Safety Insurance Net Income Steady for Q2 Under New Mass. Auto System

August 5, 2008

Massachusetts personal lines insurer Safety Insurance Group, Inc.’s second quarter results show the insurer remains profitable under the new managed competition pricing system for private passenger auto even though premiums have declined.

Net income for the second quarter was $20.9 million compared to $22.9 million for the comparable 2007 period. Net income for the six months ended June 30, 2008 was $40.0 million compared to $47.6 million for the comparable 2007 period.

Direct written premiums for the second quarter decreased by $6.7 million, or 4.3%, to $151.8 million from $158.5 million for the comparable 2007 period. Direct written premiums for the six months ended June 30, 2008 decreased by $19.9 million, or 5.9%, to $320.1 million from $340.0 million for the comparable 2007 period.

The 2008 decrease in written premiums occurred primarily in personal and commercial automobile lines, which experienced decreases of 7.5 percent and 2.1 percent, respectively, in average written premium per exposure. The decrease in personal automobile line was largely as a result of a Massachusetts-mandated private passenger rate decrease of 11.7 percent effective April 1, 2007, and a further rate decrease of 6.5 percent effective in 2008 which the company filed under the competitive pricing system recently introduced to the private passenger automobile market in Massachusetts.

Net written premiums for the second quarter decreased by $8.3 million, or 5.3%, to $148.3 million. Net written premiums for the six months ended June 30, 2008 decreased by $18.0 million, or 5.4%, to $312.5 million. The company said that these decreases were due to the factors that decreased direct written premiums combined with decreases in premiums assumed from Commonwealth Automobile Reinsurers, and partially offset by decreases in premiums ceded to CAR.

Net investment income for the second quarter was $11.2 million compared to $10.8 million for the comparable 2007 period. Net investment income for the six months ended June 30, 2008 was $22.7 million compared to $21.8 million for the comparable 2007 period.

Loss, expense and combined ratios for the quarter were 62.0 percent, 30.3 percent and 92.3 percent compared to 60.3 percent, 27.9 percent and 88.2 percent for the comparable 2007 period. Six-month loss, expense and combined ratios calculated were 62.8 percent, 29.9 percent and 92.7 percent compared to 60.3 percent, 27.2 percent and 87.5 percent for the comparable 2007 period. The loss ratio increased primarily as a result of a decrease in personal automobile earned premiums per exposure.

The insurer has voted a $0.40 per share dividend for investors.

Safety Insurance Group, Inc. is the parent of Safety Insurance Co., Safety Indemnity Insurance Co., and Safety Property and Casualty Insurance Co. which are Boston-based writers of property and casualty insurance.

Source: Safety
www.safetyinsurance.com