Amid a challenging economic climate for insurers, Safety Insurance Group, Inc. outlined its financial performance for the third quarter of 2023, showcasing a mixture of resilience amidst inflation and environmental challenges. George M. Murphy, President and CEO, described the influencing factors:
Inflationary Pressures: Private Passenger Automobile segment experiences a significant impact from inflation.
Combined Ratio Increase: Reached 104.8% due in part to natural events affecting both the Automobile and Homeowner sectors.
Premium Growth: Net Written Premiums exhibited growth of 22.2% for the quarter and 19.2% over nine months, propelled by an 11.5% rise in policy count and a 7.6% increase in average written premium per policy.
Despite pressures, Safety strives toward rate adequacy through targeted rate increases and robust risk management practices.
Financial Performance Indicators
Safety’s quarterly financial outcomes reveal shifts in net income and book value per share alongside stable dividend payouts:
Net Income: Quarter’s net income stood at $1.9 million ($0.13 per diluted share), contrasting with $6.2 million ($0.42 per diluted share) in 2022. The nine-month picture also showed contraction, with incomes at $6.6 million ($0.45 per diluted share) versus $21.9 million ($1.48 per diluted share) in the previous year.
Non-GAAP Operating Income: Per diluted share figures were recorded at $0.59 for the quarter and $0.54 for nine months, down from $1.13 and $4.05, respectively, in 2022.
Book Value and Dividends: The book value per share fell to $52.04 from $54.88 at year-end, impacted by share repurchases and dividends. Dividends remained consistent at $0.90 per share each quarter and $3.60 annually, up to December 31, 2022.
Premiums and Policy Performance
The report shed light on Safety’s ability to expand its business amidst a rough economic terrain:
Direct Written Premiums: Saw a 22.6% increase to $267.1 million for the quarter and a 19.8% increase to $745.1 million over the nine months.
Net Written Premiums: Echoed this expansion with a rise of 22.2% for the quarter and 19.2% for nine months.
Policy Metrics: Policy count across all business lines showed healthy increases for the nine-month period. Notably:
Private Passenger Automobile policies grew by 14.1%.
Commercial Automobile policies increased by 5.9%.
Homeowners policies rose by 9.7%.
Average written premium per policy also experienced a surge, with Private Passenger Automobile at 10.7%, Commercial Automobile at 4.5%, and Homeowners at 4.5% increases.
Investment Income and Market Position
Investments and yields reflected the currents of changing market rates and portfolio management:
Investment Income: Net investment income escalated to $14.0 million for Q3, a 26.0% increase, with a nine-month rise of 24.5% to $41.5 million.
Annualized Investment Yield: Increased to 4.0% for the quarter and 3.9% over the nine months, exhibiting gains from higher interest rates on the fixed maturity portfolio.
Fixed Maturity Duration: Noted at 3.6 years at the quarter’s end, a slight reduction from 3.8 years at the previous year-end.
Non-GAAP Measures and Forward-Looking Statements
In its effort to provide a more nuanced understanding of performance, Safety offered several non-GAAP financial measures while also acknowledging the inherent unpredictability of forward-looking statements:
Non-GAAP Operating Income: Represents adjustments for net realized gains on investments, changes in unrealized gains on equity securities, and related tax impacts.
Forward-Looking Statements: The report included a cautionary note, pointing out the speculative nature of statements regarding future expectations and company strategy. Such statements were supported with a reminder of past performance and potential deviations due to various market risks.
Safety Insurance Group, Inc., based in Boston, MA, 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. Operating exclusively in Massachusetts, New Hampshire, and Maine, 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.