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Safety Announces Second Quarter Results and Raises Third Quarter 2010 Dividend

^{Published on 2010-08-05 07:26:00 - Market Wire}
 

BOSTON--([ BUSINESS WIRE ])--Safety Insurance Group, Inc. (NASDAQ:SAFT) today reported second quarter 2010 results. Net income for the quarter ended June 30, 2010 was $15.1 million, or $1.00 per diluted share, compared to $15.0 million, or $0.96 per diluted share, for the comparable 2009 period. Net income for the six months ended June 30, 2010 was $27.9 million, or $1.84 per diluted share, compared to $26.9 million, or $1.69 per diluted share, for the comparable 2009 period. Safetya™s book value per share increased to $42.88 at June 30, 2010 from $41.20 at December 31, 2009. Safety paid $0.40 per share in dividends to investors during both the quarters ended June 30, 2010 and 2009. Safety paid $1.60 per share in dividends to investors during the year ended December 31, 2009.

The Board of Directors today approved and declared an increase in the quarterly cash dividend from $0.40 to $0.50 per share on the issued and outstanding common stock, payable on September 15, 2010 to shareholders of record at the close of business on September 1, 2010.

The Board of Directors today also increased Safetya™s existing share repurchase program by authorizing repurchase of an additional $30.0 million of Safetya™s outstanding common shares. Previously, the Board of Directors had authorized up to $60.0 million under the program. Safety has previously purchased $55.5 million of its common shares on the open market under the program.

Direct written premiums for the quarter ended June 30, 2010 increased by $10.8 million, or 7.2%, to $160.4 million from $149.6 million for the comparable 2009 period. Direct written premiums for the six months ended June 30, 2010 increased by $19.4 million, or 6.6%, to $314.5 million from $295.1 million for the comparable 2009 period. The 2010 increase occurred primarily in our personal automobile and homeowners lines, which experienced increases of 4.2% and 2.2%, respectively, in average written premium per exposure. Partially offsetting these increases was a 5.4% decrease in average written premium per exposure in our commercial automobile line.

Net written premiums for the quarter ended June 30, 2010 increased by $12.6 million, or 8.9%, to $153.6 million from $141.0 million for the comparable 2009 period. Net written premiums for the six months ended June 30, 2010 increased by $18.7 million, or 6.6%, to $300.6 million from $281.9 million for the comparable 2009 period. The 2010 increase was primarily due to the factors that increased direct written premiums.

Net earned premiums for the quarter ended June 30, 2010 increased by $4.8 million, or 3.7%, to $136.1 million from $131.3 million for the comparable 2009 period. Net earned premiums for the six months ended June 30, 2010 increased by $2.6 million, or 1.0%, to $269.3 million from $266.7 million for the comparable 2009 period. The 2010 increase was due to the factors that increased direct written premiums combined with decreases in earned premiums ceded to Commonwealth Automobile Reinsurers (aCARa), and partially offset by decreases in earned premiums assumed from CAR. Earned premiums ceded to and assumed from CAR decreased as a result of the phase-out of the CAR personal automobile reinsurance pool, which was fully replaced by an assigned risk plan, the Massachusetts Automobile Insurance Plan beginning with personal automobile policy effective dates after March 31, 2009. The effect of assumed and ceded premiums on net written and net earned premiums is presented in the attached tables.

Net investment income for the quarter ended June 30, 2010 was $10.9 million compared to $10.7 million for the comparable 2009 period. Net investment income for the six months ended June 30, 2010 was $21.6 million compared to $21.1 million for the comparable 2009 period. Average cash and investment securities (at cost) increased by $2.7 million, or 0.3%, to $1,062.2 million for the six months ended June 30, 2010 from $1,059.5 million for the comparable 2009 period. Net effective annualized yield on the investment portfolio increased to 4.1% for the six months ended June 30, 2010 from 4.0% for the comparable 2009 period. Our duration decreased to 2.8 years at June 30, 2010 from 3.3 years at December 31, 2009.

We continue to hold no subprime mortgage debt securities. All of our mortgage-backed securities are either U.S. Government or Agency guaranteed or are rated AAA. During the quarter and six months ended June 30, 2010, we purchased 162,907 of our common shares on the open market at a cost of $5.8 million under our share buyback program. During the year ended December 31, 2009, we purchased 1,332,535 of our common shares under the program at a cost of $42.2 million. As of June 30, 2010, we maintained $40.0 million in cash and cash equivalents and we have no outstanding debt.

Loss, expense, and combined ratios calculated under U.S. generally accepted accounting principles (aGAAPa) for the quarter ended June 30, 2010 were 64.5%, 31.0%, and 95.5%, respectively, compared to 65.8%, 30.1%, and 95.9%, respectively, for the comparable 2009 period. Loss, expense, and combined ratios calculated under GAAP for the six months ended June 30, 2010 were 65.5%, 31.2%, and 96.7%, respectively, compared to 67.2%, 30.2%, and 97.4%, respectively, for the comparable 2009 period. Total prior year favorable development included in the pre-tax results for the quarter and six months ended June 30, 2010 was $10.0 million and $22.6 million, respectively, compared to prior year favorable development of $9.6 million and $18.1 million, respectively, for the comparable 2009 periods.

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 (aSECa) Filings and investor information are available under aAbout Safetya, aInvestor Informationa on our Company website located at [ www.SafetyInsurance.com ]. Safety filed its December 31, 2009 Form 10-K with the SEC on March 15, 2010 and urges shareholders to refer to this document for more complete information concerning Safetya™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 abelieve,a aexpect,a aanticipate,a aintend,a aplan,a aestimate,a aaim,a aprojects,a or words of similar meaning and expressions that indicate future events and trends, or future or conditional verbs such as awill,a awould,a ashould,a acould,a or amaya. All statements that address expectations or projections about the future, including statements about the Companya™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 aRisk Factorsa in our Form 10-K for the year ended December 31, 2009 filed with the SEC on March 15, 2010.

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.