Expenses: Losses and loss adjustment expenses incurred 2,056 4,093 5,177 6,896 18,506 Acquisition expenses 646 2,336 1,192 894 3,792 Other expenses 3,570 4,084 5,246 7,694 12,758 Expenses due to rescission - - - - 3,542 Total expenses 6,272 10,513 11,615 15,484 38,598 ----- ------ ------ ------ ------ Earnings (loss) before income taxes 3,094 3,567 5,755 6,003 (2,520) Income Taxes 177 356 (199) 83 (1,157) ------- ------- -------- -------- -------- Net earnings (loss) $ 2,917 $ 3,211 $ 5,954 $ 5,920 $(1,363) ======= ======= ======= ======= ======== Net diluted earnings (loss) per share $ 0.98 $ 1.08 $ 1.04 $ 0.98 $(0.25) Common shares and common share equivalents used in computing net diluted earnings per share 2,964 2,964 5,738 6,032 5,497
GAAP Ratios: Loss and loss adjustment expense ratio 48.1% 49.0% 56.8% 56.9% 69.0% Expense Ratio 29.3 32.8 23.9 16.7 18.6 Combined ratio 77.4% 81.8% 80.7% 73.6% 87.6% Net premiums written to Equity 0.3x 0.4x 0.2x 0.3x 0.7x
Balance Sheet Data (at end of period) Total investments $ 17,964 $ 29,341 $ 51,048 $59,648 $ 91,247 Total assets 31,299 47,668 86,147 104,017 207,298 Unpaid losses and loss adjustment expenses 8,914 11,572 14,700 20,413 50,509 Total liabilities 13,267 25,827 26,878 42,978 149,495 Total shareholders' equity 18,032 21,841 59,269 61,039 57,803
The information in the following discussion is presented on the basis of generally accepted accounting principles (“GAAP”) and should be read in conjunction with the Company’s consolidated financial statements and notes thereto included elsewhere in this Report. All amounts and percentages are approximations.
Net Premiums earned: Reinsurance: Workers' Compensation $ 6,066 $ 7,384 $11,151 21.7% 51.0% General Liability 2,381 3,149 5,479 32.3 74.0 Auto Liability 96 30 - (68.8) - ----- ------ ------ ------ ----- Total reinsurance 8,543 10,563 16,630 23.6 57.4 ----- ------ ------ ---- -----
Primary Insurance: Commercial Lines - 39 2,638 - 6,664.1 Workers' Compensation - - 249 - - Surety 577 1,302 4,539 125.6 248.6 General Liability - - 845 - - Program Business - 221 1,904 - 761.5 ------ ------ ------ ------ ----- Total primary insurance 577 1,562 10,175 170.7 551.4 ------ ------ ------ ----- ------- Total net premiums earned 9,120 12,125 26,805 32.9 121.1 ------ ------ ------ ------ -------
Net realized gains (losses) 443 174 (518) (60.7) (397.7) Other income 24 921 939 3,737.5 2.0 -------- ------- ------- ---------- -------- Total Revenues $ 17,370 $21,487 $36,078 23.7% 67.9% -------- ------- ------- ---------- --------
The following table sets forth the components of the Company's statutory combined ratio for the period indicated:
Insurance Operations Loss & Loss Adjustment Expense Ratio 56.8% 56.9% 69.1% Expense Ratio 22.6 14.0 11.8 ------- ------- ---- Combined Ratio 79.4% 70.9% 80.9% ===== ===== =====
Year Ended December 31, 2000 to Year ended December 31, 1999
Net Premiums Earned. Net premiums earned increased 121.1% from $12.1 million in 1999 to $26.8 million in 2000. The principal factors accounting for the increase were an increase in workers’ compensation premiums by 54.4% or $4.0 million, an increase of general liability reinsurance premiums by 100.8% or $3.2 million, an increase in surety premiums by 248.6% or $3.2 million, an increase in commercial lines premiums by 6,664% or $2.6 million, and an increase in program business premiums by 761.5% or $1.7 million.
Brokerage Commission Income. Income from insurance brokerage operations increased 17.4% from $1.1 million in 1998 to $1.4 million in 1999 as a result of increased commissions derived from insurance business produced through the Company’s risk retention group affiliate which was offset by lower commissions from the Company’s brokerage operations.
Net Realized Gains. Net realized gains from the sale of investments decreased from $443,00 1998 to $174,000 in 1999.
Payroll and Other Expenses. Payroll and other expenses increased 53.6% from $5.2 million in 1998 to $7.7 million in 1999 as a result of increases in salary, benefits and operating expense primarily due to increased staffing for new and existing programs combined with operating expenses from the Company’s new financial services subsidiary.
On a consolidated basis, net cash provided from operations was $2.4 million for 1998, $5.5 million for 1999 and $24.4 million for 2000. The positive cash flows for said periods were primarily attributable to net premiums written and net earnings. Because workers' compensation and general liability claims may be paid over an extended period of time, the Company has established loss reserves for such lines of business. The assets supporting the Company's reserves continue to earn investment income until claim payments are made.
Total assets increased from $86.1 million at December 31, 1998 to $104.4 million at December 31, 1999, and to $207.3 at December 31, 2000, primarily due to increases in premiums receivable, reinsurance recoverables and real estate investments. Cash, invested assets and notes receivable increased from $72 million at December 31, 1998 to $73 million at December 31, 1999, and to $100.1 million at December 31, 2000, as a result of increases in net premiums written and investment income and real estate. At December 31, 2000, the Company has repurchased 1,267,200 shares of its common stock at a total cost of $7.1 million since January 1999.
American Safety is an insurance and financial services holding company whose principal assets are its investment portfolio and its investment in the capital stock of its subsidiaries. American Safety’s ability to pay dividends to its shareholders will depend, to a significant degree, on the ability of the Company’s subsidiaries to pay dividends to
American Safety is incorporated under the laws of Bermuda and, under current Bermuda law, is not obligated to pay any taxes in Bermuda based upon income or capital gains. American Safety has received an undertaking from the Minister of Finance in Bermuda pursuant to the provisions of The Exempted Undertakings Tax Protection Act
Certain of the Company’s insurance policies and reinsurance assumed, including general and pollution liability policies covering environmental remediation risks, as well as workers’ compensation policies, may be subject to claims brought years after an incident has occurred or the policy period has ended. The Company is required to maintain reserves to cover its estimated liability for losses and loss adjustment expenses with respect to reported and unreported claims incurred. The Company engages an independent internationally recognized actuarial consulting firm to provide reserve studies, opinions and rate studies. Reserves are estimates at a given time, which are established from actuarial and statistical projections by the Company of the ultimate settlement and administration costs of claims occurring on or prior to such time, including claims that have not yet been reported to the
insurer. The establishment of appropriate loss reserves is an inherently uncertain process, and there can be no assurance that the ultimate payments will not materially exceed the Company’s reserves.
The Company’s consolidated financial statements required under this Item 8 are included as part of Item 14 of this Report.