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," "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 Asset Management Corporation("SAMC"), and Safety Management Corporation, which is SAMC'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 53.6% of our direct written premiums in 2021), we offer a portfolio of other insurance products, including commercial automobile (16.2% of 2021 direct written premiums), homeowners (24.9% of 2021 direct written premiums) and dwelling fire, umbrella and business owner policies (totaling 5.3% of 2021 direct written premiums). Operating exclusively in Massachusetts, New Hampshire, and Mainethrough 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 856 in 1,088 locations throughout these three states during 2021. We have used these relationships and our extensive knowledge of the Massachusettsmarket to become the third largest private passenger automobile carrier and the second largest commercial automobile insurance carrier in Massachusetts, capturing an approximate 7.9% and 12.0% share, respectively, of the Massachusettsprivate passenger and commercial automobile markets in 2021 according to statistics compiled by the CAR. We are also the third largest homeowners insurance carrier in Massachusettswith a 6.8% share of the Massachusettshomeowners insurance market.
policyholders, currently assigns
"A" rating was reaffirmed by
Our Insurance Subsidiaries began writing insurance in
New Hampshireduring 2008 and in Mainein 2016. The table below shows the amount of direct written premiums written in each state during the three months ended March 31, 2022
and 2021. Three Months Ended March 31, Direct Written Premiums 2022 2021 Massachusetts
$ 181,091 $ 184,253New Hampshire 7,640 7,383 Maine 762 601 Total $ 189,493 $ 192,23722 Table of Contents Recent Trends and Events Beginning in March 2020, the global pandemic associated with the novel coronavirus COVID-19 ("COVID-19") and related economic conditions caused significant economic effects including temporary closures of many businesses and reduced consumer activity due to shelter-in-place, stay-at-home and other governmental actions. The Company continues to take actions that address the health and well-being of our employees while still serving the needs of our agents and insureds.
For additional information, see Part I, Item 1A - Risk Factors of our 2021
Annual Report on Form 10-K for the year ended
statement on Forward Looking Statements.
There are many uncertainties with respect to COVID-19. For further discussion regarding the potential impacts of COVID-19 and related economic conditions on the Company, see Part I, Item 1A - Risk Factors of our 2021 Annual Report on Form 10-K for the year ended
December 31, 2021. These risks include legal challenges or legislative actions that extend business interruption coverage outside of our policy terms for business owner policies, which require direct physical loss or damage to property. As discussed in Note 8 - Commitments and Contingencies, the Company has 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. Our business owner policies serve eligible small and medium sized commercial accounts including but not limited to apartments and condominiums; mercantile establishments; limited cooking restaurants; offices; and special trade contractors. The majority of these business owner policies do not contain a specific exclusion for viruses. However, as viruses do not produce direct physical damage or loss to property, our position is that no coverage exists for this peril. As a result, the Company accrued a reserve of $6,500for legal defense costs at March 31, 2022. While we will evaluate each claim based on the specific facts and circumstances involved, our business owner policies do not provide coverage for business interruption claims unless there is direct physical damage or loss to property. On April 21, 2022, the Massachusetts Supreme Judicial court ("SJC"), the state's highest-level court, issued its decision in Verveine Corp.et al. v. Strathmore; confirming the decision of the original trial court's dismissal of the insureds' business interruption claims against Strathmore Insuranceon the grounds that the presence of the coronavirus on the insured premises did not constitute "direct physical loss of or damage to" property. The SJC noted that while the virus can be physically present on a premises, it does not have a physical effect on property that can be characterized as loss or damage. Rather, the phrase "direct physical loss of or damage to" property requires a "distinct, demonstrable, physical alteration of the property," which was not present in Verveine. The SJC specifically rejected the argument that physical presence could amount to loss or damage. It noted that "evanescent presence of a harmful airborne substance that will quickly dissipate on its own, or surface-level contamination that can be removed by simply cleaning, does not physically alter or affect property." The claim against the Company remains open. Losses and Loss Adjustment Expenses. Losses and loss adjustment expenses incurred for the three months ended March 31, 2022, loss and loss adjustment expenses incurred increased by $11,671or 10.5%, to $123,166from $111,495for the comparable 2021 period. 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. Non-generally accepted accounting principals ("non-GAAP") operating income as defined below was $14,809for the three months ended March 31, 2022compared to $28,856for the comparable 2021 period. The decrease in Non-GAAP operating income was primarily the result of an increase in loss and loss adjustment expenses compared to the prior period. Non-GAAP operating income for the quarter ended March 31, 2022was $0.99per diluted share, compared to $1.93per diluted share, for the comparable 2021 period.
The following rate changes have been filed and approved by the insurance
passenger automobile rates include a 13% commission rate for agents.
23 Table of Contents Line of Business Effective Date Rate Change
New Hampshire Commercial Automobile September 1, 2022 2.8% Massachusetts Commercial Automobile May 1, 2022 3.3% Massachusetts Homeowner June 1, 2022 2.6% Massachusetts Private Passenger Automobile March 1, 2022 -2.3% The Massachusetts Private Passenger Automobile rate change effective
March 1, 2022was primarily related to discounts offered to our policyholders, including the enhancement of a low mileage discount, an enhancement of our E-Customer discount, and the introduction of a Paid in Full discount.
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 March 31, 2022 2021 GAAP ratios: Loss ratio 65.8 % 57.8 % Expense ratio 32.9 33.7 Combined ratio 98.7 % 91.5 % Share-Based Compensation On
April 2, 2018, the Company's Board of Directors adopted the Safety Insurance Group, Inc.2018 Long-Term Incentive Plan ("the 2018 Plan"), which was subsequently approved by our shareholders at the 2018 Annual Meeting of Shareholders. The 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 of in tandem with other awards. Eligibility to participate includes officers, directors, employees and other individuals who provide bona fide services to the Company. The 2018 Plan supersedes the Company's 2002 Management Omnibus Incentive Plan ("the 2002 Incentive Plan").
The 2018 Plan established an initial pool of 350,000 shares of common stock
available for issuance to our employees and other eligible participants.
The maximum number of shares of common stock between both the 2018 Plan and 2002 Incentive Plan with respect to which awards may be granted is 2,850,000. No further grants will be allowed under the 2002 Incentive Plan. At
March 31, 2022, there were 94,216 shares available for future grant. 24
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A summary of share based awards granted under the Incentive Plan during the
three months ended
Type of Number of Fair Equity Awards Value per Awarded Effective Date Granted Share (1) Vesting Terms RS - Service February 23, 2022 31,864
$ 84.983 years, 30%-30%-40% RS - Performance February 23, 2022 26,037 $ 84.983 years, cliff vesting (3) RSFebruary 23, 2022 5,000 $ 84.98No vesting period (2) RSMarch 24, 2022 2,000 $ 89.63
No vesting period
(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) four times their annual retainer. This requirement must be met within five
years of becoming a director. The shares represent performance-based restricted shares award. Vesting of
these shares is dependent upon the attainment of pre-established performance
(3) 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
The shares represent a true-up of previously awarded performance-based
(4) restricted share awards. The updated shares were calculated based on the
attainment of pre-established performance objectives and granted under the
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. 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 other reinsurers have an
A.M. Bestrating of "A+" (Superior) or "A" (Excellent). We maintain reinsurance coverage to help lessen the effect of losses from catastrophic events, maintaining coverage during 2022 that protects us in the event of a "136-year storm" (that is, a storm of a severity expected to occur once in a 136-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. The models include estimates for our share of the catastrophe losses generated in the residual market for property insurance by the Massachusetts Property Insurance Underwriting Association("FAIR Plan"). For 2022, we have purchased three layers of excess catastrophe reinsurance providing $590,000of coverage for property losses in excess of $75,000up to a maximum of $665,000. Our reinsurers' co-participation is 80.0% of $75,000for the 1st layer, 80.0% of $250,000for the 2nd layer and 80.0% of $265,000for the 3rd layer. We also have casualty excess of loss reinsurance for large casualty losses occurring in our automobile, homeowners, dwelling fire, business owners, and commercial package lines of business in excess of $2,000up to a maximum of $10,000. We have property excess of loss reinsurance coverage for large property losses, with coverage in excess of $2,000up to a maximum of $20,760, for our homeowners, business owners, and commercial package policies. In addition, we have liability excess of loss reinsurance for umbrella large losses in excess of $1,000up 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 and commercial package policies. We are a participant in CAR, a state-established body that runs the residual market reinsurance programs for commercial automobile insurance in Massachusettsunder which premiums, expenses, losses and loss adjustment expenses on ceded business are shared by all insurers writing automobile insurance in Massachusetts. We also participate in the 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. 25 Table of Contents As a response to the exposure to catastrophe losses, on July 1, 2021, the FAIR Plan purchased $1,800,000of catastrophe reinsurance for property losses with retention of $100,000.
adjustment expense reserves, unearned premiums and reinsurance recoverable.
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 investments, credit loss benefit (expense) and taxes related thereto. Net income (loss) and earnings (loss) per diluted share are the GAAP financial measures that are most directly comparable to non-GAAP operating income and non-GAAP operating income per diluted share, respectively. A reconciliation of the GAAP financial measures to these non-GAAP measures is included in the financial highlights below. 26 Table of Contents Results of Operations
Three Months Ended
The following table shows certain of our selected financial results.
Three Months Ended March 31, 2022 2021 Direct written premiums
$ 189,493 $ 192,237Net written premiums $ 178,052 $ 184,218Net earned premiums $ 187,088 $ 192,850Net investment income 10,590 11,532 Earnings from partnership investments 2,832 4,291 Net realized gains on investments 4,210 2,875 Change in net unrealized gains on equity securities (13,034) 6,207 Credit loss (expense) benefit - 181 Finance and other service income 3,317 3,972 Total revenue 195,003 221,908 Losses and loss adjustment expenses 123,166 111,495 Underwriting, operating and related expenses 61,594 65,024 Interest expense 129 129 Total expenses 184,889 176,648 Income before income taxes 10,114 45,260 Income tax expense 2,276 9,086 Net income $ 7,838 $ 36,174Earnings per weighted average common share: Basic $ 0.53 $ 2.44 Diluted $ 0.53 $ 2.42 Cash dividends paid per common share $
0.90 $ 0.90
Reconciliation of Net Income to Non-GAAP Operating Income:
Net income $ 7,838
$ 36,174Exclusions from net income: Net realized gains on investments (4,210) (2,875) Change in net unrealized gains on equity securities 13,034 (6,207) Credit loss expense (benefit) - (181) Income tax expense on exclusions from net income (1,853) 1,945 Non-GAAP Operating income $ 14,809 $ 28,856Net income per diluted share $ 0.53 $ 2.42 Exclusions from net income: Net realized gains on investments (0.29) (0.19) Change in net unrealized gains on equity securities 0.88 (0.42) Credit loss expense (benefit) - (0.01) Income tax expense on exclusions from net income (0.13) 0.13 Non-GAAP Operating income per diluted share $
0.99 $ 1.93
Direct Written Premiums. Direct written premiums for the three months ended
comparable 2021 period. The decrease is primarily in our private passenger
automobile line of business and is a result of a decrease in policy counts.
Net Written Premiums. Net written premiums for the three months ended
March 31, 2022decreased by $6,166, or 3.3%, to $178,052from $184,218for the comparable 2021 period. The 2022 decrease was primarily due to the factors that decreased direct written premiums. Net Earned Premiums. Net earned premiums for the three months ended March 31, 2022decreased by $5,762, or 3.0%, to $187,088from $192,850for the comparable 2021 period. The 2022 decrease was primarily due to the factors that decreased direct written premiums. 27 Table of Contents The effect of reinsurance on net written and net earned premiums is presented in the following table. Three Months Ended March 31, 2022 2021 Written Premiums Direct $ 189,493 $ 192,237Assumed 6,741 7,331 Ceded (18,182) (15,350) Net written premiums $ 178,052 $ 184,218Earned Premiums Direct $ 196,519 $ 201,055Assumed 7,754 8,027 Ceded (17,185) (16,232) Net earned premiums $ 187,088 $ 192,850Net Investment Income. Net investment income for the three months ended
March 31, 2022decreased by $942, or 8.2%, to $10,590from $11,532for the comparable 2021 period. The decrease is a result of lower yields on our fixed maturity assets on the investment portfolio which was 2.9% for the three months ended March 31, 2022compared to 3.2% for the three months ended March 31, 2021. The investment portfolio's duration was 3.7 years at March 31, 2022compared to 3.6 years at December 31, 2021. Earnings from Partnership Investments. Earnings from partnership investments was $2,832for the three months ended March 31, 2022compared to $4,291for the comparable 2021 period. Timing and generation of these returns on capital can vary based on the results and transactions of the underlying partnerships. Net Realized gains on Investments. Net realized gains on investments was $4,210for the three months ended March 31, 2022compared to $2,875for the comparable 2021 period. The increase is a result of an increase in realized gains on the sale of equity securities compared to the prior year. 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 for the periods indicated: As of March 31, 2022 Cost or Allowance for Gross Unrealized Estimated Amortized Expected Credit Fair Cost Losses Gains Losses (3) Value U.S. Treasury securities $ 1,827$ - $ - $ (71) $ 1,756Obligations of states and political subdivisions 89,553 - 1,510 (1,360) 89,703 Residential mortgage-backed securities (1) 229,117 - 1,089 (9,019) 221,187 Commercial mortgage-backed securities 154,241 - 597 (5,014) 149,824 Other asset-backed securities 74,709 - 201 (2,091) 72,819 Corporate and other securities 616,145 (691) 4,877 (19,552) 600,779 Subtotal, fixed maturity securities 1,165,592 (691) 8,274 (37,107) 1,136,068 Short term securities 5 - - - 5 Equity securities (2) 218,636 - 44,867 (4,804) 258,699 Other invested assets 91,460 - - - 91,460 Totals $ 1,475,693$ (691) $ 53,141 $ (41,911) $ 1,486,232
(1)Residential mortgage-backed securities consists primarily of obligations of
U.S. Governmentagencies 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 included 937 securities in an unrealized loss position at March 31, 2022. 28 Table of Contents The composition of our fixed income security portfolio by Moody's rating was as follows: As of March 31, 2022 Estimated Fair Value Percent U.S. Treasurysecurities and obligations of U.S.Government agencies $ 224,01319.7 % Aaa/Aa 263,608 23.2 A 247,554 21.8 Baa 212,738 18.7 Ba 58,986 5.2 B 98,900 8.7 Caa/Ca 3,136 0.3 Not rated 27,133 2.4 Total $ 1,136,068100.0 %
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.
March 31, 2022, 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
As of March 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. Treasury securities
$ 1,756$ 71 $ - $ - $ 1,756$ 71 Obligations of states and political subdivisions 19,793 1,214 904 146 20,697 1,360 Residential mortgage-backed securities 164,056 8,366 6,657 653 170,713 9,019 Commercial mortgage-backed securities 118,414 4,304 5,339 710 123,753 5,014 Other asset-backed securities 60,662 2,091 - - 60,662 2,091 Corporate and other securities 353,599 16,961 32,777 2,591 386,376 19,552 Subtotal, fixed maturity securities 718,280 33,007 45,677 4,100 763,957 37,107 Equity securities 62,921 4,456 353 348 63,274 4,804
Total temporarily impaired securities
$ 781,201 $ 37,463 $ 46,030 $ 4,448 $ 827,231 $ 41,911
March 31, 2022and December 31, 2021, the Company concluded that $691of 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 March 31, 2022and December 31, 2021resulted 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 operating 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
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.
29 Table of Contents 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
March 31, 2022decreased by $655, or 16.5%, to $3,317from $3,972for the comparable 2021 period. The decrease is primarily driven by a change in our late fee assessment policy. Loss and Loss Adjustment Expenses. Loss and loss adjustment expenses incurred for the three months ended March 31, 2022increased by $11,671, or 10.5%, to $123,166from $111,495for the comparable 2021 period. 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. Our GAAP loss ratio for the three months ended March 31, 2022increased to 65.8% from 57.8% for the comparable 2021 period. Our GAAP loss ratio excluding loss adjustment expenses for the three months ended March 31, 2022was 55.2% compared to 44.7% for the comparable 2021 period. Total prior year favorable development included in the pre-tax results for the three months ended March 31, 2022was $12,412compared to $12,459for the comparable 2021 period. Underwriting, Operating and Related Expenses. Underwriting, operating and related expenses for the three months ended March 31, 2022decreased by $3,430, or 5.3%, to $61,594from $65,024for the comparable 2021 period. Our GAAP expense ratio for the three months ended March 31, 2022decreased to 32.9% from 33.7% for the comparable 2021 period. The decrease is driven by a decrease in contingent commission expenses offset by expense incurred related to an activist investor.
Interest Expense. Interest expense was
Income Tax Expense. Our effective tax rate was 22.5% and 20.1% for the quarters ended
March 31, 2022and 2021, respectively. The effective tax rate for the quarter ended March 31, 2022was higher than the statutory rate primarily due to the effects of the change in unrealized gains on equity securities and the impact of stock-based compensation. The effective tax rate for the quarter ended March 31, 2021was lower than the statutory rate primarily due to the effects of tax-exempt investment income and the impact of stock-based compensation.
Net Income. Net income for the three months ended
Non-GAAP Operating Income. Non-GAAP operating income as defined above was
$14,809for the three months ended March 31, 2022compared to $28,856for the comparable 2021 period. The decrease in Non-GAAP operating income was primarily the result of an increase in loss and loss adjustment expenses compared to
the prior 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'ssources of funds primarily include premiums received, investment income, and proceeds from sales and redemptions of investments. Safety Insurance'sprincipal 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 used for operating activities was $15,276during the three months ended March 31, 2022compared to net cash provided by operating activities of $12,523during the three months ended March 31, 2021. Our operations 30
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typically generate positive cash flows from operations as most premiums are received in advance of the time when claim and benefit payments are required. Net cash used for operating activities during the three months ended
March 31, 2022was the result of the timing of expense payments. Positive operating cash flows are expected in the future to meet our liquidity requirements. Net cash provided by investing activities was $15,124during the three months ended March 31, 2022compared to net cash used for investing activities of $814during the three months ended March 31, 2021. Fixed maturities, equity securities, and other invested assets purchased were $84,970for the three months ended March 31, 2022compared to $80,439for the comparable prior year period. Proceeds from maturities, redemptions, calls and sales, of securities were $100,785during the three months ended March 31, 2022compared to $82,498for the comparable prior year period. Net cash used for financing activities was $28,220and $13,915during the three months ended March 31, 202220211 period. The net cash used for financing activities during the three months ended March 31, 2022consisted of dividend payments to shareholders. 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.
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
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 Insuranceof Massachusetts. The Massachusettsstatute 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 31or (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 Massachusettsstatute) 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 Massachusettslaw, 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, 2021, the statutory surplus of Safety Insurancewas $826,979, and its statutory net income for 2021 was $97,169. As a result, a maximum of $97,169is available in 2022 for such dividends without prior approval of the Commissioner. As a result of this Massachusettsstatute, the Insurance Subsidiaries had restricted net assets in the amount of $729,810at December 31, 2021. During the three months ended March 31, 2022, Safety Insurancepaid dividends to Safety of $24,096. 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 31
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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
Company has paid regular quarterly dividends to shareholders of its common
stock. Quarterly dividends paid during 2022 were as follows:
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 $ 13,246On May 4, 2022, our Board approved and declared a quarterly cash dividend of $0.90per share which will be paid on June 15, 2022to shareholders of record on June 1, 2022. We plan to continue to declare and pay quarterly cash dividends in 2022, 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 $50,000of the Company's outstanding common shares. As of March 31, 2022, the Board of Directors has cumulatively authorized increases to the existing share repurchase program of up to $180,000of 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. As of March 31, 2022, the Company had purchased 3,141,477 shares of common stock at a cost of $150,000. As of December 31, 2021, the Company had purchased 2,970,573 shares of common stock at a cost of $135,397. Under the program, Safety may repurchase shares of its common stock for cash in public or private transactions, in the open market or otherwise, at management's discretion. 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 Safety to repurchase any specific number of shares and may be modified, suspended or terminated at any time without prior notices. 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
Massachusettslaw, 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, 2021, the Insurance Subsidiaries had total capital of $826,979, 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 $200,196at December 31, 2021. 32
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Off-Balance Sheet Arrangements
We have no material obligations under a guarantee contract meeting the characteristics identified in 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
Accounting Standards Codification ("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 33
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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
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
$433,303to $496,093as of March 31, 2022. 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 $469,365as of March 31, 2022. 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
March 31, 2022. As of March 31, 2022 Line of Business Low Recorded High Private passenger automobile $ 170,129 $ 182,388 $ 192,576Commercial automobile 100,842 106,463 110,892 Homeowners 84,650 93,434 95,516 All other 77,682 87,080 97,109 Total $ 433,303 $ 469,365 $ 496,093
The following table presents our total net reserves and the corresponding case
reserves and IBNR reserves for each line of business as of
As of March 31, 2022 Line of Business Case IBNR Total Private passenger automobile
$ 226,114 $ (43,734)$
CAR assumed private passenger auto 1 7 8 Commercial automobile 67,721 7,784
CAR assumed commercial automobile 17,318 13,640
Homeowners 83,676 (529)
FAIR Plan assumed homeowners 3,956 6,331
All other 47,137 39,943
Total net reserves for losses and LAE
34 Table of Contents At
March 31, 2022, our total IBNR reserves for our private passenger automobile line of business was comprised of ( $63,102) related to estimated ultimate decreases in the case reserves, including anticipated recoveries (i.e. salvage and subrogation), and $19,368related 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 44.1% of our total reserves for CAR assumed commercial automobile business as of March 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. Our IBNR reserves for FAIR Plan assumed homeowners are 61.5% of our total reserves for FAIR Plan assumed homeowners at March 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 March 31, 2022. As of March 31, 2022 Line of Business Retained Assumed
Private passenger automobile
$ 182,380CAR assumed private passenger automobile $ 8Net private passenger automobile $
Commercial automobile 75,505 CAR assumed commercial automobile 30,958 Net commercial automobile
Homeowners 83,147 FAIR Plan assumed homeowners 10,287 Net homeowners
All other 87,080 -
Total net reserves for losses and LAE
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. 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, 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.
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 three months ended 35
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March 31, 2022, a 1 percentage-point change in the loss and LAE ratio would result in a change in reserves of $1,870. Each 1 percentage-point change in the loss and loss expense ratio would have had a $1,477effect on net income, or $0.10per 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 three months ended March 31, 2022. 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 $ (3,648) $ (1,824)$ - Estimated increase in net income 2,882 1,441 - No Change in Severity Estimated (decrease) increase in reserves (1,824) -
Estimated increase (decrease) in net income 1,441 -
+1 Percent Change in Severity Estimated increase in reserves - 1,824
Estimated decrease in net income - (1,441)
Commercial automobile retained loss and LAE reserves -1 Percent Change in Severity Estimated decrease in reserves (1,510) (755) - Estimated increase in net income 1,193 596 - No Change in Severity Estimated (decrease) increase in reserves (755) - 755 Estimated increase (decrease) in net income 596 -
+1 Percent Change in Severity Estimated increase in reserves - 755
Estimated decrease in net income - (596)
Homeowners retained loss and LAE reserves -1 Percent Change in Severity Estimated decrease in reserves (1,663) (831) - Estimated increase in net income 1,314 656 - No Change in Severity Estimated (decrease) increase in reserves (831) - 831 Estimated increase (decrease) in net income 656 -
+1 Percent Change in Severity Estimated increase in reserves - 831
Estimated decrease in net income - (656)
All other retained loss and LAE reserves -1 Percent Change in Severity Estimated decrease in reserves (1,742) (871) - Estimated increase in net income 1,376 688 - No Change in Severity Estimated (decrease) increase in reserves (871) - 871 Estimated increase (decrease) in net income 688 -
+1 Percent Change in Severity Estimated increase in reserves - 871
Estimated decrease in net income - (688)
(1,376) 36 Table of Contents 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). 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 three months ended
March 31, 2022. 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
Estimated increase (decrease) in net income
245 (245) FAIR Plan assumed homeowners Estimated (decrease) increase in reserves (103) 103 Estimated increase (decrease) in net income 81 (81)
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
The following table presents a comparison of prior year development of our net reserves for losses and LAE for the three months ended
March 31, 2022and 2021. 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. Three Months Ended March 31, Accident Year 2022 2021 2012 & prior $ (1) $ (408)2013 (176) (134) 2014 (269) (89) 2015 (297) (490) 2016 (746) 70 2017 (989) (1,732) 2018 (2,410) (2,637) 2019 (2,643) (4,353) 2020 (3,737) (2,686) 2021 (1,144) - All prior years $ (12,412) $ (12,459)
The decreases in prior years' reserves during the three months ended
March 31, 2022and 2021 resulted from re-estimations of prior year ultimate loss and LAE liabilities. The 2022 decrease is composed of reductions of $3,580in our retained private passenger automobile reserves, $2,367in our retained commercial automobile reserves, $3,884in our retained homeowners reserves and $2,581our retained other lines reserves. The 2021 decrease is primarily composed of reductions of $3,872in our retained private passenger automobile reserves, $723in our retained commercial automobile reserves, $3,492in our retained homeowners reserves and $2,404in our retained other lines reserves. 37 Table of Contents
The following table presents information by line of business for prior year
development of our net reserves for losses
Private Passenger Commercial Accident Year Automobile Automobile Homeowners All Other Total 2012 & prior $ (7)
$ (1) $ 7$ - $ (1)2013 (6) (3) 3 (170) (176) 2014 (2) (1) (96) (170) (269) 2015 (5) (16) (5) (271) (297) 2016 (57) (47) (82) (560) (746) 2017 (307) (87) (128) (467) (989) 2018 (642) (208) (1,030) (530) (2,410) 2019 (868) (571) (1,213) 9 (2,643) 2020 (1,655) (722) (1,157) (203) (3,737) 2021 (31) (711) (183) (219) (1,144) All prior years $ (3,580) $ (2,367) $ (3,884) $ (2,581) $ (12,412)The improved private passenger and commercial automobile results were primarily due to fewer IBNR claims than previously estimated and better than previously estimated severity on our established bodily injury and property damage case reserves. Our other than auto and homeowners line of business prior year reserves decreased, due primarily to fewer IBNR claims than previously estimated.
For further information, see "Results of Operations: Losses and Loss Adjustment
Investment Impairments The Company uses 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 like than not that the Company 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 the Company does not intend to sell or for which it is more likely than not that the Company would not be required to sell before an anticipated recovery in value, the Company separates 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: Net Impairment Losses on
Forward-looking statements might include one or more of the following, among
? 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
The impact of COVID-19 and related economic conditions, including the Company's
? assessment of the vulnerability of certain categories of investments due to the
economic disruptions associated with COVID-19;
? Legal and regulatory commentary
38 Table of Contents
? Descriptions of assumptions underlying or relating to any of the foregoing; and
? 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:
? The competitive nature of our industry and the possible adverse effects of such
? Conditions for business operations and restrictive regulations in
? The possibility of losses due to claims resulting from severe weather;
? 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;
The effects of emerging claim and coverage issues on the Company's business are
uncertain, and court decisions or legislative or regulatory changes that take
place after the Company issues its policies, including those taken in response
? to COVID-19 (such as requiring insurers to cover business interruption claims
irrespective of terms or other conditions included in the policies that would
otherwise preclude coverage), can result in an unexpected increase in the
number of claims and have a material adverse impact on the Company's results of
? The possibility that civil litigation and/or state insurance regulators may
require additional premium relief payouts related to COVID-19;
The impact of COVID-19 and related risks, including on the Company's employees,
? agents or other key partners, could materially affect the Company's results of
operations, financial position and/or liquidity; and
Other risks and factors identified from time to time in our reports filed with
Form 10-K for the year ended
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.
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