Recent Quotes View Full List My Watchlist Create Watchlist Indicators DJI Nasdaq Composite SPX Gold Crude Oil EL&P Market Index Markets Stocks ETFs Tools Overview News Currencies International Treasuries Safety Insurance Group, Inc. Announces Third Quarter 2022 Results and Declares Fourth Quarter 2022 Dividend By: Safety Insurance Group, Inc. via Business Wire November 02, 2022 at 16:05 PM EDT Safety Insurance Group, Inc. (NASDAQ:SAFT) (“Safety” or the “Company”) today reported third quarter 2022 results. George M. Murphy, President and Chief Executive Officer, commented: “The industry continues to experience strong headwinds as operating results are adversely impacted by inflationary trends and rising interest rates that negatively impact our investment portfolio. For the quarter ending September 30, 2022, we have posted a combined ratio of 97.1%, which demonstrates our strong underwriting discipline and focus on expense management. Also, shortly after quarter end, we were pleased to announce a letter of intent to acquire Northeast Insurance Agency, Inc. This acquisition is an exciting opportunity to strengthen our position within the independent agency channel while positioning us for future prosperity.” Net income for the quarter ended September 30, 2022 was $6.2 million, or $0.42 per diluted share, compared to net income of $24.8 million, or $1.64 per diluted share, for the comparable 2021 period. Net income for the nine months ended September 30, 2022 was $21.9 million, or $1.48 per diluted share, compared to net income of $98.7 million, or $6.58 per diluted share, for the comparable 2021 period. The decrease is largely due to the change in net unrealized gains on equity securities of $14.4 million and $56.3 million for the three and nine months ended September 30, 2022, respectively. Non-generally accepted accounting principles (“non-GAAP”) operating income, as defined below, for the quarter ended September 30, 2022 was $1.13 per diluted share, compared to $1.70 per diluted share, for the comparable 2021 period. Non-GAAP operating income for the nine months ended September 30, 2022 was $4.05 per diluted share, compared to $5.51 per diluted share, for the comparable 2021 period. Safety’s book value per share decreased to $53.21 at September 30, 2022 from $62.47 at December 31, 2021 resulting from the impact of interest rate changes on the value of our fixed maturity portfolio of $115.0 million. Additional decreases in book value resulted from capital allocation activities, specifically dividends paid, and shares repurchased during the first quarter of 2022. Safety paid $0.90 per share in dividends to investors during the quarters ended September 30, 2022 and 2021, respectively. Safety paid $3.60 per share in dividends to investors during the year ended December 31, 2021. Today, our Board of Directors approved a $0.90 per share quarterly cash dividend on its issued and outstanding common stock payable on December 15, 2022 to shareholders of record at the close of business on December 1, 2022. Direct written premiums for the quarter ended September 30, 2022 increased by $6.8 million, or 3.2%, to $217.9 million from $211.1 million for the comparable 2021 period. Direct written premiums for the nine months ended September 30, 2022 increased by $1.3 million, or 0.2% to $621.9 million from $620.6 million for the comparable 2021 period. The increase is primarily in our commercial automobile and homeowner businesses. For the quarter ended September 30, 2022, losses and loss adjustment expenses incurred increased by $5.0 million, or 4.1%, to $124.1 million from $119.1 million for the comparable 2021 period. For the nine months ended September 30, 2022, losses and loss adjustment expenses incurred increased by $19.2 million, or 5.6%, to $360.0 million from $340.8 million for the comparable 2021 period. The increase in losses is due to a return of pre-pandemic frequency in our private passenger automobile line of business and current market conditions including inflation and supply chain delays. Loss, expense, and combined ratios calculated for the quarter ended September 30, 2022 were 65.3%, 31.8%, and 97.1%, respectively, compared to 61.3%, 32.6%, and 93.9%, respectively, for the comparable 2021 period. Loss, expense, and combined ratios calculated for the nine months ended September 30, 2022 were 63.7%, 32.3%, and 96.0%, respectively, compared to 58.6%, 33.3%, and 91.9%, respectively, for the comparable 2021 period. The decrease in the expense ratio is 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, 2022 was $13.9 million compared to $15.4 million for the comparable 2021 period. Total prior year favorable development included in the pre-tax results for the nine months ended September 30, 2022 was $43.2 million compared to $41.2 million for the comparable 2021 period. Net investment income for the quarter ended September 30, 2022 was consistent at $11.1 million with the comparable 2021 period. Net investment income for the nine months ended September 30, 2022 increased by $0.9 million, or 2.8%, to $33.3 million from $32.4 million for the comparable 2021 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 3.1% for the quarter ended September 30, 2022 compared to 3.0% for the comparable 2021 period. Net effective annualized yield on the investment portfolio for the nine months ended September 30, 2022 and 2021, respectively, was 3.0%. Our duration on fixed maturities was 3.6 years at September 30, 2022 and December 31, 2021. 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 (losses) on investments, change in net unrealized gains on equity securities, credit loss benefit (expense) and taxes related thereto. For the three months September 30, 2022, a decrease of $14.4 million for the change in unrealized losses on equity securities was recognized within income before income taxes, compared to a decrease of $3.4 million recognized in the comparable 2021 period. For the nine months ended September 30, 2022, a decrease of $56.3 million for the change in unrealized gains on equity securities was recognized in income before income taxes, compared to an increase of $11.4 million recognized in the comparable 2021 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, and Safety Northeast 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, 2021 Form 10-K with the SEC on February 28, 2022 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, 2021 filed with the SEC on February 28, 2022. 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, 2022 2021 (Unaudited) Assets Investments: Fixed maturities, available for sale, at fair value (amortized cost: $1,154,503 and $1,187,857, allowance for expected credit losses of $898 and $691) $ 1,039,102 $ 1,218,279 Equity securities, at fair value (cost: $229,153 and $211,848) 225,967 264,945 Other invested assets 107,070 87,911 Total investments 1,372,139 1,571,135 Cash and cash equivalents 33,635 63,603 Accounts receivable, net of allowance for expected credit losses of $1,589 and $1,808 187,973 170,953 Receivable for securities sold 3,289 9,256 Accrued investment income 8,371 7,401 Taxes recoverable 17,550 1,508 Receivable from reinsurers related to paid loss and loss adjustment expenses 18,316 18,234 Receivable from reinsurers related to unpaid loss and loss adjustment expenses 92,026 90,667 Ceded unearned premiums 26,560 23,795 Deferred policy acquisition costs 76,662 73,024 Deferred income taxes 11,315 — Equity and deposits in pools 36,350 33,592 Operating lease right-of-use-assets 24,183 27,115 Other assets 25,784 27,108 Total assets $ 1,934,153 $ 2,117,391 Liabilities Loss and loss adjustment expense reserves $ 545,412 $ 570,651 Unearned premium reserves 437,104 413,487 Accounts payable and accrued liabilities 59,293 76,598 Payable for securities purchased 3,115 16,477 Payable to reinsurers 22,623 9,192 Deferred income taxes — 15,240 Debt 30,000 30,000 Operating lease liabilities 24,183 27,115 Other liabilities 28,058 31,458 Total liabilities 1,149,788 1,190,218 Shareholders’ equity Common stock: $0.01 par value; 30,000,000 shares authorized; 17,879,095 and 17,813,370 shares issued 179 178 Additional paid-in capital 220,755 216,070 Accumulated other comprehensive (loss) income, net of taxes (90,457) 24,579 Retained earnings 803,888 821,743 Treasury stock, at cost: 3,141,477 and 2,970,573 shares (150,000) (135,397) Total shareholders’ equity 784,365 927,173 Total liabilities and shareholders’ equity $ 1,934,153 $ 2,117,391 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, 2022 2021 2022 2021 Net earned premiums $ 189,931 $ 194,395 $ 565,352 $ 581,542 Net investment income 11,112 11,112 33,337 32,418 Earnings from partnership investments 876 5,720 9,675 12,625 Net realized gains on investments 1,251 2,226 8,613 8,507 Change in net unrealized (losses) gains on equity securities (14,364) (3,447) (56,283) 11,414 Credit loss (expense) benefit (207) (49) (207) 325 Finance and other service income 3,749 3,751 10,469 11,660 Total revenue 192,348 213,708 570,956 658,491 Losses and loss adjustment expenses 124,069 119,129 359,950 340,785 Underwriting, operating and related expenses 60,373 63,291 182,839 193,404 Interest expense 132 131 392 390 Total expenses 184,574 182,551 543,181 534,579 Income before income taxes 7,774 31,157 27,775 123,912 Income tax expense 1,582 6,337 5,844 25,251 Net income $ 6,192 $ 24,820 $ 21,931 $ 98,661 Earnings per weighted average common share: Basic $ 0.42 $ 1.65 $ 1.49 $ 6.63 Diluted $ 0.42 $ 1.64 $ 1.48 $ 6.58 Cash dividends paid per common share $ 0.90 $ 0.90 $ 2.70 $ 2.70 Number of shares used in computing earnings per share: Basic 14,599,136 14,982,405 14,608,591 14,826,515 Diluted 14,711,737 15,080,029 14,713,552 14,922,870 Reconciliation of Net Income to Non-GAAP Operating Income Net income $ 6,192 $ 24,820 $ 21,931 $ 98,661 Exclusions from net income: Net realized gains on investments (1,251) (2,226) (8,613) (8,507) Change in net unrealized gains on equity securities 14,364 3,447 56,283 (11,414) Credit loss (benefit) expense 207 49 207 (325) Income tax expense on exclusions from net income (2,797) (267) (10,054) 4,252 Non-GAAP operating income $ 16,715 $ 25,823 $ 59,754 $ 82,667 Net income per diluted share $ 0.42 $ 1.64 $ 1.48 $ 6.58 Exclusions from net income: Net realized gains on investments (0.09) (0.15) (0.59) (0.57) Change in net unrealized gains on equity securities 0.98 0.23 3.83 (0.76) Credit loss (benefit) expense 0.01 - 0.01 (0.02) Income tax expense on exclusions from net income (0.19) (0.02) (0.68) 0.28 Non-GAAP operating income per diluted share $ 1.13 $ 1.70 $ 4.05 $ 5.51 Safety Insurance Group, Inc. and Subsidiaries Additional Premium Information (Unaudited) (Dollars in thousands) Three Months Ended September 30, Nine Months Ended September 30, 2022 2021 2022 2021 Written Premiums Direct $ 217,878 $ 211,098 $ 621,947 $ 620,568 Assumed 6,460 7,585 21,168 23,345 Ceded (18,910) (16,079) (56,911) (50,265) Net written premiums $ 205,428 $ 202,604 $ 586,204 $ 593,648 Earned Premiums Direct $ 202,190 $ 204,429 $ 597,662 $ 608,448 Assumed 6,497 7,202 21,835 23,199 Ceded (18,756) (17,236) (54,145) (50,105) Net earned premiums $ 189,931 $ 194,395 $ 565,352 $ 581,542 View source version on businesswire.com: https://www.businesswire.com/news/home/20221102006025/en/Contacts Safety Insurance Group, Inc. 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Safety Insurance Group, Inc. Announces Third Quarter 2022 Results and Declares Fourth Quarter 2022 Dividend By: Safety Insurance Group, Inc. via Business Wire November 02, 2022 at 16:05 PM EDT Safety Insurance Group, Inc. (NASDAQ:SAFT) (“Safety” or the “Company”) today reported third quarter 2022 results. George M. Murphy, President and Chief Executive Officer, commented: “The industry continues to experience strong headwinds as operating results are adversely impacted by inflationary trends and rising interest rates that negatively impact our investment portfolio. For the quarter ending September 30, 2022, we have posted a combined ratio of 97.1%, which demonstrates our strong underwriting discipline and focus on expense management. Also, shortly after quarter end, we were pleased to announce a letter of intent to acquire Northeast Insurance Agency, Inc. This acquisition is an exciting opportunity to strengthen our position within the independent agency channel while positioning us for future prosperity.” Net income for the quarter ended September 30, 2022 was $6.2 million, or $0.42 per diluted share, compared to net income of $24.8 million, or $1.64 per diluted share, for the comparable 2021 period. Net income for the nine months ended September 30, 2022 was $21.9 million, or $1.48 per diluted share, compared to net income of $98.7 million, or $6.58 per diluted share, for the comparable 2021 period. The decrease is largely due to the change in net unrealized gains on equity securities of $14.4 million and $56.3 million for the three and nine months ended September 30, 2022, respectively. Non-generally accepted accounting principles (“non-GAAP”) operating income, as defined below, for the quarter ended September 30, 2022 was $1.13 per diluted share, compared to $1.70 per diluted share, for the comparable 2021 period. Non-GAAP operating income for the nine months ended September 30, 2022 was $4.05 per diluted share, compared to $5.51 per diluted share, for the comparable 2021 period. Safety’s book value per share decreased to $53.21 at September 30, 2022 from $62.47 at December 31, 2021 resulting from the impact of interest rate changes on the value of our fixed maturity portfolio of $115.0 million. Additional decreases in book value resulted from capital allocation activities, specifically dividends paid, and shares repurchased during the first quarter of 2022. Safety paid $0.90 per share in dividends to investors during the quarters ended September 30, 2022 and 2021, respectively. Safety paid $3.60 per share in dividends to investors during the year ended December 31, 2021. Today, our Board of Directors approved a $0.90 per share quarterly cash dividend on its issued and outstanding common stock payable on December 15, 2022 to shareholders of record at the close of business on December 1, 2022. Direct written premiums for the quarter ended September 30, 2022 increased by $6.8 million, or 3.2%, to $217.9 million from $211.1 million for the comparable 2021 period. Direct written premiums for the nine months ended September 30, 2022 increased by $1.3 million, or 0.2% to $621.9 million from $620.6 million for the comparable 2021 period. The increase is primarily in our commercial automobile and homeowner businesses. For the quarter ended September 30, 2022, losses and loss adjustment expenses incurred increased by $5.0 million, or 4.1%, to $124.1 million from $119.1 million for the comparable 2021 period. For the nine months ended September 30, 2022, losses and loss adjustment expenses incurred increased by $19.2 million, or 5.6%, to $360.0 million from $340.8 million for the comparable 2021 period. The increase in losses is due to a return of pre-pandemic frequency in our private passenger automobile line of business and current market conditions including inflation and supply chain delays. Loss, expense, and combined ratios calculated for the quarter ended September 30, 2022 were 65.3%, 31.8%, and 97.1%, respectively, compared to 61.3%, 32.6%, and 93.9%, respectively, for the comparable 2021 period. Loss, expense, and combined ratios calculated for the nine months ended September 30, 2022 were 63.7%, 32.3%, and 96.0%, respectively, compared to 58.6%, 33.3%, and 91.9%, respectively, for the comparable 2021 period. The decrease in the expense ratio is 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, 2022 was $13.9 million compared to $15.4 million for the comparable 2021 period. Total prior year favorable development included in the pre-tax results for the nine months ended September 30, 2022 was $43.2 million compared to $41.2 million for the comparable 2021 period. Net investment income for the quarter ended September 30, 2022 was consistent at $11.1 million with the comparable 2021 period. Net investment income for the nine months ended September 30, 2022 increased by $0.9 million, or 2.8%, to $33.3 million from $32.4 million for the comparable 2021 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 3.1% for the quarter ended September 30, 2022 compared to 3.0% for the comparable 2021 period. Net effective annualized yield on the investment portfolio for the nine months ended September 30, 2022 and 2021, respectively, was 3.0%. Our duration on fixed maturities was 3.6 years at September 30, 2022 and December 31, 2021. 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 (losses) on investments, change in net unrealized gains on equity securities, credit loss benefit (expense) and taxes related thereto. For the three months September 30, 2022, a decrease of $14.4 million for the change in unrealized losses on equity securities was recognized within income before income taxes, compared to a decrease of $3.4 million recognized in the comparable 2021 period. For the nine months ended September 30, 2022, a decrease of $56.3 million for the change in unrealized gains on equity securities was recognized in income before income taxes, compared to an increase of $11.4 million recognized in the comparable 2021 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, and Safety Northeast 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, 2021 Form 10-K with the SEC on February 28, 2022 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, 2021 filed with the SEC on February 28, 2022. 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, 2022 2021 (Unaudited) Assets Investments: Fixed maturities, available for sale, at fair value (amortized cost: $1,154,503 and $1,187,857, allowance for expected credit losses of $898 and $691) $ 1,039,102 $ 1,218,279 Equity securities, at fair value (cost: $229,153 and $211,848) 225,967 264,945 Other invested assets 107,070 87,911 Total investments 1,372,139 1,571,135 Cash and cash equivalents 33,635 63,603 Accounts receivable, net of allowance for expected credit losses of $1,589 and $1,808 187,973 170,953 Receivable for securities sold 3,289 9,256 Accrued investment income 8,371 7,401 Taxes recoverable 17,550 1,508 Receivable from reinsurers related to paid loss and loss adjustment expenses 18,316 18,234 Receivable from reinsurers related to unpaid loss and loss adjustment expenses 92,026 90,667 Ceded unearned premiums 26,560 23,795 Deferred policy acquisition costs 76,662 73,024 Deferred income taxes 11,315 — Equity and deposits in pools 36,350 33,592 Operating lease right-of-use-assets 24,183 27,115 Other assets 25,784 27,108 Total assets $ 1,934,153 $ 2,117,391 Liabilities Loss and loss adjustment expense reserves $ 545,412 $ 570,651 Unearned premium reserves 437,104 413,487 Accounts payable and accrued liabilities 59,293 76,598 Payable for securities purchased 3,115 16,477 Payable to reinsurers 22,623 9,192 Deferred income taxes — 15,240 Debt 30,000 30,000 Operating lease liabilities 24,183 27,115 Other liabilities 28,058 31,458 Total liabilities 1,149,788 1,190,218 Shareholders’ equity Common stock: $0.01 par value; 30,000,000 shares authorized; 17,879,095 and 17,813,370 shares issued 179 178 Additional paid-in capital 220,755 216,070 Accumulated other comprehensive (loss) income, net of taxes (90,457) 24,579 Retained earnings 803,888 821,743 Treasury stock, at cost: 3,141,477 and 2,970,573 shares (150,000) (135,397) Total shareholders’ equity 784,365 927,173 Total liabilities and shareholders’ equity $ 1,934,153 $ 2,117,391 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, 2022 2021 2022 2021 Net earned premiums $ 189,931 $ 194,395 $ 565,352 $ 581,542 Net investment income 11,112 11,112 33,337 32,418 Earnings from partnership investments 876 5,720 9,675 12,625 Net realized gains on investments 1,251 2,226 8,613 8,507 Change in net unrealized (losses) gains on equity securities (14,364) (3,447) (56,283) 11,414 Credit loss (expense) benefit (207) (49) (207) 325 Finance and other service income 3,749 3,751 10,469 11,660 Total revenue 192,348 213,708 570,956 658,491 Losses and loss adjustment expenses 124,069 119,129 359,950 340,785 Underwriting, operating and related expenses 60,373 63,291 182,839 193,404 Interest expense 132 131 392 390 Total expenses 184,574 182,551 543,181 534,579 Income before income taxes 7,774 31,157 27,775 123,912 Income tax expense 1,582 6,337 5,844 25,251 Net income $ 6,192 $ 24,820 $ 21,931 $ 98,661 Earnings per weighted average common share: Basic $ 0.42 $ 1.65 $ 1.49 $ 6.63 Diluted $ 0.42 $ 1.64 $ 1.48 $ 6.58 Cash dividends paid per common share $ 0.90 $ 0.90 $ 2.70 $ 2.70 Number of shares used in computing earnings per share: Basic 14,599,136 14,982,405 14,608,591 14,826,515 Diluted 14,711,737 15,080,029 14,713,552 14,922,870 Reconciliation of Net Income to Non-GAAP Operating Income Net income $ 6,192 $ 24,820 $ 21,931 $ 98,661 Exclusions from net income: Net realized gains on investments (1,251) (2,226) (8,613) (8,507) Change in net unrealized gains on equity securities 14,364 3,447 56,283 (11,414) Credit loss (benefit) expense 207 49 207 (325) Income tax expense on exclusions from net income (2,797) (267) (10,054) 4,252 Non-GAAP operating income $ 16,715 $ 25,823 $ 59,754 $ 82,667 Net income per diluted share $ 0.42 $ 1.64 $ 1.48 $ 6.58 Exclusions from net income: Net realized gains on investments (0.09) (0.15) (0.59) (0.57) Change in net unrealized gains on equity securities 0.98 0.23 3.83 (0.76) Credit loss (benefit) expense 0.01 - 0.01 (0.02) Income tax expense on exclusions from net income (0.19) (0.02) (0.68) 0.28 Non-GAAP operating income per diluted share $ 1.13 $ 1.70 $ 4.05 $ 5.51 Safety Insurance Group, Inc. and Subsidiaries Additional Premium Information (Unaudited) (Dollars in thousands) Three Months Ended September 30, Nine Months Ended September 30, 2022 2021 2022 2021 Written Premiums Direct $ 217,878 $ 211,098 $ 621,947 $ 620,568 Assumed 6,460 7,585 21,168 23,345 Ceded (18,910) (16,079) (56,911) (50,265) Net written premiums $ 205,428 $ 202,604 $ 586,204 $ 593,648 Earned Premiums Direct $ 202,190 $ 204,429 $ 597,662 $ 608,448 Assumed 6,497 7,202 21,835 23,199 Ceded (18,756) (17,236) (54,145) (50,105) Net earned premiums $ 189,931 $ 194,395 $ 565,352 $ 581,542 View source version on businesswire.com: https://www.businesswire.com/news/home/20221102006025/en/Contacts Safety Insurance Group, Inc. Office of Investor Relations 877-951-2522 InvestorRelations@SafetyInsurance.com
Safety Insurance Group, Inc. (NASDAQ:SAFT) (“Safety” or the “Company”) today reported third quarter 2022 results. George M. Murphy, President and Chief Executive Officer, commented: “The industry continues to experience strong headwinds as operating results are adversely impacted by inflationary trends and rising interest rates that negatively impact our investment portfolio. For the quarter ending September 30, 2022, we have posted a combined ratio of 97.1%, which demonstrates our strong underwriting discipline and focus on expense management. Also, shortly after quarter end, we were pleased to announce a letter of intent to acquire Northeast Insurance Agency, Inc. This acquisition is an exciting opportunity to strengthen our position within the independent agency channel while positioning us for future prosperity.” Net income for the quarter ended September 30, 2022 was $6.2 million, or $0.42 per diluted share, compared to net income of $24.8 million, or $1.64 per diluted share, for the comparable 2021 period. Net income for the nine months ended September 30, 2022 was $21.9 million, or $1.48 per diluted share, compared to net income of $98.7 million, or $6.58 per diluted share, for the comparable 2021 period. The decrease is largely due to the change in net unrealized gains on equity securities of $14.4 million and $56.3 million for the three and nine months ended September 30, 2022, respectively. Non-generally accepted accounting principles (“non-GAAP”) operating income, as defined below, for the quarter ended September 30, 2022 was $1.13 per diluted share, compared to $1.70 per diluted share, for the comparable 2021 period. Non-GAAP operating income for the nine months ended September 30, 2022 was $4.05 per diluted share, compared to $5.51 per diluted share, for the comparable 2021 period. Safety’s book value per share decreased to $53.21 at September 30, 2022 from $62.47 at December 31, 2021 resulting from the impact of interest rate changes on the value of our fixed maturity portfolio of $115.0 million. Additional decreases in book value resulted from capital allocation activities, specifically dividends paid, and shares repurchased during the first quarter of 2022. Safety paid $0.90 per share in dividends to investors during the quarters ended September 30, 2022 and 2021, respectively. Safety paid $3.60 per share in dividends to investors during the year ended December 31, 2021. Today, our Board of Directors approved a $0.90 per share quarterly cash dividend on its issued and outstanding common stock payable on December 15, 2022 to shareholders of record at the close of business on December 1, 2022. Direct written premiums for the quarter ended September 30, 2022 increased by $6.8 million, or 3.2%, to $217.9 million from $211.1 million for the comparable 2021 period. Direct written premiums for the nine months ended September 30, 2022 increased by $1.3 million, or 0.2% to $621.9 million from $620.6 million for the comparable 2021 period. The increase is primarily in our commercial automobile and homeowner businesses. For the quarter ended September 30, 2022, losses and loss adjustment expenses incurred increased by $5.0 million, or 4.1%, to $124.1 million from $119.1 million for the comparable 2021 period. For the nine months ended September 30, 2022, losses and loss adjustment expenses incurred increased by $19.2 million, or 5.6%, to $360.0 million from $340.8 million for the comparable 2021 period. The increase in losses is due to a return of pre-pandemic frequency in our private passenger automobile line of business and current market conditions including inflation and supply chain delays. Loss, expense, and combined ratios calculated for the quarter ended September 30, 2022 were 65.3%, 31.8%, and 97.1%, respectively, compared to 61.3%, 32.6%, and 93.9%, respectively, for the comparable 2021 period. Loss, expense, and combined ratios calculated for the nine months ended September 30, 2022 were 63.7%, 32.3%, and 96.0%, respectively, compared to 58.6%, 33.3%, and 91.9%, respectively, for the comparable 2021 period. The decrease in the expense ratio is 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, 2022 was $13.9 million compared to $15.4 million for the comparable 2021 period. Total prior year favorable development included in the pre-tax results for the nine months ended September 30, 2022 was $43.2 million compared to $41.2 million for the comparable 2021 period. Net investment income for the quarter ended September 30, 2022 was consistent at $11.1 million with the comparable 2021 period. Net investment income for the nine months ended September 30, 2022 increased by $0.9 million, or 2.8%, to $33.3 million from $32.4 million for the comparable 2021 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 3.1% for the quarter ended September 30, 2022 compared to 3.0% for the comparable 2021 period. Net effective annualized yield on the investment portfolio for the nine months ended September 30, 2022 and 2021, respectively, was 3.0%. Our duration on fixed maturities was 3.6 years at September 30, 2022 and December 31, 2021. 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 (losses) on investments, change in net unrealized gains on equity securities, credit loss benefit (expense) and taxes related thereto. For the three months September 30, 2022, a decrease of $14.4 million for the change in unrealized losses on equity securities was recognized within income before income taxes, compared to a decrease of $3.4 million recognized in the comparable 2021 period. For the nine months ended September 30, 2022, a decrease of $56.3 million for the change in unrealized gains on equity securities was recognized in income before income taxes, compared to an increase of $11.4 million recognized in the comparable 2021 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, and Safety Northeast 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, 2021 Form 10-K with the SEC on February 28, 2022 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, 2021 filed with the SEC on February 28, 2022. 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, 2022 2021 (Unaudited) Assets Investments: Fixed maturities, available for sale, at fair value (amortized cost: $1,154,503 and $1,187,857, allowance for expected credit losses of $898 and $691) $ 1,039,102 $ 1,218,279 Equity securities, at fair value (cost: $229,153 and $211,848) 225,967 264,945 Other invested assets 107,070 87,911 Total investments 1,372,139 1,571,135 Cash and cash equivalents 33,635 63,603 Accounts receivable, net of allowance for expected credit losses of $1,589 and $1,808 187,973 170,953 Receivable for securities sold 3,289 9,256 Accrued investment income 8,371 7,401 Taxes recoverable 17,550 1,508 Receivable from reinsurers related to paid loss and loss adjustment expenses 18,316 18,234 Receivable from reinsurers related to unpaid loss and loss adjustment expenses 92,026 90,667 Ceded unearned premiums 26,560 23,795 Deferred policy acquisition costs 76,662 73,024 Deferred income taxes 11,315 — Equity and deposits in pools 36,350 33,592 Operating lease right-of-use-assets 24,183 27,115 Other assets 25,784 27,108 Total assets $ 1,934,153 $ 2,117,391 Liabilities Loss and loss adjustment expense reserves $ 545,412 $ 570,651 Unearned premium reserves 437,104 413,487 Accounts payable and accrued liabilities 59,293 76,598 Payable for securities purchased 3,115 16,477 Payable to reinsurers 22,623 9,192 Deferred income taxes — 15,240 Debt 30,000 30,000 Operating lease liabilities 24,183 27,115 Other liabilities 28,058 31,458 Total liabilities 1,149,788 1,190,218 Shareholders’ equity Common stock: $0.01 par value; 30,000,000 shares authorized; 17,879,095 and 17,813,370 shares issued 179 178 Additional paid-in capital 220,755 216,070 Accumulated other comprehensive (loss) income, net of taxes (90,457) 24,579 Retained earnings 803,888 821,743 Treasury stock, at cost: 3,141,477 and 2,970,573 shares (150,000) (135,397) Total shareholders’ equity 784,365 927,173 Total liabilities and shareholders’ equity $ 1,934,153 $ 2,117,391 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, 2022 2021 2022 2021 Net earned premiums $ 189,931 $ 194,395 $ 565,352 $ 581,542 Net investment income 11,112 11,112 33,337 32,418 Earnings from partnership investments 876 5,720 9,675 12,625 Net realized gains on investments 1,251 2,226 8,613 8,507 Change in net unrealized (losses) gains on equity securities (14,364) (3,447) (56,283) 11,414 Credit loss (expense) benefit (207) (49) (207) 325 Finance and other service income 3,749 3,751 10,469 11,660 Total revenue 192,348 213,708 570,956 658,491 Losses and loss adjustment expenses 124,069 119,129 359,950 340,785 Underwriting, operating and related expenses 60,373 63,291 182,839 193,404 Interest expense 132 131 392 390 Total expenses 184,574 182,551 543,181 534,579 Income before income taxes 7,774 31,157 27,775 123,912 Income tax expense 1,582 6,337 5,844 25,251 Net income $ 6,192 $ 24,820 $ 21,931 $ 98,661 Earnings per weighted average common share: Basic $ 0.42 $ 1.65 $ 1.49 $ 6.63 Diluted $ 0.42 $ 1.64 $ 1.48 $ 6.58 Cash dividends paid per common share $ 0.90 $ 0.90 $ 2.70 $ 2.70 Number of shares used in computing earnings per share: Basic 14,599,136 14,982,405 14,608,591 14,826,515 Diluted 14,711,737 15,080,029 14,713,552 14,922,870 Reconciliation of Net Income to Non-GAAP Operating Income Net income $ 6,192 $ 24,820 $ 21,931 $ 98,661 Exclusions from net income: Net realized gains on investments (1,251) (2,226) (8,613) (8,507) Change in net unrealized gains on equity securities 14,364 3,447 56,283 (11,414) Credit loss (benefit) expense 207 49 207 (325) Income tax expense on exclusions from net income (2,797) (267) (10,054) 4,252 Non-GAAP operating income $ 16,715 $ 25,823 $ 59,754 $ 82,667 Net income per diluted share $ 0.42 $ 1.64 $ 1.48 $ 6.58 Exclusions from net income: Net realized gains on investments (0.09) (0.15) (0.59) (0.57) Change in net unrealized gains on equity securities 0.98 0.23 3.83 (0.76) Credit loss (benefit) expense 0.01 - 0.01 (0.02) Income tax expense on exclusions from net income (0.19) (0.02) (0.68) 0.28 Non-GAAP operating income per diluted share $ 1.13 $ 1.70 $ 4.05 $ 5.51 Safety Insurance Group, Inc. and Subsidiaries Additional Premium Information (Unaudited) (Dollars in thousands) Three Months Ended September 30, Nine Months Ended September 30, 2022 2021 2022 2021 Written Premiums Direct $ 217,878 $ 211,098 $ 621,947 $ 620,568 Assumed 6,460 7,585 21,168 23,345 Ceded (18,910) (16,079) (56,911) (50,265) Net written premiums $ 205,428 $ 202,604 $ 586,204 $ 593,648 Earned Premiums Direct $ 202,190 $ 204,429 $ 597,662 $ 608,448 Assumed 6,497 7,202 21,835 23,199 Ceded (18,756) (17,236) (54,145) (50,105) Net earned premiums $ 189,931 $ 194,395 $ 565,352 $ 581,542 View source version on businesswire.com: https://www.businesswire.com/news/home/20221102006025/en/
Safety Insurance Group, Inc. Office of Investor Relations 877-951-2522 InvestorRelations@SafetyInsurance.com