SAFT Safety Insurance Group Inc

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

George M. Murphy, Chairman of the Board of Directors, President and Chief Executive Officer, commented: “We are seeing the financial impact of both ongoing rate increases and growth in policy counts with net earned premium increasing by 22.1% for the second quarter of 2024 compared to 2023. However, the growth in policy counts combined with ongoing inflationary trends in the Private Passenger Automobile book of business has resulted in an increase in current year loss experience compared to second quarter of 2023.”

“For the quarter ended June 30, 2024, our combined ratio is 99.9% which is favorably impacted by a transaction related to the Massachusetts Property Insurance Underwriting Association as discussed below. The restructuring of the Association resulted in favorable prior year development and reduced loss and loss adjustment expenses by $9.7 million. The Company continues to see strong results across all revenue lines and increased profitability in our insurance agency operations.”

Net income for the quarter ended June 30, 2024 was $16.6 million, or $1.13 per diluted share, compared to net income of $17.0 million, or $1.15 per diluted share, for the comparable 2023 period. Net income for the six months ended June 30, 2024 was $36.7 million, or $2.48 per diluted share, compared to net income of $4.7 million, or $0.31 per diluted share, for the comparable 2023 period. Non-generally accepted accounting principles (“non-GAAP”) operating income, as defined below, for the quarter ended June 30, 2024 was $1.18 per diluted share, compared to $0.80 per diluted share, for the comparable 2023 period. Non-GAAP operating income for the six months ended June 30, 2024 was $2.09 per diluted share, compared to Non-GAAP operating loss of $0.07 per diluted share, for the comparable 2023 period.

Safety’s book value per share increased to $54.61 at June 30, 2024 from $54.37 at December 31, 2023 resulting from net income offset by dividends paid. Safety paid $0.90 per share in dividends to investors during the quarters ended June 30, 2024 and 2023. Safety paid $3.60 per share in dividends to investors during the year ended December 31, 2023.

Today, our Board of Directors approved a $0.90 per share quarterly cash dividend on our issued and outstanding common stock payable on September 13, 2024 to shareholders of record at the close of business on September 3, 2024.

Direct written premiums for the quarter ended June 30, 2024 increased by $55.3 million, or 21.3%, to $315.5 million from $260.2 million for the comparable 2023 period. Direct written premiums for the six months ended June 30, 2024 increased by $104.9 million, or 21.9% to $582.9 million from $478.0 million for the comparable 2023 period. Net written premiums for the quarter ended June 30, 2024 increased by $49.9 million, or 20.4%, to $294.9 million from $245.0 million for the comparable 2023 period. Net written premiums for the six months ended June 30, 2024 increased by $97.4 million, or 21.7%, to $545.3 million from $447.9 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 six months ended June 30, 2024, the Company achieved exposure count growth across all lines of business, including 11.9%, 4.9% and 10.3% in Private Passenger Automobile, Commercial Automobile and Homeowners lines, respectively, compared to the same period in 2023. Additionally, for the six months ended June 30, 2024, average written premium per exposure increased 12.4%, 8.5% and 8.8% in Private Passenger Automobile, Commercial Automobile and Homeowners lines, respectively, compared to the same period in 2023.

Net earned premiums for the quarter ended June 30, 2024 increased by $44.7 million, or 22.1%, to $246.9 million from $202.2 million for the comparable 2023 period. Net earned premiums for the six months ended June 30, 2024 increased by $89.0 million, or 22.6%, to $483.0 million from $394.0 million for the comparable 2023 period.

For the quarter ended June 30, 2024, losses and loss adjustment expenses incurred increased by $29.2 million, or 20.4%, to $172.7 million from $143.5 million for the comparable 2023 period. For the six months ended June 30, 2024, losses and loss adjustment expenses incurred increased by $30.4 million, or 9.8%, to $341.1 million from $310.7 million for the comparable 2023 period. The increase in losses is driven by our larger policy counts and current market conditions, specifically inflationary impacts on our Private Passenger Automobile book of business, offset by a transaction related to the Massachusetts Property Insurance Underwriting Association (“FAIR Plan”).

Since 1998, the Company has been a member company of the FAIR Plan. The FAIR Plan is a residual market insurance association in which all companies writing basic property insurance in the Commonwealth of Massachusetts are required to participate with profits and losses shared among member companies on a written premium basis. On April 1, 2024, the Massachusetts Division of Insurance approved a restructuring of the FAIR Plan transforming it from a partnership that shares profits and losses with member companies to a stand-alone, risk bearing entity, and distributing the accumulated members’ equity.

The Company carried a net asset of $13.3 million as of June 30, 2024, representing its estimated share of members’ equity based on the estimated profitability of the FAIR Plan. As an element of the restructuring, the FAIR Plan calculated each member company’s equity balance and notified the Company that our net asset balance was $23.0 million as of June 30, 2024. As a result, the Company recognized an increase in our asset and an underwriting gain of $9.7 million through the release of prior year loss reserves (“FAIR Plan Development”). Additionally, the restructuring required the Company to establish assets as of June 30, 2024, including an investment in FAIR Plan Trust of $14.9 million and a receivable of $8.0 million, of which $6.4 million was paid on July 2, 2024. The remaining receivable is expected to be paid by November 1, 2024. Going forward, the Company’s Investment in FAIR Plan Trust will be adjusted to its current fair value on a quarterly basis with changes recognized through earnings.

Loss, expense, and combined ratios calculated for the quarter ended June 30, 2024, were 70.0%, 29.9%, and 99.9%, respectively, compared to 71.0%, 30.9%, and 101.9%, respectively, for the comparable 2023 period. The decrease in the expense ratio is primarily driven by the increase in earned premiums and a decrease in contingent commission expenses. Loss, expense, and combined ratios calculated for the six months ended June 30, 2024 were 70.6%, 30.3%, and 100.9%, respectively, compared to 78.9%, 31.1%, and 110.0%, respectively, for the comparable 2023 period. The prior year loss ratio was impacted by a severe weather event, totaling $32.1 million of losses.

Total prior year favorable development included in the pre-tax results for the quarter ended June 30, 2024 was $19.4 million compared to $10.0 million for the comparable 2023 period. Total prior year favorable development included pre-tax results for the six months ended June 30, 2024 was $30.4 million compared to $21.5 million for the comparable 2023 period. The increase in 2024 is related to the FAIR Plan Development noted above.

Net investment income for the quarter ended June 30, 2024 decreased by $0.3 million, or 2.4% to $13.5 million from $13.8 million for the comparable 2023 period. The decrease is due to the timing of interest and cash payments from our variable rate secured and senior bank loans and high yield bonds. Net investment income for the six months ended June 30, 2024 increased by $1.2 million, or 4.5%, to $28.7 million from $27.5 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 investment portfolio was 3.9% for the quarters ended June 30, 2024 and 2023. Net effective annualized yield on the investment portfolio for the six months ended June 30, 2024 was 4.1% compared to 3.9% for the comparable 2023 period. The investment portfolio’s duration on fixed maturities was 3.5 years at June 30, 2024 compared to 3.6 years at December 31, 2023.

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 three months ended June 30, 2024, a decrease of $3.5 million for the change in unrealized gains on equity securities was recognized within income before income taxes, compared to an increase of $6.3 million recognized in the comparable 2023 period. For the six months ended June 30, 2024, an increase of $4.2 million for the change in unrealized gains on equity securities was recognized in income before income taxes, compared to $7.0 million recognized 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. 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; 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, 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)

 

 

 

June 30,

 

December 31,

 

 

2024

 

2023

 

 

(Unaudited)

 

 

 

Assets

 

 

 

 

 

 

Investments:

 

 

 

 

 

 

Fixed maturities, available for sale, at fair value (amortized cost: $1,120,235 and $1,120,682, allowance for expected credit losses of $1,387 and $1,208)

 

$

1,043,097

 

 

$

1,052,145

 

Equity securities, at fair value (cost: $196,039 and $221,809)

 

 

216,434

 

 

 

238,022

 

Other invested assets

 

 

154,195

 

 

 

133,946

 

Total investments

 

 

1,413,726

 

 

 

1,424,113

 

Cash and cash equivalents

 

 

44,579

 

 

 

38,152

 

Accounts receivable, net of allowance for expected credit losses of $939 and $1,053

 

 

312,361

 

 

 

256,687

 

Receivable for securities sold

 

 

2,908

 

 

 

124

 

Accrued investment income

 

 

7,281

 

 

 

7,261

 

Taxes recoverable

 

 

2,233

 

 

 

623

 

Receivable from reinsurers related to paid loss and loss adjustment expenses

 

 

27,187

 

 

 

13,129

 

Receivable from reinsurers related to unpaid loss and loss adjustment expenses

 

 

126,747

 

 

 

112,623

 

Ceded unearned premiums

 

 

35,969

 

 

 

32,346

 

Deferred policy acquisition costs

 

 

100,599

 

 

 

91,917

 

Deferred income taxes

 

 

14,328

 

 

 

12,150

 

Equity and deposits in pools

 

 

6,947

 

 

 

35,247

 

Operating lease right-of-use-assets

 

 

17,966

 

 

 

19,756

 

Goodwill

 

 

17,093

 

 

 

17,093

 

Intangible assets

 

 

7,130

 

 

 

7,551

 

Other assets

 

 

24,863

 

 

 

25,232

 

Total assets

 

$

2,161,917

 

 

$

2,094,004

 

 

 

 

 

 

 

 

Liabilities

 

 

 

 

 

 

Loss and loss adjustment expense reserves

 

$

621,637

 

 

$

603,081

 

Unearned premium reserves

 

 

586,577

 

 

 

528,150

 

Accounts payable and accrued liabilities

 

 

68,301

 

 

 

64,235

 

Payable for securities purchased

 

 

11,521

 

 

 

1,863

 

Payable to reinsurers

 

 

15,736

 

 

 

15,941

 

Short-term debt

 

 

30,000

 

 

 

—

 

Long-term debt

 

 

—

 

 

 

30,000

 

Operating lease liabilities

 

 

17,966

 

 

 

19,756

 

Other liabilities

 

 

—

 

 

 

26,711

 

Total liabilities

 

 

1,351,738

 

 

 

1,289,737

 

 

 

 

 

 

 

 

Shareholders’ equity

 

 

 

 

 

 

Common stock: $0.01 par value; 30,000,000 shares authorized; 17,993,947 and 17,949,484 shares issued

 

 

180

 

 

 

179

 

Additional paid-in capital

 

 

228,817

 

 

 

226,380

 

Accumulated other comprehensive loss, net of taxes

 

 

(59,843

)

 

 

(53,191

)

Retained earnings

 

 

791,318

 

 

 

781,192

 

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

 

 

(150,293

)

 

 

(150,293

)

Total shareholders’ equity

 

 

810,179

 

 

 

804,267

 

Total liabilities and shareholders’ equity

 

$

2,161,917

 

 

$

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 June 30,

 

Six Months Ended June 30,

 

 

2024

 

2023

 

2024

 

2023

 

 

 

 

 

 

 

 

 

 

 

 

 

Net earned premiums

 

$

246,944

 

 

$

202,225

 

 

$

482,997

 

 

$

393,960

 

Net investment income

 

 

13,500

 

 

 

13,836

 

 

 

28,731

 

 

 

27,490

 

Earnings from partnership investments

 

 

2,480

 

 

 

553

 

 

 

4,252

 

 

 

2,719

 

Net realized gains on investments

 

 

2,715

 

 

 

108

 

 

 

3,207

 

 

 

841

 

Change in net unrealized gains on equity securities

 

 

(3,483

)

 

 

6,266

 

 

 

4,182

 

 

 

7,036

 

Credit loss expense

 

 

(37

)

 

 

(35

)

 

 

(179

)

 

 

(957

)

Commission income

 

 

2,027

 

 

 

1,758

 

 

 

3,835

 

 

 

3,241

 

Finance and other service income

 

 

5,637

 

 

 

4,732

 

 

 

10,991

 

 

 

8,872

 

Total revenue

 

 

269,783

 

 

 

229,443

 

 

 

538,016

 

 

 

443,202

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Losses and loss adjustment expenses

 

 

172,742

 

 

 

143,523

 

 

 

341,141

 

 

 

310,676

 

Underwriting, operating and related expenses

 

 

73,921

 

 

 

62,582

 

 

 

146,188

 

 

 

122,615

 

Other expense

 

 

1,747

 

 

 

1,523

 

 

 

3,584

 

 

 

3,193

 

Interest expense

 

 

138

 

 

 

348

 

 

 

261

 

 

 

558

 

Total expenses

 

 

248,548

 

 

 

207,976

 

 

 

491,174

 

 

 

437,042

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Income before income taxes

 

 

21,235

 

 

 

21,467

 

 

 

46,842

 

 

 

6,160

 

Income tax expense

 

 

4,599

 

 

 

4,466

 

 

 

10,128

 

 

 

1,496

 

Net income

 

$

16,636

 

 

$

17,001

 

 

$

36,714

 

 

$

4,664

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Earnings per weighted average common share:

 

 

 

 

 

 

 

 

 

 

 

 

Basic

 

$

1.13

 

 

$

1.15

 

 

$

2.49

 

 

$

0.32

 

Diluted

 

$

1.13

 

 

$

1.15

 

 

$

2.48

 

 

$

0.31

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Cash dividends paid per common share

 

$

0.90

 

 

$

0.90

 

 

$

1.80

 

 

$

1.80

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Number of shares used in computing earnings per share:

 

 

 

 

 

 

 

 

 

 

 

 

Basic

 

 

14,698,770

 

 

 

14,681,034

 

 

 

14,682,937

 

 

 

14,681,766

 

Diluted

 

 

14,722,209

 

 

 

14,720,520

 

 

 

14,709,398

 

 

 

14,741,076

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

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

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Net income

 

$

16,636

 

 

$

17,001

 

 

$

36,714

 

 

$

4,664

 

Exclusions from net income:

 

 

 

 

 

 

 

 

 

 

 

 

Net realized gains on investments

 

 

(2,715

)

 

 

(108

)

 

 

(3,207

)

 

 

(841

)

Change in net unrealized gains on equity securities

 

 

3,483

 

 

 

(6,266

)

 

 

(4,182

)

 

 

(7,036

)

Credit loss expense

 

 

37

 

 

 

35

 

 

 

179

 

 

 

957

 

Income tax (benefit) expense on exclusions from net income

 

 

(169

)

 

 

1,331

 

 

 

1,514

 

 

 

1,453

 

Non-GAAP operating income (loss)

 

$

17,272

 

 

$

11,993

 

 

$

31,018

 

 

$

(803

)

 

 

 

 

 

 

 

 

 

 

 

 

 

Net income per diluted share

 

$

1.13

 

 

$

1.15

 

 

$

2.48

 

 

$

0.31

 

Exclusions from net income:

 

 

 

 

 

 

 

 

 

 

 

 

Net realized gains on investments

 

 

(0.18

)

 

 

(0.01

)

 

 

(0.22

)

 

 

(0.06

)

Change in net unrealized gains on equity securities

 

 

0.24

 

 

 

(0.43

)

 

 

(0.28

)

 

 

(0.48

)

Credit loss expense

 

 

-

 

 

 

-

 

 

 

0.01

 

 

 

0.06

 

Income tax (benefit) expense on exclusions from net income

 

 

(0.01

)

 

 

0.09

 

 

 

0.10

 

 

 

0.10

 

Non-GAAP operating income (loss) per diluted share

 

$

1.18

 

 

$

0.80

 

 

$

2.09

 

 

$

(0.07

)

 

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

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Three Months Ended June 30,

 

 

Six Months Ended June 30,

 

 

2024

 

2023

 

2024

 

2023

Written Premiums

 

 

 

 

 

 

 

 

 

 

 

 

Direct

 

$

315,511

 

 

$

260,157

 

 

$

582,850

 

 

$

478,009

 

Assumed

 

 

8,325

 

 

 

8,528

 

 

 

17,763

 

 

 

15,758

 

Ceded

 

 

(28,901

)

 

 

(23,716

)

 

 

(55,383

)

 

 

(45,914

)

Net written premiums

 

$

294,935

 

 

$

244,969

 

 

$

545,230

 

 

$

447,853

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Earned Premiums

 

 

 

 

 

 

 

 

 

 

 

 

Direct

 

$

265,908

 

 

$

217,281

 

 

$

517,792

 

 

$

422,836

 

Assumed

 

 

7,997

 

 

 

7,605

 

 

 

16,965

 

 

 

15,518

 

Ceded

 

 

(26,961

)

 

 

(22,661

)

 

 

(51,760

)

 

 

(44,394

)

Net earned premiums

 

$

246,944

 

 

$

202,225

 

 

$

482,997

 

 

$

393,960

 

 

View source version on businesswire.com: https://www.businesswire.com/news/home/20240807667232/en/

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