American Safety Insurance Group, Ltd. Reports Fourth Quarter and 2002 Year End Results.Business Editors HAMILTON Hamilton, city, Bermuda Hamilton, city (1990 est. pop. 3,100), capital of Bermuda, on Bermuda Island. It is a port at the head of Great Sound, a huge lagoon and deepwater harbor protected by coral reefs. , Bermuda--(BUSINESS WIRE)--April 15, 2003 American American, river, 30 mi (48 km) long, rising in N central Calif. in the Sierra Nevada and flowing SW into the Sacramento River at Sacramento. The discovery of gold at Sutter's Mill (see Sutter, John Augustus) along the river in 1848 led to the California gold rush of Safety Insurance Group, Ltd. (NYSE NYSE See: New York Stock Exchange : ASI ASI, n See Anxiety Sensitivity Index. ) today announced results for the fourth quarter and full year ended December December: see month. 31, 2002. Total revenues for the fourth quarter of 2002 decreased 35% to $29.7 million compared to the same quarter of 2001. This decrease is a result of lower real estate revenues from the Company's development of the Harbour Village Golf & Yacht yacht: see motorboating; sailing. yacht Sail- or motor-driven vessel used for racing or recreation. The term is popularly applied to large recreational engine-powered boats; the sailboats known as yachts and used for racing are usually light and Club in Ponce Inlet, Florida Ponce Inlet is a town in Volusia County, Florida, United States. The population was 2,513 at the 2000 census. As of 2004, the population recorded by the U.S. Census Bureau is 3,178 [1]. , which were $7.1 million in the fourth quarter of 2002, as compared to $24.4 million during the fourth quarter of 2001. Net premiums earned for the fourth quarter of 2002 increased 2% to $19.6 million over the same quarter of 2001. This increase is attributable attributable emanating from or pertaining to attribute. attributable proportion see attributable risk (below). attributable risk to a 48% increase in the Company's core environmental, excess and surplus, and program business net premiums earned, which was offset in part by a 61% decrease in net premiums earned from the Company's de-emphasized workers' compensation workers' compensation, payment by employers for some part of the cost of injuries, or in some cases of occupational diseases, received by employees in the course of their work. , surety An individual who undertakes an obligation to pay a sum of money or to perform some duty or promise for another in the event that person fails to act. surety n. , and commercial lines. Net loss for the fourth quarter of 2002 was $2.4 million or $0.51 per diluted di·lute tr.v. di·lut·ed, di·lut·ing, di·lutes 1. To make thinner or less concentrated by adding a liquid such as water. 2. To lessen the force, strength, purity, or brilliance of, especially by admixture. share, compared with net income of $328,000 or $0.07 per diluted share for the fourth quarter of 2001. The net loss for the fourth quarter includes accruals Accruals Accounts on a balance sheet that represent liabilities and non-cash-based assets used in accrual-based accounting. These accounts include, among many others, accounts payable, accounts receivable, goodwill, future tax liability and future interest expense. totaling $3.2 million for (i) impaired See assistive technology. real estate notes receivable as a result of an appraised market value decrease in collateral collateral (kəlăt`ərəl), something of value given or pledged as security for payment of a loan. Collateral consists usually of financial instruments, such as stocks, bonds, and negotiable paper, rather than physical goods, although and (ii) disputed reinsurance The contract made between an insurance company and a third party to protect the insurance company from losses. The contract provides for the third party to pay for the loss sustained by the insurance company when the company makes a payment on the original contract. recoverables in recognition of a settlement offer made by the Company to one of the Company's former reinsurers, Berkley Berkley (bûr`klē), city (1990 pop. 16,960), Oakland co., SE Mich., a suburb of Detroit; inc. 1932. It is chiefly residential. Insurance Company. The fourth quarter of 2002 was also impacted by a net loss of $1.6 million in connection with the Company's development of the Harbour Village project. The Company previously announced that it expected its real estate operations to report a loss for the fourth quarter due to the timing of construction activities and unit closings. On April 11, 2003, the Company and the Town of Ponce Ponce (pōn`sā), city (1990 pop. 187,749), S Puerto Rico. One of Puerto Rico's largest cities, it is the island's chief Caribbean port. Ponce is also an agricultural trade and distribution center. Inlet inlet /in·let/ (-let) a means or route of entrance. pelvic inlet the upper limit of the pelvic cavity. thoracic inlet the elliptical opening at the summit of the thorax. agreed to settle pending disputes as to the Company's development plan for the last phase of Harbour Village as a result of zoning litigation An action brought in court to enforce a particular right. The act or process of bringing a lawsuit in and of itself; a judicial contest; any dispute. When a person begins a civil lawsuit, the person enters into a process called litigation. filed by the Town. Under the settlement, the Company will reduce the size of the Harbour Village project from 809 to 676 condominium condominium In modern property law, individual ownership of one dwelling unit within a multidwelling building. Unit owners have undivided ownership interest in the land and those portions of the building shared in common. units and make other accommodations to the Town. As a result, the Company has reallocated the common and land costs of the Harbour Village project over such reduced number of condominium units, which increased the net loss for the fourth quarter of 2002. Total revenues for 2002 increased 23% to $124.0 million from $100.5 million in 2001 due to increases in real estate revenues and net premiums earned. Net premiums earned for the year increased 5% to $65.9 million from $63.0 million in the prior year. The increase in net premiums earned for 2002 was attributable to a 63% increase in net premiums earned from the Company's core business lines, which was offset in part by a 63% decrease in net premiums earned from the Company's de-emphasized business lines. Total real estate revenues for the year increased to $51.8 million from $27.6 million in the prior year due to increased unit closings. Net earnings for 2002 decreased to $2.5 million or $0.51 per diluted share, compared to $4.2 million or $0.84 per diluted share for 2001. Net earnings for 2002 were adversely impacted by the $3.2 million in accruals and the $1.6 million loss discussed above, as well as from the previously announced $1 million Principal Management rescission The abrogation of a contract, effective from its inception, thereby restoring the parties to the positions they would have occupied if no contract had ever been formed. By Agreement litigation charge. The Company's book value per share at December 31, 2002 increased 3% to $13.18 from $12.77 at December 31, 2001. This increase in per share book value is primarily attributable to the Company's profit for 2002 and an increase in the unrealized gain Unrealized Gain A profit that results from holding on to an asset rather than cashing it in and using the funds. Notes: Let's say you own a stock that has doubled, but you haven't sold it yet. This is said to be an unrealized gain. on the Company's bond portfolio of $2.1 million during the year. Commenting on the results, Stephen Stephen, 1097?–1154, king of England (1135–54). The son of Stephen, count of Blois and Chartres, and Adela, daughter of William I of England, he was brought up by his uncle, Henry I of England, who presented him with estates in England and France and R. Crim, President and Chief Executive Officer of American Safety Insurance Group, Ltd., said, "The establishment of accruals for impaired real estate notes receivable and the Berkley recoverables dispute, coupled with the loss experienced from the Harbour Village project, overshadowed an otherwise very good quarter and year for the Company. The financial performance of the Company's core environmental, excess and surplus and program insurance business lines was very strong, generating significant cash flow and underwriting profits Underwriting profit is a term used in the insurance industry. It consists of the earned premium remaining after losses have been paid and administrative expenses have been deducted. It does not include any investment income earned on held premiums. . Clarifying clar·i·fy v. clar·i·fied, clar·i·fy·ing, clar·i·fies v.tr. 1. To make clear or easier to understand; elucidate: clarified her intentions. 2. our strategic focus has confirmed the strength of the Company's core lines of insurance business and the success of our niche niche: see ecology. niche Smallest unit of a habitat that is occupied by an organism. A habitat niche is the physical space occupied by the organism; an ecological niche is the role the organism plays in the community of organisms found in the underwriting Underwriting 1. The process by which investment bankers raise investment capital from investors on behalf of corporations and governments that are issuing securities (both equity and debt). 2. The process of issuing insurance policies. strategy. Pricing and profitability trends continue to be favorable fa·vor·a·ble adj. 1. Advantageous; helpful: favorable winds. 2. Encouraging; propitious: a favorable diagnosis. 3. and these trends show every sign of continuing through 2003, which should enable the Company to see improved results and to create a foundation for sustainable profitability." Joseph D. Scollo, Jr., Executive Vice President of American Safety Insurance Group, Ltd., noted, "Our focus on growth in the Company's core business lines, which management believes offer a greater profit potential, has been successful. Gross written premiums for our environmental unit increased to $21.7 million in 2002. We continue to pursue additional growth opportunities in the environmental unit given its history of profitability. For 2002, gross written premiums in our excess and surplus lines unit were $51.0 million, an increase of 50.4% from the same period in 2001. This unit has achieved significant rate increases on both new and renewal business due to hard market conditions. Gross written premiums for 2002 for our program business lines were $74.1 million, a decrease of 9.5% from the same period in 2001. Despite the decrease in gross written premiums in our program business line, net earned premiums Earned premium is the portion of an insurance written premium which is considered "earned" by the insurer, based on the part of the policy period that the insurance has been in effect, and during which the insurer has been exposed to loss. in the program business line increased 51% due to our increased risk participation in certain insurance programs." The Company previously reported that one of its former reinsurers, Berkley Insurance Company, has disputed its obligations under several reinsurance treaties Reinsurance Treaty (June 18, 1887) Secret agreement between Germany and Russia. Arranged by Otto von Bismarck after the collapse of the Three Emperors' League, it provided that each party would remain neutral if either became involved in a war with a third nation, and that . In April 2002, the Company demanded arbitration arbitration Process of resolving a dispute or a grievance outside a court system by presenting it for decision to an impartial third party. Both sides in the dispute usually must agree in advance to the choice of arbitrator and certify that they will abide by the against the reinsurer re·in·sure tr.v. re·in·sured, re·in·sur·ing, re·in·sures To insure again, especially by transferring all or part of the risk in a contract to a new contract with another insurance company. to collect the amounts owed. The arbitration panel arbitration panel A group of individuals charged with resolving a dispute between individuals and/or organizations. Arbitration panels to resolve investment disputes are sponsored by self-regulatory organizations such as NASD. has scheduled a hearing in May 2003. During 2002, the Company declared de·clare v. de·clared, de·clar·ing, de·clares v.tr. 1. To make known formally or officially. See Synonyms at announce. 2. To state emphatically or authoritatively; affirm. 3. four quarterly cash dividends of $0.12 per share. The Board of Directors periodically reviews the Company's dividend practices in order to ensure that they are consistent with the Company's capital resource needs in order to support the continued growth of its insurance operations. As a result, the Company from time-to-time may modify its dividend practices to reflect a number of factors such as projected cash needs, capital availability and general economic conditions. The Board will next review the Company's dividend practices at the June June: see month. 2003 Annual Board meetings. A conference call to discuss fourth quarter and 2002 year end results is scheduled for Wednesday Wednesday: see week. , April 16, at 9:00 a.m. (Eastern Time), which will be broadcast through the Investor Broadcast Network's Vcall website at http://www.vcall.com or the Company's website at http://www.americansafetygroup.com. American Safety Insurance Group, Ltd. is a specialty A contract under seal. A specialty is a written document that has been sealed and delivered and is given as security for the payment of a specifically indicated debt. insurance holding company, which, through its subsidiaries, develops, underwrites, manages and markets primary casualty insurance and reinsurance programs in the alternative insurance market for environmental risks and other specialty risks. The Company is also the owner/developer of the Harbour Village Golf & Yacht Club, a residential condominium, marina Marina “a piece of virtue.” [Br. Lit.: Pericles] See : Virtuousness , par 3 golf course and beach club development in Ponce Inlet, Florida. Additional information about American Safety can be found at "http://www.americansafetygroup.com." This press release contains forward-looking statements forward-looking statement A projected financial statement based on management expectations. A forward-looking statement involves risks with regard to the accuracy of assumptions underlying the projections. , including the Company's outlook for 2003. These forward-looking statements reflect the Company's current views with respect to future events and financial performance, including future insurance claims and losses, and the Company's expectations with respect to the outcome of the Principal Management acquisition rescission litigation, the arbitration of the Berkley reinsurance recoverables dispute, and the future profitability and the value of the Harbour Village real estate development project. Forward-looking statements involve risks and uncertainties which may cause actual results to differ materially, and are subject to change based on various factors, including competitive conditions in the insurance industry, levels of new and renewal insurance business, unpredictable developments in loss trends, adequacy and changes in loss reserves, timing or collectibility of reinsurance recoverables, market acceptance of new coverages and enhancements, changes in reinsurance costs and availability, potential adverse decisions in court and arbitration proceedings, and changes in levels of general business activity and economic conditions. With respect to the development of the Harbour Village project, such forward looking statements involve risks and uncertainties which may cause actual results to differ materially, and are subject to change based on various real estate development industry factors, including competitive housing conditions housing conditions npl → condiciones fpl de habitabilidad housing conditions npl → conditions fpl de logement in the local market area, risks inherent in real estate development and new construction, increases in construction costs, construction delays, weather, zoning, litigation, changes in interest rates and the availability of mortgage financing for prospective purchasers of condominium units and boat slips, and changes in local and national levels of general business activity and economic conditions. For additional factors, which could influence the results of the Company's operating and financial performance, see the Company's filings with the Securities and Exchange Commission.
AMERICAN SAFETY INSURANCE GROUP, LTD. AND SUBSIDIARIES
Financial and Operating Highlights
Three Months Ended Twelve Months Ended
December 31, December 31,
2002 2001 2002 2001
INCOME STATEMENT DATA:
Revenues:
Direct and
assumed
premiums
earned $ 37,250,734 $ 48,263,417 $140,005,582 $146,764,844
Ceded
premiums
earned (17,600,776) (28,954,069) (74,057,036) (83,795,546)
------------- ------------- ------------- -------------
Net
premiums
earned 19,649,958 19,309,348 65,948,546 62,969,298
Net
investment
income $ 1,167,982 $ 940,600 $ 4,016,177 $ 3,649,985
Interest on
notes
receivable - - - 766,937
Brokerage
commission
income 6,569 695,783 143,253 2,410,810
Management
fees from
related
party 442,994 401,406 1,182,738 1,496,068
Net realized
gains 1,231,778 50,876 709,893 652,230
Real estate
income 7,121,389 24,380,299 51,780,576 27,561,004
Other income 67,178 47,668 186,192 1,026,067
------------- ------------- ------------- -------------
Total
revenues $ 29,687,848 $ 45,825,980 $123,967,375 $100,532,399
------------- ------------- ------------- -------------
Expenses:
Losses and
loss
adjustment
expenses $ 10,095,176 $ 15,484,486 $ 38,273,953 $ 43,986,019
Acquisition
expenses 4,720,696 2,714,170 12,544,582 10,430,824
Payroll and
related
expenses 1,922,490 1,983,038 8,526,990 8,238,355
Real estate
expenses 9,745,698 21,546,907 48,527,026 25,125,848
Other
expenses 6,708,118 2,534,153 11,126,794 6,835,780
Expense due
to
rescission 58,653 600,000 1,565,121 600,000
------------- ------------- ------------- -------------
Total
expenses 33,250,831 44,862,754 120,564,466 95,216,826
------------- ------------- ------------- -------------
Earnings
(loss)
before
income
taxes (3,562,983) 963,226 3,402,909 5,315,573
Income taxes
(benefit) (1,114,646) 635,154 918,790 1,161,304
------------- ------------- ------------- -------------
Net earnings
(loss) $ (2,448,337) $ 328,072 $ 2,484,119 $ 4,154,269
------------- ------------- ------------- -------------
Net earnings
(loss) per
share:
Basic $ (0.52) $ 0.07 $ 0.52 $ 0.87
============= ============= ============= =============
Diluted $ (0.51) $ 0.07 $ 0.51 $ 0.84
============= ============= ============= =============
Average number
of shares
outstanding:
Basic 4,748,130 4,721,123 4,735,933 4,797,371
============= ============= ============= =============
Diluted 4,796,307 4,893,299 4,870,736 4,933,167
============= ============= ============= =============
GAAP combined
ratio 90.9% 101.3% 86.1% 92.5%
============= ============= ============= =============
BALANCE SHEET DATA December 31, December 31,
2002 2001
Total investments excluding real estate $104,416,529 $ 83,578,373
Total assets 365,407,338 297,261,617
Unpaid losses and loss adjustment
expenses 160,628,579 121,423,039
Total liabilities 302,955,489 237,281,279
Total shareholders' equity 62,451,849 59,980,338
Book value per share $ 13.18 $ 12.77
======================================== ============= =============
Harbour Village Development Status
(000)s except references to Condo Units
(Unaudited)
Phase 1 Phase 2 Phase 3
-----------------------------------------------------
Townhouses
------------------------- The The
Marina Oak Links Links Fisherman's
Condos Hammock Riverwalk North South Harbour
---------------- ------- ------- ----------------- -------------------
12/31/2002
----------------
Planned Number
of Condo Units (Note 3)
and Boat Slips 248 18 28 188 188
Condo Units and
Boat Slips
under Contract 248 15 27 172 129
Value of Pre-
sale Contracts
(Note 1) 62,892 6,693 10,507 43,223 35,222
Number of Closed
Units 248 3 11 - - -
Number of
Buildings 8 4 6 4 4 1
Number of
Buildings
Complete by
Task
Building
Foundation 8 4 5 4 - -
Vertical
Building
Completed 8 4 5 2 - -
Interior Finish
Completed 8 3 4 - - -
Certificate of
Occupancy
Received 8 2 4 - - -
Actual
12/31/2002 YTD
----------------
Units Closed 146 3 11 - - -
Revenue
Recognized 39,754 1,270 3,712 - - -
Other Revenue
Total Revenue
Gross Profit
(Loss)
Recognized 5,784 (392) (176) - - -
Other Expense
(Income) Items
(Note 2)
Pre-Tax Profit
(loss)
Actual
12/31/2002 QTD
----------------
Units Closed - 3 10 - - -
Revenue
Recognized 978 1,270 3,400 - - -
- - - - - -
Total
Revenue
Gross Profit
(Loss)
Recognized (717) (392) (176) - - -
Other Expense
(Income) Items
- Note 2
Pre-Tax Profit
Outlook For 1st
Quarter of
2003
----------------
Units Closed - 5 5 - - -
Revenue
Recognized 157 2,009 1,962 - - -
Other Revenue
Total Revenue
Gross Profit
Recognized 19 - - - - -
Other Expense
(Income) Items
Pre-Tax Profit
(Loss)
---------------- ------- ------- ----------------- -------------------
Note 1 - No assurance can be given that purchasers under binding pre-
sale contracts with deposits will close each contemplated transaction.
Note 2 - Other includes net brokerage commissions, advertising,
promotion, and other general and administrative costs. These items are
not allocated to specific buildings.
Note 3 - As a result of the settlement of material zoning litigation
brought by the Town of Ponce Inlet, Florida, the Company, among other
matters, will reduce the Fisherman's Harbour building to a 2 story
commercial center, rather than a mixed use building with 70 units.
The projected results contained above for unit closings, revenue,
gross profit, fixed costs and pre-tax profit are forward looking
statements. With respect to the Company's development of the Harbour
Village project, such forward looking statements involve risks and
uncertainties which may cause actual results to differ materially, and
are subject to change based on various real estate development
industry factors, including competitive housing conditions in the
local market area, risks inherent in real estate development and new
construction, increases in construction costs, construction delays,
weather, zoning, litigation, changes in interest rates and the
availability of mortgage financing for prospective purchasers of
condominium units and boat slips and changes in local and national
levels of general business activity and economic conditions.
Harbour Village Development Status
(000)s except references to Condo Units
(Unaudited)
Total Boat
Condos Slips Total
-------------------------------------------- -------------------------
12/31/2002
--------------------------------------------
Planned Number of Condo Units and Boat Slips 670 142 812
Condo Units and Boat Slips under Contract 591 142 733
Value of Pre-sale Contracts (Note 1) 158,537 13,073 171,610
Number of Closed Units 262 121 383
Number of Buildings 27 - 27
Number of Buildings Complete by Task
Building Foundation
Vertical Building Completed
Interior Finish Completed
Certificate of Occupancy Received
Actual 12/31/2002 YTD
--------------------------------------------
Units Closed 160 62 222
Revenue Recognized 44,736 6,461 51,197
Other Revenue 584
Total Revenue 51,781
Gross Profit (Loss) Recognized 5,216 2,441 7,657
Other Expense (Income) Items (Note 2) 4,404
Pre-Tax Profit (Loss) 3,253
Actual 12/31/2002 QTD
--------------------------------------------
Units Closed 13 3 15
Revenue Recognized 5,648 1,369 7,017
- 105
Total Revenue 7,122
Gross Profit (Loss) Recognized (1,285) 312 (973)
Other Expense (Income) Items - Note 2 1,652
Pre-Tax Profit (2,625)
Outlook For 1st Quarter of 2003
--------------------------------------------
Units Closed 10 5 15
Revenue Recognized 4,128 621 4,749
Other Revenue 60
Total Revenue 4,809
Gross Profit Recognized 19 264 283
Other Expense (Income) Items 1,133
Pre-Tax Profit (Loss) (850)
-------------------------------------------- -------------------------
Note 1 - No assurance can be given that purchasers under binding pre-
sale contracts with deposits will close each contemplated transaction.
Note 2 - Other includes net brokerage commissions, advertising,
promotion, and other general and administrative costs. These items are
not allocated to specific buildings.
Note 3 - As a result of the settlement of material zoning litigation
brought by the Town of Ponce Inlet, Florida, the Company, among other
matters, will reduce the Fisherman's Harbour building to a 2 story
commercial center, rather than a mixed use building with 70 units.
The projected results contained above for unit closings, revenue,
gross profit, fixed costs and pre-tax profit are forward looking
statements. With respect to the Company's development of the Harbour
Village project, such forward looking statements involve risks and
uncertainties which may cause actual results to differ materially, and
are subject to change based on various real estate development
industry factors, including competitive housing conditions in the
local market area, risks inherent in real estate development and new
construction, increases in construction costs, construction delays,
weather, zoning, litigation, changes in interest rates and the
availability of mortgage financing for prospective purchasers of
condominium units and boat slips and changes in local and national
levels of general business activity and economic conditions.
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