Safety Insurance Group, Inc. Announces Fourth Quarter and Year Ended 2023 Results

BOSTON–(BUSINESS WIRE)–Safety Insurance Group, Inc. (NASDAQ:SAFT) (“Safety” or the “Company”) today reported fourth quarter and year ended 2023 results.


George M. Murphy, Chairman of the Board of Directors, President and Chief Executive Officer, commented: “2023 saw Safety Insurance post record top-line growth as Direct Written Premiums increased by 20.4% as a result of a 10.2% increase in overall policy counts and a 10.9% increase in average premium per policy, blended across all lines of business. While Safety achieved positive trends in all major revenue streams, ongoing inflationary impacts contributed to an elevated loss ratio specific to our Private Passenger Automobile book of business. For the year ended December 31, 2023, Safety Insurance posted a 107.7% combined ratio, resulting from these inflationary impacts and several weather events. For the fourth quarter 2023, Safety posted a 106.5% combined ratio resulting from a December 18th wind event that added $12.0M in Loss and Loss Adjustment Expenses as well as the continued elevated Private Passenger Auto loss ratio.”

“As I have previously mentioned, Safety continues to file for rate increases across all major lines and is seeing these rate increases begin to impact earned premiums. Safety remains committed to maintaining underwriting discipline, while leveraging investments in our pricing and risk management areas to ensure rate adequacy.”

Fourth Quarter and Year Ended 2023 Results and Recent Development

Net income for the quarter ended December 31, 2023 was $12.3 million, or $0.83 per diluted share, compared to net income of $24.6 million, or $1.67 per diluted share, for the comparable 2022 period. Net income for the year ended December 31, 2023 was $18.9 million, or $1.28 per diluted share, compared to net income of $46.6 million, or $3.15 per diluted share, for the comparable 2022 period. Non-generally accepted accounting principles (“non-GAAP”) operating income, as defined below, for the quarter ended December 31, 2023 was $0.30 per diluted share, compared to $0.98 per diluted share, for the comparable 2022 period. Non-GAAP operating income for the year ended December 31, 2023 was $0.84 per diluted share, compared to Non-GAAP operating income of $5.05 per diluted share, for the comparable 2022 period.

Safety’s book value per share decreased to $54.37 at December 31, 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 year ended December 31, 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 December 31, 2023 and 2022, respectively. Safety paid $3.60 per share in dividends to investors during the year ended December 31, 2023 and 2022, respectively.

On February 15, 2024, our Board of Directors approved a $0.90 per share quarterly cash dividend on our issued and outstanding common stock payable on March 15, 2024 to shareholders of record at the close of business on March 1, 2024.

Direct written premiums for the quarter ended December 31, 2023 increased by $44.7 million, or 22.2%, to $246.1 million from $201.4 million for the comparable 2022 period. Direct written premiums for the year ended December 31, 2023 increased by $167.9 million, or 20.4% to $991.2 million from $823.3 million for the comparable 2022 period. Net written premiums for the quarter ended December 30, 2023 increased by $38.9 million, or 20.7%, to $226.4 million from $187.5 million for the comparable 2022 period. Net written premiums for the year ended December 31, 2023 increased by $151.6 million, or 19.6%, to $925.3 million from $773.7 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 year ended December 31, 2023, the Company achieved exposure count growth across all lines of business, including 14.7%, 5.4% and 11.2% in Private Passenger Automobile, Commercial Automobile and Homeowners lines, respectively, compared to the same period in 2022. Additionally, for the year ended December 31, 2023, average written premium per exposure increased 10.8%, 3.8% 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 December 31, 2023 increased by $32.8 million, or 17.0%, to $226.0 million from $193.2 million for the comparable 2022 period. Net earned premiums for the year ended December 31, 2023 increased by $75.9 million, or 10.0%, to $834.4 million from $758.5 million for the comparable 2022 period.

For the quarter ended December 31, 2023, losses and loss adjustment expenses incurred increased by $40.1 million, or 30.4%, to $172.1 million from $132.0 million for the comparable 2022 period. For the year ended December 31, 2023, losses and loss adjustment expenses incurred increased by $150.3 million, or 30.6%, to $642.3 million from $492.0 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 that occurred in December, and a severe winter weather event that occurred in February.

Loss, expense, and combined ratios calculated for the quarter ended December 31, 2023, were 76.1%, 30.4%, and 106.5%, respectively, compared to 68.4%, 32.3%, and 100.7%, respectively, for the comparable 2022 period. Loss, expense, and combined ratios calculated for the year ended December 31, 2023 were 77.0%, 30.7%, and 107.7%, respectively, compared to 64.9%, 32.3%, and 97.2%, 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 December 31, 2023 was $12.4 million compared to $14.1 million for the comparable 2022 period. Total prior year favorable development included pre-tax results for the year ended December 31, 2023 was $47.4 million compared to $57.3 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 December 31, 2023 increased by $1.5 million, or 11.2% to $14.9 million from $13.4 million for the comparable 2022 period. Net investment income for the year ended December 31, 2023 increased by $9.7 million, or 20.7%, to $56.4 million from $46.7 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 4.2% for the quarter ended December 31, 2023 compared to 3.7% for the comparable 2022 period. Net effective annualized yield on the investment portfolio for the year ended December 31, 2023 was 4.0% compared to 3.2% for the comparable 2022 period. Our duration on fixed maturities was 3.6 years at December 31, 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 quarter ended December 31, 2023, an increase of $9.7 million for the change in unrealized gains on equity securities was recognized within income before income taxes, compared to an increase of $11.9 million recognized in the comparable 2022 period. For the year ended December 31, 2023, an increase of $7.5 million for the change in unrealized gains on equity securities was recognized in income before income taxes, compared to a decrease of $44.4 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)

 

 

 

 

 

 

 

 

 

December 31,

 

December 31,

 

 

2023

 

2022

 

 

(Unaudited)

 

 

 

Assets

 

 

 

 

 

 

Investments:

 

 

 

 

 

 

Fixed maturities, available for sale, at fair value (amortized cost: $1,120,682 and $1,152,779, allowance for expected credit losses of $1,208 and $678)

 

$

1,052,145

 

 

$

1,050,155

 

Equity securities, at fair value (cost: $221,809 and $231,444)

 

 

238,022

 

 

 

240,155

 

Other invested assets

 

 

133,946

 

 

 

112,850

 

Total investments

 

 

1,424,113

 

 

 

1,403,160

 

Cash and cash equivalents

 

 

38,152

 

 

 

25,300

 

Accounts receivable, net of allowance for expected credit losses of $1,053 and $1,446

 

 

256,687

 

 

 

192,542

 

Receivable for securities sold

 

 

124

 

 

 

877

 

Accrued investment income

 

 

7,261

 

 

 

8,212

 

Taxes recoverable

 

 

623

 

 

 

 

Receivable from reinsurers related to paid loss and loss adjustment expenses

 

 

13,129

 

 

 

12,988

 

Receivable from reinsurers related to unpaid loss and loss adjustment expenses

 

 

112,623

 

 

 

93,394

 

Ceded unearned premiums

 

 

32,346

 

 

 

28,453

 

Deferred policy acquisition costs

 

 

91,917

 

 

 

75,582

 

Deferred income taxes

 

 

12,150

 

 

 

21,074

 

Equity and deposits in pools

 

 

35,247

 

 

 

33,648

 

Operating lease right-of-use-assets

 

 

19,756

 

 

 

23,336

 

Goodwill

 

 

17,093

 

 

 

17,093

 

Intangible assets

 

 

7,551

 

 

 

7,856

 

Other assets

 

 

25,232

 

 

 

29,054

 

Total assets

 

$

2,094,004

 

 

$

1,972,569

 

 

 

 

 

 

 

 

Liabilities

 

 

 

 

 

 

Loss and loss adjustment expense reserves

 

$

603,081

 

 

$

549,598

 

Unearned premium reserves

 

 

528,150

 

 

 

433,375

 

Accounts payable and accrued liabilities

 

 

64,235

 

 

 

73,875

 

Payable for securities purchased

 

 

1,863

 

 

 

1,359

 

Payable to reinsurers

 

 

15,941

 

 

 

11,444

 

Taxes payable

 

 

 

 

 

1,729

 

Debt

 

 

30,000

 

 

 

35,000

 

Operating lease liabilities

 

 

19,756

 

 

 

23,336

 

Other liabilities

 

 

26,711

 

 

 

30,854

 

Total liabilities

 

 

1,289,737

 

 

 

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

 

 

226,380

 

 

 

222,049

 

Accumulated other comprehensive loss, net of taxes

 

 

(53,191

)

 

 

(80,538

)

Retained earnings

 

 

781,192

 

 

 

815,309

 

Treasury stock, at cost: 3,157,577 and 3,083,364 shares

 

 

(150,293

)

 

 

(145,000

)

Total shareholders’ equity

 

 

804,267

 

 

 

811,999

 

Total liabilities and shareholders’ equity

 

$

2,094,004

 

 

$

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 December 31,

 

Year Ended December 31,

 

 

2023

 

2022

 

2023

 

2022

 

 

 

 

 

 

 

 

 

 

 

 

 

Net earned premiums

 

$

226,029

 

 

$

193,153

 

 

$

834,414

 

 

$

758,505

 

Net investment income

 

 

14,882

 

 

 

13,388

 

 

 

56,377

 

 

 

46,725

 

Earnings from partnership investments

 

 

394

 

 

 

2,809

 

 

 

5,540

 

 

 

12,484

 

Net realized gains on investments

 

 

216

 

 

 

577

 

 

 

1,327

 

 

 

9,190

 

Change in net unrealized gains on equity securities

 

 

9,650

 

 

 

11,897

 

 

 

7,502

 

 

 

(44,386

)

Credit loss benefit (expense)

 

 

24

 

 

 

221

 

 

 

(530

)

 

 

14

 

Commission income

 

 

1,773

 

 

 

566

 

 

 

6,932

 

 

 

566

 

Finance and other service income

 

 

5,428

 

 

 

3,992

 

 

 

19,394

 

 

 

14,461

 

Total revenue

 

 

258,396

 

 

 

226,603

 

 

 

930,956

 

 

 

797,559

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Losses and loss adjustment expenses

 

 

172,105

 

 

 

132,029

 

 

 

642,302

 

 

 

491,979

 

Underwriting, operating and related expenses

 

 

68,748

 

 

 

62,306

 

 

 

256,580

 

 

 

245,145

 

Other expense

 

 

1,638

 

 

 

330

 

 

 

6,836

 

 

 

330

 

Interest expense

 

 

121

 

 

 

132

 

 

 

818

 

 

 

524

 

Total expenses

 

 

242,612

 

 

 

194,797

 

 

 

906,536

 

 

 

737,978

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Income before income taxes

 

 

15,784

 

 

 

31,806

 

 

 

24,420

 

 

 

59,581

 

Income tax expense

 

 

3,522

 

 

 

7,176

 

 

 

5,545

 

 

 

13,020

 

Net income

 

$

12,262

 

 

$

24,630

 

 

$

18,875

 

 

$

46,561

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Earnings per weighted average common share:

 

 

 

 

 

 

 

 

 

 

 

 

Basic

 

$

0.83

 

 

$

1.68

 

 

$

1.28

 

 

$

3.17

 

Diluted

 

$

0.83

 

 

$

1.67

 

 

$

1.28

 

 

$

3.15

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Cash dividends paid per common share

 

$

0.90

 

 

$

0.90

 

 

$

3.60

 

 

$

3.60

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Number of shares used in computing earnings per share:

 

 

 

 

 

 

 

 

 

 

 

 

Basic

 

 

14,645,987

 

 

 

14,604,189

 

 

 

14,663,730

 

 

 

14,607,483

 

Diluted

 

 

14,678,038

 

 

 

14,701,879

 

 

 

14,710,131

 

 

 

14,710,611

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Reconciliation of Net Income to Non-GAAP Operating Income

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Net income

 

$

12,262

 

 

$

24,630

 

 

$

18,875

 

 

$

46,561

 

Exclusions from net income:

 

 

 

 

 

 

 

 

 

 

 

 

Net realized gains on investments

 

 

(216

)

 

 

(577

)

 

 

(1,327

)

 

 

(9,190

)

Change in net unrealized gains on equity securities

 

 

(9,650

)

 

 

(11,897

)

 

 

(7,502

)

 

 

44,386

 

Credit loss (benefit) expense

 

 

(24

)

 

 

(221

)

 

 

530

 

 

 

(14

)

Income tax expense on exclusions from net income

 

 

2,077

 

 

 

2,666

 

 

 

1,743

 

 

 

(7,388

)

Non-GAAP operating income

 

$

4,449

 

 

$

14,601

 

 

$

12,319

 

 

$

74,355

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Net income per diluted share

 

$

0.83

 

 

$

1.67

 

 

$

1.28

 

 

$

3.15

 

Exclusions from net income:

 

 

 

 

 

 

 

 

 

 

 

 

Net realized gains on investments

 

 

(0.01

)

 

 

(0.04

)

 

 

(0.09

)

 

 

(0.62

)

Change in net unrealized gains on equity securities

 

 

(0.66

)

 

 

(0.81

)

 

 

(0.51

)

 

 

3.02

 

Credit loss (benefit) expense

 

 

 

 

 

(0.02

)

 

 

0.04

 

 

 

 

Income tax expense on exclusions from net income

 

 

0.14

 

 

 

0.18

 

 

 

0.12

 

 

 

(0.50

)

Non-GAAP operating income per diluted share

 

$

0.30

 

 

$

0.98

 

 

$

0.84

 

 

$

5.05

 

 

Safety Insurance Group, Inc. and Subsidiaries

Additional Premium Information

(Unaudited)

(Dollars in thousands)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Three Months Ended December 31,

 

 

Year Ended December 31,

 

 

2023

 

2022

 

2023

 

2022

Written Premiums

 

 

 

 

 

 

 

 

 

 

 

 

Direct

 

$

246,091

 

 

$

201,371

 

 

$

991,224

 

 

$

823,318

 

Assumed

 

 

7,620

 

 

 

7,667

 

 

 

30,850

 

 

 

28,835

 

Ceded

 

 

(27,356

)

 

 

(21,507

)

 

 

(96,779

)

 

 

(78,418

)

Net written premiums

 

$

226,355

 

 

$

187,531

 

 

$

925,295

 

 

$

773,735

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Earned Premiums

 

 

 

 

 

 

 

 

 

 

 

 

Direct

 

$

243,513

 

 

$

205,627

 

 

$

897,598

 

 

$

803,289

 

Assumed

 

 

7,345

 

 

 

7,141

 

 

 

29,702

 

 

 

28,976

 

Ceded

 

 

(24,829

)

 

 

(19,615

)

 

 

(92,886

)

 

 

(73,760

)

Net earned premiums

 

$

226,029

 

 

$

193,153

 

 

$

834,414

 

 

$

758,505

 

 

Contacts

Safety Insurance Group, Inc.

Office of Investor Relations

877-951-2522

InvestorRelations@SafetyInsurance.com