AMERICAN SAFETY INSURANCE HOLDINGS LTD - FORM 8-K - EX-99.1

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8-K - FORM 8-K - AMERICAN SAFETY INSURANCE HOLDINGS LTD	d577241d8k.htm
EX-99.2 - EX-99.2 - AMERICAN SAFETY INSURANCE HOLDINGS LTD	d577241dex992.htm

Exhibit 99.1

LOGO

American Safety Insurance Holdings, Ltd.

Reports Second Quarter Financial Results

HAMILTON, Bermuda, July 31, 2013 – American Safety Insurance Holdings, Ltd. (NYSE:ASI) today reported net earnings of $34.8 million for the three months ended June 30, 2013, or $3.54 per diluted share, as compared to $2.2 million, or $0.21 per diluted share, for the same period of 2012. Net earnings for the second quarter ended June 30, 2013 include after tax net realized gains of $31.4 million, or $3.20 per share.

Financial highlights for the quarter included¹:

•

Gross written premiums decreased 4.2% to $83.9 million

•

Total revenues were $105.6 million compared to $70.1 million

•

Pre-tax net realized gains were $37.5 million

•

The combined ratio was 102.2% compared to 107.1%

•

Annualized return on average equity (exclusive of realized and unrealized gains from investments) was 4.4%

•

Book value was $32.79 per diluted share versus $34.21 at December 31, 2012

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

Second Quarter Results

Total revenues in the quarter increased to $105.6 million from $70.1 million in 2012 due to net realized gains of $37.5 million in the quarter partially offset by lower investment income. During the quarter ended June 30, 2013 the Company sold $778.9 million of its investment portfolio in compliance with the merger agreement with Fairfax Financial Holdings Limited. The decline in net investment income in the 2013 quarter was due to the liquidation of a substantial portion of the investment portfolio and subsequent reinvestment of the proceeds.

The investment portfolio (exclusive of cash) totaled $928.7 million at June 30, 2013 with an average credit quality of AAA, a duration of approximately six years and a book yield of 1.31 percent. The investment portfolio at June 30, 2013 includes U.S Treasury securities of $760.3 million.

The combined ratio of 102.2% consists of a loss ratio of 60.6% and an expense ratio of 41.6%, compared to 65.8% and 41.3%, respectively, for the same quarter of 2012. The decrease in the loss ratio is primarily attributable to lower weather related losses experienced in the second quarter of 2013 as compared to the 2012 quarter. Net operating earnings² for the quarter ended June 30, 2013 and 2012 were $3.4 million and $2.2 million, respectively. Operating earnings in the second quarter of 2012 includes $3.0 million of weather related losses.

Year to Date Results

Total revenues for the six months ended 2013 were $177.9 million compared to $140.1 million in 2012. Net earned premiums increased 0.6% to $124.1 million. Net realized gains increased $38.9 million on investment sales of $790.1 million.

The combined ratio was 102.4% compared to 104.2%, composed of a loss ratio of 60.9% and an expense ratio of 41.5%, compared to 63.9% and 40.9%, respectively, in the prior year. Weather related losses during the second quarter of 2012 impacted the 2012 loss ratio by 2.9 points while for the six months ended June 30, 2013 weather related losses were minimal. The increase in expense ratio for the six months ended June 30, 2013 is primarily attributable to the July 1, 2012 acquisition of a surety managing general agency.

Net earnings for the six months ended June 30, 2013, were $40.3 million, or $4.12 per diluted share, compared to $6.2 million, or $0.59 per diluted share, for the same period in 2012 due primarily to after tax net realized gains of $32.6 million, or $3.33 per share. Net operating earnings, exclusive of weather related property losses, were $7.7 million for the six months ended June 30, 2013 compared to $9.2 million in the same period in 2012. The decrease in net operating earnings is primarily attributable to lower net investment income due to the sales of the investment portfolio noted in the quarterly results.

Book value decreased to $32.79 per diluted share as compared to $34.21 at December 31, 2012. Accumulated other comprehensive income at June 30, 2013 totaled $3.7 million as compared to $48.4 million at March 31, 2013 resulting in a $44.7 million decline in the second quarter of 2013. At December 31, 2012 accumulated other comprehensive income totaled $53.6 million. At June 30, 2013 book value, including the impact of all shares vesting under a change in control, was $31.17 per share. Book values per fully diluted share do not include transaction costs or other change in control costs.

²	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.

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.

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, and American Safety Risk Retention Group, 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.

Contacts:


American Safety Insurance Holdings, Ltd.		American Safety Insurance Holdings, Ltd.
Investor Relations		Investor Relations
Stephen R. Crim		Mark W. Haushill
scrim@amsafety.bm		mark.haushill@amsafety.com
(441) 296-8560		(770) 916-1908

American Safety Insurance Holdings, Ltd. and Subsidiaries

Financial and Operating Highlights

(Unaudited)

(dollars in thousands)


	Three Months Ended June 30,						Six Months Ended June 30,
	2013			2012			2013			2012
INCOME STATEMENT DATA:
Revenues:
Direct earned premiums	$	65,122		$	60,595		$	128,693		$	121,123
Assumed earned premiums		15,795			15,259			30,724			29,124
Ceded earned premiums		(18,725	)		(13,837	)		(35,301	)		(26,818	)

Net earned premiums		62,192			62,017			124,116			123,429
Net investment income		5,582			7,402			13,214			15,214
Net realized gains (losses)		37,482			(13	)		38,936			39
Fee income		335			717			1,563			1,385
Other income		12			12			24			25

Total revenues		105,603			70,135			177,853			140,092

Expenses:
Losses and loss adjustment expenses		37,673			40,819			75,636			78,100
Acquisition expenses		13,814			14,337			28,568			29,081
Other underwriting expenses		12,382			12,013			24,523			22,764
Interest expense		358			367			712			785
Corporate and other expenses		655			848			1,436			2,104

Total expenses		64,882			68,384			130,875			132,834

Earnings before income taxes		40,721			1,751			46,978			7,258
Income tax expense		5,900			(234	)		6,577			872

Net earnings		34,821			1,985			40,401			6,386
Less: Net earnings (loss) attributable to the non-controlling interest		10			(182	)		98			163

Net earnings attributable to ASIH, Ltd.	$	34,811		$	2,167		$	40,303		$	6,223

Net earnings per share:
Basic	$	3.65		$	0.21		$	4.25		$	0.61

Diluted	$	3.54		$	0.21		$	4.12		$	0.59

Weighted average number of shares outstanding:
Basic		9,538,924			10,256,634			9,490,498			10,238,667

Diluted		9,824,228			10,555,222			9,786,953			10,544,627

Loss ratio		60.6	%		65.8	%		60.9	%		63.3	%
Expense ratio		41.6	%		41.3	%		41.5	%		40.9	%

Combined ratio		102.2	%		107.1	%		102.4	%		104.2	%

Net operating earnings:
Net earnings attributable to ASIH, Ltd.	$	34,811		$	2,167		$	40,303		$	6,223
Less: Realized investment gains (losses), net of taxes		31,431			(13	)		32,586			20

Net operating earnings	$	3,380		$	2,180		$	7,717		$	6,203


	June 30, 2013		December 31, 2012
	(unaudited)
BALANCE SHEET DATA:
Total investments	$	928,688	$	930,648
Total assets		1,351,162		1,373,131
Unpaid losses and loss adjustment expenses		727,278		725,244
Total liabilities		1,017,099		1,028,083
Total shareholders’ equity		334,063		345,048
Book value per share-diluted	$	32.79	$	34.21

American Safety Insurance Holdings, Ltd. and Subsidiaries

Segment Data

(Unaudited)

(dollars in thousands)


	Three Months Ended June 30, 2013
	Insurance									Other
	E&S			ART			Reinsurance			Run-off			Total
Gross written premiums	$	52,063		$	16,156		$	15,641		$	—		$	83,860
Net written premiums		41,669			3,000			15,641			—			60,310
Net earned premiums		38,844			8,093			15,255			—			62,192
Fee & other income		(362	)		697			—			12			347
Losses & loss adjustment expenses		23,317			5,226			9,130			—			37,673
Acquisition & other underwriting expenses		17,275			3,528			4,623			770			26,196

Underwriting profit (loss)		(2,110	)		36			1,502			(758	)		(1,330	)
Net investment income		3,380			815			1,304			83			5,582

Pre-tax operating income (loss)		1,270			851			2,806			(675	)		4,252
Net realized gains														37,482
Interest and corporate expenses														1,013

Earnings before income taxes														40,721
Income tax expense														5,900

Net earnings													$	34,821
Less: Net earnings attributable to the non-controlling interest														10

Net earnings attributable to ASIH, Ltd.													$	34,811

Loss ratio		60.0	%		64.6	%		59.8	%		NM			60.6	%
Expense ratio		45.4	%		35.0	%		30.3	%		NM			41.6	%

Combined ratio⁽²⁾		105.4	%		99.6	%		90.1	%		⁽¹⁾NM			102.2	%


	Three Months Ended June 30, 2012
	Insurance									Other
	E&S			ART			Reinsurance			Run-off			Total
Gross written premiums	$	50,448		$	21,498		$	15,603		$	—		$	87,549
Net written premiums		39,735			14,579			15,603			—			69,917
Net earned premiums		33,600			13,157			15,260			—			62,017
Fee & other income		—			738			—			(9	)		729
Losses & loss adjustment expenses		20,221			11,875			8,751			(28	)		40,819
Acquisition & other underwriting expenses		15,140			5,865			4,471			874			26,350

Underwriting profit (loss)		(1,761	)		(3,845	)		2,038			(855	)		(4,423	)
Net investment income		4,285			1,348			1,595			174			7,402

Pre-tax operating income (loss)		2,524			(2,497	)		3,633			(681	)		2,979
Net realized losses														(13	)
Interest and corporate expenses														1,215

Earnings before income taxes														1,751
Income tax benefit														(234	)

Net earnings													$	1,985
Less: Net loss attributable to the non-controlling interest														(182	)

Net earnings attributable to ASIH, Ltd.													$	2,167

Loss ratio		60.2	%		90.3	%		57.3	%		NM			65.8	%
Expense ratio		45.1	%		39.0	%		29.3	%		NM			41.3	%

Combined ratio⁽²⁾		105.3	%		129.3	%		86.6	%		⁽¹⁾NM			107.1	%

(1)	NM = Ratio is not meaningful

(2)	The U.S. GAAP combined ratio is a measure of underwriting performance and represents the relationship of losses and loss adjustment expenses, acquisition and other underwriting expenses net of fee income to earned premiums.

American Safety Insurance Holdings, Ltd. and Subsidiaries

Segment Data

(Unaudited)

(dollars in thousands)


	Six Months Ended June 30, 2013
	Insurance									Other
	E&S			ART			Reinsurance			Run-off			Total
Gross written premiums	$	100,016		$	32,758		$	32,285		$	—		$	165,059
Net written premiums		79,215			12,879			32,285			—			124,379
Net earned premiums		75,385			19,255			29,476			—			124,116
Fee & other income		(30	)		1,468			—			149			1,587
Losses & loss adjustment expenses		45,344			12,619			17,673			—			75,636
Acquisition & other underwriting expenses		33,871			8,358			9,272			1,590			53,091

Underwriting profit (loss)		(3,860	)		(254	)		2,531			(1,441	)		(3,024	)
Net investment income		7,978			2,045			2,974			217			13,214

Pre-tax operating income (loss)		4,118			1,791			5,505			(1,224	)		10,190
Net realized gains														38,936
Interest and corporate expenses														2,148

Earnings before income taxes														46,978
Income tax expense														6,577

Net earnings													$	40,401
Less: Net earnings attributable to the non-controlling interest														98

Net earnings attributable to ASIH, Ltd.													$	40,303

Loss ratio		60.1	%		65.5	%		60.0	%		NM			60.9	%
Expense ratio		45.0	%		35.8	%		31.5	%		NM			41.5	%

Combined ratio⁽²⁾		105.1	%		101.3	%		91.5	%		⁽¹⁾NM			102.4	%


	Six Months Ended June 30, 2012
	Insurance									Other
	E&S			ART			Reinsurance			Run-off			Total
Gross written premiums	$	89,059		$	42,676		$	29,579		$	—		$	161,314
Net written premiums		70,468			30,722			29,579			—			130,769
Net earned premiums		64,750			29,501			29,178			—			123,429
Fee & other income		—			1,402			—			8			1,410
Losses & loss adjustment expenses		39,138			21,862			17,100			—			78,100
Acquisition & other underwriting expenses		29,057			12,253			8,801			1,734			51,845

Underwriting profit (loss)		(3,445	)		(3,212	)		3,277			(1,726	)		(5,106	)
Net investment income		8,910			2,778			3,216			310			15,214

Pre-tax operating income (loss)		5,465			(434	)		6,493			(1,416	)		10,108
Net realized gains														39
Interest and corporate expenses														2,889

Earnings before income taxes														7,258
Income tax expense														872

Net earnings													$	6,386
Less: Net earnings attributable to the non-controlling interest														163

Net earnings attributable to ASIH, Ltd.													$	6,223

Loss ratio		60.4	%		74.1	%		58.6	%		NM			63.3	%
Expense ratio		44.9	%		36.8	%		30.2	%		NM			40.9	%

Combined ratio⁽²⁾		105.3	%		110.9	%		88.8	%		⁽¹⁾NM			104.2	%

(1)	NM = Ratio is not meaningful

(2)	The U.S. GAAP combined ratio is a measure of underwriting performance and represents the relationship of losses and loss adjustment expenses, acquisition and other underwriting expenses net of fee income to earned premiums.

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