Form 10-Q

0000950123-11-074792.txt : 20110809 0000950123-11-074792.hdr.sgml : 20110809 20110809105907 ACCESSION NUMBER: 0000950123-11-074792 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 16 CONFORMED PERIOD OF REPORT: 20110630 FILED AS OF DATE: 20110809 DATE AS OF CHANGE: 20110809 FILER: COMPANY DATA: COMPANY CONFORMED NAME: AMERICAN SAFETY INSURANCE HOLDINGS LTD CENTRAL INDEX KEY: 0000783603 STANDARD INDUSTRIAL CLASSIFICATION: INSURANCE AGENTS BROKERS & SERVICES [6411] IRS NUMBER: 000000000 FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 10-Q SEC ACT: 1934 Act SEC FILE NUMBER: 001-14795 FILM NUMBER: 111019392 BUSINESS ADDRESS: STREET 1: 31 QUEENS STREET STREET 2: 2ND FLOOR CITY: HAMILTON STATE: D0 ZIP: HM 11 BUSINESS PHONE: 441-296-8560 MAIL ADDRESS: STREET 1: 31 QUEENS STREET STREET 2: 2ND FLOOR CITY: HAMILTON STATE: D0 ZIP: HM 11 FORMER COMPANY: FORMER CONFORMED NAME: AMERICAN SAFETY INSURANCE GROUP LTD DATE OF NAME CHANGE: 19971218 10-Q 1 c19312e10vq.htm FORM 10-Q Form 10-Q

UNITED STATES
SECURITIES AND EXCHANGE COMMISSION

WASHINGTON D.C. 20549

FORM 10 Q


þ		QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

FOR THE QUARTERLY PERIOD ENDED JUNE 30, 2011


“OR”


o		TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

FOR THE TRANSITION PERIOD FROM TO .

Commission File Number 1-14795

AMERICAN SAFETY INSURANCE HOLDINGS, LTD.

(Exact name of Registrant as specified in its charter)


Bermuda		30-0666089
(State or other jurisdiction		(I.R.S. Employer
of incorporation)		Identification No.)

The Boyle Building, 2^nd Floor
31 Queen Street
Hamilton, HM 11, Bermuda
(Address, zip code of principal executive offices)

(441) 296-8560
(Registrant’s telephone number, including area code)

Indicate by check mark whether registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or such shorter period that registrant was required to file such reports) and (2) has been subject to such filing requirements for the past 90 days.

þ Yes o No

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§229.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files). Yes o No o

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer or a non-accelerated filer. See definition of “accelerated filer” and “large accelerated filer” in Rule 12b-2 of the Exchange Act. (check one)


Large accelerated filer o		Accelerated filer þ		Non-accelerated filer o		Smaller reporting company o

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).

o Yes þ No

The aggregate number of shares outstanding of Registrant’s common stock, $0.01 par value, on August 2, 2011, was 10,387,843.

AMERICAN SAFETY INSURANCE HOLDINGS, LTD.

FORM 10-Q

TABLE OF CONTENTS


	Page

PART I — FINANCIAL INFORMATION

Item 1. Financial Statements		3

Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations		20

Item 3. Quantitative and Qualitative Disclosures About Market Risk		28

Item 4. Controls and Procedures		28

PART II — OTHER INFORMATION

Item 1. Legal Proceedings		29

Item 1A. Risk Factors		29

Item 2. Unregistered Sales of Equity Securities and Use of Proceeds		29

Item 3. Defaults Upon Senior Securities		29

Item 4. Reserved		29

Item 5. Other Information		29

Item 6. Exhibits		31

Exhibit 10.1
Exhibit 10.2
Exhibit 10.3
Exhibit 10.4
Exhibit 11
Exhibit 31.1
Exhibit 31.2
Exhibit 32.1
Exhibit 32.2
EX-101 INSTANCE DOCUMENT
EX-101 SCHEMA DOCUMENT
EX-101 CALCULATION LINKBASE DOCUMENT
EX-101 LABELS LINKBASE DOCUMENT
EX-101 PRESENTATION LINKBASE DOCUMENT
EX-101 DEFINITION LINKBASE DOCUMENT

PART I — FINANCIAL INFORMATION


Item 1.		Financial Statements

American Safety Insurance Holdings, Ltd. and Subsidiaries
Consolidated Balance Sheets
(dollars in thousands except share data)


	June 30, 2011
	(Unaudited)		December 31, 2010
Assets
Investments available-for-sale:
Fixed maturity securities at fair value (including $5,987 and $5,419 from VIE)	$	818,284	$	750,250
Common stock, at fair value		6,926		5,082
Preferred stock, at fair value		3,061		2,911
Short-term investments, at fair value (including $2,145 and $3,083 from VIE)		34,810		60,207


Total investments		863,081		818,450

Cash and cash equivalents (including $1,053 and $759 from VIE)		28,579		38,307
Accrued investment income (including $57 and $54 from VIE)		6,828		7,174
Premiums receivable (including $1,022 and $1,116 from VIE)		46,584		32,470
Ceded unearned premiums (including $230 and $286 from VIE)		25,104		24,380
Reinsurance recoverables (including $2,393 and $4,291 from VIE)		190,844		198,014
Deferred income taxes		6,295		5,922
Deferred acquisition costs (including $(533) and $(38) from VIE)		24,561		22,142
Property, plant and equipment, net		13,911		13,013
Goodwill		9,317		9,317
Other assets (including $1,191 and $0 from VIE)		50,220		52,064


Total assets	$	1,265,324	$	1,221,253


Liabilities and Shareholders’ Equity
Liabilities:
Unpaid losses and loss adjustment expenses (including $8,336 and $9,710 from VIE)	$	667,644	$	649,641
Unearned premiums (including $845 and $945 from VIE)		142,624		128,981
Ceded premiums payable (including $440 and $434 from VIE)		15,059		11,496
Funds held (including $181 and $248 from VIE)		62,020		55,917
Other liabilities (including $0 and $427 from VIE)		14,554		17,501
Loans payable		39,183		39,183


Total liabilities		941,084		902,719


Shareholders’ equity:
Preferred stock, $0.01 par value; authorized 5,000,000 shares; no shares issued and outstanding		—		—
Common stock, $0.01 par value; authorized 30,000,000 shares; issued and outstanding at June 30, 2011, 10,385,419 and December 31, 2010, 10,386,519		104		104
Additional paid-in capital		102,090		102,768
Retained earnings		186,299		174,328
Accumulated other comprehensive income, net		32,004		38,128

Total American Safety Insurance Holdings, Ltd. shareholders’ equity		320,497		315,328
Equity in non-controlling interest		3,743		3,206
Total equity		324,240		318,534


Total liabilities and equity	$	1,265,324	$	1,221,253

See accompanying notes to consolidated interim financial statements (unaudited).

American Safety Insurance Holdings, Ltd. and Subsidiaries
Consolidated Statements of Operations
(Unaudited)
(dollars in thousands except per share data)


	Three Months Ended						Six Months Ended
	June 30,						June 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 (benefit) expense		(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 American Safety Insurance Holdings, 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

See accompanying notes to consolidated interim financial statements (unaudited).

American Safety Insurance Holdings, Ltd. and Subsidiaries
Consolidated Statements of Cash Flow
(Unaudited)
(dollars in thousands)


	Six Months Ended
	June 30,
	2011			2010
Cash flow from operating activities:
Net earnings	$	12,476		$	12,926
Adjustments to reconcile net earnings to net cash provided by operating activities:
Realized gains on sale of investments		(11,302	)		(1,520	)
Depreciation and amortization expense		1,282			1,402
Stock based compensation expense		1,148			1,119
Amortization of deferred acquisition costs, net		(2,419	)		(5,187	)
Amortization of premiums on investments		1,942			510
Deferred income taxes		(1,237	)		(887	)
Change in operating assets and liabilities:
Accrued investment income		346			(279	)
Premiums receivable		(14,114	)		(8,320	)
Reinsurance recoverable		7,170			(15,701	)
Ceded unearned premiums		(724	)		19,452
Funds held		6,103			7,219
Unpaid loss and loss adjustment expenses		18,003			31,488
Unearned premiums		13,643			(3,106	)
Ceded premiums payable		3,563			1,241
Other liabilities		(2,947	)		(2,407	)
Other assets, net		1,671			(2,675	)

Net cash provided by operating activities		34,604			35,275

Cash flow from investing activities:
Purchases of fixed maturities		(248,114	)		(168,989	)
Purchase of common stock		(2,500	)		—
Proceeds from sales and maturities of fixed maturities		184,077			109,380
Proceeds from sale of equity securities		656			—
Decrease in short-term investments		25,397			34,549
Purchase of fixed assets, net		(2,022	)		(2,404	)

Net cash used in investing activities		(42,506	)		(27,464	)

Cash flow from financing activities:
Stock repurchase payments		(2,286	)		(2,883	)
Proceeds from exercised stock options		460			231
Proceeds from termination of interest rate swaps		—			2,055

Net cash used in financing activities		(1,826	)		(597	)

Net (decrease) increase in cash and cash equivalents		(9,728	)		7,214
Cash and cash equivalents at beginning of period		38,307			34,756


Cash and cash equivalents at end of period	$	28,579		$	41,970


Supplemental disclosure of cash flow information:
Income taxes paid	$	80		$	10

Interest paid	$	741		$	1,372

See accompanying notes to consolidated interim financial statements (unaudited).

American Safety Insurance Holdings, Ltd. and Subsidiaries
Consolidated Statements of Comprehensive Earnings
(Unaudited) (dollars in thousands)


	Three Months Ended						Six Months Ended
	June 30,						June 30,
	2011			2010			2011			2010

Net earnings	$	4,082		$	6,362		$	12,476		$	12,926

Other comprehensive income before income taxes:

Unrealized gains, net, on securities available-for-sale		8,004			17,282			6,076			22,464

Amortization of gain and unrealized losses on hedging transactions		(39	)		(22	)		(39	)		(703	)

Reclassification adjustment for realized gains included in net earnings		(194	)		(509	)		(11,302	)		(1,520	)


Total other comprehensive income (loss) before taxes		7,771			16,751			(5,265	)		20,241

Income tax expense related to items of other comprehensive income		1,283			2,553			846			2,862


Other comprehensive income (loss) net of income taxes		6,488			14,198			(6,111	)		17,379


Comprehensive income	$	10,570		$	20,560		$	6,365		$	30,305

Less: Comprehensive income attributable to the non-controlling interest		75			311			537			387


Comprehensive income attributable to American Safety Insurance Holdings, Ltd.	$	10,495		$	20,249		$	5,828		$	29,918

See accompanying notes to consolidated interim financial statements (unaudited).

American Safety Insurance Holdings, Ltd. and Subsidiaries
Notes to Consolidated Financial Statements

June 30, 2011
(Unaudited)

Note 1 — Basis of Presentation

The accompanying consolidated financial statements of American Safety Insurance Holdings, Ltd. (“American Safety Insurance”) and its subsidiaries and American Safety Risk Retention Group, Inc. (“American Safety RRG”), a non-subsidiary risk retention group affiliate (collectively, the “Company”), are prepared in accordance with accounting principles generally accepted in the United States of America (“GAAP”) as established by the FASB Accounting Standards Codification^© (“Codification” or “ASC”). The preparation of financial statements in conformity with GAAP requires management to make estimates, based on the best information available, in recording transactions resulting from business operations. Certain balance sheet amounts involve accounting estimates and/or actuarial determinations and are therefore subject to change and include, but are not limited to, invested assets, deferred income taxes, reinsurance recoverables, goodwill and the liabilities for unpaid losses and loss adjustment expenses. As additional information becomes available (or actual amounts are determinable), the estimates may be revised and reflected in operating results. While management believes that these estimates are adequate, such estimates may change in the future.

The results of operations for the three and six months ended June 30, 2011, may not be indicative of the results for the fiscal year ending December 31, 2011. These unaudited interim consolidated financial statements and notes should be read in conjunction with the financial statements and notes included in the audited consolidated financial statements on Form 10-K of the Company for the fiscal year ended December 31, 2010.

The unaudited interim consolidated financial statements include the accounts of American Safety Insurance, each of its subsidiaries and American Safety RRG. All significant intercompany balances as well as normal recurring adjustments have been eliminated. Unless otherwise noted, all balances are presented in thousands.

Note 2 — Investments

The amortized cost and estimated fair values of the Company’s investments at June 30, 2011 and December 31, 2010, are as follows (dollars in thousands):


			Gross		Gross
	Amortized		unrealized		unrealized			Estimated
	cost		gains		losses			fair value
June 30, 2011
Securities available for sale:
Fixed maturities:

U.S. Treasury securities and obligations of U.S. government corporations and agencies	$	66,694	$	2,963	$	(24	)	$	69,633
States of the U.S. and political subdivisions of the states		27,745		1,902		(180	)		29,467
Corporate securities		312,667		18,867		(209	)		331,325
Mortgage-backed securities		278,647		11,156		(332	)		289,471
Commercial mortgage-backed securities		61,845		4,006		(266	)		65,585
Asset-backed securities		32,256		569		(22	)		32,803


Total fixed maturities	$	779,854	$	39,463	$	(1,033	)	$	818,284


Common stock	$	6,926	$	—	$	—		$	6,926


Preferred stock	$	2,789	$	305	$	(33	)	$	3,061


			Gross		Gross
	Amortized		unrealized		unrealized			Estimated
	cost		gains		losses			fair value
December 31, 2010
Securities available for sale:
Fixed maturities:

U.S. Treasury securities and obligations of U.S. government corporations and agencies	$	70,796	$	3,014	$	(36	)	$	73,774
States of the U.S. and political subdivisions of the states		23,463		816		(253	)		24,026
Corporate securities		314,995		25,023		(459	)		339,559
Mortgage-backed securities		234,137		8,990		(408	)		242,719
Commercial mortgage-backed securities		29,123		6,438		—			35,561
Asset-backed securities		33,884		796		(69	)		34,611


Total fixed maturities	$	706,398	$	45,077	$	(1,225	)	$	750,250


Common stock	$	5,082	$	—	$	—		$	5,082


Preferred stock	$	2,789	$	198	$	(76	)	$	2,911

The amortized cost and estimated fair value at June 30, 2011 are shown below by contractual maturity.


	Amortized		Estimated
	cost		fair value

Due in one year or less	$	15,432	$	15,654
Due after one year through five years		145,033		152,130
Due after five years through ten years		174,054		184,611
Due after ten years		72,588		78,030
Mortgage and asset-backed securities		372,747		387,859


Total	$	779,854	$	818,284

The following tables summarize the gross unrealized losses of the Company’s investment portfolio as of June 30, 2011 and December 31, 2010, by category and length of time that the securities have been in an unrealized loss position.


	Less than 12 Months					12 months or longer					Total
			Unrealized					Unrealized					Unrealized
	Fair Value		Losses			Fair Value		Losses			Fair Value		Losses

June 30, 2011
Fixed Maturities:
U.S. Treasury securities and obligations of U.S. government corporations and agencies	$	5,816	$	(24	)	$	—	$	—		$	5,816	$	(24	)
States of the U.S. & other political subdivisions of the states		4,648		(136	)		1,071		(44	)		5,719		(180	)
Corporate securities		20,473		(209	)		—					20,473		(209	)
Mortgage-backed securities		35,995		(332	)		—		—			35,995		(332	)
Commercial mortgage-backed securities		36,030		(266	)		—		—			36,030		(266	)
Asset-backed securities		2,075		(22	)		—		—			2,075		(22	)

Total fixed maturities		105,037		(989	)		1,071		(44	)		106,108		(1,033	)
Common stock		—		—			—		—			—		—
Preferred stock		485		(7	)		500		(26	)		985		(33	)

Total temporarily impaired	$	105,522	$	(996	)	$	1,571	$	(70	)	$	107,093	$	(1,066	)


	Less than 12 Months					12 months or longer					Total
			Unrealized					Unrealized					Unrealized
	Fair Value		Losses			Fair Value		Losses			Fair Value		Losses

December 31, 2010
Fixed Maturities:
U.S. Treasury securities and obligations of U.S. government corporations and agencies	$	8,615	$	(36	)	$	—	$	—		$	8,615	$	(36	)
States of the U.S. & other political subdivisions of the states		7,071		(194	)		1,060		(59	)		8,131		(253	)
Corporate securities		21,321		(459	)		—		—			21,321		(459	)
Mortgage-backed securities		29,274		(408	)		—		—			29,274		(408	)
Commercial mortgage-backed securities		—		—			—		—			—		—
Asset-backed securities		6,903		(69	)		—		—			6,903		(69	)

Total fixed maturities		73,184		(1,166	)		1,060		(59	)		74,244		(1,225	)
Common stock		—		—			—		—			—		—
Preferred stock		966		(29	)		972		(47	)		1,938		(76	)

Total temporarily impaired	$	74,150	$	(1,195	)	$	2,032	$	(106	)	$	76,182	$	(1,301	)

We routinely review our investments that have experienced declines in fair value to determine if the decline is other than temporary. These reviews are performed with consideration of the facts and circumstances of an issuer in accordance with the Securities and Exchange Commission (“SEC”), Accounting for Non-Current Marketable Equity Securities; ASC-320-10-05, Accounting for Certain Investments in Debt and Equity Securities, and related guidance. The identification of distressed investments and the assessment of whether a decline is other-than-temporary involve significant management judgment and require evaluation of factors including but not limited to:

•

percentage decline in value and the length of time during which the decline has occurred;

•

recoverability of principal and interest;

•

market conditions;

•

ability and intent to hold the investment to recovery;

•

continuing operating losses of the issuer;

•

rating agency actions that affect the issuer’s credit status;

•

adverse changes in the issuer’s availability of production resources, revenue sources, technological conditions; and

•

adverse changes in the issuer’s economic, regulatory, or political environment.

Additionally, credit analysis and/or credit rating issues related to specific investments may trigger more intensive monitoring to determine if a decline in market value is other than temporary (“OTTI”). For investments with a market value below cost, the process includes evaluating the length of time and the extent to which cost exceeds market value, the prospects and financial condition of the issuer, and evaluation for a potential recovery in market value, among other factors. This process is not exact and further requires consideration of risks such as credit risk and interest rate risk. Therefore, if an investment’s cost exceeds its market value solely due to changes in interest rates, recognizing impairment may not be appropriate. For the six months ended June 30, 2011 and 2010, the Company did not incur any OTTI losses.

During the six months ended June 30, 2011 and 2010, available-for-sale fixed maturity securities were sold for total proceeds of $154.5 million and $85.8 million, respectively, resulting in net realized gains to the Company totaling $11.3 million and $1.5 million in 2011 and 2010, respectively. For the purpose of determining net realized gains, the cost of securities sold is based on specific identification.

Note 3 — Segment Information

We segregate our business into two segments: insurance operations and other. The insurance operations are further classified into three divisions: excess and surplus lines (E&S), alternative risk transfer (ART) and assumed reinsurance (Assumed Re). E&S consists of seven product lines: environmental, primary casualty, excess, property, surety, healthcare, and professional liability. ART consists of two product lines: specialty programs and fully funded. Assumed Re consists of property and casualty business assumed from unaffiliated specialty insurers and reinsurers. Other includes lines of business that we no longer underwrite (run-off) and other ancillary product lines. Prior year amounts have been reclassified to conform to the current year presentation.

Within E&S, our environmental insurance products provide general contractor pollution and/or professional liability coverage for contractors and consultants in the environmental remediation industry and property owners. Primary casualty provides general liability insurance for residential and commercial contractors as well as general liability and product liability for smaller manufacturers, distributors, non-habitational real estate and certain real property owner, landlord and tenant risks. Excess provides excess and umbrella liability coverages over our own and other carriers’ primary casualty polices. Our property product encompasses surplus lines commercial property business and commercial multi-peril (CMP) policies. Surety provides payment and performance bonds primarily to the environmental remediation and construction industries. Healthcare provides customized liability insurance solutions primarily for long-term care facilities. Professional Liability provides miscellaneous liability and professional liability coverage on both a primary and excess basis. Professional liability coverage is provided to lawyers, insurance agents, and other businesses, while miscellaneous liability coverage is provided to private and not for profit entities and, to a lesser extent, public companies.

In our ART division, specialty programs provide insurance to homogeneous niche groups through third party program managers. Our specialty programs consist primarily of property and casualty insurance coverages for certain classes of specialty risks including, but not limited to, construction contractors, pest control operators, auto dealers, real estate brokers, consultants, and restaurant and tavern owners. Fully funded policies provide our insureds the ability to fund their liability exposure via a self-insurance vehicle for which we generate fee income. We write fully funded general and professional liability for businesses operating primarily in the healthcare and construction industries.

Our Assumed Reinsurance division offers property and casualty reinsurance products in the form of treaty and facultative contracts targeting specialty insurers, risk retention groups and captives. We provide this coverage on an excess of loss and, to a lesser extent, a quota share basis. We reinsure casualty business, which includes medical malpractice, general liability, commercial auto, professional liability and workers’ compensation. The assumed reinsurance division also participates in one property catastrophe treaty that provides a maximum of $15 million of coverage over the treaty period. The treaty covers world-wide property catastrophe losses including hurricanes and earthquakes.

Our Other segment includes lines of business that we have placed in run-off, such as workers’ compensation, excess liability insurance for municipalities, other commercial lines, real estate and other ancillary product lines.

The Company measures segments using net income, total assets and total equity. The reportable insurance divisions are measured based on underwriting profit (loss) and pre-tax operating income (loss).

The following table presents key financial data by segment for the three months ended June 30, 2011 and 2010, respectively (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 written premiums		34,413			17,140			14,864			(1	)		66,416
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 written premiums		29,475			17,346			10,945			—			57,766
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	%


*		NM = Ratio is not meaningful

**		The combined ratio is a measure of underwriting performance and represents the relationship of losses and loss adjustment expenses, acquisition expenses, and other underwriting expenses net of fee income to earned premiums.

The following table presents key financial data by segment for the six months ended June 30, 2011 and 2010, respectively (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 written premiums		64,015			32,046			30,366			(1	)		126,426
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 written premiums		53,828			31,438			21,281			—			106,547
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		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	%


*		NM = Ratio is not meaningful

**		The combined ratio is a measure of underwriting performance and represents the relationship of losses and loss adjustment expenses, acquisition expenses, and other underwriting expenses net of fee income to earned premiums.

The Company conducts business in the United States and Bermuda. The following table provides financial data attributable to the geographic locations for the three months ended June 30, 2011 and 2010 (dollars in thousands):


	United States			Bermuda		Total
June 30, 2011
Income tax benefit	$	(549	)	$	—	$	(549	)
Net (loss) earnings attributable to American Safety Insurance Holdings, Ltd.	$	(1,279	)	$	5,331	$	4,052


	United States		Bermuda		Total
June 30, 2010
Income tax expense	$	950	$	—	$	950
Net earnings attributable to American Safety Insurance Holdings, Ltd.	$	1,550	$	4,613	$	6,163

The following table provides financial data attributable to the geographic locations for the six months ended June 30, 2011 and 2010 (dollars in thousands):


	United States			Bermuda		Total
June 30, 2011
Income tax benefit	$	(581	)	$	—	$	(581	)
Net (loss) earnings attributable to American Safety Insurance Holdings, Ltd.	$	(1,399	)	$	13,352	$	11,953
Assets	$	664,616		$	600,708	$	1,265,324
Equity	$	99,462		$	224,778	$	324,240


	United States		Bermuda		Total
June 30, 2010
Income tax expense	$	851	$	—	$	851
Net earnings attributable to American Safety Insurance Holdings, Ltd.	$	2,214	$	10,456	$	12,670
Assets	$	648,759	$	546,125	$	1,194,884
Equity	$	102,198	$	202,071	$	304,269

Note 4 — Income Taxes

United States federal and state income tax (benefit) expense from operations consists of the following components (dollars in thousands):


	Three Months Ended						Six Months Ended
	June 30,						June 30,
	2011			2010			2011			2010
Current	$	343		$	1,459		$	656		$	1,992
Deferred		(892	)		(509	)		(1,237	)		(887	)
Change in valuation allowance		—			—			—			(254	)


Total	$	(549	)	$	950		$	(581	)	$	851

Income tax (benefit) expense for the periods ended June 30, 2011 and 2010 differed from the amount computed by applying the United States Federal income tax rate of 34% to earnings before Federal income taxes as a result of the following (dollars in thousands):


	Three Months Ended						Six Months Ended
	June 30,						June 30,
	2011			2010			2011			2010
Expected income tax expense	$	1,191		$	2,419		$	3,866		$	4,597
Foreign earned income not subject to U.S. taxation		(1,812	)		(1,564	)		(4,539	)		(3,555	)
Change in valuation allowance		—			—			—			(254	)
Tax-exempt interest		(3	)		(3	)		(6	)		(21	)
State taxes and other		75			98			98			84

Total	$	(549	)	$	950		$	(581	)	$	851

Note 5 — Equity Based Compensation

The Company’s incentive stock plan grants incentive stock options to employees. The majority of the options outstanding under the plan vest evenly over a three year period and have a term of 10 years. The Company uses the Black-Scholes option pricing model to value stock options. The Company’s methodology for valuing stock options has not changed from December 31, 2010. During the first six months of 2011, the Company did not grant any stock options compared to 78,775 for the same period of 2010. Stock based compensation expense related to outstanding stock options was $140 and $274 for the three months ended June 30, 2011 and 2010, respectively and $329 and $442 for the six months ended June 30, 2011 and 2010, respectively, and is reflected in the Consolidated Statement of Operations in other underwriting expenses.

In addition to stock options discussed above, the Company grants restricted shares to employees under the incentive stock plan. No restricted stock was granted during the three month period ended June 30, 2011 or 2010. During the first six months of 2011, the Company granted 38,681 shares of restricted stock compared to 209,254 for the same period in 2010. All 2011 shares granted vest on the grant date anniversary ratably over three years at 25%, 25%, and 50%, respectively. Stock based compensation expense related to the restricted shares was $333 and $329 for the three months ended June 30, 2011 and 2010, respectively, and is reflected in the Consolidated Statement of Operations in other underwriting expenses. For the six months ended June 30, 2011 and 2010, $683 and $517 were recorded as compensation expense, respectively, and is reflected in the Consolidated Statement of Operations in other underwriting expenses. Additionally, the Company expensed $67 and $80 in expense for the three months ended June 30, 2011 and 2010, respectively, related to stock awards related to Director compensation. For the six months ended June 30, the company expensed $136 and $160 in 2011 and 2010, respectively, related to Director compensation.

Note 6 — Fair Value Measurements

Fair value is the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. Fair value measurement assumes that the transaction to sell the asset or transfer the liability occurs in the principal market for the asset or liability, or in the absence of a principal market, the most advantageous market. Market participants are buyers and sellers in the principal (or most advantageous) market that are independent, knowledgeable, able to transact for the asset or liability, and willing to transact for the asset or liability.

We determined the fair values of certain financial instruments based on the fair value hierarchy established in “Fair Value Measurements”, topic ASC 820-10-05. Valuation techniques consistent with the market approach, income approach and/or cost approach are used to measure fair value. The inputs of these valuation techniques are categorized into three levels. The guidance requires an entity to maximize the use of observable inputs and minimize the use of unobservable inputs when measuring fair value. The standard describes three levels of inputs that may be used to measure fair value.

Our Level 1 inputs are quoted prices (unadjusted) in active markets for identical assets or liabilities that can be accessed at the reporting date. The Company receives one quote per instrument for Level 1 inputs.

Our Level 2 inputs are inputs other than quoted prices included within Level 1 that are observable for the asset or liability, either directly or indirectly. The Company receives one quote per instrument for Level 2 inputs.

Our Level 3 inputs are valuations based on inputs that are unobservable. Unobservable inputs reflect the Company’s own assumptions about the assumptions that we believe market participants would use in pricing the asset or liability.

The Company receives fair value prices from its third-party investment managers who use an independent pricing service. These prices are determined using observable market information such as dealer quotes, market spreads, cash flows, yield curves, live trading levels, trade execution data, market consensus prepayment speeds, credit information, and the security’s terms and conditions, among other things. The Company has reviewed the processes used by the third party providers for pricing the securities, and has determined that these processes result in fair values consistent with the GAAP requirements. In addition, the Company reviews these prices for reasonableness and has not adjusted any prices received from the third-party providers as of June 30, 2011.

Assets measured at fair value on a recurring basis are summarized below:


As of June 30, 2011 Fair Value Measurements Using (dollars in thousands)
	Quoted Prices in		Significant
	Active Markets		Other		Significant
	for Identical		Observable		Unobservable
	Assets		Inputs		Inputs
	(Level 1)		(Level 2)		(Level 3)		Total
Fixed Maturities:
U.S. Treasury securities and obligations of U.S. government corporations and agencies	$	23,551	$	46,082	$	—	$	69,633
States of the U.S. and political subdivisions of the states		—		29,467		—		29,467
Corporate securities		—		331,325		—		331,325
Mortgage-backed securities		—		289,471		—		289,471
Commercial mortgage-backed securities		—		65,585		—		65,585
Asset-backed securities		—		32,803		—		32,803

Total fixed maturities		23,551		794,733		—		818,284
Equities securities		3,061		—		6,926		9,987
Short term investments		34,810		—		—		34,810


Total	$	61,422	$	794,733	$	6,926	$	863,081


	Fair Value
	Measurements
	Using Significant
	Unobservable Inputs
	(Level 3)
	(dollars in thousands)
	Equities

Level 3 Financial Instruments

Balance at December 31, 2010	$	5,082
Total gains (losses) realized (unrealized):
Included in earnings		—
Included in other comprehensive income		—
Net purchases, sales & distributions		1,844
Net transfers in (out of) Level 3		—

Balance at June 30, 2011	$	6,926


Change in net unrealized gains relating to assets still held at reporting date	$	—

There were no transfers in and out of Level 1 and 2 categories during the first six months of 2011.

A description of the Company’s inputs used to measure fair value is as follows:

Fixed maturities (Available for Sale) Levels 1 and 2

•

United States Treasury securities are valued using quoted (unadjusted) prices in active markets and are therefore shown as Level 1.

•

United States Government agencies are reported at fair value utilizing Level 2 inputs. These fair value measurements are provided by using quoted prices of securities with similar characteristics.

•

States of the U.S. and political subdivisions of the states are reported at fair value utilizing Level 2 inputs. These fair value measurements are provided by using quoted prices of securities with similar characteristics.

•

Corporate securities are reported at fair value utilizing Level 2 inputs. These fair value measurements are provided by using quoted prices of securities with similar characteristics.

•

Mortgage-backed securities are reported at fair value utilizing Level 2 inputs. These fair value measurements are provided by using quoted prices of securities with similar characteristics.

•

Commercial mortgage-backed securities are reported at fair value utilizing Level 2 inputs. These fair value measurements are provided by using quoted prices of securities with similar characteristics.

•

Asset-backed securities are reported at fair value utilizing Level 2 inputs. These fair value measurements are provided by using quoted prices of securities with similar characteristics.

Equity securities (Level 1) — For these securities, fair values are based on quoted market prices (unadjusted) in active markets.

Equity securities (Level 3) — For these equity funds, the Company was unable to use observable market inputs and management used assumptions that market participants might use.

As management is ultimately responsible for determining the fair value measurements for all securities, we validate prices received from our investment advisor by comparing the fair value estimates to our knowledge of the current market and investigate any prices deemed not to be representative of fair value. We review fair values for significant changes in a one-month period and security values that change in value contrary to general market movements.

Short-term investments are reported at fair value using Level 1 inputs.

Cash and cash equivalents — The carrying amounts approximate fair value because of the short-term maturity of those instruments.

Premiums receivable — The carrying value of premiums receivable approximate fair value due to its short-term nature.

Reinsurance recoverables — The carrying value of reinsurance receivables approximate fair value. The Company has established an allowance for bad debts associated with reinsurance balances recoverable and is primarily related to specific counterparties.

Loans payable — The carrying value of those notes is a reasonable estimate of fair value. Due to the variable interest rate of these instruments, carrying value approximates market value. Changes in credit spreads for the Company or the industry sector could change this assessment in the future.

Note 7 — Credit Facility

The Company has an unsecured line of credit facility for $20 million that expires August 20, 2013. The principal amount outstanding under the credit facility provides for interest at LIBOR plus 200 basis points with a 3% floor. In addition, the credit facility provides for an unused facility fee of 15 basis points payable monthly. The line of credit facility contains certain covenants and at June 30, 2011, the Company was in compliance with all covenants. The Company has no outstanding borrowings at June 30, 2011.

Note 8 — Loans Payable

Trust Preferred Offerings

In 2003, American Safety Capital and American Safety Capital II, both non-consolidated, wholly-owned subsidiaries of the Company, issued $8 million and $5 million, respectively, of variable rate 30-year trust preferred securities. The securities require interest payments on a quarterly basis calculated at a floating rate of LIBOR + 4.2% and LIBOR + 3.95% for American Safety Capital and American Safety Capital II, respectively. The securities can be redeemed at the Company’s option any time after five years from the date of original issuance.

In 2005, the American Safety Capital Trust III, a non-consolidated wholly-owned subsidiary of the Company, issued a 30-year trust preferred securities in the amount of $25 million. The securities require interest payments quarterly of 8.31% for the first five years and LIBOR plus 3.4% thereafter. The securities may be redeemed at the Company’s option after five years from the date of original issuance.

The balance of loans payable at June 30, 2011 was $39.2 million.

Note 9 — Variable Interest Entity

The Risk Retention Act of 1986 (the “Risk Retention Act”) allowed companies with specialized liability insurance needs that could not be met in the standard insurance market to create a new type of insurance vehicle called a risk retention group. We assisted in the formation of American Safety RRG in 1988 in order to establish a U.S. insurance company to market and underwrite specialty environmental coverages.

American Safety RRG is a variable interest entity (“VIE”) which is consolidated in our financial statements in accordance with ASC 810-10-5, as through the contractual relationships, the Company has the power to direct the activities of American Safety RRG that most significantly impact its economic performance and the right to receive benefits from American Safety RRG that could be significant to American Safety RRG. Due to these criteria being met, American Safety is the primary beneficiary of the variability of the underwriting profits of American Safety RRG. The liabilities of American Safety RRG consolidated by the Company do not represent additional claims on the Company’s general assets; rather, they represent claims against the specific assets of American Safety RRG. Similarly, the assets of American Safety RRG consolidated by the Company do not represent additional assets available to satisfy claims against the Company’s general assets.

The creditors of American Safety RRG do not have recourse to the Company for the obligations outside of obligations that exist due to contractual loss sharing or reinsurance arrangements that exist between American Safety RRG and other entities under common control in the ordinary course of the business. The equity of American Safety RRG is for the benefit of the policyholders and is considered a non-controlling interest in the shareholders’ equity section of the Company’s Consolidated Balance Sheet. Should the RRG incur net losses and the equity of RRG decline below regulatory minimum capital levels or result in a deficit, there is no legal obligation of the Company to fund those losses or contribute capital to the VIE. The profit and loss of the VIE increases or decreases the value of the non-controlling interest on the balance sheet of the Company and does not contribute to earnings or equity attributable to American Safety Insurance Holdings, Ltd.

Assets and Liabilities of the VIE as consolidated in the Consolidated Balance Sheets (dollars in thousands):


	6/30/2011		12/31/2010
Investments	$	8,132	$	8,502
Cash and equivalents		1,053		759
Accrued investment income		57		54
Premiums receivable		1,022		1,116
Ceded unearned premiums		230		286
Reinsurance recoverables		2,393		4,291
Other assets		1,191		—

Total Assets	$	14,078	$	15,008


Unpaid losses and loss adjustment expenses	$	8,336	$	9,710
Unearned premium		845		945
Ceded premiums payable		440		434
Deferred acquisition costs, net		533		38
Funds held		181		248
Other liabilities		—		427

Total Liabilities	$	10,335	$	11,802

Note 10 — Commitments and Contingencies

At June 30, 2011, the Company had aggregate outstanding irrevocable letters of credit which had not been drawn amounting to $5.9 million. Those letters of credit included $2.5 million for the benefit of the Vermont Department of Banking, Insurance, Securities and Health Care Administration, as well as $2.5 million issued pursuant to a contingent payment obligation, and $0.9 million issued to various other parties.

American Safety Reinsurance Ltd.(ASRe), our reinsurance subsidiary, provides reinsurance protection for risk retention groups, captives and insurance companies and may be required to provide letters of credit to collateralize a portion of the reinsurance protection. In the normal course of business they may provide letters of credit to the companies they reinsure. As of June 30, 2011, ASRe had $59.9 million in letters of credit issued and outstanding.

Litigation Contingencies

Certain conditions may exist as of the date the financial statements are issued, which may result in a loss to the Company but which will only be resolved when one or more future events occur or fail to occur. The Company’s management and its legal counsel assess such contingent liabilities, and such assessment inherently involves an exercise of judgment. In assessing loss contingencies related to legal proceedings that are pending against the Company or unasserted claims that may result in such proceedings, the Company’s legal counsel evaluates the perceived merits of any legal proceedings or unasserted claims as well as the perceived merits of the amount of relief sought or expected to be sought therein.

If the assessment of a contingency indicates that it is probable that a material loss has been incurred and the amount of the liability can be estimated, then the estimated liability would be accrued in the Company’s financial statements. If the assessment indicates that a potentially material loss contingency is not probable, but is reasonably possible, or is probable but cannot be estimated, then the nature of the contingent liability, together with an estimate of the range of possible loss if determinable and material, would be disclosed. Based on the information presently available, management does not believe that any pending or threatened litigation or arbitration disputes will have any material adverse effect on our final condition or operating results.

Note 11 — Accounting Pronouncements

In May 2011, the FASB issued ASU 2011-04 which was issued to provide a consistent definition of fair value and ensure that the fair value measurement and disclosure requirements are similar between U.S. GAAP and International Financial Reporting Standards (IFRS). ASU 2011-04 changes certain fair value measurement principles and enhances the disclosure requirements particularly for Level 3 fair value measurements. This guidance is effective for the Company beginning on January 1, 2012. Its adoption is not expected to significantly impact the Company’s consolidated financial statements.

In June 2011, the FASB issued ASU 2011-05 which provides new guidance on the presentation of comprehensive income. ASU 2011-05 eliminates the option to report other comprehensive income and its components in the statement of changes in stockholders’ equity and instead requires an entity to present the total of comprehensive income, the components of net income and the components of other comprehensive income either in a single continuous statement or in two separate but consecutive statements. This guidance is effective for fiscal years, and interim periods within those years, beginning after December 15, 2011, with early adoption permitted. The adoption of this ASU will not have a significant impact on the Company’s consolidated financial statements as it only requires a change in the format of the current presentation.

Note 12 — Subsequent Events

The Company evaluated subsequent events through the date of this 10Q filing and determined there were none.


Item 2.		Management’s Discussion and Analysis of Financial Condition and Results of Operations

The Company measures segments using net income, total assets and total equity. The reportable insurance divisions are measured based on underwriting profit (loss) and pre-tax operating income (loss).

The following information is presented on the basis of accounting principles generally accepted in the United States of America (“GAAP”).

The following table presents key financial data by segment for the three months ended June 30, 2011 and 2010, respectively (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 written premiums		34,413			17,140			14,864			(1	)		66,416
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 written premiums		29,475			17,346			10,945			—			57,766
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	%


*		NM = Ratio is not meaningful

**		The combined ratio is a measure of underwriting performance and represents the relationship of losses and loss adjustment expenses, acquisition expenses, and other underwriting expenses net of fee income to earned premiums.

Three Months Ended June 30, 2011, compared to
Three Months Ended June 30, 2010

Net Earnings

Net earnings attributable to ASIH were $4.1 million, or $0.38 per diluted share, for the three months ended June 30, 2011, compared to $6.2 million, or $0.58 per diluted share, for the same period of 2010. The decrease in net earnings was primarily due to U.S. storm related losses of $3.3 million after tax.

Combined Ratio

Our underwriting results are measured by the combined ratio, which is the sum of (a) the ratio of incurred losses and loss adjustment expenses to net earned premiums (loss ratio), and, (b) the ratio of acquisition expenses and other underwriting expenses, net of fee income, to net earned premiums (expense ratio). A combined ratio below 100% indicates that an insurer has an underwriting profit, and a combined ratio above 100% indicates that an insurer has an underwriting loss.

The combined ratio was 105.8%, composed of a loss ratio of 67.4% and an expense ratio of 38.4%. The increase in the loss ratio is due to U.S. storm related losses of $5.1 million pre-tax composed of $4.1 million in the ART division and $1.0 million in the E&S division. For the same quarter of 2010, the loss ratio included approximately $1.3 million dollars of storm related property losses in the ART division. The loss ratio for both 2011 and 2010 quarters does not include any revisions to prior year loss reserves. The increase in the expense ratio is primarily as a result of increased fronting fees during the second quarter of 2010 relative to the same quarter in 2011 due to a fronting transaction that was non-renewed in the third quarter of 2010.

Gross Written Premiums

Gross written premiums increased 14.2% to $82.9 million from $72.6 million for the three months ended June 30, 2011 and 2010, respectively. The growth in the E&S division to $43.9 million from $36.5 million was attributable to increased production across all product lines but driven primarily by newer producers such as excess, surety and healthcare. The newer products are a result of our product diversification strategy. The growth in Assumed Reinsurance from $12.2 million to $15.0 million was a result of growth in targeted classes of business.

Net Earned Premiums

Net earned premiums increased 25.2% to $59.2 million for the three months ended June 30, 2011, compared to $47.2 million for the same period of 2010. Net earned premium growth resulted from growth discussed above as well as during 2010 and the Company’s diversification strategy.

Net Investment Income

Net investment income is derived from the investment portfolio net of investment expenses. Net investment income was $8.1 million for the three months ended June 30, 2011, compared to $7.9 million for the same period of 2010. Average invested assets increased to $854.0 million at June 30, 2011, as compared to $768.5 million for the same period of 2010. The pretax investment yield for the three months was 3.8% and 4.1%, respectively, for 2011 and 2010.

Acquisition Expenses

Acquisition expenses are commissions paid to producers that are partially offset by ceding commissions or fronting fees. Acquisition expenses also include premium taxes paid to states in which we are admitted to conduct business. Policy acquisition expenses were $13.3 million or 22.5% of earned premium for the three months ended June 30, 2011, as compared to $9.0 million or 19.0% of earned premium for the same period of 2010. The increase in acquisition expenses, on a percentage basis, relates to the non-renewal of a fronting transaction in the third quarter of 2010.

Other Underwriting Expenses

Other underwriting expenses were $10.2 million for the three months ended June 30, 2011, compared to $9.8 million for the same 2010 period. As a percentage of net earned premiums, other underwriting expenses decreased to 17.2% from 20.8% for the same three months of 2010. The decrease is attributable to increased earned premiums without a corresponding increase to other underwriting expenses.

Income Taxes

The income tax benefit for the three months ended June 30, 2011, was $0.5 million compared to $1.0 million of expenses for the same period of 2010. The benefit is due to the geographic mix of United States and Bermuda earnings. During the quarter ended June 30, 2011, the property losses were incurred in the U.S. operations resulting in the tax benefit.

The following table presents key financial data by segment for the six months ended June 30, 2011 and 2010, respectively (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 written premiums		64,015			32,046			30,366			(1	)		126,426
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 written premiums		53,828			31,438			21,281			—			106,547
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	%


*		NM = Ratio is not meaningful

**		The combined ratio is a measure of underwriting performance and represents the relationship of losses and loss adjustment expenses, acquisition expenses, and other underwriting expenses net of fee income to earned premiums.

Six Months Ended June 30, 2011, compared to
Six Months Ended June 30, 2010

Net Earnings

Net earnings attributable to ASIH were $12.0 million, or $1.11 per diluted share, for the six months ended June 30, 2011, compared to $12.7 million, or $1.19 per diluted share, for the same period of 2010. The decrease in net earnings was primarily due to the New Zealand and Japan catastrophes and losses in the first quarter of 2011 of $5.0 million (pre-tax) and U.S. storm losses in the second quarter of 2011 of $5.1 million (pre-tax), offset by $11.3 million (pre-tax) in net realized gains on investments.

Combined Ratio

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 improvement in the expense ratio from 40.2% to 38.7% is primarily as a result of economies of scale associated with increased net earned premiums.

Gross Written Premiums

Gross written premiums increased 19.2% to $157.2 million from $131.9 million for the six months ended June 30, 2011 and 2010, respectively. The growth in the E&S division to $79.9 million from $66.1 million was attributable to increased production across all product lines but driven primarily by newer producers such as excess, surety and healthcare resulting from the product diversification strategy initiated in 2006. The growth in Assumed Reinsurance from $23.7 million to $31.5 million was due to increases in targeted classes of business.

Net Earned Premiums

Net earned premiums increased 25.8% to $113.5 million for the six months ended June 30, 2011, compared to $90.2 million for the same period of 2010 as a result of increased written premiums during 2010 and 2011 across newer product lines attributable to the company’s strategy initiated in 2006 adding shorter tailed products to the E&S platform.

Net Investment Income

Net investment income is derived from the investment portfolio net of investment expenses. Net investment income was $15.5 million for the six months ended June 30, 2011, compared to $15.8 million for the same period of 2010 primarily and decreased slightly as a result of lower yields. Average invested assets increased to $840.8 million at June 30, 2011, as compared to $764.5 million for the same period of 2010. The pretax investment yield for the six months was 3.7% and 4.1% respectively for 2011 and 2010.

Acquisition Expenses

Acquisition expenses are commissions paid to producers that are partially offset by ceding commissions or fronting fees. Acquisition expenses also include premium taxes paid to states in which we are admitted to conduct business. Policy acquisition expenses were $25.2 million or 22.2% of earned premium for the six months ended June 30, 2011, as compared to $18.8 million or 20.8% of earned premium for the same period of 2010. The increase in acquisition expenses, on a percentage basis, relates to the non-renewal of a program in the third quarter of 2010 that generated fronting fees and business mix in the ART division.

Other Underwriting Expenses

Other underwriting expenses were $20.4 million for the six months ended June 30, 2011, compared to $19.7 million for the same 2010 period. As a percentage of net earned premiums, other underwriting expenses decreased to 17.9% from 21.8% for the same six months of 2010 due to increased earned premiums without a corresponding increase to other underwriting expenses.

Income Taxes

The income tax benefit for the six months ended June 30, 2011, was $0.6 million compared to $0.9 million of expense for the same period of 2010 due to the income (loss) generated in the U.S. and Bermuda.

Liquidity and Capital Resources

The Company meets its cash requirements and finances its growth principally through cash flows generated from operations. The Company has experienced a reduction in premium rates due to the entrance of new competitors and overall market conditions. The Company’s primary sources of short-term cash flow are premium writings and investment income. Short-term cash requirements relate to claims payments, reinsurance premiums, commissions, salaries, employee benefits, and other operating expenses. Due to the uncertainty regarding the timing and amount of settlements of unpaid claims, the Company’s future liquidity requirements may vary; therefore, the Company has structured its investment portfolio to mitigate those factors. The Company believes its current cash flows are sufficient for the short-term needs of its business and its invested assets are sufficient for the long-term needs of its insurance business.

The Company has a line of credit facility of $20 million. The facility is unsecured and expires August 20, 2013. At June 30, 2011, the Company had not drawn on the facility.

Net cash provided by operations was $34.6 million for the six months ended June 30, 2011, compared to net cash provided by operations of $35.3 million for the same period of 2010.

On March 2, 2010, the Company’s Board of Directors authorized the repurchase of up to 500,000 shares of common stock. Pursuant to this authorization, the Company has repurchased a total of 155,700 shares of common stock at a cost of approximately $2.6 million during 2010 and repurchased 105,033 shares at a cost of $2.0 million through the end of the second quarter 2011.

Effective July 1, 2011 the Company renewed its reinsurance protection for the dealer open lot program. The reinsurance attaches at $500,000 or $2 million per occurrence depending on the peril causing the loss. The Company participates in various layers of the excess of loss cover and the program has reinstatement provisions and limitations. The catastrophe reinsurance protection attaches at $5 million per occurrence with the Company participating 34% in one $10 million layer at the top of the program. The catastrophe reinsurance program also has reinstatement provisions and limitations.

Our ability to pay future dividends to shareholders will depend, to a significant degree, on the ability of our subsidiaries to generate earnings from which to pay dividends. The jurisdictions in which we and our insurance and reinsurance subsidiaries are domiciled place limitations on the amount of dividends or other distributions payable by insurance companies in order to protect the solvency of insurers. Given the capital requirements associated with our business plan, we do not anticipate paying dividends on the common shares in the near future.

Forward Looking Statements

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.


Item 3.		Quantitative and Qualitative Disclosures About Market Risk

For an in-depth discussion of the Company’s market risks, see Management’s Discussion and Analysis of Quantitative and Qualitative Disclosures about Market Risk in Item 7A of the Company’s Form 10-K for the year ended December 31, 2010.


Item 4.		Controls and Procedures

Evaluation of Disclosure Controls and Procedures

The Company’s management, with the participation of the Company’s Chief Executive Officer and Chief Financial Officer, after evaluating the effectiveness of the Company’s disclosure controls and procedures (as defined in Exchange Act Rule 13a-15(e)) as of the end of the period covered by this Report, concluded that, as of such date, the Company’s disclosure controls and procedures were adequate and effective to ensure that material information relating to the Company (including consolidated subsidiaries) would be made known to them.

Changes in Internal Control

There were no changes in the Company’s internal control over financial reporting identified in connection with the evaluation described above that occurred during the Company’s last fiscal quarter that have materially affected, or are reasonably likely to materially affect, the Company’s internal control over financial reporting.

PART II — OTHER INFORMATION


Item 1.		Legal Proceedings

The Company, through its subsidiaries, is routinely party to pending or threatened litigation or arbitration disputes in the normal course of or related to its business. Based upon information presently available, in view of reserve practices and legal and other defenses available to our subsidiaries, management does not believe that any pending or threatened litigation or arbitration disputes will have any material adverse effect on our financial condition or operating results.


Item 1A.		Risk Factors

For an in-depth discussion of risk factors affecting the Company, see Part I, Item 1A. “Risk Factors” of the Company’s Form 10-K for the year ended December 31, 2010.


Item 2.		Unregistered Sales of Equity Securities and Use of Proceeds

None.


Item 3.		Defaults Upon Senior Securities

Not applicable.


Item 4.		Reserved


Item 5.		Other Information

The Company entered into amended and restated employment agreements (the “Agreements”) on August 8, 2011, with Messrs. Stephen R. Crim, Joseph D. Scollo, Mark W. Haushill and Randolph L. Hutto. The Agreements amend and restate existing employment agreements dated August 27, 2007 with Messrs. Crim, Scollo and Hutto and effective September 8, 2009, with Mr. Haushill.

The Agreements are effective as of August 8, 2011, and will continue until August 8, 2012 with automatic one year extensions unless earlier terminated by the Company or the employee as provided for under the agreements. The base salaries provided for in the Agreements are unchanged from the original employment agreements and equal $420,000 for Mr. Crim, $345,000 for Mr. Scollo, $335,000 for Mr. Haushill, and $308,850 for Mr. Hutto. Each of the Agreements provide for annual bonuses, the exact amount of which will be based on an annual bonus plan as approved by the Compensation Committee. Each of the employees may receive future grants of equity awards under the Agreement as determined by the Compensation Committee.

If the Company terminates the employment of any of the employees other than for Poor Performance, Cause or Disability, or if the employee terminates his employment for Good Reason (as defined in the Agreements), the employee will receive severance compensation equal to (i) the longer of eighteen months or the remainder of his original term of base salary, (ii) a pro-rated bonus based on year-to-date performance at the date of termination, (iii) continuation of participation in certain benefit plans, (iv) the immediate vesting of restricted stock, and (v) the immediate vesting of options that would have become vested within 24 months following the date of termination, such options to remain exercisable through the earlier of (a) the original expiration date of the option, (b) the 90th day following the end of the severance period or (c) 10 years from the date of the grant of the options. If the Company terminates the employment of any of the employees for Poor Performance, the employee will receive severance compensation equal to (i) twelve months of base salary payable in installments, (ii) continuation of participation in certain benefit plans, (iii) the immediate vesting of restricted stock that would have become vested within the 12-month period following the date of termination, and (iv) subject to approval of the Compensation Committee, the immediate vesting of options that would have become vested within the 12-month period following the date of termination, such options to remain exercisable through the earlier of (a) the original expiration date of the option, (b) the 90th day following the end of the later of (1) six months from the date of termination, or (2) the end of the severance period or (c) 10 years from the date of grant of the options. If the Company terminates the employment of any of the employees within 24 months following a Change in Control other than for Cause or Disability, or the employee terminates employment for Good Reason following a Change in Control, the employee will receive severance compensation equal to (i) thirty-six months of base salary, (ii) a bonus equal to 100% of the his bonus opportunity for the year in which the termination occurs, (iii) continuation of participation in certain benefit plans, (iv) the immediate vesting of restricted stock, and (v) the immediate vesting of options, such options to remain exercisable through the earlier of (a) the original expiration date of the option, (b) the 90th day following the end of the 36-months period beginning on the date of termination, or (c) 10 years from the date of grant of the options. The Agreements also include non-competition and confidentiality requirements that the employee must comply with in order to be eligible for severance compensation.

Attached as Exhibits 10.1 to 10.4 are copies of these Agreements, each of which is incorporated herein by reference.


Item 6.		Exhibits

The following exhibits are filed as part of this report:


Exhibit No.		Description
	10.1	Amended and Restated Employment Agreement with Stephen R. Crim dated August 8, 2011.

	10.2	Amended and Restated Employment Agreement with Joseph D. Scollo, Jr. dated August 8, 2011.

	10.3	Amended and Restated Employment Agreement with Mark W. Haushill dated August 8, 2011.

	10.4	Amended and Restated Employment Agreement with Randolph L. Hutto dated August 8, 2011.

	11	Computation of Earnings Per Share

	31.1	Certification Pursuant to § 302 of the Sarbanes-Oxley Act of 2002

	31.2	Certification Pursuant to § 302 of the Sarbanes-Oxley Act of 2002

	32.1	Certification Pursuant to § 906 of the Sarbanes-Oxley Act of 2002

	32.2	Certification Pursuant to § 906 of the Sarbanes-Oxley Act of 2002

SIGNATURES

Pursuant to the requirements of the Securities and Exchange Act of 1934, the Registrant has duly caused this Report to be signed on its behalf by the undersigned, thereunto duly authorized, on the 9^Th day of August, 2011.


	American Safety Insurance Holdings, Ltd.
	By:	/s/ Stephen R. Crim
		Stephen R. Crim
		President and Chief Executive Officer

	By:	/s/ Mark W. Haushill
		Mark W. Haushill
		Chief Financial Officer

EX-10.1 2 c19312exv10w1.htm EXHIBIT 10.1 Exhibit 10.1

Exhibit 10.1

AMENDED AND RESTATED

EMPLOYMENT AGREEMENT

BETWEEN

STEPHEN R. CRIM

AND

AMERICAN SAFETY ADMINISTRATIVE SERVICES, INC.

Dated: August 8, 2011

EMPLOYMENT AGREEMENT

THIS AMENDED AND RESTATED EMPLOYMENT AGREEMENT (this “Agreement”) is made and entered into this 8^th day of August, 2011, by and between American Safety Administrative Services, Inc., a Georgia corporation with its principal executive offices located in Atlanta, Georgia (the “Company”), and Stephen R. Crim, an individual resident of the State of Georgia (“Executive”), to be effective as of the Effective Date, as defined in Section 1.

BACKGROUND

Executive currently serves as the President and Chief Executive Officer of American Safety Insurance Holdings. Ltd., the Company’s ultimate parent, pursuant to the terms of an employment agreement, dated August 29, 2007 by and between Executive and the Company (the “2007 Agreement”). Executive and the Company desire to amend and restate the 2007 Agreement pursuant to the terms of this Amended and Restated Agreement, which as of the Effective Date supersedes and replaces the 2007 Agreement.

NOW THEREFORE, in consideration of the mutual covenants and agreements set forth herein, and other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the parties hereto agree as follows:

1. Effective Date. The effective date of this Agreement (the “Effective Date”) is August 1, 2011.

2. Employment. Executive is hereby employed as the President and Chief Executive Officer of the Company. In such capacity, Executive will have the duties and responsibilities commensurate with such position and as may be reasonably assigned to him by the Board of Directors of American Safety Insurance Holdings, Ltd., the Company’s ultimate parent, (the “Board”). Executive’s reporting responsibilities will be to the Board.

3. Employment Period. Executive’s employment hereunder will begin on the Effective Date and end on the third anniversary of the Effective Date, unless extended as hereinafter provided in this Section 3 or terminated in accordance with the provisions of Section 7 (the “Employment Period”). As of the third anniversary of the Effective Date and on each succeeding anniversary of the Effective Date during the Employment Period, Executive’s Employment Period will automatically be extended by one year so as to end on the next anniversary of the Effective Date, unless the Company otherwise provides Executive with written notice of non-renewal at least 120 days prior to the third anniversary of the Effective Date or, following any automatic extension, any succeeding anniversary of the Effective Date.

4. Extent of Service. During the Employment Period, Executive will render his services to the Company (or to its successor following a Change in Control, as defined below) in conformity with professional standards, in a prudent and workmanlike manner and in a manner consistent with the obligations imposed on officers of corporations under applicable law. Executive will promote the interests of the Company and its subsidiaries and affiliated entities in carrying out Executive’s duties and will not deliberately take any action that could, or fail to take any action which failure could, reasonably be expected to have a material adverse effect upon the business of the Company or any of its affiliates or any of their respective subsidiaries. Executive agrees to devote his business time, attention, skill and efforts exclusively to the faithful performance of his duties hereunder (both before and after a Change in Control); provided, however, that it will not be a violation of this Agreement for Executive to (i) devote reasonable periods of time to charitable and community activities and, with the approval of the Company, industry or professional activities, and/or (ii) manage personal investments, so long as such activities do not materially interfere with the performance of Executive’s responsibilities under this Agreement.

5. Compensation and Benefits.

(a) Base Salary. During the Employment Period, Executive will be entitled to receive a base salary in the amount of $420,000.00 per year (“Initial Base Salary”), less normal withholdings, payable in equal semi-monthly installments or other installments (not less frequently than monthly) as are customary under the Company’s payroll practices from time to time. The Compensation Committee of the Board will review Executive’s then current Base Salary periodically, but no less frequently than annually, and in its sole discretion may increase Executive’s Base Salary from time to time (as so increased, the “Base Salary”). The periodic review of Executive’s salary by the Board will consider, among other things, Executive’s own performance and the Company’s performance.

(b) Incentive and Savings Plans. During the Employment Period, Executive will be entitled to participate in incentive and savings plans, practices, policies and programs applicable generally to employees of the Company. Certain executive programs will be made available on a selective basis at the discretion of the Compensation Committee of the Board. Without limiting the foregoing, the following will apply:

(i) Annual Bonus. Executive will have an annual bonus opportunity based on specific objectives established by the Compensation Committee. The annual bonus opportunity will be per an annual bonus plan as approved by the Compensation Committee. Such annual bonus shall be paid, if at all, no later than the 15^th day of the third month following the end of the year to which the annual bonus relates.

(ii) Incentive Awards. On or about the Effective Date (or previously), the Company will make (or has made) a grant of restricted stock, stock options, restricted stock units, stock appreciation rights and/or similar stock-based awards to Executive as a long-term incentive for performance and in consideration for entering into this Agreement. Executive shall be entitled to further grants of incentive awards as determined by the Compensation Committee.

(c) Vacation. Executive will be entitled to 4 weeks of vacation during each fiscal year of employment hereunder. Executive agrees that he will schedule such vacation time so as not to materially impair the performance of Executive’s duties hereunder. During the term, up to a maximum of forty (40) hours of unused vacation time to which Executive shall become entitled in any given fiscal year may be carried over to the immediately next succeeding fiscal year, and such carried-over vacation time may be used in such immediately next succeeding fiscal year. If such carried-over vacation time is not used within such immediately next succeeding fiscal year, such unused vacation time shall not accrue for use in any subsequent period. Subject to the foregoing sentence, payment shall be made for accrued and unused vacation time through the date of termination of this Agreement as described herein.

(d) Welfare Benefit Plans. During the Employment Period, Executive and Executive’s family will be eligible for participation in, and will receive all benefits under, the welfare benefit plans, practices, policies and programs generally provided by the Company (including, without limitation, medical, prescription, dental, disability, employee life, group life, accidental death and travel accident insurance plans and programs), subject to the same terms that such benefits are made available to other senior executives of the Company generally. During the Employment Period, the Company will provide a supplemental disability plan in addition to the disability plan available to employees generally, which supplemental disability plan will provide Executive with disability benefits that, when added to the disability benefits payable under the general disability plan, will equal 60% of Executive’s Base Salary as of the Disability Effective Date. The Company will impute taxable income to Executive equal to the premium amount for such supplemental disability plan during each calendar year.

(e) Expenses. During the Employment Period, Executive will be entitled to receive prompt reimbursement for all reasonable expenses incurred by Executive in accordance with the policies, practices and procedures of the Company. In no event will such reimbursements be made, if at all, later than the last day of Executive’s taxable year next following Executive’s taxable year in which Executive incurs the expense.

(f) Fringe Benefits. During the Employment Period, Executive will be entitled to a car allowance of $1,000.00 per month payable in equal semi-monthly or other installments (not less frequently than monthly) as are customary under the Company’s payroll practices from time to time. In addition, the Company will pay, during each calendar year, up to $25,000.00 per calendar year for a Universal Life Insurance Policy on Executive’s life (or other instrument mutually agreed upon by Executive and the Company) and will impute taxable income to Executive equal to the amount paid. Executive will be entitled to such other fringe benefits as may be consistent with the plans, practices, programs and policies of the Company.

6. Change in Control. For the purposes of this Agreement, a “Change in Control” means:

(a) The acquisition by any individual, entity or group (within the meaning of Section 13(d)(3) or 14(d)(2) of the Securities Exchange Act of 1934, as amended (the “Exchange Act”)) (a “Person”) of beneficial ownership (within the meaning of Rule 13d-3 promulgated under the Exchange Act) of 35% or more of the combined voting power of the then outstanding voting securities of American Safety Insurance Holdings, Ltd., a Bermuda corporation (“Parent”), entitled to vote generally in the election of directors (the “Outstanding Parent Voting Securities”); provided, however, that for purposes of this subsection (a), the following acquisitions will not constitute a Change in Control: (i) any acquisition directly from the Parent to the extent that the Parent’s board of directors expressly provides in a resolution approving such issuance that such securities shall not be considered in determining whether a Change in Control occurs, (ii) any acquisition by the Parent which reduces the number of Outstanding Parent Voting Securities and thereby results in any Person having beneficial ownership of more than 35% of the Outstanding Parent Voting Securities provided that such Person does not acquire any additional Outstanding Parent Voting Securities, (iii) any acquisition by any employee benefit plan (or related trust) sponsored or maintained by the Parent or any corporation controlled by the Parent, or (iv) any acquisition by any corporation pursuant to a transaction which complies with clauses (i) and (ii) of subsection (b) of this Section 6; or

(b) Consummation of a reorganization, merger or consolidation or sale or other disposition of all or substantially all of the assets of the Parent (a “Business Combination”), in each case, unless, following such Business Combination, (i) outstanding Parent common stock (or outstanding securities issued by a surviving entity in exchange therefore) constitutes more than 50% of the then outstanding shares of common stock and the combined voting power of the then outstanding voting securities entitled to vote generally in the election of directors, as the case may be, of the corporation resulting from such Business Combination, and (ii) no Person (excluding the Parent or any employee benefit plan (or related trust) of the Parent or such corporation resulting from such Business Combination) beneficially owns, directly or indirectly, 35% or more of the combined voting power of the then outstanding voting securities of such corporation except to the extent that such ownership existed prior to the Business Combination; or

(c) The election of a majority of the members of the board of directors of Parent, without the recommendation or approval by a majority of the existing members of the board of directors of Parent;

(d) The shareholders of the Parent approve a plan of complete liquidation or dissolution of the Parent (other than by a reorganization, merger or consolidation or sale or other disposition of all or substantially all of the assets of the Parent); or

(e) The failure of Parent, directly or indirectly, to own all or substantially all of the voting securities of the Company.

Notwithstanding anything in this definition to the contrary, a restructuring and/or separation of any line of business or business unit from the Parent will not of itself constitute a Change in Control;

For the avoidance of doubt, the term “Person” as used in this Section 6 includes the shareholders of a corporation or other entity that is a party to a merger, consolidation or business combination to which the Parent also is a party, including a forward or reverse subsidiary merger pursuant to which voting securities of the Parent are issued to such shareholders.

7. Termination of Employment.

(a) Death, Disability or Retirement. Executive’s employment and the Employment Period will terminate automatically upon Executive’s death or Retirement. For purposes of this Agreement, “Retirement” means normal retirement as defined in the Company’s then-current retirement plan, or if there is no such retirement plan, “Retirement” means voluntary termination after age 65 with ten years of service. If the Company determines in good faith that a Disability of the Executive has occurred (pursuant to the definition of Disability set forth below), it may give Executive written notice of its intention to terminate Executive’s employment. In such event, Executive’s employment with the Company will terminate effective on the 30^th day after receipt of such written notice by Executive (the “Disability Effective Date”) provided that, within the 30 days after such receipt, Executive has not returned to full-time performance of Executive’s duties. For purposes of this Agreement, “Disability” means a mental or physical disability as determined by the Board in accordance with standards and procedures similar to those under the Company’s employee long-term disability plan, if any. At any time that the Company does not maintain such a long-term disability plan, Disability will mean the inability of Executive, as determined by the Board, to substantially perform the essential functions of his regular duties and responsibilities due to a medically determinable physical or mental illness which has lasted (or can reasonably be expected to last) for a period of six consecutive months.

(b) Termination by the Company. The Company may terminate Executive’s employment for Poor Performance, or with or without Cause. For purposes of this Agreement:

“Poor Performance” means the failure of Executive to meet reasonable and achievable performance expectations (other than any such failure resulting from incapacity due to physical or mental illness); provided, however, that termination for Poor Performance will not be effective unless at least 30 days prior to such termination Executive has received written notice from the Board which specifically identifies the manner in which the Board believes that Executive has not met performance expectations and Executive has failed after receipt of such notice to resume the diligent performance of his duties to the satisfaction of the Board; and

“Cause” means:

(i) the continued failure of Executive to perform substantially Executive’s duties with the Company (other than any such failure resulting from incapacity due to physical or mental illness, and specifically excluding any failure by Executive, after reasonable efforts, to meet performance expectations), after a written demand for substantial performance is delivered to Executive by the Board which specifically identifies in detail the manner in which the Board believes that Executive has not substantially performed Executive’s duties, or

(ii) any act of fraud, misappropriation, embezzlement or similar dishonest or wrongful act by Executive, or

(iii) Executive’s abuse of alcohol or any substance which materially interferes with Executive’s ability to perform services on behalf of the Company, or

(iv) Executive’s conviction for, or plea of guilty or nolo contendere to, a felony, or

(v) Executive’s acceptance of employment with an employer other than the Company or any affiliate or subsidiary of the Company, or

(vi) Executive’s conviction for any crime of moral turpitude.

(c) Termination by Executive. Executive’s employment may be terminated by Executive for Good Reason or no reason. For purposes of this Agreement, “Good Reason” means:

(i) a reduction by the Company in Executive’s Base Salary or benefits as in effect on the Effective Date or as the same may be increased from time to time, unless a similar reduction is made in salary or benefits of substantially all senior executives of the Company (or any of its affiliates and any of their respective subsidiaries with respect to which the Company exerts control over compensation policies); or

(ii) the Company’s requiring Executive, without his consent, to be based at any office or location other than in the greater metropolitan area of the city in which his office is located at the Effective Date; or

(iii) the Company’s changing the reporting structure so that Executive no longer reports directly to the Board; or

(iv) any significant change in Executive’s title, position, duties or responsibilities.

(d) Notice of Termination. Any termination by the Company for Poor Performance, or Cause, or by Executive for Good Reason, will be communicated by Notice of Termination to the other party hereto given in accordance with Section 17(f) of this Agreement. For purposes of this Agreement, a “Notice of Termination” means a written notice that (i) indicates the specific termination provision in this Agreement relied upon, (ii) to the extent applicable, sets forth in reasonable detail the facts and circumstances claimed to provide a basis for termination of Executive’s employment under the provision so indicated and (iii) if the Date of Termination (as defined below) is other than the date of receipt of such notice, specifies the termination date (which date will be not more than 30 days after the giving of such notice). The failure by Executive or the Company to set forth in the Notice of Termination any fact or circumstance which contributes to a showing of Good Reason, Poor Performance or Cause will not waive any right of Executive or the Company, respectively, hereunder or preclude Executive or the Company, respectively, from asserting such fact or circumstance in enforcing Executive’s or the Company’s rights hereunder.

(e) Date of Termination. “Date of Termination” means (i) if Executive’s employment is terminated other than by reason of death, Disability or Retirement, the date of receipt of the Notice of Termination, or any later date specified therein (which will not be more than 30 days after the date of delivery of the Notice of Termination), which also shall be the date Executive’s employment is terminated, or (ii) if Executive’s employment is terminated by reason of death, Disability or Retirement, the Date of Termination will be the date of death or Retirement, or the Disability Effective Date, as the case may be. In no event will the Date of Termination be after the end of Executive’s Employment Period, as provided for in Section 3 of this Agreement.

8. Obligations of the Company upon Termination.

(a) Prior to or More than Two Years after a Change in Control: Termination by Executive for Good Reason; Termination by the Company Other Than for Poor Performance, Cause or Disability; Expiration of Executive’s Employment Period. If, prior to or more than two years after a Change in Control and during the Executive’s Employment Period, the Company terminates Executive’s employment other than for Poor Performance, Cause or Disability, or Executive terminates his employment for Good Reason within a period of 90 days after the occurrence of the event giving rise to Good Reason, or Executive’s employment terminates upon the expiration of the Executive’s Employment Period, as described in Section 3, then, subject to Section 8(f) below (and with respect to the payments and benefits described in clauses (ii) through (vii) below, only if Executive executes a Release in substantially the form of Exhibit A hereto and the period for revoking such Release (the “Release”) has expired before the 30^th day after the Date of Termination):

(i) the Company will pay to Executive in a lump sum in cash within 30 days after the Date of Termination (with Executive not having any right to designate the taxable year of the payment) the sum of (A) Executive’s Base Salary through the Date of Termination to the extent not theretofore paid, and (B) any accrued vacation pay to the extent not theretofore paid (the sum of the amounts described in clauses (A) and (B) will be hereinafter referred to as the “Accrued Obligations”); and

(ii) for the longer of (A) 18 months from the Date of Termination or (B) the remaining term of Executive’s Employment Period (the “Normal Severance Period”), the Company will continue to pay Executive an amount equal to his monthly Base Salary, payable in equal semi-monthly or other installments (not less frequently than monthly) as are customary under the Company’s payroll practices from time to time, with the installments that otherwise would be paid within the first 30 days after the Date of Termination being paid in a lump sum on the 30^th day after the Date of Termination and the remaining installments being paid as otherwise scheduled assuming payments had begun immediately after the Date of Termination; provided, however, that the Company’s obligation to make or continue such payments will cease if Executive violates any of the Restrictive Covenants (as defined in Section 13(b) of this Agreement) and fails to remedy such violation to the satisfaction of the Board within 10 days of notice of such violation; and

(iii) during the Normal Severance Period, if and to the extent Executive timely elects COBRA continuation coverage and such coverage remains available, the Company no less frequently than monthly will pay for the full premium amount of such COBRA continuation coverage and will impute taxable income to the Executive equal to the full premium amount; with Executive being required to pay the amount of such premiums for the first 30 days after the Date of Termination and having the right to reimbursement from the Company on the 30^th day after the Date of Termination for the payments made during that time and the balance of the premiums being paid as otherwise scheduled assuming payment of the premiums had begun immediately after the Date of Termination; provided, however that the Company’s obligation to provide such benefits will cease if Executive violates any of the Restrictive Covenants (as defined in Section 13(b) of this Agreement) and fails to remedy such violation to the satisfaction of the Board within 10 days of notice of such violation; provided further, that to the extent Executive continues COBRA continuation coverage beyond his Normal Severance Period, Executive will be responsible for paying the full cost of the COBRA continuation coverage in accordance with the procedures of the Company generally applicable to all qualified beneficiaries receiving COBRA continuation coverage; and

(iv) on the 30^th day after the Date of Termination, Executive will be paid a bonus for the year in which the Date of Termination occurs in a lump sum in cash an amount equal to 100% of his bonus opportunity (prorated through the Date of Termination) adjusted up or down by reference to his year-to-date performance at the Date of Termination in relation to the prior established performance objectives under Executive’s bonus plan for such year; provided, however that the bonus payment described in this Section 8(b)(iv) will be reduced by the amount (if any) of the bonus opportunity that Executive had previously elected to receive in the form of restricted stock of the Company; and

(v) all grants of restricted stock, restricted stock units and similar Company stock-based awards (“Restricted Stock”) held by Executive as of the Date of Termination will become immediately vested as of the Date of Termination; and

(vi) all of Executive’s options to acquire Common Stock of the Company, stock appreciation rights in Common Stock of the Company and similar Company stock-based awards (“Options”) that would have become vested (by lapse of time) within the 24-month period following the Date of Termination had Executive remained employed during such period will become immediately vested as of the Date of Termination; and

(vii) notwithstanding the provisions of the applicable Option agreement, all of Executive’s vested but unexercised Options as of the Date of Termination (including those with accelerated vesting pursuant to Section 8(a)(vi) above) will remain exercisable through the earlier of (A) the original expiration date of the Option, (B) the 90th day following the end of the Normal Severance Period or (C) 10 years from the date of grant of the options; and

(viii) to the extent not theretofore paid or provided, the Company will timely pay or provide to Executive his other benefits pursuant to the plans, policies, practices and programs under which such Other Benefits are provided.

(b) Prior to or More than Two Years after a Change in Control: Termination by the Company for Poor Performance. If, prior to or more than two years after the occurrence of a Change in Control, the Company terminates Executive’s employment for Poor Performance, then, subject to Section 8(f) below (and with respect to the payments and benefits described in clauses (ii) through (vi) below, only if Executive executes the Release and the period for revoking such Release expires before the 30^th day after the Date of Termination):

(i) the Company will pay to Executive the Accrued Obligations in a lump sum in cash within 30 days after the Date of Termination (with Executive not having any right to designate the taxable year of the payment); and

(ii) for a period of 12 months after the Date of Termination (the “Poor Performance Severance Period”), the Company will continue to pay Executive an amount equal to his monthly Base Salary, payable in equal semi-monthly installments or other installments (not less frequently than monthly) as are customary under the Company’s payroll practices from time to time, with the installments that otherwise would be paid within the first 30 days after the Date of Termination being paid in a lump sum on the 30^th day after the Date of Termination and the remaining installments being paid as otherwise scheduled assuming payments had begun immediately after the Date of Termination; provided, however that the Company’s obligation to make or continue such payments will cease if Executive violates any of the Restrictive Covenants (as defined in Section 13(b) of this Agreement) and fails to remedy such violation to the satisfaction of the Board within 10 days of notice of such violation; and

(iii) during the Poor Performance Severance Period, if and to the extent Executive timely elects COBRA continuation coverage and such coverage remains available, the Company no less frequently than monthly will pay for the full premium amount of such COBRA continuation coverage and will impute taxable income to the Executive equal to the full premium amount; with Executive being required to pay the amount of such premiums for the first 30 days after the Date of Termination and having the right to reimbursement from the Company on the 30^th day after the Date of Termination for the payments made during that time and the balance of the premiums being paid as otherwise scheduled assuming payment of the premiums had begun immediately after the Date of Termination; provided, however that the Company’s obligation to provide such benefits will cease if Executive violates any of the Restrictive Covenants (as defined in Section 13(b) of this Agreement) and fails to remedy such violation to the satisfaction of the Board within 10 days of notice of such violation; provided further, that to the extent Executive continues COBRA continuation coverage beyond his Poor Performance Severance Period, Executive will be responsible for paying the full cost of the COBRA continuation coverage in accordance with the procedures of the Company generally applicable to all qualified beneficiaries receiving COBRA continuation coverage; and

(iv) all grants of Restricted Stock held by Executive as of the Date of Termination that would have become vested (by lapse of time) within the 12-month period following the Date of Termination had Executive remained employed during such period will become immediately vested as of the Date of Termination; and

(v) subject to the specific approval of the Compensation Committee, all of Executive’s Options that would have become vested (by lapse of time) within the 12-month period following the Date of Termination had Executive remained employed during such period will become immediately vested and exercisable as of the Date of Termination; and

(vi) notwithstanding the provisions of the applicable Option agreement, all of Executive’s vested but unexercised Options as of the Date of Termination (including those with accelerated vesting pursuant to the Section 8(b)(v) above) will remain exercisable through the earlier of (A) the original expiration date of the Option, (B) the 90th day following the end of the later of (1) six months from the Date of Termination, or (2) the end of the Poor Performance Severance Period or (C) 10 years from the date of grant of the options; and

(vii) to the extent not theretofore paid or provided, the Company will timely pay or provide to Executive his other benefits pursuant to the plans, policies, practices and programs under which such Other Benefits are provided.

(c) After or in Connection with a Change in Control: Termination by Executive for Good Reason; Termination by the Company Other Than for Cause or Disability. If a Change in Control occurs and, within two years following such Change in Control (or if Executive can reasonably show that termination by the Executive or by the Company was prior to and in anticipation of the Change in Control this Section 8(c) will apply in lieu of Sections 8(a) or (b) for purposes of determining the amounts to which Executive will be entitled), the Company terminates Executive’s employment other than for Cause or Disability or Executive’s employment terminates upon the expiration of the Employment Period, as described in Section 3, or Executive terminates his employment for Good Reason, then, subject to Section 8(f) below (and with respect to the payments and benefits described in clauses (ii) through (vii) below, only if Executive executes the Release and the period for revoking the Release expires before the 30^th day after the Date of Termination):

(i) the Company (or its successor) will pay to Executive the Accrued Obligations in a lump sum in cash within 30 days after the Date of Termination (with Executive not having any right to designate the taxable year of the payment); and

(ii) the Company (or its successor) will pay to Executive a lump sum cash amount equal to 36 times his monthly Base Salary on the 30^th day after the Date of Termination if the Change in Control qualifies as a change in ownership or effective control of the Parent or the Company, or in the ownership of a substantial portion of their assets, within the meaning of Section 409A(a)(2)(A)(v) and such lump sum is permitted under Section 409A; otherwise, payment will be made in equal semi-monthly installments or other installments (not less frequently than monthly) as are customary under the Company’s payroll practices from time to time, with the installments that otherwise would be paid within the first 30 days after the Date of Termination being paid in a lump sum on the 30^th day after the Date of Termination and the remaining installments being paid as otherwise scheduled assuming payments had begun immediately after the Date of Termination; provided, however, that the Company’s obligation to make or continue such payments will cease if Executive violates any of the Restrictive Covenants (as defined in Section 13(b) of this Agreement), other than the Restrictive Covenant contained in Section 13(c)(iv), and fails to remedy such violation to the satisfaction of the Board within 10 days of notice of such violation; and

(iii) for 18 months after the Date of Termination, if and to the extent Executive timely elects COBRA continuation coverage and such coverage remains available, the Company no less frequently than monthly will pay for the full premium amount of such COBRA continuation coverage and will impute taxable income to the Executive equal to the full premium amount, with Executive being required to pay the amount of such premiums for the first 30 days after the Date of Termination and having the right to reimbursement from the Company on the 30^th day after the Date of Termination for the payments made during that time and the balance of the premiums being paid as otherwise scheduled assuming payment of the premiums had begun immediately after the Date of Termination; provided, however that the Company’s obligation to provide such benefits will cease if Executive violates any of the Restrictive Covenants (as defined in Section 13(b) of this Agreement), other than the Restrictive Covenant contained in Section 13(c)(iv), and fails to remedy such violation to the satisfaction of the Board within 10 days of notice of such violation; and

(iv) on the 30^th day after the Date of Termination, Executive will be paid a lump sum cash amount equal to 100% of his bonus opportunity for the year in which the Date of Termination occurs (as defined in Section 5(b)(i)); provided, however that the total bonus payment described in this Section 8(c)(iv) will be reduced by the amount (if any) of the bonus opportunity that Executive had previously elected to receive in the form of restricted stock of the Company; and

(v) all grants of Restricted Stock held by Executive as of the Date of Termination will become immediately vested as of the Date of Termination; and

(vi) all of Executive’s Options held by Executive as of the Date of Termination will become immediately vested and exercisable as of the Date of Termination; and

(vii) notwithstanding the provisions of the applicable Option agreement, all of Executive’s vested but unexercised Options as of the Date of Termination (including those with accelerated vesting pursuant to the Section 8(c)(vi) above) will remain exercisable through the earlier of (A) the original expiration date of the Option, (B) the 90th day following the end of the 36-month period beginning on the Date of Termination or (C) 10 years from the date of grant of the options; and

(ix) the restrictions on Executive’s conduct contained in Section 13(c)(iv) of this Agreement will cease to apply.

(d) Death, Disability or Retirement. Regardless of whether or not a Change in Control has occurred, if Executive’s employment is terminated by reason of Executive’s death, Disability or Retirement, this Agreement will terminate without further obligations to Executive or his estate or legal representatives under this Agreement, other than for payment of Accrued Obligations and the timely payment or provision of other benefits. The Accrued Obligations will be paid to Executive or Executive’s estate or beneficiary, as applicable, in a lump sum in cash within 30 days after the Date of Termination (with no recipient having any right to designate the taxable year of the payment). With respect to the provision of other benefits, the term other benefits as used in this Section 8(e) will include, without limitation, and Executive or his estate and/or beneficiaries will be entitled to receive, benefits under such plans, programs, practices and policies relating to death or retirement benefits, if any, as are applicable to Executive on the Date of Termination.

(e) Cause or Voluntary Termination without Good Reason. Regardless of whether or not a Change in Control has occurred, if Executive’s employment is terminated for Cause, or if Executive voluntarily terminates employment without Good Reason (other than upon the expiration of the Employment Period), this Agreement will terminate without further obligations to Executive, other than for payment of Accrued Obligations within 30 days after the Date of Termination (with Executive not having any right to designate the taxable year of the payment) and the timely payment or provision of other benefits pursuant to the plans, policies, practices and programs under which such other benefits are provided.

(f) Effect of Section 409A. It is expressly contemplated by the parties that this Agreement will conform to, and be interpreted to comply with, Section 409A of the Internal Revenue Code, as amended (the “Code”). Notwithstanding any other provision of this Agreement, if Executive is a “specified employee” as defined in Section 409A(a)(2)(B)(i) of the Code, then the payment of any amount or the provision of any benefit under this Agreement which is considered deferred compensation subject to Section 409A of the Code shall be deferred for six (6) months after Executive’s “separation from service” or, if earlier, Executive’s death as required by Section 409A(a)(2)(B)(i) of the Code (the “409A Deferral Period”). In the event payments are otherwise due to be made in installments or periodically during the 409A Deferral Period, the payments which would otherwise have been made in the 409A Deferral Period shall be accumulated and paid in a lump sum as soon as the 409A Deferral Period ends, and the balance of the payments shall be made as otherwise scheduled. In the event benefits are required to be deferred, any such benefit may be provided during the 409A Deferral Period at Executive’s expense, with Executive having the right to reimbursement from the Company once the 409A Deferral Period ends, and the balance of the benefits shall be provided as otherwise scheduled. If Executive incurs any additional tax, interest or penalties under Section 409A of the Code as a result of the violation thereof, the Company at that time will pay Executive an additional amount so that, after all taxes on such amount, Executive has an amount remaining equal to such additional taxes, interest or penalties. Such gross-up payment shall be made no later than the time the related taxes, interest or penalties are to be remitted. For purposes of this Agreement, Executive shall not be deemed to have terminated employment unless Executive has a “separation from service” within the meaning of Section 409A of the Code where it is reasonably anticipated that no further services will be performed after such date or that the level of bona fide services Executive will perform after that date (whether as an employee or independent contractor) will permanently decrease to no more than 20 percent of the average level of bona fide services performed by Executive over the immediately preceding 36-month period. All rights to payments and benefits under this Agreement shall be treated as rights to receive a series of separate payments and benefits to the fullest extent allowed by Section 409A of the Code.

9. Non-exclusivity of Rights. Nothing in this Agreement will prevent or limit Executive’s continuing or future participation in any plan, program, policy or practice provided by the Company and for which Executive may qualify, nor, subject to Section 16(d), will anything herein limit or otherwise affect such rights as Executive may have under any contract or agreement with the Company. Amounts which are vested benefits or which Executive is otherwise entitled to receive under any plan, policy, practice or program of the Company or under any contract or agreement with the Company at or subsequent to the Date of Termination will be payable in accordance with such plan, policy, practice or program or contract or agreement except as explicitly modified by this Agreement.

10. Certain Additional Payments by the Company.

(a) Anything in this Agreement to the contrary notwithstanding and except as set forth below, in the event it will be determined that any payment or distribution by the Company to or for the benefit of Executive (whether paid or payable or distributed or distributable pursuant to the terms of this Agreement or otherwise, but determined without regard to any additional payments required under this Section 10) (a “Payment”) would be subject to the excise tax imposed by Section 4999 of the Code or any interest or penalties are incurred by Executive with respect to such excise tax (such excise tax, together with any such interest and penalties, are hereinafter collectively referred to as the “Excise Tax”), then Executive will be entitled to receive an additional payment (a “Gross-Up Payment”) in an amount such that after payment by Executive of all taxes (including any interest or penalties imposed with respect to such taxes), including, without limitation, any income taxes (and any interest and penalties imposed with respect thereto) and Excise Tax imposed upon the Gross-Up Payment, Executive retains an amount of the Gross-Up Payment equal to the Excise Tax imposed upon the Payments. Notwithstanding the foregoing provisions of this Section 10(a), if it is determined that Executive is entitled to a Gross-Up Payment, but that Executive, after taking into account the Payments and the Gross-Up Payment, would not receive a net after-tax benefit of at least $25,000 (taking into account both income taxes and any Excise Tax) as compared to the net after-tax proceeds to Executive resulting from an elimination of the Gross-Up Payment and a reduction of the Payments, in the aggregate, to an amount (the “Reduced Amount”) such that the receipt of Payments would not give rise to any Excise Tax, then no Gross-Up Payment will be made to Executive and the Payments, in the aggregate, will be reduced to the Reduced Amount. In that event, the order of reduction shall be first all cash payments on a pro rata basis, then any equity compensation on a pro rata basis and lastly any benefits on a pro rata basis.

(b) Subject to the provisions of Section 10(c), all determinations required to be made under this Section 10, including whether and when a Gross-Up Payment is required and the amount of such Gross-Up Payment and the assumptions to be utilized in arriving at such determination, will be made by BDO Seidman LLP or such other certified public accounting firm reasonably acceptable to the Company as may be designated by Executive (the “Accounting Firm”) which will provide detailed supporting calculations both to the Company and Executive within 15 business days of the receipt of notice from Executive that there has been a Payment, or such earlier time as is requested by the Company. In the event that the accounting firm is serving as accountant or auditor for the individual, entity or group effecting the Change in Control, or in the event that serving as the Accounting Firm for purposes of this Section 10(b) would jeopardize the accounting firm’s status as the Company’s independent auditor, Executive will appoint another nationally recognized accounting firm to make the determinations required hereunder (which accounting firm will then be referred to as the Accounting Firm hereunder). All fees and expenses of the Accounting Firm will be borne solely by the Company. Any Gross-Up Payment, as determined pursuant to this Section 10, will be paid by the Company to Executive within five days of the receipt of the Accounting Firm’s determination but must be paid in any event by the time the related taxes are to be remitted. Any determination by the Accounting Firm will be binding upon the Company and Executive. As a result of the uncertainty in the application of Section 4999 of the Code at the time of the initial determination by the Accounting Firm hereunder, it is possible that Gross-Up Payments which will not have been made by the Company should have been made (“Underpayment”), consistent with the calculations required to be made hereunder. In the event that the Company exhausts its remedies pursuant to Section 10(c) and Executive thereafter is required to make a payment of any Excise Tax, the Accounting Firm will determine the amount of the Underpayment that has occurred and any such Underpayment will be promptly paid by the Company to or for the benefit of Executive.

(c) The Executive will notify the Company in writing of any claim by the Internal Revenue Service that, if successful, would require the payment by the Company of the Gross-Up Payment. Such notification will be given as soon as practicable but no later than ten business days after Executive is informed in writing of such claim and apprises the Company of the nature of such claim and the date on which such claim is requested to be paid. The Executive will not pay such claim prior to the expiration of the 30-day period following the date on which it gives such notice to the Company (or such shorter period ending on the date that any payment of taxes with respect to such claim is due). If the Company notifies Executive in writing prior to the expiration of such period that it desires to contest such claim, Executive will:

(i) give the Company any information reasonably requested by the Company relating to such claim,

(ii) take such action in connection with contesting such claim as the Company reasonably requests in writing from time to time, including, without limitation, accepting legal representation with respect to such claim by an attorney reasonably selected by the Company,

(iii) cooperate with the Company in good faith in order effectively to contest such claim, and

(iv) permit the Company to participate in any proceedings relating to such claim;

will determine; provided, however, that if the Company directs Executive to pay such claim and sue for a refund, the Company will advance the amount of such payment to Executive, on an interest-free basis and will indemnify and hold Executive harmless, on an after-tax basis, from any Excise Tax or income tax (including interest or penalties with respect thereto) imposed with respect to such advance or with respect to any imputed income with respect to such advance; and further provided that any extension of the statute of limitations relating to payment of taxes for the taxable year of Executive with respect to which such contested amount is claimed to be due is limited solely to such contested amount. Furthermore, the Company’s control of the contest will be limited to issues with respect to which a Gross-Up Payment would be payable hereunder and Executive will be entitled to settle or contest, as the case may be, any other issue raised by the Internal Revenue Service or any other taxing authority. All payments to be made hereunder must be made by the end of Executive’s taxable year next following Executive’s taxable year in which the taxes are remitted or, if no taxes are remitted, the taxable year in which the matter is resolved, and all reimbursements to be made hereunder must be made by the end of Executive’s taxable year next following Executive’s taxable year in which the expenses are incurred.

(d) If, after the receipt by Executive of an amount advanced by the Company pursuant to Section 10(c), Executive becomes entitled to receive any refund with respect to such claim, Executive will (subject to the Company’s complying with the requirements of Section 10(c)) promptly pay to the Company the amount of such refund (together with any interest paid or credited thereon after taxes applicable thereto). If, after the receipt by Executive of an amount advanced by the Company pursuant to Section 10(c), a determination is made that Executive is not entitled to any refund with respect to such claim and the Company does not notify Executive in writing of its intent to contest such denial of refund prior to the expiration of 30 days after such determination, then such advance will be forgiven and will not be required to be repaid and the amount of such advance will offset, to the extent thereof, the amount of Gross-Up Payment required to be paid.

11. Costs of Enforcement. Unless otherwise provided by the arbitrator(s) in an arbitration proceeding pursuant to Section 14 hereof, in any action taken in good faith relating to the enforcement of this Agreement or any provision herein, Executive will be entitled to be paid any and all costs and expenses incurred by him in enforcing or establishing his rights thereunder, including, without limitation, reasonable attorneys’ fees, whether suit be brought or not, and whether or not incurred in trial, bankruptcy or appellate proceedings, but only if Executive is determined to be the substantially prevailing party in the enforcement proceeding. Such reimbursement shall be paid as soon as administratively practicable (and within 30 days) after any final judgment, decision or settlement of such action.

12. Representations and Warranties. Executive hereby represents and warrants to the Company that Executive is not a party to, or otherwise subject to, any covenant not to compete with any person or entity, and Executive’s execution of this Agreement and performance of his obligations hereunder will not violate the terms or conditions of any contract or obligation, written or oral, between Executive and any other person or entity.

13. Restrictions on Conduct of Executive.

(a) General. Executive and the Company understand and agree that the purpose of the provisions of this Section 13 is to protect legitimate business interests of the Company, as more fully described below, and is not intended to eliminate Executive’s post-employment competition with the Company per se, nor is it intended to impair or infringe upon Executive’s right to work, earn a living, or acquire and possess property from the fruits of his labor. Executive hereby acknowledges that the post-employment restrictions set forth in this Section 13 are reasonable and that they do not, and will not, unduly impair his ability to earn a living after the termination of this Agreement. Therefore, subject to the limitations of reasonableness imposed by law, Executive will be subject to the restrictions set forth in this Section 13.

(b) Definitions. The following terms used in this Section 13 have the meanings assigned to them below, which definitions apply to both the singular and the plural forms of such terms:

“Competitive Position” means any employment with a Competitor in which Executive will use or is likely to use any Confidential Information or Trade Secrets, or in which Executive has duties for such Competitor that relate to Competitive Services and that are the same or similar to those services actually performed by Executive for the Company;

“Competitive Services” means the provision of specialty insurance and insurance services in the excess and surplus and alternative risk transfer markets in the United States and Bermuda.

“Competitor” means any Person engaged, wholly or in part, in Competitive Services in active and direct competition with the Company.

“Confidential Information” means all information regarding the Company, its activities, business or clients that is the subject of reasonable efforts by the Company to maintain its confidentiality and that is not generally disclosed by practice or authority to persons not employed by the Company, but that does not rise to the level of a Trade Secret. “Confidential Information” includes, but is not limited to, financial plans and data concerning the Company; management planning information; business plans; operational methods; market studies; marketing plans or strategies; product development techniques or plans; lists of current or prospective customers; details of customer contracts; current and anticipated customer requirements; past, current and planned research and development; business acquisition plans; and new personnel acquisition plans. “Confidential Information” does not include information that has become generally available to the public by the act of one who has the right to disclose such information without violating any right or privilege of the Company. This definition will not limit any definition of “confidential information” or any equivalent term under state or federal law.

“Determination Date” means the date of termination of Executive’s employment with the Company for any reason whatsoever or any earlier date of an alleged breach of the Restrictive Covenants by Executive.

“Person” means any individual or any corporation, partnership, joint venture, limited liability company, association or other entity or enterprise.

“Principal or Representative” means a principal, owner, partner, shareholder, joint venturer, investor, member, trustee, director, officer, manager, employee, agent, representative or consultant.

“Protected Customers” means any Person to whom the Company has sold its products or services or solicited to sell its products or services during the twelve (12) months prior to the Determination Date; provided, however, that Protected Customers shall not include brokers or agents.

“Protected Employees” means employees of the Company who were employed by the Company at any time within six (6) months prior to the Determination Date.

“Restricted Period” means the Employment Period plus the period extending for the longer of: (i) twelve (12) months from the termination of Executive’s employment with the Company or (ii) the end of the applicable severance period.

“Restricted Territory” means the state of Georgia, any other state in which the Company or one of its affiliates writes insurance coverage.

“Restrictive Covenants” means the restrictive covenants contained in Section 13(c) hereof.

“Trade Secret” means all information, without regard to form, including, but not limited to, technical or non-technical data, a formula, a pattern, a compilation, a program, a device, a method, a technique, a drawing, a process, financial data, financial plans, product plans, distribution lists or a list of actual or potential customers, advertisers or suppliers which is not commonly known by or available to the public and which information: (A) derives economic value, actual or potential, from not being generally known to, and not being readily ascertainable by proper means by, other persons who can obtain economic value from its disclosure or use; and (B) is the subject of efforts that are reasonable under the circumstances to maintain its secrecy. Without limiting the foregoing, Trade Secret means any item of Confidential Information that constitutes a “trade secret(s)” under the common law or applicable state law.

(i) Restriction on Disclosure and Use of Confidential Information and Trade Secrets. Executive understands and agrees that the Confidential Information and Trade Secrets constitute valuable assets of the Company and its affiliated entities, and may not be converted to Executive’s own use. Accordingly, Executive hereby agrees that Executive will not, directly or indirectly, at any time during the Restricted Period reveal, divulge, or disclose to any Person not expressly authorized by the Company any Confidential Information, and Executive will not, directly or indirectly, at any time during the Restricted Period use or make use of any Confidential Information in connection with any business activity other than that of the Company. Throughout the term of this Agreement and at all times after the date that this Agreement terminates for any reason, Executive will not directly or indirectly transmit or disclose any Trade Secret of the Company to any Person, and will not make use of any such Trade Secret, directly or indirectly, for himself or for others, without the prior written consent of the Company. The parties acknowledge and agree that this Agreement is not intended to, and does not, alter either the Company’s rights or Executive’s obligations under any state or federal statutory or common law regarding trade secrets and unfair trade practices.

Anything herein to the contrary notwithstanding, Executive will not be restricted from disclosing or using Confidential Information that is required to be disclosed by law, court order or other legal process; provided, however, that in the event disclosure is required by law, Executive will provide the Company with prompt notice of such requirement so that the Company may seek an appropriate protective order prior to any such required disclosure by Executive.

(ii) Nonsolicitation of Protected Employees. Executive understands and agrees that the relationship between the Company and each of its Protected Employees constitutes a valuable asset of the Company and may not be converted to Executive’s own use. Accordingly, Executive hereby agrees that during the Restricted Period Executive will not directly or indirectly on Executive’s own behalf or as a Principal or Representative of any Person or otherwise solicit or induce any Protected Employee to terminate his or her employment relationship with the Company or to enter into employment with any other Person.

(iii) Restriction on Relationships with Protected Customers. Executive understands and agrees that the relationship between the Company and each of its Protected Customers constitutes a valuable asset of the Company and may not be converted to Executive’s own use. Accordingly, Executive hereby agrees that, during the Restricted Period, Executive will not, without the prior written consent of the Company, directly or indirectly, on Executive’s own behalf or as a Principal or Representative of any Person, solicit, divert, take away or attempt to solicit, divert or take away a Protected Customer for the purpose of providing or selling Competitive Services; provided, however, that the prohibition of this covenant will apply only to Protected Customers with whom Executive had Contact on the Company’s behalf during the twelve (12) months immediately preceding the termination of his employment hereunder. For purposes of this Agreement, Executive had “Contact” with a Protected Customer if (a) he had business dealings with the Protected Customer on the Company’s behalf; (b) he was responsible for supervising or coordinating the dealings between the Company and the Protected Customer; or (c) he obtained Trade Secrets or Confidential Information about the Protected Customer as a result of his association with the Company.

(iv) Noncompetition with the Company. The parties acknowledge:

A) that Executive’s services under this Agreement require special expertise and talent in the provision of Competitive Services and that Executive will have substantial contacts with customers, suppliers, advertisers and vendors of the Company;

(B) that pursuant to this Agreement, Executive will be placed in a position of trust and responsibility and he will have access to a substantial amount of Confidential Information and Trade Secrets and that the Company is placing him in such position and giving him access to such information in reliance upon his agreement not to compete with the Company during the Restricted Period;

(C) that due to his management duties, Executive will be the repository of a substantial portion of the goodwill of the Company and would have an unfair advantage in competing with the Company;

(D) that due to Executive’s special experience and talent, the loss of Executive’s services to the Company under this Agreement cannot reasonably or adequately be compensated solely by damages in an action at law;

(E) that Executive is capable of competing with the Company; and

(F) that Executive is capable of obtaining gainful, lucrative and desirable employment that does not violate the restrictions contained in this Agreement.

In consideration of the compensation and benefits being paid and to be paid by the Company to Executive hereunder, Executive hereby agrees that, during the Restricted Period, Executive will not, without prior written consent of the Company, directly or indirectly seek or obtain a Competitive Position in the Restricted Territory with a Competitor; provided, however, that the provisions of this Agreement will not be deemed to prohibit the ownership by Executive of any securities of the Company or its affiliated entities or not more than five percent (5%) of any class of securities of any corporation having a class of securities registered pursuant to the Securities Exchange Act of 1934, as amended.

(v) Cooperation.

A) Executive. Throughout the term of this Agreement and at all times after the date that this Agreement terminates for any reason, Executive will not make statements detrimental to the interests of nor engage in any activities detrimental to the Company or its officers, directors, stockholders, trustees, employees, agents, parent corporations, subsidiaries, affiliates, estates, successors, assigns and attorneys, nor will Executive make any statements about any of the aforementioned parties to the press (including without limitation any newspaper, magazine, radio station or television station) without the prior written consent of the Company, except as may be required by applicable law or regulation. Executive will also cooperate with the Company and its affiliates as a witness in all matters about which he has knowledge as a result of his position with the Company and its affiliates if the Company requests his testimony.

(B) Company. The Company will not at any time make derogatory statements or statements detrimental to the interests of nor engage in any activities detrimental to the Executive, nor will the Company make any statements about the Executive to the press (including without limitation any newspaper, magazine, radio station or television station) without the prior written consent of the Executive, except as may be required by applicable law or regulation.

(d) Enforcement of Restrictive Covenants.

(i) Rights and Remedies Upon Breach. In the event Executive breaches, or threatens to commit a breach of, any of the provisions of the Restrictive Covenants, the Company will have the following rights and remedies, which will be independent of any others and severally enforceable, and will be in addition to, and not in lieu of, any other rights and remedies available to the Company at law or in equity:

(A) the right and remedy to enjoin, preliminarily and permanently, Executive from violating or threatening to violate the Restrictive Covenants and to have the Restrictive Covenants specifically enforced by any court of competent jurisdiction, it being agreed that any breach or threatened breach of the Restrictive Covenants would cause irreparable injury to the Company and that money damages would not provide an adequate remedy to the Company; and

(B) the right and remedy to require Executive to account for and pay over to the Company all compensation, profits, monies, accruals, increments or other benefits derived or received by Executive hereunder after his Date of Termination, excluding any Accrued Obligations.

(ii) Severability of Covenants. Executive acknowledges and agrees that the Restrictive Covenants are reasonable and valid in time and scope and in all other respects. The covenants set forth in this Agreement will be considered and construed as separate and independent covenants. Should any part or provision of any covenant be held invalid, void or unenforceable in any court of competent jurisdiction, such invalidity, voidness or unenforceability will not render invalid, void or unenforceable any other part or provision of this Agreement. If any portion of the foregoing provisions is found to be invalid or unenforceable by a court of competent jurisdiction because its duration, the territory, the definition of activities or the definition of information covered is considered to be invalid or unreasonable in scope, the invalid or unreasonable term will be redefined, or a new enforceable term provided, such that the intent of the Company and Executive in agreeing to the provisions of this Agreement will not be impaired and the provision in question will be enforceable to the fullest extent of the applicable laws.

14. Arbitration. Any claim or dispute arising under this Agreement (other than under Section 13) will be subject to arbitration, and prior to commencing any court action, the parties agree that they will arbitrate all such controversies. The arbitration will be conducted in Atlanta, Georgia in accordance with the Employment Dispute Rules of the American Arbitration Association and the Federal Arbitration Act, 9 U.S.C. § 1, et. seq. The arbitrator(s) will be authorized to award both liquidated and actual damages, in addition to injunctive relief, but no punitive damages. The arbitrator(s) may also award attorney’s fees and costs, without regard to any restriction on the amount of such award under Georgia or other applicable law. Such an award will be binding and conclusive upon the parties hereto, subject to 9 U.S.C. §10. Each party will have the right to have the award made the judgment of a court of competent jurisdiction. By initialing below, each of Executive and Company specifically acknowledge and agree to arbitration pursuant to this Section 14.


		Executive SRC Company JDS

15. Assignment and Successors.

(a) This Agreement is personal to Executive and without the prior written consent of the Company will not be assignable by Executive otherwise than by will or the laws of descent and distribution. This Agreement will inure to the benefit of and be enforceable by the Executive’s legal representatives.

(b) This Agreement will inure to the benefit of and be binding upon the Company and its successors and assigns.

(c) The Company will require any successor (whether direct or indirect, by purchase, merger, consolidation or otherwise) to all or substantially all of the business and/or assets of the Company to assume expressly and agree to perform this Agreement in the same manner and to the same extent that the Company would be required to perform it if no such succession had taken place. As used in this Agreement, “Company” means the Company as hereinbefore defined and any successor to its business and/or assets as aforesaid which assumes and agrees to perform this Agreement by operation of law, or otherwise.

16. Miscellaneous.

(a) Waiver. Failure of either party to insist, in one or more instances, on performance by the other in strict accordance with the terms and conditions of this Agreement will not be deemed a waiver or relinquishment of any right granted in this Agreement or of the future performance of any such term or condition or of any other term or condition of this Agreement, unless such waiver is contained in a writing signed by the party making the waiver.

(b) Severability. If any provision or covenant, or any part thereof, of this Agreement should be held by any court to be invalid, illegal or unenforceable, either in whole or in part, such invalidity, illegality or unenforceability will not affect the validity, legality or enforceability of the remaining provisions or covenants, or any part thereof, of this Agreement, all of which will remain in full force and effect.

(c) Other Agents. Nothing in this Agreement is to be interpreted as limiting the Company from employing other personnel on such terms and conditions as may be satisfactory to it.

(d) Entire Agreement. Except as provided herein, this Agreement contains the entire agreement between the Company and Executive with respect to the subject matter hereof and, from and after the Effective Date, this Agreement will supersede any other agreement between the parties with respect to the subject matter hereof.

(e) Governing Law. Except to the extent preempted by federal law, and without regard to conflict of laws principles, the laws of the State of Georgia will govern this Agreement in all respects, whether as to its validity, construction, capacity, performance or otherwise.

(f) Notices. All notices, requests, demands and other communications required or permitted hereunder will be in writing and will be deemed to have been duly given if delivered or three days after mailing if mailed, first class, certified mail, postage prepaid:


		To Company:		100 Galleria Parkway
				Suite 700
				Atlanta, Georgia 30339
		To Executive:		the address of the Executive in the Company’s records

Any party may change the address to which notices, requests, demands and other communications will be delivered by giving notice thereof to the other party in the same manner provided herein.

(g) Amendments and Modifications. This Agreement may be amended or modified only by a writing signed by both parties hereto, which makes specific reference to this Agreement.

(h) Binding Effect. Except as otherwise provided in this Agreement, every covenant, term and provision of this Agreement will bind and inure to the benefit of each party’s respective successors, transferees and permitted assigns.

(i) Construction. In construing and enforcing this Agreement, the following rules will be followed:

(1) Each provision of this Agreement will be construed simply according to its fair meaning and not strictly for or against any party. No consideration will be given to the fact or presumption that any party had a greater or lesser hand in drafting this Agreement.

(2) In construing and enforcing this Agreement, no consideration will be given to the captions of the articles, sections, subsections, and clauses of this Agreement, which are inserted for convenience in organizing and locating the provisions of this Agreement, not as an aid in its construction.

(3) Plural words will be understood to include their singular forms, and vice versa.

(4) The word “include” and its syntactical forms mean “include, but are not limited to,” and corresponding syntactical forms. The principal of ejusdem generis will not be used to limit the scope of the category of things illustrated by the items mentioned in a clause introduced by the word “including.”

(5) A defined term has its defined meaning through this Agreement, regardless of where in this Agreement the term is defined.

(6) Except as otherwise provided in this Agreement, a reference to an Article, Section, or clause means an article, section, or clause of this Agreement and may be understood to mean, for example, “Section 5.1 of this Agreement” or “Section 5.1 hereof.” The term “Section” may be used variously to identify entire Sections (as in “Section 6.8”), subsections (as in “Section 6.8(a)”), and clauses (as in “Section 6.8(h)(iii)”).

(j) Incorporation by Reference. The exhibits to this Agreement are incorporated in this Agreement by reference.

(k) Time. Time is of the essence in this Agreement.

(1) Counterparts. This Agreement may be executed in any number of counterparts with the same effect as if all of the parties had signed the same document. All counterparts will be construed together and will constitute one agreement.

* * * * * * * *

IN WITNESS WHEREOF, the parties hereto have duly executed and delivered this Employment Agreement as of the date first above written.


		AMERICAN SAFETY INSURANCE SERVICES, INC.

		By:		/s/ Joseph D. Scollo, Jr. Name: Joseph D. Scollo, Jr.
				Title: President

		EXECUTIVE:

		/s/ Stephen R. Crim

		Stephen R. Crim

EXHIBIT A
Form of Release

This Release is granted effective as of the _____ day of _____, _____, by _____ (“Executive”) in favor of American Safety Insurance Services, Inc. and its affiliates (collectively, the “Company”). This is the Release referred to in that certain Employment Agreement dated as of by and between the Company and Executive (the `Employment Agreement”). Executive gives this Release in consideration of the Company’s promises and covenants as recited in the Employment Agreement, with respect to which this Release is an integral part.

1. Release of the Company. Executive, for himself, his successors, assigns, attorneys, and all those entitled to assert his rights, now and forever hereby releases and discharges the Company and its respective officers, directors, stockholders, trustees, employees, agents, parent corporations, subsidiaries, affiliates, estates, successors, assigns and attorneys (“the Released Parties”), from any and all claims, actions, causes of action, sums of money due, suits, debts, liens, covenants, contracts, obligations, costs, expenses, damages, judgments, agreements, promises, demands, claims for attorney’s fees and costs, or liabilities whatsoever, in law or in equity, which Executive ever had or now has against the Released Parties, including any claims arising by reason of or in any way connected with any employment relationship which existed between the Company or any of its parents, subsidiaries, affiliates, or predecessors, and Executive. It is understood and agreed that this Release is intended to cover all actions, causes of action, claims or demands for any damage, loss or injury, which may be traced either directly or indirectly to the aforesaid employment relationship, or the termination of that relationship, that Executive has, had or purports to have, from the beginning of time to the date of this Release, whether known or unknown, that now exists, no matter how remotely they may be related to the aforesaid employment relationship including but not limited to claims for employment discrimination under federal or state law, except as provided in Paragraph 2; claims arising under Title VII of the Civil Rights Act, 42 U.S.C. § 2000(e), et seq. or the Americans With Disabilities Act, 42 U.S.C. § 12101 et seq.; claims for statutory or common law wrongful discharge, including any claims arising under the Fair Labor Standards Act, 29 U.S.C. § 201 et seq.; claims for attorney’s fees, expenses and costs; claims for defamation; claims for wages or vacation pay; claims for benefits, including any claims arising under the Employee Retirement Income Security Act, 29 U.S.C. § 1001, et seq.; and provided, however, that nothing herein will release the Company of its obligations to Executive under the Employment Agreement or any other contractual obligations between the Company or its affiliates and Executive, or any indemnification obligations to Executive under the Company’s bylaws, certificate of incorporation, Delaware law or otherwise.

2. Release of Claims Under Age Discrimination in Employment Act. Without limiting the generality of the foregoing, Executive agrees that by executing this Release, he has released and waived any and all claims he has or may have as of the date of this Release for age discrimination under the Age Discrimination in Employment Act, 29 U.S.C. § 621, et seq. It is understood that Executive is advised to consult with an attorney prior to executing this Release; that he in fact has consulted a knowledgeable, competent attorney regarding this Release; that he may, before executing this Release, consider this Release for a period of twenty-one (21) calendar days; and that the consideration he receives for this Release is in addition to amounts to which he was already entitled. It is further understood that this Release is not effective until seven (7) calendar days after the execution of this Release and that Executive may revoke this Release within seven (7) calendar days from the date of execution hereof.

3. Executive agrees that he has carefully read this Release and is signing it voluntarily. Executive acknowledges that he has had twenty one (21) days from receipt of this Release to review it prior to signing or that, if Executive is signing this Release prior to the expiration of such 21-day period, Executive is waiving his right to review the Release for such full 21-day period prior to signing it. Executive has the right to revoke this release within seven (7) days following the date of its execution by him. However, if Executive revokes this Release within such seven (7) day period, no severance benefit will be payable to him under the Employment Agreement and he will return to the Company any such payment received prior to that date.

EXECUTIVE HAS CAREFULLY READ THIS RELEASE AND ACKNOWLEDGES THAT IT CONSTITUTES A GENERAL RELEASE OF ALL KNOWN AND UNKNOWN CLAIMS AGAINST THE COMPANY UNDER THE AGE DISCRIMINATION IN EMPLOYMENT ACT. EXECUTIVE ACKNOWLEDGES THAT HE HAS HAD A FULL OPPORTUNITY TO CONSULT WITH AN ATTORNEY OR OTHER ADVISOR OF HIS CHOOSING CONCERNING HIS EXECUTION OF THIS RELEASE AND THAT HE IS SIGNING THIS RELEASE VOLUNTARILY AND WITH THE FULL INTENT OF RELEASING THE COMPANY FROM ALL SUCH CLAIMS.


		EXECUTIVE:

EX-10.2 3 c19312exv10w2.htm EXHIBIT 10.2 Exhibit 10.2

Exhibit 10.2

EXECUTION COPY

AMENDED AND RESTATED

EMPLOYMENT AGREEMENT

BETWEEN

JOSEPH D. SCOLLO, JR.

AND

AMERICAN SAFETY INSURANCE SERVICES, INC.

Dated: August 8, 2011

EMPLOYMENT AGREEMENT

THIS AMENDED AND RESTATED EMPLOYMENT AGREEMENT (this “Agreement”) is made and entered into this 8th day of August, 2011, by and between American Safety Insurance Services, Inc., a Georgia corporation with its principal executive offices located in Atlanta, Georgia (the “Company”), and Joseph D. Scollo, Jr., an individual resident of the State of Georgia (“Executive”), to be effective as of the Effective Date, as defined in Section 1.

BACKGROUND

Executive currently serves as the Executive Vice President and Chief Operating Officer of the Company pursuant to the terms of an employment agreement, dated March 21, 2005 by and between Executive and the Company (the “2005 Agreement”). Executive and the Company desire to enter into a new employment arrangement pursuant to the terms of this Agreement, which as of the Effective Date supersedes and replaces the 2005 Agreement.

1. Effective Date. The effective date of this Agreement (the “Effective Date”) is August 1, 2011.

2. Employment. Executive is hereby employed as the Executive Vice President and Chief Operating Officer of the Company. In such capacity, Executive will have the duties and responsibilities commensurate with such position and as may be reasonably assigned to him by the Chief Executive Officer of the Company (the “CEO”). Executive’s reporting responsibilities will be to the CEO.

5. Compensation and Benefits.

(a) Base Salary. During the Employment Period, Executive will be entitled to receive a base salary in the amount of $345,000.00 per year (“Initial Base Salary”), less normal withholdings, payable in equal semi-monthly installments or other installments (not less frequently than monthly) as are customary under the Company’s payroll practices from time to time. The Compensation Committee of the Board will review Executive’s then current Base Salary periodically, but no less frequently than annually, and in its sole discretion may increase Executive’s Base Salary from time to time (as so increased, the “Base Salary”). The periodic review of Executive’s salary by the Board will consider, among other things, Executive’s own performance and the Company’s performance.

(f) Fringe Benefits. During the Employment Period, Executive will be entitled to a car allowance of $750.00 per month payable in equal semi-monthly or other installments (not less frequently than monthly) as are customary under the Company’s payroll practices from time to time. In addition, the Company will pay, during each calendar year, up to $20,000.00 per calendar year for a Universal Life Insurance Policy on Executive’s life (or other instrument mutually agreed upon by Executive and the Company) and will impute taxable income to Executive equal to the amount paid. Executive will be entitled to such other fringe benefits as may be consistent with the plans, practices, programs and policies of the Company.