8-K

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

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FORM 8-K

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CURRENT REPORT

Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934

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May 5, 2021

Date of Report (Date of earliest event reported)

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SAFETY INSURANCE GROUP, INC.

(Exact name of registrant as specified in its charter)

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Delaware	000-50070	13-4181699
(State or other jurisdiction	(Commission	(IRS Employer
of incorporation)	File Number)	Identification No.)

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20 Custom House Street , Boston , Massachusetts **** 02110

(Address of principal executive offices including zip code)

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(617) **** 951-0600

(Registrant's telephone number, including area code)

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Not Applicable

(Former name or former address, if changed since last report)

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Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions:

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☐ Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)

☐ Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)

☐ Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b))

☐ Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c))

Securities registered pursuant to Section 12(b) of the Act:

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Title of each class	Trading Symbol	Name of each exchange on which registered
Common Stock, par value $0.01 per share	SAFT	The Nasdaq Stock Market, LLC

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Indicate by check mark whether the registrant is an emerging growth company as defined in Rule 405 of the Securities Act of 1933 (§230.405 of this chapter) or Rule 12b-2 of the Securities Exchange Act of 1934 (§240.12b-2 of this chapter).

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Emerging growth company ☐

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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. ☐

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Item 2.02 Results of Operations and Financial Condition.

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In a press release dated May 5, 2021, Safety Insurance Group, Inc. (the “Registrant”) announced its first quarter 2021 results. The Registrant’s press release dated May 5, 2021 is furnished herewith as Exhibit 99.1.

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Item 9.01 Financial Statements and Exhibits.

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(d)  Exhibits. The following exhibit is furnished herewith:

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Exhibit Number	Description<br><br>​
99.1	Text of press release issued by the Registrant dated May 5, 2021

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104The cover page from this Current Report on form 8-K, formatted in Inline XBRL

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SIGNATURES

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 hereunto duly authorized.

​	Safety Insurance Group, Inc.<br><br>**** (Registrant)
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Date: May 5, 2021	By:	/s/ CHRISTOPHER T. WHITFORD
​	​	Christopher T. Whitford
​	​	V.P., Chief Financial Officer and Secretary

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Exhibit 99.1

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SAFETY ANNOUNCES FIRST QUARTER 2021 RESULTS AND DECLARES SECOND QUARTER 2021 DIVIDEND​

Boston, Massachusetts, May 5, 2021. Safety Insurance Group, Inc. (NASDAQ:SAFT) (“the Company”) today reported first quarter 2021 results.

Net income for the quarter ended March 31, 2021 was $36.2 million, or $2.42 per diluted share, compared to a net loss of $2.0 million, or $0.13 per diluted share, for the comparable 2020 period. Non-generally accepted accounting principles (“non-GAAP”) operating income, as defined below, for the quarter ended March 31, 2021 was $1.93 per diluted share, compared to $1.57 per diluted share, for the comparable 2020 period. Safety’s book value per share increased to $59.42 at March 31, 2021 from $59.40 at December 31, 2020. Safety paid $0.90 per share in dividends to investors during the quarters ended March 31, 2021 and 2020, respectively. Safety paid $3.60 per share in dividends to investors during the year ended December 31, 2020.

Beginning in March 2020, the global pandemic associated with the novel coronavirus COVID-19 (“COVID-19”) and related economic conditions caused significant economic effects including temporary closures of many businesses and reduced consumer activity due to shelter-in-place, stay-at-home and other governmental actions. The Company continues to take actions that address the health and well-being of our employees while still serving the needs of our agents and insureds.

Direct written premiums for the quarter ended March 31, 2021 decreased by $5.1 million, or 2.6%, to $192.2 million from $197.3 million for the comparable 2020 period. The decrease is primarily in our private passenger automobile line of business and is a result of a decrease in policy counts. Net written premiums for the quarter ended March 31, 2021 decreased by $4.7 million, or 2.5%, to $184.2 million from $188.9 million for the comparable 2020 period. Net earned premiums for the quarter ended March 31, 2021 decreased by $5.0 million, or 2.5%, to $192.9 million from $197.8 million for the comparable 2020 period.

The pandemic has resulted in fewer cars on the road, resulting in a decrease in frequency of claims, primarily in our private passenger automobile line of business. As a result, for the quarter ended March 31, 2021, loss and loss adjustment expenses incurred decreased by $9.2 million, or 7.7%, to $111.5 million from $120.7 million for the comparable 2020 period. Loss, expense, and combined ratios for the quarter ended March 31, 2021 were 57.8%, 33.7%, and 91.5%, respectively, compared to 61.0%, 31.9%, and 92.9%, respectively, for the comparable 2020 period. The increase in the expense ratio is driven by costs associated with various system modernization in our claims, billing and underwriting areas and an increase in contingent commission expenses. Total prior year favorable development included in the pre-tax results for the quarter ended March 31, 2021 was $12.5 million compared to $9.6 million for the comparable 2020 period.

Net investment income for the quarter ended March 31, 2021 increased by $0.8 million, or 7.7%, to $11.5 million from $10.7 million for the comparable 2020 period. The increase is a result of an increase in net effective annualized yield on the investment portfolio which was 3.2% for the three months ended March 31, 2021 compared to 3.1% for the comparable 2020 period. Our duration was 3.3 years at March 31, 2021 compared to 3.2 years at December 31, 2020.

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Today, our Board of Directors approved and declared a $0.90 per share quarterly cash dividend on its issued and outstanding common stock, payable on June 15, 2021 to shareholders of record at the close of business on June 1, 2021.

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 generally accepted accounting principles (“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 investments, credit loss benefit (expense) and taxes related thereto. For the quarter ended March 31, 2021, an increase of $6.2 million for the change in unrealized gains on equity investments was recognized within income (loss) before income taxes, compared to a decrease of $30.0 million for the change in unrealized gains on equity investments in the comparable 2020 period. Net income (loss) and earnings (loss) 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.

About Safety: Safety Insurance Group, Inc., based in Boston, MA, is the parent of Safety Insurance Company, Safety Indemnity Insurance Company, Safety Property and Casualty Insurance Company, and Safety Northeast Insurance Company.  Operating exclusively in Massachusetts, New Hampshire, and Maine, Safety is a leading writer of property and casualty insurance products, including private passenger automobile, commercial automobile, homeowners, dwelling fire, umbrella and business owner policies.

Additional Information: Press releases, announcements, U. S. Securities and Exchange Commission (“SEC”) Filings and investor information are available under “About Safety,” “Investor Information” on our Company website located at www.SafetyInsurance.com. Safety filed its December 31, 2020 Form 10-K with the SEC on February 26, 2021 and urges shareholders to refer to this document for more complete information concerning Safety’s financial results.

Contacts:

Safety Insurance Group, Inc.

Office of Investor Relations

877-951-2522

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InvestorRelations@SafetyInsurance.com

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Cautionary Statement under "Safe Harbor" Provision of the Private Securities Litigation Reform Act of 1995:

This press release contains, and Safety may from time to time make, written or oral "forward-looking statements" within the meaning of the U.S. federal securities laws. 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;
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●	The possibility of losses due to claims resulting from severe weather;
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●	The possibility that the Commissioner of Insurance may approve future Rule changes that change the operation of the residual market;
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●	Our possible need for and availability of additional financing, and our dependence on strategic relationships, among others;
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●	The effects of emerging claim and coverage issues on the Company’s business are uncertain, and court decisions or legislative or regulatory changes that take place after the Company issues its policies, including those taken in response to COVID-19 (such as requiring insurers to cover business interruption claims irrespective of terms or other conditions included in the policies that would otherwise preclude coverage), can result in an unexpected increase in the number of claims and have a material adverse impact on the Company's results of operations;
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●	The possibility that civil litigation and/or state insurance regulators may require additional premium relief payouts related to COVID-19;
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●	The impact of COVID-19 and related risks, including on the Company's employees, agents or other key partners, could materially affect the Company's results of operations, financial position and/or liquidity; and
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●	Other risks and factors identified from time to time in our reports filed with the SEC, such as those set forth under the caption “Risk Factors” in our Form 10-K for the year ended December 31, 2020 filed with the SEC on February 26, 2021.
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We are not under any obligation (and expressly disclaim any such obligation) to update or alter our forward-looking statements, whether as a result of new information, future events, or otherwise. You should carefully consider the possibility that actual results may differ materially from our forward-looking statements.

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Safety Insurance Group, Inc. and Subsidiaries

Consolidated Balance Sheets

(Dollars in thousands, except share data)

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​	​	​	​	​	​	​
​	****	March 31,		****	December 31,
​	​	2021		​	2020
​	​	(Unaudited)		​	​	​
Assets	​	​	​	​	​	​
Investments:	​	​	​	​	​	​
Fixed maturities, available for sale, at fair value (amortized cost: $1,194,353 and $1,189,951, allowance for expected credit losses of $873 and $1,054)	​	$	1,237,181	​	$	1,256,653
Short term investments, at fair value (cost: $443 and $441)	​	​	447	​	​	441
Equity securities, at fair value (cost: $173,054 and $168,289)	​	****	216,226	​		205,254
Other invested assets	​	****	52,148	​		45,239
Total investments	​	****	1,506,002	​		1,507,587
Cash and cash equivalents	​	****	51,563	​		53,769
Accounts receivable, net of allowance for expected credit losses of $2,184 and $1,754	​	****	170,915	​		179,147
Receivable for securities sold	​	****	10,950	​		1,311
Accrued investment income	​	****	9,328	​		8,045
Taxes recoverable	​	****	—	​		279
Receivable from reinsurers related to paid loss and loss adjustment expenses	​	****	7,666	​		13,432
Receivable from reinsurers related to unpaid loss and loss adjustment expenses	​	****	108,178	​		106,311
Ceded unearned premiums	​	****	21,524	​		22,406
Deferred policy acquisition costs	​	****	72,303	​		74,962
Equity and deposits in pools	​	****	29,875	​		30,429
Operating lease right-of-use-assets	​	​	29,801	​		31,000
Other assets	​	****	27,555	​		25,595
Total assets	​	$	2,045,660	​	$	2,054,273
​	​	​	​	​	​	​
Liabilities	​	​	​	​	​	​
Loss and loss adjustment expense reserves	​	$	577,266	​	$	567,581
Unearned premium reserves	​	****	412,387	​		421,901
Accounts payable and accrued liabilities	​	****	44,944	​		79,486
Payable for securities purchased	​	****	28,487	​		7,144
Payable to reinsurers	​	****	525	​		8,236
Deferred income taxes	​	​	11,574	​	​	17,611
Taxes payable	​	​	6,055	​	​	—
Debt	​	​	30,000	​	​	30,000
Operating lease liabilities	​	​	29,801	​	​	31,000
Other liabilities	​	****	14,368	​		6,635
Total liabilities	​	****	1,155,407	​		1,169,594
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Shareholders’ equity	​	​	​	​	​	​
Common stock: $0.01 par value; 30,000,000 shares authorized; 17,814,166 and 17,724,866 shares issued	​	​	178	​	​	178
Additional paid-in capital	​	****	211,638	​		209,779
Accumulated other comprehensive income, net of taxes	​	****	34,527	​		53,527
Retained earnings	​	****	767,744	​		745,029
Treasury stock, at cost: 2,831,168 shares	​	****	(123,834)	​		(123,834)
Total shareholders’ equity	​	****	890,253	​		884,679
Total liabilities and shareholders’ equity	​	$	2,045,660	​	$	2,054,273

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Safety Insurance Group, Inc. and Subsidiaries

Consolidated Statements of Operations

(Unaudited)

(Dollars in thousands, except share and per share data)

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​	​	​	​	​	​	​
​	​	Three Months Ended March 31,
​	****	2021		****	2020
​	​	​	​	​	​	​
Net earned premiums	​	$	192,850	​	$	197,895
Net investment income	​	****	11,532	​		10,710
Earnings from partnership investments	​	****	4,291	​		1,339
Net realized gains (losses) on investments	​	****	2,875	​		(631)
Change in net unrealized gains on equity investments	​	​	6,207	​	​	(29,988)
Credit loss benefit (expense)	​	​	181	​	​	(2,510)
Finance and other service income	​	****	3,972	​		4,229
Total revenue	​	****	221,908	​		181,044
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Losses and loss adjustment expenses	​	****	111,495	​		120,746
Underwriting, operating and related expenses	​	****	65,024	​		63,082
Interest expense	​	****	129	​		47
Total expenses	​	****	176,648	​		183,875
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Income (loss) before income taxes	​	****	45,260	​		(2,831)
Income tax expense (benefit)	​	****	9,086	​		(841)
Net income (loss)	​	$	36,174	​	$	(1,990)
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Earnings (loss) per weighted average common share:	​	​	​	​	​	​
Basic	​	$	2.44	​	$	(0.13)
Diluted	​	$	2.42	​	$	(0.13)
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Cash dividends paid per common share	​	$	0.90	​	$	0.90
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Number of shares used in computing earnings per share:	​	​	​	​	​	​
Basic	​	****	14,790,125	​		15,230,784
Diluted	​	****	14,886,494	​		15,347,083
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Reconciliation of Net Income (Loss) to Non-GAAP Operating Income				​	​	​
​	​	​	​	​	​	​
Net income (loss)	​	$	36,174	​	$	(1,990)
Exclusions from net income (loss):	​	​	​	​	​	​
Net realized (gains) losses on investments	​	​	(2,875)	​	​	631
Change in net unrealized gains on equity investments	​	​	(6,207)	​	​	29,988
Credit loss (benefit) expense	​	​	(181)	​	​	2,510
Income tax expense (benefit) on exclusions from net income (loss)	​	​	1,945	​	​	(6,957)
Non-GAAP operating income	​	$	28,856	​	$	24,182
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Net income (loss) per diluted share	​	$	2.42	​	$	(0.13)
Exclusions from net income (loss):	​	​	​	​	​	​
Net realized (gains) losses on investments	​	​	(0.19)	​	​	0.04
Change in net unrealized gains on equity investments	​	​	(0.42)	​	​	1.95
Credit loss (benefit) expense	​	​	(0.01)	​	​	0.16
Income tax expense (benefit) on exclusions from net income (loss)	​	​	0.13	​	​	(0.45)
Non-GAAP operating income per diluted share	​	$	1.93	​	$	1.57

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Safety Insurance Group, Inc. and Subsidiaries

Additional Premium Information

(Unaudited)

(Dollars in thousands)

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​	​	​	​	​	​	​
​	​	Three Months Ended March 31,
​		2021		****	2020
Written Premiums	​	​	​	​	​	​
Direct	​	$	192,237	​	$	197,346
Assumed	​	****	7,331	​		7,978
Ceded	​	****	(15,350)	​		(16,366)
Net written premiums	​	$	184,218	​	$	188,958
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Earned Premiums	​	​	​	​	​	​
Direct	​	$	201,055	​	$	210,151
Assumed	​	****	8,027	​		9,102
Ceded	​	****	(16,232)	​		(21,358)
Net earned premiums	​	$	192,850	​	$	197,895

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