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Safety Insurance (SAFT) Q4 Earnings Up Y/Y on Higher Revenues

Zacks Equity Research

Safety Insurance Group, Inc. SAFT reported fourth-quarter 2018 operating income per share of $1.83, increasing nearly three-fold from 67 cents earned in the year-ago quarter.  

The company benefited from higher premiums and net investment income, as well as reduction in expenses, in the quarter.

Including net realized gains on investments of 2 cents, change in net unrealized gains on equity investments of 82 cents and income tax expense of 16 cents, the company reported net income of $1.19 per share, surging 65.3% year over year.

Behind the Headlines

Direct written premiums improved 1.2% year over year to $187.0 million, while net written premiums increased 1.2% to $173.9 million.

Net earned premiums of $198.5 million increased 1.1%, year over year, driven by 2% higher direct premiums, partially offset by 3.7% lower ceded premiums.

Net investment income grew 14.4% to $11.9 million, supported by fixed maturity amortization and an increase in the average invested asset. Annualized yield on the investment portfolio was 3.5%, expanding 30 basis points (bps) year over year.

Operating revenues of $214.8 million grew 1.6% year over year.

Total expense of $179.7 million decreased 9.9% year over year, attributable to lower losses and loss adjustment expenses, as well as underwriting, operating and related expenses.

Combined ratio of 31.1% improved 190 bps year over year.

Full-Year Highlights

Operating income per share of $6.12 surged 59.4%. Operating revenues of $842.9 million improved 1.4% from 2017.

Improvement in commercial automobile and homeowners business drove premiums higher in 2018.

Combined ratio of 31.6% improved 80 bps year over year.

Financial Update

Arch Capital exited 2018 with total investments of $1.3 billion, up 2% year over year. Cash and cash equivalents totaled $37.6 million, down 9.1% from the 2017 end level.

Total assets of $1.8 billion climbed 27% year over year.

Total shareholders’ equity improved 2.5% to $718.6 million as on Dec 31, 2018.

As of Dec 31, 2018, book value per share was was $47.01, up 2.1% year over year. The upside was driven by higher net income, partially offset by dividends paid and decreases in unrealized gains.

Dividend Update

The company paid $3.20 per share in dividends in 2018.

On Feb15, the board of directors announced an 80 cents per share quarterly cash dividend. The dividend will be paid on Mar 15 to shareholders of record on Mar 1.

Performance of Other P&C Insurers

Among other players from the insurance industry, The Allstate Corporation ALL, Alleghany Corporation Y and RLI Corp. RLI, each carrying a Zacks Rank #2 (Buy), outpaced the respective Zacks Consensus Estimate. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here

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