Safety Insurance Group Reports Strong Growth in Q2 2024, Bolstered by FAIR Plan Restructuring
Safety Insurance Group, Inc. (NASDAQ: SAFT) announced its second quarter 2024 results on August 7. The results showcased significant premium growth and a stable combined ratio despite ongoing inflationary pressures. The Massachusetts-based insurer also declared a quarterly dividend, maintaining its commitment to shareholder returns.
Premium Growth Drives Revenue Increase
Safety reported a substantial increase in both direct and net written premiums for Q2 2024:
Direct written premiums rose 21.3% to $315.5 million, up from $260.2 million in Q2 2023
Net written premiums increased by 20.4% to $294.9 million, compared to $245.0 million in the same period last year
Net earned premiums grew by 22.1% to $246.9 million, versus $202.2 million in Q2 2023
George M. Murphy, Chairman of the Board of Directors, President, and Chief Executive Officer, attributed this growth to “ongoing rate increases and growth in policy counts.” The company achieved significant exposure count growth across all lines of business for the first half of 2024, with Private Passenger Automobile policy count seeing an 11.9% increase compared to the same period in 2023.
Profitability Metrics and Loss Ratios
Despite the growth in premiums, Safety’s net income for Q2 2024 slightly decreased to $16.6 million, or $1.13 per diluted share, compared to $17.0 million, or $1.15 per diluted share, in Q2 2023. However, the company’s combined ratio improved to 99.9% for the quarter, down from 101.9% in the same period last year.
Murphy noted, “The growth in policy counts combined with ongoing inflationary trends in the Private Passenger Automobile book of business has resulted in an increase in current year loss experience compared to the second quarter of 2023.”
FAIR Plan Restructuring Boosts Results
A significant development in Q2 2024 was the restructuring of the Massachusetts Property Insurance Underwriting Association, known as the FAIR Plan. On April 1, 2024, the Massachusetts Division of Insurance approved a restructuring of the FAIR Plan, transforming it from a partnership that shares profits and losses with member companies to a stand-alone, risk-bearing entity, distributing to Safety and the Association’s other members’ their accumulated partnership equity. This transformation resulted in Safety’s financials showing:
Recognition of a $9.7 million underwriting gain through the release of prior year loss reserves
Establishment of new assets, including a $14.9 million investment in FAIR Plan Trust and an $8.0 million receivable
Murphy highlighted that this restructuring “favorably impacted” the company’s quarterly combined ratio.
Investment Income and Portfolio Performance
Safety’s net investment income for Q2 2024 slightly decreased by 2.4% to $13.5 million, primarily due to timing differences in interest and cash payments from variable rate investments. The effective annualized yield on the investment portfolio remained stable at 3.9% for both Q2 2024 and Q2 2023.
Dividend Declaration
The Board of Directors approved a quarterly cash dividend of $0.90 per share, payable on September 13, 2024, to shareholders of record as of September 3, 2024. This maintains the company’s dividend at the same level as the previous quarter.
Looking Ahead
While Safety Insurance Group demonstrates strong premium growth and stable operations, the company faces ongoing challenges from inflationary pressures, particularly in its Private Passenger Automobile line.
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.
