Safety Insurance Group, Inc. Announces Fourth Quarter and Full Year 2022 Results

Rhea-AI Summary

Safety Insurance Group (NASDAQ:SAFT) reported its Q4 and full-year 2022 results, showing a combined ratio of 97.2% and GAAP earnings per diluted share of $3.15. The company’s net income for Q4 2022 was $24.6 million, down from $32.0 million in Q4 2021. For the year, net income fell to $46.6 million from $130.7 million in 2021. Despite challenges like inflation, direct written premiums increased by 10.9% in Q4 and 2.6% for the year. The company completed the acquisition of Northeast Insurance Agency to strengthen its market position.

Positive

• Direct written premiums for Q4 2022 increased by $19.8 million, or 10.9%.
• Net investment income for Q4 2022 rose by $1.7 million, or 14.3%.
• Paid dividends of $0.90 per share for both Q4 2022 and 2021.

Negative

• Net income for Q4 2022 decreased to $24.6 million from $32.0 million in Q4 2021.
• Net income for the year declined to $46.6 million from $130.7 million in 2021.
• Book value per share decreased to $54.88 from $62.47 year-over-year.

BOSTON--(BUSINESS WIRE)-- Safety Insurance Group, Inc. (NASDAQ:SAFT) (“Safety” or the “Company”) today reported fourth quarter and full year 2022 results.

George M. Murphy, President and Chief Executive Officer, commented: “Looking back at 2022, Safety Insurance had another financially successful year with a combined ratio of 97.2%, GAAP earnings per diluted share of $3.15 and non-GAAP operating earnings per diluted share of $5.05. While industry challenges around inflation continue to exist, our commitment to strong underwriting results and enhanced investment returns, remains unchanged. As always, we focus on pricing our products appropriately for the risks we are insuring while generating the capital to grow our business in new and creative ways.”

“To that point, on December 1, 2022, we completed the previously announced acquisition of Northeast Insurance Agency, Inc. This acquisition strengthens our position within the independent agency channel and provides us further insights to enhance our customer engagement initiatives and the services we provide.”

Fourth Quarter and Year Ended 2022 Results and Recent Development

Net income for the quarter ended December 31, 2022 was $24.6 million, or $1.67 per diluted share, compared to net income of $32.0 million, or $2.14 per diluted share, for the comparable 2021 period. Net income for the year ended December 31, 2022 was $46.6 million, or $3.15 per diluted share, compared to net income of $130.7 million, or $8.80 per diluted share, for the comparable 2021 period. Non-generally accepted accounting principles (“non-GAAP”) operating income, as defined below, for the quarter ended December 31, 2022 was $0.98 per diluted share, compared to $1.55 per diluted share, for the comparable 2021 period. Non-GAAP operating income for the year ended December 31, 2022 was $5.05 per diluted share, compared to $7.14 per diluted share, for the comparable 2021 period.

Safety’s book value per share decreased to $54.88 at December 31, 2022 from $62.47 at December 31, 2021 resulting from the impact of interest rate changes on the value of our fixed maturity portfolio of $105.1 million. Additional decreases in book value resulted from capital allocation activities, specifically dividends paid, and shares repurchased during the year ended December 31, 2022. Safety paid $0.90 per share in dividends to investors during the quarters ended December 31, 2022 and 2021, respectively. Safety paid $3.60 per share in dividends to investors during the year ended December 31, 2021 and 2021, respectively.

On February 15, 2023, our Board of Directors approved a $0.90 per share quarterly cash dividend on our issued and outstanding common stock payable on March 15, 2023 to shareholders of record at the close of business on March 1, 2023.

Direct written premiums for the quarter ended December 31, 2022 increased by $19.8 million, or 10.9%, to $201.4 million from $181.6 million for the comparable 2021 period. Direct written premiums for the year ended December 31, 2022 increased by $21.2 million, or 2.6% to $823.3 million from $802.1 million for the comparable 2021 period. Net written premiums for the quarter ended December 31, 2022 increased by $16.6 million, or 9.7%, to $187.5 million from $170.9 million for the comparable 2021 period. Net written premiums for the year ended December 31, 2022 increased by $9.2 million, or 1.2%, to $773.7 million from $764.5 million for the comparable 2021 period. The increases in direct written premium and net written premium, specifically in the fourth quarter, are a result of new business production, improved retention, and rate increases.

Net earned premiums for the quarter ended December 31, 2022 increased by $0.4 million, or 0.2%, to $193.2 million from $192.8 million for the comparable 2021 period. Net earned premiums for the year ended December 31, 2022 decreased by $15.8 million, or 2.0%, to $758.5 million from $774.3 million for the comparable 2021 period.

For the quarter ended December 31, 2022, losses and loss adjustment expenses incurred increased by $11.1 million, or 9.2%, to $132.0 million from $120.9 million for the comparable 2021 period. For the year ended December 31, 2022, losses and loss adjustment expenses incurred increased by $30.3 million, or 6.6%, to $492.0 million from $461.7 million for the comparable 2021 period. The increase in losses is due to a return of pre-pandemic frequency in our private passenger automobile line of business and current market conditions specifically inflation.

Loss, expense, and combined ratios calculated for the quarter ended December 31, 2022 were 68.4%, 32.3%, and 100.7%, respectively, compared to 62.7%, 33.7%, and 96.4%, respectively, for the comparable 2021 period. Loss, expense, and combined ratios calculated for the year ended December 31, 2022 were 64.9%, 32.3%, and 97.2%, respectively, compared to 59.6%, 33.4%, and 93.0%, respectively, for the comparable 2021 period. The decrease in the expense ratio is driven by a decrease in contingent commission expenses.

Total prior year favorable development included in the pre-tax results for the quarter ended December 31, 2022 was $14.1 million compared to $12.5 million for the comparable 2021 period. Total prior year favorable development included in the pre-tax results for the year ended December 31, 2022 was $57.3 million compared to $53.7 million for the comparable 2021 period.

Net investment income for the quarter ended December 31, 2022 increased by $1.7 million, or 14.3% to $13.4 million from $11.7 million for the comparable 2021 period. Net investment income for the year ended December 31, 2022 increased by $2.6 million, or 5.9%, to $46.7 million from $44.1 million for the comparable 2021 period. The increase is a result of increases in interest rates on our fixed maturity portfolio compared to the prior year. Net effective annualized yield on the investment portfolio was 3.7% for the quarter ended December 31, 2022 compared to 3.1% for the comparable 2021 period. Net effective annualized yield on the investment portfolio for the year ended December 31, 2022 was 3.2% compared to 3.0% for the comparable 2021 period. Our duration on fixed maturities was 3.8 years at December 31, 2022 compared to 3.6 years at December 31, 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 are useful to 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 on investments, change in net unrealized gains on equity securities, credit loss benefit (expense) and taxes related thereto. For the quarter ended December 31, 2022, an increase of $11.9 million for the change in unrealized losses on equity securities was recognized within income before income taxes, compared to an increase of $4.7 million recognized in the comparable 2021 period. For the year ended December 31, 2022, a decrease of $44.4 million for the change in unrealized gains on equity securities was recognized in income before income taxes, compared to an increase of $16.1 million recognized in the comparable 2021 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, Safety Northeast Insurance Company, and Safety Northeast Insurance Agency. 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, 2021 Form 10-K with the SEC on February 28, 2022 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 impact of inflation and supply chain delays on loss severity;
• 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;
• The impact of investment, economic and underwriting market conditions, including interest rates and inflation;
• 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, 2021 filed with the SEC on February 28, 2022.

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,
		2022				2021
		(Unaudited)
Assets
Investments:
Fixed maturities, available for sale, at fair value (amortized cost: $1,152,779 and $1,187,857, allowance for expected credit losses of $678 and $691)		$	1,050,155			$	1,218,279
Equity securities, at fair value (cost: $231,444 and $211,848)			240,155				264,945
Other invested assets			112,850				87,911
Total investments			1,403,160				1,571,135
Cash and cash equivalents			25,300				63,603
Accounts receivable, net of allowance for expected credit losses of $1,446 and $1,808			192,542				170,953
Receivable for securities sold			877				9,256
Accrued investment income			8,212				7,401
Taxes recoverable			—				1,508
Receivable from reinsurers related to paid loss and loss adjustment expenses			12,988				18,234
Receivable from reinsurers related to unpaid loss and loss adjustment expenses			93,394				90,667
Ceded unearned premiums			28,453				23,795
Deferred policy acquisition costs			75,582				73,024
Deferred income taxes			21,074				—
Equity and deposits in pools			33,648				33,592
Operating lease right-of-use-assets			23,336				27,115
Goodwill			17,093				—
Intangible Asset			7,856				—
Other assets			29,054				27,108
Total assets		$	1,972,569			$	2,117,391
Liabilities
Loss and loss adjustment expense reserves		$	549,598			$	570,651
Unearned premium reserves			433,375				413,487
Accounts payable and accrued liabilities			73,875				76,598
Payable for securities purchased			1,359				16,477
Payable to reinsurers			11,444				9,192
Deferred income taxes			—				15,240
Taxes payable			1,729				—
Debt			35,000				30,000
Operating lease liabilities			23,336				27,115
Other liabilities			30,854				31,458
Total liabilities			1,160,570				1,190,218
Shareholders’ equity
Common stock: $0.01 par value; 30,000,000 shares authorized; 17,879,095 and 17,813,370 shares issued			179				178
Additional paid-in capital			222,049				216,070
Accumulated other comprehensive (loss) income, net of taxes			(80,538	)			24,579
Retained earnings			815,309				821,743
Treasury stock, at cost: 3,083,364 and 2,970,573 shares			(145,000	)			(135,397	)
Total shareholders’ equity			811,999				927,173
Total liabilities and shareholders’ equity		$	1,972,569			$	2,117,391

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,
		2022				2021				2022				2021
Net earned premiums		$	193,153			$	192,786			$	758,505			$	774,328
Net investment income			13,388				11,717				46,725				44,135
Earnings from partnership investments			2,809				7,204				12,484				19,829
Net realized gains on investments			577				6,378				9,190				14,885
Change in net unrealized (losses) gains on equity securities			11,897				4,716				(44,386	)			16,130
Credit loss (expense) benefit			221				38				14				363
Commission Income			566				—				566				—
Finance and other service income			3,992				3,581				14,461				15,241
Total revenue			226,603				226,420				797,559				884,911
Losses and loss adjustment expenses			132,029				120,942				491,979				461,727
Underwriting, operating and related expenses			62,306				64,988				245,145				258,392
Other Expense			330				—				330				—
Interest expense			132				132				524				522
Total expenses			194,797				186,062				737,978				720,641
Income before income taxes			31,806				40,358				59,581				164,270
Income tax expense			7,176				8,309				13,020				33,560
Net income		$	24,630			$	32,049			$	46,561			$	130,710
Earnings per weighted average common share:
Basic		$	1.68			$	2.15			$	3.17			$	8.85
Diluted		$	1.67			$	2.14			$	3.15			$	8.80
Cash dividends paid per common share		$	0.90			$	0.90			$	3.60			$	3.60
Number of shares used in computing earnings per share:
Basic			14,604,189				14,835,334				14,607,483				14,828,736
Diluted			14,701,879				14,934,208				14,710,611				14,925,726
Reconciliation of Net Income to Non-GAAP Operating Income
Net income		$	24,630			$	32,049			$	46,561			$	130,710
Exclusions from net income:
Net realized gains on investments			(577	)			(6,378	)			(9,190	)			(14,885	)
Change in net unrealized (losses) gains on equity securities			(11,897	)			(4,716	)			44,386				(16,130	)
Credit loss (benefit) expense			(221	)			(38	)			(14	)			(363	)
Income tax expense on exclusions from net income			2,666				2,338				(7,388	)			6,589
Non-GAAP operating income		$	14,601			$	23,255			$	74,355			$	105,921
Net income per diluted share		$	1.67			$	2.14			$	3.15			$	8.80
Exclusions from net income:
Net realized gains on investments			(0.04	)			(0.43	)			(0.62	)			(1.00	)
Change in net unrealized gains on equity securities			(0.81	)			(0.32	)			3.02				(1.08	)
Credit loss (benefit) expense			(0.02	)			-				-				(0.02	)
Income tax expense on exclusions from net income			0.18				0.16				(0.50	)			0.44
Non-GAAP operating income per diluted share		$	0.98			$	1.55			$	5.05			$	7.14

Safety Insurance Group, Inc. and Subsidiaries
Additional Premium Information
(Unaudited)
(Dollars in thousands)
		Three Months Ended December 31,								Year Ended December 31,
		2022				2021				2022				2021
Written Premiums
Direct		$	201,371			$	181,571			$	823,318			$	802,139
Assumed			7,667				8,014				28,835				31,359
Ceded			(21,507	)			(18,707	)			(78,418	)			(68,972	)
Net written premiums		$	187,531			$	170,878			$	773,735			$	764,526
Earned Premiums
Direct		$	205,627			$	202,881			$	803,289			$	811,329
Assumed			7,141				7,384				28,976				30,583
Ceded			(19,615	)			(17,479	)			(73,760	)			(67,584	)
Net earned premiums		$	193,153			$	192,786			$	758,505			$	774,328

 

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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 Q4 2022 earnings per share?

Safety Insurance reported GAAP earnings per diluted share of $1.67 for Q4 2022.

How did Safety Insurance perform in 2022 compared to 2021?

In 2022, Safety Insurance's net income was $46.6 million, down from $130.7 million in 2021.

What is the combined ratio for Safety Insurance in 2022?

The combined ratio for Safety Insurance in 2022 was 97.2%.

Did Safety Insurance increase its dividends in 2022?

Safety Insurance paid a dividend of $0.90 per share for both Q4 2022 and Q4 2021.

What acquisition did Safety Insurance complete recently?

Safety Insurance completed the acquisition of Northeast Insurance Agency on December 1, 2022.