American Safety Insurance Holdings, Ltd. (NYSE: ASI) today announced that the Company’s 2012 fourth quarter results will include prior year net loss reserve strengthening of approximately $12 to $14 million pre-tax. This reserve strengthening is attributable to the Assumed Reinsurance division and specialty programs within the Alternative Risk Transfer division.
The Assumed Reinsurance reserve strengthening stemmed from four casualty contracts that were non-renewed in prior years. The Company continues shifting the risk profile of the Assumed Reinsurance division away from quota share contracts, which are the primary source of the reserve strengthening, to excess of loss contracts within targeted specialty classes of business.
The reserve strengthening in the ART division was primarily attributable to two casualty programs. Consistent with the Company’s previously announced decision to de-emphasize specialty programs, the Company had only five continuing programs remaining in the ART division at the end of 2012.
For the fourth quarter, the Company expects to report an after-tax operating loss of between $0.35 and $0.40 per fully diluted share, including the catastrophe losses from Super Storm Sandy announced on December 27, 2012.
Also today, A.M. Best affirmed the financial strength rating of “A” (Excellent) of the insurance operating subsidiaries of American Safety Insurance Holdings, Ltd., referencing the consolidated capitalization of the Company and its solid long term operating results. A.M. Best, however, revised the outlook to “negative” due to recent underwriting results combined with current market conditions.
Commenting on the quarter, Stephen R. Crim, Chief Executive Officer, said: “While I am disappointed in our fourth quarter results, the reserve strengthening occurred in areas of the Company’s business that we have de-emphasized as part our overall strategy to improve profitability. The decision by A.M. Best to affirm our “A” rating confirms their view in the strength of our balance sheet. Our Excess and Surplus Lines division continues to perform well, and I remain confident that our strategic focus on growing the E&S platform will result in improved profitability.”