Safety Insurance(SAFT) - 2025 Q2 - Quarterly Results

Executive Summary & Recent Developments Q2 2025 Performance Overview Safety Insurance Group, Inc. reported improved Q2 2025 results, with the combined ratio improving to 98.1% from 99.9% due to rate increases and policy growth - Combined ratio improved to 98.1% in Q2 2025 compared to 99.9% in Q2 2024, reflecting policy count growth and rate increases[2][3] - Net earned premium increased by 14.2% for the quarter ended June 30, 2025[3] Dividend Announcement The Board of Directors approved an increase in the quarterly cash dividend for the third quarter of 2025 - The quarterly cash dividend was increased from $0.90 to $0.92 per share[4] - The increased dividend is payable on September 15, 2025, to shareholders of record on September 2, 2025[4] Detailed Financial Performance Analysis Net Income and Earnings Per Share The company reported significant increases in both GAAP net income and non-GAAP operating income per diluted share for Q2 and YTD 2025 Net Income and Diluted EPS (GAAP) | Period | 2025 (Net Income) | 2024 (Net Income) | YoY Change | 2025 (Diluted EPS) | 2024 (Diluted EPS) | YoY Change | | :----- | :---------------- | :---------------- | :--------- | :----------------- | :----------------- | :--------- | | Q2 | $28.9 million | $16.6 million | +74.1% | $1.95 | $1.13 | +72.6% | | YTD | $50.8 million | $36.7 million | +38.4% | $3.43 | $2.48 | +38.3% | Non-GAAP Operating Income Per Diluted Share | Period | 2025 (Non-GAAP EPS) | 2024 (Non-GAAP EPS) | YoY Change | | :----- | :------------------ | :------------------ | :--------- | | Q2 | $1.45 | $1.18 | +22.9% | | YTD | $2.74 | $2.09 | +31.1% | Book Value and Shareholder Equity Book value per share increased from year-end 2024, contributing to a rise in total shareholders' equity due to net income and investment gains - Book value per share increased to $58.63 at June 30, 2025, from $55.83 at December 31, 2024[6] - Total shareholders' equity increased by $44.8 million in Q2 2025[3] Premium Growth The company experienced robust growth in direct, net written, and net earned premiums, driven by rate increases and policy count growth Direct Written Premiums | Period | 2025 (Millions) | 2024 (Millions) | YoY Change | | :----- | :-------------- | :-------------- | :--------- | | Q2 | $345.8 | $315.5 | +9.6% | | YTD | $644.8 | $582.9 | +10.6% | Net Written Premiums | Period | 2025 (Millions) | 2024 (Millions) | YoY Change | | :----- | :-------------- | :-------------- | :--------- | | Q2 | $319.5 | $294.9 | +8.3% | | YTD | $594.3 | $545.3 | +9.0% | Net Earned Premiums | Period | 2025 (Millions) | 2024 (Millions) | YoY Change | | :----- | :-------------- | :-------------- | :--------- | | Q2 | $282.1 | $246.9 | +14.2% | | YTD | $554.8 | $483.0 | +14.9% | - For the six months ended June 30, 2025, average written premium per policy increased by 9.0% in Private Passenger Automobile, 7.2% in Commercial Automobile, and 10.6% in Homeowners lines[8] - Policy count growth for the six months ended June 30, 2025, included 0.4% in Private Passenger Automobile, 2.8% in Commercial Automobile, and 3.9% in Homeowners lines[8] Underwriting Results Underwriting performance improved in Q2 and YTD 2025, with lower loss, expense, and combined ratios despite increased losses Losses and Loss Adjustment Expenses Incurred | Period | 2025 (Millions) | 2024 (Millions) | YoY Change | | :----- | :-------------- | :-------------- | :--------- | | Q2 | $194.2 | $172.7 | +12.4% | | YTD | $384.5 | $341.1 | +12.7% | Underwriting Ratios | Period | Ratio | 2025 | 2024 | Change (pp) | | :----- | :---- | :--- | :--- | :---------- | | Q2 | Loss | 68.8% | 70.0% | -1.2 | | | Expense | 29.3% | 29.9% | -0.6 | | | Combined | 98.1% | 99.9% | -1.8 | | YTD | Loss | 69.3% | 70.6% | -1.3 | | | Expense | 29.5% | 30.3% | -0.8 | | | Combined | 98.8% | 100.9% | -2.1 | Prior Year Favorable Development (Pre-tax) | Period | 2025 (Millions) | 2024 (Millions) | YoY Change | | :----- | :-------------- | :-------------- | :--------- | | Q2 | $11.2 | $19.4 | -42.3% | | YTD | $23.5 | $30.4 | -22.7% | Investment Income Net investment income increased due to higher interest rates, leading to an improved effective annualized yield on the investment portfolio Net Investment Income | Period | 2025 (Millions) | 2024 (Millions) | YoY Change | | :----- | :-------------- | :-------------- | :--------- | | Q2 | $15.7 | $13.5 | +16.5% | | YTD | $30.3 | $28.7 | +5.5% | Net Effective Annualized Yield on Investment Portfolio | Period | 2025 | 2024 | | :----- | :--- | :--- | | Q2 | 4.2% | 3.9% | | YTD | 4.0% | 3.9% | - The investment portfolio's duration on fixed maturities was 3.6 years at June 30, 2025, compared to 3.5 years at December 31, 2024[13] Non-GAAP Financial Measures Definition and Reconciliation Non-GAAP operating income adjusts GAAP net income by excluding net realized gains, unrealized gains on equity, credit loss, and related taxes - Non-GAAP operating income and non-GAAP operating income per diluted share consist of GAAP net income adjusted by net realized gains on investments, change in net unrealized gains on equity securities, credit loss benefit (expense), and related taxes[15][16] Reconciliation of Net Income to Non-GAAP Operating Income | Item | Q2 2025 (Thousands) | Q2 2024 (Thousands) | YTD 2025 (Thousands) | YTD 2024 (Thousands) | | :-------------------------------------- | :------------------ | :------------------ | :------------------- | :------------------- | | Net income | $28,937 | $16,636 | $50,833 | $36,714 | | Exclusions: | | | | | | Net realized gains on investments | (2,131) | (2,715) | (6,394) | (3,207) | | Change in net unrealized gains on equity securities | (7,194) | 3,483 | (6,923) | (4,182) | | Credit loss expense | (66) | 37 | 255 | 179 | | Income tax benefit | 1,972 | (169) | 2,743 | 1,514 | | Non-GAAP operating income | $21,518 | $17,272 | $40,514 | $31,018 | Company Overview About Safety Insurance Group, Inc. Safety Insurance Group, Inc. is a Boston-based property and casualty insurer operating exclusively in MA, NH, and ME - Safety Insurance Group, Inc. is based in Boston, MA, and is the parent of several insurance companies and an agency[17] - The company operates exclusively in Massachusetts, New Hampshire, and Maine[17] - 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[17] Investor Resources Investors can access additional company information, press releases, SEC filings, and investor contacts through the company's website - Press releases, announcements, SEC Filings, and investor information are available on the Company website at www.SafetyInsurance.com under 'About Safety,' 'Investor Information'[18] - Shareholders are urged to refer to the December 31, 2024 Form 10-K filed with the SEC on February 27, 2025, for more complete financial information[18] - Investor Relations can be contacted at 877-951-2522 or InvestorRelations@SafetyInsurance.com[19] Forward-Looking Statements & Risk Factors Cautionary Statement The press release contains forward-looking statements, which are not guarantees of future performance and are subject to various risks - Forward-looking statements are identified by words such as 'believe,' 'expect,' 'anticipate,' 'intend,' 'plan,' 'estimate,' 'aim,' 'projects,' or similar expressions indicating future events and trends[19] - Forward-looking statements are not guarantees of future performance and are subject to risks and uncertainties that could cause actual results to differ materially[20] - The Company is not under any obligation to update or alter its forward-looking statements, whether as a result of new information, future events, or otherwise[21] Key Risk Factors Factors that could materially affect future results include industry competition, restrictive regulations, severe weather, and inflation - Key risk factors include the competitive nature of the industry, restrictive regulations in Massachusetts, and the possibility of losses due to claims from severe weather[20] - Other risks include the impact of inflation, changes in tariffs and supply chain delays on loss severity, and potential future rule changes by the Commissioner of Insurance affecting the residual market[20] - Additional factors are the impact of investment, economic and underwriting market conditions (including interest rates and inflation), the possible need for and availability of additional financing, and other risks identified in SEC filings[22] Consolidated Financial Statements Consolidated Balance Sheets The balance sheet shows an increase in total assets and shareholders' equity from December 31, 2024, to June 30, 2025 Consolidated Balance Sheet Highlights | Item | June 30, 2025 (Thousands) | December 31, 2024 (Thousands) | Change (Thousands) | | :-------------------------- | :------------------------ | :-------------------------- | :----------------- | | Total assets | $2,364,208 | $2,270,090 | +$94,118 | | Total liabilities | $1,490,944 | $1,441,626 | +$49,318 | | Total shareholders' equity | $873,264 | $828,464 | +$44,800 | - Fixed maturities, available for sale, at fair value increased to $1,188,337 thousand at June 30, 2025, from $1,115,218 thousand at December 31, 2024[24] - Losses and loss adjustment expense reserves increased to $685,941 thousand at June 30, 2025, from $671,669 thousand at December 31, 2024[24] Consolidated Statements of Operations The statements of operations reflect significant growth in total revenue and net income for Q2 and YTD 2025 despite increased expenses Consolidated Statements of Operations Highlights | Item | Q2 2025 (Thousands) | Q2 2024 (Thousands) | YTD 2025 (Thousands) | YTD 2024 (Thousands) | | :-------------------------- | :------------------ | :------------------ | :------------------- | :------------------- | | Total revenue | $316,344 | $269,783 | $617,773 | $538,016 | | Total expenses | $279,517 | $248,548 | $552,716 | $491,174 | | Net income | $28,937 | $16,636 | $50,833 | $36,714 | - Income before income taxes for Q2 2025 was $36,827 thousand, up from $21,235 thousand for Q2 2024[25] Additional Premium Information Detailed premium data shows increases across direct, assumed, and net written and earned premiums for Q2 and YTD 2025 Written Premiums (Direct, Assumed, Ceded, Net) | Type | Period | 2025 (Thousands) | 2024 (Thousands) | YoY Change | | :--- | :----- | :--------------- | :--------------- | :--------- | | Direct | Q2 | $345,829 | $315,511 | +9.6% | | | YTD | $644,799 | $582,850 | +10.6% | | Assumed | Q2 | $5,675 | $8,325 | -31.9% | | | YTD | $12,480 | $17,763 | -29.7% | | Ceded | Q2 | $(32,029) | $(28,901) | +10.8% | | | YTD | $(63,024) | $(55,383) | +13.8% | | Net | Q2 | $319,475 | $294,935 | +8.3% | | | YTD | $594,255 | $545,230 | +9.0% | Earned Premiums (Direct, Assumed, Ceded, Net) | Type | Period | 2025 (Thousands) | 2024 (Thousands) | YoY Change | | :--- | :----- | :--------------- | :--------------- | :--------- | | Direct | Q2 | $308,901 | $265,908 | +16.2% | | | YTD | $605,720 | $517,792 | +16.9% | | Assumed | Q2 | $5,286 | $7,997 | -33.9% | | | YTD | $12,011 | $16,965 | -29.2% | | Ceded | Q2 | $(32,074) | $(26,961) | +18.9% | | | YTD | $(62,928) | $(51,760) | +21.6% | | Net | Q2 | $282,113 | $246,944 | +14.2% | | | YTD | $554,803 | $482,997 | +14.9% |