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Safety Insurance Group Inc.

11/07/2025 | Press release | Distributed by Public on 11/07/2025 08:19

Quarterly Report for Quarter Ending September 30, 2025 (Form 10-Q)

MANAGEMENT'S DISCUSSION AND ANALYSIS

OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

The following discussion should be read in conjunction with our accompanying consolidated financial statements and notes thereto, which appear elsewhere in this document. In this discussion, all dollar amounts are presented in thousands, except share and per share data.

The following discussion contains forward-looking statements. We intend statements which are not historical in nature to be, and are hereby identified as "forward-looking statements" to be covered by the safe harbor provisions of the Private Securities Litigation Reform Act of 1995. In addition, the Company's senior management may make forward-looking statements orally to analysts, investors, the media and others. This safe harbor requires that we specify important factors that could cause actual results to differ materially from those contained in forward-looking statements made by or on behalf of us. We cannot promise that our expectations in such forward-looking statements will turn out to be correct. Our actual results could be materially different from and worse than our expectations. See "Forward-Looking Statements" below for specific important factors that could cause actual results to differ materially from those contained in forward-looking statements.

Executive Summary and Overview

In this discussion, "Safety" refers to Safety Insurance Group, Inc. and "our Company," "the Company," "we," "us" and "our" refer to Safety Insurance Group, Inc. and its consolidated subsidiaries. Our subsidiaries consist of Safety Insurance Company ("Safety Insurance"), Safety Indemnity Insurance Company ("Safety Indemnity"), Safety Property and Casualty Insurance Company ("Safety P&C"), Safety Northeast Insurance Company ("Safety Northeast"), Safety Northeast Insurance Agency, Inc. ("SNIA"), and Safety Management Corporation ("SMC"), which is SNIA's holding company.

We are a leading provider of private passenger automobile, commercial automobile, homeowners and commercial other-than-auto insurance in Massachusetts. In addition to private passenger automobile insurance (which represented 55.8% of our direct written premiums in 2024), we offer a portfolio of other insurance products, including commercial automobile (15.2% of 2024 direct written premiums), homeowners (24.3% of 2024 direct written premiums) and dwelling fire, umbrella and business owner policies (totaling 4.7% of 2024 direct written premiums). Operating exclusively in Massachusetts, New Hampshire, and Maine through our insurance company subsidiaries, Safety Insurance, Safety Indemnity, Safety P&C and Safety Northeast (together referred to as the "Insurance Subsidiaries"), we have established strong relationships with independent insurance agents, who numbered 828 in 1,079 locations throughout these three states at December 31, 2024. We have used these relationships and our extensive knowledge of the Massachusetts market to become the third largest private passenger automobile carrier and the second largest commercial automobile insurance carrier in Massachusetts, capturing an approximate 9.7% and 12.9% share, respectively, of the Massachusetts private passenger and commercial automobile markets in 2024 according to statistics compiled by the Commonwealth Automobile Reinsurers ("CAR") based on automobile exposures. We are also the third largest homeowners insurance carrier in Massachusetts with a 6.3% share of the Massachusetts homeowners insurance market.

A.M. Best, which rates insurance companies based on factors of concern to policyholders, currently assigns Safety Insurance an "A (Excellent)" rating. Our "A" rating was reaffirmed by A.M. Best on June 20, 2025.

Our Insurance Subsidiaries began writing insurance in New Hampshire during 2008 and in Maine in 2016. In November 2020, we formed a fourth insurance subsidiary, Safety Northeast, which became licensed to write insurance products in Massachusetts.

The table below shows the amount of direct written premiums written in each state during the three and nine months ended September 30, 2025 and 2024.


	Three Months Ended September 30,				Nine Months Ended September 30,
Direct Written Premiums	2025		2024		2025		2024
Massachusetts	$	313,922	$	301,018	$	924,126	$	854,780
New Hampshire		15,681		14,226		42,835		38,310
Maine		4,578		2,938		12,019		7,942
Total	$	334,181	$	318,182	$	978,980	$	901,032

Recent Trends and Events

Direct and Net Written Premiums. For the three months ended September 30, 2025 direct written premium growth and net written premium growth were 5.0% and 5.7%, respectively, compared to the prior period. The increase in premium is driven by rate increases. For the nine months ended September 30, 2025, average written premium per policy increased 8.7%, 6.2% and 9.8% in Private Passenger Automobile, Commercial Automobile and Homeowners lines, respectively, compared to the same period in 2024.

Losses and Loss Adjustment Expenses. Losses and loss adjustment expenses incurred for the three months ended September 30, 2025 increased by $22,493, or 12.3%, to $204,982 from $182,489 for the comparable 2024 period. Losses and loss adjustment expenses incurred for the nine months ended September 30, 2025 increased by $65,874, or 12.6%, to $589,504 from $523,630 for the comparable 2024 period. The increase in losses and loss adjustment expenses is primarily driven by increased loss severity as compared to the same periods in the prior year. Our losses and loss adjustment expenses ratio for the three months ended September 30, 2025 decreased to 70.4% from 70.6% for the comparable 2024 period. Our losses and loss adjustment expense ratio for the nine months ended September 30, 2025 decreased to 69.7% from 70.6% for the comparable 2024 period. The decrease in the ratio is due to growth in earned premiums, slightly offset by increased loss severity.

Non-generally accepted accounting principles ("non-GAAP") operating income, as defined below, was $21,883 for the three months ended September 30, 2025 and $62,397 for the nine months ended September 30, 2025. Non-GAAP operating income was $16,524 for the three months ended September 30, 2024 and $47,542 for the nine months ended September 30, 2024. The increase in non-GAAP operating income for the three and nine months ended September 30, 2025 was primarily the result of an increase in net earned premiums. Non-GAAP operating income was $1.48 per diluted share for the three months ended September 30, 2025, and $4.19 per diluted share, for the nine months ended September 30, 2025, compared to non-GAAP operating income of $1.10 per diluted share for the three months ended September 30, 2024, and $3.21 per diluted share, for the nine months ended September 30, 2024.

The following rate changes have been filed and approved by the insurance regulators of Massachusetts, New Hampshire and Maine in 2025 and 2024.


Line of Business	Effective Date	Rate Change
Maine Homeowners	November 1, 2025	6.6%
New Hampshire Commercial Automobile	November 1, 2025	8.2%
New Hampshire Homeowners	October 1, 2025	3.9%
New Hampshire Private Passenger Automobile	October 1, 2025	5.2%
Maine Private Passenger Automobile	September 1, 2025	9.6%
Massachusetts Homeowners	August 1, 2025	4.2%
Massachusetts Private Passenger Automobile	July 1, 2025	5.1%
Massachusetts Commercial Automobile	May 1, 2025	5.2%
Massachusetts Private Passenger Automobile	January 1, 2025	5.3%
New Hampshire Commercial Automobile	November 1, 2024	9.5%
New Hampshire Private Passenger Automobile	October 1, 2024	4.4%
New Hampshire Homeowners	October 1, 2024	7.4%
Maine Private Passenger Automobile	September 1, 2024	4.4%
Massachusetts Homeowners	August 1, 2024	5.9%
Massachusetts Private Passenger Automobile	July 1, 2024	4.8%
Massachusetts Commercial Automobile	May 1, 2024	6.3%
New Hampshire Private Passenger Automobile	April 1, 2024	3.4%
Massachusetts Private Passenger Automobile	January 1, 2024	3.5%

Insurance Ratios

The property and casualty insurance industry uses the combined ratio as a measure of underwriting profitability. The combined ratio is the sum of the loss ratio (losses and loss adjustment expenses incurred as a percent of net earned premiums) plus the expense ratio (underwriting and other expenses as a percent of net earned premiums, calculated on a Generally Accepted Accounting Principles ("GAAP") basis). The combined ratio reflects only underwriting results and does not include income from investments or finance and other service income. Underwriting profitability is subject to significant fluctuations due to competition, catastrophic events, weather, economic and social conditions, and other factors.

Our GAAP insurance ratios are outlined in the following table.


	Three Months Ended September 30,				Nine Months Ended September 30,
	2025		2024		2025		2024
GAAP ratios:
Loss ratio	70.4	%	70.6	%	69.7	%	70.6	%
Expense ratio	28.5		30.1		29.2		30.2
Combined ratio	98.9	%	100.7	%	98.9	%	100.8	%

Share-Based Compensation

On March 24, 2022, the Company's Board of Directors adopted the Amended and Restated Safety Insurance Group, Inc. 2018 Long-Term Incentive Plan (the "Amended 2018 Plan"), which was subsequently approved by our shareholders at the 2022 Annual Meeting of Shareholders. The Amended 2018 Plan increases the share pool limit by adding 350,000 common shares to the previously adopted Safety Insurance Group, Inc. 2018 Long-Term Incentive Plan. The Amended 2018 Plan enables the grant of stock awards, performance shares, cash-based performance units, other stock-based awards, stock options, stock appreciation rights, and stock unit awards, each of which may be granted separately or in tandem with other awards. Eligibility to participate includes officers, directors, employees and other individuals who provide bona fide services to the Company. The Amended 2018 Plan supersedes the Company's 2002 Management Omnibus Incentive Plan ("the 2002 Incentive Plan").

The Amended 2018 Plan establishes a pool of 700,000 shares of common stock available for issuance to our employees and other eligible participants. The Board of Directors and the Compensation Committee intend to issue awards under the Amended 2018 Plan in the future.

The maximum number of shares of common stock between both the Amended 2018 Plan and 2002 Incentive Plan with respect to which awards may be granted is 3,200,000. No further grants will be allowed under the 2002 Incentive Plan. At September 30, 2025, there were 235,663 shares available for future grant.

A summary of share based awards granted under the Incentive Plan during the nine months ended September 30, 2025 is as follows:


Type of		Number of		Fair
Equity		Awards		Value per
Awarded	Effective Date	Granted		Share (1)	Vesting Terms
RS - Service	February 25, 2025	35,178	$	79.67	3 years, 30%-30%-40%
RS - Performance	February 25, 2025	29,105	$	79.67	3 years, cliff vesting (3)
RS	February 25, 2025	6,000	$	79.67	No vesting period (2)
RS - Service	July 15, 2025	311	$	72.31	3 years, 30%-30%-40%
RS - Performance	July 15, 2025	352	$	72.31	3 years, cliff vesting (3)

(1)	The fair value per share of the restricted stock grant is equal to the closing price of our common stock on the grant date.

(2)	Board of Director members must maintain stock ownership equal to at least four times their annual retainer. This requirement must be met within five years of becoming a director.

(3)

The shares represent performance-based restricted shares award. Vesting of these shares is dependent upon the attainment of pre-established performance objectives, and any difference between shares granted and shares earned at the end of the performance period will be reported at the conclusion of the performance period.

Reinsurance

We reinsure with other insurance companies a portion of our potential liability under the policies we have underwritten, thereby protecting us against an unexpectedly large loss or a catastrophic occurrence that could produce large losses, primarily in our homeowners line of business. We are selective in choosing our reinsurers, seeking only those companies that we consider to be financially stable and adequately capitalized. In an effort to minimize exposure to the insolvency of a reinsurer, we continually evaluate and review the financial condition of our reinsurers. Most of our reinsurers have an A.M. Best rating of "A+" (Superior) or "A" (Excellent).

We maintain reinsurance coverage to help lessen the effect of losses from catastrophic events, maintaining coverage during 2025 that protects us in the event of a "138-year storm" (that is, a storm of a severity expected to occur once in a 138-year period). We use various software products to measure our exposure to catastrophe losses and the probable maximum loss to us for catastrophe losses such as hurricanes.

For 2025, we have purchased three layers of excess catastrophe reinsurance providing $675,000 of coverage for property losses in excess of $75,000 up to a maximum of $750,000. Our reinsurers' co-participation is 85.0% of $75,000 for the 1st layer, 85.0% of $250,000 for the 2nd layer and 85.0% of $350,000 for the 3rd layer.

We also have casualty excess of loss reinsurance for large casualty losses occurring in our automobile, homeowners, dwelling fire, and business owner lines of business in excess of $2,000 up to a maximum of $10,000. We have property excess of loss reinsurance coverage for large property losses, with coverage in excess of $3,000 up to a maximum of $25,000, for our homeowners, and business owners. In addition, we have liability excess of loss reinsurance for umbrella large losses in excess of $1,000 up to a maximum of $10,000. We also have various reinsurance agreements with Hartford Steam Boiler Inspection and Insurance Company, of which the primary contract is a quota share agreement under which we cede 100% of the premiums and losses for the equipment breakdown coverage under our business owner policies.

We are a participant in CAR, a state-established body that runs the residual market reinsurance programs for commercial automobile insurance in Massachusetts under which premiums, expenses, losses and loss adjustment expenses on ceded business are shared by all insurers writing automobile insurance in Massachusetts.

At September 30, 2025, we had $160,638 recoverable from CAR, which consisted of loss adjustment expense reserves, unearned premiums and reinsurance recoverable.

The Company previously participated in the Massachusetts Property Insurance Underwriting Association ("FAIR Plan"), in which premiums, expenses, losses and loss adjustment expenses on homeowners business that could not be placed in the voluntary market were shared by all insurers writing homeowners business in Massachusetts. On April 1, 2024, the Division approved a restructuring of the FAIR Plan ("FAIR Plan Restructuring"), transforming it from a partnership that shares profit and losses with member companies to a stand-alone, risk bearing entity, and distributing the accumulated members' equity.

Non-GAAP Measures

Management has included certain non-GAAP financial measures in presenting the Company's results. Management believes that these non-GAAP measures better explain the Company's results of operations and allow for a more complete understanding of the underlying trends in the Company's business. These measures should not be viewed as a substitute for those determined in accordance with GAAP. In addition, our definitions of these items may not be comparable to the definitions used by other companies.

Non-GAAP operating income and non-GAAP operating income per diluted share consist of our GAAP net income adjusted by the net realized gains (losses) on investments, changes in net unrealized gains on equity securities, credit loss benefit (expense) and taxes related thereto. Net income and earnings per diluted share are the GAAP financial measures that are most directly comparable to non-GAAP operating income and non-GAAP operating income per diluted share, respectively. A reconciliation of the GAAP financial measures to these non-GAAP measures is included in the financial highlights below.

Results of Operations

Three and Nine Months Ended September 30, 2025 Compared to Three and Nine Months Ended September 30, 2024

The following table shows certain of our selected financial results.


	Three Months Ended September 30,				Nine Months Ended September 30,
	2025		2024		2025		2024
Direct written premiums	$	334,181	$	318,182	$	978,980	$	901,032
Net written premiums	$	309,215	$	292,612	$	903,470	$	837,842
Net earned premiums	$	291,021	$	258,657	$	845,824	$	741,654
Net investment income		15,535		12,210		45,833		40,941
Earnings from partnership investments		2,929		4,345		5,387		8,597
Net realized gains on investments		1,338		1,314		7,732		4,521
Change in net unrealized gains on equity securities		6,310		10,698		13,233		14,880
Credit loss benefit (expense)		487		(158)		232		(337)
Commission income		2,415		1,963		6,795		5,798
Finance and other service income		6,589		6,253		19,361		17,244
Total revenue		326,624		295,282		944,397		833,298
Losses and loss adjustment expenses		204,982		182,489		589,504		523,630
Underwriting, operating and related expenses		83,027		77,868		246,674		224,056
Other expense		1,979		1,896		5,980		5,480
Interest expense		426		124		972		385
Total expenses		290,414		262,377		843,130		753,551
Income before income taxes		36,210		32,905		101,267		79,747
Income tax expense		7,900		7,016		22,124		17,144
Net income	$	28,310	$	25,889	$	79,143	$	62,603
Earnings per weighted average common share:
Basic	$	1.91	$	1.74	$	5.35	$	4.24
Diluted	$	1.91	$	1.73	$	5.33	$	4.24
Cash dividends paid per common share	$	0.92	$	0.90	$	2.72	$	2.70

Reconciliation of Net Income to Non-GAAP Operating Income

Net income	$	28,310	$	25,889	$	79,143	$	62,603
Exclusions from net income:
Net realized gains on investments		(1,338)		(1,314)		(7,732)		(4,521)
Change in net unrealized gains on equity securities		(6,310)		(10,698)		(13,233)		(14,880)
Credit loss (benefit) expense		(487)		158		(232)		337
Income tax expense		1,708		2,489		4,451		4,003
Non-GAAP Operating income	$	21,883	$	16,524	$	62,397	$	47,542

Net income per diluted share	$	1.91	$	1.73	$	5.33	$	4.24
Exclusions from net income:
Net realized gains on investments		(0.09)		(0.09)		(0.52)		(0.31)
Change in net unrealized gains on equity securities		(0.43)		(0.72)		(0.90)		(1.01)
Credit loss (benefit) expense		(0.03)		0.01		(0.02)		0.02
Income tax expense		0.12		0.17		0.30		0.27
Non-GAAP Operating income per diluted share	$	1.48	$	1.10	$	4.19	$	3.21

Direct Written Premiums. Direct written premiums for the three months ended September 30, 2025 increased by $15,999, or 5.0%, to $334,181 from $318,182 for the comparable 2024 period. Direct written premiums for the nine months ended September 30, 2025 increased by $77,948, or 8.7%, to $978,980 from $901,032 for the comparable 2024 period. The increases in direct written premiums and net written premiums are a result of rate increases. For the nine months ended September 30, 2025, average written premium per policy increased 8.7%, 6.2% and 9.8% in Private Passenger Automobile, Commercial Automobile and Homeowners lines, respectively, compared to the same period in 2024.

Net Written Premiums. Net written premiums for the three months ended September 30, 2025 increased by $16,603, or 5.7%, to $309,215 from $292,612 for the comparable 2024 period. Net written premiums for the nine months ended September 30, 2025 increased by $65,628, or 7.8%, to $903,470 from $837,842 for the comparable 2024 period. The increases were primarily due to the factors that increased direct written premiums.

Net Earned Premiums. Net earned premiums for the three months ended September 30, 2025 increased by $32,364, or 12.5%, to $291,021 from $258,657 for the comparable 2024 period. Net earned premiums for the nine months ended September 30, 2025 increased by $104,170, or 14.0%, to $845,824 from $741,654 for the comparable 2024 period. The increases were primarily due to prior year growth in policy counts and rate increases earning into top-line results.

The effect of reinsurance on net written and net earned premiums is presented in the following table.


	Three Months Ended September 30,					Nine Months Ended September 30,
	2025		2024		2025		2024
Written Premiums
Direct	$	334,181	$	318,182	$	978,980	$	901,032
Assumed		5,873		5,122		18,353		22,885
Ceded		(30,839)		(30,692)		(93,863)		(86,075)
Net written premiums	$	309,215	$	292,612	$	903,470	$	837,842

Earned Premiums
Direct	$	318,209	$	282,916	$	923,929	$	800,708
Assumed		5,444		4,719		17,455		21,684
Ceded		(32,632)		(28,978)		(95,560)		(80,738)
Net earned premiums	$	291,021	$	258,657	$	845,824	$	741,654

Net Investment Income. Net investment income for the three months ended September 30, 2025 increased $3,325, or 27.2%, to $15,535 from $12,210 for the comparable 2024 period. Net investment income for the nine months ended September 30, 2025 increased by $4,892, or 11.9%, to $45,833 from $40,941 for the comparable 2024 period. The increase for the three and nine months ended September 30, 2025, compared to the same periods in 2024, is primarily due to higher earned interest from our bond portfolio, resulting from additional bond purchases made during 2025. Net effective annualized yield on the investment portfolio was 4.0% for the three months September 30, 2025 compared to 3.4% for the comparable 2024 period. Net effective annualized yield on the investment portfolio was 4.0% for the nine months ended September 30, 2025 compared to 3.9% for the comparable 2024 period. The investment portfolio's duration on fixed maturities was 3.8 years at September 30, 2025 compared to 3.5 years at December 31, 2024.

Earnings from Partnership Investments. Earnings from partnership investments were $2,929 for the three months ended September 30, 2025 compared to $4,345 for the comparable 2024 period. Earnings from partnership investments were $5,387 for the nine months ended September 30, 2025 compared to $8,597 for the comparable 2024 period. The year-over-year decline reflects lower investment appreciation and the impact of timing differences between valuation changes and the recognition of realized gains. Cash distributions received from partnerships may not correspond to earnings recognized in the same period, as gains are typically recognized over time based on changes in fair value. The timing and magnitude of these returns can vary depending on the performance and transactional activity of the underlying partnerships.

Net Realized Gains on Investments. Net realized gains on investments were $1,338 for the three months ended September 30, 2025 compared to $1,314 for the comparable 2024 period. Net realized gains on investments was $7,732 for the nine months ended September 30, 2025 compared to $4,521 for the comparable 2024 period. The increase in net realized gains during the nine-month period reflects the sale of equity securities in a gain position during the first quarter of 2025.

The gross unrealized gains and losses on investments in fixed maturity securities, including redeemable preferred stocks that have characteristics of fixed maturities, short term investments, equity securities, including interests in mutual funds, and other invested assets were as follows for the periods indicated:

As of September 30, 2025

Cost or

Allowance for

Gross Unrealized

Estimated

Amortized

Expected Credit

Fair

Cost

Losses

Gains

Losses (3)

Value

U.S. Treasury securities

2,402

(38)

2,381

Obligations of states and political subdivisions

39,226

469

(1,808)

37,887

Residential mortgage-backed securities (1)

367,722

4,166

(17,100)

354,788

Commercial mortgage-backed securities

160,539

693

(7,009)

154,223

Other asset-backed securities

67,727

329

(1,307)

66,749

Corporate and other securities

648,310

(966)

7,505

(14,257)

640,592

Subtotal, fixed maturity securities

1,285,926

(966)

13,179

(41,519)

1,256,620

Equity securities (2)

209,944

41,958

(8,561)

243,341

Other invested assets (4)

152,884

Totals

1,648,754

(966)

55,137

(50,080)

1,652,845

(1)Residential mortgage-backed securities consist primarily of obligations of U.S. Government agencies including collateralized mortgage obligations issued, guaranteed and/or insured by the following issuers: Government National Mortgage Association (GNMA), Federal Home Loan Mortgage Corporation (FHLMC), Federal National Mortgage Association (FNMA) and the Federal Home Loan Bank (FHLB).

(2)Equity securities include common stock, preferred stock, mutual funds and interests in mutual funds held to fund the Company's executive

deferred compensation plan.

(3)Our investment portfolio includes 706 securities in an unrealized loss position at September 30, 2025.

(4)Other invested assets are generally accounted for under the equity method which approximated fair value.

The composition of our fixed income security portfolio as defined by Nationally Recognized Statistical Rating Organizations was as follows:


	As of September 30, 2025
		Estimated
		Fair Value	Percent
U.S. Treasury securities and obligations of U.S. Government agencies	$	354,788	28.2	%
Aaa/Aa		247,499	19.7
A		248,265	19.8
Baa		209,242	16.7
Ba		59,382	4.7
B		97,674	7.8
Caa/Ca		5,604	0.4
Not rated		34,166	2.7
Total	$	1,256,620	100.0	%

Ratings are generally assigned upon the issuance of the securities and are subject to revision on the basis of ongoing evaluations. Ratings in the table are as of the date indicated.

As of September 30, 2025, our portfolio of fixed maturity investments was comprised principally of investment grade corporate fixed maturity securities, U.S. government and agency securities, and asset-backed securities. The portion of our non-investment grade portfolio of fixed maturity investments is primarily comprised of variable rate secured and senior bank loans and high yield bonds.

The following table illustrates the gross unrealized losses included in our investment portfolio and the fair value of those securities, aggregated by investment category. The table also illustrates the length of time that they have been in a continuous unrealized loss position as of September 30, 2025.

As of September 30, 2025

Less than 12 Months

12 Months or More

Total

Estimated

Unrealized

Estimated

Unrealized

Estimated

Unrealized

Fair Value

Losses

Fair Value

Losses

Fair Value

Losses

U.S. Treasury securities

1,465

Obligations of states and political subdivisions

522

19,249

1,795

19,771

1,808

Residential mortgage-backed securities

30,702

357

155,568

16,743

186,270

17,100

Commercial mortgage-backed securities

9,949

112,096

6,950

122,045

7,009

Other asset-backed securities

17,210

19,793

1,281

37,003

1,307

Corporate and other securities

85,142

2,010

214,613

12,335

299,755

14,345

Subtotal, fixed maturity securities

143,525

2,465

522,784

39,142

666,309

41,607

Equity securities

30,761

4,756

19,966

3,805

50,727

8,561

Total temporarily impaired securities

174,286

7,221

542,750

42,947

717,036

50,168

As of September 30, 2025 and December 31, 2024, the Company concluded that $966 and $1,198, respectively, of unrealized losses were due to credit factors and were recorded as an allowance for expected credit losses expense. The Company concluded that outside of the securities that were recognized as credit impaired, the unrealized losses recorded on the fixed maturity portfolio at September 30, 2025 and December 31, 2024 resulted from fluctuations in market interest rates and other temporary market conditions as opposed to fundamental changes in the credit quality of the issuers of such securities. Based upon the analysis performed, the Company's decision to hold these securities, the Company's current level of liquidity and our history of positive cash flows, management believes it is more likely than not that it will not be required to sell any of its securities before the anticipated recovery in the fair value to its amortized cost basis.

Specific qualitative analysis was also performed for securities appearing on our "Watch List," if any. Qualitative analysis considered such factors as the financial condition and the near term prospects of the issuer, whether the debtor is current on its contractually obligated interest and principal payments, changes to the rating of the security by a rating agency and the historical volatility of the fair value of the security.

For information regarding fair value measurements of our investment portfolio, refer to Item 1-Financial Statements, Note 5, Investments, of this Form 10-Q.

Commission Income: Commission income includes revenues from new and renewal commissions paid by insurance carriers, which we recognize when earned. Commission income was $2,415 and $1,963 for the three months ended September 30, 2025 and 2024, respectively. Commission income was $6,795 and $5,798 for the nine months ended September 30, 2025 and 2024, respectively. The year-over-year change is driven by policy count growth and increased premium rates across the property and casualty insurance market.

Finance and Other Service Income. Finance and other service income includes revenues from premium installment charges, which we recognize when earned, and other miscellaneous income and fees. Finance and other service income for the three months ended September 30, 2025 increased by $336, or 5.4%, to $6,589 from $6,253 for the comparable 2024 period. Finance and other service income for the nine months ended September 30, 2025, increased by $2,117, or 12.3%, to $19,361 from $17,244 for the comparable 2024 period. The increase is primarily driven by the increase in policy counts and changes to our fee assessment policies.

Our GAAP loss ratio for the three months ended September 30, 2025 decreased to 70.4% from 70.6% for the comparable 2024 period. Our GAAP loss ratio for the nine months ended September 30, 2025 decreased to 69.7% from 70.6% for the comparable 2024 period. Our GAAP loss ratio excluding loss adjustment expenses for the three months ended September 30, 2025 was 63.1% compared to 62.7% for the comparable 2024 period. Our GAAP loss ratio excluding loss adjustment expenses for the nine months ended September 30, 2025 was 61.8% compared to 61.8% for the comparable 2024 period. Total prior year favorable development included in the pre-tax results for the three months ended September 30, 2025 was $9,707 compared to $8,563 for the comparable 2024 period. Total prior year favorable development included in the pre-tax results for the nine months ended September 30, 2025 was $33,180 compared to $38,938 for the comparable 2024 period. The decrease in favorable prior year development in 2025 is primarily attributable to the inclusion of $8,644 of FAIR Plan development in the prior year.

Underwriting, Operating and Related Expenses. Underwriting, operating and related expenses for the three months ended September 30, 2025 increased by $5,159, or 6.6%, to $83,027 from $77,868 for the comparable 2024 period. Underwriting, operating and related expenses for the nine months ended September 30, 2025 increased by $22,618, or 10.1%, to $246,674 from $224,056 for the comparable 2024 period. The increase in the three and nine months ended September 30, 2025 is driven by an increase in base commissions resulting from the increase in written premiums. Our GAAP expense ratio for the three months ended September 30, 2025 decreased to 28.5% from 30.1% for the comparable 2024 period. Our GAAP expense ratio for the nine months ended September 30, 2025 decreased to 29.2% from 30.2% for the comparable 2024 period due to higher earned premium.

Interest Expense. Interest expense was $426 and $124 for the three months ended September 30, 2025 and 2024, respectively. Interest expense was $972 for the nine months ended September 30, 2025 compared to $385 for the comparable 2024 period. The credit facility commitment fee included in interest expense was $14 and $45 for the nine months ended September 30, 2025 and 2024, respectively. The increase in interest expense during the current quarter is primarily due to the new loan agreement entered into with Citizens Bank on March 27, 2025, which carries an interest rate of SOFR rate plus 1.25%, compared to the repaid FHLB loan that had a fixed rate of 1.42%. Additionally, the Company no longer incurs a credit facility commitment fee as of March 27, 2025, since a loan is currently outstanding under the facility.

Income Tax Expense. Our effective tax rate was 21.8% and 21.3% for the three months ended September 30, 2025 and 2024, respectively. The effective tax rate was 21.8% and 21.5% for the nine months ended September 30, 2025 and 2024, respectively. The effective tax rate in 2025 was higher than the statutory rate primarily due to the effects of stock-based compensation and permanent differences regarding executive compensation.

Net Income. Net income for the three months ended September 30, 2025 was $28,310 compared to net income of $25,889 for the comparable 2024 period. Net income for the nine months ended September 30, 2025 was $79,143 compared to $62,603 for the comparable 2024 period.

Non-GAAP Operating Income. Non-GAAP operating income, as defined above, was $21,883 for the three months ended September 30, 2025 compared to $16,524 for the comparable 2024 period. Non-GAAP operating income was $62,397 for the nine months ended September 30, 2025 compared to $47,542 for the comparable 2024 period.

Liquidity and Capital Resources

As a holding company, Safety's assets consist primarily of the stock of our direct and indirect subsidiaries. Our principal source of funds to meet our obligations and pay dividends to shareholders, therefore, is dividends and other permitted payments from our subsidiaries, principally Safety Insurance. Safety is the borrower under our credit facility.

Safety Insurance's sources of funds primarily include premiums received, investment income, and proceeds from sales and redemptions of investments. Safety Insurance's principal uses of cash are the payment of claims, operating expenses and taxes, the purchase of investments, and the payment of dividends to Safety.

Net cash provided by operating activities was $120,948 and $78,269 during the nine months ended 2025 and 2024, respectively. Our operations typically generate positive cash flows from operations as most premiums are received in advance of the time when claim and benefit payments are required. Positive operating cash flows are expected in the future to meet our liquidity requirements.

Net cash used for investing activities was $83,276 and $13,730 during the nine months ended September 30, 2025 and 2024, respectively. Fixed maturities, equity securities, and other invested assets purchased were $349,275 for the nine months ended September 30, 2025 compared to $237,338 for the comparable prior year period. Proceeds from maturities, redemptions, calls and sales, of securities were $266,399 during the nine months ended September 30, 2025 compared to $229,884 for the comparable prior year period.

Net cash used for financing activities was $40,413 and $40,093 during the nine months ended September 30, 2025 and 2024, respectively. Net cash used for financing activities during the nine months ended September 30, 2025 consisted of dividend payments to shareholders and debt activity.

The Insurance Subsidiaries maintain a high degree of liquidity within their respective investment portfolios in fixed maturity and equity securities. We do not anticipate the need to sell these securities to meet the Insurance Subsidiaries cash requirements. We expect the Insurance Subsidiaries to generate sufficient operating cash to meet all short-term and long-term cash requirements. However, there can be no assurance that unforeseen business needs or other items will not occur causing us to have to sell securities before their values fully recover; thereby causing us to recognize additional impairment charges in that time period.

Credit Facility

For information regarding our Credit Facility, please refer to Item 1-Financial Statements, Note 9, Debt, of this Form 10-Q.

Recent Accounting Pronouncements

For information regarding Recent Accounting Pronouncements, please refer to Item 1-Financial Statements, Note 2, Recent Accounting Pronouncements, of this Form 10-Q.

Regulatory Matters

Our Insurance Subsidiaries are subject to various regulatory restrictions that limit the maximum amount of dividends available to be paid to their parent without prior approval of the Commissioner of the Division of Insurance of Massachusetts (the "Commissioner"). The Massachusetts statute limits the dividends an insurer may pay in any twelve-month period, without the prior permission of the Commissioner, to the greater of (i) 10% of the insurer's surplus as of the preceding December 31 or (ii) the insurer's net income for the twelve-month period ending the preceding December 31, in each case determined in accordance with statutory accounting practices. Our insurance company subsidiaries may not declare an "extraordinary dividend" (defined as any dividend or distribution that, together with other distributions made within the preceding twelve months, exceeds the limits established by Massachusetts statute) until thirty days after the Commissioner has received notice of the intended dividend and has not objected. As historically administered by the Commissioner, this provision requires the Commissioner's prior approval of an extraordinary dividend. Under Massachusetts law, an insurer may pay cash dividends only from its unassigned funds, also known as earned surplus, and the insurer's remaining surplus must be both reasonable in relation to its outstanding liabilities and adequate to its financial needs. At December 31, 2024, the statutory surplus of Safety Insurance was $758,789, and its statutory net income for 2024 was $43,387. As a result, a maximum of $75,879 is available in 2025 for such dividends without prior approval of the Commissioner. As a result of this Massachusetts statute, the Insurance Subsidiaries had restricted net assets in the amount of $682,910 at December 31, 2024. During the nine months ended September 30, 2025, Safety Insurance paid dividends to Safety of $38,859.

The maximum dividend permitted by law is not indicative of an insurer's actual ability to pay dividends, which may be constrained by business and regulatory considerations, such as the impact of dividends on surplus, which could affect an insurer's ratings or competitive position, the amount of premiums that can be written and the ability to pay future dividends.

Since the initial public offering of its common stock in November 2002, the Company has paid regular quarterly dividends to shareholders of its common stock. Quarterly dividends paid during 2025 were as follows:


					Total
Declaration	Record	Payment	Dividend per		Dividends Paid
Date	Date	Date	Common Share		and Accrued
February 14, 2025	March 3, 2025	March 14, 2025	$	0.90	$	13,370
May 7, 2025	June 2, 2025	June 13, 2025	$	0.90	$	13,384
August 6, 2025	September 2, 2025	September 15, 2025	$	0.92	$	13,641

On August 6, 2025, our Board approved and declared an increase in the quarterly cash dividend from $0.90 to $0.92 per share. We plan to continue to declare and pay quarterly cash dividends, depending on our financial position and the regularity of our cash flows.

On February 23, 2022, the Board of Directors approved a share repurchase program of up to $50,000 of the Company's outstanding common shares. As of September 30, 2025, the Board of Directors has cumulatively authorized increases to the existing share repurchase program of up to $200,000 of its outstanding common shares. Under the program, the Company may repurchase shares of its common stock for cash in public or private transactions, in the open market or otherwise. The timing of such repurchases and actual number of shares repurchased will depend on a variety of factors including price, market conditions and applicable regulatory and corporate requirements. The program does not require us to repurchase any specific number of shares and may be modified, suspended or terminated at any time without prior notice. No share repurchases were made by the Company under the program during the three and nine months ended September 30, 2025. As of September 30, 2025 and December 31, 2024, the Company had purchased 3,215,690 shares of common stock at a cost of $155,240.

Management believes that the current level of cash flow from operations provides us with sufficient liquidity to meet our operating needs over the next 12 months. We expect to be able to continue to meet our operating needs after the next 12 months from internally generated funds. Since our ability to meet our obligations in the long term (beyond such twelve-month period) is dependent upon such factors as market changes, insurance regulatory changes and economic conditions, no assurance can be given that the available net cash flow will be sufficient to meet our operating needs. We expect that we would need to borrow or issue capital stock if we needed additional funds, for example, to pay for an acquisition or a significant expansion of our operations. There can be no assurance that sufficient funds for any of the foregoing purposes would be available to us at such time.

Risk-Based Capital Requirements

The NAIC has adopted a formula and model law to implement risk-based capital requirements for most property and casualty insurance companies, which are designed to determine minimum capital requirements and to raise the level of protection that statutory surplus provides for policyholder obligations. Under Massachusetts law, insurers having less total adjusted capital than that required by the risk-based capital calculation will be subject to varying degrees of regulatory action, depending on the level of capital inadequacy. The risk-based capital law provides for four levels of regulatory action. The extent of regulatory intervention and action increases as the level of total adjusted capital to risk-based capital falls. As of December 31, 2024, the Insurance Subsidiaries had total capital of $758,789, which is in excess of amounts requiring company or regulatory action at any prescribed risk-based capital action level. Minimum statutory capital and surplus, or company action level risk-based capital, was $236,219 at December 31, 2024.

Off-Balance Sheet Arrangements

We have no material obligations under a guarantee contract meeting the characteristics identified in Accounting Standards Codification ("ASC") 460, Guarantees. We have no material retained or contingent interests in assets transferred to an unconsolidated entity. We have no material obligations, including contingent obligations, under contracts that would be accounted for as derivative instruments. We have no obligations, including contingent obligations, arising out of a variable interest in an unconsolidated entity held by, and material to, us, where such entity provides financing, liquidity, market risk or credit risk support to, or engages in leasing, hedging or research and development services with us. We have no direct investments in real estate and no holdings of mortgages secured by commercial real estate. Accordingly, we have no material off-balance sheet arrangements.

Critical Accounting Policies and Estimates

Loss and Loss Adjustment Expense Reserves

Significant periods of time can elapse between the occurrence of an insured loss, the reporting to us of that loss and our final payment of that loss. To recognize liabilities for unpaid losses, we establish reserves as balance sheet liabilities. Our reserves represent estimates of amounts needed to pay reported and estimated losses incurred but not yet reported ("IBNR") and the expenses of investigating and paying those losses, or loss adjustment expenses. Every quarter, we review our previously established reserves and adjust them, if necessary.

When a claim is reported, claims personnel establish a "case reserve" for the estimated amount of the ultimate payment. The amount of the reserve is primarily based upon an evaluation of the type of claim involved, the circumstances surrounding each claim and the policy provisions relating to the loss. The estimate reflects the informed judgment of such personnel based on general insurance reserving practices and on the experience and knowledge of the claims person. During the loss adjustment period, these estimates are revised as deemed necessary by our claims department based on subsequent developments and periodic reviews of the cases. When a claim is closed with or without a payment, the difference between the case reserve and the settlement amount creates a reserve deficiency if the payment exceeds the case reserve or a reserve redundancy if the payment is less than the case reserve.

In accordance with industry practice, we also maintain reserves for IBNR. IBNR reserves are determined in accordance with commonly accepted actuarial reserving techniques on the basis of our historical information and experience. We review and make adjustments to incurred but not yet reported reserves quarterly. In addition, IBNR reserves can also be expressed as the total loss reserves required less the case reserves on reported claims.

When reviewing reserves, we analyze historical data and estimate the impact of various loss development factors, such as our historical loss experience and that of the industry, trends in claims frequency and severity, our mix of business, our claims processing procedures, legislative enactments, judicial decisions, legal developments in imposition of damages, and changes and trends in general economic conditions, including the effects of inflation. A change in any of these factors from the assumption implicit in our estimate can cause our actual loss experience to be better or worse than our reserves, and the difference can be material. There is no precise method, however, for evaluating the impact of any specific factor on the adequacy of reserves, because the eventual development of reserves is affected by many factors.

In estimating all our loss reserves, we follow the guidance prescribed by ASC 944, Financial Services - Insurance.

Management determines our loss and LAE reserves estimate based upon the analysis of our actuaries. A reasonable estimate is derived by selecting a point estimate within a range of indications as calculated by our actuaries using generally accepted actuarial techniques. The key assumption in most actuarial analysis is that past patterns of frequency and severity will repeat in the future, unless a significant change in the factors described above takes place.

Our key factors and resulting assumptions are the ultimate frequency and severity of claims, based upon the most recent ten years of claims reported to the Company, and the data CAR reports to us to calculate our share of the residual market, as of the date of the applicable balance sheet. For each accident year and each coverage within a line of business our actuaries calculate the ultimate losses incurred. Our total reserves are the difference between the ultimate losses incurred and the cumulative loss and loss adjustment payments made to date. Our IBNR reserves are calculated as the difference between our total reserves and the outstanding case reserves at the end of the accounting period. To determine ultimate losses, our actuaries calculate a range of indications and select a point estimation using such actuarial techniques as:

●

Paid Loss Indications:This method projects ultimate loss estimates based upon extrapolations of historic paid loss trends. This method tends to be used on short tail lines such as automobile physical damage.

●

Incurred Loss Indications:This method projects ultimate loss estimates based upon extrapolations of historic incurred loss trends. This method tends to be used on long tail lines of business such as automobile liability and homeowner's liability.

●

Bornhuetter-Ferguson Indications:This method projects ultimate loss estimates based upon extrapolations of an expected amount of IBNR, which is added to current incurred losses or paid losses. This method tends to be used on small, immature, or volatile lines of business, such as our BOP and umbrella lines of business.

●

Bodily Injury Code Indications:This method projects ultimate loss estimates for our private passenger and commercial automobile bodily injury coverage based upon extrapolations of the historic number of accidents and the historic number of bodily injury claims per accident. Projected ultimate bodily injury claims are then segregated into expected claims by type of injury (e.g. soft tissue injury vs. hard tissue injury) based on past experience. An ultimate severity, or average paid loss amounts, is estimated based upon extrapolating historic trends. Projected ultimate loss estimates using this method are the aggregate of estimated losses by injury type.

Such techniques assume that past experience, adjusted for the effects of current developments and anticipated trends, is an appropriate basis for predicting our ultimate losses, total reserves, and resulting IBNR reserves. It is possible that the final outcome may fall above or below these amounts as a result of a number of factors, including immature data, sparse data, or significant growth in a line of business. Using these methodologies our actuaries established a range of reasonably possible estimations for net reserves of approximately $537,736 to $603,892 as of September 30, 2025. In general, the low and high values of the ranges represent reasonable minimum and maximum values of the indications based on the techniques described above. Our selected point estimate of net loss and LAE reserves based upon the analysis of our actuaries was $577,917 as of September 30, 2025.

The following table presents the point estimation of the recorded reserves and the range of estimations by line of business for net loss and LAE reserves as of September 30, 2025.


		As of September 30, 2025
Line of Business	Low		Recorded		High
Private passenger automobile	$	268,176	$	287,051	$	295,506
Commercial automobile		107,994		119,554		130,806
Homeowners		103,154		106,699		108,124
All other		58,412		64,613		69,456
Total	$	537,736	$	577,917	$	603,892

The following table presents our total net reserves and the corresponding case reserves and IBNR reserves for each line of business as of September 30, 2025.


		As of September 30, 2025
Line of Business	Case		IBNR		Total
Private passenger automobile	$	346,392	$	(59,349)	$	287,043
CAR assumed private passenger auto		1		7		8
Commercial automobile		80,728		5,549		86,277
CAR assumed commercial automobile		19,166		14,111		33,277
Homeowners		116,864		(10,165)		106,699
All other		48,926		15,687		64,613
Total net reserves for losses and LAE	$	612,077	$	(34,160)	$	577,917

At September 30, 2025, our total IBNR reserves for our private passenger automobile line of business was comprised of ($102,934) related to estimated ultimate decreases in the case reserves, including anticipated recoveries (i.e. salvage and subrogation), and $43,585 related to our estimation for not yet reported losses.

Our IBNR reserves consist of our estimate of the total loss reserves required less our case reserves. The IBNR reserves for CAR assumed commercial automobile business are 42.4% of our total reserves for CAR assumed commercial automobile business as of September 30, 2025, due to the reporting delays in the information we receive from CAR, as described further in the section on Residual Market Loss and Loss Adjustment Expense Reserves.

The following table presents information by line of business for our total net reserves and the corresponding retained (i.e. direct less ceded) reserves and assumed reserves as of September 30, 2025.


		As of September 30, 2025
Line of Business		Retained		Assumed		Net
Private passenger automobile	$	287,043
CAR assumed private passenger automobile			$	8
Net private passenger automobile					$	287,051
Commercial automobile		86,277
CAR assumed commercial automobile				33,277
Net commercial automobile						119,554
Homeowners		106,699		-		106,699
All other		64,613		-		64,613
Total net reserves for losses and LAE	$	544,632	$	33,285	$	577,917

Residual Market Loss and Loss Adjustment Expense Reserves

We are a participant in CAR and other various residual markets and assume a portion of losses and LAE on business ceded by the industry participants to the residual markets. We were a participant in FAIR Plan until the recent FAIR Plan Restructuring in 2024. We estimate reserves for assumed losses and LAE that have not yet been reported to us by the residual markets. Our estimations are based upon the same factors we use for our own reserves, plus additional factors due to the nature of and the information we receive.

Residual market deficits and gains, consists of premium ceded to the various residual markets less losses and LAE, and is allocated among insurance companies based on a various formulas (the "Participation Ratio") that takes into consideration a company's voluntary market share.

Because of the lag in the various residual market estimations, and in order to try to validate to the extent possible the information provided, we must try to estimate the effects of the actions of our competitors in order to establish our Participation Ratio.

Although we rely to a significant extent in setting our reserves on the information the various residual markets provide, we are cautious in our use of that information, because of the delays in receiving data from the various residual markets. As a result, we have to estimate our Participation Ratio and these reserves are subject to significant judgments and estimates.

Sensitivity Analysis

Establishment of appropriate reserves is an inherently uncertain process. There can be no certainty that currently established reserves based on our key assumptions regarding frequency and severity in our lines of business, or our assumptions regarding our share of the CAR loss will prove adequate in light of subsequent actual experience. To the extent that reserves are inadequate and are strengthened, the amount of such increase is treated as a charge to earnings in the period that the deficiency is recognized. To the extent that reserves are redundant and are released, the amount of the release is a credit to earnings in the period the redundancy is recognized. For the nine months ended September 30, 2025, a 1 percentage-point change in the loss and LAE ratio would result in a change in reserves of $8,459. Each 1 percentage-point change in the loss and LAE ratio would have had a $6,683 effect on net income, or $0.45 per diluted share.

Our assumptions consider that past experience, adjusted for the effects of current developments and anticipated trends, are an appropriate basis for establishing our reserves. Our individual key assumptions could each have a reasonable possible range of plus or minus 5 percentage-points for each estimation, although there is no guarantee that our assumptions will not have more than a 5 percentage point variation. The following sensitivity tables present information for each of our primary lines of business on the effect each 1 percentage-point change in each of our key assumptions on unpaid frequency and severity could have on our retained (i.e., direct minus ceded) loss and LAE reserves and net income for the nine months ended September 30, 2025. In evaluating the information in the table, it should be noted that a 1 percentage-point change in a single assumption would change estimated reserves by 1 percentage-point. A 1 percentage-point change in both our key assumptions would change estimated reserves within a range of plus or minus 2 percentage-points.


	-1 Percent		No		+1 Percent
	Change in		Change in		Change in
	Frequency		Frequency		Frequency
Private passenger automobile retained loss and LAE reserves
-1 Percent Change in Severity
Estimated decrease in reserves	$	(5,741)	$	(2,870)	$	-
Estimated increase in net income		4,535		2,268		-
No Change in Severity
Estimated (decrease) increase in reserves		(2,870)		-		2,870
Estimated increase (decrease) in net income		2,268		-		(2,268)
+1 Percent Change in Severity
Estimated increase in reserves		-		2,870		5,741
Estimated decrease in net income		-		(2,268)		(4,535)

Commercial automobile retained loss and LAE reserves
-1 Percent Change in Severity
Estimated decrease in reserves		(1,726)		(863)		-
Estimated increase in net income		1,363		682		-
No Change in Severity
Estimated (decrease) increase in reserves		(863)		-		863
Estimated increase (decrease) in net income		682		-		(682)
+1 Percent Change in Severity
Estimated increase in reserves		-		863		1,726
Estimated decrease in net income		-		(682)		(1,363)

Homeowners retained loss and LAE reserves
-1 Percent Change in Severity
Estimated decrease in reserves		(2,134)		(1,067)		-
Estimated increase in net income		1,686		843		-
No Change in Severity
Estimated (decrease) increase in reserves		(1,067)		-		1,067
Estimated increase (decrease) in net income		843		-		(843)
+1 Percent Change in Severity
Estimated increase in reserves		-		1,067		2,134
Estimated decrease in net income		-		(843)		(1,686)

All other retained loss and LAE reserves
-1 Percent Change in Severity
Estimated decrease in reserves		(1,292)		(646)		-
Estimated increase in net income		1,021		510		-
No Change in Severity
Estimated (decrease) increase in reserves		(646)		-		646
Estimated increase (decrease) in net income		510		-		(510)
+1 Percent Change in Severity
Estimated increase in reserves		-		646		1,292
Estimated decrease in net income		-		(510)		(1,021)

Our estimated share of CAR loss and LAE reserves is based on assumptions about our Participation Ratio, the size of CAR, and the resulting deficit. Our assumptions consider that past experience, adjusted for the effects of current developments and anticipated trends, is an appropriate basis for establishing our CAR reserves. Each of our assumptions could have a reasonably possible range of plus or minus 5 percentage-points for each estimation.

The following sensitivity table presents information of the effect each 1 percentage-point change in our assumptions on our share of reserves for CAR and other residual markets could have on our assumed loss and LAE reserves and net income for the nine months ended September 30, 2025. In evaluating the information in the table, it should be noted that a 1 percentage-point change in our assumptions would change estimated reserves by 1 percentage-point.


	-1 Percent		+1 Percent
	Change in		Change in
	Estimation		Estimation
CAR assumed commercial automobile
Estimated (decrease) increase in reserves	$	(333)	$	333
Estimated increase (decrease) in net income		263		(263)

Reserve Development Summary

The changes we have recorded in our reserves in the past illustrate the uncertainty of estimating reserves. Our prior year reserves decreased by $33,180 and $38,938 during the nine months ended September 30, 2025 and 2024, respectively.

The following table presents a comparison of prior year development of our net reserves for losses and LAE for the nine months ended September 30, 2025 and 2024. Each accident year represents all claims for an annual accounting period in which loss events occurred, regardless of when the losses are actually reported, booked or paid. Our financial statements reflect the aggregate results of the current and all prior accident years.


	Nine Months Ended September 30,
Accident Year	2025		2024
2015 & prior	$	(574)	$	(3,512)
2016		(458)		(997)
2017		(388)		(931)
2018		(543)		(1,966)
2019		(1,529)		(3,204)
2020		(2,325)		(2,572)
2021		(2,155)		(4,217)
2022		(616)		(5,277)
2023		(9,025)		(16,262)
2024		(15,567)		-
All prior years	$	(33,180)	$	(38,938)

The decreases in prior years' reserves during the nine months ended September 30, 2025 and 2024 resulted from re-estimations of prior year ultimate loss and LAE liabilities. The 2025 decrease is composed of reductions of $5,209 in our private passenger automobile reserves, $5,910 in our commercial automobile reserves, $12,383 in our homeowners reserves, and $9,678 in our other lines reserves. The 2024 decrease is primarily composed of reductions of $5,256 in our private passenger automobile reserves, $4,937 in our commercial automobile reserves, $14,681 in our homeowners reserves which includes $8,644 of FAIR Plan Development, and $14,064 in our other lines reserves.

The following table presents information by line of business for prior year development of our net reserves for losses September 30, 2025.

Private Passenger

Commercial

Accident Year

Automobile

Homeowners

All Other

Total

2015 & prior

(371)

(166)

(44)

(574)

2016

(9)

(1)

(332)

(116)

(458)

2017

(205)

(315)

(388)

2018

287

(9)

(204)

(617)

(543)

2019

404

(622)

(123)

(1,188)

(1,529)

2020

178

(254)

(781)

(1,468)

(2,325)

2021

280

(412)

(440)

(1,583)

(2,155)

2022

3,434

(698)

(1,954)

(1,398)

(616)

2023

(209)

(1,036)

(6,557)

(1,223)

(9,025)

2024

(9,258)

(2,680)

(1,903)

(1,726)

(15,567)

All prior years

(5,209)

(5,910)

(12,383)

(9,678)

(33,180)

The improved private passenger and commercial automobile results were primarily due to fewer claims than previously estimated and better than previously estimated severity on our established bodily injury and property damage case reserves. Our retained other than auto and homeowners lines of business prior year reserves decreased, due primarily to fewer claims than previously estimated.

For further information, see "Results of Operations: Losses and Loss Adjustment Expenses."

Investment Impairments

We use a systematic methodology to evaluate declines in fair values below cost or amortized cost of our investments. Some of the factors considered in assessing impairment of fixed maturities due to credit losses include the extent to which the fair value is less than amortized cost, the financial condition of and the near and long-term prospects of the issuer, whether the debtor is current on its contractually obligated interest and principal payments, changes to the rating of the security by a rating agency, the historical volatility of the fair value of the security and whether it is more likely than not that we will be required to sell the investment prior to an anticipated recovery in value. This methodology ensures that we evaluate available evidence concerning any declines in a disciplined manner.

For fixed maturities that we do not intend to sell or for which it is more likely than not that we would not be required to sell before an anticipated recovery in value, we separate the expected credit loss component of the impairment from the amount related to all other factors. The expected credit loss component is recognized as an allowance for expected credit losses. The allowance is adjusted for any additional credit losses and subsequent recoveries, which are booked in income as either credit loss expense or credit loss benefit, respectively. Upon recognizing a credit loss, the cost basis is not adjusted. The impairment related to all other factors (non-credit factors) is reported in other comprehensive income.

For further information, see "Results of Operations."

Forward-Looking Statements

Forward-looking statements might include one or more of the following, among others:

●

Projections of revenues, income, earnings per share, capital expenditures, dividends, capital structure or other financial items;

●

Descriptions of plans or objectives of management for future operations, products or services;

●

Forecasts of future economic performance, liquidity, need for funding and income;

●

Legal and regulatory commentary;

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Descriptions of assumptions underlying or relating to any of the foregoing; and

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Future performance of credit markets.

Forward-looking statements can be identified by the fact that they do not relate strictly to historical or current facts. They often include words such as "believe," "expect," "anticipate," "intend," "plan," "estimate," "aim," "projects," or words of similar meaning and expressions that indicate future events and trends, or future or conditional verbs such as "will," "would," "should," "could," or "may." All statements that address expectations or projections about the future, including statements about the Company's strategy for growth, product development, market position, expenditures and financial results, are forward-looking statements.

Forward-looking statements are not guarantees of future performance. By their nature, forward-looking statements are subject to risks and uncertainties. There are a number of factors, many of which are beyond our control, that could cause actual future conditions, events, results or trends to differ significantly and/or materially from historical results or those projected in the forward-looking statements. These factors include but are not limited to:

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The competitive nature of our industry and the possible adverse effects of such competition;

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Conditions for business operations and restrictive regulations in Massachusetts;

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The possibility of losses due to claims resulting from severe weather;

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The impact of inflation, changes in tariffs and supply chain delays on loss severity;

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The possibility that the Commissioner may approve future rule changes that change the operation of the residual market;

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The possibility that existing insurance-related laws and regulations will become further restrictive in the future;

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The impact of investment, economic and underwriting market conditions, including interest rates and inflation;

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Our possible need for and availability of additional financing, and our dependence on strategic relationships, among others; and

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Other risks and factors identified from time to time in our reports filed with the SEC. Refer to Part I, Item 1A - Risk Factors of our 2024 Annual Report on Form 10-K for the year ended December 31, 2024.

Some other factors, such as market, operational, liquidity, interest rate, equity and other risks, are described elsewhere in this Quarterly Report on Form 10-Q. Factors relating to the regulation and supervision of our Company are also described or incorporated in this report. There are other factors besides those described or incorporated in this report that could cause actual conditions, events or results to differ from those in the forward-looking statements.

Readers are cautioned not to place undue reliance on these forward-looking statements, which speak only as of the date on which they are made. We do not undertake any obligation to update publicly or revise any forward-looking statements to reflect circumstances or events that occur after the date the forward-looking statements are made.

Safety Insurance Group Inc. published this content on November 07, 2025, and is solely responsible for the information contained herein. Distributed via Edgar on November 07, 2025 at 14:20 UTC. If you believe the information included in the content is inaccurate or outdated and requires editing or removal, please contact us at [email protected]