American Safety Insurance Holdings, Ltd. Reports Third Quarter Financial Results

American Safety Insurance Holdings, Ltd. Reports Third Quarter Financial Results

Book Value Per Share Increased 6% to $34.13

HAMILTON, Bermuda--(BUSINESS WIRE)-- American Safety Insurance Holdings, Ltd. (NYS: ASI) today reported net earnings of $6.2 million for the three months ended September 30, 2012, or $0.60 per diluted share, as compared to $5.8 million, or $0.54 per diluted share, for the same period of 2011.


Financial highlights for the quarter included1:

  • Gross written premiums increased 8% to $79.1 million

  • Net earned premiums increased 7% to $63.1 million

  • Total revenues were $77.4 million compared to $68.1 million

  • The combined ratio was 106.9% compared to 101.1%

  • The combined ratio excluding weather related property losses was 103.7% compared to 101.1%

  • Annualized return on average equity (exclusive of realized and unrealized gains from investments) was 2.9%

  • Book value was $34.13 per diluted share versus $30.80 at December 31, 2011

1All comparisons are with the same period last year unless stated otherwise.

Third Quarter Results

The increase in total revenues was driven by a $4.1 million increase in net earned premiums and a $5.7 million increase in net realized gains offset in part by a reduction of $0.8 million in investment income.

The combined ratio of 106.9% consists of a loss ratio of 63.9% and an expense ratio of 43.0%, compared to 60.8% and 40.3%, respectively, for the same quarter of 2011. Pre-tax weather related property losses in the 2012 quarter were $2.0 million (or 3.2 points in the loss ratio) compared to no impact from weather related losses for the 2011 quarter. The expense ratio increase was attributable to: (a) higher acquisition costs in 2012, due primarily to profit commissions, (b) mix of business and (c) costs associated with growth initiatives.

Net operating earnings were $2.1 million compared to $5.8 million. The decrease in operating earnings is attributable to higher weather related losses, lower investment income and increased expenses primarily associated with growth initiatives. Net operating earnings (loss) is a non-GAAP financial measure defined by the Company as net earnings adjusted for net realized gains (losses), net of applicable taxes.

Year to Date Results

Total revenues for the nine months ended 2012 were $217.5 million compared to $210.0 million in 2011. Net earned premiums increased $14.0 million, or 8%, to $186.5 million, net investment income decreased $1.1 million, and net realized gains decreased $5.6 million.

The combined ratio was 105.1% compared to 107.5%, composed of a loss ratio of 63.5% and an expense ratio of 41.6%, compared to 68.4% and 39.1%, respectively, in the prior year. The decrease in the loss ratio is primarily attributable to lower weather related property losses of $5.6 million (or 3.0 points) for the nine months ended September 30, 2012 compared to $10.8 million (or 6.3 points) for the same period in 2011.

Net earnings for the nine months ended September 30, 2012, were $12.4 million, or $1.18 per diluted share, compared to $17.8 million, or $1.65 per diluted share, for the same period in 2011. Net earnings for the nine months ended September 30, 2012, include after-tax net weather related losses of $4.7 million and realized investment gains net of taxes of $4.1 million. For the same nine months of 2011, after-tax net weather related property losses totaled $8.4 million and realized investment gains net of taxes were $11.2 million.

Net operating earnings were $8.3 million in 2012 compared to $6.6 million in 2011. The increase in operating earnings is attributable to lower weather related losses during 2012 as compared to 2011. Net operating earnings in 2012 were also impacted by reduced investment income and increased expenses primarily associated with growth initiatives.

Invested assets increased 7.4% to $948.3 million at September 30, 2012, from $883.1 million at December 31, 2011. The book yield on the portfolio was 3.6% compared to 4.1% for the 2011 period.

Since June 30, 2012, the Company purchased 488,968 shares of its common stock for $8.8 million and completed its January 24, 2012 500,000 share authorization. On October 23, 2012, the Company's Board of Directors approved the repurchase of up to an additional 500,000 shares of the Company's outstanding common stock. Repurchases may be made from time to time on the open market or in privately negotiated block transactions.

Commenting on the results, Stephen R. Crim, President and Chief Executive Officer said, "While operating earnings for the quarter were impacted by a combination of weather related losses, declining investment yields and the impact from recent investments in growth initiatives, book value per share increased by 6% during the quarter. Our growth initiatives contributed to the strong premium growth achieved in the quarter and, as they continue to gain traction, will improve operating earnings over time."

Conference Call

A conference call to discuss third quarter 2012 results is scheduled for Thursday, November 1, 2012, at 9:00 a.m. (Eastern Daylight Time), which will be broadcast through Vcall's Investor Calendar at www.investorcalendar.com, or the Company's website at www.amsafety.com. 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
September 30,

Nine months Ended
September 30,

2012

2011

2012

2011

INCOME STATEMENT DATA:

Revenues:

Direct earned premiums

$

63,547

$

62,498

$

184,670

$

180,955

Assumed earned premiums

15,088

12,287

44,212

37,422

Ceded earned premiums

(15,540

)

(15,793

)

(42,358

)

(45,866

)

Net earned premiums

63,095

58,992

186,524

172,511

Net investment income

7,364

8,196

22,577

23,682

Net realized gains

5,693

10

5,732

11,311

Fee income

1,251

843

2,636

2,494

Other income

12

12

37

35

Total revenues

77,415

68,053

217,506

210,033

Expenses:

Losses and loss adjustment expenses

40,289

35,867

118,389

117,997

Acquisition expenses

15,971

13,689

45,052

38,683

Other underwriting expenses

12,396

10,941

35,159

31,309

Interest expense

415

375

1,200

1,116

Corporate and other expenses

916

284

3,020

2,136

Total expenses

69,987

61,156

202,820

191,241

Earnings before income taxes

7,428

6,897

14,686

18,792

Income tax expense

1,350

1,169

2,222

588

Net earnings

6,078

5,728

12,464

18,204

Less: Net earnings (loss) attributable to the non-controlling interest

(128

)

(69

)

35

454

Net earnings attributable to ASIH, Ltd.

$

6,206

$

5,797

$

12,429

$

17,750

Net earnings per share:

Basic

$

0.61

$

0.56

$

1.22

$

1.70

Diluted

$

0.60

$

0.54

$

1.18

$

1.65

Weighted average number of shares outstanding:

Basic

10,113,871

10,377,890

10,196,538

10,416,979

Diluted

10,420,777

10,701,959

10,502,816

10,751,312

Loss ratio

63.9

%

60.8

%

63.5

%

68.4

%

Expense ratio

43.0

%

40.3

%

41.6

%

39.1

%

Combined ratio

106.9

%

101.1

%

105.1

%

107.5

%

Net operating earnings:

Net earnings attributable to ASIH, Ltd.

$

6,206

$

5,796

$

12,429

$

17,750

Less: Realized investment gains,

net of taxes

4,106

(7

)

4,126

11,199

Net operating earnings

$

2,100

$

5,803

$

8,303

$

6,551

BALANCE SHEET DATA:

9/30/2012

12/31/2011

(unaudited)

Total investments

$

948,314

$

883,099

Total assets

1,368,588

1,286,532

Unpaid losses and loss adjustment expenses

683,011

680,201

Total liabilities

1,012,779

951,852

Total shareholders' equity

355,809

334,680

Book value per share-diluted

$

34.13

$

30.80

American Safety Insurance Holdings, Ltd. and Subsidiaries

Segment Data

(Unaudited)

(dollars in thousands)

Three Months Ended September 30, 2012

Insurance

Other

E&S

ART

Reinsurance

Run-off

Total

Gross written premiums

$

49,192

$

16,146

$

13,807

$

-

$

79,145

Net written premiums

39,004

8,772

13,806

-

61,582

Net earned premiums

35,650

13,295

14,150

-

63,095

Fee & other income

294

915

-

54

1,263

Losses & loss adjustment expenses

20,979

10,423

8,887

-

40,289

Acquisition & other underwriting expenses***

16,812

6,280

4,303

972

28,367

Underwriting profit (loss)

(1,847