Safety Insurance Group, Inc. (NASDAQ:SAFT) today reported third quarter 2010 results. Net income for the quarter ended September 30, 2010 was $15.4 million, or $1.03 per diluted share, compared to $17.0 million, or $1.11 per diluted share, for the comparable 2009 period. Net income for the nine months ended September 30, 2010 was $43.3 million, or $2.87 per diluted share, compared to $43.9 million, or $2.79 per diluted share, for the comparable 2009 period. Safety’s book value per share increased to $43.88 at September 30, 2010 from $41.20 at December 31, 2009. Safety paid $0.50 per share in dividends to investors during the quarter ended September 30, 2010, compared to $0.40 per share during the comparable 2009 period. Safety paid $1.60 per share in dividends to investors during the year ended December 31, 2009.

Direct written premiums for the quarter ended September 30, 2010 increased by $13.8 million, or 9.7%, to $157.0 million from $143.2 million for the comparable 2009 period. Direct written premiums for the nine months ended September 30, 2010 increased by $33.2 million, or 7.6%, to $471.5 million from $438.3 million for the comparable 2009 period. The 2010 increase occurred primarily in our personal automobile and homeowners lines, which experienced increases of 4.1% and 3.1%, respectively, in average written premium per exposure and increases of 2.5% and 20.7%, respectively, in written exposures. Partially offsetting these increases was a 5.0% decrease in average written premium per exposure and a 2.6% decrease in written exposures in our commercial automobile line.

Net written premiums for the quarter ended September 30, 2010 increased by $12.7 million, or 9.3%, to $150.0 million from $137.3 million for the comparable 2009 period. Net written premiums for the nine months ended September 30, 2010 increased by $31.4 million, or 7.5%, to $450.6 million from $419.2 million for the comparable 2009 period. The 2010 increase was primarily due to the factors that increased direct written premiums.

Net earned premiums for the quarter ended September 30, 2010 increased by $6.1 million, or 4.6%, to $139.2 million from $133.1 million for the comparable 2009 period. Net earned premiums for the nine months ended September 30, 2010 increased by $8.8 million, or 2.2%, to $408.5 million from $399.7 million for the comparable 2009 period. The 2010 increase was due to the factors that increased direct written premiums combined with decreases in earned premiums ceded to Commonwealth Automobile Reinsurers (“CAR”), and partially offset by decreases in earned premiums assumed from CAR. Earned premiums ceded to and assumed from CAR decreased as a result of the phase-out of the CAR personal automobile reinsurance pool, which was fully replaced by an assigned risk plan, the Massachusetts Automobile Insurance Plan, beginning with personal automobile policy effective dates after March 31, 2009. The effect of assumed and ceded premiums on net written and net earned premiums is presented in the tables below.

Net investment income for the quarter ended September 30, 2010 decreased by $1.0 million, or 8.9%, to $10.1 million from $11.1 million for the comparable 2009 period. Net investment income for the nine months ended September 30, 2010 decreased by $0.4 million, or 1.3%, to $31.8 million from $32.2 million for the comparable 2009 period. The 2010 decrease primarily resulted from lower short-term interest rates, risk reduction actions related to municipal bonds, and duration-shortening actions taken to protect the portfolio from rising interest rates. Net effective annualized yield on the investment portfolio decreased to 3.8% and 4.0%, respectively, for the quarter and nine months ended September 30, 2010 from 4.2% and 4.1%, respectively, for the comparable 2009 periods. Our duration decreased to 2.9 years at September 30, 2010 from 3.2 years at September 30, 2009.

We continue to hold no subprime mortgage debt securities. All of our mortgage-backed securities are either U.S. Government or Agency guaranteed or are rated AAA. During the nine months ended September 30, 2010, we purchased 162,907 of our common shares on the open market at a cost of $5.8 million under our share buyback program. During the year ended December 31, 2009, we purchased 1,332,535 of our common shares under the program at a cost of $42.2 million. As of September 30, 2010, we maintained $79.0 million in net cash and cash equivalents and we have no outstanding debt.

Loss, expense, and combined ratios calculated under U.S. generally accepted accounting principles (“GAAP”) for the quarter ended September 30, 2010 were 63.5%, 31.8%, and 95.3%, respectively, compared to 61.8%, 31.6%, and 93.4%, respectively, for the comparable 2009 period. Loss, expense, and combined ratios calculated under GAAP for the nine months ended September 30, 2010 were 64.8%, 31.4%, and 96.2%, respectively, compared to 65.4%, 30.7%, and 96.1%, respectively, for the comparable 2009 period. Total prior year favorable development included in the pre-tax results for the quarter and nine months ended September 30, 2010 was $10.3 million and $32.9 million, respectively, compared to prior year favorable development of $11.9 million and $30.0 million, respectively, for the comparable 2009 periods.

The Board of Directors today approved and declared a quarterly cash dividend of $0.50 per share on the issued and outstanding common stock, payable on December 15, 2010 to shareholders of record at the close of business on December 1, 2010.

About Safety: Safety Insurance Group, Inc. is the parent of Safety Insurance Company, Safety Indemnity Insurance Company, and Safety Property and Casualty Insurance Company which are Boston, MA, based writers of property and casualty insurance. Safety is a leading writer of personal automobile insurance in Massachusetts.

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, 2009 Form 10-K with the SEC on March 15, 2010 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, 2009 filed with the SEC on March 15, 2010.

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,
2010 2009
(Unaudited)
Assets
Investment securities available for sale:
Fixed maturities, at fair value (amortized cost: $982,910 and $989,444) $ 1,037,739 $ 1,018,329
Equity securities, at fair value (cost: $13,524 and $9,736)   13,958     9,876  
Total investment securities 1,051,697 1,028,205
Cash and cash equivalents 90,883 74,470
Accounts receivable, net of allowance for doubtful accounts 158,352 137,238
Accrued investment income 9,223 10,044
Taxes recoverable 2,695 -
Receivable from reinsurers related to paid loss and loss adjustment expenses 6,700 6,851
Receivable from reinsurers related to unpaid loss and loss adjustment expenses 56,726 64,874
Ceded unearned premiums 11,892 13,698
Deferred policy acquisition costs 55,579 47,900
Deferred income taxes 4 8,335
Equity and deposits in pools 25,682 23,840
Other assets   10,676     12,382  
Total assets $ 1,480,109   $ 1,427,837  
 
Liabilities
Loss and loss adjustment expense reserves $ 413,066 $ 439,706
Unearned premium reserves 322,761 282,434
Accounts payable and accrued liabilities 43,516 59,869
Taxes payable - 3,916
Payable for securities purchased 11,895 -
Payable to reinsurers 10,954 4,674
Other liabilities   18,496     16,803  
Total liabilities   820,688     807,402  
 
Shareholders' equity

Common stock: $0.01 par value; 30,000,000 shares authorized; 16,754,727  and 16,624,220 shares issued
168 166
Additional paid-in capital 148,800 144,814
Accumulated other comprehensive income, net of taxes 35,921 18,866
Retained earnings 530,058 506,301
Treasury stock, at cost; 1,727,455 and 1,564,548 shares   (55,526 )   (49,712 )
Total shareholders' equity   659,421     620,435  
Total liabilities and shareholders' equity $ 1,480,109   $ 1,427,837  
 
Safety Insurance Group, Inc. and Subsidiaries
Consolidated Statements of Operations
(Unaudited)
(Dollars in thousands, except share and per share data)
                 
Three Months Ended Nine Months Ended
September 30, September 30,
2010 2009 2010 2009
Net earned premiums $ 139,190 $ 133,059 $ 408,490 $ 399,715
Net investment income 10,108 11,093 31,757 32,221
Net realized gains (losses) on investments 363 (20 ) 295 (337 )
Finance and other service income   4,770     4,197     13,642     12,578  
Total revenue   154,431     148,329     454,184     444,177  
 
Losses and loss adjustment expenses 88,455 82,280 264,905 261,555
Underwriting, operating and related expenses 44,229 42,061 128,354 122,681
Interest expense   22     23     66     66  
Total expenses   132,706     124,364     393,325     384,302  
 
Income before income taxes 21,725 23,965 60,859 59,875
Income tax expense   6,258     6,941     17,529     15,992  
Net income $ 15,467   $ 17,024   $ 43,330   $ 43,883  
 
Earnings per weighted average common share:
Basic $ 1.03   $ 1.11   $ 2.87   $ 2.80  
Diluted $ 1.03   $ 1.11   $ 2.87   $ 2.79  
 
Cash dividends paid per common share $ 0.50   $ 0.40   $ 1.30   $ 1.20  
 
Number of shares used in computing earnings per share:
Basic   15,018,988     15,296,221     15,072,238     15,694,500  
Diluted   15,036,656     15,314,552     15,089,317     15,713,733  
 
Safety Insurance Group, Inc. and Subsidiaries
Additional Premium Information
(Unaudited)
(Dollars in thousands)
 
Three Months Ended Nine Months Ended
September 30, September 30,
2010 2009 2010 2009
Written Premiums
Direct $ 157,038 $ 143,210 $ 471,527 $ 438,269
Assumed 2,617 3,059 9,557 12,447
Ceded   (9,651 )   (9,009 )   (30,461 )   (31,540 )
Net written premiums $ 150,004   $ 137,260   $ 450,623   $ 419,176  
 
Earned Premiums
Direct $ 147,440 $ 139,101 $ 430,506 $ 415,810
Assumed 2,463 5,778 10,251 22,377
Ceded   (10,713 )   (11,820 )   (32,267 )   (38,472 )
Net earned premiums $ 139,190   $ 133,059   $ 408,490   $ 399,715  

Copyright Business Wire 2010

More from Press Releases

NFL Pushes for Regulation Following Supreme Court's Sports Gambling Ruling

NFL Pushes for Regulation Following Supreme Court's Sports Gambling Ruling

21st Century Fox Scoops Up Local News Stations

21st Century Fox Scoops Up Local News Stations

Walmart CEO: 'We Are Transforming Globally' With Flipkart

Walmart CEO: 'We Are Transforming Globally' With Flipkart

Three-Part FREE Webinar Series

Three-Part FREE Webinar Series

March 24 Full-Day Course Offering: Professional Approach to Trading SPX

March 24 Full-Day Course Offering: Professional Approach to Trading SPX