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

American Safety Insurance Holdings, Ltd. (NYSE:ASI) today reported net earnings of $4.1 million for the three months ended March 31, 2012, or $0.39 per diluted share, as compared to $7.9 million, or $0.73 per diluted share, for the same period of 2011. For the three months ended March 31, 2012, net operating earnings 1 were $4.0 million or $0.38 per diluted share, compared to a net operating loss of $3.2 million or $(0.30) per diluted share for the same quarter of 2011.

Financial highlights for the quarter included 2 :
  • Gross written premiums were $73.8 million compared to $74.3 million
  • Total revenues were $70.0 million compared to $73.8 million
  • Net earned premiums increased 13% to $61.4 million
  • The combined ratio was 101.1% compared to 116.5%
  • Book value was $31.73 per diluted share versus $30.80 at December 31, 2011
  • Annualized return on average equity (exclusive of realized and unrealized gains from investments) was 5.6%

1 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.

2All comparisons are with the same period last year unless stated otherwise.

First Quarter Results

E&S gross written premiums increased 7% to $38.6 million, ART gross written premiums declined 3% to $21.2 million and Assumed Reinsurance gross written premiums declined 15% to 14.0 million.

The decrease in total revenue to $70.0 million was driven by a decline in net realized gains to $0.1 million compared to $11.1 million in 2011. Partially offsetting the reduction in net realized gains were increases in net earned premiums to $61.4 million from $54.4 million and investment income of $7.8 million compared $7.4 million.

The combined ratio consists of a loss ratio of 60.7% and an expense ratio of 40.4%, compared to 77.7% and 38.8%, respectively, for the same quarter of 2011. The 2011 loss ratio includes property catastrophe losses of $5.8 million and casualty reserve strengthening of $4.6 million, which added 19 points in the aggregate to the 2011 loss ratio. The 2012 expense ratio increase was primarily due to lower acquisition costs in 2011 as a result of reduced profit commissions associated with the property catastrophe treaty.

Pursuant to the January 24, 2012, authorization by the Board of Directors, the company repurchased 5,000 shares at an average price of $18.34 per share.

Commenting on the results, Stephen R. Crim, President and Chief Executive Officer said, “We achieved solid operating results in the quarter with a combined ratio in line with our projections. I am pleased with the growth we produced in the E&S business, advancing our strategy to build scale in our product platform. During the quarter, we saw momentum continue in the improving rate environment, supporting our ability to generate organic growth in existing products.”

Conference Call

A conference call to discuss first quarter 2012 results is scheduled for Thursday, May 3, 2012, 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.

This press release 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 Ended March 31,
  2012       2011  
INCOME STATEMENT DATA:

Revenues:
Direct earned premiums $ 60,528 $ 57,656
Assumed earned premiums 13,865 11,283
Ceded earned premiums   (12,980 )   (14,571 )
Net earned premiums 61,413 54,368
 
Net investment income 7,811 7,437
Net realized gains 53 11,107
Fee income 668 865
Other income   12     11  
Total revenues   69,957     73,788  
 
Expenses:
Losses and loss adjustment expenses 37,281 42,260
Acquisition expenses 14,744 11,755
Other underwriting expenses 10,752 10,199
Interest expense 417 386
Corporate and other expenses   1,256     826  
Total expenses   64,450     65,426  
 
Earnings before income taxes 5,507 8,362
Income tax expense (benefit)   1,106     (32 )
Net earnings 4,401 8,394
Less: Net earnings attributable to the non-controlling interest   345     493  
 
Net earnings attributable to ASIH, Ltd. $ 4,056   $ 7,901  
 
Net earnings per share:
Basic $ 0.40   $ 0.76  
Diluted $ 0.39   $ 0.73  
 
Weighted average number of shares outstanding:
Basic   10,220,700     10,444,325  
Diluted   10,533,732     10,788,117  
 
Loss ratio 60.7 % 77.7 %
Expense ratio   40.4 %   38.8 %
Combined ratio   101.1 %   116.5 %
 
Net operating earnings:
Net earnings attributable to ASIH, Ltd. $ 4,056 $ 7,901
Less: Realized investment gains,

net of taxes
  35    

11,061
 
Net operating earnings (loss) $ 4,021   $ (3,160 )
 
 
BALANCE SHEET DATA:   March 31, 2012   December 31, 2011
(unaudited)  
Total investments $ 897,204 $ 883,099
Total assets 1,298,973 1,286,532
Unpaid losses and loss adjustment expenses 685,690 680,201
Total liabilities 956,554 951,852
Total shareholders’ equity 342,419 334,680
Book value per share-diluted $ 31.73 $ 30.80
 
 

American Safety Insurance Holdings, Ltd. and Subsidiaries

 Segment Data

(Unaudited) (Dollars in thousands)
 
Three Months Ended March 31, 2012
Insurance     Other      
E&S     ART     Reinsurance Run-off Total
Gross written premiums $ 38,611 $ 21,178 $ 13,976 $ - $ 73,765
Net written premiums 30,733 16,143 13,976 - 60,852
Net earned premiums 31,150 16,344 13,919 - 61,413
Fee & other income - 663 - 17 680
 
Losses & loss adjustment expenses 18,917 9,987 8,349 28 37,281
Acquisition & other underwriting expenses   14,190     6,485     4,343     478     25,496  
Underwriting profit (loss) (1,957 ) 535 1,227 (489 ) (684 )
 
Net investment income   4,625     1,429     1,621     136     7,811  
Pre-tax operating income (loss) 2,668 1,964 2,848 (353 ) 7,127
 
Net realized gains 53
Interest and corporate expenses   1,673  
Earnings before income taxes 5,507
Income tax expense   1,106  
Net earnings $ 4,401
Less: Net earnings attributable to the

non-controlling interest
  345  
Net earnings attributable to ASIH, Ltd. $ 4,056  
 
Loss ratio 60.7 % 61.1 % 60.0 % NM 60.7 %
Expense ratio   45.6 %   35.6 %   31.2 %   NM     40.4 %
Combined ratio   106.3 %   96.7 %   91.2 %   NM     101.1 %
 
Three Months Ended March 31, 2011
Insurance Other  
E&S ART Reinsurance Run-off Total
Gross written premiums $ 35,995 $ 21,878 $ 16,472 $ - $ 74,345
Net written premiums 29,602 14,906 15,502 - 60,010
Net earned premiums 27,994 14,355 12,019 - 54,368
Fee & other income 5 860 - 11 876
 
Losses & loss adjustment expenses 17,753 9,014 15,494 (1 ) 42,260
Acquisition & other underwriting expenses   13,013     6,313     2,911     (283 )   21,954  
Underwriting profit (loss) (2,767 ) (112 ) (6,386 ) 295 (8,970 )
 
Net investment income   4,815     1,121     1,349     152     7,437  
Pre-tax operating income (loss) 2,048 1,009 (5,037 ) 447 (1,533 )
 
Net realized gains 11,107
Interest and corporate expenses   1,212  
Earnings before income taxes 8,362
Income tax benefit   (32 )
Net earnings $ 8,394
Less: Net earnings attributable to the

non-controlling interest
  493  
Net earnings attributable to ASIH, Ltd. $ 7,901  
 
Loss ratio 63.4 % 62.8 % 128.9 % NM 77.7 %
Expense ratio   46.5 %   38.0 %   24.2 %   NM     38.8 %
Combined ratio   109.9 %   100.8 %   153.1 %   NM     116.5 %

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