Safety Insurance Group, Inc. (NASDAQ:SAFT) (“Safety” or the
“Company”) today reported fourth quarter and year ended 2023
results.
George M. Murphy, Chairman of the Board of Directors, President
and Chief Executive Officer, commented: “2023 saw Safety Insurance
post record top-line growth as Direct Written Premiums increased by
20.4% as a result of a 10.2% increase in overall policy counts and
a 10.9% increase in average premium per policy, blended across all
lines of business. While Safety achieved positive trends in all
major revenue streams, ongoing inflationary impacts contributed to
an elevated loss ratio specific to our Private Passenger Automobile
book of business. For the year ended December 31, 2023, Safety
Insurance posted a 107.7% combined ratio, resulting from these
inflationary impacts and several weather events. For the fourth
quarter 2023, Safety posted a 106.5% combined ratio resulting from
a December 18th wind event that added $12.0M in Loss and Loss
Adjustment Expenses as well as the continued elevated Private
Passenger Auto loss ratio.”
“As I have previously mentioned, Safety continues to file for
rate increases across all major lines and is seeing these rate
increases begin to impact earned premiums. Safety remains committed
to maintaining underwriting discipline, while leveraging
investments in our pricing and risk management areas to ensure rate
adequacy.”
Fourth Quarter and Year Ended 2023 Results and Recent
Development
Net income for the quarter ended December 31, 2023 was $12.3
million, or $0.83 per diluted share, compared to net income of
$24.6 million, or $1.67 per diluted share, for the comparable 2022
period. Net income for the year ended December 31, 2023 was $18.9
million, or $1.28 per diluted share, compared to net income of
$46.6 million, or $3.15 per diluted share, for the comparable 2022
period. Non-generally accepted accounting principles (“non-GAAP”)
operating income, as defined below, for the quarter ended December
31, 2023 was $0.30 per diluted share, compared to $0.98 per diluted
share, for the comparable 2022 period. Non-GAAP operating income
for the year ended December 31, 2023 was $0.84 per diluted share,
compared to Non-GAAP operating income of $5.05 per diluted share,
for the comparable 2022 period.
Safety’s book value per share decreased to $54.37 at December
31, 2023 from $54.88 at December 31, 2022 resulting from net income
offset by capital stock activities, specifically share repurchases
and dividends paid. During the year ended December 31, 2023, the
Company purchased 74,213 shares at a cost of $5.2 million. Safety
paid $0.90 per share in dividends to investors during the quarters
ended December 31, 2023 and 2022, respectively. Safety paid $3.60
per share in dividends to investors during the year ended December
31, 2023 and 2022, respectively.
On February 15, 2024, our Board of Directors approved a $0.90
per share quarterly cash dividend on our issued and outstanding
common stock payable on March 15, 2024 to shareholders of record at
the close of business on March 1, 2024.
Direct written premiums for the quarter ended December 31, 2023
increased by $44.7 million, or 22.2%, to $246.1 million from $201.4
million for the comparable 2022 period. Direct written premiums for
the year ended December 31, 2023 increased by $167.9 million, or
20.4% to $991.2 million from $823.3 million for the comparable 2022
period. Net written premiums for the quarter ended December 30,
2023 increased by $38.9 million, or 20.7%, to $226.4 million from
$187.5 million for the comparable 2022 period. Net written premiums
for the year ended December 31, 2023 increased by $151.6 million,
or 19.6%, to $925.3 million from $773.7 million for the comparable
2022 period.
The increases in direct written premiums and net written
premiums are a result of new business production, improved
retention, and rate increases. For the year ended December 31,
2023, the Company achieved exposure count growth across all lines
of business, including 14.7%, 5.4% and 11.2% in Private Passenger
Automobile, Commercial Automobile and Homeowners lines,
respectively, compared to the same period in 2022. Additionally,
for the year ended December 31, 2023, average written premium per
exposure increased 10.8%, 3.8% and 4.5% in Private Passenger
Automobile, Commercial Automobile and Homeowners lines,
respectively, compared to the same period in 2022.
Net earned premiums for the quarter ended December 31, 2023
increased by $32.8 million, or 17.0%, to $226.0 million from $193.2
million for the comparable 2022 period. Net earned premiums for the
year ended December 31, 2023 increased by $75.9 million, or 10.0%,
to $834.4 million from $758.5 million for the comparable 2022
period.
For the quarter ended December 31, 2023, losses and loss
adjustment expenses incurred increased by $40.1 million, or 30.4%,
to $172.1 million from $132.0 million for the comparable 2022
period. For the year ended December 31, 2023, losses and loss
adjustment expenses incurred increased by $150.3 million, or 30.6%,
to $642.3 million from $492.0 million for the comparable 2022
period. The increase in losses is driven by current market
conditions, specifically inflation, as well as weather events
including multiple flood events, a high wind event that occurred in
December, and a severe winter weather event that occurred in
February.
Loss, expense, and combined ratios calculated for the quarter
ended December 31, 2023, were 76.1%, 30.4%, and 106.5%,
respectively, compared to 68.4%, 32.3%, and 100.7%, respectively,
for the comparable 2022 period. Loss, expense, and combined ratios
calculated for the year ended December 31, 2023 were 77.0%, 30.7%,
and 107.7%, respectively, compared to 64.9%, 32.3%, and 97.2%,
respectively, for the comparable 2022 period. The decrease in the
expense ratio is primarily driven by a decrease in contingent
commission expenses.
Total prior year favorable development included in the pre-tax
results for the quarter ended December 31, 2023 was $12.4 million
compared to $14.1 million for the comparable 2022 period. Total
prior year favorable development included pre-tax results for the
year ended December 31, 2023 was $47.4 million compared to $57.3
million for the comparable 2022 period, which included the reversal
of a $6.5 million accrued reserve for legal defense costs
associated with business interruption claims resulting from the
COVID-19 pandemic.
Net investment income for the quarter ended December 31, 2023
increased by $1.5 million, or 11.2% to $14.9 million from $13.4
million for the comparable 2022 period. Net investment income for
the year ended December 31, 2023 increased by $9.7 million, or
20.7%, to $56.4 million from $46.7 million for the comparable 2022
period. The increase is a result of increases in interest rates on
our fixed maturity portfolio compared to the prior year. Net
effective annualized yield on the investment portfolio was 4.2% for
the quarter ended December 31, 2023 compared to 3.7% for the
comparable 2022 period. Net effective annualized yield on the
investment portfolio for the year ended December 31, 2023 was 4.0%
compared to 3.2% for the comparable 2022 period. Our duration on
fixed maturities was 3.6 years at December 31, 2023 compared to 3.8
years at December 31, 2022.
Non-GAAP Measures
Management has included certain non-GAAP financial measures in
presenting the Company’s results. Management believes that these
non-GAAP measures are useful to 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 non-GAAP operating income per
diluted share consist of our GAAP net income adjusted by the net
realized gains on investments, change in net unrealized gains on
equity securities, credit loss benefit (expense) and taxes related
thereto. For the quarter ended December 31, 2023, an increase of
$9.7 million for the change in unrealized gains on equity
securities was recognized within income before income taxes,
compared to an increase of $11.9 million recognized in the
comparable 2022 period. For the year ended December 31, 2023, an
increase of $7.5 million for the change in unrealized gains on
equity securities was recognized in income before income taxes,
compared to a decrease of $44.4 million recognized in the
comparable 2022 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, Safety
Property and Casualty Insurance Company, Safety Northeast Insurance
Company, and Safety Northeast Insurance Agency. 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,
2022 Form 10-K with the SEC on February 28, 2023 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;
- Conditions for business operations and restrictive regulations
in Massachusetts;
- The possibility of losses due to claims resulting from severe
weather;
- The impact of inflation and supply chain delays on loss
severity;
- The possibility that the Commissioner of Insurance may approve
future rule changes that change the operation of the residual
market;
- The possibility that existing insurance-related laws and
regulations will become further restrictive in the future;
- The impact of investment, economic and underwriting market
conditions, including interest rates and inflation;
- 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, 2022 filed with the SEC on February 28, 2023.
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,
2023
2022
(Unaudited)
Assets
Investments:
Fixed maturities, available for sale, at
fair value (amortized cost: $1,120,682 and $1,152,779, allowance
for expected credit losses of $1,208 and $678)
$
1,052,145
$
1,050,155
Equity securities, at fair value (cost:
$221,809 and $231,444)
238,022
240,155
Other invested assets
133,946
112,850
Total investments
1,424,113
1,403,160
Cash and cash equivalents
38,152
25,300
Accounts receivable, net of allowance for
expected credit losses of $1,053 and $1,446
256,687
192,542
Receivable for securities sold
124
877
Accrued investment income
7,261
8,212
Taxes recoverable
623
—
Receivable from reinsurers related to paid
loss and loss adjustment expenses
13,129
12,988
Receivable from reinsurers related to
unpaid loss and loss adjustment expenses
112,623
93,394
Ceded unearned premiums
32,346
28,453
Deferred policy acquisition costs
91,917
75,582
Deferred income taxes
12,150
21,074
Equity and deposits in pools
35,247
33,648
Operating lease right-of-use-assets
19,756
23,336
Goodwill
17,093
17,093
Intangible assets
7,551
7,856
Other assets
25,232
29,054
Total assets
$
2,094,004
$
1,972,569
Liabilities
Loss and loss adjustment expense
reserves
$
603,081
$
549,598
Unearned premium reserves
528,150
433,375
Accounts payable and accrued
liabilities
64,235
73,875
Payable for securities purchased
1,863
1,359
Payable to reinsurers
15,941
11,444
Taxes payable
—
1,729
Debt
30,000
35,000
Operating lease liabilities
19,756
23,336
Other liabilities
26,711
30,854
Total liabilities
1,289,737
1,160,570
Shareholders’ equity
Common stock: $0.01 par value; 30,000,000
shares authorized; 17,949,484 and 17,879,095 shares issued
179
179
Additional paid-in capital
226,380
222,049
Accumulated other comprehensive loss, net
of taxes
(53,191
)
(80,538
)
Retained earnings
781,192
815,309
Treasury stock, at cost: 3,157,577 and
3,083,364 shares
(150,293
)
(145,000
)
Total shareholders’ equity
804,267
811,999
Total liabilities and shareholders’
equity
$
2,094,004
$
1,972,569
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,
2023
2022
2023
2022
Net earned premiums
$
226,029
$
193,153
$
834,414
$
758,505
Net investment income
14,882
13,388
56,377
46,725
Earnings from partnership investments
394
2,809
5,540
12,484
Net realized gains on investments
216
577
1,327
9,190
Change in net unrealized gains on equity
securities
9,650
11,897
7,502
(44,386
)
Credit loss benefit (expense)
24
221
(530
)
14
Commission income
1,773
566
6,932
566
Finance and other service income
5,428
3,992
19,394
14,461
Total revenue
258,396
226,603
930,956
797,559
Losses and loss adjustment expenses
172,105
132,029
642,302
491,979
Underwriting, operating and related
expenses
68,748
62,306
256,580
245,145
Other expense
1,638
330
6,836
330
Interest expense
121
132
818
524
Total expenses
242,612
194,797
906,536
737,978
Income before income taxes
15,784
31,806
24,420
59,581
Income tax expense
3,522
7,176
5,545
13,020
Net income
$
12,262
$
24,630
$
18,875
$
46,561
Earnings per weighted average common
share:
Basic
$
0.83
$
1.68
$
1.28
$
3.17
Diluted
$
0.83
$
1.67
$
1.28
$
3.15
Cash dividends paid per common
share
$
0.90
$
0.90
$
3.60
$
3.60
Number of shares used in computing
earnings per share:
Basic
14,645,987
14,604,189
14,663,730
14,607,483
Diluted
14,678,038
14,701,879
14,710,131
14,710,611
Reconciliation of Net Income to
Non-GAAP Operating Income
Net income
$
12,262
$
24,630
$
18,875
$
46,561
Exclusions from net income:
Net realized gains on investments
(216
)
(577
)
(1,327
)
(9,190
)
Change in net unrealized gains on equity
securities
(9,650
)
(11,897
)
(7,502
)
44,386
Credit loss (benefit) expense
(24
)
(221
)
530
(14
)
Income tax expense on exclusions from net
income
2,077
2,666
1,743
(7,388
)
Non-GAAP operating income
$
4,449
$
14,601
$
12,319
$
74,355
Net income per diluted share
$
0.83
$
1.67
$
1.28
$
3.15
Exclusions from net income:
Net realized gains on investments
(0.01
)
(0.04
)
(0.09
)
(0.62
)
Change in net unrealized gains on equity
securities
(0.66
)
(0.81
)
(0.51
)
3.02
Credit loss (benefit) expense
-
(0.02
)
0.04
-
Income tax expense on exclusions from net
income
0.14
0.18
0.12
(0.50
)
Non-GAAP operating income per diluted
share
$
0.30
$
0.98
$
0.84
$
5.05
Safety Insurance Group, Inc.
and Subsidiaries
Additional Premium
Information
(Unaudited)
(Dollars in thousands)
Three Months Ended December
31,
Year Ended December
31,
2023
2022
2023
2022
Written Premiums
Direct
$
246,091
$
201,371
$
991,224
$
823,318
Assumed
7,620
7,667
30,850
28,835
Ceded
(27,356
)
(21,507
)
(96,779
)
(78,418
)
Net written premiums
$
226,355
$
187,531
$
925,295
$
773,735
Earned Premiums
Direct
$
243,513
$
205,627
$
897,598
$
803,289
Assumed
7,345
7,141
29,702
28,976
Ceded
(24,829
)
(19,615
)
(92,886
)
(73,760
)
Net earned premiums
$
226,029
$
193,153
$
834,414
$
758,505
View source
version on businesswire.com: https://www.businesswire.com/news/home/20240227155706/en/
Safety Insurance Group, Inc. Office of Investor Relations
877-951-2522 InvestorRelations@SafetyInsurance.com
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