Safety Announces First Quarter 2003 Results
BOSTON--May 14, 2003--Safety Insurance Group, Inc. today reported first quarter 2003 results. Net income available to common shareholders for the three months ended March 31, 2003 was $2.9 million, or $0.19 per diluted share, compared to $3.0 million, or $0.53 per diluted share, for the three months ended March 31, 2002. Safety's book value per share was $16.38 at March 31, 2003, compared to $16.07 at December 31, 2002, based on 15,259,991 shares of common stock outstanding at the end of each period.Direct written premiums for the three months ended March 31, 2003 increased by $14.8 million, or 9.7%, to $167.4 million from $152.6 million for the three months ended March 31, 2002. The primary reason for this increase occurred in our personal automobile line of insurance which experienced a 7.2% increase in average written premium and a 0.1% increase in written exposures. In addition, we increased our commercial automobile line average rates by 7.1% effective December 16, 2002 and had a 5.2% increase in written exposures, while we increased our homeowners line average rates by 9.3% effective February 19, 2003 and had a 1.5% decrease in written exposures.
Net written premiums for the three months ended March 31, 2003 increased by $15.5 million, or 10.2%, to $167.2 million from $151.7 million for the three months ended March 31, 2002. This was primarily due to an increase in direct written premiums, in addition to an increase in assumed premiums from Commonwealth Automobile Reinsurers ("CAR").
Net earned premiums for the three months ended March 31, 2003 increased by $13.1 million, or 11.0%, to $132.1 million from $119.0 million for the three months ended March 31, 2002. This was primarily due to increased rates on personal automobile, commercial automobile and homeowners product lines, as well as an increase in assumed premiums from CAR.
Investment income for the three months ended March 31, 2003 increased to $7.0 million from $6.9 million for the three months ended March 31, 2002. An increase of $67.3 million or 12.5% in average cash and invested securities (at amortized cost) to $605.6 million for the three months ended March 31, 2003 from $538.3 million for the three months ended March 31, 2002 was more than offset by a decrease in net effective yield on our investment portfolio to 4.6% from 5.1% during the same period due to declining interest rates, as well as a change in management's investment strategy to shorten the portfolio duration, shift to higher rated securities, and increase tax-exempt holdings.
Net realized investment losses for the three months ended March 31, 2003 increased to $0.7 million from less than $0.1 million for the three months ended March 31, 2002.
GAAP loss, expense and combined ratios for the three months ended March 31, 2003 were 80.7%, 24.1% and 104.8% compared to 74.7%, 28.1% and 102.8% for the three months ended March 31, 2002. Primarily due to the severe winter conditions in Massachusetts during the three months ended March 31, 2003 as compared to the mild weather in the three months ended March 31, 2002, our homeowners line, which represents 6.4% of net earned premiums, experienced approximate increases of 118% in claim frequency and 39% in claim severity. Our automobile lines experienced a claim frequency increase of approximately 17%, which was offset by a reduction of approximately 8% in claim severity.
Interest expenses for the three months ended March 31, 2003 decreased by $2.1 million to $0.2 million from $2.3 million for the three months ended March 31, 2002. Interest expenses for the three months ended March 31, 2002 were related to old debt facilities that were extinguished at Safety's IPO, which occurred on November 27, 2002. Primarily as a result of the IPO, Safety significantly reduced debt outstanding to $20.0 million at March 31, 2003 from $98.5 million at March 31, 2002.
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.
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 personal 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 filed its December 31, 2002 Form 10-K with the U.S. Securities and Exchange Commission on March 31, 2003, expects to file its March 31, 2003 Form 10-Q on May 15, 2003 and urges shareholders to refer to those documents 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. and Subsidiaries Consolidated Balance Sheets (Dollars in thousands, except share data) March 31, Dec. 31, 2003 2002 ----------- --------- (Unaudited) Assets Investment securities available for sale: Fixed maturities, at fair value (amortized cost:$597,483 in 2003 and $581,854 in 2002) $623,161 $603,886 Cash and cash equivalents 18,052 34,777 Accounts receivable, net of allowance for doubtful accounts 137,674 122,005 Accrued investment income 7,345 6,812 Taxes receivable 1,739 1,546 Receivable from reinsurers related to paid loss and loss adjustment expenses 38,618 40,886 Receivable from reinsurers related to unpaid loss and loss adjustment expenses 68,329 66,661 Prepaid reinsurance premiums 33,313 30,967 Deferred policy acquisition costs 41,783 36,992 Deferred income taxes 5,214 6,245 Equity and deposits in pools 11,328 24,983 Other assets 2,248 2,836 ----------- --------- Total assets $988,804 $978,596 =========== ========= Liabilities Loss and loss adjustment expense reserves $349,433 $333,297 Unearned premium reserves 309,505 271,998 Accounts payable and accrued liabilities 16,189 33,222 Outstanding claims drafts 20,274 19,391 Payable for securities 2,172 18,814 Payable to reinsurers 21,315 36,666 Debt 19,956 19,956 ----------- --------- Total liabilities 738,844 733,344 ----------- --------- Commitments and contingencies Shareholders' equity Common stock: $0.01 par value; 30,000,000 shares authorized, 15,259,991 shares issued and outstanding 153 153 Additional paid-in capital 110,632 110,632 Accumulated other comprehensive income, net of taxes 16,690 14,321 Promissory notes receivable from management (212) (737) Retained earnings 122,697 120,883 ----------- --------- Total shareholders' equity 249,960 245,252 ----------- --------- Total liabilities and shareholders' equity $988,804 $978,596 =========== ========= Safety Insurance Group, Inc. and Subsidiaries Consolidated Statements of Operations (Unaudited) (Dollars in thousands except per share and share data) Three Months Ended March 31, 2003 2002 ------------ ----------- Net earned premiums $ 132,070 $ 119,041 Investment income 7,029 6,874 Net realized losses on investments (729) (43) Finance and other service income 4,045 3,823 ------------ ----------- Total income 142,415 129,695 ------------ ----------- Losses and loss adjustment expenses 106,628 88,927 Underwriting, operating and related expenses 31,802 33,493 Interest expenses 168 2,300 ------------ ----------- Total expenses 138,598 124,720 ------------ ----------- Income before income taxes 3,817 4,975 Income tax expense 935 1,591 ------------ ----------- Net income $ 2,882 $ 3,384 ============ =========== Dividends on mandatorily redeemable preferred stock - (336) ------------ ----------- Net income available to common shareholders $ 2,882 $ 3,048 ============ =========== Earnings per common share: Net income available to common shareholders Basic $ 0.19 $ 0.55 ============ =========== Diluted $ 0.19 $ 0.53 ============ =========== Cash dividends paid per common share $ 0.07 $ - ============ =========== Weighted average number of common shares outstanding Basic 15,259,991 5,519,492 ============ =========== Diluted 15,285,257 5,809,992 ============ ===========