Safety Announces First Quarter 2019 Results and Declares Second Quarter 2019 Dividend

BOSTON–(BUSINESS WIRE)–Safety Insurance Group, Inc. (NASDAQ:SAFT) today reported first quarter
2019 results. Net income for the quarter ended March 31, 2019 was $29.9
million, or $1.95 per diluted share, compared to net income of $9.1
million, or $0.60 per diluted share, for the comparable 2018 period.
Non-generally accepted accounting principles (“non-GAAP”) operating
income, as defined below, for the quarter ended March 31, 2019 was $1.36
per diluted share, compared to $0.71 per diluted share, for the
comparable 2018 period. Safety’s book value per share increased to
$49.08 at March 31, 2019 from $47.01 at December 31, 2018. Safety paid
$0.80 per share in dividends to investors during each of the quarters
ended March 31, 2019 and 2018, respectively. Safety paid $3.20 per share
in dividends to investors during the year ended December 31, 2018.

Direct written premiums for the quarter ended March 31, 2019 decreased
by $0.3 million, or 0.2%, to $203.4 million from $203.7 million for the
comparable 2018 period. Net written premiums for the quarter ended
March 31, 2019 decreased by $0.1 million, to $189.9 million from $190.0
million for the comparable 2018 period. Net earned premiums for the
quarter ended March 31, 2019 increased by $2.5 million, or 1.3%, to
$194.5 million from $192.0 million for the comparable 2018 period.

For the quarter ended March 31, 2019, loss and loss adjustment expenses
incurred decreased by $11.6 million, or 8.4%, to $126.0 million from
$137.6 million for the comparable 2018 period. Loss, expense, and
combined ratios for the quarter ended March 31, 2019 were 64.8%, 31.1%,
and 95.9%, respectively, compared to 71.7%, 31.7%, and 103.4%,
respectively, for the comparable 2018 period. Total prior year favorable
development included in the pre-tax results for the quarter ended
March 31, 2019 was $12.0 million compared to $14.2 million for the
comparable 2018 period.

Net investment income for the quarter ended March 31, 2019 increased by
$1.3 million, or 11.6%, to $11.8 million from $10.5 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 March 31, 2019 was 3.5%
compared to 3.3% for the comparable 2018 period. Our duration was 3.2
years at March 31, 2019 and 3.6 years at December 31, 2018, respectively.

Today, our Board of Directors approved and declared a quarterly cash
dividend of $0.80 per share on the issued and outstanding common stock,
payable on June 14, 2019 to shareholders of record at the close of
business on June 3, 2019.

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 (losses) gains, net
impairment losses on investments, change in net unrealized gains on
equity securities and taxes related thereto. For the quarter ended March
31, 2019, an increase of $11.8 million for the change in unrealized
gains was recognized within income before income taxes, compared to a
decrease of $3.5 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)

 
March 31, December 31,
2019 2018
(Unaudited)
Assets
Investments:
Fixed maturities, available for sale, at fair value (amortized cost:
$1,161,552 and $1,175,413)
$ 1,173,384 $ 1,161,862
Equity securities, at fair value (cost: $143,608 and $142,948) 160,471 148,011
Other invested assets   26,238     23,481  
Total investments 1,360,093 1,333,354
Cash and cash equivalents 22,892 37,582
Accounts receivable, net of allowance for doubtful accounts 188,654 190,062
Receivable for securities sold 1,079 1,039
Accrued investment income 9,450 8,420
Receivable from reinsurers related to paid loss and loss adjustment
expenses
29,881 13,691
Receivable from reinsurers related to unpaid loss and loss
adjustment expenses
109,200 108,398
Ceded unearned premiums 33,537 33,974
Deferred policy acquisition costs 71,905 73,355
Deferred income taxes 2,949 8,749
Equity and deposits in pools 28,505 28,094
Operating lease right-of-use-assets 36,992
Other assets   22,881     19,522  
Total assets $ 1,918,018   $ 1,856,240  
 
Liabilities
Loss and loss adjustment expense reserves $ 581,762 $ 584,719
Unearned premium reserves 430,389 435,380
Accounts payable and accrued liabilities 53,875 71,896
Payable for securities purchased 5,494 5,156
Payable to reinsurers 18,939 12,220
Taxes payable 8,286 6,090
Operating lease liabilities 36,992
Other liabilities   27,219     22,135  
Total liabilities   1,162,956     1,137,596  
 
 
Shareholders’ equity
Common stock: $0.01 par value; 30,000,000 shares authorized;
17,663,364 and 17,566,180 shares issued
177 176
Additional paid-in capital 198,014 196,292
Accumulated other comprehensive income (loss), net of taxes 9,347 (10,706 )
Retained earnings 631,359 616,717
Treasury stock, at cost: 2,279,570 shares   (83,835 )   (83,835 )
Total shareholders’ equity   755,062     718,644  
Total liabilities and shareholders’ equity $ 1,918,018   $ 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 March 31,
2019 2018
 
Net earned premiums $ 194,491 $ 192,033
Net investment income 11,751 10,531
Earnings from partnership investments 835 4,864
Net realized (losses) gains on investments (164 ) 1,306
Change in net unrealized gains on equity investments 11,801 (3,482 )
Net impairment losses on investments (a) (220 )
Finance and other service income   4,085     4,467  
Total revenue   222,579     209,719  
 
Losses and loss adjustment expenses 126,027 137,644
Underwriting, operating and related expenses 60,434 60,856
Interest expense   22     22  
Total expenses   186,483     198,522  
 
Income before income taxes 36,096 11,197
Income tax expense   6,150     2,072  
Net income $ 29,946   $ 9,125  
 
Earnings per weighted average common share:
Basic $ 1.97   $ 0.60  
Diluted $ 1.95   $ 0.60  
 
Cash dividends paid per common share $ 0.80   $ 0.80  
 
Number of shares used in computing earnings per share:
Basic   15,140,804     15,045,962  
Diluted   15,305,785     15,191,139  
 
(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 $ 29,946 $ 9,125
Exclusions from net income:
Net realized losses (gains) on investments 164 (1,306 )
Change in net unrealized gains on equity investments (11,801 ) 3,482
Net impairment losses on investments 220
Income tax expense (benefit) on exclusions from net income 2,398   (457 )
Non-GAAP operating income $ 20,927   $ 10,844  
 
Net income per diluted share $ 1.95 $ 0.60
Exclusions from net income:
Net realized losses (gains) on investments 0.01 (0.09 )
Change in net unrealized gains on equity investments (0.77 ) 0.23
Net impairment losses on investments 0.01
Income tax expense (benefit) on exclusions from net income 0.16   (0.03 )
Non-GAAP operating income per diluted share $ 1.36   $ 0.71  
     

Safety Insurance Group, Inc. and Subsidiaries
Additional
Premium Information

(Unaudited)
(Dollars
in thousands)

 
Three Months Ended March 31,
2019 2018
Written Premiums
Direct $ 203,387 $ 203,733
Assumed 8,245 7,948
Ceded   (21,694 )   (21,668 )
Net written premiums $ 189,938   $ 190,013  
 
Earned Premiums
Direct $ 207,308 $ 203,819
Assumed 9,315 8,887
Ceded   (22,132 )   (20,673 )
Net earned premiums $ 194,491   $ 192,033  

Contacts

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

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