Market Overview

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

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HAMILTON, Bermuda--(BUSINESS WIRE)--

American Safety Insurance Holdings, Ltd. (NYSE: ASI) today reported net earnings of $6.2 million for the three months ended September 30, 2012, or $0.60 per diluted share, as compared to $5.8 million, or $0.54 per diluted share, for the same period of 2011.

Financial highlights for the quarter included1:

  • Gross written premiums increased 8% to $79.1 million
  • Net earned premiums increased 7% to $63.1 million
  • Total revenues were $77.4 million compared to $68.1 million
  • The combined ratio was 106.9% compared to 101.1%
  • The combined ratio excluding weather related property losses was 103.7% compared to 101.1%
  • Annualized return on average equity (exclusive of realized and unrealized gains from investments) was 2.9%
  • Book value was $34.13 per diluted share versus $30.80 at December 31, 2011

1All comparisons are with the same period last year unless stated otherwise.

Third Quarter Results

The increase in total revenues was driven by a $4.1 million increase in net earned premiums and a $5.7 million increase in net realized gains offset in part by a reduction of $0.8 million in investment income.

The combined ratio of 106.9% consists of a loss ratio of 63.9% and an expense ratio of 43.0%, compared to 60.8% and 40.3%, respectively, for the same quarter of 2011. Pre-tax weather related property losses in the 2012 quarter were $2.0 million (or 3.2 points in the loss ratio) compared to no impact from weather related losses for the 2011 quarter. The expense ratio increase was attributable to: (a) higher acquisition costs in 2012, due primarily to profit commissions, (b) mix of business and (c) costs associated with growth initiatives.

Net operating earnings were $2.1 million compared to $5.8 million. The decrease in operating earnings is attributable to higher weather related losses, lower investment income and increased expenses primarily associated with growth initiatives. Net operating earnings (loss) is a non-GAAP financial measure defined by the Company as net earnings adjusted for net realized gains (losses), net of applicable taxes.

Year to Date Results

Total revenues for the nine months ended 2012 were $217.5 million compared to $210.0 million in 2011. Net earned premiums increased $14.0 million, or 8%, to $186.5 million, net investment income decreased $1.1 million, and net realized gains decreased $5.6 million.

The combined ratio was 105.1% compared to 107.5%, composed of a loss ratio of 63.5% and an expense ratio of 41.6%, compared to 68.4% and 39.1%, respectively, in the prior year. The decrease in the loss ratio is primarily attributable to lower weather related property losses of $5.6 million (or 3.0 points) for the nine months ended September 30, 2012 compared to $10.8 million (or 6.3 points) for the same period in 2011.

Net earnings for the nine months ended September 30, 2012, were $12.4 million, or $1.18 per diluted share, compared to $17.8 million, or $1.65 per diluted share, for the same period in 2011. Net earnings for the nine months ended September 30, 2012, include after-tax net weather related losses of $4.7 million and realized investment gains net of taxes of $4.1 million. For the same nine months of 2011, after-tax net weather related property losses totaled $8.4 million and realized investment gains net of taxes were $11.2 million.

Net operating earnings were $8.3 million in 2012 compared to $6.6 million in 2011. The increase in operating earnings is attributable to lower weather related losses during 2012 as compared to 2011. Net operating earnings in 2012 were also impacted by reduced investment income and increased expenses primarily associated with growth initiatives.

Invested assets increased 7.4% to $948.3 million at September 30, 2012, from $883.1 million at December 31, 2011. The book yield on the portfolio was 3.6% compared to 4.1% for the 2011 period.

Since June 30, 2012, the Company purchased 488,968 shares of its common stock for $8.8 million and completed its January 24, 2012 500,000 share authorization. On October 23, 2012, the Company's Board of Directors approved the repurchase of up to an additional 500,000 shares of the Company's outstanding common stock. Repurchases may be made from time to time on the open market or in privately negotiated block transactions.

Commenting on the results, Stephen R. Crim, President and Chief Executive Officer said, “While operating earnings for the quarter were impacted by a combination of weather related losses, declining investment yields and the impact from recent investments in growth initiatives, book value per share increased by 6% during the quarter. Our growth initiatives contributed to the strong premium growth achieved in the quarter and, as they continue to gain traction, will improve operating earnings over time.”

Conference Call

A conference call to discuss third quarter 2012 results is scheduled for Thursday, November 1, 2012, at 9:00 a.m. (Eastern Daylight Time), which will be broadcast through Vcall's Investor Calendar at www.investorcalendar.com, or the Company's website at www.amsafety.com. If you are unable to participate at this time, a replay will be available for 30 days, beginning approximately two hours after the call.

This press release contains forward-looking statements and non-GAAP financial measures. The forward-looking statements reflect the Company's current views with respect to future events and financial performance, including insurance market conditions, combined ratio, premium growth, acquisitions and new products and the impact of new accounting standards. Forward-looking statements involve risks and uncertainties which may cause actual results to differ materially, including competitive conditions in the insurance industry, levels of new and renewal insurance business, developments in loss trends, adequacy and changes in loss reserves and actuarial assumptions, timing or collectability of reinsurance recoverables, market acceptance of new coverages and enhancements, changes in reinsurance costs and availability, potential adverse decisions in court and arbitration proceedings, the integration and other challenges attendant to acquisitions, and changes in levels of general business activity and economic conditions.

About Us:

For 25 years, American Safety Insurance Holdings, Ltd. (NYSE: ASI), a Bermuda holding company, has offered innovative solutions outside the U.S. in the reinsurance and alternative risk markets through its subsidiaries, American Safety Reinsurance, Ltd., and American Safety Assurance, Ltd., and in the U.S. for specialty risks and alternative risk markets through its program administrator, American Safety Insurance Services, Inc., and insurance company subsidiaries and affiliates, American Safety Casualty Insurance Company, American Safety Indemnity Company, American Safety Risk Retention Group, Inc., and American Safety Assurance (Vermont), Inc. As a group, ASI's insurance subsidiaries and affiliates are rated “A” (Excellent) IX by A.M. Best. For additional information, please visit www.asih.bm.

American Safety Insurance Holdings, Ltd. and Subsidiaries
Financial and Operating Highlights
(Unaudited)
(dollars in thousands)
                   

Three months Ended
September 30,

Nine months Ended
September 30,

  2012     2011     2012     2011  
INCOME STATEMENT DATA:
Revenues:
Direct earned premiums $ 63,547 $ 62,498 $ 184,670 $ 180,955
Assumed earned premiums 15,088 12,287 44,212 37,422
Ceded earned premiums   (15,540 )   (15,793 )   (42,358 )   (45,866 )
Net earned premiums 63,095 58,992 186,524 172,511
Net investment income 7,364 8,196 22,577 23,682
Net realized gains 5,693 10 5,732 11,311
Fee income 1,251 843 2,636 2,494
Other income   12     12     37     35  
Total revenues   77,415     68,053     217,506     210,033  
Expenses:
Losses and loss adjustment expenses 40,289 35,867 118,389 117,997
Acquisition expenses 15,971 13,689 45,052 38,683
Other underwriting expenses 12,396 10,941 35,159 31,309
Interest expense 415 375 1,200 1,116
Corporate and other expenses   916     284     3,020     2,136  
Total expenses   69,987     61,156     202,820     191,241  
Earnings before income taxes 7,428 6,897 14,686 18,792
Income tax expense   1,350     1,169     2,222     588  
Net earnings 6,078 5,728 12,464 18,204
Less: Net earnings (loss) attributable to the non-controlling interest   (128 )   (69 )   35     454  
Net earnings attributable to ASIH, Ltd. $ 6,206   $ 5,797   $ 12,429   $ 17,750  
Net earnings per share:
Basic $ 0.61   $ 0.56   $ 1.22   $ 1.70  
Diluted $ 0.60   $ 0.54   $ 1.18   $ 1.65  
Weighted average number of shares outstanding:
Basic   10,113,871     10,377,890     10,196,538     10,416,979  
Diluted   10,420,777     10,701,959     10,502,816     10,751,312  
Loss ratio 63.9 % 60.8 % 63.5 % 68.4 %
Expense ratio   43.0 %   40.3 %   41.6 %   39.1 %
Combined ratio   106.9 %   101.1 %   105.1 %   107.5 %
Net operating earnings:
Net earnings attributable to ASIH, Ltd. $ 6,206 $ 5,796 $ 12,429 $ 17,750
Less: Realized investment gains,

net of taxes

  4,106     (7 )   4,126     11,199  
Net operating earnings $ 2,100   $ 5,803   $ 8,303   $ 6,551  
 
 
 
BALANCE SHEET DATA:   9/30/2012     12/31/2011  
(unaudited)
Total investments $ 948,314 $ 883,099
Total assets 1,368,588 1,286,532
Unpaid losses and loss adjustment expenses 683,011 680,201
Total liabilities 1,012,779 951,852
Total shareholders' equity 355,809 334,680
Book value per share-diluted $ 34.13 $ 30.80
 
 
American Safety Insurance Holdings, Ltd. and Subsidiaries
Segment Data
(Unaudited)
(dollars in thousands)
           
Three Months Ended September 30, 2012
Insurance   Other
E&S       ART       Reinsurance Run-off Total
Gross written premiums $ 49,192 $ 16,146 $ 13,807 $ - $ 79,145
Net written premiums 39,004 8,772 13,806 - 61,582
Net earned premiums 35,650 13,295 14,150 - 63,095
Fee & other income 294 915 - 54 1,263
Losses & loss adjustment expenses 20,979 10,423 8,887 - 40,289
Acquisition & other underwriting expenses***   16,812     6,280     4,303     972     28,367  
Underwriting profit (loss) (1,847 ) (2,493 ) 960 (918 ) (4,298 )
Net investment income   4,452     1,030     1,745     137     7,364  
Pre-tax operating income (loss) 2,605 (1,463 ) 2,705 (781 ) 3,066
Net realized gains - - - - 5,693
Interest and corporate expenses**** - - - -   1,331  
Earnings before income taxes - - - - 7,428
Income tax expense - - - -   1,350  
Net earnings - - - - $ 6,078
Less: Net losses attributable to the non-controlling interest - - - -   (128 )
Net earnings attributable to ASIH, Ltd. - - - - $ 6,206  
Loss ratio 58.8 % 78.4 % 62.8 % NM 63.9 %
Expense ratio   46.3 %   40.4 %   30.4 %   NM   43.0 %
Combined ratio**   105.2 %   118.8 %   93.2 %   NM   106.9 %
 
 
Three Months Ended September 30, 2011
Insurance Other
E&S ART Reinsurance Run-off Total
Gross written premiums $ 39,782 $ 18,952 $ 14,512 $ - $ 73,246
Net written premiums 31,621 14,040 14,559 - 60,220
Net earned premiums 30,752 15,552 12,688 - 58,992
Fee & other income (8 ) 806 - 57 855
Losses & loss adjustment expenses 19,019 8,466 8,382 - 35,867
Acquisition & other underwriting expenses***   12,778     6,464     4,491     895     24,628  
Underwriting profit (loss) (1,053 ) 1,428 (185 ) (838 ) (648 )
Net investment income   5,280     1,186     1,593     137     8,196  
Pre-tax operating income (loss) 4,227 2,614 1,408 (701 ) 7,548
Net realized gains - - - - 10
Interest and corporate expenses**** - - - -   661  
Earnings before income taxes - - - - 6,897
Income tax expense - - - -   1,169  
Net earnings - - - - $ 5,728
Less: Net losses attributable to the non-controlling interest - - -

-

  (69 )
Net earnings attributable to ASIH, Ltd. - - - - $ 5,797  
Loss ratio 61.8 % 54.4 % 66.1 %

*NM

60.8 %
Expense ratio   41.6 %   36.4 %   35.4 %   NM   40.3 %
Combined ratio**   103.4 %   90.8 %   101.5 %   NM   101.1 %
 
* NM = Ratio is not meaningful

** The U.S. GAAP 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.

*** Reclassifications between divisions and segments were made to allocate indirect corporate overhead costs.
**** Excise taxes have been classified as corporate expenses resulting in a reclassification of expenses for prior year.
 
 
American Safety Insurance Holdings, Ltd. and Subsidiaries
Segment Data
(Unaudited)
(dollars in thousands)
       
Nine Months Ended September 30, 2012
Insurance       Other
E&S       ART       Reinsurance Run-off Total
Gross written premiums $ 138,251 $ 58,822 $ 43,386 $ - $ 240,459
Net written premiums 109,472 39,494 43,385 - 192,351
Net earned premiums 100,400 42,796 43,328 - 186,524
Fee & other income 294 2,317 - 62 2,673
Losses & loss adjustment expenses 60,117 32,285 25,987 - 118,389
Acquisition & other underwriting expenses***   45,869     18,533     13,104     2,705     80,211  
Underwriting profit (loss) (5,292 ) (5,705 ) 4,237 (2,643 ) (9,403 )
Net investment income   13,362     3,807     4,961     447     22,577  
Pre-tax operating income (loss) 8,070 (1,898 ) 9,198 (2,196 ) 13,174
Net realized gains - - - - 5,732
Interest and corporate expenses**** - - - -   4,220  
Earnings before income taxes - - - - 14,686
Income tax expense - - - -   2,222  
Net earnings - - - - $ 12,464
Less: Net earnings attributable to the non-controlling interest - - - -   35  
Net earnings attributable to ASIH, Ltd. - - - - $ 12,429  
Loss ratio 59.9 % 75.4 % 60.0 % NM 63.5 %
Expense ratio   45.4 %   37.9 %   30.2 %   NM   41.6 %
Combined ratio**   105.3 %   113.3 %   90.2 %   NM   105.1 %
 
 
Nine Months Ended September 30, 2011
Insurance Other
E&S ART Reinsurance Run-off Total
Gross written premiums $ 119,706 $ 64,753 $ 46,012 $ (1 ) $ 230,470
Net written premiums 95,636 46,086 44,925 (1 ) 186,646
Net earned premiums 87,831 45,523 39,158 (1 ) 172,511
Fee & other income (8 ) 2,436 - 101 2,529
Losses & loss adjustment expenses 54,657 30,310 33,030 - 117,997
Acquisition & other underwriting expenses***   37,411     18,428     11,605     2,548     69,992  
Underwriting profit (loss) (4,245 ) (779 ) (5,477 ) (2,448 ) (12,949 )
Net investment income   15,176     3,538     4,528     440     23,682  
Pre-tax operating income (loss) 10,931 2,759 (949 ) (2,008 ) 10,733
Net realized gains - - - - 11,311
Interest and corporate expenses**** - - - -   3,252  
Earnings before income taxes - - - - 18,792
Income tax expense - - - -   588  
Net earnings - - - - $ 18,204
Less: Net earnings attributable to the non-controlling interest - - - -   454  
Net earnings attributable to ASIH, Ltd. - - - - $ 17,750  
Loss ratio 62.2 % 66.6 % 84.4 % *NM 68.4 %
Expense ratio   42.6 %   35.1 %   29.6 %   NM   39.1 %
Combined ratio**   104.8 %   101.7 %   114.0 %   NM   107.5 %
 
* NM = Ratio is not meaningful

** The U.S. GAAP 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.

*** Reclassifications between divisions and segments were made to allocate indirect corporate overhead costs.
**** Excise taxes have been classified as corporate expenses resulting in a reclassification of expenses for prior year.

American Safety Insurance Holdings, Ltd.
Investor Relations
Stephen R. Crim, (441) 296-8560
scrim@amsafety.bm
or
American Safety Administrative Services, Inc.
Media Relations
Patrick Driscoll, CPA, CPCU, (770) 916-1908
patrick.driscoll@amsafety.com

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