Safety Insurance Net Income Plummets as Auto Claims, Inflation Take Toll

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Boston-based Safety Insurance Group, Inc. reported first quarter 2022 results showing net income of $7.8 million, compared to $36.2 million for the comparable 2021 period, as auto insurance claim frequency returned to pre-pandemic levels and inflation boosted repair costs.

Direct written premiums for the quarter decreased by $2.7 million, or 1.4%, to $189.5 million. The company said the decrease was primarily in its private passenger automobile line of business and is a result of a decrease in policy counts.

Net earned premiums for the quarter decreased by $5.8 million, or 3.0%, to $187.1 million compared to the first quarter last year.

For the quarter ended March 31, 2022, loss and loss adjustment expenses incurred increased by $11.7 million, or 10.5%, to $123.2 million from $111.5 million for the comparable 2021 period. The company blamed the increase in losses on a return of pre-pandemic frequency in its private passenger automobile line of business as well as inflation and supply chain delays.

Loss, expense, and combined ratios for the quarter ended March 31, 2022 were 65.8%, 32.9%, and 98.7%, respectively, compared to 57.8%, 33.7%, and 91.5% for the comparable 2021 period.

Net investment income for the quarter decreased by $0.9 million, or 8.2%, to $10.6 million from $11.5 million for the comparable 2021 period.

“We continue to see our operating results return to pre-COVID-19 pandemic levels,” commented George M. Murphy, president and chief executive officer.

Murphy said the first quarter’s combined ratio of 98.7% was impacted by a return to pre-pandemic level frequency in its private passenger auto line of business and an increase in physical damage inflation costs.

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He said the insurer is focused on its expense ratio that improved this quarter compared to 2021 and that it said is, on average, below its regional competitors. The company said the decrease in the expense ratio was driven by a decrease in contingent commission expenses offset by expenses incurred related to an activist investor.

In a January letter to the company, activist investment firm Ides Capital Management, which owns about 1% of shares, said it wants the company to buy back 10% of its shares, cut costs and improve financial disclosure by electing directors every year and holding quarterly earnings calls. It also nominated two new directors.

In January, Safety announced it would increase the size of its board, named a lead independent director and vowed to continue improving its governance practices. In March, Safety announced appointments of two new directors and several governance changes to be considered at the upcoming annual meeting.

Safety’s book value per share decreased to $58.47 at March 31, 2022 from $62.47 at December 31, 2021, resulting from the impact of interest rate changes on the value of its fixed maturity portfolio. Additional decreases in book value resulted from capital allocation activities, specifically dividends paid, and shares repurchased. During the three months ended March 31, 2022, the company purchased 170,904 shares at a cost of $14.6M.

Safety writes private passenger automobile, commercial automobile, homeowners, dwelling fire, umbrella and business owner policies in Massachusetts, New Hampshire and Maine.

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Topics
Auto
Claims
Profit Loss