American Safety Insurance Holdings, Ltd. Reports Fourth Quarter and Year End Financial Results

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American Safety Insurance Holdings, Ltd. Reports Fourth Quarter and Year End Financial Results

Book Value Per Diluted Share Increased to $34.21, an 11% Increase Year Over Year

HAMILTON, Bermuda--(BUSINESS WIRE)-- American Safety Insurance Holdings, Ltd. (NYS: ASI) today reported a net loss of $0.6 million, or $(0.06) per diluted share, for the 2012 fourth quarter, compared to net loss of $6.9 million, or ($0.67) per diluted share, for the same period in 2011. Net earnings for the year ended December 31, 2012, were $11.8 million, or $1.14 per diluted share, compared to $10.8 million, or $1.01 per diluted share, for the year ended 2011.


Financial highlights for the quarter included1:

  • Gross written premiums increased 15.7% to $78.8 million
  • Total revenues increased 16.2% to $79.6 million
  • Net earned premiums increased 11.6% to $67.3 million
  • The combined ratio was 116.6% compared to 124.0%
  • The net operating loss was $3.7 million compared to a net operating loss of $6.6 million

Financial highlights for the year included1:

  • Gross written premiums increased 6.9% to $319.2 million
  • Total revenues increased 6.7% to $297.1 million
  • Net earned premiums increased 9.0% to $253.9 million
  • The combined ratio was 108.1% compared to 111.8%
  • Book value increased 11% to $34.21 per diluted share
  • Net operating earnings were $4.6 million compared to $0

1 All comparisons are with the same period of 2011 unless stated otherwise.

Fourth Quarter Results

E&S gross written premiums totaled $47.7 million compared to $35.8 million, ART gross written premiums were $16.8 million compared to $19.1 million, and Reinsurance gross written premiums were $14.3 million compared to $13.2 million.

The increase in total revenue to $79.6 million was driven by increases in net earned premiums of $7.0 million and net realized gains of $4.3 million. Approximately $4.3 million of the increase in net earned premiums is due to adjustments in the E&S division attributable to ceded reinsurance contracts containing adjustable provisions and the property catastrophe treaty in the Reinsurance division.

The combined ratio for the quarter ended December 31, 2012 was 116.6%, composed of a loss ratio of 79.2% and an expense ratio of 37.4%. The loss ratio includes losses from Super Storm Sandy of $5.9 million (8.7 points) and prior year net loss reserve strengthening of $9.0 million (13.4 points). The prior year reserve strengthening is composed of $8.1 million in the Reinsurance division and $2.9 million in the ART division, partially offset by $2.0 million of favorable prior year loss reserve development in the E&S and run-off divisions. Reinsurance prior year net loss reserve strengthening stemmed from four casualty contracts that were non-renewed in prior years. The reserve strengthening in the ART division was primarily attributable to two casualty programs.

The combined ratio for the quarter ended December 31, 2011 was 124.0%, composed of a loss ratio of 85.1% and an expense ratio of 38.9%. The loss ratio includes loss reserve strengthening of $16.4 million (27.2 points) in the ART and Reinsurance divisions, net of $12.2 million (20.2 points) of favorable development in the E&S division.

Year End Results

E&S gross written premiums were $185.9 million compared to $155.5 million, ART gross written premiums were $75.6 million compared to $83.8 million, and Reinsurance gross written premiums were $57.7 million compared to $59.2 million.

The increase in total revenue to $297.1 million was due to increases in net earned premiums of $21.0 million partially offset by a decrease in investment income and net realized gains of $1.1 million and $1.3 million, respectively.

The combined ratio of 108.1% for the year ended December 31, 2012 was composed of a loss ratio of 67.6% and an expense ratio of 40.5%. The 67.6% loss ratio includes prior year loss reserve strengthening of $9.0 million (3.5 points), and $11.4 million (4.5 points) of property catastrophe losses.

The combined ratio of 111.8% for the year ended December 31, 2011 was composed of a loss ratio of 72.7% and an expense ratio of 39.1%. The loss ratio includes $20.2 million (8.7 points) of loss reserve strengthening and $13.5 million (5.8 points) of property catastrophe losses.

The investment portfolio increased 5.8% to $930.6 million. The book yield at December 31, 2012, was 3.8% and the duration was approximately four years.

During 2012, the Company repurchased a total of 779,034 shares of outstanding Company stock at an average cost per share of $17.70. There were 83,998 shares remaining for repurchase at February 28, 2013 under the current repurchase authorization.

Commenting on the results, Stephen R. Crim, Chief Executive Officer, said: "2012 financial results were disappointing for ASI, driven by a combination of catastrophe losses and reserve strengthening in business that has been non-renewed. We are confident that the steps we have taken to leverage strategic investments in our excess and surplus lines product platform, shift the profile of our reinsurance business, and to de-emphasize specialty programs will produce improved underwriting results going forward."

Conference Call

A conference call to discuss fourth quarter and year end 2012 results is scheduled for Thursday, March 7, 2013, at 9:00 a.m. (Eastern Standard Time), which will be broadcast through Vcall's Investor Calendar at www.investorcalendar.com, or the Company's website at www.amsafety.bm. Participants inside the U.S. can access the call by dialing (877) 407-8035. Callers dialing from outside the U.S. can access the call by dialing (201) 689-8035. If you are unable to participate at this time, a replay will be available for 30 days, beginning approximately two hours after the call.

This press release contains forward-looking statements and non-GAAP financial measures. The forward-looking statements reflect the Company's current views with respect to future events and financial performance, including insurance market conditions, combined ratio, premium growth, acquisitions and new products and the impact of new accounting standards. Forward-looking statements involve risks and uncertainties which may cause actual results to differ materially, including competitive conditions in the insurance industry, levels of new and renewal insurance business, developments in loss trends, adequacy and changes in loss reserves and actuarial assumptions, timing or collectability of reinsurance recoverables, market acceptance of new coverages and enhancements, changes in reinsurance costs and availability, potential adverse decisions in court and arbitration proceedings, the integration and other challenges attendant to acquisitions, and changes in levels of general business activity and economic conditions.

About Us:

For 25 years, American Safety Insurance Holdings, Ltd. (NYS: ASI) , a Bermuda holding company, has offered innovative solutions outside the U.S. in the reinsurance and alternative risk markets through its subsidiaries, American Safety Reinsurance, Ltd., and American Safety Assurance, Ltd., and in the U.S. for specialty risks and alternative risk markets through its program administrator, American Safety Insurance Services, Inc., and insurance company subsidiaries and affiliates, American Safety Casualty Insurance Company, American Safety Indemnity Company, American Safety Risk Retention Group, Inc., and American Safety Assurance (Vermont), Inc. As a group, ASI's insurance subsidiaries and affiliates are rated "A" (Excellent) IX by A.M. Best. For additional information, please visitwww.asih.bm.

American Safety Insurance Holdings, Ltd. and Subsidiaries
Financial and Operating Highlights
(Unaudited) (dollars in thousands)
   
Three months Ended December 31,Twelve Months Ended December 31,
 2012  2011  2012  2011 
INCOME STATEMENT DATA:
Revenues:
Direct earned premiums$65,140$60,473$249,810$241,428
Assumed earned premiums16,54413,62560,75651,047
Ceded earned premiums (14,342) (13,730) (56,700) (59,596)
Net earned premiums67,34260,368253,866232,879
Net investment income7,6217,65630,19831,338
Net realized gains (losses)3,961(345)9,69310,966
Fee income6808153,3163,309
Other income 12  12  49  47 
Total revenues 79,616  68,506  297,122  278,539 
Expenses:
Losses and loss adjustment expenses53,30951,370171,698169,367
Acquisition expenses13,52713,39658,57952,080
Other underwriting expenses12,37210,92047,53142,230
Interest expense3223291,5211,444
Corporate and other expenses 825  553  3,844  2,688 
Total expenses 80,355  76,568  283,173  267,809 
Earnings (loss) before income taxes(738)(8,062)13,94910,730
Income tax (benefit) expense (1,381) (3,981) 841  (3,394)
Net earnings (loss)643(4,081)13,10814,124
Less: Net earnings attributable to the non-controlling interest 1,233  2,828  1,269  3,282 
Net earnings (loss) attributable to ASIH, Ltd.$(590)$(6,909)$11,839 $10,842 
Net earnings (loss) per share:
Basic$(0.06)$(0.67)$1.18 $1.04 
Diluted$(0.06)$(0.67)$1.14 $1.01 
Weighted average number of shares outstanding:
Basic 9,704,205  10,324,884  10,073,304  10,393,766 
Diluted 10,023,632  10,703,156  10,382,887  10,739,174 
Loss ratio79.2%85.1%67.6%72.7%
Expense ratio 37.4% 38.9% 40.5% 39.1%
Combined ratio 116.6% 124.0% 108.1% 111.8%
Net operating earnings:
Net earnings (loss) attributable to ASIH, Ltd.$(590)$(6,909)$11,839$10,842
Less: Realized investment gains (losses),

net of taxes

 3,137  (350) 7,263  10,849 
Net operating earnings (loss)$(3,727)$(6,559)$4,576 $(7)
 
 
 
BALANCE SHEET DATA:December 31, 2012December 31, 2011
(unaudited)
Total investments$930,648$883,099
Total assets1,373,1311,286,532
Unpaid losses and loss adjustment expenses725,244680,201
Total liabilities1,028,083951,852
Total shareholders' equity(1)345,048334,680
Book value per share-diluted$34.21$30.80
 
(1) Includes American Safety Risk Retention Group shareholders' equity of $7,742 and $6,592
 
 
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American Safety Insurance Holdings, Ltd. and Subsidiaries
Segment Data
(Unaudited) (Dollars in thousands)
           
Three Months Ended December 31, 2012
Insurance Other  
E&S ART ReinsuranceRun-off Total
Gross written premiums$47,697$16,768$14,320$-$78,785
Net written premiums38,8259,86314,321-63,009
Net earned premiums38,06413,67015,608-67,342
Fee & other income(156)8141717692
Losses & loss adjustment expenses(3)22,35315,11116,076(231)53,309
Acquisition & other underwriting expenses 15,400  4,975  4,601  923  25,899 
Underwriting profit (loss)155(5,602)(5,052)(675)(11,174)
Net investment income 4,253  1,366  1,888  114  7,621 
Pre-tax operating income (loss)4,408(4,236)(3,164)(561)(3,553)
Net realized gains----3,961
Interest and corporate expenses(4)---- 1,147 
Loss before income taxes----(738)