American Safety Insurance Holdings, Ltd. Reports Net Earnings of $5.0 Million

Financial highlights for the quarter included:

-- Gross premiums written increased 24.3% to $92.6 million.

-- Net premiums written decreased 6.1% to $38.1 million.

-- Net premiums earned decreased 4.1% to $40.0 million.

-- Investment income decreased 2.2% to $7.3 million.

-- Cash flow from operations was $12.6 million compared to $69.6 million for the same period in 2008.

-- Combined ratio decreased to 100.2% from 103.2% for the same period of 2008.

-- Loss ratio improved to 57.7% compared to 60.1% for the same period of 2008.

-- Expense ratio improved to 42.5% from 43.1% for the same period of 2008.

-- Annualized return on average equity increased to 8.4% from (7.4)% for the same period of 2008. Excluding net realized gains and (losses), the return was 8.3% compared to 8.1% for the same period of 2008.

-- Book value increased to $25.97 per outstanding share and $25.03 per diluted share compared to $21.12 and $20.55, respectively, at December 31, 2008.

Third Quarter Results

Net earnings of $5.0 million for the quarter include a $1.6 million increase in other underwriting expenses resulting from the write-off of a reinsurance recoverable related to a legacy program. Net earnings also include $60 thousand in net realized gains on investments as compared with $9.2 million in net realized losses on investments in the 2008 quarter.

Gross premiums written for the quarter increased by $18.1 million primarily due to a specialty program written in the third quarter for which the Company assumes no underwriting risk and receives fee income.

Revenues for the quarter increased 20.0% to $48.6 million from $40.5 million in the 2008 quarter due to the impact of $9.2 million in net realized losses on investments in the 2008 period. The decline in net premiums earned resulted from a decline in the construction and assumed reinsurance lines of business. The decline in the construction line was due to the slow housing market and our exercise of underwriting discipline, while the decline in the assumed reinsurance line was due to the impact of the cancellation of one treaty. Investment income totaled $7.3 million, a decrease of $0.2 million, due to yield contraction across the investment portfolio. Cash flow for the quarter was $12.6 million compared to $69.6 million in the 2008 quarter, due to collections related to certain reinsurance treaties in the prior year.

The improvement in the loss ratio to 57.7% from 60.1% was due primarily to $1.5 million in adverse prior year reserve development recognized in the 2008 quarter which added 3.6 points to the 2008 loss ratio. There was no prior year reserve development in the 2009 quarter.

The expense ratio of 42.5% for the quarter includes the impact of the $1.6 million write-off. The impact of the write-off was partially offset by lower acquisition costs in our assumed reinsurance line of business, due to the cancellation of a reinsurance treaty and the shift to excess of loss treaties from quota share.

Year to Date Results

Net earnings for the nine months ended September 30, 2009 were $17.4 million, or $1.65 per diluted share, compared to $8.5 million, or $0.79 per diluted share for the same period in 2008. Net realized gains on investments for the current nine month period were approximately $0.3 million compared to net realized losses on investments of $8.4 million during 2008.

Results in 2009 reflect an improvement in both the loss ratio and expense ratio. The combined ratio for the nine months ended September 30, 2009 was 99.5%, composed of a 58.9% loss ratio and a 40.6% expense ratio. The 2008 combined ratio was 102.5%, with a loss ratio of 60.6% and an expense ratio of 41.9%.

During 2009, there has been no prior year reserve development, while 2008 results include $1.5 million of development related to prior year loss reserves. The improvement in the expense ratio resulted from the same factors impacting the three month results.

Invested assets increased 9.8% to $739.7 million at September 30, 2009 from $673.7 million at December 31, 2008. The pretax book yield realized during the nine months on the investment portfolio was 4.3% compared to 4.7% for the same period in 2008.

Book value at September 30, 2009 increased 23.0% to $25.97 per outstanding share and 21.8% to $25.03 per outstanding diluted share as compared to December 31, 2008 due to net earnings and appreciation in the value of the investment portfolio.

Commenting on the results, Stephen R. Crim, President and Chief Executive Officer said, "We have been able to generate improved underwriting results in this extremely competitive market. We will continue to use our diversified platform to opportunistically grow as market conditions permit."

Conference Call

A conference call to discuss third quarter 2009 results is scheduled for Thursday, October 29, 2009 at 9:00 a.m. (Eastern Daylight 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.

This report contains forward-looking statements and non-GAAP financial measures. The forward-looking statements reflect the Company's current views with respect to future events and financial performance, including insurance market conditions, combined ratio, premium growth, acquisitions and new products and the impact of new accounting standards. Forward-looking statements involve risks and uncertainties which may cause actual results to differ materially, including competitive conditions in the insurance industry, levels of new and renewal insurance business, developments in loss trends, adequacy and changes in loss reserves and actuarial assumptions, timing or collectability of reinsurance recoverables, market acceptance of new coverages and enhancements, changes in reinsurance costs and availability, potential adverse decisions in court and arbitration proceedings, the integration and other challenges attendant to acquisitions, and changes in levels of general business activity and economic conditions.

About Us:

American Safety Insurance Holdings, Ltd. (NYSE:ASI), a Bermuda holding company, offers innovative solutions outside the U.S. in the reinsurance and alternative risk markets through its subsidiaries, American Safety Reinsurance, Ltd. and American Safety Assurance, Ltd., and in the U.S. for specialty risks and alternative risk markets through its program administrator, American Safety Insurance Services, Inc., and insurance company subsidiaries and affiliates, American Safety Casualty Insurance Company, American Safety Indemnity Company, American Safety Risk Retention Group, Inc, American Safety Assurance (Vermont), Inc. and Victore Insurance Company. As a group, ASI's insurance subsidiaries and affiliates are rated "A" (Excellent) VIII by A.M. Best. For additional information, please visit www.asih.bm.

American Safety Insurance Holdings, Ltd. and Subsidiaries
Financial and Operating Highlights
(Unaudited)
(in thousands except per share data and percentages)
                                          Three Months Ended  Nine Months Ended
                                          September 30,       September 30,
                                          2009     2008       2009      2008
PREMIUM SUMMARY (in Thousands)
Gross Premiums Written:
Excess and Surplus Lines Segment
Environmental                             $9,406   $11,345    $32,224   $37,676
Construction                              5,811    8,183      16,653    28,253
Products Liability                        1,484    1,385      5,700     4,498
Excess                                    1,118    1,544      4,426     5,874
Property                                  2,141    1,415      7,328     5,705
Surety                                    4,021    3,561      9,776     8,180
Healthcare                                2,929    3,121      9,313     8,224
Total Excess and Surplus Lines Segment    26,910   30,554     85,420    98,410
Alternative Risk Transfer Segment
Specialty Programs                        58,593   30,088     89,477    60,586
Total Alternative Risk Transfer Segment   58,593   30,088     89,477    60,586
Assumed Reinsurance Segment               7,100    13,829     25,327    42,457
Total Gross Premiums Written              $92,603  $74,471    $200,224  $201,453
Net Premiums Written:
Excess and Surplus Lines Segment
Environmental                             $7,325   $9,048     $26,149   $27,669
Construction                              4,836    7,019      13,814    21,921
Products Liability                        1,251    1,134      4,781     3,625
Excess                                    177      935        676       1,566
Property                                  1,260    1,351      5,471     4,363
Surety                                    2,914    2,506      6,982     6,183
Healthcare                                1,904    2,028      6,054     5,345
Total Excess and Surplus Lines Segment    19,667   24,021     63,927    70,672
Alternative Risk Transfer Segment
Specialty Programs                        11,262   10,551     30,995    31,020
Total Alternative Risk Transfer Segment   11,262   10,551     30,995    31,020
Assumed Reinsurance Segment               7,134    5,975      25,776    34,603
Total Net Premiums Written                $38,063  $40,547    $120,698  $136,295
Net Premiums Earned:
Excess and Surplus Lines Segment
Environmental                             $8,804   $8,575     $27,204   $26,404
Construction                              5,350    8,550      17,946    29,240
Products Liability                        1,528    1,280      4,391     3,463
Excess                                    215      551        856       913
Property                                  1,636    1,622      4,769     3,377
Surety                                    2,473    1,907      6,707     5,259
Healthcare                                2,019    1,061      6,578     1,781
Total Excess and Surplus Lines Segment    22,025   23,546     68,451    70,437
Alternative Risk Transfer Segment
Specialty Programs                        11,261   10,238     31,758    27,426
Total Alternative Risk Transfer Segment   11,261   10,238     31,758    27,426
Assumed Reinsurance Segment   6,695    7,908    26,041    30,020
Total Net Premiums Earned     $39,981  $41,692  $126,250  $127,883

American Safety Insurance Holdings, Ltd. and Subsidiaries
Financial and Operating Highlights
(Unaudited)
(in thousands)
                                                                 Three Months Ended                Nine Months Ended
                                                                 September 30,                     September 30,
                                                                 2009             2008             2009             2008
INCOME STATEMENT DATA:
Revenues:
Direct premiums earned                                           $58,877          $53,786          $160,057         $148,057
Assumed premiums earned                                          6,895            13,107           26,991           35,220
Ceded premiums earned                                            (25,791    )     (25,201    )     (60,798    )     (55,394    )
Net premiums earned                                              39,981           41,692           126,250          127,883
Net investment income                                            7,331            7,497            22,850           22,141
Net realized gains (losses)                                      61               (9,153     )     298              (8,358     )
Fee income                                                       1,250            499              3,368            2,017
Other income (loss)                                              (41        )     (37        )     44               (7         )
Total revenues                                                   48,582           40,498           152,810          143,676
Expenses:
Losses and loss adjustment expenses                              23,074           25,059           74,322           77,468
Acquisition expenses                                             7,844            9,685            26,920           30,723
Payroll and related expenses                                     5,321            5,729            16,843           15,397
Other underwriting expenses                                      5,055            3,042            10,839           9,552
Interest expense                                                 828              715              2,379            2,370
Corporate and other expenses                                     639              696              2,076            (612       )
Total expenses                                                   42,761           44,926           133,379          134,898
Earnings (loss) before income taxes                              5,821            (4,428     )     19,431           8,778
Income taxes                                                     446              179              1,420            422
Net earnings before noncontrolling interest                      5,375            (4,607     )     18,011           8,356
Less: Net earnings attributable to the noncontrolling interest   421              312              593              (160       )
Net earnings (loss)                                              $4,954           $(4,295    )     $17,418          $8,516
Net earnings (loss) per share:
Basic                                                            $0.48            $(0.42     )     $1.69            $0.81
Diluted                                                          $0.47            $(0.42     )     $1.65            $0.79
Weighted average number of shares outstanding:
Basic                                                            10,303,121       10,326,661       10,297,303       10,521,209
Diluted                                                          10,608,138       10,326,661       10,536,027       10,782,741
Loss Ratio                                                       57.7       %     60.1       %     58.9       %     60.6       %
Expense Ratio                                                    42.5       %     43.1       %     40.6       %     41.9       %
GAAP combined ratio                                              100.2      %     103.2      %     99.5       %     102.5      %

                                            At
BALANCE SHEET DATA:                         9/30/2009       12/31/2008
                                            (unaudited)
Total investments                           $739,674        $ 673,739
Total assets                                1,135,125       1,026,364
Unpaid losses and loss adjustment expenses  618,869         586,647
Total liabilities                           863,493         806,242
Total shareholders' equity                  267,654         217,030
Book value per share                        $25.97          $21.12

SOURCE: American Safety Insurance Holdings, Ltd.

American Safety Insurance Holdings, Ltd. 
Investor Relations 
Mark W. Haushill, 441-296-8560 
mark.haushill@amsafety.bm 
or 
American Safety Administrative Services, Inc. 
Media Relations 
Julie McDonald, 770-916-1908 
jmcdonald@amsafety.com