Ides Capital Delivers Letter Commenting on Recent Changes at Safety Insurance Group

Notes that Company Has Made Significant Changes as a Result of Ides’ Engagement and Announces Withdrawal of Director Nominees

Urges New Directors John Farina and Deborah Gray to Immediately Set a Tone of Enhanced Governance, Independence and Stakeholder and Shareholder Advocacy in the Boardroom

Highlights Need for Additional ESG, Operational and Strategic Improvements at the Company

Ides Will Continue to Monitor Safety’s Progress and Will Not Hesitate to Consider Any and All Steps to Improve Shareholder Value Going Forward

NEW YORK--()--Ides Capital Management, LP (together with its affiliates, “Ides”) is a New York-based investment advisor that engages with corporate boards and management teams to drive long-term shareholder value, sustainable change and inclusive outcomes at small and mid-capitalization publicly traded companies over a multi-year hold period. Ides, a shareholder of Safety Insurance Group, Inc. (“Safety”, “Safety Insurance” or the “Company”) (NASDAQ: SAFT), today sent a letter to the Company’s Board of Directors (the “Board”).

The full text of the letter is below:

March 31, 2022

To the Board of Directors of Safety Insurance Group, Inc.,

We are writing today to inform you that, in light of the numerous actions undertaken by Safety’s Board in response to Ides’ engagement and in alignment with many of our suggested improvements, we have made the decision to withdraw our two highly qualified nominees, Olga Kondrashova and Farooq Sheikh, for election at the upcoming annual meeting of shareholders. We want to make very clear to the Board and to Safety’s stakeholders that we have not come to this decision lightly because we firmly believe that there remain many unaddressed opportunities at Safety. Moreover, our concerns are compounded by our observation that Safety’s shareholders are represented by a Board that institutes obvious and sorely-needed changes on a purely reactive basis. This unsatisfactory reality is evidenced by both the Board’s hasty and “coincidental” decision to remedy a myriad of long-standing issues only when faced with Ides’ impending proxy fight as well as the Board’s similarly reactive moves to rectify conspicuous governance shortcomings upon the heels of outsized engagements by other Safety investors, including their submission of shareholder proposals.

We are nevertheless gratified that Ides’ engagement with Safety has driven substantial improvement to a wide range of policies and practices and we are pleased to see what we view as recognition of these important changes through the recent increase in the Company’s market valuation. In fact, since Ides’ December 8, 2021 delivery of our notice of intent to nominate directors, Safety’s stock has returned +14.6%, outperforming its insurance peers by 8.5% (NYSE: KIE, +6.1%), small capitalization companies by 22.7% (NYSE: IWM, -8.1%) and the Nasdaq Composite by 23.1% (-8.5%). This outperformance represents a positive divergence from the Company’s material underperformance relative to these same indices/ETFs over the prior 1-, 3- and 5-year periods preceding Ides’ nomination notice. Below, we summarize Ides’ suggested improvements and Safety’s implemented responses:

Ides’ Proposed Enhancements

Safety’s Implemented Responses

Board Refreshment

  • Resignation of Director Frederic Lindeberg, who in prior elections had garnered withhold votes that placed him among the lowest deciles of shareholder support with no action by the Board
  • Addition of two new and independent directors – John Farina and Deborah Gray

Racial, Ethnic and Multicultural Diversity

  • Appointment of Deborah Gray, who Ides understands to be the first racially, ethnically or multiculturally diverse director to serve on Safety’s Board

Gender Diversity

  • First instance that Safety’s Board has three concurrently serving gender diverse directors

Optimized Capital Allocation

  • New $50mm share repurchase plan, the first adoption of a repurchase plan increase since November 2013
  • Resumption of share repurchases in Q4 2021, representing first repurchases since September 2020

Improved Board Structure

  • Creation of Lead Independent Director role
  • Adoption of three-year term limits for committee chairs

Enhanced Shareholder Rights

  • Ability for shareholders to act by written consent
  • Ability for shareholders to call special meetings
  • Removal of supermajority voting standard and implementation of simple majority voting standard

With respect to the Company’s recently announced proposals to amend Safety’s Certificate of Incorporation and Bylaws to permit shareholders to act by written consent and call special meetings of shareholders, while we agree these are important governance enhancements, we are disappointed with the Board’s decision to place material restrictions on these rights and believe it reflects the Board’s troubling pattern of window-dressing and doing the bare minimum in an attempt to appease the status quo. We also remain deeply concerned that the Company chose not to declassify the Board as part of these governance enhancements, which would have materially improved the Company’s corporate governance profile.

Further, we note that, notwithstanding the above improvements in response to Ides’ engagement with Safety, the Board has yet to take action on several other pressing areas of concern and opportunities for improvement previously highlighted by Ides, including:

  • the necessity that Safety begins to behave as a public company through the implementation of quarterly and annual earnings calls, the participation in investment industry conferences and the development of relationships with the sell side analysts;
  • the need to provide shareholders with direct email contact information for at least one and preferably several of Safety’s independent directors such that shareholders are not forced to communicate with the Board through management intermediaries;
  • the declassification of the Board;
  • the initiation of sustainability reporting;
  • the creation of a Board committee to review Safety’s elevated expense structure as well as strategic execution and opportunities;
  • the addition of directors with insurance industry operating experience as we remain deeply concerned that the only directors with industry operational experience are current CEO and Director George Murphy and former CEO and current Chair David Brussard; and
  • the addition of directors and executives with meaningful insurance industry operational experience in digital transformation.

We look forward to Safety’s Board continuing down its newly-found path of ESG, operational, capital allocation and strategic enhancement that improves Safety stakeholder outcomes and shareholder returns, as our nominees were prepared to implement broad-based change that we believe would unlock shareholder value in excess of +70% of current prices (implying a share price of approximately $155) over the next several years.

We believe it is incumbent upon the new Safety directors, Mr. Farina and Ms. Gray, to immediately set a tone of enhanced governance, independence and stakeholder and shareholder advocacy that represents a distinct departure from the incumbent Board’s modus operandi. Further, we believe that Mr. Farina’s and Ms. Gray’s credentials as directors will be assessed in this context and, should they succeed in driving transformative change, appropriately judged apart from their boardroom peers who have, in our opinion and over many years, failed to execute on even the bare minimum expected of public company fiduciaries. Accordingly, we believe the Board, and perhaps most especially its new directors Mr. Farina and Ms. Gray, should retain any additional expertise necessary to improve operational execution, strategic performance and ESG policies and practices. This expertise could certainly take the form of the retention of ESG and strategic consultants. However, we also strongly suggest that the Board swiftly recruit at least one independent director with insurance industry operating experience, a critical attribute that each of Ides’ nominees would have brought to Safety’s Board. On this point we want to be very clear: we have no reason to believe that the current Board is in any way equipped with the requisite operational and strategic experience and expertise necessary to effectively challenge current CEO and Director Murphy and former CEO and current Chair Brussard, the only Safety directors with insurance industry operating experience, each of whom Ides considers to be non-independent.

Finally, we remind Safety that Ides is a long-term shareholder and we will be watching the necessary forthcoming developments and improvements unfold (or fail to unfold) with great interest. We underscore that the Board has opted to not work constructively with Ides and we are therefore not subject to any arrangements nor standstill agreements. Should the Board fall short and decline to undertake additional and sorely-needed change to reverse Safety’s underperformance, Ides will consider any and all steps to improve stakeholder outcomes and long-term shareholder value. Importantly, Ides notes that the two directors we believe to be most answerable for Safety’s underperformance and, in their leadership positions, most accountable for its correction - Chair David Brussard and Lead Independent Director Thalia Meehan - will each stand for reelection at the 2023 annual meeting of Safety shareholders.


Dianne K. McKeever
Managing Member, Cofounder and Chief Investment Officer

About Ides Capital Management

Ides Capital Management LP is a New York-based activist investment advisor that engages with corporate boards and management teams to drive long-term shareholder value, sustainable change and inclusive outcomes at small and mid-capitalization publicly traded companies over a multi-year hold period.


Longacre Square Partners
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Longacre Square Partners
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