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Safety Announces First Quarter 2021 Results and Declares Second Quarter 2021 Dividend

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Safety Insurance Group, Inc. (NASDAQ:SAFT) ("the Company") today reported first quarter 2021 results.

Net income for the quarter ended March 31, 2021 was $36.2 million, or $2.42 per diluted share, compared to a net loss of $2.0 million, or $0.13 per diluted share, for the comparable 2020 period. Non-generally accepted accounting principles ("non-GAAP") operating income, as defined below, for the quarter ended March 31, 2021 was $1.93 per diluted share, compared to $1.57 per diluted share, for the comparable 2020 period. Safety’s book value per share increased to $59.42 at March 31, 2021 from $59.40 at December 31, 2020. Safety paid $0.90 per share in dividends to investors during the quarters ended March 31, 2021 and 2020, respectively. Safety paid $3.60 per share in dividends to investors during the year ended December 31, 2020.

Beginning in March 2020, the global pandemic associated with the novel coronavirus COVID-19 ("COVID-19") and related economic conditions caused significant economic effects including temporary closures of many businesses and reduced consumer activity due to shelter-in-place, stay-at-home and other governmental actions. The Company continues to take actions that address the health and well-being of our employees while still serving the needs of our agents and insureds.

Direct written premiums for the quarter ended March 31, 2021 decreased by $5.1 million, or 2.6%, to $192.2 million from $197.3 million for the comparable 2020 period. The decrease is primarily in our private passenger automobile line of business and is a result of a decrease in policy counts. Net written premiums for the quarter ended March 31, 2021 decreased by $4.7 million, or 2.5%, to $184.2 million from $188.9 million for the comparable 2020 period. Net earned premiums for the quarter ended March 31, 2021 decreased by $5.0 million, or 2.5%, to $192.9 million from $197.8 million for the comparable 2020 period.

The pandemic has resulted in fewer cars on the road, resulting in a decrease in frequency of claims, primarily in our private passenger automobile line of business. As a result, for the quarter ended March 31, 2021, loss and loss adjustment expenses incurred decreased by $9.2 million, or 7.7%, to $111.5 million from $120.7 million for the comparable 2020 period. Loss, expense, and combined ratios for the quarter ended March 31, 2021 were 57.8%, 33.7%, and 91.5%, respectively, compared to 61.0%, 31.9%, and 92.9%, respectively, for the comparable 2020 period. The increase in the expense ratio is driven by costs associated with various system modernization in our claims, billing and underwriting areas and an increase in contingent commission expenses. Total prior year favorable development included in the pre-tax results for the quarter ended March 31, 2021 was $12.5 million compared to $9.6 million for the comparable 2020 period.

Net investment income for the quarter ended March 31, 2021 increased by $0.8 million, or 7.7%, to $11.5 million from $10.7 million for the comparable 2020 period. The increase is a result of an increase in net effective annualized yield on the investment portfolio which was 3.2% for the three months ended March 31, 2021 compared to 3.1% for the comparable 2020 period. Our duration was 3.3 years at March 31, 2021 compared to 3.2 years at December 31, 2020.

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, 2021 to shareholders of record at the close of business on June 1, 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, 2021, an increase of $6.2 million for the change in unrealized gains on equity investments was recognized within income (loss) before income taxes, compared to a decrease of $30.0 million for the change in unrealized gains on equity investments in the comparable 2020 period. Net income (loss) and earnings (loss) 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, 2020 Form 10-K with the SEC on February 26, 2021 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, 2020 filed with the SEC on February 26, 2021.

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,

2021

2020

(Unaudited)

Assets

Investments:

Fixed maturities, available for sale, at fair value (amortized cost: $1,194,353 and $1,189,951, allowance for expected credit losses of $873 and $1,054)

$

1,237,181

$

1,256,653

Short term investments, at fair value (cost: $443 and $441)

447

441

Equity securities, at fair value (cost: $173,054 and $168,289)

216,226

205,254

Other invested assets

52,148

45,239

Total investments

1,506,002

1,507,587

Cash and cash equivalents

51,563

53,769

Accounts receivable, net of allowance for expected credit losses of $2,184 and $1,754

170,915

179,147

Receivable for securities sold

10,950

1,311

Accrued investment income

9,328

8,045

Taxes recoverable

279

Receivable from reinsurers related to paid loss and loss adjustment expenses

7,666

13,432

Receivable from reinsurers related to unpaid loss and loss adjustment expenses

108,178

106,311

Ceded unearned premiums

21,524

22,406

Deferred policy acquisition costs

72,303

74,962

Equity and deposits in pools

29,875

30,429

Operating lease right-of-use-assets

29,801

31,000

Other assets

27,555

25,595

Total assets

$

2,045,660

$

2,054,273

Liabilities

Loss and loss adjustment expense reserves

$

577,266

$

567,581

Unearned premium reserves

412,387

421,901

Accounts payable and accrued liabilities

44,944

79,486

Payable for securities purchased

28,487

7,144

Payable to reinsurers

525

8,236

Deferred income taxes

11,574

17,611

Taxes payable

6,055

Debt

30,000

30,000

Operating lease liabilities

29,801

31,000

Other liabilities

14,368

6,635

Total liabilities

1,155,407

1,169,594

Shareholders’ equity

Common stock: $0.01 par value; 30,000,000 shares authorized; 17,814,166 and 17,724,866 shares issued

178

178

Additional paid-in capital

211,638

209,779

Accumulated other comprehensive income, net of taxes

34,527

53,527

Retained earnings

767,744

745,029

Treasury stock, at cost: 2,831,168 shares

(123,834)

(123,834)

Total shareholders’ equity

890,253

884,679

Total liabilities and shareholders’ equity

$

2,045,660

$

2,054,273

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,

2021

2020

Net earned premiums

$

192,850

$

197,895

Net investment income

11,532

10,710

Earnings from partnership investments

4,291

1,339

Net realized gains (losses) on investments

2,875

(631)

Change in net unrealized gains on equity investments

6,207

(29,988)

Credit loss benefit (expense)

181

(2,510)

Finance and other service income

3,972

4,229

Total revenue

221,908

181,044

Losses and loss adjustment expenses

111,495

120,746

Underwriting, operating and related expenses

65,024

63,082

Interest expense

129

47

Total expenses

176,648

183,875

Income (loss) before income taxes

45,260

(2,831)

Income tax expense (benefit)

9,086

(841)

Net income (loss)

$

36,174

$

(1,990)

Earnings (loss) per weighted average common share:

Basic

$

2.44

$

(0.13)

Diluted

$

2.42

$

(0.13)

Cash dividends paid per common share

$

0.90

$

0.90

Number of shares used in computing earnings per share:

Basic

14,790,125

15,230,784

Diluted

14,886,494

15,347,083

Reconciliation of Net Income (Loss) to Non-GAAP Operating Income

Net income (loss)

$

36,174

$

(1,990)

Exclusions from net income (loss):

Net realized (gains) losses on investments

(2,875)

631

Change in net unrealized gains on equity investments

(6,207)

29,988

Credit loss (benefit) expense

(181)

2,510

Income tax expense (benefit) on exclusions from net income (loss)

1,945

(6,957)

Non-GAAP operating income

$

28,856

$

24,182

Net income (loss) per diluted share

$

2.42

$

(0.13)

Exclusions from net income (loss):

Net realized (gains) losses on investments

(0.19)

0.04

Change in net unrealized gains on equity investments

(0.42)

1.95

Credit loss (benefit) expense

(0.01)

0.16

Income tax expense (benefit) on exclusions from net income (loss)

0.13

(0.45)

Non-GAAP operating income per diluted share

$

1.93

$

1.57

Safety Insurance Group, Inc. and Subsidiaries

Additional Premium Information

(Unaudited)

(Dollars in thousands)

Three Months Ended March 31,

2021

2020

Written Premiums

Direct

$

192,237

$

197,346

Assumed

7,331

7,978

Ceded

(15,350)

(16,366)

Net written premiums

$

184,218

$

188,958

Earned Premiums

Direct

$

201,055

$

210,151

Assumed

8,027

9,102

Ceded

(16,232)

(21,358)

Net earned premiums

$

192,850

$

197,895

View source version on businesswire.com: https://www.businesswire.com/news/home/20210505006018/en/

Contacts

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