Document and Entity Information
Document and Entity Information - shares | 9 Months Ended | |
Sep. 30, 2019 | Oct. 30, 2019 | |
Document and Entity Information | ||
Document Type | 10-Q | |
Document Quarterly Report | true | |
Document Transition Report | false | |
Document Period End Date | Sep. 30, 2019 | |
Entity File Number | 000-50070 | |
Entity Registrant Name | SAFETY INSURANCE GROUP, INC. | |
Entity Incorporation, State or Country Code | DE | |
Entity Tax Identification Number | 13-4181699 | |
Entity Address, Address Line One | Delaware | |
Entity Address, City or Town | Boston | |
Entity Address, State or Province | MA | |
Entity Address, Postal Zip Code | 02110 | |
City Area Code | 617 | |
Local Phone Number | 951-0600 | |
Title of 12(b) Security | Common Stock, par value $0.01 per share | |
Trading Symbol | SAFT | |
Security Exchange Name | NASDAQ | |
Entity Current Reporting Status | Yes | |
Entity Interactive Data Current | Yes | |
Entity Filer Category | Large Accelerated Filer | |
Entity Small Business | false | |
Entity Emerging Growth Company | false | |
Entity Shell Company | false | |
Entity Common Stock, Shares Outstanding | 15,383,540 | |
Current Fiscal Year End Date | --12-31 | |
Document Fiscal Year Focus | 2019 | |
Document Fiscal Period Focus | Q3 | |
Entity Central Index Key | 0001172052 | |
Amendment Flag | false |
Consolidated Balance Sheets
Consolidated Balance Sheets - USD ($) $ in Thousands | Sep. 30, 2019 | Dec. 31, 2018 |
Investments: | ||
Fixed maturities, available for sale, at fair value (amortized cost: $1,172,117 and $1,175,413) | $ 1,207,829 | $ 1,161,862 |
Equity securities, at fair value (cost: $146,829 and $142,948) | 167,061 | 148,011 |
Other invested assets | 34,206 | 23,481 |
Total investments | 1,409,096 | 1,333,354 |
Cash and cash equivalents | 47,482 | 37,582 |
Accounts receivable, net of allowance for doubtful accounts | 209,906 | 190,062 |
Receivable for securities sold | 702 | 1,039 |
Accrued investment income | 9,475 | 8,420 |
Taxes recoverable | 1,454 | |
Receivable from reinsurers related to paid loss and loss adjustment expenses | 33,209 | 13,691 |
Receivable from reinsurers related to unpaid loss and loss adjustment expenses | 117,884 | 108,398 |
Ceded unearned premiums | 35,105 | 33,974 |
Deferred policy acquisition costs | 78,344 | 73,355 |
Deferred income taxes | 8,749 | |
Equity and deposits in pools | 33,231 | 28,094 |
Operating lease right-of-use-assets | 35,758 | |
Other assets | 22,155 | 19,522 |
Total assets | 2,033,801 | 1,856,240 |
Liabilities | ||
Loss and loss adjustment expense reserves | 601,459 | 584,719 |
Unearned premium reserves | 466,003 | 435,380 |
Accounts payable and accrued liabilities | 61,515 | 71,896 |
Payable for securities purchased | 6,145 | 5,156 |
Payable to reinsurers | 33,101 | 12,220 |
Deferred income taxes | 2,726 | |
Taxes payable | 6,090 | |
Operating lease liabilities | 35,758 | |
Other liabilities | 35,017 | 22,135 |
Total liabilities | 1,241,724 | 1,137,596 |
Shareholders' equity | ||
Common stock: $0.01 par value; 30,000,000 shares authorized; 17,663,364 and 17,566,180 shares issued | 177 | 176 |
Additional paid-in capital | 200,836 | 196,292 |
Accumulated other comprehensive income (loss), net of taxes | 28,212 | (10,706) |
Retained earnings | 646,687 | 616,717 |
Treasury stock, at cost: 2,279,570 shares | (83,835) | (83,835) |
Total shareholders' equity | 792,077 | 718,644 |
Total liabilities and shareholders' equity | $ 2,033,801 | $ 1,856,240 |
Consolidated Balance Sheets (Pa
Consolidated Balance Sheets (Parenthetical) - USD ($) $ in Thousands | Sep. 30, 2019 | Dec. 31, 2018 |
Consolidated Balance Sheets | ||
Fixed maturity securities, amortized cost | $ 1,172,117 | $ 1,175,413 |
Equity securities, at cost | $ 146,829 | $ 142,948 |
Common stock par value (in dollars per share) | $ 0.01 | $ 0.01 |
Common stock shares authorized | 30,000,000 | 30,000,000 |
Common stock shares issued | 17,663,364 | 17,566,180 |
Treasury stock shares | 2,279,570 | 2,279,570 |
Consolidated Statements of Oper
Consolidated Statements of Operations - USD ($) $ in Thousands | 3 Months Ended | 9 Months Ended | ||
Sep. 30, 2019 | Sep. 30, 2018 | Sep. 30, 2019 | Sep. 30, 2018 | |
Revenues | ||||
Net earned premiums | $ 198,410 | $ 196,968 | $ 589,327 | $ 583,126 |
Net investment income | 11,947 | 11,120 | 34,272 | 31,839 |
(Losses) earnings from partnership investments | (139) | 1,188 | 1,431 | 6,539 |
Net realized gains on investments | 1,194 | 53 | 1,513 | 2,948 |
Change in net unrealized gains on equity investments | (387) | 2,444 | 15,168 | (3,749) |
Net impairment losses on investments (a) | (123) | (228) | (397) | (228) |
Finance and other service income | 4,371 | 4,362 | 12,540 | 13,121 |
Total revenue | 215,273 | 215,907 | 653,854 | 633,596 |
Expenses | ||||
Losses and loss adjustment expenses | 134,966 | 116,693 | 383,386 | 367,564 |
Underwriting, operating and related expenses | 60,845 | 62,496 | 182,187 | 184,925 |
Interest expense | 22 | 22 | 67 | 67 |
Total expenses | 195,833 | 179,211 | 565,640 | 552,556 |
Income before income taxes | 19,440 | 36,696 | 88,214 | 81,040 |
Income tax expense | 3,821 | 7,788 | 16,715 | 16,191 |
Net income | $ 15,619 | $ 28,908 | $ 71,499 | $ 64,849 |
Earnings per weighted average common share: | ||||
Basic (in dollars per share) | $ 1.02 | $ 1.90 | $ 4.68 | $ 4.28 |
Diluted (in dollars per share) | 1.01 | 1.88 | 4.64 | 4.24 |
Cash dividends paid per common share (in dollars per share) | $ 0.90 | $ 0.80 | $ 2.50 | $ 2.40 |
Number of shares used in computing earnings per share: | ||||
Basic (in shares) | 15,220,902 | 15,091,754 | 15,194,469 | 15,076,214 |
Diluted (in shares) | 15,360,908 | 15,250,332 | 15,337,331 | 15,217,927 |
Consolidated Statements of Comp
Consolidated Statements of Comprehensive Income - USD ($) $ in Thousands | 3 Months Ended | 9 Months Ended | ||
Sep. 30, 2019 | Sep. 30, 2018 | Sep. 30, 2019 | Sep. 30, 2018 | |
Consolidated Statements of Comprehensive Income | ||||
Net income | $ 15,619 | $ 28,908 | $ 71,499 | $ 64,849 |
Other comprehensive income (loss), net of tax: | ||||
Unrealized holding gains (losses) during the period, net of income tax expense (benefit) of $1,864, ($704), $10,663 and ($5,053). | 7,014 | (2,647) | 40,113 | (19,010) |
Reclassification adjustment for net realized gains on investments included in net income, net of income tax expense of ($251), ($11), ($318) and ($619). | (943) | (42) | (1,195) | (2,329) |
Other comprehensive income (loss), net of tax: | 6,071 | (2,689) | 38,918 | (21,339) |
Comprehensive income | $ 21,690 | $ 26,219 | $ 110,417 | $ 43,510 |
Consolidated Statements of Co_2
Consolidated Statements of Comprehensive Income (Parenthetical) - USD ($) $ in Thousands | 3 Months Ended | 9 Months Ended | ||
Sep. 30, 2019 | Sep. 30, 2018 | Sep. 30, 2019 | Sep. 30, 2018 | |
Consolidated Statements of Comprehensive Income. | ||||
Tax expense (benefit) on unrealized holding gains (losses) during the period | $ 1,864 | $ (704) | $ 10,663 | $ (5,053) |
Tax expense on reclassification adjustment for gains included in net income | $ (251) | $ (11) | $ (318) | $ (619) |
Consolidated Statements of Chan
Consolidated Statements of Changes in Shareholders' Equity - USD ($) $ in Thousands | Common Stock | Additional Paid-in Capital | Accumulated Other Comprehensive (Loss) Income, Net of Taxes | Retained Earnings | Treasury Stock | Total |
Balance at Dec. 31, 2017 | $ 175 | $ 189,714 | $ 24,269 | $ 570,693 | $ (83,835) | $ 701,016 |
Reclassification of certain tax effects from accumulated other comprehensive income at January 1, 2018 | 4,736 | (4,736) | ||||
Net income | 9,125 | 9,125 | ||||
Unrealized (losses) gains on securities available for sale, net of deferred federal income taxes | (13,785) | (13,785) | ||||
Restricted share awards issued | 1 | 375 | 376 | |||
Recognition of employee share-based compensation, net of deferred federal income taxes | 1,239 | 1,239 | ||||
Dividends paid and accrued | (12,326) | (12,326) | ||||
Balance at Mar. 31, 2018 | 176 | 191,328 | (1,675) | 579,651 | (83,835) | 685,645 |
Balance at Dec. 31, 2017 | 175 | 189,714 | 24,269 | 570,693 | (83,835) | 701,016 |
Net income | 64,849 | |||||
Balance at Sep. 30, 2018 | 176 | 193,991 | (9,229) | 610,768 | (83,835) | 711,871 |
Cumulative effect of adoption of updated accounting guidance for equity financial instruments at January 1, 2018 | (16,895) | 16,895 | ||||
Balance at Mar. 31, 2018 | 176 | 191,328 | (1,675) | 579,651 | (83,835) | 685,645 |
Net income | 26,816 | 26,816 | ||||
Unrealized (losses) gains on securities available for sale, net of deferred federal income taxes | (4,865) | (4,865) | ||||
Recognition of employee share-based compensation, net of deferred federal income taxes | 1,167 | 1,167 | ||||
Dividends paid and accrued | (12,295) | (12,295) | ||||
Balance at Jun. 30, 2018 | 176 | 192,495 | (6,540) | 594,172 | (83,835) | 696,468 |
Net income | 28,908 | 28,908 | ||||
Unrealized (losses) gains on securities available for sale, net of deferred federal income taxes | (2,689) | (2,689) | ||||
Recognition of employee share-based compensation, net of deferred federal income taxes | 1,496 | 1,496 | ||||
Dividends paid and accrued | (12,312) | (12,312) | ||||
Balance at Sep. 30, 2018 | 176 | 193,991 | (9,229) | 610,768 | (83,835) | 711,871 |
Balance at Dec. 31, 2018 | 176 | 196,292 | (10,706) | 616,717 | (83,835) | 718,644 |
Net income | 29,946 | 29,946 | ||||
Unrealized (losses) gains on securities available for sale, net of deferred federal income taxes | 20,053 | 20,053 | ||||
Restricted share awards issued | 1 | 462 | 463 | |||
Recognition of employee share-based compensation, net of deferred federal income taxes | 1,260 | 1,260 | ||||
Dividends paid and accrued | (12,300) | (12,300) | ||||
Balance at Mar. 31, 2019 | 177 | 198,014 | 9,347 | 631,359 | (83,835) | 755,062 |
Balance at Dec. 31, 2018 | 176 | 196,292 | (10,706) | 616,717 | (83,835) | 718,644 |
Net income | 71,499 | |||||
Balance at Sep. 30, 2019 | 177 | 200,836 | 28,212 | 646,687 | (83,835) | 792,077 |
Cumulative effect of adoption of updated accounting guidance for callable debt securities at January 1, 2019 | (3,004) | (3,004) | ||||
Balance at Mar. 31, 2019 | 177 | 198,014 | 9,347 | 631,359 | (83,835) | 755,062 |
Net income | 25,934 | 25,934 | ||||
Unrealized (losses) gains on securities available for sale, net of deferred federal income taxes | 12,794 | 12,794 | ||||
Recognition of employee share-based compensation, net of deferred federal income taxes | 1,630 | 1,630 | ||||
Dividends paid and accrued | (12,371) | (12,371) | ||||
Balance at Jun. 30, 2019 | 177 | 199,644 | 22,141 | 644,922 | (83,835) | 783,049 |
Net income | 15,619 | 15,619 | ||||
Unrealized (losses) gains on securities available for sale, net of deferred federal income taxes | 6,071 | 6,071 | ||||
Recognition of employee share-based compensation, net of deferred federal income taxes | 1,192 | 1,192 | ||||
Dividends paid and accrued | (13,854) | (13,854) | ||||
Balance at Sep. 30, 2019 | $ 177 | $ 200,836 | $ 28,212 | $ 646,687 | $ (83,835) | $ 792,077 |
Consolidated Statements of Cash
Consolidated Statements of Cash Flows - USD ($) $ in Thousands | 9 Months Ended | |
Sep. 30, 2019 | Sep. 30, 2018 | |
Cash flows from operating activities: | ||
Net income | $ 71,499 | $ 64,849 |
Adjustments to reconcile net income to net cash provided by operating activities: | ||
Investment amortization, net | 3,603 | 3,943 |
Fixed Asset depreciation, net | 3,854 | 3,839 |
Stock based compensation | 4,545 | 4,277 |
Provision (credit) for deferred income taxes | 1,129 | (668) |
Net realized gains on investments | (1,513) | (2,948) |
Net impairment losses on investments | 397 | 228 |
Earnings from partnership investments | (1,004) | (3,254) |
Change in net unrealized gains on equity investments | (15,168) | 3,749 |
Changes in assets and liabilities: | ||
Accounts receivable | (19,844) | (18,821) |
Accrued investment income | (1,055) | (261) |
Receivable from reinsurers | (29,004) | (17,044) |
Ceded unearned premiums | (1,131) | (2,239) |
Deferred policy acquisition costs | (4,989) | (5,331) |
Taxes recoverable | (1,454) | 738 |
Other assets | (5,268) | (610) |
Loss and loss adjustment expense reserves | 16,740 | 8,903 |
Unearned premium reserves | 30,623 | 32,148 |
Taxes payable | (6,090) | |
Accounts payable and accrued liabilities | (9,982) | (3,110) |
Payable to reinsurers | 20,881 | 20,013 |
Other liabilities | 12,882 | 1,996 |
Net cash provided by operating activities | 69,651 | 90,397 |
Cash flows from investing activities: | ||
Fixed maturities purchased | (148,624) | (236,117) |
Equity securities purchased | (18,330) | (61,573) |
Other invested assets purchased | (10,206) | (3,333) |
Proceeds from sales and paydowns of fixed maturities | 114,376 | 197,147 |
Proceeds from maturities, redemptions, and calls of fixed maturities | 31,276 | 51,155 |
Proceed from sales of equity securities | 16,349 | 15,299 |
Proceeds from other invested assets redeemed | 687 | 3,814 |
Fixed assets purchased | (6,355) | (10,513) |
Net cash used for investing activities | (20,827) | (44,121) |
Cash flows from financing activities: | ||
Dividends paid to shareholders | (38,924) | (36,667) |
Net cash used for financing activities | (38,924) | (36,667) |
Net increase in cash and cash equivalents | 9,900 | 9,609 |
Cash and cash equivalents at beginning of year | 37,582 | 41,708 |
Cash and cash equivalents at end of period | $ 47,482 | $ 51,317 |
Basis of Presentation
Basis of Presentation | 9 Months Ended |
Sep. 30, 2019 | |
Basis of Presentation | |
Basis of Presentation | 1. Basis of Presentation The consolidated financial statements have been prepared on the basis of accounting principles generally accepted in the United States of America (“GAAP”). The preparation of financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting periods. Actual results could differ from these estimates. The consolidated financial statements include Safety Insurance Group, Inc. and its subsidiaries (the “Company”). The subsidiaries consist of Safety Insurance Company, Safety Indemnity Insurance Company, Safety Property and Casualty Insurance Company, Safety Asset Management Corporation (“SAMC”), and Safety Management Corporation, which is SAMC’s holding company. All intercompany transactions have been eliminated. The financial information for the three and nine months ended September 30, 2019 and 2018 is unaudited; however, in the opinion of the Company, the information includes all adjustments, consisting only of normal recurring adjustments, necessary for a fair presentation of the financial condition, results of operations, and cash flows for the periods. The financial information as of December 31, 2018 is derived from the audited financial statements included in the Company's 2018 Annual Report on Form 10-K filed with the U.S. Securities and Exchange Commission (“SEC”) on February 28, 2019. These unaudited interim consolidated financial statements may not be indicative of financial results for the full year and should be read in conjunction with the audited financial statements included in the Company’s 2018 Annual Report on Form 10-K filed with the SEC on February 28, 2019. The Company is a leading provider of property and casualty insurance focused primarily on the Massachusetts market. The Company’s principal product line is automobile insurance. The Company operates through its insurance company subsidiaries, Safety Insurance Company, Safety Indemnity Insurance Company, and Safety Property and Casualty Insurance Company (together referred to as the “Insurance Subsidiaries”). |
Recent Accounting Pronouncement
Recent Accounting Pronouncements | 9 Months Ended |
Sep. 30, 2019 | |
Recent Accounting Pronouncements | |
Recent Accounting Pronouncements | 2. Recent Accounting Pronouncements On March 20, 2019, the SEC adopted amendments to Regulation S-K and related rules and forms to modernize and simplify certain disclosure requirements for public companies. The amendments are intended to reduce the costs and burdens of the disclosure process and while continuing to require disclosure of all material information. The amended rules generally were effective on May 2, 2019 and reduced disclosures but some provisions added new requirements. The adoption of the new rules did not have a material impact on the Company’s financial position, results of operations, cash flows, or disclosures. On August 17, 2018, the SEC adopted amendments to eliminate, integrate, update or modify certain of its disclosure requirements. The amendments which are focused on disclosure requirements that have become redundant, duplicative, overlapping, outdated, or superseded, are intended to facilitate the disclosure of information to investors and simplify compliance without significantly altering the total mix of information provided to investors. The amended rules generally reduce disclosures but some provisions added new disclosure requirements. The amendments were effective November 5, 2018. The adoption of the new rules did not have a material In February 2018, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”) No. 2018-02, Income Statement – Reporting Comprehensive Income (Topic 220): Reclassification of Certain Tax Effects from Accumulated Other Comprehensive Income In March 2017, the FASB issued ASU 2017-08, Receivables – Nonrefundable Fees and Other Costs (Subtopic 310-20): Premium Amortization on Purchased Callable Debt Securities , which requires certain premiums on callable debt securities to be amortized to the earliest call date. The amortization period for callable debt securities purchased at a discount will not be impacted. The Company adopted ASU 2017-08 effective January 1, 2019 which resulted in the recognition of In August 2016, the FASB issued ASU 2016-15 , Statement of Cash Flows (Topic 230): Classification of Certain Cash Receipts and Cash Payments. In June 2016, the FASB issued ASU 2016-13, Financial Instruments – Credit Losses (Topic 326): Measurement of Credit Losses on Financial Statements , which amends the guidance for the impairment of financial instruments and is expected to result in more timely recognition of impairment losses. The update introduces an impairment model referred to as the current expected credit loss (“CECL”) model. The impairment model is based on expected losses rather than incurred losses. Under the new guidance, an entity recognizes as an allowance its estimate of expected credit losses. The ASU is also intended to reduce the complexity of the current guidance by decreasing the number of credit impairment models that entities use to account for debt instruments. For public business entities that are SEC filers, the amendments in ASU No. 2016-13 are effective for fiscal years beginning after December 15, 2019, including interim periods within those fiscal years. The Company is evaluating the impact of ASU 2016-13 on its financial position and results of operations with regards to potential credit losses on its Available For Sale investment portfolio and reinsurance recoverables. The extent of the increase of credit losses will depend upon the nature and characteristics of the Company’s portfolio at the adoption date and the macroeconomic conditions and forecasts at the date, however, the impact of adoption is not expected to be material to the Company. In March 2016, the FASB issued ASU 2016-09, Compensation-Stock Compensation (Topic 718): Improvements to Employee Share-Based Payment Accounting period in which they occur. Additionally, excess tax benefits will be classified with other income tax cash flows as an operating activity and cash paid by an employer when directly withholding shares for tax withholding purposes will be classified as a financing activity. Awards that are used to settle employee tax liabilities will be allowed to qualify for equity classification for withholdings up to the maximum statutory tax rates in applicable jurisdictions. Regarding forfeitures, a company can make an entity-wide accounting policy election to either continue estimating the number of awards that are expected to vest or account for forfeitures when they occur. The updated guidance was effective for annual periods beginning after December 15, 2016 and interim periods within those annual periods. The impact of the adoption of ASU 2016-09 was not material to the Company’s financial position, results of operations or cash flows. In February 2016, the FASB issued ASU 2016-02, Leases Codification Improvements to Topic 842, Leases Leases (Topic 842): Targeted Improvements, creates an additional transition method which allows companies to elect to not adjust their comparative period financial information and disclosures for the effects of the new lease standard and also creates a practical expedient for lessors to not separate lease and non-lease components. The Company adopted ASU 2016-02, ASU 2018-10 and ASU 2018-11 effective January 1, 2019 (“the application date”) using the required modified retrospective transition approach. In accordance with the guidance, the Company has elected not to adjust comparative periods. As such, Accounting Standards Codification (“ASC”) 842 will be applied to each lease that had commenced as of the application date with a cumulative effect adjustment as of that date. As of January 1, 2019, a right of use asset and lease liability of were recorded in the Consolidated Balance Sheets. All periods prior to the application date presented in the financial statements will not change and the guidance in ASC 840, Leases , will apply. There was no impact on retained earnings or other components of equity in the Consolidated Balance Sheets as of September 30, 2019 and December 31, 2018. In January 2016, the FASB issued ASU 2016-01, Financial Instruments-Overall (Subtopic 825-10), Recognition and Measurement of Financial Assets and Financial Liabilities In May 2014, the FASB issued as final, ASU 2014-09, Revenue from Contracts with Customers (Topic 606) updated guidance effective January 1, 2018 using the modified retrospective approach. The adoption of ASU 2014-09 did not have a material impact on the Company’s financial position, results of operations, cash flows, or disclosures. |
Earnings per Weighted Average C
Earnings per Weighted Average Common Share | 9 Months Ended |
Sep. 30, 2019 | |
Earnings per Weighted Average Common Share | |
Earnings per Weighted Average Common Share | 3. Earnings per Weighted Average Common Share Basic earnings per weighted average common share (“EPS”) are calculated by dividing net income by the weighted average number of basic common shares outstanding during the period. Diluted earnings per share amounts are based on the weighted average number of common shares including non-vested performance stock grants. The following table sets forth the computation of basic and diluted EPS for the periods indicated. Three Months Ended September 30, Nine Months Ended September 30, 2019 2018 2019 2018 Earnings attributable to common shareholders - basic and diluted: Net income from continuing operations $ 15,619 $ 28,908 $ 71,499 $ 64,849 Allocation of income for participating shares (80) (170) (378) (389) Net income from continuing operations attributed to common shareholders $ 15,539 $ 28,738 $ 71,121 $ 64,460 Earnings per share denominator - basic and diluted Total weighted average common shares outstanding, including participating shares 15,299,689 15,181,196 15,275,322 15,167,153 Less: weighted average participating shares (78,787) (89,442) (80,853) (90,939) Basic earnings per share denominator 15,220,902 15,091,754 15,194,469 15,076,214 Common equivalent shares- non-vested performance stock grants 140,006 158,578 142,862 141,713 Diluted earnings per share denominator 15,360,908 15,250,332 15,337,331 15,217,927 Basic earnings per share $ 1.02 $ 1.90 $ 4.68 $ 4.28 Diluted earnings per share $ 1.01 $ 1.88 $ 4.64 $ 4.24 Undistributed earnings attributable to common shareholders - basic and diluted: Net income from continuing operations attributable to common shareholders -Basic $ 1.02 $ 1.90 $ 4.68 $ 4.28 Dividends declared (0.90) (0.80) (2.50) (2.40) Undistributed earnings $ 0.12 $ 1.10 $ 2.18 $ 1.88 Net income from continuing operations attributable to common shareholders -Diluted $ 1.01 $ 1.88 $ 4.64 $ 4.24 Dividends declared (0.90) (0.80) (2.50) (2.40) Undistributed earnings $ 0.11 $ 1.08 $ 2.14 $ 1.84 Diluted EPS excludes non vested performance stock grants with exercise prices and exercise tax benefits greater than the average market price of the Company’s common stock during the period because their inclusion would be anti-dilutive. There were no anti-dilutive shares related to non-vested performance stock grants for the three and nine months ended September 30, 2019 and 2018 |
Share-Based Compensation
Share-Based Compensation | 9 Months Ended |
Sep. 30, 2019 | |
Share-Based Compensation | |
Share-Based Compensation | 4. Share-Based Compensation 2018 Long Term Incentive Plan 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 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 2018 Plan supersedes the Company’s 2002 Management Omnibus Incentive Plan (“the 2002 Incentive Plan”). The 2018 Plan establishes an initial pool of 350,000 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 2018 Plan in the future. 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 September 30, 2019, there were 293,031 shares available for future grant. Accounting and Reporting for Stock-Based Awards Accounting Standards Codification (“ASC”) 718, Compensation —Stock Compensation requires the Company to measure and recognize the cost of employee services received in exchange for an award of equity instruments. Under the provisions of ASC 718, share-based compensation cost is measured at the grant date, based on the fair value of the award, and is recognized as an expense over the requisite service period (generally the vesting period of the equity grant). Restricted Stock Service-based restricted stock awarded in the form of unvested shares is recorded at the market value of the Company’s common stock on the grant date and amortized ratably as compensation expense over the requisite service period. Service-based restricted stock awards generally vest over a service period and independent directors’ stock awards which vest immediately. Our independent directors are subject to stock ownership guidelines, which require them to have a value four times their annual cash retainer. In addition to service-based awards, the Company grants performance-based restricted shares to certain employees. These performance shares cliff vest after a three-year performance period provided certain performance measures are attained. A portion of these awards, which contain a market condition, vest according to the level of total shareholder return achieved by the Company compared to its property-casualty insurance peers over a three-year period. The remainder, which contain a performance condition, vest according to the level of Company’s combined ratio results compared to a target based on its property-casualty insurance peers. Actual payouts can range from 0% to 200% of target shares awarded depending upon the level of achievement of the respective market and performance conditions during a three calendar-year performance period. Compensation expense for share awards with a performance condition is based on the probable number of awards expected to vest using the performance level most likely to be achieved at the end of the performance period. Performance-based awards with market conditions are accounted for and measured differently from awards that have a performance or service condition. The effect of a market condition is reflected in the award’s fair value on the grant date. That fair value is recognized as compensation cost over the requisite service period regardless of whether the market-based performance objective has been satisfied. All of the Company’s restricted stock awards are issued as incentive compensation and are equity classified. The following table summarizes restricted stock activity under the Incentive Plan during the nine months ended September 30, 2019 assuming a target payout for the 2019 performance-based shares. Shares Weighted Performance-based Weighted Under Average Shares Under Average Restriction Fair Value Restriction Fair Value Outstanding at beginning of year 89,135 $ 68.70 105,170 $ 66.79 Granted 33,778 92.52 63,447 (1) 69.61 Vested and unrestricted (44,085) 68.41 (84,512) 56.42 Forfeited (41) 53.64 — — Outstanding at end of period 78,787 $ 79.08 84,105 $ 79.34 (1) Includes a true-up of previously awarded performance-based restricted share awards. The updated shares were calculated based on the attainment of pre-established performance objectives and granted under the 2002 Incentive Plan. |
Investments
Investments | 9 Months Ended |
Sep. 30, 2019 | |
Investments | |
Investments | 5. Investments The gross unrealized gains and losses on investments in fixed maturity securities, including redeemable preferred stocks that have characteristics of fixed maturities, and equity securities, including interests in mutual funds, and other invested assets were as follows for the periods indicated. As of September 30, 2019 Gross Unrealized Losses (3) Cost or Gross Non-OTTI OTTI Estimated Amortized Unrealized Unrealized Unrealized Fair Cost Gains Losses Losses (4) Value U.S. Treasury securities $ 1,805 $ 8 $ — $ — $ 1,813 Obligations of states and political subdivisions 242,418 10,889 — — 253,307 Residential mortgage-backed securities (1) 305,655 6,785 (1,017) — 311,423 Commercial mortgage-backed securities 81,962 4,464 (10) — 86,416 Other asset-backed securities 37,651 297 (64) — 37,884 Corporate and other securities 502,626 16,958 (2,598) — 516,986 Subtotal, fixed maturity securities 1,172,117 39,401 (3,689) — 1,207,829 Equity securities (2) 146,829 23,197 (2,965) — 167,061 Other invested assets (5) 34,206 — — — 34,206 Totals $ 1,353,152 $ 62,598 $ (6,654) $ — $ 1,409,096 As of December 31, 2018 Gross Unrealized Losses (3) Cost or Gross Non-OTTI OTTI Estimated Amortized Unrealized Unrealized Unrealized Fair Cost Gains Losses Losses (4) Value U.S. Treasury securities $ 1,807 $ — $ (30) $ — $ 1,777 Obligations of states and political subdivisions 262,772 5,098 (1,672) — 266,198 Residential mortgage-backed securities (1) 300,387 1,477 (4,841) — 297,023 Commercial mortgage-backed securities 60,897 337 (898) — 60,336 Other asset-backed securities 61,310 95 (329) — 61,076 Corporate and other securities 488,240 1,775 (14,563) — 475,452 Subtotal, fixed maturity securities 1,175,413 8,782 (22,333) — 1,161,862 Equity securities (2) 142,948 15,419 (10,356) — 148,011 Other invested assets (5) 23,481 — — — 23,481 Totals $ 1,341,842 $ 24,201 $ (32,689) $ — $ 1,333,354 (1) Residential mortgage-backed securities consists primarily of obligations of U.S. Government agencies including collateralized mortgage obligations issued, guaranteed and/or insured by the following issuers: Government National Mortgage Association (GNMA), Federal Home Loan Mortgage Corporation (FHLMC), Federal National Mortgage Association (FNMA) and the Federal Home Loan Bank (FHLB). (2) Equity securities include common stock, preferred stock, mutual funds and interests in mutual funds held to fund the Company’s executive deferred compensation plan. (3) The Company’s investment portfolio included 298 and 958 securities in an unrealized loss position at September 30, 2019 and December 31, 2018, respectively. (4) Amounts in this column represent other-than-temporary impairment (“OTTI”) recognized in accumulated other comprehensive (loss) income. (5) Other invested assets are accounted for under the equity method which approximated fair value. The amortized cost and the estimated fair value of fixed maturity securities, by maturity, are shown below for the period indicated. Expected maturities will differ from contractual maturities because borrowers may have the right to call or prepay obligations with or without call or prepayment penalties. As of September 30, 2019 Amortized Estimated Cost Fair Value Due in one year or less $ 39,848 $ 40,053 Due after one year through five years 304,339 310,616 Due after five years through ten years 291,596 303,596 Due after ten years through twenty years 110,027 116,681 Due after twenty years 1,040 1,161 Asset-backed securities 425,267 435,722 Totals $ 1,172,117 $ 1,207,829 The gross realized gains and losses on sales of investments were as follows for the periods indicated. Three Months Ended September 30, Nine Months Ended September 30, 2019 2018 2019 2018 Gross realized gains Fixed maturity securities $ 365 $ 445 $ 959 $ 963 Equity securities 1,221 851 2,862 4,346 Gross realized losses Fixed maturity securities (375) (1,170) (1,283) (1,849) Equity securities (17) (73) (1,025) (512) Net realized gains on investments $ 1,194 $ 53 $ 1,513 $ 2,948 In the normal course of business, the Company enters into transactions involving various types of financial instruments, including investments in fixed maturities and equity securities. Investment transactions have credit exposure to the extent that a counter party may default on an obligation to the Company. Credit risk is a consequence of carrying, trading and investing in securities. To manage credit risk, the Company focuses on higher quality fixed income securities, reviews the credit strength of all companies in which it invests, limits its exposure in any one investment and monitors the portfolio quality, taking into account credit ratings assigned by recognized statistical rating organizations. The following tables as of September 30, 2019 and December 31, 2018 present the gross unrealized losses included in the Company’s investment portfolio and the fair value of those securities aggregated by investment category. The tables also present the length of time that they have been in a continuous unrealized loss position. As of September 30, 2019 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 $ — $ — $ 300 $ — $ 300 $ — Obligations of states and political subdivisions — — — — — — Residential mortgage-backed securities 51,560 415 39,362 602 90,922 1,017 Commercial mortgage-backed securities 1,701 9 1,229 1 2,930 10 Other asset-backed securities 13,025 58 6,905 6 19,930 64 Corporate and other securities 47,125 1,741 19,760 857 66,885 2,598 Subtotal, fixed maturity securities 113,411 2,223 67,556 1,466 180,967 3,689 Equity securities 25,294 965 16,708 2,000 42,002 2,965 Total temporarily impaired securities $ 138,705 $ 3,188 $ 84,264 $ 3,466 $ 222,969 $ 6,654 As of December 31, 2018 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 $ — $ — $ 1,777 $ 30 $ 1,777 $ 30 Obligations of states and political subdivisions 80,856 707 16,049 965 96,905 1,672 Residential mortgage-backed securities 64,101 694 138,572 4,147 202,673 4,841 Commercial mortgage-backed securities 22,652 270 13,117 628 35,769 898 Other asset-backed securities 33,866 112 23,532 217 57,398 329 Corporate and other securities 288,786 10,149 87,546 4,414 376,332 14,563 Subtotal, fixed maturity securities 490,261 11,932 280,593 10,401 770,854 22,333 Equity securities 71,439 9,955 2,072 401 73,511 10,356 Total temporarily impaired securities $ 561,700 $ 21,887 $ 282,665 $ 10,802 $ 844,365 $ 32,689 Other-Than-Temporary Impairments ASC 320, Investments – Debt and Equity Securities requires entities to separate an OTTI of a debt security into two components when there are credit related losses associated with the impaired debt security for which the Company asserts that it does not have the intent to sell the security, and it is more likely than not that it will not be required to sell the security before recovery of its cost basis. Under ASC 320, the amount of the OTTI related to a credit loss is recognized in earnings, and the amount of the OTTI related to other factors is recorded as a component of other comprehensive income. In instances where no credit loss exists but it is more likely than not that the Company will have to sell the debt security prior to the anticipated recovery, the decline in market value below amortized cost is recognized as an OTTI in earnings. In periods after the recognition of an OTTI on debt securities, the Company accounts for such securities as if they had been purchased on the measurement date of the OTTI at an amortized cost basis equal to the previous amortized cost basis less the OTTI recognized in earnings. For debt securities for which OTTI was recognized in earnings, the difference between the new amortized cost basis and the cash flows expected to be collected will be accreted or amortized into net investment income. The Company holds no subprime mortgage debt securities. All of the Company’s holdings in mortgage-backed securities are either U.S. Government or Agency guaranteed or are rated investment grade by either Moody’s or Standard & Poor’s. The unrealized losses in the Company’s fixed income and equity portfolio as of September 30, 2019 were reviewed for potential other-than-temporary asset impairments. As a result of the analysis, the Company recognized OTTI losses of $123 and $397 during the three and nine months ended September 30, 2019, respectively which consisted entirely of credit losses related to fixed maturity securities. The Company recognized $228 of OTTI losses during the three and nine months ended September 30, 2018. Specific qualitative analysis was also performed for any additional securities appearing on the Company’s “Watch List.” Qualitative analysis considered such factors as the financial condition and the near term prospects of the issuer, whether the debtor is current on its contractually obligated interest and principal payments, changes to the rating of the security by a rating agency and the historical volatility of the fair value of the security. The qualitative analysis performed by the Company concluded that outside of the securities that were recognized through OTTI, the unrealized losses recorded on the investment portfolio at September 30, 2019 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. Therefore, decreases in fair values of the Company’s securities are viewed as being temporary. The following table summarizes the credit loss recognized in earnings related to fixed maturity securities. Three Months Ended September 30, Nine Months Ended September 30, 2019 2018 2019 2018 Credit losses on fixed maturity securities, beginning of period $ 274 $ 616 $ 844 $ 616 Add: credit losses on OTTI not previously recognized 123 228 397 228 Less: credit losses on securities sold (220) — (1,064) - Less: credit losses on securities impaired due to intent to sell — — — — Add: credit losses on previously impaired securities — — — — Less: increases in cash flows expected on previously impaired securities — — — — Credit losses on fixed maturity securities, end of period $ 177 $ 844 $ 177 $ 844 At September 30, 2019 and December 31, 2018, there were no amounts included in accumulated other comprehensive income related to securities which were considered by the Company to be other-than-temporarily impaired. Based upon the qualitative 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. Net Investment Income The components of net investment income were as follows: Three Months Ended September 30, Nine Months Ended September 30, 2019 2018 2019 2018 Interest on fixed maturity securities $ 11,285 $ 10,576 $ 32,129 $ 30,330 Dividends on equity securities 1,116 980 3,315 2,613 Equity in earnings of other invested assets 310 260 1,070 985 Interest on other assets 7 9 24 54 Total investment income 12,718 11,825 36,538 33,982 Investment expenses 771 705 2,266 2,143 Net investment income $ 11,947 $ 11,120 $ 34,272 $ 31,839 Fair Value of Financial Instruments ASC 820, Fair Value Measurements and Disclosure Level 1 — Valuations based on quoted prices in active markets for identical assets and liabilities; Level 2 — Valuations based on observable inputs that do not meet the criteria for Level 1, including quoted prices in inactive markets and quoted prices in active markets for similar, but not identical instruments; and Level 3 — Valuations based on unobservable inputs. Fair values for the Company’s fixed maturity securities are based on prices provided by its custodian bank and its investment managers. Both the Company’s custodian bank and investment managers use a variety of independent, nationally recognized pricing services to determine market valuations. If the pricing service cannot provide fair value determinations, the Company obtains non-binding price quotes from broker-dealers. A minimum of two quoted prices is obtained for the majority of the Company’s available-for-sale fixed maturity securities in its investment portfolio. The Company uses a third-party pricing service as its primary provider of quoted prices from third-party pricing services and broker-dealers. To provide reasonable assurance of the validity of each price or quote, a secondary third-party pricing service or broker-dealer quote is obtained from the Company’s custodian or investment managers. An examination of the pricing data is then performed for each security. If the variance between the primary and secondary price quotes for a security is within an accepted tolerance level, the quoted price obtained from the Company’s primary source is used for the security. If the variance between the primary and secondary price quotes exceeds an accepted tolerance level, the Company obtains a quote from an alternative source, if possible, and documents and resolves any differences between the pricing sources. In addition, the Company may request that its investment managers and its traders provide input as to which vendor is providing prices that its traders believe are reflective of fair value for the security. Following this process, the Company may decide to value the security in its financial statements using the secondary or alternative source if it believes that pricing is more reflective of the security’s value than the primary pricing provided by its custodian bank. The Company analyzes market valuations received to verify reasonableness, to understand the key assumptions used and their sources, and to determine an appropriate ASC 820 fair value hierarchy level based upon trading activity and the observability of market inputs. Based on this evaluation and investment class analysis, each price is classified into Level 1, 2 or 3. Fair values of instruments are based on (i) quoted prices in active markets for identical assets (Level 1), (ii) quoted prices for similar instruments in active markets, quoted prices for identical or similar instruments in markets that are not active and model-derived valuations in which all significant inputs are observable in active markets (Level 2) or (iii) valuations derived from valuation techniques in which one or more significant inputs are unobservable in the marketplace (Level 3). The Company’s Level 1 securities consist of equity securities whose values are based on quoted prices in active markets for identical assets. The Company’s Level 2 securities are comprised of available-for-sale fixed maturity securities whose fair value was determined using observable market inputs. The Company’s Level 3 security consists of an investment in the Federal Home Loan Bank of Boston related to Safety Insurance Company’s membership stock, which is not redeemable in a short-term time frame. Fair values for securities for which quoted market prices were unavailable were estimated based upon reference to observable inputs such as benchmark interest rates, market comparables, and other relevant inputs. Investments valued using these inputs include U.S. Treasury securities, obligations of states and political subdivisions, corporate and other securities, commercial and residential mortgage-backed securities, and other asset-backed securities. Inputs into the fair value application that are utilized by asset class include but are not limited to: ● Obligations of states and political subdivisions : overall credit quality, including assessments of market sectors and the level and variability of sources of payment such as general obligation, revenue or lease; credit support such as insurance, state or local economic and political base, prefunded and escrowed to maturity covenants. ● Corporate and other securities : overall credit quality, the establishment of a risk adjusted credit spread over the applicable risk-free yield curve for discounted cash flow valuations; assessments of the level of industry economic sensitivity, company financial policies, indenture restrictive covenants, and/or security and collateral. ● Residential mortgage-backed securities , U.S. agency pass-throughs, collateralized mortgage obligations (“CMOs”), non U.S. agency CMOs: estimates of prepayment speeds based upon historical prepayment rate trends, underlying collateral interest rates, original weighted average maturity, vintage year, borrower credit quality characteristics, interest rate and yield curve forecasts, U.S. government support programs, tax policies, and delinquency/default trends. ● Commercial mortgage-backed securities : overall credit quality, including assessments of the level and variability of credit support and collateral type such as office, retail, or lodging, predictability of cash flows for the deal structure, prevailing economic market conditions. ● Other asset-backed securities : overall credit quality, estimates of prepayment speeds based upon historical trends and characteristics of underlying loans, including assessments of the level and variability of collateral, revenue generating agreements, area licenses agreements, product sourcing agreements and equipment and property leases. ● Federal Home Loan Bank of Boston (“FHLB-Boston”): value is equal to the cost of the member stock purchased. In order to ensure the fair value determination is representative of an exit price (consistent with ASC 820), the Company’s procedures for validating quotes or prices obtained from third parties include, but are not limited to, obtaining a minimum of two price quotes for each fixed maturity security if possible, as discussed above, the periodic testing of sales activity to determine if there are any significant differences between the market price used to value the security as of the balance sheet date and the sales price of the security for sales that occurred around the balance sheet date, and the periodic review of reports provided by its external investment manager regarding those securities with ratings changes and securities placed on its “Watch List.” In addition, valuation techniques utilized by pricing services and prices obtained from external sources are reviewed by the Company’s external investment manager, whose investment professionals are familiar with the securities being priced and the markets in which they trade, to ensure the fair value determination is representative of an exit price (consistent with ASC 820). All unadjusted estimates of fair value for our fixed maturities priced by the pricing services as described above are included in the amounts disclosed in Level 2. With the exception of the FHLB-Boston security, which is categorized as a Level 3 security, the Company’s entire portfolio was priced based upon quoted market prices or other observable inputs as of September 30, 2019. There were no significant changes to the valuation process during the nine months ended September 30, 2019. As of September 30, 2019 and December 31, 2018, no quotes or prices obtained were adjusted by management. All broker quotes obtained were non-binding. At September 30, 2019 and December 31, 2018, investments in fixed maturities classified as available-for-sale had a fair value which equaled carrying value of $1,207,829 and $1,161,862 , respectively. We have The following tables summarize the Company’s total fair value measurements for investments for the periods indicated. As of September 30, 2019 Total Level 1 Inputs Level 2 Inputs Level 3 Inputs U.S. Treasury securities $ 1,813 $ — $ 1,813 $ — Obligations of states and political subdivisions 253,307 — 253,307 — Residential mortgage-backed securities 311,423 — 311,423 — Commercial mortgage-backed securities 86,416 — 86,416 — Other asset-backed securities 37,884 — 37,884 — Corporate and other securities 516,986 — 516,986 — Equity securities 134,486 134,000 — 486 Total investment securities $ 1,342,315 $ 134,000 $ 1,207,829 $ 486 As of December 31, 2018 Total Level 1 Inputs Level 2 Inputs Level 3 Inputs U.S. Treasury securities $ 1,777 $ — $ 1,777 $ — Obligations of states and political subdivisions 266,198 — 266,198 — Residential mortgage-backed securities 297,023 — 297,023 — Commercial mortgage-backed securities 60,336 — 60,336 — Other asset-backed securities 61,076 — 61,076 — Corporate and other securities 475,452 — 475,452 — Equity securities 116,173 115,493 — 680 Total investment securities $ 1,278,035 $ 115,493 $ 1,161,862 $ 680 There were no transfers between Level 1 and Level 2 during the three and nine months ended September 30, 2019 and 2018. The following table summarizes the changes in the Company’s Level 3 fair value securities for the periods indicated. Three Months Ended September 30, Nine Months Ended September 30, 2019 2018 2019 2018 Level 3 Level 3 Level 3 Level 3 Fair Value Fair Value Fair Value Fair Value Securities Securities Securities Securities Balance at beginning of period $ 486 $ 680 $ 680 $ 680 Net gains and losses included in earnings — — — — Net gains included in other comprehensive income — — — — Purchases — — 103 — Sales — — (297) — Transfers into Level 3 — — — — Transfers out of Level 3 — — — — Balance at end of period $ 486 $ 680 $ 486 $ 680 Amount of total losses included in earnings attributable to the change in unrealized losses related to assets still held at end of period $ — $ — $ — $ — Transfers in and out of Level 3 are attributable to changes in the ability to observe significant inputs in determining fair value exit pricing. As noted in the table above, no transfers were made in or out of Level 3 during the nine months ended September 30, 2019 and 2018. The Company held one Level 3 security at September 30, 2019 and September 30, 2018. As of September 30, 2019 and December 31, 2018, there were approximately $32,575 and $31,838 , respectively, in a real estate investment trust (“REIT”). The REIT is excluded from the fair value hierarchy because the fair value is recorded using the net asset value per share practical expedient. The net asset value per share of this REIT is derived from member ownership in the capital venture to which a proportionate share of independently appraised net assets is attributed. The fair value was determined using the trust’s net asset value obtained from its audited financial statements. The Company is required to submit a request 45 days before a quarter end to dispose of the security. |
Loss and Loss Adjustment Expens
Loss and Loss Adjustment Expense Reserves | 9 Months Ended |
Sep. 30, 2019 | |
Loss and Loss Adjustment Expense Reserves | |
Loss and Loss Adjustment Expense Reserves | 6. Loss and Loss Adjustment Expense Reserves The following table sets forth a reconciliation of beginning and ending reserves for losses and loss adjustment expenses (“LAE”), as shown in the Company’s consolidated financial statements for the periods indicated. Nine Months Ended September 30, 2019 2018 Reserves for losses and LAE at beginning of year $ 584,719 $ 574,054 Less receivable from reinsurers related to unpaid losses and LAE (108,398) (83,085) Net reserves for losses and LAE at beginning of year 476,321 490,969 Incurred losses and LAE, related to: Current year 408,927 406,912 Prior years (25,541) (39,348) Total incurred losses and LAE 383,386 367,564 Paid losses and LAE related to: Current year 226,660 169,161 Prior years 149,472 206,980 Total paid losses and LAE 376,132 376,141 Net reserves for losses and LAE at end of period 483,575 482,392 Plus receivable from reinsurers related to unpaid losses and LAE 117,884 100,565 Reserves for losses and LAE at end of period $ 601,459 $ 582,957 At the end of each period, the reserves were re-estimated for all prior accident years. The Company’s prior year reserves decreased by 30, 2019 and 2018, respectively, and resulted from re-estimations of prior year’s ultimate loss and LAE liabilities. The decreases in prior years reserves during the nine months ended September 30, 2019 and 2018, are primarily composed of reductions in our retained automobile and retained homeowners lines reserves. |
Commitments and Contingencies
Commitments and Contingencies | 9 Months Ended |
Sep. 30, 2019 | |
Commitments and Contingencies | |
Commitments and Contingencies | 7. Commitments and Contingencies Various claims, generally incidental to the conduct of normal business, are pending or alleged against the Company from time to time. In the opinion of management, based in part on the advice of legal counsel, the ultimate resolution of such claims will not have a material adverse effect on the Company’s consolidated financial statements. However, if estimates of the ultimate resolutions of those proceedings are revised, liabilities related to those proceedings could be adjusted in the near term. Massachusetts law requires that insurers licensed to do business in Massachusetts participate in the Massachusetts Insurers Insolvency Fund (“Insolvency Fund”). Members of the Insolvency Fund are assessed a proportionate share of the obligations and expenses of the Insolvency Fund in connection with an insolvent insurer. It is anticipated that there will be additional assessments from time to time relating to various insolvencies. Although the timing and amounts of any future assessments are not known, based upon existing knowledge, management’s opinion is that such future assessments are not expected to have a material effect upon the financial position of the Company. |
Debt
Debt | 9 Months Ended |
Sep. 30, 2019 | |
Debt | |
Debt | 8. Debt On August 10, 2018, the Company extended its Revolving Credit Agreement (the “Credit Agreement”) with Citizens Bank, N.A. (formerly known as RBS Citizens, N.A. (“Citizens Bank”)) to a maturity date of August 10, 2023. The Credit Agreement provides a $30,000 revolving credit facility with an accordion feature allowing for future expansion of the committed amount up to $50,000 . Loans under the credit facility bear interest at the Company’s option at either (i) the Interest only is payable prior to maturity. The Company’s obligations under the credit facility are secured by pledges of its assets and the capital stock of its operating subsidiaries. The credit facility is guaranteed by the Company’s non-insurance company subsidiaries. The credit facility contains covenants including requirements to maintain minimum risk-based capital ratios and statutory surplus of Safety Insurance Company as well as limitations or restrictions on indebtedness, liens, and other matters. As of September 30, 2019, the Company was in compliance with all covenants. In addition, the credit facility includes customary events of default, including a cross-default provision permitting the lenders to accelerate the facility if the Company (i) defaults in any payment obligation under debt having a principal amount in excess of The Company had no amounts outstanding on its credit facility at September 30, 2019 and December 31, 2018. The credit facility commitment fee included in interest expense was computed at a rate of The Company is a member of the FHLB-Boston. Membership in the FHLB-Boston allows the Company to borrow money at competitive interest rates provided the loan is collateralized by specific U.S Government residential mortgage backed securities. At September 30, 2019, the Company has the ability to borrow using eligible invested assets that would be used as collateral. The Company has |
Income Taxes
Income Taxes | 9 Months Ended |
Sep. 30, 2019 | |
Income Taxes | |
Income Taxes | 9. Income Taxes Federal income tax expense for the nine months ended September 30, 2019 and 2018 has been computed using estimated effective tax rates. These rates are revised, if necessary, at the end of each successive interim period to reflect the current estimates of the annual effective tax rates. The effective rate in 2019 was lower than the statutory rate primarily due to effects of tax-exempt investment income and the impact of stock-based compensation. The Company believes that the positions taken on its income tax returns for open tax years will be sustained upon examination by the Internal Revenue Service (“IRS”). Therefore, the Company has not recorded any liability for uncertain tax positions under ASC 740, Income Taxes During the nine months ended September 30, 2019, there were no material changes to the amount of the Company’s unrecognized tax benefits or to any assumptions regarding the amount of its ASC 740 liability. The Company’s U.S. federal tax returns for the years ended December 31, 2013, 2014 and 2015 respectively, were examined by the IRS. This examination related to the refund claim for the 2015 Net Operating Loss that was carried back to prior years, which triggered a review by the Joint Committee on Taxation. No adjustments were noted as part of the examination. All tax years prior to 2016 are closed. In the Company’s opinion, adequate tax liabilities have been established for all open years. However, the amount of these tax liabilities could be revised in the near term if estimates of the Company’s ultimate liability are revised. On December 22, 2017, the TCJA was enacted, which significantly amends the Internal Revenue Code of 1986. The TCJA, among other things, reduces the corporate tax rate from a statutory rate of 35% to 21%, imposes additional limitations on net operating losses and executive compensation, allows for the full expensing of certain capital expenditures and enacts other changes impacting the insurance industry. Subsequent to the enactment of the TCJA, the SEC issued Staff Accounting Bulletin no. 118, Income Tax Accounting Implications of the Tax Cuts and Jobs Act (“SAB 118”). SAB 118 provided a measurement period of one year to finalize provisional amounts. The measurement period provided in SAB 118 concluded on December 22, 2018 and accordingly, the Company has finalized its accounting for the impact of the TCJA as of December 31, 2018. |
Share Repurchase Program
Share Repurchase Program | 9 Months Ended |
Sep. 30, 2019 | |
Share Repurchase Program | |
Share Repurchase Program | 10. Share Repurchase Program On August 3, 2007, the Board of Directors approved a share repurchase program of up to $30,000 of the Company’s outstanding common shares. As of September 30, 2019, the Board of Directors had cumulatively authorized increases to the existing share repurchase program of up to No share purchases were made by the Company under the program during the nine months ended September 30, 2019 and 2018. As of September 30, 2019, the Company has purchased |
Leases
Leases | 9 Months Ended |
Sep. 30, 2019 | |
Leases | |
Leases | 11. Leases The Company has various non-cancelable, long-term operating leases, the largest of which are for office space including the corporate headquarters, VIP claims centers and law offices. Other operating leases consist of auto leases and various office equipment. The Company has no finance leases. Our leases have remaining lease terms of one year to ten years , some of which include options to extend the leases for up to five years . The Company adopted ASU 2016-02, ASU 2018-10 and ASU 2018-11 effective January 1, 2019 (“the application date”) using the required modified retrospective transition approach. In accordance with the guidance, the Company has elected not to adjust comparative periods. As such ASC 842 will be applied to each lease that had commenced as of the application date with a cumulative effect adjustment as of that date. All periods before the application date presented in the financial statements will not change and the guidance in ASC 840 will apply. The Company has elected to apply the package of practical expedients provided in ASC 842 to all leases. In addition, the Company has elected not to apply the hindsight practical expedient or the land easement practical expedient. In calculating lease liabilities the Company uses its incremental borrowing rate as of the application date based on original lease terms. The components of lease expense were as follows: Three Months Ended September 30, Nine Months Ended September 30, 2019 2019 Operating lease cost $ 1,178 $ 3,486 Other information related to leases was as follows: Three Months Ended September 30, Nine Months Ended September 30, 2019 2019 Cash paid for amounts included in the measurement of lease liabilities: Operating cash flows from operating leases $ 1,279 $ 3,791 Weighted average remaining lease term Operating leases 8.69 Years Weighted average discount rate Operating leases 3.42% Maturities of lease liabilities were as follows: Operating Leases 2019 $ 1,287 2020 5,059 2021 4,851 2022 4,373 2023 3,984 Thereafter 20,132 Total lease payments 39,686 Less imputed interest (3,928) Total $ 35,758 |
Subsequent Event
Subsequent Event | 9 Months Ended |
Sep. 30, 2019 | |
Subsequent Event | |
Subsequent Event | 12. Subsequent Events |
Earnings per Weighted Average_2
Earnings per Weighted Average Common Share (Tables) | 9 Months Ended |
Sep. 30, 2019 | |
Earnings per Weighted Average Common Share | |
Computation of basic and diluted EPS | Three Months Ended September 30, Nine Months Ended September 30, 2019 2018 2019 2018 Earnings attributable to common shareholders - basic and diluted: Net income from continuing operations $ 15,619 $ 28,908 $ 71,499 $ 64,849 Allocation of income for participating shares (80) (170) (378) (389) Net income from continuing operations attributed to common shareholders $ 15,539 $ 28,738 $ 71,121 $ 64,460 Earnings per share denominator - basic and diluted Total weighted average common shares outstanding, including participating shares 15,299,689 15,181,196 15,275,322 15,167,153 Less: weighted average participating shares (78,787) (89,442) (80,853) (90,939) Basic earnings per share denominator 15,220,902 15,091,754 15,194,469 15,076,214 Common equivalent shares- non-vested performance stock grants 140,006 158,578 142,862 141,713 Diluted earnings per share denominator 15,360,908 15,250,332 15,337,331 15,217,927 Basic earnings per share $ 1.02 $ 1.90 $ 4.68 $ 4.28 Diluted earnings per share $ 1.01 $ 1.88 $ 4.64 $ 4.24 Undistributed earnings attributable to common shareholders - basic and diluted: Net income from continuing operations attributable to common shareholders -Basic $ 1.02 $ 1.90 $ 4.68 $ 4.28 Dividends declared (0.90) (0.80) (2.50) (2.40) Undistributed earnings $ 0.12 $ 1.10 $ 2.18 $ 1.88 Net income from continuing operations attributable to common shareholders -Diluted $ 1.01 $ 1.88 $ 4.64 $ 4.24 Dividends declared (0.90) (0.80) (2.50) (2.40) Undistributed earnings $ 0.11 $ 1.08 $ 2.14 $ 1.84 |
Share-Based Compensation (Table
Share-Based Compensation (Tables) | 9 Months Ended |
Sep. 30, 2019 | |
Share-Based Compensation | |
Schedule of restricted stock and performance-based restricted stock activity | Shares Weighted Performance-based Weighted Under Average Shares Under Average Restriction Fair Value Restriction Fair Value Outstanding at beginning of year 89,135 $ 68.70 105,170 $ 66.79 Granted 33,778 92.52 63,447 (1) 69.61 Vested and unrestricted (44,085) 68.41 (84,512) 56.42 Forfeited (41) 53.64 — — Outstanding at end of period 78,787 $ 79.08 84,105 $ 79.34 |
Investments (Tables)
Investments (Tables) | 9 Months Ended |
Sep. 30, 2019 | |
Investments | |
Gross unrealized gains and losses on investments in securities | As of September 30, 2019 Gross Unrealized Losses (3) Cost or Gross Non-OTTI OTTI Estimated Amortized Unrealized Unrealized Unrealized Fair Cost Gains Losses Losses (4) Value U.S. Treasury securities $ 1,805 $ 8 $ — $ — $ 1,813 Obligations of states and political subdivisions 242,418 10,889 — — 253,307 Residential mortgage-backed securities (1) 305,655 6,785 (1,017) — 311,423 Commercial mortgage-backed securities 81,962 4,464 (10) — 86,416 Other asset-backed securities 37,651 297 (64) — 37,884 Corporate and other securities 502,626 16,958 (2,598) — 516,986 Subtotal, fixed maturity securities 1,172,117 39,401 (3,689) — 1,207,829 Equity securities (2) 146,829 23,197 (2,965) — 167,061 Other invested assets (5) 34,206 — — — 34,206 Totals $ 1,353,152 $ 62,598 $ (6,654) $ — $ 1,409,096 As of December 31, 2018 Gross Unrealized Losses (3) Cost or Gross Non-OTTI OTTI Estimated Amortized Unrealized Unrealized Unrealized Fair Cost Gains Losses Losses (4) Value U.S. Treasury securities $ 1,807 $ — $ (30) $ — $ 1,777 Obligations of states and political subdivisions 262,772 5,098 (1,672) — 266,198 Residential mortgage-backed securities (1) 300,387 1,477 (4,841) — 297,023 Commercial mortgage-backed securities 60,897 337 (898) — 60,336 Other asset-backed securities 61,310 95 (329) — 61,076 Corporate and other securities 488,240 1,775 (14,563) — 475,452 Subtotal, fixed maturity securities 1,175,413 8,782 (22,333) — 1,161,862 Equity securities (2) 142,948 15,419 (10,356) — 148,011 Other invested assets (5) 23,481 — — — 23,481 Totals $ 1,341,842 $ 24,201 $ (32,689) $ — $ 1,333,354 (1) Residential mortgage-backed securities consists primarily of obligations of U.S. Government agencies including collateralized mortgage obligations issued, guaranteed and/or insured by the following issuers: Government National Mortgage Association (GNMA), Federal Home Loan Mortgage Corporation (FHLMC), Federal National Mortgage Association (FNMA) and the Federal Home Loan Bank (FHLB). (2) Equity securities include common stock, preferred stock, mutual funds and interests in mutual funds held to fund the Company’s executive deferred compensation plan. (3) The Company’s investment portfolio included 298 and 958 securities in an unrealized loss position at September 30, 2019 and December 31, 2018, respectively. (4) Amounts in this column represent other-than-temporary impairment (“OTTI”) recognized in accumulated other comprehensive (loss) income. (5) Other invested assets are accounted for under the equity method which approximated fair value. |
Amortized cost and the estimated fair value of fixed maturity securities, by maturity | As of September 30, 2019 Amortized Estimated Cost Fair Value Due in one year or less $ 39,848 $ 40,053 Due after one year through five years 304,339 310,616 Due after five years through ten years 291,596 303,596 Due after ten years through twenty years 110,027 116,681 Due after twenty years 1,040 1,161 Asset-backed securities 425,267 435,722 Totals $ 1,172,117 $ 1,207,829 |
Gross realized gains and losses on sales of investments | Three Months Ended September 30, Nine Months Ended September 30, 2019 2018 2019 2018 Gross realized gains Fixed maturity securities $ 365 $ 445 $ 959 $ 963 Equity securities 1,221 851 2,862 4,346 Gross realized losses Fixed maturity securities (375) (1,170) (1,283) (1,849) Equity securities (17) (73) (1,025) (512) Net realized gains on investments $ 1,194 $ 53 $ 1,513 $ 2,948 |
Gross unrealized losses included in the Company's investment portfolio and the fair value of those securities | As of September 30, 2019 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 $ — $ — $ 300 $ — $ 300 $ — Obligations of states and political subdivisions — — — — — — Residential mortgage-backed securities 51,560 415 39,362 602 90,922 1,017 Commercial mortgage-backed securities 1,701 9 1,229 1 2,930 10 Other asset-backed securities 13,025 58 6,905 6 19,930 64 Corporate and other securities 47,125 1,741 19,760 857 66,885 2,598 Subtotal, fixed maturity securities 113,411 2,223 67,556 1,466 180,967 3,689 Equity securities 25,294 965 16,708 2,000 42,002 2,965 Total temporarily impaired securities $ 138,705 $ 3,188 $ 84,264 $ 3,466 $ 222,969 $ 6,654 As of December 31, 2018 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 $ — $ — $ 1,777 $ 30 $ 1,777 $ 30 Obligations of states and political subdivisions 80,856 707 16,049 965 96,905 1,672 Residential mortgage-backed securities 64,101 694 138,572 4,147 202,673 4,841 Commercial mortgage-backed securities 22,652 270 13,117 628 35,769 898 Other asset-backed securities 33,866 112 23,532 217 57,398 329 Corporate and other securities 288,786 10,149 87,546 4,414 376,332 14,563 Subtotal, fixed maturity securities 490,261 11,932 280,593 10,401 770,854 22,333 Equity securities 71,439 9,955 2,072 401 73,511 10,356 Total temporarily impaired securities $ 561,700 $ 21,887 $ 282,665 $ 10,802 $ 844,365 $ 32,689 |
Credit loss recognized in earnings related to fixed maturity securities | Three Months Ended September 30, Nine Months Ended September 30, 2019 2018 2019 2018 Credit losses on fixed maturity securities, beginning of period $ 274 $ 616 $ 844 $ 616 Add: credit losses on OTTI not previously recognized 123 228 397 228 Less: credit losses on securities sold (220) — (1,064) - Less: credit losses on securities impaired due to intent to sell — — — — Add: credit losses on previously impaired securities — — — — Less: increases in cash flows expected on previously impaired securities — — — — Credit losses on fixed maturity securities, end of period $ 177 $ 844 $ 177 $ 844 |
Components of net investment income | Three Months Ended September 30, Nine Months Ended September 30, 2019 2018 2019 2018 Interest on fixed maturity securities $ 11,285 $ 10,576 $ 32,129 $ 30,330 Dividends on equity securities 1,116 980 3,315 2,613 Equity in earnings of other invested assets 310 260 1,070 985 Interest on other assets 7 9 24 54 Total investment income 12,718 11,825 36,538 33,982 Investment expenses 771 705 2,266 2,143 Net investment income $ 11,947 $ 11,120 $ 34,272 $ 31,839 |
Fair value measurements for investments | As of September 30, 2019 Total Level 1 Inputs Level 2 Inputs Level 3 Inputs U.S. Treasury securities $ 1,813 $ — $ 1,813 $ — Obligations of states and political subdivisions 253,307 — 253,307 — Residential mortgage-backed securities 311,423 — 311,423 — Commercial mortgage-backed securities 86,416 — 86,416 — Other asset-backed securities 37,884 — 37,884 — Corporate and other securities 516,986 — 516,986 — Equity securities 134,486 134,000 — 486 Total investment securities $ 1,342,315 $ 134,000 $ 1,207,829 $ 486 As of December 31, 2018 Total Level 1 Inputs Level 2 Inputs Level 3 Inputs U.S. Treasury securities $ 1,777 $ — $ 1,777 $ — Obligations of states and political subdivisions 266,198 — 266,198 — Residential mortgage-backed securities 297,023 — 297,023 — Commercial mortgage-backed securities 60,336 — 60,336 — Other asset-backed securities 61,076 — 61,076 — Corporate and other securities 475,452 — 475,452 — Equity securities 116,173 115,493 — 680 Total investment securities $ 1,278,035 $ 115,493 $ 1,161,862 $ 680 |
Changes in the Company's Level 3 fair value securities | Three Months Ended September 30, Nine Months Ended September 30, 2019 2018 2019 2018 Level 3 Level 3 Level 3 Level 3 Fair Value Fair Value Fair Value Fair Value Securities Securities Securities Securities Balance at beginning of period $ 486 $ 680 $ 680 $ 680 Net gains and losses included in earnings — — — — Net gains included in other comprehensive income — — — — Purchases — — 103 — Sales — — (297) — Transfers into Level 3 — — — — Transfers out of Level 3 — — — — Balance at end of period $ 486 $ 680 $ 486 $ 680 Amount of total losses included in earnings attributable to the change in unrealized losses related to assets still held at end of period $ — $ — $ — $ — |
Loss and Loss Adjustment Expe_2
Loss and Loss Adjustment Expense Reserves (Tables) | 9 Months Ended |
Sep. 30, 2019 | |
Loss and Loss Adjustment Expense Reserves | |
Schedule of reconciliation of beginning and ending reserves for losses and loss adjustment expenses (LAE) | Nine Months Ended September 30, 2019 2018 Reserves for losses and LAE at beginning of year $ 584,719 $ 574,054 Less receivable from reinsurers related to unpaid losses and LAE (108,398) (83,085) Net reserves for losses and LAE at beginning of year 476,321 490,969 Incurred losses and LAE, related to: Current year 408,927 406,912 Prior years (25,541) (39,348) Total incurred losses and LAE 383,386 367,564 Paid losses and LAE related to: Current year 226,660 169,161 Prior years 149,472 206,980 Total paid losses and LAE 376,132 376,141 Net reserves for losses and LAE at end of period 483,575 482,392 Plus receivable from reinsurers related to unpaid losses and LAE 117,884 100,565 Reserves for losses and LAE at end of period $ 601,459 $ 582,957 |
Leases (Tables)
Leases (Tables) | 9 Months Ended |
Sep. 30, 2019 | |
Leases | |
Schedule of operating lease cost | Three Months Ended September 30, Nine Months Ended September 30, 2019 2019 Operating lease cost $ 1,178 $ 3,486 |
Schedule of other information related to leases | Three Months Ended September 30, Nine Months Ended September 30, 2019 2019 Cash paid for amounts included in the measurement of lease liabilities: Operating cash flows from operating leases $ 1,279 $ 3,791 Weighted average remaining lease term Operating leases 8.69 Years Weighted average discount rate Operating leases 3.42% |
Schedule of the maturities of lease liabilities | Operating Leases 2019 $ 1,287 2020 5,059 2021 4,851 2022 4,373 2023 3,984 Thereafter 20,132 Total lease payments 39,686 Less imputed interest (3,928) Total $ 35,758 |
Recent Accounting Pronounceme_2
Recent Accounting Pronouncements (Details) - USD ($) $ in Thousands | Jan. 01, 2019 | Jan. 01, 2018 | Dec. 22, 2017 | Sep. 30, 2019 |
Statutory tax rate | 35.00% | 21.00% | ||
Accounting Standards Update 2018-02 | ||||
Cumulative Effect of Adoption of ASU 2018-02 in Period of Adoption | $ (4,736) | |||
Accounting Standards Update 2016-01 | ||||
Cumulative effect of change in accounting principle | $ 16,895 | |||
Accounting Standards Update 2017-08 | ||||
Cumulative effect of change in accounting principle | $ 3,004 | |||
Accounting Standards Update 2016-02 | ||||
Cumulative effect of change in accounting principle | $ 35,984 |
Earnings per Weighted Average_3
Earnings per Weighted Average Common Share (Details) - USD ($) $ / shares in Units, $ in Thousands | 3 Months Ended | 9 Months Ended | ||||||
Sep. 30, 2019 | Jun. 30, 2019 | Mar. 31, 2019 | Sep. 30, 2018 | Jun. 30, 2018 | Mar. 31, 2018 | Sep. 30, 2019 | Sep. 30, 2018 | |
Earnings attributable to common shareholders - basic and diluted: | ||||||||
Net income from continuing operations | $ 15,619 | $ 25,934 | $ 29,946 | $ 28,908 | $ 26,816 | $ 9,125 | $ 71,499 | $ 64,849 |
Allocation of income for participating shares | (80) | (170) | (378) | (389) | ||||
Net income from continuing operations attributed to common shareholders | $ 15,539 | $ 28,738 | $ 71,121 | $ 64,460 | ||||
Total weighted average common shares outstanding, including participating shares | 15,299,689 | 15,181,196 | 15,275,322 | 15,167,153 | ||||
Less: weighted average participating shares | (78,787) | (89,442) | (80,853) | (90,939) | ||||
Basic earnings per share denominator | 15,220,902 | 15,091,754 | 15,194,469 | 15,076,214 | ||||
Common equivalent shares- non-vested performance stock grants | 140,006 | 158,578 | 142,862 | 141,713 | ||||
Diluted earnings per share denominator | 15,360,908 | 15,250,332 | 15,337,331 | 15,217,927 | ||||
Basic earnings per share (in dollars per share) | $ 1.02 | $ 1.90 | $ 4.68 | $ 4.28 | ||||
Diluted earnings per share (in dollars per share) | 1.01 | 1.88 | 4.64 | 4.24 | ||||
Undistributed earnings attributable to common shareholders - basic and diluted: | ||||||||
Net income from continuing operations attributable to common shareholders -Basic | 1.02 | 1.90 | 4.68 | 4.28 | ||||
Dividends declared | (0.90) | (0.80) | (2.50) | (2.40) | ||||
Undistributed earnings | 0.12 | 1.10 | 2.18 | 1.88 | ||||
Undistributed earnings attributable to common shareholders - diluted | ||||||||
Net income from continuing operations attributable to common shareholders -Diluted | 1.01 | 1.88 | 4.64 | 4.24 | ||||
Dividends declared | (0.90) | (0.80) | (2.50) | (2.40) | ||||
Undistributed earnings | $ 0.11 | $ 1.08 | $ 2.14 | $ 1.84 | ||||
Non Vested Performance Stock Grants | ||||||||
Undistributed earnings attributable to common shareholders - diluted | ||||||||
Antidilutive common shares | 0 | 0 | 0 | 0 |
Share-Based Compensation (Detai
Share-Based Compensation (Details) - shares | Sep. 30, 2019 | Apr. 02, 2018 |
Maximum number of shares of common stock with respect to which awards may be granted | 2,850,000 | |
Number of shares available for future grant | 293,031 | |
2018 Long Term Incentive Plan | ||
Maximum number of shares of common stock with respect to which awards may be granted | 350,000 |
Share-Based Compensation Restri
Share-Based Compensation Restricted Stock Activity (Details) - USD ($) $ / shares in Units, $ in Thousands | 9 Months Ended | |
Sep. 30, 2019 | Sep. 30, 2018 | |
Weighted Average Fair Value | ||
Unrecognized compensation expense related to non-vested restricted stock awards | $ 7,426 | |
Weighted average period expected for recognition of compensation expense related to non-vested restricted stock awards | 1 year 7 months 6 days | |
Total fair value of the shares that were vested and unrestricted during the period | $ 7,784 | $ 4,413 |
Compensation Expense, Net of Tax | 3,591 | 3,379 |
Income tax benefits from compensation expense | $ 954 | $ 898 |
Performance-based Shares Under Restriction | ||
Share-Based Compensation | ||
Vesting period | 3 years | |
Shares Under Restriction | ||
Outstanding at beginning of year (in shares) | 105,170 | |
Granted (in shares) | 63,447 | |
Vested and unrestricted (in shares) | (84,512) | |
Outstanding at end of period (in shares) | 84,105 | |
Weighted Average Fair Value | ||
Outstanding at beginning of year (in dollars per share) | $ 66.79 | |
Granted (in dollars per share) | 69.61 | |
Vested and unrestricted (in dollars per share) | 56.42 | |
Outstanding at end of period (in dollars per share) | $ 79.34 | |
Performance-based Shares Under Restriction | Minimum | ||
Share-Based Compensation | ||
Actual Payouts (as a percent) | 0.00% | |
Performance-based Shares Under Restriction | Maximum | ||
Share-Based Compensation | ||
Actual Payouts (as a percent) | 200.00% | |
Restricted Stock | ||
Shares Under Restriction | ||
Outstanding at beginning of year (in shares) | 89,135 | |
Granted (in shares) | 33,778 | |
Vested and unrestricted (in shares) | (44,085) | |
Forfeited (in shares) | (41) | |
Outstanding at end of period (in shares) | 78,787 | |
Weighted Average Fair Value | ||
Outstanding at beginning of year (in dollars per share) | $ 68.70 | |
Granted (in dollars per share) | 92.52 | |
Vested and unrestricted (in dollars per share) | 68.41 | |
Forfeited (in dollars per share) | 53.64 | |
Outstanding at end of period (in dollars per share) | $ 79.08 | |
Restricted Stock | Non-executive | ||
Share-Based Compensation | ||
Vesting period | 5 years | |
Restricted Stock | Executives and non-executives (2018 and after) | ||
Share-Based Compensation | ||
Vesting period | 3 years | |
Restricted Stock | First anniversary of grant date | Executives and non-executives (2018 and after) | ||
Share-Based Compensation | ||
Actual Payouts (as a percent) | 30.00% | |
Restricted Stock | Second anniversary of grant date | Executives and non-executives (2018 and after) | ||
Share-Based Compensation | ||
Actual Payouts (as a percent) | 30.00% | |
Restricted Stock | Third anniversary of grant date | Executives and non-executives (2018 and after) | ||
Share-Based Compensation | ||
Actual Payouts (as a percent) | 40.00% |
Investments (Details)
Investments (Details) $ in Thousands | Sep. 30, 2019USD ($)security | Dec. 31, 2018USD ($)security |
Marketable Securities | ||
Fixed maturity securities, amortized cost | $ 1,172,117 | $ 1,175,413 |
Fixed maturity securities, Gross Unrealized Gains | 39,401 | 8,782 |
Fixed maturity securities, Non-OTTI Gross Unrealized Losses | (3,689) | (22,333) |
Fixed maturity securities, Estimated Fair Value | 1,207,829 | 1,161,862 |
Equity securities, Cost or Amortized Cost | 146,829 | 142,948 |
Equity securities, Estimated Fair Value | 167,061 | 148,011 |
Other invested assets, Cost or Amortized Cost | 34,206 | 23,481 |
Cost or Amortized Cost | 1,353,152 | 1,341,842 |
Gross Unrealized Gains | 62,598 | 24,201 |
Gross Non-OTTI Unrealized Losses | (6,654) | (32,689) |
Estimated Fair Value | $ 1,409,096 | $ 1,333,354 |
Number of securities in an unrealized loss position | security | 298 | 958 |
U.S. Treasury securities | ||
Marketable Securities | ||
Fixed maturity securities, amortized cost | $ 1,805 | $ 1,807 |
Fixed maturity securities, Gross Unrealized Gains | 8 | |
Fixed maturity securities, Non-OTTI Gross Unrealized Losses | (30) | |
Fixed maturity securities, Estimated Fair Value | 1,813 | 1,777 |
Obligations of states and political subdivisions | ||
Marketable Securities | ||
Fixed maturity securities, amortized cost | 242,418 | 262,772 |
Fixed maturity securities, Gross Unrealized Gains | 10,889 | 5,098 |
Fixed maturity securities, Non-OTTI Gross Unrealized Losses | (1,672) | |
Fixed maturity securities, Estimated Fair Value | 253,307 | 266,198 |
Residential mortgage-backed securities | ||
Marketable Securities | ||
Fixed maturity securities, amortized cost | 305,655 | 300,387 |
Fixed maturity securities, Gross Unrealized Gains | 6,785 | 1,477 |
Fixed maturity securities, Non-OTTI Gross Unrealized Losses | (1,017) | (4,841) |
Fixed maturity securities, Estimated Fair Value | 311,423 | 297,023 |
Commercial mortgage-backed securities | ||
Marketable Securities | ||
Fixed maturity securities, amortized cost | 81,962 | 60,897 |
Fixed maturity securities, Gross Unrealized Gains | 4,464 | 337 |
Fixed maturity securities, Non-OTTI Gross Unrealized Losses | (10) | (898) |
Fixed maturity securities, Estimated Fair Value | 86,416 | 60,336 |
Other asset-backed securities | ||
Marketable Securities | ||
Fixed maturity securities, amortized cost | 37,651 | 61,310 |
Fixed maturity securities, Gross Unrealized Gains | 297 | 95 |
Fixed maturity securities, Non-OTTI Gross Unrealized Losses | (64) | (329) |
Fixed maturity securities, Estimated Fair Value | 37,884 | 61,076 |
Corporate and other securities | ||
Marketable Securities | ||
Fixed maturity securities, amortized cost | 502,626 | 488,240 |
Fixed maturity securities, Gross Unrealized Gains | 16,958 | 1,775 |
Fixed maturity securities, Non-OTTI Gross Unrealized Losses | (2,598) | (14,563) |
Fixed maturity securities, Estimated Fair Value | 516,986 | 475,452 |
Equity securities | ||
Marketable Securities | ||
Equity securities, Cost or Amortized Cost | 146,829 | 142,948 |
Equity securities, Gross Unrealized Gains | 23,197 | 15,419 |
Equity securities, Non-OTTI Gross Unrealized Losses | (2,965) | (10,356) |
Equity securities, Estimated Fair Value | 167,061 | 148,011 |
Other invested assets | ||
Marketable Securities | ||
Other invested assets, Cost or Amortized Cost | 34,206 | 23,481 |
Other invested assets, Estimated Fair Value | $ 34,206 | $ 23,481 |
Investments Amortized Cost and
Investments Amortized Cost and Estimated Fair Value (Details) - USD ($) $ in Thousands | Sep. 30, 2019 | Dec. 31, 2018 |
Amortized Cost | ||
Due in one year or less, Amortized Cost | $ 39,848 | |
Due after one year through five years, Amortized Cost | 304,339 | |
Due after five years though ten years, Amortized Cost | 291,596 | |
Due after ten years through twenty years, Amortized Cost | 110,027 | |
Due after twenty years, Amortized Cost | 1,040 | |
Asset-backed securities, Amortized Cost | 425,267 | |
Totals, Amortized Cost | 1,172,117 | $ 1,175,413 |
Estimated Fair Value | ||
Due in one year or less, Fair Value | 40,053 | |
Due after one year through five years, Fair Value | 310,616 | |
Due after five years through ten years, Fair Value | 303,596 | |
Due after ten years through twenty years, Fair Value | 116,681 | |
Due after twenty years, Fair Value | 1,161 | |
Asset-backed securities, Fair Value | 435,722 | |
Totals, Fair Value | $ 1,207,829 | $ 1,161,862 |
Investments Gross Realized Gain
Investments Gross Realized Gains and Losses (Details) - USD ($) $ in Thousands | 3 Months Ended | 9 Months Ended | ||
Sep. 30, 2019 | Sep. 30, 2018 | Sep. 30, 2019 | Sep. 30, 2018 | |
Marketable Securities [Line Items] | ||||
Net realized gains on investments | $ 1,194 | $ 53 | $ 1,513 | $ 2,948 |
Fixed maturity securities | ||||
Marketable Securities [Line Items] | ||||
Gross realized gains fixed maturity securities | 365 | 445 | 959 | 963 |
Gross realized losses fixed maturities | (375) | (1,170) | (1,283) | (1,849) |
Equity securities | ||||
Marketable Securities [Line Items] | ||||
Gross realized gains equity securities | 1,221 | 851 | 2,862 | 4,346 |
Gross realized losses equity securities | $ (17) | $ (73) | $ (1,025) | $ (512) |
Investments Gross Unrealized Lo
Investments Gross Unrealized Losses and Fair Value (Details) - USD ($) $ in Thousands | Sep. 30, 2019 | Dec. 31, 2018 |
Marketable Securities | ||
Estimated Fair Value, Less than 12 Months | $ 138,705 | $ 561,700 |
Estimated Fair Value, 12 Months or More | 84,264 | 282,665 |
Estimated Fair Value, Total | 222,969 | 844,365 |
Unrealized Losses, Less than 12 Months | 3,188 | 21,887 |
Unrealized Losses, 12 Months or More | 3,466 | 10,802 |
Unrealized Losses, Total | 6,654 | 32,689 |
Fixed maturity securities | ||
Fixed Maturity Securities | ||
Estimated Fair Value, Less than 12 Months | 113,411 | 490,261 |
Estimated Fair Value, 12 Months or More | 67,556 | 280,593 |
Estimated Fair Value, Total | 180,967 | 770,854 |
Unrealized Losses, Less than 12 Months | 2,223 | 11,932 |
Unrealized Losses, 12 Months or More | 1,466 | 10,401 |
Unrealized Losses, Total | 3,689 | 22,333 |
U.S. Treasury securities | ||
Fixed Maturity Securities | ||
Estimated Fair Value, 12 Months or More | 300 | 1,777 |
Estimated Fair Value, Total | 300 | 1,777 |
Unrealized Losses, 12 Months or More | 30 | |
Unrealized Losses, Total | 30 | |
Obligations of states and political subdivisions | ||
Fixed Maturity Securities | ||
Estimated Fair Value, Less than 12 Months | 80,856 | |
Estimated Fair Value, 12 Months or More | 16,049 | |
Estimated Fair Value, Total | 96,905 | |
Unrealized Losses, Less than 12 Months | 707 | |
Unrealized Losses, 12 Months or More | 965 | |
Unrealized Losses, Total | 1,672 | |
Residential mortgage-backed securities | ||
Fixed Maturity Securities | ||
Estimated Fair Value, Less than 12 Months | 51,560 | 64,101 |
Estimated Fair Value, 12 Months or More | 39,362 | 138,572 |
Estimated Fair Value, Total | 90,922 | 202,673 |
Unrealized Losses, Less than 12 Months | 415 | 694 |
Unrealized Losses, 12 Months or More | 602 | 4,147 |
Unrealized Losses, Total | 1,017 | 4,841 |
Commercial mortgage-backed securities | ||
Fixed Maturity Securities | ||
Estimated Fair Value, Less than 12 Months | 1,701 | 22,652 |
Estimated Fair Value, 12 Months or More | 1,229 | 13,117 |
Estimated Fair Value, Total | 2,930 | 35,769 |
Unrealized Losses, Less than 12 Months | 9 | 270 |
Unrealized Losses, 12 Months or More | 1 | 628 |
Unrealized Losses, Total | 10 | 898 |
Other asset-backed securities | ||
Fixed Maturity Securities | ||
Estimated Fair Value, Less than 12 Months | 13,025 | 33,866 |
Estimated Fair Value, 12 Months or More | 6,905 | 23,532 |
Estimated Fair Value, Total | 19,930 | 57,398 |
Unrealized Losses, Less than 12 Months | 58 | 112 |
Unrealized Losses, 12 Months or More | 6 | 217 |
Unrealized Losses, Total | 64 | 329 |
Corporate and other securities | ||
Fixed Maturity Securities | ||
Estimated Fair Value, Less than 12 Months | 47,125 | 288,786 |
Estimated Fair Value, 12 Months or More | 19,760 | 87,546 |
Estimated Fair Value, Total | 66,885 | 376,332 |
Unrealized Losses, Less than 12 Months | 1,741 | 10,149 |
Unrealized Losses, 12 Months or More | 857 | 4,414 |
Unrealized Losses, Total | 2,598 | 14,563 |
Equity securities | ||
Equity Securities | ||
Estimated Fair Value, Less than 12 Months | 25,294 | 71,439 |
Estimated Fair Value, 12 Months or More | 16,708 | 2,072 |
Estimated Fair Value, Total | 42,002 | 73,511 |
Unrealized Losses, Less than 12 Months | 965 | 9,955 |
Unrealized Losses, 12 Months or More | 2,000 | 401 |
Unrealized Losses, Total | $ 2,965 | $ 10,356 |
Investments Other (Details)
Investments Other (Details) $ in Thousands | 3 Months Ended | 9 Months Ended | 12 Months Ended | ||
Sep. 30, 2019USD ($)item | Sep. 30, 2018USD ($)item | Sep. 30, 2019USD ($)item | Sep. 30, 2018USD ($)item | Dec. 31, 2018USD ($) | |
Other than Temporary Impairment, Credit Losses Recognized in Earnings | |||||
Credit losses on fixed maturity securities, beginning of period | $ 274 | $ 616 | $ 844 | $ 616 | $ 616 |
Add: credit losses on OTTI not previously recognized | 123 | 228 | 397 | 228 | |
Less: credit losses on securities sold | (220) | (1,064) | |||
Less: credit losses on securities impaired due to intent to sell | 0 | 0 | 0 | 0 | |
Credit losses on fixed maturity securities, end of period | 177 | $ 844 | 177 | $ 844 | 844 |
Amounts included in accumulated other comprehensive income related to OTTI securities | 0 | 0 | 0 | ||
Available-for-sale investments | 1,207,829 | 1,161,862 | |||
Short-term Investments | $ 0 | $ 0 | $ 0 | ||
Level 3 Securities Held Number | item | 1 | 1 | 1 | 1 | |
Subprime mortgage debt securities | |||||
Other-Than-Temporary Impairments | |||||
Securities held | $ 0 | $ 0 |
Investments Components of Net I
Investments Components of Net Investment Income (Details) - USD ($) $ in Thousands | 3 Months Ended | 9 Months Ended | ||
Sep. 30, 2019 | Sep. 30, 2018 | Sep. 30, 2019 | Sep. 30, 2018 | |
Components of net investment income | ||||
Interest on fixed maturity securities | $ 11,285 | $ 10,576 | $ 32,129 | $ 30,330 |
Dividends on equity securities | 1,116 | 980 | 3,315 | 2,613 |
Equity in earnings of other invested assets | 310 | 260 | 1,070 | 985 |
Interest on other assets | 7 | 9 | 24 | 54 |
Total investment income | 12,718 | 11,825 | 36,538 | 33,982 |
Investment expenses | 771 | 705 | 2,266 | 2,143 |
Net investment income | $ 11,947 | $ 11,120 | $ 34,272 | $ 31,839 |
Investments Fair Value Measurem
Investments Fair Value Measurements (Details) - USD ($) $ in Thousands | Sep. 30, 2019 | Dec. 31, 2018 |
Fair value of financial instruments | ||
Fixed maturity securities, Estimated Fair Value | $ 1,207,829 | $ 1,161,862 |
Equity securities, Estimated Fair Value | 167,061 | 148,011 |
Level 1 Inputs | ||
Fair value of financial instruments | ||
Marketable Securities, Total | 134,000 | 115,493 |
Level 1 Inputs | Equity securities | ||
Fair value of financial instruments | ||
Equity securities, Estimated Fair Value | 134,000 | 115,493 |
Level 2 Inputs | ||
Fair value of financial instruments | ||
Marketable Securities, Total | 1,207,829 | 1,161,862 |
Level 2 Inputs | U.S. Treasury securities | ||
Fair value of financial instruments | ||
Fixed maturity securities, Estimated Fair Value | 1,813 | 1,777 |
Level 2 Inputs | Obligations of states and political subdivisions | ||
Fair value of financial instruments | ||
Fixed maturity securities, Estimated Fair Value | 253,307 | 266,198 |
Level 2 Inputs | Residential mortgage-backed securities | ||
Fair value of financial instruments | ||
Fixed maturity securities, Estimated Fair Value | 311,423 | 297,023 |
Level 2 Inputs | Commercial mortgage-backed securities | ||
Fair value of financial instruments | ||
Fixed maturity securities, Estimated Fair Value | 86,416 | 60,336 |
Level 2 Inputs | Other asset-backed securities | ||
Fair value of financial instruments | ||
Fixed maturity securities, Estimated Fair Value | 37,884 | 61,076 |
Level 2 Inputs | Corporate and other securities | ||
Fair value of financial instruments | ||
Fixed maturity securities, Estimated Fair Value | 516,986 | 475,452 |
Level 3 Inputs | ||
Fair value of financial instruments | ||
Marketable Securities, Total | 486 | 680 |
Level 3 Inputs | Equity securities | ||
Fair value of financial instruments | ||
Equity securities, Estimated Fair Value | 486 | 680 |
Total | ||
Fair value of financial instruments | ||
Marketable Securities, Total | 1,342,315 | 1,278,035 |
Total | U.S. Treasury securities | ||
Fair value of financial instruments | ||
Fixed maturity securities, Estimated Fair Value | 1,813 | 1,777 |
Total | Obligations of states and political subdivisions | ||
Fair value of financial instruments | ||
Fixed maturity securities, Estimated Fair Value | 253,307 | 266,198 |
Total | Residential mortgage-backed securities | ||
Fair value of financial instruments | ||
Fixed maturity securities, Estimated Fair Value | 311,423 | 297,023 |
Total | Commercial mortgage-backed securities | ||
Fair value of financial instruments | ||
Fixed maturity securities, Estimated Fair Value | 86,416 | 60,336 |
Total | Other asset-backed securities | ||
Fair value of financial instruments | ||
Fixed maturity securities, Estimated Fair Value | 37,884 | 61,076 |
Total | Corporate and other securities | ||
Fair value of financial instruments | ||
Fixed maturity securities, Estimated Fair Value | 516,986 | 475,452 |
Total | Equity securities | ||
Fair value of financial instruments | ||
Equity securities, Estimated Fair Value | $ 134,486 | $ 116,173 |
Investments Level 3 and Other (
Investments Level 3 and Other (Details) - USD ($) $ in Thousands | 3 Months Ended | 9 Months Ended | |||
Sep. 30, 2019 | Sep. 30, 2018 | Sep. 30, 2019 | Sep. 30, 2018 | Dec. 31, 2018 | |
Transfers between Levels | |||||
Transfers from Level 1 to Level 2 | $ 0 | $ 0 | $ 0 | $ 0 | |
Transfers from Level 2 to Level 1 | 0 | 0 | 0 | 0 | |
Changes in the Company's Level 3 fair value securities | |||||
Balance at beginning of period | 486 | 680 | 680 | 680 | |
Purchases | 103 | ||||
Sales | (297) | ||||
Transfers into Level 3 | 0 | 0 | 0 | 0 | |
Transfers out of Level 3 | 0 | 0 | 0 | 0 | |
Balance at end of period | 486 | $ 680 | $ 486 | $ 680 | |
Period of advance notice before quarter end | 45 days | ||||
Accounting Standards Update 2015-07 | |||||
Changes in the Company's Level 3 fair value securities | |||||
Alternative investments fair value | $ 32,575 | $ 32,575 | $ 31,838 |
Loss and Loss Adjustment Expe_3
Loss and Loss Adjustment Expense Reserves (Details) - USD ($) $ in Thousands | 9 Months Ended | ||
Sep. 30, 2019 | Sep. 30, 2018 | Dec. 31, 2018 | |
Loss and Loss Adjustment Expense Reserves | |||
Reserves for losses and LAE at beginning of year | $ 584,719 | $ 574,054 | |
Less receivable from reinsurers related to unpaid losses and LAE | (108,398) | (83,085) | |
Net reserves for losses and LAE at beginning of year | 476,321 | 490,969 | |
Incurred losses and LAE, related to: | |||
Current year | 408,927 | 406,912 | |
Prior years | (25,541) | (39,348) | |
Total incurred losses and LAE | 383,386 | 367,564 | |
Paid losses and LAE related to: | |||
Current year | 226,660 | 169,161 | |
Prior years | 149,472 | 206,980 | |
Total paid losses and LAE | 376,132 | 376,141 | |
Net reserves for losses and LAE at end of period | 483,575 | 482,392 | |
Plus receivable from reinsurers related to unpaid losses and LAE | 117,884 | 100,565 | $ 108,398 |
Reserves for losses and LAE at end of period | 601,459 | 582,957 | |
Prior years | $ 25,541 | $ 39,348 |
Debt (Details)
Debt (Details) - USD ($) $ in Thousands | 9 Months Ended | ||
Sep. 30, 2019 | Sep. 30, 2018 | Dec. 31, 2018 | |
Revolving Credit Agreement | LIBOR rate | |||
Debt | |||
Variable interest rate basis | LIBOR | ||
Spread on variable rate (as a percent) | 1.25% | ||
Revolving Credit Agreement | Prime rate | |||
Debt | |||
Variable interest rate basis | prime rate | ||
Revolving Credit Agreement | Federal Funds Effective Swap Rate | |||
Debt | |||
Variable interest rate basis | federal funds rate | ||
Spread on variable rate (as a percent) | 1.25% | ||
Additional spread on variable rate (as a percent) | 0.50% | ||
RBS Citizens | Revolving Credit Agreement | |||
Debt | |||
Current borrowing capacity | $ 30,000 | $ 30,000 | |
Maximum borrowing capacity | 50,000 | ||
Default trigger, principal amount | 10,000 | ||
Outstanding amount | $ 0 | $ 0 | |
Commitment fee (as a percent) | 0.25% | 0.25% | |
F H L B Boston | |||
Debt | |||
Outstanding amount | $ 0 | $ 0 | |
Maximum borrowing capacity using eligible invested assets as collateral | $ 296,811 |
Income Taxes (Details)
Income Taxes (Details) | Dec. 22, 2017 | Sep. 30, 2019 |
Income Taxes | ||
Statutory tax rate | 35.00% | 21.00% |
Share Repurchase Program (Detai
Share Repurchase Program (Details) - USD ($) $ in Thousands | 9 Months Ended | |||
Sep. 30, 2019 | Sep. 30, 2018 | Dec. 31, 2018 | Aug. 03, 2007 | |
Share Repurchase Program | ||||
Share Repurchase Program | $ 150,000 | $ 30,000 | ||
Number of common shares purchased during period under the program | 0 | 0 | ||
Treasury stock shares | 2,279,570 | 2,279,570 | ||
Treasury stock, at cost | $ 83,835 | $ 83,835 |
Leases - Remaining Lease Term (
Leases - Remaining Lease Term (Details) | 9 Months Ended |
Sep. 30, 2019 | |
Leases | |
Lease, Practical Expedients, Package [true false] | true |
Lease, Practical Expedient, Use of Hindsight [true false] | false |
Operating lease, existence of option to extend | true |
Minimum | |
Leases | |
Operating lease, remaining lease term | 1 year |
Maximum | |
Leases | |
Operating lease, remaining lease term | 10 years |
Operating lease, renewal term | 5 years |
Leases (Details)
Leases (Details) $ in Thousands | 3 Months Ended | 9 Months Ended |
Sep. 30, 2019USD ($) | Sep. 30, 2019USD ($) | |
Leases | ||
Operating lease cost | $ 1,178 | $ 3,486 |
Operating cash flows from operating leases | $ 1,279 | $ 3,791 |
Weighted average remaining lease term Operating leases | 8 years 8 months 8 days | 8 years 8 months 8 days |
Weighted average discount rate Operating leases | 3.42% | 3.42% |
Leases (Maturities) (Details)
Leases (Maturities) (Details) $ in Thousands | Sep. 30, 2019USD ($) |
Leases | |
2019 | $ 1,287 |
2020 | 5,059 |
2021 | 4,851 |
2022 | 4,373 |
2023 | 3,984 |
Thereafter | 20,132 |
Total lease payments | 39,686 |
Less imputed interest | (3,928) |
Total | $ 35,758 |