Safety Insurance Group, Inc. Announces Fourth Quarter and Year Ended 2023 Results
- Record top-line growth with Direct Written Premiums up by 20.4% in 2023
- Positive revenue trends in all major streams
- Increased exposure count growth across all lines of business
- Net income for the year ended December 31, 2023, was $18.9 million, compared to $46.6 million in 2022
- Direct written premiums for the year ended December 31, 2023, increased by $167.9 million
- Safety paid $0.90 per share in dividends to investors during the quarters ended December 31, 2023, and 2022
- Net earned premiums for the year ended December 31, 2023, increased by $75.9 million
- Total prior year favorable development included in the pre-tax results for the year ended December 31, 2023, was $47.4 million
- Net investment income for the year ended December 31, 2023, increased by $9.7 million
- Net income decreased from $46.6 million in 2022 to $18.9 million in 2023
- Loss ratio specific to Private Passenger Automobile business was elevated due to inflationary impacts
- Loss, expense, and combined ratios increased for the year ended December 31, 2023, compared to 2022
- Total prior year favorable development decreased from $57.3 million in 2022 to $47.4 million in 2023
Insights
The reported financial results of Safety Insurance Group, Inc. show a significant increase in direct written premiums, indicating robust top-line growth. This growth is attributed to a combination of higher policy counts and increased average premiums, which could be indicative of successful market penetration and pricing strategies. However, the elevated combined ratio of 107.7% for the year, exceeding the breakeven point of 100%, raises concerns about underwriting profitability. This is particularly noteworthy as combined ratios above 100% suggest that the company is paying out more in claims and expenses than it is receiving from premiums.
Investors should note the impact of inflation and weather-related events on loss ratios, particularly within the Private Passenger Automobile segment. While rate increases are a typical response to mitigate such impacts, the effectiveness of these measures in improving the combined ratio will be critical for future profitability. The increase in net investment income, driven by higher interest rates, is a positive offsetting factor, but may not sufficiently counteract underwriting losses.
Lastly, the decrease in book value per share, despite a positive net income, is influenced by share repurchases and dividends paid. Share repurchases can indicate management's confidence in the stock's value, but they also reduce equity, which is reflected in the book value per share. The consistent dividend payout could be attractive to income-focused investors, but it is essential to monitor whether such payouts are sustainable in the long term, especially given the increased loss ratios.
The insurance sector is highly sensitive to loss ratios and combined ratios as key indicators of financial health. Safety Insurance Group's reported increase in loss ratios, primarily due to inflationary pressures and weather-related events, is a trend that has been affecting the insurance industry at large. The ability to adapt pricing to account for these factors is a crucial aspect of maintaining underwriting discipline.
Moreover, the reported growth in exposure counts across all lines of business suggests that Safety is expanding its market share, which could lead to greater diversification of risk. However, this expansion must be balanced against the risk of adverse selection, where increased policy counts could potentially include higher-risk exposures.
The reported decrease in the expense ratio, driven by a reduction in contingent commission expenses, is a positive development that indicates improved operational efficiency. However, investors should closely monitor whether these savings can be sustained and whether they will be sufficient to improve the combined ratio in the future.
An integral aspect of Safety Insurance Group's strategy appears to be its focus on pricing and risk management to ensure rate adequacy. This is particularly important in the context of the insurance industry, where accurate risk assessment and appropriate rate setting are essential to maintain profitability. The company's commitment to underwriting discipline, despite the challenges posed by inflation and natural disasters, is a positive sign for risk management.
It is also important to consider the company's investment portfolio yield, which has increased due to rising interest rates. This improved yield can provide a buffer against underwriting losses but also requires careful risk management to ensure that the investment portfolio remains aligned with the company's overall risk appetite and liquidity needs.
The impact of severe weather events on loss ratios underscores the need for sophisticated risk modeling and geographic diversification. As climate-related risks become more prominent, the ability to accurately price these risks and manage exposure through reinsurance or other risk transfer mechanisms will be increasingly important for insurers like Safety.
George M. Murphy, Chairman of the Board of Directors, President and Chief Executive Officer, commented: “2023 saw Safety Insurance post record top-line growth as Direct Written Premiums increased by
“As I have previously mentioned, Safety continues to file for rate increases across all major lines and is seeing these rate increases begin to impact earned premiums. Safety remains committed to maintaining underwriting discipline, while leveraging investments in our pricing and risk management areas to ensure rate adequacy.”
Fourth Quarter and Year Ended 2023 Results and Recent Development
Net income for the quarter ended December 31, 2023 was
Safety’s book value per share decreased to
On February 15, 2024, our Board of Directors approved a
Direct written premiums for the quarter ended December 31, 2023 increased by
The increases in direct written premiums and net written premiums are a result of new business production, improved retention, and rate increases. For the year ended December 31, 2023, the Company achieved exposure count growth across all lines of business, including
Net earned premiums for the quarter ended December 31, 2023 increased by
For the quarter ended December 31, 2023, losses and loss adjustment expenses incurred increased by
Loss, expense, and combined ratios calculated for the quarter ended December 31, 2023, were
Total prior year favorable development included in the pre-tax results for the quarter ended December 31, 2023 was
Net investment income for the quarter ended December 31, 2023 increased by
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, 2023, an increase of
About Safety: Safety Insurance Group, Inc., based in
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, 2022 Form 10-K with the SEC on February 28, 2023 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
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, 2022 filed with the SEC on February 28, 2023.
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 |
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Consolidated Balance Sheets |
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(Dollars in thousands, except share data) |
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|
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December 31, |
|
December 31, |
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|
|
2023 |
|
2022 |
||||
|
|
(Unaudited) |
|
|
|
|||
Assets |
|
|
|
|
|
|
||
Investments: |
|
|
|
|
|
|
||
Fixed maturities, available for sale, at fair value (amortized cost: |
|
$ |
1,052,145 |
|
|
$ |
1,050,155 |
|
Equity securities, at fair value (cost: |
|
|
238,022 |
|
|
|
240,155 |
|
Other invested assets |
|
|
133,946 |
|
|
|
112,850 |
|
Total investments |
|
|
1,424,113 |
|
|
|
1,403,160 |
|
Cash and cash equivalents |
|
|
38,152 |
|
|
|
25,300 |
|
Accounts receivable, net of allowance for expected credit losses of |
|
|
256,687 |
|
|
|
192,542 |
|
Receivable for securities sold |
|
|
124 |
|
|
|
877 |
|
Accrued investment income |
|
|
7,261 |
|
|
|
8,212 |
|
Taxes recoverable |
|
|
623 |
|
|
|
— |
|
Receivable from reinsurers related to paid loss and loss adjustment expenses |
|
|
13,129 |
|
|
|
12,988 |
|
Receivable from reinsurers related to unpaid loss and loss adjustment expenses |
|
|
112,623 |
|
|
|
93,394 |
|
Ceded unearned premiums |
|
|
32,346 |
|
|
|
28,453 |
|
Deferred policy acquisition costs |
|
|
91,917 |
|
|
|
75,582 |
|
Deferred income taxes |
|
|
12,150 |
|
|
|
21,074 |
|
Equity and deposits in pools |
|
|
35,247 |
|
|
|
33,648 |
|
Operating lease right-of-use-assets |
|
|
19,756 |
|
|
|
23,336 |
|
Goodwill |
|
|
17,093 |
|
|
|
17,093 |
|
Intangible assets |
|
|
7,551 |
|
|
|
7,856 |
|
Other assets |
|
|
25,232 |
|
|
|
29,054 |
|
Total assets |
|
$ |
2,094,004 |
|
|
$ |
1,972,569 |
|
|
|
|
|
|
|
|
||
Liabilities |
|
|
|
|
|
|
||
Loss and loss adjustment expense reserves |
|
$ |
603,081 |
|
|
$ |
549,598 |
|
Unearned premium reserves |
|
|
528,150 |
|
|
|
433,375 |
|
Accounts payable and accrued liabilities |
|
|
64,235 |
|
|
|
73,875 |
|
Payable for securities purchased |
|
|
1,863 |
|
|
|
1,359 |
|
Payable to reinsurers |
|
|
15,941 |
|
|
|
11,444 |
|
Taxes payable |
|
|
— |
|
|
|
1,729 |
|
Debt |
|
|
30,000 |
|
|
|
35,000 |
|
Operating lease liabilities |
|
|
19,756 |
|
|
|
23,336 |
|
Other liabilities |
|
|
26,711 |
|
|
|
30,854 |
|
Total liabilities |
|
|
1,289,737 |
|
|
|
1,160,570 |
|
|
|
|
|
|
|
|
||
|
|
|
|
|
|
|
||
Shareholders’ equity |
|
|
|
|
|
|
||
Common stock: |
|
|
179 |
|
|
|
179 |
|
Additional paid-in capital |
|
|
226,380 |
|
|
|
222,049 |
|
Accumulated other comprehensive loss, net of taxes |
|
|
(53,191 |
) |
|
|
(80,538 |
) |
Retained earnings |
|
|
781,192 |
|
|
|
815,309 |
|
Treasury stock, at cost: 3,157,577 and 3,083,364 shares |
|
|
(150,293 |
) |
|
|
(145,000 |
) |
Total shareholders’ equity |
|
|
804,267 |
|
|
|
811,999 |
|
Total liabilities and shareholders’ equity |
|
$ |
2,094,004 |
|
|
$ |
1,972,569 |
|
Safety Insurance Group, Inc. and Subsidiaries |
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Consolidated Statements of Operations |
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(Unaudited) |
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(Dollars in thousands, except share and per share data) |
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Three Months Ended December 31, |
|
Year Ended December 31, |
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|
|
2023 |
|
2022 |
|
2023 |
|
2022 |
||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
||||
Net earned premiums |
|
$ |
226,029 |
|
|
$ |
193,153 |
|
|
$ |
834,414 |
|
|
$ |
758,505 |
|
Net investment income |
|
|
14,882 |
|
|
|
13,388 |
|
|
|
56,377 |
|
|
|
46,725 |
|
Earnings from partnership investments |
|
|
394 |
|
|
|
2,809 |
|
|
|
5,540 |
|
|
|
12,484 |
|
Net realized gains on investments |
|
|
216 |
|
|
|
577 |
|
|
|
1,327 |
|
|
|
9,190 |
|
Change in net unrealized gains on equity securities |
|
|
9,650 |
|
|
|
11,897 |
|
|
|
7,502 |
|
|
|
(44,386 |
) |
Credit loss benefit (expense) |
|
|
24 |
|
|
|
221 |
|
|
|
(530 |
) |
|
|
14 |
|
Commission income |
|
|
1,773 |
|
|
|
566 |
|
|
|
6,932 |
|
|
|
566 |
|
Finance and other service income |
|
|
5,428 |
|
|
|
3,992 |
|
|
|
19,394 |
|
|
|
14,461 |
|
Total revenue |
|
|
258,396 |
|
|
|
226,603 |
|
|
|
930,956 |
|
|
|
797,559 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||
Losses and loss adjustment expenses |
|
|
172,105 |
|
|
|
132,029 |
|
|
|
642,302 |
|
|
|
491,979 |
|
Underwriting, operating and related expenses |
|
|
68,748 |
|
|
|
62,306 |
|
|
|
256,580 |
|
|
|
245,145 |
|
Other expense |
|
|
1,638 |
|
|
|
330 |
|
|
|
6,836 |
|
|
|
330 |
|
Interest expense |
|
|
121 |
|
|
|
132 |
|
|
|
818 |
|
|
|
524 |
|
Total expenses |
|
|
242,612 |
|
|
|
194,797 |
|
|
|
906,536 |
|
|
|
737,978 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||
Income before income taxes |
|
|
15,784 |
|
|
|
31,806 |
|
|
|
24,420 |
|
|
|
59,581 |
|
Income tax expense |
|
|
3,522 |
|
|
|
7,176 |
|
|
|
5,545 |
|
|
|
13,020 |
|
Net income |
|
$ |
12,262 |
|
|
$ |
24,630 |
|
|
$ |
18,875 |
|
|
$ |
46,561 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||
Earnings per weighted average common share: |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Basic |
|
$ |
0.83 |
|
|
$ |
1.68 |
|
|
$ |
1.28 |
|
|
$ |
3.17 |
|
Diluted |
|
$ |
0.83 |
|
|
$ |
1.67 |
|
|
$ |
1.28 |
|
|
$ |
3.15 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||
Cash dividends paid per common share |
|
$ |
0.90 |
|
|
$ |
0.90 |
|
|
$ |
3.60 |
|
|
$ |
3.60 |
|
|
|
|
|
|
|
|
|
|
|
|
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|
||||
Number of shares used in computing earnings per share: |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Basic |
|
|
14,645,987 |
|
|
|
14,604,189 |
|
|
|
14,663,730 |
|
|
|
14,607,483 |
|
Diluted |
|
|
14,678,038 |
|
|
|
14,701,879 |
|
|
|
14,710,131 |
|
|
|
14,710,611 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||
|
|
|
|
|
|
|
|
|
|
|||||||
Reconciliation of Net Income to Non-GAAP Operating Income |
|
|
|
|
|
|
|
|
|
|
|
|
||||
|
|
|
|
|
|
|
|
|
|
|
|
|
||||
Net income |
|
$ |
12,262 |
|
|
$ |
24,630 |
|
|
$ |
18,875 |
|
|
$ |
46,561 |
|
Exclusions from net income: |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Net realized gains on investments |
|
|
(216 |
) |
|
|
(577 |
) |
|
|
(1,327 |
) |
|
|
(9,190 |
) |
Change in net unrealized gains on equity securities |
|
|
(9,650 |
) |
|
|
(11,897 |
) |
|
|
(7,502 |
) |
|
|
44,386 |
|
Credit loss (benefit) expense |
|
|
(24 |
) |
|
|
(221 |
) |
|
|
530 |
|
|
|
(14 |
) |
Income tax expense on exclusions from net income |
|
|
2,077 |
|
|
|
2,666 |
|
|
|
1,743 |
|
|
|
(7,388 |
) |
Non-GAAP operating income |
|
$ |
4,449 |
|
|
$ |
14,601 |
|
|
$ |
12,319 |
|
|
$ |
74,355 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||
Net income per diluted share |
|
$ |
0.83 |
|
|
$ |
1.67 |
|
|
$ |
1.28 |
|
|
$ |
3.15 |
|
Exclusions from net income: |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Net realized gains on investments |
|
|
(0.01 |
) |
|
|
(0.04 |
) |
|
|
(0.09 |
) |
|
|
(0.62 |
) |
Change in net unrealized gains on equity securities |
|
|
(0.66 |
) |
|
|
(0.81 |
) |
|
|
(0.51 |
) |
|
|
3.02 |
|
Credit loss (benefit) expense |
|
|
- |
|
|
|
(0.02 |
) |
|
|
0.04 |
|
|
|
- |
|
Income tax expense on exclusions from net income |
|
|
0.14 |
|
|
|
0.18 |
|
|
|
0.12 |
|
|
|
(0.50 |
) |
Non-GAAP operating income per diluted share |
|
$ |
0.30 |
|
|
$ |
0.98 |
|
|
$ |
0.84 |
|
|
$ |
5.05 |
|
Safety Insurance Group, Inc. and Subsidiaries |
||||||||||||||||
Additional Premium Information |
||||||||||||||||
(Unaudited) |
||||||||||||||||
(Dollars in thousands) |
||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
||||
|
|
Three Months Ended December 31, |
|
|
Year Ended December 31, |
|||||||||||
|
|
2023 |
|
2022 |
|
2023 |
|
2022 |
||||||||
Written Premiums |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Direct |
|
$ |
246,091 |
|
|
$ |
201,371 |
|
|
$ |
991,224 |
|
|
$ |
823,318 |
|
Assumed |
|
|
7,620 |
|
|
|
7,667 |
|
|
|
30,850 |
|
|
|
28,835 |
|
Ceded |
|
|
(27,356 |
) |
|
|
(21,507 |
) |
|
|
(96,779 |
) |
|
|
(78,418 |
) |
Net written premiums |
|
$ |
226,355 |
|
|
$ |
187,531 |
|
|
$ |
925,295 |
|
|
$ |
773,735 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||
Earned Premiums |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Direct |
|
$ |
243,513 |
|
|
$ |
205,627 |
|
|
$ |
897,598 |
|
|
$ |
803,289 |
|
Assumed |
|
|
7,345 |
|
|
|
7,141 |
|
|
|
29,702 |
|
|
|
28,976 |
|
Ceded |
|
|
(24,829 |
) |
|
|
(19,615 |
) |
|
|
(92,886 |
) |
|
|
(73,760 |
) |
Net earned premiums |
|
$ |
226,029 |
|
|
$ |
193,153 |
|
|
$ |
834,414 |
|
|
$ |
758,505 |
|
View source version on businesswire.com: https://www.businesswire.com/news/home/20240227155706/en/
Safety Insurance Group, Inc.
Office of Investor Relations
877-951-2522
InvestorRelations@SafetyInsurance.com
Source: Safety Insurance Group, Inc.
FAQ
What was Safety Insurance Group, Inc.'s (SAFT) net income for the year ended December 31, 2023?
How much did direct written premiums increase by for the year ended December 31, 2023?
What was the total prior year favorable development included in the pre-tax results for the year ended December 31, 2023?
What was Safety Insurance Group, Inc.'s (SAFT) net investment income for the year ended December 31, 2023?
