Newswires
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 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 52.0% of our direct written premiums in 2022), we offer a portfolio
of other insurance products, including commercial automobile (17.4% of 2022
direct written premiums), homeowners (25.3% of 2022 direct written premiums) and
dwelling fire, umbrella and business owner policies (totaling 5.3% of 2022
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 843 in 1,071 locations
throughout these three states at December 31, 2022 . 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 7.9% and 12.6% share, respectively, of the Massachusetts private
passenger and commercial automobile markets in 2022 according to statistics
compiled by the Commonwealth Automobile Reinsurers ("CAR") based on automobile
exposures. We are also the third largest homeowners insurance carrier in
Massachusetts with a 6.5% share of the Massachusetts homeowners insurance
market.
policyholders, currently assigns
"A" rating was reaffirmed by
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Our Insurance Subsidiaries began writing insurance inNew Hampshire during 2008 and inMaine in 2016. InNovember 2020 , we formed a fourth insurance subsidiary, Safety Northeast, which became licensed to write insurance products inMassachusetts . The table below shows the amount of direct written premiums written in each state during the three months endedMarch 31, 2023 and 2022. Three Months Ended March 31, Direct Written Premiums 2023 2022 Massachusetts$ 207,952 $ 181,091 New Hampshire 8,612 7,640 Maine 1,288 762 Total$ 217,852 $ 189,493 Recent Trends and Events Beginning onFebruary 2, 2023 and throughFebruary 5, 2023 , the Northeast region experienced a severe winter weather event ("FebruaryWinter Freeze ") over a thirty-six hour period, whereby temperatures reached lows of negative 40 degrees Fahrenheit, including windchill. As a result of the FebruaryWinter Freeze , the Company received 783 claims totaling$32,100 of losses and loss adjustment expenses as of the quarter endedMarch 31, 2023 .
Losses and Loss Adjustment Expenses. Losses and loss adjustment expenses
incurred for the three months ended
35.7%, to
losses is due to the February
conditions, specifically inflation.
Direct and Net Written Premiums. For the quarter endedMarch 31, 2023 , the Company achieved its second consecutive quarter of double-digit growth in direct and net written premiums. For the three months endedMarch 31, 2023 , direct written premium growth and net written premium growth were 15.0% and 13.9%, respectively. The increase in premium is driven by new business production, specifically in the private passenger auto line, improved retention, and rate increases. Non-generally accepted accounting principles ("non-GAAP") operating loss, as defined below, was$12,796 for the three months endedMarch 31, 2023 , compared to non-GAAP operating income of$14,809 for the comparable 2022 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 loss for the quarter endedMarch 31, 2023 was$0.87 per diluted share, compared to non-GAAP operating income of$0.99 per diluted share for the comparable 2022 period.
The following rate changes have been filed and approved by the insurance
regulators of
for agents.
Line of Business Effective Date Rate Change
Massachusetts Homeowners August 1, 2023 3.9%
Massachusetts Private Passenger Automobile July 1, 2023 4.3%
Massachusetts Commercial Automobile May 1, 2023 4.0%
Massachusetts Private Passenger Automobile
New Hampshire Commercial Automobile
September 1, 2022 5.8% New Hampshire Homeowners September 1, 2022 3.5%
New Hampshire Private Passenger Automobile
Massachusetts Homeowners
July 1, 2022 2.6% Massachusetts Commercial Automobile May 1, 2022 3.1% Massachusetts Private Passenger Automobile April 1, 2022 -2.3%
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
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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,
2023 2022
GAAP ratios:
Loss ratio 87.2 % 65.8 %
Expense ratio 31.3 32.9
Combined ratio 118.5 % 98.7 %
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
March 31, 2023 , there were 374,422 shares available for future grant.
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, 2023 33,101 $ 80.24 3 years, 30%-30%-40%
RS - Performance February 23, 2023 25,990 $ 80.24 3 years, cliff vesting (3)
RS - Performance February 23, 2023 4,703 $ 80.24 3 years, cliff vesting (4)
RS February 23, 2023 6,000 $ 80.24
No vesting period (2)
(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
performance period.
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
Amended 2018 Plan.
Reinsurance
We reinsure with other insurance companies a portion of our potential liability
under the policies we have underwritten, thereby protecting us against an
unexpectedly large loss or a catastrophic occurrence that could produce
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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 anA.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 2023 that protects us in the event of a "129-year storm" (that is, a storm of a severity expected to occur once in a 129-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 theMassachusetts Property Insurance Underwriting Association ("FAIR Plan"). For 2023, we have purchased three layers of excess catastrophe reinsurance providing$590,000 of coverage for property losses in excess of$75,000 up to a maximum of$665,000 . Our reinsurers' co-participation is 75.0% of$75,000 for the 1st layer, 75.0% of$250,000 for the 2nd layer and 75.0% of$265,000 for the 3rd layer. We 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$2,500 up to a maximum of$20,000 , 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 withHartford 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 inMassachusetts under which premiums, expenses, losses and loss adjustment expenses on ceded business are shared by all insurers writing automobile insurance inMassachusetts . 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 inMassachusetts . As a response to the exposure to catastrophe losses, onJuly 1, 2022 , the FAIR Plan purchased$1,800,000 of catastrophe reinsurance for property losses with retention of$100,000 .
At
adjustment expense reserves, unearned premiums and reinsurance recoverable.
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 (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.
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Results of Operations
Three Months Ended
The following table shows certain of our selected financial results.
Three Months Ended
2023 2022
Direct written premiums $ 217,852 $ 189,493
Net written premiums $ 202,884 $ 178,052
Net earned premiums $ 191,735 $ 187,088
Net investment income 13,654 10,590
Earnings from partnership investments 2,166 2,832 Net realized gains on investments 733 4,210 Change in net unrealized gains on equity securities
770 (13,034) Credit loss expense (922) - Commission income 1,483 -
Finance and other service income 4,140 3,317 Total revenue 213,759 195,003 Losses and loss adjustment expenses 167,153 123,166 Underwriting, operating and related expenses
60,033 61,594 Other expense 1,670 - Interest expense 210 129 Total expenses 229,066 184,889
(Loss) income before income taxes (15,307) 10,114 Income tax (benefit) expense (2,970) 2,276 Net (loss) income
(Loss) earnings per weighted average common share:
Basic
$ (0.84) $ 0.53 Diluted$ (0.84) $ 0.53 Cash dividends paid per common share
$ 0.90 $ 0.90
Reconciliation of Net (Loss) Income to Non-GAAP Operating (Loss) Income
Net (loss) income$ (12,337) $ 7,838 Exclusions from net (loss) income: Net realized gains on investments (733) (4,210) Change in net unrealized gains on equity securities (770) 13,034 Credit loss expense 922 - Income tax benefit (expense) on exclusions from net (loss) income 122 (1,853) Non-GAAP Operating (loss) income
Net (loss) income per diluted share$ (0.84) $ 0.53 Exclusions from net (loss) income: Net realized gains on investments (0.05) (0.29) Change in net unrealized (gains) on equity securities (0.05) 0.88 Credit loss expense 0.06 - Income tax benefit (expense) on exclusions from net (loss) income 0.01 (0.13) Non-GAAP Operating (loss) income per diluted share
Direct Written Premiums. Direct written premiums for the three months endedMarch 31, 2023 increased by$28,359 , or 15.0%, to$217,852 from$189,493 for the comparable 2022 period. The increase in direct written premium is the result of new business production, improved retention, and rate increases.
Net Written Premiums. Net written premiums for the three months ended
2023
comparable 2022 period. The increase was primarily due to the factors that
increased direct written premiums.
Net Earned Premiums. Net earned premiums for the three months endedMarch 31, 2023 increased by$4,647 , or 2.5%, to$191,735 from$187,088 for the comparable 2022 period. 27 Table of Contents The effect of reinsurance on net written and net earned premiums is presented in the following table. Three Months Ended March 31, 2023 2022 Written Premiums Direct$ 217,852 $ 189,493 Assumed 7,230 6,741 Ceded (22,198) (18,182) Net written premiums$ 202,884 $ 178,052 Earned Premiums Direct$ 205,555 $ 196,519 Assumed 7,913 7,754 Ceded (21,733) (17,185) Net earned premiums$ 191,735 $ 187,088 Net Investment Income. Net investment income for the three months endedMarch 31, 2023 increased by$3,064 , or 28.9%, to$13,654 from$10,590 for the comparable 2022 period. The increase is a result of higher yields of 3.8% for the three months endedMarch 31, 2023 compared to 2.9% for the three months endedMarch 31, 2022 . The investment portfolio's duration was 3.8 years atMarch 31, 2023 andDecember 31, 2022 , respectively, Earnings from Partnership Investments. Earnings from partnership investments was$2,166 for the three months endedMarch 31, 2023 compared to$2,832 for the comparable 2022 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$733 for the three months endedMarch 31, 2023 compared to$4,210 for the comparable 2022 period. The gross unrealized gains and losses on investments in fixed maturity securities, including redeemable preferred stocks that have characteristics of fixed maturities, short term investments, equity securities, including interests in mutual funds, and other invested assets were as follows for the periods
indicated:
As of March 31, 2023
Cost or Allowance for Gross Unrealized Estimated
Amortized Expected Credit Fair
Cost Losses Gains Losses (3) Value
U.S. Treasury securities $ 1,825 $ - $ - $ (130) $ 1,695
Obligations of states and
political subdivisions 48,107 - 349 (2,832) 45,624
Residential
mortgage-backed securities
(1) 254,043 - 690 (21,370) 233,363
Commercial mortgage-backed
securities 160,015 - 124 (14,335) 145,804
Other asset-backed
securities 68,729 - - (4,116) 64,613
Corporate and other
securities 599,966 (1,600) 1,713 (42,729) 557,350
Subtotal, fixed maturity
securities 1,132,685 (1,600) 2,876 (85,512) 1,048,449
Short term investments 79 - - - 79
Equity securities (2) 236,392 - 27,663 (18,183) 245,872
Other invested assets (4) 121,318 - - - 121,318
Totals $ 1,490,474 $ (1,600) $ 30,539 $ (103,695) $ 1,415,718
(1)Residential mortgage-backed securities consists primarily of obligations ofU.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 theFederal 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 1,118 securities in an unrealized loss position atMarch 31, 2023 . (4)Other invested asset accounted for under the equity method which approximated fair value. 28 Table of Contents The composition of our fixed income security portfolio by Moody's rating was as follows: As of March 31, 2023 Estimated Fair Value PercentU.S. Treasury securities and obligations ofU.S. Government agencies$ 233,363 22.3 % Aaa/Aa 229,887 21.9 A 210,444 20.1 Baa 209,397 20.0 Ba 62,177 5.9 B 86,585 8.3 Caa/Ca 4,376 0.4 Not rated 12,220 1.1 Total$ 1,048,449 100.0 %
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 ofMarch 31, 2023 , 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, 2023
Less than 12 Months 12 Months or More Total
Estimated Unrealized Estimated Unrealized Estimated Unrealized
Fair Value Losses Fair Value Losses Fair Value Losses
U.S. Treasury securities $ - $ - $ 1,695 $ 130 $ 1,695 $ 130
Obligations of states and
political subdivisions 14,286 203 19,232 2,629 33,518 2,832
Residential mortgage-backed
securities 75,548 3,088 134,453 18,282 210,001 21,370
Commercial mortgage-backed
securities 31,265 1,436
108,347 12,899 139,612 14,335
Other asset-backed securities
11,364 661 52,731 3,455 64,095 4,116 Corporate and other securities 190,320 7,150 287,799 35,579 478,119 42,729 Subtotal, fixed maturity securities 322,783 12,538 604,257 72,974 927,040 85,512 Equity securities 101,178 12,527 19,959 5,656 121,137 18,183 Total temporarily impaired securities$ 423,961 $ 25,065 $
624,216
As ofMarch 31, 2023 andDecember 31, 2022 , the Company concluded that$1,600 and$678 , 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 atMarch 31, 2023 andDecember 31, 2022 resulted from fluctuations in market interest rates and other temporary market conditions as opposed to fundamental changes in the credit quality of the issuers of such securities. 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.
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Commission Income: Commission income includes revenues from new and renewal
commissions paid by insurance carriers, which we recognize when earned.
Commission income for the three months ended
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 endedMarch 31, 2023 increased by$823 , or 24.8%, to$4,140 from$3,317 for the comparable 2022 period. The increase is primarily driven by the increase in written premium and changes to our fee assessment policies. Losses and Loss Adjustment Expenses. Loss and loss adjustment expenses incurred for the three months endedMarch 31, 2023 increased by$43,987 , or 35.7%, to$167,153 from$123,166 for the comparable 2022 period. The increase in losses is due to the FebruaryWinter Freeze , as well as current market conditions including inflation. Our GAAP loss ratio for the three months endedMarch 31, 2023 increased to 87.2% from 65.8% for the comparable 2022 period. Our GAAP loss ratio excluding loss adjustment expenses for the three months endedMarch 31, 2023 was 76.2% compared to 55.2% for the comparable 2022 period. Total prior year favorable development included in the pre-tax results for the three months endedMarch 31, 2023 was$11,533 compared to$12,412 for the comparable 2022 period. Underwriting, Operating and Related Expenses. Underwriting, operating and related expenses for the three months endedMarch 31, 2023 decreased by$1,561 , or 2.5%, to$60,033 from$61,594 for the comparable 2022 period. Our GAAP expense ratio for the three months endedMarch 31, 2023 decreased to 31.3% from 32.9% for the comparable 2022 period. The decrease is driven by a decrease in contingent commission expenses. Interest Expense. Interest expense was$210 and$129 for the three months endedMarch 31, 2023 and 2022, respectively. The credit facility commitment fee included in interest expense was$19 for the three months endedMarch 31, 2023 and 2022. Income Tax Expense. Our effective tax rate was 19.4% and 22.5% for the quarters endedMarch 31, 2023 and 2022, respectively. The effective tax rate for the quarter endedMarch 31, 2023 was lower than the statutory rate primarily due to the effects of the change in unrealized gains on equity securities. The effective tax rate for the quarter endedMarch 31, 2022 was 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.
Net (Loss) Income. Net loss for the three months ended
Non-GAAP Operating Income. Non-GAAP operating loss as defined above was$12,796 for the three months endedMarch 31, 2023 compared to non-GAAP operating income of$14,809 for the comparable 2022 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, principallySafety 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. 30 Table of Contents Net cash used for operating activities was$12,892 and$15,276 during the three months endedMarch 31, 2023 and 2022, 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. Net cash used for operating activities during the three months endedMarch 31, 2023 was the result of the timing of expense and FebruaryWinter Freeze payments. Positive operating cash flows are expected in the future to meet our liquidity requirements. Net cash provided by investing activities was$6,655 and$15,124 during the three months endedMarch 31, 2023 and 2022, respectively. Fixed maturities, equity securities, and other invested assets purchased were$43,292 for the three months endedMarch 31, 2023 compared to$84,965 for the comparable prior year period. Proceeds from maturities, redemptions, calls and sales, of securities were$50,561 during the three months endedMarch 31, 2023 compared to$100,785 for the comparable prior year period. Net cash used for financing activities was$3,747 and$28,220 during the three months endedMarch 31, 2023 2022 period. The net cash used for financing activities during the three months endedMarch 31, 2023 consisted of dividend payments to shareholders offset by borrowings from the FHLB-Boston. 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
There are no recent accounting pronouncements that are applicable to the
Company.
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 theDivision of Insurance ofMassachusetts (the "Commissioner"). TheMassachusetts 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 precedingDecember 31 or (ii) the insurer's net income for the twelve-month period ending the precedingDecember 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 byMassachusetts 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. UnderMassachusetts 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. AtDecember 31, 2022 , the statutory surplus ofSafety Insurance was$782,200 , and its statutory net income for 2022 was$66,197 . As a result, a maximum of$78,220 is available in 2023 for such dividends without prior approval of the Commissioner. As a result of thisMassachusetts statute, the Insurance Subsidiaries had restricted net assets in the amount of$703,980 atDecember 31, 2022 . During the three months endedMarch 31, 2023 ,Safety Insurance paid dividends to Safety of$8,056 . 31 Table of Contents 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
Company has paid regular quarterly dividends to shareholders of its common
stock. Quarterly dividends paid during 2023 were as follows:
Total
Declaration Record Payment Dividend per Dividends Paid
Date Date Date Common Share and Accrued
February 15, 2023 March 1, 2023 March 15, 2023 $ 0.90 $ 13,247
On May 3, 2023 , our Board approved and declared a quarterly cash dividend of
$0.90 per share which will be paid on June 15, 2023 to shareholders of record on
June 1, 2023 . We plan to continue to declare and pay quarterly cash dividends in
2023, depending on our financial position and the regularity of our cash flows.
On February 23, 2022 , the Board of Directors approved a share repurchase program
of up to $50,000 of the Company's outstanding common shares. As of March 31,
2023 , 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
purchases were made by the Company under the program during the three months
ended March 31, 2023 . As of March 31, 2023 and December 31, 2022 , the Company
had purchased 3,141,477 shares of common stock at a cost of $150,000 .
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. UnderMassachusetts 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 ofDecember 31, 2022 , the Insurance Subsidiaries had total capital of$782,200 , 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$200,196 atDecember 31, 2022 . 32
Table of Contents
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
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Table of Contents
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$443,086 to$496,959 as ofMarch 31, 2023 . 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$474,239 as ofMarch 31, 2023 . The following table presents the point estimation of the recorded reserves and the range of estimations by line of business for net loss and LAE reserves
as ofMarch 31, 2023 . As of March 31, 2023 Line of Business Low Recorded High Private passenger automobile$ 172,673 $ 181,497 $ 191,753 Commercial automobile 95,526 103,334 106,960 Homeowners 99,238 104,784 107,952 All other 75,649 84,624 90,294 Total$ 443,086 $ 474,239 $ 496,959 34 Table of Contents
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, 2023
Line of Business Case IBNR Total
Private passenger automobile $ 229,821 $ (48,333) $
181,488
CAR assumed private passenger auto 1 8 9 Commercial automobile 63,145 9,966
73,111
CAR assumed commercial automobile 18,332 11,891
30,223
Homeowners 95,953 (1,621)
94,332
FAIR Plan assumed homeowners 4,002 6,450
10,452
All other 45,675 38,949
84,624
Total net reserves for losses and LAE
AtMarch 31, 2023 , our total IBNR reserves for our private passenger automobile line of business was comprised of ($73,731 ) related to estimated ultimate decreases in the case reserves, including anticipated recoveries (i.e. salvage and subrogation), and$25,398 related to our estimation for not yet reported losses. Our IBNR reserves consist of our estimate of the total loss reserves required less our case reserves. The IBNR reserves for CAR assumed commercial automobile business are 39.3% of our total reserves for CAR assumed commercial automobile business as ofMarch 31, 2023 , due to the reporting delays in the information we receive from CAR, as described further in the section on Residual Market Loss and Loss Adjustment Expense Reserves. Our IBNR reserves for FAIR Plan assumed homeowners are 61.7% of our total reserves for FAIR Plan assumed homeowners atMarch 31, 2023 , due to similar reporting delays in the information we receive from FAIR Plan. The following table presents information by line of business for our total net reserves and the corresponding retained (i.e. direct less ceded) reserves and assumed reserves as ofMarch 31, 2023 . As of March 31, 2023 Line of Business Retained Assumed
Net
Private passenger automobile$ 181,488 CAR assumed private passenger automobile$ 9 Net private passenger automobile $
181,497
Commercial automobile 73,111 CAR assumed commercial automobile 30,223 Net commercial automobile
103,334
Homeowners 94,332 FAIR Plan assumed homeowners 10,452 Net homeowners
104,784
All other 84,624 -
84,624
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.
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Table of Contents
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 three months endedMarch 31, 2023 , a 1 percentage-point change in the loss and LAE ratio would result in a change in reserves of$1,916 . Each 1 percentage-point change in the loss and loss expense ratio would have had a$1,514 effect on net income, or$0.10 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 three months endedMarch 31, 2023 . 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. 36 Table of Contents
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 $ (3,630) $ (1,815) $ -
Estimated increase in net income 2,868 1,434 -
No Change in Severity
Estimated (decrease) increase in reserves (1,815) -
1,815
Estimated increase (decrease) in net income 1,434 -
(1,434)
+1 Percent Change in Severity Estimated increase in reserves - 1,815
3,630
Estimated decrease in net income - (1,434)
(2,868)
Commercial automobile retained loss and LAE reserves -1 Percent Change in Severity Estimated decrease in reserves (1,462) (731) - Estimated increase in net income 1,155 578 - No Change in Severity Estimated (decrease) increase in reserves (731) - 731 Estimated increase (decrease) in net income 578 -
(578)
+1 Percent Change in Severity Estimated increase in reserves - 731
1,462
Estimated decrease in net income - (578)
(1,155)
Homeowners retained loss and LAE reserves -1 Percent Change in Severity Estimated decrease in reserves (1,887) (943) - Estimated increase in net income 1,490 745 - No Change in Severity Estimated (decrease) increase in reserves (943) - 943 Estimated increase (decrease) in net income 745 -
(745)
+1 Percent Change in Severity Estimated increase in reserves - 943
1,887
Estimated decrease in net income - (745)
(1,490)
All other retained loss and LAE reserves -1 Percent Change in Severity Estimated decrease in reserves (1,692) (846) - Estimated increase in net income 1,337 669 - No Change in Severity Estimated (decrease) increase in reserves (846) - 846 Estimated increase (decrease) in net income 669 -
(669)
+1 Percent Change in Severity Estimated increase in reserves - 846
1,692
Estimated decrease in net income - (669)
(1,337)
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
37
Table of Contents
reserves and net income for the three months endedMarch 31, 2023 . 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
239 (239) FAIR Plan assumed homeowners Estimated (decrease) increase in reserves (105) 105 Estimated increase (decrease) in net income 83 (83)
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
and
The following table presents a comparison of prior year development of our net reserves for losses and LAE for the three months endedMarch 31, 2023 and 2022. 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 2023 2022 2013 & prior$ (116) $ (177) 2014 (228) (269) 2015 (662) (297) 2016 (302) (746) 2017 (1,117) (989) 2018 (766) (2,410) 2019 (2,143) (2,643) 2020 (3,575) (3,737) 2021 (1,198) (1,144) 2022 (1,426) - All prior years$ (11,533) $ (12,412)
The decreases in prior years' reserves during the three months endedMarch 31, 2023 and 2022 resulted from re-estimations of prior year ultimate loss and LAE liabilities. The 2023 decrease is composed of reductions of$3,207 in our retained private passenger automobile reserves,$2,286 in our retained commercial automobile reserves,$2,570 in our retained homeowners reserves and$3,470 our retained other lines reserves. The 2022 decrease is primarily composed of reductions of$3,580 in our retained private passenger automobile reserves,$1,175 in our retained commercial automobile reserves,$3,570 in our retained homeowners reserves and$2,581 in our retained other lines reserves. 38 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
2013 & prior $ (30) $ 1 $ - $ (87) $ (116)
2014 (28) (22) - (178) (228)
2015 (28) (21) (134) (479) (662)
2016 (6) (83) (236) 23 (302)
2017 (239) (399) (229) (250) (1,117)
2018 (123) (485) (134) (24) (766)
2019 (615) (632) (440) (456) (2,143)
2020 (1,898) (178) (1,174) (325) (3,575)
2021 (142) (230) (91) (735) (1,198)
2022 (98) (237) (132) (959) (1,426)
All prior years $ (3,207) $ (2,286) $ (2,570) $ (3,470) $ (11,533)
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
Expenses."
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
Investments."
Forward-Looking Statements
Forward-looking statements might include one or more of the following, among
others:
? Projections of revenues, income, earnings per share, capital expenditures,
dividends, capital structure or other financial items;
? Descriptions of plans or objectives of management for future operations,
products or services;
? Forecasts of future economic performance, liquidity, need for funding and
income;
? Legal and regulatory commentary
? Descriptions of assumptions underlying or relating to any of the foregoing; and
? Future performance of credit markets.
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Table of Contents
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
competition;
? Conditions for business operations and restrictive regulations in
? The possibility of losses due to claims resulting from severe weather;
? The impact of inflation and supply chain delays on loss severity;
? The possibility that the Commissioner may approve future rule changes that
change the operation of the residual market;
? The possibility that existing insurance-related laws and regulations will
become further restrictive in the future;
? Our possible need for and availability of additional financing, and our
dependence on strategic relationships, among others;
Other risks and factors identified from time to time in our reports filed with
? the
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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Table of Contents
QUINSTREET, INC – 10-Q – MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
Management's Discussion and Analysis of Financial Condition and Results of Operations (tabular dollars are in thousands)
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