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Safety Insurance Announces 2002 Year-End Results

    BOSTON--March 24, 2003--Safety Insurance Group, Inc. ("Safety") is pleased to report results for the first time as a public company. Please read this release and the attached financial statements and summary of adjusted after-tax operating income carefully, as certain financial figures presented for prior periods may not be directly comparable to recent and/or future results as a consequence of Safety's purchase by its Senior Management Team with sponsorship by a group of private investors in October 2001 (the "Acquisition"), and the subsequent close of the initial public offering of our common stock on November 27, 2002 (the "IPO"). Further, the 2001 "successor" period (after the Acquisition) and the 2001 "predecessor" period (prior to the Acquisition) on the attached financials and summary have been combined below for comparative purposes whenever "the year ended December 31, 2001" is referenced.

    Year-Ended December 31, 2002 Results

    Net income available to common stockholders for the year ended December 31, 2002 was $9.2 million compared to $117.3 million for the year ended December 31, 2001. Adjusted after-tax operating income (a non-GAAP financial measure that is explained in the attached summary) for the year ended 2002 was $15.1 million compared to $16.0 million for the year ended December 31, 2001.
    Direct written premiums for the year ended December 31, 2002 increased by $44.7 million, or 9.5%, to $516.6 million from $471.9 million for the year ended December 31, 2001. This increase was primarily due to an approximate 5.2% increase in the average written premium per automobile exposure on our private passenger automobile business, a 2.2% increase in our private passenger automobile written exposures, and a 7.6% increase in our commercial automobile written exposures. We also increased our average rates on commercial automobile insurance by 7.2% effective January 1, 2002, and in addition we increased our average rates on homeowners insurance by 9.8% effective February 19, 2002.
    Net written premiums for the year ended December 31, 2002 increased by $52.1 million, or 11.2%, to $517.6 million from $465.5 million for the year ended December 31, 2001. This increase was primarily due to increased direct written premiums, and an increase in assumed premiums from Commonwealth Automobile Reinsurers ("CAR").
    Net earned premiums for the year ended December 31, 2002 increased by $42.0 million, or 9.4%, to $489.3 million from $447.3 million for the year ended December 31, 2001. This increase was primarily due to an approximate 4.4% increase in automobile exposures for which we earned premiums in our private passenger automobile business, an increase in assumed premiums from CAR, and the above mentioned increased rates on our private passenger automobile, commercial automobile and homeowners lines.
    Investment income for the year ended December 31, 2002 decreased by $1.5 million, or 5.4%, to $26.1 million from $27.6 million for the year ended December 31, 2001. An increase of $57.5 million or 11.1% in average invested securities and cash (at fair value) to $574.6 million for the year ended December 31, 2002 from $517.1 million for the year ended December 31, 2001 period was more than offset by a decrease in net effective yield on our investment portfolio to 4.55% from 5.34% during the same period due to declining interest rates on our investment portfolio.
    Net realized investment losses for the year ended December 31, 2002 decreased by $4.7 million to $0.3 million from $5.0 million for the year ended December 31, 2001.
    GAAP loss, expense and combined ratios for the year ended December 31, 2002 were 76.7%, 26.3% and 103.0% compared to 78.7%, 26.3% and 105.0% for the year ended December 31, 2001.
    Other expenses for the year ended December 31, 2002 increased to $6.3 million from $0 for the year ended December 31, 2001. Other expenses are comprised of $4.0 million of TJC management fee expense related to services that ceased at the IPO, and $2.3 million of unamortized deferred debt issuance costs related to the Acquisition debt which were expensed upon the closing of the IPO.
    Interest expenses for the year ended December 31, 2002 increased by $4.9 million to $7.3 million from $2.4 million for the year ended December 31, 2001. Interest expenses for 2002 were related to Acquisition debt that was extinguished at the IPO, as well as indebtedness incurred in connection with the IPO. Interest expenses for 2001 were related to the employee stock ownership plan debt that was extinguished at the Acquisition, as well as indebtedness incurred in connection with the Acquisition. Primarily as a result of the IPO, we significantly reduced our debt outstanding to $20.0 million at December 31, 2002 from $99.5 million at December 31, 2001.
    The Board of Directors approved and declared a $0.07 per share quarterly cash dividend on its issued and outstanding common stock, which was paid on Monday, March 17, 2003, to shareholders of record at the close of business on March 3, 2003. Safety's book value per share was $16.07, based on 15,259,991 common shares outstanding at December 31, 2002.

    About Safety Insurance Group, Inc.

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

    Additional Information

    Press releases, announcements, financial reports, SEC Filings, investor information and other items of interest are available under "Investor Information" on Safety's web site located at www.safetyinsurance.com. Safety expects to file its Form 10-K for the year ended December 31, 2002, with the U.S. Securities and Exchange Commission on Monday, March 31, 2003 and urges stockholders to refer to that 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. These forward-looking statements rely on a number of assumptions concerning future events and are subject to a number of uncertainties and other factors, many of which are outside Safety's control, which could cause actual results to differ materially from such statements. Important factors that could cause the actual results to differ include, but are not necessarily limited to, our concentration of business in Massachusetts personal lines insurance; our dependence on principal employees; our exposure to claims related to severe weather conditions; and rating agency policies and practices. For a more detailed description of these uncertainties and other factors, please see Safety's filings with the U.S. Securities and Exchange Commission. Forward-looking statements speak only as of the date they are made, and Safety assumes no obligation to update or revise any of them in light of new information, future events or otherwise.



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

                                                  Successor Successor
                                                   Dec. 31,   Dec. 31,
                                                     2002      2001
Assets
Investment securities available for sale:
  Bonds, at fair value (amortized cost:
   $572,063 in 2002 and $513,926 in 2001)         $ 594,071  $507,292
  Preferred stocks, at fair value (amortized cost:
   $9,791 in 2002 and $9,939 in 2001)                 9,815     9,716
     Total investment securities                    603,886   517,008
Cash and cash equivalents                            34,777    12,278
Accounts receivable, net of allowance for doubtful
 accounts of $548 in 2002 and $226 in 2001          122,005   118,244
Accrued investment income                             6,812     5,958
Taxes receivable                                      1,546     4,224
Receivable from reinsurers related to paid loss
 and loss adjustment expenses                        40,886    38,454
Receivable from reinsurers related to unpaid loss
 and loss adjustment expenses                        66,661    75,179
Prepaid reinsurance premiums                         30,967    23,121
Deferred policy acquisition costs                    36,992    31,598
Deferred income taxes                                 6,245    18,141
Equipment and leasehold improvements, net               642        10
Deferred debt issuance costs                            325     2,679
Equity and deposits in pools                         24,983    11,720
Other assets                                          1,869       560
    Total assets                                  $ 978,596  $859,174

Liabilities
Loss and loss adjustment expense reserves         $ 333,297  $302,556
Unearned premium reserves                           271,998   235,794
Accounts payable and accrued liabilities             33,222    43,478
Outstanding claims drafts                            19,391    19,015
Payable for securities                               18,814        --
Payable to reinsurers                                36,666    27,129
Capital lease obligations                                --        40
Debt                                                 19,956    99,500
     Total liabilities                              733,344   727,512

Mandatorily redeemable preferred stock                   --    22,680
Commitments and contingencies
Stockholders' equity

Common stock: $0.01 par value; 9,296,000 shares
 authorized; and 5,810,000 outstanding                   --        58
Common stock: $0.01 par value; 30,000,000 shares
 authorized; and 15,259,991 outstanding                 153        --
Additional paid-in capital                          110,632     2,442
Accumulated other comprehensive income (loss), net
 of taxes                                            14,321    (4,457)
Promissory notes receivable from management            (737)     (702)
Retained earnings                                   120,883   111,641
     Total stockholders' equity                     245,252   108,982
Total liabilities, mandatorily redeemable
 preferred stock and stockholders' equity         $ 978,596  $859,174


                     Safety Insurance Group, Inc.
    Consolidated Statements of Operations and Comprehensive Income
      (Dollars in thousands, except per share and share amounts)

                          Successor  Successor Predecessor Predecessor
                          Year Ended  Oct. 16-   Jan. 1-    Year Ended
                           Dec. 31,   Dec.  31,  Oct. 15,    Dec. 31,
                             2002       2001       2001        2000
Premiums earned, net       $489,256   $100,175   $347,098    $381,413
Investment income            26,142      5,359     22,246      26,889
Net realized losses on
 sales of investments          (277)    (4,284)      (766)     (1,246)
Finance and other service
 income                      14,168      2,546      9,260      10,514
Total income                529,289    103,796    377,838     417,570
Losses and loss
 adjustment expenses        375,178     75,559    276,383     275,139
Underwriting, operating
 and related expenses       128,866     29,808     87,998     113,425
Transaction expenses             --      3,874      5,605         406
Other expenses                6,250         --         --          --
Interest expense              7,254      1,823        550       1,071
Total expenses              517,548    111,064    370,536     390,041
Income (loss) before
 income taxes                11,741     (7,268)     7,302      27,529
Income tax expense
 (benefit)                    1,280     (1,666)     1,678       8,255
Net income (loss) before
 extraordinary item and
 preferred stock dividends   10,461     (5,602)     5,624      19,274
Excess of fair value of
 acquired net assets over
 cost                            --    117,523         --          --
Net income before
 preferred stock dividend    10,461    111,921      5,624      19,274
Changes in unrealized
 gains for investment
 held, net                   18,598     (7,241)     6,099      10,573
Reclassification
 adjustment for gains
 included in net income,
 net                            180      2,784        498         810
Comprehensive net income    $29,239   $107,464    $12,221     $30,657
Computation of net income
 available to common
 stockholders:
Net income before
 preferred stock dividend    10,461    111,921      5,624      19,274
Dividends on mandatorily
 redeemable preferred
 stock                       (1,219)      (280)        --          --
Net income available to
 common stockholders         $9,242   $111,641     $5,624     $19,274

Earnings (loss) per
 common share:
Net income (loss) available to common
 stockholders before extraordinary
 item
Basic                         $1.44     $(1.07)     $6.26      $22.50
Diluted                       $1.38     $(1.07)     $6.26      $22.50

Extraordinary item
Basic and diluted               $--     $21.29        $--         $--

Net income available to
 common stockholders
Basic                         $1.44     $20.23      $6.26      $22.50
Diluted                       $1.38     $20.23      $6.26      $22.50

Weighted average number
 of common shares
 outstanding
Basic                     6,433,786  5,519,500    898,300     856,800
Diluted                   6,699,338  5,810,000    898,300     856,800



                     Safety Insurance Group, Inc.
            Summary of Adjusted After-Tax Operating Income


    In managing our business, one measure we use to evaluate our
performance is our adjusted after-tax operating income. In calculating
these amounts, we start with our reported generally accepted
accounting principles ("GAAP") net income available to common
stockholders and exclude net realized investment gains/(losses) and
certain other items that we do not believe reflect overall operating
trends. The size and timing of realized investment gains/(losses) are
often subject to management's discretion. The other excluded items are
related to costs incurred as a result of our prior ownership structure
(predecessor) and certain other items that are not expected to recur,
primarily comprised of a $117.5 million extraordinary gain for the
excess of fair value of acquired net assets over cost. While some of
these items may be significant components of our GAAP net income, we
believe that adjusted operating income is an appropriate measure that
is more reflective of the net income attributable to the ongoing
operations of the business.

   Items are excluded from adjusted after-tax operating income based
on management's judgment after a thorough review of our results of
operations for the relevant period. Because discretion is exercised in
compiling these amounts, adjusted operating income is an imperfect
measure of operating trends, and inconsistencies may exist in the
adjustments made by management. Adjusted after-tax operating income is
not a substitute for net income determined in accordance with GAAP,
and investors should not place undue reliance on this measure. Our
adjusted after-tax operating income may be different from similarly
titled measures of other companies. The following are the adjustments
we made to GAAP net income to arrive at adjusted after-tax operating
income.


                          Successor  Successor Predecessor Predecessor
                          Year Ended  Oct. 16-   Jan. 1-    Year Ended
                           Dec. 31,   Dec.  31,  Oct. 15,    Dec. 31,
                             2002       2001       2001        2000
                                     (Dollars in thousands)
Adjusted after-tax
 operating income available
 to common stockholders   $ 15,145  $   1,718    $ 14,294   $ 29,375

Adjustments
   Net realized losses on
    sales of investments      (180)    (2,785)       (498)      (810)
   Extraordinary gain(1)        --    117,523          --         --
   Employee stock ownership
    plan/supplemental
    executive stock
    ownership plan
    compensation expenses(2)    --         --      (2,180)    (6,371)
   Chairman salary and
    bonus(3)                    --         --      (1,300)    (1,960)
   Transaction expense(4)       --     (3,874)     (4,334)      (264)
   Interest expense(2)          --         --        (358)      (696)
   TJC management fees(5)   (3,415)      (136)         --         --
   Put and call options on
    shares held by
    management(6)           (2,909)      (805)         --         --
   Changes in tax estimates    601         --          --         --
   Total after-tax
    adjustments             (5,903)   109,923      (8,670)   (10,101)

GAAP reported:
   Net income available to
    common stockholders    $ 9,242  $ 111,641    $  5,624   $ 19,274


    (1) Represents extraordinary gain related to the excess of the
estimated fair value of net assets over the purchase price in
connection with the Acquisition in accordance with FAS 141, Business
Combinations.

    (2) Represents interest and other expenses related to the
elimination of employee stock ownership plan and supplemental
executive stock ownership plan compensation expenses incurred during
the predecessor period. We established these plans in 1995 under our
prior majority owner. These plans represented a much larger retirement
benefit than was provided prior to their implementation or that has
been provided under our 401(k) plan since January 1, 2002. We do not
believe that expenses of a comparable magnitude will be needed to
attract and motivate our employees in the future. Accordingly,
management believes that this adjustment is appropriate. 401(k)
expenses incurred were $567 and $0 for the years ended December 31,
2002 and 2001, respectively. Further, $4,715 and $1,185 of after-tax
interest expense, and $1,463 and $0 of after-tax unamortized deferred
debt issuance costs expensed related to outstanding debt from the
Acquisition for the years ended December 31, 2002 and 2001,
respectively, have not been added back to GAAP net income available to
common stockholders in determining adjusted after-tax operating income
available to common stockholders.

    (3) Represents salary and bonus paid to our former owner.
Management believes that this adjustment is appropriate because of the
limited role our former owner played in our operations, and the fact
that he did not participate in day-to-day decisions following late
1998 and the appointment of David Brussard as our President and Chief
Executive Officer in January 1999. In addition, no comparable expense
has been incurred since the Acquisition, and no need to hire an
additional person to fill this function is foreseen.

    (4) Represents transaction expenses incurred in connection with
the Acquisition.

    (5) Represents TJC Management fee expense. These fees are related
to services that will no longer be provided after the IPO. We have
agreed to terminate this aspect of our management consulting agreement
with TJC Management for several reasons, including the ability of our
current management to perform the equivalent functions following the
IPO. We do not expect to hire additional employees or retain a new
consultant on an annual or other periodic fee basis to perform these
services following the IPO. We will still be required to pay fees to
TJC Management in connection with consulting services they render on
certain purchase, sale and financing transactions.

    (6) Represents compensation expenses related to put and call
options on shares held by management. These options terminated upon
completion of the IPO.