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

American Safety Insurance Holdings, Ltd. (NYSE:ASI) today reported net earnings of $4.1 million for the three months ended June 30, 2011, or $0.38 per diluted share, as compared to $6.2 million, or $0.58 per diluted share, for the same period of 2010.

Financial highlights for the quarter included 1 :
  • Net earned premiums increased 25% to $59.2 million
  • Property losses from U.S. storms were $5.1 million ($3.3 million after tax), contributing approximately 9 points to the combined ratio
  • The combined ratio was 105.8% compared to 99.4%
  • Operating cash flow was $8.1 million compared to $24.7 million
  • Book value was $29.76 per diluted share versus $29.00 at December 31, 2010

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

Second Quarter Results

Total revenues in the quarter increased to $68.2 million from $56.8 million in 2010 primarily due to increases in net earned premiums across all insurance divisions. Investment income increased to $8.1 million while net realized gains and fee income decreased slightly.

The combined ratio of 105.8% consists of a loss ratio of 67.4% and an expense ratio of 38.4%, compared to 61.9% and 37.5%, respectively, for the same quarter of 2010. The loss ratio includes the impact from U.S. storm losses of $5.1 million, composed of $4.1 million in the ART division and $1.0 million in the E&S division. The increase in the expense ratio was primarily attributable to lower fronting fees in the ART division.

For the three months ended June 30, 2011, net operating earnings of $3.9 million compares to $5.7 million for the same quarter 2010. The decrease in net operating earnings is primarily due to the U.S. storm losses noted above. 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

Net earnings for the six months ended June 30, 2011 were $12.0 million, or $1.11 per diluted share, compared to $12.7 million, or $1.19 per diluted share for the same period in 2010. Net earned premiums year to date increased 26% to $113.5 million. Pre-tax net realized gains on investments for the six months ended June 30 were $11.3 million compared to $1.5 million during the same period in 2010.

The combined ratio was 111.0%, composed of a loss ratio of 72.3% and an expense ratio of 38.7%. The increase in the loss ratio to 72.3% from 60.6% for the 2010 period is primarily due to catastrophe losses in the first quarter of $5 million and losses attributable to U.S. storms of $5.1 million in the second quarter. The decrease in the expense ratio to 38.7% for the six months ended June 30, 2011 from 40.2% in the same period in 2010 is due primarily to economies of scale associated with increased net earned premiums.

Invested assets increased 5.5% to $863.1 million at June 30, 2011 from $818.5 million at December 31, 2010. The pre-tax book yield realized during the six months on the investment portfolio was 3.7% compared to 4.1% for the same period in 2010.

Book value at June 30, 2011 increased to $29.76 per diluted share compared to $29.00 at December 31, 2010. Since December 31, 2010, the Company has repurchased 105,033 shares at an average price of $18.97 per share. There are 239,267 shares remaining under the current repurchase authorization.

Commenting on the results, Stephen R. Crim, President and Chief Executive Officer said, “The unprecedented U.S. storm activity during the second quarter negatively impacted financial results for the property and casualty insurance industry. While our losses did impact the quarterly results, they represented only 1% of our capital on an after tax basis. We continue our product diversification, which has been the driver of our premium growth, and the steady improvement in our expense ratio.”

Conference Call

A conference call to discuss second quarter 2011 results is scheduled for Thursday, August 4, 2011 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. A transcript of the call will be available on the Company’s website beginning several days after the call.

This report contains forward-looking statements. The forward-looking statements reflect the Company’s current views with respect to future events and financial performance, including catastrophe and other losses. Forward-looking statements involve risks and uncertainties which may cause actual results to differ materially, including developments in loss trends and adequacy and changes in loss reserves and actuarial assumptions.

About Us:

For 25 years, American Safety Insurance Holdings, Ltd. (NYSE: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. 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 visit www.asih.bm .
American Safety Insurance Holdings, Ltd. and Subsidiaries
Financial and Operating Highlights
(Unaudited) (in thousands)
 

Three Months EndedJune 30,
 

Six Months EndedJune 30,
2011   2010 2011   2010
INCOME STATEMENT DATA:

Revenues:
Direct earned premiums $ 60,801 $ 60,976 $ 118,456 $ 116,718
Assumed earned premiums 13,851 9,270 25,135 18,290
Ceded earned premiums   (15,502 )   (23,006 )   (30,073 )   (44,800 )
Net earned premiums 59,150 47,240 113,518 90,208
 
Net investment income 8,050 7,929 15,486 15,834
Net realized gains 194 509 11,302 1,520
Fee income 786 1,155 1,651 2,248
Other income   12     10     23     30  
Total revenues   68,192     56,843     141,980     109,840  
 
Expenses:
Losses and loss adjustment expenses 39,869 29,251 82,129 54,652
Acquisition expenses 13,347 8,995 25,208 18,825
Other underwriting expenses 10,171 9,849 20,370 19,676
Interest expense 354 685 740 1,444
Corporate and other expenses   918     751     1,638     1,466  
Total expenses   64,659     49,531     130,085     96,063  
 
Earnings before income taxes 3,533 7,312 11,895 13,777
Income tax expense (benefit)   (549 )   950     (581 )   851  
Net earnings 4,082 6,362 12,476 12,926

Less: Net earnings attributable to the  non-controlling interest
  30     199     523     256  
 
Net earnings attributable to ASIH, Ltd. $ 4,052   $ 6,163   $ 11,953   $ 12,670  
 
Net earnings per share:
Basic $ 0.39   $ 0.60   $ 1.15   $ 1.23  
Diluted $ 0.38   $ 0.58   $ 1.11   $ 1.19  
 
Weighted average number of shares outstanding:
Basic   10,429,188     10,246,100     10,436,848     10,288,718  
Diluted   10,764,542     10,589,708     10,776,398     10,616,956  
 
Loss ratio 67.4 % 61.9 % 72.3 % 60.6 %
Expense ratio   38.4 %   37.5 %   38.7 %   40.2 %
Combined ratio   105.8 %   99.4 %   111.0 %   100.8 %
 
Net operating earnings:
Net earnings attributable to ASIH, Ltd. $ 4,052 $ 6,163 $ 11,953 $ 12,670

Less: Realized investment gains,  net of taxes
  146     431     11,208     1,173  
Net operating earnings $ 3,906   $ 5,732   $ 745   $ 11,497  
 
  At
BALANCE SHEET DATA:   6/30/2011     12/31/2010
(unaudited)
Total investments $ 863,081 $ 818,450
Total assets 1,265,324 1,221,253
Unpaid losses and loss adjustment expenses 667,644 649,641
Total liabilities 941,084 902,719
Total shareholders’ equity 324,240 318,534
 
Book value per share-diluted $ 29.76 $ 29.00
 
American Safety Insurance Holdings, Ltd. and Subsidiaries
Segment Data
(Unaudited) (Dollars in thousands)
 
  Three Months Ended June 30, 2011
Insurance   Other    
E&S   ART   Reinsurance Run-off Total
Gross written premiums $ 43,929 $ 23,923 $ 15,028 $ (1 ) $ 82,879
Net earned premiums 29,085 15,616 14,450 (1 ) 59,150
Fee & other income (5 ) 770 - 33 798
 
Losses & loss adjustment expenses 17,885 12,830 9,153 1 39,869
Acquisition & other underwriting expenses   13,216     6,148     4,292     (138 )   23,518  
Underwriting profit (loss) (2,021 ) (2,592 ) 1,005 169 (3,439 )
 
Net investment income   5,081     1,232     1,586     151     8,050  
Pre-tax operating income (loss) 3,060 (1,360 ) 2,591 320 4,611
 
Net realized gains 194
Interest and corporate expenses   1,272  
Earnings before income taxes 3,533
Income tax benefit   (549 )
Net earnings $ 4,082

Less: Net earnings attributable to the  non-controlling interest
  30  
Net earnings attributable to ASIH, Ltd. $ 4,052  
 
Loss ratio 61.5 % 82.2 % 63.3 % NM 67.4 %
Expense ratio   45.5 %   34.4 %   29.7 %   NM     38.4 %
Combined ratio   107.0 %   116.6 %   93.0 %   NM     105.8 %
  Three Months Ended June 30, 2010
Insurance   Other    
E&S   ART   Reinsurance Run-off Total
Gross written premiums $ 36,478 $ 23,885 $ 12,215 $ - $ 72,578
Net earned premiums 24,242 12,901 10,097 - 47,240
Fee & other income 203 873 55 34 1,165
 
Losses & loss adjustment expenses 13,720 8,479 7,052 - 29,251
Acquisition & other underwriting expenses   11,918     3,687     2,896     343     18,844  
Underwriting profit (loss) (1,193 ) 1,608 204 (309 ) 310
 
Net investment income   5,385     1,139     1,178     227     7,929  
Pre-tax operating income (loss) 4,192 2,747 1,382 (82 ) 8,239
 
Net realized gains 509
Interest and corporate expenses   1,436  
Earnings before income taxes 7,312
Income tax expense   950  
Net earnings $ 6,362

Less: Net earnings attributable to the  non-controlling interest
  199  
Net earnings attributable to ASIH, Ltd. $ 6,163  
 
Loss ratio 56.6 % 65.7 % 69.8 % NM 61.9 %
Expense ratio   48.3 %   21.8 %   28.1 %   NM     37.5 %
Combined ratio   104.9 %   87.5 %   97.9 %   NM     99.4 %
 
American Safety Insurance Holdings, Ltd. and Subsidiaries
Segment Data
(Unaudited) (Dollars in thousands)
 
  Six Months Ended June 30, 2011
Insurance   Other    
E&S   ART   Reinsurance Run-off Total
Gross written premiums $ 79,924 $ 45,801 $ 31,500 $ (1 ) $ 157,224
Net earned premiums 57,079 29,971 26,469 (1 ) 113,518
Fee & other income - 1,630 - 44 1,674
 
Losses & loss adjustment expenses 35,638 21,844 24,647 - 82,129
Acquisition & other underwriting expenses   26,326     12,461     7,211     (420 )   45,578  
Underwriting profit (loss) (4,885 ) (2,704 ) (5,389 ) 463 (12,515 )
 
Net investment income   9,896     2,352     2,935     303     15,486  
Pre-tax operating income (loss) 5,011 (352 ) (2,454 ) 766 2,971
 
Net realized gains 11,302
Interest and corporate expenses   2,378  
Earnings before income taxes 11,895
Income tax benefit   (581 )
Net earnings $ 12,476

Less: Net earnings attributable to the  non-controlling interest
  523  
Net earnings attributable to ASIH, Ltd. $ 11,953  
 
Loss ratio 62.4 % 72.9 % 93.1 % NM 72.3 %
Expense ratio   46.1 %   36.1 %   27.2 %   NM     38.7 %
Combined ratio   108.5 %   109.0 %   120.3 %   NM     111.0 %
 
  Six Months Ended June 30, 2010
Insurance   Other    
E&S   ART   Reinsurance Run-off Total
Gross written premiums $ 66,106 $ 42,119 $ 23,670 $ - $ 131,895
Net earned premiums 46,394 24,064 19,750 - 90,208
Fee & other income 349 1,704 171 54 2,278
 
Losses & loss adjustment expenses 26,883 14,894 12,876 (1 ) 54,652
Acquisition & other underwriting expenses   23,428     8,424     5,971     678     38,501  
Underwriting profit (loss) (3,568 ) 2,450 1,074 (623 ) (667 )
 
Net investment income   10,834     2,268     2,266     466     15,834  
Pre-tax operating income (loss) 7,266 4,718 3,340 (157 ) 15,167
 
Net realized gains 1,520
Interest and corporate expenses   2,910  
Earnings before income taxes 13,777
Income tax expense   851  
Net earnings $ 12,926

Less: Net earnings attributable to the  non-controlling interest
  256  
Net earnings attributable to ASIH, Ltd. $ 12,670  
 
Loss ratio 57.9 % 61.9 % 65.2 % NM 60.6 %
Expense ratio   49.8 %   27.9 %   29.4 %   NM     40.2 %
Combined ratio   107.7 %   89.8 %   94.6 %   NM     100.8 %

Copyright Business Wire 2010

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