Safety Insurance Group, Inc. Announces First Quarter 2022 Results and Declares Second Quarter 2022 Dividend

BOSTON--()--Safety Insurance Group, Inc. (NASDAQ:SAFT) (“the Company” or “Safety”) today reported first quarter 2022 results.

George M. Murphy, President and Chief Executive Officer, commented: “We continue to see our operating results return to pre-COVID-19 pandemic levels. For the quarter ending March 31, 2022, we have posted a combined ratio of 98.7%, which is impacted by a return to pre-pandemic level frequency in our private passenger line of business and an increase in physical damage inflation costs. As always, we are focused on our expense ratio that improved this quarter compared to 2021 and is on average, below our regional competitors. We will continue our disciplined underwriting approach that puts an emphasis on the appropriate price for the risks insured.”

Net income for the quarter ended March 31, 2022 was $7.8 million, or $0.53 per diluted share, compared to net income of $36.2 million, or $2.42 per diluted share, for the comparable 2021 period. Non-generally accepted accounting principles (“non-GAAP”) operating income, as defined below, for the quarter ended March 31, 2022 was $0.99 per diluted share, compared to $1.93 per diluted share, for the comparable 2021 period.

Safety’s book value per share decreased to $58.47 at March 31, 2022 from $62.47 at December 31, 2021, resulting from the impact of interest rate changes on the value of our fixed maturity portfolio. Additional decreases in book value resulted from capital allocation activities, specifically dividends paid, and shares repurchased. During the three months ended March 31, 2022, the Company purchased 170,904 shares at a cost of $14.6M. Safety paid $0.90 per share in dividends to investors during the quarters ended March 31, 2022 and 2021, respectively. Safety paid $3.60 per share in dividends to investors during the year ended December 31, 2021.

Today, our Board of Directors approved and declared a $0.90 per share quarterly cash dividend on its issued and outstanding common stock, payable on June 15, 2022 to shareholders of record at the close of business on June 1, 2022.

Direct written premiums for the quarter ended March 31, 2022 decreased by $2.7 million, or 1.4%, to $189.5 million from $192.2 million for the comparable 2021 period. The decrease is primarily in our private passenger automobile line of business and is a result of a decrease in policy counts. Net earned premiums for the quarter ended March 31, 2022 decreased by $5.8 million, or 3.0%, to $187.1 million from $192.9 million for the comparable 2021 period.

For the quarter ended March 31, 2022, loss and loss adjustment expenses incurred increased by $11.7 million, or 10.5%, to $123.2 million from $111.5 million for the comparable 2021 period. The increase in losses is due to a return of pre-pandemic frequency in our private passenger automobile line of business and current market conditions including inflation and supply chain delays. Loss, expense, and combined ratios for the quarter ended March 31, 2022 were 65.8%, 32.9%, and 98.7%, respectively, compared to 57.8%, 33.7%, and 91.5%, respectively, for the comparable 2021 period. Total prior year favorable development included in the pre-tax results for the quarter ended March 31, 2022 was $12.4 million compared to $12.5 million for the comparable 2021 period.

The decrease in the expense ratio is driven by a decrease in contingent commission expenses offset by expenses incurred related to an activist investor.

Net investment income for the quarter ended March 31, 2022 decreased by $0.9 million, or 8.2%, to $10.6 million from $11.5 million for the comparable 2021 period. The decrease is a result of lower yields on our fixed maturity assets which was 2.9% for the three months ended March 31, 2022 compared to 3.2% for the comparable 2021 period. Our duration was 3.7 years at March 31, 2022 compared to 3.6 years at December 31, 2021.

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 non-GAAP operating income per diluted share consist of our GAAP net income adjusted by the net realized gains (losses) on investments, changes in net unrealized gains on equity investments, credit loss benefit (expense) and taxes related thereto. For the quarter ended March 31, 2022, an increase of $13.0 million for the change in unrealized gains on equity investments was recognized within income before income taxes, compared to a decrease of $6.2 million for the change in unrealized gains on equity investments in the comparable 2021 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, Safety Property and Casualty Insurance Company, and Safety Northeast 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, 2021 Form 10-K with the SEC on February 28, 2022 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;
  • 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;
  • The effects of emerging claim and coverage issues on the Company’s business are uncertain, and court decisions or legislative or regulatory changes that take place after the Company issues its policies, including those taken in response to COVID-19 (such as requiring insurers to cover business interruption claims irrespective of terms or other conditions included in the policies that would otherwise preclude coverage), can result in an unexpected increase in the number of claims and have a material adverse impact on the Company's results of operations;
  • The possibility that civil litigation and/or state insurance regulators may require additional premium relief payouts related to COVID-19;
  • The impact of COVID-19 and related risks, including on the Company's employees, agents or other key partners, could materially affect the Company's results of operations, financial position and/or liquidity; 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, 2021 filed with the SEC on February 28, 2022.

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)

 

 

 

 

 

 

 

March 31,

 

December 31,

 

 

2022

 

2021

 

 

(Unaudited)

 

 

Assets

 

 

 

 

Investments:

 

 

 

 

Fixed maturities, available for sale, at fair value (amortized cost: $1,165,592 and $1,187,857, allowance for expected credit losses of $691 and $691)

 

$

1,136,068

 

 

$

1,218,279

 

Short term investments, at fair value (cost: $5 and $0)

 

 

5

 

 

 

 

Equity securities, at fair value (cost: $218,636 and $211,848)

 

 

258,699

 

 

 

264,945

 

Other invested assets

 

 

91,460

 

 

 

87,911

 

Total investments

 

 

1,486,232

 

 

 

1,571,135

 

Cash and cash equivalents

 

 

35,231

 

 

 

63,603

 

Accounts receivable, net of allowance for expected credit losses of $1,733 and $1,808

 

 

167,096

 

 

 

170,953

 

Receivable for securities sold

 

 

7,774

 

 

 

9,256

 

Accrued investment income

 

 

7,692

 

 

 

7,401

 

Taxes recoverable

 

 

4,525

 

 

 

1,508

 

Receivable from reinsurers related to paid loss and loss adjustment expenses

 

 

8,687

 

 

 

18,234

 

Receivable from reinsurers related to unpaid loss and loss adjustment expenses

 

 

90,656

 

 

 

90,667

 

Ceded unearned premiums

 

 

24,792

 

 

 

23,795

 

Deferred policy acquisition costs

 

 

70,812

 

 

 

73,024

 

Equity and deposits in pools

 

 

32,705

 

 

 

33,592

 

Operating lease right-of-use-assets

 

 

26,527

 

 

 

27,115

 

Other assets

 

 

27,955

 

 

 

27,108

 

Total assets

 

$

1,990,684

 

 

$

2,117,391

 

 

 

 

 

 

Liabilities

 

 

 

 

Loss and loss adjustment expense reserves

 

$

560,021

 

 

$

570,651

 

Unearned premium reserves

 

 

405,447

 

 

 

413,487

 

Accounts payable and accrued liabilities

 

 

51,160

 

 

 

76,598

 

Payable for securities purchased

 

 

16,354

 

 

 

16,477

 

Payable to reinsurers

 

 

2,743

 

 

 

9,192

 

Deferred income taxes

 

 

4,963

 

 

 

15,240

 

Debt

 

 

30,000

 

 

 

30,000

 

Operating lease liabilities

 

 

26,527

 

 

 

27,115

 

Other liabilities

 

 

31,581

 

 

 

31,458

 

Total liabilities

 

 

1,128,796

 

 

 

1,190,218

 

 

 

 

 

 

Shareholders’ equity

 

 

 

 

Common stock: $0.01 par value; 30,000,000 shares authorized; 17,883,255 and 17,813,370 shares issued

 

 

179

 

 

 

178

 

Additional paid-in capital

 

 

218,152

 

 

 

216,070

 

Accumulated other comprehensive (loss) income, net of taxes

 

 

(22,778

)

 

 

24,579

 

Retained earnings

 

 

816,335

 

 

 

821,743

 

Treasury stock, at cost: 3,141,477 and 2,970,573 shares

 

 

(150,000

)

 

 

(135,397

)

Total shareholders’ equity

 

 

861,888

 

 

 

927,173

 

Total liabilities and shareholders’ equity

 

$

1,990,684

 

 

$

2,117,391

 

Safety Insurance Group, Inc. and Subsidiaries

Consolidated Statements of Operations

(Unaudited)

(Dollars in thousands, except share and per share data)

 

 

 

 

 

 

 

Three Months Ended March 31,

 

 

2022

 

2021

 

 

 

 

 

Net earned premiums

 

$

187,088

 

 

$

192,850

 

Net investment income

 

 

10,590

 

 

 

11,532

 

Earnings from partnership investments

 

 

2,832

 

 

 

4,291

 

Net realized gains on investments

 

 

4,210

 

 

 

2,875

 

Change in net unrealized gains on equity securities

 

 

(13,034

)

 

 

6,207

 

Credit loss (expense) benefit

 

 

 

 

 

181

 

Finance and other service income

 

 

3,317

 

 

 

3,972

 

Total revenue

 

 

195,003

 

 

 

221,908

 

 

 

 

 

 

Losses and loss adjustment expenses

 

 

123,166

 

 

 

111,495

 

Underwriting, operating and related expenses

 

 

61,594

 

 

 

65,024

 

Interest expense

 

 

129

 

 

 

129

 

Total expenses

 

 

184,889

 

 

 

176,648

 

 

 

 

 

 

Income before income taxes

 

 

10,114

 

 

 

45,260

 

Income tax expense

 

 

2,276

 

 

 

9,086

 

Net income

 

$

7,838

 

 

$

36,174

 

 

 

 

 

 

Earnings per weighted average common share:

 

 

 

 

Basic

 

$

0.53

 

 

$

2.44

 

Diluted

 

$

0.53

 

 

$

2.42

 

 

 

 

 

 

Cash dividends paid per common share

 

$

0.90

 

 

$

0.90

 

 

 

 

 

 

Number of shares used in computing earnings per share:

 

 

 

 

Basic

 

 

14,627,898

 

 

 

14,790,125

 

Diluted

 

 

14,727,707

 

 

 

14,886,494

 

 

 

 

 

 

 

 

 

Reconciliation of Net Income to Non-GAAP Operating Income

 

 

 

 

 

 

 

 

 

Net income

 

$

7,838

 

 

$

36,174

 

Exclusions from net income:

 

 

 

 

Net realized gains on investments

 

 

(4,210

)

 

 

(2,875

)

Change in net unrealized gains on equity securities

 

 

13,034

 

 

 

(6,207

)

Credit loss (benefit) expense

 

 

-

 

 

 

(181

)

Income tax expense on exclusions from net income

 

 

(1,853

)

 

 

1,945

 

Non-GAAP operating income

 

$

14,809

 

 

$

28,856

 

 

 

 

 

 

Net income per diluted share

 

$

0.53

 

 

$

2.42

 

Exclusions from net income:

 

 

 

 

Net realized gains on investments

 

 

(0.29

)

 

 

(0.19

)

Change in net unrealized gains on equity securities

 

 

0.88

 

 

 

(0.42

)

Credit loss (benefit) expense

 

 

-

 

 

 

(0.01

)

Income tax expense on exclusions from net income

 

 

(0.13

)

 

 

0.13

 

Non-GAAP operating income per diluted share

 

$

0.99

 

 

$

1.93

Safety Insurance Group, Inc. and Subsidiaries

Additional Premium Information

(Unaudited)

(Dollars in thousands)

 

 

 

 

 

 

 

Three Months Ended March 31,

 

 

2022

 

2021

Written Premiums

 

 

 

 

Direct

 

$

189,493

 

 

$

192,237

 

Assumed

 

 

6,741

 

 

 

7,331

 

Ceded

 

 

(18,182

)

 

 

(15,350

)

Net written premiums

 

$

178,052

 

 

$

184,218

 

 

 

 

 

 

Earned Premiums

 

 

 

 

Direct

 

$

196,519

 

 

$

201,055

 

Assumed

 

 

7,754

 

 

 

8,027

 

Ceded

 

 

(17,185

)

 

 

(16,232

)

Net earned premiums

 

$

187,088

 

 

$

192,850

 

 

Contacts

Safety Insurance Group, Inc.
Office of Investor Relations
877-951-2522

InvestorRelations@SafetyInsurance.com

Contacts

Safety Insurance Group, Inc.
Office of Investor Relations
877-951-2522

InvestorRelations@SafetyInsurance.com