Safety Insurance Group Reports Record Premium Growth Amid Elevated (107.7%) Loss Ratio
Safety Insurance Group, Inc. issued its financial results for the Fourth Quarter of 2023 (Q4-2023) as well as its Full Year 2023 results on February 27, 2024. The Boston-based Property and Casualty insurer reported record top-line growth driven by increases in policy count and average premium per policy across all lines of business. However, the company also experienced an elevated combined loss ratio, particularly in its private passenger automobile segment, due to ongoing inflationary pressures and weather events.
Q4-2023 Financial Highlights
“2023 saw Safety Insurance post record top-line growth as Direct Written Premiums increased by 20.4% as a result of a 10.2% increase in overall policy counts and a 10.9% increase in average premium per policy, blended across all lines of business,” commented George M. Murphy, Chairman of the Board, President and CEO.
For the quarter ended December 31, 2023, Safety Insurance highlighted the following results:
- Direct written premiums of $246.1 million, a 22.2% increase from $201.4 million in Q4 2022
- Net income of $12.3 million, or $0.83 per diluted share, compared to $24.6 million, or $1.67 per diluted share, in the prior year quarter
- A combined ratio of 106.5%, up from 100.7% in Q4 2022, resulting from a December 18th wind event that added $12 million in losses and loss adjustment expenses
- Non-GAAP operating income of $0.30 per diluted share versus $0.98 in the comparable 2022 period
Murphy acknowledged that while Safety achieved positive trends in all major revenue streams, “ongoing inflationary impacts contributed to an elevated loss ratio specific to our Private Passenger Automobile book of business.” He noted that the company continues to file for rate increases across all major lines to ensure rate adequacy.
Full Year 2023 results show 20.4% in premium growth but with a combined ratio of 107.7%
Turning to full year results for the year ended December 31, 2023, Safety Insurance issued the following results:
- Direct written premiums of $991.2 million, up 20.4% from $823.3 million in 2022
- Net income of $18.9 million, or $1.28 per diluted share, compared to $46.6 million, or $3.15 per diluted share, in the prior year
- A combined ratio of 107.7% versus 97.2% in 2022
- Non-GAAP operating income per diluted share of $0.84, down from $5.05 in 2022
The insurer achieved exposure count growth across all lines of business for the full year, including increases of 14.7% in private passenger auto, 5.4% in commercial auto, and 11.2% in homeowners compared to 2022. Average written premium per exposure also rose 10.8%, 3.8% and 4.5% in those respective segments year-over-year.
Losses and loss adjustment expenses incurred, however, jumped 30.6% to $642.3 million in 2023 from $492.0 million the prior year. Safety attributed the increase to current market conditions, specifically inflation, as well as multiple weather events such as floods, high winds, and a severe winter storm.
As for net investment income, it grew 20.7% to $56.4 million for the year, benefiting from higher interest rates. The company’s net effective annualized yield on its investment portfolio improved to 4.0% from 3.2% in 2022.
Shareholder Returns and Outlook
Safety Insurance’s book value per share dipped to $54.37 on December 31, 2023, from $54.88 a year earlier. The decrease resulted from share repurchases and dividends offsetting net income. In 2023, the company bought back 74,213 shares for $5.2 million and paid $3.60 per share in dividends.
“Safety remains committed to maintaining underwriting discipline while leveraging investments in our pricing and risk management areas,” Murphy noted. The company continues to navigate a challenging environment marked by inflationary headwinds and weather volatility as it focuses on achieving rate adequacy across its book of business. Safety’s strong premium growth and investment gains provide support as it works to improve underwriting margins moving forward.
On February 15, 2024, Safety’s Board of Directors declared a quarterly cash dividend of $0.90 per share payable on March 15, 2024, to shareholders of record at the close of business on March 1, 2024.
About Safety
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.
