American Safety Insurance Holdings Unveils Q4 Numbers

Bermuda-based American Safety Insurance Holdings Ltd. reported net earnings of $3.3 million from its insurance and real estate operations for the fourth quarter ended Dec. 31, 2003, which were offset by the establishment of a $3.9 million valuation allowance related to a note receivable secured by real property, resulting in a net loss for the quarter of $582,000, or $0.09 per diluted share, as compared to a net loss of $2.5 million, or $.51 per diluted share in the fourth quarter of 2002.

The valuation allowance was established in connection with the preparation of the company’s year end financial statements as a result of the review of the 2003 financial performance of the golf course property which secures the loan, coupled with a general economic decline in the value of golf course properties.

In January 2004, the company entered into a settlement agreement under which modified repayment terms the borrower is required to pay $5.4 million. The company received payment of the first installment of $1.4 million during the first quarter of 2004. After the payment and valuation allowance, the company has no remaining notes receivable on its balance sheet.

The increase in net earnings from insurance operations was due to strong underwriting profits in the company’s core environmental, excess and surplus and program business lines. The increase in net earnings from real estate operations was due to increased closings of condominiums units and one boat slip at Harbour Village. Total revenues for the fourth quarter of 2003 increased 70 percent to $55 million as compared to the same quarter of 2002 as a result of increased net premiums earned, investment income and real estate income.

Net premiums earned for the fourth quarter of 2003 increased 50 percent to $34.6 million from the same quarter of 2002 due to increases in the company’s core environmental, excess and surplus, and program business net premiums earned. Net cash flow generated from operations increased to $20 million for the fourth quarter of 2003 from $7.1 million in the same quarter of 2002.

Net earnings for the year ended Dec. 31, 2003 increased to $7.4 million, or $1.42 per diluted share, from $2.5 million, or $.51 per diluted share for the same period of 2002.

The increase in net earnings from insurance operations was due to strong underwriting profits in the company’s core environmental, excess and surplus and program business lines. The increase in net earnings from real estate operations was due to increased closings of condominium units and boat slips at Harbour Village. Total revenues for the year ended Dec. 31, 2003 increased 35 percent to $176 million as compared to the same period of 2002 as a result of increased net premiums earned, investment income and realized gains from the sale of investments.

Net premiums earned for the year ended Dec. 31, 2003 increased 49 percent to $109 million from the same period of 2002 due to increases in net premiums earned in the company’s core lines of business. Net cash flow from operations increased to $80 million for the year ended Dec. 31, 2003 from $38 million in the same period of 2002.

The company’s book value per share increased 5 percent to $13.80 at Dec. 31, 2003 from $13.18 at Dec. 31, 2002. This increase in book value per share is due primarily to the company’s net earnings during the year ended Dec. 31, 2003 offset, in part, by a decrease in unrealized gains on investments, and a small amount of dilution from the secondary offering in the fourth quarter of 2003.

Commenting on the results, Stephen Crim, president and CEO of American Safety Insurance Holdings Ltd., said, “I am very pleased with the continued improvement in our insurance business for both the quarter and year ended December 31, 2003. Net earnings from insurance improved by 170 percent for the quarter and 96 percent for the year over the same period in 2002. The consistent growth in underwriting profits and strong cash flow from our insurance business supports our ability to effectively utilize our capital and continue to profitably grow our insurance business in the current favorable market conditions. The note receivable charge was required under GAAP due to a decrease in the value of the collateral securing the note. Any future payments received from the borrower under the settlement agreement will be treated as earnings to the company. Absent the note receivable charge, net earnings for the fourth quarter were $3.3 million or 50 cents per diluted share, and $11.3 million or $2.16 per diluted share for the year.”