SAFT Safety Insurance Group Inc

Safety Insurance Group, Inc. (NASDAQ:SAFT) (“the Company” or “Safety”) today reported first quarter 2024 results.

George M. Murphy, Chairman of the Board of Directors, President and Chief Executive Officer, commented: “We are beginning to see the financial impact of our prior year growth with net earned premium increasing for the quarter by 23.1%. As a result, our first quarter combined ratio in 2024 improved to 101.9% compared to 118.5% in the first quarter of 2023, which was impacted by a Winter Freeze event. While severity trends in our Private Passenger Automobile book of business are showing signs of stabilization, the losses and loss adjustment expenses in 2024 are still being impacted by continued inflationary pressure. We continue to see positive trends in all revenue line items and have been approved for additional rate increases across multiple lines of business. We remain confident in our pricing and underwriting strategies.”

Net income for the quarter ended March 31, 2024 was $20.1 million, or $1.36 per diluted share, compared to net loss of $12.3 million, or $0.84 per diluted share, for the comparable 2023 period. Non-generally accepted accounting principles (“non-GAAP”) operating income, as defined below, for the quarter ended March 31, 2024 was $0.93 per diluted share, compared to non-GAAP operating loss of $0.87 per diluted share, for the comparable 2023 period.

Safety’s book value per share increased to $54.40 at March 31, 2024 from $54.37 at December 31, 2023 resulting from the net income offset by dividends paid. Safety paid $0.90 per share in dividends to investors during the quarters ended March 31, 2024 and 2023, respectively. Safety paid $3.60 per share in dividends to investors during the year ended December 31, 2023.

Today, our Board of Directors approved and declared a $0.90 per share quarterly cash dividend on its issued and outstanding common stock, payable on June 14, 2024 to shareholders of record at the close of business on June 3, 2024.

Direct written premiums for the quarter ended March 31, 2024 increased by $49.4 million, or 22.7%, to $267.3 million from $217.9 million for the comparable 2023 period. Net written premiums for the quarter ended March 31, 2024 increased by $47.4 million, or 23.4%, to $250.3 million from $202.9 million for the comparable 2023 period. Net earned premiums for the quarter ended March 31, 2024 increased by $44.4 million, or 23.1%, to $236.1 million from $191.7 million for the comparable 2023 period.

The increases in direct written premiums and net written premiums are a result of new business production and rate increases. For the three months ended March 31, 2024, the Company achieved policy count growth across all lines of business, including 12.4%, 2.3% and 10.9% in Private Passenger Automobile, Commercial Automobile and Homeowners lines, respectively, compared to the same period in 2023. Additionally, for the three months ended March 31, 2024, average written premium per policy increased 13.5%, 6.4%, and 7.4% in Private Passenger Automobile, Commercial Automobile and Homeowners lines, respectively, compared to the same period in 2023.

For the quarter ended March 31, 2024, loss and loss adjustment expenses incurred increased by $1.2 million, or 0.7%, to $168.4 million from $167.2 million for the comparable 2023 period. The slight increase is driven by larger policy counts offset by improved results in our homeowners lines.

Loss, expense, and combined ratios for the quarter ended March 31, 2024 were 71.3%, 30.6%, and 101.9%, respectively, compared to 87.2%, 31.3%, and 118.5%, respectively, for the comparable 2023 period. Total prior year favorable development included in the pre-tax results for the quarter ended March 31, 2024 was $11.0 million compared to $11.5 million for the comparable 2023 period. The prior year loss ratio was impacted by a severe weather event, totaling $32.1 million of losses for the quarter ended March 31, 2023.

Net investment income for the quarter ended March 31, 2024 increased by $1.5 million, or 11.5%, to $15.2 million from $13.7 million for the comparable 2023 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 portfolio was 4.3% for the three months ended March 31, 2024 compared to 3.8% for the comparable 2023 period. Our duration on fixed maturities was 3.5 years at March 31, 2024 and 3.6 years at December 31, 2023, 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 non-GAAP operating loss 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 expense and taxes related thereto. For the quarter ended March 31, 2024, an increase of $7.7 million for the change in unrealized gains on equity investments was recognized within loss before income taxes, compared to an increase of $0.8 million for the change in unrealized gains on equity investments in the comparable 2023 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, Inc. 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, 2023 Form 10-K with the SEC on February 28, 2024 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;
• 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, 2023 filed with the SEC on February 28, 2024.

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)

 

 

 

 

 

 

 

 

 

March 31,

 

December 31,

 

 

2024

 

2023

 

 

(Unaudited)

 

 

 

Assets

 

 

 

 

 

 

Investments:

 

 

 

 

 

 

Fixed maturities, available for sale, at fair value (amortized cost: $1,119,116 and $1,120,682, allowance for expected credit losses of $1,349 and $1,208)

 

$

1,043,556

 

 

$

1,052,145

 

Equity securities, at fair value (cost: $192,721 and $221,809)

 

 

216,598

 

 

 

238,022

 

Other invested assets

 

 

138,270

 

 

 

133,946

 

Total investments

 

 

1,398,424

 

 

 

1,424,113

 

Cash and cash equivalents

 

 

30,801

 

 

 

38,152

 

Accounts receivable, net of allowance for expected credit losses of $824 and $1,053

 

 

269,491

 

 

 

256,687

 

Receivable for securities sold

 

 

322

 

 

 

124

 

Accrued investment income

 

 

8,012

 

 

 

7,261

 

Taxes recoverable

 

 

—

 

 

 

623

 

Receivable from reinsurers related to paid loss and loss adjustment expenses

 

 

15,359

 

 

 

13,129

 

Receivable from reinsurers related to unpaid loss and loss adjustment expenses

 

 

121,504

 

 

 

112,623

 

Ceded unearned premiums

 

 

34,029

 

 

 

32,346

 

Deferred policy acquisition costs

 

 

93,711

 

 

 

91,917

 

Deferred income taxes

 

 

14,667

 

 

 

12,150

 

Equity and deposits in pools

 

 

36,410

 

 

 

35,247

 

Operating lease right-of-use-assets

 

 

19,078

 

 

 

19,756

 

Goodwill

 

 

17,093

 

 

 

17,093

 

Intangible assets

 

 

7,340

 

 

 

7,551

 

Other assets

 

 

27,198

 

 

 

25,232

 

Total assets

 

$

2,093,439

 

 

$

2,094,004

 

 

 

 

 

 

 

 

Liabilities

 

 

 

 

 

 

Loss and loss adjustment expense reserves

 

$

603,796

 

 

$

603,081

 

Unearned premium reserves

 

 

544,075

 

 

 

528,150

 

Accounts payable and accrued liabilities

 

 

60,615

 

 

 

64,235

 

Payable for securities purchased

 

 

6,434

 

 

 

1,863

 

Payable to reinsurers

 

 

12,496

 

 

 

15,941

 

Taxes payable

 

 

780

 

 

 

—

 

Short-term debt

 

 

30,000

 

 

 

—

 

Long-term debt

 

 

—

 

 

 

30,000

 

Operating lease liabilities

 

 

19,078

 

 

 

19,756

 

Other liabilities

 

 

9,094

 

 

 

26,711

 

Total liabilities

 

 

1,286,368

 

 

 

1,289,737

 

 

 

 

 

 

 

 

Shareholders’ equity

 

 

 

 

 

 

Common stock: $0.01 par value; 30,000,000 shares authorized; 17,994,242 and 17,949,484 shares issued

 

 

180

 

 

 

179

 

Additional paid-in capital

 

 

227,820

 

 

 

226,380

 

Accumulated other comprehensive loss, net of taxes

 

 

(58,626

)

 

 

(53,191

)

Retained earnings

 

 

787,990

 

 

 

781,192

 

Treasury stock, at cost: 3,157,577 and 3,157,577 shares

 

 

(150,293

)

 

 

(150,293

)

Total shareholders’ equity

 

 

807,071

 

 

 

804,267

 

Total liabilities and shareholders’ equity

 

$

2,093,439

 

 

$

2,094,004

 

Safety Insurance Group, Inc. and Subsidiaries Consolidated Statements of Operations (Unaudited) (Dollars in thousands, except share and per share data)

 

 

 

 

 

 

 

 

 

Three Months Ended March 31,

 

 

2024

 

2023

 

 

 

 

 

 

 

Net earned premiums

 

$

236,053

 

 

$

191,735

 

Net investment income

 

 

15,231

 

 

 

13,654

 

Earnings from partnership investments

 

 

1,772

 

 

 

2,166

 

Net realized gains on investments

 

 

492

 

 

 

733

 

Change in net unrealized gains on equity securities

 

 

7,665

 

 

 

770

 

Credit loss expense

 

 

(142

)

 

 

(922

)

Commission income

 

 

1,808

 

 

 

1,483

 

Finance and other service income

 

 

5,354

 

 

 

4,140

 

Total revenue

 

 

268,233

 

 

 

213,759

 

 

 

 

 

 

 

 

Losses and loss adjustment expenses

 

 

168,399

 

 

 

167,153

 

Underwriting, operating and related expenses

 

 

72,267

 

 

 

60,033

 

Other expense

 

 

1,837

 

 

 

1,670

 

Interest expense

 

 

123

 

 

 

210

 

Total expenses

 

 

242,626

 

 

 

229,066

 

 

 

 

 

 

 

 

Income (loss) before income taxes

 

 

25,607

 

 

 

(15,307

)

Income tax expense (benefit)

 

 

5,529

 

 

 

(2,970

)

Net income (loss)

 

$

20,078

 

 

$

(12,337

)

 

 

 

 

 

 

 

Earnings (loss) per weighted average common share:

 

 

 

 

 

 

Basic

 

$

1.36

 

 

$

(0.84

)

Diluted

 

$

1.36

 

 

$

(0.84

)

 

 

 

 

 

 

 

Cash dividends paid per common share

 

$

0.90

 

 

$

0.90

 

 

 

 

 

 

 

 

Number of shares used in computing earnings per share:

 

 

 

 

 

 

Basic

 

 

14,667,107

 

 

 

14,682,507

 

Diluted

 

 

14,696,590

 

 

 

14,761,861

 

 

 

 

 

 

 

 

 

 

 

 

Reconciliation of Net Income (Loss) to Non-GAAP Operating Income (Loss)

 

 

 

 

 

 

 

 

 

 

 

 

 

Net income (loss)

 

$

20,078

 

 

$

(12,337

)

Exclusions from net income:

 

 

 

 

 

 

Net realized gains on investments

 

 

(492

)

 

 

(733

)

Change in net unrealized gains on equity securities

 

 

(7,665

)

 

 

(770

)

Credit loss expense

 

 

142

 

 

 

922

 

Income tax expense on exclusions from net income

 

 

1,683

 

 

 

122

 

Non-GAAP operating income (loss)

 

$

13,746

 

 

$

(12,796

)

 

 

 

 

 

 

 

Net income per diluted share

 

$

1.36

 

 

$

(0.84

)

Exclusions from net income:

 

 

 

 

 

 

Net realized gains on investments

 

 

(0.03

)

 

 

(0.05

)

Change in net unrealized gains on equity securities

 

 

(0.52

)

 

 

(0.05

)

Credit loss (benefit) expense

 

 

0.01

 

 

 

0.06

 

Income tax expense on exclusions from net income

 

 

0.11

 

 

 

0.01

 

Non-GAAP operating income (loss) per diluted share

 

$

0.93

 

 

$

(0.87

)

Safety Insurance Group, Inc. and Subsidiaries Additional Premium Information (Unaudited) (Dollars in thousands)

 

 

 

 

 

 

 

 

 

Three Months Ended March 31,

 

 

2024

 

2023

Written Premiums

 

 

 

 

 

 

Direct

 

$

267,339

 

 

$

217,852

 

Assumed

 

 

9,438

 

 

 

7,230

 

Ceded

 

 

(26,482

)

 

 

(22,198

)

Net written premiums

 

$

250,295

 

 

$

202,884

 

 

 

 

 

 

 

 

Earned Premiums

 

 

 

 

 

 

Direct

 

$

251,884

 

 

$

205,555

 

Assumed

 

 

8,968

 

 

 

7,913

 

Ceded

 

 

(24,799

)

 

 

(21,733

)

Net earned premiums

 

$

236,053

 

 

$

191,735

 

 

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Safety Insurance Group, Inc. Office of Investor Relations 877-951-2522 InvestorRelations@SafetyInsurance.com