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What changed in SAFETY INSURANCE GROUP INC's 10-K — 2022 vs 2023

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Paragraph-level year-over-year comparison of SAFETY INSURANCE GROUP INC's 2022 and 2023 10-K annual filings, covering the Business, Risk Factors, Legal Proceedings, Cybersecurity, MD&A and Market Risk sections. Every new, removed and edited paragraph is highlighted side-by-side so you can see exactly what management changed in the 2023 report.

+125 added−128 removedSource: 10-K (2024-02-28) vs 10-K (2023-02-28)

Top changes in SAFETY INSURANCE GROUP INC's 2023 10-K

125 paragraphs added · 128 removed · 107 edited across 5 sections

Item 2. Properties

Properties — owned and leased real estate

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Biggest changeThis real estate space was remodeled in 2018 and included capital expenditures to update lighting as well as heating, ventilation and air condition systems with state of the art and environmentally focused technologies. ​ 32 Table of Contents
Biggest changeThis real estate space was remodeled in 2018 and included capital expenditures to update lighting as well as heating, ventilation and air condition systems with state of the art and environmentally focused technologies. ​

Item 3. Legal Proceedings

Legal Proceedings — active lawsuits and investigations

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Biggest changeAs of December 31, 2022, the claim against the Company was closed and the accrual of $6,500 was reversed. ​ On October 19, 2021, the Supreme Judicial Court of Massachusetts (the “Court”) unanimously ruled that property and casualty insurers must compensate third-party claimants under property damage coverage, part 4 of the standard Massachusetts automobile insurance policy, 2008 edition (standard policy), for the inherent diminished value (“IDV”) that occurs when their vehicles are damaged in a crash.
Biggest changeWe believe that the ultimate resolution of these lawsuits will not, individually or in the aggregate, have a material adverse effect on our financial condition. ​ On October 19, 2021, the Supreme Judicial Court of Massachusetts (the “SJC”) unanimously ruled that property and casualty insurers must compensate third-party claimants under property damage coverage, part 4 of the standard Massachusetts automobile insurance policy, 2008 edition (standard policy), for the inherent diminished value (“IDV”) that occurs when their vehicles are damaged in a crash.
This ruling overturned a previous decision by the Massachusetts Superior Court, which found that a Massachusetts auto insurance policy did not provide property damage coverage for inherent diminished value damages for third-party claimants.
This ruling overturned a previous decision by the Massachusetts Superior Court (the “Superior Court”), which found that a Massachusetts auto insurance policy did not provide property damage coverage for inherent diminished value damages for third-party claimants.
The Court placed the burden of proof on the individual claimant by explicitly specifying that the claimant must establish that the vehicle has suffered IDV damages and also the amount of IDV damages at issue.
The SJC placed the burden of proof on the individual claimant by explicitly specifying that the claimant must establish that the vehicle has suffered IDV damages and also the amount of IDV damages at issue.
Based on the Court’s rulings, at this time the Company does not expect any claims for IDV damages to be material, and therefore has not accrued for a specific loss contingency ​ ​ ITEM 4. MINE SAFETY DISCLOSURES ​ Not Applicable ​ 33 Table of Contents PART II.
Based on the SJC’s rulings, at this time the Company does not expect any claims for IDV damages to be material, and therefore has not accrued for a specific loss contingency. ​ ​ ITEM 4. MINE SAFETY DISCLOSURES ​ Not Applicable ​ 35 Table of Contents PART II.
The Court further ruled that an insurer’s previous denial of coverage for such damages could not serve as the basis for a claim of unfair business practices.
The SJC further ruled that an insurer’s previous denial of coverage for such damages could not serve as the basis for a claim of unfair business practices. On June 20, 2023, the Superior Court denied a motion brought by the plaintiffs seeking class certification.
Removed
We believe that the ultimate resolution of these lawsuits will not, individually or in the aggregate, have a material adverse effect on our financial condition. ​ Safety Insurance had been named in a lawsuit alleging that the Company improperly denied coverage to commercial insureds for loss of business income resulting from the COVID-19 pandemic.
Added
The plaintiffs have since filed a motion to amend the complaint, seeking to address the concerns raised by the Superior Court in denying their motion for class certification; Safety has opposed the motion to amend the complaint, which has yet to be heard or ruled on by the Superior Court.
Removed
As a result of the lawsuit, the Company accrued a reserve of $6,500 for legal defense costs included in loss and loss adjustment expense during the year ended December 31, 2021.

Item 5. Market for Registrant's Common Equity

Market for Common Equity — stock, dividends, buybacks

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Biggest changeThe graph shows the change in value of an initial one hundred dollar investment over the period indicated, assuming re-investment of all dividends. 34 Table of Contents Comparative Cumulative Total Returns since December 31, 2017 Among Safety Insurance Group, Inc., Property & Casualty Insurance Peer Group and the NASDAQ Stock Market Index ​ The foregoing performance graph and data shall not be deemed "filed" as part of this Form 10-K for purposes of Section 18 of the Securities Exchange Act of 1934 or otherwise subject to the liabilities of that section and should not be deemed incorporated by reference into any other filing of the Company under the Securities Act of 1933 or the Securities Exchange Act of 1934, except to the extent the Company specifically incorporates it by reference into such filing. ​ ​ ​ 35 Table of Contents ​ ​ ITEM 6. [RESERVED] ​ ​
Biggest changeThe graph shows the change in value of an initial one hundred dollar investment over the period indicated, assuming re-investment of all dividends. 36 Table of Contents Comparative Cumulative Total Returns since December 31, 2018 Among Safety Insurance Group, Inc., Property & Casualty Insurance Peer Group and the NASDAQ Stock Market Index ​ ​ The foregoing performance graph and data shall not be deemed "filed" as part of this Form 10-K for purposes of Section 18 of the Securities Exchange Act of 1934 or otherwise subject to the liabilities of that section and should not be deemed incorporated by reference into any other filing of the Company under the Securities Act of 1933 or the Securities Exchange Act of 1934, except to the extent the Company specifically incorporates it by reference into such filing. ​ ​ 37 Table of Contents ​ ​ ​ ISSUER PURCHASES OF EQUITY SECURITIES On February 23, 2022, the Board of Directors approved an additional share repurchase of up to $50,000 of the Company’s outstanding common shares.
Securities and Exchange Commission within 120 days after December 31, 2022 (the Company's fiscal year end), and such information is incorporated herein by reference. For information regarding our share repurchase program, refer to Item 8—Financial Statements and Supplementary Data, Note 14, Share Repurchase Program, of this Form 10-K.
Securities and Exchange Commission within 120 days after December 31, 2023 (the Company's fiscal year end), and such information is incorporated herein by reference. For information regarding our share repurchase program, refer to Item 8—Financial Statements and Supplementary Data, Note 14, Share Repurchase Program, of this Form 10-K.
COMMON STOCK PERFORMANCE GRAPH Set forth below is a line graph comparing the dollar change in the cumulative total shareholder return on the Company's Common Stock, for the period beginning on December 31, 2017 and ending on December 31, 2022 with the cumulative total return of the NASDAQ Stock Market Index and a peer group comprised of seven selected property & casualty insurance companies over the same period.
COMMON STOCK PERFORMANCE GRAPH Set forth below is a line graph comparing the dollar change in the cumulative total shareholder return on the Company's Common Stock, for the period beginning on December 31, 2018 and ending on December 31, 2023 with the cumulative total return of the NASDAQ Stock Market Index and a peer group comprised of seven selected property & casualty insurance companies over the same period.
On February 22, 2023, the Company's Board of Directors declared a quarterly cash dividend of $0.90 per share to shareholders of record on March 1, 2023 payable on March 15, 2023. The Company plans to continue to declare and pay quarterly cash dividends in 2023, depending on the Company's financial position and the regularity of its cash flows.
On February 21, 2024, the Company's Board of Directors declared a quarterly cash dividend of $0.90 per share to shareholders of record on March 1, 2024 payable on March 15, 2024. The Company plans to continue to declare and pay quarterly cash dividends in 2024, depending on the Company's financial position and the regularity of its cash flows.
The Company’s common stock trades on the NASDAQ stock exchange under the symbol SAFT. During 2022 and 2021, the Company’s Board of Directors declared four quarterly cash dividends to shareholders, which were paid and accrued in the amounts of $52,995 and $53,996, respectively.
The Company’s common stock trades on the NASDAQ stock exchange under the symbol SAFT. During 2023 and 2022, the Company’s Board declared four quarterly cash dividends to shareholders, which were paid and accrued in the amounts of $52,992 and $52,995, respectively.
MARKET FOR THE REGISTRANT'S COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND ISSUER PURCHASES OF EQUITY SECURITIES As of February 21, 2023, there were 20 holders of record of the Company's common stock, par value $0.01 per share, and we estimate another 17,280 held in "Street Name." The closing price of the Company's common stock on February 21, 2023 was $87.32 per share.
MARKET FOR THE REGISTRANT'S COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND ISSUER PURCHASES OF EQUITY SECURITIES As of February 13, 2024, there were 22 holders of record of the Company's common stock, par value $0.01 per share, and we estimate another 17,519 held in "Street Name." The closing price of the Company's common stock on February 13, 2024 was $83.25 per share.
Added
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.
Added
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.
Added
No shares were repurchased during the three months ended December 31, 2023. ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ 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 October 1-31, 2023 — ​ ​ — ​ — ​ ​ 703,971 November 1-30, 2023 — ​ $ — ​ — ​ ​ 703,971 December 1-31, 2023 — ​ ​ — ​ — ​ ​ 703,971 Total — ​ $ — ​ — ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ 38 Table of Contents ​ ​ ITEM 6. [RESERVED] ​ ​

Item 7. Management's Discussion & Analysis

Management's Discussion & Analysis (MD&A) — revenue / margin commentary

92 edited+14 added−19 removed66 unchanged
Biggest changeOur Massachusetts private passenger automobile rates include a 13% commission rate for agents. ​ ​ ​ ​ ​ ​ Line of Business Effective Date Rate Change Massachusetts Commercial Automobile ​ May 1, 2022 ​ 3.1% Massachusetts Homeowner ​ July 1, 2022 ​ 2.6% Massachusetts Private Passenger Automobile ​ April 1, 2022 ​ -2.3% Massachusetts Private Passenger Automobile ​ December 1, 2022 ​ 3.5% New Hampshire Commercial Automobile ​ September 1, 2022 ​ 5.8% New Hampshire Homeowners ​ September 1, 2022 ​ 3.5% New Hampshire Private Passenger Automobile ​ September 1, 2022 ​ 2.8% ​ Statutory Accounting Principles Our results are reported in accordance with generally accepted accounting principles (“GAAP”), which differ from amounts reported in accordance with statutory accounting principles ("SAP") as prescribed by insurance regulatory authorities, which in general reflect a liquidating, rather than going concern concept of accounting.
Biggest changeAdditionally, for the year ended December 31, 2023, average written premium per exposure increased 10.8%, 3.8% and 4.5% in Private Passenger Automobile, Commercial Automobile and Homeowners lines, respectively, compared to the same period in 2022. ​ The following rate changes have been filed and approved by the insurance regulators of Massachusetts, New Hampshire and Maine in 2024, 2023 and 2022. ​ ​ ​ ​ ​ ​ Line of Business Effective Date Rate Change New Hampshire Private Passenger Automobile ​ April 1, 2024 ​ 3.4% Massachusetts Private Passenger Automobile ​ January 1, 2024 ​ 3.5% New Hampshire Commercial Automobile ​ November 1, 2023 ​ 7.9% New Hampshire Homeowners ​ October 1, 2023 ​ 6.0% Maine Private Passenger Automobile ​ October 1, 2023 ​ 7.3% New Hampshire Private Passenger Automobile ​ September 1, 2023 ​ 6.5% Massachusetts Homeowners ​ August 1, 2023 ​ 3.9% Massachusetts Private Passenger Automobile ​ July 1, 2023 ​ 4.3% Massachusetts Commercial Automobile ​ May 1, 2023 ​ 4.0% Massachusetts Private Passenger Automobile ​ December 1, 2022 ​ 3.5% New Hampshire Commercial Automobile ​ September 1, 2022 ​ 5.8% New Hampshire Homeowners ​ September 1, 2022 ​ 3.5% New Hampshire Private Passenger Automobile ​ September 1, 2022 ​ 2.8% Massachusetts Homeowners ​ July 1, 2022 ​ 2.6% ​ Statutory Accounting Principles Our results are reported in accordance with generally accepted accounting principles (“GAAP”), which differ from amounts reported in accordance with statutory accounting principles ("SAP") as prescribed by insurance regulatory authorities, which in general reflect a liquidating, rather than going concern concept of accounting.
These factors include but are not limited to: ​ ● The competitive nature of our industry and the possible adverse effects of such competition; ● Conditions for business operations and restrictive regulations in Massachusetts; ● The possibility of losses due to claims resulting from severe weather; ● The impact of inflation and supply chain delays on loss severity; 54 Table of Contents ● The possibility that the Commissioner may approve future rule changes that change the operation of the residual market; ● The possibility that existing insurance-related laws and regulations will become further restrictive in the future; ● Our possible need for and availability of additional financing, and our dependence on strategic relationships, among others; ● Other risks and factors identified from time to time in our reports filed with the SEC.
These factors include but are not limited to: ​ ● The competitive nature of our industry and the possible adverse effects of such competition; ● Conditions for business operations and restrictive regulations in Massachusetts; ● The possibility of losses due to claims resulting from severe weather; ● The impact of inflation and supply chain delays on loss severity; ● The possibility that the Commissioner may approve future rule changes that change the operation of the residual market; ● The possibility that existing insurance-related laws and regulations will become further restrictive in the future; ● Our possible need for and availability of additional financing, and our dependence on strategic relationships, among others; ● Other risks and factors identified from time to time in our reports filed with the SEC.
The 2022 decrease in the expense ratios in both periods is primarily driven by a decrease in contingent commission expense. ​ We define a “catastrophe” as an event that produces pre-tax losses before reinsurance in excess of $1,000 and involves multiple first-party policyholders, or an event that produces a number of claims in excess of a preset, per-event threshold of average claims in a specific area, occurring within a certain amount of time following the event.
The 2023 decrease in the expense ratios in both periods is primarily driven by a decrease in contingent commission expense. ​ We define a “catastrophe” as an event that produces pre-tax losses before reinsurance in excess of $1,000 and involves multiple first-party policyholders, or an event that produces a number of claims in excess of a preset, per-event threshold of average claims in a specific area, occurring within a certain amount of time following the event.
Each of our assumptions could have a reasonably possible range of plus or minus 5 percentage-points for each estimation. ​ The following sensitivity table presents information of the effect each 1 percentage-point change in our assumptions on our share of reserves for CAR and other residual markets could have on our assumed loss and LAE reserves and net income for the year ended December 31, 2022.
Each of our assumptions could have a reasonably possible range of plus or minus 5 percentage-points for each estimation. ​ The following sensitivity table presents information of the effect each 1 percentage-point change in our assumptions on our share of reserves for CAR and other residual markets could have on our assumed loss and LAE reserves and net income for the year ended December 31, 2023.
The following sensitivity tables present information for each of our primary lines of business on the effect each 1 percentage-point change in each of our key assumptions on unpaid frequency and severity could have on our retained (i.e., direct minus ceded) loss and LAE reserves and net income for the twelve months ended December 31, 2022.
The following sensitivity tables present information for each of our primary lines of business on the effect each 1 percentage-point change in each of our key assumptions on unpaid frequency and severity could have on our retained (i.e., direct minus ceded) loss and LAE reserves and net income for the twelve months ended December 31, 2023.
The Company concluded that outside of the securities that were recognized as credit impaired, the unrealized losses recorded on the fixed maturity portfolio at December 31, 2022 and December 31, 2021 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.
The Company concluded that outside of the securities that were recognized as credit impaired, the unrealized losses recorded on the fixed maturity portfolio at December 31, 2023 and 2022 resulted from fluctuations in market interest rates and other temporary market conditions as opposed to fundamental changes in the credit quality of the issuers of such securities.
Specifically, under GAAP: ● Policy acquisition costs such as commissions, premium taxes and other variable costs incurred which are directly related to the successful acquisition of a new or renewal insurance contract are capitalized and amortized on a pro rata basis over the period in which the related premiums are earned, rather than expensed as incurred, as required by SAP. ​ ● Certain assets are included in the consolidated balance sheets whereas, under SAP, such assets are designated as "nonadmitted assets," and charged directly against statutory surplus.
Specifically, under GAAP: ● Policy acquisition costs such as commissions, premium taxes and other variable costs incurred which are directly related to the successful acquisition of a new or renewal insurance contract are capitalized and amortized on a pro rata basis over the period in which the related premiums are earned, rather than expensed as incurred, as required by SAP. ​ 41 Table of Contents ● Certain assets are included in the consolidated balance sheets whereas, under SAP, such assets are designated as "nonadmitted assets," and charged directly against statutory surplus.
Our retained other than auto and homeowners line of business prior year reserves decreased, due primarily to fewer IBNR claims than previously estimated. ​ 53 Table of Contents In estimating all our loss reserves, we follow the guidance prescribed by ASC 944, Financial Services-Insurance.
Our retained other than auto and homeowners line of business prior year reserves decreased, due primarily to fewer IBNR claims than previously estimated. 57 Table of Contents ​ In estimating all our loss reserves, we follow the guidance prescribed by ASC 944, Financial Services-Insurance.
We continue to manage and model our exposure and adjust our reinsurance programs as a result of the changes to the models. As of January 1, 2022, we purchased three layers of excess catastrophe reinsurance providing $590,000 of coverage for property losses in excess of $75,000 up to a maximum of $665,000.
We continue to manage and model our exposure and adjust our reinsurance programs as a result of the changes to the models. As of January 1, 2023, we purchased three layers of excess catastrophe reinsurance providing $590,000 of coverage for property losses in excess of $75,000 up to a maximum of $665,000.
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.
The estimate reflects the informed judgment of such personnel based on general insurance reserving practices and on the experience and knowledge of the claims professional. During the loss adjustment period, these estimates are revised as deemed necessary by our claims department based on subsequent developments and periodic reviews of the cases.
Our reinsurers’ co-participation is 80.0% of $75,000 for the 1st layer, 80.0% of $250,000 for the 2nd layer, and 80.0% of $265,000 for the 3rd layer.
Our reinsurers’ co-participation is 75.0% of $75,000 for the 1st layer, 75.0% of $250,000 for the 2nd layer, and 75.0% of $265,000 for the 3rd layer.
We plan to continue to declare and pay quarterly cash dividends in 2023, depending on our financial position and the regularity of our cash flows. ​ On February 23, 2022, the Board approved a share repurchase program of up to $50,000 of the Company’s outstanding common shares.
We plan to continue to declare and pay quarterly cash dividends in 2024, depending on our financial position and the regularity of our cash flows. ​ On February 23, 2022, the Board approved a share repurchase program of up to $50,000 of the Company’s outstanding common shares.
The table also presents the length of time that they have been in a continuous unrealized loss position of December 31, 2022. ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ As of December 31, 2022 ​ ​ 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.
The table also presents the length of time that they have been in a continuous unrealized loss position of December 31, 2023. ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ As of December 31, 2023 ​ ​ 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.
The decreases in prior year reserves in 2022 resulted from re-estimations of prior year’s ultimate loss and LAE liabilities and are primarily composed of reductions of $20,241 in our retained automobile reserves and $32,963 in our retained other than auto and homeowner’s reserves.
The decreases in prior year reserves in 2022 resulted from re-estimations of prior year’s ultimate loss and LAE liabilities and are primarily composed of reductions of $20,241 in our retained automobile reserves and $32,963 in our retained other than auto and homeowner reserves.
For information regarding fair value measurements of our investment portfolio, refer to Item 8—Financial Statements and Supplementary Data, Note 16, Fair Value of Financial Instruments, of this Form 10-K. ​ Commission Income: Commission income includes revenues from new and renewal commissions paid by insurance carriers, which we recognize when earned. ​ Finance and Other Service Income.
For information regarding fair value measurements of our investment portfolio, refer to Item 8—Financial Statements and Supplementary Data, Note 16, Fair Value of Financial Instruments, of this Form 10-K. ​ Commission Income: Commission income includes revenues from new and renewal commissions paid by insurance carriers, which we recognize when earned.
The Massachusetts statute limits the dividends an insurer may pay in any twelve-month period, without the prior permission of the 45 Table of Contents 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.
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.
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. ​ ​ ​ 55 Table of Contents
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. ​ 58 Table of Contents ​
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. 43 Table of Contents ​ The majority of unrealized losses recorded on the investment portfolio at December 31, 2022 resulted from fluctuations in market interest rates and other temporary market conditions as opposed to fundamental changes in the credit quality of the issuers of such securities.
Qualitative analysis considered such factors as the financial condition and the near term prospects of the issuer, whether the debtor is current on its contractually obligated interest and principal payments, changes to the rating of the security by a rating agency and the historical volatility of the fair value of the security. ​ The majority of unrealized losses recorded on the investment portfolio at December 31, 2023 resulted from fluctuations in market interest rates and other temporary market conditions as opposed to fundamental changes in the credit quality of the issuers of such securities.
(2) Board of Director members must maintain stock ownership equal to at least four times their annual cash retainer. This requirement must be met within five years of becoming a director. 39 Table of Contents (3) The shares represent performance-based restricted shares award.
(2) Board of Director members must maintain stock ownership equal to at least four times their annual cash retainer. This requirement must be met within five years of becoming a director. (3) The shares represent performance-based restricted shares award.
We also participate in the Massachusetts Property Insurance Underwriting Association (“FAIR Plan”), in which premiums, expenses, losses and loss adjustment expenses on homeowners business that cannot be placed in the voluntary market are shared by all insurers writing homeowners insurance in Massachusetts. The FAIR Plan buys reinsurance to reduce their exposure to catastrophe losses.
We also participate in the Massachusetts Property Insurance Underwriting Association (“FAIR Plan”), in which premiums, 43 Table of Contents expenses, losses and loss adjustment expenses on homeowners business that cannot be placed in the voluntary market are shared by all insurers writing homeowners insurance in Massachusetts. The FAIR Plan buys reinsurance to reduce their exposure to catastrophe losses.
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.
To determine ultimate losses, our actuaries calculate a range of indications and select a point estimation using such actuarial techniques as: 51 Table of Contents ● Paid Loss Indications: This method projects ultimate loss estimates based upon extrapolations of historic paid loss trends.
The updated shares were calculated based on the attainment of pre-established performance objectives. ​ ​ 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.
The updated shares were calculated based on the attainment of pre-established performance objectives and granted under the Amended 2018 Plan. ​ ​ Reinsurance ​ We reinsure with other insurance companies a portion of our potential liability under the policies we have underwritten, thereby protecting us against an unexpectedly large loss or a catastrophic occurrence that could produce large losses, primarily in our homeowners line of business.
Net realized gains on investments were $9,190 for the year ended December 31, 2022 compared to $14,885 for the comparable 2021 period. ​ The gross unrealized gains and losses on investments in fixed maturity securities, including redeemable preferred stocks that have characteristics of fixed maturities, equity securities, including interests in mutual funds, and other invested assets were as follows: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ As of December 31, 2022 ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Cost or Allowance for Gross Unrealized Estimated ​ ​ Amortized ​ Expected Credit ​ ​ ​ ​ ​ Fair ​ ​ Cost ​ Losses ​ Gains ​ Losses (3) ​ Value U.S.
Net realized gains on investments were $1,327 for the year ended December 31, 2023 compared to $9,190 for the comparable 2022 period. ​ The gross unrealized gains and losses on investments in fixed maturity securities, including redeemable preferred stocks that have characteristics of fixed maturities, equity securities, including interests in mutual funds, and other invested assets were as follows: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ As of December 31, 2023 ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Cost or Allowance for Gross Unrealized Estimated ​ ​ Amortized ​ Expected Credit ​ ​ ​ ​ ​ Fair ​ ​ Cost ​ Losses ​ Gains ​ Losses (3) ​ Value U.S.
(4) Other invested assets are accounted for under the equity method which approximates fair value. ​ The composition of our fixed income security portfolio by rating was as follows: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ As of December 31, 2022 ​ Estimated ​ ​ Fair Value ​ Percent U.S. Treasury securities and obligations of U.S.
(4) Other invested assets are accounted for under the equity method which approximated fair value. ​ The composition of our fixed income security portfolio by rating was as follows: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ As of December 31, 2023 ​ Estimated ​ ​ Fair Value ​ Percent U.S. Treasury securities and obligations of U.S.
Underwriting profitability is subject to significant fluctuations due to competition, catastrophic events, weather, economic and social conditions, and other factors. ​ Our GAAP insurance ratios are presented in the following table for the periods indicated. ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Years Ended December 31, ​ ​ 2022 ​ 2021 2020 GAAP ratios: ​ ​ ​ ​ ​ ​ ​ Loss ratio 64.9 % 59.6 % 52.5 % Expense ratio 32.3 ​ 33.4 ​ 34.6 ​ Combined ratio 97.2 % 93.0 % 87.1 % ​ 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.
Underwriting profitability is subject to significant fluctuations due to competition, catastrophic events, weather, economic and social conditions, and other factors. ​ Our GAAP insurance ratios are presented in the following table for the periods indicated. ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Years Ended December 31, ​ ​ 2023 ​ 2022 2021 GAAP ratios: ​ ​ ​ ​ ​ ​ ​ Loss ratio 77.0 % 64.9 % 59.6 % Expense ratio 30.7 ​ 32.3 ​ 33.4 ​ Combined ratio 107.7 % 97.2 % 93.0 % ​ 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.
Ratings in the table are as of the date indicated. ​ As of December 31, 2022, our portfolio of fixed maturity investments was principally comprised of investment grade corporate fixed maturity securities, U.S. government and agency securities, and asset-backed securities.
Ratings in the table are as of the date indicated. 46 Table of Contents ​ As of December 31, 2023, our portfolio of fixed maturity investments was principally comprised of investment grade corporate fixed maturity securities, U.S. government and agency securities, and asset-backed securities.
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 843 in 1,071 locations throughout these three states during 2022.
Operating exclusively in Massachusetts, New Hampshire and Maine through our insurance company subsidiaries, Safety Insurance, Safety Indemnity, Safety P&C, and Safety Northeast (together referred to as the “Insurance Subsidiaries”), we have established strong relationships with independent insurance agents, who numbered 834 in 1,090 locations throughout these three states during 2023.
We have used these relationships and our extensive knowledge of the market to become the fifth largest private passenger automobile carrier and the second largest commercial automobile carrier in Massachusetts, capturing an approximate 7.7% and 12.6% share, respectively, of the Massachusetts private passenger and commercial automobile markets in 2022, according to statistics compiled by the Commonwealth Automobile Reinsurers (“CAR”) based on automobile exposures.
We have used these relationships and our extensive knowledge of the market to become the third largest private passenger automobile carrier and the second largest commercial automobile carrier in Massachusetts, capturing an approximate 8.7% and 12.7% share, respectively, of the Massachusetts private passenger and commercial automobile markets in 2023, according to statistics compiled by the Commonwealth Automobile Reinsurers (“CAR”) based on automobile exposures.
On July 1, 2022, the FAIR Plan purchased $1,800,000 of catastrophe reinsurance for property losses with retention of $100,000. ​ We also had $115,058 due from CAR comprising of loss and loss adjustment expense reserves, unearned premiums and reinsurance recoverables. ​ ​ Non-GAAP Measures ​ Management has included certain non-generally accepted accounting principles (“non-GAAP”) financial measures in presenting the Company’s results.
On July 1, 2023, the FAIR Plan purchased $1,600,000 of catastrophe reinsurance for property losses with retention of $100,000. ​ We also had $133,551 due from CAR comprising of loss and loss adjustment expense reserves, unearned premiums and reinsurance recoverables. ​ Non-GAAP Measures ​ Management has included certain non-generally accepted accounting principles (“non-GAAP”) financial measures in presenting the Company’s results.
Safety Insurance’s principal uses of cash are the payment of claims, operating expenses and taxes, the purchase of investments and payment of dividends to Safety. Net cash provided by operating activities was $44,326, $141,394, and $109,460 during the years ended December 31, 2022, 2021, and 2020, respectively.
Safety Insurance’s principal uses of cash are the payment of claims, operating expenses and taxes, the purchase of investments and payment of dividends to Safety. Net cash provided by operating activities was $52,114, $44,326, and $141,394 during the years ended December 31, 2023, 2022, and 2021, respectively.
The IBNR reserves for CAR assumed commercial automobile business are 40.3% of our total reserves for CAR assumed commercial automobile business as of December 31, 2022 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 IBNR reserves for CAR assumed commercial automobile business are 64.4% of our total reserves for CAR assumed commercial automobile business as of December 31, 2023 due to the reporting delays in the information we receive from CAR, as described further in the section on Residual Market Loss and Loss Adjustment Expense Reserves.
Our prior year reserves decreased by $57,279, $53,673 and $54,844 during the years ended December 31, 2022, 2021, and 2020, respectively. The following table presents a comparison of prior year development of our net reserves for losses and LAE for the years ended December 31, 2022, 2021 and 2020, respectively.
Our prior year reserves decreased by $47,381, $57,279 and $53,673 during the years ended December 31, 2023, 2022, and 2021, respectively. The following table presents a comparison of prior year development of our net reserves for losses and LAE for the years ended December 31, 2023, 2022 and 2021, respectively.
As a result of the changes to the models, our catastrophe reinsurance in 2022 protects us in the event of a “135-year storm” (that is, a storm of a severity expected to occur once in a 135-year period). Most of our reinsurers have an A.M.
As a result of the changes to the models, our catastrophe reinsurance in 2023 protects us in the event of a “121-year storm” (that is, a storm of a severity expected to occur once in a 121-year period). Most of our reinsurers have an A.M.
Earnings from partnership investments were $12,484 for the year ended December 31, 2022 compared to $19,829 for the year ended December 31, 2021. The 2022 earnings reflect a decrease in investment appreciation and timing of cash proceeds received compared to the prior year.
Earnings from partnership investments were $5,540 for the year ended December 31, 2023 compared to $12,484 for the year ended December 31, 2022. The 2023 earnings reflect a decrease in investment appreciation and timing of cash proceeds received compared to the prior year.
We expect to be able to continue to meet our operating needs after 46 Table of Contents the next 12 months from internally generated funds.
We expect to be able to continue to meet our operating needs after the next 12 months from internally generated funds.
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. 51 Table of Contents ​ ​ ​ ​ ​ ​ ​ ​ ​ -1 Percent +1 Percent ​ ​ Change in ​ Change in ​ ​ Estimation ​ Estimation CAR assumed commercial automobile ​ ​ ​ ​ ​ ​ Estimated (decrease) increase in reserves ​ $ (303) ​ $ 303 Estimated increase (decrease) in net income ​ ​ 239 ​ ​ (239) FAIR Plan assumed homeowners ​ ​ ​ ​ ​ ​ Estimated (decrease) increase in reserves ​ ​ (97) ​ ​ 97 Estimated increase (decrease) in net income ​ ​ 77 ​ ​ (77) ​ Reserve Development Summary The changes we have recorded in our reserves in the past illustrate the uncertainty of estimating reserves.
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. 55 Table of Contents ​ ​ ​ ​ ​ ​ ​ ​ ​ -1 Percent +1 Percent ​ ​ Change in ​ Change in ​ ​ Estimation ​ Estimation CAR assumed commercial automobile ​ ​ ​ ​ ​ ​ Estimated (decrease) increase in reserves ​ $ (307) ​ $ 307 Estimated increase (decrease) in net income ​ ​ 243 ​ ​ (243) FAIR Plan assumed homeowners ​ ​ ​ ​ ​ ​ Estimated (decrease) increase in reserves ​ ​ (107) ​ ​ 107 Estimated increase (decrease) in net income ​ ​ 84 ​ ​ (84) ​ Reserve Development Summary The changes we have recorded in our reserves in the past illustrate the uncertainty of estimating reserves.
As of December 31, 2022, the remaining committed capital that could be called is $52,000, which includes potential recallable capital distributions. ​ ​ ​ ​ ​ 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.
As of December 31, 2023, the remaining committed capital that could be called is $42,043, which includes potential recallable capital distributions. 50 Table of Contents ​ ​ ​ ​ ​ 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.
The impairment related to all other factors (non-credit factors) is reported in other comprehensive income. ​ For further information, see “Results of Operations: Credit Loss Benefit (Expense).” ​ 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.
For further information, see “Results of Operations: Losses and Loss Adjustment Expense s.” ​ ​ 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.
Net effective annual yield on the investment portfolio was 3.2% for the year ended December 31, 2022 compared to 3.0% for comparable 2021 period. Our duration was 3.8 years at December 31, 2022, compared to 3.6 years at December 31, 2021. Earnings from Partnership Investments.
Net effective annual yield on the investment portfolio was 45 Table of Contents 4.0% for the year ended December 31, 2023, compared to 3.2% for comparable 2022 period. Our duration was 3.6 years at December 31, 2023, compared to 3.8 years at December 31, 2022. Earnings from Partnership Investments.
The combined ratio reflects only underwriting results and does not include income from 38 Table of Contents investments or finance and other service income.
The combined ratio reflects only underwriting results and does not include income from investments or finance and other service income.
The Board of Directors and the Compensation Committee intend to issue awards under the Amended 2018 Plan in the future. ​ The maximum number of shares of common stock between both the 2018 Amended Plan and 2002 Incentive Plan with respect to which awards may be granted is 3,200,000. No further grants will be allowed under the 2002 Incentive Plan.
The Board of Directors and the Compensation Committee intend to issue awards under the Amended 2018 Plan in the future. ​ ​ ​ 42 Table of Contents ​ The maximum number of shares of common stock between both the 2018 Amended Plan and 2002 Incentive Plan with respect to which awards may be granted is 3,200,000.
In addition to these coverages, we offer a portfolio of other insurance products, including dwelling fire, umbrella and business owner policies (totaling 5.3% of 2022 direct written premiums).
In addition to these coverages, we offer a portfolio of other insurance products, including dwelling fire, umbrella and business owner policies (totaling 4.9% of 2023 direct written premiums).
We are the third largest homeowners insurance carrier in Massachusetts, with a market share of 6.5% in 2021. ​ 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 May 26, 2022.
We are the fourth largest homeowners insurance carrier in Massachusetts, with a market share of 6.2% in 2022. ​ A.M. Best, which rates insurance companies based on factors of concern to policyholders, currently assigns Safety Insurance an “A (Excellent)” rating. Our “A” rating was reaffirmed by A.M. Best on June 15, 2023.
Our GAAP loss ratio excluding loss adjustment expenses was 56.0% and 50.0% for the years ended December 31, 2022 and 2021, respectively. Total prior year favorable development included in the pre-tax results for the year ended December 31, 2022 was $57,279, compared to $53,673, for the comparable 2021 period.
Our GAAP loss ratio excluding loss adjustment expenses was 67.9% and 56.0% for the years ended December 31, 2023 and 2022, respectively. Total prior year favorable development included in the pre-tax results for the year ended December 31, 2023 was $47,381, compared to $57,279, for the comparable 2022 period.
(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. 42 Table of Contents (3) Our investment portfolio included 1,195 securities in an unrealized loss position at December 31, 2022.
(2) Equity securities include common stock, preferred stock, mutual funds and interests in mutual funds held to fund the Company’s executive deferred compensation plan. (3) Our investment portfolio included 861 securities in an unrealized loss position at December 31, 2023.
Quarterly dividends paid during 2022 and 2021 were as follows: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Total Declaration ​ Record ​ Payment ​ Dividend per ​ Dividends Paid Date ​ Date ​ Date ​ Common Share ​ and Accrued February 16, 2021 March 5, 2021 March 15, 2021 $ 0.90 $ 13,459 May 5, 2021 June 1, 2021 June 15, 2021 $ 0.90 $ 13,490 August 4, 2021 September 1, 2021 September 15, 2021 $ 0.90 $ 13,493 November 3, 2021 ​ December 1, 2021 ​ December 15, 2021 ​ $ 0.90 $ 13,554 February 15, 2022 March 5, 2022 March 15, 2022 $ 0.90 $ 13,248 May 6, 2022 June 1, 2022 June 15, 2022 $ 0.90 $ 13,278 August 3, 2022 September 1, 2022 September 15, 2022 $ 0.90 $ 13,262 November 2, 2022 ​ December 1, 2022 ​ December 15, 2022 ​ $ 0.90 $ 13,207 ​ On February 15, 2023, our Board approved and declared a quarterly cash dividend on our common stock of $0.90 per share to be paid on March 15, 2023 to shareholders of record on March 1, 2023.
Quarterly dividends paid during 2023 and 2022 were as follows: ​ 49 Table of Contents ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Total Declaration ​ Record ​ Payment ​ Dividend per ​ Dividends Paid Date ​ Date ​ Date ​ Common Share ​ and Accrued February 15, 2022 March 5, 2022 March 15, 2022 $ 0.90 $ 13,248 May 6, 2022 June 1, 2022 June 15, 2022 $ 0.90 $ 13,278 August 3, 2022 September 1, 2022 September 15, 2022 $ 0.90 $ 13,262 November 2, 2022 ​ December 1, 2022 ​ December 15, 2022 ​ $ 0.90 $ 13,207 February 15, 2023 March 1, 2023 March 15, 2023 $ 0.90 $ 13,247 May 3, 2023 ​ June 1, 2023 ​ June 15, 2023 ​ $ 0.90 ​ $ 13,283 August 2, 2023 ​ September 1, 2023 ​ September 15, 2023 ​ $ 0.90 ​ $ 13,223 November 3, 2023 ​ December 1, 2023 ​ December 15, 2023 ​ $ 0.90 ​ $ 13,239 ​ On February 15, 2024, our Board approved and declared a quarterly cash dividend on our common stock of $0.90 per share to be paid on March 15, 2024 to shareholders of record on March 1, 2024.
Net cash used for financing activities was $62,641, $65,571, and $64,574 during the years ended December 31, 2022, 2021 and 2020, respectively.
Net cash used for financing activities was $63,531, $62,641, and $65,571 during the years ended December 31, 2023, 2022 and 2021, respectively.
The effective tax rates for the year end December 31, 2021 were lower than the statutory rates primarily due to the effects of tax-exempt investment income and the impact of stock-based compensation. ​ The comparison of results for the year ended December 31, 2021 compared to the year ended December 31, 2020 can be found in the Company’s 2021 Annual Report on Form 10-K filed with the SEC on February 28, 2022. ​ ​ ​ ​ ​ 44 Table of Contents ​ Liquidity and Capital Resources As a holding company, Safety’s assets consist primarily of the stock of our direct and indirect subsidiaries.
The effective rates for the year ended December 31, 2023 and 2022 were higher than the statutory rate primary due to the impact of stock-based and executive compensation. ​ The comparison of results for the year ended December 31, 2022 compared to the year ended December 31, 2021 can be found in the Company’s 2022 Annual Report on Form 10-K filed with the SEC on February 28, 2023. ​ ​ Liquidity and Capital Resources As a holding company, Safety’s assets consist primarily of the stock of our direct and indirect subsidiaries.
Grants outstanding under the plans as of December 31, 2022, were comprised of 138,482 restricted shares. ​ Grants made under the Incentive Plan during the years 2020 through 2022 were as follows. ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Type of Number of ​ Fair Equity ​ ​ ​ Awards ​ ​ Value per ​ ​ Awarded Effective Date Granted ​ Share (1) ​ Vesting Terms RS - Service February 26, 2020 28,799 $ 90.50 ​ 3 years, 30%-30%-40% RS - Performance February 26, 2020 24,062 $ 90.50 ​ 3 years, cliff vesting (3) RS February 26, 2020 5,000 $ 90.50 ​ No vesting period (2) RS - Performance February 26, 2020 12,587 $ 90.50 ​ No vesting period (4) RS March 27, 2020 1,000 $ 76.60 ​ No vesting period (2) RS - Service February 24, 2021 33,840 $ 79.27 ​ 3 years, 30%-30%-40% RS - Performance February 24, 2021 29,422 $ 79.27 ​ 3 years, cliff vesting (3) RS February 24, 2021 6,000 $ 79.27 ​ No vesting period (2) RS - Performance February 24, 2021 20,038 $ 79.27 ​ No vesting period (4) RS - Service February 23, 2022 31,864 $ 84.98 ​ 3 years, 30%-30%-40% RS - Performance February 23, 2022 26,037 $ 84.98 ​ 3 years, cliff vesting (3) RS February 23, 2022 5,000 $ 84.98 ​ No vesting period (2) RS March 24, 2022 2,000 $ 89.63 ​ No vesting period (2) RS - Performance February 23, 2022 5,791 $ 84.98 ​ No vesting period (4) ​ (1) The fair value per share of the restricted stock grant is equal to the closing price of our common stock on the grant date.
Grants outstanding under the plans as of December 31, 2023, were comprised of 145,920 restricted shares. ​ Grants made under the Incentive Plan during the years 2021 through 2023 were as follows. ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Type of Number of ​ Fair Equity ​ ​ ​ Awards ​ ​ Value per ​ ​ Awarded Effective Date Granted ​ Share (1) ​ Vesting Terms RS - Service February 24, 2021 33,840 $ 79.27 ​ 3 years, 30%-30%-40% RS - Performance February 24, 2021 29,422 $ 79.27 ​ 3 years, cliff vesting (3) RS February 24, 2021 6,000 $ 79.27 ​ No vesting period (2) RS - Performance February 24, 2021 20,038 $ 79.27 ​ No vesting period (4) RS - Service February 23, 2022 31,864 $ 84.98 ​ 3 years, 30%-30%-40% RS - Performance February 23, 2022 26,037 $ 84.98 ​ 3 years, cliff vesting (3) RS February 23, 2022 5,000 $ 84.98 ​ No vesting period (2) RS March 24, 2022 2,000 $ 89.63 ​ No vesting period (2) RS - Performance February 23, 2022 5,791 $ 84.98 ​ No vesting period (4) RS - Service February 23, 2023 33,101 $ 80.24 ​ 3 years, 30%-30%-40% RS - Performance February 23, 2023 25,990 $ 80.24 ​ 3 years, cliff vesting (3) RS - Performance February 23, 2023 4,703 $ 80.24 ​ 3 years, cliff vesting (4) RS February 23, 2023 6,000 $ 80.24 ​ No vesting period (2) RS May 17, 2023 1,000 $ 71.78 ​ No vesting period (2) ​ (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.
Using these methodologies our actuaries established a range of reasonably possible estimations for net reserves of approximately $423,452 to $481,902 as of December 31, 2022 compared to a range of $445,511 to $504,580 as of December 31, 2021.
Using these methodologies our actuaries established a range of reasonably possible estimations for net reserves of approximately $449,272 to $511,724 as of December 31, 2023 compared to a range of $423,452 to $481,902 as of December 31, 2022.
Net investment income for the year ended December 31, 2022 increased by $2,590, or 5.9%, to $46,725 from $44,135 for the comparable 2021 period. The increase is a result of increases in interest rates on our fixed maturity portfolio as compared to the prior year.
Net investment income for the year ended December 31, 2023 increased by $9,652, or 20.7%, to $56,377 from $46,725 for the comparable 2022 period. The increase is a result of increases in interest rates on our fixed maturity portfolio as compared to the prior year.
In addition, IBNR reserves can also be expressed as the total loss reserves required less the case reserves on reported claims. 47 Table of Contents 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.
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.
Our prior year reserves decreased by $57,279, $53,673, and $54,844 for the years ended 2022, 2021, and 2020, respectively.
Our prior year reserves decreased by $47,381, $57,279, and $53,673 for the years ended 2023, 2022, and 2021, respectively.
As part of the Company’s investment activity, we have committed $160,000 to investments in limited partnerships. The Company has contributed $114,418 to these commitments as of December 31, 2022.
As part of the Company’s investment activity, we have committed $170,000 to investments in limited partnerships. The Company has contributed $133,330 to these commitments as of December 31, 2023.
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.
To the extent that reserves are inadequate and are strengthened, the amount of such increase is treated as a charge to 53 Table of Contents earnings in the period that the deficiency is recognized.
As a result of this Massachusetts statute, the Insurance Subsidiaries had restricted net assets in the amount of $703,980 at December 31, 2022. During the twelve months ended December 31, 2022, Safety Insurance recorded dividends to Safety of $94,260.
As a result of this Massachusetts statute, the Insurance Subsidiaries had restricted net assets in the amount of $670,414 at December 31, 2023. During the twelve months ended December 31, 2023, Safety Insurance recorded dividends to Safety of $56,329.
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.
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.
Net cash used for investing activities was $19,988, $65,989, and $35,524 for the years ended December 31, 2022, 2021, and 2020, respectively, as purchases of fixed maturity and equity securities exceeded proceeds from the sales, paydowns, calls and maturities of fixed maturity and equity securities.
Net cash provided by investing activities was $24,269 during the year ended December 31, 2023 compared to net cash used for investing activities was $19,988, and $65,989 for the years ended December 31, 2022, and 2021, 48 Table of Contents respectively, as proceeds from the sales, paydowns, calls and maturities of fixed maturity and equity securities exceeded purchases.
A reconciliation of the GAAP financial measures to these non-GAAP measures is included in the financial highlights below. ​ 40 Table of Contents Results of Operations The following table shows certain of our selected financial results. ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Years Ended December 31, ​ 2022 ​ 2021 ​ ​ 2020 Direct written premiums ​ ​ $ 823,318 ​ $ 802,139 ​ $ 798,712 Net written premiums ​ ​ $ 773,735 ​ $ 764,526 ​ $ 763,537 Net earned premiums ​ ​ $ 758,505 ​ $ 774,328 ​ $ 771,078 Net investment income ​ ​ 46,725 ​ 44,135 ​ ​ 41,045 Earnings from partnership investments ​ ​ ​ 12,484 ​ ​ 19,829 ​ ​ 6,901 Net realized gains on investments ​ ​ ​ 9,190 ​ ​ 14,885 ​ ​ 957 Change in net unrealized (losses) gains on equity investments ​ ​ (44,386) ​ 16,130 ​ ​ 10,449 Credit loss benefit (expense) ​ ​ 14 ​ 363 ​ ​ (1,054) Commission income ​ ​ 566 ​ — ​ ​ — Finance and other service income ​ ​ 14,461 ​ 15,241 ​ ​ 16,872 Total revenue ​ ​ 797,559 ​ 884,911 ​ ​ 846,248 Loss and loss adjustment expenses ​ ​ 491,979 ​ 461,727 ​ ​ 404,556 Underwriting, operating and related expenses ​ ​ 245,145 ​ 258,392 ​ ​ 266,482 Other expense ​ ​ 330 ​ — ​ ​ — Interest expense ​ ​ 524 ​ 522 ​ ​ 440 Total expenses ​ ​ 737,978 ​ 720,641 ​ ​ 671,478 Income before income taxes ​ ​ 59,581 ​ 164,270 ​ ​ 174,770 Income tax expense ​ ​ 13,020 ​ 33,560 ​ ​ 36,559 Net income ​ ​ $ 46,561 ​ $ 130,710 ​ $ 138,211 Earnings per weighted average common share: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Basic ​ ​ $ 3.17 ​ $ 8.85 ​ $ 9.25 Diluted ​ ​ $ 3.15 ​ $ 8.80 ​ $ 9.18 Cash dividends paid per common share ​ ​ $ 3.60 ​ $ 3.60 ​ $ 3.60 ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Reconciliation of Net Income to Non-GAAP Operating Income: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Net income ​ ​ $ 46,561 ​ $ 130,710 ​ $ 138,211 Exclusions from net income: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Net realized gains on investments ​ ​ ​ (9,190) ​ ​ (14,885) ​ ​ (957) Change in net unrealized (losses) gains on equity investments ​ ​ ​ 44,386 ​ ​ (16,130) ​ ​ (10,449) Credit loss (benefit) expense ​ ​ ​ (14) ​ ​ (363) ​ ​ 1,054 Income tax benefit ​ ​ ​ (7,388) ​ ​ 6,589 ​ ​ 2,174 Non-GAAP Operating income ​ ​ $ 74,355 ​ $ 105,921 ​ $ 130,033 ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Net income per diluted share ​ ​ $ 3.15 ​ $ 8.80 ​ $ 9.18 Exclusions from net income: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Net realized gains on investments ​ ​ ​ (0.62) ​ ​ (1.00) ​ ​ (0.06) Change in net unrealized losses (gains) on equity investments ​ ​ ​ 3.02 ​ ​ (1.08) ​ ​ (0.69) Credit loss (benefit) expense ​ ​ ​ - ​ ​ (0.02) ​ ​ 0.07 Income tax benefit ​ ​ ​ (0.50) ​ ​ 0.44 ​ ​ 0.14 Non-GAAP Operating income per diluted share ​ ​ $ 5.05 ​ $ 7.14 ​ $ 8.64 ​ ​ YEAR ENDED DECEMBER 31, 2022 COMPARED TO YEAR ENDED DECEMBER 31, 2021 ​ Direct Written Premiums.
A reconciliation of the GAAP financial measures to these non-GAAP measures is included in the financial highlights below. ​ ​ ​ ​ ​ ​ Results of Operations The following table shows certain of our selected financial results. ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Years Ended December 31, ​ 2023 ​ 2022 ​ ​ 2021 Direct written premiums ​ ​ $ 991,224 ​ $ 823,318 ​ $ 802,139 Net written premiums ​ ​ $ 925,295 ​ $ 773,735 ​ $ 764,526 Net earned premiums ​ ​ $ 834,414 ​ $ 758,505 ​ $ 774,328 Net investment income ​ ​ 56,377 ​ 46,725 ​ ​ 44,135 Earnings from partnership investments ​ ​ ​ 5,540 ​ ​ 12,484 ​ ​ 19,829 Net realized gains on investments ​ ​ ​ 1,327 ​ ​ 9,190 ​ ​ 14,885 Change in net unrealized (losses) gains on equity investments ​ ​ 7,502 ​ (44,386) ​ ​ 16,130 Credit loss (expense) benefit ​ ​ (530) ​ 14 ​ ​ 363 Commission income ​ ​ 6,932 ​ 566 ​ ​ — Finance and other service income ​ ​ 19,394 ​ 14,461 ​ ​ 15,241 Total revenue ​ ​ 930,956 ​ 797,559 ​ ​ 884,911 Loss and loss adjustment expenses ​ ​ 642,302 ​ 491,979 ​ ​ 461,727 Underwriting, operating and related expenses ​ ​ 256,580 ​ 245,145 ​ ​ 258,392 Other expense ​ ​ 6,836 ​ 330 ​ ​ — Interest expense ​ ​ 818 ​ 524 ​ ​ 522 Total expenses ​ ​ 906,536 ​ 737,978 ​ ​ 720,641 Income before income taxes ​ ​ 24,420 ​ 59,581 ​ ​ 164,270 Income tax expense ​ ​ 5,545 ​ 13,020 ​ ​ 33,560 Net income ​ ​ $ 18,875 ​ $ 46,561 ​ $ 130,710 Earnings per weighted average common share: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Basic ​ ​ $ 1.28 ​ $ 3.17 ​ $ 8.85 Diluted ​ ​ $ 1.28 ​ $ 3.15 ​ $ 8.80 Cash dividends paid per common share ​ ​ $ 3.60 ​ $ 3.60 ​ $ 3.60 ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ 44 Table of Contents Reconciliation of Net Income to Non-GAAP Operating Income: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Net income ​ ​ $ 18,875 ​ $ 46,561 ​ $ 130,710 Exclusions from net income: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Net realized gains on investments ​ ​ ​ (1,327) ​ ​ (9,190) ​ ​ (14,885) Change in net unrealized (losses) gains on equity investments ​ ​ ​ (7,502) ​ ​ 44,386 ​ ​ (16,130) Credit loss expense (benefit) ​ ​ ​ 530 ​ ​ (14) ​ ​ (363) Income tax benefit ​ ​ ​ 1,743 ​ ​ (7,388) ​ ​ 6,589 Non-GAAP Operating income ​ ​ $ 12,319 ​ $ 74,355 ​ $ 105,921 ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Net income per diluted share ​ ​ $ 1.28 ​ $ 3.15 ​ $ 8.80 Exclusions from net income: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Net realized gains on investments ​ ​ ​ (0.09) ​ ​ (0.62) ​ ​ (1.00) Change in net unrealized losses (gains) on equity investments ​ ​ ​ (0.51) ​ ​ 3.02 ​ ​ (1.08) Credit loss expense (benefit) ​ ​ ​ 0.04 ​ ​ - ​ ​ (0.02) Income tax benefit ​ ​ ​ 0.12 ​ ​ (0.50) ​ ​ 0.44 Non-GAAP Operating income per diluted share ​ ​ $ 0.84 ​ $ 5.05 ​ $ 7.14 ​ ​ YEAR ENDED DECEMBER 31, 2023 COMPARED TO YEAR ENDED DECEMBER 31, 2022 ​ Direct Written Premiums.
The decreases in prior year reserves in 2021 resulted from re-estimations of prior year’s ultimate loss and LAE liabilities and are primarily composed of reductions of $22,313 in our retained automobile reserves and $26,220 in our retained other than auto and homeowner reserves.
The decreases in prior year reserves in 2023 resulted from re-estimations of prior year’s ultimate loss and LAE liabilities and are primarily composed of reductions of $15,451 in our retained automobile reserves and $29,782 in our retained other than auto and homeowner’s reserves.
The decrease in prior year reserves during 2020 are primarily composed of reductions of $26,902 in our retained automobile reserves and $21,717 in our retained homeowners reserves.
The decrease in prior year reserves during 2021 are primarily composed of reductions of $22,313 in our retained automobile reserves and $26,220 in our retained homeowners reserves.
Direct written premiums for the year ended December 31, 2022 increased by $21,179, or 2.6%, to $823,318 from $802,139 for the comparable 2021 period. The increase in direct written premium is the result of new business production, improved retention, and rate increases. Net Written Premiums.
Direct written premiums for the year ended December 31, 2023 increased by $167,906, or 20.4%, to $991,224 from $823,318 for the comparable 2022 period. The increase in direct written premium is the result of new business production, improved retention, and rate increases.
Interest expense was $524 and $522 for the years ended December 31, 2022 and 2021, respectively. Interest expense primarily relates to the borrowing from the FHLB as noted within Item 8 – Financial Statements and Supplementary Data, Note 10, Debt, of this Form 10-K.
Interest expense primarily relates to the borrowing from the FHLB as noted within Item 8 – Financial Statements and Supplementary Data, Note 10, Debt, of this Form 10-K. The credit facility commitment fee included in interest expense was $75 for each of the years ended December 31, 2023 and 2022. Income Tax Expense.
Our financial statements reflect the aggregate results of the current and all prior accident years. ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Year Ended December 31, Accident Year 2022 2021 ​ 2020 2012 & prior ​ $ (423) ​ $ (1,609) ​ $ (2,723) 2013 ​ ​ (880) ​ ​ (194) ​ ​ (822) 2014 ​ ​ (521) ​ ​ (1,534) ​ ​ (452) 2015 ​ ​ (2,057) ​ ​ (2,757) ​ ​ (3,265) 2016 ​ ​ (1,662) ​ ​ (1,096) ​ ​ (5,496) 2017 ​ ​ (3,749) ​ ​ (4,682) ​ ​ (10,726) 2018 ​ ​ (7,233) ​ ​ (10,190) ​ ​ (16,697) 2019 ​ ​ (12,520) ​ ​ (16,810) ​ ​ (14,663) 2020 ​ ​ (18,985) ​ ​ (14,801) ​ ​ — 2021 ​ ​ (9,249) ​ ​ — ​ ​ — All prior years $ (57,279) $ (53,673) ​ $ (54,844) ​ At the end of each period, the reserves were re-estimated for all prior accident years.
Our financial statements reflect the aggregate results of the current and all prior accident years. ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Year Ended December 31, Accident Year 2023 2022 ​ 2021 2013 & prior ​ $ (1,403) ​ $ (1,303) ​ $ (1,803) 2014 ​ ​ (996) ​ ​ (521) ​ ​ (1,534) 2015 ​ ​ (1,982) ​ ​ (2,057) ​ ​ (2,757) 2016 ​ ​ (1,484) ​ ​ (1,662) ​ ​ (1,096) 2017 ​ ​ (3,836) ​ ​ (3,749) ​ ​ (4,682) 2018 ​ ​ (3,892) ​ ​ (7,233) ​ ​ (10,190) 2019 ​ ​ (7,451) ​ ​ (12,520) ​ ​ (16,810) 2020 ​ ​ (10,212) ​ ​ (18,985) ​ ​ (14,801) 2021 ​ ​ (7,246) ​ ​ (9,249) ​ ​ — 2022 ​ ​ (8,879) ​ ​ — ​ ​ — All prior years $ (47,381) $ (57,279) ​ $ (53,673) ​ At the end of each period, the reserves were re-estimated for all prior accident years.
The nature and level of catastrophes in any period cannot be reliably predicted. ​ Catastrophe losses incurred by the type of event are shown in the following table. ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Years Ended December 31, Event 2022 ​ 2021 ​ 2020 Windstorms and hailstorms $ - ​ $ 11,677 ​ $ 7,291 ​ Total losses incurred (1) $ - ​ $ 11,677 ​ $ 7,291 ​ 37 Table of Contents (1) Total losses incurred include losses plus defense and cost containment expenses and excludes adjusting and other claims settlement expenses.
The nature and level of catastrophes in any period cannot be reliably predicted. ​ ​ ​ ​ ​ ​ ​ 40 Table of Contents ​ Catastrophe losses incurred by the type of event are shown in the following table. ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Years Ended December 31, Event 2023 ​ 2022 ​ 2021 Freeze $ 29,543 ​ $ - ​ $ - Windstorms and hailstorms $ 11,635 ​ $ - ​ $ 11,677 ​ Total losses incurred (1) $ 41,178 ​ $ - ​ $ 11,677 ​ (1) Total losses incurred include losses plus defense and cost containment expenses and excludes adjusting and other claims settlement expenses. ​ Direct and Net Written Premiums ​ For the quarter ended December 31, 2023, the Company achieved its fifth consecutive quarter of double-digit growth in direct and net written premiums.
A 1 percentage-point change in both our key assumptions would change estimated reserves within a range of plus or minus 2 percentage-points. 50 Table of Contents ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ -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 $ (3,761) $ (1,881) $ — Estimated increase in net income ​ ​ 2,972 ​ ​ 1,486 ​ ​ — No Change in Severity ​ ​ ​ ​ ​ ​ ​ ​ ​ Estimated (decrease) increase in reserves ​ ​ (1,881) ​ ​ — ​ ​ 1,881 Estimated increase (decrease) in net income ​ ​ 1,486 ​ ​ — ​ ​ (1,486) +1 Percent Change in Severity ​ ​ ​ ​ ​ ​ ​ ​ ​ Estimated increase in reserves ​ ​ — ​ ​ 1,881 ​ ​ 3,761 Estimated decrease in net income ​ ​ — ​ ​ (1,486) ​ ​ (2,972) ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Commercial automobile retained loss and LAE reserves ​ ​ ​ ​ ​ ​ ​ ​ ​ -1 Percent Change in Severity ​ ​ ​ ​ ​ ​ ​ ​ ​ Estimated decrease in reserves ​ ​ (1,532) ​ ​ (766) ​ ​ — Estimated increase in net income ​ ​ 1,210 ​ ​ 605 ​ ​ — No Change in Severity ​ ​ ​ ​ ​ ​ ​ ​ ​ Estimated (decrease) increase in reserves ​ ​ (766) ​ ​ — ​ ​ 766 Estimated increase (decrease) in net income ​ ​ 605 ​ ​ — ​ ​ (605) +1 Percent Change in Severity ​ ​ ​ ​ ​ ​ ​ ​ ​ Estimated increase in reserves ​ ​ — ​ ​ 766 ​ ​ 1,532 Estimated decrease in net income ​ ​ — ​ ​ (605) ​ ​ (1,210) ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Homeowners retained loss and LAE reserves ​ ​ ​ ​ ​ ​ ​ ​ ​ -1 Percent Change in Severity ​ ​ ​ ​ ​ ​ ​ ​ ​ Estimated decrease in reserves ​ ​ (1,527) ​ ​ (764) ​ ​ — Estimated increase in net income ​ ​ 1,206 ​ ​ 603 ​ ​ — No Change in Severity ​ ​ ​ ​ ​ ​ ​ ​ ​ Estimated (decrease) increase in reserves ​ ​ (764) ​ ​ — ​ ​ 764 Estimated increase (decrease) in net income ​ ​ 603 ​ ​ — ​ ​ (603) +1 Percent Change in Severity ​ ​ ​ ​ ​ ​ ​ ​ ​ Estimated increase in reserves ​ ​ — ​ ​ 764 ​ ​ 1,527 Estimated decrease in net income ​ ​ — ​ ​ (603) ​ ​ (1,206) ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ All other retained loss and LAE reserves ​ ​ ​ ​ ​ ​ ​ ​ ​ -1 Percent Change in Severity ​ ​ ​ ​ ​ ​ ​ ​ ​ Estimated decrease in reserves ​ ​ (1,503) ​ ​ (751) ​ ​ — Estimated increase in net income ​ ​ 1,187 ​ ​ 594 ​ ​ — No Change in Severity ​ ​ ​ ​ ​ ​ ​ ​ ​ Estimated (decrease) increase in reserves ​ ​ (751) ​ ​ — ​ ​ 751 Estimated increase (decrease) in net income ​ ​ 594 ​ ​ — ​ ​ (594) +1 Percent Change in Severity ​ ​ ​ ​ ​ ​ ​ ​ ​ Estimated increase in reserves ​ ​ — ​ ​ 751 ​ ​ 1,503 Estimated decrease in net income ​ ​ — ​ ​ (594) ​ ​ (1,187) ​ Our estimated share of CAR loss and LAE reserves is based on assumptions about our Participation Ratio, the size of CAR, and the resulting deficit (similar assumptions apply with respect to the FAIR Plan).
A 1 percentage-point change in both our key assumptions would change estimated reserves within a range of plus or minus 2 percentage-points. 54 Table of Contents ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ -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 $ (4,252) $ (2,126) $ — Estimated increase in net income ​ ​ 3,359 ​ ​ 1,680 ​ ​ — No Change in Severity ​ ​ ​ ​ ​ ​ ​ ​ ​ Estimated (decrease) increase in reserves ​ ​ (2,126) ​ ​ — ​ ​ 2,126 Estimated increase (decrease) in net income ​ ​ 1,680 ​ ​ — ​ ​ (1,680) +1 Percent Change in Severity ​ ​ ​ ​ ​ ​ ​ ​ ​ Estimated increase in reserves ​ ​ — ​ ​ 2,126 ​ ​ 4,252 Estimated decrease in net income ​ ​ — ​ ​ (1,680) ​ ​ (3,359) ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Commercial automobile retained loss and LAE reserves ​ ​ ​ ​ ​ ​ ​ ​ ​ -1 Percent Change in Severity ​ ​ ​ ​ ​ ​ ​ ​ ​ Estimated decrease in reserves ​ ​ (1,492) ​ ​ (746) ​ ​ — Estimated increase in net income ​ ​ 1,179 ​ ​ 589 ​ ​ — No Change in Severity ​ ​ ​ ​ ​ ​ ​ ​ ​ Estimated (decrease) increase in reserves ​ ​ (746) ​ ​ — ​ ​ 746 Estimated increase (decrease) in net income ​ ​ 589 ​ ​ — ​ ​ (589) +1 Percent Change in Severity ​ ​ ​ ​ ​ ​ ​ ​ ​ Estimated increase in reserves ​ ​ — ​ ​ 746 ​ ​ 1,492 Estimated decrease in net income ​ ​ — ​ ​ (589) ​ ​ (1,179) ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Homeowners retained loss and LAE reserves ​ ​ ​ ​ ​ ​ ​ ​ ​ -1 Percent Change in Severity ​ ​ ​ ​ ​ ​ ​ ​ ​ Estimated decrease in reserves ​ ​ (1,769) ​ ​ (885) ​ ​ — Estimated increase in net income ​ ​ 1,398 ​ ​ 699 ​ ​ — No Change in Severity ​ ​ ​ ​ ​ ​ ​ ​ ​ Estimated (decrease) increase in reserves ​ ​ (885) ​ ​ — ​ ​ 885 Estimated increase (decrease) in net income ​ ​ 699 ​ ​ — ​ ​ (699) +1 Percent Change in Severity ​ ​ ​ ​ ​ ​ ​ ​ ​ Estimated increase in reserves ​ ​ — ​ ​ 885 ​ ​ 1,769 Estimated decrease in net income ​ ​ — ​ ​ (699) ​ ​ (1,398) ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ All other retained loss and LAE reserves ​ ​ ​ ​ ​ ​ ​ ​ ​ -1 Percent Change in Severity ​ ​ ​ ​ ​ ​ ​ ​ ​ Estimated decrease in reserves ​ ​ (1,467) ​ ​ (733) ​ ​ — Estimated increase in net income ​ ​ 1,159 ​ ​ 579 ​ ​ — No Change in Severity ​ ​ ​ ​ ​ ​ ​ ​ ​ Estimated (decrease) increase in reserves ​ ​ (733) ​ ​ — ​ ​ 733 Estimated increase (decrease) in net income ​ ​ 579 ​ ​ — ​ ​ (579) +1 Percent Change in Severity ​ ​ ​ ​ ​ ​ ​ ​ ​ Estimated increase in reserves ​ ​ — ​ ​ 733 ​ ​ 1,467 Estimated decrease in net income ​ ​ — ​ ​ (579) ​ ​ (1,159) ​ Our estimated share of CAR loss and LAE reserves is based on assumptions about our Participation Ratio, the size of CAR, and the resulting deficit (similar assumptions apply with respect to the FAIR Plan).
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.
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.
The increase in the prior year favorable development in 2022 is primarily related to the reversal of $6,500 legal expense reserve during the second quarter of 2022. Underwriting, Operating and Related Expenses. Underwriting, operating and related expenses for the year ended December 31, 2022 decreased by $13,247, or 5.1%, to $245,145 from $258,392 for the comparable 2021 period.
Prior year favorable development in 2022 benefitted from the reversal of $6,500 legal expense reserve during the second quarter of 2022. Underwriting, Operating and Related Expenses. Underwriting, operating and related expenses for the year ended December 31, 2023 increased by $11,435, or 4.7%, to $256,580 from $245,145 for the comparable 2022 period.
At year-end 2022, the statutory surplus of Safety Insurance was $782,200, and its net income for 2022 was $66,197. As a result, a maximum of $78,220 is available in 2022 for such dividends without prior approval of the Commissioner.
At year-end 2023, the statutory surplus of Safety Insurance was $744,904, and its net loss for 2023 was $4,022. As a result, a maximum of $74,490 is available in 2023 for such dividends without prior approval of the Commissioner.
Net written premiums for the year ended December 31, 2022 increased by $9,209, or 1.2%, to $773,735 from $764,526 for the comparable 2021 period. T he 2022 increase was primarily due to the factors that increased direct written premiums. ​ 41 Table of Contents Net Earned Premiums.
Net written premiums for the year ended December 31, 2023 increased by $151,560, or 19.6%, to $925,295 from $773,735 for the comparable 2022 period. T he 2023 increase was primarily due to the factors that increased direct written premiums. ​ Net Earned Premiums.
The specific amounts and timing of obligations related to case reserves, IBNR reserves and related LAE reserves are not set contractually, and the amounts and timing of these obligations are unknown.
Our loss and LAE reserves are estimates as described in more detail under Critical Accounting Policies and Estimates . The specific amounts and timing of obligations related to case reserves, IBNR reserves and related LAE reserves are not set contractually, and the amounts and timing of these obligations are unknown.
Our GAAP expense ratio for the year ended December 31, 2022 decreased to 32.3% from 33.4% for the comparable 2021 period. The 2022 decrease is driven by a decrease in contingent commission expense. ​ Other Expense: Other expense includes the operating and related expenses associated with SNIA. ​ Interest Expense.
Our GAAP expense ratio for the year ended December 31, 2023 decreased to 30.7% from 32.3% for the comparable 2022 period. ​ Other Expense: Other expense includes the operating and related expenses associated with SNIA. ​ Interest Expense. Interest expense was $818 and $524 for the years ended December 31, 2023 and 2022, respectively.
Loss, expense, and combined ratios calculated under U.S. generally accepted accounting principles for the year ended December 31, 2022 were 64.9%, 32.3%, and 97.2%, respectively, compared to 59.6%, 33.4%, and 93.0%, respectively, for the comparable 2021 period.
Loss, expense, and combined ratios calculated under U.S. generally accepted accounting principles for the year ended December 31, 2023 were 77.0%, 30.7%, and 107.7%, respectively, compared to 64.9%, 32.3%, and 97.2%, respectively, for the comparable 2022 period. The 2023 increase in loss ratio is primarily due to the factors that increased losses and loss adjustment expenses.
Our IBNR reserves for FAIR Plan assumed homeowners are 58.9% of our total reserves for FAIR Plan assumed homeowners at December 31, 2022 due to similar reporting delays in the information we receive from FAIR Plan. ​ The following table presents information by line of business for our total net reserves and the corresponding retained (i.e. direct less ceded) reserves and assumed reserves as of December 31, 2022. ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ As of December 31, 2022 Line of Business ​ Retained ​ Assumed ​ Net Private passenger automobile $ 188,075 ​ ​ ​ ​ ​ ​ CAR assumed private passenger automobile ​ ​ ​ $ 8 ​ ​ ​ Net private passenger automobile ​ ​ ​ ​ ​ ​ $ 188,083 Commercial automobile ​ ​ 76,609 ​ ​ ​ ​ ​ ​ CAR assumed commercial automobile ​ ​ ​ ​ ​ 30,312 ​ ​ ​ Net commercial automobile ​ ​ ​ ​ ​ ​ ​ ​ 106,921 Homeowners ​ ​ 76,357 ​ ​ ​ ​ ​ ​ FAIR Plan assumed homeowners ​ ​ ​ ​ ​ 9,707 ​ ​ ​ Net homeowners ​ ​ ​ ​ ​ ​ ​ ​ 86,064 All other ​ ​ 75,136 ​ ​ — ​ ​ 75,136 Total net reserves for losses and LAE $ 416,177 $ 40,027 $ 456,204 ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ 49 Table of Contents Residual Market Loss and Loss Adjustment Expense Reserves ​ We are a participant in CAR, the FAIR Plan and other various residual markets and assume a portion of losses and LAE on business ceded by the industry participants to the residual markets.
Our IBNR reserves for FAIR Plan assumed homeowners are 57.5% of our total reserves for FAIR Plan assumed homeowners at December 31, 2023 due to similar reporting delays in the information we receive from FAIR Plan. ​ The following table presents information by line of business for our total net reserves and the corresponding retained (i.e. direct less ceded) reserves and assumed reserves as of December 31, 2023. ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ As of December 31, 2023 Line of Business ​ Retained ​ Assumed ​ Net Private passenger automobile $ 212,619 ​ ​ ​ ​ ​ ​ CAR assumed private passenger automobile ​ ​ ​ $ 9 ​ ​ ​ Net private passenger automobile ​ ​ ​ ​ ​ ​ $ 212,628 Commercial automobile ​ ​ 74,614 ​ ​ ​ ​ ​ ​ CAR assumed commercial automobile ​ ​ ​ ​ ​ 30,721 ​ ​ ​ Net commercial automobile ​ ​ ​ ​ ​ ​ ​ ​ 105,335 Homeowners ​ ​ 88,470 ​ ​ ​ ​ ​ ​ FAIR Plan assumed homeowners ​ ​ ​ ​ ​ 10,690 ​ ​ ​ Net homeowners ​ ​ ​ ​ ​ ​ ​ ​ 99,160 All other ​ ​ 73,335 ​ ​ — ​ ​ 73,335 Total net reserves for losses and LAE $ 449,038 $ 41,420 $ 490,458 ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Residual Market Loss and Loss Adjustment Expense Reserves ​ We are a participant in CAR, the FAIR Plan and other various residual markets and assume a portion of losses and LAE on business ceded by the industry participants to the residual markets.
Net earned premiums for the year ended December 31, 2022 decreased by $15,823, or 2.0%, to $758,505 from $774,328 for the comparable 2021 period. ​ The effect of reinsurance on net written and net earned premiums is presented in the following table. ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Year Ended December 31, ​ 2022 2021 Written Premiums ​ ​ ​ ​ ​ ​ Direct ​ $ 823,318 ​ $ 802,139 Assumed ​ 28,835 ​ 31,359 Ceded ​ (78,418) ​ (68,972) Net written premiums ​ $ 773,735 ​ $ 764,526 ​ ​ ​ ​ ​ ​ ​ Earned Premiums ​ ​ ​ ​ ​ ​ Direct ​ $ 803,289 ​ $ 811,329 Assumed ​ 28,976 ​ 30,583 Ceded ​ (73,760) ​ (67,584) Net earned premiums ​ $ 758,505 ​ $ 774,328 ​ ​ Net Investment Income.
Net earned premiums for the year ended December 31, 2023 increased by $75,909, or 10.0%, to $834,414 from $758,505 for the comparable 2022 period. ​ The effect of reinsurance on net written and net earned premiums is presented in the following table. ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Year Ended December 31, ​ 2023 2022 Written Premiums ​ ​ ​ ​ ​ ​ Direct ​ $ 991,224 ​ $ 823,318 Assumed ​ 30,850 ​ 28,835 Ceded ​ (96,779) ​ (78,418) Net written premiums ​ $ 925,295 ​ $ 773,735 ​ ​ ​ ​ ​ ​ ​ Earned Premiums ​ ​ ​ ​ ​ ​ Direct ​ $ 897,598 ​ $ 803,289 Assumed ​ 29,702 ​ 28,976 Ceded ​ (92,886) ​ (73,760) Net earned premiums ​ $ 834,414 ​ $ 758,505 ​ ​ Net Investment Income.
We are a leading provider of private passenger automobile (52.0% of our direct written premiums in 2022), commercial automobile, (17.4% of 2022 direct written premiums), and homeowners (25.3% of 2022 direct written premiums) insurance.
We are a leading provider of private passenger automobile (54.7% of our direct written premiums in 2023), commercial automobile, (15.9% of 2023 direct written premiums), and homeowners (24.5% of 2023 direct written premiums) insurance.
During the year ended December 31, 2022, the claim against the Company was closed and the accrual of $6,500 was reversed. ​ Losses and Loss Adjustment Expenses Losses and loss adjustment expenses incurred for the year ended December 31, 2022 increased by $30,252, or 6.6%, to $491,979 from $461,727 for the comparable 2021 period.
Losses and loss adjustment expenses incurred for the year ended December 31, 2023 increased by $150,323, or 30.6%, to $642,302 from $491,979 for the comparable 2022 period.
Government agencies $ 234,152 22.3 % Aaa/Aa ​ ​ 237,191 22.6 ​ A ​ ​ 201,943 19.2 ​ Baa ​ ​ 202,763 19.3 ​ Ba ​ ​ 61,619 5.9 ​ B ​ ​ 93,633 8.9 ​ Caa/Ca ​ ​ 4,489 0.4 ​ Not rated ​ ​ 14,365 1.4 ​ Total ​ $ 1,050,155 100.0 % ​ ​ ​ ​ ​ ​ ​ Ratings are generally assigned upon the issuance of the securities and are subject to revision on the basis of ongoing evaluations.
Government agencies $ 247,237 23.5 % Aaa/Aa ​ ​ 212,833 20.2 ​ A ​ ​ 219,018 20.8 ​ Baa ​ ​ 202,513 19.2 ​ Ba ​ ​ 47,946 4.6 ​ B ​ ​ 84,681 8.0 ​ Caa/Ca ​ ​ 3,733 0.4 ​ Not rated ​ ​ 34,184 3.3 ​ Total ​ $ 1,052,145 100.0 % ​ ​ ​ ​ ​ ​ ​ Ratings are generally assigned upon the issuance of the securities and are subject to revision on the basis of ongoing evaluations.
The decrease is primarily driven by a change in our late fee assessment policy. Losses and Loss Adjustment Expenses. Losses and loss adjustment expenses incurred for the year ended December 31, 2022 increased by $30,252, or 6.6%, to $491,979 from $461,727 for the comparable 2021 period.
Finance and other service income increased by $4,933, or 34.1%, to $19,394 for the year ended December 31, 2023 from $14,461 for the comparable 2022 period. The increase is primarily driven by the increase in policy counts and changes to our fee assessment policies. Losses and Loss Adjustment Expenses.
The increase in losses is due to a return of pre-pandemic frequency in our private passenger automobile line of business and current market conditions including inflation and supply chain delays. ​ Loss, expense, and combined ratios calculated under U.S. generally accepted accounting principles for the quarter ended December 31, 2022 were 68.4%, 32.3%, and 100.7%, respectively, compared to 62.7%, 33.7%, and 96.4%, respectively, for the comparable 2021 period.
The increase in losses for the year ended December 31, 2023 also included the February Winter Freeze and increased total automobile losses due to multiple flood events, and a separate high wind event that impacted our Homeowners line of business. ​ Loss, expense, and combined ratios calculated under U.S. generally accepted accounting principles for the quarter ended December 31, 2023 were 76.1%, 30.4%, and 106.5%, respectively, compared to 68.4%, 32.3%, and 100.7%, respectively, for the comparable 2022 period.

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Item 7A. Quantitative and Qualitative Disclosures About Market Risk

Market Risk — interest-rate, FX, commodity exposure

3 edited+0 added−0 removed8 unchanged
Biggest changeBased 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 December 31, 2022 ​ ​ ​ ​ ​ ​ ​ ​ ​ Estimated fair value $ 1,092,151 $ 1,050,155 $ 1,007,772 Estimated increase (decrease) in fair value $ 41,996 $ — $ (42,383) ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ As of December 31, 2021 ​ ​ ​ ​ ​ ​ ​ ​ ​ Estimated fair value $ 1,261,399 $ 1,218,279 $ 1,174,068 Estimated increase (decrease) in fair value $ 43,120 $ — $ (44,211) ​ With respect to floating rate debt, we are exposed to the effects of changes in prevailing interest rates.
Biggest changeBased 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 December 31, 2023 ​ ​ ​ ​ ​ ​ ​ ​ ​ Estimated fair value $ 1,091,365 $ 1,052,145 $ 1,012,316 Estimated increase (decrease) in fair value $ 39,220 $ — $ (39,829) ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ With respect to floating rate debt, we are exposed to the effects of changes in prevailing interest rates.
At December 31, 2022, we had no debt outstanding under our credit facility. Assuming the full utilization of our current available credit facility, a 2.0% increase in the prevailing interest rate on our variable rate debt would result in interest expense increasing approximately $600 for 2022, assuming that all of such debt is outstanding for the entire year.
At December 31, 2023, we had no debt outstanding under our credit facility. Assuming the full utilization of our current available credit facility, a 2.0% increase in the prevailing interest rate on our variable rate debt would result in interest expense increasing approximately $600 for 2023, assuming that all of such debt is outstanding for the entire year.
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. ​ ​ 56 Table of Contents
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. ​ ​ 59 Table of Contents

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