American Safety Insurance Holdings, Ltd. Reports Fourth Quarter and 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)--March 29, 2004 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 Holdings, Ltd. (NYSE NYSE See: New York Stock Exchange : ASI ASI, n See Anxiety Sensitivity Index. ) today reported net earnings of $3.3 million from its insurance and real estate operations for the fourth quarter ended December December: see month. 31, 2003, which were offset by the establishment of a $3.9 million valuation allowance related to a note receivable note receivable A debt due from borrowers and evidenced by a written promise of payment. Note receivable, an entry on the asset side of many corporate balance sheets, indicates the dollar amount of loans due to be repaid by borrowers. secured by real property, resulting in a net loss for the quarter of $582,000, or $0.09 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, 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 January: see month. 2004, the Company entered into a settlement agreement under which modified mod·i·fy v. mod·i·fied, mod·i·fy·ing, mod·i·fies v.tr. 1. To change in form or character; alter. 2. repayment Repayment The act of paying back a debt. Notes: Everyone has to repay their debts eventually. See also: Debt, Defeasance, Loan terms the borrower BORROWER, contracts. He to whom a thing is lent at his request. 2. The contract of loan confers rights, and imposes duties on the borrower' 1. In general, he has the right to use the thing borrowed, during the time and for the purpose intended between the is required to pay $5.4 million. The Company received payment of the first installment Regular, partial portion of the same debt, paid at successive periods as agreed by a debtor and creditor. An installment loan is designed to be repaid in certain specified, ordinarily equal amounts over a designated period, such as a year or a number of months. 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. Fourth quarter net earnings (loss) are detailed as follows (in thousands):
Qtr. Ended Qtr. Ended
Dec. 31, Dec. 31,
2003 2002
---------- ----------
Insurance Operations $2,083 $771
Real Estate Operations 1,219 (1,660)
Other, including realized gains and (losses)
16 909
---------- ----------
Earnings before Impairment of Note Receivable 3,318 20
Impairment of Note Receivable (3,900) (2,468)
---------- ----------
Net Loss $(582) $(2,448)
========== ==========
The increase in net earnings from insurance operations was due to strong 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. 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% 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% 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 December 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 Company's net earnings are detailed as follows (in thousands):
Year Ended Year Ended
Dec. 31, Dec. 31,
2003 2002
---------- ----------
Insurance Operations $7,076 $3,618
Real Estate Operations 2,218 1,900
Other, including realized gains and (losses)
2,020 (566)
---------- ----------
Earnings before Impairment of Note Receivable 11,314 4,952
Impairment of note Receivable (3,900) (2,468)
---------- ----------
Net Earnings $7,414 $2,484
========== ==========
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 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 boat slips at Harbour Village. Total revenues for the year ended December 31, 2003 increased 35% to $176 million as compared to the same period of 2002 as a result of increased net premiums earned, investment income and realized gains Realized Gain A gain resulting from selling an asset at a price higher than the original purchase price. Notes: There may be tax consequences for a realized profit. from the sale of investments. Net premiums earned for the year ended December 31, 2003 increased 49% 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 Cash flow from operations A firm's net cash inflow resulting directly from its regular operations (disregarding extraordinary items such as the sale of fixed assets or transaction costs associated with issuing securities), calculated as the sum of net income plus noncash expenses increased to $80 million for the year ended December 31, 2003 from $38 million in the same period of 2002. The Company's book value per share increased 5% to $13.80 at December 31, 2003 from $13.18 at December 31, 2002. This increase in book value per share is due primarily to the Company's net earnings during the year ended December 31, 2003 offset, in part, by a decrease in unrealized gains 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 investments, and a small amount of dilution Dilution A reduction in earnings per share of common stock that occurs through the issuance of additional shares or the conversion of convertible securities. Notes: Adding to the number of shares outstanding reduces the value of holdings of existing shareholders. from the secondary offering in the fourth quarter of 2003. 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 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% for the quarter and 96% 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 fa·vor·a·ble adj. 1. Advantageous; helpful: favorable winds. 2. Encouraging; propitious: a favorable diagnosis. 3. market conditions. The note receivable charge was required under GAAP GAAP See: Generally Accepted Accounting Principles GAAP See generally accepted accounting principles (GAAP). due to a decrease in the value of the 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 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." A conference call to discuss fourth quarter and year end 2003 results is scheduled for Tuesday Tuesday: see week. , March 30, 2004 at 11:00 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.americansafetyinsurance.com. A replay will be available on the Company's website. American Safety Insurance Holdings, 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, provides innovative insurance solutions in the alternative insurance market for environmental remediation Generally, remediation means providing a remedy, so environmental remediation deals with the removal of pollution or contaminants from environmental media such as soil, groundwater, sediment, or surface water for the general protection of human health and the environment or from a , contracting and other specialty risks. Additional information about the Company can be found at http://www.americansafetyinsurance.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. . 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 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 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. , 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 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, market acceptance of new coverages and enhancements, changes in reinsurance costs and availability, potential adverse decisions in court and 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 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 Holdings, Ltd. and Subsidiaries
Financial and Operating Highlights
Three Months Ended Twelve Months Ended
December 31, December 31,
--------------------------------------------------
2003 2002 2003 2002
--------------------------------------------------
INCOME STATEMENT
DATA:
Revenues:
Direct and assumed
premiums earned $54,469,923 $40,291,170 $184,402,663 $145,307,974
Ceded premiums
earned (19,872,808)(17,283,613) (75,068,826) (71,725,522)
--------------------------------------------------
Net premiums
earned 34,597,115 23,007,557 109,333,837 73,582,452
Net investment
income 1,931,451 1,263,684 5,800,536 4,388,416
Net realized
gains (losses) 24,164 1,242,109 3,139,907 685,472
Real estate income 18,677,300 7,121,389 57,555,194 51,780,576
Other income 42,249 (19,003) 161,785 226,197
--------------------------------------------------
Total revenues $55,272,279 $32,615,736 $175,991,259 $130,663,113
--------------------------------------------------
Expenses:
Losses and loss
adjustment
expenses $22,009,364 $12,004,785 $65,833,743 $42,030,633
Acquisition expenses 7,780,168 5,433,143 21,817,717 14,506,718
Payroll and related
expenses 2,388,148 1,922,490 9,048,799 8,526,990
Real estate
expenses 16,721,714 9,745,698 53,998,892 48,527,026
Other expenses 6,654,227 7,082,634 14,635,404 11,975,672
Minority interest (9,240) (68,684) 311,774 128,044
Expense due to
rescission 65,521 58,653 255,145 1,565,121
--------------------------------------------------
Total expenses $55,609,902 $36,178,719 $165,901,474 $127,260,204
--------------------------------------------------
Earnings before
income taxes (337,623) (3,562,983) 10,089,785 3,402,909
Income taxes 244,286 (1,114,646) 2,675,375 918,790
--------------------------------------------------
Net earnings $(581,909)$(2,448,337) $7,414,410 $2,484,119
==================================================
Net earnings per share:
Basic $(0.09) $(0.52) $1.45 $0.52
==================================================
Diluted $(0.09) $(0.51) $1.42 $0.51
==================================================
Average number of shares outstanding:
Basic 6,182,108 4,748,130 5,105,770 4,735,933
==================================================
Diluted 6,594,397 4,796,307 5,233,716 4,870,736
==================================================
GAAP combined ratio 99.4% 105.5% 96.8% 101.3%
BALANCE SHEET DATA: December 31, December 31,
2003 2002
Total investments, excluding
real estate $222,418,973 $111,926,287
Total assets 514,259,644 389,341,789
Unpaid losses and
loss adjustment
expenses 230,103,754 179,163,593
Total liabilities 418,916,521 326,889,940
Total shareholders'
equity 95,343,123 62,451,849
Book value per share $13.80 $13.18
Harbour Village Development Status
(000)s except references to Condo Units
Phase 1 Phase 2
---------------------------------------
Townhouses
----------------- The The
Marina Oak Links Links
Condos Hammock Riverwalk North South
---------------------------------------
12/31/2003
-------------------------------
Planned Number of Condo Units
and Boat Slips 248 18 28 188 188
Condo Units and Boat Slips
under Contract 248 15 27 179 161
Value of Pre-sale Contracts
(Note 1) 62,892 6,696 10,486 45,506 44,674
Number of Buildings 8 4 6 4 4
Number of Closed Units 248 15 25 171 -
Number of Buildings Complete by
Task
Building Foundation 8 4 6 4 4
Vertical Building Completed 8 4 6 4 4
Interior Finish Completed 8 4 6 4 -
Certificate of Occupancy
Received 8 4 6 4 -
4th Quarter Actual
-------------------------------
Units Closed - - 3 62 -
Revenue Recognized 85 19 1,277 16,788 -
Other Revenue
Total Revenue
Gross Profit Recognized (301) (295) 39 4,212 -
Other Expense (Income) Items
Pre-Tax Profit
Actual 12/31/2003 YTD
-------------------------------
Units Closed - 12 14 171
Revenue Recognized 498 5,314 5,840 42,706
Other Revenue
Total Revenue
Gross Profit Recognized (935) (546) 37 8,898
Other Expense (Income) Items
Pre-Tax Profit
Outlook For 1st Quarter of
2004
-------------------------------
Units Closed - 2 1 24
Revenue Recognized - Condos and
Boat Slips - 1,186 372 7,214
Land Sales and Other Revenue
Total Revenue
Gross Profit Recognized -
Condos and Boat Slips - (1) 8 1,322
Gross Profit Recognized - Land
Sales
Other Expense (Income) Items
Pre-tax Profit
Harbour Village Development Status
(000)s except references to Condo Units
Total Boat
Condos Slips Total
-----------------------
12/31/2003
-----------------------------------------------
Planned Number of Condo Units and Boat Slips 670 142 812
Condo Units and Boat Slips under Contract 630 142 772
Value of Pre-sale Contracts (Note 1) 170,254 13,082 183,336
Number of Buildings 26 - 26
Number of Closed Units 459 138 597
Number of Buildings Complete by Task
Building Foundation
Vertical Building Completed
Interior Finish Completed
Certificate of Occupancy Received
4th Quarter Actual
-----------------------------------------------
Units Closed 65 1 66
Revenue Recognized 18,169 142 18,311
Other Revenue 366
Total Revenue 18,677
Gross Profit Recognized 3,655 (874) 2,781
Other Expense (Income) Items 825
Pre-Tax Profit 1,956
Actual 12/31/2003 YTD
-----------------------------------------------
Units Closed 197 17 214
Revenue Recognized 54,358 1,905 56,263
Other Revenue 1,292
Total Revenue 57,555
Gross Profit Recognized 7,454 (73) 7,381
Other Expense (Income) Items 3,825
Pre-Tax Profit 3,556
Outlook For 1st Quarter of 2004
-----------------------------------------------
Units Closed 27 1 28
Revenue Recognized - Condos and Boat Slips 8,772 138 8,910
Land Sales and Other Revenue 2,300
Total Revenue 11,210
Gross Profit Recognized - Condos and Boat Slips 1,329 58 1,387
Gross Profit Recognized - Land Sales 450
Other Expense (Income) Items 811
Pre-tax Profit 1,026
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.
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 property, 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, 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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