American Safety Insurance Holdings, Ltd. Reports a 31% Increase in Third Quarter Earnings; Book Value per Outstanding Share Increases to $20.52

American Safety Insurance Holdings, Ltd. (NYSE:ASI) today reported a 31% increase in net earnings for the three months ended September 30, 2007 to $7.0 million, or $0.64 per diluted share, compared to $5.4 million, or $0.50 per diluted share, for the same period of 2006. Effective July 1, 2007 the Company entered into an excess of loss reinsurance treaty on our casualty lines of business increasing third quarter net earnings by approximately $170,000. The treaty also impacted net premiums written, net premiums earned, losses and loss adjustment expenses incurred and cash flow from operations as described in Third Quarter Results below. Financial highlights (as compared to the 2006 period) for the quarter included: Gross premiums written decreased 18% to $50.3 million. Net premiums written decreased 24% to $32.1 million. Retention ratio was 63.8% compared to 68.6%. Net premiums earned decreased 5% to $36.6 million. Investment income increased 30% to $7.8 million. Cash flow from operations was $9.4 million compared to $13.2 million. Combined ratio decreased to 95.3% compared to 96.7%. Loss ratio was 57.5% compared to 61.0%. Expense ratio increased to 37.8% compared to 35.7%. Annualized return on average equity increased to 13.1% from 11.7%. Book value per share increased to $20.52 per outstanding share and $19.80 per diluted share compared to $18.59 and $17.88, respectively, as of December 31, 2006. Third Quarter Results The impact of the new casualty excess of loss reinsurance treaty for the quarter is as follows: Net premiums written decreased $4.3 million reducing our retention ratio by 8.6 percentage points. Net premiums earned decreased $3.0 million increasing our reported expense ratio by 3.4 percentage points. Losses and loss adjustment expense incurred decreased by $3.4 million reducing our loss ratio by 4.2 percentage points. Cash flow from operations decreased a net of $5 million due to funding the treaty. The increase in net earnings for the quarter was primarily due to a 30% increase in net investment income as well as improved underwriting results including the impact of the reinsurance treaty. The pre-tax investment yield increased 90 basis points to 5.4% as compared to 4.5% in the 2006 quarter. The combined ratio for the quarter was 95.3%, composed of a 57.5% loss ratio and a 37.8% expense ratio, a decrease from the 2006 combined ratio of 96.7%, composed of a loss ratio of 61.0% and an expense ratio of 35.7%. Year to Date Results Net earnings for the nine months ended September 30, 2007 were $21.4 million, or $1.95 per diluted share, compared to $14.1 million, or $1.67 per diluted share, for the same period of 2006. The increase in net earnings was due mainly to a 10.3% increase in total revenues driven by a 5.4% increase in net premiums earned and a 47.3% increase in net investment income. The increase in net premiums earned was primarily due to increased retention levels on the Company’s core product lines for the first six months of the year and increased writings of assumed reinsurance. Average invested assets increased 28.8% from September 30, 2006 due to the proceeds from the 2006 equity offering and positive cash flow from operations. The pre-tax investment yield increased 70 basis points to 5.3% as compared to 4.6% for the same period of 2006. The combined ratio for the nine months ended September 30, 2007 was 95.1%, composed of a 60% loss ratio and a 35.1% expense ratio. The 2006 combined ratio was 95.8% made up of a loss ratio of 61.5% and an expense ratio of 34.3%. Cash flow from operations totaled $55.1 million, an increase of $9.7 million over 2006 due to lower claims payments. The annualized return on average equity increased to 13.8% from 12.6% in 2006 and book value per outstanding share was $20.52 and $19.80 per diluted share compared to $18.59 and $17.88, respectively, as of December 31, 2006. Commenting on the results, Stephen R. Crim, President and Chief Executive Officer said: "We believe that exercising underwriting discipline in a softening market is in the long term best interest of our shareholders. Our western construction business continued to experience aggressive pricing competition, resulting in the loss of $12.5 million of premium during the quarter as a result of our disciplined approach to underwriting. The loss of this premium was the primary contributor to the overall decline in gross premiums written. The product diversification strategy that we began in 2006 mitigated, in part, the negative impact of the overall decline, producing $13 million of premium for the third quarter and $45 million of premium for nine months through the addition of assumed reinsurance, excess liability, non-construction, property and construction outside of western states. These new products represent more than 25% of the Company’s gross premiums written year to date in 2007. Based on our current assessment of the impact of market conditions on our product lines, we are revising our forecast for the year to an 8%-12% decrease in gross premiums written and a 1%-5% decrease in net premiums written as compared to 2006. We expect the 2007 return on equity to be in the range of 13%. I believe the growth in our new products will continue to ease or offset the impact of any further deterioration in our western construction business next year, and I expect we will achieve growth in gross premiums written in 2008 while we continue our underwriting discipline.” Conference Call A conference call to discuss third quarter 2007 results is scheduled for Tuesday, October 30, 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. American Safety Insurance Holdings, Ltd., (NYSE:ASI), offers customized insurance and reinsurance products and solutions to small and medium sized businesses in industries that it believes are underserved by the standard insurance market. ASI provides reinsurance and alternative risk transfer products outside of the U.S. through its Class III Bermuda reinsurance subsidiary, American Safety Reinsurance, Ltd., and through its captive, segregated cell subsidiary, American Safety Assurance, Ltd. ASI offers excess and surplus lines and alternative risk transfer products in the U.S. through its U.S. program administrator, American Safety Insurance Services, Inc., its insurance company subsidiaries, American Safety Casualty Insurance Company and American Safety Indemnity Company, and its non-subsidiary affiliate, American Safety Risk Retention Group, Inc. ASI, as a group, is rated "A” Excellent VIII by A.M. Best. This press release contains forward-looking statements. These forward-looking statements reflect the Company's current views with respect to future events and financial performance, including insurance market conditions, premium growth, acquisitions and new products. 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 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, the integration and other challenges attendant to acquisitions, and changes in levels of general business activity and economic conditions. For additional factors which could influence the Company's operating and financial performance, see the Company's Form 10-Q for the quarter ended June 30, 2007 as filed with the Securities and Exchange Commission. American Safety Insurance Holdings, Ltd. and Subsidiaries Financial and Operating Highlights (Unaudited) (in thousands except per share data and percentages)     Three Months Ended September 30,   Nine Months Ended September 30,   2007       2006     2007       2006   INCOME STATEMENT DATA: Revenues:   Direct and assumed premiums earned $ 54,584 $ 55,724 $ 168,151 $ 164,798 Ceded premiums earned   (18,012 )   (17,152 )   (53,811 )   (56,272 ) Net premiums earned 36,572 38,572 114,340 108,526   Net investment income 7,791 6,002 22,497 15,271 Net realized gains (81 ) (9 ) (89 ) 351 Fee income 411 450 1,675 1,317 Other income   18     6     50     37   Total revenues $ 44,711   $ 45,021   $ 138,473   $ 125,502     Expenses: Losses and loss adjustment expenses 21,013 23,526 68,586 66,694 Acquisition expenses 7,185 7,038 21,031 20,461 Payroll and related expenses 4,320 4,361 12,996 11,895 Real estate expenses 25 55 319 224 Interest Expense 846 839 2,484 2,580 Other expenses 3,441 3,423 9,579 9,038 Minority interest   26     48     151     (464 ) Total expenses $ 36,856 $ 39,290 $ 115,146 $ 110,428   Earnings before income taxes 7,855 5,731 23,327 15,075 Income taxes   809     343     1,917     959   Net earnings $ 7,046   $ 5,388   $ 21,410   $ 14,116     Net earnings per share: Basic $ 0.66 $ 0.52 $ 2.02 $ 1.74 Diluted $ 0.64   $ 0.50   $ 1.95   $ 1.67   Average number of shares outstanding: Basic 10,709,996 10,438,692 10,624,416 8,116,056 Diluted   11,044,340     10,782,087     10,938,607     8,477,697       BALANCE SHEET DATA:   Sept. 30, 2007   Dec. 31, 2006   Total investments $ 591,336 $ 551,158 Total assets 898,943 847,130 Unpaid losses and loss adjustment expenses 476,863 439,673 Total liabilities 679,057 650,980 Total shareholders' equity 219,886 196,150   Book value per share $ 20.52 $ 18.59 American Safety Insurance Holdings, Ltd. and Subsidiaries Financial and Operating Highlights (Unaudited)     Three Months Ended September 30,   Nine Months Ended September 30,     2007     2006     2007     2006 PREMIUM SUMMARY (in Thousands)       Gross Premiums Written: Excess and Surplus Lines Segment Environmental $ 11,391 $ 12,404 $ 36,374 $ 39,289 Construction 14,481 26,204 47,403 72,952 Excess 1,756 881 4,952 2,350 Non Construction 899 733 3,757 1,280 Property 1,050 -0- 1,283 -0- Surety   1,645   1,132   4,431   3,087 Total Excess and Surplus Lines Segment $ 31,222 $ 41,354 $ 98,200 $ 118,958   Alternative Risk Transfer Segment Specialty Programs   14,920   19,957   49,705   56,880 Assumed Reinsurance 4,188 -0- 15,699 -0-         Total Gross Premiums Written $ 50,330 $ 61,311 $ 163,604 $ 175,838   Net Premiums Written: Excess and Surplus Lines Segment Environmental 6,195 9,869 26,305 29,676 Construction 9,382 25,325 41,896 68,543 Excess 192 123 608 505 Non Construction 730 50 2,159 597 Property 862 -0- 1,018 -0- Surety   1,633   1,048   4,370   2,131 Total Excess and Surplus Lines Segment $ 18,994 $ 36,415 $ 76,356 $ 101,452   Alternative Risk Transfer Segment Specialty Programs   8,938   5,617   23,372   15,606     Assumed Reinsurance 4,188 -0- 15,699 -0-         Total Net Premiums Written $ 32,120 $ 42,032 $ 115,427 $ 117,058   Net Premiums Earned: Excess and Surplus Lines Segment Environmental 9,558 9,947 29,108 27,306 Construction 14,339 23,151 53,600 65,023 Excess 187 139 598 378 Non Construction 626 155 1,569 179 Property 223 -0- 229 -0- Surety   1,697   720   3,768   1,503 Total Excess and Surplus Lines Segment 26,630 34,112 88,872 94,389   Alternative Risk Transfer Segment Specialty Programs 7,568 4,460 19,930 14,137   Assumed Reinsurance 2,373 -0- 5,538 -0-         Total Net Premiums Earned $ 36,571 $ 38,572 $ 114,340 $ 108,526