Safety Announces Second Quarter 2013 Results and Declares Third Quarter 2013 Dividend

Safety Announces Second Quarter 2013 Results and Declares Third Quarter 2013 Dividend

BOSTON--(BUSINESS WIRE)-- Safety Insurance Group, Inc. (NAS: SAFT) today reported second quarter 2013 results. Net income for the quarter ended June 30, 2013 was $18.0 million, or $1.17 per diluted share, compared to net income of $17.0 million, or $1.11 per diluted share, for the comparable 2012 period. Net income for the six months ended June 30, 2013 was $32.0 million, or $2.08 per diluted share, compared to $34.2 million, or $2.24 per diluted share, for the comparable 2012 period. Safety's book value per share decreased to $44.49 at June 30, 2013 from $45.31 at December 31, 2012 primarily due to a decrease in net unrealized investment gains. Safety paid $0.60 per share in dividends to investors during the quarter ended June 30, 2013, compared to $0.50 per share during the comparable 2012 period. Safety paid $2.20 per share in dividends to investors during the year ended December 31, 2012.

Direct written premiums for the quarter ended June 30, 2013 increased by $13.0 million, or 7.0%, to $198.8 million from $185.8 million for the comparable 2012 period. Direct written premiums for the six months ended June 30, 2013 increased by $22.3 million, or 6.2%, to $384.4 million from $362.1 million for the comparable 2012 period. The 2013 increases occurred primarily in our personal automobile and homeowners business lines, which experienced increases of 3.9% and 5.7%, respectively, in average written premium per exposure. Written exposures decreased slightly in our personal automobile line by 0.4% and increased by 5.4% in our homeowners business line.


Net written premiums for the quarter ended June 30, 2013 increased by $12.8 million, or 7.3%, to $189.8 million from $177.0 million for the comparable 2012 period. Net written premiums for the six months ended June 30, 2013 increased by $22.2 million, or 6.4%, to $368.5 million from $346.3 million for the comparable 2012 period. Net earned premiums for the quarter ended June 30, 2013 increased by $10.5 million, or 6.6%, to $169.6 million from $159.1 million for the comparable 2012 period. Net earned premiums for the six months ended June 30, 2013 increased by $21.4 million, or 6.8%, to $336.0 million from $314.6 million for the comparable 2012 period. Net written and net earned premiums increased primarily due to increases in our personal automobile and homeowners business lines as discussed above.

Net investment income for the quarter ended June 30, 2013 decreased by $0.8 million, or 7.4%, to $9.7 million from $10.5 million for the comparable 2012 period. Net investment income for the six months ended June 30, 2013 decreased by $0.3 million, or 1.4%, to $20.1 million from $20.4 million for the comparable 2012 period. Net effective annualized yield on the investment portfolio decreased to 3.4% and 3.5%, respectively, for the quarter and six months ended June 30, 2013 from 3.8% and 3.7%, respectively, for the comparable 2012 periods. Our duration was 3.8 years at June 30, 2013, up from 3.6 years at December 31, 2012.

For the quarter ended June 30, 2013, loss and loss adjustment expenses incurred increased by $4.3 million, or 4.2%, to $107.0 million from $102.7 million for the comparable 2012 period. For the six months ended June 30, 2013, loss and loss adjustment expenses incurred increased by $18.4 million, or 9.2%, to $219.1 million from $200.7 million for the comparable 2012 period. Loss, expense, and combined ratios calculated under U.S. generally accepted accounting principles for the quarter ended June 30, 2013 were 63.1%, 30.4%, and 93.5%, respectively, compared to 64.6%, 30.2%, and 94.8%, respectively, for the comparable 2012 period. Loss, expense, and combined ratios calculated under U.S. generally accepted accounting principles for the six months ended June 30, 2013 were 65.2%, 30.2%, and 95.4%, respectively, compared to 63.8%, 30.7%, and 94.5%, respectively, for the comparable 2012 period. Total prior year favorable development included in the pre-tax results for the quarter and six months ended June 30, 2013 was $7.0 million and $14.4 million, respectively, compared to $3.6 million and $7.6 million, respectively, for the comparable 2012 periods.

Today, our Board of Directors approved and declared a quarterly cash dividend of $0.60 per share on the issued and outstanding common stock, payable on September 13, 2013 to shareholders of record at the close of business on September 3, 2013.

About Safety: Safety Insurance Group, Inc. is the parent of Safety Insurance Company, Safety Indemnity Insurance Company, and Safety Property and Casualty Insurance Company which are Boston, MA, based writers of property and casualty insurance. Safety is a leading writer of personal automobile insurance in Massachusetts.

Additional Information: Press releases, announcements, U. S. Securities and Exchange Commission ("SEC") Filings and investor information are available under "About Safety," "Investor Information" on our Company website located at www.SafetyInsurance.com. Safety filed its December 31, 2012 Form 10-K with the SEC on March 18, 2013 and urges shareholders to refer to this document for more complete information concerning Safety's financial results.

Cautionary Statement under "Safe Harbor" Provision of the Private Securities Litigation Reform Act of 1995:

This press release contains, and Safety may from time to time make, written or oral "forward-looking statements" within the meaning of the U.S. federal securities laws. Forward-looking statements can be identified by the fact that they do not relate strictly to historical or current facts. They often include words such as "believe," "expect," "anticipate," "intend," "plan," "estimate," "aim," "projects," or words of similar meaning and expressions that indicate future events and trends, or future or conditional verbs such as "will," "would," "should," "could," or "may". All statements that address expectations or projections about the future, including statements about the Company's strategy for growth, product development, market position, expenditures and financial results, are forward-looking statements.

Forward-looking statements are not guarantees of future performance. By their nature, forward-looking statements are subject to risks and uncertainties. There are a number of factors, many of which are beyond our control, that could cause actual future conditions, events, results or trends to differ significantly and/or materially from historical results or those projected in the forward-looking statements. These factors include but are not limited to the competitive nature of our industry and the possible adverse effects of such competition.Although a number of national insurers that are much larger than we are do not currently compete in a material way in the Massachusetts private passenger automobile market, if one or more of these companies decided to aggressively enter the market it could have a material adverse effect on us.Other significant factors include conditions for business operations and restrictive regulations in Massachusetts, the possibility of losses due to claims resulting from severe weather, the possibility that the Commissioner of Insurance may approve future Rule changes that change the operation of the residual market, our possible need for and availability of additional financing, and our dependence on strategic relationships, among others, and other risks and factors identified from time to time in our reports filed with the SEC, such as those set forth under the caption "Risk Factors" in our Form 10-K for the year ended December 31, 2012 filed with the SEC on March 18, 2013.

We are not under any obligation (and expressly disclaim any such obligation) to update or alter our forward-looking statements, whether as a result of new information, future events, or otherwise.You should carefully consider the possibility that actual results may differ materially from our forward-looking statements.

Safety Insurance Group, Inc. and Subsidiaries
Consolidated Balance Sheets
(Dollars in thousands, except share data)

June 30,

December 31,

2013

2012

(Unaudited)

Assets

Investments:

Securities available for sale:

Fixed maturities, at fair value (amortized cost: $1,091,210 and $1,100,414)

$

1,118,028

$

1,165,553

Equity securities, at fair value (cost: $42,798 and $21,237)

46,511

22,800

Total investments

1,164,539

1,188,353

Cash and cash equivalents

35,788

35,383

Accounts receivable, net of allowance for doubtful accounts

189,256

165,750

Receivable for securities sold

250

835

Accrued investment income

10,366

10,587

Taxes recoverable

125

5,529

Receivable from reinsurers related to paid loss and loss adjustment expenses

12,183

6,610

Receivable from reinsurers related to unpaid loss and loss adjustment expenses

57,459

52,185

Ceded unearned premiums

17,750

16,206

Deferred policy acquisition costs

65,751

60,665

Deferred income taxes

4,232

-

Equity and deposits in pools

18,872

16,965

Other assets

15,875

15,278

Total assets

$

1,592,446

$

1,574,346

Liabilities

Loss and loss adjustment expense reserves

$

432,596

$

423,842

Unearned premium reserves

387,311

353,219

Accounts payable and accrued liabilities

48,515

65,458

Payable for securities purchased

5,397

2,630

Payable to reinsurers

12,020

7,056

Deferred income taxes

-

8,202

Other liabilities

22,249

19,580

Total liabilities

908,088

879,987

Shareholders' equity

Common stock: $0.01 par value; 30,000,000 shares authorized; 17,200,461 and 17,052,034 shares issued

172

170

Additional paid-in capital

167,757

163,041

Accumulated other comprehensive income, net of taxes

19,845

43,356

Retained earnings

556,952

543,361

Treasury stock, at cost: 1,819,547 and 1,728,645 shares

(60,368

)

(55,569

)

Total shareholders' equity

684,358

694,359

Total liabilities and shareholders' equity

$

1,592,446

$

1,574,346

Safety Insurance Group, Inc. and Subsidiaries
Consolidated Statements of Operations
(Unaudited)
(Dollars in thousands, except share and per share data)

Three Months Ended June 30,

Six Months Ended June 30,

2013

2012

2013

2012

Net earned premiums

$

169,550

$

159,070

$

335,989

$

314,606

Net investment income

9,727

10,500

20,114

20,409

Net realized gains on investments

140

617

542

1,073

Finance and other service income

4,584

4,521

9,152

9,026

Total revenue

184,001

174,708

365,797

345,114

Losses and loss adjustment expenses

106,976

102,695

219,121

200,739

Underwriting, operating and related expenses

51,467

48,010

101,565

96,548

Interest expense

21

22

43

44

Total expenses

158,464

150,727

320,729

297,331

Income before income taxes

25,537

23,981

45,068

47,783

Income tax expense

7,478

7,025

13,025

13,618

Net income

$

18,059

$

16,956

$

32,043

$

34,165

Earnings per weighted average common share:

Basic

$

1.17

$

1.11

$

2.09

$

2.24

Diluted

$

1.17

$

1.11

$

2.08

$

2.24

Cash dividends paid per common share

$

0.60

$

0.50

$

1.20

$

1.00

Number of shares used in computing earningsper share:

Basic

15,380,053

15,302,801

15,359,983

15,260,080

Diluted

15,421,300

15,309,012

15,389,236

15,267,434

Safety Insurance Group, Inc. and Subsidiaries
Additional Premium Information
(Unaudited)
(Dollars in thousands)

Three Months Ended June 30,

Six Months Ended June 30,

2013

2012

2013

2012

Written Premiums

Direct

$

198,875

$

185,830

$

384,429

$

362,083

Assumed

5,227

4,006

11,263

8,729

Ceded

(14,253

)

(12,843

)

(27,155

)

(24,521

)

Net written premiums

$

189,849

$

176,993

$

368,537

$

346,291

Earned Premiums

Direct

$

178,146

$

166,868

$

351,835

$

329,274

Assumed

4,441

4,154

9,765

8,421

Ceded

(13,037

)

(11,952

)

(25,611

)

(23,089

)

Net earned premiums

$

169,550

$

159,070

$