Safety Insurance Group Inc 10-Q for FY2025 Q3
Safety Insurance Group Inc (SAFT)
About this 10-Q
Safety Insurance Group Inc filed this 10-Q on November 7, 2025, covering the quarter ended September 30, 2025 (FY2025 Q3).
Headline figures
Quarter ended September 30, 2025, as reported in this filing, compared with the same period a year earlier where the filing states it.
- Revenue
- $326.62M
- up 10.6% from $295.28M a year earlier
- Net income
- $28.31M
- up 9.4% from net income of $25.89M a year earlier
- Diluted EPS
- $1.91
- up 10.4% from $1.73 a year earlier
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
For the quarterly period ended
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:
(Exact name of registrant as specified in its charter)
(State or other jurisdiction of incorporation or organization) | | (I.R.S. Employer Identification No.) |
(Address of principal executive offices including zip code)
(
(Registrant’s telephone number, including area code)
Not Applicable
(Former name or former address, if changed since last report)
Securities registered pursuant to Section 12(b) of the Act:
Title of each class | Trading Symbol | Name of each exchange on which registered |
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.
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).
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 the definition of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act. (Check one):
| ||||||
| ☒ |
| Accelerated filer |
| ☐ | |
Non-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 is a shell company (as defined in Rule 12b-2 of the Exchange Act).
Yes
As of November 3, 2025 there were
SAFETY INSURANCE GROUP, INC.
TABLE OF CONTENTS
Page No. | ||
Part I. Financial Information | ||
Item 1. | Consolidated Financial Statements | |
| 3 | |
| 4 | |
| 5 | |
| 6 | |
| 7 | |
| 8 | |
Management’s Discussion and Analysis of Financial Condition and Results of Operations | 24 | |
43 | ||
44 | ||
Part II. Other Information | ||
45 | ||
45 | ||
45 | ||
45 | ||
45 | ||
45 | ||
46 | ||
47 | ||
48 | ||
| | |
2
Safety Insurance Group, Inc. and Subsidiaries
Consolidated Balance Sheets
(Dollars in thousands, except share data)
|
| September 30, |
| December 31, | ||
| | 2025 | | 2024 | ||
| | (Unaudited) | | | | |
Assets | | | | | | |
Investments: | | | | | | |
Fixed maturities, available for sale, at fair value (amortized cost: $ | | $ | | | $ | |
Short-term investments, at fair value (cost: $ | |
| — | |
| |
Equity securities, at fair value (cost: $ | |
| | |
| |
Other invested assets | |
| | |
| |
Total investments | |
| | |
| |
Cash and cash equivalents | |
| | |
| |
Accounts receivable, net of allowance for expected credit losses of $ | |
| | |
| |
Receivable for securities sold | |
| | |
| |
Accrued investment income | |
| | |
| |
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 | | | | | | |
Losses and loss adjustment expense reserves | | $ | | | $ | |
Unearned premium reserves | |
| | |
| |
Accounts payable and accrued liabilities | |
| | |
| |
Payable for securities purchased | |
| | |
| |
Payable to reinsurers | |
| | |
| |
Taxes payable | | | | | | |
Short-term debt | | | — | | | |
Long-term debt | | | | | | — |
Operating lease liabilities | | | | | | |
Total liabilities | |
| | |
| |
| | | | | | |
Commitments and contingencies (Note 8) | | | | | | |
| | | | | | |
Shareholders’ equity | | | | | | |
Common stock: $ | | | | | | |
Additional paid-in capital | |
| | |
| |
Accumulated other comprehensive loss, net of taxes | |
| ( | |
| ( |
Retained earnings | |
| | |
| |
Treasury stock, at cost: | |
| ( | |
| ( |
Total shareholders’ equity | |
| | |
| |
Total liabilities and shareholders’ equity | | $ | | | $ | |
The accompanying notes are an integral part of these financial statements.
3
Safety Insurance Group, Inc. and Subsidiaries
Consolidated Statements of Operations
(Unaudited)
(Dollars in thousands, except per share data)
| | Three Months Ended September 30, |
| Nine Months Ended September 30, | ||||||||
|
| 2025 |
| 2024 |
| 2025 |
| 2024 | ||||
| | | | | | | | | | | | |
Net earned premiums | | $ | | | $ | | | $ | | | $ | |
Net investment income | |
| | |
| | |
| | |
| |
Earnings from partnership investments | |
| | |
| | |
| | |
| |
Net realized gains on investments | |
| | |
| | |
| | |
| |
Change in net unrealized gains on equity securities | | | | | | | | | | | | |
Credit loss benefit (expense) | | | | | | ( | | | | | | ( |
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 | | $ | | | $ | | | $ | | | $ | |
| | | | | | | | | | | | |
Number of shares used in computing earnings per share: | | | | | | | | | | | | |
Basic | |
| | |
| | |
| | |
| |
Diluted | |
| | |
| | |
| | |
| |
| | | | | | | | | | | | |
The accompanying notes are an integral part of these financial statements.
4
Safety Insurance Group, Inc. and Subsidiaries
Consolidated Statements of Comprehensive Income (Loss)
(Unaudited)
(Dollars in thousands)
| | Three Months Ended September 30, |
| Nine Months Ended September 30, | ||||||||
| | 2025 |
| 2024 |
| 2025 |
| 2024 | ||||
Net income | | $ | | | $ | | | $ | | | $ | |
| | | | | | | | | | | | |
Other comprehensive income (loss), net of tax: | | | | | | | | | | | | |
Unrealized holding gains (losses) during the period, net of income tax expense (benefit) of $ | |
| | |
| | |
| | |
| |
Reclassification adjustment for net realized gains on investments included in net income, net of income tax benefit of ($ | |
| ( | |
| ( | |
| ( | |
| ( |
Other comprehensive income (loss), net of tax: | |
| | |
| | |
| | |
| |
| | | | | | | | | | | | |
Comprehensive income | | $ | | | $ | | | $ | | | $ | |
| | | | | | | | | | | | |
The accompanying notes are an integral part of these financial statements.
5
Safety Insurance Group, Inc. and Subsidiaries
Consolidated Statements of Changes in Shareholders’ Equity
(Unaudited)
(Dollars in thousands)
|
|
| |
|
| |
| Accumulated |
|
| |
|
| |
|
| | |
| | | | | | | | Other | | | | | | | | | | |
| | | | | Additional | | Comprehensive | | | | | | | | Total | |||
| | Common | | Paid-in | | Loss, | | Retained | | Treasury | | Shareholders’ | ||||||
| | Stock | | Capital | | Net of Taxes | | Earnings | | Stock | | Equity | ||||||
Balance at December 31, 2023 | | $ | | | $ | | | $ | ( | | $ | | | $ | ( | | $ | |
Net income, January 1 to March 31, 2024 | | | — | | | — | | | — | |
| | | | — | |
| |
Unrealized gains and losses on securities available for sale, net of deferred federal income taxes | | | — | | | — | |
| ( | | | — | | | — | |
| ( |
Restricted share awards issued | |
| — | |
| | | | — | | | — | | | — | |
| |
Recognition of employee share-based compensation, net of deferred federal income taxes | | | | |
| | | | — | | | — | | | — | |
| |
Dividends paid and accrued | | | — | | | — | | | — | | | ( | | | — | |
| ( |
Balance at March 31, 2024 | | | | | | | | | ( | | | | | | ( | | | |
Net income, April 1 to June 30, 2024 | | | — | | | — | | | — | |
| | | | — | |
| |
Unrealized gains and losses on securities available for sale, net of deferred federal income taxes | | | — | | | — | |
| ( | | | — | | | — | |
| ( |
Recognition of employee share-based compensation, net of deferred federal income taxes | | | — | |
| | | | — | | | — | | | — | |
| |
Dividends paid and accrued | | | — | | | — | | | — | |
| ( | | | — | |
| ( |
Balance at June 30, 2024 | | | | | | | | | ( | | | | | | ( | | | |
Net income, July 1 to September 30, 2024 | | | — | | | — | | | — | |
| | | | — | |
| |
Unrealized gains and losses on securities available for sale, net of deferred federal income taxes | | | — | | | — | |
| | | | — | | | — | |
| |
Recognition of employee share-based compensation, net of deferred federal income taxes | | | — | |
| | | | — | | | — | | | — | |
| |
Dividends paid and accrued | | | — | | | — | | | — | |
| ( | | | — | |
| ( |
Balance at September 30, 2024 | | $ | | | $ | | | $ | ( | | $ | | | $ | ( | | $ | |
|
|
| |
|
| |
| Accumulated |
|
| |
|
| |
|
| | |
| | | | | | | | Other | | | | | | | | | | |
| | | | | Additional | | Comprehensive | | | | | | | | Total | |||
| | Common | | Paid-in | | Loss, | | Retained | | Treasury | | Shareholders’ | ||||||
| | Stock | | Capital | | Net of Taxes | | Earnings | | Stock | | Equity | ||||||
Balance at December 31, 2024 | | $ | | | $ | | | $ | ( | | $ | | | $ | ( | | $ | |
Net income, January 1 to March 31, 2025 | | | — | | | — | | | — | |
| | | | — | |
| |
Unrealized gains and losses on securities available for sale, net of deferred federal income taxes | | | — | | | — | |
| | | | — | | | — | |
| |
Restricted share awards issued | |
| — | |
| | | | — | | | — | | | — | |
| |
Recognition of employee share-based compensation, net of deferred federal income taxes | | | | |
| | | | — | | | — | | | — | |
| |
Dividends paid and accrued | | | — | | | — | | | — | |
| ( | | | — | |
| ( |
Balance at March 31, 2025 | | | | | | | | | ( | | | | | | ( | | | |
Net income, April 1 to June 30, 2025 | | | — | | | — | | | — | |
| | | | — | |
| |
Unrealized gains and losses on securities available for sale, net of deferred federal income taxes | | | — | | | — | |
| | | | — | | | — | |
| |
Recognition of employee share-based compensation, net of deferred federal income taxes | | | — | |
| | | | — | | | — | | | — | |
| |
Dividends paid and accrued | | | — | | | — | | | — | |
| ( | | | — | |
| ( |
Balance at June 30, 2025 | | | | | | | | | ( | | | | | | ( | | | |
Net income, July 1 to September 30, 2025 | | | — | | | — | | | — | |
| | | | — | |
| |
Unrealized gains and losses on securities available for sale, net of deferred federal income taxes | | | — | | | — | |
| | | | — | | | — | |
| |
Recognition of employee share-based compensation, net of deferred federal income taxes | | | — | |
| | | | — | | | — | | | — | |
| |
Dividends paid and accrued | | | — | | | — | | | — | |
| ( | | | — | |
| ( |
Balance at September 30, 2025 | | $ | | | $ | | | $ | ( | | $ | | | $ | ( | | $ | |
The accompanying notes are an integral part of these financial statements.
6
Safety Insurance Group, Inc. and Subsidiaries
Consolidated Statements of Cash Flows
(Unaudited)
(Dollars in thousands)
| | Nine Months Ended September 30, | ||||
|
| 2025 |
| 2024 | ||
Cash flows from operating activities: | | | | | | |
Net income | | $ | | | $ | |
Adjustments to reconcile net income to net cash provided by (used for) operating activities: | | | | | | |
Investment amortization, net | |
| ( | |
| |
Fixed asset depreciation, net | |
| | |
| |
Stock based compensation | | | | | | |
Credit for deferred income taxes | |
| ( | |
| |
Net realized gains on investments | |
| ( | |
| ( |
Credit loss (benefit) expense | | | ( | | | |
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 payable | | | | | | ( |
Other assets | |
| ( | |
| |
Losses 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 | |
| ( | |
| ( |
Short-term investments 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 | |
| | |
| |
Proceeds from maturities of short-term investments | | | | | | — |
Proceed from sales of equity securities | |
| | |
| |
Proceeds from other invested assets redeemed | | | | | | |
Acquisition, net of cash received | | | — | | | ( |
Fixed assets purchased | |
| ( | |
| ( |
Net cash used for investing activities | |
| ( | |
| ( |
| | | | | | |
Cash flows from financing activities: | | | | | | |
Proceeds from Citizens loan | |
| | |
| — |
Proceeds from FHLB loan | | | — | | | |
Payments on FHLB loan | |
| ( | |
| ( |
Dividends paid to shareholders | |
| ( | |
| ( |
Net cash used for financing activities | |
| ( | |
| ( |
| | | | | | |
Net (decrease) increase in cash and cash equivalents | |
| ( | |
| |
Cash and cash equivalents at beginning of year | |
| | |
| |
Cash and cash equivalents at end of period | | $ | | | $ | |
| | | | | | |
The accompanying notes are an integral part of these financial statements.
7
In this Form 10-Q, Notes to the Unaudited 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 preparation of financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting periods. Actual results could differ from these estimates.
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 other expense, have been eliminated. Eliminated commission income totaled $
The financial information for the three and nine months ended September 30, 2025 and 2024 is unaudited; however, in the opinion of the Company, the information includes all adjustments, consisting only of normal recurring adjustments, necessary for a fair presentation of the financial condition, results of operations, and cash flows for the periods. The financial information as of December 31, 2024 is derived from the audited consolidated financial statements included in the Company’s 2024 Annual Report on Form 10-K filed with the U.S. Securities and Exchange Commission (“SEC”) on February 27, 2025.
These unaudited interim consolidated financial statements may not be indicative of financial results for the full year and should be read in conjunction with the audited consolidated financial statements included in the Company’s 2024 Annual Report on Form 10-K filed with the SEC on February 27, 2025.
The Company is a leading provider of property and casualty insurance focused primarily on the Massachusetts market. The Company’s principal product line is automobile insurance. 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”).
Since 1998, the Company had been a member of the Massachusetts Property Insurance Underwriting Association (“FAIR Plan”). The FAIR Plan was a residual market insurance association in which all companies writing basic property insurance in the Commonwealth of Massachusetts were required to participate, with profits and losses shared among member companies on a written premium basis. On April 1, 2024, the Massachusetts Division of Insurance approved a restructuring of the FAIR Plan (“FAIR Plan Restructuring”), transforming it from a partnership that shares profit and losses with member companies to a stand-alone, risk bearing entity, and distributing the accumulated members’ equity. As a result of the FAIR Plan Restructuring, during the year ended December 31, 2024, the Company recognized an underwriting gain through the release of prior year loss reserves, and established a new invested asset, (“Investment in FAIR Plan Trust”).
2. 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 updated 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 was effective for fiscal years starting January
8
1, 2024, and for interim periods starting January 1, 2025, and was applied on a retrospective basis. The effect of implementing this guidance was not material to the Company’s consolidated financial position, results of operations or cash flows.
The Company has
The Company’s chief operating decision maker (“CODM”) is the chief executive officer. The CODM assesses performance for the property and casualty insurance operations segment and decides how to allocate resources based on consolidated net income, which is reported in the consolidated statements of operations. The significant segment expenses regularly provided and reviewed by the CODM are the consolidated expenses as reported in the consolidated statements of operations. The measure of segment assets is reported on the consolidated balance sheets as total assets. The CODM uses consolidated net income in deciding whether to reinvest profits into the property and casualty insurance operations or into other parts of the entity, such as for acquisitions or to pay dividends.
In December 2023, the FASB issued ASU 2023-09, Income Taxes (Topic 740): Improvements to Income Tax Disclosures. This ASU updated 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 evaluating the disclosure impact of this new guidance; however, it will not have an impact on the consolidated financial position, results of operations, or cash flows.
In November 2024, the FASB issued ASU 2024-03, Income Statement – Reporting of Comprehensive Income – Expense Disaggregation Disclosures (Subtopic 220-40): Disaggregation of Income Statement Expenses. This ASU requires disaggregated disclosure of income statement expenses. This ASU does not change how a Company presents expense captions on the face of the income statement; however, it requires disaggregation of certain expense captions into specified categories in disclosures in the footnotes to the financial statements. This ASU is effective for fiscal years starting January 1, 2027, and for interim periods starting January 1, 2028 and will be applied on a prospective basis. The Company is evaluating the disclosure impact of this new guidance; however, it will not have an impact on the consolidated financial position, results of operations, or cash flows.
In September 2025, the FASB issued ASU 2025-06, Intangibles – Goodwill and Other – Internal-Use Software (Subtopic 350-40): Targeted Improvements to the Accounting for Internal-Use Software. Under the new guidance, costs associated with software developed for internal use will now be capitalized when management authorizes a project and when it is probable the project will be completed and used to perform the function intended, rather than when a project reaches the application development stage under existing guidance. The guidance is effective beginning January 1, 2028, with early adoption permitted, and can be applied prospectively, retrospectively, or on a modified retrospective basis. The Company has not yet determined the transition method or timing for adoption; however the adoption of this guidance is not expected to have a significant impact on the consolidated financial position, results of operations, or cash flows.
3. 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.
9
The following table sets forth the computation of basic and diluted EPS for the periods indicated.
| | Three Months Ended September 30, |
| Nine Months Ended September 30, | ||||||||
| | 2025 | | 2024 | | 2025 | | 2024 | ||||
Earnings attributable to common shareholders - basic and diluted: | | | | | | | | | | | | |
Net income from continuing operations | | $ | | | $ | | | $ | | | $ | |
Allocation of income for participating shares | | | ( | | | ( | | | ( | | | ( |
Net income from continuing operations attributed to common shareholders | | $ | | | $ | | | $ | | | $ | |
Earnings per share denominator - basic 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 | | $ | | | $ | | | $ | | | $ | |
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
4. 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 increased the share pool limit by adding
The Amended 2018 Plan establishes a pool of
10
The maximum number of shares of common stock between both the Amended 2018 Plan and 2002 Incentive Plan with respect to which awards may be granted is
Accounting and Reporting for Stock-Based Awards
The Company measures and recognizes the cost of employee services received in exchange for an award of equity instruments. Under the provisions of Accounting Standards Codification (“ASC”) 718, Compensation – Stock Compensation, 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).
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
In addition to service-based awards, the Company grants performance-based restricted shares to certain employees. These performance shares cliff vest after a
Actual payouts can range from
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 during the nine months ended September 30, 2025 assuming a target payout for the 2025 performance-based shares.
|
| Shares |
| Weighted | | Performance-based |
| Weighted | ||
| | Under | | Average | | Shares Under | | Average | ||
| | Restriction | | Fair Value | | Restriction | | Fair Value | ||
Outstanding at beginning of year |
| | | $ | | | | | $ | |
Granted |
| | | | | | | (1) | | |
Vested and unrestricted |
| ( | | | | | ( | | | |
Forfeited | | ( | | | | | ( | | | |
Outstanding at end of period |
| | | $ | | | | | $ | |
| (1) | Includes an update 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. |
11
As of September 30, 2025, there was $
5. Investments
The gross unrealized gains and losses on investments in fixed maturity securities, including redeemable preferred stocks that have characteristics of fixed maturities, short-term investments, equity securities, including interests in mutual funds, and other invested assets were as follows for the periods indicated.
| | As of September 30, 2025 | |||||||||||||
| | | | | | | | | | | | | | | |
|
| Cost or |
| Allowance for |
| Gross Unrealized |
| Estimated | |||||||
| | Amortized | | Expected Credit | | | | | | Fair | |||||
| | Cost | | Losses | | Gains | | Losses (3) | | 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 | | $ | | | $ | ( | | $ | | | $ | ( | | $ | |
| | As of December 31, 2024 | |||||||||||||
| | | | | | | | | | | | | | | |
|
| Cost or |
| Allowance for |
| Gross Unrealized |
| Estimated | |||||||
| | Amortized | | Expected Credit | | | | | | Fair | |||||
| | Cost | | Losses | | Gains | | Losses (3) | | 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 | |
| | |
| ( | |
| | |
| ( | |
| |
Short-term investments | |
| | |
| — | |
| | |
| — | |
| |
Equity securities (2) | |
| | |
| — | |
| | |
| ( | |
| |
Other invested assets (4) | |
| | |
| — | |
| — | |
| — | |
| |
Totals | | $ | | | $ | ( | | $ | | | $ | ( | | $ | |
| (1) | Residential mortgage-backed securities consist 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). |
| (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) | The Company’s investment portfolio includes |
| (4) | Other invested assets are generally accounted for under the equity method which approximated fair value. |
12
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.
| | | | | | |
| | As of September 30, 2025 | ||||
|
| Amortized |
| Estimated | ||
| | Cost | | Fair Value | ||
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 | | $ | | | $ | |
The gross realized gains and losses on sales of investments were as follows for the periods indicated.
| | | | | | | | | | | | |
| | Three Months Ended September 30, |
| Nine Months Ended September 30, | ||||||||
|
| 2025 |
| 2024 |
| 2025 |
| 2024 | ||||
Gross realized gains | | | | | | | | | | | | |
Fixed maturity securities | | $ | | | $ | | | $ | | | $ | |
Equity securities | |
| | |
| | |
| | |
| |
Gross realized losses | | | | | | | | | | | | |
Fixed maturity securities | |
| ( | |
| ( | |
| ( | |
| ( |
Equity securities | |
| ( | |
| ( | |
| ( | |
| ( |
Net realized gains on investments | | $ | | | $ | | | $ | | | $ | |
| | | | | | | | | | | | |
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.
The following tables as of September 30, 2025 and December 31, 2024 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.
| | | | | | | | | | | | | | | | | | |
| | As of September 30, 2025 | ||||||||||||||||
| | Less than 12 Months | | 12 Months or More | | Total | ||||||||||||
|
| Estimated |
| Unrealized |
| Estimated |
| Unrealized |
| Estimated |
| Unrealized | ||||||
| | Fair Value | | Losses | | Fair Value | | Losses | | Fair Value | | Losses | ||||||
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 | | $ | | | $ | | | $ | | | $ | | | $ | | | $ | |
13
| | | | | | | | | | | | | | | | | | |
| | As of December 31, 2024 | ||||||||||||||||
| | Less than 12 Months | | 12 Months or More | | Total | ||||||||||||
|
| Estimated |
| Unrealized |
| Estimated |
| Unrealized |
| Estimated |
| Unrealized | ||||||
| | Fair Value | | Losses | | Fair Value | | Losses | | Fair Value | | Losses | ||||||
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 | | $ | | | $ | | | $ | | | $ | | | $ | | | $ | |
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 expected 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.
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 September 30, 2025 and December 31, 2024, the Company concluded that $
The following table represents a reconciliation of the beginning and ending balances of the allowance for expected credit losses on fixed maturities classified as available for sale.
| | | | | | | | | | | | |
14
| | Three Months Ended September 30, | | Nine Months Ended September 30, | ||||||||
| | | 2025 | | | 2024 | | 2025 |
| 2024 | ||
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 | | $ | | | $ | | | $ | | | $ | |
The Company holds
Net Investment Income
The components of net investment income were as follows:
| | Three Months Ended September 30, |
| Nine Months Ended September 30, | ||||||||
|
| 2025 |
| 2024 |
| 2025 |
| 2024 | ||||
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 | | $ | | | $ | | | $ | | | $ | |
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 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
15
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 FHLB-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. Short-term investments are comprised of U.S. Treasury securities. Inputs into the fair value application that are utilized by asset class include but are not limited to:
In order to ensure the fair value determination is representative of an exit price, 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
16
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 September 30, 2025. There were no significant changes to the valuation process during the nine months ended September 30, 2025. As of September 30, 2025 and December 31, 2024, no quotes or prices obtained were adjusted by management. All broker quotes obtained were non-binding.
At September 30, 2025 and December 31, 2024, investments in fixed maturities classified as available-for-sale had a fair value which equaled carrying value of $
The following tables summarize the Company’s total fair value measurements for investments for the periods indicated.
| | As of September 30, 2025 | ||||||||||
|
| 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 | |
| | |
| — | |
| | |
| — |
Other invested assets | | | | | | — | | | | | | — |
Equity securities | |
| | |
| | |
| — | |
| |
Total investment securities | | $ | | | $ | | | $ | | | $ | |
| | As of December 31, 2024 | ||||||||||
|
| 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 | |
| | |
| — | |
| | |
| — |
Short-term investments | | | | |
| — | |
| | |
| — |
Other invested assets | | | | | | — | | | | | | — |
Equity securities | |
| | |
| | |
| — | |
| |
Total investment securities | | $ | | | $ | | | $ | | | $ | |
As of September 30, 2025 and December 31, 2024, there were approximately $
There were
17
The following table summarizes the changes in the Company’s Level 3 fair value securities for the periods indicated.
| | Three Months Ended September 30, |
| Nine Months Ended September 30, | ||||||||
|
| 2025 |
| 2024 |
| 2025 |
| 2024 | ||||
| | Level 3 | | Level 3 |
| Level 3 | | Level 3 | ||||
| | Fair Value | | Fair Value |
| Fair Value | | Fair Value | ||||
| | Securities | | Securities |
| Securities | | Securities | ||||
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 | | $ | | | $ | | | $ | | | $ | |
Amount of total losses included in earnings attributable to the change in unrealized losses related to assets still held at end of period | | $ | — | | $ | — | | $ | — | | $ | — |
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,
As an element of the FAIR Plan Restructuring, in a non-cash transaction, the Company liquidated its net asset position in the FAIR Plan and established an Investment in FAIR Plan Trust. The Company’s Investment in FAIR Plan Trust was adjusted to its current fair value on a quarterly basis based on information from the FAIR Plan, with changes recognized through earnings. As of September 30, 2025 and December 31, 2024, the Company’s Investment in FAIR Plan Trust of $
6. Allowance for Expected Credit Losses
The Company’s financial instruments measured at amortized cost 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 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 and changes in the allowance for expected credit losses for the three and nine months ended September 30, 2025 and 2024.
18
| | | At and For the | | | At and For the | ||||||
| | | Three Months Ended September 30, 2025 | | | Three Months Ended September 30, 2024 | ||||||
|
| | Accounts Receivable Net of Allowance for Expected Credit Losses | | | Allowance for Expected Credit Losses | | | 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 | | $ | | | $ | | | $ | | | $ | |
| | | At and For the | | | At and For the | ||||||
| | | Nine Months Ended September 30, 2025 | | | Nine Months Ended September 30, 2024 | ||||||
|
| | Accounts Receivable Net of Allowance for Expected Credit Losses | | | Allowance for Expected Credit Losses | | | 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 | | $ | | | $ | | | $ | | | $ | |
| | | | | | | | | | | | |
Reinsurance recoverables include amounts due from reinsurers for both paid and unpaid losses. The Company cedes insurance to Commonwealth Automobile Reinsurers (“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 loss adjustment expenses (“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 losses and loss 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 represented
19
7. Loss and Loss Adjustment Expense Reserves
The following table sets forth a reconciliation of beginning and ending reserves for losses and LAE, as shown in the Company’s consolidated financial statements for the periods indicated.
| | Nine Months Ended September 30, | ||||
|
| 2025 |
| 2024 | ||
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 | | $ | | | $ | |
At the end of each period, the reserves were re-estimated for all prior accident years. The Company’s prior year reserves decreased by $
The Company’s automobile lines of business reserves decreased for the nine months ended September 30, 2025 and 2024, 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. 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.
8. Commitments and Contingencies
Commitments
As part of the Company’s investment activity, we have committed $
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.
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
20
timing and amounts of any future assessments are not known, based upon existing knowledge, management’s opinion is that such future assessments are not expected to have a material effect upon the financial position of the Company.
9. Debt
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 $
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 September 30, 2025, 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 $
On March 27, 2025, the Company borrowed $
Safety Insurance Company is a member of the FHLB-Boston. Membership in the FHLB-Boston allows Safety Insurance Company to borrow money at competitive interest rates provided the loan is collateralized by specific U.S. Government residential mortgage backed securities. At September 30, 2025, Safety Insurance Company has the ability to borrow $
On March 17, 2020, the Company borrowed $
On April 8, 2024, the Company borrowed $
On April 15, 2024, the Company borrowed $
The Company estimates the fair value of the FHLB-Boston and the Citizens Bank Credit Agreement loans (the “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 loan with the FHLB-Boston was $
Interest expense on the FHLB-Boston borrowing was $
21
$
10. Income Taxes
Federal income tax expense for the nine months ended September 30, 2025 and 2024 has been computed using estimated effective tax rates. These rates are revised, if necessary, at the end of each successive interim period to reflect the current estimates of the annual effective tax rates.
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 tax positions under ASC 740, Income Taxes.
During the nine months ended September 30, 2025, 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.
On July 4, 2025, the “One Big Beautiful Bill Act” (H.R.1) (the “Act”) was signed into law. This wide-ranging budget reconciliation legislation introduces significant changes across multiple areas of federal policy, including taxation, and social programs. Based on the Company’s ongoing monitoring and analysis, the provisions of the Act do not currently have a material impact on the Company’s financial position or results of operations, nor are they expected to have a material impact in future periods.
All tax years prior to 2021 are closed. There are no current examinations ongoing.
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.
11. Share Repurchase Program
On February 23, 2022, the Board of Directors approved a share repurchase program of up to $
12. Leases
The Company has various non-cancelable, long-term operating leases, the largest of which are for office space including the corporate headquarters, 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
22
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:
| | Three Months Ended September 30, | | Nine Months Ended September 30, | |||||||||
|
| | 2025 | | | 2024 |
| | 2025 | | | 2024 | |
Operating lease cost | | $ | | | $ | | | $ | | | $ | | |
Other information related to leases was as follows:
| Three Months Ended September 30, | | Nine Months Ended September 30, | |||||||||
| | 2025 | | | 2024 |
| | 2025 | | | 2024 | |
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 | | | | | | | | | | | ||
Maturities of lease liabilities were as follows:
|
| Operating Leases | |
2025 | | $ | |
2026 | | | |
2027 | | | |
2028 | | | |
Total lease payments | | | |
Less imputed interest | | | ( |
Total | | $ | |
13. Subsequent Events
The Company has evaluated subsequent events for recognition or disclosure in the consolidated financial statements filed on Form 10-Q with the SEC and no events have occurred that require recognition or disclosure.
23
Item 2.
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,” “the 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, commercial automobile, homeowners and commercial other-than-auto insurance in Massachusetts. In addition to private passenger automobile insurance (which represented 55.8% of our direct written premiums in 2024), we offer a portfolio of other insurance products, including commercial automobile (15.2% of 2024 direct written premiums), homeowners (24.3% of 2024 direct written premiums) and dwelling fire, umbrella and business owner policies (totaling 4.7% of 2024 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 828 in 1,079 locations throughout these three states at December 31, 2024. We have used these relationships and our extensive knowledge of the Massachusetts market to become the third largest private passenger automobile carrier and the second largest commercial automobile insurance carrier in Massachusetts, capturing an approximate 9.7% and 12.9% share, respectively, of the Massachusetts private passenger and commercial automobile markets in 2024 according to statistics compiled by the Commonwealth Automobile Reinsurers (“CAR”) based on automobile exposures. We are also the third largest homeowners insurance carrier in Massachusetts with a 6.3% share of the Massachusetts homeowners insurance market.
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 20, 2025.
Our Insurance Subsidiaries began writing insurance in New Hampshire during 2008 and in Maine in 2016. In November 2020, we formed a fourth insurance subsidiary, Safety Northeast, which became licensed to write insurance products in Massachusetts.
24
The table below shows the amount of direct written premiums written in each state during the three and nine months ended September 30, 2025 and 2024.
| Three Months Ended September 30, | | Nine Months Ended September 30, | ||||||||
Direct Written Premiums | 2025 | | 2024 | | 2025 |
| 2024 | ||||
Massachusetts | $ | 313,922 | | $ | 301,018 | | $ | 924,126 | | $ | 854,780 |
New Hampshire | | 15,681 | | | 14,226 | |
| 42,835 | | | 38,310 |
Maine | | 4,578 | | | 2,938 | |
| 12,019 | | | 7,942 |
Total | $ | 334,181 | | $ | 318,182 | | $ | 978,980 | | $ | 901,032 |
Recent Trends and Events
Direct and Net Written Premiums. For the three months ended September 30, 2025 direct written premium growth and net written premium growth were 5.0% and 5.7%, respectively, compared to the prior period. The increase in premium is driven by rate increases. For the nine months ended September 30, 2025, average written premium per policy increased 8.7%, 6.2% and 9.8% in Private Passenger Automobile, Commercial Automobile and Homeowners lines, respectively, compared to the same period in 2024.
Losses and Loss Adjustment Expenses. Losses and loss adjustment expenses incurred for the three months ended September 30, 2025 increased by $22,493, or 12.3%, to $204,982 from $182,489 for the comparable 2024 period. Losses and loss adjustment expenses incurred for the nine months ended September 30, 2025 increased by $65,874, or 12.6%, to $589,504 from $523,630 for the comparable 2024 period. The increase in losses and loss adjustment expenses is primarily driven by increased loss severity as compared to the same periods in the prior year. Our losses and loss adjustment expenses ratio for the three months ended September 30, 2025 decreased to 70.4% from 70.6% for the comparable 2024 period. Our losses and loss adjustment expense ratio for the nine months ended September 30, 2025 decreased to 69.7% from 70.6% for the comparable 2024 period. The decrease in the ratio is due to growth in earned premiums, slightly offset by increased loss severity.
Non-generally accepted accounting principles (“non-GAAP”) operating income, as defined below, was $21,883 for the three months ended September 30, 2025 and $62,397 for the nine months ended September 30, 2025. Non-GAAP operating income was $16,524 for the three months ended September 30, 2024 and $47,542 for the nine months ended September 30, 2024. The increase in non-GAAP operating income for the three and nine months ended September 30, 2025 was primarily the result of an increase in net earned premiums. Non-GAAP operating income was $1.48 per diluted share for the three months ended September 30, 2025, and $4.19 per diluted share, for the nine months ended September 30, 2025, compared to non-GAAP operating income of $1.10 per diluted share for the three months ended September 30, 2024, and $3.21 per diluted share, for the nine months ended September 30, 2024.
25
The following rate changes have been filed and approved by the insurance regulators of Massachusetts, New Hampshire and Maine in 2025 and 2024.
Line of Business |
| Effective Date |
| Rate Change |
Maine Homeowners | | November 1, 2025 | | 6.6% |
New Hampshire Commercial Automobile | | November 1, 2025 | | 8.2% |
New Hampshire Homeowners | | October 1, 2025 | | 3.9% |
New Hampshire Private Passenger Automobile | | October 1, 2025 | | 5.2% |
Maine Private Passenger Automobile | | September 1, 2025 | | 9.6% |
Massachusetts Homeowners | | August 1, 2025 | | 4.2% |
Massachusetts Private Passenger Automobile | | July 1, 2025 | | 5.1% |
Massachusetts Commercial Automobile | | May 1, 2025 | | 5.2% |
Massachusetts Private Passenger Automobile | | January 1, 2025 | | 5.3% |
New Hampshire Commercial Automobile | | November 1, 2024 | | 9.5% |
New Hampshire Private Passenger Automobile | | October 1, 2024 | | 4.4% |
New Hampshire Homeowners | | October 1, 2024 | | 7.4% |
Maine Private Passenger Automobile | | September 1, 2024 | | 4.4% |
Massachusetts Homeowners | | August 1, 2024 | | 5.9% |
Massachusetts Private Passenger Automobile | | July 1, 2024 | | 4.8% |
Massachusetts Commercial Automobile | | May 1, 2024 | | 6.3% |
New Hampshire Private Passenger Automobile | | April 1, 2024 | | 3.4% |
Massachusetts Private Passenger Automobile | | January 1, 2024 | | 3.5% |
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 Generally Accepted Accounting Principles (“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 outlined in the following table.
|
| Three Months Ended September 30, |
| | Nine Months Ended September 30, |
| ||||
| | 2025 | | 2024 | | | 2025 | | 2024 |
|
GAAP ratios: | | | | | | | | | | |
Loss ratio |
| 70.4 | % | 70.6 | % | | 69.7 | % | 70.6 | % |
Expense ratio |
| 28.5 | | 30.1 | | | 29.2 | | 30.2 | |
Combined ratio |
| 98.9 | % | 100.7 | % | | 98.9 | % | 100.8 | % |
Share-Based Compensation
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.
26
The maximum number of shares of common stock between both the Amended 2018 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 September 30, 2025, there were 235,663 shares available for future grant.
A summary of share based awards granted under the Incentive Plan during the nine months ended September 30, 2025 is as follows:
Type of |
|
|
| Number of |
| | Fair |
|
|
Equity | | | | Awards | | | Value per | | |
Awarded |
| Effective Date |
| Granted |
| | Share (1) | | Vesting Terms |
RS - Service |
| February 25, 2025 |
| 35,178 |
| $ | 79.67 | | 3 years, 30%-30%-40% |
RS - Performance |
| February 25, 2025 |
| 29,105 |
| $ | 79.67 | | 3 years, cliff vesting (3) |
RS |
| February 25, 2025 |
| 6,000 |
| $ | 79.67 | | No vesting period (2) |
RS - Service | | July 15, 2025 | | 311 | | $ | 72.31 | | 3 years, 30%-30%-40% |
RS - Performance | | July 15, 2025 | | 352 | | $ | 72.31 | | 3 years, cliff vesting (3) |
| (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 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. |
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 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 during 2025 that protects us in the event of a “138-year storm” (that is, a storm of a severity expected to occur once in a 138-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.
For 2025, we have purchased three layers of excess catastrophe reinsurance providing $675,000 of coverage for property losses in excess of $75,000 up to a maximum of $750,000. Our reinsurers’ co-participation is 85.0% of $75,000 for the 1st layer, 85.0% of $250,000 for the 2nd layer and 85.0% of $350,000 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 $3,000 up to a maximum of $25,000, 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.
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 automobile insurance in Massachusetts.
At September 30, 2025, we had $160,638 recoverable from CAR, which consisted of loss adjustment expense reserves, unearned premiums and reinsurance recoverable.
27
The Company previously participated in the Massachusetts Property Insurance Underwriting Association (“FAIR Plan”), in which premiums, expenses, losses and loss adjustment expenses on homeowners business that could not be placed in the voluntary market were shared by all insurers writing homeowners business in Massachusetts. On April 1, 2024, the Division approved a restructuring of the FAIR Plan (“FAIR Plan Restructuring”), transforming it from a partnership that shares profit and losses with member companies to a stand-alone, risk bearing entity, and distributing the accumulated members’ equity.
Non-GAAP Measures
Management has included certain 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 (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.
28
Results of Operations
Three and Nine Months Ended September 30, 2025 Compared to Three and Nine Months Ended September 30, 2024
The following table shows certain of our selected financial results.
|
| Three Months Ended September 30, |
| Nine Months Ended September 30, | ||||||||
|
| 2025 |
| 2024 |
| 2025 |
| 2024 | ||||
Direct written premiums | | $ | 334,181 | | $ | 318,182 | | $ | 978,980 | | $ | 901,032 |
Net written premiums | | $ | 309,215 | | $ | 292,612 | | $ | 903,470 | | $ | 837,842 |
Net earned premiums | | $ | 291,021 | | $ | 258,657 | | $ | 845,824 | | $ | 741,654 |
Net investment income | |
| 15,535 | |
| 12,210 | |
| 45,833 | |
| 40,941 |
Earnings from partnership investments | |
| 2,929 | |
| 4,345 | |
| 5,387 | |
| 8,597 |
Net realized gains on investments | |
| 1,338 | |
| 1,314 | |
| 7,732 | |
| 4,521 |
Change in net unrealized gains on equity securities | | | 6,310 | |
| 10,698 | |
| 13,233 | |
| 14,880 |
Credit loss benefit (expense) | |
| 487 | |
| (158) | |
| 232 | |
| (337) |
Commission income | |
| 2,415 | |
| 1,963 | |
| 6,795 | |
| 5,798 |
Finance and other service income | |
| 6,589 | |
| 6,253 | |
| 19,361 | |
| 17,244 |
Total revenue | |
| 326,624 | |
| 295,282 | |
| 944,397 | |
| 833,298 |
Losses and loss adjustment expenses | |
| 204,982 | |
| 182,489 | |
| 589,504 | |
| 523,630 |
Underwriting, operating and related expenses | |
| 83,027 | |
| 77,868 | |
| 246,674 | |
| 224,056 |
Other expense | |
| 1,979 | |
| 1,896 | |
| 5,980 | |
| 5,480 |
Interest expense | |
| 426 | |
| 124 | |
| 972 | |
| 385 |
Total expenses | |
| 290,414 | |
| 262,377 | |
| 843,130 | |
| 753,551 |
Income before income taxes | |
| 36,210 | |
| 32,905 | |
| 101,267 | |
| 79,747 |
Income tax expense | |
| 7,900 | |
| 7,016 | |
| 22,124 | |
| 17,144 |
Net income | | $ | 28,310 | | $ | 25,889 | | $ | 79,143 | | $ | 62,603 |
Earnings per weighted average common share: | | | | | | | | | | | | |
Basic | | $ | 1.91 | | $ | 1.74 | | $ | 5.35 | | $ | 4.24 |
Diluted | | $ | 1.91 | | $ | 1.73 | | $ | 5.33 | | $ | 4.24 |
Cash dividends paid per common share | | $ | 0.92 | | $ | 0.90 | | $ | 2.72 | | $ | 2.70 |
| | | | | | | | | | | | |
Reconciliation of Net Income to Non-GAAP Operating Income | | | | | | | | | | | | |
| | | | | | | | | | | | |
Net income | | $ | 28,310 | | $ | 25,889 | | $ | 79,143 | | $ | 62,603 |
Exclusions from net income: | | | | | | | | | | | | |
Net realized gains on investments | | | (1,338) | | | (1,314) | | | (7,732) | | | (4,521) |
Change in net unrealized gains on equity securities | | | (6,310) | | | (10,698) | | | (13,233) | | | (14,880) |
Credit loss (benefit) expense | | | (487) | | | 158 | | | (232) | | | 337 |
Income tax expense | | | 1,708 | | | 2,489 | | | 4,451 | | | 4,003 |
Non-GAAP Operating income | | $ | 21,883 | | $ | 16,524 | | $ | 62,397 | | $ | 47,542 |
| | | | | | | | | | | | |
Net income per diluted share | | $ | 1.91 | | $ | 1.73 | | $ | 5.33 | | $ | 4.24 |
Exclusions from net income: | | | | | | | | | | | | |
Net realized gains on investments | | | (0.09) | | | (0.09) | | | (0.52) | | | (0.31) |
Change in net unrealized gains on equity securities | | | (0.43) | | | (0.72) | | | (0.90) | | | (1.01) |
Credit loss (benefit) expense | | | (0.03) | | | 0.01 | | | (0.02) | | | 0.02 |
Income tax expense | | | 0.12 | | | 0.17 | | | 0.30 | | | 0.27 |
Non-GAAP Operating income per diluted share | | $ | 1.48 | | $ | 1.10 | | $ | 4.19 | | $ | 3.21 |
Direct Written Premiums. Direct written premiums for the three months ended September 30, 2025 increased by $15,999, or 5.0%, to $334,181 from $318,182 for the comparable 2024 period. Direct written premiums for the nine months ended September 30, 2025 increased by $77,948, or 8.7%, to $978,980 from $901,032 for the comparable 2024 period. The increases in direct written premiums and net written premiums are a result of rate increases. For the nine months ended September 30, 2025, average written premium per policy increased 8.7%, 6.2% and 9.8% in Private Passenger Automobile, Commercial Automobile and Homeowners lines, respectively, compared to the same period in 2024.
29
Net Written Premiums. Net written premiums for the three months ended September 30, 2025 increased by $16,603, or 5.7%, to $309,215 from $292,612 for the comparable 2024 period. Net written premiums for the nine months ended September 30, 2025 increased by $65,628, or 7.8%, to $903,470 from $837,842 for the comparable 2024 period. The increases were primarily due to the factors that increased direct written premiums.
Net Earned Premiums. Net earned premiums for the three months ended September 30, 2025 increased by $32,364, or 12.5%, to $291,021 from $258,657 for the comparable 2024 period. Net earned premiums for the nine months ended September 30, 2025 increased by $104,170, or 14.0%, to $845,824 from $741,654 for the comparable 2024 period. The increases were primarily due to prior year growth in policy counts and rate increases earning into top-line results.
The effect of reinsurance on net written and net earned premiums is presented in the following table.
| | Three Months Ended September 30, | | | Nine Months Ended September 30, | |||||||
|
| 2025 |
| 2024 |
| 2025 |
| 2024 | ||||
Written Premiums | | | | | | | | | | | | |
Direct | | $ | 334,181 | | $ | 318,182 | | $ | 978,980 | | $ | 901,032 |
Assumed | |
| 5,873 | |
| 5,122 | |
| 18,353 | |
| 22,885 |
Ceded | |
| (30,839) | |
| (30,692) | |
| (93,863) | |
| (86,075) |
Net written premiums | | $ | 309,215 | | $ | 292,612 | | $ | 903,470 | | $ | 837,842 |
| | | | | | | | | | | | |
Earned Premiums | | | | | | | | | | | | |
Direct | | $ | 318,209 | | $ | 282,916 | | $ | 923,929 | | $ | 800,708 |
Assumed | |
| 5,444 | |
| 4,719 | |
| 17,455 | |
| 21,684 |
Ceded | |
| (32,632) | |
| (28,978) | |
| (95,560) | |
| (80,738) |
Net earned premiums | | $ | 291,021 | | $ | 258,657 | | $ | 845,824 | | $ | 741,654 |
Net Investment Income. Net investment income for the three months ended September 30, 2025 increased $3,325, or 27.2%, to $15,535 from $12,210 for the comparable 2024 period. Net investment income for the nine months ended September 30, 2025 increased by $4,892, or 11.9%, to $45,833 from $40,941 for the comparable 2024 period. The increase for the three and nine months ended September 30, 2025, compared to the same periods in 2024, is primarily due to higher earned interest from our bond portfolio, resulting from additional bond purchases made during 2025. Net effective annualized yield on the investment portfolio was 4.0% for the three months September 30, 2025 compared to 3.4% for the comparable 2024 period. Net effective annualized yield on the investment portfolio was 4.0% for the nine months ended September 30, 2025 compared to 3.9% for the comparable 2024 period. The investment portfolio’s duration on fixed maturities was 3.8 years at September 30, 2025 compared to 3.5 years at December 31, 2024.
Earnings from Partnership Investments. Earnings from partnership investments were $2,929 for the three months ended September 30, 2025 compared to $4,345 for the comparable 2024 period. Earnings from partnership investments were $5,387 for the nine months ended September 30, 2025 compared to $8,597 for the comparable 2024 period. The year-over-year decline reflects lower investment appreciation and the impact of timing differences between valuation changes and the recognition of realized gains. Cash distributions received from partnerships may not correspond to earnings recognized in the same period, as gains are typically recognized over time based on changes in fair value. The timing and magnitude of these returns can vary depending on the performance and transactional activity of the underlying partnerships.
Net Realized Gains on Investments. Net realized gains on investments were $1,338 for the three months ended September 30, 2025 compared to $1,314 for the comparable 2024 period. Net realized gains on investments was $7,732 for the nine months ended September 30, 2025 compared to $4,521 for the comparable 2024 period. The increase in net realized gains during the nine-month period reflects the sale of equity securities in a gain position during the first quarter of 2025.
30
The gross unrealized gains and losses on investments in fixed maturity securities, including redeemable preferred stocks that have characteristics of fixed maturities, short term investments, equity securities, including interests in mutual funds, and other invested assets were as follows for the periods indicated:
| | As of September 30, 2025 | |||||||||||||
| | | | | | | | | | | | | | | |
|
| Cost or |
| Allowance for |
| Gross Unrealized |
| Estimated | |||||||
| | Amortized | | Expected Credit | | | | | | Fair | |||||
| | Cost | | Losses | | Gains | | Losses (3) | | Value | |||||
U.S. Treasury securities | | $ | 2,402 | | $ | — | | $ | 17 | | $ | (38) | | $ | 2,381 |
Obligations of states and political subdivisions | |
| 39,226 | |
| — | |
| 469 | |
| (1,808) | |
| 37,887 |
Residential mortgage-backed securities (1) | |
| 367,722 | |
| — | |
| 4,166 | |
| (17,100) | |
| 354,788 |
Commercial mortgage-backed securities | |
| 160,539 | |
| — | |
| 693 | |
| (7,009) | |
| 154,223 |
Other asset-backed securities | |
| 67,727 | |
| — | |
| 329 | |
| (1,307) | |
| 66,749 |
Corporate and other securities | |
| 648,310 | |
| (966) | |
| 7,505 | |
| (14,257) | |
| 640,592 |
Subtotal, fixed maturity securities | |
| 1,285,926 | |
| (966) | |
| 13,179 | |
| (41,519) | |
| 1,256,620 |
Equity securities (2) | |
| 209,944 | |
| — | |
| 41,958 | |
| (8,561) | |
| 243,341 |
Other invested assets (4) | |
| 152,884 | |
| — | |
| — | |
| — | |
| 152,884 |
Totals | | $ | 1,648,754 | | $ | (966) | | $ | 55,137 | | $ | (50,080) | | $ | 1,652,845 |
deferred compensation plan.
The composition of our fixed income security portfolio as defined by Nationally Recognized Statistical Rating Organizations was as follows:
| | As of September 30, 2025 | ||||
|
| | Estimated |
|
| |
| | | Fair Value | | Percent | |
U.S. Treasury securities and obligations of U.S. Government agencies |
| $ | 354,788 |
| 28.2 | % |
Aaa/Aa | | | 247,499 |
| 19.7 | |
A | | | 248,265 |
| 19.8 | |
Baa | | | 209,242 |
| 16.7 | |
Ba | | | 59,382 |
| 4.7 | |
B | | | 97,674 |
| 7.8 | |
Caa/Ca | | | 5,604 |
| 0.4 | |
Not rated | | | 34,166 |
| 2.7 | |
Total | | $ | 1,256,620 |
| 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.
As of September 30, 2025, 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.
31
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 illustrates the length of time that they have been in a continuous unrealized loss position as of September 30, 2025.
| | As of September 30, 2025 | ||||||||||||||||
| | Less than 12 Months | | 12 Months or More | | Total | ||||||||||||
|
| Estimated |
| Unrealized |
| Estimated |
| Unrealized |
| Estimated |
| Unrealized | ||||||
| | Fair Value | | Losses | | Fair Value | | Losses | | Fair Value | | Losses | ||||||
U.S. Treasury securities | | $ | — | | $ | — | | $ | 1,465 | | $ | 38 | | $ | 1,465 | | $ | 38 |
Obligations of states and political subdivisions | |
| 522 | |
| 13 | |
| 19,249 | |
| 1,795 | |
| 19,771 | |
| 1,808 |
Residential mortgage-backed securities | |
| 30,702 | |
| 357 | |
| 155,568 | |
| 16,743 | |
| 186,270 | |
| 17,100 |
Commercial mortgage-backed securities | |
| 9,949 | |
| 59 | |
| 112,096 | |
| 6,950 | |
| 122,045 | |
| 7,009 |
Other asset-backed securities | |
| 17,210 | | | 26 | | | 19,793 | | | 1,281 | | | 37,003 | | | 1,307 |
Corporate and other securities | |
| 85,142 | |
| 2,010 | |
| 214,613 | |
| 12,335 | |
| 299,755 | |
| 14,345 |
Subtotal, fixed maturity securities | |
| 143,525 | |
| 2,465 | |
| 522,784 | |
| 39,142 | |
| 666,309 | |
| 41,607 |
Equity securities | |
| 30,761 | |
| 4,756 | |
| 19,966 | |
| 3,805 | |
| 50,727 | |
| 8,561 |
Total temporarily impaired securities | | $ | 174,286 | | $ | 7,221 | | $ | 542,750 | | $ | 42,947 | | $ | 717,036 | | $ | 50,168 |
As of September 30, 2025 and December 31, 2024, the Company concluded that $966 and $1,198, respectively, of unrealized losses were due to credit factors and were recorded as an allowance for expected credit losses expense. The Company concluded that outside of the securities that were recognized as credit impaired, the unrealized losses recorded on the fixed maturity portfolio at September 30, 2025 and December 31, 2024 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 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.
For information regarding fair value measurements of our investment portfolio, refer to Item 1—Financial Statements, Note 5, Investments, of this Form 10-Q.
Commission Income: Commission income includes revenues from new and renewal commissions paid by insurance carriers, which we recognize when earned. Commission income was $2,415 and $1,963 for the three months ended September 30, 2025 and 2024, respectively. Commission income was $6,795 and $5,798 for the nine months ended September 30, 2025 and 2024, respectively. The year-over-year change is driven by policy count growth and increased premium rates across the property and casualty insurance market.
Finance and Other Service Income. Finance and other service income includes revenues from premium installment charges, which we recognize when earned, and other miscellaneous income and fees. Finance and other service income for the three months ended September 30, 2025 increased by $336, or 5.4%, to $6,589 from $6,253 for the comparable 2024 period. Finance and other service income for the nine months ended September 30, 2025, increased by $2,117, or 12.3%, to $19,361 from $17,244 for the comparable 2024 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 three months ended September 30, 2025 increased by $22,493, or 12.3%, to $204,982 from $182,489 for the comparable 2024 period. Losses and loss adjustment expenses incurred for the nine months ended September 30, 2025 increased by $65,874, or 12.6%, to $589,504 from $523,630 for the comparable 2024 period.
32
Our GAAP loss ratio for the three months ended September 30, 2025 decreased to 70.4% from 70.6% for the comparable 2024 period. Our GAAP loss ratio for the nine months ended September 30, 2025 decreased to 69.7% from 70.6% for the comparable 2024 period. Our GAAP loss ratio excluding loss adjustment expenses for the three months ended September 30, 2025 was 63.1% compared to 62.7% for the comparable 2024 period. Our GAAP loss ratio excluding loss adjustment expenses for the nine months ended September 30, 2025 was 61.8% compared to 61.8% for the comparable 2024 period. Total prior year favorable development included in the pre-tax results for the three months ended September 30, 2025 was $9,707 compared to $8,563 for the comparable 2024 period. Total prior year favorable development included in the pre-tax results for the nine months ended September 30, 2025 was $33,180 compared to $38,938 for the comparable 2024 period. The decrease in favorable prior year development in 2025 is primarily attributable to the inclusion of $8,644 of FAIR Plan development in the prior year.
Underwriting, Operating and Related Expenses. Underwriting, operating and related expenses for the three months ended September 30, 2025 increased by $5,159, or 6.6%, to $83,027 from $77,868 for the comparable 2024 period. Underwriting, operating and related expenses for the nine months ended September 30, 2025 increased by $22,618, or 10.1%, to $246,674 from $224,056 for the comparable 2024 period. The increase in the three and nine months ended September 30, 2025 is driven by an increase in base commissions resulting from the increase in written premiums. Our GAAP expense ratio for the three months ended September 30, 2025 decreased to 28.5% from 30.1% for the comparable 2024 period. Our GAAP expense ratio for the nine months ended September 30, 2025 decreased to 29.2% from 30.2% for the comparable 2024 period due to higher earned premium.
Interest Expense. Interest expense was $426 and $124 for the three months ended September 30, 2025 and 2024, respectively. Interest expense was $972 for the nine months ended September 30, 2025 compared to $385 for the comparable 2024 period. The credit facility commitment fee included in interest expense was $14 and $45 for the nine months ended September 30, 2025 and 2024, respectively. The increase in interest expense during the current quarter is primarily due to the new loan agreement entered into with Citizens Bank on March 27, 2025, which carries an interest rate of SOFR rate plus 1.25%, compared to the repaid FHLB loan that had a fixed rate of 1.42%. Additionally, the Company no longer incurs a credit facility commitment fee as of March 27, 2025, since a loan is currently outstanding under the facility.
Income Tax Expense. Our effective tax rate was 21.8% and 21.3% for the three months ended September 30, 2025 and 2024, respectively. The effective tax rate was 21.8% and 21.5% for the nine months ended September 30, 2025 and 2024, respectively. The effective tax rate in 2025 was higher than the statutory rate primarily due to the effects of stock-based compensation and permanent differences regarding executive compensation.
Net Income. Net income for the three months ended September 30, 2025 was $28,310 compared to net income of $25,889 for the comparable 2024 period. Net income for the nine months ended September 30, 2025 was $79,143 compared to $62,603 for the comparable 2024 period.
Non-GAAP Operating Income. Non-GAAP operating income, as defined above, was $21,883 for the three months ended September 30, 2025 compared to $16,524 for the comparable 2024 period. Non-GAAP operating income was $62,397 for the nine months ended September 30, 2025 compared to $47,542 for the comparable 2024 period.
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 the payment of dividends to Safety.
33
Net cash provided by operating activities was $120,948 and $78,269 during the nine months ended 2025 and 2024, 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. Positive operating cash flows are expected in the future to meet our liquidity requirements.
Net cash used for investing activities was $83,276 and $13,730 during the nine months ended September 30, 2025 and 2024, respectively. Fixed maturities, equity securities, and other invested assets purchased were $349,275 for the nine months ended September 30, 2025 compared to $237,338 for the comparable prior year period. Proceeds from maturities, redemptions, calls and sales, of securities were $266,399 during the nine months ended September 30, 2025 compared to $229,884 for the comparable prior year period.
Net cash used for financing activities was $40,413 and $40,093 during the nine months ended September 30, 2025 and 2024, respectively. Net cash used for financing activities during the nine months ended September 30, 2025 consisted of dividend payments to shareholders and debt activity.
The Insurance Subsidiaries maintain a high degree of liquidity within their respective investment portfolios in fixed maturity and equity securities. 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 1—Financial Statements, Note 9, Debt, of this Form 10-Q.
Recent Accounting Pronouncements
For information regarding Recent Accounting Pronouncements, please refer to Item 1—Financial Statements, Note 2, Recent Accounting Pronouncements, of this Form 10-Q.
Regulatory Matters
Our 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 Commissioner of the Division of Insurance of Massachusetts (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 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, 2024, the statutory surplus of Safety Insurance was $758,789, and its statutory net income for 2024 was $43,387. As a result, a maximum of $75,879 is available in 2025 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 $682,910 at December 31, 2024. During the nine months ended September 30, 2025, Safety Insurance paid dividends to Safety of $38,859.
34
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 2025 were as follows:
|
|
|
|
|
|
| |
| Total | |
Declaration | | Record | | Payment | | Dividend per | | Dividends Paid | ||
Date | | Date | | Date | | Common Share | | and Accrued | ||
February 14, 2025 | | March 3, 2025 | | March 14, 2025 | | $ | 0.90 | | $ | 13,370 |
May 7, 2025 | | June 2, 2025 | | June 13, 2025 | | $ | 0.90 | | $ | 13,384 |
August 6, 2025 | | September 2, 2025 | | September 15, 2025 | | $ | 0.92 | | $ | 13,641 |
On August 6, 2025, our Board approved and declared an increase in the quarterly cash dividend from $0.90 to $0.92 per share. We plan to continue to declare and pay quarterly cash dividends, depending on our financial position and the regularity of our cash flows.
On February 23, 2022, the Board of Directors approved a share repurchase program of up to $50,000 of the Company’s outstanding common shares. As of September 30, 2025, 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 us to repurchase any specific number of shares and may be modified, suspended or terminated at any time without prior notice. No share repurchases were made by the Company under the program during the three and nine months ended September 30, 2025. As of September 30, 2025 and December 31, 2024, the Company had purchased 3,215,690 shares of common stock at a cost of $155,240.
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.
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, 2024, the Insurance Subsidiaries had total capital of $758,789, 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 $236,219 at December 31, 2024.
35
Off-Balance Sheet Arrangements
We have no material obligations under a guarantee contract meeting the characteristics identified in Accounting Standards Codification (“ASC”) 460, Guarantees. We have no material retained or contingent interests in assets transferred to an unconsolidated entity. We have no material obligations, including contingent obligations, under contracts that would be accounted for as derivative instruments. We have no obligations, including contingent obligations, arising out of a variable interest in an unconsolidated entity held by, and material to, us, where such entity provides financing, liquidity, market risk or credit risk support to, or engages in leasing, hedging or research and development services with us. We have no direct investments in real estate and no holdings of mortgages secured by commercial real estate. Accordingly, we have no material off-balance sheet arrangements.
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 person. 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 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.
36
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. |
| ● | 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 $537,736 to $603,892 as of September 30, 2025. 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 LAE reserves based upon the analysis of our actuaries was $577,917 as of September 30, 2025.
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 September 30, 2025.
| | | As of September 30, 2025 | ||||||
Line of Business |
| Low |
| Recorded |
| High | |||
Private passenger automobile |
| $ | 268,176 |
| $ | 287,051 |
| $ | 295,506 |
Commercial automobile | | | 107,994 | | | 119,554 | | | 130,806 |
Homeowners | | | 103,154 | | | 106,699 | | | 108,124 |
All other | | | 58,412 | | | 64,613 | | | 69,456 |
Total |
| $ | 537,736 |
| $ | 577,917 |
| $ | 603,892 |
| | | | | | | | | |
37
The following table presents our total net reserves and the corresponding case reserves and IBNR reserves for each line of business as of September 30, 2025.
| | | As of September 30, 2025 | ||||||
Line of Business |
| Case |
| IBNR |
| Total | |||
Private passenger automobile |
| $ | 346,392 |
| $ | (59,349) |
| $ | 287,043 |
CAR assumed private passenger auto | | | 1 | | | 7 | | | 8 |
Commercial automobile | | | 80,728 | | | 5,549 | | | 86,277 |
CAR assumed commercial automobile | | | 19,166 | | | 14,111 | | | 33,277 |
Homeowners | | | 116,864 | | | (10,165) | | | 106,699 |
All other | | | 48,926 | | | 15,687 | | | 64,613 |
Total net reserves for losses and LAE |
| $ | 612,077 |
| $ | (34,160) |
| $ | 577,917 |
At September 30, 2025, our total IBNR reserves for our private passenger automobile line of business was comprised of ($102,934) related to estimated ultimate decreases in the case reserves, including anticipated recoveries (i.e. salvage and subrogation), and $43,585 related to our estimation for not yet reported losses.
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 42.4% of our total reserves for CAR assumed commercial automobile business as of September 30, 2025, 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.
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 September 30, 2025.
| | | As of September 30, 2025 | ||||||
Line of Business |
| | Retained |
| | Assumed |
| | Net |
Private passenger automobile |
| $ | 287,043 | | | | | | |
CAR assumed private passenger automobile | | | |
| $ | 8 | | | |
Net private passenger automobile | | | | | | |
| $ | 287,051 |
Commercial automobile | | | 86,277 | | | | | | |
CAR assumed commercial automobile | | | | | | 33,277 | | | |
Net commercial automobile | | | | | | | | | 119,554 |
Homeowners | | | 106,699 | | | — | | | 106,699 |
All other | | | 64,613 | | | — | | | 64,613 |
Total net reserves for losses and LAE |
| $ | 544,632 |
| $ | 33,285 |
| $ | 577,917 |
Residual Market Loss and Loss Adjustment Expense Reserves
We are a participant in CAR 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 were a participant in FAIR Plan until the recent FAIR Plan Restructuring in 2024. 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 and gains, consists 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 takes 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 must try to 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.
38
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 nine months ended September 30, 2025, a 1 percentage-point change in the loss and LAE ratio would result in a change in reserves of $8,459. Each 1 percentage-point change in the loss and LAE ratio would have had a $6,683 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 nine months ended September 30, 2025. 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.
39
|
| -1 Percent |
| No |
| +1 Percent | |||
| | Change in | | Change in | | Change in | |||
| | Frequency | | Frequency | | Frequency | |||
Private passenger automobile retained loss and LAE reserves | | | | | | | | | |
-1 Percent Change in Severity | | | | | | | | | |
Estimated decrease in reserves |
| $ | (5,741) |
| $ | (2,870) |
| $ | — |
Estimated increase in net income | | | 4,535 | | | 2,268 | | | — |
No Change in Severity | | | | | | | | | |
Estimated (decrease) increase in reserves | | | (2,870) | | | — | | | 2,870 |
Estimated increase (decrease) in net income | | | 2,268 | | | — | | | (2,268) |
+1 Percent Change in Severity | | | | | | | | | |
Estimated increase in reserves | | | — | | | 2,870 | | | 5,741 |
Estimated decrease in net income | | | — | | | (2,268) | | | (4,535) |
| | | | | | | | | |
Commercial automobile retained loss and LAE reserves | | | | | | | | | |
-1 Percent Change in Severity | | | | | | | | | |
Estimated decrease in reserves | | | (1,726) | | | (863) | | | — |
Estimated increase in net income | | | 1,363 | | | 682 | | | — |
No Change in Severity | | | | | | | | | |
Estimated (decrease) increase in reserves | | | (863) | | | — | | | 863 |
Estimated increase (decrease) in net income | | | 682 | | | — | | | (682) |
+1 Percent Change in Severity | | | | | | | | | |
Estimated increase in reserves | | | — | | | 863 | | | 1,726 |
Estimated decrease in net income | | | — | | | (682) | | | (1,363) |
| | | | | | | | | |
Homeowners retained loss and LAE reserves | | | | | | | | | |
-1 Percent Change in Severity | | | | | | | | | |
Estimated decrease in reserves | | | (2,134) | | | (1,067) | | | — |
Estimated increase in net income | | | 1,686 | | | 843 | | | — |
No Change in Severity | | | | | | | | | |
Estimated (decrease) increase in reserves | | | (1,067) | | | — | | | 1,067 |
Estimated increase (decrease) in net income | | | 843 | | | — | | | (843) |
+1 Percent Change in Severity | | | | | | | | | |
Estimated increase in reserves | | | — | | | 1,067 | | | 2,134 |
Estimated decrease in net income | | | — | | | (843) | | | (1,686) |
| | | | | | | | | |
All other retained loss and LAE reserves | | | | | | | | | |
-1 Percent Change in Severity | | | | | | | | | |
Estimated decrease in reserves | | | (1,292) | | | (646) | | | — |
Estimated increase in net income | | | 1,021 | | | 510 | | | — |
No Change in Severity | | | | | | | | | |
Estimated (decrease) increase in reserves | | | (646) | | | — | | | 646 |
Estimated increase (decrease) in net income | | | 510 | | | — | | | (510) |
+1 Percent Change in Severity | | | | | | | | | |
Estimated increase in reserves | | | — | | | 646 | | | 1,292 |
Estimated decrease in net income | | | — | | | (510) | | | (1,021) |
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. Our assumptions 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 nine months ended September 30, 2025. 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.
40
|
| -1 Percent |
| +1 Percent | ||
| | Change in | | Change in | ||
| | Estimation | | Estimation | ||
CAR assumed commercial automobile | | | | | | |
Estimated (decrease) increase in reserves | | $ | (333) | | $ | 333 |
Estimated increase (decrease) in net income | | | 263 | | | (263) |
| | | | | | |
Reserve Development Summary
The changes we have recorded in our reserves in the past illustrate the uncertainty of estimating reserves. Our prior year reserves decreased by $33,180 and $38,938 during the nine months ended September 30, 2025 and 2024, respectively.
The following table presents a comparison of prior year development of our net reserves for losses and LAE for the nine months ended September 30, 2025 and 2024. 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.
| | Nine Months Ended September 30, | ||||
Accident Year |
| 2025 |
| 2024 | ||
2015 & prior | | $ | (574) | | $ | (3,512) |
2016 | | | (458) | | | (997) |
2017 | | | (388) | | | (931) |
2018 | | | (543) | | | (1,966) |
2019 | | | (1,529) | | | (3,204) |
2020 | | | (2,325) | | | (2,572) |
2021 | | | (2,155) | | | (4,217) |
2022 | | | (616) | | | (5,277) |
2023 | | | (9,025) | | | (16,262) |
2024 | | | (15,567) | | | — |
All prior years |
| $ | (33,180) |
| $ | (38,938) |
The decreases in prior years’ reserves during the nine months ended September 30, 2025 and 2024 resulted from re-estimations of prior year ultimate loss and LAE liabilities. The 2025 decrease is composed of reductions of $5,209 in our private passenger automobile reserves, $5,910 in our commercial automobile reserves, $12,383 in our homeowners reserves, and $9,678 in our other lines reserves. The 2024 decrease is primarily composed of reductions of $5,256 in our private passenger automobile reserves, $4,937 in our commercial automobile reserves, $14,681 in our homeowners reserves which includes $8,644 of FAIR Plan Development, and $14,064 in our other lines reserves.
The following table presents information by line of business for prior year development of our net reserves for losses September 30, 2025.
|
| Private Passenger |
| Commercial |
|
| |
|
| |
|
| | ||
Accident Year | | Automobile | | Automobile | | Homeowners | | All Other | | Total | |||||
2015 & prior | | $ | (371) | | $ | 7 | | $ | (166) | | $ | (44) | | $ | (574) |
2016 | | | (9) | | | (1) | | | (332) | | | (116) | | | (458) |
2017 | | | 55 | | | (205) | | | 77 | | | (315) | | | (388) |
2018 | | | 287 | | | (9) | | | (204) | | | (617) | | | (543) |
2019 | | | 404 | | | (622) | | | (123) | | | (1,188) | | | (1,529) |
2020 | | | 178 | | | (254) | | | (781) | | | (1,468) | | | (2,325) |
2021 | | | 280 | | | (412) | | | (440) | | | (1,583) | | | (2,155) |
2022 | | | 3,434 | | | (698) | | | (1,954) | | | (1,398) | | | (616) |
2023 | | | (209) | | | (1,036) | | | (6,557) | | | (1,223) | | | (9,025) |
2024 | | | (9,258) | | | (2,680) | | | (1,903) | | | (1,726) | | | (15,567) |
All prior years |
| $ | (5,209) |
| $ | (5,910) |
| $ | (12,383) |
| $ | (9,678) |
| $ | (33,180) |
41
The improved private passenger and commercial automobile results were primarily due to fewer 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 lines of business prior year reserves decreased, due primarily to fewer claims than previously estimated.
For further information, see “Results of Operations: Losses and Loss Adjustment Expenses.”
Investment Impairments
We use 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 likely than not that we will be required to sell the investment prior to an anticipated recovery in value. This methodology ensures that we evaluate available evidence concerning any declines in a disciplined manner.
For fixed maturities that we do not intend to sell or for which it is more likely than not that we would not be required to sell before an anticipated recovery in value, we separate the expected 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 further information, see “Results of Operations.”
Forward-Looking Statements
Forward-looking statements might include one or more of the following, among others:
| ● | Projections of revenues, income, earnings per share, capital expenditures, dividends, capital structure or other financial items; |
| ● | Descriptions of plans or objectives of management for future operations, products or services; |
| ● | Forecasts of future economic performance, liquidity, need for funding and income; |
| ● | Legal and regulatory commentary; |
| ● | 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; |
42
| ● | The impact of inflation, changes in tariffs 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; |
| ● | The impact of investment, economic and underwriting market conditions, including interest rates and inflation; |
| ● | Our possible need for and availability of additional financing, and our dependence on strategic relationships, among others; and |
| ● | Other risks and factors identified from time to time in our reports filed with the SEC. Refer to Part I, Item 1A — Risk Factors of our 2024 Annual Report on Form 10-K for the year ended December 31, 2024. |
Some other factors, such as market, operational, liquidity, interest rate, equity and other risks, are described elsewhere in this Quarterly Report on Form 10-Q. 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.
Item 3. Quantitative and Qualitative Information about Market Risk (Dollars in thousands)
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 of Directors 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).
|
| | -100 Basis |
| |
|
| | +100 Basis |
| | | Point Change | | | No Change | | | Point Change |
As of September 30, 2025 | | | | | | | | | |
Estimated fair value |
| $ | 1,310,165 |
| $ | 1,256,620 |
| $ | 1,203,514 |
Estimated increase (decrease) in fair value |
| $ | 53,545 |
| $ | — |
| $ | (53,106) |
| | | | | | | | | |
43
With respect to floating rate debt, we are exposed to the effects of changes in prevailing interest rates. At September 30, 2025, we had $30,000 of 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 2025, 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.
Item 4. 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.
Changes in Internal Control over Financial Reporting
There have been no changes in our internal control over financial reporting that occurred during our last fiscal quarter that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.
44
Part II. OTHER INFORMATION
Item 1. Legal Proceedings
Please see “Item 1—Financial Statements, Note 8, Commitments and Contingencies.”
Item 1A. Risk Factors
There have been no subsequent material changes from the risk factors previously disclosed in the Company’s 2024 Annual Report on Form 10-K.
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds (Dollars in thousands)
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 and nine months ended September 30, 2025.
|
| Total number |
| Average | | Total number of shares purchased as part of |
| Maximum number of | ||
| | of Shares | | price paid | | publicly announced | | shares that may yet be purchased under the | ||
Period | | purchase | | per share | | plans or programs | | plans or programs | ||
July 1-31, 2025 |
| — | | | — | | — | | | 703,971 |
August 1-31, 2025 |
| — | | | — | | — | | | 703,971 |
September 1-30, 2025 |
| — | | | — | | — | | | 703,971 |
Total |
| — | | | — | | — | | | |
Item 3. Defaults upon Senior Securities
None.
Item 4. Mine Safety Disclosures
None.
Item 5. Other Information
On
On
45
On
On
On
On
On
Item 6. Exhibits
The exhibits are contained herein as listed in the Exhibit Index.
46
SAFETY INSURANCE GROUP, INC.
EXHIBIT INDEX
Exhibit | | | ||
Number | | Description | ||
11.0 | | |||
| | | ||
31.1 | | |||
31.2 | | | | |
| | | ||
32.1 | | |||
| | | ||
32.2 | | |||
| | | ||
101.INS | | Inline XBRL Instance Document (2) | ||
| | | ||
101.SCH | | Inline XBRL Taxonomy Extension Schema (2) | ||
| | | ||
101.CAL | | Inline XBRL Taxonomy Extension Calculation Linkbase (2) | ||
| | | ||
101.DEF | | Inline XBRL Taxonomy Extension Definition Linkbase (2) | ||
| | | ||
101.LAB | | Inline XBRL Taxonomy Extension Label Linkbase (2) | ||
| | | ||
101.PRE | | Inline XBRL Taxonomy Extension Presentation Linkbase (2) | ||
| | | ||
104 | | The cover page from this Current Report on form 10-Q, formatted in Inline XBRL (2) |
| (1) | Not included herein as the information is included as part of this Form 10-Q, Item 1 – Financial Statements, Note 3, Earnings per Weighted Average Common Share. |
| (2) | Included herein. |
47
SIGNATURE
Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.
November 7, 2025 | SAFETY INSURANCE GROUP, INC. (Registrant) | |
| | |
| | |
| | |
| By: | /s/ CHRISTOPHER T. WHITFORD |
|
| Christopher T. Whitford |
|
| Vice President, Chief Financial Officer, Secretary and Principal Accounting Officer |
48
Exhibit 31.1
CERTIFICATION OF CHIEF EXECUTIVE OFFICER
I, George M. Murphy, Chief Executive Officer of Safety Insurance Group, Inc. certify that:
| 1. | I have reviewed this quarterly report on Form 10-Q of Safety Insurance Group, Inc.; |
| 2. | Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report; |
| 3. | Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report; |
| 4. | The registrant’s other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f))for the registrant and have: |
| a) | Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared; |
| b) | Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, 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; |
| c) | Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and |
| d) | Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonable likely to materially affect, the registrant’s internal control over financial reporting; and |
| 5. | The registrant’s other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of registrant’s board of directors (or persons performing the equivalent functions): |
| a) | All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and |
| b) | Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting. |
/s/ GEORGE M. MURPHY
George M. Murphy
President, Chief Executive Officer and Director
(Principal Executive Officer)
November 7, 2025
Exhibit 31.2
CERTIFICATION OF CHIEF FINANCIAL OFFICER
I, Christopher T. Whitford, Chief Financial Officer of Safety Insurance Group, Inc. certify that:
| 1. | I have reviewed this quarterly report on Form 10-Q of Safety Insurance Group, Inc.; |
| 2. | Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report; |
| 3. | Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report; |
| 4. | The registrant’s other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have: |
| a) | Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared; |
| b) | Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, 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; |
| c) | Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and |
| d) | Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonable likely to materially affect, the registrant’s internal control over financial reporting; and |
| 5. | The registrant’s other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of registrant’s board of directors (or persons performing the equivalent functions): |
| a) | All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and |
| b) | Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting. |
/s/ CHRISTOPHER T. WHITFORD
Christopher T. Whitford
Vice President, Chief Financial Officer and Secretary
(Principal Financial Officer)
November 7, 2025
Exhibit 32.1
CERTIFICATION PURSUANT TO 18 U.S.C. SECTION 1350,
AS ADOPTED PURSUANT TO SECTION 906 OF
THE SARBANES-OXLEY ACT OF 2002
In connection with this quarterly report of Safety Insurance Group, Inc. (the “Company”) on Form 10-Q for the period ending September 30, 2025 as filed with the United States Securities and Exchange Commission on the date hereof (the “Report”), I, George M. Murphy, President, Chief Executive Officer and Director of the Company, certify, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that to my knowledge:
| ● | The Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and |
| ● | The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company as of and for the periods presented in the Report. |
/s/ GEORGE M. MURPHY
George M. Murphy
President, Chief Executive Officer and Director
(Principal Executive Officer)
November 7, 2025
Exhibit 32.2
CERTIFICATION PURSUANT TO 18 U.S.C. SECTION 1350,
AS ADOPTED PURSUANT TO SECTION 906 OF
THE SARBANES-OXLEY ACT OF 2002
In connection with this quarterly report of Safety Insurance Group, Inc. (the “Company”) on Form 10-Q for the period ending September 30, 2025 as filed with the United States Securities and Exchange Commission on the date hereof (the “Report”), I, Christopher T. Whitford, Vice President, Chief Financial Officer and Secretary of the Company, certify, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that to my knowledge:
| ● | The Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and |
| ● | The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company as of and for the periods presented in the Report. |
/s/ CHRISTOPHER T. WHITFORD
Christopher T. Whitford
Vice President, Chief Financial Officer and Secretary
(Principal Financial Officer)
November 7, 2025