Safety Announces Fourth Quarter and Year End 2017 Results

BOSTON--()--Safety Insurance Group, Inc. (NASDAQ:SAFT) today reported fourth quarter 2017 results. Net income for the quarter ended December 31, 2017 was $11.3 million, or $0.72 per diluted share, compared to net income of $12.0 million, or $0.79 per diluted share, for the comparable 2016 period. Net income for the year ended December 31, 2017 was $62.4 million, or $4.10 per diluted share, compared to net income of $64.6 million, or $4.27 per diluted share, for the comparable 2016 period. Safety’s book value per share increased to $46.06 at December 31, 2017 from $44.27 at December 31, 2016. Safety paid $0.80 and $0.70 per share in dividends to investors during the quarters ended December 31, 2017 and 2016, respectively. Safety paid $3.00 per share in dividends to investors during the year ended December 31, 2017 compared to $2.80 per share during the comparable 2016 period.

Direct written premiums for the quarter ended December 31, 2017 increased by $3.6 million, or 2.0%, to $184.7 million from $181.1 million for the comparable 2016 period. Direct written premiums for the year ended December 31, 2017 increased by $15.7 million, or 1.9%, to $827.3 million from $811.6 million for the comparable 2016 period. The 2017 increase occurred in our private passenger automobile, commercial passenger automobile and homeowner lines of business, which experienced increases in average written premium per exposure of 3.3%, 2.3% and 4.0% respectively.

Net written premiums for the quarter ended December 31, 2017 increased by $3.6 million, or 2.1%, to $171.9 million from $168.3 million for the comparable 2016 period. Net written premiums for the year ended December 31, 2017 increased by $14.6 million, or 1.9%, to $781.1 million from $766.5 million for the comparable 2016 period. Net earned premiums for the quarter ended December 31, 2017 increased by $4.4 million, or 2.3%, to $196.4 million from $192.0 million for the comparable 2016 period. Net earned premiums for the year ended December 31, 2017 increased by $18.6 million, or 2.5%, to $774.4 million from $755.8 million for the comparable 2016 period. Net earned premiums increased primarily due to increases in our automobile and homeowners business as discussed above.

For the quarter ended December 31, 2017, loss and loss adjustment expenses incurred increased by $7.3 million, or 5.7%, to $134.6 million from $127.3 million for the comparable 2016 period. The increase in losses during the quarter is a result of reinsurance arbitration resulting from the 2015 winter snow event. On January 8, 2018 the Company received a final order from the panel of arbitrators in which the reinsurer would pay the Company $9.2 million for settlement of all paid and outstanding losses. The amount of recoverable in dispute as of December 31, 2017, which was based on our total incurred loss, was $20.9 million. As a result of the order, the remaining $11.7 million of recoverable was written off at December 31, 2017. For the year ended December 31, 2017, loss and loss adjustment expenses incurred increased by $10.5 million, or 2.1%, to $503.9 million from $493.4 million for the comparable 2016 period.

Total prior year favorable development, inclusive of the reinsurance recoverable loss, included in the pre-tax results for the quarter ended December 31, 2017 was $10.6 million compared to $11.8 million for the comparable 2016 period. Total prior year favorable development included in the pre-tax results for the year ended December 31, 2017 was $41.8 million compared to $45.4 million for the comparable 2016 period.

Loss, expense, and combined ratios calculated under U.S. generally accepted accounting principles for the quarter ended December 31, 2017 were 68.6%, 33.0%, and 101.6%, respectively, compared to 66.3%, 31.8%, and 98.1%, respectively, for the comparable 2016 period. Loss, expense, and combined ratios calculated under U.S. generally accepted accounting principles for the year ended December 31, 2017 were 65.1%, 32.1%, and 97.2%, respectively, compared to 65.3%, 30.8%, and 96.1%, respectively, for the comparable 2016 period. The increase in the expense ratio is primarily attributable to increases in contingent commissions and nonrecurring legal fees related to reinsurance arbitration.

Net investment income for the quarter ended December 31, 2017 increased by $0.2 million, or 2.6%, to $10.4 million from $10.2 million for the comparable 2016 period. Net investment income for the year ended December 31, 2017 increased by $0.4 million, or 0.9%, to $38.8 million from $38.4 million for the comparable 2016 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 was 3.2% for the quarters ended December 31, 2017 and December 31, 2016. Net effective annualized yield on the investment portfolio was 3.1% for the years ended December 31, 2017 and December 31, 2016. Our duration was 3.7 years at December 31, 2017 and 4.3 years at December 31, 2016, respectively.

On February 15, 2018, The Board of Directors approved a $0.80 per share quarterly cash dividend on its issued and outstanding common stock payable on March 15, 2018 to shareholders of record at the close of business on March 1, 2018.

About Safety: Safety Insurance Group, Inc., based in Boston, MA, is the parent of Safety Insurance Company, Safety Indemnity Insurance Company, and Safety Property and Casualty 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, 2016 Form 10-K with the SEC on February 24, 2017 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, 2016 filed with the SEC on February 24, 2017.

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,
2017
December 31,
2016
(Unaudited)
Assets
Investments:
Securities available for sale:
Fixed maturities, at fair value (amortized cost: $1,156,697 and $1,142,663) $ 1,172,026 $ 1,154,269
Equity securities, at fair value (cost: $90,481 and $92,326) 111,867 105,095
Other invested assets   23,162   21,142
Total investments 1,307,055 1,280,506
Cash and cash equivalents 41,708 20,052
Accounts receivable, net of allowance for doubtful accounts 190,649 187,696
Receivable for securities sold 1,380 7,098
Accrued investment income 8,876 8,858
Taxes recoverable 908
Receivable from reinsurers related to paid loss and loss adjustment expenses 24,776 29,504
Receivable from reinsurers related to unpaid loss and loss adjustment expenses 83,085 83,724
Ceded unearned premiums 32,175 28,585
Deferred policy acquisition costs 72,202 70,996
Deferred income taxes 3,083
Equity and deposits in pools 28,246 24,675
Other assets   16,219   13,469
Total assets $ 1,807,279 $ 1,758,246
 
Liabilities
Loss and loss adjustment expense reserves $ 574,054 $ 560,321
Unearned premium reserves 428,257 418,033
Accounts payable and accrued liabilities 60,701 66,805
Payable for securities purchased 4,188 5,564
Payable to reinsurers 13,801 13,502
Deferred income taxes 2,917
Taxes payable 1,110
Other liabilities   22,345   22,185
Total liabilities   1,106,263   1,087,520
 
Shareholders’ equity
Common stock: $0.01 par value; 30,000,000 shares authorized; 17,499,544 and 17,430,189 shares issued 175 174
Additional paid-in capital 189,714 184,549
Accumulated other comprehensive income, net of taxes 24,269 15,843
Retained earnings 570,693 553,995
Treasury stock, at cost: 2,279,570 shares   (83,835)   (83,835)
Total shareholders’ equity   701,016   670,726
Total liabilities and shareholders’ equity $ 1,807,279 $ 1,758,246
 
 

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,   Years Ended December 31,
2017   2016 2017   2016
 
Net earned premiums $ 196,361 $ 192,001 $ 774,420 $ 755,760
Net investment income 10,445 10,178 38,758 38,413
Earnings from partnership investments 849 96 2,082 3,185
Net realized gains on investments 1,210 631 6,036 5,559
Net impairment losses on investments (a) (369) (256) (798)
Finance and other service income   4,700   4,421   18,073   17,703
Total revenue   213,565   206,958   839,113   819,822
 
Losses and loss adjustment expenses 134,616 127,349 503,887 493,433
Underwriting, operating and related expenses 64,793 61,141 248,436 233,017
Interest expense   23   23   90   90
Total expenses   199,432   188,513   752,413   726,540
 
Income before income taxes 14,133 18,445 86,700 93,282
Income tax expense   2,824   6,492   24,313   28,697
Net income $ 11,309 $ 11,953 $ 62,387 $ 64,585
 
Earnings per weighted average common share:
Basic $ 0.73 $ 0.79 $ 4.13 $ 4.29
Diluted $ 0.72 $ 0.79 $ 4.10 $ 4.27
 
Cash dividends paid per common share $ 0.80 $ 0.70 $ 3.00 $ 2.80
 
Number of shares used in computing earnings per share:
Basic   15,021,228   14,960,853   15,010,751   14,946,453
Diluted   15,170,518   15,074,714   15,135,348   15,032,263
 

(a) No portion of the other-than-temporary impairments recognized in the period indicated were included in Other Comprehensive Income

 

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

 
    Three Months Ended December 31,     Years Ended December 31,
2017   2016 2017   2016
Written Premiums
Direct $ 184,683 $ 181,051 $ 827,316 $ 811,559
Assumed 8,888 7,750 34,214 30,424
Ceded   (21,670)   (20,483)   (80,476)   (75,513)
Net written premiums $ 171,901 $ 168,318 $ 781,054 $ 766,470
 
Earned Premiums
Direct $ 208,168 $ 203,163 $ 818,804 $ 796,366
Assumed 8,265 7,337 32,502 29,544
Ceded   (20,072)   (18,499)   (76,886)   (70,150)
Net earned premiums $ 196,361 $ 192,001 $ 774,420 $ 755,760
 

Contacts

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

Release Summary

Safety Announces Fourth Quarter and Year End 2017 Results.

Contacts

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