EX-99 2 formprq3earnings141.htm Q3 2008 EARNINGS PRESS RELEASE

 



 


American Safety Insurance Holdings, Ltd.

Reports a Third Quarter Net Loss of $4.3 Million, Including

$9.2 Million of Net Realized Losses on Investments

 

HAMILTON, Bermuda, October 27, 2008 – American Safety Insurance Holdings, Ltd. (NYSE:ASI) today announced a net loss of $4.3 million, or $(0.42) per diluted share, for the three months ended September 30, 2008, compared to net earnings of $7.0 million, or $0.64 per diluted share, for the same period of 2007. The 2008 net loss is a result of net realized losses of $9.2 million which include a charge of $7.7 million for other than temporary impairment of debt and equity securities issued by Lehman Brothers, Freddie Mac and Fannie Mae and realized losses of  $1.4 million from the sale of other fixed maturity securities due to credit concerns about certain financial services companies.

 

Financial highlights for the quarter included (compared to the same period of 2007, except as noted):

 

•

Gross premiums written increased 48% to $74.5 million.

•

Net premiums written increased 26% to $40.5 million.

•

Net premiums earned increased 14% to $41.7 million.

•

Net investment income decreased 4% to $7.5 million.

•

Combined ratio increased to 103.2% compared to 95.3%.

•

Loss ratio was 60.1% compared to 57.5%.

•

Expense ratio increased to 43.1% from 37.8%.

•

Annualized return (loss) on average equity was (7.4)%; excluding net realized losses, the return was 8.1%, in each case compared to 13.1%.

•

Book value per share decreased to $20.53 per outstanding share and $19.94 per diluted share compared to $21.53 and $20.81, respectively, as of December 31, 2007.

•

Cash flow from operations was $69.7 million compared to $9.4 million.

 

Third Quarter Results

 

Gross premiums written increased by $24.2 million primarily due to $14.1 million in premium from a specialty program tied to a July 1 effective date and a $9.6 million increase in assumed reinsurance premiums. The entire annual premium for the program is written in the third quarter and the Company assumes no underwriting risk on the specialty program. The Company receives fee income for acting as the policy issuing carrier and cedes 100% of the premium to an unrelated insurance company. Approximately $7.8 million of the assumed reinsurance premium written during the quarter relates to one transaction and was retroceded to an unrelated insurer. The established reserves related to the ceded and retroceded premiums are fully collateralized.

 

 


 

 

Total revenues were $40.5 million, a decline of $4.2 million. Excluding the $9.2 million of net realized losses on investments, total revenues improved to $49.7 million from $44.7 million in 2007, due to a $5.0 million increase in net premiums earned. Excluding the net realized losses, net earnings for the quarter were $4.9 million, or $0.46 per diluted share, compared to $7.0 million, or $0.64 per diluted share, for the comparable period of 2007. The loss ratio increased by 2.6 percentage points due primarily to changes in the mix of business and $700,000 of additional current accident year reserves related to two programs. The expense ratio increased by 5.3 percentage points due to higher acquisition expenses primarily as a result of changes in the mix of business and the impact of the change from quota share to excess of loss reinsurance on its specialty program line.

 

Cash flow provided from operations was $69.7 million, an increase of $60.3 million as compared to the 2007 quarter. This substantial increase is due to collection of premium from one large assumed reinsurance transaction, collection of reinsurance recoverables and receipt of return premium from the July 1, 2007 core casualty reinsurance treaty. Fourth quarter cash flow is expected to be negatively impacted by payment of the deposit premiums under the renewed core casualty treaty and the payment of retroceded assumed reinsurance premiums.

 

Year to Date

 

Net earnings for the nine months ended September 30, 2008 were $8.5 million, or $0.79 per diluted share. Excluding $8.4 million of net realized losses for the period, net earnings were $16.9 million, or $1.55 per diluted share, compared to net earnings of $21.4 million, or $1.95 per diluted share for the 2007 period. Total revenues were $143.7 million, an increase of $5.2 million. Excluding the net realized losses, total revenues increased $13.5 million due to higher net premiums earned as a result of increased writings in our newer lines of business and increased retentions in the specialty program line. The combined ratio for the nine months ended September 30, 2008 was 102.5%, composed of a loss ratio of 60.6% and an expense ratio of 41.9%, compared to the comparable 2007 period’s combined ratio of 95.1%, composed of a 60.0% loss ratio and a 35.1% expense ratio.

 

Average invested assets increased 9.5% over September 30, 2007 due primarily to increased cash flow from operations. The pre-tax investment yield decreased 60 basis points to 4.7%. Book value per outstanding share and diluted share was $20.53 and $19.94, respectively, compared to $21.53 and $20.81, respectively, at December 31, 2007.

 

Commenting on the results, Stephen R. Crim, Chief Executive Officer, said; “American Safety Insurance remains in strong financial condition despite net realized losses from investments, representing less than 1.5% of our $634 million investment portfolio. The 48% growth we achieved in gross premiums written during the quarter was the result of one time transactions in which the risk was ceded to unrelated insurance companies in exchange for fee income, and we do not expect significant fourth quarter growth. We remain committed to preserving long term profitability through underwriting discipline and a conservative investment philosophy. Newer products resulting from our product diversification strategy initiated in 2006 produced over $21 million of gross premiums written during the quarter and create a platform providing the Company with the opportunity to achieve significant growth when market conditions improve.”

 

Conference Call

 

A conference call to discuss third quarter 2008 results is scheduled for Monday, October 27, 2008 at 9:00 a.m. (Eastern Time), which will be broadcast through Vcall’s Investor Calendar at www.investorcalendar.com, or the Company’s website at www.amsafety.bm. 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. These forward-looking statements reflect the Company's current views with respect to future events and financial performance, including insurance market conditions, 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:

American Safety Insurance Holdings, Ltd. (NYSE:ASI), a Bermuda holding company, offers 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. In the U.S. it offers innovative insurance solutions 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. As a group, ASI’s insurance subsidiaries and affiliates are rated "A" (Excellent) VIII by A.M. Best.

 

Contacts:

American Safety Insurance Holdings, Ltd.

 

American Safety Administrative Services, Inc.

Investor Relations

 

Media Relations

William Tepe

 

Julie McDonald

btepe@amsafety.bm

 

jmcdonald@amsafety.com

(441) 296-8560

 

(770) 916-1908

 

 


 

 

American Safety Insurance Holdings, Ltd. and Subsidiaries

Financial and Operating Highlights

(Unaudited)

(in thousands except per share data and percentages)

 

 

 

Three Months Ended

September 30,

 

 

 

 

Nine Months Ended

September 30,

 

2008

 

2007

 

2008

 

2007

INCOME STATEMENT DATA:

Revenues:

 

 

 

 

 

 

 

Direct premiums earned

$          53,786 

 

$         52,211 

 

$      148,057 

 

$        162,613 

Assumed premiums earned

13,107 

 

2,373 

 

35,220 

 

5,538 

Ceded premiums earned

         (25,201)

 

       (18,012)

 

      (55,394)

 

         (53,811)

Net premiums earned

41,692 

 

36,572 

 

127,883 

 

114,340 

 

 

 

 

 

 

 

 

Net investment income

7,497 

 

7,791  

 

22,141 

 

22,497 

Net realized losses

(9,153)

 

(81)

 

(8,358)

 

(89)

Fee income

499 

 

411 

 

2,017 

 

1,675 

Other income (loss)

               (37)

 

               18 

 

               (7)

 

                50 

Total revenues

          40,498 

 

        44,711 

 

        143,676 

 

      138,473 

 

 

 

 

 

 

 

 

Expenses:

 

 

 

 

 

 

 

Losses and loss adjustment expenses

25,059 

 

21,013

 

77,468 

 

68,586

Acquisition expenses

9,685 

 

7,185

 

30,723 

 

21,031

Payroll and related expenses

5,729 

 

4,320

 

15,975 

 

12,996

Other underwriting expenses

3,042 

 

2,769

 

8,974 

 

7,765

Interest expense

715 

 

846

 

2,370 

 

2,484

Corporate and other expenses

696 

 

697

 

(612)

 

2,134

Minority interest

             (312)

 

                26

 

            (160)

 

               150

Total expenses

         44,614  

 

         36,856

 

      134,738 

 

        115,146
Earnings (loss) before income taxes

(4,116)

 

7,855

 

8,938

 

23,327

Income taxes

              179

 

             809

 

             422

 

           1,917

Net (loss) earnings

$        (4,295)

 

$         7,046

 

$         8,516

 

$         21,410

 

 

 

 

 

 

 

 

Net (loss) earnings per share:

 

 

 

 

 

 

 

Basic

$(0.42)

 

$0.66

 

$0.81

 

$ 2.02

Diluted

$(0.42)

 

$0.64

 

$0.79

 

$ 1.95

Weighted average number of shares outstanding:

 

 

 

 

 

 

 

Basic

10,326,661

 

10,709,996

 

10,521,209

 

10,624,416

Diluted

10,326,661

 

11,044,340

 

10,782,741

 

10,938,607

 

 

 

 

 

 

 

 

GAAP combined ratio

103.2%

 

95.3%

 

102.5%

 

95.1%

 

 

 

 

 

 

 

 

BALANCE SHEET DATA:

 

 

 

 

 

Sept. 30,

2008

 

 

December 31,

2007

 

 

 

 

 

(in millions except per share data)

 

 

 

 

 

 

 

 

Total investments

 

 

 

 

$      634

 

$      617

Total assets

 

 

 

 

992

 

934

Unpaid losses and loss adjustment expenses

 

 

 

 

551

 

505

Total liabilities

 

 

 

 

781

 

704

Total shareholders' equity

 

 

 

 

211

 

230

 

 

 

 

 

 

 

 

Book value per share

 

 

 

 

$  20.53

 

$  21.53

Book value per diluted share

 

 

 

 

$  19.94

 

$  20.81

 

 


 

 

American Safety Insurance Holdings, Ltd. and Subsidiaries

Financial and Operating Highlights

(Unaudited)

(in thousands )

 

Three Months Ended

September 30,

 

 

Nine Months Ended

September 30,

 

2008

 

2007

 

2008

 

2007

PREMIUM SUMMARY (in Thousands)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Gross Premiums Written:

 

 

 

 

 

 

 

Excess and Surplus Lines Segment

 

 

 

 

 

 

 

Environmental

$         11,345

 

$          11,391

 

$         37,676

 

$         36,374

Construction

8,183

 

14,481

 

28,253

 

47,403

Excess

1,544

 

1,756

 

5,874

 

4,952

Healthcare

3,121

 

-

 

8,224

 

-

Products Liability

1,385

 

899

 

4,498

 

3,757

Property

1,415

 

1,050

 

5,705

 

1,283

Surety

           3,561

 

            1,645

 

          8,180

 

          4,431

Total Excess and Surplus

Lines Segment

30,554

 

31,222

 

98,410

 

98,200

 

 

 

 

 

 

 

 

Alternative Risk Transfer Segment

 

 

 

 

 

 

 

Specialty Programs

        30,088

 

          14,920

 

        60,586

 

          49,705

Total Alternative Risk

Transfer Segment

30,088

 

14,920

 

60,586

 

49,705

 

 

 

 

 

 

 

 

Assumed Reinsurance Segment

        13,829

 

            4,188

 

        42,457

 

        15,699

 

 

 

 

 

 

 

 

Total Gross Premiums Written

$       74,471

 

$         50,330

 

$       201,453

 

$      163,604

 

 

 

 

 

 

 

 

Net Premiums Written:

 

 

 

 

 

 

 

Excess and Surplus Lines Segment

 

 

 

 

 

 

 

Environmental

$         9,048

 

$        6,195

 

$        27,669

 

$        26,305

Construction

7,019

 

9,382

 

21,921

 

41,896

Excess

935

 

192

 

1,566

 

608

Healthcare

2,028

 

-

 

5,345

 

-

Products Liability

1,134

 

730

 

3,625

 

2,159

Property

1,351

 

862

 

4,363

 

1,018

Surety

        2,506

 

           1,633

 

          6,183

 

             4,370

Total Excess and Surplus

Lines Segment

24,021

 

18,994

 

70,672

 

76,356

 

 

 

 

 

 

 

 

Alternative Risk Transfer Segment

 

 

 

 

 

 

 

Specialty Programs

      10,551

 

          8,938

 

         31,020

 

         23,372

Total Alternative Risk

Transfer Segment

10,551

 

8,938

 

31,020

 

23,372

 

 

 

 

 

 

 

 

Assumed Reinsurance Segment

        5,975

 

          4,188

 

         34,603

 

         15,699

 

 

 

 

 

 

 

 

Total Net Premiums Written

$      40,547

 

$       32,120

 

$      136,295

 

$      115,427

 

 

 

 

 

 

 

 

Net Premiums Earned:

 

 

 

 

 

 

 

Excess and Surplus Lines Segment

 

 

 

 

 

 

 

Environmental

$       8,575

 

$         9,558

 

$        26,404

 

$        29,108

Construction

8,550

 

14,339

 

29,240

 

53,600

Excess

551

 

188

 

913

 

598

Healthcare

1,061

 

-

 

1,781

 

-

Products Liability

1,280

 

626

 

3,463

 

1,569

Property

1,622

 

223

 

3,377

 

229

Surety

        1,907

 

          1,697

 

         5,259

 

           3,768

Total Excess and Surplus

Lines Segment

23,546

 

26,631

 

70,437

 

88,872

 

 

 

 

 

 

 

 

Alternative Risk Transfer Segment

 

 

 

 

 

 

 

Specialty Programs

      10,238

 

         7,568

 

        27,426

 

        19,930

Total Alternative Risk

Transfer Segment

10,238

 

7,568

 

27,426

 

19,930

 

 

 

 

 

 

 

 

Assumed Reinsurance Segment

        7,908

 

         2,373

 

        30,020

 

          5,538

 

 

 

 

 

 

 

 

Total Net Premiums Earned

$      41,692

 

$      36,572

 

$     127,883

 

$      114,340