Q2-2023 Spotlight: Safety Insurance Reports Q2 Results Amid Auto Inflation Headwinds

Insurer Looks to Battle Rising Auto Claims with Underwriting Discipline

Boston-based Safety Insurance Group announced its second quarter 2023 results this week, highlighting ongoing inflationary pressures particularly impacting its private passenger auto line.

“Safety’s combined ratio of 101.9% for the second quarter is driven mainly by continued inflationary impacts on our private passenger auto line of business,” said President & CEO George Murphy.

The company reported sizeable increases in both losses and direct written premiums compared to last year, indicating it is battling elevated claims costs with price hikes. Net losses jumped 27% in Q2 to $143 million, while direct written premiums grew 21% to $260 million.

Key highlights from Safety’s earnings report:

Q2 net income of $17 million, or $1.15 per share, up from $7.9 million, or $0.53 per share in Q2 2022.

Combined ratio spiked to 101.9%, driven by auto loss cost trends. Taking significant rate actions to address this.

Direct written premiums grew 21% to $260 million, with policy count up 11.6% year-to-date. Average premium per policy also rose 6.4%.

Net investment income increased 19% to $13.8 million given higher interest rates on fixed income portfolio.

Book value per share decreased slightly to $53.66, impacted by winter storm losses and capital actions.

Policy growth and increased premiums in Q2

Safety also highlighted strong policy growth in the quarterly update, up 11.6% year-to-date across all lines of business including auto, commercial auto, and homeowners. It also achieved higher average premium per policy of 6.4% this year.

While net income improved from last year, book value per share dipped slightly to $53.66. This was attributed to the impact of severe winter weather claims that occurred in February 2023, along with capital actions like dividends and share repurchases.

Rate increases on tap for personal auto

CFO Glenn Hiltpold emphasized Safety’s focus on “filing rate increases to combat ongoing industry-wide loss trends” in private passenger auto insurance. He said the company remains diligent in its underwriting while taking rate to keep pace with rising claims costs.

Safety expects the auto insurance environment to remain challenging in the near-term, but believes its strategy of underwriting discipline and actuarial rate adjustments will allow it to navigate market conditions.