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

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 premiums

16,544

13,625

60,756

51,047

Ceded earned premiums

(14,342

)

(13,730

)

(56,700

)

(59,596

)

Net earned premiums

67,342

60,368

253,866

232,879

Net investment income

7,621

7,656

30,198

31,338

Net realized gains (losses)

3,961

(345

)

9,693

10,966

Fee income

680

815

3,316

3,309

Other income

12

12

49

47

Total revenues

79,616

68,506

297,122

278,539

Expenses:

Losses and loss adjustment expenses

53,309

51,370

171,698

169,367

Acquisition expenses

13,527

13,396

58,579

52,080

Other underwriting expenses

12,372

10,920

47,531

42,230

Interest expense

322

329

1,521

1,444

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

)

13,949

10,730

Income tax (benefit) expense

(1,381

)

(3,981

)

841

(3,394

)

Net earnings (loss)

643

(4,081

)

13,108

14,124

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 ratio

79.2

%

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, 2012

December 31, 2011

(unaudited)

Total investments

$

930,648

$

883,099

Total assets

1,373,131

1,286,532

Unpaid losses and loss adjustment expenses

725,244

680,201

Total liabilities

1,028,083

951,852

Total shareholders' equity(1)

345,048

334,680

Book value per share-diluted

$

34.21

$

30.80

(1) Includes American Safety Risk Retention Group shareholders' equity of $7,742 and $6,592

American Safety Insurance Holdings, Ltd. and Subsidiaries

Segment Data

(Unaudited) (Dollars in thousands)

Three Months Ended December 31, 2012

Insurance

Other

E&S

ART

Reinsurance

Run-off

Total

Gross written premiums

$

47,697

$

16,768

$

14,320

$

-

$

78,785

Net written premiums

38,825

9,863

14,321

-

63,009

Net earned premiums

38,064

13,670

15,608

-

67,342

Fee & other income

(156

)

814

17

17

692

Losses & loss adjustment expenses(3)

22,353

15,111

16,076

(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

)