Safety Insurance Group, Inc. (NASDAQ:SAFT) (“the Company”) today
reported fourth quarter 2020 results. Net income for the quarter
ended December 31, 2020 was $53.0 million, or $3.55 per diluted
share, compared to net income of $28.1 million, or $1.82 per
diluted share, for the comparable 2019 period. Net income for the
year ended December 31, 2020 was $138.2 million, or $9.18 per
diluted share, compared to net income of $99.6 million, or $6.46
per diluted share, for the comparable 2019 period. Non-generally
accepted accounting principles (“non-GAAP”) operating income, as
defined below, for the quarter ended December 31, 2020 was $2.55
per diluted share, compared to $1.44 per diluted share, for the
comparable 2019 period. Non-GAAP operating income for the year
ended December 31, 2020 was $8.64 per diluted share, compared to
$5.25 per diluted share, for the comparable 2019 period.
Safety’s book value per share increased to $59.40 at December
31, 2020 from $52.55 at December 31, 2019, primarily as a result of
net income and an increase in unrealized gains, partially offset by
dividends paid and the purchase of treasury shares during the year
ended December 31, 2020. During the year ended December 31, 2020
the Company purchased 551,598 shares, on the open market at a cost
of $40.0 million. No share purchases were made by the Company under
the program during the year ended December 31, 2019. Safety paid
$3.60 per share in dividends to investors during the year ended
December 31, 2020 compared to $3.40 per share during the year ended
December 31, 2019.
Beginning in March 2020, the global pandemic associated with the
novel coronavirus COVID-19 (“COVID-19”) and related economic
conditions caused significant economic effects including temporary
closures of many businesses and reduced consumer activity due to
shelter-in-place, stay-at-home and other governmental actions. The
Company has continued to take many actions that address the health
and well-being of our employees while still serving the needs of
our agents and insureds.
Direct written premiums for the quarter ended December 31, 2020
decreased by $7.1 million, or 3.7%, to $182.6 million from $189.7
million for the comparable 2019 period. Direct written premiums for
the year ended December 31, 2020 decreased by $53.7 million, or
6.3% to $798.7 million from $852.4 million for the comparable 2019
period. The 2020 decrease, in part, is attributable to our
commercial automobile line of business and is a result of changes
made by Commonwealth Automobile Reinsurers (“CAR”) to eligibility
requirements which impacted the number of policies that we handle
as a Servicing Carrier to the ceded pool. This resulted in a
commensurate decrease in ceded written premium to and assumed from
these programs. The decrease for the year ended December 31, 2020
also reflects the Safety Personal Auto Relief Credit, a 15%
policyholder credit, representing $17.7 million in total premium
which was applied to personal auto policies for the months of
April, May and June.
Net written premiums for the quarter ended December 31, 2020
decreased by $4.5 million, or 2.6%, to $171.1 million from $175.6
million for the comparable 2019 period. Net written premiums for
the year ended December 31, 2020 decreased by $30.9 million, or
3.9%, to $763.5 million from $794.4 million for the comparable 2019
period. Net earned premiums for the quarter ended December 31, 2020
decreased by $3.1 million, or 1.5%, to $196.4 million from $199.5
million for the comparable 2019 period. Net earned premiums for the
year ended December 31, 2020 decreased by $17.7 million, or 2.2%,
to $771.1 million from $788.8 million for the comparable 2019
period. The decreases in both periods are a result of the decrease
in direct written premiums as described above.
The pandemic has resulted in fewer cars on the road, resulting
in a decrease in frequency of claims, primarily in our private
passenger automobile line of business. As a result, for the quarter
ended December 31, 2020, loss and loss adjustment expenses incurred
decreased by $30.6 million, or 24.3%, to $95.8 million from $126.4
million for the comparable 2019 period. For the year ended December
31, 2020, loss and loss adjustment expenses incurred decreased by
$105.2 million, or 20.7%, to $404.6 million from $509.8 million for
the comparable 2019 period. Loss, expense, and combined ratios
calculated under U.S. generally accepted accounting principles for
the quarter ended December 31, 2020 were 48.8%, 36.3%, and 85.1%,
respectively, compared to 63.4%, 31.1%, and 94.5%, respectively,
for the comparable 2019 period. Loss, expense, and combined ratios
calculated under U.S. generally accepted accounting principles for
the year ended December 31, 2020 were 52.5%, 34.6%, and 87.1%,
respectively, compared to 64.6%, 31.0%, and 95.6%, respectively,
for the comparable 2019 period. Total prior year favorable
development included in the pre-tax results for the quarter ended
December 31, 2020 was $20.2 million compared to $16.5 million for
the comparable 2019 period. Total prior year favorable development
included in the pre-tax results for the year ended December 31,
2020 was $54.8 million compared to $42.1 million for the comparable
2019 period.
The increase in the expense ratios in the respective periods is
driven by an increase in contingent commission expense as well as
costs associated with various system modernization in our claims,
billing and underwriting areas and a reduction in certain expense
allowances provided under the Servicing Carrier program that have
decreased with the related written premium as noted above.
Net investment income for the quarter ended December 31, 2020
decreased by $1.7 million, or 13.7%, to $10.7 million from $12.4
million for the comparable 2019 period. Net investment income for
the year ended December 31, 2020 decreased by $5.7 million, or
12.0%, to $41.0 million from $46.7 million for the comparable 2019
period. The decreases in both periods is a result of lower floating
yields on our bank loan portfolio, lower interest income on certain
partnership investments and fixed maturity amortization resulting
from prepayment activity on certain residential mortgage-backed
securities. Net effective annualized yield on the investment
portfolio for the quarter ended December 31, 2020 was 3.0% compared
to 3.6% for the comparable 2019 period. Net effective annualized
yield on the investment portfolio for the year ended December 31,
2020 was 2.9% compared to 3.4% for the comparable 2019 period. Our
duration on fixed maturities was 3.2 years at December 31, 2020
compared to 3.3 years at December 31, 2019.
On February 16, 2021, our Board of Directors approved a $0.90
per share quarterly cash dividend on its issued and outstanding
common stock payable on March 15, 2021 to shareholders of record at
the close of business on March 5, 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 on investments, net
impairment losses on investments, change in net unrealized gains on
equity investments, credit loss benefit (expense) and taxes related
thereto. For the quarter ended December 31, 2020, an increase of
$16.1 million for the change in unrealized gains on equity
securities was recognized within income before income taxes,
compared to an increase of $6.3 million recognized in the
comparable 2019 period. For the year ended December 31, 2020, an
increase of $10.4 million for the change in unrealized gains on
equity securities was recognized in income before income taxes,
compared to an increase of $21.5 million recognized in the
comparable 2019 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, 2019 Form
10-K with the SEC on February 28, 2020 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;
- 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 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, 2019 filed with the SEC on February 28, 2020.
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,
2020
2019
(Unaudited)
Assets
Investments:
Fixed maturities, available for sale, at
fair value (amortized cost: $1,189,951 and $1,192,357, allowance
for expected credit losses of $1,054 at December 31, 2020)
$
1,256,653
$
1,228,040
Short term investments, at fair value
(cost: $441 and $0)
441
—
Equity securities, at fair value (cost:
$168,289 and $151,121)
205,254
177,637
Other invested assets
45,239
37,278
Total investments
1,507,587
1,442,955
Cash and cash equivalents
53,769
44,407
Accounts receivable, net of allowance for
expected credit losses of $1,754 at December 31, 2020
179,147
193,369
Receivable for securities sold
1,311
1,784
Accrued investment income
8,045
8,404
Taxes recoverable
279
1,003
Receivable from reinsurers related to paid
loss and loss adjustment expenses
13,432
11,319
Receivable from reinsurers related to
unpaid loss and loss adjustment expenses
106,311
122,372
Ceded unearned premiums
22,406
35,182
Deferred policy acquisition costs
74,962
74,287
Equity and deposits in pools
30,429
29,791
Operating lease right-of-use-assets
31,000
33,998
Other assets
25,595
23,798
Total assets
$
2,054,273
$
2,022,669
Liabilities
Loss and loss adjustment expense
reserves
$
567,581
$
610,566
Unearned premium reserves
421,901
442,219
Accounts payable and accrued
liabilities
79,486
75,016
Payable for securities purchased
7,144
6,377
Payable to reinsurers
8,236
12,911
Deferred income taxes
17,611
5,717
Debt
30,000
—
Operating lease liabilities
31,000
33,998
Other liabilities
6,635
27,459
Total liabilities
1,169,594
1,214,263
Shareholders’ equity
Common stock: $0.01 par value; 30,000,000
shares authorized; 17,724,866 and 17,662,779 shares issued
178
177
Additional paid-in capital
209,779
202,321
Accumulated other comprehensive income,
net of taxes
53,527
28,190
Retained earnings
745,029
661,553
Treasury stock, at cost: 2,831,168 and
2,279,570 shares
(123,834
)
(83,835
)
Total shareholders’ equity
884,679
808,406
Total liabilities and shareholders’
equity
$
2,054,273
$
2,022,669
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,
2020
2019
2020
2019
Net earned premiums
$
196,438
$
199,450
$
771,078
$
788,777
Net investment income
10,701
12,393
41,045
46,665
Earnings from partnership investments
4,312
506
6,901
1,937
Net realized gains on investments
1,640
1,463
957
2,976
Change in net unrealized gains on equity
investments
16,088
6,286
10,449
21,454
Net impairment losses on investments
(a)
—
(492
)
—
(889
)
Credit loss benefit (expense)
1,235
—
(1,054
)
—
Finance and other service income
4,620
4,293
16,872
16,833
Total revenue
235,034
223,899
846,248
877,753
Losses and loss adjustment expenses
95,782
126,460
404,556
509,846
Underwriting, operating and related
expenses
71,290
61,949
266,482
244,136
Interest expense
132
23
440
90
Total expenses
167,204
188,432
671,478
754,072
Income before income taxes
67,830
35,467
174,770
123,681
Income tax expense
14,865
7,365
36,559
24,080
Net income
$
52,965
$
28,102
$
138,211
$
99,601
Earnings per weighted average common
share:
Basic
$
3.57
$
1.84
$
9.25
$
6.52
Diluted
$
3.55
$
1.82
$
9.18
$
6.46
Cash dividends paid per common
share
$
0.90
$
0.90
$
3.60
$
3.40
Number of shares used in computing
earnings per share:
Basic
14,755,082
15,220,902
15,002,755
15,201,132
Diluted
14,866,704
15,340,518
15,119,027
15,337,807
(a) No portion of the other-than-temporary
impairments recognized in the period indicated were included in
Other Comprehensive Income for the period ended December 31,
2019.
Reconciliation of Net Income to
Non-GAAP Operating Income
Net income
$
52,965
$
28,102
$
138,211
$
99,601
Exclusions from net income:
Net realized gains on investments
(1,640
)
(1,463
)
(957
)
(2,976
)
Change in net unrealized gains on equity
investments
(16,088
)
(6,286
)
(10,449
)
(21,454
)
Net impairment losses on investments
-
492
-
889
Credit loss (benefit) expense
(1,235
)
-
1,054
-
Income tax expense on exclusions from net
income
3,982
1,524
2,174
4,944
Non-GAAP operating income
$
37,984
$
22,369
$
130,033
$
81,004
Net income per diluted share
$
3.55
$
1.82
$
9.18
$
6.46
Exclusions from net income:
Net realized gains on investments
(0.11
)
(0.10
)
(0.06
)
(0.19
)
Change in net unrealized gains on equity
investments
(1.08
)
(0.41
)
(0.69
)
(1.40
)
Net impairment losses on investments
-
0.03
-
0.06
Credit loss (benefit) expense
(0.08
)
-
0.07
-
Income tax expense on exclusions from net
income
0.27
0.10
0.14
0.32
Non-GAAP operating income per diluted
share
$
2.55
$
1.44
$
8.64
$
5.25
Safety Insurance Group, Inc.
and Subsidiaries
Additional Premium
Information
(Unaudited)
(Dollars in thousands)
Three Months Ended December
31,
Year Ended December
31,
2020
2019
2020
2019
Written Premiums
Direct
$
182,627
$
189,671
$
798,712
$
852,404
Assumed
5,535
8,498
26,316
32,391
Ceded
(17,077
)
(22,579
)
(61,491
)
(90,386
)
Net written premiums
$
171,085
$
175,590
$
763,537
$
794,409
Earned Premiums
Direct
$
207,464
$
213,841
$
815,981
$
845,102
Assumed
5,954
8,111
29,365
32,853
Ceded
(16,980
)
(22,502
)
(74,268
)
(89,178
)
Net earned premiums
$
196,438
$
199,450
$
771,078
$
788,777
View source
version on businesswire.com: https://www.businesswire.com/news/home/20210224006017/en/
Safety Insurance Group, Inc. Office of Investor Relations
877-951-2522 InvestorRelations@SafetyInsurance.com
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