Safety Insurance(SAFT) - 2025 Q1 - Quarterly Results

First Quarter 2025 Results Overview Safety Insurance Group reported improved Q1 2025 results with a lower combined ratio, increased net income, and consistent dividends Key Financial Highlights Safety Insurance Group reported improved Q1 2025 results with a lower combined ratio, increased net income, and higher EPS Q1 2025 vs Q1 2024 Key Financial Highlights | Metric | Q1 2025 | Q1 2024 | Change | | :----------------------------------- | :------ | :------ | :----- | | Combined Ratio | 99.4% | 101.9% | -2.5 pp | | Net Income | $21.9M | $20.1M | +$1.8M | | Diluted EPS | $1.48 | $1.36 | +$0.12 | | Non-GAAP Operating Income per diluted share | $1.28 | $0.93 | +$0.35 | - Book value per share increased to $57.12 at March 31, 2025, from $55.83 at December 31, 2024, primarily due to net income and increases in the fixed maturity portfolio value[3] - Total shareholders' equity increased by $22.2 million[2] Dividend Declaration The Board approved a $0.90 per share quarterly cash dividend for Q2 2025, consistent with prior payments - A $0.90 per share quarterly cash dividend was approved for Q2 2025, payable on June 13, 2025[4] - Safety paid $0.90 per share in dividends during Q1 2025 and Q1 2024[3] Detailed Financial Performance Analysis Q1 2025 saw strong premium growth and improved underwriting, partially offset by a slight decrease in net investment income Premium Performance Q1 2025 premium growth was significant, driven by new business, rate increases, and policy count expansion Written and Earned Premiums Direct written premiums increased by 11.8% to $299.0 million, net written premiums by 9.8% to $274.8 million, and net earned premiums by 15.5% to $272.7 million in Q1 2025 compared to Q1 2024 Q1 2025 vs Q1 2024 Premium Performance | Metric | Q1 2025 ($M) | Q1 2024 ($M) | Change ($M) | Change (%) | | :-------------------- | :----------- | :----------- | :---------- | :--------- | | Direct Written Premiums | 299.0 | 267.3 | 31.7 | 11.8% | | Net Written Premiums | 274.8 | 250.3 | 24.5 | 9.8% | | Net Earned Premiums | 272.7 | 236.1 | 36.6 | 15.5% | Drivers of Premium Growth New business, rate increases, and increased policy counts and average premiums drove Q1 2025 premium growth - Increases in direct and net written premiums are a result of new business production and rate increases[6] Q1 2025 Policy Count Growth (YoY) | Line of Business | Policy Count Growth | | :----------------------- | :------------------ | | Private Passenger Automobile | 1.3% | | Commercial Automobile | 2.5% | | Homeowners | 5.4% | Q1 2025 Average Written Premium per Policy Increase (YoY) | Line of Business | Average Written Premium per Policy Increase | | :----------------------- | :---------------------------------------- | | Private Passenger Automobile | 9.5% | | Commercial Automobile | 8.4% | | Homeowners | 11.0% | Underwriting Performance Underwriting ratios improved in Q1 2025, with the combined ratio decreasing to 99.4% due to higher earned premiums and better auto loss experience Loss and Loss Adjustment Expenses Loss and loss adjustment expenses increased 13.0% to $190.3 million in Q1 2025, driven by policy counts but offset by improved auto results Q1 2025 vs Q1 2024 Loss and Loss Adjustment Expenses | Metric | Q1 2025 ($M) | Q1 2024 ($M) | Change ($M) | Change (%) | | :-------------------------------- | :----------- | :----------- | :---------- | :--------- | | Loss and Loss Adjustment Expenses | 190.3 | 168.4 | 21.9 | 13.0% | - The increase in loss and loss adjustment expenses is driven by larger policy counts, offset by improved results in the Private Passenger Automobile line[7] Combined Ratio and Components The combined ratio improved to 99.4% in Q1 2025 from 101.9%, reflecting lower loss and expense ratios driven by higher earned premiums Q1 2025 vs Q1 2024 Underwriting Ratios | Ratio | Q1 2025 | Q1 2024 | Change (pp) | | :---------- | :------ | :------ | :---------- | | Loss Ratio | 69.8% | 71.3% | -1.5 | | Expense Ratio | 29.6% | 30.6% | -1.0 | | Combined Ratio | 99.4% | 101.9% | -2.5 | - The decrease in loss and expense ratios is driven by the increase in earned premiums[8] - Total prior year favorable development included in pre-tax results was $12.2 million for Q1 2025, up from $11.0 million in Q1 2024[8] Investment Income Net investment income decreased 4.3% in Q1 2025, primarily due to lower earned interest from higher yield bonds and variable-rate loans Q1 2025 vs Q1 2024 Net Investment Income | Metric | Q1 2025 ($M) | Q1 2024 ($M) | Change ($M) | Change (%) | | :------------------ | :----------- | :----------- | :---------- | :--------- | | Net Investment Income | 14.6 | 15.2 | (0.6) | -4.3% | - The decrease in net investment income is primarily driven by lower earned interest from higher yield bonds and variable-rate secured and senior bank loans[9] - Net effective annualized yield on the investment portfolio was 3.9% for Q1 2025, down from 4.3% for Q1 2024[9] Non-GAAP Financial Measures Non-GAAP measures clarify operational results by adjusting GAAP net income for specific non-recurring or non-cash items Definition and Purpose Non-GAAP measures provide a comprehensive explanation of operational results and highlight business trends, supplementing but not replacing GAAP figures - Non-GAAP measures are included to better explain the Company's results of operations and allow for a more complete understanding of underlying business trends[10] - 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 expense, and related taxes[11] Reconciliation to GAAP Detailed reconciliation of GAAP net income and EPS to non-GAAP operating income and EPS is provided, outlining adjustments for investment and credit loss items Reconciliation of Net Income to Non-GAAP Operating Income (Q1 2025 vs Q1 2024) | Reconciliation Item | Q1 2025 ($K) | Q1 2024 ($K) | | :------------------------------------------ | :----------- | :----------- | | Net income (GAAP) | 21,896 | 20,078 | | Exclusions: | | | | Net realized gains on investments | (4,263) | (492) | | Change in net unrealized gains on equity securities | 271 | (7,665) | | Credit loss expense | 321 | 142 | | Income tax expense on exclusions | 771 | 1,683 | | Non-GAAP operating income | 18,996 | 13,746 | Reconciliation of Net Income per Diluted Share to Non-GAAP Operating Income per Diluted Share (Q1 2025 vs Q1 2024) | Reconciliation Item | Q1 2025 ($) | Q1 2024 ($) | | :------------------------------------------ | :---------- | :---------- | | Net income per diluted share (GAAP) | 1.48 | 1.36 | | Exclusions: | | | | Net realized gains on investments | (0.29) | (0.03) | | Change in net unrealized gains on equity securities | 0.02 | (0.52) | | Credit loss expense | 0.02 | 0.01 | | Income tax expense on exclusions | 0.05 | 0.11 | | Non-GAAP operating income per diluted share | 1.28 | 0.93 | Company Information Safety Insurance Group, Inc. is a Boston-based property and casualty insurer operating in MA, NH, and ME, providing investor information About Safety Insurance Group, Inc. Safety Insurance Group, Inc. is a Boston-based parent company operating in MA, NH, and ME, specializing in property and casualty insurance - Safety Insurance Group, Inc. is based in Boston, MA, and is the parent of Safety Insurance Company, Safety Indemnity Insurance Company, Safety Property and Casualty Insurance Company, Safety Northeast Insurance Company, and Safety Northeast Insurance Agency, Inc[12] - The company operates exclusively in Massachusetts, New Hampshire, and Maine[12] - 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[12] Investor Information and Contacts Investor information, SEC filings, and press releases are available on the company website, with direct contact details for inquiries - Press releases, announcements, SEC Filings, and investor information are available on the Company website at www.SafetyInsurance.com[13](index=13&type=chunk) - Safety filed its December 31, 2024 Form 10-K with the SEC on February 27, 2025[13] - Investor Relations can be contacted at 877-951-2522 or InvestorRelations@SafetyInsurance.com[14] Cautionary Statement Regarding Forward-Looking Information This section outlines forward-looking statements, emphasizing that future results may differ due to inherent risks and uncertainties Nature of Forward-Looking Statements Forward-looking statements in this release are not guarantees of future performance, subject to inherent risks and uncertainties, identifiable by future-oriented language - Forward-looking statements do not relate strictly to historical or current facts and often include words such as 'believe,' 'expect,' 'anticipate,' 'intend,' 'plan,' 'estimate,' 'aim,' 'projects,' or future/conditional verbs[15] - All statements addressing expectations or projections about the future, including strategy for growth, product development, market position, expenditures, and financial results, are considered forward-looking statements[15] Risks and Uncertainties Actual future results may differ significantly from forward-looking statements due to factors like competition, regulations, severe weather, inflation, and market conditions - Factors that could cause actual results to differ materially include the competitive nature of the industry, restrictive regulations in Massachusetts, and the possibility of losses due to claims from severe weather[17] - Other risks include the impact of inflation, changes in tariffs and supply chain delays on loss severity, potential future rule changes by the Commissioner of Insurance, and the impact of investment, economic, and underwriting market conditions[17] - The company is not obligated to update or alter its forward-looking statements[16] Consolidated Financial Statements Consolidated financial statements present the company's balance sheets, statements of operations, and detailed premium information Consolidated Balance Sheets The consolidated balance sheet shows increased total assets and shareholders' equity from December 2024 to March 2025, driven by fixed maturities and equity securities Consolidated Balance Sheet Highlights (March 31, 2025 vs December 31, 2024) | Metric | March 31, 2025 ($K) | December 31, 2024 ($K) | | :-------------------------------- | :------------------ | :------------------- | | Total Assets | 2,291,302 | 2,270,090 | | Total Liabilities | 1,440,635 | 1,441,626 | | Total Shareholders' Equity | 850,667 | 828,464 | | Fixed maturities, available for sale | 1,140,093 | 1,115,218 | | Equity securities | 222,516 | 221,422 | | Losses and loss adjustment expense reserves | 682,717 | 671,669 | | Unearned premium reserves | 622,146 | 619,916 | Consolidated Statements of Operations Q1 2025 consolidated statements of operations show increased total revenue and net income, driven by higher net earned premiums and realized investment gains Consolidated Statements of Operations Highlights (Q1 2025 vs Q1 2024) | Metric | Q1 2025 ($K) | Q1 2024 ($K) | | :-------------------------------- | :----------- | :----------- | | Total revenue | 301,429 | 268,233 | | Total expenses | 273,199 | 242,626 | | Income before income taxes | 28,230 | 25,607 | | Net income | 21,896 | 20,078 | | Net earned premiums | 272,690 | 236,053 | | Losses and loss adjustment expenses | 190,290 | 168,399 | | Underwriting, operating and related expenses | 80,851 | 72,267 | Additional Premium Information This section details direct, assumed, and ceded written and earned premiums for Q1 2025 and Q1 2024, reinforcing premium growth trends Additional Premium Information (Q1 2025 vs Q1 2024) | Metric | Q1 2025 ($K) | Q1 2024 ($K) | | :---------------- | :----------- | :----------- | | Direct Written Premiums | 298,970 | 267,339 | | Assumed Written Premiums | 6,805 | 9,438 | | Ceded Written Premiums | (30,995) | (26,482) | | Net Written Premiums | 274,780 | 250,295 | | Direct Earned Premiums | 296,819 | 251,884 | | Assumed Earned Premiums | 6,725 | 8,968 | | Ceded Earned Premiums | (30,854) | (24,799) | | Net Earned Premiums | 272,690 | 236,053 |