Safety Announces Third Quarter 2021 Results and Declares Fourth Quarter 2021 Dividend

Rhea-AI Summary

Safety Insurance Group (NASDAQ:SAFT) reported Q3 2021 net income of $24.8 million ($1.64 per diluted share), down from $44.7 million ($2.96 per diluted share) in Q3 2020. Year-to-date net income increased to $98.7 million ($6.58 per diluted share) from $85.2 million ($5.58 per diluted share) in the same prior year period. The company declared a quarterly dividend of $0.90 per share, payable on December 15, 2021. Direct written premiums fell by 1.1% to $211.1 million, while net earned premiums decreased marginally by 0.2%. Total losses increased by 22.7% to $119.1 million for Q3 2021.

Positive

• Year-to-date net income grew to $98.7 million ($6.58 per diluted share), up from $85.2 million ($5.58 per diluted share) in 2020.
• Quarterly dividend of $0.90 per share approved, reaffirming shareholder returns.

Negative

• Q3 2021 net income decreased by 44.0% compared to Q3 2020.
• Direct written premiums down 1.1% to $211.1 million.
• Losses and loss adjustment expenses incurred rose by 22.7% to $119.1 million.

BOSTON--(BUSINESS WIRE)-- Safety Insurance Group, Inc. (NASDAQ:SAFT) (“the Company”) today reported third quarter 2021 results.

Net income for the quarter ended September 30, 2021 was $24.8 million, or $1.64 per diluted share, compared to net income of $44.7 million, or $2.96 per diluted share, for the comparable 2020 period. Net income for the nine months ended September 30, 2021 was $98.7 million, or $6.58 per diluted share, compared to net income of $85.2 million, or $5.58 per diluted share, for the comparable 2020 period. Non-generally accepted accounting principles (“non-GAAP”) operating income, as defined below, for the quarter ended September 30, 2021 was $1.70 per diluted share, compared to $2.53 per diluted share, for the comparable 2020 period. Non-GAAP operating income for the nine months ended September 30, 2021 was $5.51 per diluted share, compared to $6.02 per diluted share, for the comparable 2020 period.

Safety’s book value per share increased to $61.94 at September 30, 2021 from $59.40 at December 31, 2020. Safety paid $0.90 per share in dividends to investors during the quarters ended September 30, 2021 and 2020, respectively. Safety paid $3.60 per share in dividends to investors during the year ended December 31, 2020.

Direct written premiums for the quarter ended September 30, 2021 decreased by $2.3 million, or 1.1%, to $211.1 million from $213.4 million for the comparable 2020 period. Direct written premiums for the nine months ended September 30, 2021 increased by $4.5 million, or 0.7% to $620.6 million from $616.1 million for the comparable 2020 period. The nine months ended September 30, 2020 direct written premium reflects the Safety Personal Auto Relief Credit, a 15% policyholder credit that was applied to personal auto policies for the months of April, May and June 2020 and was booked as an adjustment to premiums during the second quarter of 2020.

Net written premiums for the quarter ended September 30, 2021 decreased by $3.1 million, or 1.5%, to $202.6 million from $205.7 million for the comparable 2020 period. Net written premiums for the nine months ended September 30, 2021 increased by $1.1 million, or 0.2%, to $593.6 million from $592.5 million for the comparable 2020 period. Net earned premiums for the quarter ended September 30, 2021 decreased by $0.4 million, or 0.2%, to $194.4 million from $194.8 million for the comparable 2020 period. Net earned premiums for the nine months ended September 30, 2021 increased by $6.9 million, or 1.2%, to $581.5 million from $574.6 million for the comparable 2020 period. The changes in both periods are a result of the changes in direct written premiums as described above.

For the quarter ended September 30, 2021, losses and loss adjustment expenses incurred increased by $22.0 million, or 22.7%, to $119.1 million from $97.1 million for the comparable 2020 period. For the nine months ended September 30, 2021, losses and loss adjustment expenses incurred increased by $32.0 million, or 10.4%, to $340.8 million from $308.8 million for the comparable 2020 period. The 2020 losses and loss adjustment expenses in both periods reflect a decrease in frequency, primarily in our private passenger automobile line of business as a result of the COVID-19 pandemic.

Total prior year favorable development included in the pre-tax results for the quarter ended September 30, 2021 was $15.4 million compared to $15.3 million for the comparable 2020 period. Total prior year favorable development included in the pre-tax results for the nine months ended September 30, 2021 was $41.2 million compared to $34.6 million for the comparable 2020 period.

Loss, expense, and combined ratios calculated under U.S. generally accepted accounting principles for the quarter ended September 30, 2021 were 61.3%, 32.6%, and 93.9%, respectively, compared to 49.8%, 35.2%, and 85.0%, respectively, for the comparable 2020 period. Loss, expense, and combined ratios calculated under U.S. generally accepted accounting principles for the nine months ended September 30, 2021 were 58.6%, 33.3%, and 91.9%, respectively, compared to 53.7%, 34.0%, and 87.7%, respectively, for the comparable 2020 period.

Net investment income for the quarter ended September 30, 2021 increased by $1.4 million, or 14.3%, to $11.1 million from $9.7 million for the comparable 2020 period. Net investment income for the nine months ended September 30, 2021 increased by $2.1 million, or 6.8%, to $32.4 million from $30.3 million for the comparable 2020 period. The increase in both periods is a result of an increase in the average invested asset balance and an increase in the equity in earnings of other invested assets compared to the prior year. Net effective annualized yield on the investment portfolio for the quarter ended September 30, 2021 was 3.1% compared to 2.8% for the comparable 2020 period. Net effective annualized yield on the investment portfolio for the nine months ended September 30, 2021 was 3.0% compared to 2.9% for the comparable 2020 period. Our duration on fixed maturities was 3.5 years at September 30, 2021 compared to 3.2 years at December 31, 2020, respectively.

Today, our Board of Directors approved a $0.90 per share quarterly cash dividend on its issued and outstanding common stock payable on December 15, 2021 to shareholders of record at the close of business on December 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, change in net unrealized gains on equity securities, credit loss (expense) benefit and taxes related thereto. For the three months ended September 30, 2021, a decrease of $3.4 million for the change in unrealized gains on equity securities was recognized within income before income taxes, compared to an increase of $7.5 million recognized in the comparable 2020 period. For the nine months ended September 30, 2021, an increase of $11.4 million for the change in unrealized gains on equity securities was recognized in income before income taxes, compared to a decrease of $5.6 million recognized in the comparable 2020 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, 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;
• The possibility that existing insurance-related laws and regulations will become further restrictive in the future;
• 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 the Commissioner 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)
		September 30,			December 31,
		2021			2020
		(Unaudited)
Assets
Investments:
Fixed maturities, available for sale, at fair value (amortized cost: $1,235,207 and $1,189,951, allowance for expected credit losses of $729 and $1,054)		$	1,277,402		$	1,256,653
Short term investments, at fair value (cost: $0 and $441)			—			441
Equity securities, at fair value (cost: $204,243 and $168,289)			252,623			205,254
Other invested assets			66,323			45,239
Total investments			1,596,348			1,507,587
Cash and cash equivalents			44,703			53,769
Accounts receivable, net of allowance for expected credit losses of $2,409 and $1,754			183,774			179,147
Receivable for securities sold			7,113			1,311
Accrued investment income			9,289			8,045
Taxes recoverable			—			279
Receivable from reinsurers related to paid loss and loss adjustment expenses			11,269			13,432
Receivable from reinsurers related to unpaid loss and loss adjustment expenses			99,248			106,311
Ceded unearned premiums			22,567			22,406
Deferred policy acquisition costs			76,445			74,962
Equity and deposits in pools			38,955			30,429
Operating lease right-of-use-assets			27,313			31,000
Other assets			27,704			25,595
Total assets		$	2,144,728		$	2,054,273
Liabilities
Loss and loss adjustment expense reserves		$	578,547		$	567,581
Unearned premium reserves			434,167			421,901
Accounts payable and accrued liabilities			64,413			79,486
Payable for securities purchased			28,224			7,144
Payable to reinsurers			18,623			8,236
Deferred income taxes			11,561			17,611
Taxes payable			2,643			—
Debt			30,000			30,000
Operating lease liabilities			27,313			31,000
Other liabilities			21,160			6,635
Total liabilities			1,216,651			1,169,594
Shareholders’ equity
Common stock: $0.01 par value; 30,000,000 shares authorized; 17,813,573 and 17,724,866 shares issued			178			178
Additional paid-in capital			214,576			209,779
Accumulated other comprehensive income, net of taxes			33,909			53,527
Retained earnings			803,248			745,029
Treasury stock, at cost: 2,831,168 shares			(123,834)			(123,834)
Total shareholders’ equity			928,077			884,679
Total liabilities and shareholders’ equity		$	2,144,728		$	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 September 30,						Nine Months Ended September 30,
		2021			2020			2021			2020
Net earned premiums		$	194,395		$	194,843		$	581,542		$	574,640
Net investment income			11,112			9,718			32,418			30,344
Earnings from partnership investments			5,720			4,699			12,625			2,589
Net realized gains (losses) on investments			2,226			669			8,507			(683)
Change in net unrealized gains on equity securities			(3,447)			7,521			11,414			(5,639)
Credit loss (expense) benefit			(49)			182			325			(2,289)
Finance and other service income			3,751			4,768			11,660			12,252
Total revenue			213,708			222,400			658,491			611,214
Losses and loss adjustment expenses			119,129			97,054			340,785			308,774
Underwriting, operating and related expenses			63,291			68,596			193,404			195,192
Interest expense			131			131			390			308
Total expenses			182,551			165,781			534,579			504,274
Income before income taxes			31,157			56,619			123,912			106,940
Income tax expense			6,337			11,877			25,251			21,694
Net income		$	24,820		$	44,742		$	98,661		$	85,246
Earnings per weighted average common share:
Basic		$	1.65		$	2.99		$	6.63		$	5.62
Diluted		$	1.64		$	2.96		$	6.58		$	5.58
Cash dividends paid per common share		$	0.90		$	0.90		$	2.70		$	2.70
Number of shares used in computing earnings per share:
Basic			14,982,405			14,907,809			14,826,515			15,085,914
Diluted			15,080,029			15,030,277			14,922,870			15,204,155
Reconciliation of Net Income to Non-GAAP Operating Income
Net income		$	24,820		$	44,742		$	98,661		$	85,246
Exclusions from net income:
Net realized (gains) losses on investments			(2,226)			(669)			(8,507)			683
Change in net unrealized gains on equity securities			3,447			(7,521)			(11,414)			5,639
Credit loss expense (benefit)			49			(182)			(325)			2,289
Income tax (benefit) expense on exclusions from net income			(267)			1,758			4,252			(1,808)
Non-GAAP operating income		$	25,823		$	38,128		$	82,667		$	92,049
Net income per diluted share		$	1.64		$	2.96		$	6.58		$	5.58
Exclusions from net income:
Net realized (gains) losses on investments			(0.15)			(0.04)			(0.57)			0.04
Change in net unrealized gains on equity securities			0.23			(0.50)			(0.76)			0.37
Credit loss expense (benefit)			-			(0.01)			(0.02)			0.15
Income tax (benefit) expense on exclusions from net income			(0.02)			0.12			0.28			(0.12)
Non-GAAP operating income per diluted share		$	1.70		$	2.53		$	5.51		$	6.02

Safety Insurance Group, Inc. and Subsidiaries Additional Premium Information (Unaudited) (Dollars in thousands)
		Three Months Ended September 30,							Nine Months Ended September 30,
		2021			2020			2021			2020
Written Premiums
Direct		$	211,098		$	213,438		$	620,568		$	616,085
Assumed			7,585			5,675			23,345			20,781
Ceded			(16,079)			(13,355)			(50,265)			(44,414)
Net written premiums		$	202,604		$	205,758		$	593,648		$	592,452
Earned Premiums
Direct		$	204,429		$	205,421		$	608,448		$	608,517
Assumed			7,202			6,542			23,199			23,411
Ceded			(17,236)			(17,120)			(50,105)			(57,288)
Net earned premiums		$	194,395		$	194,843		$	581,542		$	574,640

 

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Safety Insurance Group, Inc.

Office of Investor Relations

877-951-2522

InvestorRelations@SafetyInsurance.com

Source: Safety Insurance Group, Inc.

FAQ

What were Safety Insurance's Q3 2021 earnings?

Safety Insurance reported Q3 2021 net income of $24.8 million, or $1.64 per diluted share.

What is the dividend amount for Safety Insurance in 2021?

The company declared a dividend of $0.90 per share, payable on December 15, 2021.

How did Safety Insurance perform in terms of premiums for Q3 2021?

Direct written premiums decreased by 1.1% to $211.1 million in Q3 2021 compared to the same period in 2020.

What were the losses reported by Safety Insurance in Q3 2021?

Losses and loss adjustment expenses increased by 22.7% to $119.1 million in Q3 2021.