Safety Insurance Group, Inc. (NASDAQ:SAFT) today reported fourth
quarter 2019 results. Net income for the quarter ended December 31,
2019 was $28.1 million, or $1.82 per diluted share, compared to net
income of $18.3 million, or $1.19 per diluted share, for the
comparable 2018 period. Net income for the year ended December 31,
2019 was $99.6 million, or $6.46 per diluted share, compared to net
income of $83.2 million, or $5.43 per diluted share, for the
comparable 2018 period. Non-generally accepted accounting
principles (“non-GAAP”) operating income, as defined below, for the
quarter ended December 31, 2019 was $1.44 per diluted share,
compared to $1.83 per diluted share, for the comparable 2018
period. Non-GAAP operating income for the year ended December 31,
2019 was $5.25 per diluted share, compared to $6.12 per diluted
share, for the comparable 2018 period. Safety’s book value per
share increased to $52.55 at December 31, 2019 from $47.01 at
December 31, 2018, primarily as a result of net income and an
increase in unrealized gains, partially offset by dividends paid.
Safety paid $3.40 per share in dividends to investors during the
year ended December 31, 2019 compared to $3.20 per share during the
year ended December 31, 2018.
Direct written premiums for the quarter ended December 31, 2019
increased by $2.7 million, or 1.4%, to $189.7 million from $187.0
million for the comparable 2018 period. Direct written premiums for
the year ended December 31, 2019 increased by $8.7 million, or
1.0%, to $852.4 million from $843.7 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 December 31, 2019
increased by $1.7 million, or 1.0%, to $175.6 million from $173.9
million for the comparable 2018 period. Net written premiums for
the year ended December 31, 2019 increased by $7.5 million, or
1.0%, to $794.4 million from $786.9 million for the comparable 2018
period. Net earned premiums for the quarter ended December 31, 2019
increased by $1.0 million, or 0.5%, to $199.5 million from $198.5
million for the comparable 2018 period. Net earned premiums for the
year ended December 31, 2019 increased by $7.2 million, or 0.9%, to
$788.8 million from $781.6 million for the comparable 2018 period.
Net written and net earned premiums increased primarily due to
increases in our commercial automobile and homeowners lines of
business.
For the quarter ended December 31, 2019, loss and loss
adjustment expenses incurred increased by $8.5 million, or 7.2%, to
$126.4 million from $117.9 million for the comparable 2018 period.
For the year ended December 31, 2019, loss and loss adjustment
expenses incurred increased by $24.3 million, or 5.0%, to $509.8
million from $485.5 million for the comparable 2018 period. Loss,
expense, and combined ratios calculated under U.S. generally
accepted accounting principles for the quarter ended December 31,
2019 were 63.4%, 31.1%, and 94.5%, respectively, compared to 59.4%,
31.1%, and 90.5%, respectively, for the comparable 2018 period.
Loss, expense, and combined ratios calculated under U.S. generally
accepted accounting principles for the year ended December 31, 2019
were 64.6%, 31.0%, and 95.6%, respectively, compared to 62.1%,
31.6%, and 93.7%, respectively, for the comparable 2018 period.
Total prior year favorable development included in the pre-tax
results for the quarter ended December 31, 2019 was $16.5 million
compared to $17.1 million for the comparable 2018 period. Total
prior year favorable development included in the pre-tax results
for the year ended December 31, 2019 was $42.0 million compared to
$56.5 million for the comparable 2018 period.
Net investment income for the quarter ended December 31, 2019
increased by $0.5 million, or 3.7%, to $12.4 million from $11.9
million for the comparable 2018 period. Net investment income for
the year ended December 31, 2019 increased by $2.9 million, or
6.6%, to $46.7 million from $43.8 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 for the quarter ended December 31, 2019 was
3.6% compared to 3.5% for the comparable 2018 period. Net effective
annualized yield on the investment portfolio for the year ended
December 31, 2019 was 3.4% compared to 3.3% for the comparable 2018
period. Our duration on fixed maturities was 3.3 years at December
31, 2019 and 3.6 years at December 31, 2018, respectively.
On February 14, 2020, our Board of Directors approved a $0.90
per share quarterly cash dividend on its issued and outstanding
common stock payable on March 16, 2020 to shareholders of record at
the close of business on March 2, 2020.
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 December 31, 2019,
an increase of $6.3 million for the change in unrealized gains on
equity securities was recognized within income before income taxes,
compared to a decrease of $12.6 million recognized in the
comparable 2018 period. For the year ended December 31, 2019, an
increase of $21.5 million for the change in unrealized gains on
equity securities was recognized in income before income taxes,
compared to a decrease of $16.3 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)
December 31,
December 31,
2019
2018
(Unaudited)
Assets
Investments:
Fixed maturities, available for sale, at
fair value (amortized cost: $1,192,357 and $1,175,413)
$
1,228,040
$
1,161,862
Equity securities, at fair value (cost:
$151,121 and $142,948)
177,637
148,011
Other invested assets
37,278
23,481
Total investments
1,442,955
1,333,354
Cash and cash equivalents
44,407
37,582
Accounts receivable, net of allowance for
doubtful accounts
193,369
190,062
Receivable for securities sold
1,784
1,039
Accrued investment income
8,404
8,420
Taxes recoverable
1,003
—
Receivable from reinsurers related to paid
loss and loss adjustment expenses
11,319
13,691
Receivable from reinsurers related to
unpaid loss and loss adjustment expenses
122,372
108,398
Ceded unearned premiums
35,182
33,974
Deferred policy acquisition costs
74,287
73,355
Deferred income taxes
—
8,749
Equity and deposits in pools
29,791
28,094
Operating lease right-of-use-assets
33,998
—
Other assets
23,798
19,522
Total assets
$
2,022,669
$
1,856,240
Liabilities
Loss and loss adjustment expense
reserves
$
610,566
$
584,719
Unearned premium reserves
442,219
435,380
Accounts payable and accrued
liabilities
75,016
71,896
Payable for securities purchased
6,377
5,156
Payable to reinsurers
12,911
12,220
Deferred income taxes
5,717
—
Taxes payable
—
6,090
Operating lease liabilities
33,998
—
Other liabilities
27,459
22,135
Total liabilities
1,214,263
1,137,596
Shareholders’ equity
Common stock: $0.01 par value; 30,000,000
shares authorized; 17,662,779 and 17,566,180 shares issued
177
176
Additional paid-in capital
202,321
196,292
Accumulated other comprehensive income
(loss), net of taxes
28,190
(10,706)
Retained earnings
661,553
616,717
Treasury stock, at cost: 2,279,570
shares
(83,835)
(83,835)
Total shareholders’ equity
808,406
718,644
Total liabilities and shareholders’
equity
$
2,022,669
$
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 December
31,
Year Ended December
31,
2019
2018
2019
2018
Net earned premiums
$
199,450
$
198,461
$
788,777
$
781,587
Net investment income
12,393
11,949
46,665
43,788
Earnings from partnership investments
506
376
1,937
6,915
Net realized gains on investments
1,463
278
2,976
3,226
Change in net unrealized gains on equity
investments
6,286
(12,575)
21,454
(16,324)
Net impairment losses on investments
(a)
(492)
—
(889)
(228)
Finance and other service income
4,293
4,412
16,833
17,533
Total revenue
223,899
202,901
877,753
836,497
Losses and loss adjustment expenses
126,460
117,949
509,846
485,513
Underwriting, operating and related
expenses
61,949
61,718
244,136
246,643
Interest expense
23
23
90
90
Total expenses
188,432
179,690
754,072
732,246
Income before income taxes
35,467
23,211
123,681
104,251
Income tax expense
7,365
4,865
24,080
21,056
Net income
$
28,102
$
18,346
$
99,601
$
83,195
Earnings per weighted average common
share:
Basic
$
1.84
$
1.21
$
6.52
$
5.48
Diluted
$
1.82
$
1.19
$
6.46
$
5.43
Cash dividends paid per common
share
$
0.90
$
0.80
$
3.40
$
3.20
Number of shares used in computing
earnings per share:
Basic
15,220,902
15,092,305
15,201,132
15,080,269
Diluted
15,340,518
15,267,325
15,337,807
15,229,898
(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
$
28,102
$
18,346
$
99,601
$
83,195
Exclusions from net income:
Net realized gains on investments
(1,463)
(278)
(2,976)
(3,226)
Change in net unrealized gains on equity
investments
(6,286)
12,575
(21,454)
16,324
Net impairment losses on investments
492
-
889
228
Income tax expense (benefit) on exclusions
from net income
1,524
(2,582)
4,944
(2,798)
Non-GAAP operating income
$
22,369
$
28,061
$
81,004
$
93,723
Net income per diluted share
$
1.82
$
1.19
$
6.46
$
5.43
Exclusions from net income:
Net realized gains on investments
(0.10)
(0.02)
(0.19)
(0.21)
Change in net unrealized gains on equity
investments
(0.41)
0.82
(1.40)
1.07
Net impairment losses on investments
0.03
-
0.06
0.01
Income tax expense (benefit) on exclusions
from net income
0.10
(0.16)
0.32
(0.18)
Non-GAAP operating income per diluted
share
$
1.44
$
1.83
$
5.25
$
6.12
Safety Insurance Group, Inc. and
Subsidiaries Additional Premium Information (Unaudited) (Dollars in
thousands)
Three Months Ended December
31,
Year Ended December
31,
2019
2018
2019
2018
Written Premiums
Direct
$
189,671
$
186,962
$
852,404
$
843,675
Assumed
8,498
8,408
32,391
32,403
Ceded
(22,579)
(21,492)
(90,386)
(89,166)
Net written premiums
$
175,590
$
173,878
$
794,409
$
786,912
Earned Premiums
Direct
$
213,841
$
212,434
$
845,102
$
836,759
Assumed
8,111
7,960
32,853
32,196
Ceded
(22,502)
(21,933)
(89,178)
(87,368)
Net earned premiums
$
199,450
$
198,461
$
788,777
$
781,587
View source
version on businesswire.com: https://www.businesswire.com/news/home/20200226005888/en/
Safety Insurance Group, Inc. Office of Investor Relations
877-951-2522 InvestorRelations@SafetyInsurance.com
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