Safety Insurance Group, Inc. (NASDAQ:SAFT) today reported first
quarter 2019 results. Net income for the quarter ended
March 31, 2019 was $29.9 million, or $1.95 per diluted share,
compared to net income of $9.1 million, or $0.60 per diluted share,
for the comparable 2018 period. Non-generally accepted accounting
principles (“non-GAAP”) operating income, as defined below, for the
quarter ended March 31, 2019 was $1.36 per diluted share,
compared to $0.71 per diluted share, for the comparable 2018
period. Safety’s book value per share increased to $49.08 at
March 31, 2019 from $47.01 at December 31, 2018. Safety
paid $0.80 per share in dividends to investors during each of the
quarters ended March 31, 2019 and 2018, respectively. Safety
paid $3.20 per share in dividends to investors during the year
ended December 31, 2018.
Direct written premiums for the quarter ended March 31,
2019 decreased by $0.3 million, or 0.2%, to $203.4 million from
$203.7 million for the comparable 2018 period. Net written premiums
for the quarter ended March 31, 2019 decreased by $0.1
million, to $189.9 million from $190.0 million for the comparable
2018 period. Net earned premiums for the quarter ended
March 31, 2019 increased by $2.5 million, or 1.3%, to $194.5
million from $192.0 million for the comparable 2018 period.
For the quarter ended March 31, 2019, loss and loss
adjustment expenses incurred decreased by $11.6 million, or 8.4%,
to $126.0 million from $137.6 million for the comparable 2018
period. Loss, expense, and combined ratios for the quarter ended
March 31, 2019 were 64.8%, 31.1%, and 95.9%, respectively,
compared to 71.7%, 31.7%, and 103.4%, respectively, for the
comparable 2018 period. Total prior year favorable development
included in the pre-tax results for the quarter ended
March 31, 2019 was $12.0 million compared to $14.2 million for
the comparable 2018 period.
Net investment income for the quarter ended March 31, 2019
increased by $1.3 million, or 11.6%, to $11.8 million from $10.5
million for the comparable 2018 period. The increase is a result of
an increase in the average invested asset balance and improved
investment income yields compared to the prior year. Net effective
annualized yield on the investment portfolio for the quarter ended
March 31, 2019 was 3.5% compared to 3.3% for the comparable
2018 period. Our duration was 3.2 years at March 31, 2019 and
3.6 years at December 31, 2018, respectively.
Today, our Board of Directors approved and declared a quarterly
cash dividend of $0.80 per share on the issued and outstanding
common stock, payable on June 14, 2019 to shareholders of record at
the close of business on June 3, 2019.
Non-GAAP Measures
Management has included certain non-GAAP financial measures in
presenting the Company’s results. Management believes that these
non-GAAP measures better explain the Company’s results of
operations and allow for a more complete understanding of the
underlying trends in the Company’s business. These measures should
not be viewed as a substitute for those determined in accordance
with generally accepted accounting principles (“GAAP”). In
addition, our definitions of these items may not be comparable to
the definitions used by other companies.
Non-GAAP operating income and operating income per diluted share
consist of our GAAP net income adjusted by the net realized
(losses) gains, net impairment losses on investments, change in net
unrealized gains on equity securities and taxes related thereto.
For the quarter ended March 31, 2019, an increase of $11.8 million
for the change in unrealized gains was recognized within income
before income taxes, compared to a decrease of $3.5 million
recognized in the comparable 2018 period. Net income and earnings
per diluted share are the GAAP financial measures that are most
directly comparable to non-GAAP operating income and non-GAAP
operating income per diluted share, respectively. A reconciliation
of the GAAP financial measures to these non-GAAP measures is
included in the financial highlights below.
About Safety: Safety
Insurance Group, Inc., based in Boston, MA, is the parent of Safety
Insurance Company, Safety Indemnity Insurance Company, and Safety
Property and Casualty Insurance Company. Operating exclusively in
Massachusetts, New Hampshire, and Maine, Safety is a leading writer
of property and casualty insurance products, including private
passenger automobile, commercial automobile, homeowners, dwelling
fire, umbrella and business owner policies.
Additional Information: Press releases, announcements, U.
S. Securities and Exchange Commission (“SEC”) Filings and investor
information are available under “About Safety,” “Investor
Information” on our Company website located at
www.SafetyInsurance.com. Safety filed its December 31, 2018
Form 10-K with the SEC on February 28, 2019 and urges shareholders
to refer to this document for more complete information concerning
Safety’s financial results.
Cautionary Statement under "Safe Harbor" Provision of the
Private Securities Litigation Reform Act of 1995:
This press release contains, and Safety may from time to time
make, written or oral "forward-looking statements" within the
meaning of the U.S. federal securities laws. Forward-looking
statements can be identified by the fact that they do not relate
strictly to historical or current facts. They often include words
such as “believe,” “expect,” “anticipate,” “intend,” “plan,”
“estimate,” “aim,” “projects,” or words of similar meaning and
expressions that indicate future events and trends, or future or
conditional verbs such as “will,” “would,” “should,” “could,” or
“may”. All statements that address expectations or projections
about the future, including statements about the Company’s strategy
for growth, product development, market position, expenditures and
financial results, are forward-looking statements.
Forward-looking statements are not guarantees of future
performance. By their nature, forward-looking statements are
subject to risks and uncertainties. There are a number of factors,
many of which are beyond our control, that could cause actual
future conditions, events, results or trends to differ
significantly and/or materially from historical results or those
projected in the forward-looking statements. These factors include
but are not limited to the competitive nature of our industry and
the possible adverse effects of such competition. Although a number
of national insurers that are much larger than we are do not
currently compete in a material way in the Massachusetts private
passenger automobile market, if one or more of these companies
decided to aggressively enter the market it could have a material
adverse effect on us. Other significant factors include conditions
for business operations and restrictive regulations in
Massachusetts, the possibility of losses due to claims resulting
from severe weather, the possibility that the Commissioner of
Insurance may approve future Rule changes that change the operation
of the residual market, our possible need for and availability of
additional financing, and our dependence on strategic
relationships, among others, and other risks and factors identified
from time to time in our reports filed with the SEC, such as those
set forth under the caption “Risk Factors” in our Form 10-K for the
year ended December 31, 2018 filed with the SEC on February
28, 2019.
We are not under any obligation (and expressly disclaim any such
obligation) to update or alter our forward-looking statements,
whether as a result of new information, future events, or
otherwise. You should carefully consider the possibility that
actual results may differ materially from our forward-looking
statements.
Safety Insurance Group, Inc. and
SubsidiariesConsolidated Balance Sheets(Dollars in
thousands, except share data)
March 31, December 31, 2019 2018
(Unaudited) Assets Investments: Fixed maturities,
available for sale, at fair value (amortized cost: $1,161,552 and
$1,175,413)
$ 1,173,384 $ 1,161,862 Equity
securities, at fair value (cost: $143,608 and $142,948)
160,471 148,011 Other invested assets
26,238
23,481 Total investments
1,360,093
1,333,354 Cash and cash equivalents
22,892 37,582 Accounts
receivable, net of allowance for doubtful accounts
188,654
190,062 Receivable for securities sold
1,079 1,039 Accrued
investment income
9,450 8,420 Receivable from reinsurers
related to paid loss and loss adjustment expenses
29,881
13,691 Receivable from reinsurers related to unpaid loss and loss
adjustment expenses
109,200 108,398 Ceded unearned premiums
33,537 33,974 Deferred policy acquisition costs
71,905 73,355 Deferred income taxes
2,949 8,749
Equity and deposits in pools
28,505 28,094 Operating lease
right-of-use-assets
36,992 — Other assets
22,881 19,522
Total assets
$ 1,918,018 $ 1,856,240
Liabilities Loss and loss adjustment expense reserves
$ 581,762 $ 584,719 Unearned premium reserves
430,389 435,380 Accounts payable and accrued liabilities
53,875 71,896 Payable for securities purchased
5,494
5,156 Payable to reinsurers
18,939 12,220 Taxes payable
8,286 6,090 Operating lease liabilities
36,992 —
Other liabilities
27,219 22,135
Total liabilities 1,162,956
1,137,596
Shareholders’ equity Common
stock: $0.01 par value; 30,000,000 shares authorized; 17,663,364
and 17,566,180 shares issued
177 176 Additional paid-in
capital
198,014 196,292 Accumulated other comprehensive
income (loss), net of taxes
9,347 (10,706 ) Retained
earnings
631,359 616,717 Treasury stock, at cost: 2,279,570
shares
(83,835 ) (83,835 )
Total
shareholders’ equity 755,062
718,644
Total liabilities and shareholders’ equity
$ 1,918,018 $ 1,856,240
Safety Insurance Group, Inc. and
SubsidiariesConsolidated Statements of
Operations(Unaudited)(Dollars in thousands, except
share and per share data)
Three Months Ended March 31, 2019 2018
Net earned premiums
$ 194,491 $ 192,033 Net
investment income
11,751 10,531 Earnings from partnership
investments
835 4,864 Net realized (losses) gains on
investments
(164 ) 1,306 Change in net unrealized
gains on equity investments
11,801 (3,482 ) Net impairment
losses on investments (a)
(220 ) — Finance and
other service income
4,085 4,467
Total revenue
222,579 209,719
Losses and loss adjustment expenses
126,027 137,644
Underwriting, operating and related expenses
60,434 60,856
Interest expense
22 22 Total
expenses
186,483 198,522
Income before income taxes
36,096 11,197 Income tax expense
6,150 2,072
Net income
$ 29,946 $ 9,125
Earnings per
weighted average common share: Basic
$ 1.97
$ 0.60 Diluted
$ 1.95 $ 0.60
Cash dividends paid per common share $
0.80 $ 0.80
Number of shares used in
computing earnings per share: Basic
15,140,804
15,045,962 Diluted
15,305,785
15,191,139 (a) No portion of the
other-than-temporary impairments recognized in the period indicated
were included in Other Comprehensive Income.
Reconciliation of Net Income to Non-GAAP Operating Income
Net income $ 29,946 $ 9,125 Exclusions
from net income: Net realized losses (gains) on investments
164 (1,306 ) Change in net unrealized gains on equity
investments
(11,801 ) 3,482 Net impairment losses on
investments
220 - Income tax expense (benefit) on exclusions
from net income
2,398 (457 )
Non-GAAP operating
income $ 20,927 $ 10,844
Net income per diluted share $ 1.95 $ 0.60
Exclusions from net income: Net realized losses (gains) on
investments
0.01 (0.09 ) Change in net unrealized gains on
equity investments
(0.77 ) 0.23 Net impairment losses
on investments
0.01 - Income tax expense (benefit) on
exclusions from net income
0.16 (0.03 )
Non-GAAP
operating income per diluted share $ 1.36
$ 0.71
Safety Insurance Group, Inc. and
SubsidiariesAdditional Premium
Information(Unaudited)(Dollars in thousands)
Three Months Ended March 31, 2019 2018
Written Premiums Direct
$ 203,387 $ 203,733
Assumed
8,245 7,948 Ceded
(21,694 )
(21,668 ) Net written premiums
$ 189,938
$ 190,013
Earned Premiums Direct
$ 207,308 $ 203,819 Assumed
9,315 8,887 Ceded
(22,132 ) (20,673 ) Net earned premiums
$ 194,491 $ 192,033
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Safety Insurance Group, Inc.Office of Investor
Relations877-951-2522InvestorRelations@SafetyInsurance.com
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