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

American Safety Insurance Holdings, Ltd. (NYSE:ASI) today reported net earnings of $5.8 million for the three months ended September 30, 2011, or $.54 per diluted share, as compared to $7.2 million, or $0.68 per diluted share, for the same period of 2010.

Financial highlights for the quarter included 1 :
  • Gross written premiums increased 2.4% to $73.2 million
  • Net earned premiums increased 10.8% to $59.0 million
  • The combined ratio was 101.3% compared to 98.3%
  • Operating cash flow was $17.2 million compared to $17.0 million
  • Book value was $31.31 per diluted share versus $29.00 at December 31, 2010
  • Annualized return on average equity (exclusive of realized and unrealized gains from investments) was 8.0%

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

Third Quarter Results

Total revenues in the quarter increased to $68.1 million from $63.3 million in 2010 due to increased earned premiums across all divisions, driven primarily by growth in newer products within the E&S division.

The combined ratio of 101.3% consists of a loss ratio of 60.8% and an expense ratio of 40.5%, compared to 59.0% and 39.3%, respectively, for the same quarter of 2010. The increase in the loss ratio was due primarily to current market conditions, but was not impacted by Hurricane Irene losses. The increase in the expense ratio was due primarily to the impact of technology investments placed in service during the quarter and lower fee income.

For the three months ended September 30, 2011, net operating earnings of $5.8 million compares to $6.7 million for the same quarter 2010. We have presented net operating earnings, which is a non-GAAP financial measure because we believe that investors’ understanding of operating performance is enhanced by this disclosure. Net operating earnings (loss) represent after tax operational results without consideration of after-tax net investment gains (losses).

Year to Date Results

Net earnings for the nine months ended September 30, 2011 were $17.8 million, or $1.65 per diluted share, compared to $19.9 million, or $1.87 per diluted share for the same period in 2010. Net earned premiums year to date increased 20.3% to $172.5 million. Pre-tax net realized gains on investments for the nine months ended September 30, 2011 were $11.3 million compared to $2.1 million during the same period in 2010.

The combined ratio was 107.7%, composed of a loss ratio of 68.4% and an expense ratio of 39.3%. The increase in the loss ratio to 68.4% from 60.0% for the 2010 period is primarily due to $10.1 million of catastrophe and weather related losses that occurred in the first six months of 2011. The expense ratio was 39.3% for the nine months ended September 30, 2011 compared to 39.8% in the same period in 2010.

Invested assets increased 8% to $881.1 million at September 30, 2011 from $818.5 million at December 31, 2010. The pre-tax book yield realized during the nine months on the investment portfolio was 3.7% compared to 4.1% for the same period in 2010.

Book value at September 30, 2011 increased to $31.31 per diluted share compared to $29.00 at December 31, 2010. Since December 31, 2010, the Company has repurchased 132,661 shares at an average price of $18.87 per share. There are 211,639 shares remaining under the current repurchase authorization.

Commenting on the results, Stephen R. Crim, President and Chief Executive Officer said, “We produced solid operating results in the third quarter with minimal impact from weather related events. We also achieved modest growth in gross written premiums resulting from our product diversification strategy. Overall, I am pleased with our 2011 results, with book value per diluted share increasing by 8% year to date in the face of a competitive insurance market and difficult economy.”

Conference Call

A conference call to discuss third quarter 2011 results is scheduled for Thursday, November 3, 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, 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 Ended

September 30,

 
Nine Months Ended

September 30,
  2011       2010     2011       2010  
INCOME STATEMENT DATA:

Revenues:
Direct earned premiums $ 62,498 $ 55,941 $ 180,955 $ 172,659
Assumed earned premiums 12,287 10,861 37,422 29,151
Ceded earned premiums   (15,793 )   (13,582 )   (45,866 )   (58,382 )
Net earned premiums 58,992 53,220 172,511 143,428
 
Net investment income 8,196 8,265 23,682 24,099
Net realized gains 10 560 11,311 2,080
Fee income 843 1,474 2,494 3,722
Other income   12     (260 )   35     (230 )
Total revenues   68,053     63,259     210,033     173,099  
 
Expenses:
Losses and loss adjustment expenses 35,867 31,378 117,997 86,030
Acquisition expenses 13,800 12,393 39,008 31,218
Other underwriting expenses 10,941 9,996 31,309 29,672
Interest expense 375 586 1,116 2,030
Corporate and other expenses   173     965     1,811     2,431  
Total expenses   61,156     55,318     191,241     151,381  
 
Earnings before income taxes 6,897 7,941 18,792 21,718
Income tax expense   1,169     635     588     1,486  
Net earnings 5,728 7,306 18,204 20,232
Less: Net earnings attributable to the
non-controlling interest   (69 )   104     454     360  
 
Net earnings attributable to ASIH, Ltd. $ 5,797   $ 7,202   $ 17,750   $ 19,872  
 
Net earnings per share:
Basic $ 0.56   $ 0.70   $ 1.70   $ 1.93  
Diluted $ 0.54   $ 0.68   $ 1.65   $ 1.87  
 
Weighted average number of shares outstanding:
Basic   10,377,890     10,271,184     10,416,979     10,282,976  
Diluted   10,701,959     10,612,281     10,751,312     10,615,548  
 
Loss ratio 60.8 % 59.0 % 68.4 % 60.0 %
Expense ratio   40.5 %   39.3 %   39.3 %   39.8 %
Combined ratio   101.3 %   98.3 %   107.7 %   99.8 %
 
Net operating earnings:
Net earnings attributable to ASIH, Ltd. $ 5,797 $ 7,202 $ 17,750 $ 19,872
Less: Realized investment gains,

net of taxes
  (7 )   487     11,199     1,660  
Net operating earnings $ 5,804   $ 6,715   $ 6,551   $ 18,212  
 
 
  At
BALANCE SHEET DATA:   9/30/2011     12/31/2010
(unaudited)  
Total investments $ 881,088 $ 818,450
Total assets 1,277,399 1,221,253
Unpaid losses and loss adjustment expenses 666,392 649,641
Total liabilities 937,450 902,719
Total shareholders’ equity 339,949 318,534
 
Book value per share-diluted $ 31.31 $ 29.00
 
 

American Safety Insurance Holdings, Ltd. and Subsidiaries

Segment Data

(Unaudited) (Dollars in thousands)
 
Three Months Ended September 30, 2011
Insurance   Other    
E&S   ART   Reinsurance Run-off Total
Gross written premiums $ 39,782 $ 18,952 $ 14,512 $ - $ 73,246
Net written premiums 31,621 14,040 14,559 - 60,220
Net earned premiums 30,752 15,552 12,688 - 58,992
Fee & other income (8 ) 806 - 57 855
 
Losses & loss adjustment expenses 19,019 8,466 8,382 - 35,867
Acquisition & other underwriting expenses   13,326     6,610     4,517     288     24,741  
Underwriting profit (loss) (1,601 ) 1,282 (211 ) (231 ) (761 )
 
Net investment income   5,280     1,186     1,593     137     8,196  
Pre-tax operating income (loss) 3,679 2,468 1,382 (94 ) 7,435
 
Net realized gains 10
Interest and corporate expenses   548  
Earnings before income taxes 6,897
Income tax expense   1,169  
Net earnings $ 5,728
Less: Net earnings attributable to the
non-controlling interest   (69 )
Net earnings attributable to ASIH, Ltd. $ 5,797  
 
Loss ratio 61.8 % 54.4 % 66.1 % NM 60.8 %
Expense ratio   43.4 %   37.3 %   35.6 %   NM     40.5 %
Combined ratio   105.2 %   91.8 %   101.6 %   NM     101.3 %
Three Months Ended September 30, 2010
Insurance   Other    
E&S   ART   Reinsurance Run-off Total
Gross written premiums $ 34,121 $ 24,847 $ 12,971 $ (6 ) $ 71,933
Net written premiums 27,423 17,063 12,258 (6 ) 56,738
Net earned premiums 26,347 15,114 11,765 (6 ) 53,220
Fee & other income 43 1,150 57 (36 ) 1,214
 
Losses & loss adjustment expenses 15,094 8,033 8,258 (7 ) 31,378
Acquisition & other underwriting expenses   12,414     6,345     3,326     304     22,389  
Underwriting profit (loss) (1,118 ) 1,886 239 (340 ) 667
 
Net investment income   5,286     1,366     1,486     127     8,265  
Pre-tax operating income (loss) 4,168 3,252 1,725 (213 ) 8,932
 
Net realized gains 560
Interest and corporate expenses   1,551  
Earnings before income taxes 7,941
Income tax expense   635  
Net earnings $ 7,306
Less: Net earnings attributable to the
non-controlling interest   104  
Net earnings attributable to ASIH, Ltd. $ 7,202  
 
Loss ratio 57.3 % 53.1 % 70.2 % NM 59.0 %
Expense ratio   46.1 %   34.4 %   27.8 %   NM     39.3 %
Combined ratio   103.4 %   87.5 %   98.0 %   NM     98.3 %
 
 
American Safety Insurance Holdings, Ltd. and Subsidiaries
Segment Data
(Unaudited) (Dollars in thousands)
 
Nine Months Ended September 30, 2011
Insurance   Other    
E&S   ART   Reinsurance Run-off Total
Gross written premiums $ 119,706 $ 64,753 $ 46,012 $ (1 ) $ 230,470
Net written premiums 95,636 46,086 44,925 (1 ) 186,646
Net earned premiums 87,831 45,523 39,158 (1 ) 172,511
Fee & other income (8 ) 2,436 - 101 2,529
 
Losses & loss adjustment expenses 54,657 30,310 33,030 - 117,997
Acquisition & other underwriting expenses   39,652     19,071     11,726     (132 )   70,317  
Underwriting profit (loss) (6,486 ) (1,422 ) (5,598 ) 232 (13,274 )
 
Net investment income   15,176     3,538     4,528     440     23,682  
Pre-tax operating income (loss) 8,690 2,116 (1,070 ) 672 10,408
 
Net realized gains 11,311
Interest and corporate expenses   2,927  
Earnings before income taxes 18,792
Income tax expense   588  
Net earnings $ 18,204
Less: Net earnings attributable to the
non-controlling interest   454  
Net earnings attributable to ASIH, Ltd. $ 17,750  
 
Loss ratio 62.2 % 66.6 % 84.4 % NM 68.4 %
Expense ratio   45.2 %   36.5 %   29.9 %   NM     39.3 %
Combined ratio   107.4 %   103.1 %   114.3 %   NM     107.7 %
Nine Months Ended September 30, 2010
Insurance   Other    
E&S   ART   Reinsurance Run-off Total
Gross written premiums $ 100,227 $ 66,966 $ 36,641 $ (6 ) $ 203,828
Net written premiums 81,251 48,501 33,539 (6 ) 163,285
Net earned premiums 72,741 39,178 31,515 (6 ) 143,428
Fee & other income 392 2,854 228 18 3,492
 
Losses & loss adjustment expenses 41,977 22,927 21,132 (6 ) 86,030
Acquisition & other underwriting expenses   35,842     14,769     9,297     982     60,890  
Underwriting profit (loss) (4,686 ) 4,336 1,314 (964 ) -
 
Net investment income   16,120     3,634     3,753     592     24,099  
Pre-tax operating income (loss) 11,434 7,970 5,067 (372 ) 24,099
 
Net realized gains 2,080
Interest and corporate expenses   4,461  
Earnings before income taxes 21,718
Income tax expense   1,486  
Net earnings $ 20,232
Less: Net earnings attributable to the
non-controlling interest   360  
Net earnings attributable to ASIH, Ltd. $ 19,872  
 
Loss ratio 57.7 % 58.5 % 67.1 % NM 60.0 %
Expense ratio   48.4 %   30.4 %   28.8 %   NM     39.8 %
Combined ratio   106.1 %   88.9 %   95.8 %   NM     99.8 %

Copyright Business Wire 2010

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