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Safety Announces Fourth Quarter and Year End 2019 Results

Safety Insurance Group, Inc. (NASDAQ:SAFT) today reported fourth quarter 2019 results. Net income for the quarter ended December 31, 2019 was $28.1 million, or $1.82 per diluted share, compared to net income of $18.3 million, or $1.19 per diluted share, for the comparable 2018 period. Net income for the year ended December 31, 2019 was $99.6 million, or $6.46 per diluted share, compared to net income of $83.2 million, or $5.43 per diluted share, for the comparable 2018 period. Non-generally accepted accounting principles ("non-GAAP") operating income, as defined below, for the quarter ended December 31, 2019 was $1.44 per diluted share, compared to $1.83 per diluted share, for the comparable 2018 period. Non-GAAP operating income for the year ended December 31, 2019 was $5.25 per diluted share, compared to $6.12 per diluted share, for the comparable 2018 period. Safety’s book value per share increased to $52.55 at December 31, 2019 from $47.01 at December 31, 2018, primarily as a result of net income and an increase in unrealized gains, partially offset by dividends paid. Safety paid $3.40 per share in dividends to investors during the year ended December 31, 2019 compared to $3.20 per share during the year ended December 31, 2018.

Direct written premiums for the quarter ended December 31, 2019 increased by $2.7 million, or 1.4%, to $189.7 million from $187.0 million for the comparable 2018 period. Direct written premiums for the year ended December 31, 2019 increased by $8.7 million, or 1.0%, to $852.4 million from $843.7 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 December 31, 2019 increased by $1.7 million, or 1.0%, to $175.6 million from $173.9 million for the comparable 2018 period. Net written premiums for the year ended December 31, 2019 increased by $7.5 million, or 1.0%, to $794.4 million from $786.9 million for the comparable 2018 period. Net earned premiums for the quarter ended December 31, 2019 increased by $1.0 million, or 0.5%, to $199.5 million from $198.5 million for the comparable 2018 period. Net earned premiums for the year ended December 31, 2019 increased by $7.2 million, or 0.9%, to $788.8 million from $781.6 million for the comparable 2018 period. Net written and net earned premiums increased primarily due to increases in our commercial automobile and homeowners lines of business.

For the quarter ended December 31, 2019, loss and loss adjustment expenses incurred increased by $8.5 million, or 7.2%, to $126.4 million from $117.9 million for the comparable 2018 period. For the year ended December 31, 2019, loss and loss adjustment expenses incurred increased by $24.3 million, or 5.0%, to $509.8 million from $485.5 million for the comparable 2018 period. Loss, expense, and combined ratios calculated under U.S. generally accepted accounting principles for the quarter ended December 31, 2019 were 63.4%, 31.1%, and 94.5%, respectively, compared to 59.4%, 31.1%, and 90.5%, respectively, for the comparable 2018 period. Loss, expense, and combined ratios calculated under U.S. generally accepted accounting principles for the year ended December 31, 2019 were 64.6%, 31.0%, and 95.6%, respectively, compared to 62.1%, 31.6%, and 93.7%, respectively, for the comparable 2018 period. Total prior year favorable development included in the pre-tax results for the quarter ended December 31, 2019 was $16.5 million compared to $17.1 million for the comparable 2018 period. Total prior year favorable development included in the pre-tax results for the year ended December 31, 2019 was $42.0 million compared to $56.5 million for the comparable 2018 period.

Net investment income for the quarter ended December 31, 2019 increased by $0.5 million, or 3.7%, to $12.4 million from $11.9 million for the comparable 2018 period. Net investment income for the year ended December 31, 2019 increased by $2.9 million, or 6.6%, to $46.7 million from $43.8 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 for the quarter ended December 31, 2019 was 3.6% compared to 3.5% for the comparable 2018 period. Net effective annualized yield on the investment portfolio for the year ended December 31, 2019 was 3.4% compared to 3.3% for the comparable 2018 period. Our duration on fixed maturities was 3.3 years at December 31, 2019 and 3.6 years at December 31, 2018, respectively.

On February 14, 2020, our Board of Directors approved a $0.90 per share quarterly cash dividend on its issued and outstanding common stock payable on March 16, 2020 to shareholders of record at the close of business on March 2, 2020.

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 December 31, 2019, an increase of $6.3 million for the change in unrealized gains on equity securities was recognized within income before income taxes, compared to a decrease of $12.6 million recognized in the comparable 2018 period. For the year ended December 31, 2019, an increase of $21.5 million for the change in unrealized gains on equity securities was recognized in income before income taxes, compared to a decrease of $16.3 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)

 

 

 

 

 

 

 

 

 

December 31,

 

December 31,

 

 

2019

 

2018

 

 

(Unaudited)

 

 

 

Assets

 

 

 

 

 

 

Investments:

 

 

 

 

 

 

Fixed maturities, available for sale, at fair value (amortized cost: $1,192,357 and $1,175,413)

 

$

1,228,040

 

$

1,161,862

Equity securities, at fair value (cost: $151,121 and $142,948)

 

 

177,637

 

 

148,011

Other invested assets

 

 

37,278

 

 

23,481

Total investments

 

 

1,442,955

 

 

1,333,354

Cash and cash equivalents

 

 

44,407

 

 

37,582

Accounts receivable, net of allowance for doubtful accounts

 

 

193,369

 

 

190,062

Receivable for securities sold

 

 

1,784

 

 

1,039

Accrued investment income

 

 

8,404

 

 

8,420

Taxes recoverable

 

 

1,003

 

 

Receivable from reinsurers related to paid loss and loss adjustment expenses

 

 

11,319

 

 

13,691

Receivable from reinsurers related to unpaid loss and loss adjustment expenses

 

 

122,372

 

 

108,398

Ceded unearned premiums

 

 

35,182

 

 

33,974

Deferred policy acquisition costs

 

 

74,287

 

 

73,355

Deferred income taxes

 

 

 

 

8,749

Equity and deposits in pools

 

 

29,791

 

 

28,094

Operating lease right-of-use-assets

 

 

33,998

 

 

Other assets

 

 

23,798

 

 

19,522

Total assets

 

$

2,022,669

 

$

1,856,240

 

 

 

 

 

 

 

Liabilities

 

 

 

 

 

 

Loss and loss adjustment expense reserves

 

$

610,566

 

$

584,719

Unearned premium reserves

 

 

442,219

 

 

435,380

Accounts payable and accrued liabilities

 

 

75,016

 

 

71,896

Payable for securities purchased

 

 

6,377

 

 

5,156

Payable to reinsurers

 

 

12,911

 

 

12,220

Deferred income taxes

 

 

5,717

 

 

Taxes payable

 

 

 

 

6,090

Operating lease liabilities

 

 

33,998

 

 

Other liabilities

 

 

27,459

 

 

22,135

Total liabilities

 

 

1,214,263

 

 

1,137,596

 

 

 

 

 

 

 

Shareholders’ equity

 

 

 

 

 

 

Common stock: $0.01 par value; 30,000,000 shares authorized; 17,662,779 and 17,566,180 shares issued

 

 

177

 

 

176

Additional paid-in capital

 

 

202,321

 

 

196,292

Accumulated other comprehensive income (loss), net of taxes

 

 

28,190

 

 

(10,706)

Retained earnings

 

 

661,553

 

 

616,717

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

 

 

(83,835)

 

 

(83,835)

Total shareholders’ equity

 

 

808,406

 

 

718,644

Total liabilities and shareholders’ equity

 

$

2,022,669

 

$

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 December 31,

 

Year Ended December 31,

 

 

2019

 

2018

 

2019

 

2018

 

 

 

 

 

 

 

 

 

 

 

 

 

Net earned premiums

 

$

199,450

 

$

198,461

 

$

788,777

 

$

781,587

Net investment income

 

 

12,393

 

 

11,949

 

 

46,665

 

 

43,788

Earnings from partnership investments

 

 

506

 

 

376

 

 

1,937

 

 

6,915

Net realized gains on investments

 

 

1,463

 

 

278

 

 

2,976

 

 

3,226

Change in net unrealized gains on equity investments

 

 

6,286

 

 

(12,575)

 

 

21,454

 

 

(16,324)

Net impairment losses on investments (a)

 

 

(492)

 

 

 

 

(889)

 

 

(228)

Finance and other service income

 

 

4,293

 

 

4,412

 

 

16,833

 

 

17,533

Total revenue

 

 

223,899

 

 

202,901

 

 

877,753

 

 

836,497

 

 

 

 

 

 

 

 

 

 

 

 

 

Losses and loss adjustment expenses

 

 

126,460

 

 

117,949

 

 

509,846

 

 

485,513

Underwriting, operating and related expenses

 

 

61,949

 

 

61,718

 

 

244,136

 

 

246,643

Interest expense

 

 

23

 

 

23

 

 

90

 

 

90

Total expenses

 

 

188,432

 

 

179,690

 

 

754,072

 

 

732,246

 

 

 

 

 

 

 

 

 

 

 

 

 

Income before income taxes

 

 

35,467

 

 

23,211

 

 

123,681

 

 

104,251

Income tax expense

 

 

7,365

 

 

4,865

 

 

24,080

 

 

21,056

Net income

 

$

28,102

 

$

18,346

 

$

99,601

 

$

83,195

 

 

 

 

 

 

 

 

 

 

 

 

 

Earnings per weighted average common share:

 

 

 

 

 

 

 

 

 

 

 

 

Basic

 

$

1.84

 

$

1.21

 

$

6.52

 

$

5.48

Diluted

 

$

1.82

 

$

1.19

 

$

6.46

 

$

5.43

 

 

 

 

 

 

 

 

 

 

 

 

 

Cash dividends paid per common share

 

$

0.90

 

$

0.80

 

$

3.40

 

$

3.20

 

 

 

 

 

 

 

 

 

 

 

 

 

Number of shares used in computing earnings per share:

 

 

 

 

 

 

 

 

 

 

 

 

Basic

 

 

15,220,902

 

 

15,092,305

 

 

15,201,132

 

 

15,080,269

Diluted

 

 

15,340,518

 

 

15,267,325

 

 

15,337,807

 

 

15,229,898

 

 

 

 

 

 

 

 

 

 

 

 

 

(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

 

$

28,102

 

$

18,346

 

$

99,601

 

$

83,195

Exclusions from net income:

 

 

 

 

 

 

 

 

 

 

 

 

Net realized gains on investments

 

 

(1,463)

 

 

(278)

 

 

(2,976)

 

 

(3,226)

Change in net unrealized gains on equity investments

 

 

(6,286)

 

 

12,575

 

 

(21,454)

 

 

16,324

Net impairment losses on investments

 

 

492

 

 

-

 

 

889

 

 

228

Income tax expense (benefit) on exclusions from net income

 

 

1,524

 

 

(2,582)

 

 

4,944

 

 

(2,798)

Non-GAAP operating income

 

$

22,369

 

$

28,061

 

$

81,004

 

$

93,723

 

 

 

 

 

 

 

 

 

 

 

 

 

Net income per diluted share

 

$

1.82

 

$

1.19

 

$

6.46

 

$

5.43

Exclusions from net income:

 

 

 

 

 

 

 

 

 

 

 

 

Net realized gains on investments

 

 

(0.10)

 

 

(0.02)

 

 

(0.19)

 

 

(0.21)

Change in net unrealized gains on equity investments

 

 

(0.41)

 

 

0.82

 

 

(1.40)

 

 

1.07

Net impairment losses on investments

 

 

0.03

 

 

-

 

 

0.06

 

 

0.01

Income tax expense (benefit) on exclusions from net income

 

 

0.10

 

 

(0.16)

 

 

0.32

 

 

(0.18)

Non-GAAP operating income per diluted share

 

$

1.44

 

$

1.83

 

$

5.25

 

$

6.12

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

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Three Months Ended December 31,

 

 

Year Ended December 31,

 

 

2019

 

2018

 

2019

 

2018

Written Premiums

 

 

 

 

 

 

 

 

 

 

 

 

Direct

 

$

189,671

 

$

186,962

 

$

852,404

 

$

843,675

Assumed

 

 

8,498

 

 

8,408

 

 

32,391

 

 

32,403

Ceded

 

 

(22,579)

 

 

(21,492)

 

 

(90,386)

 

 

(89,166)

Net written premiums

 

$

175,590

 

$

173,878

 

$

794,409

 

$

786,912

 

 

 

 

 

 

 

 

 

 

 

 

 

Earned Premiums

 

 

 

 

 

 

 

 

 

 

 

 

Direct

 

$

213,841

 

$

212,434

 

$

845,102

 

$

836,759

Assumed

 

 

8,111

 

 

7,960

 

 

32,853

 

 

32,196

Ceded

 

 

(22,502)

 

 

(21,933)

 

 

(89,178)

 

 

(87,368)

Net earned premiums

 

$

199,450

 

$

198,461

 

$

788,777

 

$

781,587

 

View source version on businesswire.com: https://www.businesswire.com/news/home/20200226005888/en/

Contacts

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