Safety Insurance Group, Inc. (NASDAQ:SAFT) today reported second quarter
2018 results. Net income for the quarter ended June 30, 2018 was $26.8
million, or $1.75 per diluted share, compared to net income of $21.1
million, or $1.39 per diluted share, for the comparable 2017 period. Net
income for the six months ended June 30, 2018 was $35.9 million, or
$2.35 per diluted share, compared to net income of $33.1 million, or
$2.18 per diluted share, for the comparable 2017 period. Non-generally
accepted accounting principles (“non-GAAP”) operating income, as defined
below, for the quarter ended June 30, 2018 was $1.81 per diluted share,
compared to $1.37 per diluted share, for the comparable 2017 period.
Non-GAAP operating income for the six months ended June 30, 2018 was
$2.52 per diluted share, compared to $2.09 per diluted share, for the
comparable 2017 period due to a decline in net unrealized gains.
Safety’s book value per share decreased to $45.56 at June 30, 2018 from
$46.06 at December 31, 2017. Safety paid $0.80 and $0.70 per share in
dividends to investors during the quarters ended June 30, 2018 and 2017,
respectively. Safety paid $3.00 per share in dividends to investors
during the year ended December 31, 2017.
Direct written premiums for the quarter ended June 30, 2018 increased by
$6.0 million, or 2.6%, to $233.0 million from $227.0 million for the
comparable 2017 period. Direct written premiums for the six months ended
June 30, 2018 increased by $10.1 million, or 2.4%, to $436.8 million
from $426.7 million for the comparable 2017 period. The 2018 increase
occurred primarily in our commercial automobile and homeowners lines of
business.
Net written premiums for the quarter ended June 30, 2018 increased by
$1.7 million, or 0.8%, to $215.5 million from $213.8 million for the
comparable 2017 period. Net written premiums for the six months ended
June 30, 2018 increased by $0.8 million, or 0.2%, to $405.5 million from
$404.7 million for the comparable 2017 period. Net earned premiums for
the quarter ended June 30, 2018 increased by $1.3 million, or 0.7%, to
$194.1 million from $192.8 million for the comparable 2017 period. Net
earned premiums for the six months ended June 30, 2018 increased by $3.6
million, or 0.9%, to $386.1 million from $382.5 million for the
comparable 2017 period. Net written and net earned premiums increased
primarily due to increases in our commercial automobile and homeowners
business as discussed above.
For the quarter ended June 30, 2018, loss and loss adjustment expenses
incurred decreased by $3.8 million, or 3.3%, to $113.2 million from
$117.0 million for the comparable 2017 period. For the six months ended
June 30, 2018, loss and loss adjustment expenses incurred increased by
$5.4 million, or 2.2%, to $250.9 million from $245.5 million for the
comparable 2017 period. Loss, expense, and combined ratios calculated
under U.S. generally accepted accounting principles for the quarter
ended June 30, 2018 were 58.3%, 31.7%, and 90.0%, respectively, compared
to 60.7%, 31.6%, and 92.3%, respectively, for the comparable 2017
period. Loss, expense, and combined ratios calculated under U.S.
generally accepted accounting principles for the six months ended
June 30, 2018 were 65.0%, 31.7%, and 96.7%, respectively, compared to
64.2%, 31.5%, and 95.7%, respectively, for the comparable 2017 period.
Total prior year favorable development included in the pre-tax results
for the quarter ended June 30, 2018 was $12.1 million compared to $10.0
million for the comparable 2017 period. Total prior year favorable
development included in the pre-tax results for the six months ended
June 30, 2018 was $26.3 million compared to $20.4 million for the
comparable 2017 period.
Net investment income for the quarter ended June 30, 2018 increased by
$0.5 million, or 4.9%, to $10.2 million from $9.7 million for the
comparable 2017 period. Net investment income for the six months ended
June 30, 2018 increased by $1.9 million, or 10.1%, to $20.7 million from
$18.8 million for the comparable 2017 period. The increase is a result
of fixed maturity amortization and an increase in the average invested
asset balance compared to the prior year. Net effective annualized yield
on the investment portfolio for the quarter ended June 30, 2018 was 3.2%
compared to 3.1% for the comparable 2017 period. Net effective
annualized yield on the investment portfolio for the six months ended
June 30, 2018 was 3.2% compared to 3.0% for the comparable 2017 period.
Our duration was 3.9 years at June 30, 2018 compared to 3.7 years at
December 31, 2017.
Today, our Board of Directors approved a $0.80 per share quarterly cash
dividend on its issued and outstanding common stock payable on September
14, 2018 to shareholders of record at the close of business on September
4, 2018.
Recently Adopted Accounting Standard
As disclosed in Safety’s Annual Report on Form 10-K for the year ended
December 31, 2017, accounting guidance for financial instruments changed
in 2018 under ASU 2016-01, Financial Instruments – Overall (Subtopic
825-10): Recognition and Measurement of Financial Assets and Financial
Liabilities. We adopted this accounting standard update, effective
January 1, 2018, using a cumulative-effect adjustment. This adjustment
moved the historical unrealized gains and losses, net of tax, on the
equity portfolio from accumulated other comprehensive earnings to
retained earnings, but had no impact on overall shareholders’ equity. In
addition, for 2018 and forward, the change in fair value for equity
securities is required to be recognized through net income rather than
through other comprehensive income. As defined below, we exclude these
unrealized gains and losses in arriving at non-GAAP operating income and
non-GAAP operating income per diluted share. For the quarter ended June
30, 2018, a decrease of $2.7 million for the change in unrealized gains
was recognized within income before income taxes and the income tax
expense was reduced by $0.6 million. For the six months ended June 30,
2018, a decrease of $6.2 million for the change in unrealized gains was
recognized within income before income taxes and the income tax expense
was reduced by $1.3 million.
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 gains (losses), net
impairment losses on investments, change in net unrealized gains
(losses) on equity securities and taxes related thereto. The adjustment
for net unrealized losses on equity securities is only applicable for
2018 due to the adoption of the above mentioned accounting standard
update. Net income and earnings per diluted share are the GAAP financial
measures that are most directly comparable to operating income and
operating income per diluted share, respectively. A reconciliation of
the GAAP financial measures to these non-GAAP measures is included in
the 2018 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, 2017 Form 10-K with the SEC on February
28, 2018 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, 2017 filed with the SEC on
February 28, 2018.
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)
Safety Insurance Group, Inc. and Subsidiaries
Consolidated Statements of Operations
(Unaudited)
(Dollars in thousands, except share and per share data)
Safety Insurance Group, Inc. and Subsidiaries
Additional Premium Information
(Unaudited)
(Dollars in thousands)
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