Safety Insurance(SAFT) - 2022 Q4 - Annual Report

Company Overview - The company operates as the fifth largest private passenger auto premium insurance carrier, the second largest commercial auto insurance carrier, and the third largest homeowner insurance carrier in Massachusetts[20]. - The company is the second largest writer of commercial automobile insurance in Massachusetts with a market share of 12.6% in 2022[119]. - The company is the third largest writer of homeowners insurance in Massachusetts, holding a market share of 6.5% in 2021[120]. Financial Performance - In 2022, direct written premiums totaled $823.3 million, with private passenger automobile insurance contributing 52.0%, commercial automobile 17.4%, and homeowners 25.3%[26]. - The combined ratio is typically maintained below industry averages, indicating effective cost management and underwriting practices[20]. - In 2022, the bad debt expense as a percentage of direct written premiums was 0.1%, indicating effective credit management[74]. - The total incurred losses and LAE for the current year 2022 amounted to $491,979, compared to $461,727 in 2021, reflecting an increase of approximately 6.5%[99]. - The statutory surplus of Safety Insurance was $782,200, with a net income of $66,197 for 2022, allowing for a maximum of $78,220 in dividends without prior approval[159]. Market Strategy - The company aims to further penetrate the Massachusetts, New Hampshire, and Maine markets across all lines of business[27]. - The company focuses on developing interdependent relationships with agents in Massachusetts, New Hampshire, and Maine to increase market share[50]. - Competitive commissions and incentives are offered to agents, with a focus on attracting profitable new business[52]. Technology and Innovation - The investment in technology aims to provide agents with advanced tools, enhancing the ease of doing business[20]. - The Innovation Lab has been active in 2022, conducting research and developing new technologies to enhance customer experience and competitiveness[71]. - The company introduced the Safety Commercial Express system in 2021, which was updated in 2022 to improve agent processing capabilities[70]. Claims Management - The claims department utilizes stringent settlement procedures, with approximately 58% of bodily injury claims in 2022 being soft tissue injuries[82]. - The company employs automated systems for claims processing, which streamline operations and improve customer service[87]. - Reserves for unpaid losses are reviewed quarterly, with annual certification required from a qualified actuary to ensure reasonableness[92]. Investment Portfolio - As of December 31, 2022, the company's investment portfolio was valued at $1,403,160, with 74.9% in fixed maturity securities and 17.1% in equity securities[137]. - The company’s fixed maturity investments primarily consist of investment grade corporate securities, U.S. government securities, and asset-backed securities[134]. - The estimated fair value of asset-backed securities was $443,164, representing 42.3% of the total fixed income security portfolio[149]. Risk Management - The Company has adopted a comprehensive risk management approach to assess its current and prospective solvency positions under various stress scenarios[173]. - The Company has significant exposure to interest rate risk due to its holdings of fixed rate investments, with estimated fair values of $1,092,151, $1,261,399, and changes in fair value of $41,996 and $43,120 for the years ending December 31, 2022, and 2021 respectively[394]. - The Company manages equity price risk through diversification and asset allocation techniques, with plans to purchase additional equity securities in the future[396]. Corporate Governance - The Company has a Code of Business Conduct and Ethics that applies to all employees and directors, ensuring compliance and ethical standards[192]. - The Company’s executive officers have extensive experience, with the President and CEO, George M. Murphy, having over 34 years in the industry[176]. - The Company’s Vice President of Claims, Paul J. Narciso, has 36 years of claims experience, contributing to the Company’s operational expertise[181]. Audit and Compliance - The Company reported a fair presentation of its financial position as of December 31, 2022, and 2021, in accordance with generally accepted accounting principles[400]. - The Company maintained effective internal control over financial reporting as of December 31, 2022[400]. - The audit procedures included testing the effectiveness of controls related to loss reserves and evaluating the methods and assumptions used in estimating these reserves[411].