Safety Insurance(SAFT) - 2024 Q4 - Annual Results

markdown [**Executive Summary**](index=1&type=section&id=1.%20Executive%20Summary) This section summarizes Safety Insurance Group's key financial and operational highlights for the full year and fourth quarter of 2024 [**Full Year 2024 Highlights**](index=1&type=section&id=1.1.%20Full%20Year%202024%20Highlights) Safety Insurance Group, Inc. achieved significant direct written premium growth, exceeding **$1 billion** for the first time, driven by increased policy counts and premium rate actions. The company also saw an improved combined ratio and substantial growth in net income and non-GAAP operating income for the full year 2024 - Direct written premium growth of **20.4%** for the year ended December 31, 2024, surpassing **$1 billion** for the first time[2](index=2&type=chunk) - Overall policy counts increased by **8.5%** and average premium per policy increased by **10.9%** across all lines of business[2](index=2&type=chunk) Full Year 2024 Key Financial Highlights | Metric | FY2024 | FY2023 | Change (YoY) | % Change (YoY) | | :-------------------------------- | :----- | :----- | :----------- | :------------- | | Direct Written Premiums (Millions) | $1,193.1 | $991.2 | +$201.9 | +20.4% | | Combined Ratio | 101.1% | 107.7% | -6.6 pp | -6.13% | | Net Income (Millions) | $70.7 | $18.9 | +$51.8 | +274.07% | | Diluted EPS | $4.78 | $1.28 | +$3.50 | +273.44% | | Non-GAAP Operating Income (Millions) | $61.5 | $12.3 | +$49.2 | +400.00% | | Non-GAAP Operating Income per Diluted Share | $4.16 | $0.84 | +$3.32 | +395.24% | | Book Value per Share | $55.83 | $54.37 | +$1.46 | +2.68% | [**Fourth Quarter 2024 Highlights**](index=1&type=section&id=1.2.%20Fourth%20Quarter%202024%20Highlights) For the fourth quarter of 2024, Safety Insurance reported an improved combined ratio and strong growth in direct written premiums, although net income saw a decrease compared to the prior year quarter Fourth Quarter 2024 Key Financial Highlights | Metric | Q4 2024 | Q4 2023 | Change (YoY) | % Change (YoY) | | :-------------------------------- | :------ | :------ | :----------- | :------------- | | Direct Written Premiums (Millions) | $292.0 | $246.1 | +$45.9 | +18.7% | | Combined Ratio | 101.9% | 106.5% | -4.6 pp | -4.32% | | Net Income (Millions) | $8.1 | $12.3 | -$4.2 | -34.15% | | Diluted EPS | $0.55 | $0.83 | -$0.28 | -33.73% | | Non-GAAP Operating Income (Millions) | $14.0 | $4.4 | +$9.6 | +218.18% | | Non-GAAP Operating Income per Diluted Share | $0.94 | $0.30 | +$0.64 | +213.33% | [**Financial Performance Analysis**](index=1&type=section&id=2.%20Financial%20Performance%20Analysis) This section analyzes Safety Insurance Group's premium growth, underwriting results, investment performance, and net income for the reported periods [**Premium Growth**](index=1&type=section&id=2.1.%20Premium%20Growth) Safety Insurance experienced robust premium growth in both the fourth quarter and full year 2024, driven by increases in direct written, net written, and net earned premiums. This growth was primarily attributed to new business production, rate increases, and higher policy counts across key lines of business [**Direct and Net Written Premiums**](index=1&type=section&id=2.1.1.%20Direct%20and%20Net%20Written%20Premiums) This section presents a detailed breakdown of direct and net written premiums for the reported periods Written Premiums (in millions) | Metric | Q4 2024 | Q4 2023 | YoY Change | FY 2024 | FY 2023 | YoY Change | | :------------------ | :------ | :------ | :--------- | :-------- | :-------- | :--------- | | Direct Written Premiums | $292.0 | $246.1 | +18.7% | $1,193.1 | $991.2 | +20.4% | | Net Written Premiums | $255.6 | $226.3 | +12.9% | $1,093.4 | $925.3 | +18.2% | [**Net Earned Premiums**](index=2&type=section&id=2.1.2.%20Net%20Earned%20Premiums) This section details the net earned premiums for the reported periods Net Earned Premiums (in millions) | Metric | Q4 2024 | Q4 2023 | YoY Change | FY 2024 | FY 2023 | YoY Change | | :--------------- | :------ | :------ | :--------- | :-------- | :-------- | :--------- | | Net Earned Premiums | $269.1 | $226.0 | +19.0% | $1,010.7 | $834.4 | +21.1% | [**Drivers of Premium Growth**](index=2&type=section&id=2.1.3.%20Drivers%20of%20Premium%20Growth) This section identifies the key factors contributing to premium growth, including policy counts and average premium per policy - Increases in direct and net written premiums were driven by new business production and rate increases[7](index=7&type=chunk) Policy Count and Average Premium Per Policy Growth (FY2024 vs FY2023) | Line of Business | Policy Count Growth | Average Written Premium Per Policy Growth | | :----------------------- | :------------------ | :---------------------------------------- | | Private Passenger Automobile | 10.0% | 14.1% | | Commercial Automobile | 4.5% | 10.7% | | Homeowners | 8.7% | 8.9% | [**Underwriting Results**](index=2&type=section&id=2.2.%20Underwriting%20Results) Safety Insurance demonstrated improved underwriting performance in 2024, with a lower combined ratio for both the quarter and the full year. This improvement was primarily due to increased earned premiums and moderation of loss severity in the Private Passenger Automobile line, despite an increase in total losses and loss adjustment expenses [**Losses and Loss Adjustment Expenses**](index=2&type=section&id=2.2.1.%20Losses%20and%20Loss%20Adjustment%20Expenses) This section outlines the incurred losses and loss adjustment expenses and their primary drivers Losses and Loss Adjustment Expenses Incurred (in millions) | Metric | Q4 2024 | Q4 2023 | YoY Change | FY 2024 | FY 2023 | YoY Change | | :-------------------------------- | :------ | :------ | :--------- | :-------- | :-------- | :--------- | | Losses and Loss Adjustment Expenses | $193.0 | $172.1 | +12.1% | $716.6 | $642.3 | +11.6% | - Increase in losses driven by larger policy counts and inflationary impacts on the Private Passenger Automobile book of business[9](index=9&type=chunk) [**Loss, Expense, and Combined Ratios**](index=2&type=section&id=2.2.2.%20Loss,%20Expense,%20and%20Combined%20Ratios) This section analyzes the company's loss, expense, and combined ratios, highlighting underwriting efficiency Underwriting Ratios | Ratio | Q4 2024 | Q4 2023 | YoY Change (pp) | FY 2024 | FY 2023 | YoY Change (pp) | | :---------- | :------ | :------ | :-------------- | :-------- | :-------- | :-------------- | | Loss Ratio | 71.7% | 76.1% | -4.4 | 70.9% | 77.0% | -6.1 | | Expense Ratio | 30.2% | 30.4% | -0.2 | 30.2% | 30.7% | -0.5 | | Combined Ratio | 101.9% | 106.5% | -4.6 | 101.1% | 107.7% | -6.6 | - Decrease in loss and expense ratios driven by the increase in earned premiums. The loss ratio was also favorably impacted by the moderation of loss severity in the Private Passenger Automobile line[10](index=10&type=chunk) - The prior year (FY2023) loss ratio was impacted by severe weather events totaling **$41.2 million** of losses[10](index=10&type=chunk) [**Prior Year Favorable Development**](index=2&type=section&id=2.2.3.%20Prior%20Year%20Favorable%20Development) This section details the favorable development from prior year loss reserves and related adjustments Total Prior Year Favorable Development (in millions) | Period | 2024 | 2023 | YoY Change | | :---------------- | :----- | :----- | :--------- | | Quarter Ended Dec 31 | $13.0 | $12.4 | +$0.6 | | Year Ended Dec 31 | $51.9 | $47.4 | +$4.5 | - Included within **2024** current and prior year development is **$10.1 million** related to the Massachusetts Property Insurance Underwriting Association ("FAIR Plan") due to a restructuring approved on April 1, **2024**[11](index=11&type=chunk) [**Investment Performance**](index=2&type=section&id=2.3.%20Investment%20Performance) Net investment income saw a slight decrease in 2024, both quarterly and annually, despite higher yield bonds and variable rate loans. The effective annualized yield on the investment portfolio also experienced a minor decline Net Investment Income (in millions) | Metric | Q4 2024 | Q4 2023 | YoY Change | FY 2024 | FY 2023 | YoY Change | | :------------------ | :------ | :------ | :--------- | :-------- | :-------- | :--------- | | Net Investment Income | $14.8 | $14.9 | -0.7% | $55.7 | $56.4 | -1.2% | | Net Effective Annualized Yield | 4.0% | 4.2% | -0.2 pp | 3.9% | 4.0% | -0.1 pp | - The decrease in net investment income is attributed to earned interest from higher yield bonds and variable rate secured and senior bank loans[12](index=12&type=chunk) - The investment portfolio's duration on fixed maturities was **3.5 years** at December 31, **2024**, compared to **3.6 years** at December 31, **2023**[12](index=12&type=chunk) [**Net Income and Non-GAAP Operating Income**](index=1&type=section&id=2.4.%20Net%20Income%20and%20Non-GAAP%20Operating%20Income) Safety Insurance reported a significant increase in net income and non-GAAP operating income for the full year 2024, reflecting improved overall performance. While Q4 net income decreased, non-GAAP operating income for the quarter saw a substantial rise Net Income and Non-GAAP Operating Income (in millions, except per share data) | Metric | Q4 2024 | Q4 2023 | YoY Change | FY 2024 | FY 2023 | YoY Change | | :-------------------------------- | :------ | :------ | :--------- | :-------- | :-------- | :--------- | | Net Income | $8.1 | $12.3 | -34.1% | $70.7 | $18.9 | +274.1% | | Diluted EPS | $0.55 | $0.83 | -33.7% | $4.78 | $1.28 | +273.4% | | Non-GAAP Operating Income | $14.0 | $4.4 | +218.2% | $61.5 | $12.3 | +400.0% | | Non-GAAP Operating Income per Diluted Share | $0.94 | $0.30 | +213.3% | $4.16 | $0.84 | +395.2% | - Non-GAAP operating income adjusts GAAP net income by excluding net realized gains on investments, changes in net unrealized gains on equity securities, credit loss benefit (expense), and related taxes, providing a clearer view of underlying business trends[13](index=13&type=chunk)[14](index=14&type=chunk) [**Financial Position and Shareholder Returns**](index=1&type=section&id=3.%20Financial%20Position%20and%20Shareholder%20Returns) This section details Safety Insurance Group's book value per share and dividend distributions, reflecting its financial health and shareholder value initiatives [**Book Value Per Share**](index=1&type=section&id=3.1.%20Book%20Value%20Per%20Share) Safety Insurance's book value per share increased at year-end 2024, primarily driven by net income, partially offset by dividends paid Book Value Per Share | Metric | Dec 31, 2024 | Dec 31, 2023 | Change | | :--------------- | :----------- | :----------- | :----- | | Book Value per Share | $55.83 | $54.37 | +$1.46 | [**Dividends**](index=1&type=section&id=3.2.%20Dividends) The company maintained its quarterly cash dividend, with the Board of Directors approving the next payment for Q1 2025 Dividends Paid Per Common Share | Period | Q4 2024 | Q4 2023 | FY 2024 | FY 2023 | | :----------------------- | :------ | :------ | :------ | :------ | | Cash Dividends Paid per Share | $0.90 | $0.90 | $3.60 | $3.60 | - On February 14, **2025**, the Board of Directors approved a **$0.90** per share quarterly cash dividend payable on March 14, **2025**[5](index=5&type=chunk) [**Company Information**](index=3&type=section&id=4.%20Company%20Information) This section provides an overview of Safety Insurance Group, Inc., including its operations, subsidiaries, and investor information resources [**About Safety Insurance Group, Inc.**](index=3&type=section&id=4.1.%20About%20Safety%20Insurance%20Group,%20Inc.) Safety Insurance Group, Inc. is a Boston-based property and casualty insurer operating exclusively in Massachusetts, New Hampshire, and Maine, offering a range of insurance products through its subsidiaries - Safety Insurance Group, Inc. is headquartered in Boston, MA, and is the parent company of Safety Insurance Company, Safety Indemnity Insurance Company, Safety Property and Casualty Insurance Company, Safety Northeast Insurance Company, and Safety Northeast Insurance Agency[15](index=15&type=chunk) - The company operates exclusively in Massachusetts, New Hampshire, and Maine[15](index=15&type=chunk) - 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[15](index=15&type=chunk) [**Additional Information**](index=3&type=section&id=4.2.%20Additional%20Information) Investors can access press releases, SEC filings, and other information on the company's website. Safety filed its 2023 Form 10-K on February 28, 2024 - Press releases, announcements, SEC Filings, and investor information are available on the Company website at www.SafetyInsurance.com[16](index=16&type=chunk) - Safety filed its December 31, **2023** Form **10-K** with the SEC on February 28, **2024**[16](index=16&type=chunk) [**Forward-Looking Statements and Risk Factors**](index=3&type=section&id=5.%20Forward-Looking%20Statements%20and%20Risk%20Factors) This section outlines cautionary statements regarding forward-looking information and identifies key risks impacting Safety Insurance Group's future performance [**Cautionary Statement**](index=3&type=section&id=5.1.%20Cautionary%20Statement) The press release contains forward-looking statements, which are not guarantees of future performance and are subject to various risks and uncertainties that could cause actual results to differ materially - Forward-looking statements are identified by words like "believe," "expect," "anticipate," "intend," "plan," "estimate," and indicate future events or trends[17](index=17&type=chunk) - These statements are not guarantees of future performance and are subject to numerous risks and uncertainties, many beyond the company's control[18](index=18&type=chunk) - The company disclaims any obligation to update or alter forward-looking statements[19](index=19&type=chunk) [**Identified Risk Factors**](index=3&type=section&id=5.2.%20Identified%20Risk%20Factors) Key risk factors include competitive industry conditions, restrictive regulations, potential losses from severe weather, inflationary impacts on loss severity, and broader investment and economic market conditions - Competitive nature of the industry and possible adverse effects of competition[18](index=18&type=chunk) - Conditions for business operations and restrictive regulations in Massachusetts[18](index=18&type=chunk) - Possibility of losses due to claims resulting from severe weather[18](index=18&type=chunk) - Impact of inflation and supply chain delays on loss severity[20](index=20&type=chunk) - Impact of investment, economic, and underwriting market conditions, including interest rates and inflation[20](index=20&type=chunk) [**Consolidated Financial Statements**](index=5&type=section&id=6.%20Consolidated%20Financial%20Statements) This section presents Safety Insurance Group's consolidated balance sheets, statements of operations, and detailed premium information for the reported periods [**Consolidated Balance Sheets**](index=5&type=section&id=6.1.%20Consolidated%20Balance%20Sheets) The consolidated balance sheet shows an increase in total assets and total liabilities, with a modest increase in total shareholders' equity at year-end 2024 compared to 2023 Consolidated Balance Sheet Highlights (in thousands) | Metric | Dec 31, 2024 | Dec 31, 2023 | Change | | :------------------------------------ | :----------- | :----------- | :----- | | Total Investments | $1,513,059 | $1,424,113 | +$88,946 | | Cash and Cash Equivalents | $58,974 | $38,152 | +$20,822 | | Total Assets | $2,270,090 | $2,094,004 | +$176,086 | | Losses and Loss Adjustment Expense Reserves | $671,669 | $603,081 | +$68,588 | | Unearned Premium Reserves | $619,916 | $528,150 | +$91,766 | | Total Liabilities | $1,441,626 | $1,289,737 | +$151,889 | | Total Shareholders' Equity | $828,464 | $804,267 | +$24,197 | [**Consolidated Statements of Operations**](index=6&type=section&id=6.2.%20Consolidated%20Statements%20of%20Operations) The consolidated statements of operations detail the company's revenues, expenses, and net income for the fourth quarter and full year 2024, along with a reconciliation to non-GAAP operating income Consolidated Statements of Operations Highlights (in thousands) | Metric | Q4 2024 | Q4 2023 | FY 2024 | FY 2023 | | :------------------------------------ | :------ | :------ | :-------- | :-------- | | Net Earned Premiums | $269,050 | $226,029 | $1,010,704 | $834,414 | | Total Revenue | $286,719 | $258,396 | $1,120,017 | $930,956 | | Losses and Loss Adjustment Expenses | $193,007 | $172,105 | $716,637 | $642,302 | | Underwriting, Operating and Related Expenses | $81,266 | $68,748 | $305,322 | $256,580 | | Total Expenses | $276,600 | $242,612 | $1,030,151 | $906,536 | | Income Before Income Taxes | $10,119 | $15,784 | $89,866 | $24,420 | | Net Income | $8,131 | $12,262 | $70,734 | $18,875 | | Non-GAAP Operating Income | $13,964 | $4,449 | $61,507 | $12,319 | [**Additional Premium Information**](index=7&type=section&id=6.3.%20Additional%20Premium%20Information) This section provides a detailed breakdown of direct, assumed, ceded, net written, and net earned premiums for the reported periods Additional Premium Information (in thousands) | Metric | Q4 2024 | Q4 2023 | FY 2024 | FY 2023 | | :------------------ | :------ | :------ | :-------- | :-------- | | Direct Written Premiums | $292,025 | $246,091 | $1,193,057 | $991,224 | | Assumed Written Premiums | $(2,606) | $7,620 | $20,279 | $30,850 | | Ceded Written Premiums | $(33,856) | $(27,356) | $(119,931) | $(96,779) | | Net Written Premiums | $255,563 | $226,355 | $1,093,405 | $925,295 | | Direct Earned Premiums | $301,987 | $243,513 | $1,102,695 | $897,598 | | Assumed Earned Premiums | $(2,810) | $7,345 | $18,874 | $29,702 | | Ceded Earned Premiums | $(30,127) | $(24,829) | $(110,865) | $(92,886) | | Net Earned Premiums | $269,050 | $226,029 | $1,010,704 | $834,414 |