Safety Insurance Group, Inc. (NASDAQ:SAFT) today reported second
quarter 2019 results. Net income for the quarter ended June 30,
2019 was $25.9 million, or $1.68 per diluted share, compared to net
income of $26.8 million, or $1.75 per diluted share, for the
comparable 2018 period. Net income for the six months ended June
30, 2019 was $55.9 million, or $3.63 per diluted share, compared to
net income of $35.9 million, or $2.35 per diluted share, for the
comparable 2018 period. Non-generally accepted accounting
principles (“non-GAAP”) operating income, as defined below, for the
quarter ended June 30, 2019 was $1.47 per diluted share, compared
to $1.81 per diluted share, for the comparable 2018 period.
Non-GAAP operating income for the six months ended June 30, 2019
was $2.83 per diluted share, compared to $2.52 per diluted share,
for the comparable 2018 period. Safety’s book value per share
increased to $50.90 at June 30, 2019 from $47.01 at December 31,
2018. Safety paid $0.80 per share in dividends to investors during
each of the quarters ended June 30, 2019 and 2018, respectively.
Safety paid $3.20 per share in dividends to investors during the
year ended December 31, 2018.
Today, our Board of Directors approved and declared an increase
in the quarterly cash dividend from $0.80 to $0.90 per share on the
issued and outstanding common stock payable on September 13, 2019
to shareholders of record at the close of business on September 3,
2019.
Direct written premiums for the quarter ended June 30, 2019
increased by $0.5 million, or 0.2%, to $233.6 million from $233.1
million for the comparable 2018 period. Direct written premiums for
the six months ended June 30, 2019 increased by $0.2 million to
$437.0 million from $436.8 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 June 30, 2019
increased by $1.8 million, or 0.8%, to $217.3 million from $215.5
million for the comparable 2018 period. Net written premiums for
the six months ended June 30, 2019 increased by $1.7 million, or
0.4%, to $407.2 million from $405.5 million for the comparable 2018
period. Net earned premiums for the quarter ended June 30, 2019
increased by $2.3 million, or 1.2%, to $196.4 million from $194.1
million for the comparable 2018 period. Net earned premiums for the
six months ended June 30, 2019 increased by $4.8 million, or 1.2%,
to $390.9 million from $386.1 million for the comparable 2018
period.
For the quarter ended June 30, 2019, loss and loss adjustment
expenses incurred increased by $9.2 million, or 8.1%, to $122.4
million from $113.2 million for the comparable 2018 period. For the
six months ended June 30, 2019, loss and loss adjustment expenses
incurred decreased by $2.5 million, or 1.0%, to $248.4 million from
$250.9 million for the comparable 2018 period. Loss, expense, and
combined ratios calculated under U.S. generally accepted accounting
principles for the quarter ended June 30, 2019 were 62.3%, 31.0%,
and 93.3%, respectively, compared to 58.3%, 31.7%, and 90.0%,
respectively, for the comparable 2018 period. Loss, expense, and
combined ratios calculated under U.S. generally accepted accounting
principles for the six months ended June 30, 2019 were 63.5%,
31.0%, and 94.5%, respectively, compared to 65.0%, 31.7%, and
96.7%, respectively, for the comparable 2018 period. Total prior
year favorable development included in the pre-tax results for the
quarter ended June 30, 2019 was $10.4 million compared to $12.1
million for the comparable 2018 period. Total prior year favorable
development included in the pre-tax results for the six months
ended June 30, 2019 was $22.3 million compared to $26.3 million for
the comparable 2018 period.
Net investment income for the quarter ended June 30, 2019
increased by $0.4 million, or 3.8%, to $10.6 million from $10.2
million for the comparable 2018 period. Net investment income for
the six months ended June 30, 2019 increased by $1.6 million, or
7.8%, to $22.3 million from $20.7 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 3.2% for the three months ended June 30,
2019 and 2018. Net effective annualized yield on the investment
portfolio for the six months ended June 30, 2019 was 3.3% compared
to 3.2% for the comparable 2018 period. Our duration on fixed
maturities was 3.0 years at June 30, 2019 and 3.6 years at December
31, 2018, respectively.
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 June 30, 2019 an
increase of $3.8 million for the change in unrealized gains was
recognized within income before income taxes, compared to a
decrease of $2.7 million recognized in the comparable 2018 period.
For the six months ended June 30, 2019, an increase of $15.6
million for the change in unrealized gains was recognized in income
before income taxes, compared to a decrease of $6.2 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)
June 30,
December 31,
2019
2018
(Unaudited)
Assets
Investments:
Fixed maturities, available for sale, at
fair value (amortized cost: $1,150,224 and $1,175,413)
$
1,178,251
$
1,161,862
Equity securities, at fair value (cost:
$145,041 and $142,948)
165,659
148,011
Other invested assets
30,124
23,481
Total investments
1,374,034
1,333,354
Cash and cash equivalents
37,968
37,582
Accounts receivable, net of allowance for
doubtful accounts
209,658
190,062
Receivable for securities sold
964
1,039
Accrued investment income
8,304
8,420
Taxes recoverable
1,671
—
Receivable from reinsurers related to paid
loss and loss adjustment expenses
28,819
13,691
Receivable from reinsurers related to
unpaid loss and loss adjustment expenses
112,228
108,398
Ceded unearned premiums
35,900
33,974
Deferred policy acquisition costs
75,670
73,355
Deferred income taxes
—
8,749
Equity and deposits in pools
28,492
28,094
Operating lease right-of-use-assets
36,116
—
Other assets
23,290
19,522
Total assets
$
1,973,114
$
1,856,240
Liabilities
Loss and loss adjustment expense
reserves
$
589,123
$
584,719
Unearned premium reserves
453,612
435,380
Accounts payable and accrued
liabilities
56,799
71,896
Payable for securities purchased
7,684
5,156
Payable to reinsurers
21,240
12,220
Deferred income taxes
1,221
—
Taxes payable
—
6,090
Operating lease liabilities
36,116
—
Other liabilities
24,270
22,135
Total liabilities
1,190,065
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
199,644
196,292
Accumulated other comprehensive income
(loss), net of taxes
22,141
(10,706
)
Retained earnings
644,922
616,717
Treasury stock, at cost: 2,279,570
shares
(83,835
)
(83,835
)
Total shareholders’ equity
783,049
718,644
Total liabilities and shareholders’
equity
$
1,973,114
$
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 June
30,
Six Months Ended June
30,
2019
2018
2019
2018
Net earned premiums
$
196,426
$
194,125
$
390,917
$
386,158
Net investment income
10,574
10,188
22,325
20,719
Earnings from partnership investments
735
487
1,570
5,351
Net realized gains on investments
483
1,589
319
2,895
Change in net unrealized gains on equity
investments
3,754
(2,711)
15,555
(6,193)
Net impairment losses on investments
(a)
(54)
—
(274)
—
Finance and other service income
4,084
4,292
8,169
8,759
Total revenue
216,002
207,970
438,581
417,689
Losses and loss adjustment expenses
122,393
113,227
248,420
250,871
Underwriting, operating and related
expenses
60,908
61,573
121,342
122,429
Interest expense
23
23
45
45
Total expenses
183,324
174,823
369,807
373,345
Income before income taxes
32,678
33,147
68,774
44,344
Income tax expense
6,744
6,331
12,894
8,403
Net income
$
25,934
$
26,816
$
55,880
$
35,941
Earnings per weighted average common
share:
Basic
$
1.70
$
1.77
$
3.66
$
2.37
Diluted
$
1.68
$
1.75
$
3.63
$
2.35
Cash dividends paid per common
share
$
0.80
$
0.80
$
1.60
$
1.60
Number of shares used in computing
earnings per share:
Basic
15,220,822
15,090,435
15,181,034
15,068,321
Diluted
15,346,234
15,213,414
15,326,121
15,202,338
(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
$
25,934
$
26,816
$
55,880
$
35,941
Exclusions from net income:
Net realized gains on investments
(483)
(1,589)
(319)
(2,895)
Change in net unrealized gains on equity
investments
(3,754)
2,711
(15,555)
6,193
Net impairment losses on investments
54
-
274
-
Income tax expense (benefit) on exclusions
from net income
878
(236)
3,276
(693)
Non-GAAP operating income
$
22,629
$
27,702
$
43,556
$
38,546
Net income per diluted share
$
1.68
$
1.75
$
3.63
$
2.35
Exclusions from net income:
Net realized gains on investments
(0.03)
(0.10)
(0.02)
(0.19)
Change in net unrealized gains on equity
investments
(0.24)
0.18
(1.01)
0.41
Net impairment losses on investments
-
-
0.02
-
Income tax expense (benefit) on exclusions
from net income
0.06
(0.02)
0.21
(0.05)
Non-GAAP operating income per diluted
share
$
1.47
$
1.81
$
2.83
$
2.52
Safety Insurance Group, Inc.
and Subsidiaries Additional Premium Information (Unaudited)
(Dollars in thousands)
Three Months Ended June
30,
Six Months Ended June
30,
2019
2018
2019
2018
Written Premiums
Direct
$
233,595
$
233,050
$
436,982
$
436,783
Assumed
8,175
8,297
16,420
16,245
Ceded
(24,485
)
(25,832
)
(46,179
)
(47,500
)
Net written premiums
$
217,285
$
215,515
$
407,223
$
405,528
Earned Premiums
Direct
$
210,334
$
208,297
$
417,642
$
412,116
Assumed
8,213
7,880
17,528
16,767
Ceded
(22,121
)
(22,052
)
(44,253
)
(42,725
)
Net earned premiums
$
196,426
$
194,125
$
390,917
$
386,158
View source
version on businesswire.com: https://www.businesswire.com/news/home/20190731005972/en/
Safety Insurance Group, Inc. Office of Investor Relations
877-951-2522 InvestorRelations@SafetyInsurance.com
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