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

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

HAMILTON, Bermuda--(BUSINESS WIRE)-- American Safety Insurance Holdings, Ltd. (NYS: ASI) today reported net earnings of $34.8 million for the three months ended June 30, 2013, or $3.54 per diluted share, as compared to $2.2 million, or $0.21 per diluted share, for the same period of 2012. Net earnings for the second quarter ended June 30, 2013 include after tax net realized gains of $31.4 million, or $3.20 per share.

Financial highlights for the quarter included1:

  • Gross written premiums decreased 4.2% to $83.9 million
  • Total revenues were $105.6 million compared to $70.1 million
  • Pre-tax net realized gains were $37.5 million
  • The combined ratio was 102.2% compared to 107.1%
  • Annualized return on average equity (exclusive of realized and unrealized gains from investments) was 4.4%
  • Book value was $32.79 per diluted share versus $34.21 at December 31, 2012

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

Second Quarter Results

Total revenues in the quarter increased to $105.6 million from $70.1 million in 2012 due to net realized gains of $37.5 million in the quarter partially offset by lower investment income. During the quarter ended June 30, 2013 the Company sold $778.9 million of its investment portfolio in compliance with the merger agreement with Fairfax Financial Holdings Limited. The decline in net investment income in the 2013 quarter was due to the liquidation of a substantial portion of the investment portfolio and subsequent reinvestment of the proceeds.

The investment portfolio (exclusive of cash) totaled $928.7 million at June 30, 2013 with an average credit quality of AAA, a duration of approximately six years and a book yield of 1.31 percent. The investment portfolio at June 30, 2013 includes U.S. Treasury securities of $760.3 million.

The combined ratio of 102.2% consists of a loss ratio of 60.6% and an expense ratio of 41.6%, compared to 65.8% and 41.3%, respectively, for the same quarter of 2012. The decrease in the loss ratio is primarily attributable to lower weather related losses experienced in the second quarter of 2013 as compared to the 2012 quarter. Net operating earnings2 for the quarter ended June 30, 2013 and 2012 were $3.4 million and $2.2 million, respectively. Operating earnings in the second quarter of 2012 includes $3.0 million of weather related losses.

Year to Date Results

Total revenues for the six months ended 2013 were $177.9 million compared to $140.1 million in 2012. Net earned premiums increased 0.6% to $124.1 million. Net realized gains increased $38.9 million on investment sales of $790.1 million.

The combined ratio was 102.4% compared to 104.2%, composed of a loss ratio of 60.9% and an expense ratio of 41.5%, compared to 63.9% and 40.9%, respectively, in the prior year. Weather related losses during the second quarter of 2012 impacted the 2012 loss ratio by 2.9 points while for the six months ended June 30, 2013 weather related losses were minimal. The increase in expense ratio for the six months ended June 30, 2013 is primarily attributable to the July 1, 2012 acquisition of a surety managing general agency.

Net earnings for the six months ended June 30, 2013, were $40.3 million, or $4.12 per diluted share, compared to $6.2 million, or $0.59 per diluted share, for the same period in 2012 due primarily to after tax net realized gains of $32.6 million, or $3.33 per share. Net operating earnings, exclusive of weather related property losses, were $7.7 million for the six months ended June 30, 2013 compared to $9.2 million in the same period in 2012. The decrease in net operating earnings is primarily attributable to lower net investment income due to the sales of the investment portfolio noted in the quarterly results.

Book value decreased to $32.79 per diluted share as compared to $34.21 at December 31, 2012. Accumulated other comprehensive income at June 30, 2013 totaled $3.7 million as compared to $48.4 million at March 31, 2013 resulting in a $44.7 million decline in the second quarter of 2013. At December 31, 2012 accumulated other comprehensive income totaled $53.6 million. At June 30, 2013 book value, including the impact of all shares vesting under a change in control, was $31.17 per share. Book values per fully diluted share do not include transaction costs or other change in control costs.

2 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.

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.

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, and American Safety Risk Retention Group, 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 June 30,Six Months Ended June 30,
2013201220132012
INCOME STATEMENT DATA:
Revenues:
Direct earned premiums$65,122$60,595$128,693$121,123
Assumed earned premiums15,79515,25930,72429,124
Ceded earned premiums (18,725) (13,837) (35,301) (26,818)
Net earned premiums62,19262,017124,116123,429
Net investment income5,5827,40213,21415,214
Net realized gains (losses)37,482(13)38,93639
Fee income3357171,5631,385
Other income 12  12  24  25 
Total revenues 105,603  70,135  177,853  140,092 
Expenses:
Losses and loss adjustment expenses37,67340,81975,63678,100
Acquisition expenses13,81414,33728,56829,081
Other underwriting expenses12,38212,01324,52322,764
Interest expense358367712785
Corporate and other expenses 655  848  1,436  2,104 
Total expenses 64,882  68,384  130,875  132,834 
Earnings before income taxes40,7211,75146,9787,258
Income tax expense 5,900  (234) 6,577  872 
Net earnings34,8211,98540,4016,386
Less: Net earnings (loss) attributable to
the non-controlling interest 10  (182) 98  163 
Net earnings attributable to ASIH, Ltd.$34,811 $2,167 $40,303 $6,223 
Net earnings per share:
Basic$3.65 $0.21 $4.25 $0.61 
Diluted$3.54 $0.21 $4.12 $0.59 
Weighted average number of shares outstanding:
Basic 9,538,924  10,256,634  9,490,498  10,238,667 
Diluted 9,824,228  10,555,222  9,786,953  10,544,627 
 
Loss ratio60.6%65.8%60.9%63.3%
Expense ratio 41.6% 41.3% 41.5% 40.9%
Combined ratio 102.2% 107.1% 102.4% 104.2%
 
Net operating earnings:
Net earnings attributable to ASIH, Ltd.$34,811$2,167$40,303$6,223
Less: Realized investment gains (losses),
net of taxes 31,431  (13) 32,586  20 
Net operating earnings$3,380 $2,180 $7,717 $6,203 
 
 
BALANCE SHEET DATA:June 30, 2013December 31, 2012
(unaudited)
Total investments$928,688$930,648
Total assets1,351,1621,373,131
Unpaid losses and loss adjustment expenses727,278725,244
Total liabilities1,017,0991,028,083
Total shareholders' equity334,063345,048
Book value per share-diluted$32.79$34.21
 
American Safety Insurance Holdings, Ltd. and Subsidiaries
Segment Data

(Unaudited)

(dollars in thousands)

           
Three Months Ended June 30, 2013
Insurance Other  
E&S ART ReinsuranceRun-off Total
Gross written premiums$52,063$16,156$15,641$-$83,860
Net written premiums41,6693,00015,641-60,310
Net earned premiums38,8448,09315,255-62,192
Fee & other income(362)697-12347
Losses & loss adjustment expenses23,3175,2269,130-37,673
Acquisition & other underwriting expenses 17,275  3,528  4,623  770  26,196 
Underwriting profit (loss)(2,110)361,502(758)(1,330)
Net investment income 3,380  815  1,304  83  5,582 
Pre-tax operating income (loss)1,2708512,806(675)4,252
Net realized gains37,482
Interest and corporate expenses 1,013 
Earnings before income taxes40,721
Income tax expense 5,900 
Net earnings$34,821
Less: Net earnings attributable to the non-controlling
interest 10 
Net earnings attributable to ASIH, Ltd.$34,811 
 
Loss ratio60.0%64.6% Read Full Story

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