SAFETY INSURANCE GROUP INC

Previous wording

We are a leading provider of private passenger automobile (54.7% of our direct written premiums in 2023), commercial automobile, (15.9% of 2023 direct written premiums), and homeowners (24.5% of 2023 direct written premiums) insurance. In addition to these coverages, we offer a portfolio of other insurance products, including dwelling fire, umbrella and business owner policies (totaling 4.9% of 2023 direct written premiums). Operating exclusively in Massachusetts, New Hampshire and Maine through our insurance company subsidiaries, Safety Insurance, Safety Indemnity, Safety P&C, and Safety Northeast (together referred to as the “Insurance Subsidiaries”), we have established strong relationships with independent insurance agents, who numbered 834 in 1,090 locations throughout these three states during 2023. We have used these relationships and our extensive knowledge of the market to become the third largest private passenger automobile carrier and the second largest commercial automobile carrier in Massachusetts, capturing an approximate 8.7% and 12.7% share, respectively, of the Massachusetts private passenger and commercial automobile markets in 2023, according to statistics compiled by the Commonwealth Automobile Reinsurers (“CAR”) based on automobile exposures. We are the fourth largest homeowners insurance carrier in Massachusetts, with a market share of 6.2% in 2022.

Current wording

We are a leading provider of private passenger automobile (55.8% of our direct written premiums in 2024), commercial automobile, (15.2% of 2024 direct written premiums), and homeowners (24.3% of 2024 direct written premiums) insurance. In addition to these coverages, we offer a portfolio of other insurance products, including dwelling fire, umbrella and business owner policies (totaling 4.7% of 2024 direct written premiums). Operating exclusively in Massachusetts, New Hampshire and Maine through our insurance company subsidiaries, Safety Insurance, Safety Indemnity, Safety P&C, and Safety Northeast (together referred to as the “Insurance Subsidiaries”), we have established strong relationships with independent insurance agents, who numbered 828 in 1,079 locations throughout these three states during 2024. We have used these relationships and our extensive knowledge of the market to become the third largest private passenger automobile carrier and the second largest commercial automobile carrier in Massachusetts, capturing an approximate 9.7% and 12.9% share, respectively, of the Massachusetts private passenger and commercial automobile markets in 2024, according to statistics compiled by the Commonwealth Automobile Reinsurers (“CAR”) based on automobile exposures. We are the third largest homeowners insurance carrier in Massachusetts, with a market share of 6.3% in 2023.

Previous wording

For the quarter ended December 31, 2023, the Company achieved its fifth consecutive quarter of double-digit growth in direct and net written premiums. For the three months ended December 31, 2023, direct written premium growth and net written premium growth were 22.2% and 20.7%, respectively. For the year ended December 31, 2023, direct written premium growth and net written premium growth were 20.4% and 19.6%, respectively. The increase in premium is driven by new business production, improved retention, and rate increases. For the year ended December 31, 2023, the Company achieved exposure count growth across all lines of business, including 14.7%, 5.4% and 11.2% in Private Passenger Automobile, Commercial Automobile and Homeowners lines, respectively, compared to the same period in 2022. Additionally, for the year ended December 31, 2023, average written premium per exposure increased 10.8%, 3.8% and 4.5% in Private Passenger Automobile, Commercial Automobile and Homeowners lines, respectively, compared to the same period in 2022.

Current wording

*Direct and Net Written Premiums.*For the quarter ended December 31, 2024, the Company achieved its ninth consecutive quarter of double-digit growth in direct and net written premiums. For the three months ended December 31, 2024, direct written premium growth and net written premium growth were 18.7% and 12.9%, respectively. For the year ended December 31, 2024, direct written premium growth and net written premium growth were 20.4% and 18.2%, respectively. The increase in premium is driven by new business production, improved retention, and rate increases. For the year ended December 31, 2024, the Company achieved policy count growth across all lines of business, including 10.0%, 4.5% and 8.7% in Private Passenger Automobile, Commercial Automobile and Homeowners lines, respectively, compared to the same period in 2023. Additionally, for the year ended December 31, 2024, average written premium per policy increased 14.1%, 10.7% and 8.9% in Private Passenger Automobile, Commercial Automobile and Homeowners lines, respectively, compared to the same period in 2023.

Previous wording

Losses and loss adjustment expenses incurred for the three months ended December 31, 2023 increased by $40,076, or 30.4%, to $172,105 from $132,029 for the comparable 2022 period. Losses and loss adjustment expenses incurred for the year ended December 31, 2023 increased by $150,323, or 30.6%, to $642,302 from $491,979 for the comparable 2022 period. The increase in losses for the three months ended December 31, 2023 is due to continued inflationary impacts on our Private Passenger Automobile line of business and the December Wind Storm. The increase in losses for the year ended December 31, 2023 also included the February Winter Freeze and increased total automobile losses due to multiple flood events, and a separate high wind event that impacted our Homeowners line of business.

Current wording

*Losses and Loss Adjustment Expenses.*Losses and loss adjustment expenses incurred for the three months ended December 31, 2024 increased by $20,902, or 12.1%, to $193,007 from $172,105 for the comparable 2023 period. Losses and loss adjustment expenses incurred for the year ended December 31, 2024 increased by $74,335, or 11.6%, to $716,637 from $642,302 for the comparable 2023 period. The increase in losses for the three months ended and year ended December 31, 2024 is primarily driven by larger policy counts.

Previous wording

Loss, expense, and combined ratios calculated under U.S. generally accepted accounting principles for the quarter ended December 31, 2023 were 76.1%, 30.4%, and 106.5%, respectively, compared to 68.4%, 32.3%, and 100.7%, respectively, for the comparable 2022 period. Loss, expense, and combined ratios calculated under U.S. generally accepted accounting principles for the year ended December 31, 2023 were 77.0%, 30.7%, and 107.7%, respectively, compared to 64.9%, 32.3%, and 97.2%, respectively, for the comparable 2022 period. The 2023 increase in loss ratio is primarily due to the factors that increased losses and loss adjustment expenses. The 2023 decrease in the expense ratios in both periods is primarily driven by a decrease in contingent commission expense.

Current wording

Loss, expense, and combined ratios calculated under U.S. generally accepted accounting principles for the quarter ended December 31, 2024 were 71.7%, 30.2%, and 101.9%, respectively, compared to 76.1%, 30.4%, and 106.5%, respectively, for the comparable 2023 period. Loss, expense, and combined ratios calculated under U.S. generally accepted accounting principles for the year ended December 31, 2024 were 70.9%, 30.2%, and 101.1%, respectively, compared to 77.0%, 30.7%, and 107.7%, respectively, for the comparable 2023 period. The 2024 decrease

Previous wording

The maximum number of shares of common stock between both the 2018 Amended Plan and 2002 Incentive Plan with respect to which awards may be granted is 3,200,000. No further grants will be allowed under the 2002 Incentive Plan. At December 31, 2023, there were 373,422 shares available for future grant. Grants outstanding under the plans as of December 31, 2023, were comprised of 145,920 restricted shares.

Current wording

The maximum number of shares of common stock between both the 2018 Amended Plan and 2002 Incentive Plan with respect to which awards may be granted is 3,200,000. No further grants will be allowed under the 2002 Incentive Plan. At December 31, 2024, there were 364,912 shares available for future grant. Grants outstanding under the plans as of December 31, 2024, were comprised of 136,754 restricted shares.

Previous wording

We reinsure with other insurance companies a portion of our potential liability under the policies we have underwritten, thereby protecting us against an unexpectedly large loss or a catastrophic occurrence that could produce large losses, primarily in our homeowners line of business. We use various software products to measure our exposure to catastrophe losses and the probable maximum loss to us for catastrophe losses such as hurricanes. The models include estimates for our share of the catastrophe losses generated in the residual market for property insurance by the FAIR Plan. The reinsurance market has seen from the various software modelers, increases in the estimate of damage from hurricanes in the southern and northeast portions of the United States due to revised estimations of increased hurricane activity and increases in the estimation of demand surge in the periods following a significant event. We continue to manage and model our exposure and adjust our reinsurance programs as a result of the changes to the models. As of January 1, 2023, we purchased three layers of excess catastrophe reinsurance providing $590,000 of coverage for property losses in excess of $75,000 up to a maximum of $665,000. Our reinsurers’ co-participation is 75.0% of $75,000 for the 1st layer, 75.0% of $250,000 for the 2nd layer, and 75.0% of $265,000 for the 3rd layer. As a result of the changes to the models, our catastrophe reinsurance in 2023 protects us in the event of a “121-year storm” (that is, a storm of a severity expected to occur once in a 121-year period). Most of our reinsurers have an A.M. Best rating of “A+” (Superior) or “A” (Excellent).

Current wording

We reinsure with other insurance companies a portion of our potential liability under the policies we have underwritten, thereby protecting us against an unexpectedly large loss or a catastrophic occurrence that could produce large losses, primarily in our homeowners line of business. We use various software products to measure our exposure to catastrophe losses and the probable maximum loss to us for catastrophe losses such as hurricanes. The reinsurance market has seen from the various software modelers, increases in the estimate of damage from hurricanes in the southern and northeast portions of the United States due to revised estimations of increased hurricane activity and increases in the estimation of demand surge in the periods following a significant event. We continue to manage and model our exposure and adjust our reinsurance programs as a result of the changes to the models. As of January 1, 2024, we purchased three layers of excess catastrophe reinsurance providing $615,000 of coverage for property losses in excess of $75,000 up to a maximum of $690,000. Our reinsurers’ co-participation is 80.0% of $75,000 for the 1st layer, 80.0% of $250,000 for the 2nd layer, and 80.0% of $290,000 for the 3rd layer. As a result of the changes to the models, our catastrophe reinsurance in 2024 protects us in the event of a “121-year storm” (that is, a storm of a severity expected to occur once in a 121-year period). Most of our reinsurers have an A.M. Best rating of “A+” (Superior) or “A” (Excellent).

Previous wording

We are a participant in CAR, a state-established body that runs the residual market reinsurance programs for commercial automobile insurance in Massachusetts under which premiums, expenses, losses and loss adjustment expenses on ceded business are shared by all insurers writing commercial automobile insurance in Massachusetts. We also participate in the Massachusetts Property Insurance Underwriting Association (“FAIR Plan”), in which premiums,

Current wording

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

Previous wording

We also had $133,551 due from CAR comprising of loss and loss adjustment expense reserves, unearned premiums and reinsurance recoverables.

Current wording

We also had $168,538 due from CAR comprising of loss and loss adjustment expense reserves, unearned premiums and reinsurance recoverables.

Previous wording

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

Current wording

Company’s results of operations and allow for a more complete understanding of the underlying trends in the Company’s business. These measures should not be viewed as a substitute for those determined in accordance with GAAP. In addition, our definitions of these items may not be comparable to the definitions used by other companies.

Previous wording

Direct Written Premiums. Direct written premiums for the year ended December 31, 2023 increased by $167,906, or 20.4%, to $991,224 from $823,318 for the comparable 2022 period. The increase in direct written premium is the result of new business production, improved retention, and rate increases. For the year ended December 31, 2023, the Company achieved exposure count growth across all lines of business, including 14.7%, 5.4% and 11.2% in Private Passenger Automobile, Commercial Automobile and Homeowners lines, respectively, compared to the same period in 2022. Additionally, for the year ended December 31, 2023, average written premium per exposure increased 10.8%, 3.8% and 4.5% in Private Passenger Automobile, Commercial Automobile and Homeowners lines, respectively, compared to the same period in 2022.

Current wording

Direct Written Premiums. Direct written premiums for the year ended December 31, 2024 increased by $201,833, or 20.4%, to $1,193,057 from $991,224 for the comparable 2023 period. The increase in direct written premium is the result of new business production, improved retention, and rate increases. For the year ended December 31, 2024, the Company achieved policy count growth across all lines of business, including 10.0%, 4.5% and 8.7% in Private Passenger Automobile, Commercial Automobile and Homeowners lines, respectively, compared to the same period in 2023. Additionally, for the year ended December 31, 2024, average written premium per policy increased 14.1%, 10.7% and 8.9% in Private Passenger Automobile, Commercial Automobile and Homeowners lines, respectively, compared to the same period in 2023.

Previous wording

Net Written Premiums. Net written premiums for the year ended December 31, 2023 increased by $151,560, or 19.6%, to $925,295 from $773,735 for the comparable 2022 period. The 2023 increase was primarily due to the factors

Current wording

Net Written Premiums. Net written premiums for the year ended December 31, 2024 increased by $168,110, or 18.2%, to $1,093,405 from $925,295 for the comparable 2023 period. The 2024 increase was primarily due to the factors that increased direct written premiums.

Previous wording

Net Earned Premiums. Net earned premiums for the year ended December 31, 2023 increased by $75,909, or 10.0%, to $834,414 from $758,505 for the comparable 2022 period.

Current wording

Net Earned Premiums. Net earned premiums for the year ended December 31, 2024 increased by $176,290, or 21.1%, to $1,010,704 from $834,414 for the comparable 2023 period. The 2024 increase was primarily due to the factors that increased direct written premiums.

Previous wording

4.0% for the year ended December 31, 2023, compared to 3.2% for comparable 2022 period. Our duration was 3.6 years at December 31, 2023, compared to 3.8 years at December 31, 2022.

Current wording

Net Investment Income. Net investment income for the year ended December 31, 2024 decreased by $657, or 1.2%, to $55,720 from $56,377 for the comparable 2023 period. The decrease is a result of decreases due to the earned interest from our higher yield bonds and variable rate secured and senior bank loans. Net effective annual yield on the investment portfolio was 3.9% for the year ended December 31, 2024, compared to 4.0% for comparable 2023 period. Our duration was 3.5 years at December 31, 2024, compared to 3.6 years at December 31, 2023.

Previous wording

*Earnings from Partnership Investments.*Earnings from partnership investments were $5,540 for the year ended December 31, 2023 compared to $12,484 for the year ended December 31, 2022. The 2023 earnings reflect a decrease in investment appreciation and timing of cash proceeds received compared to the prior year. Timing and generation of these returns on capital can vary based on the results and transactions of the underlying partnerships.

Current wording

*Earnings from Partnership Investments.*Earnings from partnership investments were $10,271 for the year ended December 31, 2024 compared to $5,540 for the year ended December 31, 2023. The 2024 earnings reflect an increase in investment appreciation and distribution of investment returns compared to the prior year. Timing and generation of these returns on capital can vary based on the results and transactions of the underlying partnerships.

Previous wording

Net Realized Gains on Investments. Net realized gains on investments were $1,327 for the year ended December 31, 2023 compared to $9,190 for the comparable 2022 period.

Current wording

Net Realized Gains on Investments. Net realized gains on investments were $7,720 for the year ended December 31, 2024 compared to $1,327 for the comparable 2023 period. The increase is driven by higher realized gains from the sale of equity securities compared to prior years.

Previous wording

(3) Our investment portfolio included 861 securities in an unrealized loss position at December 31, 2023.

Current wording

(3) Our investment portfolio included 884 securities in an unrealized loss position at December 31, 2024.

Previous wording

The Company’s analysis of its fixed maturity portfolio at December 31, 2023 concluded that $1,208 of unrealized losses were due to credit factors and were recorded as an allowance for expected credit losses at December 31, 2023, compared to $678 at December 31, 2022. The Company concluded that outside of the securities that were recognized as credit impaired, the unrealized losses recorded on the fixed maturity portfolio at December 31, 2023 and 2022 resulted from fluctuations in market interest rates and other temporary market conditions as opposed to fundamental changes in the credit quality of the issuers of such securities. Based upon the analysis performed, the Company’s decision to hold these securities, the Company’s current level of liquidity and our history of positive operating cash flows, management believes it is more likely than not that it will not be required to sell any of its securities before the anticipated recovery in the fair value to its amortized cost basis.

Current wording

The Company’s analysis of its fixed maturity portfolio at December 31, 2024 concluded that $1,198 of unrealized losses were due to credit factors and were recorded as an allowance for expected credit losses at December 31, 2024, compared to $1,208 at December 31, 2023. The Company concluded that outside of the securities that were recognized as credit impaired, the unrealized losses recorded on the fixed maturity portfolio at December 31, 2024 and 2023 resulted from fluctuations in market interest rates and other temporary market conditions as opposed to fundamental changes in the credit quality of the issuers of such securities. Based upon the analysis performed, the Company’s decision to hold these securities, the Company’s current level of liquidity and our history of positive operating cash flows, management believes it is more likely than not that it will not be required to sell any of its securities before the anticipated recovery in the fair value to its amortized cost basis.

Previous wording

*Commission Income:*Commission income includes revenues from new and renewal commissions paid by insurance carriers, which we recognize when earned. Commission Income was $6,932 and $566 for the years ended December 31, 2023 and 2022, respectively.

Current wording

*Commission Income:*Commission income includes revenues from new and renewal commissions paid by insurance carriers, which we recognize when earned. Commission income was $7,942 and $6,932 for the years ended December 31, 2024 and 2023, respectively.

Previous wording

installment charges, which we recognize when earned, and other miscellaneous income and fees. Finance and other service income increased by $4,933, or 34.1%, to $19,394 for the year ended December 31, 2023 from $14,461 for the comparable 2022 period. The increase is primarily driven by the increase in policy counts and changes to our fee assessment policies.

Current wording

Finance and Other Service Income. Finance and other service income includes revenues from premium installment charges, which we recognize when earned, and other miscellaneous income and fees. Finance and other service income increased by $4,306, or 22.2%, to $23,700 for the year ended December 31, 2024 from $19,394 for the comparable 2023 period. The increase is primarily driven by the increase in policy counts and changes to our fee assessment policies.

Previous wording

Our GAAP loss ratio for the years ended December 31, 2023 and 2022 were 77.0% and 64.9%, respectively. Our GAAP loss ratio excluding loss adjustment expenses was 67.9% and 56.0% for the years ended December 31, 2023 and 2022, respectively. Total prior year favorable development included in the pre-tax results for the year ended December 31, 2023 was $47,381, compared to $57,279, for the comparable 2022 period. Prior year favorable development in 2022 benefitted from the reversal of $6,500 legal expense reserve during the second quarter of 2022.

Current wording

Our GAAP loss ratio for the years ended December 31, 2024 and 2023 were 70.9% and 77.0%, respectively. Our GAAP loss ratio excluding loss adjustment expenses was 62.6% and 67.9% for the years ended December 31, 2024 and 2023, respectively. Total prior year favorable development included in the pre-tax results for the year ended December 31, 2024 was $51,894, compared to $47,381 for the comparable 2023 period.

Previous wording

Underwriting, Operating and Related Expenses. Underwriting, operating and related expenses for the year ended December 31, 2023 increased by $11,435, or 4.7%, to $256,580 from $245,145 for the comparable 2022 period. The increase is driven by an increase in base commissions resulting from the increase in written premiums, offset by a decrease in contingent commission expense. Our GAAP expense ratio for the year ended December 31, 2023 decreased to 30.7% from 32.3% for the comparable 2022 period.

Current wording

Underwriting, Operating and Related Expenses. Underwriting, operating and related expenses for the year ended December 31, 2024 increased by $48,742, or 19.0%, to $305,322 from $256,580 for the comparable 2023 period. The increase is driven by an increase in base commissions resulting from the increase in written premiums, offset by a decrease in contingent commission expense. Our GAAP expense ratio for the year ended December 31, 2024 decreased to 30.2% from 30.7% for the comparable 2023 period.

Previous wording

Interest Expense. Interest expense was $818 and $524 for the years ended December 31, 2023 and 2022, respectively. Interest expense primarily relates to the borrowing from the FHLB as noted within Item 8 – Financial Statements and Supplementary Data, Note 10, Debt, of this Form 10-K. The credit facility commitment fee included in interest expense was $75 for each of the years ended December 31, 2023 and 2022.

Current wording

Interest Expense. Interest expense was $509 and $818 for the years ended December 31, 2024 and 2023, respectively. Interest expense primarily relates to the borrowing from the FHLB as noted within Item 8 – Financial Statements and Supplementary Data, Note 10, Debt, of this Form 10-K. The credit facility commitment fee included in interest expense was $60 and $75 for the years ended December 31, 2024 and 2023, respectively.

Previous wording

Income Tax Expense. Our effective tax rates were 22.7% and 21.9% for the years ended December 31, 2023 and 2022, respectively. The effective rates for the year ended December 31, 2023 and 2022 were higher than the statutory rate primary due to the impact of stock-based and executive compensation.

Current wording

Income Tax Expense. Our effective tax rates were 21.3% and 22.7% for the years ended December 31, 2024 and 2023, respectively. The effective rates for the year ended December 31, 2024 and 2023 were higher than the statutory rate primary due to the impact of stock-based and executive compensation.

Previous wording

Net cash provided by operating activities was $52,114, $44,326, and $141,394 during the years ended December 31, 2023, 2022, and 2021, respectively. Our operations typically generate positive cash flows from operations as most premiums are received in advance of the time when claim and benefit payments are required. These positive operating cash flows are expected to continue to meet our liquidity requirements.

Current wording

Net cash provided by operating activities was $128,688, $52,114, and $44,326 during the years ended December 31, 2024, 2023, and 2022, respectively. Our operations typically generate positive cash flows from operations as most premiums are received in advance of the time when claim and benefit payments are required. These positive operating cash flows are expected to continue to meet our liquidity requirements.

Previous wording

Net cash provided by investing activities was $24,269 during the year ended December 31, 2023 compared to net cash used for investing activities was $19,988, and $65,989 for the years ended December 31, 2022, and 2021,

Current wording

Net cash used for investing activities was $54,541 during the year ended December 31, 2024 compared to net cash provided by investing activities of $24,269 for December 31, 2023, and net cash used for investing activities of $19,988 for the year ended December 31, 2022. This fluctuation was driven by purchases exceeding proceeds from sales, paydowns, calls and maturities of fixed maturity and equity securities in 2024.

Previous wording

Net cash used for financing activities was $63,531, $62,641, and $65,571 during the years ended December 31, 2023, 2022 and 2021, respectively. Net cash used for financing activities during the year ended December 31, 2023 comprised dividend payments to shareholders and the acquisition of treasury stock.

Current wording

Net cash used for financing activities was $53,325, $63,531, and $62,641 during the years ended December 31, 2024, 2023 and 2022, respectively. Net cash used for financing activities during the year ended December 31, 2024 consisted of dividend payments to shareholders.

Previous wording

Our insurance company’s subsidiaries are subject to various regulatory restrictions that limit the maximum amount of dividends available to be paid to their parent without prior approval of the Commissioner. The Massachusetts statute limits the dividends an insurer may pay in any twelve-month period, without the prior permission of the Commissioner, to the greater of (i) 10% of the insurer’s surplus as of the preceding December 31 or (ii) the insurer’s net income for the twelve-month period ending the preceding December 31, in each case determined in accordance with statutory accounting practices. Our Insurance Subsidiaries may not declare an “extraordinary dividend” (defined as any dividend or distribution that, together with other distributions made within the preceding twelve months, exceeds the limits established by Massachusetts statute) until thirty days after the Commissioner has received notice of the intended dividend and has not objected. As historically administered by the Commissioner, this provision requires the Commissioner’s prior approval of an extraordinary dividend. Under Massachusetts law, an insurer may pay cash dividends only from its unassigned funds, also known as earned surplus, and the insurer’s remaining surplus must be both reasonable in relation to its outstanding liabilities and adequate to its financial needs. At year-end 2023, the statutory surplus of Safety Insurance was $744,904, and its net loss for 2023 was $4,022. As a result, a maximum of $74,490 is available in 2023 for such dividends without prior approval of the Commissioner. As a result of this Massachusetts statute, the Insurance Subsidiaries had restricted net assets in the amount of $670,414 at December 31, 2023. During the twelve months ended December 31, 2023, Safety Insurance recorded dividends to Safety of $56,329.

Current wording

Our insurance company’s subsidiaries are subject to various regulatory restrictions that limit the maximum amount of dividends available to be paid to their parent without prior approval of the Commissioner. The Massachusetts statute limits the dividends an insurer may pay in any twelve-month period, without the prior permission of the Commissioner, to the greater of (i) 10% of the insurer’s surplus as of the preceding December 31 or (ii) the insurer’s net income for the twelve-month period ending the preceding December 31, in each case determined in accordance with statutory accounting practices. Our Insurance Subsidiaries may not declare an “extraordinary dividend” (defined as any dividend or distribution that, together with other distributions made within the preceding twelve months, exceeds the limits established by Massachusetts statute) until thirty days after the Commissioner has received notice of the intended dividend and has not objected. As historically administered by the Commissioner, this provision requires the Commissioner’s prior approval of an extraordinary dividend. Under Massachusetts law, an insurer may pay cash dividends only from its unassigned funds, also known as earned surplus, and the insurer’s remaining surplus must be both reasonable in relation to its outstanding liabilities and adequate to its financial needs. At year-end 2024, the statutory surplus of Safety Insurance was $758,789, and its net income for 2024 was $43,387. As a result, a maximum of $75,879 is available in 2024 for such dividends without prior approval of the Commissioner. As a result of this Massachusetts statute, the Insurance Subsidiaries had restricted net assets in the amount of $682,910 at December 31, 2024. During the twelve months ended December 31, 2024, Safety Insurance recorded dividends to Safety of $51,123.

Previous wording

No share purchases were made by the Company during the three months ended December 31, 2023. During the year ended December 31, 2023, the Company purchased 74,213 shares at a cost of $5,240. As of December 31, 2023, the Company had purchased 3,215,690 shares on the open market at a cost $155,240. As of December 31, 2022, the Company had purchased 3,141,477 shares on the open market at a cost of $150,000.

Current wording

No share purchases were made by the Company during the year ended December 31, 2024. During the year ended December 31, 2023, the Company purchased 74,213 shares at a cost of $5,240. As of December 31, 2024 and 2023, the Company had purchased 3,215,690 shares on the open market at a cost of $155,240.

Previous wording

As of December 31, 2023, the Company had loss and LAE reserves of $603,081, unpaid reinsurance recoverables of $112,623 and net loss and LAE reserves of $490,458. Our loss and LAE reserves are estimates as described in more detail underCritical Accounting Policies and Estimates. The specific amounts and timing of obligations related to case reserves, IBNR reserves and related LAE reserves are not set contractually, and the amounts and timing of these obligations are unknown. While management believes that historical performance of loss payment patterns is a reasonable source for projecting future claims payments, there is inherent uncertainty in this estimated projected settlement of loss and LAE reserves, and as a result these estimates will differ, perhaps significantly, from actual future payments.

Current wording

As of December 31, 2024, the Company had loss and LAE reserves of $671,669, unpaid reinsurance recoverables of $130,792 and net loss and LAE reserves of $540,877. Our loss and LAE reserves are estimates as described in more detail underCritical Accounting Policies and Estimates. The specific amounts and timing of obligations related to case reserves, IBNR reserves and related LAE reserves are not set contractually, and the amounts and timing of these obligations are unknown. While management believes that historical performance of loss payment patterns is a reasonable source for projecting future claims payments, there is inherent uncertainty in this estimated projected settlement of loss and LAE reserves, and as a result these estimates will differ, perhaps significantly, from actual future payments.

Previous wording

As part of the Company’s investment activity, we have committed $170,000 to investments in limited partnerships. The Company has contributed $133,330 to these commitments as of December 31, 2023. As of December 31, 2023, the remaining committed capital that could be called is $42,043, which includes potential recallable capital distributions.

Current wording

As part of the Company’s investment activity, we have committed $170,000 to investments in limited partnerships. The Company has contributed $144,682 to these commitments as of December 31, 2024. As of December 31, 2024, the remaining committed capital that could be called is $34,033, which includes potential recallable capital distributions.

Previous wording

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

Current wording

judgment of such personnel based on general insurance reserving practices and on the experience and knowledge of the claims professional. During the loss adjustment period, these estimates are revised as deemed necessary by our claims department based on subsequent developments and periodic reviews of the cases. When a claim is closed with or without a payment, the difference between the case reserve and the settlement amount creates a reserve deficiency if the payment exceeds the case reserve or a reserve redundancy if the payment is less than the case reserve.

Previous wording

Such techniques assume that past experience, adjusted for the effects of current developments and anticipated trends, is an appropriate basis for predicting our ultimate losses, total reserves and resulting IBNR reserves. It is possible that the final outcome may fall above or below these amounts as a result of a number of factors, including immature data, sparse data, or significant growth in a line of business. Using these methodologies our actuaries established a range of reasonably possible estimations for net reserves of approximately $449,272 to $511,724 as of December 31, 2023 compared to a range of $423,452 to $481,902 as of December 31, 2022. In general, the low and high values of the ranges represent reasonable minimum and maximum values of the indications based on the techniques described above. Our selected point estimate of net loss and loss adjustment expense reserves based upon the analysis of our actuaries was $490,458 as of December 31, 2023 compared to $456,204 as of December 31, 2022.

Current wording

Such techniques assume that past experience, adjusted for the effects of current developments and anticipated trends, is an appropriate basis for predicting our ultimate losses, total reserves and resulting IBNR reserves. It is possible that the final outcome may fall above or below these amounts as a result of a number of factors, including immature data, sparse data, or significant growth in a line of business. Using these methodologies our actuaries established a range of reasonably possible estimations for net reserves of approximately $497,512 to $566,772 as of December 31, 2024 compared to a range of $449,272 to $511,724 as of December 31, 2023. In general, the low and high values of the ranges represent reasonable minimum and maximum values of the indications based on the techniques described above. Our selected point estimate of net loss and loss adjustment expense reserves based upon the analysis of our actuaries was $540,877 as of December 31, 2024 compared to $490,458 as of December 31, 2023.

Previous wording

At December 31, 2023 and 2022, our total IBNR reserves for our private passenger automobile line of business were comprised of $(87,456) and $(67,848) related to estimated ultimate decreases in the case reserves, including anticipated recoveries (i.e. salvage and subrogation), and $34,170 and $24,320 related to our estimation for not yet reported losses, respectively.

Current wording

At December 31, 2024 and 2023, our total IBNR reserves for our private passenger automobile line of business were comprised of ($98,528) and ($87,456) related to estimated ultimate decreases in the case reserves, including anticipated recoveries (i.e. salvage and subrogation), and $41,462 and $34,170 related to our estimation for not yet reported losses, respectively.

Previous wording

Our IBNR reserves consist of our estimate of the total loss reserves required less our case reserves. The IBNR reserves for CAR assumed commercial automobile business are 64.4% of our total reserves for CAR assumed commercial automobile business as of December 31, 2023 due to the reporting delays in the information we receive from CAR, as described further in the section on*Residual Market Loss and Loss Adjustment Expense Reserves.*Our IBNR reserves for FAIR Plan assumed homeowners are 57.5% of our total reserves for FAIR Plan assumed homeowners at December 31, 2023 due to similar reporting delays in the information we receive from FAIR Plan.

Current wording

Our IBNR reserves consist of our estimate of the total loss reserves required less our case reserves. The IBNR reserves for CAR assumed commercial automobile business are 37.9% of our total reserves for CAR assumed commercial automobile business as of December 31, 2024 due to the reporting delays in the information we receive from CAR, as described further in the section onResidual Market Loss and Loss Adjustment Expense Reserves.

Previous wording

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

Current wording

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

Previous wording

earnings in the period that the deficiency is recognized. To the extent that reserves are redundant and are released, the amount of the release is a credit to earnings in the period the redundancy is recognized. For the twelve months ended December 31, 2023, a 1 percentage-point change in the loss and LAE ratio would result in a change in reserves of $8,341. Each 1 percentage-point change in the loss and loss expense ratio would have had a $6,589 effect on net income, or $0.45 per diluted share.

Current wording

Establishment of appropriate reserves is an inherently uncertain process. There can be no certainty that currently established reserves based on our key assumptions regarding frequency and severity in our lines of business, or our assumptions regarding our share of the CAR loss will prove adequate in light of subsequent actual experience. To the extent that reserves are inadequate and are strengthened, the amount of such increase is treated as a charge to earnings in the period that the deficiency is recognized. To the extent that reserves are redundant and are released, the amount of the release is a credit to earnings in the period the redundancy is recognized. For the twelve months ended December 31, 2024, a 1 percentage-point change in the loss and LAE ratio would result in a change in reserves of $10,110. Each 1 percentage-point change in the loss and loss expense ratio would have had a $7,987 effect on net income, or $0.54 per diluted share.

Previous wording

Our assumptions consider that past experience, adjusted for the effects of current developments and anticipated trends, are an appropriate basis for establishing our reserves. Our individual key assumptions could each have a reasonable possible range of plus or minus 5 percentage-points for each estimation, although there is no guarantee that our assumptions will not have more than a 5 percentage point variation. The following sensitivity tables present information for each of our primary lines of business on the effect each 1 percentage-point change in each of our key assumptions on unpaid frequency and severity could have on our retained (i.e., direct minus ceded) loss and LAE reserves and net income for the twelve months ended December 31, 2023. In evaluating the information in the table, it should be noted that a 1 percentage-point change in a single assumption would change estimated reserves by 1 percentage-point. A 1 percentage-point change in both our key assumptions would change estimated reserves within a range of plus or minus 2 percentage-points.

Current wording

Our assumptions consider that past experience, adjusted for the effects of current developments and anticipated trends, are an appropriate basis for establishing our reserves. Our individual key assumptions could each have a reasonable possible range of plus or minus 5 percentage-points for each estimation, although there is no guarantee that our assumptions will not have more than a 5 percentage point variation. The following sensitivity tables present information for each of our primary lines of business on the effect each 1 percentage-point change in each of our key assumptions on unpaid frequency and severity could have on our retained (i.e., direct minus ceded) loss and LAE reserves and net income for the twelve months ended December 31, 2024. In evaluating the information in the table, it should be noted that a 1 percentage-point change in a single assumption would change estimated reserves by 1

Previous wording

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

Current wording

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

Previous wording

The changes we have recorded in our reserves in the past illustrate the uncertainty of estimating reserves. Our prior year reserves decreased by $47,381, $57,279 and $53,673 during the years ended December 31, 2023, 2022, and 2021, respectively.

Current wording

The changes we have recorded in our reserves in the past illustrate the uncertainty of estimating reserves. Our prior year reserves decreased by $51,894, $47,381 and $57,279 during the years ended December 31, 2024, 2023, and 2022, respectively.

Previous wording

At the end of each period, the reserves were re-estimated for all prior accident years. Our prior year reserves decreased by $47,381, $57,279, and $53,673 for the years ended 2023, 2022, and 2021, respectively. The decreases in prior year reserves in 2023 resulted from re-estimations of prior year’s ultimate loss and LAE liabilities and are primarily composed of reductions of $15,451 in our retained automobile reserves and $29,782 in our retained other than auto and homeowner’s reserves. The decreases in prior year reserves in 2022 resulted from re-estimations of prior year’s ultimate loss and LAE liabilities and are primarily composed of reductions of $20,241 in our retained automobile reserves and $32,963 in our retained other than auto and homeowner reserves. The decrease in prior year reserves during 2021 are primarily composed of reductions of $22,313 in our retained automobile reserves and $26,220 in our retained homeowners reserves. It is not appropriate to extrapolate future favorable or unfavorable development of reserves from this past experience.

Current wording

At the end of each period, the reserves were re-estimated for all prior accident years. Our prior year reserves decreased by $51,894, $47,381, and $57,279 for the years ended 2024, 2023, and 2022, respectively. The decreases in prior year reserves in 2024 resulted from re-estimations of prior years’ ultimate loss and LAE liabilities and are primarily composed of reductions of $12,742 in our retained automobile reserves and $29,286 in our retained other than auto and homeowner’s reserves. The decreases in prior year reserves in 2023 resulted from re-estimations of prior year’s ultimate loss and LAE liabilities and are primarily composed of reductions of $15,451 in our retained automobile reserves and $29,782 in our retained other than auto and homeowner reserves. The decrease in prior year reserves during 2022 are primarily composed of reductions of $20,241 in our retained automobile reserves and $32,963 in our retained homeowners reserves. It is not appropriate to extrapolate future favorable or unfavorable development of reserves from this past experience.