American Safety Insurance Holdings, Ltd. Reports Fourth Quarter And Year End Financial Results

American Safety Insurance Holdings, Ltd. (NYSE:ASI) today reported a net loss of $0.6 million, or $(0.06) per diluted share, for the 2012 fourth quarter, compared to net loss of $6.9 million, or ($0.67) per diluted share, for the same period in 2011. Net earnings for the year ended December 31, 2012, were $11.8 million, or $1.14 per diluted share, compared to $10.8 million, or $1.01 per diluted share, for the year ended 2011.

Financial highlights for the quarter included 1 :
  • Gross written premiums increased 15.7% to $78.8 million
  • Total revenues increased 16.2% to $79.6 million
  • Net earned premiums increased 11.6% to $67.3 million
  • The combined ratio was 116.6% compared to 124.0%
  • The net operating loss was $3.7 million compared to a net operating loss of $6.6 million

Financial highlights for the year included 1 :
  • Gross written premiums increased 6.9% to $319.2 million
  • Total revenues increased 6.7% to $297.1 million
  • Net earned premiums increased 9.0% to $253.9 million
  • The combined ratio was 108.1% compared to 111.8%
  • Book value increased 11% to $34.21 per diluted share
  • Net operating earnings were $4.6 million compared to $0

1All comparisons are with the same period of 2011 unless stated otherwise.

Fourth Quarter Results

E&S gross written premiums totaled $47.7 million compared to $35.8 million, ART gross written premiums were $16.8 million compared to $19.1 million, and Reinsurance gross written premiums were $14.3 million compared to $13.2 million.

The increase in total revenue to $79.6 million was driven by increases in net earned premiums of $7.0 million and net realized gains of $4.3 million. Approximately $4.3 million of the increase in net earned premiums is due to adjustments in the E&S division attributable to ceded reinsurance contracts containing adjustable provisions and the property catastrophe treaty in the Reinsurance division.

The combined ratio for the quarter ended December 31, 2012 was 116.6%, composed of a loss ratio of 79.2% and an expense ratio of 37.4%. The loss ratio includes losses from Super Storm Sandy of $5.9 million (8.7 points) and prior year net loss reserve strengthening of $9.0 million (13.4 points). The prior year reserve strengthening is composed of $8.1 million in the Reinsurance division and $2.9 million in the ART division, partially offset by $2.0 million of favorable prior year loss reserve development in the E&S and run-off divisions. Reinsurance prior year net loss reserve strengthening stemmed from four casualty contracts that were non-renewed in prior years. The reserve strengthening in the ART division was primarily attributable to two casualty programs.

The combined ratio for the quarter ended December 31, 2011 was 124.0%, composed of a loss ratio of 85.1% and an expense ratio of 38.9%. The loss ratio includes loss reserve strengthening of $16.4 million (27.2 points) in the ART and Reinsurance divisions, net of $12.2 million (20.2 points) of favorable development in the E&S division.

Year End Results

E&S gross written premiums were $185.9 million compared to $155.5 million, ART gross written premiums were $75.6 million compared to $83.8 million, and Reinsurance gross written premiums were $57.7 million compared to $59.2 million.

The increase in total revenue to $297.1 million was due to increases in net earned premiums of $21.0 million partially offset by a decrease in investment income and net realized gains of $1.1 million and $1.3 million, respectively.

The combined ratio of 108.1% for the year ended December 31, 2012 was composed of a loss ratio of 67.6% and an expense ratio of 40.5%. The 67.6% loss ratio includes prior year loss reserve strengthening of $9.0 million (3.5 points), and $11.4 million (4.5 points) of property catastrophe losses.

The combined ratio of 111.8% for the year ended December 31, 2011 was composed of a loss ratio of 72.7% and an expense ratio of 39.1%. The loss ratio includes $20.2 million (8.7 points) of loss reserve strengthening and $13.5 million (5.8 points) of property catastrophe losses.

The investment portfolio increased 5.8% to $930.6 million. The book yield at December 31, 2012, was 3.8% and the duration was approximately four years.

During 2012, the Company repurchased a total of 779,034 shares of outstanding Company stock at an average cost per share of $17.70. There were 83,998 shares remaining for repurchase at February 28, 2013 under the current repurchase authorization.

Commenting on the results, Stephen R. Crim, Chief Executive Officer, said: “2012 financial results were disappointing for ASI, driven by a combination of catastrophe losses and reserve strengthening in business that has been non-renewed. We are confident that the steps we have taken to leverage strategic investments in our excess and surplus lines product platform, shift the profile of our reinsurance business, and to de-emphasize specialty programs will produce improved underwriting results going forward.“

Conference Call

A conference call to discuss fourth quarter and year end 2012 results is scheduled for Thursday, March 7, 2013, at 9:00 a.m. (Eastern Standard Time), which will be broadcast through Vcall’s Investor Calendar at www.investorcalendar.com, or the Company’s website at www.amsafety.bm. Participants inside the U.S. can access the call by dialing (877) 407-8035. Callers dialing from outside the U.S. can access the call by dialing (201) 689-8035. 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 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.

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) (dollars in thousands)
     
Three months Ended December 31, Twelve Months Ended December 31,
  2012     2011     2012     2011  
INCOME STATEMENT DATA:
Revenues:
Direct earned premiums $ 65,140 $ 60,473 $ 249,810 $ 241,428
Assumed earned premiums 16,544 13,625 60,756 51,047
Ceded earned premiums   (14,342 )   (13,730 )   (56,700 )   (59,596 )
Net earned premiums 67,342 60,368 253,866 232,879
Net investment income 7,621 7,656 30,198 31,338
Net realized gains (losses) 3,961 (345 ) 9,693 10,966
Fee income 680 815 3,316 3,309
Other income   12     12     49     47  
Total revenues   79,616     68,506     297,122     278,539  
Expenses:
Losses and loss adjustment expenses 53,309 51,370 171,698 169,367
Acquisition expenses 13,527 13,396 58,579 52,080
Other underwriting expenses 12,372 10,920 47,531 42,230
Interest expense 322 329 1,521 1,444
Corporate and other expenses   825     553     3,844     2,688  
Total expenses   80,355     76,568     283,173     267,809  
Earnings (loss) before income taxes (738 ) (8,062 ) 13,949 10,730
Income tax (benefit) expense   (1,381 )   (3,981 )   841     (3,394 )
Net earnings (loss) 643 (4,081 ) 13,108 14,124
Less: Net earnings attributable to the non-controlling interest   1,233     2,828     1,269     3,282  
Net earnings (loss) attributable to ASIH, Ltd. $ (590 ) $ (6,909 ) $ 11,839   $ 10,842  
Net earnings (loss) per share:
Basic $ (0.06 ) $ (0.67 ) $ 1.18   $ 1.04  
Diluted $ (0.06 ) $ (0.67 ) $ 1.14   $ 1.01  
Weighted average number of shares outstanding:
Basic   9,704,205     10,324,884     10,073,304     10,393,766  
Diluted   10,023,632     10,703,156     10,382,887     10,739,174  
Loss ratio 79.2 % 85.1 % 67.6 % 72.7 %
Expense ratio   37.4 %   38.9 %   40.5 %   39.1 %
Combined ratio   116.6 %   124.0 %   108.1 %   111.8 %
Net operating earnings:
Net earnings (loss) attributable to ASIH, Ltd. $ (590 ) $ (6,909 ) $ 11,839 $ 10,842
Less: Realized investment gains (losses),

net of taxes
  3,137     (350 )   7,263     10,849  
Net operating earnings (loss) $ (3,727 ) $ (6,559 ) $ 4,576   $ (7 )
 
 
 
BALANCE SHEET DATA: December 31, 2012 December 31, 2011
(unaudited)
Total investments $ 930,648 $ 883,099
Total assets 1,373,131 1,286,532
Unpaid losses and loss adjustment expenses 725,244 680,201
Total liabilities 1,028,083 951,852
Total shareholders’ equity(1) 345,048 334,680
Book value per share-diluted $ 34.21 $ 30.80
 
(1) Includes American Safety Risk Retention Group shareholders' equity of $7,742 and $6,592
 
 
American Safety Insurance Holdings, Ltd. and Subsidiaries
Segment Data
(Unaudited) (Dollars in thousands)
                     
Three Months Ended December 31, 2012
Insurance   Other    
E&S   ART   Reinsurance Run-off   Total
Gross written premiums $ 47,697 $ 16,768 $ 14,320 $ - $ 78,785
Net written premiums 38,825 9,863 14,321 - 63,009
Net earned premiums 38,064 13,670 15,608 - 67,342
Fee & other income (156 ) 814 17 17 692
Losses & loss adjustment expenses(3) 22,353 15,111 16,076 (231 ) 53,309
Acquisition & other underwriting expenses   15,400     4,975     4,601     923     25,899  
Underwriting profit (loss) 155 (5,602 ) (5,052 ) (675 ) (11,174 )
Net investment income   4,253     1,366     1,888     114     7,621  
Pre-tax operating income (loss) 4,408 (4,236 ) (3,164 ) (561 ) (3,553 )
Net realized gains - - - - 3,961
Interest and corporate expenses(4) - - - -   1,147  
Loss before income taxes - - - - (738 )
Income tax benefit - - - -   (1,381 )
Net earnings - - - - 643
Less: Net earnings attributable to the non-controlling interest - - - -   1,233  
Net loss attributable to ASIH, Ltd. - - - -   (590 )
 
Loss ratio 58.7 % 110.5 % 103.0 % NM 79.2 %
Expense ratio   40.9 %   30.4 %   29.4 %   NM     37.4 %
Combined ratio(2)   99.6 %   140.9 %   132.4 % (1)NM     116.6 %
 
           
Three Months Ended December 31, 2011
Insurance Other  
E&S ART Reinsurance Run-off   Total
Gross written premiums $ 35,828 $ 19,067 $ 13,180 $ - $ 68,075
Net written premiums 29,471 11,243 13,258 - 53,972
Net earned premiums 31,394 15,144 13,830 - 60,368
Fee & other income 4 767 - 56 827
Losses & loss adjustment expenses(3) 5,875 26,820 16,675 2,000 51,370
Acquisition & other underwriting expenses   13,543     6,560     3,180     1,033     24,316  
Underwriting profit (loss) 11,980 (17,469 ) (6,025 ) (2,977 ) (14,491 )
Net investment income   3,396     2,143     1,830     287     7,656  
Pre-tax operating income (loss) 15,376 (15,326 ) (4,195 ) (2,690 ) (6,835 )
Net realized losses - - - - (345 )
Interest and corporate expenses(4) - - - -   882  
Loss before income taxes - - - - (8,062 )
Income tax benefit - - - -   (3,981 )
Net loss - - - - (4,081 )
Less: Net earnings attributable to the non-controlling interest - - - -   2,828  
Net loss attributable to ASIH, Ltd. - - - -   (6,909 )
 
Loss ratio 18.7 % 177.1 % 120.6 % NM 85.1 %
Expense ratio   43.1 %   38.3 %   23.0 %   NM     38.9 %
Combined ratio(2)   61.8 %   215.4 %   143.6 %

(1)NM
    124.0 %
 
(1) NM = Ratio is not meaningful
(2) The U.S. GAAP combined ratio is a measure of underwriting performance and represents the relationship of losses and loss adjustment

expenses, acquisition and other underwriting expenses net of fee income to earned premiums.
(3) Reclassifications between divisions and segments were made to allocate indirect corporate overhead costs.
(4) Excise taxes have been classified as corporate expenses resulting in a reclassification of expenses for prior year.
 
 
American Safety Insurance Holdings, Ltd. and Subsidiaries
Segment Data
(Unaudited) (Dollars in thousands)
                   
Twelve Months Ended December 31, 2012
Insurance   Other    
E&S   ART   Reinsurance Run-off   Total
Gross written premiums $ 185,948 $ 75,590 $ 57,706 $ - $ 319,244
Net written premiums 148,297 49,357 57,706 - 255,360
Net earned premiums 138,464 56,466 58,936 - 253,866
Fee & other income 138 3,131 17 79 3,365
Losses & loss adjustment expenses 82,470 47,396 42,063 (231 ) 171,698
Acquisition & other underwriting expenses(3)   61,269     23,508     17,705     3,628     106,110  
Underwriting loss (5,137 ) (11,307 ) (815 ) (3,318 ) (20,577 )
Net investment income   17,615     5,173     6,849     561     30,198  
Pre-tax operating income (loss) 12,478 (6,134 ) 6,034 (2,757 ) 9,621
Net realized gains - - - - 9,693
Interest and corporate expenses(4) - - - -   5,365  
Earnings before income taxes - - - - 13,949
Income tax expense - - - -   841  
Net earnings - - - - 13,108
Less: Net earnings attributable to the non-controlling interest - - - -   1,269  
Net earnings attributable to ASIH, Ltd. - - - -   11,839  
 
Loss ratio 59.6 % 83.9 % 71.4 % NM 67.6 %
Expense ratio   44.1 %   36.1 %   30.0 %   NM     40.5 %
Combined ratio(2)   103.7 %   120.0 %   101.4 % (1)NM     108.1 %
 
                 
Twelve Months Ended December 31, 2011
Insurance Other  
E&S ART Reinsurance Run-off   Total
Gross written premiums $ 155,534 $ 83,820 $ 59,192 $ (1 ) $ 298,545
Net written premiums 125,107 57,329 58,183 (1 ) 240,618
Net earned premiums 119,225 60,667 52,988 (1 ) 232,879
Fee & other income (4 ) 3,203 - 157 3,356
Losses & loss adjustment expenses 60,532 57,130 49,705 2,000 169,367
Acquisition & other underwriting expenses(3)   50,956     24,988     14,785     3,581     94,310  
Underwriting profit (loss) 7,733 (18,248 ) (11,502 ) (5,425 ) (27,442 )
Net investment income   18,572     5,681     6,358     727     31,338  
Pre-tax operating income (loss) 26,305 (12,567 ) (5,144 ) (4,698 ) 3,896
Net realized gains - - - - 10,966
Interest and corporate expenses(4) - - - -   4,132  
Earnings before income taxes - - - - 10,730
Income tax benefit - - - -   (3,394 )
Net earnings - - - - 14,124
Less: Net earnings attributable to the non-controlling interest - - - -   3,282  
Net earnings attributable to ASIH, Ltd. - - - -   10,842  
 
Loss ratio 50.8 % 94.2 % 93.8 % NM 72.7 %
Expense ratio   42.7 %   35.9 %   27.9 %   NM     39.1 %
Combined ratio(2)   93.5 %   130.1 %   121.7 % (1)NM     111.8 %
 
(1) NM = Ratio is not meaningful
(2) The U.S. GAAP combined ratio is a measure of underwriting performance and represents the relationship of losses and loss adjustment expenses,

acquisition and other underwriting expenses net of fee income to earned premiums.
(3) Reclassifications between divisions and segments were made to allocate indirect corporate overhead costs.
(4) Excise taxes have been classified as corporate expenses resulting in a reclassification of expenses for prior year.

Copyright Business Wire 2010

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