American Safety Insurance Holdings, Ltd. Reports a 57% Increase in Second Quarter Earnings

Business Wire, July 30, 2007

HAMILTON, Bermuda -- American Safety Insurance Holdings, Ltd. (NYSE:ASI) today reported a 57% increase in net earnings for the three months ended June 30, 2007 to $7.3 million, or $0.66 per diluted share, compared to $4.6 million, or $0.62 per diluted share, for the same period of 2006.

Financial highlights for the quarter included:

* Gross premiums written decreased 6% to $57.9 million.

* Net premiums written increased 7% to $44.5 million.

* Net premiums written as a percentage of gross premiums written increased to 76.9% from 67.6% in 2006.

* Net premiums earned increased 12% to $39.4 million.

* Investment income increased 58% to $7.5 million.

* Combined ratio decreased to 94.4% compared to 95.2% for the same period of 2006.

* Loss ratio was 59.9% compared to 59.6% for the same period of 2006.

* Expense ratio decreased to 34.5% from 35.7% for the same period of 2006.

* Annualized return on average equity declined to 14.1% from 15.8% for the same period of 2006 due to the impact of the 2006 equity offering.

* Book value per share increased to $19.49 per outstanding share and $18.90 per diluted share compared to $18.59 and $17.88, respectively, as of December 31, 2006.

Second Quarter Results

The increase in net earnings for the quarter was primarily due to an 18% increase in total revenues, driven by a 58% increase in net investment income and a 12% increase in net premiums earned. Average invested assets increased 33% over June 30, 2006 due to the proceeds from the 2006 equity offering and positive cash flow from operations. The pre-tax investment yield increased 80 basis points to 5.3% as compared to 4.5% in the 2006 quarter. The increase in net premiums earned was primarily due to increased retention levels on the Company's core product lines and increased writings of assumed reinsurance. The combined ratio for the quarter was 94.4%, comprised of a 59.9% loss ratio and a 34.5% expense ratio. The increase in the loss ratio is the result of an increase in the 2007 accident year loss ratio due to the effects of the soft market. Book value per share increased by 4.8% and book value per diluted share increased by 5.7% despite the negative impact of $0.48 per share and $0.47 per diluted share due to the increase in unrealized losses on the investment portfolio as a result of higher interest rates.

Year to Date Results

Net earnings for the six months ended June 30, 2007 were $14.4 million, or $1.31 per diluted share, compared to $8.7 million, or $1.19 per diluted share, for the same period of 2006. The increase in net earnings was due mainly to a 17% increase in total revenues driven by an 11% increase in net premiums earned and a 59% increase in net investment income. Average invested assets increased 27% over June 30, 2006 due to the proceeds from the 2006 equity offering and positive cash flow from operations. The pre-tax investment yield increased 100 basis points to 5.2% as compared to 4.2% for the same period of 2006. The increase in net premiums earned was primarily due to increased retention levels on the Company's core product lines and increased writings of assumed reinsurance. The combined ratio for the six months ended June 30, 2007 was 95.0% comprised of a 61.2% loss ratio and a 33.8% expense ratio. The 2006 combined ratio was 97.3% comprised of a loss ratio of 61.7% and an expense ratio of 35.6%. Cash flow from operations totaled $45.7 million, an increase of $13.3 million over 2006 due to lower claims payments and increased receivable collections.

The Company also announced the reversal by a Florida Court of Appeals of the $4.0 million trial court judgment against the Company in the Griggs case, which is associated with the Company's former real estate development project in Florida. This decision did not impact the financial results for the second quarter 2007.

Commenting on the results, Stephen R. Crim, President and Chief Executive Officer said, "The soft market adversely impacted premium growth in the quarter as we continued to exercise underwriting discipline. Our western states construction line was impacted the most, declining by approximately 50% during the quarter. Given the greater than anticipated decline in the insurance markets, we are revising our growth projection for 2007 to be flat in gross premiums written and modest growth in net premiums written. As previously announced, to further diversify our products we recently added an excess and surplus lines property underwriting team that has already begun producing premium. Our new products and our eastern states construction business produced $18 million of premium, representing 31% of gross premiums written for the quarter. We remain optimistic about the longer term prospects for profitable premium growth as a result of our product diversification strategy."

Conference Call

A conference call to discuss second quarter 2007 results is scheduled for Tuesday, July 31, 2007 at 9:00 a.m. (Eastern Time), which will be broadcast through Vcall's Investor Calendar at www.investorcalendar.com, or the Company's website at www.amsafety.com. If you are unable to participate at this time, a replay will be available for 30 days, beginning approximately two hours after the call. A transcript of the call will be available on the Company's website beginning several days after the call.