Safety Announces Second Quarter 2021 Results and Declares Third Quarter 2021 Dividend

BOSTON–(BUSINESS WIRE)–Safety Insurance Group, Inc. (NASDAQ:SAFT) (“the Company”) today reported second quarter 2021 results.

Net income for the quarter ended June 30, 2021 was $37.7 million, or $2.49 per diluted share, compared to net income of $42.5 million, or $2.78 per diluted share, for the comparable 2020 period. Net income for the six months ended June 30, 2021 was $73.8 million, or $4.93 per diluted share, compared to net income of $40.5 million, or $2.64 per diluted share, for the comparable 2020 period. Non-generally accepted accounting principles (“non-GAAP”) operating income, as defined below, for the quarter ended June 30, 2021 was $1.85 per diluted share, compared to $1.95 per diluted share, for the comparable 2020 period. Non-GAAP operating income for the six months ended June 30, 2021 was $3.78 per diluted share, compared to $3.52 per diluted share, for the comparable 2020 period.

Safety’s book value per share increased to $61.43 at June 30, 2021 from $59.40 at December 31, 2020. Safety paid $0.90 per share in dividends to investors during the quarters ended June 30, 2021 and 2020, respectively. Safety paid $3.60 per share in dividends to investors during the year ended December 31, 2020.

Direct written premiums for the quarter ended June 30, 2021 increased by $11.9 million, or 5.8%, to $217.2 million from $205.3 million for the comparable 2020 period. Direct written premiums for the six months ended June 30, 2021 increased by $6.9 million, or 1.7% to $409.5 million from $402.6 million for the comparable 2020 period. The 2020 direct written premium reflects the Safety Personal Auto Relief Credit, a 15% policyholder credit that was applied to personal auto policies for the months of April, May and June 2020 and was booked as an adjustment to premiums during the second quarter of 2020.

Net written premiums for the quarter ended June 30, 2021 increased by $9.1 million, or 4.6%, to $206.8 million from $197.7 million for the comparable 2020 period. Net written premiums for the six months ended June 30, 2021 increased by $4.4 million, or 1.1%, to $391.0 million from $386.6 million for the comparable 2020 period. Net earned premiums for the quarter ended June 30, 2021 increased by $12.4 million, or 6.8%, to $194.3 million from $181.9 million for the comparable 2020 period. Net earned premiums for the six months ended June 30, 2021 increased by $7.4 million, or 1.9%, to $387.1 million from $379.7 million for the comparable 2020 period. The increases in both periods are a result of the increase in direct written premiums as described above.

For the quarter ended June 30, 2021, losses and loss adjustment expenses incurred increased by $19.2 million, or 21.1%, to $110.2 million from $91.0 million for the comparable 2020 period. For the six months ended June 30, 2021, losses and loss adjustment expenses incurred increased by $10.0 million, or 4.7%, to $221.7 million from $211.7 million for the comparable 2020 period. The 2020 losses and loss adjustment expenses in both periods reflect a decrease in frequency, primarily in our private passenger automobile line of business as a result of the COVID-19 pandemic.

Total prior year favorable development included in the pre-tax results for the quarter ended June 30, 2021 was $13.3 million compared to $9.7 million for the comparable 2020 period. Total prior year favorable development included in the pre-tax results for the six months ended June 30, 2021 was $25.8 million compared to $19.3 million for the comparable 2020 period.

Loss, expense, and combined ratios calculated under U.S. generally accepted accounting principles for the quarter ended June 30, 2021 were 56.7%, 33.5%, and 90.2%, respectively, compared to 50.0%, 34.9%, and 84.9%, respectively, for the comparable 2020 period. Loss, expense, and combined ratios calculated under U.S. generally accepted accounting principles for the six months ended June 30, 2021 were 57.3%, 33.6%, and 90.9%, respectively, compared to 55.7%, 33.3%, and 89.0%, respectively, for the comparable 2020 period.

Net investment income for the quarter ended June 30, 2021 decreased by $0.1 million, or 1.4%, to $9.8 million from $9.9 million for the comparable 2020 period. The decrease is a result of lower yields on our fixed maturity assets compared to the prior year. Net investment income for the six months ended June 30, 2021 increased by $0.7 million, or 3.3%, to $21.3 million from $20.6 million for the comparable 2020 period. The increase is a result of an increase in the average invested asset balance compared to the prior year. Net effective annualized yield on the investment portfolio for the quarter ended June 30, 2021 was 2.7% compared to 2.9% for the comparable 2020 period. Net effective annualized yield on the investment portfolio for the six months ended June 30, 2021 was 2.9% compared to 3.0% for the comparable 2020 period. Our duration on fixed maturities was 3.2 years at June 30, 2021 and December 31, 2020, respectively.

Today, our Board of Directors approved a $0.90 per share quarterly cash dividend on its issued and outstanding common stock payable on September 15, 2021 to shareholders of record at the close of business on September 1, 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 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 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 ended June 30, 2021, an increase of $8.6 million for the change in unrealized gains on equity securities was recognized within income before income taxes, compared to an increase of $16.8 million recognized in the comparable 2020 period. For the six months ended June 30, 2021, an increase of $14.9 million for the change in unrealized gains on equity securities was recognized in income before income taxes, compared to a decrease of $13.2 million recognized in the comparable 2020 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, 2020 Form 10-K with the SEC on February 26, 2021 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 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;

Our possible need for and availability of additional financing, and our dependence on strategic relationships, among others;

The effects of emerging claim and coverage issues on the Company’s business are uncertain, and court decisions or legislative or regulatory changes that take place after the Company issues its policies, including those taken in response to COVID-19 (such as requiring insurers to cover business interruption claims irrespective of terms or other conditions included in the policies that would otherwise preclude coverage), can result in an unexpected increase in the number of claims and have a material adverse impact on the Company’s results of operations;

The possibility that civil litigation and/or the Commissioner may require additional premium relief payouts related to COVID-19;

The impact of COVID-19 and related risks, including on the Company’s employees, agents or other key partners, could materially affect the Company’s results of operations, financial position and/or liquidity; 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, 2020 filed with the SEC on February 26, 2021.

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,

 

 

2021

 

2020

 

 

(Unaudited)

 

 

 

Assets

 

 

 

 

 

 

Investments:

 

 

 

 

 

 

Fixed maturities, available for sale, at fair value (amortized cost: $1,187,050 and $1,189,951, allowance for expected credit losses of $680 and $1,054)

 

$

1,235,680

 

 

$

1,256,653

 

Short term investments, at fair value (cost: $0 and $441)

 

 

 

 

 

441

 

Equity securities, at fair value (cost: $181,287 and $168,289)

 

 

233,114

 

 

 

205,254

 

Other invested assets

 

 

52,580

 

 

 

45,239

 

Total investments

 

 

1,521,374

 

 

 

1,507,587

 

Cash and cash equivalents

 

 

82,364

 

 

 

53,769

 

Accounts receivable, net of allowance for expected credit losses of $2,192 and $1,754

 

 

183,222

 

 

 

179,147

 

Receivable for securities sold

 

 

12,598

 

 

 

1,311

 

Accrued investment income

 

 

7,307

 

 

 

8,045

 

Taxes recoverable

 

 

 

 

 

279

 

Receivable from reinsurers related to paid loss and loss adjustment expenses

 

 

10,389

 

 

 

13,432

 

Receivable from reinsurers related to unpaid loss and loss adjustment expenses

 

 

101,107

 

 

 

106,311

 

Ceded unearned premiums

 

 

23,725

 

 

 

22,406

 

Deferred policy acquisition costs

 

 

74,432

 

 

 

74,962

 

Equity and deposits in pools

 

 

34,765

 

 

 

30,429

 

Operating lease right-of-use-assets

 

 

28,573

 

 

 

31,000

 

Other assets

 

 

28,047

 

 

 

25,595

 

Total assets

 

$

2,107,903

 

 

$

2,054,273

 

 

 

 

 

 

 

 

Liabilities

 

 

 

 

 

 

Loss and loss adjustment expense reserves

 

$

576,951

 

 

$

567,581

 

Unearned premium reserves

 

 

427,115

 

 

 

421,901

 

Accounts payable and accrued liabilities

 

 

58,247

 

 

 

79,486

 

Payable for securities purchased

 

 

26,259

 

 

 

7,144

 

Payable to reinsurers

 

 

11,214

 

 

 

8,236

 

Deferred income taxes

 

 

11,915

 

 

 

17,611

 

Taxes payable

 

 

4,965

 

 

 

 

Debt

 

 

30,000

 

 

 

30,000

 

Operating lease liabilities

 

 

28,573

 

 

 

31,000

 

Other liabilities

 

 

12,365

 

 

 

6,635

 

Total liabilities

 

 

1,187,604

 

 

 

1,169,594

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Shareholders’ equity

 

 

 

 

 

 

Common stock: $0.01 par value; 30,000,000 shares authorized; 17,813,573 and 17,724,866 shares issued

 

 

178

 

 

 

178

 

Additional paid-in capital

 

 

213,079

 

 

 

209,779

 

Accumulated other comprehensive income, net of taxes

 

 

38,955

 

 

 

53,527

 

Retained earnings

 

 

791,921

 

 

 

745,029

 

Treasury stock, at cost: 2,831,168 shares

 

 

(123,834

)

 

 

(123,834

)

Total shareholders’ equity

 

 

920,299

 

 

 

884,679

 

Total liabilities and shareholders’ equity

 

$

2,107,903

 

 

$

2,054,273

 

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,

 

 

2021

 

2020

 

2021

 

2020

 

 

 

 

 

 

 

 

 

 

 

 

 

Net earned premiums

 

$

194,297

 

 

$

181,902

 

 

$

387,147

 

 

$

379,797

 

Net investment income

 

 

9,774

 

 

 

9,916

 

 

 

21,306

 

 

 

20,626

 

Earnings (losses) from partnership investments

 

 

2,614

 

 

 

(3,449

)

 

 

6,905

 

 

 

(2,110

)

Net realized gains (losses) on investments

 

 

3,406

 

 

 

(721

)

 

 

6,281

 

 

 

(1,352

)

Change in net unrealized gains on equity securities

 

 

8,654

 

 

 

16,828

 

 

 

14,861

 

 

 

(13,160

)

Credit loss benefit (expense)

 

 

193

 

 

 

39

 

 

 

374

 

 

 

(2,471

)

Finance and other service income

 

 

3,937

 

 

 

3,255

 

 

 

7,909

 

 

 

7,484

 

Total revenue

 

 

222,875

 

 

 

207,770

 

 

 

444,783

 

 

 

388,814

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Losses and loss adjustment expenses

 

 

110,161

 

 

 

90,974

 

 

 

221,656

 

 

 

211,720

 

Underwriting, operating and related expenses

 

 

65,089

 

 

 

63,514

 

 

 

130,113

 

 

 

126,596

 

Interest expense

 

 

130

 

 

 

130

 

 

 

259

 

 

 

177

 

Total expenses

 

 

175,380

 

 

 

154,618

 

 

 

352,028

 

 

 

338,493

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Income before income taxes

 

 

47,495

 

 

 

53,152

 

 

 

92,755

 

 

 

50,321

 

Income tax expense

 

 

9,828

 

 

 

10,658

 

 

 

18,914

 

 

 

9,817

 

Net income

 

$

37,667

 

 

$

42,494

 

 

$

73,841

 

 

$

40,504

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Earnings per weighted average common share:

 

 

 

 

 

 

 

 

 

 

 

 

Basic

 

$

2.50

 

 

$

2.80

 

 

$

4.96

 

 

$

2.66

 

Diluted

 

$

2.49

 

 

$

2.78

 

 

$

4.93

 

 

$

2.64

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Cash dividends paid per common share

 

$

0.90

 

 

$

0.90

 

 

$

1.80

 

 

$

1.80

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Number of shares used in computing earnings per share:

 

 

 

 

 

 

 

 

 

 

 

 

Basic

 

 

14,983,365

 

 

 

15,120,039

 

 

 

14,817,312

 

 

 

15,175,409

 

Diluted

 

 

15,079,495

 

 

 

15,237,295

 

 

 

14,913,561

 

 

 

15,292,186

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Reconciliation of Net Income to Non-GAAP Operating Income

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Net income

 

$

37,667

 

 

$

42,494

 

 

$

73,841

 

 

$

40,504

 

Exclusions from net income:

 

 

 

 

 

 

 

 

 

 

 

 

Net realized (gains) losses on investments

 

 

(3,406

)

 

 

721

 

 

 

(6,281

)

 

 

1,352

 

Change in net unrealized gains on equity securities

 

 

(8,654

)

 

 

(16,828

)

 

 

(14,861

)

 

 

13,160

 

Credit loss (benefit) expense

 

 

(193

)

 

 

(39

)

 

 

(374

)

 

 

2,471

 

Income tax expense (benefit) on exclusions from net income

 

 

2,573

 

 

 

3,391

 

 

 

4,518

 

 

 

(3,566

)

Non-GAAP operating income

 

$

27,987

 

 

$

29,739

 

 

$

56,843

 

 

$

53,921

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Net income per diluted share

 

$

2.49

 

 

$

2.78

 

 

$

4.93

 

 

$

2.64

 

Exclusions from net income:

 

 

 

 

 

 

 

 

 

 

 

 

Net realized (gains) losses on investments

 

 

(0.23

)

 

 

0.05

 

 

 

(0.42

)

 

 

0.09

 

Change in net unrealized gains on equity securities

 

 

(0.57

)

 

 

(1.10

)

 

 

(1.00

)

 

 

0.86

 

Credit loss (benefit) expense

 

 

(0.01

)

 

 

 

 

 

(0.03

)

 

 

0.16

 

Income tax expense (benefit) on exclusions from net income

 

 

0.17

 

 

 

0.22

 

 

 

0.30

 

 

 

(0.23

)

Non-GAAP operating income per diluted share

 

$

1.85

 

 

$

1.95

 

 

$

3.78

 

 

$

3.52

 

Safety Insurance Group, Inc. and Subsidiaries

Additional Premium Information

(Unaudited)

(Dollars in thousands)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Three Months Ended June 30,

 

Six Months Ended June 30,

 

 

2021

 

2020

 

2021

 

2020

Written Premiums

 

 

 

 

 

 

 

 

 

 

 

 

Direct

 

$

217,233

 

 

$

205,301

 

 

$

409,470

 

 

$

402,647

 

Assumed

 

 

8,429

 

 

 

7,128

 

 

 

15,760

 

 

 

15,106

 

Ceded

 

 

(18,836

)

 

 

(14,693

)

 

 

(34,186

)

 

 

(31,059

)

Net written premiums

 

$

206,826

 

 

$

197,736

 

 

$

391,044

 

 

$

386,694

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Earned Premiums

 

 

 

 

 

 

 

 

 

 

 

 

Direct

 

$

202,964

 

 

$

192,945

 

 

$

404,019

 

 

$

403,096

 

Assumed

 

 

7,970

 

 

 

7,767

 

 

 

15,997

 

 

 

16,869

 

Ceded

 

 

(16,637

)

 

 

(18,810

)

 

 

(32,869

)

 

 

(40,168

)

Net earned premiums

 

$

194,297

 

 

$

181,902

 

 

$

387,147

 

 

$

379,797

 

 

Contacts

Safety Insurance Group, Inc.

Office of Investor Relations

877-951-2522

InvestorRelations@SafetyInsurance.com