Safety Insurance Group, Inc. (NASDAQ:SAFT) (“Safety” or the
“Company”) today reported third quarter 2023 results.
George M. Murphy, President and Chief Executive Officer,
commented: “The third quarter financial results continue to be
impacted by the inflationary pressures on our Private Passenger
Automobile book of business. Safety’s third quarter combined ratio
of 104.8% also includes an increased amount of Private Passenger
Automobile losses resulting from multiple flooding events and a
wind event that impacted our Homeowners book of business. We
continue to see strong growth in our Net Written Premiums which
increased by 22.2% and 19.2% for the three and nine months ended
September 30, 2023, respectively. This is driven by an increase in
policy counts of 11.5% and an increase in average written premium
per policy of 7.6%.”
“We continue to file rate increases to combat the ongoing
industry wide loss and severity trends in the private passenger
automobile business. We have also been approved for increases
across all other lines of business. Safety remains committed to
maintaining underwriting discipline, while leveraging investments
in our pricing and risk management areas to ensure rate
adequacy.”
Net income for the quarter ended September 30, 2023 was $1.9
million, or $0.13 per diluted share, compared to net income of $6.2
million, or $0.42 per diluted share, for the comparable 2022
period. Net income for the nine months ended September 30, 2023 was
$6.6 million, or $0.45 per diluted share, compared to net income of
$21.9 million, or $1.48 per diluted share, for the comparable 2022
period. Non-generally accepted accounting principles (“non-GAAP”)
operating income, as defined below, for the quarter ended September
30, 2023 was $0.59 per diluted share, compared to $1.13 per diluted
share, for the comparable 2022 period. Non-GAAP operating income
for the nine months ended September 30, 2023 was $0.54 per diluted
share, compared to Non-GAAP operating income of $4.05 per diluted
share, for the comparable 2022 period.
Safety’s book value per share decreased to $52.04 at September
30, 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 nine months ended September 30,
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 September 30, 2023 and 2022,
respectively. Safety paid $3.60 per share in dividends to investors
during the year ended December 31, 2022.
Today, our Board of Directors approved a $0.90 per share
quarterly cash dividend on our issued and outstanding common stock
payable on December 15, 2023 to shareholders of record at the close
of business on December 1, 2023.
Direct written premiums for the quarter ended September 30, 2023
increased by $49.2 million, or 22.6%, to $267.1 million from $217.9
million for the comparable 2022 period. Direct written premiums for
the nine months ended September 30, 2023 increased by $123.2
million, or 19.8% to $745.1 million from $621.9 million for the
comparable 2022 period. Net written premiums for the quarter ended
September 30, 2023 increased by $45.6 million, or 22.2%, to $251.1
million from $205.5 million for the comparable 2022 period. Net
written premiums for the year ended September 30, 2023 increased by
$112.7 million, or 19.2%, to $698.9 million from $586.2 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 nine
months ended September 30, 2023, the Company achieved policy count
growth across all lines of business, including 14.1%, 5.9% and 9.7%
in Private Passenger Automobile, Commercial Automobile and
Homeowners lines, respectively, compared to the same period in
2022. Additionally, for the nine months ended September 30, 2023,
average written premium per policy increased 10.7%, 4.5% 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 September 30, 2023
increased by $24.5 million, or 12.9%, to $214.4 million from $189.9
million for the comparable 2022 period. Net earned premiums for the
nine months ended September 30, 2023 increased by $43.0 million, or
7.6%, to $608.4 million from $565.4 million for the comparable 2022
period.
For the quarter ended September 30, 2023, losses and loss
adjustment expenses incurred increased by $35.4 million, or 28.6%,
to $159.5 million from $124.1 million for the comparable 2022
period. For the nine months ended September 30, 2023, losses and
loss adjustment expenses incurred increased by $110.2 million, or
30.6%, to $470.2 million from $360.0 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, and a severe
winter weather event that occurred in February.
Loss, expense, and combined ratios calculated for the quarter
ended September 30, 2023, were 74.4%, 30.4%, and 104.8%,
respectively, compared to 65.3%, 31.8%, and 97.1%, respectively,
for the comparable 2022 period. Loss, expense, and combined ratios
calculated for the nine months ended September 30, 2023 were 77.3%,
30.9%, and 108.2%, respectively, compared to 63.7%, 32.3%, and
96.0%, 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 September 30, 2023 was $13.5 million
compared to $14.0 million for the comparable 2022 period. Total
prior year favorable development included pre-tax results for the
nine months ended September 30, 2023 was $35.0 million compared to
$43.2 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 September 30, 2023
increased by $2.9 million, or 26.0% to $14.0 million from $11.1
million for the comparable 2022 period. Net investment income for
the nine months ended September 30, 2023 increased by $8.2 million,
or 24.5%, to $41.5 million from $33.3 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 4.0%
for the quarter ended September 30, 2023 compared to 3.1% for the
comparable 2022 period. Net effective annualized yield on the
investment portfolio for the nine months ended September 30, 2023
was 3.9% compared to 3.0% for the comparable 2022 period. Our
duration on fixed maturities was 3.6 years at September 30, 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 three months ended September 30, 2023, a decrease
of $9.2 million for the change in unrealized gains on equity
securities was recognized within income before income taxes,
compared to a decrease of $14.4 million recognized in the
comparable 2022 period. For the nine months ended September 30,
2023, a decrease of $2.1 million for the change in unrealized gains
on equity securities was recognized in income before income taxes,
compared to a decrease of $56.3 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)
September 30,
December 31,
2023
2022
(Unaudited)
Assets
Investments:
Fixed maturities, available for sale, at
fair value (amortized cost: $1,117,352 and $1,152,779, allowance
for expected credit losses of $1,231 and $678)
$
1,005,225
$
1,050,155
Equity securities, at fair value (cost:
$216,589 and $231,444)
223,152
240,155
Other invested assets
129,739
112,850
Total investments
1,358,116
1,403,160
Cash and cash equivalents
30,894
25,300
Accounts receivable, net of allowance for
expected credit losses of $867 and $1,446
258,267
192,542
Receivable for securities sold
845
877
Accrued investment income
7,688
8,212
Taxes recoverable
7,286
—
Receivable from reinsurers related to paid
loss and loss adjustment expenses
30,006
12,988
Receivable from reinsurers related to
unpaid loss and loss adjustment expenses
106,708
93,394
Ceded unearned premiums
29,819
28,453
Deferred policy acquisition costs
91,613
75,582
Deferred income taxes
21,307
21,074
Equity and deposits in pools
37,096
33,648
Operating lease right-of-use-assets
20,586
23,336
Goodwill
17,093
17,093
Intangible assets
7,242
7,856
Other assets
27,539
29,054
Total assets
$
2,052,105
$
1,972,569
Liabilities
Loss and loss adjustment expense
reserves
$
584,175
$
549,598
Unearned premium reserves
525,297
433,375
Accounts payable and accrued
liabilities
61,757
73,875
Payable for securities purchased
2,059
1,359
Payable to reinsurers
24,526
11,444
Taxes payable
—
1,729
Debt
30,000
35,000
Operating lease liabilities
20,586
23,336
Other liabilities
33,956
30,854
Total liabilities
1,282,356
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
225,301
222,049
Accumulated other comprehensive (loss)
income, net of taxes
(87,607)
(80,538)
Retained earnings
782,169
815,309
Treasury stock, at cost: 3,157,577 and
3,083,364 shares
(150,293)
(145,000)
Total shareholders’ equity
769,749
811,999
Total liabilities and shareholders’
equity
$
2,052,105
$
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 September
30,
Nine Months Ended September
30,
2023
2022
2023
2022
Net earned premiums
$
214,425
$
189,931
$
608,385
$
565,352
Net investment income
14,005
11,112
41,495
33,337
Earnings from partnership investments
2,427
876
5,146
9,675
Net realized gains on investments
270
1,251
1,111
8,613
Change in net unrealized gains on equity
securities
(9,184)
(14,364)
(2,148)
(56,283)
Credit loss expense
403
(207)
(554)
(207)
Commission income
1,918
—
5,159
—
Finance and other service income
5,094
3,749
13,966
10,469
Total revenue
229,358
192,348
672,560
570,956
Losses and loss adjustment expenses
159,521
124,069
470,197
359,950
Underwriting, operating and related
expenses
65,217
60,373
187,832
182,839
Other expense
2,005
—
5,198
—
Interest expense
139
132
697
392
Total expenses
226,882
184,574
663,924
543,181
Income before income taxes
2,476
7,774
8,636
27,775
Income tax expense
527
1,582
2,023
5,844
Net income
$
1,949
$
6,192
$
6,613
$
21,931
Earnings per weighted average common
share:
Basic
$
0.13
$
0.42
$
0.45
$
1.49
Diluted
$
0.13
$
0.42
$
0.45
$
1.48
Cash dividends paid per common
share
$
0.90
$
0.90
$
2.70
$
2.70
Number of shares used in computing
earnings per share:
Basic
14,645,988
14,599,136
14,669,709
14,608,591
Diluted
14,682,082
14,711,737
14,721,063
14,713,552
Reconciliation of Net Income to
Non-GAAP Operating Income
Net income
$
1,949
$
6,192
$
6,613
$
21,931
Exclusions from net income:
Net realized gains on investments
(270)
(1,251)
(1,111)
(8,613)
Change in net unrealized gains on equity
securities
9,184
14,364
2,148
56,283
Credit loss expense
(403)
207
554
207
Income tax expense on exclusions from net
income
(1,787)
(2,797)
(334)
(10,054)
Non-GAAP operating income
$
8,673
$
16,715
$
7,870
$
59,754
Net income per diluted share
$
0.13
$
0.42
$
0.45
$
1.48
Exclusions from net income:
Net realized gains on investments
(0.02)
(0.09)
(0.08)
(0.59)
Change in net unrealized gains on equity
securities
0.63
0.98
0.15
3.83
Credit loss expense
(0.03)
0.01
0.04
0.01
Income tax expense on exclusions from net
income
(0.12)
(0.19)
(0.02)
(0.68)
Non-GAAP operating income per diluted
share
$
0.59
$
1.13
$
0.54
$
4.05
Safety Insurance Group, Inc.
and Subsidiaries
Additional Premium
Information
(Unaudited)
(Dollars in thousands)
Three Months Ended September
30,
Nine Months Ended September
30,
2023
2022
2023
2022
Written Premiums
Direct
$
267,124
$
217,878
$
745,133
$
621,947
Assumed
7,472
6,460
23,230
21,168
Ceded
(23,509)
(18,910)
(69,423)
(56,911)
Net written premiums
$
251,087
$
205,428
$
698,940
$
586,204
Earned Premiums
Direct
$
231,249
$
202,190
$
654,085
$
597,662
Assumed
6,839
6,497
22,357
21,835
Ceded
(23,663)
(18,756)
(68,057)
(54,145)
Net earned premiums
$
214,425
$
189,931
$
608,385
$
565,352
View source
version on businesswire.com: https://www.businesswire.com/news/home/20231101473067/en/
Safety Insurance Group, Inc. Office of Investor Relations
877-951-2522 InvestorRelations@SafetyInsurance.com
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