Safety Insurance Group, Inc. :SAFT-US: Earnings Analysis: Q1, 2017 By the Numbers : June 9, 2017

Safety Insurance Group, Inc. reports financial results for the quarter ended March 31, 2017.

We analyze the earnings along side the following peers of Safety Insurance Group, Inc. – Progressive Corporation, Allstate Corporation, Mercury General Corporation, Infinity Property and Casualty Corporation and American International Group, Inc. (PGR-US, ALL-US, MCY-US, IPCC-US and AIG-US) that have also reported for this period.


  • Summary numbers: Revenues of USD 204.42 million, Net Earnings of USD 11.94 million.
  • Year-on-year change in operating cash flow of -59.31% is about the same as the change in earnings, likely no significant movement in accruals or reserves.
  • Earnings decline from operating margin decreases as well as from unusual items

The table below shows the preliminary results and recent trends for key metrics such as revenues and net income (See complete table at the end of this report):

2017-03-31 2016-12-31 2016-09-30 2016-06-30 2016-03-31
Relevant Numbers (Quarterly)
Revenues (mil) 204.42 207.23 209.04 201.42 199.08
Revenue Growth (%YOY) 2.68 3.38 4.18 2.37 0.7
Earnings (mil) 11.94 11.88 18.48 21.23 12.51
Earnings Growth (%YOY) -4.59 15.45 55.39 2115.86 135.68
Net Margin (%) 5.84 5.73 8.84 10.54 6.29
EPS 0.79 0.79 1.23 1.41 0.84
Return on Equity (%) 7.08 7 10.81 12.69 7.68
Return on Assets (%) 2.68 2.64 4.15 4.91 2.91

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Market Share Versus Profits

Revenues History
Earnings History

SAFT-US‘s change in revenue this period compared to the same period last year of 2.68% is almost the same as its change in earnings, and is about average among the announced results thus far in its peer group, suggesting that SAFT-US is holding onto its market share. Also, for comparison purposes, revenues changed by -1.36% and earnings by 0.51% compared to the immediate last period.

Revenues Growth Versus Earnings Growth

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Leader, Earnings Focus, Laggard, Revenues Focus

Earnings Growth Analysis

Insurance companies sometimes tradeoff for improvements in premiums earned by relaxing standards in underwriting policies. A quick way to check against such activity is to compare the changes in loan loss provisions as well any chnages in the level of policy claims. If either of these checks point to a decline in the underwriting standards, it is quite possible that the company’s performance is a result of underwriting policy changes that could have a longer term impact compared to the shorter term pop in premiums earned.

Premiums Earned Percent History
Loss Ratio History

The company’s year-on-year earnings decline has been driven by the drop in premiums earned as a percent of total revenues from 93.25% to 92.80%. This decline in earnings would have been worse but for underwriting policy improvements in its operations which helped improve the loss ratio from 67.86% to 67.70%. For comparison, premiums earned as a percent of revenues were 92.65% and the loss ratio 66.33% in the immediate last period.

Premiums Earned Percent Versus Loss Ratio

Cash Versus Earnings – Sustainable Performance?

It is important to examine a company�s cash versus earnings numbers to gauge whether its performance is sustainable.

Operating Cash Flow Growth Versus Earnings Growth

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Cash Flow based Earnings, Likely Non-cash Earnings, Low Cash Flow Base, Likely Undeclared Earnings

SAFT-US‘s change in operating cash flow of -59.31% compared to the same period last year is about the same as its change in earnings this period. Additionally, this change in operating cash flow is about average among its peer group. This suggests that the company did not use accruals or reserves to manage earnings this period, and that, all else being equal, the earnings number is sustainable.


The company’s fall in earnings have been influenced by the following factors: (1) Contraction in operating margins after interest from 8.61% to 7.98% and (2) One-time items that contributed to a weakening of pretax margins from 8.98% to 8.14%.

EBIT Margin Versus PreTax Margin

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Operation driven Earnings, One-time Favorables, Low Earnings Base, One-time Unfavorables
EBIT Margin History
PreTax Margin History

Access our Ratings and Scores for Safety Insurance Group, Inc.

Company Profile

Safety Insurance Group, Inc. engages in the management and provision of insurance services. It offers property and casualty insurance products which include commercial vehicles and fleets. The company was founded in 1979 and is headquartered in Boston, MA.

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