Derivatives

12 Months Ended

Dec. 31, 2011

Derivatives [Abstract]

Derivatives

(10) Derivatives

The underlying debt obligations between the Company and American Safety Capital, American Safety Capital II and American Safety Capital III expose the Company to variability in interest payments due to changes in interest rates.

During May of 2009, the Company entered into interest rate swaps on the Trust Preferred debts that were designated as hedging instruments. On February 12, 2010, the Company terminated these swaps resulting in a $2.1 million gain. For accounting purposes, the gain is reported in comprehensive income net of tax and recognized through earnings using the effective interest method over the time period the derivative was originally designated to hedge interest payments on the underlying debt.

During May 2009 the Company terminated an interest rate swap entered in January 2009 on the American Safety Capital III. The swap was a received variable pay fixed swap with an expiration in 2035. Due to movements in long-term rates the swap value moved in the Company’s favor prior to being sold. Because the swap was not designated as a hedge transaction at the time of termination, the transaction resulted in a $2.3 million realized gain during the second quarter ended June 30, 2009, and was reported as net realized gains.