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Safety Announces Third Quarter 2017 Results and Declares Fourth Quarter 2017 Dividend
[November 01, 2017]

Safety Announces Third Quarter 2017 Results and Declares Fourth Quarter 2017 Dividend


Safety Insurance Group, Inc. (NASDAQ:SAFT) today reported third quarter 2017 results. Net income for the quarter ended September 30, 2017 was $18.0 million, or $1.18 per diluted share, compared to net income of $18.6 million, or $1.23 per diluted share, for the comparable 2016 period. Net income for the nine months ended September 30, 2017 was $51.1 million, or $3.36 per diluted share, compared to net income of $52.6 million, or $3.48 per diluted share, for the comparable 2016 period. Safety's book value per share increased to $46.18 at September 30, 2017 from $44.27 at December 31, 2016. Safety paid $0.80 and $0.70 per share in dividends to investors during the quarters ended September 30, 2017 and 2016, respectively. Safety paid $2.80 per share in dividends to investors during the year ended December 31, 2016.

Direct written premiums for the quarter ended September 30, 2017 increased by $2.7 million, or 1.3%, to $215.9 million from $213.2 million for the comparable 2016 period. Direct written premiums for the nine months ended September 30, 2017 increased by $12.1 million, or 1.9%, to $642.6 million from $630.5 million for the comparable 2016 period. The 2017 increase occurred in our private passenger automobile, commercial passenger automobile and homeowner lines of business, which experienced increases in average written premium per exposure of 3.5%, 2.6% and 4.1% respectively.

Net written premiums for the quarter ended September 30, 2017 decreased by $0.1 million, or 0.1%, to $204.5 million from $204.6 million for the comparable 2016 period. The decrease during the quarter is due to additional commercial automobile premiums ceded to the residual market. Net written premiums for the nine months ended September 30, 2017 increased by $11.0 million, or 1.8%, to $609.2 million from $598.2 million for the comparable 2016 period. Net earned premiums for the quarter ended September 30, 2017 increased by $4.8 million, or 2.5%, to $195.5 million from $190.7 million for the comparable 2016 period. Net earned premiums for the nine months ended September 30, 2017 increased by $14.3 million, or 2.5%, to $578.1 million from $563.8 million for the comparable 2016 period. Net earned premiums increased primarily due to increases in our automobile and homeowners business as discussed above.

For the quarter ended September 30, 2017, loss and loss adjustment expenses incurred decreased by $1.2 million, or 0.9%, to $123.8 million from $125.0 million for the comparable 2016 period. For the nine months ended September 30, 2017, loss and loss adjustment expenses incurred increased by $3.2 million, or 0.9%, to $369.3 million from $366.1 million for the comparable 2016 period. Total prior year favorable development included in the pre-tax results for the quarter ended September 30, 2017 was $10.8 million compared to $11.7 million for the comparable 2016 period. Total prior year favorable development included in the pre-tax results for the nine months ended September 30, 2017 was $31.2 million compared to $33.6 million for the comparable 2016 period.

Loss, expense, and combined ratios calculated under U.S. generally accepted accounting principles for the quarter ended September 30, 2017 were 63.3%, 32.2%, and 95.5%, respectively, compared to 65.5%, 30.6%, and 96.1%, respectively, for the comparable 2016 period. Loss, expense, and combined ratios calculated under U.S. generally accepted accounting principles for the nine months ended September 30, 2017 were 63.9%, 31.8%, and 95.7%, respectively, compared to 64.9%, 30.5%, and 95.4%, respectively, for the comparable 2016 period. The increase in the expense ratio is attributable to increases in nonrecurring legal fees related to reinsurance arbitration, contingent commissions and restricted stock compensation.

Net investment income for the quarter ended September 30, 2017 increased by $0.5 million, or 6.0%, to $9.5 million from $9.0 million for the comparable 2016 period. Net investment income for the nine months ended September 30, 2017 increased by $0.1 million, or 0.3%, to $28.3 million from $28.2 million for the comparable 2016 period. The increase is a result of 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 September 30, 2017 was 3.0% compared to 2.9% for the comparable 2016 period. Net effective annualized yield on the investment portfolio for the nine months ended September 30, 2017 was 3.0% compared to 3.1% for the comparable 2016 period. Our duration was 3.8 years at September 30, 2017 and 4.3 years at December 31, 2016.

Today, our Board of Directors approved and declared a quarterly cash dividend of $0.80 per share on the issued and outstanding common stock, payable on December 15, 2017 to shareholders of record at the close of business on December 1, 2017.

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 (News - Alert)") 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, 2016 Form 10-K with the SEC on February 24, 2017 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, 2016 filed with the SEC on February 24, 2017.

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,
2017 2016
(Unaudited)
Assets
Investments:
Securities available for sale:
Fixed maturities, at fair value (amortized cost: $1,155,466 and $1,142,663) $ 1,177,631 $ 1,154,269
Equity securities, at fair value (cost: $87,580 and $92,326) 105,987 105,095
Other invested assets   27,893     21,142  
Total investments 1,311,511 1,280,506
Cash and cash equivalents 31,934 20,052
Accounts receivable, net of allowance for doubtful accounts 205,835 187,696
Receivable for securities sold 2,495 7,098
Accrued investment income 9,674 8,858
Taxes recoverable 3,849 -
Receivable from reinsurers related to paid loss and loss adjustment expenses 42,865 29,504
Receivable from reinsurers related to unpaid loss and loss adjustment expenses 92,942 83,724
Ceded unearned premiums 30,578 28,585
Deferred policy acquisition costs 76,458 70,996
Deferred income taxes - 3,083
Equity and deposits in pools 30,934 24,675
Other assets   15,535     13,469  
Total assets $ 1,854,610   $ 1,758,246  
 
Liabilities
Loss and loss adjustment expense reserves $ 577,637 $ 560,321
Unearned premium reserves 451,119 418,033
Accounts payable and accrued liabilities 51,290 66,805
Payable for securities purchased 14,860 5,564
Payable to reinsurers 29,013 13,502
Deferred income taxes 6,412 -
Taxes payable - 1,110
Other liabilities   21,440     22,185  
Total liabilities   1,151,771     1,087,520  
 
 
Shareholders' equity
Common stock: $0.01 par value; 30,000,000 shares authorized; 17,499,544 and 17,430,189 shares issued 175 174
Additional paid-in capital 188,576 184,549
Accumulated other comprehensive income, net of taxes 26,371 15,843
Retained earnings 571,552 553,995
Treasury stock, at cost: 2,279,570 shares   (83,835 )   (83,835 )
Total shareholders' equity   702,839     670,726  
Total liabilities and shareholders' equity $ 1,854,610   $ 1,758,246  
 

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,
2017     2016 2017     2016
 
Net earned premiums $ 195,524 $ 190,712 $ 578,059 $ 563,759
Net investment income 9,503 8,967 28,313 28,235
Earnings from partnership investments 351 802 1,233 3,089
Net realized gains on investments 2,717 4,891 4,826 4,928
Net impairment losses on investments (a) (256 ) - (256 ) (429 )
Finance and other service income   4,690     4,713   13,373     13,282  
Total revenue   212,529     210,085   625,548     612,864  
 
Losses and loss adjustment expenses 123,792 124,961 369,271 366,084
Underwriting, operating and related expenses 62,994 58,406 183,643 171,876
Interest expense   22     22   67     67  
Total expenses   186,808     183,389   552,981     538,027  
 
Income before income taxes 25,721 26,696 72,567 74,837
Income tax expense   7,767     8,099   21,489     22,205  
Net income $ 17,954   $ 18,597 $ 51,078   $ 52,632  
 
Earnings per weighted average common share:
Basic $ 1.19   $ 1.24 $ 3.38   $ 3.50  
Diluted $ 1.18   $ 1.23 $ 3.36   $ 3.48  
 
Cash dividends paid per common share $ 0.80   $ 0.70 $ 2.20   $ 2.10  
 
Number of shares used in computing earnings per share:
Basic   15,021,189     14,960,516   15,007,221     14,941,732  
Diluted   15,161,962     15,076,635   15,124,044     15,018,124  
 

(a) No portion of the other-than-temporary impairments recognized in the period indicated were included in Other Comprehensive Income

Safety Insurance Group, Inc. and Subsidiaries

Additional Premium Information

(Unaudited)

(Dollars in thousands)

 
    Three Months Ended September 30,       Nine Months Ended September 30,
2017     2016 2017     2016
Written Premiums
Direct $ 215,919 $ 213,197 $ 642,633 $ 630,508
Assumed 8,291 7,120 25,326 22,674
Ceded   (19,743 )   (15,723 )   (58,806 )   (55,030 )
Net written premiums $ 204,467   $ 204,594   $ 609,153   $ 598,152  
 
Earned Premiums
Direct $ 207,597 $ 201,818 $ 610,636 $ 593,203
Assumed 7,525 6,901 24,237 22,207
Ceded   (19,598 )   (18,007 )   (56,814 )   (51,651 )
Net earned premiums $ 195,524   $ 190,712   $ 578,059   $ 563,759  


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