Safety Announces Second Quarter 2019 Results and Raises Third Quarter 2019 Dividend

BOSTON--()--Safety Insurance Group, Inc. (NASDAQ:SAFT) today reported second quarter 2019 results. Net income for the quarter ended June 30, 2019 was $25.9 million, or $1.68 per diluted share, compared to net income of $26.8 million, or $1.75 per diluted share, for the comparable 2018 period. Net income for the six months ended June 30, 2019 was $55.9 million, or $3.63 per diluted share, compared to net income of $35.9 million, or $2.35 per diluted share, for the comparable 2018 period. Non-generally accepted accounting principles (“non-GAAP”) operating income, as defined below, for the quarter ended June 30, 2019 was $1.47 per diluted share, compared to $1.81 per diluted share, for the comparable 2018 period. Non-GAAP operating income for the six months ended June 30, 2019 was $2.83 per diluted share, compared to $2.52 per diluted share, for the comparable 2018 period. Safety’s book value per share increased to $50.90 at June 30, 2019 from $47.01 at December 31, 2018. Safety paid $0.80 per share in dividends to investors during each of the quarters ended June 30, 2019 and 2018, respectively. Safety paid $3.20 per share in dividends to investors during the year ended December 31, 2018.

Today, our Board of Directors approved and declared an increase in the quarterly cash dividend from $0.80 to $0.90 per share on the issued and outstanding common stock payable on September 13, 2019 to shareholders of record at the close of business on September 3, 2019.

Direct written premiums for the quarter ended June 30, 2019 increased by $0.5 million, or 0.2%, to $233.6 million from $233.1 million for the comparable 2018 period. Direct written premiums for the six months ended June 30, 2019 increased by $0.2 million to $437.0 million from $436.8 million for the comparable 2018 period. The 2019 increase occurred primarily in our commercial automobile and homeowners lines of business.

Net written premiums for the quarter ended June 30, 2019 increased by $1.8 million, or 0.8%, to $217.3 million from $215.5 million for the comparable 2018 period. Net written premiums for the six months ended June 30, 2019 increased by $1.7 million, or 0.4%, to $407.2 million from $405.5 million for the comparable 2018 period. Net earned premiums for the quarter ended June 30, 2019 increased by $2.3 million, or 1.2%, to $196.4 million from $194.1 million for the comparable 2018 period. Net earned premiums for the six months ended June 30, 2019 increased by $4.8 million, or 1.2%, to $390.9 million from $386.1 million for the comparable 2018 period.

For the quarter ended June 30, 2019, loss and loss adjustment expenses incurred increased by $9.2 million, or 8.1%, to $122.4 million from $113.2 million for the comparable 2018 period. For the six months ended June 30, 2019, loss and loss adjustment expenses incurred decreased by $2.5 million, or 1.0%, to $248.4 million from $250.9 million for the comparable 2018 period. Loss, expense, and combined ratios calculated under U.S. generally accepted accounting principles for the quarter ended June 30, 2019 were 62.3%, 31.0%, and 93.3%, respectively, compared to 58.3%, 31.7%, and 90.0%, respectively, for the comparable 2018 period. Loss, expense, and combined ratios calculated under U.S. generally accepted accounting principles for the six months ended June 30, 2019 were 63.5%, 31.0%, and 94.5%, respectively, compared to 65.0%, 31.7%, and 96.7%, respectively, for the comparable 2018 period. Total prior year favorable development included in the pre-tax results for the quarter ended June 30, 2019 was $10.4 million compared to $12.1 million for the comparable 2018 period. Total prior year favorable development included in the pre-tax results for the six months ended June 30, 2019 was $22.3 million compared to $26.3 million for the comparable 2018 period.

Net investment income for the quarter ended June 30, 2019 increased by $0.4 million, or 3.8%, to $10.6 million from $10.2 million for the comparable 2018 period. Net investment income for the six months ended June 30, 2019 increased by $1.6 million, or 7.8%, to $22.3 million from $20.7 million for the comparable 2018 period. The increase is a result of an increase in the average invested asset balance and improved investment income yields compared to the prior year. Net effective annualized yield on the investment portfolio was 3.2% for the three months ended June 30, 2019 and 2018. Net effective annualized yield on the investment portfolio for the six months ended June 30, 2019 was 3.3% compared to 3.2% for the comparable 2018 period. Our duration on fixed maturities was 3.0 years at June 30, 2019 and 3.6 years at December 31, 2018, respectively.

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 operating income per diluted share consist of our GAAP net income adjusted by the net realized gains, net impairment losses on investments, change in net unrealized gains on equity securities and taxes related thereto. For the quarter ended June 30, 2019 an increase of $3.8 million for the change in unrealized gains was recognized within income before income taxes, compared to a decrease of $2.7 million recognized in the comparable 2018 period. For the six months ended June 30, 2019, an increase of $15.6 million for the change in unrealized gains was recognized in income before income taxes, compared to a decrease of $6.2 million recognized in the comparable 2018 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, 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, 2018 Form 10-K with the SEC on February 28, 2019 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, 2018 filed with the SEC on February 28, 2019.

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,

 

 

2019

 

2018

 

 

(Unaudited)

 

 

 

Assets

 

 

 

 

 

 

Investments:

 

 

 

 

 

 

Fixed maturities, available for sale, at fair value (amortized cost: $1,150,224 and $1,175,413)

 

$

 

1,178,251

 

 

$

 

1,161,862

 

Equity securities, at fair value (cost: $145,041 and $142,948)

 

 

165,659

 

 

 

148,011

 

Other invested assets

 

 

30,124

 

 

 

23,481

 

Total investments

 

 

1,374,034

 

 

 

1,333,354

 

Cash and cash equivalents

 

 

37,968

 

 

 

37,582

 

Accounts receivable, net of allowance for doubtful accounts

 

 

209,658

 

 

 

190,062

 

Receivable for securities sold

 

 

964

 

 

 

1,039

 

Accrued investment income

 

 

8,304

 

 

 

8,420

 

Taxes recoverable

 

 

1,671

 

 

 

Receivable from reinsurers related to paid loss and loss adjustment expenses

 

 

28,819

 

 

 

13,691

 

Receivable from reinsurers related to unpaid loss and loss adjustment expenses

 

 

112,228

 

 

 

108,398

 

Ceded unearned premiums

 

 

35,900

 

 

 

33,974

 

Deferred policy acquisition costs

 

 

75,670

 

 

 

73,355

 

Deferred income taxes

 

 

 

 

8,749

 

Equity and deposits in pools

 

 

28,492

 

 

 

28,094

 

Operating lease right-of-use-assets

 

 

36,116

 

 

 

Other assets

 

 

23,290

 

 

 

19,522

 

Total assets

 

$

 

1,973,114

 

 

$

 

1,856,240

 

 

 

 

 

 

 

 

Liabilities

 

 

 

 

 

 

Loss and loss adjustment expense reserves

 

$

 

589,123

 

 

$

 

584,719

 

Unearned premium reserves

 

 

453,612

 

 

 

435,380

 

Accounts payable and accrued liabilities

 

 

56,799

 

 

 

71,896

 

Payable for securities purchased

 

 

7,684

 

 

 

5,156

 

Payable to reinsurers

 

 

21,240

 

 

 

12,220

 

Deferred income taxes

 

 

1,221

 

 

 

Taxes payable

 

 

 

 

6,090

 

Operating lease liabilities

 

 

36,116

 

 

 

Other liabilities

 

 

24,270

 

 

 

22,135

 

Total liabilities

 

 

1,190,065

 

 

 

1,137,596

 

 

 

 

 

 

 

 

Shareholders’ equity

 

 

 

 

 

 

Common stock: $0.01 par value; 30,000,000 shares authorized; 17,663,364 and 17,566,180 shares issued

 

 

177

 

 

 

176

 

Additional paid-in capital

 

 

199,644

 

 

 

196,292

 

Accumulated other comprehensive income (loss), net of taxes

 

 

22,141

 

 

 

(10,706

)

Retained earnings

 

 

644,922

 

 

 

616,717

 

Treasury stock, at cost: 2,279,570 shares

 

 

(83,835

)

 

 

(83,835

)

Total shareholders’ equity

 

 

783,049

 

 

 

718,644

 

Total liabilities and shareholders’ equity

 

$

 

1,973,114

 

 

$

 

1,856,240

 

 

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,

 

 

2019

 

2018

 

2019

 

2018

 

 

 

 

 

 

 

 

 

 

 

 

 

Net earned premiums

 

$

196,426

 

$

194,125

 

$

390,917

 

$

386,158

Net investment income

 

 

10,574

 

 

10,188

 

 

22,325

 

 

20,719

Earnings from partnership investments

 

 

735

 

 

487

 

 

1,570

 

 

5,351

Net realized gains on investments

 

 

483

 

 

1,589

 

 

319

 

 

2,895

Change in net unrealized gains on equity investments

 

 

3,754

 

 

(2,711)

 

 

15,555

 

 

(6,193)

Net impairment losses on investments (a)

 

 

(54)

 

 

 

 

(274)

 

 

Finance and other service income

 

 

4,084

 

 

4,292

 

 

8,169

 

 

8,759

Total revenue

 

 

216,002

 

 

207,970

 

 

438,581

 

 

417,689

 

 

 

 

 

 

 

 

 

 

 

 

 

Losses and loss adjustment expenses

 

 

122,393

 

 

113,227

 

 

248,420

 

 

250,871

Underwriting, operating and related expenses

 

 

60,908

 

 

61,573

 

 

121,342

 

 

122,429

Interest expense

 

 

23

 

 

23

 

 

45

 

 

45

Total expenses

 

 

183,324

 

 

174,823

 

 

369,807

 

 

373,345

 

 

 

 

 

 

 

 

 

 

 

 

 

Income before income taxes

 

 

32,678

 

 

33,147

 

 

68,774

 

 

44,344

Income tax expense

 

 

6,744

 

 

6,331

 

 

12,894

 

 

8,403

Net income

 

$

25,934

 

$

26,816

 

$

55,880

 

$

35,941

 

 

 

 

 

 

 

 

 

 

 

 

 

Earnings per weighted average common share:

 

 

 

 

 

 

 

 

 

 

 

 

Basic

 

$

1.70

 

$

1.77

 

$

3.66

 

$

2.37

Diluted

 

$

1.68

 

$

1.75

 

$

3.63

 

$

2.35

 

 

 

 

 

 

 

 

 

 

 

 

 

Cash dividends paid per common share

 

$

0.80

 

$

0.80

 

$

1.60

 

$

1.60

 

 

 

 

 

 

 

 

 

 

 

 

 

Number of shares used in computing earnings per share:

 

 

 

 

 

 

 

 

 

 

 

 

Basic

 

 

15,220,822

 

 

15,090,435

 

 

15,181,034

 

 

15,068,321

Diluted

 

 

15,346,234

 

 

15,213,414

 

 

15,326,121

 

 

15,202,338

 

 

 

 

 

 

 

 

 

 

 

 

 

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

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Reconciliation of Net Income to Non-GAAP Operating Income

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Net income

 

$

25,934

 

$

26,816

 

$

55,880

 

$

35,941

Exclusions from net income:

 

 

 

 

 

 

 

 

 

 

 

 

Net realized gains on investments

 

 

(483)

 

 

(1,589)

 

 

(319)

 

 

(2,895)

Change in net unrealized gains on equity investments

 

 

(3,754)

 

 

2,711

 

 

(15,555)

 

 

6,193

Net impairment losses on investments

 

 

54

 

 

-

 

 

274

 

 

-

Income tax expense (benefit) on exclusions from net income

 

 

878

 

 

(236)

 

 

3,276

 

 

(693)

Non-GAAP operating income

 

$

22,629

 

$

27,702

 

$

43,556

 

$

38,546

 

 

 

 

 

 

 

 

 

 

 

 

 

Net income per diluted share

 

$

1.68

 

$

1.75

 

$

3.63

 

$

2.35

Exclusions from net income:

 

 

 

 

 

 

 

 

 

 

 

 

Net realized gains on investments

 

 

(0.03)

 

 

(0.10)

 

 

(0.02)

 

 

(0.19)

Change in net unrealized gains on equity investments

 

 

(0.24)

 

 

0.18

 

 

(1.01)

 

 

0.41

Net impairment losses on investments

 

 

-

 

 

-

 

 

0.02

 

 

-

Income tax expense (benefit) on exclusions from net income

 

 

0.06

 

 

(0.02)

 

 

0.21

 

 

(0.05)

Non-GAAP operating income per diluted share

 

$

1.47

 

$

1.81

 

$

2.83

 

$

2.52

 

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

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Three Months Ended June 30,

 

Six Months Ended June 30,

 

 

2019

 

2018

 

2019

 

2018

Written Premiums

 

 

 

 

 

 

 

 

 

 

 

 

Direct

 

$

 

233,595

 

 

$

 

233,050

 

 

$

 

436,982

 

 

$

 

436,783

 

Assumed

 

 

8,175

 

 

 

8,297

 

 

 

16,420

 

 

 

16,245

 

Ceded

 

 

(24,485

)

 

 

(25,832

)

 

 

(46,179

)

 

 

(47,500

)

Net written premiums

 

$

 

217,285

 

 

$

 

215,515

 

 

$

 

407,223

 

 

$

 

405,528

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Earned Premiums

 

 

 

 

 

 

 

 

 

 

 

 

Direct

 

$

 

210,334

 

 

$

 

208,297

 

 

$

 

417,642

 

 

$

 

412,116

 

Assumed

 

 

8,213

 

 

 

7,880

 

 

 

17,528

 

 

 

16,767

 

Ceded

 

 

(22,121

)

 

 

(22,052

)

 

 

(44,253

)

 

 

(42,725

)

Net earned premiums

 

$

 

196,426

 

 

$

 

194,125

 

 

$

 

390,917

 

 

$

 

386,158

 

 

Contacts

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

Release Summary

Safety Announces Second Quarter 2019 Results and Raises Third Quarter 2019 Dividend

Contacts

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