Safety Announces Second Quarter 2016 Results and Declares Third Quarter 2016 Dividend

BOSTON--()--Safety Insurance Group, Inc. (NASDAQ:SAFT) today reported second quarter 2016 results. Net income for the quarter ended June 30, 2016 was $21.4 million, or $1.41 per diluted share, compared to net loss of $1.1 million, or $0.07 per diluted share, for the comparable 2015 period. Net income for the six months ended June 30, 2016 was $34.0 million, or $ 2.25 per diluted share, compared to net loss of $36.1 million, or $2.43 per diluted share, for the comparable 2015 period. Safety’s book value per share increased to $44.86 at June 30, 2016 from $42.70 at December 31, 2015. Safety paid $0.70 per share in dividends to investors during the quarters ended June 30, 2016 and June 30, 2015 respectively. Safety paid $2.80 per share in dividends to investors during the year ended December 31, 2015.

Direct written premiums for the quarter ended June 30, 2016 increased by $8.1 million, or 3.8%, to $221.3 million from $213.2 million for the comparable 2015 period. Direct written premiums for the six months ended June 30, 2016 increased by $9.3 million, or 2.3%, to $417.3 million from $408.0 million for the comparable 2015 period. The 2016 increase occurred primarily in our homeowners and commercial automobile lines of business, which experienced increases in average written premium per exposure of 8.4% and 7.4% respectively.

Net written premiums for the quarter ended June 30, 2016 increased by $3.7 million, or 1.8%, to $207.9 million from $204.2 million for the comparable 2015 period. Net written premiums for the six months ended June 30, 2016 increased by $4.1 million, or 1.1%, to $393.6 million from $389.5 million for the comparable 2015 period. Net earned premiums for the quarter ended June 30, 2016 increased by $4.9 million, or 2.7%, to $187.3 million from $182.4 million for the comparable 2015 period. Net earned premiums for the six months ended June 30, 2016 increased by $8.0 million, or 2.2%, to $373.0 million from $365.0 million for the comparable 2015 period. Net written and net earned premiums increased primarily due to the factors that increased direct written premiums.

For the quarter ended June 30, 2016, loss and loss adjustment expenses incurred decreased by $31.9 million, or 21.7%, to $115.1 million from $147.0 million for the comparable 2015 period. For the six months ended June 30, 2016, loss and loss adjustment expenses incurred decreased by $114.2 million, or 32.1%, to $241.1 million from $355.3 million for the comparable 2015 period.

Loss, expense, and combined ratios calculated under U.S. generally accepted accounting principles for the quarter ended June 30, 2016 were 61.4%, 30.7%, and 92.1%, respectively, compared to 80.6%, 28.6%, and 109.2%, respectively, for the comparable 2015 period. Loss, expense, and combined ratios calculated under U.S. generally accepted accounting principles for the six months ended June 30, 2016 were 64.6%, 30.4%, and 95.0%, respectively, compared to 97.4%, 28.6%, and 126.0%, respectively, for the comparable 2015 period. Loss, expense and combined ratios for the six months ended June 30, 2015 were impacted by the highest recorded snowfall totals in Massachusetts history. Total prior year favorable development included in the pre-tax results for the quarter ended June 30, 2016 was $11.8 million compared to $7.9 million for the comparable 2015 period. Total prior year favorable development included in the pre-tax results for the six months ended June 30, 2016 was $21.9 million compared to $12.0 million for the comparable 2015 period.

Net investment income for the quarter ended June 30, 2016 decreased by $0.7 million, or 6.6%, to $9.6 million from $10.3 million for the comparable 2015 period. Net investment income for the six months ended June 30, 2016 decreased by $1.6 million, or 7.7%, to $19.3 million from $20.9 million for the comparable 2015 period. The decrease is a result of changes in the average invested asset balance as a result of investment proceeds used in the payment of claims resulting from the 2015 winter events. Net effective annualized yield on the investment portfolio for the quarter ended June 30, 2016 was 3.2% compared to 3.4% for the comparable 2015 period. Net effective annualized yield on the investment portfolio for the six months ended June 30, 2016 was 3.2% compared to 3.4% for the comparable 2015 period. Our duration was 4.0 years at June 30, 2016 and 4.1 at December 31, 2015, respectively.

Today, our Board of Directors approved and declared a quarterly cash dividend of $0.70 per share on the issued and outstanding common stock, payable on September 15, 2016 to shareholders of record at the close of business on September 1, 2016.

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, 2015 Form 10-K with the SEC on February 26, 2016 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, 2015 filed with the SEC on February 26, 2016.

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,
2016 2015
(Unaudited)
Assets
Investments:
Securities available for sale:
Fixed maturities, at fair value (amortized cost: $1,068,806 and $1,063,971) $ 1,112,277 $ 1,081,637
Equity securities, at fair value (cost: $103,898 and $102,541) 116,961 110,204
Other invested assets   19,304     17,602  
Total investments 1,248,542 1,209,443
Cash and cash equivalents 44,053 47,494
Accounts receivable, net of allowance for doubtful accounts 195,509 178,567
Receivable for securities sold 518 260
Accrued investment income 8,469 8,922
Taxes recoverable 17,037 15,497
Receivable from reinsurers related to paid loss and loss adjustment expenses 26,444 40,972
Receivable from reinsurers related to unpaid loss and loss adjustment expenses 78,043 68,261
Ceded unearned premiums 28,886 23,222
Deferred policy acquisition costs 72,386 68,937
Deferred income taxes 4,430
Equity and deposits in pools 27,695 23,558
Other assets   16,917     14,306  
Total assets $ 1,764,499   $ 1,703,869  
 
Liabilities
Loss and loss adjustment expense reserves $ 544,082 $ 553,977
Unearned premium reserves 428,135 401,961
Accounts payable and accrued liabilities 51,762 53,722
Payable for securities purchased 7,093 8,607
Payable to reinsurers 23,177 11,547
Deferred income taxes 7,117
Other liabilities   23,098     29,556  
Total liabilities   1,084,464     1,059,370  
 
 
Shareholders’ equity
Common stock: $0.01 par value; 30,000,000 shares authorized; 17,437,644 and 17,373,643 shares issued 174 174
Additional paid-in capital 182,278 179,896
Accumulated other comprehensive income, net of taxes 36,746 16,464
Retained earnings 544,672 531,800
Treasury stock, at cost: 2,279,570 shares   (83,835 )   (83,835 )
Total shareholders’ equity   680,035     644,499  
Total liabilities and shareholders’ equity $ 1,764,499   $ 1,703,869  
 

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,
2016 2015 2016 2015
 
Net earned premiums $ 187,393 $ 182,447 $ 373,047 $ 365,011
Net investment income 9,641 10,317 19,268 20,874
Earnings from partnership investments 1,409 577 2,287 577
Net realized (losses) gains on investments 360 (173 ) 37 238
Net impairment losses on investments (a) (137 ) (429 )
Finance and other service income   4,284     4,434     8,569     8,941  
Total revenue   202,950     197,602     402,779     395,641  
 
Losses and loss adjustment expenses 115,144 147,026 241,123 355,350
Underwriting, operating and related expenses 57,513 52,198 113,470 104,295
Interest expense   23     23     45     45  
Total expenses   172,680     199,247     354,638     459,690  
 
Income (loss) before income taxes 30,270 (1,645 ) 48,141 (64,049 )
Income tax expense (credit)   8,905     (592 )   14,106     (27,925 )
Net income (loss) $ 21,365   $ (1,053 ) $ 34,035   $ (36,124 )
 
Earnings (loss) per weighted average common share:
Basic $ 1.42   $ (0.07 ) $ 2.26   $ (2.43 )
Diluted $ 1.41   $ (0.07 ) $ 2.25   $ (2.43 )
 
Cash dividends paid per common share $ 0.70   $ 0.70   $ 1.40   $ 1.40  
 
Number of shares used in computing earnings (loss) per share:
Basic   14,960,516     14,879,047     14,932,237     14,851,742  
Diluted   15,041,077     14,879,047     14,988,546     14,851,742  
 

(a) No portion of the other-than-temporary impairments recognized in the period indicated were included in comprehensive income

 

Safety Insurance Group, Inc. and Subsidiaries
Additional Premium Information
(Unaudited)
(Dollars in thousands)

               
Three Months Ended June 30,   Six Months Ended June 30,
2016 2015 2016 2015
Written Premiums
Direct $ 221,359 $ 213,246 $ 417,311 $ 407,979
Assumed 8,414 6,640 15,554 13,932
Ceded   (21,867 )   (15,709 )   (39,307 )   (32,444 )
Net written premiums $ 207,906   $ 204,177   $ 393,558   $ 389,467  
 
Earned Premiums
Direct $ 197,090 $ 192,574 $ 391,385 $ 383,285
Assumed 7,631 5,762 15,306 12,600
Ceded   (17,328 )   (15,889 )   (33,644 )   (30,874 )
Net earned premiums $ 187,393   $ 182,447   $ 373,047   $ 365,011  

Contacts

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

Release Summary

SAFETY ANNOUNCES SECOND QUARTER 2016 RESULTS AND DECLARES THIRD QUARTER 2016 DIVIDEND

Contacts

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