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SI

SAFETY INSURANCE GROUP INC (SAFT)·Q1 2025 Earnings Summary

Executive Summary

  • Q1 2025 delivered improving underwriting performance: combined ratio fell to 99.4% (from 101.9% YoY) on higher earned premiums and a better private passenger auto loss ratio; diluted EPS rose to $1.48 vs. $1.36 YoY and $0.55 in Q4 2024. Bold positive surprise: sub‑100% combined ratio returns the core book to marginal profitability.
  • Top-line momentum continued: net earned premiums grew 15.5% YoY to $272.7M and total revenue reached $301.4M, supported by policy count growth across PPA, commercial auto, and homeowners, plus rate increases.
  • Investment income softened modestly (-4.3% YoY) and portfolio yield dipped to 3.9% (vs. 4.3% YoY), partially offset by gains and partnerships earnings; book value rose to $57.12.
  • Dividend maintained: Board declared $0.90/share for Q2 2025, payable June 13.
  • Watchlist catalyst: AM Best downgraded SAFT’s long-term ICRs on June 20, citing reduced risk-adjusted capitalization since YE 2021; could weigh on sentiment despite improving operations.

What Went Well and What Went Wrong

What Went Well

  • Combined ratio improved to 99.4% on increased earned premiums and better PPA loss ratio; CEO: “Safety’s first quarter combined ratio in 2025 improved to 99.4%… improvements in our private passenger automobile loss ratio.”
  • Policy count growth across all lines (PPA +1.3%, commercial +2.5%, homeowners +5.4%) and higher average written premium per policy (PPA +9.5%, commercial +8.4%, homeowners +11.0%).
  • Book value per share increased to $57.12 (+$1.29 QoQ), supported by net income and fixed maturity valuation gains.

What Went Wrong

  • Net investment income decreased 4.3% YoY to $14.6M; effective portfolio yield fell to 3.9% (from 4.3% YoY) due to lower earned interest on higher-yield bonds and variable-rate loans.
  • Loss and LAE rose 13.0% YoY to $190.3M as larger policy counts flowed through, partly offset by improved PPA outcomes.
  • Capitalization watch: subsequent AM Best downgrade of long-term ICRs (post-quarter) reflects BCAR-driven deterioration since YE 2021; potential perception headwind even as operating performance remains strong.

Financial Results

MetricQ1 2024Q4 2024Q1 2025
Total Revenue ($USD Millions)$268.233 $286.719 $301.429
Net Earned Premiums ($USD Millions)$236.053 $269.050 $272.690
Net Investment Income ($USD Millions)$15.231 $14.779 $14.574
Net Income ($USD Millions)$20.078 $8.131 $21.896
Diluted EPS ($USD)$1.36 $0.55 $1.48
Non-GAAP Operating Income per Diluted Share ($USD)$0.93 $0.94 $1.28
Loss Ratio (%)71.3% 71.7% 69.8%
Expense Ratio (%)30.6% 30.2% 29.6%
Combined Ratio (%)101.9% 101.9% 99.4%

Segment/line KPIs (mix/volume indicators):

KPI (Q1 2025)Private Passenger AutoCommercial AutoHomeowners
Policy Count Growth YoY (%)+1.3% +2.5% +5.4%
Avg Written Premium per Policy YoY (%)+9.5% +8.4% +11.0%

Additional premium and capital KPIs:

MetricQ1 2024Q4 2024Q1 2025
Direct Written Premiums ($USD Millions)$267.339 $292.025 $298.970
Net Written Premiums ($USD Millions)$250.295 $255.563 $274.780
Prior-Year Favorable Development ($USD Millions)$11.0 $13.0 $12.2
Effective Portfolio Yield (%)4.3% 4.0% 3.9%
Duration (Fixed Maturities, years)—3.5 3.6
Book Value per Share ($)—$55.83 $57.12
Dividend per Share ($)$0.90 $0.90 $0.90

Guidance Changes

MetricPeriodPrevious GuidanceCurrent GuidanceChange
Quarterly Cash Dividend per ShareQ2 2025$0.90 (Q4 2024 declared) $0.90, payable Jun 13, 2025; record Jun 2, 2025 Maintained
Revenue / Margins / Tax / OpExFY/Q2 2025Not providedNot provided—

No formal financial guidance ranges were provided; Safety continues to communicate via reported results and capital returns.

Earnings Call Themes & Trends

Note: No dedicated Q1 2025 earnings call transcript was found; only the May 14 Annual Meeting transcript was available.

TopicQ3 2024Q4 2024Q1 2025Trend
PPA Loss Severity & RatioModeration in severity; CR 100.7% Continued moderation; CR 101.9% Improved PPA loss ratio; CR 99.4% Improving
Policy Count Growth & Rate ActionsExposures +10.7% YTD; rate increases Policy count growth across lines; rate actions earning in Policy count +1.3%/+2.5%/+5.4%; avg premium +9.5%/+8.4%/+11.0% Continuing positive
Favorable Prior-Year Development$8.6M Q3 $13.0M Q4 $12.2M Q1 Stable contributor
Investment Income & Portfolio YieldYield 3.4%; duration 3.4 yrs Yield 4.0%; duration 3.5 yrs Yield 3.9%; duration 3.6 yrs Stable/slight uptick in duration
FAIR Plan/Regulatory Adjustments$10.1M favorable development tied to FAIR Plan Restructuring recognition continued Not highlightedOne-off/normalized

Management Commentary

  • CEO George Murphy: “Safety’s first quarter combined ratio in 2025 improved to 99.4% compared to 101.9% in the first quarter of 2024… Positive trends in other revenue lines resulted in strong earnings per share of $1.48 per share and a $22.2 million increase in total shareholders’ equity.”
  • Strategic message: Growth in direct written premiums is earning into top-line results; underwriting improvement driven by private passenger auto loss ratio moderation.
  • Portfolio positioning: Net effective annualized yield of 3.9% and fixed maturity duration of 3.6 years reflect a conservative, short-to-intermediate duration stance amid rate/inflation dynamics.

Q&A Highlights

No Q1 2025 earnings call Q&A was available; the only transcript located was the Annual Meeting proceedings (procedural content).

Estimates Context

MetricActual Q1 2025Consensus Q1 2025 (S&P Global)# of Estimates
Diluted EPS ($)$1.48 Unavailable*Unavailable*
Total Revenue ($USD Millions)$301.429 Unavailable*Unavailable*

*Values retrieved from S&P Global. Consensus estimates were not available for SAFT Q1 2025 via S&P Global at the time of this recap.

Implication: With limited/no sell-side consensus, price discovery likely hinges on reported underwriting trends (combined ratio, loss ratio) and capital signals (dividends, rating actions).

Key Takeaways for Investors

  • Underwriting turning the corner: combined ratio below 100% is a meaningful milestone; watch sustainability as earned premiums from prior growth continue to roll in.
  • Growth remains robust: written and earned premium growth supported by both policy count and pricing; this should continue to benefit loss and expense ratios as rate actions earn through.
  • Quality-of-earnings lens: prior-year favorable development ($12.2M) contributed again; monitor the magnitude vs. core accident-year performance each quarter.
  • Investment income is a mild headwind: yield compression to 3.9% constrains the non-underwriting earnings lever; duration creeping to 3.6 years adds modest interest-rate sensitivity.
  • Capital and ratings: the June AM Best downgrade (post-quarter) introduces sentiment risk and may influence capital strategy; assess surplus trajectory vs. premium growth.
  • Dividend stability: $0.90 per share maintained, supporting total return while underwriting stabilizes; payout sustainability linked to combined ratio and reserve development trends.
  • Near-term trading: positive bias on sub‑100% combined ratio and EPS recovery; medium-term thesis depends on continued PPA loss moderation, disciplined pricing, and maintaining strong BCAR within AM Best’s “strong” range.