Safety Insurance Group, Inc. (NASDAQ:SAFT) today reported third
quarter 2019 results. Net income for the quarter ended September
30, 2019 was $15.6 million, or $1.01 per diluted share, compared to
net income of $28.9 million, or $1.88 per diluted share, for the
comparable 2018 period. Net income for the nine months ended
September 30, 2019 was $71.5 million, or $4.64 per diluted share,
compared to net income of $64.8 million, or $4.24 per diluted
share, for the comparable 2018 period. Non-generally accepted
accounting principles (“non-GAAP”) operating income, as defined
below, for the quarter ended September 30, 2019 was $0.98 per
diluted share, compared to $1.76 per diluted share, for the
comparable 2018 period. Non-GAAP operating income for the nine
months ended September 30, 2019 was $3.80 per diluted share,
compared to $4.30 per diluted share, for the comparable 2018
period. Safety’s book value per share increased to $51.49 at
September 30, 2019 from $47.01 at December 31, 2018. Safety paid
$0.90 per share in dividends to investors during the quarter ended
September 30, 2019 compared to $0.80 per share during the quarter
ended September 30, 2018. Safety paid $3.20 per share in dividends
to investors during the year ended December 31, 2018.
On September 12, 2019, we reached an agreement to settle
litigation involving a liability claim seeking to recover
extra-contractual damages against one of our personal umbrella
policyholders. The settlement received court approval and the costs
associated with such settlement were accrued during the quarter
ended September 30, 2019 within loss and loss adjustment expense.
The net pre-tax income impact from this settlement during the
quarter ended September 30, 2019 was $6.9 million which represents
a direct loss of $15.5 million net of $8.6 million of reinsurance.
The after-tax impact of the settlement was $5.5 million or $0.36
per diluted share.
For the quarter ended September 30, 2019, loss and loss
adjustment expenses incurred increased by $18.3 million, or 15.7%,
to $135.0 million from $116.7 million for the comparable 2018
period. For the nine months ended September 30, 2019, loss and loss
adjustment expenses incurred increased by $15.8 million, or 4.3%,
to $383.4 million from $367.6 million for the comparable 2018
period. Loss, expense, and combined ratios calculated under U.S.
generally accepted accounting principles for the quarter ended
September 30, 2019 were 68.0%, 30.7%, and 98.7%, respectively,
compared to 59.2%, 31.7%, and 90.9%, respectively, for the
comparable 2018 period. Loss, expense, and combined ratios
calculated under U.S. generally accepted accounting principles for
the nine months ended September 30, 2019 were 65.1%, 30.9%, and
96.0%, respectively, compared to 63.0%, 31.7%, and 94.7%,
respectively, for the comparable 2018 period. Total prior year
favorable development included in the pre-tax results for the
quarter ended September 30, 2019 was $3.2 million compared to $13.0
million for the comparable 2018 period. The decrease is mainly a
result of the umbrella claim noted above. Total prior year
favorable development included in the pre-tax results for the nine
months ended September 30, 2019 was $25.5 million compared to $39.4
million for the comparable 2018 period.
Direct written premiums for the quarter ended September 30, 2019
increased by $5.8 million, or 2.6%, to $225.7 million from $219.9
million for the comparable 2018 period. Direct written premiums for
the nine months ended September 30, 2019 increased by $6.0 million
or 0.9% to $662.7 million from $656.7 million for the comparable
2018 period. The 2019 increase occurred primarily in our commercial
automobile and homeowners lines of business.
Net written premiums for the quarter ended September 30, 2019
increased by $4.1 million, or 2.0%, to $211.6 million from $207.5
million for the comparable 2018 period. Net written premiums for
the nine months ended September 30, 2019 increased by $5.8 million,
or 0.9%, to $618.8 million from $613.0 million for the comparable
2018 period. Net earned premiums for the quarter ended September
30, 2019 increased by $1.4 million, or 0.7%, to $198.4 million from
$197.0 million for the comparable 2018 period. Net earned premiums
for the nine months ended September 30, 2019 increased by $6.2
million, or 1.1%, to $589.3 million from $583.1 million for the
comparable 2018 period.
Net investment income for the quarter ended September 30, 2019
increased by $0.8 million, or 7.4%, to $11.9 million from $11.1
million for the comparable 2018 period. Net investment income for
the nine months ended September 30, 2019 increased by $2.5 million,
or 7.6%, to $34.3 million from $31.8 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 was 3.5% for the three months ended September
30, 2019 compared to 3.4% for the comparable 2018 period. Net
effective annualized yield on the investment portfolio for the nine
months ended September 30, 2019 was 3.4% compared to 3.3% for the
comparable 2018 period. Our duration on fixed maturities was 2.9
years at September 30, 2019 and 3.6 years at December 31, 2018,
respectively.
Today, our Board of Directors approved a $0.90 per share
quarterly cash dividend on its issued and outstanding common stock
payable on December 13, 2019 to shareholders of record at the close
of business on December 2, 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 gains, net impairment losses on
investments, change in net unrealized gains on equity securities
and taxes related thereto. For the quarter ended September 30, 2019
a decrease of $0.4 million for the change in unrealized gains was
recognized within income before income taxes, compared to an
increase of $2.4 million recognized in the comparable 2018 period.
For the nine months ended September 30, 2019, an increase of $15.2
million for the change in unrealized gains was recognized in income
before income taxes, compared to a decrease of $3.7 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 Subsidiaries Consolidated Balance Sheets (Dollars in thousands,
except share data)
September 30,
December 31,
2019
2018
(Unaudited)
Assets
Investments:
Fixed maturities, available for sale, at
fair value (amortized cost: $1,172,117 and $1,175,413)
$
1,207,829
$
1,161,862
Equity securities, at fair value (cost:
$146,829 and $142,948)
167,061
148,011
Other invested assets
34,206
23,481
Total investments
1,409,096
1,333,354
Cash and cash equivalents
47,482
37,582
Accounts receivable, net of allowance for
doubtful accounts
209,906
190,062
Receivable for securities sold
702
1,039
Accrued investment income
9,475
8,420
Taxes recoverable
1,454
—
Receivable from reinsurers related to paid
loss and loss adjustment expenses
33,209
13,691
Receivable from reinsurers related to
unpaid loss and loss adjustment expenses
117,884
108,398
Ceded unearned premiums
35,105
33,974
Deferred policy acquisition costs
78,344
73,355
Deferred income taxes
—
8,749
Equity and deposits in pools
33,231
28,094
Operating lease right-of-use-assets
35,758
—
Other assets
22,155
19,522
Total assets
$
2,033,801
$
1,856,240
Liabilities
Loss and loss adjustment expense
reserves
$
601,459
$
584,719
Unearned premium reserves
466,003
435,380
Accounts payable and accrued
liabilities
61,515
71,896
Payable for securities purchased
6,145
5,156
Payable to reinsurers
33,101
12,220
Deferred income taxes
2,726
—
Taxes payable
—
6,090
Operating lease liabilities
35,758
—
Other liabilities
35,017
22,135
Total liabilities
1,241,724
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
200,836
196,292
Accumulated other comprehensive income
(loss), net of taxes
28,212
(10,706
)
Retained earnings
646,687
616,717
Treasury stock, at cost: 2,279,570
shares
(83,835
)
(83,835
)
Total shareholders’ equity
792,077
718,644
Total liabilities and shareholders’
equity
$
2,033,801
$
1,856,240
Safety Insurance Group, Inc.
and Subsidiaries Consolidated Statements of Operations (Unaudited)
(Dollars in thousands, except share and per share data)
Three Months Ended September
30,
Nine Months Ended September
30,
2019
2018
2019
2018
Net earned premiums
$
198,410
$
196,968
$
589,327
$
583,126
Net investment income
11,947
11,120
34,272
31,839
(Losses) earnings from partnership
investments
(139
)
1,188
1,431
6,539
Net realized gains on investments
1,194
53
1,513
2,948
Change in net unrealized gains on equity
investments
(387
)
2,444
15,168
(3,749
)
Net impairment losses on investments
(a)
(123
)
(228
)
(397
)
(228
)
Finance and other service income
4,371
4,362
12,540
13,121
Total revenue
215,273
215,907
653,854
633,596
Losses and loss adjustment expenses
134,966
116,693
383,386
367,564
Underwriting, operating and related
expenses
60,845
62,496
182,187
184,925
Interest expense
22
22
67
67
Total expenses
195,833
179,211
565,640
552,556
Income before income taxes
19,440
36,696
88,214
81,040
Income tax expense
3,821
7,788
16,715
16,191
Net income
$
15,619
$
28,908
$
71,499
$
64,849
Earnings per weighted average common
share:
Basic
$
1.02
$
1.90
$
4.68
$
4.28
Diluted
$
1.01
$
1.88
$
4.64
$
4.24
Cash dividends paid per common
share
$
0.90
$
0.80
$
2.50
$
2.40
Number of shares used in computing
earnings per share:
Basic
15,220,902
15,091,754
15,194,469
15,076,214
Diluted
15,360,908
15,250,332
15,337,331
15,217,927
(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
$
15,619
$
28,908
$
71,499
$
64,849
Exclusions from net income:
Net realized gains on investments
(1,194
)
(53
)
(1,513
)
(2,948
)
Change in net unrealized gains on equity
investments
387
(2,444
)
(15,168
)
3,749
Net impairment losses on investments
123
228
397
228
Income tax expense (benefit) on exclusions
from net income
144
476
3,420
(216
)
Non-GAAP operating income
$
15,079
$
27,115
$
58,635
$
65,662
Net income per diluted share
$
1.01
$
1.88
$
4.64
$
4.24
Exclusions from net income:
Net realized gains on investments
(0.08
)
-
(0.10
)
(0.19
)
Change in net unrealized gains on equity
investments
0.03
(0.16
)
(0.99
)
0.25
Net impairment losses on investments
0.01
0.01
0.03
0.01
Income tax expense (benefit) on exclusions
from net income
0.01
0.03
0.22
(0.01
)
Non-GAAP operating income per diluted
share
$
0.98
$
1.76
$
3.80
$
4.30
Safety Insurance Group, Inc.
and Subsidiaries Additional Premium Information (Unaudited)
(Dollars in thousands)
Three Months Ended September
30,
Nine Months Ended September
30,
2019
2018
2019
2018
Written Premiums
Direct
$
225,751
$
219,930
$
662,733
$
656,713
Assumed
7,473
7,750
23,893
23,995
Ceded
(21,628
)
(20,174
)
(67,807
)
(67,674
)
Net written premiums
$
211,596
$
207,506
$
618,819
$
613,034
Earned Premiums
Direct
$
213,619
$
212,209
$
631,261
$
624,325
Assumed
7,214
7,469
24,742
24,236
Ceded
(22,423
)
(22,710
)
(66,676
)
(65,435
)
Net earned premiums
$
198,410
$
196,968
$
589,327
$
583,126
View source
version on businesswire.com: https://www.businesswire.com/news/home/20191030005924/en/
Safety Insurance Group, Inc. Office of Investor Relations
877-951-2522
InvestorRelations@SafetyInsurance.com
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