Safety Announces Fourth Quarter and Year End 2013 Results

BOSTON--()--Safety Insurance Group, Inc. (NASDAQ:SAFT) today reported fourth quarter 2013 results. Net income for the quarter ended December 31, 2013 was $11.7 million, or $0.76 per diluted share, compared to net income of $9.6 million, or $0.62 per diluted share, for the comparable 2012 period. Net income for the twelve months ended December 31, 2013 was $61.4 million, or $3.98 per diluted share, compared to $58.1 million, or $3.80 per diluted share, for the comparable 2012 period. Safety’s book value per share decreased to $45.18 at December 31, 2013 from $45.31 at December 31, 2012 primarily due to a decrease in net unrealized investment gains. Safety paid $0.60 per share in dividends to investors during both the quarters ended December 31, 2013 and 2012. Safety paid $2.40 per share in dividends to investors during the year ended December 31, 2013 compared to $2.20 per share during the comparable 2012 period.

Direct written premiums for the quarter ended December 31, 2013 increased by $5.5 million, or 3.5%, to $160.6 million from $155.1 million for the comparable 2012 period. Direct written premiums for the twelve months ended December 31, 2013 increased by $35.5 million, or 5.1%, to $731.7 million from $696.2 million for the comparable 2012 period. The increase for the quarter ended December 31, 2013 from the comparable 2012 period occurred primarily in our homeowners and commercial automobile business lines, which experienced increases of 6.2% and 7.0%, respectively in written exposures. The increase for the twelve months ended December 31, 2013 from the comparable 2012 period occurred primarily in our homeowners and personal automobile business lines, which experienced increases of 4.5% and 2.5%, respectively, in average written premium per exposure, increases of 5.7% and 10.9% in written exposures in our homeowners and commercial automobile business lines, respectively, and a slight decrease of 0.3% in written exposures in our personal automobile business line.

Net written premiums for the quarter ended December 31, 2013 increased by $5.4 million, or 3.7%, to $151.3 million from $145.9 million for the comparable 2012 period. Net written premiums for the twelve months ended December 31, 2013 increased by $33.6 million, or 5.1%, to $697.5 million from $663.9 million for the comparable 2012 period. Net written premiums increased primarily due to increases in direct written premiums in our homeowners, commercial automobile, and personal automobile business lines as discussed above.

Net earned premiums for the quarter ended December 31, 2013 increased by $8.2 million, or 5.0%, to $173.6 million from $165.4 million for the comparable 2012 period. Net earned premiums for the twelve months ended December 31, 2013 increased by $39.4 million, or 6.1%, to $681.9 million from $642.5 million for the comparable 2012 period. Net earned premiums increased primarily due to increases in direct written premiums in our personal automobile and homeowners business lines as discussed above.

Net investment income for the quarter ended December 31, 2013 increased by $2.6 million, or 25.2%, to $12.9 million from $10.3 million for the comparable 2012 period. Net investment income for the year ended December 31, 2013 increased by $2.1 million, or 5.3%, to $43.0 million from $40.9 million for the comparable 2012 period, primarily due to the diversification of the investment portfolio into equity securities. Net effective annualized yield on the investment portfolio increased to 4.3% for the quarter ended December 31, 2013 from 3.6% for the comparable 2012 period. Net effective annual yield was 3.7% for the years ended December 31, 2013 and 2012. Our duration was 4.1 years at December 31, 2013, up from 3.6 years at December 31, 2012.

For the quarter ended December 31, 2013, loss and loss adjustment expenses incurred increased by $4.4 million, or 3.8%, to $119.4 million from $115.0 million for the comparable 2012 period. For the year ended December 31, 2013 loss and loss adjustment expenses incurred increased by $25.5 million, or 6.0%, to $447.7 million from $422.2 million for the comparable 2012 period. Loss, expense, and combined ratios calculated under U.S. generally accepted accounting principles for the quarter ended December 31, 2013 were 68.8%, 31.8%, and 100.6%, respectively, compared to 69.6%, 32.4%, and 102.0%, respectively, for the comparable 2012 period. Loss, expense, and combined ratios calculated under U.S. generally accepted accounting principles for the twelve months ended December 31, 2013 were 65.7%, 30.8%, and 96.5%, respectively, compared to 65.7%, 31.2%, and 96.9%, respectively, for the comparable 2012 period. Total prior year favorable development included in the pre-tax results for the quarter and twelve months ended December 31, 2013 was $7.1 million and $28.9 million, respectively, compared to $5.4 million and $17.3 million, respectively, for the comparable 2012 periods.

About Safety: Safety Insurance Group, Inc. is the parent of Safety Insurance Company, Safety Indemnity Insurance Company, and Safety Property and Casualty Insurance Company which are Boston, MA, based writers of property and casualty insurance. Safety is a leading writer of personal automobile insurance in Massachusetts.

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, 2012 Form 10-K with the SEC on March 18, 2013 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. Although a number of national insurers that are much larger than we are do not currently compete in a material way in the Massachusetts private passenger automobile market, if one or more of these companies decided to aggressively enter the market it could have a material adverse effect on us. Other significant factors include 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, 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, 2012 filed with the SEC on March 18, 2013.

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,
2013 2012
(Unaudited)
Assets
Investments:

Securities available for sale:

Fixed maturities, at fair value (amortized cost: $1,087,232 and $1,100,414) $ 1,104,957 $ 1,165,553
Equity securities, at fair value (cost: $83,134 and $21,237) 91,871 22,800
Other invested assets 5,748   -  
Total investments 1,202,576 1,188,353
Cash and cash equivalents 55,877 35,383
Accounts receivable, net of allowance for doubtful accounts 169,304 165,750
Receivable for securities sold 1,320 835
Accrued investment income 10,329 10,587
Taxes recoverable 709 5,529
Receivable from reinsurers related to paid loss and loss adjustment expenses 4,588 6,610
Receivable from reinsurers related to unpaid loss and loss adjustment expenses 60,346 52,185
Ceded unearned premiums 17,900 16,206
Deferred policy acquisition costs 63,388 60,665
Deferred income taxes 3,984 -
Equity and deposits in pools 18,733 16,965
Other assets   16,403     15,278  
Total assets $ 1,625,457   $ 1,574,346  
 
Liabilities
Loss and loss adjustment expense reserves $ 455,014 $ 423,842
Unearned premium reserves 370,583 353,219
Accounts payable and accrued liabilities 66,508 65,458
Payable for securities purchased 13,327 2,630
Payable to reinsurers 7,094 7,056
Deferred income taxes - 8,202
Other liabilities   17,744     19,580  
Total liabilities   930,270     879,987  
 
Shareholders' equity

Common stock: $0.01 par value; 30,000,000 shares authorized; 17,207,929 and 17,052,034 shares issued

172 170
Additional paid-in capital 170,391 163,041
Accumulated other comprehensive income, net of taxes 17,200 43,356
Retained earnings 567,792 543,361
Treasury stock, at cost: 1,819,547 and 1,728,645 shares   (60,368 )   (55,569 )
Total shareholders' equity   695,187     694,359  
Total liabilities and shareholders' equity $ 1,625,457   $ 1,574,346  
 
 
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, Twelve Months Ended December 31,
2013 2012 2013 2012
Net earned premiums $ 173,635 $ 165,370 $ 681,870 $ 642,469
Net investment income 12,917 10,319 43,054 40,870
Net realized gains on investments 478 749 1,677 1,975
Finance and other service income   4,763     4,784     18,683     18,553  
Total revenue   191,793     181,222     745,284     703,867  
 
Losses and loss adjustment expenses 119,445 115,033 447,749 422,217
Underwriting, operating and related expenses 55,253 53,536 209,758 200,138
Interest expense   23     22     89     88  
Total expenses   174,721     168,591     657,596     622,443  
 
Income before income taxes 17,072 12,631 87,688 81,424
Income tax expense   5,420     3,060     26,337     23,354  
Net income $ 11,652   $ 9,571   $ 61,351   $ 58,070  
 
Earnings per weighted average common share:
Basic $ 0.76   $ 0.62   $ 4.00   $ 3.80  
Diluted $ 0.76   $ 0.62   $ 3.98   $ 3.80  
 
Cash dividends paid per common share $ 0.60   $ 0.60   $ 2.40   $ 2.20  
 

Number of shares used in computing earnings per share:

Basic   15,351,039     15,320,265     15,354,468     15,288,346  
Diluted   15,412,687     15,328,772     15,399,801     15,295,452  
 
 
Safety Insurance Group, Inc. and Subsidiaries
Additional Premium Information
(Unaudited)
(Dollars in thousands)
 
Three Months Ended December 31, Twelve Months Ended December 31,
2013 2012 2013 2012
Written Premiums
Direct $ 160,624 $ 155,130 $ 731,680 $ 696,220
Assumed 5,167 4,709 20,593 17,943
Ceded   (14,512 )   (13,880 )   (54,733 )   (50,221 )
Net written premiums $ 151,279   $ 145,959   $ 697,540   $ 663,942  
 
Earned Premiums
Direct $ 182,634 $ 173,706 $ 715,657 $ 673,596
Assumed 4,839 4,350 19,251 16,910
Ceded   (13,838 )   (12,686 )   (53,038 )   (48,037 )
Net earned premiums $ 173,635   $ 165,370   $ 681,870   $ 642,469  

Contacts

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

Release Summary

SAFETY ANNOUNCES FOURTH QUARTER AND YEAR END 2013 RESULTS

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Contacts

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