Safety Announces Fourth Quarter And Year End 2010 Results

Safety Insurance Group, Inc. (NASDAQ:SAFT) today reported fourth quarter and year end 2010 results. Net income for the quarter ended December 31, 2010 was $13.0 million, or $0.86 per diluted share, compared to $10.3 million, or $0.68 per diluted share, for the comparable 2009 period. Net income for the year ended December 31, 2010 was $56.3 million, or $3.74 per diluted share, compared to $54.2 million, or $3.48 per diluted share, for the comparable 2009 period. Safety’s book value per share increased to $43.37 at December 31, 2010 from $41.20 at December 31, 2009. Safety paid $0.50 per share in dividends to investors during the quarter ended December 31, 2010 compared to $0.40 per share during the comparable 2009 period. Safety paid $1.80 per share in dividends to investors during the year ended December 31, 2010 compared to $1.60 per share during the comparable 2009 period.

Direct written premiums for the quarter ended December 31, 2010 increased by $11.9 million, or 9.8%, to $133.4 million from $121.5 million for the comparable 2009 period. Direct written premiums for the year ended December 31, 2010 increased by $45.2 million, or 8.1%, to $604.9 million from $559.7 million for the comparable 2009 period. The 2010 increase occurred primarily in our personal automobile and homeowners business lines, which experienced increases of 3.8% and 3.2%, respectively, in average written premium per exposure and increases of 3.3% and 19.6%, respectively, in written exposures. Partially offsetting these increases was a 4.6% decrease in average written premium per exposure and a 2.2% decrease in written exposures in our commercial automobile business line.

Net written premiums for the quarter ended December 31, 2010 increased by $12.8 million, or 11.2%, to $126.2 million from $113.4 million for the comparable 2009 period. Net written premiums for the year ended December 31, 2010 increased by $44.2 million, or 8.3%, to $576.8 million from $532.6 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 December 31, 2010 increased by $11.2 million, or 8.5%, to $143.5 million from $132.3 million for the comparable 2009 period. Net earned premiums for the year ended December 31, 2010 increased by $20.0 million, or 3.8%, to $552.0 million from $532.0 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 December 31, 2010 decreased by $1.5 million, or 13.1%, to $9.6 million from $11.1 million for the comparable 2009 period. Net investment income for the year ended December 31, 2010 decreased by $1.9 million, or 4.4%, to $41.4 million from $43.3 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 ongoing maintenance of short duration to protect the portfolio from rising interest rates. Net effective annualized yield on the investment portfolio decreased to 3.6% for the quarter ended December 31, 2010 from 4.2% for the comparable 2009 period. Net effective annual yield decreased to 3.9% for the year ended December 31, 2010 from 4.1% for the comparable 2009 period. Our duration was 3.4 years at December 31, 2010, up slightly from 3.3 years at December 31, 2009.

Loss, expense, and combined ratios calculated under U.S. generally accepted accounting principles (“GAAP”) for the quarter ended December 31, 2010 were 66.9%, 31.0%, and 97.9%, respectively, compared to 64.1%, 36.6%, and 100.7%, respectively, for the comparable 2009 period. For the quarter ended December 31, 2009, underwriting expenses included an increase of $5.8 million related to our previously disclosed settlement with the Massachusetts Attorney General regarding the calculation of motorcycle insurance premiums. Loss, expense, and combined ratios calculated under GAAP for the year ended December 31, 2010 were 65.4%, 31.3%, and 96.7%, respectively, compared to 65.1%, 32.2%, and 97.3%, respectively, for the comparable 2009 period. Total prior year favorable development included in the pre-tax results for the quarter and year ended December 31, 2010 was $15.3 million and $48.2 million, respectively, compared to prior year favorable development of $14.0 million and $44.1 million, respectively, for the comparable 2009 periods.

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)
         
December 31,
  2010     2009  
Assets
Investments:
Securities available for sale:
Fixed maturities, at fair value (amortized cost: $1,030,354 and $989,444) $ 1,063,237 $ 1,018,329
Equity securities, at fair value (cost: $13,704 and $9,736) 14,624 9,876
Other invested assets, at cost, which approximates fair value   2,817     409  
Total investment securities 1,080,678 1,028,614
Cash and cash equivalents 40,291 74,470
Accounts receivable, net of allowance for doubtful accounts 145,726 137,238
Accrued investment income 9,471 10,044
Taxes recoverable 5,061 -
Receivable from reinsurers related to paid loss and loss adjustment expenses 4,579 6,851
Receivable from reinsurers related to unpaid loss and loss adjustment expenses 53,147 64,874
Ceded unearned premiums 12,461 13,698
Deferred policy acquisition costs 52,824 47,900
Deferred income taxes 3,643 8,335
Equity and deposits in pools 19,971 23,840
Other assets   11,600     11,973  
Total assets $ 1,439,452   $ 1,427,837  
 
Liabilities
Loss and loss adjustment expense reserves $ 404,391 $ 439,706
Unearned premium reserves 306,053 282,434
Accounts payable and accrued liabilities 54,239 59,869
Taxes payable - 3,916
Payable to reinsurers 5,571 4,674
Other liabilities   15,722     16,803  
Total liabilities   785,976     807,402  
 
Shareholders' equity

Common stock: $0.01 par value; 30,000,000 shares authorized; 16,795,504 and 16,624,220 shares issued
168 166
Additional paid-in capital 151,317 144,814
Accumulated other comprehensive income, net of taxes 21,972 18,866
Retained earnings 535,545 506,301
Treasury stock, at cost: 1,727,455 and 1,564,548 shares   (55,526 )   (49,712 )
Total shareholders' equity   653,476     620,435  
Total liabilities and shareholders' equity $ 1,439,452   $ 1,427,837  
 
 
Safety Insurance Group, Inc. and Subsidiaries
Consolidated Statements of Operations
(Dollars in thousands, except share and per share data)
             
Three Months Ended Twelve Months Ended
December 31, December 31,
  2010     2009     2010     2009  
Net earned premiums $ 143,460 $ 132,254 $ 551,950 $ 531,969
Net investment income 9,638 11,087 41,395 43,308
Net realized gains (losses) on investments 568 170 863 (167 )
Finance and other service income   4,869     4,266     18,511     16,844  
Total revenue   158,535     147,777     612,719     591,954  
 
Losses and loss adjustment expenses 95,943 84,746 360,848 346,301
Underwriting, operating and related expenses 44,469 48,443 172,823 171,124
Interest expenses   22     69     88     135  
Total expenses   140,434     133,258     533,759     517,560  
 
Income before income taxes 18,101 14,519 78,960 74,394
Income tax expense   5,089     4,250     22,618     20,242  
Net income $ 13,012   $ 10,269   $ 56,342   $ 54,152  
 
Earnings per weighted average common share:
Basic $ 0.86   $ 0.68   $ 3.74   $ 3.49  
Diluted $ 0.86   $ 0.68   $ 3.74   $ 3.48  
 
Cash dividends paid per common share $ 0.50   $ 0.40   $ 1.80   $ 1.60  
 
Number of shares used in computing earnings per share:
Basic   15,046,283     15,055,082     15,065,696     15,533,331  
Diluted   15,067,428     15,072,706     15,084,295     15,552,063  
 
Safety Insurance Group, Inc. and Subsidiaries
Additional Premium Information
(Dollars in thousands)
 
Three Months Ended Twelve Months Ended
December 31, December 31,
  2010     2009     2010     2009  
Written Premiums
Direct $ 133,430 $ 121,478 $ 604,957 $ 559,747
Assumed 4,181 2,117 13,738 14,564
Ceded   (11,427 )   (10,142 )   (41,888 )   (41,682 )
Net written premiums $ 126,184   $ 113,453   $ 576,807   $ 532,629  
 
Earned Premiums
Direct $ 150,436 $ 139,210 $ 580,942 $ 555,020
Assumed 3,883 4,175 14,134 26,552
Ceded   (10,859 )   (11,131 )   (43,126 )   (49,603 )
Net earned premiums $ 143,460   $ 132,254   $ 551,950   $ 531,969  

Copyright Business Wire 2010

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