S
A
F
E
T
Y
I
N
S
U
R
A
N
C
E
A
U
T
O
•
H
O
M
E
•
B
U
S
I
N
E
S
S
2
0
2
3
A
N
N
U
A
L
R
E
P
O
R
T
A
N
D
F
O
R
M
1
0
-
K
A U T O
H O M E
B U S I N E S S
2023
ANNUAL
REPORT
TO
OUR
SHAREHOLDERS
We help you
manage life’s
storms
Safety Insurance was founded in 1979 with a belief that we would
succeed as a company if customers were given the best possible service.
As we’ve grown and expanded our product line to include a full portfolio of
property and casualty insurance products, staying committed to that belief
has meant even more. At Safety, we do everything possible to make it easy
for our agents and policyholders to do business with us.
Today, Safety is the third largest private passenger automobile
carrier, the second largest commercial automobile carrier, and the
fourth largest homeowners carrier in Massachusetts. We support
our network of independent agents with state-of-the-art tools
that make the ease and convenience of doing business with Safety
second to none.
Together with our agents, Safety
Insurance remains a premier provider
of property and casualty insurance
in Massachusetts, New Hampshire,
and Maine. We’ll continue this tradition
into the future.
The key to our success: SERVICE.The key to our customers’ success: SAFETY. Dear Fellow Stockholders:
In 2023, Safety Insurance Group posted 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. The hardest insurance market in decades,
brought opportunities for us to grow our rounded account strategy with our key independent agency partners.
While in prior years, our moderate growth was mainly driven by rate, these important relationships, and our strong
financial position, allowed us to be a carrier of choice, and grow all major lines of business, setting Safety Insurance
up for continued future success.
The increases to direct written premiums and net written premiums were focused in our key areas of business,
including 14.7%, 5.4% and 11.2% in Private Passenger Automobile, Commercial Automobile and Homeowners lines,
respectively, compared to the same period in 2022. Average written premium per exposure increased 10.8%, 3.8%
and 4.5% in Private Passenger Automobile, Commercial Automobile and Homeowners lines, respectively,
compared to the same period in 2022.
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.
For the year ended December 31, 2023, Safety Insurance posted a 107.7% combined ratio, impacted
by these inflationary trends and several weather events, including a $30.0 million Winter Freeze and a
$12.0 million wind event. Our non-GAAP operating earnings per diluted share, which exclude the impact
of changes in unrealized gains/losses on equity investments, realized gains/losses on investments,
and other-than-temporary impairments, was $0.84.
The long-term commitment to strong underwriting results and enhanced investment returns remains
unchanged. As always, we focus on pricing our products appropriately for the risks we are insuring
while generating the capital to grow our business. We continue to work with our agency partners toward
our goal of maintaining underwriting discipline, while leveraging investments in our pricing and risk
management areas to ensure rate adequacy. Safety continues to file for rate increases across all major
lines and is seeing these rate increases begin to impact earned premiums.
Our investment objective focuses on maximizing total returns while investing conservatively. Net effective
annual yield on our investment portfolio was 4.0% for the year ended December 31, 2023 compared
to 3.2% in the prior year. Overall, we saw a $9.7 million, or 20.7% increase in our Net Investment Income.
Our duration on fixed maturities was 3.6 years at December 31, 2023. We additionally generated
$5.5 million on our partnership investments and $1.3 million in realized gains in 2023. We believe that
Cash Dividends Paid Per Common Share
(Dollars)
Total Revenues
(Dollars in Millions)
(Excluding Changes in Unrealized Gains on Equity Investments)
Total Direct Written Premiums
$3.40
$3.60
$3.60
$3.60
$3.60
$856.30
$835.70
$868.80
$842.00
$923.40
852,404
798,712
802,139
823,318
our current portfolio position and strong underlying operating cash
flow provides sufficient liquidity to meet our needs.
Our long-standing strategy remains consistent as we look to maintain
991,224
and develop strong independent agent relationships. In contrast to
some of our competitors, Safety distributes its products exclusively
through our extensive network of agents throughout Massachusetts,
New Hampshire, and Maine. We support them with a full suite
of insurance products and information technology services, which
enables them to better serve their customers and more easily
2019
2020
2021
2022
2023
2019
2020
2021
2022
2023
2019
2020
2021
2022
2023
transact business with us.
Safety Insurance 2023 Annual Report 1
Total Exposures
Total Assets
(Dollars in Billions)
697,157
675,377
653,584
648,497
728,379
$2.02
$2.05
$2.12
$1.97
$2.09
2019
2020
2021
2022
2023
2019
2020
2021
2022
2023
George M. MurphyPresident and Chief Executive Officer Safety is proud of our history as an independent agency company and remains committed to the agency channel. In
December 2022, Safety acquired, through a wholly-owned subsidiary, the assets and operations of Northeast Insurance
Agency, Inc. In our first full year of ownership of the agency, we saw revenue of $6.9 million and profits that exceeded our
budgeted expectations. In addition to the financial impact of the agency, we have been able to leverage the benefits and
offerings of the operation into our own internal Service Center.
We continue to invest in technology enhancements for our core systems that are aimed at providing our independent
agents and consumers with useful tools to enhance the user experience. During 2023, the Innovation Lab and business
units introduced a no-code, low-code product into our technology toolset which was used to develop an underwriting
workbench. Additional technological upgrades over the past year included a centralized Customer System of Record,
The long-term
commitment to strong
underwriting results
and enhanced
investment returns
remains unchanged.
Cash Dividends Paid Per Common Share
(Dollars)
$3.40
$3.60
$3.60
$3.60
electronic claim payments functionality and additional enhancements to
internal underwriting workflows.
Our strategy of providing agents with value and unparalleled service has
enabled Safety to establish strong relationships with agency partners
and to capture a larger share of the total business written by each agent.
We position ourselves as the preferred insurance carrier for those agents
and are ranked first or second in over 70% of their agencies based on
direct written premium. We have translated our competitive advantage and
extensive knowledge of the market to become the second largest commercial
automobile carrier, the third largest private passenger automobile carrier
and the fourth largest homeowners carrier in Massachusetts.
Our insurance subsidiaries ‘‘A’’ (Excellent) rating was reaffirmed by A.M. Best on
Total Revenues
(Excluding Changes in Unrealized Gains on Equity Investments)
(Dollars in Millions)
June 15, 2023. In reaffirming the rating, A.M. Best recognized our solid risk-
$3.60
adjusted capitalization, historically strong operating income, favorable loss reserve
$923.40
$856.30
$835.70
$868.80
$842.00
development, and market position as a leading property and casualty insurance
writer in the New England region. A.M. Best also noted our low investment leverage and disciplined underwriting approach as
important strengths.
We were also named to the 2023 Ward’s 50 group of top performing property and casualty insurance companies. Ward
2019
2020
2021
2022
2023
2019
2020
2021
2022
2023
Total Direct Written Premiums
852,404
798,712
802,139
823,318
991,224
2019
2020
2021
2022
2023
Group analyzed the financial performance of nearly 3,000 property-casualty insurance companies based in the United
States and identified the top performances based on objective data and subjective quality measures. Each company must
pass primary safety and consistency tests and are measured and scored along five-year average returns on equity, assets,
total revenue, growth in revenue, growth in surplus, and combined ratio.
Safety’s book value per share decreased slightly to $54.37 at December 31, 2023 from $54.88 at December 31, 2022
resulting from net income offset by capital stock activities, specifically share repurchases and dividends paid. Safety
paid $3.60 per share in dividends to investors during the year ended December 31, 2023 and 2022, respectively. Our
Total Exposures
Cash Dividends Paid Per Common Share
(Dollars)
Total Assets
(Dollars in Billions)
Total Revenues
(Excluding Changes in Unrealized Gains on Equity Investments)
(Dollars in Millions)
Total Direct Written Premiums
697,157
$3.40
$3.60
675,377
$3.60
653,584
$3.60
648,497
728,379
$3.60
$2.02
$856.30
$2.05
$835.70
$2.12
$868.80
$842.00
$1.97
$923.40
$2.09
852,404
798,712
802,139
823,318
991,224
2019
2019
2020
2020
2021
2021
2022
2022
2023
2023
2019
2019
2020
2020
2021
2021
2022
2022
2023
2023
2019
2020
2021
2022
2023
2 Safety Insurance 2023 Annual Report
Total Exposures
Total Assets
(Dollars in Billions)
697,157
675,377
653,584
648,497
728,379
$2.02
$2.05
$2.12
$1.97
$2.09
2019
2020
2021
2022
2023
2019
2020
2021
2022
2023
dividend yield ranks in the top three of our Performance Peer Group and remains a priority of the Board of
Directors and management team.
We believe that Safety Insurance has a responsibility to both its stakeholders and the environment in which it
operates, and that the effective management of ESG issues will help drive the continued success of the business.
To that end, Safety Insurance is committed to developing environmentally and socially-conscious solutions for
our employees, our community, our investors and our independent agency partners and policyholders.
For the environment, we efficiently operate our physical footprint in the heart of Boston, Massachusetts. We are
committed to investigating additional ways to measure and reduce our overall carbon footprint in line with industry
practices. Most importantly, ESG risk management is incorporated into
our formal Enterprise Risk Management Program. Through this program,
our senior leadership team oversees the management and risk mitigation
process and works with the Board of Directors to evolve our ESG strategy
and monitor ESG initiatives.
Our employees give both their time and their financial resources to charities
of all types, and the company promotes corporate citizenship through
charitable donations and company-sponsored volunteer activities. Safety
is committed to making a positive impact on the communities where our
employees live and work through our matching gift program, corporate giving
and employee volunteerism. The Safety Insurance Charitable Foundation
Our long-standing
strategy remains
consistent as we look to
maintain and develop
strong independent
agent relationships.
Cash Dividends Paid Per Common Share
financially supports a wide array of charities in areas such as community
(Dollars)
service, veterans benefits, education, job training, homelessness, arts/culture,
Total Revenues
(Dollars in Millions)
(Excluding Changes in Unrealized Gains on Equity Investments)
Total Direct Written Premiums
food banks, youth programs, healthcare, medical research and disaster relief.
$3.40
With the support of an experienced, knowledgeable and dedicated senior
management team, we continue to achieve operational and financial success.
$3.60
$3.60
$3.60
$3.60
$856.30
$835.70
$868.80
$842.00
$923.40
852,404
798,712
802,139
823,318
991,224
The ongoing commitment of our employees, allows us to continually provide the best service possible to our
independent agent partners and policyholders. This has resulted in a history of strong returns and enduring value
for our stockholders. We appreciate your long-term participation as a stockholder of Safety Insurance Group.
2019
2020
2021
2022
2023
2019
2020
2021
2022
2023
2019
2020
2021
2022
2023
Sincerely,
George M. Murphy
President and Chief Executive Officer
Cash Dividends Paid Per Common Share
(Dollars)
Total Revenues
(Excluding Changes in Unrealized Gains on Equity Investments)
(Dollars in Millions)
Total Exposures
Total Direct Written Premiums
Total Assets
(Dollars in Billions)
$3.40
$3.60
$3.60
$3.60
$3.60
$856.30
$835.70
$868.80
$842.00
$923.40
852,404
697,157
798,712
675,377
802,139
653,584
823,318
728,379
648,497
991,224
$2.02
$2.05
$2.12
$1.97
$2.09
2019
2020
2021
2022
2023
2019
2020
2021
2022
2023
2019
2019
2020
2020
2021
2021
2022
2022
2023
2023
2019
2020
2021
2022
2023
Safety Insurance 2023 Annual Report 3
Total Exposures
Total Assets
(Dollars in Billions)
697,157
675,377
653,584
648,497
728,379
$2.02
$2.05
$2.12
$1.97
$2.09
2019
2020
2021
2022
2023
2019
2020
2021
2022
2023
AUTO
Private passenger
automobile insurance
is our primary product
representing 54.7%
of our direct written
premiums. We also
offer insurance for
commercial vehicles used
for business purposes,
insuring individual
vehicles as well as
commercial fleets, which
represented 15.9% of our
direct written premium
in 2023. We are the third
largest private passenger
automobile carrier
and the second largest
commercial automobile
carrier in Massachusetts,
capturing approximately
8.7% and 12.7% of the
respective markets.
Net Written Premiums
(Dollars in Thousands)
Net Written Premiums
(Dollars in Thousands)
$566,050
$534,245
$534,722
$535,586
$661,283
$190,629
$192,026
$191,876
$199,436
$221,992
2019
2020
2021
2022
2023
2019
2020
2021
2022
2023
4 Safety Insurance 2023 Annual Report
Net Written Premiums
(Dollars in Thousands)
$37,728
$37,266
$37,928
$38,713
$42,021
2019
2020
2021
2022
2023
HOME
We write policies on
homes, condominiums,
and apartments and
offer a broad selection
of coverage forms for
qualified policyholders.
We are the fourth
largest homeowner
carrier in Massachusetts,
representing 24.5%
of our total direct
written premium.
Net Written Premiums
(Dollars in Thousands)
Net Written Premiums
(Dollars in Thousands)
$566,050
$534,245
$534,722
$535,586
$661,283
$190,629
$192,026
$191,876
$199,436
$221,992
2019
2020
2021
2022
2023
2019
2020
2021
2022
2023
Net Written Premiums
(Dollars in Thousands)
$37,728
$37,266
$37,928
$38,713
$42,021
2019
2020
2021
2022
2023
Safety Insurance 2023 Annual Report 5
BUSINESS
OWNER
PRODUCTS
We serve eligible small-
and medium-sized
commercial accounts
with a program that
covers apartments
and residential
condominiums; mercantile
establishments, including
restaurants; offices;
processing and services
businesses; special
trade contractors; and
wholesaling businesses.
Commercial property
products make up
4.9% of our total direct
Net Written Premiums
(Dollars in Thousands)
Net Written Premiums
(Dollars in Thousands)
written premium.
$566,050
$534,245
$534,722
$535,586
$661,283
$190,629
$192,026
$191,876
$199,436
$221,992
2019
2020
2021
2022
2023
2019
2020
2021
2022
2023
Net Written Premiums
(Dollars in Thousands)
$37,728
$37,266
$37,928
$38,713
$42,021
2019
2020
2021
2022
2023
6 Safety Insurance 2023 Annual Report
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-K
☒
☐
ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
ACT OF 1934
For the fiscal year ended December 31, 2023
Or
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the transition period from to
Commission file number 000-50070
SAFETY INSURANCE GROUP, INC.
(Exact name of registrant as specified in its charter)
Delaware
(State or other jurisdiction of incorporation or organization)
13-4181699
(I.R.S. Employer Identification No.)
20 Custom House Street, Boston, Massachusetts 02110
(Address of principal executive offices including zip code)
(617) 951-0600
(Registrant’s telephone number, including area code)
Securities registered pursuant to Section 12(b) of the Act:
Title of each class
Common Shares, $0.01 par value per share
Trading Symbol
SAFT
Securities registered pursuant to Section 12(g) of the Act: None
Name of each exchange on which registered
The Nasdaq Stock Market, LLC
Indicate by check mark whether the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act. Yes ☒ No ☐
Indicate by check mark whether the registrant is not required to file reports pursuant to Section 13 of Section 15(d) of the Act. Yes ☐ No ☒
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days. Yes ☒ No ☐
Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405
of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such
files). Yes ☒ No ☐
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company,
or an emerging growth company. See definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth
company” in Rule 12b-2 of the Exchange Act. (Check one):
Large accelerated filer ☒
Non-accelerated filer ☐
Accelerated filer ☐
Smaller reporting company ☐
Emerging growth company ☐
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with
any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐
Indicate by check mark whether the registrant has filed a report on and attestation to its management’s assessment of the effectiveness of its internal
control over financial reporting under Section 404(b) of the Sarbanes-Oxley Act (15 U.S.C. 7262(b)) by the registered public accounting firm that
prepared or issued its audit report. ☒
If securities are registered pursuant to Section 12(b) of the Act, indicate by check mark whether the financial statements of the registrant included in
the filing reflect the correction of an error to previously issued financial statements. ☐
Indicate by check mark whether any of those error corrections are restatements that required a recovery analysis of incentive-based compensation
received by any of the registrant’s executive officers during the relevant recovery period pursuant to §240.10D-1(b). ☐
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Act). Yes ☐ No ☒
The aggregate market value of the registrant’s voting and non-voting common equity (based on the closing sales price on NASDAQ) held by
non-affiliates of the registrant as of June 30, 2023, was approximately $1,039,516,422.
As of February 20, 2024 there were 14,791,812 Common Shares with a par value of $0.01 per share outstanding.
Documents Incorporated by Reference
Portions of the registrant’s definitive proxy statement for its Annual Meeting of Shareholders, which Safety Insurance Group, Inc. (“Safety”, the
“Company”, “we”, “our”, “us”) intends to file within 120 days after its December 31, 2023 year-end, are incorporated by reference into Part II and Part III
hereof.
SAFETY INSURANCE GROUP, INC.
Table of Contents
Business
Risk Factors
Unresolved Staff Comments
Cybersecurity
Properties
Legal Proceedings
Mine Safety Disclosures
Market for Registrant's Common Equity, Related Stockholder Matters and Issuer
Purchases of Equity Securities
[Reserved]
Management's Discussion and Analysis of Financial Condition and Results of Operations
Quantitative and Qualitative Disclosures About Market Risk
Financial Statements and Supplementary Data
Changes in and Disagreements With Accountants on Accounting and Financial Disclosure
Controls and Procedures
Other Information
Disclosure Regarding Foreign Jurisdictions that Prevent Inspections
Directors, Executive Officers and Corporate Governance
Executive Compensation
Security Ownership of Certain Beneficial Owners and Management and Related
Stockholder Matters
Certain Relationships and Related Transactions, and Director Independence
Principal Accounting Fees and Services
Exhibits, Financial Statement Schedules
Form 10-K Summary
PART I.
Item 1.
Item 1A.
Item 1B.
Item 1C.
Item 2.
Item 3.
Item 4.
PART II.
Item 5.
Item 6.
Item 7.
Item 7A.
Item 8.
Item 9.
Item 9A.
Item 9B.
Item 9C.
PART III.
Item 10.
Item 11.
Item 12.
Item 13.
Item 14.
PART IV.
Item 15.
Item 16
SIGNATURES
Page
1
25
33
33
35
35
35
36
39
39
58
59
98
98
99
99
100
100
100
100
100
100
112
113
In this Form 10-K, all dollar amounts are presented in thousands, except average premium, average claim and
per claim data, share, and per share data.
ITEM 1. BUSINESS
PART I.
General
We are a leading provider of private passenger automobile, commercial automobile, and homeowners insurance
in Massachusetts. In addition to these coverages, we offer a portfolio of other insurance products, including dwelling
fire, umbrella and business owner policies. Operating exclusively in Massachusetts, New Hampshire and Maine through
our insurance company subsidiaries, Safety Insurance Company ("Safety Insurance"), Safety Indemnity Insurance
Company ("Safety Indemnity"), Safety Property and Casualty Insurance Company ("Safety P&C"), and Safety Northeast
Insurance Company (“Safety Northeast”) (together referred to as the "Insurance Subsidiaries"), we have established
strong relationships with independent insurance agents, who numbered 834 in 1,090 locations throughout these three
states during 2023. We have used these relationships and, in particular, our extensive knowledge of the Massachusetts
market to become the third largest private passenger automobile carrier and the second largest commercial automobile
carrier in Massachusetts, capturing an approximate 8.7% and 12.7% share, respectively, of the Massachusetts private
passenger and commercial automobile markets in 2023 according to statistics compiled by Commonwealth Automobile
Reinsurers ("CAR"). We also are the fourth largest homeowners insurance carrier in Massachusetts with a 6.2% share of
that market in 2022. We were ranked the 50th largest automobile writer in the country according to S&P Global Market
Intelligence, based on 2022 direct written premiums. We were incorporated under the laws of Delaware in 2001, but
through our predecessors, we have underwritten insurance in Massachusetts since 1979.
Our Insurance Subsidiaries began writing insurance in New Hampshire during 2008 and Maine in 2016. The
table below shows the amount of direct written premiums written in each state during the year ended December 31,
2023, 2022, and 2021.
Direct Written Premiums
2023
2022
2021
Years Ended December 31,
Massachusetts
New Hampshire
Maine
Total
Website Access to Information
$
$
941,721
42,762
6,741
991,224
$
$
782,790
36,519
4,009
823,318
$
$
765,007
34,261
2,871
802,139
The Internet address for our website is www.SafetyInsurance.com. All of our press releases and United States
Securities and Exchange Commission ("SEC") reports are available for viewing or download at our website. These
documents are made available as soon as reasonably practicable after each press release is made and SEC report is filed
with, or furnished to, the SEC. Copies of any current public information about our Company is available without charge
upon written, telephone, faxed or e-mailed request to the Office of Investor Relations, Safety Insurance Group, Inc., 20
Custom House Street, Boston, MA 02110, Tel: 877-951-2522, Fax: 617-603-4837, or e-mail:
InvestorRelations@SafetyInsurance.com. The materials on our website are not part of this report on Form 10-K nor are
they incorporated by reference into this report and the URL above is intended to be an inactive textual reference only.
The SEC maintains a website at www.sec.gov that contains reports, proxy and information statements and other
information regarding issuers that file electronically with the SEC.
1
Our Competitive Strengths
We Have Strong Relationships with Independent Agents. In 2023, independent agents accounted for
approximately 64.8% of the Massachusetts personal lines insurance market measured by direct written premiums as
compared to approximately 38.0% nationwide, based on data made available by Independent Insurance Agents and
Brokers of America, Inc. and CAR. For that reason, our strategy is centered around, and we sell exclusively through, a
network of independent agents. In order to support our independent agents and enhance our relationships with them, we:
provide our agents with a portfolio of property and casualty insurance products at competitive prices to
help them effectively address the insurance needs of their clients;
provide our agents with a variety of technological resources which enable us to deliver superior service and
support to them; and
offer our agents competitive commission schedules and profit sharing programs.
Through these measures, we strive to become the preferred provider of the independent agents in our agency
network and capture a growing share of the total insurance business written by these agents in Massachusetts, New
Hampshire and Maine. We must compete with other insurance carriers for the business of independent agents.
We Have a History of Profitable Operations. In 42 out of 43 years since our inception in 1979, we have been
profitable. We have achieved our profitability, among other things, by:
operating as the third largest private passenger auto premium insurance carrier, the second largest
commercial auto insurance carrier, and third largest homeowner insurance carrier in Massachusetts.
maintaining a combined ratio that is typically below industry averages (refer to Insurance Ratios under
Item 7—Management's Discussion and Analysis of Financial Condition and Results of Operations for a
discussion on insurance ratios);
taking advantage of the institutional knowledge our management has amassed during its long tenure in the
industry;
introducing new lines and forms of insurance products;
investing in technology to provide our agents with state-of-the-art tools that make the ease and convenience
of doing business with us second to none; and
maintaining a high-quality investment portfolio.
We Continue to Develop and Deploy Advanced Technology and Services for Our Business. We have dedicated
significant human and financial resources to the development and deployments of advanced information systems and
technologies, customer and agent facing websites, mobile applications, and customer engagement tools including online
chat and text. Over the last several years we have modernized all of our core systems along with many of our surround
systems and technology platforms in an effort to increase efficiencies within the organization and provide a better user
experience for our employees, agents, and customers. These modern systems and platforms position us to continue to
take advantage of the latest in InsureTech offerings, Software as a Service (SaaS) products and cloud-based technologies
to improve the customer experience, engage with customers on their terms, and assist with customer retention all while
improving operational efficiencies and reducing operational costs. We also continue to expand our usage of Robotics
Process Automation throughout the organization to automate manual processes, streamline the software testing process
and perform application performing testing to insure a robust technical environment.
We Have an Experienced, Committed and Knowledgeable Management Team. Our senior management team
has an average of over 30 years of experience with Safety and a demonstrated ability to operate successfully within the
property and casualty market.
2
Our Strategy
To achieve our goal of increasing shareholder value, our strategy is to maintain and develop strong independent
agent relationships by providing our agents with a full package of insurance products and information technology
services. We believe this strategy will allow us to:
further penetrate the Massachusetts, New Hampshire and Maine markets in all lines of business;
implement rates, forms and billing options that allow us to cross-sell private passenger automobile,
homeowners, dwelling fire, and personal umbrella policies in the personal lines market and commercial
automobile, business owner policies, commercial property package and commercial umbrella policies in
the commercial lines market in order to capture a larger share of the total Massachusetts, New Hampshire
and Maine property and casualty insurance business written by each of our independent agents; and
continue to expand our technology to enable independent agents to more easily serve their customers and
conduct business with us, thereby strengthening their relationships with us.
Property and Casualty Insurance Market
Introduction. We are licensed by the respective state insurance departments to transact property and casualty
insurance in Massachusetts, New Hampshire, and Maine. All of our business is regulated by these departments, with the
most extensive oversight from our domestic regulator, the Massachusetts Division of Insurance (“Division”).
Products
We provide our insureds with an extensive offering of coverage options in private passenger automobile,
homeowners, commercial automobile, business owner and personal and commercial umbrella insurance lines. Private
passenger automobile coverage is written by Safety Insurance. Homeowners, business owner, personal umbrella,
dwelling fire and commercial umbrella coverages are written by Safety Insurance at standard rates, and written by Safety
Indemnity at preferred rates. Safety P&C offers a high value homeowners product and competitive commercial
automobile coverage. Safety Northeast writes homeowners insurance products in Massachusetts, offering a basic
coverage package at ultra preferred rates.
The table below shows our premiums in each of these product lines for the periods indicated and the portions of
our total premiums each product line represented.
Direct Written Premiums
Private passenger automobile
Commercial automobile
Homeowners
Business owners
Personal umbrella
Dwelling fire
Commercial umbrella
Total
2023
543,167
157,101
242,346
26,583
9,385
11,305
1,337
991,224
$
$
Years Ended December 31,
2022
54.7 % $
15.9
24.5
2.7
1.0
1.1
0.1
100.0 % $
427,665
143,571
208,577
24,200
8,441
9,667
1,197
823,318
52.0 %
17.4
25.3
2.9
1.0
1.2
0.2
100.0 %
$
$
2021
429,819
129,832
199,886
23,334
8,417
9,698
1,153
802,139
53.6 %
16.2
24.9
2.9
1.1
1.2
0.1
100.0 %
3
Our product lines are as follows:
Private Passenger Automobile (54.7% of 2023 direct written premiums). Private passenger automobile
insurance is our primary product. These policies provide coverage for bodily injury and property damage to others, no-
fault personal injury coverage for the insured/insured's car occupants, and physical damage coverage for an insured's
own vehicle for collision or other perils.
Commercial Automobile (15.9% of 2023 direct written premiums). Commercial automobile policies provide
coverage for bodily injury and property damage to others, no-fault personal injury coverage, and physical damage
coverage for an insured's own vehicle for collision or other perils resulting from the ownership or use of commercial
vehicles in a business. We offer insurance for commercial vehicles used for business purposes such as private
passenger-type vehicles, trucks, tractors and trailers (excluding long-haul trucking), and insure individual vehicles as
well as commercial fleets.
Homeowners (24.5% of 2023 direct written premiums). We offer a broad selection of coverage forms for
qualified policyholders. Homeowners policies provide coverage for losses to a dwelling and its contents from numerous
perils, and coverage for liability to others arising from ownership or occupancy. We write policies on homes,
condominiums, and apartments.
Business Owner Policies (2.7% of 2023 direct written premiums). We serve eligible small and medium sized
commercial accounts with a program that covers apartments and residential condominiums; mercantile establishments,
including restaurants; offices, including office condominiums; processing and services businesses; special trade
contractors; and wholesaling businesses. Business owner policies provide liability and property coverage for many
perils, including business interruption from a covered loss. Equipment breakdown coverage is automatically included,
and a wide range of additional coverage is available to qualified customers. We write policies for business owners at
standard rates with qualifying risks eligible for preferred lower rates.
Personal Umbrella (1.0% of 2023 direct written premiums). We offer personal excess liability coverage over
and above the limits of individual automobile, watercraft, and homeowner's insurance policies to clients. We write
policies at standard rates with limits of $1,000 to $5,000.
Dwelling Fire (1.1% of 2023 direct written premiums). We underwrite dwelling fire insurance, which is a
limited form of a homeowner's policy for non-owner occupied residences. We write all forms of dwelling fire coverage
at standard rates.
Commercial Umbrella (0.1% of 2023 direct written premiums). We offer an excess liability product to clients
for whom we underwrite both commercial automobile and business owner policies. The program is directed at
commercial automobile risks with private passenger-type automobiles or light and medium trucks. We write commercial
umbrella policies at standard rates with limits ranging from $1,000 to $5,000.
Inland Marine (included in our Homeowners direct written premiums). We offer inland marine coverage as an
endorsement for all homeowners and business owner policies. Inland marine provides additional coverage for jewelry,
fine arts and other items that a homeowners or business owner policy would limit or not cover. Scheduled items valued
at more than $5 must meet our underwriting guidelines and be appraised.
Watercraft (included in our Homeowners direct written premiums). We offer watercraft coverage for small and
medium sized pleasure craft with maximum lengths of 32 feet, valued at less than $75 and maximum speed of 39 knots.
We write this coverage as an endorsement to our homeowner's policies.
The insurance industry can also be impacted by terrorism, and we have filed and received approval for a
number of terrorism endorsements, which limit our liability and property exposure according to the Terrorism Risk
Insurance Act of 2002, the Terrorism Risk Insurance Extension Act of 2005, the Terrorism Risk Insurance Program
4
Reauthorization Act of 2007, the Terrorism Risk Insurance Program Reauthorization of 2015 and the Terrorism Risk
Insurance Program Reauthorization Act of 2019. See "Reinsurance," discussed below.
Distribution
We distribute our products exclusively through independent agents, unlike some of our competitors who use
multiple distribution channels. We believe this gives us a competitive advantage with the agents. With the exception of
personal automobile business assigned to us by the Massachusetts Automobile Insurance Plan (“MAIP”) or written
through CAR’s commercial automobile Servicing Carrier program, we do not accept business from insurance brokers.
Our voluntary agents have authority pursuant to our voluntary agency agreement to bind our Insurance Subsidiaries for
any coverage that is within the scope of their authority. We reserve the ability to cancel any coverage bound, in
accordance with applicable law. In total, our independent agents numbered 834 and had 1,090 offices (some agencies
have more than one office) and approximately 11,091 customer service representatives during 2023.
Voluntary Agents. In 2023, we obtained approximately 97.1% of our direct written premiums for automobile
insurance and 100% of our direct written premiums for all of our other lines of business through our voluntary agents.
As of December 31, 2023, we had agreements with 737 voluntary agents. Our voluntary agents are located in all regions
of Massachusetts, New Hampshire and Maine.
We look for agents with profitable portfolios of business. To become a voluntary agent for our Company, we
generally require that an agency: (i) have been in business for at least five years; (ii) have exhibited a three year private
passenger average ratio of losses, excluding loss adjustment expenses, to net earned premiums ("pure loss ratio") of
65.0% or less on the portion of the agent's portfolio that we would underwrite; (iii) make a commitment for us to
underwrite at least 300 policies from the agency during the first twelve months after entering an agreement with us; and
(iv) offer multiple product lines. Every year, we review the prior year performance of our agents. If an agent fails to
meet our profitability standards, we try to work with the agent to improve the profitability of the business it places with
us. We generally terminate contracts each year with a few agencies, which, despite our efforts, have been consistently
unable to meet our standards. Although independent agents usually represent several unrelated insurers, our goal is to be
one of the top two insurance companies represented in each of our agencies, as measured by direct written premiums.
No individual agency generated more than 10.0% of our direct written premiums in 2023.
Massachusetts law guarantees that CAR provides motor vehicle insurance coverage to all eligible risks. Under
the MAIP, personal automobile policies are assigned to us for three years, unless the policyholder is offered a voluntary
policy by another insurer. All Massachusetts agents are authorized to submit eligible business to the MAIP for random
assignment to a carrier such as Safety Insurance. We are allocated all private passenger residual market business through
the MAIP.
CAR runs a reinsurance pool for ceded commercial automobile policies through the Commercial Automobile
Program (the “Commercial Automobile Program”). CAR has appointed Safety and three other servicing carriers to process
ceded commercial automobile insurance. Safety was reappointed for this program on January 1, 2023 for an additional
five-year term. Historically, CAR ran a separate reinsurance pool for Taxi, Limousine and Car Service risks; however,
beginning with the January 1, 2023 policy year, this pool was combined into the Commercial Automobile Program.
Approximately $205,000 of ceded premium is spread equitably among the four servicing carriers. Subject to the review
of the Massachusetts Commissioner of Insurance (“the Commissioner”), CAR sets the premium rates for commercial
automobile policies reinsured through CAR and this reinsurance pool can generate an underwriting result that is a profit
or deficit based upon CAR's rate level. This underwriting result is allocated among every Massachusetts commercial
automobile insurance company, including us, based on a company's commercial automobile voluntary market share.
5
We are assigned independent agents by CAR who can submit commercial business to us in the Commercial
Automobile Program and the Taxi/Limo Program, and we classify those agents as Exclusive Representative Producers
(“ERPs”).
The table below shows our direct written exposures in each of our product lines for the periods indicated and
the change in exposures for each product line.
Line of Business
Private passenger automobile:
Voluntary agents
MAIP
Total private passenger automobile
Commercial automobile:
Voluntary agents
ERPs
Total commercial automobile
Other:
Homeowners
Business owners
Personal umbrella
Dwelling fire
Commercial umbrella
Total other
Total
2023
Years Ended December 31,
2022
2021
Exposures
Change
Exposures
Change
Exposures
Change
445,336
1,388
446,724
69,451
4,229
73,680
170,047
8,557
22,462
6,188
721
207,975
728,379
14.9 %
(35.1)
14.7
4.9
14.3
5.4
11.2
(0.8)
6.5
8.3
9.6
10.1
12.3
387,463
2,140
389,603
66,214
3,700
69,914
152,884
8,624
21,099
5,715
658
188,980
648,497
(0.9)%
1.4
(0.9)
0.6
(1.5)
0.5
(0.7)
(1.7)
(2.0)
(4.8)
(2.1)
(1.0)
(0.8)
390,919
2,110
393,029
65,848
3,755
69,603
153,980
8,770
21,530
6,000
672
190,952
653,584
(4.4)%
(36.0)
(4.6)
3.2
(1.2)
2.9
(2.3)
0.4
(2.7)
(7.0)
3.1
(2.4)
(0.4)
(0.4)
Total voluntary agents
722,762
12.5
642,657
(0.8)
647,719
In 2023, 64.5% of the private passenger automobile exposures we insure had an other than private passenger
policy with us, compared to 65.2% and 65.6% in 2022 and 2021, respectively. In addition, 83.0% of our homeowners’
policyholders had a matching automobile policy with us in 2023 compared to 81.9% in 2022 and 82.6% in 2021.
Marketing
We view the independent agent as our customer and business partner. As a result, a component of our
marketing efforts focuses on developing interdependent relationships with leading Massachusetts, New Hampshire and
Maine agents that write profitable business and positioning ourselves as the preferred insurance carrier of those agents,
thereby receiving a larger portion of each agent's aggregate business. Our principal marketing strategies to agents are:
to offer a range of products, which we believe enables our agents to meet the insurance needs of their
clients;
to price our products competitively, including offering discounts when and where appropriate for safer
drivers for our personal automobile products, loss-free credits for our homeowner products, paperless e-
Customer discounts, and also offering account discounts for policyholders that have more than one policy
with us;
to design, price and market our products to our agents for their customers to place all their insurance with
us;
to offer agents competitive commissions, with incentives for placing their more profitable business with us;
and
to provide a level of support and service that enhances the agent's ability to do business with its clients and
with us.
6
We have a comprehensive branding campaign using a variety of radio, television, digital, social and print
advertisements.
Commission Schedule and Profit Sharing Plan. We have several programs designed to attract profitable new
business from agents by paying them competitive commissions. We recognize our top performing agents by making
them members of either our Chairman's Elite, Chairman's, President's, Executive's or Preferred Agent's Club.
Further, we have a competitive agency incentive commission program under which we pay agents a percentage
of premiums based on the loss ratio on their business.
Service and Support. We believe that the level and quality of service and support we provide helps differentiate
us from other insurers. We have made a significant investment in information technology designed to facilitate our
agents' business. Our Agents Virtual Community website helps agents manage their work efficiently. We provide a
substantial amount of information online that agents need to serve their customers, such as information about the status
of policies, billing and claims. We are also committed to providing our agents with new information through our
Resource Center articles on SafetyInsurance.com to keep their customers informed on how to best protect their auto,
home and business. Providing this type of content reduces the number of customer calls we receive and empowers the
agent's customer service representatives by enabling them to respond to customers' inquiries while the customer is on the
telephone. Finally, we believe that the knowledge and experience of our employees enhances the quality of support we
provide.
Underwriting and Insurance Operations
Our underwriting department is responsible for a number of key decisions affecting the profitability of our
business, including:
pricing of our private passenger automobile, commercial automobile, homeowners, dwelling fire, personal
umbrella, business owner, and commercial umbrella policies;
developing new products, coverages, forms and discounts, as well as expansion into new states;
determining underwriting guidelines for all our products; and
evaluating whether to accept transfers of a portion of an existing or potential new agent's portfolio from
another insurer.
Pricing. Subject to the applicable state insurance department’s review, we set rates for all of our products using
our own loss experience, industry loss cost data, residual market deficits, catastrophe modeling and prices charged by our
competitors. We have four pricing segments for most products, utilizing Safety Insurance for standard rates, Safety
Indemnity for preferred rates, Safety Northeast for ultra preferred rates and Safety P&C for high value homeowners
rates.
Massachusetts Residual Automobile Insurance Markets. CAR establishes the rates for personal automobile
policies assigned to carriers through the MAIP. In accordance with Massachusetts law, insurers may only charge MAIP
policyholders the lower of the MAIP rate or the company's competitive voluntary market rate. CAR also sets rates for
commercial automobile policies, reinsured through the CAR residual market pool. All commercial automobile business
that is not written in the voluntary market in Massachusetts is apportioned to one of the servicing carriers that handles
business on behalf of CAR. Every Massachusetts commercial automobile insurer must bear a portion of the losses of the
total commercial reinsurance pool that is serviced by the approved servicing carriers. We are one of four servicing
carriers in CAR’s Commercial Automobile Program.
Bulk Policy Transfers and New Voluntary Agents. From time to time, we receive proposals from an existing
voluntary agent to transfer a portfolio of the agent's business from another insurer to us. Our underwriters model the
7
profitability of these portfolios before we accept these transfers. We generally require any new voluntary agent to
commit to transfer a portfolio to us consisting of at least $300 in written premium.
Policy Processing. Our underwriting department assists in processing policy applications, endorsements,
renewals and cancellations. Our proprietary software applications, Safety Express and Safety Commercial Express,
provide our agents with new business and endorsement entry, real-time policy issuance, immediate printing of
declarations pages in agents' offices, policy downloads to most major agency management systems and data imports
from Boston Software's SinglePoint (Massachusetts) and Vertafore's PL Rater (Massachusetts, New Hampshire and
Maine) for personal lines.
Rate Pursuit. We aggressively monitor all insurance transactions to make sure we receive the correct premium
for the risk insured. We accomplish this by verifying pricing criteria. For automobile policies, we verify proper
classification of drivers, the make, model, and age of insured vehicles, and the availability of discounts. We also verify
that operators are properly listed and classified, assignment of operators to vehicles, and vehicle garaging. In our
homeowners and dwelling fire lines, we use third party software to evaluate property characteristics and we conduct
property inspections. We have a premium audit program in our business owner program, as well as other loss control
reviews for additional commercial lines of business.
Product Management. The Product Management department is responsible for the overall review and updating
of our products. The department maintains an annual schedule where each line of business is reviewed and benchmarked
against our major competitors. Product offerings, discounts, rate levels and underwriting guidelines are reviewed and
updates are performed as required. The department is also responsible for updating producer materials such as rate and
rule manuals, underwriting guidelines, and promotional materials. In conjunction with the underwriting operations area,
the department works with third party vendors that assist with risk information, data, and rate pursuit for in-force
policies. The department also provides product training and general marketplace education for the organization.
Legal. The Legal department provides legal and compliance support to all business units within the Company.
The department serves as the primary liaison with regulators, government, and industry trade associations. The
department also provides legal support to all areas of the company, including general corporate matters and vendor
contracting. The department monitors legal and regulatory changes affecting the enterprise and provides guidance on
how to comply with those changes. The department additionally reviews business unit operations to identify and address
compliance vulnerabilities.
Business Intelligence. The Business Intelligence department unit within the Actuarial Services division is
responsible for maintaining and improving the quality of Safety’s data, maintaining Safety’s enterprise data warehouse
environment, and providing a suite of management reports and predictive analytical models to all departments and
management levels at Safety. The Business Intelligence unit’s directive is to turn the daily transactional data in the
warehouse into usable information to help Safety’s management team make more intelligent data-driven business
decisions.
Customer Engagement. The Customer Engagement department provides professional customer service to our
agents and insureds by continuously identifying new ways to enhance the ease of doing business with us and by looking
for new ways to personalize our services for each customer.
The focuses of our information technology (“IT”) efforts are:
Technology
to support the strategic goals, objectives, and business needs of the Company by aligning our IT annual
goals with those of the business, assuring that IT resources are being utilized efficiently;
to constantly re-engineer internal processes to allow more efficient operations, resulting in lower operating
costs;
8
to continuously improve the customer experience, making it easier for independent agents and
policyholders to transact business with us;
to enable agents to efficiently provide their clients with a high level of service; and
to maintain and support a secure computing environment.
We believe that our technology initiatives have increased revenue and decreased costs while at the same time
improving the customer experience for our employees, agents, and policyholders. In 2021, we introduced our Safety
Commercial Express commercial auto quoting and policy issuance system in Massachusetts for new business. During
2022, this system was updated to allow for agent processing of endorsements. We are continuously investing in new
technologies, including areas such as robotic process automation, artificial intelligence, and automated testing to improve
company efficiency.
Cybersecurity. We continuously evolve our cybersecurity strategy to protect Safety's computer assets from a
cybersecurity attack. Safety’s cybersecurity committee monitors the landscape for emerging threats, evaluates the latest
preventative tools and methods, and recommends ways to increase enterprise security. An employee education program
provides ongoing training to Safety's employees, including phishing tests and remediation training.
Innovation Lab. Since 2018, we have had an Innovation Lab to foster a culture of innovative thinking, monitor
the InsureTech landscape, and provide Safety, our independent agents, and policyholders with the tools and processes
necessary to continuously improve the customer experience and remain competitive in both the current and future
insurance marketplace. During 2023, the Innovation Lab did substantial research, performed multiple proofs of
concepts, initiated pilot projects, participated in industry sponsored InsureTech events, and presented fully functional
technologies to the business for their use. During 2023, the Innovation Lab did significant research on Generative AI,
and during the third quarter, a proof of concept on Large Language Models and Generative AI was initiated, with results
expected during 2024. In 2023, the Innovation Lab partnered with Safety’s Personal Underwriting department to build
out a no code low code underwriting workbench. A proof of concept was conducted with our Service Center to explore
the development of a Customer System of Record application. The proof of concept was successful, and a production-
ready version of the system was implemented in the fourth quarter of 2023. The Innovation Lab also partnered with the
Claims Department and Insurance Operations Department to select a two-way texting system, which we will look to
implement in 2024.
Internal Applications
Our employees access our proprietary and vendor supplied applications through our secure corporate intranet.
Our intranet applications streamline internal processes and improve overall operational efficiencies and customer
experience in areas including:
Claims. A vendor supplied claims system provides the claims department with a workload management
application that allows our claims and subrogation adjusters to better manage the claims process. Subrogation refers to
the process by which we are reimbursed by other insurers for claims costs we incur due to the fault of their insureds. The
use of this application has reduced the time it takes for us to respond to and settle claims, which we believe helps reduce
the total amount of our claims expense while also providing a better customer experience for the policyholder and
claimant.
The automated adjuster assignment system categorizes our new claims by severity and assigns them to the
appropriate adjuster responsible for investigation. Once assigned, the integrated workload management tools facilitate
the work of promptly assigning appraisers, investigating liability, issuing payments, and receiving subrogation receipts.
Billing. A vendor supplied billing systems, integrated with the systems of our print and lock-box vendors,
expedite the processing and collection of premium receipts and finance charges from agents and policyholders. This
billing system also allows for policyholder automatic payments (AutoPay) as well as electronic bill (eBill). We believe
9
the sophistication of our direct bill system helps us to limit our bad debt expense. Our bad debt expense as a percentage
of direct written premiums was 0.2% and 0.1% in 2023 and 2022, respectively.
External Applications
Our agent technology offerings are centralized within our agency portal and feature PowerDesk, Safety Express
and Safety Commercial Express. PowerDesk is a web-based application that allows for billing inquiry, agent payments
on behalf of their policyholders, policy inquiry and claims inquiry. Safety Express and Safety Commercial Express
provide agents with new business and endorsement entry, real-time policy issuance for personal lines, immediate
printing of declarations pages in agents' offices, policy downloads to most major agency management systems and data
imports from Boston Software's SinglePoint, Vertafore's PL Rater, EZLynx and TurboRater. In addition, we provide our
agents with commission and claims download for all lines of business, Transformation Station and Transact Now
Inquires, e-Claims online claims reporting, e-View daily transaction reports and e-Docs online electronic document file
cabinet.
We also provide eBill, online bill pay (including credit and debit cards), online AutoPay registration, online
declarations pages, billing inquiry, claims inquiry, auto and homeowners claims first notice of loss, online auto insurance
cards, and bill pay reminder alerts to our agents’ policyholders through our public website, SafetyInsurance.com.
Additionally, we provide policyholders with mobile technology through our Safety Mobile App for iPhone and
Android devices. Safety Mobile provides consumers with access to their agent information, bill pay capabilities, the
ability to report an automobile or homeowners claim and access to their insurance card, among other features.
Claims
On casualty claims we utilize stringent claims settlement procedures, which include guidelines that establish
settlement ranges for soft tissue injuries, which constituted approximately 58% of our bodily injury claims in 2022. If
we are unable to settle these claims within our pricing guidelines, we explore other cost-effective options including
alternative dispute resolutions and/or litigation. We believe that these procedures result in providing our adjusting staff
with a uniform approach to negotiation.
We believe an important component of handling claims efficiently is prompt investigation and settlement. We
find that faster claims settlements often result in less expensive claims settlements. Our E-Claim reporting system is an
online product that reduces the time it takes for agents to notify our adjusters about claims, thereby enabling us to contact
third-party claimants and other witnesses quickly. Our insureds can report claims directly by phone, web, or mobile
application. In addition, we utilize an after-hours reporting vendor to ensure that new claims can be reported 24 hours
per day and 365 days per year.
We believe that early notification results in our adjusters conducting prompt investigations of claims and
compiling more accurate information about those claims. Our modern claims software provides our staff with efficient
workplan management tools to assist our adjusters in handling claims quickly while providing high levels of customer
service.
We believe the structure of our claims department allows us to respond quickly to claimants. The department is
organized into distinct claim units that contain loss costs on injury claims. Field adjusting resources are utilized for
prompt response to large potential exposure claims and dedicated litigation staff focus on managing loss costs and
litigation expense.
Additionally, we utilize a special investigation unit to investigate potential fraud in connection with claims
presented. In cases where adjusters suspect fraud in connection with a claim, we deploy this special unit to conduct
investigations. We deny payment in cases in which we have succeeded in accumulating sufficient evidence of fraud.
10
Our auto physical damage claims units handle physical damage claims arising in our private passenger and
commercial automobile lines. Process automation has streamlined our claims function and in combination with
established policy and procedures newly reported claims are handled in a proactive manner to ensure that coverages are
verified, damages are appraised and claim payments are issued in a timely and efficient manner. This ensures the highest
level of customer service to our insureds while reducing claim cycle times and mitigating claim handling expenses. We
continue to vet and implement new methods of appraisal for vehicle damage, including vehicle photo only appraisals
within the regulatory established guidelines. Once we receive this information, an automated system redirects the claim
to the appropriate internal adjuster responsible for investigating the claim to determine liability. Upon determination of
liability, the system automatically begins the process of seeking a subrogation recovery from another insurer, if liable.
We believe this process results in a shorter time period from when the claimant first contacts the agent to when the
claimant receives a claim payment, while enabling our agents to build credibility with their clients by responding to
claims in a timely and efficient manner.
Our property claims division oversees physical damage claims arising in our homeowners and other than auto
insurance lines. Property Field Adjusters are located remotely across our service areas to handle larger more complex
property losses. Our modern claims software system and applications enables more efficient handling of the claim
process and customer engagement from first notice of loss through settlement and potential subrogation. We also utilize
house counsel on subrogation recoveries to reduce collection expenses and maximize damage recoveries.
Reserves
Significant periods of time can elapse between the occurrence of an insured loss, the reporting of the loss to the
insurer and the insurer's payment of that loss. To recognize liabilities for unpaid losses, insurers establish reserves as
balance sheet liabilities representing estimates of amounts needed to pay reported and unreported losses and the expenses
associated with investigating and paying the losses, or loss adjustment expenses. Every quarter, we review and establish
our reserves. Regulations promulgated by the Commissioner require us to annually obtain a certification from either a
qualified actuary or an approved loss reserve specialist, who may be one of our employees, that our loss and loss
adjustment expenses reserves are reasonable.
When a claim is reported, claims personnel establish a "case reserve" for the estimated amount of the ultimate
payment. The amount of the reserve is primarily based upon an evaluation of the type of claim involved, the
circumstances surrounding each claim and the policy provisions relating to the loss. The estimate reflects informed
judgment of such personnel based on general insurance reserving practices and on the experience and knowledge of the
claims professional. During the loss adjustment period, these estimates are revised as deemed necessary by our claims
department based on subsequent developments and periodic reviews of the cases.
In accordance with industry practice, we also maintain reserves for estimated losses incurred but not yet
reported (“IBNR”). IBNR reserves are determined in accordance with commonly accepted actuarial reserving
techniques on the basis of our historical information and experience. We make adjustments to incurred but not yet
reported reserves quarterly to take into account changes in the volume of business written, claims frequency and severity,
our mix of business, claims processing and other items that can be expected to affect our liability for losses and loss
adjustment expenses over time.
When reviewing reserves, we analyze historical data and estimate the impact of various loss development
factors, such as our historical loss experience and that of the industry, legislative enactments, judicial decisions, legal
developments in imposition of damages, and changes and trends in general economic conditions, including the effects of
inflation. There is no precise method, however, for evaluating the impact of any specific factor on the adequacy of
reserves, because the eventual development of reserves is affected by many factors. After taking into account all
relevant factors, management believes that our provision for unpaid losses and loss adjustment expenses at December 31,
2023 is adequate to cover the ultimate cost of losses and claims incurred as of that date.
Management determines its loss and loss adjustment expense ("LAE") reserve estimates based upon the analysis
of the Company's actuaries. Management has established a process for the Company's actuaries to follow in establishing
11
reasonable reserves. The process consists of meeting with our claims department, establishing ultimate incurred losses
by using development models accepted by the actuarial community, and reviewing the analysis with management. The
Company's estimate for loss and LAE reserves, net of the effect of ceded reinsurance, ranges from a low of $449,272 to a
high of $511,724 as of December 31, 2023. The Company's net loss and LAE reserves, based on our actuaries' best
estimate, were set at $490,458 as of December 31, 2023. The ultimate liability may be greater or less than reserves
carried at the balance sheet date. Establishment of appropriate reserves is an inherently uncertain process, and there can
be no certainty that currently established reserves will prove adequate in light of subsequent actual experience. To the
extent that reserves are inadequate and are strengthened, the amount of such increase is treated as a charge to earnings in
the period that the deficiency is recognized. To the extent that reserves are redundant and are released, the amount of the
release is a credit to earnings in the period the redundancy is recognized. We do not discount any of our reserves.
The following table presents development information on changes in the reserves for losses and LAE of our
Insurance Subsidiaries for each year in the three-year period ended December 31, 2023, 2022 and 2021.
Reserves for losses and LAE at beginning of year
Less receivable from reinsurers related to unpaid losses and LAE
Net reserves for losses and LAE at beginning of year
Incurred losses and LAE, related to:
Current year
Prior years
Total incurred losses and LAE
Paid losses and LAE related to:
Current year
Prior years
Total paid losses and LAE
Net reserves for losses and LAE at end of period
Plus receivable from reinsurers related to unpaid losses and LAE
Reserves for losses and LAE at end of period
2023
Year Ended
2022
$
$
549,598
(93,394)
456,204
689,683
(47,381)
642,302
409,634
198,414
608,048
490,458
112,623
603,081
$
$
570,651
(90,667)
479,984
549,258
(57,279)
491,979
342,971
172,788
515,759
456,204
93,394
549,598
$
$
2021
567,581
(106,311)
461,270
515,400
(53,673)
461,727
310,116
132,897
443,013
479,984
90,667
570,651
The following table represents the development of reserves, net of reinsurance, for calendar years 2013 through
2023. The top line of the table shows the reserves at the balance sheet date for each of the indicated years. This
represents the estimated amounts of losses and loss adjustment expenses for claims arising in all years that were unpaid
at the balance sheet date, including losses that had been incurred but not yet reported to us. The upper portion of the
table shows the cumulative amounts paid as of the end of each successive year with respect to those claims. The lower
portion of the table shows the re-estimated amount of the previously recorded reserves based on experience as of the end
of each succeeding year, including cumulative payments made since the end of the respective year. The estimate changes
as more information becomes known about the payments, frequency and severity of claims for individual years.
Favorable loss development, shown as a cumulative redundancy in the table, exists when the original reserve estimate is
greater than the re-estimated reserves at December 31, 2023.
12
Information with respect to the cumulative development of gross reserves (that is, without deduction for
reinsurance ceded) also appears at the bottom portion of the table.
2023
2022
2021
2020
As of and for the Year Ended December 31,
2018
2017
2019
2016
2015
2014
2013
Reserves for losses and
LAE originally estimated:
Cumulative amounts paid as of:
One year later
Two years later
Three years later
Four years later
Five years later
Six years later
Seven years later
Eight years later
Nine years later
Ten years later
Reserves re-estimated as of:
One year later
Two years later
Three years later
Four years later
Five years later
Six years later
Seven years later
Eight years later
Nine years later
Ten years later
Cumulative
(redundancy) deficiency 2023
Gross liability-end of year
Reinsurance recoverables
Net liability-end of year
Gross estimated liability-latest
Reinsurance recoverables-latest
Net estimated liability-latest
$ 490,458
$ 456,204
$ 479,984
$ 461,270
$ 488,194
$ 476,321
$ 490,969
$ 476,597
$ 485,716
$ 420,767
$ 394,668
198,414
172,788
258,181
132,897
202,320
253,495
153,727
216,822
263,149
296,870
164,595
230,294
269,065
293,203
314,032
159,234
241,032
282,242
304,009
318,471
328,661
164,466
231,473
283,812
305,024
318,149
325,785
331,864
174,506
250,306
290,287
310,140
319,817
325,669
328,703
332,439
132,364
189,367
223,465
241,589
252,714
255,581
256,733
257,956
260,163
133,288
178,411
207,626
223,743
231,346
234,480
235,562
235,807
236,039
238,049
2023
2022
2021
2020
$ 408,823
$ 422,705
384,120
$ 407,597
359,564
328,268
As of and for the Year Ended December 31,
2018
2017
2019
2016
2015
2014
2013
$ 433,350
395,578
365,786
344,785
$ 434,273
393,948
372,282
355,215
341,625
$ 434,481
400,312
376,584
365,267
355,415
345,705
$ 434,813
391,630
372,379
359,549
352,330
346,607
340,738
$ 440,268
406,253
376,201
361,335
353,983
347,373
343,345
338,934
$ 390,452
348,660
313,100
287,131
276,309
272,178
268,514
266,532
264,095
$ 357,300
328,182
295,788
274,214
255,368
248,746
245,071
243,000
241,594
240,189
(47,381)
(95,864)
(133,002)
(143,409)
(134,696)
(145,264)
(135,859)
(146,782)
(156,672)
(154,479)
2023
$ 603,081
112,623
490,458
2022
$ 549,598
93,394
456,204
502,839
94,016
408,823
2021
$ 570,651
90,667
479,984
457,758
73,638
384,120
2020
$ 567,580
106,310
461,270
415,001
86,733
328,268
As of and for the Year Ended December 31,
2018
$ 584,719
108,398
476,321
437,567
95,942
341,625
2019
$ 610,566
122,372
488,194
450,719
105,934
344,785
2017
$ 574,054
83,085
490,969
424,392
78,687
345,705
2016
$ 560,321
83,724
476,597
400,449
59,711
340,738
2015
$ 553,977
68,261
485,716
369,147
30,213
338,934
2014
$ 482,012
61,245
420,767
303,226
39,131
264,095
2013
$ 455,014
60,346
394,668
273,159
32,970
240,189
In evaluating the information in the table, it should be noted that each amount entered incorporates the effects of
all changes in amounts entered for prior periods. Thus, if the 2023 estimate for a previously incurred loss was $150 and
the loss was reserved at $100 in 2019, the $50 deficiency (later estimate minus original estimate) would be included in
the cumulative (redundancy) deficiency in each of the years 2019-2022 shown in the table. It should further be noted that
the table does not present accident or policy year development data. In addition, conditions and trends that have affected
the development of liability in the past may not necessarily recur in the future. Accordingly, it is not appropriate to
extrapolate future redundancies or deficiencies from the table.
The table shows that we have substantially benefited in the current and prior years from releasing redundant
reserves. In the years ended December 31, 2023, 2022, and 2021 we decreased loss reserves related to prior years by
$47,381, $57,279 and $53,673, respectively. Reserves and development are discussed further in Item 7—Management's
Discussion and Analysis of Financial Condition and Results of Operations, Executive Summary and Overview.
As a result of our focus on core business lines since our founding in 1979, we believe we have no specific
exposure to asbestos or environmental pollution liabilities.
Reinsurance
Reinsurance involves an insurance company transferring (ceding) a portion of its exposure on insurance
underwritten by it to another insurer (reinsurer). The reinsurer assumes a portion of the exposure in return for a share of
the premium. Reinsurance does not legally discharge an insurance company from its primary liability for the full amount
of the policies, but it does make the reinsurer liable to the company for the reinsured portion of any loss realized.
13
We reinsure with other insurance companies a portion of our potential liability under the policies we have
underwritten, thereby protecting us against an unexpectedly large loss or a catastrophic occurrence that could produce
large losses, primarily in our homeowners line of business. We are selective in choosing our reinsurers, seeking only
those companies that we consider to be financially stable and adequately capitalized. In an effort to minimize exposure
to the insolvency of a reinsurer, we continually evaluate and review the financial condition of our reinsurers. Most of
our reinsurers have an A.M. Best rating of “A+” (Superior) or “A” (Excellent).
We maintain reinsurance coverage to help lessen the effect of losses from catastrophic events, maintaining
coverage that during 2023 protected us in the event of a "121-year storm" (that is, a storm of a severity expected to occur
once in a 121-year period). We use various software products to measure our exposure to catastrophe losses and the
probable maximum loss to us for catastrophe losses such as hurricanes. The models include estimates for our share of
the catastrophe losses generated in the residual market for property insurance by the Massachusetts Property Insurance
Underwriting Association ("FAIR Plan"). In 2023, we purchased three layers of excess catastrophe reinsurance
providing $590,000 of coverage for property losses in excess of $75,000 up to a maximum of $665,000. Our reinsurers’
co-participation is 75.0% of $75,000 for the 1st layer, 75.0% of $250,000 for the 2nd layer, and 75.0% of $265,000 for
the 3rd layer.
For 2024, we have purchased three layers of excess catastrophe reinsurance providing $615,000 of coverage for
property losses in excess of $75,000 up to a maximum of $690,000. Our reinsurers’ co-participation is 75.0% of
$75,000 for the 1st layer, 75.0% of 250,000 for the 2nd layer and 75.0% of $290,000 for the 3rd layer.
We also have casualty excess of loss reinsurance for large casualty losses occurring in our automobile,
homeowners, dwelling fire, and business owner lines of business in excess of $2,000 up to a maximum of $10,000. We
have property excess of loss reinsurance coverage for large property losses, with coverage in excess of $2,500 up to a
maximum of $20,000, for our homeowners, and business owners. In addition, we have liability excess of loss
reinsurance for umbrella large losses in excess of $1,000 up to a maximum of $10,000. We also have various
reinsurance agreements with Hartford Steam Boiler Inspection and Insurance Company, of which the primary contract is
a quota share agreement under which we cede 100% of the premiums and losses for the equipment breakdown coverage
under our business owner policies and commercial package policies.
Our reinsurance program excludes coverage for acts of terrorism. The Terrorism Risk Insurance Program
Reauthorization Act of 2019 was signed into law on December 20, 2019 which extended the Terrorism Risk Insurance
Act (“TRIA”) through the year 2027. The intent of this legislation is to provide federal assistance to the insurance
industry for the needs of commercial insurance policyholders with the potential exposure for losses due to acts of
terrorism. TRIA provides reinsurance for certified acts of terrorism.
In addition to the above mentioned reinsurance programs and as described in more detail above under The
Massachusetts Property and Casualty Insurance Market, we are a participant in CAR, a state-established body that, in
part, runs the residual market reinsurance programs for commercial automobile insurance in Massachusetts under which
premiums, expenses, losses and loss adjustment expenses on ceded business are shared by all insurers writing
automobile insurance in Massachusetts. We also participate in the FAIR Plan in which premiums, expenses, losses and
loss adjustment expenses on homeowners business that cannot be placed in the voluntary market are shared by all
insurers writing homeowners insurance in Massachusetts. On July 1, 2023, the FAIR Plan purchased $1,600,000 of
catastrophe reinsurance for property losses with retention of $100,000.
At December 31, 2023, we also had $133,551 due from CAR comprising of loss and loss adjustment expense
reserves, unearned premiums and reinsurance recoverables.
On March 10, 2005, our Board of Directors (the “Board”) adopted a resolution that prohibits Safety from
purchasing finite reinsurance (reinsurance that transfers only a relatively finite or limited amount of risk to the reinsurer)
without approval by the Board. To date, the Company has never purchased a finite reinsurance contract.
14
Competition
The property and casualty insurance business is highly competitive and many of our competitors have
substantially greater financial and other resources than we do. We compete with both large national writers and smaller
regional companies. Our competitors include companies which, like us, serve the independent agency market, as well as
companies which sell insurance directly to customers. Direct writers may have certain competitive advantages over
agency writers, including increased name recognition, loyalty of the customer base to the insurer rather than to an
independent agency, and potentially, lower cost structures. A material reduction in the amount of business independent
agents sell would adversely affect us. Further, we and others compete on the basis of the commissions and other cash
and non-cash incentives provided to agents.
Although, historically, a number of national insurers that are much larger than we have chosen not to compete
in a material way in the Massachusetts private passenger automobile market, since 2008, several new companies have
entered the market. These companies include some that would be able to sustain significant losses in order to acquire
market share, as well as others which use distribution methods that compete with the independent agent channel. There
can be no assurance that we will be able to compete effectively against these companies in the future.
We are the third largest writer of private passenger automobile insurance in Massachusetts with a market share
of 8.7% in 2023. Our principal competitors within the Massachusetts private passenger automobile insurance market are
MAPFRE SA, Government Employees Insurance Company, Arbella Mutual Insurance Company, and Plymouth Rock
Assurance Corporation, which held 20.0%, 15.1%, 7.6% and 7.2% market shares based on premiums, respectively, in
2023 according to CAR.
We are the second largest writer of commercial automobile insurance in Massachusetts with a market share of
12.7% in 2023. Our principal competitors in the Massachusetts commercial automobile insurance market are MAPFRE
SA, Arbella Mutual Insurance Company and Progressive Casualty Insurance Company, which held 13.8 %, 10.5% and
9.0% market shares based on premium, respectively, according to CAR. This includes our share of residual market
business as one of four servicing carriers in CAR’s Commercial Automobile Program.
We are the fourth largest writer of homeowners insurance business in Massachusetts, with a market share of
6.2% in 2022. Our principal competitors within the Massachusetts homeowners insurance market are MAPFRE SA,
Liberty Mutual and The Andover Companies, which held 12.2%, 9.4% and 6.3% market shares, respectively, in 2022
(according to S&P Global Market Intelligence).
Human Capital
At December 31, 2023, we employed 539 employees who all work in the New England region. The
management team establishes hiring and compensation practices for our Company. The Board is periodically updated on
key employee engagement and employee relations measures. In addition, the Board’s Compensation Committee is
responsible for reviewing performance and approving compensation paid to senior leaders. Our Human Resources team,
led by our Chief Financial Officer, supports the Compensation Committee in the execution of its responsibilities. In
addition to the day-to-day support, they provide to our management team, the Human Resources team monitors the pulse
of our employee population.
As noted in our Environmental, Social and Governance (“ESG”) Report, located on our Company website, we
create a workplace where all employees are treated with dignity and respect, and individual differences are valued, all
with the goal of securing the trust and satisfaction of our employees. The Company is committed to a policy of
inclusiveness and is committed to actively seeking out highly-qualified candidates with diverse gender, race, color,
religion, ethnicity, age, marital status, handicap, sexual orientation, gender identity or expression, and backgrounds. The
Company prioritizes an environment where employees are respected, inspired to perform at their best, and are recognized
for their contributions. We persistently work to improve the employee experience in support of our continuing strategic
objective to attract, retain and develop talent in the insurance industry. Our commitment to a robust talent pool starts at
the top. The Board engages with the Compensation Committee annually to review executive level compensation,
15
consider key pipeline talent and conduct succession planning. In addition, our leadership team conducts a comprehensive
annual review process across our organization each year. We have a history of promotion from within as approximately
20% of our organization has 25 years of experience at Safety.
We offer competitive pay and benefits to our employees. In addition to competitive salaries, all management
level employees are included in our long-term incentive compensation program where they can receive a combination of
time and performance-based awards. The Company also engages in a number of additional practices to ensure pay
fairness, including:
Centralized compensation function ensuring consistent programs and practices across the enterprise;
Enterprise-wide framework for evaluating and aligning roles and compensation levels based on job
responsibilities, strategic importance of the role, and other relevant factors;
Prohibition against asking external job applicants for current or historical compensation information;
Individual compensation decisions consider each employee’s experience, proficiency, and performance;
Multiple levels of review and approval required for all compensation decisions.
We are committed to our extensive, long-standing policies and practices to ensure fair pay across the
organization, while also staying attuned to external best practices and insights, and leveraging input from our pay
consultants.
We further foster our culture through our robust learning and development program and our competitive benefit
programs. Our extensive benefits include a variety of items, not limited to the following:
Medical and vision plan options;
HSA & FSA options
Dental options;
Company paid life-insurance;
401(k) plan with company matching contributions of up to 8%;
Sick hours;
Paid holidays;
Flexible work schedules, including remote work arrangements;
Tuition reimbursement that is not capped;
Short and long-term disability;
Family medical leave;
Parental leave;
Employee assistance program.
Our employees participate in a work from home program that helps contribute to a flexible work-life balance
and allows the Company to minimize the real estate rented at our home office. Our employees are not covered by any
collective bargaining agreement.
Our employees give both their time and their financial resources to charities of all types, and the Company
promotes corporate citizenship through charitable donations and Company-sponsored volunteer activities. Safety is
committed to making a positive impact on the communities where our employees live and work through our matching
gift program, corporate giving and employee volunteerism. We help employees amplify their community impact by
providing our employees with a 1:1 match on their donations to recognized charitable organizations. The Safety
Insurance Charitable Foundation was established in 2005 and has provided financial support for a wide array of charities
in areas such as community service, education, job training, homelessness, arts/culture, food banks, youth programs,
healthcare, medical research and disaster relief.
The reputation of the Company depends on the conduct of its Board, officers, and employees. Every employee
who is associated with Safety must play a part in maintaining our corporate reputation for the highest ethical standards.
Management considers our relationship with our employees to be strong.
16
Investments
Investment income is an important source of revenue for us and the return on our investment portfolio has a
material effect on our net earnings. Our investment objective is to focus on maximizing total returns while investing
conservatively. We maintain a high-quality investment portfolio consistent with our established investment policy. As
of December 31, 2023, our portfolio of fixed maturity investments was comprised principally of investment grade
corporate fixed maturity securities, U.S. government and agency securities, and asset-backed securities. The portion of
our non-investment grade portfolio of fixed maturity investments is primarily comprised of variable rate secured and
senior bank loans and high yield bonds.
According to our investment guidelines, no more than 2.0% of our portfolio may be invested in the securities of
any one issuer (excluding U.S. government-backed securities). In addition, no more than 0.5% of our portfolio may be
invested in securities of any one issuer rated "Baa," or the lowest investment grade assigned by Moody's. Of the less
than 15.0% of our portfolio invested in senior bank loans and high yield bonds at December 31, 2023, no more than
5.0% may be invested in the securities of any one issuer, no more than 10.0% may be invested in any issuers total
outstanding debt issue, and a maximum of 10.0% may be invested in securities unrated or rated "B-" or below by
Moody's. We continually monitor the mix of taxable and tax-exempt securities in an attempt to maximize our total after-
tax return. We utilize the services of third-party investment managers.
We believe that the incorporation of material, non-financial factors into investment selection and risk
management has the potential to enhance long-term investment returns. We incorporate ESG factors managed for us by
third-party investment managers. We measure our exposure to ESG risks at both individual asset classes and total
portfolio levels.
The following table reflects the composition of our investment portfolio as of December 31, 2023 and 2022.
U.S. Treasury Securities
Obligations of states and political subdivisions
Residential mortgage-backed securities (1)
Commercial mortgage-backed securities
Other asset-backed securities
Corporate and other securities
Subtotal, fixed maturity securities
Equity securities (2)
Other invested assets (3)
As of December 31,
2023
2022
Estimated
Fair Value
% of
Portfolio
Estimated
Fair Value
% of
Portfolio
$
$
2,320
36,523
247,237
139,850
61,333
564,882
1,052,145
238,022
133,946
1,424,113
0.2 % $
2.6
17.4
9.8
4.3
39.6
73.9
16.7
9.4
100.0 % $
1,669
54,069
234,502
139,931
68,731
551,253
1,050,155
240,155
112,850
1,403,160
0.1 %
3.9
16.7
10.0
4.9
39.3
74.9
17.1
8.0
100.0 %
(1) Residential mortgage-backed securities consists primarily of obligations of U.S. Government agencies including collateralized mortgage
obligations and mortgage-backed securities guaranteed and/or insured by the following issuers: Government National Mortgage Association (GNMA),
Federal Home Loan Mortgage Corporation (FHLMC), Federal National Mortgage Association (FNMA) and the Federal Home Loan Bank (FHLB).
(2) Equity securities include common stock, preferred stock, mutual funds and interests in mutual funds held to fund the Company's executive deferred
compensation plan.
(3) Other invested assets are accounted for under the equity method which approximates fair value.
17
The principal risks inherent in holding mortgage-backed securities and other pass-through securities are
prepayment and extension risks, which affect the timing of when cash flows will be received. When interest rates
decline, mortgages underlying mortgage-backed securities tend to be prepaid more rapidly than anticipated, causing early
repayments. When interest rates rise, the underlying mortgages tend to be prepaid at a slower rate than anticipated,
causing the principal repayments to be extended. Although early prepayments may result in acceleration of income from
recognition of any unamortized discount, the proceeds could be reinvested at a lower current yield, resulting in a net
reduction of future investment income. In addition, in the current market environment, such investments can also
contain liquidity risks.
The Company invests in bank loans which are primarily investments in senior secured floating rate loans that
banks have made to corporations. The loans are generally priced at an interest rate spread over the floating rate feature;
this asset class provides protection against rising interest rates. However, this asset class is subject to default risk since
these investments are typically below investment grade.
Equity risk is the risk that we will incur economic losses due to adverse changes in equity prices. Our exposure
to changes in equity prices results from our holdings of common stock, preferred stock, mutual funds and interests in
mutual funds held to fund the executive deferred compensation plan. We continuously evaluate market conditions and
we expect in the future to purchase additional equity securities. We principally manage equity price risk through industry
and issuer diversification and asset allocation techniques.
The following table reflects our investment results for each of the three-year periods ended December 31, 2023,
2022 and 2021.
Average cash and invested securities (at cost)
Net investment income (1)
Net effective yield (2)
$
$
Years Ended December 31,
2023
1,421,882
56,377
4.0 %
$
$
2022
1,462,761
46,725
3.2 %
$
$
2021
1,466,133
44,135
3.0 %
(1) After investment expenses, excluding realized investment gains or losses.
(2) Net investment income for the period divided by average invested securities and cash for the same period.
As of December 31, 2023, our portfolio of fixed maturity investments was comprised principally of investment
grade corporate fixed maturity securities, U.S. government and agency securities, and asset-backed securities. The
portion of our non-investment grade portfolio of fixed maturity investments is primarily comprised of variable rate
secured, senior bank loans and high yield bonds.
The composition of our fixed income security portfolio by rating is presented in the following table.
U.S. Treasury securities and obligations of U.S. Government
agencies
Aaa/Aa
A
Baa
Ba
B
Caa/Ca
Not rated
Total
As of December 31,
2023
Estimated
Fair Value
Percent
2022
Estimated
Fair Value
Percent
$
$
247,237
212,833
219,018
202,513
47,946
84,681
3,733
34,184
1,052,145
23.5 % $
20.2
20.8
19.2
4.6
8.0
0.4
3.3
100.0 % $
234,152
237,191
201,943
202,763
61,619
93,633
4,489
14,365
1,050,155
22.3 %
22.6
19.2
19.3
5.9
8.9
0.4
1.4
100.0 %
18
Ratings are generally assigned upon the issuance of the securities and are subject to revision on the basis of
ongoing evaluations. Ratings in the table are as of the date indicated.
The Securities Valuation Office of the National Association of Insurance Commissioners (the "SVO") evaluates
all public and private bonds purchased as investments by insurance companies. The SVO assigns one of six investment
categories to each security it reviews. Category 1 is the highest quality rating and Category 6 is the lowest. Categories 1
and 2 are the equivalent of investment grade debt as defined by rating agencies such as Standard & Poor's Ratings
Services and Moody's, while Categories 3-6 are the equivalent of below investment grade securities. SVO ratings are
reviewed at least annually. At December 31, 2023, 65.8% of our available for sale fixed maturity investments were rated
Category 1 and 18.8% were rated Category 2, the two highest ratings assigned by the SVO.
The following table indicates the composition of our fixed income security portfolio (at carrying value) by time
to maturity as of December 31, 2023.
Due in one year or less
Due after one year through five years
Due after five years through ten years
Due after ten years through twenty years
Due after twenty years
Asset-backed securities (1)
Totals
As of December 31, 2023
Estimated
Fair Value
Percent
31,048
323,755
226,452
22,178
292
448,420
1,052,145
3.0 %
30.8
21.5
2.1
-
42.6
100.0 %
$
$
(1) Actual maturities of asset-backed securities may differ from contractual maturities because borrowers may have the right to call or prepay
obligations with or without call or prepayment penalties. Prepayment rates are influenced by a number of factors that cannot be predicted with
certainty, including: the relative sensitivity of the underlying mortgages or other collateral to changes in interest rates; a variety of economic,
geographic and other factors; and the repayment priority of the securities in the overall securitization structures.
Ratings
A.M. Best, which rates insurance companies based on factors of concern to policyholders, currently assigns the
Company an "A (Excellent)" rating. Our "A" rating was reaffirmed by A.M. Best on June 15, 2023. Such rating is the
third highest rating of 13 ratings that A.M. Best assigns to solvent insurance companies, which currently range from
"A++ (Superior)" to "D (Poor)." Publications of A.M. Best indicate that the "A" rating is assigned to those companies
that in A.M. Best's opinion have an excellent ability to meet their ongoing obligations to policyholders over a long period
of time. In evaluating a company's financial and operating performance, A.M. Best reviews the Company's profitability,
leverage and liquidity, as well as its book of business, the adequacy and soundness of its reinsurance, the quality and
estimated fair value of its assets, the adequacy of its loss reserves, the adequacy of its surplus, its capital structure, the
experience and competence of its management and its market presence. A.M. Best's ratings reflect its opinion of an
insurance company's financial strength, operating performance and ability to meet its obligations to policyholders and
are not evaluations directed to purchasers of an insurance company's securities.
In assigning the Company’s rating, A.M. Best recognized its solid risk-adjusted capitalization, conservative
operating strategy, and long-standing agency relationships. A.M. Best also noted among our positive attributes our
favorable investment leverage, our disciplined underwriting approach, and our expertise in the closely managed
Massachusetts automobile insurance market. A.M. Best cited other factors that partially offset these positive attributes,
including our concentration of business in the Massachusetts private passenger automobile market which exposes our
business to regulatory actions.
Introduction. Our principal operations are conducted through the Insurance Subsidiaries which are subject to
comprehensive regulation by state insurance departments, primarily through our domestic regulator, the Division, of
Supervision and Regulation
19
which the Commissioner is the senior official. The Commissioner is appointed by the Governor. We are subject to the
authority of the Commissioner in many areas of our business under Massachusetts law, including:
our licenses to transact insurance;
the rates and policy forms we may use;
our financial condition including the adequacy of our reserves and provisions for unearned premium;
the solvency standards that we must maintain;
the type and size of investments we may make;
the prescribed or permitted statutory accounting practices we must use; and
the nature of the transactions we may engage in with our affiliates.
In addition, the Commissioner periodically conducts financial and market conduct examinations of all licensees
domiciled in Massachusetts. Our most recent financial condition examination was for the five-year period ending
December 31, 2018. The Division had no material findings as a result of this examination. The Division notified us that
it will be conducting a financial condition examination for the five-year period ended December 31, 2023.
We are also required to be licensed by the insurance department in each state in which we do business, as well
as to comply with the various laws and regulations of those jurisdictions, including those governing our use of rates and
policy forms in those states.
Insurance Holding Company Regulation. Our principal operating subsidiaries are insurance companies, and
therefore we are subject to certain laws in Massachusetts regulating insurance holding company systems. These laws
require that we file a registration statement with the Commissioner that discloses the identity, financial condition, capital
structure and ownership of each entity within our corporate structure and any transactions among the members of our
holding company system. In some instances, we must provide prior notice to the Commissioner for material transactions
between our insurance company subsidiaries and other affiliates in our holding company system. These holding
company statutes also require, among other things, prior approval of the payment of extraordinary dividends or
distributions and any acquisition of a domestic insurer and that we file an annual Enterprise Risk Management report
with the Commissioner.
Insurance Regulation Concerning Dividends. We rely on dividends from the Insurance Subsidiaries for our
cash requirements. The insurance holding company law of Massachusetts requires notice to the Commissioner of any
dividend to the shareholders of an insurance company. The Insurance Subsidiaries may not make an "extraordinary
dividend" until thirty days after the Commissioner has received notice of the intended dividend and has not objected in
such time. As historically administered by the Commissioner, this provision requires the prior approval by the
Commissioner of an extraordinary dividend. An extraordinary dividend is defined as any dividend or distribution that,
together with other distributions made within the preceding twelve months exceeds the greater of 10.0% of the insurer's
surplus as of the preceding December 31, or the insurer's net income for the twelve-month period ending the preceding
December 31, in each case determined in accordance with statutory accounting practices. Under Massachusetts law, an
insurer may pay cash dividends only from its unassigned funds, also known as its earned surplus, and the insurer's
remaining surplus must be both reasonable in relation to its outstanding liabilities and adequate to its financial needs. At
December 31, 2023, the statutory surplus of Safety Insurance was $744,904 and its net loss for 2023 was $4,022. A
maximum of $74,490 will be available during 2023 for such dividends without prior approval of the Commissioner.
Acquisition of Control of a Massachusetts Domiciled Insurance Company. Massachusetts law requires advance
approval by the Commissioner of any change in control of an insurance company that is domiciled in Massachusetts.
That law presumes that control exists where any person, directly or indirectly, owns, controls, holds the power to vote or
holds proxies representing 10.0% or more of our outstanding voting stock. Even persons who do not acquire beneficial
ownership of more than 10.0% of the outstanding shares of our common stock may be deemed to have acquired control
if the Commissioner determines that control exists in fact. Any purchaser of shares of common stock representing 10.0%
20
or more of the voting power of our capital stock will be presumed to have acquired control of the Insurance Subsidiaries
unless, following application by that purchaser the Commissioner determines that the acquisition does not constitute a
change of control or is otherwise not subject to regulatory review. These requirements may deter, delay or prevent
transactions affecting the control of or the ownership of our common stock, including transactions that could be
advantageous to our stockholders.
Protection Against Insurer Insolvency. Massachusetts law requires that insurers licensed to do business in
Massachusetts participate in the Massachusetts Insurers Insolvency Fund ("Insolvency Fund"). The Insolvency Fund
must pay any claim up to $300 of a policyholder of an insolvent insurer if the claim existed prior to the declaration of
insolvency or arose within sixty days after the declaration of insolvency. Members of the Insolvency Fund are assessed
the amount the Insolvency Fund deems necessary to pay its obligations and expenses in connection with handling
covered claims. Subject to certain exceptions, assessments are made in the proportion that each member's net written
premiums for the prior calendar year for all property and casualty lines bore to the corresponding net written premiums
for Insolvency Fund members for the same period. As a matter of Massachusetts law, insurance rates and premiums
include amounts to recoup any amounts paid by insurers for the costs of the Insolvency Fund. By statute, no insurer in
Massachusetts may be assessed in any year an amount greater than two percent of that insurer's direct written premium
for the calendar year prior to the assessment. We account for allocations from the Insolvency Fund as underwriting
expenses. CAR also assesses its members as a result of insurer insolvencies. Because CAR is not able to recover an
insolvent company's share of the net CAR losses from the Insolvency Fund, CAR must increase each of its member's
shares of the deficit in order to compensate for the insolvent carrier's inability to pay its deficit assessment. It is
anticipated that there will be future assessments from time to time relating to various insolvencies.
The Insurance Regulatory Information System. The Insurance Regulatory Information System ("IRIS") was
developed to help state insurance regulators identify companies that may require special financial attention. IRIS consists
of a statistical phase and an analytical phase whereby financial examiners review annual statements and financial ratios.
The statistical phase consists of 13 key financial ratios based on year-end data that are generated annually from the
database of the National Association of Insurance Commissioners ("NAIC"). Each ratio has an established "usual range"
of results. These ratios assist state insurance departments in executing their statutory mandate to oversee the financial
condition of insurance companies.
A ratio result falling outside the usual range of IRIS ratios is not considered a failing result; rather, unusual
values are viewed as part of the regulatory early monitoring system. Furthermore, in some years, it may not be unusual
for financially sound companies to have several ratios with results outside the usual ranges. Generally, an insurance
company will become subject to regulatory scrutiny if it falls outside the usual ranges of four or more of the ratios. In
2023, 2022, and 2021 all our ratios for all our Insurance Subsidiaries were within the normal range.
Risk-Based Capital Requirements. The NAIC has adopted a formula and model law to implement risk-based
capital requirements for most property and casualty insurance companies, which are designed to determine minimum
capital requirements and to raise the level of protection that statutory surplus provides for policyholder obligations. The
risk-based capital formula for property and casualty insurance companies measures three major areas of risk facing
property and casualty insurers:
underwriting, which encompasses the risk of adverse loss developments and inadequate pricing;
declines in asset values arising from market and/or credit risk; and
off-balance sheet risk arising from adverse experience from non-controlled assets, guarantees for affiliates
or other contingent liabilities and reserve and premium growth.
Under Massachusetts law, insurers having less total adjusted capital than that required by the risk-based capital
calculation will be subject to varying degrees of regulatory action, depending on the level of capital inadequacy.
21
The risk-based capital law provides for four levels of regulatory action. The extent of regulatory intervention
and action increases as the level of total adjusted capital to risk-based capital falls. The first level, the company action
level, as defined by the NAIC, requires an insurer to submit a plan of corrective actions to the Commissioner if total
adjusted capital falls below 200% of the risk-based capital amount. The regulatory action level, as defined by the NAIC
requires an insurer to submit a plan containing corrective actions and requires the Commissioner to perform an
examination or other analysis and issue a corrective order if total adjusted capital falls below 150.0% of the risk-based
capital amount. The authorized control level, as defined by the NAIC, authorizes the Commissioner to take whatever
regulatory actions he or she considers necessary to protect the best interest of the policyholders and creditors of the
insurer which may include the actions necessary to cause the insurer to be placed under regulatory control,
i.e., rehabilitation or liquidation, if total adjusted capital falls below 100.0% of the risk-based capital amount. The fourth
action level is the mandatory control level, as defined by the NAIC, which requires the Commissioner to place the
insurer under regulatory control if total adjusted capital falls below 70.0% of the risk-based capital amount.
The formulas have not been designed to differentiate among adequately capitalized companies that operate with
higher levels of capital. Therefore, it is inappropriate and ineffective to use the formulas to rate or to rank these
companies. At December 31, 2023, our Insurance Subsidiaries had total adjusted capital in excess of amounts requiring
company or regulatory action at any prescribed risk-based capital action level.
Own Risk Solvency Assessment. On January 11, 2017, the Division adopted the National Association of
Insurance Commissioners’ Own Risk Solvency Assessment (“ORSA”) Act requiring the Company to file its assessment
on an annual basis. ORSA is an internal process undertaken by an insurer or insurance group to assess the adequacy of
its risk management and current and prospective solvency positions under normal and severe stress scenarios. We have
completed this filing for the 2023 period.
Executive Officers and Directors
The table below sets forth certain information concerning our directors and executive officers as of the date of
this annual report.
Name
George M. Murphy
Christopher T. Whitford
James D. Berry
John P. Drago
Ann M. McKeown
Paul J. Narciso
Stephen A. Varga
Glenn R. Hiltpold
Peter J. Manning
Thalia M. Meehan
Mary C. Moran
John D. Farina
Deborah E. Gray
Dennis J. Langwell
Charles J. Brophy III
___________________
(1) As of February 15, 2024
President, Chief Executive Officer, Chairman of the Board
Position
Age (1)
57
41 Vice President, Chief Financial Officer and Secretary
64 Vice President - Underwriting
57 Vice President - Marketing
56 Vice President - Insurance Operations
60 Vice President - Claims
56 Vice President - Management Information Systems
53 Vice President - Actuarial Services
85 Director
62
68 Director
60 Director
60 Director
65 Director
67 Director
Lead Independent Director
Years
Employed
by Safety
35
11
41
29
34
33
31
24
-
-
-
-
-
-
-
George M. Murphy, CPCU, was appointed President and Chief Executive Officer of the Company effective
April 1, 2016. He previously was the Vice President of Marketing since October 1, 2005. Mr. Murphy was appointed to
the Board of Directors and to the Investment Committee in February 2016. Effective May 17, 2023, Mr. Murphy was
elected to serve as Chairman of the Board. Mr. Murphy has been employed by the Insurance Subsidiaries for over
35 years. Mr. Murphy is also on the Board of Trustees of the Insurance Library Association of Boston.
Christopher T. Whitford, was appointed Chief Financial Officer, Vice President and Secretary of the Company
on March 2, 2020. Mr. Whitford, a Certified Public Accountant in Massachusetts, has been employed by the Insurance
Subsidiaries for over 11 years, previously serving as the Company’s Controller since 2012, and began his career at
22
PricewaterhouseCoopers in 2005. Mr. Whitford serves on the Audit Committee of Guaranty Fund Management Services
and serves on the Audit Committee of the Massachusetts Property Insurance Underwriting Association.
James D. Berry, CPCU, was appointed Vice President of Underwriting of the Company in July 2015, and was
named as Secretary of the Insurance Subsidiaries at that time. Prior to that, he served as the Vice President of Insurance
Operations since October 2005. Mr. Berry has been employed by the Insurance Subsidiaries for over 41 years and has
directed the Company's Massachusetts Private Passenger line of business since 2001. Mr. Berry is a member of the
FAIR Plan Executive Committee and had previously served as the Chair of the Board of Directors and Executive
Committee. He has served on several committees of CAR including Market Review and Defaulted Brokers and also
served on Computer Sciences Corporation Series II and Exceed advisory councils. He also serves as the Treasurer of the
In Control Family Foundation, is a member of their Executive Committee and is the Chairman of that organization’s
Business Development Committee.
John P. Drago was appointed Vice President of Marketing on February 1, 2016. Mr. Drago has been employed
by the Insurance Subsidiaries for over 29 years and most recently served as Director of Marketing.
Ann M. McKeown was appointed Vice President of Insurance Operations of the Company on July 1, 2015. Ms.
McKeown has been employed by the Insurance Subsidiaries for over 34 years wherein she has held management
positions in the Underwriting, Information Technology, and Insurance Operations departments. Ms. McKeown has
served on the MAIP Steering and Operations Committees of CAR. On February 27, 2024, Ann communicated her
intention to retire, to which the Board of Directors accepted, effective March 1, 2024.
Paul J. Narciso was appointed Vice President of Claims of the Company on August 5, 2013. Mr. Narciso has
held various adjusting and claims management positions with the Company since 1990. Mr. Narciso has 37 years of
claim experience having worked at two national carriers prior to joining Safety. He has previously served on the
Governing Board of the Massachusetts Insurance Fraud Bureau and the Claims Subcommittee at Commonwealth
Automobile Reinsurers.
Stephen A. Varga was appointed Vice President of Management Information Systems of the Company on
August 6, 2014. Mr. Varga has held various information technology positions with the Company since 1992 and most
recently served as Senior Director of MIS.
Glenn R. Hiltpold was appointed Vice President of Actuarial Services of the Company on March 1, 2021. Mr.
Hiltpold, a Fellow of the Casualty Actuarial Society, has held the Director of Actuarial Services position with the
Company since 2004 and has been an employee of the Insurance Subsidiaries for 24 years.
Brian S. Lam was appointed Vice President of Insurance Operations of the Company on February 27, 2024,
effective March 1, 2024. Mr. Lam has held the Director of Insurance Operations and Customer Engagement position
with the Company since 2014 and began his career with the Company in 2002. He currently sits on the Deep Customer
Connections Innovators Committee. Mr. Lam received his undergraduate degree at Bucknell University and his Master
of Business Administration at Babson College.
Peter J. Manning has served as a director of the Company since September 2003. Mr. Manning retired in 2003,
as Vice Chairman Strategic Business Development of FleetBoston Financial, after 32 years with FleetBoston Financial
Corporation (formerly BankBoston) where he also held the positions of Comptroller and Executive Vice President and
Chief Financial Officer. Mr. Manning started his career with Coopers & Lybrand in 1962 prior to his 1972 employment
with BankBoston. He is a former director of the Blue Hills Bank and a former director of Thermo Fisher Scientific and
the Lahey Clinic. Mr. Manning qualifies as an “Audit Committee Financial Expert” as defined by the U.S. Securities and
Exchange Commission rules. Mr. Manning serves as a member of the Audit and Compensation Committees.
Thalia M. Meehan was appointed Director of the Company on July 3, 2017 and Lead Independent Director on
January 11, 2022. Ms. Meehan has also been appointed to serve as a member of the Investment Committee and the
Nominating and Governance Committee, as well as Chairperson of the Compensation Committee of the Board. Ms.
23
Meehan, a Chartered Financial Analyst, has over 30 years of experience in the investment sector. Ms. Meehan retired
from Putnam Investments in 2016 with 27 years of experience and most recently served as a Team Leader and Portfolio
Manager at Putnam Investments. Ms. Meehan currently serves on the Board of Cambridge Bancorp where she is a
member of the Trust and Risk Committees. Ms. Meehan serves as a member of the Nominating and Governance
Committees of the Municipal Securities Rulemaking Board and the Advisory Committee of the Board of Boston Women
in Public Finance.
Mary C. Moran was appointed Director of the Company on March 27, 2020. Ms. Moran has over 40 years of
financial experience in both private industry as well as consulting. Ms. Moran began her career at KPMG, previously
Peat Marwick, where she became a Senior Manager before serving as Senior Vice President of Finance and
Administration for Boston Sand and Gravel Company from 1990 to 2001. Since 2002 she has served as CEO of MCM
Financial Consulting, focusing on projects within in the banking, construction, higher education, manufacturing, not-for-
profit and professional services industries. Ms. Moran is a former director of Care Dimensions where she served on the
finance and audit committee and is a former director and audit committee member of Danvers Bankcorp, the College of
the Holy Cross and Catholic Memorial School. Ms. Moran graduated from Northeastern University with a M.B.A. and
MS in Accounting and from the College of the Holy Cross with a degree in Economics. Ms. Moran qualifies as an
“Audit Committee Financial Expert” as defined by the U.S. Securities and Exchange Commission rules. Ms. Moran
serves as Chairperson of the Nominating and Governance Committee and serves as a member of the Audit Committee.
John D. Farina was appointed Director of the Company on March 24, 2022. Mr. Farina was appointed
Chairperson of the Audit Committee in May 2023, and also serves as a member of the Investment Committee. Mr.
Farina recently retired from PricewaterhouseCoopers (“PwC”) as Northeast Managing Partner and as a member of
PwC’s Global Board of Directors, where he was a member of the Risk & Quality and Operations Committees. He has 36
years of experience advising both domestic and multinational Fortune 500 companies on financial accounting,
regulatory, and tax matters, with a deep expertise in the insurance industry. Mr. Farina also led PwC’s US Insurance Tax
practice and has deep insurance industry expertise. During his time at PwC, Mr. Farina held a variety of senior leadership
roles including Managing Partner of the Northeast Region, where he was responsible for approximately 3,800 partners
and staff in five offices. In this role, he oversaw strategic planning, operations, finance, risk management, human capital,
and marketing functions. Mr. Farina was elected by his fellow partners for two terms on both PwC’s US and Global
Boards, providing 10 years of governance oversight to the firm. After retiring from PwC in 2021, Mr. Farina was elected
to join the National Committee of St. Jude Children's Research Hospital in Memphis, Tennessee, where he serves as the
Vice Chair of the Audit & Compliance Committee. Mr. Farina has also served on several non-profit boards, including
the Greater Boston Chamber of Commerce. Mr. Farina received his BBA in Accounting from Evangel University and is
a CPA in Massachusetts and Texas. Mr. Farina qualifies as an “Audit Committee Financial Expert” as defined by the
U.S. SEC rules.
Deborah E. Gray was appointed Director of the Company on March 24, 2022. Ms. Gray has also been
appointed to serve as a member of the Nominating and Governance Committee and the Compensation Committee. She
joins the Board with over 30 years of experience as a corporate attorney and General Counsel for both publicly traded
and private entities in a diverse range of industries, including high tech, ed tech, Software-as-a-Service (SaaS),
professional services and life sciences. Her legal and business expertise with high-growth companies, ranging from start-
ups to publicly traded multibillion-dollar corporations, are beneficial to Safety, particularly in relation to risk
management, compliance, data privacy and security, and corporate governance matters. Ms. Gray has served in various
General Counsel roles over her 30-year career, including most recently providing her expertise as an outside General
Counsel to a variety of companies. She is also currently Vice President and General Counsel of The Achievement
Network, a private, non-profit, national education and technology organization where she leads all day-to-day legal, data
privacy and security, and compliance initiatives. Prior to this role, Ms. Gray served as Vice President, General Counsel
and Secretary at Acquia, Inc., a SaaS company where she led the creation and build out of its global legal, data security
and corporate compliance functions including M&A, commercial contracts, licensing, real estate, employment, corporate
and board of directors governance. Previously she held senior positions with Charles River Laboratories, International,
Sapient Corporation and Harcourt General. Ms. Gray began her legal career at WilmerHale in Boston where she
specialized in mergers and acquisitions, public offerings and SEC compliance matters. She also currently serves on the
Board of Directors for The Home for Little Wanderers, serving as Secretary and a member of the Executive Committee,
is a Trustee Emerita of Colby College, and a former Overseer of the Boston Symphony Orchestra.
24
Charles J. Brophy III was appointed Director of the Company on April 5, 2023. Mr. Brophy joins the Board
with over 30 years of experience in the insurance industry. He has spent the last 22 years with HUB International, where
he currently serves as the Regional President (U.S. East) and his extensive commercial and personal sales development
and management experience. Prior to joining HUB International, Mr. Brophy was a Director at Bain Hogg Robinson,
LLC, and began his career in commercial lines underwriting with the Travelers Insurance Company. Mr. Brophy was the
2016 Massachusetts Insurance Professional of the Year and has served on various advisory councils for The Hartford
Insurance Group, Arbella Mutual Insurance, the Hanover Insurance Group, and the Travelers Insurance Company. He is
also a member at the Insurance Library Association of Boston.
Dennis J. Langwell was appointed Director of the Company on April 5, 2023. Mr. Langwell is a retired senior
executive of Liberty Mutual Insurance, a Fortune 100 company, where he worked more than 25 years in various
executive, strategic and financial positions, until his retirement in 2021. His most recent position was Vice Chairman of
Insurance Operations, and prior to that he was President of Global Risk Solutions, where he led Liberty’s $20 billion
global commercial (re) insurance business. Prior to his role as President of Global Risk Solutions, Mr. Langwell served
as Executive Vice President and Chief Financial Officer from 2003 to 2018. Mr. Langwell began his career at KPMG
and has over 40 years of insurance and finance experience. Mr. Langwell also serves on the boards of James River Group
and Companion Protect and on the Advisory Board of Owl.co. He is also a trustee of Providence College, where he
received his Bachelor of Science in Accounting, and is Chairman of the Board of Trustees of the U.S.S. Constitution
Museum. Mr. Langwell qualifies as an “Audit Committee Financial Expert” as defined by the U.S. SEC rules. Mr.
Langwell has been appointed to serve as a member of the Audit and Compensation Committees.
The Company has adopted a Code of Business Conduct and Ethics (“Code of Ethics”) that applies to all
employees, including executive officers, and to directors. The Code of Ethics is available on the About Us, Investor
Information page of the Company’s website at www.safetyinsurance.com. If the Company ever were to amend or waive
any provision of its Code of Ethics that applies to the Company’s principal executive officer, principal financial officer,
principal accounting officer or any person performing similar functions, the Company intends to satisfy its disclosure
obligations, if any, with respect to any such waiver or amendment by posting such information on its website set forth
above rather than by filing a Current Report on Form 8-K.
ITEM 1A. RISK FACTORS
An investment in our common stock involves a number of risks. Any of the risks described below could result in
a significant or material adverse effect on our results of operations or financial condition, and a corresponding decline
in the market price of our common stock.
We operate in a heavily regulated industry and are subject to regulations and laws in various jurisdictions:
We are subject to comprehensive government regulation and our ability to earn profits may be restricted by these
regulations.
General Regulation. We are subject to regulation by the state insurance department of each state in which we
do business. In each jurisdiction, we must comply with various laws and regulations, including those involving:
approval or filing of premium rates and policy forms;
limitation of the right to cancel or non-renew policies in some lines;
requirements to participate in residual markets;
licensing of insurers and agents; and
regulation of the right to withdraw from markets or terminate involvement with agencies;
25
We also are subject to enhanced regulation by our domestic regulator, the Division, from which we must obtain
prior approval for certain corporate actions. Among other things, we must comply with laws and regulations governing:
transactions between an insurance company and any of its affiliates;
the payment of dividends;
the acquisition of an insurance company or of any company controlling an insurance company;
solvency standards;
minimum amounts of capital and surplus which must be maintained;
limitations on types and amounts of investments;
restrictions on the size of risks which may be insured by a single company;
deposits of securities for the benefit of policyholders; and
reporting with respect to financial condition.
In addition, insurance department examiners from Massachusetts perform periodic financial and market conduct
examinations of insurance companies. Such regulation is generally intended for the protection of policyholders rather
than security holders.
Massachusetts, New Hampshire and Maine require that all licensed property and casualty insurers bear a portion
of the losses suffered by some insureds as a result of impaired or insolvent insurance companies by participating in each
state’s insolvency fund. Members of the state’s insolvency fund are assessed a proportionate share of the obligations and
expenses of the fund in connection with an insolvent insurer. These assessments are made by the fund to cover the cost
of paying eligible claims of policyholders of these insolvent insurers. Similarly, assessments are made by each state’s
commercial automobile insurance residual market mechanism to recover the shares of net losses that would have been
assessed to the insolvent companies but for their insolvencies. In addition, Massachusetts has established an underwriting
association in order to ensure that property insurance is available for owners of high risk property who are not able to
obtain insurance from private insurers. The losses of this underwriting association, the Massachusetts Property Insurance
Underwriting Association, are shared by all insurers that write property and casualty insurance in Massachusetts. We are
assessed from time to time to pay these losses. The effect of these assessments could reduce our profitability in any given
period and limit our ability to grow our business.
Because we are unable to predict with certainty changes in the political, economic or regulatory environments
of the states in which we operate in the future, there can be no assurance that existing insurance-related laws and
regulations will not become more restrictive in the future or that new restrictive laws will not be enacted and, therefore, it
is not possible to predict the potential effects of these laws and regulations on us.
There are anti-takeover provisions contained in our organizational documents and in laws of the State of Delaware
and the Commonwealth of Massachusetts that could impede an attempt to replace or remove our management or
prevent the sale of our company, which could diminish the value of our common stock.
Our certificate of incorporation, bylaws and the laws of Delaware contain provisions that may delay, deter or
prevent a takeover attempt that shareholders might consider in their best interests. For example, our organizational
documents provide for a classified board of directors with staggered terms and provide for the filling of vacancies on our
board of directors by the vote of a majority of the directors then in office. These provisions will render the removal of the
incumbent board of directors or management more difficult. In addition, these provisions may prevent shareholders from
receiving the benefit of any premium over the market price of our common stock offered by a bidder in a potential
takeover. Even in the absence of a takeover attempt, the existence of these provisions may adversely affect the prevailing
market price of our common stock if they are viewed as discouraging takeover attempts in the future.
26
The Massachusetts insurance law prohibits any person from acquiring control of us, and thus indirect control of
the Insurance Subsidiaries, without the prior approval of the Commissioner. That law presumes that control exists where
any person, directly or indirectly, owns, controls, holds the power to vote or holds proxies representing 10.0% or more of
our outstanding voting stock. Even persons who do not acquire beneficial ownership of more than 10.0% of the
outstanding shares of our common stock may be deemed to have acquired such control if the Commissioner determines
that such control exists in fact. Therefore, any person seeking to acquire a controlling interest in us would face regulatory
obstacles which could delay, deter or prevent an acquisition that shareholders might consider in their best interests.
Section 203 of the General Corporation Law of Delaware, the jurisdiction in which the Company is organized,
may affect the ability of an "interested stockholder" to engage in certain business combinations including mergers,
consolidations or acquisitions of additional shares, for a period of three years following the time that the stockholder
becomes an interested stockholder. An interested stockholder is defined to include persons owning directly or indirectly
15.0% or more of the outstanding voting stock of the corporation.
Our private passenger automobile business is concentrated in in New England:
With a concentration of private passenger automobile insurance, our business may be adversely affected by
conditions in this industry.
Approximately 54.7% of our direct written premiums for the year ended December 31, 2023 were generated
from private passenger automobile insurance policies. As a result of our focus on that line of business, negative
developments in the economic, competitive or regulatory conditions affecting the private passenger automobile insurance
industry could have a material adverse effect on our results of operations and financial condition. In addition, these
developments would have a disproportionate effect on us, compared to insurers which conduct operations in multiple
business lines.
Because we write insurance principally in Massachusetts, our business may be adversely affected by conditions in
Massachusetts, including the impact of additional competitors.
Almost all of our direct written premiums are currently generated in Massachusetts. Our revenues and
profitability are therefore subject to prevailing regulatory, economic, demographic, competitive and other conditions in
Massachusetts. Changes in any of these conditions could make it more costly or difficult for us to conduct our business.
The Massachusetts market has seen an increased level of competition, particularly in the private passenger automobile
insurance line, due to prior changes in regulatory conditions. To date, we have not had a significant decrease in our
private passenger automobile insurance business. However, further competition and adverse results could include loss of
market share, decreased revenue, and/or increased costs.
As writers of property insurance, our Insurance Subsidiaries are exposed to potential losses related to severe
weather:
We have exposure to claims related to severe weather conditions, which may result in an increase in claims frequency
and severity.
We are subject to claims arising out of severe weather conditions, such as rainstorms, snowstorms and
icestorms, that may have a significant effect on our results of operations and financial condition. The incidence and
severity of weather conditions are inherently unpredictable. There is generally an increase in claims frequency and
severity under the private passenger automobile insurance we write when severe weather occurs because a higher
incidence of vehicular accidents and other insured losses tend to occur as a result of severe weather conditions. In
addition, we have exposure to an increase in claims frequency and severity under the homeowners and other property
insurance we write because property damage may result from severe weather conditions.
27
Because some of our insureds live near the Massachusetts coastline, we also have a potential exposure to losses
from hurricanes and major coastal storms such as Nor'easters. Although we purchase catastrophe reinsurance to limit
our exposure to natural catastrophes, in the event of a major catastrophe resulting in property losses to us in excess of
$690,000 our losses would exceed the limits of this reinsurance in addition to losses from our co-participation retention
of a portion of the risk up to $690,000.
Climate change and increasing climate change regulation may adversely impact our results of operations.
There are concerns that the increase in weather-related catastrophes and other losses incurred by the industry in
recent years may be indicative of changing weather patterns. This change in weather patterns could lead to higher overall
losses and higher reinsurance costs. Changes in climate conditions may also cause our underlying modeling data to not
adequately reflect frequency and severity, limiting our ability to effectively evaluate and manage risks of catastrophes
and severe weather events. Among other impacts, this could result in not charging enough premiums or not obtaining
timely state approvals for rate increases to cover the risks we insure. Climate change could also have an impact on
issuers of securities in which we invest, resulting in realized and unrealized losses in future periods which could have a
material adverse impact on our results of operations and/or financial position.
We are also subject to complex and changing laws and regulations relating to climate change which are difficult
to predict and quantify and may have an adverse impact on our business. Changes in regulations relating to climate
change or our own management decisions implemented as a result of assessing the impact of climate change on our
business may result in an increase in the cost of doing business.
We are subject to economic and underwriting market conditions:
The impact of inflation and supply chain delays may increase loss severity.
Economic and market conditions outside of our control, such as inflation and supply chain issues, may
adversely impact our underwriting profitability. Inflation in recent periods has significantly increased our loss costs
across all lines of business, especially private passenger automobile. Inflation higher than the levels that the Company
anticipates could continue to negatively impact our loss costs in future periods. In addition to the impact of inflation on
reserves, on a going forward basis, we may not be able to offset the impact of inflation on our loss costs with sufficient
price increases.
We operate in the highly competitive property and casualty insurance industry:
If we are not able to attract and retain independent agents, it could adversely affect our business.
We market our insurance solely through independent agents. We must compete with other insurance carriers for
the business of independent agents. Some of our competitors offer a larger variety of products, lower prices for insurance
coverage or higher commissions. While we believe that the commissions and services we provide to our agents are
competitive with other insurers, changes in commissions, services or products offered by our competitors could make it
harder for us to attract and retain independent agents to sell our insurance products.
Established competitors with greater resources may make it difficult for us to market our products effectively and
offer our products at a profit.
The property and casualty insurance business is highly competitive and many of our competitors have
substantially greater financial and other resources than we do. We compete with both large national writers and smaller
regional companies. Further, our competitors include other companies which, like us, serve the independent agency
market, as well as companies which sell insurance directly to customers. Direct writers may have certain competitive
advantages over agency writers, including increased name recognition, loyalty of the customer base to the insurer rather
than to an independent agency and, potentially, lower cost structures. A material reduction in the amount of business
28
independent agents sell would directly and negatively affect our profitability and our ability to compete with insurers that
do not rely solely on the independent agency market to sell their products. Further, our Company and others compete on
the basis of the commissions and other cash and non-cash incentives provided to agents. Although a number of national
insurers that are much larger than we are do not currently compete in a material way in the Massachusetts personal auto
market, if one or more of these companies decided to aggressively enter the market it could reduce our share of the
Massachusetts market and thereby have a material adverse effect on us. These companies include some that would be
able to sustain significant losses in order to acquire market share, as well as others which use distribution methods that
compete with the independent agent channel. Progressive Corporation, GEICO and Allstate, large insurers that market
directly to policyholders rather than through agents, along with other carriers have entered the Massachusetts private
passenger automobile insurance market.
We may enter new markets and there can be no assurance that our diversification strategy will be effective.
Although we intend to concentrate on our core businesses in Massachusetts, New Hampshire, and Maine, we
also may seek to take advantage of prudent opportunities to expand our core businesses into other states where we
believe the independent agent distribution channel is strong. As a result of a number of factors, including the difficulties
of finding appropriate expansion opportunities and the challenges of operating in an unfamiliar market, we may not be
successful in this diversification. Additionally, in order to carry out any such strategy we would need to obtain the
appropriate licenses from the insurance regulatory authority of any such state.
The success of our business is subject to operational risks:
We may not be able to successfully alleviate risk through reinsurance arrangements which could cause us to reduce
our premiums written in certain lines or could result in losses.
In order to reduce risk, to increase our underwriting capacity, and mitigate the volatility of losses on our
financial condition and operations, we purchase reinsurance. The availability and the cost of reinsurance protection are
subject to market conditions, which are outside of our control. As a result, we may not be able to successfully alleviate
risk through these arrangements. For example, if reinsurance capacity for homeowner's risks were reduced as a result of
terrorist attacks, climate change or other causes, we might seek to reduce the amount of homeowners business we write.
As a result, the Company may not be able to successfully purchase reinsurance and transfer a portion of the Company’s
risk through reinsurance arrangements. In addition, we are subject to credit risk with respect to our reinsurance because
the ceding of risk to reinsurers does not relieve us of our liability to our policyholders. A significant reinsurer's
insolvency or inability to make payments under the terms of a reinsurance treaty could have a material adverse effect on
our results of operations or financial condition.
As a holding company, Safety Insurance Group, Inc. is dependent on the results of operations of the Safety Insurance
Company.
Safety Insurance Group, Inc. is a company and a legal entity separate and distinct from Safety Insurance
Company, our principal operating subsidiary. As a holding company without significant operations of its own, the
principal sources of Safety Insurance Group, Inc.'s funds are dividends and other distributions from Safety Insurance
Company. Our rights to participate in any distribution of assets of Safety Insurance Company are subject to prior claims
of policyholders, creditors and preferred shareholders, if any, of Safety Insurance Company (except to the extent that our
rights, if any, as a creditor are recognized). Consequently, our ability to pay debts, expenses and cash dividends to our
shareholders may be limited. The ability of Safety Insurance Company to pay dividends is subject to limits under
Massachusetts insurance law. Further, the ability of Safety Insurance Group, Inc. to pay dividends, and our subsidiaries'
ability to incur indebtedness or to use the proceeds of equity offerings, will be subject to limits under our revolving credit
facility.
29
Our failure to maintain a commercially acceptable financial strength rating would significantly and negatively affect
our ability to implement our business strategy successfully.
A.M. Best has currently assigned Safety Insurance an "A (Excellent)" rating. An "A" rating is A.M. Best's third
highest rating, out of 13 possible rating classifications for solvent companies. An "A" rating is assigned to insurers that
in A.M. Best's opinion have an excellent ability to meet their ongoing obligations to policyholders. Moreover, an "A"
rating is assigned to companies that have, on balance, excellent balance sheet strength, operating performance and
business profile when compared to the standards established by A.M. Best. A.M. Best bases its ratings on factors that
concern policyholders and not upon factors concerning investor protection. Such ratings are subject to change and are not
recommendations to buy, sell, or hold securities. An important factor in an insurer's ability to compete effectively is
its A.M. Best rating. Our A.M. Best rating is lower than those of some of our competitors. Any future decrease in our
rating could affect our competitive position.
Our losses and loss adjustment expenses may exceed our reserves, which could significantly affect our business.
The reserves for losses and loss adjustment expenses that we have established are estimates of amounts needed
to pay reported and unreported claims and related expenses based on facts and circumstances known to us as of the time
we established the reserves. Reserves are based on historical claims information, industry statistics and other factors. The
establishment of appropriate reserves is an inherently uncertain process. If our reserves are inadequate and are
strengthened, we would have to treat the amount of such increase as a charge to our earnings in the period that the
deficiency is recognized. As a result of these factors, there can be no assurance that our ultimate liability will not
materially exceed our reserves and have a negative effect on our results of operations or financial condition.
Due to the inherent uncertainty of estimating reserves, it has been necessary, and may over time continue to be
necessary, to revise estimated future liabilities as reflected in our reserves for claims and policy expenses. The historic
development of reserves for losses and loss adjustment expenses may not necessarily reflect future trends in the
development of these amounts. Accordingly, it is not appropriate to extrapolate redundancies or deficiencies based on
historical information.
30
If we lose key personnel, our ability to implement our business strategy could be delayed or hindered.
The loss of key personnel could prevent us from fully implementing our business strategy and could
significantly and negatively affect our financial condition or results of operations. As we continue to grow, we will need
to recruit and retain additional qualified management personnel, and our ability to do so will depend upon a number of
factors, such as our results of operations and prospects and the level of competition then prevailing in the market for
qualified personnel.
Acquisitions may not produce the anticipated benefits and may result in unintended consequences, which could have
a material adverse impact on our financial condition or results of operations.
We may not be able to successfully integrate acquired businesses or achieve the expected synergies as a result
of such acquisitions. The process of integrating an acquired business can be complex and costly and may create
unforeseen operating difficulties that could result in the business performing differently than we expected, including
through the loss of customers or in our failure to realize anticipated increased revenue growth or expense-related
efficiencies.
If our agency business does not perform well, we may be required to recognize an impairment of our goodwill.
Goodwill represents the excess of the amounts we paid to acquire businesses over the fair value of their net
assets at the date of acquisition. We test goodwill at least annually for impairment. Impairment testing is performed
based upon estimates of the fair value of the “reporting unit” to which the goodwill relates. The fair value of the
reporting unit could decrease if new business, customer retention, profitability or other drivers of performance differ
from expectations. If it is determined that the goodwill has been impaired, we must write down the goodwill by the
amount of the impairment, with a corresponding charge to net income (loss). These write downs could have a material
adverse effect on our results of operations or financial condition.
Future sales of shares of our common stock by our existing shareholders in the public market, or the possibility or
perception of such future sales, could adversely affect the market price of our stock.
Investors currently known to be the beneficial owners of greater than 5.0% of our outstanding common stock
hold approximately 50.9% of the common stock of Safety Insurance Group, Inc. on a fully diluted basis. No prediction
can be made as to the effect, if any, that future sales of shares by our existing shareholders, or the availability of shares
for future sale, will have on the prevailing market price of our common stock from time to time. Sales of substantial
amounts of our common stock in the public market by our existing shareholders, or the possibility or perception that
such sales could occur, could cause the prevailing market prices for our common stock to decrease. If such sales reduce
the market price of our common stock, our ability to raise additional capital in the equity markets may be adversely
affected.
A proxy contest with an activist shareholder could cause us to incur significant costs, divert management’s attention
and resources, and have an adverse effect on our business
Activist shareholders may engage in proxy solicitations, advance shareholder proposals or director nominations
or otherwise attempt to affect changes or acquire control over us. Responding to these actions can be costly and time-
consuming and divert the attention of our Board and management from the management of our operations and the pursuit
of our business strategies, particularly if such activist shareholders advocate for actions that are not supported by other
shareholders, our Board or management. In addition, perceived uncertainties as to our future direction may result in the
loss of potential business opportunities, damage to our reputation and may make it more difficult to attract and retain
qualified directors, personnel and business partners. These actions could also cause our stock price to experience periods
of volatility.
31
We are subject to technology, cybersecurity and privacy risks:
Our business depends on the uninterrupted operation of our systems and business functions, including our
information technology, telecommunications and other business systems. Our business continuity and disaster
recovery plans may not sufficiently address all contingencies.
Our business is highly dependent upon our ability to execute, in an efficient and uninterrupted fashion,
necessary business functions, such as processing new and renewal business, providing customer service, and processing
and paying claims. A shut-down of or inability to access our facility, a power outage, or a failure of one or more of our
information technology, telecommunications or other systems could significantly impair our ability to perform such
functions on a timely basis. If sustained or repeated, such a business interruption, systems failure or service denial could
result in a deterioration in the level of service we provide to our agents and policyholders. We have established a
business continuity plan in an effort to ensure the continuation of core business operations in the event that normal
business operations could not be performed due to a catastrophic event. While we continue to test and assess our
business continuity plan to ensure it meets the needs of our core business operations and addresses multiple business
interruption events, there is no assurance that core business operations could be performed upon the occurrence of such
an event, which may result in a material adverse effect on our financial position or results of operations.
We outsource certain business and administrative functions to third parties and may do so increasingly in the
future. If we fail to develop and implement our outsourcing strategies or our third-party providers fail to perform as
anticipated, we may experience operational difficulties, increased costs and a loss of business that may have a material
adverse effect on our results of operations or financial condition.
Our business could be materially and adversely affected by a security breach or other attack involving our computer
systems or the systems of one or more of our agents and vendors.
Our highly automated and networked organization is subject to cyber-terrorism and a variety of other cyber-
security threats. These threats come in a variety of forms, such as viruses and malicious software. Such threats can be
difficult to prevent or detect, and if experienced, could interrupt or damage our operations, harm our reputation or have a
material effect on our operations. Our technology and telecommunications systems are highly integrated and connected
with other networks. Cyber-attacks involving these systems could be carried out remotely and from multiple sources and
could interrupt, damage or otherwise adversely affect the operations of these critical systems. Cyber-attacks could result
in the modification or theft of data, the distribution of false information or the denial of service to users. The risks of
cyber-attacks could be exacerbated by geopolitical tensions, including hostile actions taken by nation-states and terrorist
organizations. We obtain, utilize and maintain data concerning individuals and organizations with which we have a
business relationship. Threats to data security can emerge from a variety of sources and change in rapid fashion, resulting
in the ongoing need to expend resources to secure our data in accordance with customer expectations and statutory and
regulatory requirements.
Our businesses must comply with regulations to control the privacy of customer, employee and third-party data,
and state, federal and international regulations regarding data privacy, are becoming increasingly more onerous. A
misuse or mishandling of confidential or proprietary information could result in legal liability, regulatory action and
reputational harm. We could be subject to liability if confidential customer information is misappropriated from our
technology systems. Despite the implementation of security measures, these systems may be vulnerable to physical
break-ins, computer viruses, programming errors, attacks by third parties or similar disruptive problems. Any well-
publicized compromise of security could deter people from entering into transactions that involve transmitting
confidential information to our systems, which could have a material adverse effect on our business and reputation. We
rely on services and products provided by many vendors. In the event that one or more of our vendors fails to protect
personal information of our customers, claimants or employees, we may incur operational impairments, or could be
exposed to litigation, compliance costs or reputational damage. We maintain cyber-liability insurance coverage to offset
certain potential losses, subject to policy limits, such as liability to others, costs of related crisis management, data
extortion, applicable forensics and certain regulatory defense costs, fines and penalties.
While, to date, we are not aware of having experienced a material breach of our cyber security systems,
32
administrative, internal accounting and technical controls as well as other preventive actions may be insufficient to
prevent physical and electronic break-ins, denial of service, cyber-attacks, business email compromises, ransomware or
other security breaches to our systems or those of third parties with whom we do business.
We believe that we have established and implemented appropriate security measures to provide reasonable
assurance that our information technology systems are secure and appropriate controls and procedures to enable us to
identify and respond to unauthorized access to such systems. While we have not experienced material cyber-incidents to
date, the occurrence and effects of cyber-incidents may remain undetected for an extended period. We periodically
engage third parties to evaluate and test the adequacy of our security measures, controls and procedures. Despite these
security measures, controls and procedures, disruptions to and breaches of our information technology systems are
possible.
We invest in securities which are subject to market risk:
Market fluctuations and changes in interest rates can have significant and negative effects on our investment
portfolio.
Our results of operations depend in part on the performance of our invested assets. As of December 31, 2023,
based upon fair value measurement, 73.9% of our investment portfolio was invested in fixed maturity securities, 16.7%
in equity securities and 9.4% in other invested assets. Certain risks are inherent in connection with debt securities
including loss upon default and price volatility in reaction to changes in interest rates and general market factors.
Changes in interest rates affect the carrying value of our fixed maturity investments and returns on our fixed maturity
investments. A decline in interest rates reduces the returns available on new fixed maturity investments (including those
purchases to re-invest maturities from the existing portfolio), thereby negatively impacting our net investment income on
a going-forward basis, while rising interest rates reduce the market value of existing fixed maturity investments, thereby
negatively impacting our book value.
We have a significant investment portfolio and adverse capital market conditions, including but not limited to
volatility and credit spread changes, will impact the liquidity and value of our investments, potentially resulting in higher
realized or unrealized losses. Values of our investments can also be impacted by reductions in price transparency and
changes in investor confidence and preferences, potentially resulting in higher realized or unrealized losses. If the
carrying value of our investments exceeds the fair value, and the decline in fair value is deemed to be other-than-
temporary, we will be required to write down the value of our investments, which could materially harm our results of
operations or financial condition.
ITEM 1B. UNRESOLVED STAFF COMMENTS
As of the date of this report, the Company had no unresolved comments from the Commission staff regarding
its periodic or current reports under the Exchange Act.
ITEM 1C. CYBERSECURITY
The Company has implemented a cybersecurity program that oversees, assesses, and manages its cybersecurity
risks. As a component of the Company’s formal enterprise risk management program, whose goal is to support the
business objectives and strategy, the cybersecurity program leverages multiple security measures to protect the integrity
of the Company’s information assets. The program's strategy aligns to the National Institute of Standards and
Technology Cybersecurity Control Framework, where controls are implemented throughout our environment to achieve
five categorical objectives of a cybersecurity program, including identification, protection, detection, response, and
recovery.
Our cybersecurity program is regularly assessed to ensure it meets the ever-changing cyber risk
environment. This is accomplished via monthly risk assessment meetings performed by our technical cybersecurity
33
committee, periodic risk assessments and audits performed by internal audit, and cyber tests and assessments performed
by contracted consultants.
Our cybersecurity program includes several methods to protect against intrusion by a bad actor, including such
techniques as reputational filtering, anti-virus scans, intrusion prevention, multi-factor authentication, and account
isolation among others. We also use numerous approaches to detect ransomware and other cyber-attacks, including
among others, dark web searches, email sandboxing, endpoint detection, and intrusion detection. The Company
continuously monitors and enhances its program to respond to evolving cyber threats and changes in the regulatory
environment.
To ensure the effectiveness of the cybersecurity program, we have implemented various assurance methods
including ongoing internal audit control reviews, external reviews by third-party consultants including penetration
testing, and cyber incident response team exercises. Ongoing monitoring of our systems and security metric reviews are
in place to manage external threats. Our cyber monitoring and supporting metrics include such areas as intrusion
detection, phishing attempts, cyber training results, and patch management vulnerabilities. Additionally, the Company
collaborates with industry associations, government authorities, peers, and external advisors to monitor the threat
environment to ensure no gaps exist in our security practices.
A third-party risk management program is in place ensuring those risks associated with our use of vendors to
support our business objectives and strategic initiatives are properly understood and mitigated. Through management’s
oversight, third-party assessments of vendor’s information security practices and protocols, including their readiness to
protect against and respond to cybersecurity breaches are performed. Third-party service providers are categorized into
tiers in consideration of the risk of a vendor’s activities. Vendor due diligence questionnaires are issued seeking to
understand a service provider’s cyber and information security control environment, as well as their resiliency in the
event of an intrusion to their systems. Formalized vendor incident response procedures are in place that support the
activities required should a cyber event occur.
We continue to improve our ability to defend against, respond to, and recover from ransomware and other cyber
events; enhance application cybersecurity capabilities, including defenses against fraud attacks; and to ensure security
capabilities are built into new cloud-based platforms that we adopt. We are also required to maintain strong cyber
defense protocols in the states where we are authorized or licensed to write business. We monitor the status of new
cybersecurity regulations, including notification requirements.
To the best knowledge of management, no risks from cybersecurity threats have materially affected or are
reasonably likely to materially affect the Company, including its business strategy, results of operations, or financial
condition.
Our Board is ultimately responsible for the oversight of risk management strategy, business plan and
management of financial resources. As part of these responsibilities, the Board is apprised, annually and as needed, of
developments in the external environment and business strategies that present increased cyber risk exposure to the
Company. On a weekly basis, The Vice President of Management Information Services (“VP of MIS”) meets with the
Chairman of the Board of Directors, President and Chief Executive Officer (“Chairman, President and CEO”), to discuss
developments with the Company’s IT environment, including its cybersecurity program. The Chairman, President and
CEO would then inform the Board of those developments, as needed. The Board has delegated oversight of
cybersecurity risk management to the Audit Committee of the Board of Directors.
The Audit Committee meets on a quarterly basis. A set agenda of risk matters includes detailed updates of the
Company’s preparedness and significant cybersecurity activities. The topics covered by these updates have included
discussions of policies and procedures to prevent, detect and respond to cybersecurity incidents, modifications to on-line
platforms, and the use of cloud-based applications. Lessons learned from cybersecurity incidents and the internal and
external testing of our cyber defenses are provided quarterly. The Board is also provided with an annual cybersecurity
technology risk and control update.
34
A management level risk committee exists and oversees the management of the Company’s highest-level risks,
including cybersecurity. This committee consists of representatives from the Risk, Financial, Underwriting, Information
Technology and Legal Departments. The Risk Committee, as supported by the Cybersecurity Committee, is responsible
for keeping the audit committee apprised of the Company’s cybersecurity preparedness and cyber incidents. The
Cybersecurity Committee oversees and ensures the Company’s cyber-related controls are sufficient to protect the
Company’s information and proprietary assets, in accordance with the acceptable risk policies and risk tolerances.
The VP of MIS has expertise assessing and managing cybersecurity risks, and is a member of both the Risk
Committee and Cybersecurity Committee. He has served in his current role since 2014 and has held several senior-level
information technology roles in his 31-year tenure with the Company. In his various roles, he has been responsible for
providing senior leadership in the areas of information security, IT governance risk & compliance, business continuity,
and disaster recovery.
ITEM 2. PROPERTIES
We conduct most of our operations in approximately 72 thousand square feet of leased space at 20 Custom
House Street in downtown Boston, Massachusetts. Our lease will expire on December 31, 2028. This real estate space
was remodeled in 2018 and included capital expenditures to update lighting as well as heating, ventilation and air
condition systems with state of the art and environmentally focused technologies.
ITEM 3. LEGAL PROCEEDINGS
Our Insurance Subsidiaries are parties to a number of lawsuits arising in the ordinary course of their insurance
business. We believe that the ultimate resolution of these lawsuits will not, individually or in the aggregate, have a
material adverse effect on our financial condition.
On October 19, 2021, the Supreme Judicial Court of Massachusetts (the “SJC”) unanimously ruled that property
and casualty insurers must compensate third-party claimants under property damage coverage, part 4 of the standard
Massachusetts automobile insurance policy, 2008 edition (standard policy), for the inherent diminished value (“IDV”)
that occurs when their vehicles are damaged in a crash. This ruling overturned a previous decision by the Massachusetts
Superior Court (the “Superior Court”), which found that a Massachusetts auto insurance policy did not provide property
damage coverage for inherent diminished value damages for third-party claimants. The SJC placed the burden of proof
on the individual claimant by explicitly specifying that the claimant must establish that the vehicle has suffered IDV
damages and also the amount of IDV damages at issue. The SJC further ruled that an insurer’s previous denial of
coverage for such damages could not serve as the basis for a claim of unfair business practices. On June 20, 2023, the
Superior Court denied a motion brought by the plaintiffs seeking class certification. The plaintiffs have since filed a
motion to amend the complaint, seeking to address the concerns raised by the Superior Court in denying their motion for
class certification; Safety has opposed the motion to amend the complaint, which has yet to be heard or ruled on by the
Superior Court. Based on the SJC’s rulings, at this time the Company does not expect any claims for IDV damages to be
material, and therefore has not accrued for a specific loss contingency.
ITEM 4. MINE SAFETY DISCLOSURES
Not Applicable
35
PART II.
ITEM 5. MARKET FOR THE REGISTRANT'S COMMON EQUITY, RELATED STOCKHOLDER MATTERS
AND ISSUER PURCHASES OF EQUITY SECURITIES
As of February 13, 2024, there were 22 holders of record of the Company's common stock, par value $0.01 per
share, and we estimate another 17,519 held in "Street Name."
The closing price of the Company's common stock on February 13, 2024 was $83.25 per share. The Company’s
common stock trades on the NASDAQ stock exchange under the symbol SAFT.
During 2023 and 2022, the Company’s Board declared four quarterly cash dividends to shareholders, which
were paid and accrued in the amounts of $52,992 and $52,995, respectively. On February 21, 2024, the Company's
Board of Directors declared a quarterly cash dividend of $0.90 per share to shareholders of record on March 1, 2024
payable on March 15, 2024. The Company plans to continue to declare and pay quarterly cash dividends in 2024,
depending on the Company's financial position and the regularity of its cash flows.
The Company relies on dividends from its Insurance Subsidiaries for a portion of its cash requirements. The
payment by the Company of any cash dividends to the holders of common stock therefore depends on the receipt of
dividend payments from its Insurance Subsidiaries. The payment of dividends by the Insurance Subsidiaries is subject to
limitations imposed by Massachusetts law, as discussed in Item 1—Business, Supervision and Regulation, Insurance
Regulation Concerning Dividends, and also in Item 7—Management's Discussion and Analysis of Financial Condition
and Results of Operations, Liquidity and Capital Resources.
The information called for by Item 201 (d) of Regulation S-K regarding securities authorized for issuance under
equity compensation plans will be contained in the Company's Proxy Statement for its Annual Meeting of Shareholders,
which the Company intends to file with the U.S. Securities and Exchange Commission within 120 days after
December 31, 2023 (the Company's fiscal year end), and such information is incorporated herein by reference.
For information regarding our share repurchase program, refer to Item 8—Financial Statements and
Supplementary Data, Note 14, Share Repurchase Program, of this Form 10-K.
COMMON STOCK PERFORMANCE GRAPH
Set forth below is a line graph comparing the dollar change in the cumulative total shareholder return on the
Company's Common Stock, for the period beginning on December 31, 2018 and ending on December 31, 2023 with the
cumulative total return of the NASDAQ Stock Market Index and a peer group comprised of seven selected property &
casualty insurance companies over the same period. The peer group consists of Donegal Group, Inc., Erie Indemnity
Company, Horace Mann Educators Corporation, The Hanover Insurance Group, Inc., Mercury General Corp., Selective
Insurance Group, Inc., and United Fire Group. Note that this peer group has changed from prior years due to acquisition
activity. The graph shows the change in value of an initial one hundred dollar investment over the period indicated,
assuming re-investment of all dividends.
36
Comparative Cumulative Total Returns since December 31, 2018 Among
Safety Insurance Group, Inc.,
Property & Casualty Insurance Peer Group and the NASDAQ Stock Market Index
The foregoing performance graph and data shall not be deemed "filed" as part of this Form 10-K for purposes of
Section 18 of the Securities Exchange Act of 1934 or otherwise subject to the liabilities of that section and should not be
deemed incorporated by reference into any other filing of the Company under the Securities Act of 1933 or the Securities
Exchange Act of 1934, except to the extent the Company specifically incorporates it by reference into such filing.
37
ISSUER PURCHASES OF EQUITY SECURITIES
On February 23, 2022, the Board of Directors approved an additional share repurchase of up to $50,000 of the
Company’s outstanding common shares. The Board of Directors has cumulatively authorized increases to the existing
share repurchase program of up to $200,000 of its outstanding common shares. Under the program, the Company may
repurchase shares of its common stock for cash in public or private transactions, in the open market or otherwise. The
timing of such repurchases and actual number of shares repurchased will depend on a variety of factors including price,
market conditions and applicable regulatory and corporate requirements. The program does not require the Company to
repurchase any specific number of shares and it may be modified, suspended or terminated at any time without prior
notice. No shares were repurchased during the three months ended December 31, 2023.
Maximum number of
shares that may yet be purchased under the
plans or programs
703,971
703,971
703,971
Total number Average Total number of shares purchased as part of
Period
October 1-31, 2023
November 1-30, 2023
December 1-31, 2023
Total
of Shares
purchase
price paid
per share
—
—
—
—
—
— $
—
— $
publicly announced
plans or programs
—
—
—
—
38
ITEM 6. [RESERVED]
ITEM 7. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
OPERATIONS
The following discussion should be read in conjunction with our accompanying consolidated financial
statements and notes thereto, which appear elsewhere in this document. In this discussion, all dollar amounts are
presented in thousands, except share and per share data.
The following discussion contains forward-looking statements. We intend statements which are not historical in
nature to be, and are hereby identified as “forward-looking statements” to be covered by the safe harbor provisions of
the Private Securities Litigation Reform Act of 1995. In addition, the Company’s senior management may make forward-
looking statements orally to analysts, investors, the media and others. This safe harbor requires that we specify
important factors that could cause actual results to differ materially from those contained in forward-looking statements
made by or on behalf of us. We cannot promise that our expectations in such forward-looking statements will turn out to
be correct. Our actual results could be materially different from and worse than our expectations. See “Forward-
Looking Statements” below for specific important factors that could cause actual results to differ materially from those
contained in forward-looking statements.
Executive Summary and Overview
In this discussion, “Safety” refers to Safety Insurance Group, Inc. and “our Company,” “we,” “us” and “our”
refer to Safety Insurance Group, Inc. and its consolidated subsidiaries. Our subsidiaries consist of Safety Insurance
Company (“Safety Insurance”), Safety Indemnity Insurance Company (“Safety Indemnity”), Safety Property and
Casualty Insurance Company (“Safety P&C”), Safety Northeast Insurance Company (“Safety Northeast”), Safety
Northeast Insurance Agency, Inc. (“SNIA”), and Safety Management Corporation (“SMC”), which is SNIA’s holding
company.
We are a leading provider of private passenger automobile (54.7% of our direct written premiums in 2023),
commercial automobile, (15.9% of 2023 direct written premiums), and homeowners (24.5% of 2023 direct written
premiums) insurance. In addition to these coverages, we offer a portfolio of other insurance products, including dwelling
fire, umbrella and business owner policies (totaling 4.9% of 2023 direct written premiums). Operating exclusively in
Massachusetts, New Hampshire and Maine through our insurance company subsidiaries, Safety Insurance, Safety
Indemnity, Safety P&C, and Safety Northeast (together referred to as the “Insurance Subsidiaries”), we have established
strong relationships with independent insurance agents, who numbered 834 in 1,090 locations throughout these three
states during 2023. We have used these relationships and our extensive knowledge of the market to become the third
largest private passenger automobile carrier and the second largest commercial automobile carrier in Massachusetts,
capturing an approximate 8.7% and 12.7% share, respectively, of the Massachusetts private passenger and commercial
automobile markets in 2023, according to statistics compiled by the Commonwealth Automobile Reinsurers (“CAR”)
based on automobile exposures. We are the fourth largest homeowners insurance carrier in Massachusetts, with a market
share of 6.2% in 2022.
A.M. Best, which rates insurance companies based on factors of concern to policyholders, currently assigns
Safety Insurance an “A (Excellent)” rating. Our “A” rating was reaffirmed by A.M. Best on June 15, 2023.
Our Insurance Subsidiaries began writing insurance in New Hampshire during 2008 and Maine in 2016. In
November 2020, we formed a fourth insurance subsidiary, Safety Northeast, which became licensed to write insurance
products in Massachusetts. The table below shows the amount of direct written premiums in each state during the years
ended December 31, 2023, 2022, and 2021.
39
Direct Written Premiums
Massachusetts
New Hampshire
Maine
Total
Recent Events
Years Ended December 31,
2023
2022
2021
941,721
42,762
6,741
991,224
$
$
782,790
36,519
4,009
823,318
$
$
765,007
34,261
2,871
802,139
$
$
Beginning on February 2, 2023 and through February 5, 2023, the Northeast region experienced a severe winter
weather event (“February Winter Freeze”) over a thirty-six hour period, whereby temperatures reached lows of negative
40 degrees Fahrenheit, including windchill. As a result of the February Winter Freeze, the Company received
approximately 800 claims totaling $29,543 of losses and loss adjustment expenses for the year ended December 31,
2023.
On the morning of December 18, 2023, the Northeast region experienced a severe weather event (“December
Wind Storm”) comprising heavy rain and hurricane-strength winds. This event broke forty-five-year-old wind gust
records, with wind gusts reaching 90 miles per hour. As a result of the December Wind Event, the Company received
approximately 1,000 claims totaling $11,635 of losses and loss adjustment expenses for the year ended December 31,
2023.
Losses and Loss Adjustment Expenses
Losses and loss adjustment expenses incurred for the three months ended December 31, 2023 increased by
$40,076, or 30.4%, to $172,105 from $132,029 for the comparable 2022 period. Losses and loss adjustment expenses
incurred for the year ended December 31, 2023 increased by $150,323, or 30.6%, to $642,302 from $491,979 for the
comparable 2022 period. The increase in losses for the three months ended December 31, 2023 is due to continued
inflationary impacts on our Private Passenger Automobile line of business and the December Wind Storm. The increase
in losses for the year ended December 31, 2023 also included the February Winter Freeze and increased total automobile
losses due to multiple flood events, and a separate high wind event that impacted our Homeowners line of business.
Loss, expense, and combined ratios calculated under U.S. generally accepted accounting principles for the
quarter ended December 31, 2023 were 76.1%, 30.4%, and 106.5%, respectively, compared to 68.4%, 32.3%, and
100.7%, respectively, for the comparable 2022 period. Loss, expense, and combined ratios calculated under U.S.
generally accepted accounting principles for the year ended December 31, 2023 were 77.0%, 30.7%, and 107.7%,
respectively, compared to 64.9%, 32.3%, and 97.2%, respectively, for the comparable 2022 period. The 2023 increase in
loss ratio is primarily due to the factors that increased losses and loss adjustment expenses. The 2023 decrease in the
expense ratios in both periods is primarily driven by a decrease in contingent commission expense.
We define a “catastrophe” as an event that produces pre-tax losses before reinsurance in excess of $1,000 and
involves multiple first-party policyholders, or an event that produces a number of claims in excess of a preset, per-event
threshold of average claims in a specific area, occurring within a certain amount of time following the event.
Catastrophes are caused by various natural events including high winds, winter storms, tornadoes, hailstorms, and
hurricanes. The nature and level of catastrophes in any period cannot be reliably predicted.
40
Catastrophe losses incurred by the type of event are shown in the following table.
Event
Freeze
Windstorms and hailstorms
Total losses incurred (1)
Years Ended December 31,
2023
2022
2021
$
$
$
29,543
11,635
41,178
$
$
$
-
-
-
$
$
$
-
11,677
11,677
(1) Total losses incurred include losses plus defense and cost containment expenses and excludes adjusting and other claims settlement
expenses.
Direct and Net Written Premiums
For the quarter ended December 31, 2023, the Company achieved its fifth consecutive quarter of double-digit
growth in direct and net written premiums. For the three months ended December 31, 2023, direct written premium
growth and net written premium growth were 22.2% and 20.7%, respectively. For the year ended December 31, 2023,
direct written premium growth and net written premium growth were 20.4% and 19.6%, respectively. The increase in
premium is driven by new business production, improved retention, and rate increases. For the year ended December 31,
2023, the Company achieved exposure count growth across all lines of business, including 14.7%, 5.4% and 11.2% in
Private Passenger Automobile, Commercial Automobile and Homeowners lines, respectively, compared to the same
period in 2022. Additionally, for the year ended December 31, 2023, average written premium per exposure increased
10.8%, 3.8% and 4.5% in Private Passenger Automobile, Commercial Automobile and Homeowners lines, respectively,
compared to the same period in 2022.
The following rate changes have been filed and approved by the insurance regulators of Massachusetts, New
Hampshire and Maine in 2024, 2023 and 2022.
Line of Business
New Hampshire Private Passenger Automobile
Massachusetts Private Passenger Automobile
New Hampshire Commercial Automobile
New Hampshire Homeowners
Maine Private Passenger Automobile
New Hampshire Private Passenger Automobile
Massachusetts Homeowners
Massachusetts Private Passenger Automobile
Massachusetts Commercial Automobile
Massachusetts Private Passenger Automobile
New Hampshire Commercial Automobile
New Hampshire Homeowners
New Hampshire Private Passenger Automobile
Massachusetts Homeowners
Statutory Accounting Principles
Effective Date
April 1, 2024
January 1, 2024
November 1, 2023
October 1, 2023
October 1, 2023
September 1, 2023
August 1, 2023
July 1, 2023
May 1, 2023
December 1, 2022
September 1, 2022
September 1, 2022
September 1, 2022
July 1, 2022
Rate Change
3.4%
3.5%
7.9%
6.0%
7.3%
6.5%
3.9%
4.3%
4.0%
3.5%
5.8%
3.5%
2.8%
2.6%
Our results are reported in accordance with generally accepted accounting principles (“GAAP”), which differ
from amounts reported in accordance with statutory accounting principles ("SAP") as prescribed by insurance regulatory
authorities, which in general reflect a liquidating, rather than going concern concept of accounting. Specifically, under
GAAP:
Policy acquisition costs such as commissions, premium taxes and other variable costs incurred which are
directly related to the successful acquisition of a new or renewal insurance contract are capitalized and
amortized on a pro rata basis over the period in which the related premiums are earned, rather than expensed as
incurred, as required by SAP.
41
Certain assets are included in the consolidated balance sheets whereas, under SAP, such assets are designated as
"nonadmitted assets," and charged directly against statutory surplus. These assets consist primarily of premium
receivables that are outstanding over ninety days, federal deferred tax assets in excess of statutory limitations,
furniture, equipment, leasehold improvements and prepaid expenses.
Amounts related to ceded reinsurance are shown gross of ceded unearned premiums and reinsurance
recoverables, rather than netted against unearned premium reserves and loss and loss adjustment expense
reserves, respectively, as required by SAP.
Fixed maturities securities, which are classified as available-for-sale, are reported at current fair values, rather
than at amortized cost, or the lower of amortized cost or market, depending on the specific type of security, as
required by SAP.
The differing treatment of income and expense items results in a corresponding difference in federal income tax
expense. Changes in deferred income taxes are reflected as an item of income tax benefit or expense, rather than
recorded directly to surplus as regards policyholders, as required by SAP. Admittance testing may result in a
charge to unassigned surplus for non-admitted portions of deferred tax assets. Under GAAP reporting, a
valuation allowance may be recorded against the deferred tax asset and reflected as an expense.
Insurance Ratios
The property and casualty insurance industry uses the combined ratio as a measure of underwriting
profitability. The combined ratio is the sum of the loss ratio (losses and loss adjustment expenses incurred as a percent
of net earned premiums) plus the expense ratio (underwriting and other expenses as a percent of net earned premiums,
calculated on a GAAP basis). The combined ratio reflects only underwriting results and does not include income from
investments or finance and other service income. Underwriting profitability is subject to significant fluctuations due to
competition, catastrophic events, weather, economic and social conditions, and other factors.
Our GAAP insurance ratios are presented in the following table for the periods indicated.
GAAP ratios:
Loss ratio
Expense ratio
Combined ratio
Share-Based Compensation
2023
Years Ended December 31,
2022
2021
77.0 %
30.7
107.7 %
64.9 %
32.3
97.2 %
59.6 %
33.4
93.0 %
On March 24, 2022, the Company’s Board of Directors adopted the Amended and Restated Safety Insurance
Group, Inc. 2018 Long-Term Incentive Plan (the “Amended 2018 Plan”), which was subsequently approved by our
shareholders at the 2022 Annual Meeting of Shareholders. The Amended 2018 Plan increases the share pool limit by
adding 350,000 common shares to the previously adopted Safety Insurance Group, Inc. 2018 Long-Term Incentive Plan.
The Amended 2018 Plan enables the grant of stock awards, performance shares, cash-based performance units, other
stock-based awards, stock options, stock appreciation rights, and stock unit awards, each of which may be granted
separately or in tandem with other awards. Eligibility to participate includes officers, directors, employees and other
individuals who provide bona fide services to the Company. The Amended 2018 Plan supersedes the Company’s 2002
Management Omnibus Incentive Plan (“the 2002 Incentive Plan”).
The Amended 2018 Plan establishes a pool of 700,000 shares of common stock available for issuance to our
employees and other eligible participants. The Board of Directors and the Compensation Committee intend to issue
awards under the Amended 2018 Plan in the future.
42
The maximum number of shares of common stock between both the 2018 Amended Plan and 2002 Incentive
Plan with respect to which awards may be granted is 3,200,000. No further grants will be allowed under the 2002
Incentive Plan. At December 31, 2023, there were 373,422 shares available for future grant. Grants outstanding under the
plans as of December 31, 2023, were comprised of 145,920 restricted shares.
Grants made under the Incentive Plan during the years 2021 through 2023 were as follows.
Type of
Equity
Awarded
RS - Service
RS - Performance
RS
RS - Performance
RS - Service
RS - Performance
RS
RS
RS - Performance
RS - Service
RS - Performance
RS - Performance
RS
RS
Effective Date
February 24, 2021
February 24, 2021
February 24, 2021
February 24, 2021
February 23, 2022
February 23, 2022
February 23, 2022
March 24, 2022
February 23, 2022
February 23, 2023
February 23, 2023
February 23, 2023
February 23, 2023
May 17, 2023
Number of
Awards
Granted
Fair
Value per
Share (1)
33,840
29,422
6,000
20,038
31,864
26,037
5,000
2,000
5,791
33,101
25,990
4,703
6,000
1,000
$
$
$
$
$
$
$
$
$
$
$
$
$
$
Vesting Terms
3 years, 30%-30%-40%
3 years, cliff vesting (3)
3 years, 30%-30%-40%
3 years, cliff vesting (3)
79.27
79.27
79.27 No vesting period (2)
79.27 No vesting period (4)
84.98
84.98
84.98 No vesting period (2)
89.63 No vesting period (2)
84.98 No vesting period (4)
80.24
80.24
80.24
80.24 No vesting period (2)
71.78 No vesting period (2)
3 years, 30%-30%-40%
3 years, cliff vesting (3)
3 years, cliff vesting (4)
(1) The fair value per share of the restricted stock grant is equal to the closing price of our common stock on the grant date.
(2) Board of Director members must maintain stock ownership equal to at least four times their annual cash retainer. This requirement must be met
within five years of becoming a director.
(3) The shares represent performance-based restricted shares award. Vesting of these shares is dependent upon the attainment of pre-established
performance objectives, and any difference between shares granted and shares earned at the end of the performance period will be reported at the
conclusion of the performance period.
(4) The shares represent a true-up of previously awarded performance-based restricted share awards. The updated shares were calculated based on the
attainment of pre-established performance objectives and granted under the Amended 2018 Plan.
Reinsurance
We reinsure with other insurance companies a portion of our potential liability under the policies we have
underwritten, thereby protecting us against an unexpectedly large loss or a catastrophic occurrence that could produce
large losses, primarily in our homeowners line of business. We use various software products to measure our exposure
to catastrophe losses and the probable maximum loss to us for catastrophe losses such as hurricanes. The models include
estimates for our share of the catastrophe losses generated in the residual market for property insurance by the FAIR
Plan. The reinsurance market has seen from the various software modelers, increases in the estimate of damage from
hurricanes in the southern and northeast portions of the United States due to revised estimations of increased hurricane
activity and increases in the estimation of demand surge in the periods following a significant event. We continue to
manage and model our exposure and adjust our reinsurance programs as a result of the changes to the models. As of
January 1, 2023, we purchased three layers of excess catastrophe reinsurance providing $590,000 of coverage for
property losses in excess of $75,000 up to a maximum of $665,000. Our reinsurers’ co-participation is 75.0% of
$75,000 for the 1st layer, 75.0% of $250,000 for the 2nd layer, and 75.0% of $265,000 for the 3rd layer. As a result of
the changes to the models, our catastrophe reinsurance in 2023 protects us in the event of a “121-year storm” (that is, a
storm of a severity expected to occur once in a 121-year period). Most of our reinsurers have an A.M. Best rating of
“A+” (Superior) or “A” (Excellent).
We are a participant in CAR, a state-established body that runs the residual market reinsurance programs for
commercial automobile insurance in Massachusetts under which premiums, expenses, losses and loss adjustment
expenses on ceded business are shared by all insurers writing commercial automobile insurance in Massachusetts. We
also participate in the Massachusetts Property Insurance Underwriting Association (“FAIR Plan”), in which premiums,
43
expenses, losses and loss adjustment expenses on homeowners business that cannot be placed in the voluntary market are
shared by all insurers writing homeowners insurance in Massachusetts. The FAIR Plan buys reinsurance to reduce their
exposure to catastrophe losses. On July 1, 2023, the FAIR Plan purchased $1,600,000 of catastrophe reinsurance for
property losses with retention of $100,000.
We also had $133,551 due from CAR comprising of loss and loss adjustment expense reserves, unearned
premiums and reinsurance recoverables.
Non-GAAP Measures
Management has included certain non-generally accepted accounting principles (“non-GAAP”) financial
measures in presenting the Company’s results. Management believes that these non-GAAP measures better explain the
Company’s results of operations and allow for a more complete understanding of the underlying trends in the Company’s
business. These measures should not be viewed as a substitute for those determined in accordance with GAAP. In
addition, our definitions of these items may not be comparable to the definitions used by other companies.
Non-GAAP operating income and non-GAAP operating income per diluted share consist of our GAAP net
income adjusted by the net realized gains on investments, net impairment losses on investments, changes in net
unrealized gains on equity securities, credit loss benefit (expense) and taxes related thereto. Net income and earnings per
diluted share are the GAAP financial measures that are most directly comparable to non-GAAP operating income and
non-GAAP operating income per diluted share, respectively. A reconciliation of the GAAP financial measures to these
non-GAAP measures is included in the financial highlights below.
The following table shows certain of our selected financial results.
Results of Operations
Direct written premiums
Net written premiums
Net earned premiums
Net investment income
Earnings from partnership investments
Net realized gains on investments
Change in net unrealized (losses) gains on equity investments
Credit loss (expense) benefit
Commission income
Finance and other service income
Total revenue
Loss and loss adjustment expenses
Underwriting, operating and related expenses
Other expense
Interest expense
Total expenses
Income before income taxes
Income tax expense
Net income
Earnings per weighted average common share:
Basic
Diluted
Cash dividends paid per common share
44
Years Ended December 31,
2022
2023
991,224
925,295
834,414
56,377
5,540
1,327
7,502
(530)
6,932
19,394
930,956
642,302
256,580
6,836
818
906,536
24,420
5,545
18,875
1.28
1.28
3.60
$
$
$
$
$
$
$
823,318
773,735
758,505
46,725
12,484
9,190
(44,386)
14
566
14,461
797,559
491,979
245,145
330
524
737,978
59,581
13,020
46,561
3.17
3.15
3.60
$
$
$
$
$
$
$
$
$
$
$
$
$
$
2021
802,139
764,526
774,328
44,135
19,829
14,885
16,130
363
—
15,241
884,911
461,727
258,392
—
522
720,641
164,270
33,560
130,710
8.85
8.80
3.60
Reconciliation of Net Income to Non-GAAP Operating Income:
Net income
Exclusions from net income:
Net realized gains on investments
Change in net unrealized (losses) gains on equity investments
Credit loss expense (benefit)
Income tax benefit
Non-GAAP Operating income
Net income per diluted share
Exclusions from net income:
Net realized gains on investments
Change in net unrealized losses (gains) on equity investments
Credit loss expense (benefit)
Income tax benefit
Non-GAAP Operating income per diluted share
$
18,875
$
46,561
$
130,710
(1,327)
(7,502)
530
1,743
12,319
1.28
(0.09)
(0.51)
0.04
0.12
0.84
$
$
$
(9,190)
44,386
(14)
(7,388)
74,355
$
3.15
$
(0.62)
3.02
-
(0.50)
5.05
$
(14,885)
(16,130)
(363)
6,589
105,921
8.80
(1.00)
(1.08)
(0.02)
0.44
7.14
$
$
$
YEAR ENDED DECEMBER 31, 2023 COMPARED TO YEAR ENDED DECEMBER 31, 2022
Direct Written Premiums. Direct written premiums for the year ended December 31, 2023 increased by
$167,906, or 20.4%, to $991,224 from $823,318 for the comparable 2022 period. The increase in direct written premium
is the result of new business production, improved retention, and rate increases. For the year ended December 31, 2023,
the Company achieved exposure count growth across all lines of business, including 14.7%, 5.4% and 11.2% in Private
Passenger Automobile, Commercial Automobile and Homeowners lines, respectively, compared to the same period in
2022. Additionally, for the year ended December 31, 2023, average written premium per exposure increased 10.8%,
3.8% and 4.5% in Private Passenger Automobile, Commercial Automobile and Homeowners lines, respectively,
compared to the same period in 2022.
Net Written Premiums. Net written premiums for the year ended December 31, 2023 increased by $151,560, or
19.6%, to $925,295 from $773,735 for the comparable 2022 period. The 2023 increase was primarily due to the factors
that increased direct written premiums.
Net Earned Premiums. Net earned premiums for the year ended December 31, 2023 increased by $75,909, or
10.0%, to $834,414 from $758,505 for the comparable 2022 period.
The effect of reinsurance on net written and net earned premiums is presented in the following table.
Written Premiums
Direct
Assumed
Ceded
Net written premiums
Earned Premiums
Direct
Assumed
Ceded
Net earned premiums
Year Ended December 31,
2023
2022
$
$
$
$
991,224
30,850
(96,779)
925,295
897,598
29,702
(92,886)
834,414
$
$
$
$
823,318
28,835
(78,418)
773,735
803,289
28,976
(73,760)
758,505
Net Investment Income. Net investment income for the year ended December 31, 2023 increased by $9,652, or
20.7%, to $56,377 from $46,725 for the comparable 2022 period. The increase is a result of increases in interest rates on
our fixed maturity portfolio as compared to the prior year. Net effective annual yield on the investment portfolio was
45
4.0% for the year ended December 31, 2023, compared to 3.2% for comparable 2022 period. Our duration was 3.6 years
at December 31, 2023, compared to 3.8 years at December 31, 2022.
Earnings from Partnership Investments. Earnings from partnership investments were $5,540 for the year ended
December 31, 2023 compared to $12,484 for the year ended December 31, 2022. The 2023 earnings reflect a decrease in
investment appreciation and timing of cash proceeds received compared to the prior year. Timing and generation of
these returns on capital can vary based on the results and transactions of the underlying partnerships.
Net Realized Gains on Investments. Net realized gains on investments were $1,327 for the year ended
December 31, 2023 compared to $9,190 for the comparable 2022 period.
The gross unrealized gains and losses on investments in fixed maturity securities, including redeemable
preferred stocks that have characteristics of fixed maturities, equity securities, including interests in mutual funds, and
other invested assets were as follows:
As of December 31, 2023
Cost or
Amortized
Cost
Allowance for
Expected Credit
Losses
Gross Unrealized
Gains
Losses (3)
Estimated
Fair
Value
U.S. Treasury securities
Obligations of states and political subdivisions
Residential mortgage-backed securities (1)
Commercial mortgage-backed securities
Other asset-backed securities
Corporate and other securities
Subtotal, fixed maturity securities
Equity securities (2)
Other invested assets (4)
Totals
$
$
2,420
38,682
267,271
153,923
64,043
594,343
1,120,682
221,809
133,946
1,476,437
$
$
— $
—
—
—
—
(1,208)
(1,208)
—
—
(1,208) $
15
262
1,947
200
216
3,784
6,424
25,707
—
32,131
$
$
(115) $
(2,421)
(21,979)
(14,273)
(2,927)
(32,038)
(73,753)
(9,494)
—
(83,247) $
2,320
36,523
247,239
139,850
61,332
564,881
1,052,145
238,022
133,946
1,424,113
(1) Residential mortgage-backed securities consists of obligations of U.S. Government agencies including collateralized mortgage obligations issued,
guaranteed and/or insured by the following issuers: Government National Mortgage Association (GNMA), Federal Home Loan Mortgage Corporation
(FHLMC), Federal National Mortgage Association (FNMA) and the Federal Home Loan Bank (FHLB).
(2) Equity securities include common stock, preferred stock, mutual funds and interests in mutual funds held to fund the Company’s executive
deferred compensation plan.
(3) Our investment portfolio included 861 securities in an unrealized loss position at December 31, 2023.
(4) Other invested assets are accounted for under the equity method which approximated fair value.
The composition of our fixed income security portfolio by rating was as follows:
U.S. Treasury securities and obligations of U.S. Government agencies
Aaa/Aa
A
Baa
Ba
B
Caa/Ca
Not rated
Total
As of December 31, 2023
Estimated
Fair Value
Percent
$
$
247,237
212,833
219,018
202,513
47,946
84,681
3,733
34,184
1,052,145
23.5 %
20.2
20.8
19.2
4.6
8.0
0.4
3.3
100.0 %
Ratings are generally assigned upon the issuance of the securities and are subject to revision on the basis of
ongoing evaluations. Ratings in the table are as of the date indicated.
46
As of December 31, 2023, our portfolio of fixed maturity investments was principally comprised of investment
grade corporate fixed maturity securities, U.S. government and agency securities, and asset-backed securities. The
portion of our non-investment grade portfolio of fixed maturity investments is primarily comprised of variable rate
secured and senior bank loans and high yield bonds.
The following table illustrates the gross unrealized losses included in our investment portfolio and the fair value
of those securities, aggregated by investment category. The table also presents the length of time that they have been in
a continuous unrealized loss position of December 31, 2023.
Less than 12 Months
As of December 31, 2023
12 Months or More
Total
U.S. Treasury securities
Obligations of states and political subdivisions
Residential mortgage-backed securities
Commercial mortgage-backed securities
Other asset-backed securities
Corporate and other securities
Subtotal, fixed maturity securities
Equity securities
Total temporarily impaired securities
$
$
Estimated
Fair Value
— $
$
Losses
Losses
Unrealized Estimated Unrealized
Fair Value
1,708
28,893
182,794
130,493
46,600
369,163
759,651
45,797
$ 805,448
— $
17
167
108
224
1,338
1,854
3,079
4,933
115
2,404
21,812
14,165
2,703
30,700
71,899
6,415
78,314
$
$
Estimated
Fair Value
1,708
$
29,296
194,042
134,560
52,573
408,616
820,795
80,069
900,864
$
Unrealized
Losses
$
$
115
2,421
21,979
14,273
2,927
32,038
73,753
9,494
83,247
403
11,248
4,067
5,973
39,453
61,144
34,272
95,416
The Company’s analysis of its fixed maturity portfolio at December 31, 2023 concluded that $1,208 of
unrealized losses were due to credit factors and were recorded as an allowance for expected credit losses at December
31, 2023, compared to $678 at December 31, 2022. The Company concluded that outside of the securities that were
recognized as credit impaired, the unrealized losses recorded on the fixed maturity portfolio at December 31, 2023 and
2022 resulted from fluctuations in market interest rates and other temporary market conditions as opposed to
fundamental changes in the credit quality of the issuers of such securities. Based upon the analysis performed, the
Company’s decision to hold these securities, the Company’s current level of liquidity and our history of positive
operating cash flows, management believes it is more likely than not that it will not be required to sell any of its
securities before the anticipated recovery in the fair value to its amortized cost basis.
Specific qualitative analysis was also performed for securities appearing on our “Watch List,” if any.
Qualitative analysis considered such factors as the financial condition and the near term prospects of the issuer, whether
the debtor is current on its contractually obligated interest and principal payments, changes to the rating of the security
by a rating agency and the historical volatility of the fair value of the security.
The majority of unrealized losses recorded on the investment portfolio at December 31, 2023 resulted from
fluctuations in market interest rates and other temporary market conditions as opposed to fundamental changes in the
credit quality of the issuers of such securities. Given our current level of liquidity, the fact that we do not intend to sell
these securities, and that it is more likely than not that we will not be required to sell these securities prior to recovery of
the cost basis of these securities, these decreases in values are viewed as being temporary.
For information regarding fair value measurements of our investment portfolio, refer to Item 8—Financial
Statements and Supplementary Data, Note 16, Fair Value of Financial Instruments, of this Form 10-K.
Commission Income: Commission income includes revenues from new and renewal commissions paid by
insurance carriers, which we recognize when earned. Commission Income was $6,932 and $566 for the years ended
December 31, 2023 and 2022, respectively.
Finance and Other Service Income. Finance and other service income includes revenues from premium
47
installment charges, which we recognize when earned, and other miscellaneous income and fees. Finance and other
service income increased by $4,933, or 34.1%, to $19,394 for the year ended December 31, 2023 from $14,461 for the
comparable 2022 period. The increase is primarily driven by the increase in policy counts and changes to our fee
assessment policies.
Losses and Loss Adjustment Expenses. Losses and loss adjustment expenses incurred for the year ended
December 31, 2023 increased by $150,323, or 30.6%, to $642,302 from $491,979 for the comparable 2022 period. The
increase in losses is due to continued inflationary impacts on our Private Passenger Automobile line of business, and
impacts from weather related events including February Winter Freeze and December Wind Storm.
Our GAAP loss ratio for the years ended December 31, 2023 and 2022 were 77.0% and 64.9%, respectively.
Our GAAP loss ratio excluding loss adjustment expenses was 67.9% and 56.0% for the years ended December 31, 2023
and 2022, respectively. Total prior year favorable development included in the pre-tax results for the year ended
December 31, 2023 was $47,381, compared to $57,279, for the comparable 2022 period. Prior year favorable
development in 2022 benefitted from the reversal of $6,500 legal expense reserve during the second quarter of 2022.
Underwriting, Operating and Related Expenses. Underwriting, operating and related expenses for the year
ended December 31, 2023 increased by $11,435, or 4.7%, to $256,580 from $245,145 for the comparable 2022 period.
The increase is driven by an increase in base commissions resulting from the increase in written premiums, offset by a
decrease in contingent commission expense. Our GAAP expense ratio for the year ended December 31, 2023 decreased
to 30.7% from 32.3% for the comparable 2022 period.
Other Expense: Other expense includes the operating and related expenses associated with SNIA.
Interest Expense. Interest expense was $818 and $524 for the years ended December 31, 2023 and 2022,
respectively. Interest expense primarily relates to the borrowing from the FHLB as noted within Item 8 – Financial
Statements and Supplementary Data, Note 10, Debt, of this Form 10-K. The credit facility commitment fee included in
interest expense was $75 for each of the years ended December 31, 2023 and 2022.
Income Tax Expense. Our effective tax rates were 22.7% and 21.9% for the years ended December 31, 2023
and 2022, respectively. The effective rates for the year ended December 31, 2023 and 2022 were higher than the
statutory rate primary due to the impact of stock-based and executive compensation.
The comparison of results for the year ended December 31, 2022 compared to the year ended December 31,
2021 can be found in the Company’s 2022 Annual Report on Form 10-K filed with the SEC on February 28, 2023.
Liquidity and Capital Resources
As a holding company, Safety’s assets consist primarily of the stock of our direct and indirect subsidiaries.
Our principal source of funds to meet our obligations and pay dividends to shareholders, therefore, is dividends and other
permitted payments from our subsidiaries, principally Safety Insurance. Safety is the borrower under our credit facility.
Safety Insurance’s sources of funds primarily include premiums received, investment income and proceeds
from sales and redemptions of investments. Safety Insurance’s principal uses of cash are the payment of claims,
operating expenses and taxes, the purchase of investments and payment of dividends to Safety.
Net cash provided by operating activities was $52,114, $44,326, and $141,394 during the years ended
December 31, 2023, 2022, and 2021, respectively. Our operations typically generate positive cash flows from operations
as most premiums are received in advance of the time when claim and benefit payments are required. These positive
operating cash flows are expected to continue to meet our liquidity requirements.
Net cash provided by investing activities was $24,269 during the year ended December 31, 2023 compared to
net cash used for investing activities was $19,988, and $65,989 for the years ended December 31, 2022, and 2021,
48
respectively, as proceeds from the sales, paydowns, calls and maturities of fixed maturity and equity securities exceeded
purchases.
Net cash used for financing activities was $63,531, $62,641, and $65,571 during the years ended December 31,
2023, 2022 and 2021, respectively. Net cash used for financing activities during the year ended December 31, 2023
comprised dividend payments to shareholders and the acquisition of treasury stock.
The Insurance Subsidiaries maintain a high degree of liquidity within their respective investment portfolios in
fixed maturity and short-term investments. We do not anticipate the need to sell these securities to meet the Insurance
Subsidiaries cash requirements. We expect the Insurance Subsidiaries to generate sufficient operating cash to meet all
short-term and long-term cash requirements. However, there can be no assurance that unforeseen business needs or other
items will not occur causing us to have to sell securities before their values fully recover; thereby causing us to recognize
additional impairment charges in that time period.
Credit Facility
For information regarding our Credit Facility, please refer to Item 8—Financial Statements and Supplementary
Data, Note 10, Debt, of this Form 10-K.
Recent Accounting Pronouncements
For information regarding Recent Accounting Pronouncements, please refer to Item 8—Financial Statements
and Supplementary Data, Note 2, Summary of Significant Accounting Policies, of this Form 10-K.
Regulatory Matters
Our insurance company’s subsidiaries are subject to various regulatory restrictions that limit the maximum
amount of dividends available to be paid to their parent without prior approval of the Commissioner. The Massachusetts
statute limits the dividends an insurer may pay in any twelve-month period, without the prior permission of the
Commissioner, to the greater of (i) 10% of the insurer’s surplus as of the preceding December 31 or (ii) the insurer’s net
income for the twelve-month period ending the preceding December 31, in each case determined in accordance with
statutory accounting practices. Our Insurance Subsidiaries may not declare an “extraordinary dividend” (defined as any
dividend or distribution that, together with other distributions made within the preceding twelve months, exceeds the
limits established by Massachusetts statute) until thirty days after the Commissioner has received notice of the intended
dividend and has not objected. As historically administered by the Commissioner, this provision requires the
Commissioner’s prior approval of an extraordinary dividend. Under Massachusetts law, an insurer may pay cash
dividends only from its unassigned funds, also known as earned surplus, and the insurer’s remaining surplus must be
both reasonable in relation to its outstanding liabilities and adequate to its financial needs. At year-end 2023, the
statutory surplus of Safety Insurance was $744,904, and its net loss for 2023 was $4,022. As a result, a maximum of
$74,490 is available in 2023 for such dividends without prior approval of the Commissioner. As a result of this
Massachusetts statute, the Insurance Subsidiaries had restricted net assets in the amount of $670,414 at December 31,
2023. During the twelve months ended December 31, 2023, Safety Insurance recorded dividends to Safety of $56,329.
The maximum dividend permitted by law is not indicative of an insurer’s actual ability to pay dividends, which
may be constrained by business and regulatory considerations, such as the impact of dividends on surplus, which could
affect an insurer’s ratings or competitive position, the amount of premiums that can be written and the ability to pay
future dividends.
Since the initial public offering of its common stock in November 2002, the Company has paid regular quarterly
dividends to shareholders of its common stock. Quarterly dividends paid during 2023 and 2022 were as follows:
49
Declaration
Date
February 15, 2022
May 6, 2022
August 3, 2022
November 2, 2022
February 15, 2023
May 3, 2023
August 2, 2023
November 3, 2023
Record
Date
March 5, 2022
June 1, 2022
September 1, 2022
December 1, 2022
March 1, 2023
June 1, 2023
September 1, 2023
December 1, 2023
Payment
Date
March 15, 2022
June 15, 2022
September 15, 2022
December 15, 2022
March 15, 2023
June 15, 2023
September 15, 2023
December 15, 2023
Dividend per
Common Share
Total
Dividends Paid
and Accrued
$
$
$
$
$
$
$
$
0.90
0.90
0.90
0.90
0.90
0.90
0.90
0.90
$
$
$
$
$
$
$
$
13,248
13,278
13,262
13,207
13,247
13,283
13,223
13,239
On February 15, 2024, our Board approved and declared a quarterly cash dividend on our common stock of
$0.90 per share to be paid on March 15, 2024 to shareholders of record on March 1, 2024. We plan to continue to declare
and pay quarterly cash dividends in 2024, depending on our financial position and the regularity of our cash flows.
On February 23, 2022, the Board approved a share repurchase program of up to $50,000 of the Company’s
outstanding common shares. The Board of Directors had cumulatively authorized increases to the existing share
repurchase program of up to $200,000 of its outstanding common shares. Under the program, the Company may
repurchase shares of its common stock for cash in public or private transactions, in the open market or otherwise. The
timing of such repurchases and actual number of shares repurchased will depend on a variety of factors including price,
market conditions and applicable regulatory and corporate requirements. The program does not require the Company to
repurchase any specific number of shares and may be modified, suspended or terminated at any time without prior
notice.
No share purchases were made by the Company during the three months ended December 31, 2023. During the
year ended December 31, 2023, the Company purchased 74,213 shares at a cost of $5,240. As of December 31, 2023, the
Company had purchased 3,215,690 shares on the open market at a cost $155,240. As of December 31, 2022, the
Company had purchased 3,141,477 shares on the open market at a cost of $150,000.
Management believes that the current level of cash flow from operations provides us with sufficient liquidity to
meet our operating needs over the next 12 months. We expect to be able to continue to meet our operating needs after
the next 12 months from internally generated funds. Since our ability to meet our obligations in the long term (beyond
such twelve-month period) is dependent upon such factors as market changes, insurance regulatory changes and
economic conditions, no assurance can be given that the available net cash flow will be sufficient to meet our operating
needs. We expect that we would need to borrow or issue capital stock if we needed additional funds, for example, to pay
for an acquisition or a significant expansion of our operations. There can be no assurance that sufficient funds for any of
the foregoing purposes would be available to us at such time.
Contractual Obligations
We have obligations to make future payments under contracts and credit-related financial instruments and
commitments.
As of December 31, 2023, the Company had loss and LAE reserves of $603,081, unpaid reinsurance
recoverables of $112,623 and net loss and LAE reserves of $490,458. Our loss and LAE reserves are estimates as
described in more detail under Critical Accounting Policies and Estimates. The specific amounts and timing of
obligations related to case reserves, IBNR reserves and related LAE reserves are not set contractually, and the amounts
and timing of these obligations are unknown. While management believes that historical performance of loss payment
patterns is a reasonable source for projecting future claims payments, there is inherent uncertainty in this estimated
projected settlement of loss and LAE reserves, and as a result these estimates will differ, perhaps significantly, from
actual future payments.
As part of the Company’s investment activity, we have committed $170,000 to investments in limited
partnerships. The Company has contributed $133,330 to these commitments as of December 31, 2023. As of
December 31, 2023, the remaining committed capital that could be called is $42,043, which includes potential recallable
capital distributions.
50
Critical Accounting Policies and Estimates
Loss and Loss Adjustment Expense Reserves
Significant periods of time can elapse between the occurrence of an insured loss, the reporting to us of that loss
and our final payment of that loss. To recognize liabilities for unpaid losses, we establish reserves as balance sheet
liabilities. Our reserves represent estimates of amounts needed to pay reported and estimated losses incurred but not yet
reported (“IBNR”) and the expenses of investigating and paying those losses, or loss adjustment expenses. Every
quarter, we review our previously established reserves and adjust them, if necessary.
When a claim is reported, claims personnel establish a “case reserve” for the estimated amount of the ultimate
payment. The amount of the reserve is primarily based upon an evaluation of the type of claim involved, the
circumstances surrounding each claim and the policy provisions relating to the loss. The estimate reflects the informed
judgment of such personnel based on general insurance reserving practices and on the experience and knowledge of the
claims professional. During the loss adjustment period, these estimates are revised as deemed necessary by our claims
department based on subsequent developments and periodic reviews of the cases. When a claim is closed with or
without a payment, the difference between the case reserve and the settlement amount creates a reserve deficiency if the
payment exceeds the case reserve or a reserve redundancy if the payment is less than the case reserve.
In accordance with industry practice, we also maintain reserves for IBNR. IBNR reserves are determined in
accordance with commonly accepted actuarial reserving techniques on the basis of our historical information and
experience. We review and make adjustments to incurred but not yet reported reserves quarterly. In addition, IBNR
reserves can also be expressed as the total loss reserves required less the case reserves on reported claims.
When reviewing reserves, we analyze historical data and estimate the impact of various loss development
factors, such as our historical loss experience and that of the industry, trends in claims frequency and severity, our mix of
business, our claims processing procedures, legislative enactments, judicial decisions, legal developments in imposition
of damages, and changes and trends in general economic conditions, including the effects of inflation. A change in any
of these factors from the assumption implicit in our estimate can cause our actual loss experience to be better or worse
than our reserves, and the difference can be material. There is no precise method, however, for evaluating the impact of
any specific factor on the adequacy of reserves, because the eventual development of reserves is affected by many
factors.
In estimating all our loss reserves, we follow the guidance prescribed by ASC 944, Financial Services –
Insurance.
Management determines our loss and loss adjustment expense reserves estimate based upon the analysis of our
actuaries. A reasonable estimate is derived by selecting a point estimate within a range of indications as calculated by
our actuaries using generally accepted actuarial techniques. The key assumption in most actuarial analysis is that past
patterns of frequency and severity will repeat in the future, unless a significant change in the factors described above
takes place. Our key factors and resulting assumptions are the ultimate frequency and severity of claims, based upon the
most recent ten years of claims reported to the Company, and the data CAR reports to us to calculate our share of the
residual market, as of the date of the applicable balance sheet. For each accident year and each coverage within a line of
business our actuaries calculate the ultimate losses incurred. Our total reserves are the difference between the ultimate
losses incurred and the cumulative loss and loss adjustment payments made to date. Our IBNR reserves are calculated as
the difference between our total reserves and the outstanding case reserves at the end of the accounting period. To
determine ultimate losses, our actuaries calculate a range of indications and select a point estimation using such actuarial
techniques as:
Paid Loss Indications: This method projects ultimate loss estimates based upon extrapolations of
historic paid loss trends. This method tends to be used on short tail lines such as automobile physical
damage.
51
Incurred Loss Indications: This method projects ultimate loss estimates based upon extrapolations of
historic incurred loss trends. This method tends to be used on long tail lines of business such as
automobile liability and homeowner’s liability.
Bornhuetter-Ferguson Indications: This method projects ultimate loss estimates based upon
extrapolations of an expected amount of IBNR, which is added to current incurred losses or paid
losses. This method tends to be used on small, immature, or volatile lines of business, such as our
BOP and umbrella lines of business.
Bodily Injury Code Indications: This method projects ultimate loss estimates for our private passenger
and commercial automobile bodily injury coverage based upon extrapolations of the historic number of
accidents and the historic number of bodily injury claims per accident. Projected ultimate bodily injury
claims are then segregated into expected claims by type of injury (e.g. soft tissue injury vs. hard tissue
injury) based on past experience. An ultimate severity, or average paid loss amounts, is estimated
based upon extrapolating historic trends. Projected ultimate loss estimates using this method are the
aggregate of estimated losses by injury type.
Such techniques assume that past experience, adjusted for the effects of current developments and anticipated
trends, is an appropriate basis for predicting our ultimate losses, total reserves and resulting IBNR reserves. It is possible
that the final outcome may fall above or below these amounts as a result of a number of factors, including immature data,
sparse data, or significant growth in a line of business. Using these methodologies our actuaries established a range of
reasonably possible estimations for net reserves of approximately $449,272 to $511,724 as of December 31, 2023
compared to a range of $423,452 to $481,902 as of December 31, 2022. In general, the low and high values of the
ranges represent reasonable minimum and maximum values of the indications based on the techniques described above.
Our selected point estimate of net loss and loss adjustment expense reserves based upon the analysis of our actuaries was
$490,458 as of December 31, 2023 compared to $456,204 as of December 31, 2022.
The following table presents the point estimation of the recorded reserves and the range of estimations by line
of business for net loss and LAE reserves as of December 31, 2023.
Line of Business
Private passenger automobile
Commercial automobile
Homeowners
All other
Total
As of December 31, 2023
Low
Recorded
High
194,337
99,562
91,306
64,067
449,272
$
$
212,628
105,335
99,159
73,336
490,458
$
$
220,359
110,339
104,852
76,174
511,724
$
$
The following table presents our total net reserves and the corresponding case reserves and IBNR reserves for
each line of business as of December 31, 2023.
Line of Business
Private passenger automobile
CAR assumed private passenger auto
Commercial automobile
CAR assumed commercial automobile
Homeowners
FAIR Plan assumed homeowners
All other
Total net reserves for losses and LAE
As of December 31, 2023
Case
IBNR
Total
$
$
265,905
1
67,879
10,951
91,477
4,541
42,968
483,722
$
$
(53,286)
8
6,735
19,770
(3,007)
6,149
30,367
6,736
$
$
212,619
9
74,614
30,721
88,470
10,690
73,335
490,458
At December 31, 2023 and 2022, our total IBNR reserves for our private passenger automobile line of business
were comprised of $(87,456) and $(67,848) related to estimated ultimate decreases in the case reserves, including
anticipated recoveries (i.e. salvage and subrogation), and $34,170 and $24,320 related to our estimation for not yet
reported losses, respectively.
52
Our IBNR reserves consist of our estimate of the total loss reserves required less our case reserves. The IBNR
reserves for CAR assumed commercial automobile business are 64.4% of our total reserves for CAR assumed
commercial automobile business as of December 31, 2023 due to the reporting delays in the information we receive from
CAR, as described further in the section on Residual Market Loss and Loss Adjustment Expense Reserves. Our IBNR
reserves for FAIR Plan assumed homeowners are 57.5% of our total reserves for FAIR Plan assumed homeowners at
December 31, 2023 due to similar reporting delays in the information we receive from FAIR Plan.
The following table presents information by line of business for our total net reserves and the corresponding
retained (i.e. direct less ceded) reserves and assumed reserves as of December 31, 2023.
Line of Business
Private passenger automobile
CAR assumed private passenger automobile
Net private passenger automobile
Commercial automobile
CAR assumed commercial automobile
Net commercial automobile
Homeowners
FAIR Plan assumed homeowners
Net homeowners
All other
Total net reserves for losses and LAE
Retained
$
212,619
As of December 31, 2023
Assumed
Net
$
9
$
212,628
74,614
88,470
$
73,335
449,038
$
30,721
10,690
—
41,420
$
105,335
99,160
73,335
490,458
Residual Market Loss and Loss Adjustment Expense Reserves
We are a participant in CAR, the FAIR Plan and other various residual markets and assume a portion of losses
and LAE on business ceded by the industry participants to the residual markets. We estimate reserves for assumed losses
and LAE that have not yet been reported to us by the residual markets. Our estimations are based upon the same factors
we use for our own reserves, plus additional factors due to the nature of and the information we receive.
Residual market deficits consist of premium ceded to the various residual markets less losses and LAE and is
allocated among insurance companies based on a various formulas (the “Participation Ratio”) that take into consideration
a company’s voluntary market share.
Because of the lag in the various residual market estimations, and in order to try to validate to the extent
possible the information provided, we estimate the effects of the actions of our competitors in order to establish our
Participation Ratio.
Although we rely to a significant extent in setting our reserves on the information the various residual markets
provide, we are cautious in our use of that information, because of the delays in receiving data from the various residual
markets. As a result, we have to estimate our Participation Ratio and these reserves are subject to significant judgments
and estimates.
Sensitivity Analysis
Establishment of appropriate reserves is an inherently uncertain process. There can be no certainty that
currently established reserves based on our key assumptions regarding frequency and severity in our lines of business, or
our assumptions regarding our share of the CAR loss will prove adequate in light of subsequent actual experience. To
the extent that reserves are inadequate and are strengthened, the amount of such increase is treated as a charge to
earnings in the period that the deficiency is recognized. To the extent that reserves are redundant and are released, the
amount of the release is a credit to earnings in the period the redundancy is recognized. For the twelve months ended
December 31, 2023, a 1 percentage-point change in the loss and LAE ratio would result in a change in reserves of
53
$8,341. Each 1 percentage-point change in the loss and loss expense ratio would have had a $6,589 effect on net
income, or $0.45 per diluted share.
Our assumptions consider that past experience, adjusted for the effects of current developments and anticipated
trends, are an appropriate basis for establishing our reserves. Our individual key assumptions could each have a
reasonable possible range of plus or minus 5 percentage-points for each estimation, although there is no guarantee that
our assumptions will not have more than a 5 percentage point variation. The following sensitivity tables present
information for each of our primary lines of business on the effect each 1 percentage-point change in each of our key
assumptions on unpaid frequency and severity could have on our retained (i.e., direct minus ceded) loss and LAE
reserves and net income for the twelve months ended December 31, 2023. In evaluating the information in the table, it
should be noted that a 1 percentage-point change in a single assumption would change estimated reserves by 1
percentage-point. A 1 percentage-point change in both our key assumptions would change estimated reserves within a
range of plus or minus 2 percentage-points.
-1 Percent
Change in
Frequency
No
Change in
Frequency
+1 Percent
Change in
Frequency
Private passenger automobile retained loss and LAE reserves
-1 Percent Change in Severity
Estimated decrease in reserves
Estimated increase in net income
No Change in Severity
Estimated (decrease) increase in reserves
Estimated increase (decrease) in net income
+1 Percent Change in Severity
Estimated increase in reserves
Estimated decrease in net income
Commercial automobile retained loss and LAE reserves
-1 Percent Change in Severity
Estimated decrease in reserves
Estimated increase in net income
No Change in Severity
Estimated (decrease) increase in reserves
Estimated increase (decrease) in net income
+1 Percent Change in Severity
Estimated increase in reserves
Estimated decrease in net income
Homeowners retained loss and LAE reserves
-1 Percent Change in Severity
Estimated decrease in reserves
Estimated increase in net income
No Change in Severity
Estimated (decrease) increase in reserves
Estimated increase (decrease) in net income
+1 Percent Change in Severity
Estimated increase in reserves
Estimated decrease in net income
All other retained loss and LAE reserves
-1 Percent Change in Severity
Estimated decrease in reserves
Estimated increase in net income
No Change in Severity
Estimated (decrease) increase in reserves
Estimated increase (decrease) in net income
+1 Percent Change in Severity
Estimated increase in reserves
Estimated decrease in net income
$
(4,252) $
3,359
(2,126) $
1,680
(2,126)
1,680
—
—
(1,492)
1,179
(746)
589
—
—
(1,769)
1,398
(885)
699
—
—
(1,467)
1,159
(733)
579
—
—
—
—
2,126
(1,680)
(746)
589
—
—
746
(589)
(885)
699
—
—
885
(699)
(733)
579
—
—
733
(579)
—
—
2,126
(1,680)
4,252
(3,359)
—
—
746
(589)
1,492
(1,179)
—
—
885
(699)
1,769
(1,398)
—
—
733
(579)
1,467
(1,159)
Our estimated share of CAR loss and LAE reserves is based on assumptions about our Participation Ratio, the
size of CAR, and the resulting deficit (similar assumptions apply with respect to the FAIR Plan). Our assumptions
54
consider that past experience, adjusted for the effects of current developments and anticipated trends, is an appropriate
basis for establishing our CAR reserves. Each of our assumptions could have a reasonably possible range of plus or
minus 5 percentage-points for each estimation.
The following sensitivity table presents information of the effect each 1 percentage-point change in our
assumptions on our share of reserves for CAR and other residual markets could have on our assumed loss and LAE
reserves and net income for the year ended December 31, 2023. In evaluating the information in the table, it should be
noted that a 1 percentage-point change in our assumptions would change estimated reserves by 1 percentage-point.
CAR assumed commercial automobile
Estimated (decrease) increase in reserves
Estimated increase (decrease) in net income
FAIR Plan assumed homeowners
Estimated (decrease) increase in reserves
Estimated increase (decrease) in net income
Reserve Development Summary
-1 Percent
Change in
Estimation
+1 Percent
Change in
Estimation
$
$
(307)
243
(107)
84
307
(243)
107
(84)
The changes we have recorded in our reserves in the past illustrate the uncertainty of estimating reserves. Our
prior year reserves decreased by $47,381, $57,279 and $53,673 during the years ended December 31, 2023, 2022, and
2021, respectively.
The following table presents a comparison of prior year development of our net reserves for losses and LAE for
the years ended December 31, 2023, 2022 and 2021, respectively. Each accident year represents all claims for an annual
accounting period in which loss events occurred, regardless of when the losses are actually reported, booked or
paid. Our financial statements reflect the aggregate results of the current and all prior accident years.
Accident Year
2013 & prior
2014
2015
2016
2017
2018
2019
2020
2021
2022
All prior years
2023
Year Ended December 31,
2022
2021
$
$
(1,403)
(996)
(1,982)
(1,484)
(3,836)
(3,892)
(7,451)
(10,212)
(7,246)
(8,879)
(47,381)
$
$
(1,303)
(521)
(2,057)
(1,662)
(3,749)
(7,233)
(12,520)
(18,985)
(9,249)
—
(57,279)
$
$
(1,803)
(1,534)
(2,757)
(1,096)
(4,682)
(10,190)
(16,810)
(14,801)
—
—
(53,673)
At the end of each period, the reserves were re-estimated for all prior accident years. Our prior year reserves
decreased by $47,381, $57,279, and $53,673 for the years ended 2023, 2022, and 2021, respectively. The decreases in
prior year reserves in 2023 resulted from re-estimations of prior year’s ultimate loss and LAE liabilities and are primarily
composed of reductions of $15,451 in our retained automobile reserves and $29,782 in our retained other than auto and
homeowner’s reserves. The decreases in prior year reserves in 2022 resulted from re-estimations of prior year’s ultimate
loss and LAE liabilities and are primarily composed of reductions of $20,241 in our retained automobile reserves and
$32,963 in our retained other than auto and homeowner reserves. The decrease in prior year reserves during 2021 are
primarily composed of reductions of $22,313 in our retained automobile reserves and $26,220 in our retained
homeowners reserves. It is not appropriate to extrapolate future favorable or unfavorable development of reserves from
this past experience.
55
The following table presents information by line of business for prior year development of our net reserves for
losses and LAE for the year ended December 31, 2023.
Commercial
Automobile
$
Homeowners
$
Accident Year
2013 & prior
2014
2015
2016
2017
2018
2019
2020
2021
2022
All prior years
Private Passenger
Automobile
$
$
(397)
(192)
(127)
(240)
(1,067)
129
(867)
(2,303)
(1,233)
(3,224)
(9,521)
(236)
(110)
(585)
(320)
(362)
(982)
(1,892)
(1,408)
(1,083)
(1,095)
(8,073)
$
$
(132)
—
(373)
(450)
(625)
(631)
(2,886)
(4,520)
(1,024)
(2,343)
(12,984)
All Other
Total
$
$
(638)
(694)
(897)
(474)
(1,782)
(2,408)
(1,806)
(1,981)
(3,906)
(2,217)
(16,803)
$
$
(1,403)
(996)
(1,982)
(1,484)
(3,836)
(3,892)
(7,451)
(10,212)
(7,246)
(8,879)
(47,381)
To further clarify the effects of changes in our reserve estimates for CAR and other residual markets, the next
two tables break out the information in the table above by source of the business (i.e., non-residual market vs. residual
market).
The following table presents information by line of business for prior year development of retained reserves for
losses and LAE for the year ended December 31, 2023 that is, all our reserves except for business ceded or assumed
from CAR and other residual markets.
Accident Year
2013 & prior
2014
2015
2016
2017
2018
2019
2020
2021
2022
All prior years
Retained
Private Passenger
Automobile
Retained
Commercial
Automobile
$
$
(397) $
(192)
(127)
(240)
(1,067)
129
(867)
(2,303)
(1,233)
(3,224)
(9,521) $
(236) $
(110)
(570)
(242)
(129)
(681)
(1,417)
(707)
(542)
(1,296)
(5,930) $
Retained
Retained
Homeowners All Other
(132) $
—
(373)
(450)
(625)
(686)
(2,936)
(4,592)
(956)
(2,229)
(12,979) $
(638) $
(694)
(897)
(474)
(1,782)
(2,408)
(1,806)
(1,981)
(3,906)
(2,217)
(16,803) $
Total
(1,403)
(996)
(1,967)
(1,406)
(3,603)
(3,646)
(7,026)
(9,583)
(6,637)
(8,966)
(45,233)
The following table presents information by line of business for prior year development of reserves assumed
from residual markets for losses and LAE for the year ended December 31, 2023.
Accident Year
2015
2016
2017
2018
2019
2020
2021
2022
All prior years
CAR Assumed
Private Passenger
Automobile
CAR Assumed
Commercial
Automobile
FAIR Plan
Homeowners
Total
$
$
— $
—
—
—
—
—
—
—
— $
(15)
(78)
(233)
(301)
(475)
(701)
(541)
201
(2,143)
$
$
— $
—
—
55
50
72
(68)
(114)
(5)
$
(15)
(78)
(233)
(246)
(425)
(629)
(609)
87
(2,148)
The improved retained private passenger and commercial automobile results were primarily due to fewer IBNR
claims than previously estimated and better than previously estimated severity on our established bodily injury and
property damage case reserves. Our retained other than auto and homeowners line of business prior year reserves
decreased, due primarily to fewer IBNR claims than previously estimated.
56
In estimating all our loss reserves, we follow the guidance prescribed by ASC 944, Financial Services-
Insurance.
For further information, see “Results of Operations: Losses and Loss Adjustment Expenses.”
Forward-looking statements might include one or more of the following, among others:
Forward-Looking Statements
Projections of revenues, income, earnings per share, capital expenditures, dividends, capital structure
or other financial items;
Forecasts of future economic performance, liquidity, need for funding and income;
Legal and regulatory commentary;
Descriptions of plans or objectives of management for future operations, products or services;
Descriptions of assumptions underlying or relating to any of the foregoing; and
Future performance of credit markets.
Forward-looking statements can be identified by the fact that they do not relate strictly to historical or current
facts. They often include words such as “believe,” “expect,” “anticipate,” “intend,” “plan,” “estimate,” “aim,”
“projects,” or words of similar meaning and expressions that indicate future events and trends, or future or conditional
verbs such as “will,” “would,” “should,” “could,” or “may.” All statements that address expectations or projections
about the future, including statements about the Company’s strategy for growth, product development, market position,
expenditures and financial results, are forward-looking statements.
Forward-looking statements are not guarantees of future performance. By their nature, forward-looking
statements are subject to risks and uncertainties. There are a number of factors, many of which are beyond our control,
that could cause actual future conditions, events, results or trends to differ significantly and/or materially from historical
results or those projected in the forward-looking statements. These factors include but are not limited to:
The competitive nature of our industry and the possible adverse effects of such competition;
Conditions for business operations and restrictive regulations in Massachusetts;
The possibility of losses due to claims resulting from severe weather;
The impact of inflation and supply chain delays on loss severity;
The possibility that the Commissioner may approve future rule changes that change the operation of
the residual market;
The possibility that existing insurance-related laws and regulations will become further restrictive in
the future;
Our possible need for and availability of additional financing, and our dependence on strategic
relationships, among others;
Other risks and factors identified from time to time in our reports filed with the SEC. Refer to
Part I, Item 1A — Risk Factors.
Some other factors, such as market, operational, liquidity, interest rate, equity and other risks, are described
elsewhere in this Annual Report on Form 10-K. Factors relating to the regulation and supervision of our Company are
also described or incorporated in this report. There are other factors besides those described or incorporated in this
report that could cause actual conditions, events or results to differ from those in the forward-looking statements.
Readers are cautioned not to place undue reliance on these forward-looking statements, which speak only as of
the date on which they are made. We do not undertake any obligation to update publicly or revise any forward-looking
statements to reflect circumstances or events that occur after the date the forward-looking statements are made.
57
ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
Market Risk. Market risk is the risk that we will incur losses due to adverse changes in market rates and prices.
We have exposure to market risk through our investment activities and our financing activities. Our primary market risk
exposure is to changes in interest rates. We use both fixed and variable rate debt as sources of financing. We have not
entered, and do not plan to enter, into any derivative financial instruments for trading or speculative purposes.
Interest Rate Risk. Interest rate risk is the risk that we will incur economic losses due to adverse changes in
interest rates. Our exposure to interest rate changes primarily results from our significant holdings of fixed rate
investments and from our financing activities. Our fixed maturity investments include U.S. and foreign government
bonds, securities issued by government agencies, obligations of state and local governments and governmental
authorities, corporate bonds and asset-backed securities, most of which are exposed to changes in prevailing interest
rates.
We manage our exposure to risks associated with interest rate fluctuations through active review of our
investment portfolio by our management and Board and consultation with third-party financial advisors. As a general
matter, we do not attempt to match the durations of our assets with the durations of our liabilities, and the majority of our
liabilities are “short tail.” Our goal is to maximize the total after-tax return on all of our investments. An important
strategy that we employ to achieve this goal is to try to hold enough in cash and short-term investments in order to avoid
liquidating longer-term investments to pay claims.
Based upon the results of interest rate sensitivity analysis, the following table shows the interest rate risk of our
investments in fixed maturities, measured in terms of fair value (which is equal to the carrying value for all our fixed
maturity securities).
As of December 31, 2023
Estimated fair value
Estimated increase (decrease) in fair value
-100 Basis
Point Change
No Change
+100 Basis
Point Change
$
$
1,091,365
39,220
$
$
1,052,145
$
— $
1,012,316
(39,829)
With respect to floating rate debt, we are exposed to the effects of changes in prevailing interest rates. At
December 31, 2023, we had no debt outstanding under our credit facility. Assuming the full utilization of our current
available credit facility, a 2.0% increase in the prevailing interest rate on our variable rate debt would result in interest
expense increasing approximately $600 for 2023, assuming that all of such debt is outstanding for the entire year.
In addition, in the current market environment, our investments can also contain liquidity risks.
Equity Risk. Equity risk is the risk that we will incur economic losses due to adverse changes in equity prices.
Our exposure to changes in equity prices results from our holdings of common stock and mutual funds held to fund the
executive deferred compensation plan. We continuously evaluate market conditions and we expect in the future to
purchase additional equity securities. We principally manage equity price risk through industry and issuer diversification
and asset allocation techniques.
58
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTAL DATA
SAFETY INSURANCE GROUP, INC.
INDEX TO CONSOLIDATED FINANCIAL STATEMENTS
Consolidated Financial Statements:
Report of Independent Registered Public Accounting Firm (PCAOB ID No. 34)
Balance Sheets
Statements of Operations
Statements of Comprehensive (Loss) Income
Statements of Changes in Shareholders’ Equity
Statements of Cash Flows
Notes to Consolidated Financial Statements
Page
60
63
64
65
66
67
68
59
Report of Independent Registered Public Accounting Firm
To the shareholders and the Board of Directors of Safety Insurance Group, Inc.
Opinions on the Financial Statements and Internal Control over Financial Reporting
We have audited the accompanying consolidated balance sheets of Safety Insurance Group, Inc. and subsidiaries (the
"Company") as of December 31, 2023 and 2022, the related consolidated statements of operations, comprehensive
income (loss), changes in shareholders’ equity, and cash flows, for each of the three years in the period ended December
31, 2023, and the related notes and the schedules listed in the Index at Item 15 (collectively referred to as the "financial
statements"). We also have audited the Company’s internal control over financial reporting as of December 31, 2023,
based on criteria established in Internal Control — Integrated Framework (2013) issued by the Committee of Sponsoring
Organizations of the Treadway Commission (COSO).
In our opinion, the financial statements referred to above present fairly, in all material respects, the financial position of
the Company as of December 31, 2023 and 2022, and the results of its operations and its cash flows for each of the three
years in the period ended December 31, 2023, in conformity with accounting principles generally accepted in the United
States of America. Also, in our opinion, the Company maintained, in all material respects, effective internal control over
financial reporting as of December 31, 2023, based on criteria established in Internal Control — Integrated Framework
(2013) issued by COSO.
Basis for Opinions
The Company’s management is responsible for these financial statements, for maintaining effective internal control over
financial reporting, and for its assessment of the effectiveness of internal control over financial reporting, included in the
accompanying Item 9A. Controls and Procedures. Our responsibility is to express an opinion on these financial
statements and an opinion on the Company’s internal control over financial reporting based on our audits. We are a
public accounting firm registered with the Public Company Accounting Oversight Board (United States) (PCAOB) and
are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the
applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.
We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and
perform the audits to obtain reasonable assurance about whether the financial statements are free of material
misstatement, whether due to error or fraud, and whether effective internal control over financial reporting was
maintained in all material respects.
Our audits of the financial statements included performing procedures to assess the risks of material misstatement of the
financial statements, whether due to error or fraud, and performing procedures to respond to those risks. Such procedures
included examining, on a test basis, evidence regarding the amounts and disclosures in the financial statements. Our
audits also included evaluating the accounting principles used and significant estimates made by management, as well as
evaluating the overall presentation of the financial statements. Our audit of internal control over financial reporting
included obtaining an understanding of internal control over financial reporting, assessing the risk that a material
weakness exists, and testing and evaluating the design and operating effectiveness of internal control based on the
assessed risk. Our audits also included performing such other procedures as we considered necessary in the
circumstances. We believe that our audits provide a reasonable basis for our opinions.
Definition and Limitations of Internal Control over Financial Reporting
A company’s internal control over financial reporting is a process designed to provide reasonable assurance regarding
the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with
generally accepted accounting principles. A company’s internal control over financial reporting includes those policies
and procedures that (1) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the
transactions and dispositions of the assets of the company; (2) provide reasonable assurance that transactions are
recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting
principles, and that receipts and expenditures of the company are being made only in accordance with authorizations of
60
management and directors of the company; and (3) provide reasonable assurance regarding prevention or timely
detection of unauthorized acquisition, use, or disposition of the company’s assets that could have a material effect on the
financial statements.
Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements.
Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become
inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may
deteriorate.
Critical Audit Matter
The critical audit matter communicated below is a matter arising from the current-period audit of the financial statements
that was communicated or required to be communicated to the audit committee and that (1) relates to accounts or
disclosures that are material to the financial statements and (2) involved our especially challenging, subjective, or
complex judgments. The communication of critical audit matters does not alter in any way our opinion on the financial
statements, taken as a whole, and we are not, by communicating the critical audit matter below, providing a separate
opinion on the critical audit matter or on the accounts or disclosures to which it relates.
Losses and Loss Adjustment Expense Reserves – Refer to Notes 2 and 12 to the financial statements
Critical Audit Matter Description
The Company establishes loss and loss adjustment expense reserves as balance sheet liabilities representing estimates of
amounts needed to pay reported and unreported losses and the expenses associated with investigating and paying the
losses, or loss adjustment expenses. The loss and loss adjustment expense reserves are determined in accordance with
commonly accepted actuarial reserving techniques on the basis of the Company’s historical information and experience.
In determining the loss and loss adjustment expense reserves, the Company analyzes historical data and estimates the
impact of various loss development factors, such as the Company’s historical loss experience and that of the industry,
trends in claims frequency and severity, the Company’s mix of business, the Company’s claims processing procedures,
legislative enactments, judicial decisions, legal developments in imposition of damages, and changes and trends in
general economic conditions, including the effects of inflation.
Given the subjectivity associated with assumptions and methodologies used in determining the estimated ultimate cost to
settle the liabilities for certain long tail reported and unreported losses due to uncertainties caused by various factors
including frequency and severity of claims, as well as future legislative, judicial, and legal uncertainties, performing
audit procedures to evaluate whether the ultimate cost of loss and loss adjustment expense reserves were appropriately
recorded as of December 31, 2023, required a high degree of auditor judgment and an increased extent of effort,
including the need to involve our actuarial specialists.
How the Critical Audit Matter was Addressed in the Audit
Our audit procedures related to certain loss and loss adjustment expense reserves included the following, among others:
1. We tested the effectiveness of the Company’s controls related to loss and loss adjustment expense reserves,
including controls over inputs, methods, and assumptions used in the Company’s estimation process.
2. We tested the underlying data that served as the basis for the Company’s analysis, including historical claims, to
test that the inputs to the actuarial estimate were complete and accurate.
3. With the assistance of our actuarial specialists, we evaluated the methods and assumptions used by the
Company to estimate ultimate losses incurred in determining loss and loss adjustment expense reserves by:
a. Assessing the reasonableness of the Company’s analysis, developing independent estimates of loss and
loss adjustment expense reserves and comparing such estimates to the Company’s recorded loss and
loss adjustment expense reserves.
61
b. Comparing the Company’s prior year estimates of expected incurred losses to actual experience during
the current year to identify potential management bias in the determination of loss and loss adjustment
expense reserves.
/s/ Deloitte & Touche LLP
Boston, Massachusetts
February 28, 2024
We have served as the Company’s auditor since 2021.
62
Safety Insurance Group, Inc. and Subsidiaries
Consolidated Balance Sheets
(Dollars in thousands, except share data)
December 31,
2023
December 31,
2022
Assets
Investments:
Fixed maturities, available for sale, at fair value (amortized cost: $1,120,682 and $1,152,779,
allowance for expected credit losses of $1,208 and $678)
Equity securities, at fair value (cost: $221,809 and $231,444)
Other invested assets
Total investments
Cash and cash equivalents
Accounts receivable, net of allowance for expected credit losses of $1,053 and $1,446
Receivable for securities sold
Accrued investment income
Taxes recoverable
Receivable from reinsurers related to paid loss and loss adjustment expenses
Receivable from reinsurers related to unpaid loss and loss adjustment expenses
Ceded unearned premiums
Deferred policy acquisition costs
Deferred income taxes
Equity and deposits in pools
Operating lease right-of-use-assets
Goodwill
Intangible assets
Other assets
Total assets
Liabilities
Loss and loss adjustment expense reserves
Unearned premium reserves
Accounts payable and accrued liabilities
Payable for securities purchased
Payable to reinsurers
Taxes payable
Debt
Operating lease liabilities
Other liabilities
Total liabilities
Commitments and contingencies (Note 8)
Shareholders’ equity
Common stock: $0.01 par value; 30,000,000 shares authorized; 17,949,484 and 17,879,095 shares
issued
Additional paid-in capital
Accumulated other comprehensive (loss) income, net of taxes
Retained earnings
Treasury stock, at cost: 3,157,577 and 3,083,364 shares
Total shareholders’ equity
Total liabilities and shareholders’ equity
$
$
$
$
$
$
$
1,052,145
238,022
133,946
1,424,113
38,152
256,687
124
7,261
623
13,129
112,623
32,346
91,917
12,150
35,247
19,756
17,093
7,551
25,232
2,094,004
603,081
528,150
64,235
1,863
15,941
—
30,000
19,756
26,711
1,289,737
1,050,155
240,155
112,850
1,403,160
25,300
192,542
877
8,212
—
12,988
93,394
28,453
75,582
21,074
33,648
23,336
17,093
7,856
29,054
1,972,569
549,598
433,375
73,875
1,359
11,444
1,729
35,000
23,336
30,854
1,160,570
179
226,380
(53,191)
781,192
(150,293)
804,267
2,094,004
$
179
222,049
(80,538)
815,309
(145,000)
811,999
1,972,569
The accompanying notes are an integral part of these financial statements.
63
Safety Insurance Group, Inc. and Subsidiaries
Consolidated Statements of Operations
(Dollars in thousands, except per share data)
Net earned premiums
Net investment income
Earnings from partnership investments
Net realized gains on investments
Change in unrealized gains on equity securities
Credit loss (expense) benefit
Commission income
Finance and other service income
Total revenue
Losses and loss adjustment expenses
Underwriting, operating and related expenses
Other expense
Interest expense
Total expenses
Income before income taxes
Income tax expense
Net income
Earnings per weighted average common share:
Basic
Diluted
Cash dividends paid per common share
2023
Years Ended December 31,
2022
2021
$
$
$
$
$
834,414
56,377
5,540
1,327
7,502
(530)
6,932
19,394
930,956
642,302
256,580
6,836
818
906,536
24,420
5,545
18,875
1.28
1.28
3.60
$
$
$
$
$
758,505
46,725
12,484
9,190
(44,386)
14
566
14,461
797,559
491,979
245,145
330
524
737,978
59,581
13,020
46,561
3.17
3.15
3.60
$
$
$
$
$
774,328
44,135
19,829
14,885
16,130
363
—
15,241
884,911
461,727
258,392
—
522
720,641
164,270
33,560
130,710
8.85
8.80
3.60
Number of shares used in computing earnings per share:
Basic
Diluted
14,663,730
14,710,131
14,607,483
14,710,611
14,828,736
14,925,726
The accompanying notes are an integral part of these financial statements.
64
Safety Insurance Group, Inc. and Subsidiaries
Consolidated Statements of Comprehensive Income (Loss)
(Dollars in thousands)
Net income
Other comprehensive income (loss), net of tax:
Unrealized holding gains (losses) during the period, net of income tax (benefit)
expense of $7,548 , ($26,013), and ($4,569).
Reclassification adjustment for net realized gains on investments included in net
income, net of income tax expense of ($279), ($1,930), and ($3,126).
Other comprehensive income (loss), net of tax:
Years Ended December 31,
2023
2022
2021
$
18,875
$
46,561
$
130,710
28,395
(1,048)
27,347
(97,857)
(7,260)
(105,117)
(17,189)
(11,759)
(28,948)
Comprehensive income (loss)
$
46,222
$
(58,556)
$
101,762
The accompanying notes are an integral part of these financial statements.
65
Safety Insurance Group, Inc. and Subsidiaries
Consolidated Statements of Changes in Shareholders’ Equity
(Dollars in thousands)
Accumulated
Other
Common
Stock
178
—
$
Additional Comprehensive
(Loss) Income,
Net of Taxes
53,527
—
Paid-in
Capital
209,779
—
Retained
Earnings
745,029
130,710
Total
Shareholders’
Equity
Treasury
Stock
(123,834) $
—
—
—
—
—
—
178
—
—
1
—
—
—
—
179
—
—
—
—
—
—
179
$
—
475
5,816
—
—
216,070
—
—
—
5,979
—
—
—
222,049
—
(28,948)
—
—
—
—
24,579
—
(105,117)
—
—
—
—
—
(80,538)
—
—
—
4,331
—
—
$ 226,380
$
27,347
—
—
—
—
(53,191) $
—
—
—
(53,996)
—
821,743
46,561
—
—
—
(52,995)
—
—
815,309
18,875
—
—
—
(52,992)
—
781,192
—
—
—
—
(11,563)
(135,397)
—
—
—
—
—
5,000
(14,603)
(145,000)
—
—
—
—
—
(5,293)
$ (150,293) $
884,679
130,710
(28,948)
475
5,816
(53,996)
(11,563)
927,173
46,561
(105,117)
1
5,979
(52,995)
5,000
(14,603)
811,999
18,875
27,347
-
4,331
(52,992)
(5,293)
804,267
Balance at January 1, 2021
Net income
Unrealized losses on securities available for sale, net of
deferred federal income taxes
Restricted share awards issued
Recognition of employee share-based compensation
Dividends paid and accrued
Acquisition of treasury stock
Balance at December 31, 2021
Net income
Unrealized losses on securities available for sale, net of
deferred federal income taxes
Restricted share awards issued
Recognition of employee share-based compensation
Dividends paid and accrued
Reissuance of treasury stock
Acquisition of treasury stock
Balance at December 31, 2022
Net income
Unrealized gains on securities available for sale, net of
deferred federal income taxes
Restricted share awards issued
Recognition of employee share-based compensation
Dividends paid and accrued
Acquisition of treasury stock
Balance at December 31, 2023
The accompanying notes are an integral part of these financial statements.
66
Safety Insurance Group, Inc. and Subsidiaries
Consolidated Statements of Cash Flows
(Dollars in thousands)
Cash flows from operating activities:
Net income
Adjustments to reconcile net income to net cash provided by operating
activities:
2023
Year Ended December 31,
2022
2021
$
18,875
$
46,561
$
130,710
Investment amortization, net
Fixed asset depreciation, net
Stock based compensation
Provision for deferred income taxes
Net realized gains on investments
Credit loss expense (benefit)
Earnings from partnership investments
Change in net unrealized gains on equity securities
Changes in assets and liabilities:
Accounts receivable, net
Accrued investment income
Receivable from reinsurers
Ceded unearned premiums
Deferred policy acquisition costs
Taxes recoverable/payable
Other assets
Loss and loss adjustment expense reserves
Unearned premium reserves
Accounts payable and accrued liabilities
Payable to reinsurers
Other liabilities
Net cash provided by operating activities
Cash flows from investing activities:
Fixed maturities purchased
Equity securities purchased
Other invested assets purchased
Proceeds from sales and paydowns of fixed maturities
Proceeds from maturities, redemptions, and calls of fixed maturities
Proceed from sales of equity securities
Proceeds from other invested assets redeemed
Acquisition, net of cash received
Fixed assets purchased
Net cash provided by (used for) investing activities
Cash flows from financing activities:
Proceeds from FHLB loan
Payments on FHLB loan
Dividends paid to shareholders
Acquisition of treasury stock
Net cash used for financing activities
Net increase (decrease) in cash and cash equivalents
Cash and cash equivalents at beginning of year
Cash and cash equivalents at end of period
Supplemental disclosure of cash flow information:
Cash paid during the year for:
Federal and state income taxes
Interest
$
$
$
(310)
6,949
4,332
1,655
(1,327)
530
(4,635)
(7,502)
(64,145)
951
(19,370)
(3,893)
(16,335)
(2,405)
(2,128)
53,483
94,775
(9,341)
4,497
(2,542)
52,114
(91,674)
(50,849)
(19,066)
102,143
19,542
64,691
3,377
(2,112)
(1,783)
24,269
20,000
(25,000)
(53,291)
(5,240)
(63,531)
12,852
25,300
38,152
6,072
811
$
$
$
1,693
6,610
5,980
(8,371)
(9,190)
(14)
(8,388)
44,386
(21,589)
(811)
2,519
(4,658)
(2,558)
3,237
(6,477)
(21,053)
19,888
(2,680)
2,252
(3,011)
44,326
(215,092)
(52,192)
(20,204)
154,491
86,406
43,348
2,933
(17,586)
(2,092)
(19,988)
5,000
—
(53,038)
(14,603)
(62,641)
(38,303)
63,603
25,300
19,119
507
$
$
$
4,234
6,896
6,292
5,323
(14,885)
(363)
(13,896)
(16,130)
8,194
644
10,842
(1,389)
1,938
(1,229)
(3,346)
3,070
(8,414)
(2,876)
956
24,823
141,394
(355,561)
(59,296)
(32,814)
213,665
144,910
26,724
4,608
—
(8,225)
(65,989)
—
—
(54,008)
(11,563)
(65,571)
9,834
53,769
63,603
29,190
507
The accompanying notes are an integral part of these financial statements.
67
In this Form 10-K, Notes to the Consolidated Financial Statements, dollar amounts are presented in thousands, except per share data.
1.
Basis of Presentation
The consolidated financial statements have been prepared on the basis of accounting principles generally
accepted in the United States of America (“GAAP”). The consolidated financial statements include Safety Insurance
Group, Inc. and its subsidiaries (the “Company”). The subsidiaries consist of Safety Insurance Company, Safety
Indemnity Insurance Company, Safety Property and Casualty Insurance Company, Safety Northeast Insurance Company,
Safety Northeast Insurance Agency, Inc. (“SNIA”), and Safety Management Corporation (“SMC”), which is SNIA’s
holding company. All intercompany commission transactions, including commission income and underwriting, operating
and related expenses, have been eliminated. Commission income totaled $963 and $50 for the years ended December 31,
2023 and 2022, respectively.
The Company was incorporated on June 25, 2001 in the State of Delaware. On October 16, 2001, the Company
acquired all of the issued and outstanding common stock of Thomas Black Corporation (“TBC”) and its property and
casualty subsidiaries. TBC subsequently merged with and into Safety Insurance Group, Inc. with Safety Insurance
Group, Inc. being the corporation surviving the merger.
The Company is a leading provider of property and casualty insurance in Massachusetts, New Hampshire and
Maine. The Company’s principal product line is private passenger automobile insurance, which accounted for 54.7% of
its direct written premiums in 2023. The Company primarily operates through its insurance company subsidiaries, Safety
Insurance Company, Safety Indemnity Insurance Company, Safety Property and Casualty Insurance Company, and
Safety Northeast Insurance Company (together referred to as the “Insurance Subsidiaries”).
SNIA was established on December 1, 2022, when the Company acquired the assets and operations of
Northeast Metrowest Insurance Agency, Inc. (“Northeast / Metrowest”), an independent insurance agency, through its
wholly-owned subsidiary, SMC. SNIA provides personal and commercial property and casualty insurance products to
customers on behalf of the Insurance Subsidiaries and third-party insurance carriers. The Company conducted business
with Northeast / Metrowest prior to its acquisition. During the eleven months prior to December 1, 2022, all
commissions paid to Northeast / Metrowest were reflected as expenses and were conducted at standard market rates.
Subsequent to the acquisition date, all business conducted with SNIA was considered an intercompany transaction and
have been eliminated. As of December 31, 2023, fiduciary assets held by SNIA were immaterial and less than $250.
As part of the purchase of SNIA, the Company paid cash and reissued treasury stock of $5,000.
2.
Summary of Significant Accounting Policies
Investments
Investments in fixed maturities, which include taxable and non-taxable bonds and redeemable preferred stocks,
are reported at fair value. Fair values for fixed maturity securities are based on estimates obtained from independent
pricing services. Unrealized gains or losses on fixed maturity securities reported at fair value are excluded from earnings
and reported in a separate component of shareholder’s equity known as “accumulated other comprehensive income net of
taxes” until realized. For fixed maturities that the Company does not intend to sell or for which it is more likely than not
that the Company would not be required to sell before an anticipated recovery in value, the Company separates the credit
loss component of the impairment from the amount related to all other factors and reports the credit loss component as
credit loss expense. The impairment related to all other factors (non-credit factors) is reported in accumulated other
comprehensive income. The allowance for expected credit losses is adjusted for any additional credit losses and
subsequent recoveries. Upon recognizing a credit loss, the cost basis is not adjusted. See Note 3 for further details of the
Company’s accounting for impairments of available-for-sale investments.
68
Investments in equity securities, which include interests in common stocks, mutual funds and a real estate
investment trust (“REIT”), are reported at fair value. Fair values for equity securities are derived from external market
quotations, with the exception of the REIT whose fair value was determined using the trust’s net asset value obtained
from its audited financial statements. Changes in unrealized gains or losses on equity securities are recognized in
earnings.
Other invested assets consist of investments in limited partnerships. The partnership interest is accounted for
using the equity method of accounting and recorded in earnings from partnership investments. The carrying value of
these investments are written down, or impaired, to fair value when a decline in value is considered to be
other-than-temporary. In applying the equity method (including assessment for other-than-temporary impairment), the
Company uses financial information provided by the investee, generally on a three month lag.
Realized gains or losses on the sale or maturity of investments are determined based on the specific cost
identification method.
Investment income is recognized on an accrual basis of accounting. Bonds not backed by other loans are
amortized using the interest method. Loan-backed bonds and structured securities are amortized using the interest
method and significant changes in estimated cash flows from the original purchase assumptions are accounted for using
the retrospective method.
Cash and Cash Equivalents
Cash and cash equivalents includes money market accounts and U.S. Treasury bills with original maturities of
three months or less from the date of purchase. U.S. Treasury bills are stated at amortized cost, which approximates fair
value.
Accounts Receivable
Amounts included in accounts receivable represent premiums as well as finance charges, the majority of which
are billed on a monthly installment basis. Accounts receivable are stated net of allowances for doubtful accounts. At
December 31, 2023 and 2022, these allowances were $1,053 and $1,446, respectively. Uncollected premium balances
over ninety days past due are written off.
Deferred Policy Acquisition Costs
Amounts that vary with and are primarily related to the successful acquisition of a new or renewal insurance
contract, principally commissions, premium taxes and certain other costs, are deferred and amortized ratably over the
effective period of the policy. All other acquisition expenses are expensed as incurred. Deferred policy acquisition costs
are reviewed to determine if they are recoverable from future income, and if not, are charged to expense. Future
investment income attributable to related premiums is not taken into account in measuring the recoverability of the
carrying value of this asset. Amortization of acquisition costs in the amount of $161,630, $146,013 and $146,573 were
included in underwriting, operating and other expenses for the years ended 2023, 2022 and 2021, respectively.
Equity and Deposits in Pools
Equity and deposits in pools represents the net receivable amounts from the residual market mechanisms,
Commonwealth Automobile Reinsurers (“CAR”) for automobile and Massachusetts Property Insurance Underwriting
Association (“FAIR Plan”) for homeowners insurance in Massachusetts. See Note 11 for a discussion of the Company’s
accounting for amounts assumed from residual markets.
Equipment and Leasehold Improvements
Property, equipment, leasehold improvements, and software which are included in other assets are carried at
cost less accumulated depreciation. Depreciation is provided using the straight- line or accelerated method over the
69
estimated useful lives of the related assets, which range from 3 to 10 years. Amortization of leasehold improvements is
provided using the straight-line method over the term of the lease. The costs of computer software developed or obtained
for internal use are capitalized and amortized over the estimated life of the business system, beginning when the software
is ready for its intended use. Maintenance and repairs are charged to expense as incurred
Business Combinations
The Company accounts for acquisitions of entities that qualify as businesses using the acquisition method of
accounting in accordance with Accounting Standards Codification (“ASC”) 805, Business Combinations. Purchase
consideration is allocated to the assets acquired, including customer relationship intangible assets, and liabilities assumed
based on their estimated fair values at acquisition. Management estimated the fair value of such intangible assets using
an income approach that considered cash flows expected to be generated by the acquired business relationships, a
weighted average cost of capital discount rate reflecting the relative risk of achieving the anticipated cash flows, profits,
the time value of money, and other relevant inputs. The excess of the total purchase consideration over the fair value of
the identified net assets acquired is recognized as goodwill. The results of acquired businesses are included in the results
of operations beginning from the date of acquisition. Acquisition related costs are expensed as incurred. During the
measurement period, which may be up to one year from the acquisition date, the Company may record adjustments to the
allocation of purchase consideration and to the fair values of assets acquired and liabilities assumed to the extent that
additional information becomes available. After this period, any subsequent adjustments are recorded in earnings.
Goodwill
Goodwill generated through acquisition is carried at cost, net of impairments. Goodwill is not amortized but is
reviewed for impairment at least annually or more frequently when indicators of potential impairment exist.
Management first evaluates impairment of goodwill by assessing qualitative factors to determine whether it is more
likely than not that the fair value of a reporting unit is less than its carrying amount. If after performing the qualitative
assessment, management determines it is more likely than not that the fair value of the reporting unit is less than its
carrying amount, a quantitative assessment to determine the fair value of the reporting unit. Management’s
determination of the fair value of the reporting unit incorporates multiple inputs into discounted cash flow calculations,
including levels of economic capital required to support the business, future business growth, earnings projections, and
the weighted average cost of capital used for purposes of discounting. Goodwill is impaired up to the amount that the
carrying value of the reporting unit exceeds the fair value. The Company did not recognize any goodwill impairments
during the year ended December 31, 2023.
Intangible Assets
Acquired intangible assets are amortized over their useful lives on a straight-line basis over the period of
expected benefit, generally 10 years. The Company recognized $816 and $44 of amortization expense for the years
ended December 31, 2023 and 2022, respectively, and expects to recognize $816 of amortization expense annually.
Intangible assets are assessed for impairment generally when events or circumstances indicate a potential impairment. If
it is determined that the carrying amount of the asset is not recoverable, the asset is written down to fair value and an
impairment loss is recognized. The Company did not identify any impairment indicators during the year ended
December 31, 2023.
Revenue Recognition
The Company recognizes revenue under both ASC 944, Financial Services – Insurance (“ASC 944”) and ASC
606, Revenue from Contracts with Customers (“ASC 606”).
Premiums are earned over the terms of the respective policies, which are generally one year. Unearned
premiums represent the portion of premiums written applicable to the unexpired terms of the policies.
Ceded premiums are charged to income over the terms of the respective policies and the applicable term of the
reinsurance contracts with third-party reinsurers. Ceded unearned premiums represent the unexpired portion of premiums
70
ceded to CAR and other reinsurers.
Premiums received in advance of the policy effective date are recorded as a liability and not recognized as
income until earned. Such amounts are included in accounts payable and accrued liabilities and totaled $11,983 and
$12,858 at December 31, 2023 and 2022, respectively.
Finance and other service income primarily include revenues from premium installment charges, which are
recognized when earned.
Commission revenue includes new and renewal commissions paid by insurance carriers. These commissions
are earned at the later of the effective date or billing date, as all rights are passed to the insured, the obligation to pay a
claim resides with the insurance carrier, and no further performance obligation exists for the Company. Under the terms
of its contracts with insurance carriers, the Company can earn additional, variable commission revenue in the form of
annual contingent underwriting commissions (“CUC”) based on the underwriting performance of the insurance book of
business. Each carrier contract and related CUC is calculated independently. Under ASC 606, the Company must
estimate the amount of consideration that will be received in the coming year such that a significant reversal of revenue
is not probable. As such, CUC is recognized as a contract asset as policies are issued using applicable premium and
payout factors based on the estimated loss ratio from the contract.
Losses and Loss Adjustment Expenses
Liabilities for losses and loss adjustment expenses (“LAE”) include case basis estimates for open claims
reported prior to year-end and estimates of unreported claims and claim adjustment expenses, net of salvage and
subrogation. The estimates are continually reviewed and modified to reflect current conditions, and any resulting
adjustments are reflected in current operating results. Adjustments for anticipated salvage and subrogation are recorded
on incurred and reported and incurred but not reported losses.
The Company determines its loss and LAE reserves estimate based upon the analysis of our actuaries. A
reasonable estimate is derived by selecting a point estimate within a range of indications as calculated by our actuaries
using generally accepted actuarial techniques. The key assumption in most actuarial analysis is that past patterns of
frequency and severity will repeat in the future, unless a significant change in the factors described above takes place.
Our key factors and resulting assumptions are the ultimate frequency and severity of claims, based upon the most recent
ten years of claims reported to the Company, and the data reported to us to calculate our share of the residual market.
For each accident year and each coverage within a line of business our actuaries calculate the ultimate losses incurred.
Reinsurance
Liabilities for unearned premiums and unpaid losses are stated before deductions for ceded reinsurance. The
ceded amounts are carried as receivables. Earned premiums are stated net of deductions for ceded reinsurance.
The Company, as primary insurer, will be required to pay losses in their entirety in the event that the reinsurers
are unable to discharge their obligations under the reinsurance agreements.
Advertising Costs
Advertising costs are charged to expense when they are incurred. Total advertising costs were $2,405, $2,399
and $2,232 for the years ended December 31, 2023, 2022, and 2021, respectively, and are included in underwriting,
operating and related expenses.
Income Taxes
The Company and its subsidiaries file a consolidated U.S. federal income tax return. The method of allocation
among members of the consolidated group is subject to a written agreement approved by the Board of Directors (the
“Board”). The consolidated tax liability is allocated on the basis of the members’ proportionate contribution to
consolidated taxable income.
71
Deferred income taxes are generally recognized when assets and liabilities have different values for financial
statement and tax reporting purposes, and for other temporary taxable and deductible differences as defined by ASC 740,
Income Taxes. A valuation allowance is established where management has assessed that it is more likely than not that
the Company will not be able to utilize the full deferred tax asset.
Earnings per Weighted Average Common share
Basic earnings per weighted average common share (“EPS”) are calculated by dividing net income by the
weighted average number of basic common shares outstanding during the period. Diluted earnings per share amounts
are based on the weighted average number of common shares including non-vested performance stock grants.
The following table sets forth the computation of basic and diluted EPS for the periods indicated.
Earnings attributable to common shareholders - basic and diluted:
Net income from continuing operations
Allocation for participating shares
Net income from continuing operations attributed to common shareholders
Earnings per share denominator - basis and diluted
Total weighted average common shares outstanding, including participating shares
Less: weighted average participating shares
Basic earnings per share denominator
Common equivalent shares- non-vested performance stock grants
Diluted earnings per share denominator
Basic earnings per share
Diluted earnings per share
Undistributed earnings attributable to common shareholders - basic and diluted:
Net income from continuing operations attributable to common shareholders -Basic
Dividends declared
Undistributed earnings
Net income from continuing operations attributable to common shareholders -Diluted
Dividends declared
Undistributed earnings
Years Ended December 31,
2022
2023
2021
18,875
(85)
18,790
$
$
46,561
(205)
46,356
$
$
130,710
575
131,285
14,730,547
(66,817)
14,663,730
46,401
14,710,131
14,672,234
(64,751)
14,607,483
103,128
14,710,611
14,894,532
(65,796)
14,828,736
96,990
14,925,726
1.28
1.28
$
$
$
1.28
(3.60)
(2.32) $
$
1.28
(3.60)
(2.32) $
3.17
3.15
3.17
(3.60)
(0.43)
3.15
(3.60)
(0.45)
$
$
$
$
$
$
8.85
8.80
8.85
(3.60)
5.25
8.80
(3.60)
5.20
$
$
$
$
$
$
$
$
Diluted EPS excludes non vested performance stock grants with exercise prices and exercise tax benefits greater
than the average market price of the Company’s common stock during the period because their inclusion would be
anti-dilutive. There were no anti-dilutive non-vested performance stock grants for the years ended December 31, 2023,
2022 and 2021.
Share-Based Compensation
ASC 718, Compensation —Stock Compensation (“ASC 718”), requires the Company to measure and recognize
the cost of employee services received in exchange for an award of equity instruments. Under the provisions of ASC
718, share-based compensation cost is measured at the grant date, based on the fair value of the award, and is recognized
as an expense over the requisite service period (generally the vesting period of the equity grant).
See Note 7 for further information regarding share-based compensation.
Use of Estimates
The preparation of financial statements in conformity with GAAP requires management to make estimates and
assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at
72
the date of the financial statements and reported amounts of revenues and expenses during the reporting period. Actual
results could differ from those estimates.
Recent Accounting Pronouncements
In November 2023, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update
(“ASU”) 2023-07, Segment Reporting (Topic 280): Improvements to Reportable Segment Disclosures. This ASU
updates reportable segment disclosures primarily through enhanced disclosures about significant segment expenses. This
ASU does not change how a Company identifies its operating segments, aggregates those operating segments, or applies
the quantitative thresholds to determine its reportable segments. This ASU is effective for fiscal years starting January 1,
2024, and for interim periods starting January 1, 2025, and will be applied on a retrospective basis. The ASU has not yet
been adopted and will not have a material impact on the Company’s consolidated financial position, results of operations
or cash flows, but the ASU will require additional disclosures to our annual and interim consolidated financial
statements.
In December 2023, the FASB issued ASU 2023-09, Income Taxes (Topic 740): Improvements to Income Tax
Disclosures. This ASU updates the required income tax disclosures to include disclosure of income taxes paid
disaggregated by jurisdiction and greater disaggregation of information in the required rate reconciliation. This ASU is
effective for fiscal years starting January 1, 2025, and will be applied on a prospective basis. The Company is currently
evaluating the impact of this guidance on its consolidated financial statements.
Segments
The Company comprises one business segment: property and casualty insurance operations. Management
organizes the business around private passenger automobile insurance in Massachusetts sold exclusively through
independent agents and offers other personal and commercial insurance as complementary products. In accordance with
ASC 280, Segment Reporting, the financial information of the segment is presented consistent with the way results are
regularly evaluated by the chief operating decision maker in deciding how to allocate resources and in assessing
performance.
3.
Investments
The gross unrealized gains and losses on investments in fixed maturity securities, including redeemable
preferred stocks that have characteristics of fixed maturities, and equity securities, including interests in mutual funds,
and other invested assets, were as follows for the periods indicated.
U.S. Treasury securities
Obligations of states and political subdivisions
Residential mortgage-backed securities (1)
Commercial mortgage-backed securities
Other asset-backed securities
Corporate and other securities
Subtotal, fixed maturity securities
Equity securities (2)
Other invested assets (4)
Totals
$
$
As of December 31, 2023
Cost or
Amortized
Cost
Allowance for
Expected Credit
Losses
Gross Unrealized
Gains
Losses (3)
2,420
38,682
267,271
153,923
64,043
594,343
1,120,682
221,809
133,946
1,476,437
$
$
— $
—
—
—
—
(1,208)
(1,208)
—
—
(1,208)
$
15
262
1,945
200
217
3,785
6,424
25,707
—
32,131
$
$
(115)
(2,421)
(21,979)
(14,273)
(2,927)
(32,038)
(73,753)
(9,494)
—
(83,247)
$
$
Estimated
Fair
Value
2,320
36,523
247,237
139,850
61,333
564,882
1,052,145
238,022
133,946
1,424,113
73
As of December 31, 2022
Cost or
Amortized
Cost
Allowance for
Expected Credit
Losses
Gross Unrealized
Gains
Losses (3)
Estimated
Fair
Value
U.S. Treasury securities
Obligations of states and political subdivisions
Residential mortgage-backed securities (1)
Commercial mortgage-backed securities
Other asset-backed securities
Corporate and other securities
Subtotal, fixed maturity securities
Equity securities (2)
Other invested assets (4)
Totals
$
$
1,825
57,319
259,878
156,303
74,160
603,294
1,152,779
231,444
112,850
1,497,073
$
$
— $
—
—
—
—
(678)
(678)
—
—
(678) $
— $
282
385
107
—
740
1,514
31,857
—
33,371
$
(156) $
(3,532)
(25,761)
(16,479)
(5,429)
(52,103)
(103,460)
(23,146)
—
(126,606) $
1,669
54,069
234,502
139,931
68,731
551,253
1,050,155
240,155
112,850
1,403,160
(1)
(2)
(3)
(4)
Residential mortgage-backed securities consists primarily of obligations of U.S. Government agencies including collateralized mortgage
obligations issued, guaranteed and/or insured by the following issuers: Government National Mortgage Association (GNMA), Federal
Home Loan Mortgage Corporation (FHLMC), Federal National Mortgage Association (FNMA) and the Federal Home Loan Bank (FHLB).
Equity securities include common stock, preferred stock, mutual funds and interests in mutual funds held to fund the Company’s executive
deferred compensation plan.
The Company’s investment portfolio included 861 and 1,195 securities in an unrealized loss position at December 31, 2023 and 2022,
respectively.
Other invested assets are accounted for under the equity method which approximated fair value.
The amortized cost and the estimated fair value of fixed maturity securities, by maturity, are shown below for
the period indicated. Expected maturities will differ from contractual maturities because borrowers may have the right to
call or prepay obligations with or without call or prepayment penalties
Due in one year or less
Due after one year through five years
Due after five years through ten years
Due after ten years through twenty years
Due after twenty years
Asset-backed securities
Totals
As of December 31, 2023
Amortized
Cost
Estimated
Fair Value
31,463
338,918
241,110
23,704
250
485,237
1,120,682
$
$
31,048
323,755
226,452
22,178
292
448,420
1,052,145
$
$
The gross realized gains and losses on sales of investments were as follows for the periods indicated.
Gross realized gains
Fixed maturity securities
Equity securities
Gross realized losses
Fixed maturity securities
Equity securities
Net realized gains on investments
2023
Years Ended December 31,
2022
2021
$
$
1,025
8,584
(3,577)
(4,705)
1,327
$
$
1,511
12,367
(2,987)
(1,701)
9,190
$
$
3,666
12,275
(1,036)
(20)
14,885
In the normal course of business, the Company enters into transactions involving various types of financial
instruments, including investments in fixed maturities and equity securities. Investment transactions have credit exposure
to the extent that a counter party may default on an obligation to the Company. Credit risk is a consequence of carrying,
trading and investing in securities. To manage credit risk, the Company focuses on higher quality fixed income
securities, reviews the credit strength of all companies in which it invests, limits its exposure in any one investment and
monitors the portfolio quality, taking into account credit ratings assigned by recognized statistical rating organizations.
74
The following tables as of December 31, 2023 and 2022 present the gross unrealized losses included in the
Company’s investment portfolio and the fair value of those securities aggregated by investment category. The tables also
present the length of time that they have been in a continuous unrealized loss position.
Less than 12 Months
12 Months or More
Total
As of December 31, 2023
U.S. Treasury securities
Obligations of states and political subdivisions
Residential mortgage-backed securities
Commercial mortgage-backed securities
Other asset-backed securities
Corporate and other securities
Subtotal, fixed maturity securities
Equity securities
Total temporarily impaired securities
$
$
Estimated
Fair Value
— $
$
Losses
Losses
Unrealized Estimated Unrealized
Fair Value
1,708
28,893
182,794
130,493
46,600
369,163
759,651
45,797
$ 805,448
— $
17
167
108
224
1,338
1,854
3,079
4,933
115
2,404
21,812
14,165
2,703
30,700
71,899
6,415
78,314
$
$
Estimated
Fair Value
1,708
$
29,296
194,042
134,560
52,573
408,616
820,795
80,069
900,864
$
Unrealized
Losses
$
$
115
2,421
21,979
14,273
2,927
32,038
73,753
9,494
83,247
403
11,248
4,067
5,973
39,453
61,144
34,272
95,416
Less than 12 Months
As of December 31, 2022
12 Months or More
Total
U.S. Treasury securities
Obligations of states and political subdivisions
Residential mortgage-backed securities
Commercial mortgage-backed securities
Other asset-backed securities
Corporate and other securities
Subtotal, fixed maturity securities
Equity securities
Total temporarily impaired securities
Estimated
Fair Value
1,669
34,178
140,855
110,073
41,113
386,401
714,289
116,881
831,170
$
$
156
2,504
12,254
11,632
2,358
28,048
56,952
21,198
78,150
$
Unrealized Estimated Unrealized
Fair Value
$
— $
Losses
Losses
$
— $
3,072
70,956
24,653
27,618
131,046
257,345
6,209
$ 263,554
1,028
13,507
4,847
3,071
24,055
46,508
1,948
48,456
$
$
Estimated
Fair Value
1,669
37,250
211,811
134,726
68,731
517,447
971,634
123,090
1,094,724
Unrealized
Losses
$
156
3,532
25,761
16,479
5,429
52,103
103,460
23,146
$ 126,606
At December 31, 2023, U.S. Government residential mortgage backed securities with a fair value of $53,503
are pledged as collateral for a borrowing with the Federal Home Loan Bank of Boston (“FHLB-Boston”) as described in
Note 10 – Debt. These securities are included in fixed maturity securities on the Company’s Consolidated Balance
Sheets.
Impairments
For fixed maturities that the Company does not intend to sell or for which it is more likely than not that the
Company would not be required to sell before an anticipated recovery in value, the Company separates the credit loss
component of the impairment from the amount related to all other factors. The expected credit loss component is
recognized as an allowance for expected credit losses. The allowance is adjusted for any additional credit losses and
subsequent recoveries, which are booked in income as either credit loss expense or credit loss benefit, respectively. Upon
recognizing a credit loss, the cost basis is not adjusted. The impairment related to all other factors (non-credit factors) is
reported in other comprehensive income.
For fixed maturities where the Company records a credit loss, a determination is made as to the cause of the
impairment and whether the Company expects a recovery in the value. For fixed maturities where the Company expects
a recovery in value, the constant effective yield method is utilized, and the investment is amortized to par.
For fixed maturity investments the Company intends to sell or for which it is more likely than not that the
Company will be required to sell before an anticipated recovery in value, the full amount of the impairment is included
in credit loss expense. The new cost basis of the investment is the previous amortized cost basis less the impairment
recognized in credit loss expense. The new cost basis is not adjusted for any subsequent recoveries in fair value.
75
The Company uses a systematic methodology to evaluate declines in fair values below cost or amortized cost of
our investments. Some of the factors considered in assessing impairment of fixed maturities due to credit losses include
the extent to which the fair value is less than amortized cost, the financial condition of and the near and long-term
prospects of the issuer, whether the debtor is current on its contractually obligated interest and principal payments,
changes to the rating of the security by a rating agency, the historical volatility of the fair value of the security and
whether it is more like than not that the Company will be required to sell the investment prior to an anticipated recovery
in value.
As of December 31, 2023, the Company concluded that $1,208 of unrealized losses were due to credit factors
and were recorded as an allowance for expected credit losses, compared to $678 as of December 31, 2022. The Company
concluded that outside of the securities that were recognized as credit impaired, the unrealized losses recorded on the
fixed maturity portfolio at December 31, 2023 and 2022 resulted from fluctuations in market interest rates and other
temporary market conditions as opposed to fundamental changes in the credit quality of the issuers of such securities.
Based upon the analysis performed, the Company’s decision to hold these securities, the Company’s current level of
liquidity and our history of positive operating cash flows, management believes it is more likely than not that it will not
be required to sell any of its securities before the anticipated recovery in the fair value to its amortized cost basis.
The following tables represent a reconciliation of the beginning and ending balances of the allowance for
expected credit losses on fixed maturities classified as available for sale.
Beginning of period
Credit losses on securities with no previously recorded credit losses
Net increases (decreases) in allowance on previously impaired securities
Reduction due to sales
Writeoffs charged against allowance
Recoveries of amounts previously written off
Ending balance of period
Year Ended December 31,
2023
2022
678
1,395
254
(771)
(348)
—
1,208
$
$
691
193
98
(304)
—
—
678
$
$
The Company holds no subprime mortgage debt securities. All of the Company’s holdings in mortgage-backed
securities are either U.S. Government or Agency guaranteed or are rated investment grade by either Moody’s or Standard
& Poor’s.
Net Investment Income
The components of net investment income were as follows for the periods indicated.
Interest on fixed maturity securities
Dividends on equity securities
Equity in earnings of other invested assets
Interest on other assets
Total Investment Income
Investment expenses
Net investment income
Years Ended December 31,
2023
2022
2021
46,609
7,298
5,521
219
59,647
3,270
56,377
$
$
40,886
6,746
2,304
61
49,997
3,272
46,725
$
$
36,160
6,421
4,895
22
47,498
3,363
44,135
$
$
4.
Allowance for Expected Credit Losses
The Company’s financial instruments include premiums and accounts receivable, and reinsurance recoverables.
Premiums and accounts receivable are reported net of an allowance for expected credit losses. The allowance is
based upon the Company’s ongoing review of amounts outstanding, historical loss data, including delinquencies and
write-offs, current and forecasted economic conditions and other relevant factors. Credit risk is partially mitigated by the
76
Company’s ability to cancel the policy if the policyholder does not pay the premium and the Company writes off
premiums receivable balances that are more than 90 days overdue.
The following tables present the balances of premiums receivable, net of the allowance for expected credit
losses, for the years ended December 31, 2023 and 2022, and changes in the allowance for expected credit losses for the
years ended December 31, 2023 and 2023.
At and For the
Year Ended December 31, 2023
Accounts
Receivable Net of
Allowance for
Expected Credit
Losses
Allowance for
Expected Credit
Losses
At and For the
Year Ended December 31, 2022
Accounts
Receivable Net of
Allowance for
Expected Credit
Losses
Allowance for
Expected Credit
Losses
Balance, beginning of period
Current period change for expected credit losses
Writeoffs of uncollectable accounts receivable
Balance, end of period
$
$
192,542
$
256,687
$
1,446
2,598
(2,991)
1,053
$
$
170,953
$
192,542
$
1,808
1,339
(1,701)
1,446
Reinsurance recoverables include amounts due from reinsurers for both paid and unpaid losses. The Company
cedes insurance to CAR and to other reinsurers. The Company has a property catastrophe excess of loss agreement and a
casualty excess of loss agreement that qualify as reinsurance treaties and are designed to protect against large or unusual
loss and LAE activity. Reinsurance contracts do not relieve the Company from its obligations to policyholders. Failure of
reinsurers to honor their obligations could result in losses to the Company. The Company evaluates the financial
condition of its reinsurers and monitors economic characteristics of the reinsurers to minimize its exposure to significant
losses from reinsurer insolvencies. The Company reports its reinsurance recoverables net of an allowance for estimated
uncollectable reinsurance. A probability-of-default methodology which reflects current and forecasted economic
conditions is used to estimate the amount of uncollectible reinsurance due to credit-related factors and the estimate is
reported in an allowance for estimated uncollectible reinsurance. Amounts deemed to be uncollectible, including
amounts due from known insolvent reinsurers, are written off against the allowance. Changes in the allowance, as well as
any subsequent collections of amounts previously written off, are reported as part of claims and claim adjustment
expenses.
The majority of the Company’s reinsurance recoverable on paid and unpaid losses is a result of our participation
as a servicing carrier in the CAR Commercial Automobile Program, which represents 94% of the total reinsurance
recoverable on paid and unpaid losses at December 31, 2023 and 2022, respectively. The remaining 6% of amounts due
from reinsurers are related to our other excess of loss and quota share contracts. For amounts due under these contracts,
the Company utilizes updated A.M. Best credit ratings on a quarterly basis to determine the allowance for expected
credit losses. As of December 31, 2023 and 2022, all reinsurers under these programs are rated “A” or better by A.M.
Best. Certain of the Company's reinsurance recoverables are collateralized by letters of credit, funds held or trust
agreements. The Company’s analysis concludes that there are no expected credit losses at December 31, 2023 or 2022.
77
5.
Equipment and Leasehold Improvements
The carrying value of equipment and leasehold improvements by classification was as follows for the periods
indicated. Equipment and leasehold improvements are included in other assets in the consolidated balance sheets.
Software
Computer equipment
Leasehold improvements
Other equipment
Furniture and fixtures
Total cost
Less accumulated depreciation and amortization
Equipment and leasehold improvements, net
As of December 31,
2023
2022
$
$
58,896
16,264
8,264
3,132
4,346
90,902
79,182
11,720
$
$
58,079
15,649
8,264
3,132
4,346
89,470
71,342
18,128
Depreciation and amortization expense for the years ended December 31, 2023, 2022, and 2021 was $7,840,
$7,876 and $6,896, respectively and is included in underwriting, operating and related expenses.
6.
Employee Benefit Plan
The Company sponsors the Safety Insurance Company 401(k) qualified defined contribution retirement plan
(the “Retirement Plan”). The Retirement Plan is available to all eligible employees of the Company. An employee must
be 21 years of age to be eligible to participate in the Retirement Plan and is allowed to contribute on a pre-tax basis up to
the maximum allowed under federal law. The Retirement Plan is administered by the Company and is subject to the
provisions of the Employee Retirement Income Security Act of 1974. At the close of each Retirement Plan year, the
Company makes a matching contribution equal to 100% of the amount each participant contributed during the plan year
from their total pay, up to a maximum amount of 8% of the participant’s base salary, to those participants who have
contributed to the Retirement Plan and were employed on the last day of the Retirement Plan year. Compensation
expense related to the Retirement Plan was $3,788, $3,382, and $3,433 for the years ended December 31, 2023, 2022,
and 2021, respectively.
7.
Share-Based Compensation
2018 Long Term Incentive Plan
On March 24, 2022, the Company’s Board of Directors adopted the Amended and Restated Safety Insurance
Group, Inc. 2018 Long-Term Incentive Plan (“the Amended 2018 Plan”), which was subsequently approved by our
shareholders at the 2022 Annual Meeting of Shareholders. The Amended 2018 Plan increases the share pool limit by
adding 350,000 common shares to the previously adopted Safety Insurance Group, Inc. 2018 Long-Term Incentive Plan.
The Amended 2018 Plan enables the grant of stock awards, performance shares, cash-based performance units, other
stock-based awards, stock options, stock appreciation rights, and stock unit awards, each of which may be granted
separately or in tandem with other awards. Eligibility to participate includes officers, directors, employees and other
individuals who provide bona fide services to the Company. The Amended 2018 Plan supersedes the Company’s 2002
Management Omnibus Incentive Plan (“the 2002 Incentive Plan”).
The Amended 2018 Plan establishes a pool of 700,000 shares of common stock available for issuance to our
employees and other eligible participants. The Board of Directors and the Compensation Committee intend to issue
awards under the Amended 2018 Plan in the future.
The maximum number of shares of common stock between the Amended 2018 Plan and the 2002 Incentive
Plan with respect to which awards may be granted is 3,200,000. No further grants will be allowed under the 2002
Incentive Plan. At December 31, 2023, there were 373,422 shares available for future grant.
78
Restricted Stock
Service-based restricted stock awarded in the form of unvested shares is recorded at the market value of the
Company’s common stock on the grant date and amortized ratably as compensation expense over the requisite service
period. Service-based restricted stock awards generally vest over a three-year period and vest 30% on the first and
second anniversaries of the grant date and 40% on the third anniversary of the grant date, except for non-executive
employees’ restricted stock awards granted prior to 2018 which vest ratably over a five-year service period and
independent directors’ stock awards which vest immediately. Our independent directors are subject to stock ownership
guidelines, which require them to have a value equal to four times their annual cash retainer.
In addition to service-based awards, the Company grants performance-based restricted shares to certain
employees. These performance shares cliff vest after a three-year performance period provided certain performance
measures are attained. A portion of these awards, which contain a market condition, vest according to the level of total
shareholder return achieved by the Company compared to its property-casualty insurance peers over a three-year period.
The remainder, which contain a performance condition, vest according to the level of Company’s combined ratio results
compared to a target based on its property-casualty insurance peers.
Actual payouts can range from 0% to 200% of target shares awarded depending upon the level of achievement
of the respective market and performance conditions during a three calendar-year performance period. Compensation
expense for share awards with a performance condition is based on the probable number of awards expected to vest
using the performance level most likely to be achieved at the end of the performance period.
Performance-based awards with market conditions are accounted for and measured differently from awards that
have a performance or service condition. The effect of a market condition is reflected in the award’s fair value on the
grant date. That fair value is recognized as compensation cost over the requisite service period regardless of whether the
market-based performance objective has been satisfied.
All of the Company’s restricted stock awards are issued as incentive compensation and are equity classified.
The following table summarizes restricted stock activity under the Amended 2018 Plan assuming a target
payout for the performance-based shares.
2023
Shares
Under
Restriction
63,413
40,101
(36,352)
(233)
66,929
Weighted
Average
Fair Value
83.87
$
80.03
83.87
81.62
81.58
Years Ended December 31,
2022
Shares
Under
Restriction
65,171
38,864
(38,328)
(2,294)
63,413
Weighted
Average
Fair Value
84.30
$
85.22
86.02
83.10
83.87
2021
Shares
Under
Restriction
66,550
39,840
(40,763)
(456)
65,171
Weighted
Average
Fair Value
85.16
$
79.27
80.82
81.17
84.30
Shares Under
Restriction
2023
Performance-based Weighted
Average
Fair Value
84.46
$
81.81
90.50
83.39
81.40
75,069
30,693
(26,599)
(172)
78,991
Shares Under
Restriction
Years Ended December 31,
2022
Performance-based Weighted
Average
Fair Value
86.53
$
86.35
92.52
83.01
84.46
72,418
31,828
(26,504)
(2,673)
75,069
Shares Under
Restriction
2021
Performance-based Weighted
Average
Fair Value
84.94
$
77.56
75.05
87.43
86.53
71,964
49,460
(48,666)
(340)
72,418
Outstanding at beginning of year
Granted
Vested and unrestricted
Forfeited
Outstanding at end of period
Outstanding at beginning of year
Granted (1)
Vested and unrestricted
Forfeited
Outstanding at end of period
(1) Includes a true-up of previously awarded performance-based restricted share awards. The updated shares were calculated based on the attainment
of pre-established performance objectives.
79
As of December 31, 2023, there was $4,404 of unrecognized compensation expense related to non-vested
restricted stock awards that is expected to be recognized over a weighted average period of 1.4 years. The total fair value
of the shares that were vested and unrestricted during the years ended December 31, 2023, 2022, and 2021 was $5,456,
$5,749 and $6,947, respectively. For the years ended December 31, 2023, 2022, and 2021, the Company recorded
compensation expense related to awards under the Incentive Plan of $3,422, $4,724, and $4,971, net of income tax
benefit of $910, $1,256, and $1,321, respectively.
8.
Commitments and Contingencies
Commitments
As part of the Company’s investment activity, we have committed $170,000 to investments in limited
partnerships. The Company has contributed $133,330 to these commitments as of December 31, 2023. As of
December 31, 2023, the remaining committed capital that could be called is $42,043, which includes potential recallable
capital distributions.
Contingencies
Various claims, generally incidental to the conduct of normal business, are pending or alleged against the
Company from time to time. In the opinion of management, based in part on the advice of legal counsel, the ultimate
resolution of such claims will not have a material adverse effect on the Company’s consolidated financial statements.
However, if estimates of the ultimate resolutions of those proceedings are revised, liabilities related to those proceedings
could be adjusted in the near term.
The Company had been named in a lawsuit alleging that the Company improperly denied coverage to
commercial insureds for loss of business income resulting from the COVID-19 pandemic. Our position is that no
coverage existed for this peril. As a result of the lawsuit, the Company accrued a reserve of $6,500 for legal defense
costs included in loss and losses adjustment expenses during the year ended December 31, 2021. During the year ended
December 31, 2022, the claim against the Company was closed and the accrual of $6,500 was reversed.
On October 19, 2021, the Supreme Judicial Court of Massachusetts (the “SJC”) unanimously ruled that property
and casualty insurers must compensate third-party claimants under property damage coverage, part 4 of the standard
Massachusetts automobile insurance policy, 2008 edition (standard policy), for the inherent diminished value (“IDV”)
that occurs when their vehicles are damaged in a crash. This ruling overturned a previous decision by the Massachusetts
Superior Court (the “Superior Court”), which found that a Massachusetts auto insurance policy did not provide property
damage coverage for inherent diminished value damages for third-party claimants. The SJC placed the burden of proof
on the individual claimant by explicitly specifying that the claimant must establish that the vehicle has suffered IDV
damages and also the amount of IDV damages at issue. The SJC further ruled that an insurer’s previous denial of
coverage for such damages could not serve as the basis for a claim of unfair business practices. On June 20, 2023, the
Superior Court denied a motion brought by the plaintiffs seeking class certification. The plaintiffs have since filed a
motion to amend the complaint, seeking to address the concerns raised by the Superior Court in denying their motion for
class certification; Safety has opposed the motion to amend the complaint, which has yet to be heard or ruled on by the
Superior Court. Based on the SJC’s rulings, at this time the Company does not expect any claims for IDV damages to be
material, and therefore has not accrued for a specific loss contingency.
Massachusetts law requires that insurers licensed to do business in Massachusetts participate in the
Massachusetts Insurers Insolvency Fund (“Insolvency Fund”). Members of the Insolvency Fund are assessed a
proportionate share of the obligations and expenses of the Insolvency Fund in connection with an insolvent insurer. It is
anticipated that there will be additional assessments from time to time relating to various insolvencies. Although the
timing and amounts of any future assessments are not known, based upon existing knowledge, management’s opinion is
that such future assessments will not have a material effect upon the financial position of the Company.
80
9. Leases
The Company has various non-cancelable, long-term operating leases, the largest of which are for office space
including the corporate headquarters, agency locations, VIP claims centers and law offices. Other operating leases
consist of auto leases and various office equipment. The Company has no finance leases. Our leases have remaining
lease terms of one year to five years, some of which also include options to extend the leases for an additional five-year
period.
Certain lease agreements contain renewal options and, in addition to the minimum annual rentals, generally
provide for payment of a share of the real estate taxes and operating expenses in excess of a base amount. Rental expense
for our office space, law offices and VIP claims centers was $4,294, $3,948 and $3,852 for the years ended
December 31, 2023, 2022, and 2021, respectively. All leases expire prior to 2029. The Company expects that in the
normal course of business, leases that expire will be renewed.
In calculating lease liabilities the Company uses its incremental borrowing rate as of the application date based
on original lease terms. The components of lease expense were as follows:
Operating lease cost
$
4,115
$
4,214
$
Year Ended December 31,
2023
2022
2021
4,464
Other information related to leases was as follows:
Cash paid for amounts included in the measurement of lease liabilities:
Operating cash flows from operating leases
Weighted average remaining lease term
Operating leases
Weighted average discount rate
Operating leases
Year Ended December 31,
2023
2022
2021
$
4,647
$
4,757
$
4,979
4.81 Years
5.75 Years
6.65 Years
2.48%
2.39%
2.34%
Maturities of lease liabilities were as follows:
2024
2025
2026
2027
2028
Thereafter
Total lease payments
Less imputed interest
Total
10.
Debt
$
$
Operating Leases
4,598
4,211
3,980
3,973
3,906
—
20,668
(912)
19,756
On August 10, 2023, the Company extended its Revolving Credit Agreement (the “Credit Agreement”) with
Citizens Bank, N.A. (“Citizens Bank”) to a maturity date of August 10, 2028. The Credit Agreement provides a $30,000
revolving credit facility with an accordion feature allowing for future expansion of the committed amount up to $50,000.
Loans under the credit facility bear interest at the Company’s option at the higher of Citizens Bank prime rate, the SOFR
81
rate plus 1.25% per annum, or 0.5% above the federal funds rate. Interest only is payable prior to maturity.
The Company’s obligations under the credit facility are secured by pledges of its assets and the capital stock of
its operating subsidiaries. The credit facility is guaranteed by the Company’s non-insurance company subsidiaries. The
credit facility contains covenants including requirements to maintain minimum risk-based capital ratios and statutory
surplus of Safety Insurance Company as well as limitations or restrictions on indebtedness, liens, and other matters. As
of December 31, 2023, the Company was in compliance with all covenants. In addition, the credit facility includes
customary events of default, including a cross-default provision permitting the lenders to accelerate the facility if the
Company (i) defaults in any payment obligation under debt having a principal amount in excess of $10,000 or (ii) fails to
perform any other covenant permitting acceleration of all such debt.
The Company had no amounts outstanding on its credit facility at December 31, 2023 or 2022. The credit
facility commitment fee included in interest expense was computed at a rate of 0.20% and 0.25% per annum on the
$30,000 commitment at December 31, 2023 and 2022, respectively.
The Company is a member of the FHLB-Boston. Membership in the FHLB-Boston allows the Company to
borrow money at competitive interest rates provided the loan is collateralized by specific U.S Government residential
mortgage backed securities. At December 31, 2023, the Company has the ability to borrow approximately $203,152
using eligible invested assets that would be used as collateral.
On March 17, 2020, the Company borrowed $30,000 from the FHLB-Boston for a term of five-years, bearing
interest at a rate of 1.42%. Interest is payable monthly and the principal is due on the maturity date of March 17, 2025
but may be prepaid in whole or in part by the Company in advance with a minor penalty for prepayment.
On December 29, 2022, the Company borrowed $5,000 from the FHLB-Boston for a term of one-month,
bearing interest at a rate of 4.34%. The interest and principal was paid on the maturity date of January 27, 2023.
On March 7, 2023, the Company borrowed $15,000 from FHLB-Boston for a term of one-month, bearing an
interest rate of 4.92%. The interest and principal was paid on the maturity date of April 5, 2023.
On June 29, 2023, the Company borrowed $5,000 from FHLB-Boston for a term of one-week, bearing an
interest rate of 5.24%. The interest and principal was paid on the maturity date of July 6, 2023.
The Company estimates the fair value of the FHLB-Boston loans by discounting cash flows using the interest
rate stated in the loan agreements, which is an observable input. As such, the loans are categorized as Level 2 within the
fair value hierarchy. The fair value of the outstanding loans was $30,468 and $35,807 at December 31, 2023 and 2022,
respectively. The loans are fully collateralized by specific U.S. Government residential mortgage-backed securities with
a fair value of $53,503 and $40,195 at year ended December 31, 2023 and 2022, respectively. The borrowing is
outstanding from the FHLB-Boston at year ended December 31, 2023 and 2022.
Interest expense on the FHLB-Boston borrowing was $818 and $524 for the years ended December 31, 2023
and 2022, respectively.
11.
Reinsurance
The Company cedes insurance to CAR and to other reinsurers. The Company has various excess of loss and
quota share agreements that qualify as reinsurance treaties and are designed to protect against large or unusual loss and
LAE activity. Reinsurance contracts do not relieve the Company from its obligations to policyholders. Failure of
reinsurers to honor their obligations could result in losses to the Company. The Company evaluates the financial
condition of its reinsurers and monitors economic characteristics of the reinsurers to minimize its exposure to significant
losses from reinsurer insolvencies.
The Company is subject to concentration of credit risk with respect to reinsurance ceded. At December 31,
2023, reinsurance receivables on paid and unpaid loss and LAE with a carrying value of $116,008 and ceded unearned
82
premiums of $29,890 were associated with CAR. At December 31, 2022, reinsurance receivables on paid and unpaid
loss and LAE with a carrying value of $99,688 and ceded unearned premiums of $26,377 were associated with CAR.
The Company assumes a proportionate share of the obligations from CAR. The Company makes an estimate of its share
of assumed activity from the most recent quarter reported by CAR and records adjustments to the reported activity to
reflect its anticipated final assumed obligations. The Company’s participation in CAR resulted in assumed net income of
$100, $3,326 and $5,002 for the years ended December 31, 2023, 2022 and 2021, respectively.
CAR has been, with few exceptions, required by law to issue a policy to any applicant who seeks it. As a
servicing carrier of CAR, this requirement has applied to the Company.
The effect of assumed and ceded premiums on net written and earned premiums and losses and LAE incurred is
as follows.
Written Premiums
Direct
Assumed
Ceded
Net written premiums
Earned Premiums
Direct
Assumed
Ceded
Net earned premiums
Loss and LAE
Direct
Assumed
Ceded
Net loss and LAE
2023
Years Ended December 31,
2022
2021
$
$
$
$
$
$
991,224
30,850
(96,779)
925,295
897,598
29,702
(92,886)
834,414
691,768
23,706
(73,172)
642,302
$
$
$
$
$
$
823,318
28,835
(78,418)
773,735
803,289
28,976
(73,760)
758,505
515,535
18,627
(42,183)
491,979
$
$
$
$
$
$
802,139
31,359
(68,972)
764,526
811,329
30,583
(67,584)
774,328
473,162
16,873
(28,308)
461,727
12.
Loss and Loss Adjustment Expense Reserves
The following table sets forth a reconciliation of beginning and ending reserves for LAE, as shown in the
Company’s consolidated financial statements for the periods indicated.
Reserves for losses and LAE at beginning of year
Less receivable from reinsurers related to unpaid losses and LAE
Net reserves for losses and LAE at beginning of year
Incurred losses and LAE, related to:
Current year
Prior years
Total incurred losses and LAE
Paid losses and LAE related to:
Current year
Prior years
Total paid losses and LAE
Net reserves for losses and LAE at end of period
Plus receivable from reinsurers related to unpaid losses and LAE
Reserves for losses and LAE at end of period
2023
Year Ended December 31,
2022
2021
$
$
549,598
(93,394)
456,204
689,683
(47,381)
642,302
409,634
198,414
608,048
490,458
112,623
603,081
$
$
$
570,651
(90,667)
479,984
549,258
(57,279)
491,979
342,971
172,788
515,759
456,204
93,394
549,598
$
567,581
(106,311)
461,270
515,400
(53,673)
461,727
310,116
132,897
443,013
479,984
90,667
570,651
At the end of each period, the reserves were re-estimated for all prior accident years. The Company’s prior year
reserves decreased by $47,381, $57,279, and $53,673, for the years ended December 31, 2023, 2022, and 2021,
respectively, and resulted from re-estimations of prior years’ ultimate loss and LAE liabilities. The decrease in prior year
reserves during 2023 was primarily composed of reductions of $15,451 in the Company’s retained automobile and
83
$29,782 in the Company’s retained other than auto and homeowners reserves. The decrease in prior year reserves during
2022 was primarily composed of reductions of $20,241 in the Company’s retained automobile and $32,963 in the
Company’s retained other than auto and homeowners reserves. The decrease in prior year reserves during 2021 was
primarily composed of reductions of $22,313 in the Company’s retained automobile and $26,220 in the Company’s
retained homeowners reserves.
The Company’s private passenger automobile line of business prior year reserves decreased during the years
ended December 31, 2023, 2022 and 2021 primarily due to improved retained private passenger results. The improved
retained private passenger results were primarily due to fewer incurred but not yet reported claims than previously
estimated and better than previously estimated severity on the Company’s established bodily injury and property damage
case reserves.
The following is information about incurred and paid claims development as of December 31, 2023, net of
reinsurance, as well as cumulative claim frequency and the total of incurred-but-not-reported liabilities plus expected
development on reported claims included within the net incurred claims amounts for our three largest lines of business.
The cumulative number of reported claims include claims closed with payment, claims closed without payment and all
open claims. It does not include anticipated IBNR claims. For the Private Passenger Automobile and Commercial
Automobile lines of business, claim count is defined on a claimant basis where several claim counts may arise from a
single auto accident. For Homeowners and all other lines of business, claim count is defined on an accident basis.
The information about incurred claims and allocated claim adjustment expense, net of reserves and paid
ultimate claims development for the years ended December 31, 2014 to 2023 is presented as required supplementary
information.
84
Private Passenger Automobile Liability
Incurred Claims and Allocated Claim Adjustment Expenses, Net of Reinsurance
Accident Year
2014
2015
2016
2017
2018
2019
2020
2021
2022
2023
For the Years Ended December 31,
(Unaudited)
As of December 31, 2023
Total of
Incurred-but-
Not-Reported
Liabilities Plus
Expected
Development of
Reported
Claims
Cumulative
Number of
Reported
Claims
2014
$ 187,305
$ 187,104
$ 186,798
$ 183,119
$ 181,312
$ 179,251
$ 179,267
$ 179,268
$ 179,264
$ 179,096
($ 182)
2015
2016
2017
2018
2019
2020
2021
2022
2023
190,036
190,236
188,317
184,477
181,299
179,451
179,248
178,951
178,833
192,912
192,318
185,009
180,486
177,009
176,600
176,700
185,673
184,429
182,068
177,941
177,320
176,564
176,509
175,513
176,411
175,222
170,447
168,185
166,046
166,164
176,171
174,439
170,477
166,940
166,175
130,335
125,888
120,060
117,985
146,997
147,391
148,015
157,921
152,752
203,726
Total
$ 1,664,768
(56)
(67)
(620)
(1,578)
(3,255)
(4,136)
(12,330)
(16,766)
(580)
52,787
52,980
49,386
46,260
43,088
40,577
26,224
30,202
30,264
32,818
Private Passenger Automobile Liability
Cumulative Paid Claims and Allocated Claim Adjustment Expenses, Net of Reinsurance
Accident Year
2014
2015
2016
2017
2018
2019
2020
2021
2022
2023
For the Years Ended December 31,
2014
2015
2016
2017
2018
2019
2020
2021
2022
2023
$ 79,049
$ 136,434
$ 156,693
$ 166,815
$ 173,163
$ 176,616
$ 177,360
$ 177,968
$ 178,324
$ 178,486
(Unaudited)
76,934
138,255
156,483
168,641
173,816
176,652
177,782
178,357
78,862
137,917
154,964
167,458
171,865
174,410
175,803
77,519
133,037
153,675
164,467
169,024
172,362
72,895
126,456
143,656
154,169
159,066
72,219
127,910
143,570
154,633
52,962
88,037
56,826
102,601
111,516
61,227
178,643
176,242
174,207
164,000
161,134
112,143
130,556
118,918
78,289
All outstanding liabilities before 2014, net of reinsurance
368
Liabilities for claims and claim adjustment expenses, net of reinsurance
$ 192,518
Total
$ 1,472,618
85
Private Passenger Automobile Physical Damage
Incurred Claims and Allocated Claim Adjustment Expenses, Net of Reinsurance
Accident Year
2014
2015
2016
2017
2018
2019
2020
2021
2022
2023
For the Years Ended December 31,
(Unaudited)
$ 123,421
$ 123,622
$ 122,410
$ 122,327
$ 122,341
$ 122,213
$ 122,188
$ 122,182
$ 122,163
$ 122,143
140,219
136,661
134,101
133,737
133,581
133,530
133,523
133,552
133,548
129,528
124,922
122,116
121,717
121,543
121,570
121,615
121,566
128,340
126,304
124,128
123,715
123,777
123,779
123,775
129,450
130,145
128,426
128,090
128,003
127,991
128,698
126,648
124,332
123,858
123,781
98,546
97,244
97,644
97,668
122,943
122,549
121,619
141,041
143,366
2014
2015
2016
2017
2018
2019
2020
2021
2022
2023
As of December 31, 2023
Total of
Incurred-but-
Not-Reported
Liabilities Plus
Expected
Development of
Reported
Claims
Cumulative
Number of
Reported
Claims
$ -
-
(31)
(65)
(28)
(30)
(97)
(598)
(2,995)
135,006
144,276
126,091
124,026
119,762
117,040
81,870
89,623
94,939
180,863
(24,097)
103,402
Total
$ 1,296,320
Private Passenger Automobile Physical Damage
Cumulative Paid Claims and Allocated Claim Adjustment Expenses, Net of Reinsurance
Accident Year
2014
2015
2016
2017
2018
2019
2020
2021
2022
2023
For the Years Ended December 31,
$ 130,732
$ 126,414
143,532
$ 122,668
136,760
133,530
(Unaudited)
$ 122,402
134,066
124,298
132,409
$ 122,350
133,701
122,023
126,822
138,036
2014
2015
2016
2017
2018
2019
2020
2021
2022
2023
$ 122,251
133,639
121,795
124,286
132,591
134,429
$ 122,216
133,596
121,660
123,844
128,624
128,173
102,764
$ 122,189
133,575
121,634
123,839
128,154
124,467
98,819
123,636
$ 122,163
133,555
121,618
123,795
128,054
123,974
98,083
123,847
142,004
Total
$ 122,142
133,548
121,597
123,816
128,005
123,811
97,755
122,204
146,130
171,437
$ 1,290,445
All outstanding liabilities before 2014, net of reinsurance
-
Liabilities for claims and claim adjustment expenses, net of reinsurance
$ 5,875
86
Commercial Automobile Liability
Incurred Claims and Allocated Claim Adjustment Expenses, Net of Reinsurance
Accident Year
2014
2015
2016
2017
2018
2019
2020
2021
2022
2023
For the Years Ended December 31,
2014
2015
2016
2017
2018
2019
2020
2021
2022
2023
$ 34,117
$ 34,105
$ 34,376
$ 33,914
$ 32,948
$ 32,438
$ 32,200
$ 32,052
$ 32,313
$ 32,172
(Unaudited)
35,371
36,150
36,610
37,730
38,015
38,257
37,995
37,630
37,954
39,416
40,947
40,916
40,679
40,996
40,767
42,865
41,373
41,055
39,369
39,232
38,185
41,347
40,115
38,589
37,322
36,014
51,679
49,163
48,783
46,964
35,010
31,930
30,869
41,814
39,564
43,496
37,066
40,487
37,874
35,154
45,363
29,865
38,634
43,061
46,690
Total
$ 386,366
As of December 31, 2023
Total of
Incurred-but-
Not-Reported
Liabilities Plus
Expected
Development of
Reported
Claims
Cumulative
Number of
Reported
Claims
$ 2
(311)
128
426
465
826
1,860
(185)
494
13,750
6,087
7,213
6,457
6,136
5,745
5,687
3,470
4,297
4,526
3,782
Commercial Automobile Liability
Cumulative Paid Claims and Allocated Claim Adjustment Expenses, Net of Reinsurance
Accident Year
2014
2015
2016
2017
2018
2019
2020
2021
2022
2023
For the Years Ended December 31,
(Unaudited)
$ 9,426
$ 17,853
11,181
$ 21,968
21,700
9,991
$ 25,253
26,018
19,902
10,407
2014
2015
2016
2017
2018
2019
2020
2021
2022
2023
$ 27,886
29,804
25,711
20,106
9,704
$ 30,420
31,537
32,274
24,409
18,499
12,113
$ 31,298
33,416
36,237
28,721
23,544
22,480
7,025
$ 31,451
34,976
38,275
31,389
26,774
28,373
13,166
7,883
$ 32,085
35,302
39,233
33,569
29,336
36,048
16,268
17,925
10,941
Total
$ 32,109
36,483
40,248
34,960
32,996
39,233
19,635
25,647
22,702
9,615
$ 293,628
All outstanding liabilities before 2014, net of reinsurance
6
Liabilities for claims and claim adjustment expenses, net of reinsurance
$ 92,744
87
Commercial Automobile Physical Damage
Incurred Claims and Allocated Claim Adjustment Expenses, Net of Reinsurance
Accident Year
2014
2015
2016
2017
2018
2019
2020
2021
2022
2023
For the Years Ended December 31,
2014
2015
2016
2017
2018
2019
2020
2021
2022
2023
$ 17,426
$ 16,925
$ 15,455
$ 15,419
$ 15,353
$ 15,381
$ 15,373
$ 15,376
$ 15,376
$ 15,375
(Unaudited)
20,223
19,047
19,021
18,974
18,641
18,535
18,525
18,523
20,216
18,506
17,909
17,808
17,725
17,713
17,721
19,691
19,200
19,021
18,834
18,780
18,774
21,230
19,937
19,270
19,210
19,196
20,039
19,652
18,956
18,685
16,507
16,334
16,606
20,156
21,524
27,459
18,521
17,721
18,760
19,149
18,672
16,434
21,810
28,007
29,564
Total
$ 204,013
As of December 31, 2023
Total of
Incurred-but-
Not-Reported
Liabilities Plus
Expected
Development of
Reported
Claims
Cumulative
Number of
Reported
Claims
$ -
-
1
2
2
0
94
273
168
178
13,545
15,468
13,593
13,113
12,908
12,757
9,623
11,515
12,779
11,410
Commercial Automobile Physical Damage
Cumulative Paid Claims and Allocated Claim Adjustment Expenses, Net of Reinsurance
Accident Year
2014
2015
2016
2017
2018
2019
2020
2021
2022
2023
For the Years Ended December 31,
2014
2015
2016
2017
2018
2019
2020
2021
2022
2023
$ 15,377
$ 15,862
$ 15,424
$ 15,388
$ 15,381
$ 15,376
$ 15,373
$ 15,376
$ 15,376
$ 15,375
(Unaudited)
17,787
18,910
17,228
18,667
18,143
17,957
18,549
17,763
19,336
18,842
18,541
17,712
18,915
19,842
18,128
18,530
17,709
18,787
19,236
19,161
15,550
18,525
17,712
18,786
19,208
18,752
16,596
18,610
18,523
17,721
18,772
19,194
18,681
16,407
21,620
24,380
18,521
17,720
18,758
19,147
18,672
16,340
21,533
27,806
25,889
All outstanding liabilities before 2014, net of reinsurance
-
Liabilities for claims and claim adjustment expenses, net of reinsurance
$ 4,252
Total
$ 199,761
88
Homeowners Liability
Incurred Claims and Allocated Claim Adjustment Expenses, Net of Reinsurance
Accident Year
2014
2015
2016
2017
2018
2019
2020
2021
2022
2023
For the Years Ended December 31,
2014
2015
2016
2017
2018
2019
2020
2021
2022
2023
$ 11,494
$ 11,494
$ 9,738
$ 7,388
$ 7,120
$ 6,984
$ 6,984
$ 6,818
$ 6,620
$ 6,620
(Unaudited)
12,965
12,555
10,594
9,908
9,201
10,594
10,594
11,276
10,058
9,951
9,201
9,847
9,328
9,951
9,201
9,491
8,585
9,951
8,172
9,491
7,819
9,768
7,582
8,873
7,053
8,616
14,130
13,848
11,949
11,371
14,664
13,708
11,025
12,797
12,797
12,973
7,333
8,572
6,689
8,245
9,175
9,686
12,797
11,770
12,891
Total
$ 93,778
As of December 31, 2023
Total of
Incurred-but-
Not-Reported
Liabilities Plus
Expected
Development of
Reported
Claims
Cumulative
Number of
Reported
Claims
$ -
-
-
-
38
197
534
(1,621)
2,649
5,944
261
288
277
269
256
265
224
215
205
134
Homeowners Liability
Cumulative Paid Claims and Allocated Claim Adjustment Expenses, Net of Reinsurance
Accident Year
2014
2015
2016
2017
2018
2019
2020
2021
2022
2023
For the Years Ended December 31,
2014
2015
2016
2017
2018
2019
2020
2021
2022
2023
$ 340
$ 1,834
$ 3,212
$ 4,200
$ 4,828
$ 6,315
$ 6,368
$ 6,419
$ 6,419
$ 6,419
(Unaudited)
428
3,319
647
4,267
2,669
305
5,205
4,257
1,676
551
6,445
5,387
2,913
2,039
1,634
7,022
6,300
3,593
3,972
3,343
220
7,215
7,128
4,217
4,597
5,183
3,254
218
7,302
7,628
4,765
5,664
6,038
3,845
3,388
451
7,302
8,166
4,902
6,958
7,218
6,870
6,573
2,597
287
All outstanding liabilities before 2014, net of reinsurance
-
Liabilities for claims and claim adjustment expenses, net of reinsurance
$ 36,486
Total
$ 57,292
89
Homeowners Property Damage
Incurred Claims and Allocated Claim Adjustment Expenses, Net of Reinsurance
Accident Year
2014
2015
2016
2017
2018
2019
2020
2021
2022
2023
For the Years Ended December 31,
(Unaudited)
As of December 31, 2023
Total of
Incurred-but-
Not-Reported
Liabilities Plus
Expected
Development of
Reported Claims
Cumulative
Number of
Reported
Claims
2014
2015
2016
2017
2018
2019
2020
2021
2022
2023
$ 59,160
$ 60,213
$ 59,751
$ 57,331
$ 55,127
$ 54,607
$ 54,602
$ 54,560
$ 54,556
$ 54,557
$ 251
152,586
152,049
162,377
162,788
162,722
162,354
162,244
162,244
162,125
67,116
66,442
64,208
61,262
60,019
59,898
59,857
80,736
76,560
70,689
68,737
67,530
67,388
83,443
82,581
77,970
74,989
73,996
77,976
73,697
68,769
65,624
80,093
76,638
72,622
75,696
75,011
72,524
59,709
67,130
73,730
64,950
69,503
74,140
71,467
113,941
Total
$ 811,252
320
253
160
247
391
582
(704)
(10,843)
(937)
6,077
20,076
5,421
6,011
8,239
5,453
6,113
6,353
5,032
6,274
Homeowners Property Damage
Cumulative Paid Claims and Allocated Claim Adjustment Expenses, Net of Reinsurance
Accident Year
2014
2015
2016
2017
2018
2019
2020
2021
2022
2023
For the Years Ended December 31,
2014
2015
2016
2017
2018
2019
2020
2021
2022
2023
$ 40,409
$ 52,161
$ 54,088
$ 54,224
$ 54,262
$ 54,274
$ 54,306
$ 54,305
$ 54,306
$ 54,306
112,563
145,337
160,572
161,745
161,773
161,850
161,783
161,781
161,805
(Unaudited)
44,103
57,238
46,366
59,155
64,401
57,704
59,449
66,181
70,959
49,121
59,403
66,892
72,078
61,905
50,304
59,428
66,765
73,119
63,536
65,927
51,390
59,493
66,826
73,307
64,427
68,706
67,998
48,906
59,456
66,865
73,334
64,412
68,495
70,118
66,990
68,479
All outstanding liabilities before 2014, net of reinsurance
1,155
Liabilities for claims and claim adjustment expenses, net of reinsurance
$ 58,147
Total
$ 754,260
90
The following is unaudited supplementary information about average historical claims duration as of December
31, 2023.
Average Annual Percentage Payout of Incurred Claims by Age, Net of Reinsurance (Unaudited)
Years
Private Passenger Automobile
Liability
Private Passenger Automobile
Physical Damage
Commercial Automobile Liability
Commercial Automobile Physical
Damage
Homeowners Liability
Homeowners Property Damage
1
2
3
4
5
6
7
8
9
10
42.5%
33.5%
10.9%
6.6%
3.1%
2.0%
0.7%
0.3%
0.2%
0.1%
104.3%
48.8%
(3.3)%
19.3%
(2.2)%
8.5%
(0.3)%
8.3%
(0.1)%
5.0%
0.0%
4.5%
93.0%
5.4%
70.2%
7.7%
23.9%
21.8%
(1.9)%
18.4%
4.6%
(0.4)%
14.6%
0.7%
0.0%
12.1%
0.0%
(0.1)%
12.6%
0.0%
0.0%
2.2%
0.0%
3.0%
0.0%
0.0%
0.9%
0.0%
3.0%
0.0%
0.0%
1.8%
0.0%
0.0%
0.0%
0.0%
0.0%
0.0%
0.0%
0.0%
The reconciliation of the net incurred and paid claims development tables to the liability for claims and claim
adjustment expenses in the consolidated balance sheets is as follows.
Reconciliation of the Disclosure of Incurred and Paid Claims Development to the Liability for Unpaid claims and Claim Adjustment Expenses
December 31, 2023
Net outstanding liabilities
Private Passenger Automobile Liability
Private Passenger Automobile Physical Damage
Commercial Automobile Liability
Commercial Automobile Physical Damage
Homeowners Liability
Homeowners Property Damage
Other Short-Duration Insurance Lines
Liabilities for unpaid claims and claim adjustment expenses, net of reinsurance
Reinsurance recoverable on unpaid claims
Private Passenger Automobile Liability
Private Passenger Automobile Physical Damage
Commercial Automobile Liability
Commercial Automobile Physical Damage
Homeowners Liability
Homeowners Property Damage
Other Short-Duration Insurance Lines
Total reinsurance recoverable on unpaid claims
Unallocated claims adjustment expenses
Total gross liability for unpaid claims and claim adjustment expenses
$
$
$
$
$
192,518
5,875
92,744
4,252
36,486
58,147
70,954
460,976
1,383
-
102,194
4,334
-
2,191
2,521
112,623
29,482
603,081
Due to the nature of the risks that the Company underwrites and has historically underwritten, management
does not believe that it has an exposure to asbestos or environmental pollution liabilities
91
13.
Income Taxes
A summary of the income tax expense in the consolidated statements of operations is shown below.
Current Income Taxes:
Federal
State
Deferred Income Taxes:
Federal
State
Total income tax expense
2023
Years Ended December 31,
2022
2021
$
$
3,614
276
3,890
1,655
—
1,655
5,545
$
$
21,317
74
21,391
(8,371)
—
(8,371)
13,020
$
$
28,222
15
28,237
5,323
—
5,323
33,560
The income tax expense attributable to the consolidated results of operations is different from the amounts
determined by multiplying income before federal income taxes by the statutory federal income tax rate. The sources of
the difference and the tax effects of each were as follows for the periods indicated.
Federal income tax expense at statutory rate
Investment income, net
State taxes, net
Nondeductible expenses
Tax related to share-based stock compensation
Other, net
Total income tax expense
2023
Years Ended December 31,
2022
2021
5,128
(364)
218
400
213
(50)
5,545
$
$
12,512
(559)
58
468
222
319
13,020
$
$
34,496
(1,060)
11
613
(101)
(399)
33,560
$
$
The deferred income tax asset (liability) represents the tax effects of temporary differences attributable to the
Company’s consolidated federal tax return group. Its components were as shown in the following table for the periods
indicated.
Deferred tax assets:
Discounting of loss reserves
Discounting of unearned premium reserve
Net unrealized losses on investments
Bad debt allowance
Employee benefits
Rent incentive
Other
Total deferred tax assets before valuation allowance
Valuation allowance for deferred tax assets
Total deferred tax assets
Deferred tax liabilities:
Deferred acquisition costs
Investments
Loss reserve transition adjustment
Software development costs
Premium acquisition expenses
Depreciation
Total deferred tax liabilities
Net deferred tax assets (liability)
Years Ended December 31,
2023
2022
$
$
5,122
21,327
9,648
239
4,357
570
60
41,323
—
41,323
(19,303)
(5,926)
(554)
(2,175)
(432)
(783)
(29,173)
12,150
$
$
4,790
17,546
16,917
329
4,506
684
—
44,772
—
44,772
(15,872)
(2,662)
(831)
(2,913)
(461)
(959)
(23,698)
21,074
The Company believes that the positions taken on its income tax returns for open tax years will be sustained
upon examination by the Internal Revenue Service. Therefore, the Company has not recorded any liability for uncertain
92
tax positions under ASC 740, Income Taxes.
During the years ended December 31, 2023 and 2022 there were no material changes to the amount of the
Company’s unrecognized tax benefits or to any assumptions regarding the amount of its ASC 740 liability.
As of December 31, 2023 and 2022, the Company had no unrecognized tax benefits, and none which if
recognized would affect the effective tax rate. The Company does not currently anticipate significant changes in the
amount of unrecognized income tax benefits during the next twelve months.
The Company records interest and penalties associated with audits as a component of income before income
taxes. Penalties are recorded in underwriting, operating and other expenses, and interest expense is recorded in interest
expenses in the consolidated statements of operations. The Company had no interest and penalties related to income
taxes accrued as of December 31, 2023 and 2022.
In the Company’s opinion, adequate tax liabilities have been established for all open years. However, the
amount of these tax liabilities could be revised in the near term if estimates of the Company’s ultimate liability are
revised. All tax years prior to 2020 are closed.
14.
Share Repurchase Program
On August 3, 2007, the Board approved a share repurchase program of up to $30,000 of the Company’s
outstanding common shares. The Board had cumulatively authorized increases to the existing share repurchase program
of up to $200,000 of its outstanding common shares. Under the program, the Company may repurchase shares of its
common stock for cash in public or private transactions, in the open market or otherwise. The timing of such
repurchases and actual number of shares repurchased will depend on a variety of factors including price, market
conditions and applicable regulatory and corporate requirements. The program does not require the Company to
repurchase any specific number of shares and it may be modified, suspended or terminated at any time without prior
notice.
No share purchases were made by the Company during the three months ended December 31, 2023 and 2022.
The Company purchased 74,213 shares at a cost of $5,240 during the year ended December 31, 2023 and purchased
170,904 shares at a cost of $14,603 during the year ended December 31, 2022. Included in the cost of treasury stock
acquired during 2023 is the one percent excise tax imposed as part of the Inflation Reduction Act, which became
effective January 1, 2023. As of December 31, 2023 and 2022, the Company had purchased 3,215,690 and 3,141,477
shares at cost of $155,240 and $150,000, respectively.
15.
Statutory Net Income and Surplus
Statutory Accounting Practices
The Company’s insurance company subsidiaries, domiciled in the Commonwealth of Massachusetts, prepare
statutory financial statements in accordance with the accounting practices prescribed or permitted by the Division.
Prescribed statutory accounting practices are those practices that are incorporated directly or by reference in state laws,
regulations, and general administrative rules applicable to all insurance enterprises domiciled in a particular state.
Permitted statutory accounting practices include practices not prescribed by the Division, but allowed by the Division.
Statutory net loss was $4,022 for the year ended December 31, 2023. Statutory net income was $66,197, and $97,169 for
the years ended December 31, 2022, and 2021, respectively. Statutory capital and surplus of the Company’s insurance
subsidiaries was $744,904 and $782,200 at December 31, 2023 and 2022, respectively.
93
Dividends
The Insurance Subsidiaries are subject to various regulatory restrictions that limit the maximum amount of
dividends available to be paid to their parent without prior approval of the Commonwealth of Massachusetts
Commissioner of Insurance (the “Commissioner”). Massachusetts statute limits the dividends an insurer may pay in any
twelve month period, without the prior permission of the Commissioner, to the greater of (i) 10% of the insurer’s surplus
as of the preceding December 31 or (ii) the insurer’s net income for the twelve- month period ending the preceding
December 31, in each case determined in accordance with statutory accounting practices. Our insurance company
subsidiaries may not declare an “extraordinary dividend” (defined as any dividend or distribution that, together with
other distributions made within the preceding twelve months, exceeds the limits established by Massachusetts statute)
until thirty days after the Commissioner has received notice of the intended dividend and has not objected. As
historically administered by the Commissioner, this provision requires the Commissioner’s prior approval of an
extraordinary dividend. Under Massachusetts law, an insurer may pay cash dividends only from its unassigned funds,
also known as earned surplus, and the insurer’s remaining surplus must be both reasonable in relation to its outstanding
liabilities and adequate to its financial needs. At December 31, 2023, the statutory capital and surplus of Safety Insurance
was $744,904 and its net loss for 2023 was $4,022. As a result, a maximum of $74,490 is available in 2024 for such
dividends without prior approval of the Commissioner. During the year ended December 31, 2023, Safety Insurance
recorded dividends of $56,329. As result of this Massachusetts statute, the Insurance Subsidiaries had restricted net
assets in the amount of $670,414 at December 31, 2023.
Risk-Based Capital Requirements
The NAIC has adopted a formula and model law to implement risk-based capital requirements for most
property and casualty insurance companies, which are designed to determine minimum capital requirements and to raise
the level of protection that statutory surplus provides for policyholder obligations. Under Massachusetts law, insurers
having less total adjusted capital than that required by the risk-based capital calculation will be subject to varying
degrees of regulatory action, depending on the level of capital inadequacy. The risk-based capital law provides for four
levels of regulatory action. The extent of regulatory intervention and action increases as the level of total adjusted capital
to risk-based capital falls. As of December 31, 2023, the Insurance Subsidiaries had total adjusted capital of $744,904,
which is in excess of amounts requiring company or regulatory action at any prescribed risk-based capital action level.
Minimum statutory capital and surplus, or company action level risk-based capital, was $231,882 at December 31, 2023.
16.
Fair Value of Financial Instruments
ASC 820, Fair Value Measurements and Disclosure provides a revised definition of fair value, establishes a
framework for measuring fair value and expands financial statement disclosure requirements for fair value
information. Under ASC 820, fair value is defined as the price that would be received to sell an asset or paid to transfer
a liability in an orderly transaction between market participants (an exit price). ASC 820 establishes a fair value
hierarchy that distinguishes between inputs based on market data from independent sources (“observable inputs”) and a
reporting entity’s internal assumptions based upon the best information available when external market data is limited or
unavailable (“unobservable inputs”). The fair value hierarchy in ASC 820 prioritizes fair value measurements into three
levels based on the nature of the inputs as follows:
Level 1 — Valuations based on quoted prices in active markets for identical assets and liabilities;
Level 2 — Valuations based on observable inputs that do not meet the criteria for Level 1, including quoted
prices in inactive markets and quoted prices in active markets for similar, but not identical instruments; and
Level 3 — Valuations based on unobservable inputs.
Fair values for the Company’s fixed maturity securities are based on prices provided by its custodian bank and
its investment managers. Both the Company’s custodian bank and investment managers use a variety of independent,
nationally recognized pricing services to determine market valuations. If the pricing service cannot provide fair value
determinations, the Company obtains non-binding price quotes from broker-dealers. A minimum of two quoted prices is
94
obtained for the majority of the Company’s available-for-sale fixed maturity securities in its investment portfolio. The
Company uses a third-party pricing service as its primary provider of quoted prices from third-party pricing services and
broker-dealers. To provide reasonable assurance of the validity of each price or quote, a secondary third-party pricing
service or broker-dealer quote is obtained from the Company’s custodian or investment managers. An examination of
the pricing data is then performed for each security. If the variance between the primary and secondary price quotes for
a security is within an accepted tolerance level, the quoted price obtained from the Company’s primary source is used for
the security. If the variance between the primary and secondary price quotes exceeds an accepted tolerance level, the
Company obtains a quote from an alternative source, if possible, and documents and resolves any differences between
the pricing sources. In addition, the Company may request that its investment managers and its traders provide input as
to which vendor is providing prices that its traders believe are reflective of fair value for the security. Following this
process, the Company may decide to value the security in its financial statements using the secondary or alternative
source if it believes that pricing is more reflective of the security’s value than the primary pricing provided by its
custodian bank. The Company analyzes market valuations received to verify reasonableness, to understand the key
assumptions used and their sources, and to determine an appropriate ASC 820 fair value hierarchy level based upon
trading activity and the observability of market inputs. Based on this evaluation and investment class analysis, each
price is classified into Level 1, 2 or 3.
Fair values of instruments are based on (i) quoted prices in active markets for identical assets (Level 1),
(ii) quoted prices for similar instruments in active markets, quoted prices for identical or similar instruments in markets
that are not active and model-derived valuations in which all significant inputs are observable in active markets (Level 2)
or (iii) valuations derived from valuation techniques in which one or more significant inputs are unobservable in the
marketplace (Level 3).
The Company’s Level 1 securities consist of equity securities whose values are based on quoted prices in active
markets for identical assets. The Company’s Level 2 securities are comprised of available-for-sale fixed maturity
securities whose fair value was determined using observable market inputs. The Company’s Level 3 security consists of
an investment in the Federal Home Loan Bank of Boston related to Safety Insurance Company’s membership stock,
which is not redeemable in a short-term time frame. Fair values for securities for which quoted market prices were
unavailable were estimated based upon reference to observable inputs such as benchmark interest rates, market
comparables, and other relevant inputs. Investments valued using these inputs include U.S. Treasury securities,
obligations of states and political subdivisions, corporate and other securities, commercial and residential mortgage-
backed securities, and other asset-backed securities. Inputs into the fair value application that are utilized by asset class
include but are not limited to:
Obligations of states and political subdivisions: overall credit quality, including assessments of market
sectors and the level and variability of sources of payment such as general obligation, revenue or lease;
credit support such as insurance, state or local economic and political base, prefunded and escrowed to
maturity covenants.
Corporate and other securities: overall credit quality, the establishment of a risk adjusted credit spread
over the applicable risk-free yield curve for discounted cash flow valuations; assessments of the level of
industry economic sensitivity, company financial policies, indenture restrictive covenants, and/or security
and collateral.
Residential mortgage-backed securities: U.S. agency pass-throughs, collateralized mortgage obligations
(“CMOs”), non U.S. agency CMOs: estimates of prepayment speeds based upon historical prepayment rate
trends, underlying collateral interest rates, original weighted average maturity, vintage year, borrower
credit quality characteristics, interest rate and yield curve forecasts, U.S. government support programs, tax
policies, and delinquency/default trends.
Commercial mortgage-backed securities: overall credit quality, including assessments of the level and
variability of credit support and collateral type such as office, retail, or lodging, predictability of cash flows
for the deal structure, prevailing economic market conditions.
95
Other asset-backed securities: overall credit quality, estimates of prepayment speeds based upon historical
trends and characteristics of underlying loans, including assessments of the level and variability of
collateral, revenue generating agreements, area licenses agreements, product sourcing agreements and
equipment and property leases.
FHLB-Boston: value is equal to the cost of the member stock purchased.
In order to ensure the fair value determination is representative of an exit price (consistent with ASC 820), the
Company’s procedures for validating quotes or prices obtained from third parties include, but are not limited to,
obtaining a minimum of two price quotes for each fixed maturity security if possible, as discussed above, the periodic
testing of sales activity to determine if there are any significant differences between the market price used to value the
security as of the balance sheet date and the sales price of the security for sales that occurred around the balance sheet
date, and the periodic review of reports provided by its external investment manager regarding those securities with
ratings changes and securities placed on its “Watch List.” In addition, valuation techniques utilized by pricing services
and prices obtained from external sources are reviewed by the Company’s external investment manager, whose
investment professionals are familiar with the securities being priced and the markets in which they trade, to ensure the
fair value determination is representative of an exit price.
All unadjusted estimates of fair value for our fixed maturities priced by the pricing services as described above
are included in the amounts disclosed in Level 2. With the exception of the FHLB-Boston security, which is categorized
as a Level 3 security, the Company’s entire portfolio was priced based upon quoted market prices or other observable
inputs as of December 31, 2023. There were no significant changes to the valuation process during the year ended
December 31, 2023. As of December 31, 2023 and 2022, no quotes or prices obtained were adjusted by management. All
broker quotes obtained were non-binding.
At December 31, 2023 and 2022, investments in fixed maturities classified as available-for-sale had a fair value
which equaled carrying value of $1,052,145 and $1,050,155, respectively. At December 31, 2023 and 2022 the Company
held no short-term investments. The carrying values of cash and cash equivalents and investment income accrued
approximated fair value.
The following tables summarize the Company’s total fair value measurements for investments for the periods
indicated.
U.S. Treasury securities
Obligations of states and political subdivisions
Residential mortgage-backed securities
Commercial mortgage-backed securities
Other asset-backed securities
Corporate and other securities
Equity securities
Total investment securities
As of December 31, 2023
Total
Level 1 Inputs
$
$
2,320
36,523
247,237
139,850
61,333
564,882
204,849
1,256,994
$
$
— $
—
—
—
—
—
202,763
202,763
$
Level 2 Inputs
2,320
36,523
247,237
139,850
61,333
564,882
—
1,052,145
Level 3 Inputs
—
—
—
—
—
—
2,086
2,086
$
$
As of December 31, 2022
Total
Level 1 Inputs
Level 2 Inputs
Level 3 Inputs
U.S. Treasury securities
Obligations of states and political subdivisions
Residential mortgage-backed securities
Commercial mortgage-backed securities
Other asset-backed securities
Corporate and other securities
Equity securities
Total investment securities
$
$
1,669
54,069
234,502
139,931
68,731
551,253
199,705
1,249,860
$
$
— $
—
—
—
—
—
197,450
197,450
$
1,669
54,069
234,502
139,931
68,731
551,253
—
1,050,155
$
$
—
—
—
—
—
—
2,255
2,255
There were no transfers between Level 1 and Level 2 during the years ended December 31, 2023 or 2022.
96
The following tables summarize the changes in the Company’s Level 3 fair value securities for the periods
indicated.
Balance at beginning of period
Net gains and losses included in earnings
Net gains included in other comprehensive income
Purchases
Sales
Transfers into Level 3
Transfers out of Level 3
Balance at end of period
Years Ended December 31,
2023
2022
2021
2,255
—
—
1,351
(1,520)
—
—
2,086
$
$
1,698
—
—
557
—
—
—
2,255
$
$
1,698
—
—
—
—
—
—
1,698
$
$
Transfers in and out of Level 3 are attributable to changes in the ability to observe significant inputs in
determining fair value exit pricing. As noted in the table above, no transfers were made in or out of Level 3 during 2023,
2022 and 2021. The Company held one Level 3 security at December 31, 2023.
As of December 31, 2023 and 2022, there were approximately $33,173 and $40,450 in a REIT and is included
in equity securities in the consolidated balance sheets. The REIT is excluded from the fair value hierarchy because the
fair value is recorded using the net asset value per share practical expedient. The net asset value per share of this REIT is
derived from member ownership in the capital venture to which a proportionate share of independently appraised net
assets is attributed. The fair value was determined using the trust’s net asset value obtained from its audited financial
statements. The Company is required to submit a request 45 days before a quarter end to dispose of the security.
17.
Subsequent Events
The Company has evaluated subsequent events for recognition or disclosure in the consolidated financial
statements on Form 10-K filed herewith and no events have occurred that require recognition or disclosure.
97
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE
None.
ITEM 9A. CONTROLS AND PROCEDURES
Conclusion Regarding the Effectiveness of Disclosure Controls and Procedures
Under the supervision and with the participation of our management, including our Chief Executive Officer
(“CEO”) and Chief Financial Officer (“CFO”), we evaluated the effectiveness of the design and operation of our
disclosure controls and procedures [as defined in Rules 13a-15(e) and 15d-15(e) of the Securities Exchange Act of 1934,
as amended (the “Exchange Act”)] as of the end of the period covered by this report. Based on that evaluation, our CEO
and CFO have concluded that our disclosure controls and procedures are adequate and effective and ensure that all
information required to be disclosed by us in the reports that we file or submit under the Exchange Act is recorded,
processed, summarized and reported within the time periods specified in the SEC’s rules and that information required to
be disclosed in such reports is accumulated and communicated to management, including our CEO and CFO, as
appropriate, to allow timely decisions regarding required disclosures.
Management's Report on Internal Control over Financial Reporting
Our management is responsible for establishing and maintaining adequate internal control over financial
reporting, as defined in Exchange Act Rules 13a-15(f) and 15d-15(f). Under the supervision and with the participation
of our management, including our Chief Executive Officer and Chief Financial Officer, we conducted an evaluation of
the effectiveness of our internal control over financial reporting based on the framework in Internal Control—Integrated
Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission. Based on our
evaluation under the framework in Internal Control—Integrated Framework (2013), our management concluded that our
internal control over financial reporting was effective as of December 31, 2023.
Deloitte & Touche LLP, the Company's independent registered public accounting firm, has audited the
effectiveness of Safety Insurance Group, Inc.'s internal control over financial reporting as of December 31, 2023, as
stated in their report which is included herein.
Changes in Internal Control over Financial Reporting
There have been no changes in our internal control over financial reporting identified in connection with the
evaluation required by Exchange Act Rules 13a-15 and 15d-15 that occurred during our last fiscal quarter that have
materially affected, or are reasonably likely to materially affect our internal control over financial reporting.
98
ITEM 9B. OTHER INFORMATION
The Company had no information required to be disclosed on a Form 8-K during the fourth fiscal quarter of
2023 that has not already been reported.
During the three months ended December 31, 2023, none of the officers (as defined in Rule 16a-1(f) of the
Securities Exchange Act of 1934) or directors of the Company adopted, terminated or modified any contract, instruction
or written plan for the purchase and sale of our securities that was intended to satisfy the affirmative defense conditions
of Rule 10b5-1(c) or any “non-Rule 10b5-1 trading arrangement,” as such term is defined in Item 408(a) of Regulation
S-K.
The following disclosures relate to actions taken by the Board of Directors of the Company (the "Board"), the
Compensation Committee of the Board and the Board of Directors of Safety Insurance Company and would otherwise
have been filed during the first fiscal quarter of 2024 on a Form 8-K.
On February 27, 2024, the Compensation Committee of the Board approved executive long-term incentive
awards to certain members of senior management pursuant to the Amended 2018 Plan. The long-term incentive
awards were granted in a total amount of $3,000 in the form of restricted stock, to be effective on and given a
fair value of the closing price of our common stock on February 27, 2024. Of the total award, 45% vests in three
annual installments of 30% on February 27, 2025, 30% on February 27, 2026, and 40% on February 27, 2028
and were allocated to the Company's Named Executive Officers as follows: George M. Murphy, $495 worth of
restricted stock; Christopher T. Whitford, $180 worth of restricted stock; Stephen A. Varga, $191 worth of
restricted stock; and Paul J. Narciso, $169 worth of restricted stock. Of the total award, 55% vests over a three-
year performance period commencing on January 1, 2024 and ending on December 31, 2026. Vesting of these
shares is dependent upon the attainment of pre-established performance objectives and were allocated to the
Named Executive Officers as follows: George M. Murphy $605 worth of restricted stock; Christopher T.
Whitford, $220 worth of restricted stock; Stephen A. Varga, $234 worth of restricted stock; and Paul J. Narciso,
$206 worth of restricted stock.
ITEM 9C. DISCLOSURE REGARDING FOREIGN JURISDICTIONS THAT PREVENT INSPECTIONS
Not Applicable
99
ITEMS 10-14.
PART III
Within 120 days after the close of its fiscal year, the Company intends to file with the Securities and Exchange
Commission a definitive proxy statement pursuant to Regulation 14A of the Securities Exchange Act of 1934 as
amended, which will include the matters required by these items.
PART IV.
ITEM 15. EXHIBITS, FINANCIAL STATEMENT SCHEDULES.
(a) The following documents are filed as a part of this report:
1. Financial Statements: The Consolidated Financial Statements for the year ended December 31, 2023 are
contained herein as listed in the Index to Consolidated Financial Statements.
2. Financial Statement Schedules: The Financial Statement Schedules are contained herein as listed in the Index
to Financial Statement Schedules.
3. Exhibits: The exhibits are contained herein as listed in the Index to Exhibits.
100
SAFETY INSURANCE GROUP, INC.
INDEX TO FINANCIAL STATEMENT SCHEDULES
Schedules
I
II
III
IV
V
VI
Summary of Investments – Other than Investments in Related Parties as of December 31, 2023
Condensed Financial Information of the Registrant at December 31, 2023 and 2022 and for the years
ended December 31, 2023, 2022 and 2021
Supplementary Insurance Information at December 31, 2023 and 2022 and for the years ended
December 31, 2023, 2022 and 2021
Reinsurance for the years ended December 31, 2023, 2022 and 2021
Valuation and Qualifying Accounts at December 31, 2023, 2022 and 2021 and for the years ended
December 31, 2023, 2022 and 2021
Supplemental Information Concerning Property and Casualty Insurance Operations at December 31,
2023, 2022 and 2021 and for the years ended December 31, 2023, 2022 and 2021
Page
102
103
105
106
107
108
101
Safety Insurance Group, Inc.
Summary of Investments—Other than Investments in Related Parties
Schedule I
At December 31, 2023
(Dollars in thousands)
Fixed maturities:
U.S. government and government agencies and authorities
Obligations of states and political subdivisions
Corporate and other securities
Total fixed maturities
Equity securities:
Common stocks:
Industrial, miscellaneous and all other
Total equity securities
Other invested assets (1)
Total investments
Cost or
Amortized Cost
Estimated
Fair Value
$
$
269,691
38,682
812,309
1,120,682
221,809
221,809
133,946
1,476,437
$
$
249,557
36,523
766,065
1,052,145
238,022
238,022
133,946
1,424,113
$
$
Amount at
which shown
in the Balance
Sheet
249,557
36,523
766,065
1,052,145
238,022
238,022
133,946
1,424,113
(1)
Other invested assets are accounted for under the equity method which approximates fair value.
102
Safety Insurance Group, Inc.
Condensed Financial Information of the Registrant
Condensed Balance Sheets
Schedule II
(Dollars in thousands)
Assets
Investments in consolidated affiliates
Other
Total assets
Liabilities
Accounts payable and other liabilities
Total liabilities
Shareholders’ equity
Total liabilities and shareholders’ equity
Years Ended December 31,
2023
2022
806,029
—
806,029
1,762
1,762
804,267
806,029
$
$
$
$
813,916
9
813,925
1,926
1,926
811,999
813,925
$
$
$
$
The condensed financial statements should be read in conjunction with the consolidated financial statements and notes thereto.
Safety Insurance Group, Inc.
Condensed Financial Information of the Registrant
Condensed Statements of Operations and Comprehensive Income (Loss)
Schedule II
(Dollars in thousands)
Revenues
Expenses
Net loss
Earnings from consolidated subsidiaries
Net income
Other comprehensive income (loss), net of tax
Comprehensive income (loss)
2023
Years Ended December 31,
2022
2021
—
2,110
(2,110)
20,985
18,875
27,347
46,222
$
$
—
3,255
(3,255)
49,816
46,561
(105,117)
(58,556)
$
$
—
1,755
(1,755)
132,465
130,710
(28,948)
101,762
$
$
The condensed financial statements should be read in conjunction with the consolidated financial statements and notes thereto.
103
Safety Insurance Group, Inc.
Condensed Financial Information of the Registrant
Condensed Statements of Cash Flows
Schedule II
(Dollars in thousands)
Net income
Adjustments to reconcile net income to net cash provided by operating
activities:
Earnings from consolidated subsidiaries
Dividends received from consolidated subsidiaries(1)
Amortization of restricted stock expense
Changes in assets and liabilities:
Intercompany receivable / payable
Other assets
Accounts payable and accrued liabilities
Net cash provided by operating activities
Contributed capital
Net cash provided by investing activities
Dividends paid
Acquisition of treasury stock
Net cash used for financing activities
Net increase in cash and cash equivalents
Cash and cash equivalents, beginning of year
Cash and cash equivalents, end of year
Years Ended December 31,
2023
2022
2021
$
18,875
$
46,561
$
130,710
(20,985)
56,329
4,467
197
9
(361)
58,531
—
—
(53,291)
(5,240)
(58,531)
(49,816)
94,260
6,022
(11,376)
15
(75)
85,591
(17,950)
(17,950)
(53,038)
(14,603)
(67,641)
$
—
—
—
$
—
—
—
$
(132,465)
49,488
6,304
11,821
15
(302)
65,571
—
—
(54,008)
(11,563)
(65,571)
—
—
—
(1) No portion of the dividends received from operating subsidiaries during 2023, 2022 or 2021 represent returns of capital and therefore no
portion is presented as an investing activity.
The condensed financial statements should be read in conjunction with the consolidated financial statements and notes thereto.
104
Safety Insurance Group, Inc.
Supplementary Insurance Information
Schedule III
(Dollars in thousands)
Deferred
Policy
Acquisition
Costs
As of December 31,
Future Policy
Benefits,
Losses,
Claims and Loss
Expenses
Years Ended December 31,
Unearned
Premiums
Earned
Premiums
Net
Investment
Income
$
91,917
75,582
73,024
$
603,081
549,598
570,651
$
528,150
433,375
413,487
$
834,414
758,505
774,328
56,377
46,725
44,135
Segment
Property and Casualty Insurance
2023
2022
2021
$
Premium
Revenue
Net
Investment
Income
Years Ended December 31,
Benefits,
Claims,
Losses, and
Settlement
Expenses
Amortization of
Deferred
Policy
Acquisition
Costs
Other
Operating
Expenses
Premiums
Written
$
834,414
758,505
774,328
$
56,377
46,725
44,135
$
642,302
491,979
461,727
$
161,630
146,013
146,573
$
94,950
99,132
111,819
925,295
773,735
764,526
Segment
Property and Casualty Insurance
2023
2022
2021
$
105
Safety Insurance Group, Inc.
Reinsurance
Schedule IV
(Dollars in thousands)
Property and Casualty
Insurance Earned Premiums
Years ended December 31,
2023
2022
2021
Gross
Amount
Ceded to Other
Companies
Assumed from
Other Companies
Net
Amount
Percent of
Amount
Assumed
to Net
$
$
897,598
803,289
811,329
$
92,886
73,760
67,584
$
29,702
28,976
30,583
834,414
758,505
774,328
3.6%
3.8%
3.9%
106
Safety Insurance Group, Inc.
Valuation and Qualifying Accounts
Schedule V
(Dollars in thousands)
Allowance for doubtful accounts Years Ended December 31,
2023
2022
2021
Balance at
Beginning
of Period
$
1,446
1,808
1,754
Additions
Charged to
Costs and
Expenses
Charged to
Other
Accounts
Deductions(1)
Balance at
End of
Period
$
$
2,598
1,339
2,339
$
—
—
—
$
2,991
1,701
2,285
1,053
1,446
1,808
(1) Deductions represent write-offs of accounts determined to be uncollectible.
107
Safety Insurance Group, Inc.
Supplemental Information Concerning Property and Casualty Insurance Operations
Schedule VI
(Dollars in thousands)
As of December 31,
Reserves for
Unpaid Claims
and Claims
Adjustment
Expenses
Deferred
Policy
Acquisition
Costs
Years Ended December 31,
Unearned
Premiums
Earned
Premiums
Net
Investment
Income
$
$
91,917
75,582
73,024
$
603,081
549,598
570,651
$
528,150
433,375
413,487
834,414
758,505
774,328
$
56,377
46,725
44,135
Years Ended December 31,
Claims and Claims
Adjustment Expenses
Incurred Related to
Current
Year
Prior
Year
Amortization
of Deferred
Policy
Acquisition
Costs
Paid Claims
and Claims
Adjustment
Expenses
Premiums
Written
$
$
689,683
549,258
515,400
$
(47,381)
(57,279)
(53,673)
$
161,630
146,013
146,573
$
608,048
515,759
443,013
925,295
773,735
764,526
Affiliation With Registrant
Consolidated Property & Casualty Subsidiaries
2023
2022
2021
Affiliation With Registrant
Consolidated Property & Casualty Subsidiaries
2023
2022
2021
108
SAFETY INSURANCE GROUP, INC.
INDEX TO EXHIBITS
Description
Form of Amended and Restated Certificate of Incorporation of Safety Insurance Group, Inc.(20)
Form of Amended and Restated Bylaws of Safety Insurance Group, Inc.(20)
Form of Stock Certificate for the Common Stock (1)
Description of Safety Insurance Group, Inc. Capital Stock (19)
Lease Agreement between Thomas Black Corporation and Aman, Inc. for the lease of office space
located on the 1st through 6th, 11th and 12th floors of 20 Custom House Street, Boston, Massachusetts,
dated June 11, 2087, and as amended on October 11, 2088, September 14, 2089, September 20, 2090,
February 23, 2094, December 20, 2096, June 24, 2002, July 26, 2004 and April 5, 2007, November 7,
2017 (2) (14)
Tax Indemnity Agreement by and among Safety Holdings, Inc. and the Management Team, dated
October 16, 2001(1)
2001 Restricted Stock Plan (1)(3)
Executive Incentive Compensation Plan (1)(3)
2002 Management Omnibus Incentive Plan, as Amended (5)
Safety Insurance Company Executive Incentive Compensation Plan—Basic Document(3)(4)(7)
Safety Insurance Company Executive Incentive Compensation Plan—Adoption Agreement(3)(4)(7)
Safety Insurance Company Executive Incentive Compensation Plan—Rabbi Trust Agreement(3)(4)(7)
Form of Restricted Stock Notice and Agreement (with vesting) under the 2002 Management Omnibus
Incentive Plan(3)(4)
Form of Restricted Stock Notice and Agreement (without vesting) under the 2002 Management
Omnibus Incentive Plan(3)(4)
Form of Nonqualified Stock Option Notice and Agreement under the 2002 Management Omnibus
Incentive Plan(3)(4)
Form of Incentive Stock Option Notice and Agreement under the 2002 Management Omnibus Incentive
Plan(3)(4)
Form of Stock Appreciation Right Notice and Agreement under the 2002 Management Omnibus
Incentive Plan(3)(4)
Annual Performance Incentive Plan(3)(5)
Amendment to Annual Performance Incentive Plan(3)(6)
Amendment to Management Omnibus Incentive Plan dated December 31, 2008(3)(6)
Amendment to Management Omnibus Incentive Plan dated August 4, 2010 (3)(8)
Amendment to Management Omnibus Incentive Plan, as Amended dated March 11, 2013(3)(9)
Form of Restricted Stock Notice and Agreement (with performance-based vesting) under the 2002
Management Omnibus Plan, as Amended(3)(9)
Exhibit
Number
3.1
3.2
4
4.1
10.1
10.2
10.3
10.4
10.5
10.6
10.7
10.8
10.9
10.10
10.11
10.12
10.13
10.14
10.15
10.16
10.17
10.18
10.20
10.20
Amended and Restated Revolving Credit Agreement with RBS Citizens(10)
109
10.21
10.22
10.23
10.24
10.25
10.26
10.27
10.28
10.29
21
23
24
31.1
31.2
32.1
32.2
97.1
Form of Restricted Stock Notice and Agreement (with performance-based vesting) under the 2002
Management Omnibus Plan, As Amended(3) (11)
Form of Restricted Stock Notice and Agreement (with performance-based vesting) under the 2002
Management Omnibus Plan, As Amended(3) (12)
Form of Restricted Stock Notice and Agreement under the 2002 Management Omnibus Plan, As
Amended(3) (12)
Employment Agreement by and between Safety Insurance Group, Inc. and John Drago as of April 1,
2016(3)(13)
Employment Agreement by and between Safety Insurance Group, Inc. and George M. Murphy as of
April 1, 2016(3)(13)
Employment Agreement by and between Safety Insurance Group, Inc. and individual executive member
as of January 1, 2021. (3) (17)
2018 Long-Term Incentive Plan (15)
Employment Agreement by and between Safety Insurance Group, Inc. and Christopher T. Whitford as
of March 2, 2020. (3) (16)
Employment Agreement by and between Safety Insurance Group, Inc. and Glenn R. Hiltpold as of
March 1, 2021. (3) (17)
Subsidiaries of Safety Insurance Group, Inc. (20)
Consent of Deloitte & Touche LLP (20)
Power of Attorney (contained on the signature page herein)
CEO Certification Pursuant to Rule 13a-14(a)/15d-14(a), as Adopted Pursuant to Section 302 of the
Sarbanes-Oxley Act of 2002 (20)
CFO Certification Pursuant to Rule 13a-14(a)/15d-14(a), as Adopted Pursuant to Section 302 of the
Sarbanes-Oxley Act of 2002(20)
CEO Certification Pursuant to U.S.C. Section 1350, as Adopted Pursuant to Section 906 of the
Sarbanes-Oxley Act of 2002 (20)
CFO Certification Pursuant to U.S.C. Section 1350, as Adopted Pursuant to Section 906 of the
Sarbanes-Oxley Act of 2002 (20)
Safety Insurance Group, Inc. Policy Regarding Recovery of Erroneously Awarded Incentive
Compensation.
101.INS
Inline XBRL Instance Document (20)
101.SCH
Inline XBRL Taxonomy Extension Schema (20)
101.CAL
Inline XBRL Taxonomy Extension Calculation Linkbase (20)
101.DEF
Inline XBRL Taxonomy Extension Definition Linkbase (20)
101.LAB
Inline XBRL Taxonomy Extension Label Linkbase (20)
101.PRE
Inline XBRL Taxonomy Extension Presentation Linkbase (20)
104
Cover Page Interactive Data File (formatted as iXBRL and contained in Exhibit 101) (20)
(1)
Incorporated herein by reference to the Registrant’s Registration Statement on Form S-1 (File No. 333-87056)
filed April 26, 2002, and as amended on Form S-8 (Reg. No. 333-110676) filed on November 21, 2003, as
110
amended on Form S-8 (Reg. No. 333-140423) filed on February 2, 2007, as amended on Form S-8 (Reg. No.
333-226690) filed on August 8, 2018, and as amended on Form S-8 (Reg. No. 333-269314) filed on January 20,
2023.
Incorporated herein by reference to the Registrant’s Registration Statement on Form S-1 (File No. 333-87056)
filed April 26, 2002, and as amended on Form S-8 (Reg. No. 333-110676) filed on November 21, 2003, as
amended on Form S-8 (Reg. No. 333-140423) filed on February 2, 2007, and as amended on Form S-8 (Reg.
No. 333-226690) filed on August 8, 2018 and as incorporated herein by reference on Form 10-Q for the
quarterly period ended March 31, 2007, as filed on May 5, 2007, and as incorporated by reference to the
Registrant’s Form 10-K for the year ended December 31, 2017, as filed on February 28, 2018.
Denotes management contract or compensation plan or arrangement.
Incorporated herein by reference to the Registrant’s Form 10-K for the year ended December 31, 2004 filed on
March 16, 2005.
Incorporated herein by reference to the Registrant’s Form 10-K for the year ended December 31, 2006 filed on
March 1, 2007.
Incorporated herein by reference to the Registrant’s Form 8-K filed on December 31, 2008.
Incorporated herein by reference to the Registrant’s Form 10-Q for the quarter ended September 30, 2008, as
filed on November 7, 2008.
Incorporated herein by reference to the Registrant’s Form 10-K for the year ended December 31, 2010 filed on
March 14, 2011.
Incorporated herein by reference to the Registrant’s Form 10-K for the year ended December 31, 2012 filed on
March 18, 2013
Incorporated herein by reference to the Registrant’s Form 8-K filed on August 27, 2013.
Incorporated herein by reference to the Registrant’s Form 10-Q for the quarter ended June 30, 2013, as filed on
August 9, 2013.
Incorporated herein by reference to the Registrant’s Form 10-K for the year ended December 31, 2014 filed on
March 2, 2015
Incorporated herein by reference to the Registrant’s Form 10-Q for the quarter ended June 30, 2016, as filed on
August 5, 2016.
Incorporated herein by reference to the Registrant’s Form 10-K for the year ended December 31, 2017, as filed
on February 28, 2018.
Incorporated herein by reference to the Registrant’s Definitive Proxy Statement filed on April 11, 2018.
Incorporated herein by reference to the Registrant’s Form 10-K for the year ended December 31, 2020, as filed
on February 28, 2020.
Incorporated herein by reference to the Registrant’s Form 10-K for the year ended December 31, 2020, as filed
on February 26, 2021.
Incorporated herein by reference to the Registrant’s Form 10-K for the year ended December 31, 2021, as filed
on February 28, 2022.
Incorporated herein by reference to the Registrant’s Form 10-K for the year ended December 31, 2022, as filed
on February 28, 2023.
Included herein.
(2)
(3)
(4)
(5)
(6)
(7)
(8)
(9)
(10)
(11)
(12)
(13)
(14)
(15)
(16)
(17)
(18)
(19)
(20)
111
ITEM 16. FORM 10-K SUMMARY
None
112
Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, as amended, the
Registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized on
February 28, 2024
SIGNATURES
Safety Insurance Group, Inc.
By:
/s/ George M. Murphy
George M. Murphy,
President, Chief Executive Officer
113
POWER OF ATTORNEY
KNOW ALL PERSONS BY THESE PRESENTS, that each person whose signature appears below constitutes
and appoints George M. Murphy and Christopher T. Whitford, and each of them individually, his true and lawful
attorney-in-fact and agent with full power of substitution and resubstitution for him and in his name, place and stead, in
any and all capacities, to sign any and all amendments to this Annual Report, and to file the same, with all exhibits
thereto, and other documents in connection therewith, with the Securities and Exchange Commission, granting unto each
such attorney-in-fact and agent, or his substitutes, full power and authority to do and perform each and every act and
thing requisite and necessary to be done in and about the premises, to all intents and purposes and as fully as he might or
could do in person, hereby ratifying and confirming all that each such attorney-in-fact and agent, or his substitutes, may
lawfully do or cause to be done by virtue hereof.
Pursuant to the requirements of the Securities Exchange Act of 1934, this Annual Report has been signed by the
following persons in the capacities and on the date indicated:
Signature
Title
Date
/s/ George M. Murphy
George M. Murphy
President, Chief Executive Officer
February 28, 2024
/s/ Christopher T. Whitford
Christoper T. Whitford
Vice President, Chief Financial Officer,
Secretary, and Principal Accounting Officer
February 28, 2024
February 28, 2024
February 28, 2024
February 28, 2024
February 28, 2024
February 28, 2024
Director
Director
Director
Director
Director
/s/ Charles J. Brophy III
Charles J. Brophy III
/s/ John D. Farina
John D. Farina
/s/ Deborah E. Gray
Deborah E. Gray
/s/ Dennis J. Langwell
Dennis J. Langdell
/s/ Peter J. Manning
Peter J. Manning
/s/ Thalia M. Meehan
Thalia M. Meehan
Lead Independent Director
February 28, 2024
/s/ Mary C. Moran
Mary C. Moran
Director
February 28, 2024
114
EXECUTIVE OFFICERS
SHAREHOLDER INFORMATION
George M. Murphy, CPCU
President and Chief Executive Officer
Christopher T. Whitford, CPA
Vice President, Chief Financial Officer and Secretary
James D. Berry, CPCU
Vice President—Underwriting
John P. Drago
Vice President—Marketing
Glenn R. Hiltpold, FCAS
Vice President—Actuarial Services
Brian S. Lam
Vice President—Insurance Operations
Paul J. Narciso
Vice President—Claims
Stephen A. Varga
Vice President—Management Information Systems
BOARD OF DIRECTORS
Chairperson—George M. Murphy(3C)
Lead Independent Director—
Thalia M. Meehan(2C)(3)(4)
Charles J. Brophy III(3)
Dennis J. Langwell(1)(2)
John D. Farina(1C)(3)
Deborah E. Gray(2)(4)
Peter J. Manning(1)(2)
Mary C. Moran(1)(4C)
(1) Member of the Audit Committee
(2) Member of the Compensation Committee
(3) Member of the Investment Committee
(4) Member of the Nominating and Governance Committee
(C) Chairperson of the committee referenced
Transfer Agent
Broadridge Shareholder Services
C/O Broadridge Corporate Issuer Solutions
P.O. Box 1342
Brentwood, NY 11717-0718
Shareholder inquiries:
877-830-4936
www.shareholder.broadridge.com
Independent Auditors
Deloitte & Touche LLP
Boston, MA
General Counsel
DLA Piper
Boston, MA
Executive Offices
20 Custom House Street
Boston, MA 02110
617-951-0600
http://www.SafetyInsurance.com
Stock Listing
We are listed on the NASDAQ Global Select Market
under the symbol “SAFT.”
Office of Investor Relations
20 Custom House Street
Boston, MA 02110
Tel: 877-951-2522
Fax: 617-603-4837
e-Mail: InvestorRelations@SafetyInsurance.com
Annual Meeting of Shareholders
Wednesday, May 15, 2024 at 10:00 A.M. EST
20 Custom House Street, Boston, MA 02110
Annual Report to Shareholders
Anyone interested in a copy of our Annual
Report on Form 10-K, or any of our other public
information, including press releases, Section
16 reports and other SEC filings, may obtain a
copy without charge by either contacting the
Office of Investor Relations listed above or by
viewing and downloading from our Web site:
www.SafetyInsurance.com, under “About Safety,”
“Investor Information.”
SAFETY INSURANCE GROUP, INC. Safety Insurance Group, Inc.
20 Custom House Street
Boston, MA 02110
617-951-0600
www.SafetyInsurance.com