Table of Contents
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
☒
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended June 30, 2026
OR
☐
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from ______to ______
Commission File Number: 000-50070
SAFETY INSURANCE GROUP, INC.
(Exact name of registrant as specified in its charter)
Delaware
13-4181699
(State or other jurisdiction of incorporation or organization)
(I.R.S. Employer Identification No.)
20 Custom House Street, Boston, Massachusetts 02110
(Address of principal executive offices including zip code)
(617) 951-0600
(Registrant’s telephone number, including area code)
Not Applicable
(Former name or former address, if changed since last report)
Securities registered pursuant to Section 12(b) of the Act:
Title of each class
Trading Symbol
Name of each exchange on which registered
Common Stock, par value $0.01 per share
SAFT
The Nasdaq Stock Market, LLC
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes ⌧ No ◻
Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes ⌧ No ◻
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definition of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act. (Check one):
Large accelerated filer
Accelerated filer
Non-accelerated filer
Smaller reporting company
Emerging growth company
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).
Yes ☐ No ☒
As of August 3, 2026, there were 14,680,482 shares of common stock with a par value of $0.01 per share outstanding.
TABLE OF CONTENTS
Page No.
Part I. Financial Information
Item 1.
Consolidated Financial Statements
Consolidated Balance Sheets
3
Consolidated Statements of Operations
4
Consolidated Statements of Comprehensive Income (Loss)
5
Consolidated Statements of Changes in Shareholders’ Equity
6
Consolidated Statements of Cash Flows
7
Notes to Unaudited Consolidated Financial Statements
8
Item 2.
Management’s Discussion and Analysis of Financial Condition and Results of Operations
24
Item 3.
Quantitative and Qualitative Information about Market Risk
43
Item 4.
Controls and Procedures
44
Part II. Other Information
Item 1
Legal Proceedings
45
Item 1A.
Risk Factors
Unregistered Sales of Equity Securities and Use of Proceeds
47
Defaults upon Senior Securities
Mine Safety Disclosures
Item 5.
Other Information
Item 6.
Exhibits
EXHIBIT INDEX
48
SIGNATURE
49
2
Safety Insurance Group, Inc. and Subsidiaries
(Dollars in thousands, except share data)
June 30,
December 31,
2026
2025
(Unaudited)
Assets
Investments:
Fixed maturities, available for sale, at fair value (amortized cost: $1,365,368 and $1,337,235, allowance for expected credit losses of $355 and $0)
$
1,328,594
1,315,548
Equity securities, at fair value (cost: $189,372 and $201,591)
201,956
220,953
Other invested assets
154,036
151,020
Total investments
1,684,586
1,687,521
Cash and cash equivalents
67,918
73,901
Accounts receivable, net of allowance for expected credit losses of $890 and $802
332,530
320,187
Receivable for securities sold
527
4,269
Accrued investment income
11,702
12,169
Taxes recoverable
10,731
—
Receivable from reinsurers related to paid loss and loss adjustment expenses
25,074
9,433
Receivable from reinsurers related to unpaid loss and loss adjustment expenses
150,659
149,441
Ceded unearned premiums
43,317
39,674
Deferred policy acquisition costs
112,755
111,791
Deferred income taxes
6,253
4,116
Equity and deposits in pools
5,081
4,197
Operating lease right-of-use-assets
9,773
11,861
Goodwill
17,093
Intangible assets
6,309
6,783
Other assets
18,976
18,672
Total assets
2,503,284
2,471,108
Liabilities
Losses and loss adjustment expense reserves
808,264
761,739
Unearned premium reserves
664,746
654,803
Accounts payable and accrued liabilities
70,299
80,461
Payable for securities purchased
5,061
846
Payable to reinsurers
18,487
15,184
Taxes payable
3,903
Long-term debt
50,000
Operating lease liabilities
Total liabilities
1,626,630
1,578,797
Commitments and contingencies (Note 8)
Shareholders’ equity
Common stock: $0.01 par value; 30,000,000 shares authorized; 18,103,084 and 18,051,631 shares issued
181
Additional paid-in capital
238,435
235,693
Accumulated other comprehensive loss, net of taxes
(28,771)
(17,133)
Retained earnings
837,302
844,063
Treasury stock, at cost: 3,419,947 shares
(170,493)
Total shareholders’ equity
876,654
892,311
Total liabilities and shareholders’ equity
The accompanying notes are an integral part of these financial statements.
(Dollars in thousands, except per share data)
Three Months Ended June 30,
Six Months Ended June 30,
Net earned premiums
291,653
282,113
582,639
554,803
Net investment income
16,559
15,724
33,597
30,298
Earnings from partnership investments
3,329
346
7,234
2,458
Net realized gains on investments
1,418
2,131
8,049
6,394
Change in net unrealized gains on equity securities
4,720
7,194
(6,777)
6,923
Credit loss (expense) benefit
(7)
66
(355)
(255)
Commission income
2,252
2,285
4,402
4,380
Finance and other service income
5,758
6,485
11,559
12,772
Total revenue
325,682
316,344
640,348
617,773
Losses and loss adjustment expenses
195,119
194,232
442,609
384,522
Underwriting, operating and related expenses
83,883
82,796
166,164
163,647
Other expense
2,110
2,047
4,247
4,001
Interest expense
814
442
1,432
546
Total expenses
281,926
279,517
614,452
552,716
Income before income taxes
43,756
36,827
25,896
65,057
Income tax expense
9,239
7,890
5,702
14,224
Net income
34,517
28,937
20,194
50,833
Earnings per weighted average common share:
Basic
2.36
1.95
1.38
3.44
Diluted
3.43
Cash dividends paid per common share
0.92
0.90
1.84
1.80
Number of shares used in computing earnings per share:
14,521,693
14,744,968
14,509,999
14,731,843
14,558,294
14,782,244
14,552,290
14,763,732
(Dollars in thousands)
Other comprehensive income (loss), net of tax:
Unrealized holding gains (losses) during the period, net of income tax expense (benefit) of ($83), $2,020, ($1,404) and $6,178.
(314)
7,600
(5,279)
23,244
Reclassification adjustment for net realized gains on investments included in net income, net of income tax benefit of ($298), ($447), ($1,690) and ($1,343).
(1,120)
(1,683)
(6,359)
(5,051)
Other comprehensive income (loss), net of tax
(1,434)
5,917
(11,638)
18,193
Comprehensive income
33,083
34,854
8,556
69,026
Accumulated
Other
Additional
Comprehensive
Total
Common
Paid-in
Loss,
Retained
Treasury
Shareholders’
Stock
Capital
Net of Taxes
Earnings
Equity
Balance at December 31, 2024
180
230,864
(51,047)
798,760
(150,293)
828,464
Net income, January 1 to March 31, 2025
21,896
Unrealized gains and losses on securities available for sale, net of deferred federal income taxes
12,276
Restricted share awards issued
477
Recognition of employee share-based compensation, net of deferred federal income taxes
1
923
924
Dividends paid and accrued
(13,370)
Balance at March 31, 2025
232,264
(38,771)
807,286
850,667
Net income, April 1 to June 30, 2025
1,127
(13,384)
Balance at June 30, 2025
233,391
(32,854)
822,839
873,264
Balance at December 31, 2025
Net loss, January 1 to March 31, 2026
(14,323)
(10,204)
509
927
(13,470)
Balance at March 31, 2026
237,129
(27,337)
816,270
855,750
Net income, April 1 to June 30, 2026
1,306
(13,485)
Balance at June 30, 2026
Cash flows from operating activities:
Adjustments to reconcile net income to net cash provided by operating activities:
Investment amortization, net
(709)
(321)
Fixed asset depreciation, net
2,739
3,911
Stock based compensation
2,743
2,528
Credit for deferred income taxes
957
(88)
(8,049)
(6,394)
Credit loss expense
355
255
(4,361)
(2,413)
6,777
(6,923)
Changes in assets and liabilities:
Accounts receivable, net
(12,343)
(26,549)
467
(1,256)
Receivable from reinsurers
(16,859)
(10,682)
(3,643)
(95)
(964)
(6,007)
Taxes recoverable/payable
(14,634)
(2,710)
(984)
(932)
46,525
14,272
9,943
39,548
(10,163)
(7,618)
3,303
(3,863)
Net cash provided by operating activities
21,294
35,496
Cash flows from investing activities:
Fixed maturities purchased
(165,072)
(117,399)
Equity securities purchased
(48,633)
(37,209)
Other invested assets purchased
(2,508)
(4,406)
Proceeds from sales and paydowns of fixed maturities
127,760
44,818
Proceeds from maturities, redemptions, and calls of fixed maturities
18,268
32,519
Proceeds from maturities of short-term investments
20,000
Proceed from sales of equity securities
68,743
37,407
Proceeds from other invested assets redeemed
3,588
6,453
Fixed assets purchased
(2,469)
(400)
Net cash used for investing activities
(323)
(18,217)
Cash flows from financing activities:
Proceeds from Citizens loan
30,000
Payments on FHLB loan
(30,000)
Dividends paid to shareholders
(26,954)
(26,844)
Net cash used for financing activities
Net (decrease) increase in cash and cash equivalents
(5,983)
(9,565)
Cash and cash equivalents at beginning of year
58,974
Cash and cash equivalents at end of period
49,409
In this Form 10-Q, Notes to the Unaudited Consolidated Financial Statements, dollar amounts are presented in thousands, except per share data.
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 Northeast Insurance Company, Safety Northeast Insurance Agency, Inc. (“SNIA”), and Safety Management Corporation, which is SNIA’s holding company. All intercompany commission transactions, including commission income and other expense, have been eliminated. Eliminated commission income totaled $299 and $317 for the three months ended June 30, 2026 and 2025, respectively. Eliminated commission income totaled $555 and $562 for the six months ended June 30, 2026 and 2025, respectively. As of June 30, 2026 and December 31, 2025, fiduciary assets held by SNIA were immaterial and less than $275.
The financial information for the three and six months ended June 30, 2026 and 2025 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, 2025 is derived from the audited consolidated financial statements included in the Company’s 2025 Annual Report on Form 10-K filed with the U.S. Securities and Exchange Commission (“SEC”) on February 27, 2026.
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 consolidated financial statements included in the Company’s 2025 Annual Report on Form 10-K filed with the SEC on February 27, 2026.
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 primarily operates through its insurance company subsidiaries, Safety Insurance Company, Safety Indemnity Insurance Company, Safety Property and Casualty Insurance Company, and Safety Northeast Insurance Company.
2. Recent Accounting Pronouncements
In November 2023, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”) 2023-07, Segment Reporting (Topic 280): Improvements to Reportable Segment Disclosures. This ASU updated reportable segment disclosures primarily through enhanced disclosures about significant segment expenses. This ASU does not change how a Company identifies its operating segments, aggregates those operating segments, or applies the quantitative thresholds to determine its reportable segments. This ASU was effective for fiscal years starting January 1, 2024, and for interim periods starting January 1, 2025, and was applied on a retrospective basis. The effect of implementing this guidance was not material to the Company’s consolidated financial position, results of operations or cash flows.
The Company has one reportable operating segment, property and casualty insurance operations. Property and casualty insurance operations accounted for substantially all of the Company’s operations. The Company’s business is organized around private passenger automobile insurance in Massachusetts sold exclusively through independent agents and offers other personal and commercial insurance as complementary products. The accounting policies of the segment are the same as those described in the summary of significant accounting policies.
The Company’s chief operating decision maker (“CODM”) is the chief executive officer. The CODM assesses performance for the property and casualty insurance operations segment and decides how to allocate resources based on consolidated net income, which is reported in the consolidated statements of operations. The significant segment expenses regularly provided and reviewed by the CODM are the consolidated expenses as reported in the consolidated statements of operations. The measure of segment assets is reported on the consolidated balance sheets as total assets. The CODM uses consolidated net income in deciding whether to reinvest profits into the property and casualty insurance operations or into other parts of the entity, such as for acquisitions or to pay dividends.
In December 2023, the FASB issued ASU 2023-09, Income Taxes (Topic 740): Improvements to Income Tax Disclosures. This ASU updated the required income tax disclosures to include disclosure of income taxes paid disaggregated by jurisdiction and greater disaggregation of information in the required rate reconciliation. This ASU was effective for fiscal years starting January 1, 2025, and was applied on a prospective basis. Refer to Note 13, Income Taxes, within the Company’s 2025 Annual Report on Form 10-K filed with the SEC on February 27, 2026 for the enhanced disclosures required by this ASU.
In November 2024, the FASB issued ASU 2024-03, Income Statement – Reporting of Comprehensive Income – Expense Disaggregation Disclosures (Subtopic 220-40): Disaggregation of Income Statement Expenses. This ASU requires disaggregated disclosure of income statement expenses. This ASU does not change how a Company presents expense captions on the face of the income statement; however, it requires disaggregation of certain expense captions into specified categories in disclosures in the footnotes to the financial statements. This ASU is effective for fiscal years starting January 1, 2027, and for interim periods starting January 1, 2028 and will be applied on a prospective basis. The Company is evaluating the disclosure impact of this new guidance; however, it will not have an impact on the consolidated financial position, results of operations, or cash flows.
In September 2025, the FASB issued ASU 2025-06, Intangibles – Goodwill and Other – Internal-Use Software (Subtopic 350-40): Targeted Improvements to the Accounting for Internal-Use Software. Under the new guidance, costs associated with software developed for internal use will now be capitalized when management authorizes a project and when it is probable the project will be completed and used to perform the function intended, rather than when a project reaches the application development stage under existing guidance. The guidance is effective beginning January 1, 2028, with early adoption permitted, and can be applied prospectively, retrospectively, or on a modified retrospective basis. The Company has not yet determined the transition method or timing for adoption; however, the adoption of this guidance is not expected to have a significant impact on the consolidated financial position, results of operations, or cash flows.
3. Earnings per Share
Basic earnings per share (“EPS”) is calculated by dividing net income by the weighted average number of basic common shares outstanding during the period. Diluted EPS amounts are based on the weighted average number of common shares including non-vested performance stock grants.
9
The following table sets forth the computation of basic and diluted EPS for the periods indicated.
Earnings attributable to common shareholders - basic and diluted:
Net income from continuing operations
Allocation of income for participating shares
(176)
(136)
(101)
(229)
Net income from continuing operations attributed to common shareholders
34,341
28,801
20,093
50,604
Earnings per share denominator - basic and diluted
Total weighted average common shares outstanding, including participating shares
14,596,262
14,814,223
14,582,798
14,799,173
Less: weighted average participating shares
(74,569)
(69,255)
(72,799)
(67,330)
Basic earnings per share denominator
Common equivalent shares- non-vested performance stock grants
36,601
37,276
42,291
31,889
Diluted earnings per share denominator
Basic earnings per share
Diluted earnings per share
Undistributed earnings attributable to common shareholders - basic and diluted:
Net income from continuing operations attributable to common shareholders -Basic
Dividends declared
(0.92)
(0.90)
(1.84)
(1.80)
Undistributed earnings
1.44
1.05
(0.46)
1.64
Net income from continuing operations attributable to common shareholders -Diluted
1.63
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 six months ended June 30, 2026 and 2025, respectively.
4. Share-Based Compensation
2018 Long Term Incentive Plan
On March 24, 2022, the Company’s Board of Directors adopted the Amended and Restated Safety Insurance Group, Inc. 2018 Long-Term Incentive Plan (“the Amended 2018 Plan”), which was subsequently approved by our shareholders at the 2022 Annual Meeting of Shareholders. The Amended 2018 Plan increased the share pool limit by adding 350,000 common shares to the previously adopted Safety Insurance Group, Inc. 2018 Long-Term Incentive Plan. The Amended 2018 Plan enables the grant of stock awards, performance shares, cash-based performance units, other stock-based awards, stock options, stock appreciation rights, and stock unit awards, each of which may be granted separately or in tandem with other awards. Eligibility to participate includes officers, directors, employees and other individuals who provide bona fide services to the Company. The Amended 2018 Plan supersedes the Company’s 2002 Management Omnibus Incentive Plan (“the 2002 Incentive Plan”).
The Amended 2018 Plan establishes a pool of 700,000 shares of common stock available for issuance to our employees and other eligible participants. The Board of Directors and the Compensation Committee intend to issue awards under the Amended 2018 Plan in the future.
10
The maximum number of shares of common stock between both the Amended 2018 Plan and 2002 Incentive Plan with respect to which awards may be granted is 3,200,000. No further grants will be allowed under the 2002 Incentive Plan. At June 30, 2026, there were 160,334 shares available for future grant.
Accounting and Reporting for Stock-Based Awards
The Company measures and recognizes the cost of employee services received in exchange for an award of equity instruments. Under the provisions of Accounting Standards Codification (“ASC”) 718, Compensation – Stock Compensation, 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 three-year period and vest 30% on the first and second anniversaries of the grant date and 40% on the third anniversary of the grant date, except for non-executive employees’ restricted stock awards granted prior to 2018 which vest ratably over a five-year 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 Amended 2018 Plan during the six months ended June 30, 2026 assuming a target payout for the 2026 performance-based shares.
Shares
Weighted
Performance-based
Under
Average
Shares Under
Restriction
Fair Value
Outstanding at beginning of year
69,243
82.79
79,659
83.80
Granted
44,282
78.46
31,047
(1)
Vested and unrestricted
(39,197)
83.14
-
Forfeited
(115)
(23,761)
86.90
Outstanding at end of period
74,213
80.04
86,945
81.05
11
As of June 30, 2026, there was $8,595 of unrecognized compensation expense related to non-vested restricted stock awards that is expected to be recognized over a weighted average period of 1.7 years. The total fair value of the shares that were vested and unrestricted during the six months ended June 30, 2026 and 2025 was $3,259 and $3,709, respectively. For the six months ended June 30, 2026 and 2025, the Company recorded compensation expense related to restricted stock of $2,167 and $1,997, net of income tax benefits of $576 and $531, respectively, within Underwriting, operating and related expenses on the Consolidated Statements of Operations.
5. Investments
The gross unrealized gains and losses on investments in fixed maturity securities, including redeemable preferred stocks that have characteristics of fixed maturities, short-term investments, equity securities, including interests in mutual funds, and other invested assets were as follows for the periods indicated.
As of June 30, 2026
Cost or
Allowance for
Gross Unrealized
Estimated
Amortized
Expected Credit
Fair
Cost
Losses
Gains
Losses (3)
Value
U.S. Treasury securities
4,209
(46)
4,167
Obligations of states and political subdivisions
38,814
287
(1,820)
37,281
Residential mortgage-backed securities (1)
372,628
2,641
(17,622)
357,647
Commercial mortgage-backed securities
157,196
(7,072)
150,379
Other asset-backed securities
190,732
315
(1,318)
189,729
Corporate and other securities
601,789
2,822
(14,865)
589,391
Subtotal, fixed maturity securities
1,365,368
6,324
(42,743)
Equity securities (2)
189,372
25,530
(12,946)
Other invested assets (4)
Totals
1,708,776
31,854
(55,689)
As of December 31, 2025
4,211
22
(28)
4,205
38,837
532
(1,651)
37,718
376,354
5,075
(15,382)
366,047
162,755
702
(6,439)
157,018
170,332
373
(1,196)
169,509
584,746
7,431
(11,126)
581,051
1,337,235
14,135
(35,822)
201,591
27,327
(7,965)
1,689,846
41,462
(43,787)
12
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.
Due in one year or less
5,694
5,671
Due after one year through five years
340,433
332,248
Due after five years through ten years
278,972
273,275
Due after ten years through twenty years
18,882
18,795
Due after twenty years
831
850
Asset-backed securities
720,556
697,755
The gross realized gains and losses on sales of investments were as follows for the periods indicated.
Gross realized gains
Fixed maturity securities
194
127
1,570
313
Equity securities
3,707
3,426
13,590
8,271
Gross realized losses
(669)
(147)
(1,361)
(271)
(1,814)
(1,275)
(5,750)
(1,919)
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 June 30, 2026 and December 31, 2025 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.
Less than 12 Months
12 Months or More
Unrealized
2,078
31
1,487
15
3,565
46
10,146
104
10,603
1,716
20,749
1,820
Residential mortgage-backed securities
66,891
769
140,933
16,853
207,824
17,622
29,577
94,468
6,605
124,045
7,072
89,238
296
6,350
1,022
95,588
1,318
272,833
3,708
145,466
11,157
418,299
14,865
470,763
5,375
399,307
37,368
870,070
42,743
74,420
11,250
4,790
1,696
79,210
12,946
Total temporarily impaired securities
545,183
16,625
404,097
39,064
949,280
55,689
13
1,474
28
1,199
10,684
1,645
11,883
1,651
26,318
153
156,857
15,229
183,175
15,382
15,491
108
103,960
6,331
119,451
6,439
95,322
146
10,113
1,050
105,435
1,196
91,652
464
176,063
10,662
267,715
11,126
229,982
877
459,151
34,945
689,133
35,822
68,924
5,162
7,967
2,803
76,891
7,965
298,906
6,039
467,118
37,748
766,024
43,787
Impairments
For fixed maturities that the Company does not intend to sell or for which it is more likely than not that the Company would not be required to sell before an anticipated recovery in value, the Company separates the expected credit loss component of the impairment from the amount related to all other factors. The expected credit loss component is recognized as an allowance for expected credit losses. The allowance is adjusted for any additional credit losses and subsequent recoveries, which are booked in income as either credit loss expense or credit loss benefit, respectively. Upon recognizing a credit loss, the cost basis is not adjusted. The impairment related to all other factors (non-credit factors) is reported in other comprehensive income.
For fixed maturities where the Company records a credit loss, a determination is made as to the cause of the impairment and whether the Company expects a recovery in the value. For fixed maturities where the Company expects a recovery in value, the constant effective yield method is utilized, and the investment is amortized to par.
For fixed maturity investments the Company intends to sell or for which it is more likely than not that the Company will be required to sell before an anticipated recovery in value, the full amount of the impairment is included in credit loss expense. The new cost basis of the investment is the previous amortized cost basis less the impairment recognized in credit loss expense. The new cost basis is not adjusted for any subsequent recoveries in fair value.
The Company uses a systematic methodology to evaluate declines in fair values below cost or amortized cost of our investments. Some of the factors considered in assessing impairment of fixed maturities due to credit losses include the extent to which the fair value is less than amortized cost, the financial condition of and the near and long-term prospects of the issuer, whether the debtor is current on its contractually obligated interest and principal payments, changes to the rating of the security by a rating agency, the historical volatility of the fair value of the security and whether it is more likely than not that the Company will be required to sell the investment prior to an anticipated recovery in value.
As of June 30, 2026, the Company concluded that $355 of unrealized losses were due to credit factors and were recorded as an allowance for expected credit losses expense. As of December 31, 2025, the Company concluded that none of the unrealized losses in the fixed maturity portfolio were attributable to credit factors; therefore, no allowance for credit losses was recorded. The Company concluded that outside of the securities that were recognized as credit impaired, the unrealized losses recorded on the fixed maturity portfolio at June 30, 2026 and December 31, 2025 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.
The following table represents a reconciliation of the beginning and ending balances of the allowance for expected credit losses on fixed maturities classified as available for sale.
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Beginning of period
348
1,519
1,198
Credit losses on securities with no previously recorded credit losses
303
Net increases (decreases) in allowance on previously impaired securities
84
Reduction due to sales
(132)
Writeoffs charged against allowance
Recoveries of amounts previously written off
Ending balance of period
1,453
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 nationally recognized rating agencies.
Net Investment Income
The components of net investment income were as follows:
Interest on fixed maturity securities
14,972
14,752
29,180
27,285
Dividends on equity securities
2,333
1,415
4,980
2,944
Equity in earnings of other invested assets
279
384
1,502
1,761
Interest on other assets
55
80
110
160
Total investment income
17,639
16,631
35,772
32,150
Investment expenses
1,080
907
2,175
1,852
Fair Value of Financial Instruments
ASC 820, Fair Value Measurements and Disclosure, provides a revised definition of fair value, establishes a framework for measuring fair value and expands financial statement disclosure requirements for fair value information. Under ASC 820, fair value is defined as the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants (an exit price). ASC 820 establishes a fair value hierarchy that distinguishes between inputs based on market data from independent sources (“observable inputs”) and a reporting entity’s internal assumptions based upon the best information available when external market data is limited or unavailable (“unobservable inputs”). The fair value hierarchy in ASC 820 prioritizes fair value measurements into three levels based on the nature of the inputs as follows:
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 FHLB 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:
In order to ensure the fair value determination is representative of an exit price, 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
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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.
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 of 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 June 30, 2026. There were no significant changes to the valuation process during the six months ended June 30, 2026. As of June 30, 2026 and December 31, 2025, no quotes or prices obtained were adjusted by management. All broker quotes obtained were non-binding.
At June 30, 2026 and December 31, 2025, investments in fixed maturities classified as available-for-sale had a fair value which equaled carrying value of $1,328,594 and $1,315,548, respectively. The carrying values of cash and cash equivalents and investment income accrued approximated fair value.
The following tables summarize the Company’s total fair value measurements for investments for the periods indicated.
Level 1 Inputs
Level 2 Inputs
Level 3 Inputs
14,285
169,908
168,910
998
Total investment securities
1,512,787
1,342,879
14,209
188,954
188,022
932
1,518,711
1,329,757
As of June 30, 2026 and December 31, 2025, there were approximately $32,048 and $31,999, 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 financial statements. The Company is required to submit a request 45 days before a quarter end to dispose of the security.
There were no transfers between Level 1 and Level 2 during the three and six months ended June 30, 2026 and 2025.
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The following table summarizes the changes in the Company’s Level 3 fair value securities for the periods indicated.
Level 3
Securities
Balance at beginning of period
884
2,120
Net gains and losses included in earnings
Net gains included in other comprehensive income
Purchases
Sales
(1,236)
Transfers into Level 3
Transfers out of Level 3
Balance at end of period
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 three and six months ended June 30, 2026 and 2025. The Company held one Level 3 security at June 30, 2026 and 2025.
In April 2024, the Massachusetts Division of Insurance approved a restructuring of the Massachusetts Property Insurance Underwriting Association (“FAIR Plan”), pursuant to which, in a non-cash transaction, the Company liquidated its net asset position in the FAIR Plan and established an investment interest (“Investment in FAIR Plan Trust”). The Company’s Investment in FAIR Plan Trust is adjusted to its current fair value on a quarterly basis based on information from the FAIR Plan, with changes recognized through earnings. As of June 30, 2026 and December 31, 2025, the Company’s Investment in FAIR Plan Trust of $14,285 and $14,209, respectively, was included in other invested assets. The Company recognized $53 and $76, respectively, of income in earnings from partnership investments from its Investment in FAIR Plan Trust during the three and six months ended June 30, 2026. The Company recognized $186 and $323, respectively, of income in earnings from partnership investments from its Investment in FAIR Plan Trust during the three and six months ended June 30, 2025.
6. Allowance for Expected Credit Losses
The Company’s financial instruments measured at amortized cost include premiums and accounts receivable, and reinsurance recoverables.
Premiums and accounts receivable are reported net of an allowance for expected credit losses. The allowance is based upon the Company’s ongoing review of amounts outstanding, historical loss data, including delinquencies and write-offs, current and forecasted economic conditions and other relevant factors. Credit risk is partially mitigated by the Company’s ability to cancel the policy if the policyholder does not pay the premium and the Company writes off premiums receivable balances that are more than 90 days overdue.
The following tables present the balances of premiums receivable, net of the allowance for expected credit losses and changes in the allowance for expected credit losses for the three and six months ended June 30, 2026 and 2025.
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As of and For the
Three Months Ended June 30, 2026
Three Months Ended June 30, 2025
Accounts Receivable Net of Allowance for Expected Credit Losses
Allowance for Expected Credit Losses
Balance, beginning of period
313,428
823
306,408
785
Current period change for expected credit losses
880
834
Writeoffs of uncollectable accounts receivable
(813)
(792)
Balance, end of period
890
333,014
827
Six Months Ended June 30, 2026
Six Months Ended June 30, 2025
802
306,465
918
1,758
1,675
(1,670)
(1,766)
Reinsurance recoverables include amounts due from reinsurers for both paid and unpaid losses. The Company cedes insurance to Commonwealth Automobile Reinsurers (“CAR”) and to other reinsurers. The Company has a property catastrophe excess of loss agreement and a casualty excess of loss agreement that qualify as reinsurance treaties and are designed to protect against large or unusual loss and loss adjustment expenses (“LAE”) activity. Reinsurance contracts do not relieve the Company from its obligations to policyholders. Failure of reinsurers to honor their obligations could result in losses to the Company. The Company evaluates the financial condition of its reinsurers and monitors economic characteristics of the reinsurers to minimize its exposure to significant losses from reinsurer insolvencies. The Company reports its reinsurance recoverables net of an allowance for estimated uncollectable reinsurance. A probability-of-default methodology which reflects current and forecasted economic conditions is used to estimate the amount of uncollectible reinsurance due to credit-related factors and the estimate is reported in an allowance for estimated uncollectible reinsurance. Amounts deemed to be uncollectible, including amounts due from known insolvent reinsurers, are written off against the allowance. Changes in the allowance, as well as any subsequent collections of amounts previously written off, are reported as part of losses and loss adjustment expenses.
The majority of the Company’s reinsurance recoverable on paid and unpaid losses is a result of our participation as a servicing carrier in the CAR Commercial Automobile Program, which represented 97% and 95% of the total reinsurance recoverable on paid and unpaid losses at June 30, 2026 and December 31, 2025, respectively. The remaining 3% and 5%, respectively, of amounts due from reinsurers are related to our other excess of loss and quota share contracts. For amounts due under these contracts, the Company utilizes updated A.M. Best credit ratings on a quarterly basis to determine the allowance for expected credit losses. As of June 30, 2026 and December 31, 2025, most of the reinsurers under these programs are rated “A” or better by A.M. Best. Certain of the Company's reinsurance recoverables are collateralized by letters of credit, funds held or trust agreements. The Company’s analysis concludes that there are no expected credit losses at June 30, 2026 or December 31, 2025.
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7. Loss and Loss Adjustment Expense Reserves
The following table sets forth a reconciliation of beginning and ending reserves for losses and LAE, as shown in the Company’s consolidated financial statements for the periods indicated.
Reserves for losses and LAE at beginning of year
671,669
Less receivable from reinsurers related to unpaid losses and LAE
(149,441)
(130,792)
Net reserves for losses and LAE at beginning of year
612,298
540,877
Incurred losses and LAE, related to:
Current year
463,727
407,995
Prior years
(21,118)
(23,473)
Total incurred losses and LAE
Paid losses and LAE related to:
224,091
198,298
173,212
176,786
Total paid losses and LAE
397,303
375,084
Net reserves for losses and LAE at end of period
657,605
550,315
Plus receivable from reinsurers related to unpaid losses and LAE
135,626
Reserves for losses and LAE at end of period
685,941
At the end of each period, the reserves were re-estimated for all prior accident years. The Company’s prior year reserves decreased by $21,118 and $23,473 for the six months ended June 30, 2026 and 2025, respectively, and resulted from re-estimations of prior year’s ultimate loss and LAE liabilities. The decreases in prior years reserves during the six months ended June 30, 2026 and 2025 are primarily composed of reductions in our retained automobile and retained homeowners lines reserves.
The Company’s automobile lines of business reserves decreased for the six months ended June 30, 2026 and 2025, primarily due to fewer incurred but not yet reported claims than previously estimated and better than previously estimated severity on the Company’s established bodily injury and property damage case reserves. Due to the nature of the risks that the Company underwrites and has historically underwritten, management does not believe that it has an exposure to asbestos or environmental pollution liabilities.
8. Commitments and Contingencies
Commitments
As part of the Company’s investment activity, we have committed $170,000 to investments in limited partnerships. The Company has contributed $155,134 to these commitments as of June 30, 2026. As of June 30, 2026, the remaining committed capital that could be called is $27,952, which includes potential recallable capital distributions.
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.
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9. Debt
On August 10, 2023, the Company extended its Revolving Credit Agreement (the “Credit Agreement”) with Citizens Bank, N.A. (“Citizens Bank”) to a maturity date of August 10, 2028. Subsequently, on June 9, 2026, the Company amended the Credit Agreement to increase the aggregate committed amount of the revolving credit facility from $50,000 to $100,000 and extend the maturity date to June 9, 2031. Loans under the credit facility bear interest at the Company’s option at the higher of the Citizens Bank prime rate, the daily SOFR rate plus 1.25% per annum, or 0.5% above the federal funds rate. 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 June 30, 2026, 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 $10,000 or (ii) fails to perform any other covenant permitting acceleration of all such debt.
On March 27, 2025, the Company borrowed $30,000 under the Credit Agreement with Citizens Bank. On November 10, 2025, the Company utilized the accordion feature under the Credit Agreement and borrowed an additional $20,000. Borrowings under the Credit Agreement bear interest at SOFR plus 1.25%. Interest is payable quarterly and the principal is due upon the maturity of the Credit Agreement. Principal may be repaid at any time without penalty. The Company had $50,000 outstanding on its credit facility at June 30, 2026 and December 31, 2025, respectively. The credit facility commitment fee included in interest expense was computed at a rate of 0.20% per annum on the $30,000 commitment. Commitment fees were incurred through March 27, 2025, when the Company borrowed under the facility.
Safety Insurance Company is a member of the FHLB of Boston. Membership in the FHLB of Boston allows Safety Insurance Company to borrow money at competitive interest rates provided the loan is collateralized by specific U.S. Government residential mortgage-backed securities. At June 30, 2026, Safety Insurance Company has the ability to borrow $264,435 using eligible invested assets that would be used as collateral.
On March 17, 2020, the Company borrowed $30,000 from the FHLB of Boston for a term of five-years, bearing interest at a rate of 1.42%. The interest and principal were paid on the maturity date of March 17, 2025.
The Company estimates the fair value of the loan under the Credit Agreement with Citizens Bank by discounting cash flows using the interest rate stated in the loan agreement, which is an observable input. As such, the loan is categorized as Level 2 within the fair value hierarchy. The fair value of the loan was $53,006 and $53,386 at June 30, 2026 and December 31, 2025, respectively.
Interest expense on the FHLB of Boston borrowing was incurred only during the six months ended June 30, 2025 and totaled $89. Interest expense on the Credit Agreement with Citizens Bank was $814 and $443 for the three months ended June 30, 2026 and 2025, respectively. Interest expense on the Credit Agreement with Citizens Bank was $1,432 and $457 for the six months ended June 30, 2026 and 2025, respectively.
10. Income Taxes
Federal income tax expense for the six months ended June 30, 2026 and 2025 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.
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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. Therefore, the Company has not recorded any liability for uncertain tax positions under ASC 740, Income Taxes.
During the six months ended June 30, 2026, 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.
All tax years prior to 2022 are closed. There are no current examinations ongoing.
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.
11. Share Repurchase Program
On February 23, 2022, the Board of Directors approved a share repurchase program of up to $50,000 of the Company’s outstanding common shares. The Board of Directors has cumulatively authorized increases to the existing share repurchase program of up to $200,000 of its outstanding common shares. Under the program, the Company may repurchase shares of its common stock for cash in public or private transactions, in the open market or otherwise. The timing of such repurchases and actual number of shares repurchased will depend on a variety of factors including price, market conditions and applicable regulatory and corporate requirements. The program does not require the Company to repurchase any specific number of shares and it may be modified, suspended or terminated at any time without prior notice.
No share purchases were made by the Company under the program during the three and six months ended June 30, 2026 and 2025. As of June 30, 2026 and December 31, 2025, the Company had purchased 3,478,060 shares at a cost of $175,240.
12. 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 four years, some of which include options to extend the leases for up to five years.
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:
Operating lease cost
904
1,764
1,809
Other information related to leases was as follows:
Cash paid for amounts included in the measurement of lease liabilities:
Operating cash flows from operating leases
1,049
1,058
2,107
2,117
Weighted average remaining lease term
Operating leases
2.47 Years
3.45 Years
Weighted average discount rate
2.46%
Maturities of lease liabilities are as follows:
Operating Leases
2,109
2027
3,995
2028
3,924
Total lease payments
10,028
Less imputed interest
13. Subsequent Events
On July 23, 2026, the Company entered into an Agreement and Plan of Merger (the “Merger Agreement”) with MAPFRE U.S.A Corp., a Massachusetts corporation (“Parent”), and Splash Merger Sub, Inc., a Delaware corporation and wholly owned direct subsidiary of Parent (“Merger Subsidiary”), pursuant to which Merger Subsidiary will merge with and into the Company, with the Company surviving the merger as a wholly-owned direct subsidiary of Parent (the “Merger”).
Under the Merger Agreement, at the effective time of the Merger (the “Effective Time”), each share of common stock of the Company issued and outstanding immediately prior to the Effective Time (other than certain excluded shares as described in the Merger Agreement) will be cancelled and converted into the right to receive $105.00 in cash, without interest.
The respective obligations of the Company, Parent and Merger Subsidiary to consummate the transactions contemplated by the Merger Agreement are subject to the satisfaction or waiver of customary closing conditions, including, among others, approval by the holders of a majority of the voting powers of the outstanding shares of Company common stock entitled to vote on the Merger and the receipt of certain regulatory approvals, including from insurance regulators in Massachusetts. In addition, Parent’s and Merger Subsidiary’s obligation to consummate the transactions contemplated by the Merger Agreement are subject to the satisfaction or waiver of a condition that there has not occurred a material adverse effect on the Company since the date of the Merger Agreement that is continuing.
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MANAGEMENT’S DISCUSSION AND ANALYSIS
OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
The following discussion should be read in conjunction with our accompanying consolidated financial statements and notes thereto, which appear elsewhere in this document. In this discussion, all dollar amounts are presented in thousands, except share and per share data.
The following discussion contains forward-looking statements. We intend statements which are not historical in nature to be, and are hereby identified as “forward-looking statements” to be covered by the safe harbor provisions of the Private Securities Litigation Reform Act of 1995. In addition, the Company’s senior management may make forward-looking statements orally to analysts, investors, the media and others. This safe harbor requires that we specify important factors that could cause actual results to differ materially from those contained in forward-looking statements made by or on behalf of us. We cannot promise that our expectations in such forward-looking statements will turn out to be correct. Our actual results could be materially different from and worse than our expectations. See “Forward-Looking Statements” below for specific important factors that could cause actual results to differ materially from those contained in forward-looking statements.
Executive Summary and Overview
In this discussion, “Safety” refers to Safety Insurance Group, Inc. and “our Company,” “the Company,” “we,” “us” and “our” refer to Safety Insurance Group, Inc. and its consolidated subsidiaries. Our subsidiaries consist of Safety Insurance Company (“Safety Insurance”), Safety Indemnity Insurance Company (“Safety Indemnity”), Safety Property and Casualty Insurance Company (“Safety P&C”), Safety Northeast Insurance Company (“Safety Northeast”), Safety Northeast Insurance Agency, Inc. (“SNIA”), and Safety Management Corporation, which is SNIA’s holding company.
We are a leading provider of private passenger automobile, commercial automobile, homeowners and commercial other-than-auto insurance in Massachusetts. In addition to private passenger automobile insurance (which represented 54.9% of our direct written premiums in 2025), we offer a portfolio of other insurance products, including commercial automobile (15.2% of 2025 direct written premiums), homeowners (25.2% of 2025 direct written premiums) and dwelling fire, umbrella and business owner policies (totaling 4.7% of 2025 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 797 in 1,063 locations throughout these three states at December 31, 2025. We have used these relationships and our extensive knowledge of the Massachusetts market to become the third largest private passenger automobile carrier and the second largest commercial automobile insurance carrier in Massachusetts, capturing an approximate 9.4% and 13.0% share, respectively, of the Massachusetts private passenger and commercial automobile markets in 2025 according to statistics compiled by the Commonwealth Automobile Reinsurers (“CAR”) based on automobile exposures. We are also the third largest homeowners insurance carrier in Massachusetts with a 7.0% share of the Massachusetts homeowners insurance market.
A.M. Best, which rates insurance companies based on factors of concern to policyholders, currently assigns Safety Insurance an “A (Excellent)” rating. Our “A” rating was reaffirmed by A.M. Best on July 15, 2026.
Our Insurance Subsidiaries began writing insurance in New Hampshire during 2008 and in Maine in 2016. In November 2020, we formed a fourth insurance subsidiary, Safety Northeast, which became licensed to write insurance products in Massachusetts.
The table below shows the amount of direct written premiums written in each state during the three and six months ended June 30, 2026 and 2025.
Direct Written Premiums
Massachusetts
321,930
326,925
604,535
610,204
New Hampshire
15,027
14,731
28,286
27,154
Maine
4,878
4,173
8,789
7,441
341,835
345,829
641,610
644,799
Recent Trends and Events
During the quarter ended March 31, 2026, the Northeast region was impacted by two severe winter weather events (“Winter Storms”). Beginning on January 23, 2026 through January 26, 2026, the Northeast region experienced a severe winter weather event, which developed into a nor’easter, bringing blizzard conditions including excess snowfall, subzero temperatures and wind gusts reaching 75 miles per hour. Beginning on February 22, 2026, the Northeast region experienced a severe winter weather event, which produced record-breaking snowfall and hurricane-force wind gusts. Areas in the region received up to 36 inches of snowfall and wind gusts exceeding 80 miles per hour. As a result of the Winter Storms, the Company received approximately 1,800 reported claims totaling $42,736 of losses and loss adjustment expenses for the six months ended June 30, 2026.
Direct and Net Written Premiums. For the three months ended June 30, 2026, direct written premium and net written premium decreased 1.2% and 1.9%, respectively, compared to the prior period. The decrease was primarily due to the cancellation of certain underperforming agency relationships. For the six months ended June 30, 2026, the Company experienced policy count declines of 8.8% in Private Passenger Automobile and 4.0% in Homeowners lines, partially offset by 2.7% growth in Commercial Automobile policies, compared to the same period in 2025. Average written premium per policy increased 2.9%, 6.4% and 10.9% in Private Passenger Automobile, Commercial Automobile and Homeowners lines, respectively, primarily reflecting rate increases.
Losses and Loss Adjustment Expenses. Losses and loss adjustment expenses incurred for the three months ended June 30, 2026 increased by $887, or 0.5%, to $195,119 from $194,232 for the comparable 2025 period. Losses and loss adjustment expenses incurred for the six months ended June 30, 2026 increased by $58,087, or 15.1%, to $442,609 from $384,522 for the comparable 2025 period. Our losses and loss adjustment expenses ratio for the three months ended June 30, 2026 decreased to 66.9% from 68.8% for the comparable 2025 period. The decrease in our losses and loss adjustment expense ratio for the three months ended June 30, 2026 is primarily driven by improved reported accident frequency in our Private Passenger Automobile line of business. Our losses and loss adjustment expense ratio for the six months ended June 30, 2026 increased to 76.0% from 69.3% for the comparable 2025 period. The increase in losses and loss adjustment expense ratio for the six months ended June 30, 2026 is due to the impact of Winter Storms.
The following rate changes have been filed and approved by the insurance regulators of Massachusetts, New Hampshire and Maine in 2026 and 2025.
Line of Business
Effective Date
Rate Change
Massachusetts Private Passenger Automobile
July 1, 2026
3.3%
Maine Private Passenger Automobile
June 1, 2026
1.7%
Massachusetts Commercial Automobile
May 1, 2026
5.9%
January 1, 2026
1.3%
Maine Commercial Automobile
December 1, 2025
14.8%
Maine Homeowners
November 1, 2025
6.6%
New Hampshire Commercial Automobile
8.2%
New Hampshire Homeowners
October 1, 2025
3.9%
New Hampshire Private Passenger Automobile
5.2%
September 1, 2025
9.6%
Massachusetts Homeowners
August 1, 2025
4.2%
July 1, 2025
5.1%
May 1, 2025
January 1, 2025
5.3%
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Insurance Ratios
The property and casualty insurance industry uses the combined ratio as a measure of underwriting profitability. The combined ratio is the sum of the loss ratio (losses and loss adjustment expenses incurred as a percent of net earned premiums) plus the expense ratio (underwriting and other expenses as a percent of net earned premiums, calculated on a Generally Accepted Accounting Principles (“GAAP”) basis). The combined ratio reflects only underwriting results and does not include income from investments or finance and other service income. Underwriting profitability is subject to significant fluctuations due to competition, catastrophic events, weather, economic and social conditions, and other factors.
Our GAAP insurance ratios are outlined in the following table.
GAAP ratios:
Loss ratio
66.9
%
68.8
76.0
69.3
Expense ratio
28.8
29.3
28.5
29.5
Combined ratio
95.7
98.1
104.5
98.8
Share-Based Compensation
On March 24, 2022, the Company’s Board of Directors adopted the Amended and Restated Safety Insurance Group, Inc. 2018 Long-Term Incentive Plan (the “Amended 2018 Plan”), which was subsequently approved by our shareholders at the 2022 Annual Meeting of Shareholders. The Amended 2018 Plan increases the share pool limit by adding 350,000 common shares to the previously adopted Safety Insurance Group, Inc. 2018 Long-Term Incentive Plan. The Amended 2018 Plan enables the grant of stock awards, performance shares, cash-based performance units, other stock-based awards, stock options, stock appreciation rights, and stock unit awards, each of which may be granted separately or in tandem with other awards. Eligibility to participate includes officers, directors, employees and other individuals who provide bona fide services to the Company. The Amended 2018 Plan supersedes the Company’s 2002 Management Omnibus Incentive Plan (“the 2002 Incentive Plan”).
A summary of share based awards granted under the Incentive Plan during the six months ended June 30, 2026 is as follows:
Type of
Number of
Awards
Value per
Awarded
Share (1)
Vesting Terms
RS - Service
February 25, 2026
37,784
3 years, 30%-30%-40%
RS - Performance
3 years, cliff vesting (3)
RS
6,498
No vesting period (2)
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Reinsurance
We reinsure with other insurance companies a portion of our potential liability under the policies we have underwritten, thereby protecting us against an unexpectedly large loss or a catastrophic occurrence that could produce large losses, primarily in our homeowners line of business. We are selective in choosing our reinsurers, seeking only those companies that we consider to be financially stable and adequately capitalized. In an effort to minimize exposure to the insolvency of a reinsurer, we continually evaluate and review the financial condition of our reinsurers. Most of our reinsurers have an A.M. Best rating of “A+” (Superior) or “A” (Excellent).
We maintain reinsurance coverage to help lessen the effect of losses from catastrophic events, maintaining coverage during 2026 that protects us in the event of a “140-year storm” (that is, a storm of a severity expected to occur once in a 140-year period). We use various software products to measure our exposure to catastrophe losses and the probable maximum loss to us for catastrophe losses such as hurricanes.
For 2026, we have purchased three layers of excess catastrophe reinsurance providing $770,000 of coverage for property losses in excess of $80,000 up to a maximum of $850,000. Our reinsurers’ co-participation is 85.0% of $120,000 for the 1st layer, 85.0% of $250,000 for the 2nd layer and 90.0% of $400,000 for the 3rd layer.
We also have casualty excess of loss reinsurance for large casualty losses occurring in our automobile, homeowners, dwelling fire, and business owner lines of business in excess of $2,000 up to a maximum of $10,000. We have property excess of loss reinsurance coverage for large property losses, with coverage in excess of $3,000 up to a maximum of $25,000, for our homeowners, and business owners. In addition, we have liability excess of loss reinsurance for umbrella large losses in excess of $1,000 up to a maximum of $10,000. We also have various reinsurance agreements with Hartford Steam Boiler Inspection and Insurance Company, of which the primary contract is a quota share agreement under which we cede 100% of the premiums and losses for the equipment breakdown coverage under our business owner policies.
We are a participant in CAR, a state-established body that runs the residual market reinsurance programs for commercial automobile insurance in Massachusetts under which premiums, expenses, losses and loss adjustment expenses on ceded business are shared by all insurers writing automobile insurance in Massachusetts.
At June 30, 2026, we had $181,032 recoverable from CAR, which consisted of loss adjustment expense reserves, unearned premiums and reinsurance recoverable.
Proposed Merger
On July 23, 2026, the Company entered into an Agreement and Plan of Merger (the “Merger Agreement”) with MAPFRE U.S.A. Corp., a Massachusetts corporation (“Parent”), and Splash Merger Sub, Inc., a Delaware corporation and wholly owned direct subsidiary of Parent (“Merger Subsidiary”), pursuant to which the Company is to be acquired by Parent. Upon the terms and conditions set forth in the Merger Agreement, Merger Subsidiary will be merged with and into the Company, with the Company surviving as a wholly owned subsidiary of Parent (the “Merger”). At the effective time of the Merger, each issued and outstanding share of the Company’s common stock (other than certain excluded shares and shares held by stockholders who properly exercise appraisal rights) will be cancelled and converted into the right to receive $105.00 per share in cash, without interest thereon. In addition, at or immediately prior to the effective time, our outstanding equity awards, including stock options and restricted stock units, will be cancelled and converted into the right to receive cash payments based on the Merger consideration, subject to the terms of the Merger Agreement.
The respective obligations of the Company, Parent and Merger Subsidiary to consummate the transactions contemplated by the Merger Agreement are subject to the satisfaction or waiver of customary closing conditions, including, among others, approval by the holders of a majority of the voting powers of the outstanding shares of Company common stock entitled to vote on the Merger and the receipt of certain regulatory approvals, including from insurance regulators in Massachusetts. In addition, Parent’s and Merger Subsidiary’s obligation to consummate the
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transactions contemplated by the Merger Agreement are subject to the satisfaction or waiver of a condition that there has not occurred a material adverse effect on the Company since the date of the Merger Agreement that is continuing.
The Company expects to incur significant costs, expenses, and fees for professional services and other transaction costs in connection with the Merger. Additionally, if the Merger Agreement is terminated under specified circumstances, the Company may be required to pay Parent a termination fee of $46.2 million and Parent may in certain circumstances be required to pay the Company a termination fee of $111.8 million.
Non-GAAP Measures
Management has included certain non-GAAP financial measures in presenting the Company’s results. Management believes that these non-GAAP measures better explain the Company’s results of operations and allow for a more complete understanding of the underlying trends in the Company’s business. These measures should not be viewed as a substitute for those determined in accordance with GAAP. In addition, our definitions of these items may not be comparable to the definitions used by other companies.
Non-GAAP operating income and non-GAAP operating income per diluted share consist of our GAAP net income adjusted by the net realized gains (losses) on investments, changes in net unrealized gains on equity securities, credit loss benefit (expense) and taxes related thereto. Net income and earnings per diluted share are the GAAP financial measures that are most directly comparable to non-GAAP operating income and non-GAAP operating income per diluted share, respectively. A reconciliation of the GAAP financial measures to these non-GAAP measures is included in the financial highlights below.
Results of Operations
Three and Six Months Ended June 30, 2026 Compared to Three and Six Months Ended June 30, 2025
The following table shows certain of our selected financial results.
Direct written premiums
Net written premiums
313,510
319,475
588,941
594,255
Reconciliation of Net Income to Non-GAAP Operating Income
Exclusions from net income:
(1,418)
(2,131)
(4,720)
(7,194)
Credit loss expense (benefit)
(66)
1,288
1,972
193
Non-GAAP operating income
29,674
21,518
19,470
40,514
Net income per diluted share
(0.10)
(0.14)
(0.55)
(0.43)
(0.32)
(0.49)
0.47
(0.47)
0.02
0.09
0.13
0.01
0.19
Non-GAAP operating income per diluted share
2.03
1.45
1.33
2.74
Direct Written Premiums. Direct written premiums for the three months ended June 30, 2026 decreased by $3,994, or 1.2%, to $341,835 from $345,829 for the comparable 2025 period. Direct written premiums for the six months ended June 30, 2026 decreased by $3,189, or 0.5%, to $641,610 from $644,799 for the comparable 2025 period. The decreases in direct written premiums and net written premiums reflect lower policy counts resulting from the cancellation of certain underperforming agency relationships. For the six months ended June 30, 2026, average written premium per policy increased 2.9%, 6.4% and 10.9% in Private Passenger Automobile, Commercial Automobile and Homeowners lines, respectively, compared to the same period in 2025.
Net Written Premiums. Net written premiums for the three months ended June 30, 2026 decreased by $5,965, or 1.9%, to $313,510 from $319,475 for the comparable 2025 period. Net written premiums for the six months ended
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June 30, 2026 decreased by $5,314, or 0.9%, to $588,941 from $594,255 for the comparable 2025 period. The decreases were primarily due to the factors that decreased direct written premiums.
Net Earned Premiums. Net earned premiums for the three months ended June 30, 2026 increased by $9,540, or 3.4%, to $291,653 from $282,113 for the comparable 2025 period. Net earned premiums for the six months ended June 30, 2026 increased by $27,836, or 5.0%, to $582,639 from $554,803 for the comparable 2025 period. The increases were primarily due to rate increases earning into top-line results.
The effect of reinsurance on net written and net earned premiums is presented in the following table.
Written Premiums
Direct
Assumed
6,059
5,675
12,715
12,480
Ceded
(34,384)
(32,029)
(65,384)
(63,024)
Earned Premiums
317,749
308,901
631,682
605,720
5,717
5,286
12,700
12,011
(31,813)
(32,074)
(61,743)
(62,928)
Net Investment Income. Net investment income for the three months ended June 30, 2026 increased $835, or 5.3%, to $16,559 from $15,724 for the comparable 2025 period. Net investment income for the six months ended June 30, 2026 increased by $3,299, or 10.9%, to $33,597 from $30,298 for the comparable 2025 period. The increase for the three and six months ended June 30, 2026, compared to the same periods in 2025, is primarily driven by higher assets under management, reinvestment rates that exceeded the yields on maturing securities, and strong alternative asset returns. Net effective annualized yield on the investment portfolio was 4.0% for the three months June 30, 2026 compared to 4.2% for the comparable 2025 period. Net effective annualized yield on the investment portfolio was 4.1% for the six months ended June 30, 2026 compared to 4.0% for the comparable 2025 period. The investment portfolio’s duration on fixed maturities was 3.8 years at June 30, 2026 compared to 3.9 years at December 31, 2025.
Earnings from Partnership Investments. Earnings from partnership investments were $3,329 for the three months ended June 30, 2026 compared to $346 for the comparable 2025 period. Earnings from partnership investments were $7,234 for the six months ended June 30, 2026 compared to $2,458 for the comparable 2025 period. The year-over-year increase reflects higher investment appreciation and the impact of timing differences between valuation changes and the recognition of realized gains. Cash distributions received from partnerships may not correspond to earnings recognized in the same period, as gains are typically recognized over time based on changes in fair value. The timing and magnitude of these returns can vary depending on the performance and transactional activity of the underlying partnerships.
Net Realized Gains on Investments. Net realized gains on investments were $1,418 for the three months ended June 30, 2026 compared to $2,131 for the comparable 2025 period. Net realized gains on investments was $8,049 for the six months ended June 30, 2026 compared to $6,394 for the comparable 2025 period. The increase in net realized gains during the six-month period reflects the sale of equity securities in a gain position during the first quarter of 2026.
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The gross unrealized gains and losses on investments in fixed maturity securities, including redeemable preferred stocks that have characteristics of fixed maturities, short term investments, equity securities, including interests in mutual funds, and other invested assets were as follows for the periods indicated:
deferred compensation plan.
The composition of our fixed income security portfolio as defined by nationally recognized rating agencies was as follows:
Percent
U.S. Treasury securities and obligations of U.S. Government agencies
357,648
27.0
Aaa/Aa
336,155
25.3
A
301,846
22.7
Baa
232,016
17.5
Ba
45,775
3.4
B
50,756
3.8
Caa/Ca
601
Not rated
3,797
0.3
100.0
Ratings are generally assigned upon the issuance of the securities and are subject to revision on the basis of ongoing evaluations. Ratings in the table are as of the date indicated.
As of June 30, 2026, our portfolio of fixed maturity investments was comprised principally of investment grade corporate fixed maturity securities, U.S. government and agency securities, and asset-backed securities. The portion of our non-investment grade portfolio of fixed maturity investments is primarily comprised of high yield bonds.
The following table illustrates the gross unrealized losses included in our investment portfolio and the fair value of those securities, aggregated by investment category. The table also illustrates the length of time that they have been in a continuous unrealized loss position as of June 30, 2026.
As of June 30, 2026 the Company concluded that $355 of unrealized losses were due to credit factors and were recorded as an allowance for expected credit losses. As of December 31, 2025, the Company concluded that none of the unrealized losses in the fixed maturity portfolio were due to credit factors; therefore, no allowance for credit losses was reported. The Company concluded that outside of the securities that were recognized as credit impaired, the unrealized losses recorded on the fixed maturity portfolio at June 30, 2026 and December 31, 2025 resulted from fluctuations in market interest rates and other temporary market conditions as opposed to fundamental changes in the credit quality of the issuers of such securities. Based upon the analysis performed, the Company’s decision to hold these securities, the Company’s current level of liquidity and our history of positive cash flows, management believes it is more likely than not that it will not be required to sell any of its securities before the anticipated recovery in the fair value to its amortized cost basis.
Specific qualitative analysis was also performed for securities appearing on our “Watch List,” if any. Qualitative analysis considered such factors as the financial condition and the near term prospects of the issuer, whether the debtor is current on its contractually obligated interest and principal payments, changes to the rating of the security by a rating agency and the historical volatility of the fair value of the security.
For information regarding fair value measurements of our investment portfolio, refer to Item 1—Financial Statements, Note 5, Investments, of this Form 10-Q.
Commission Income: Commission income includes revenues from new and renewal commissions paid by insurance carriers, which we recognize when earned. Commission income was $2,252 and $2,285 for the three months ended June 30, 2026 and 2025, respectively. Commission income was $4,402 and $4,380 for the six months ended June 30, 2026 and 2025, respectively. The year-over-year change is driven by increased premium rates across the property and casualty insurance market.
Finance and Other Service Income. Finance and other service income includes revenues from premium installment charges, which we recognize when earned, and other miscellaneous income and fees. Finance and other service income for the three months ended June 30, 2026 decreased by $727, or 11.2%, to $5,758 from $6,485 for the comparable 2025 period. Finance and other service income for the six months ended June 30, 2026, decreased by $1,213, or 9.5%, to $11,559 from $12,772 for the comparable 2025 period. The decrease is primarily driven by the decline in policy counts.
Losses and Loss Adjustment Expenses. Losses and loss adjustment expenses incurred for the three months ended June 30, 2026 increased by $887, or 0.5%, to $195,119 from $194,232 for the comparable 2025 period. Losses and loss adjustment expenses incurred for the six months ended June 30, 2026 increased by $58,087, or 15.1%, to $442,609 from $384,522 for the comparable 2025 period.
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Our GAAP loss ratio for the three months ended June 30, 2026 decreased to 66.9% from 68.8% for the comparable 2025 period. Our GAAP loss ratio for the six months ended June 30, 2026 increased to 76.0% from 69.3% for the comparable 2025 period. Our GAAP loss ratio excluding loss adjustment expenses for the three months ended June 30, 2026 was 59.5% compared to 60.9% for the comparable 2025 period. Our GAAP loss ratio excluding loss adjustment expenses for the six months ended June 30, 2026 was 67.6% compared to 61.1% for the comparable 2025 period. Total prior year favorable development included in the pre-tax results for the three months ended June 30, 2026 was $10,569 compared to $11,235 for the comparable 2025 period. Total prior year favorable development included in the pre-tax results for the six months ended June 30, 2026 was $21,118 compared to $23,473 for the comparable 2025 period.
Underwriting, Operating and Related Expenses. Underwriting, operating and related expenses for the three months ended June 30, 2026 increased by $1,087, or 1.3%, to $83,883 from $82,796 for the comparable 2025 period. Underwriting, operating and related expenses for the six months ended June 30, 2026 increased by $2,517, or 1.5%, to $166,164 from $163,647 for the comparable 2025 period. Our GAAP expense ratio for the three months ended June 30, 2026 decreased to 28.8% from 29.3% for the comparable 2025 period. Our GAAP expense ratio for the six months ended June 30, 2026 decreased to 28.5% from 29.5% for the comparable 2025 period. The decrease in the GAAP expense ratio during the three and six months ended June 30, 2026 was due to higher earned premium.
Interest Expense. Interest expense was $814 and $442 for the three months ended June 30, 2026 and 2025, respectively. Interest expense was $1,432 for the six months ended June 30, 2026 compared to $546 for the comparable 2025 period. The increase in interest expense is due to borrowings under the Company’s existing Credit Agreement with Citizens Bank on March 27, 2025, which carries an interest rate of SOFR rate plus 1.25%, compared to the repaid FHLB of Boston loan that had a fixed rate of 1.42%.
Income Tax Expense. Our effective tax rate was 21.1% and 21.4% for the three months ended June 30, 2026 and 2025, respectively. The effective tax rate was 22.0% and 21.9% for the six months ended June 30, 2026 and 2025, respectively. The effective tax rate in 2026 was higher than the statutory rate primarily due to the effects of stock-based compensation and permanent differences regarding executive compensation.
Net Income. Net income for the three months ended June 30, 2026 was $34,517 compared to net income of $28,937 for the comparable 2025 period. Net income for the six months ended June 30, 2026 was $20,194 compared to $50,833 for the comparable 2025 period.
Non-GAAP Operating Income. Non-GAAP operating income, as defined above, was $29,674 for the three months ended June 30, 2026 compared to $21,519 for the comparable 2025 period. Non-GAAP operating income was $19,470 for the six months ended June 30, 2026 compared to $40,515 for the comparable 2025 period.
Liquidity and Capital Resources
As a holding company, Safety’s assets consist primarily of the stock of our direct and indirect subsidiaries. Our principal source of funds to meet our obligations and pay dividends to shareholders, therefore, is dividends and other permitted payments from our subsidiaries, principally Safety Insurance. Safety is the borrower under our credit facility.
Safety Insurance’s sources of funds primarily include premiums received, investment income, and proceeds from sales and redemptions of investments. Safety Insurance’s principal uses of cash are the payment of claims, operating expenses and taxes, the purchase of investments, and the payment of dividends to Safety.
Net cash provided by operating activities was $21,294 and $35,496 during the six months ended 2026 and 2025, respectively. Our operations typically generate positive cash flows from operations as most premiums are received in advance of the time when claim and benefit payments are required. Positive operating cash flows are expected in the future to meet our liquidity requirements.
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Net cash used for investing activities was $323 and $18,217 during the six months ended June 30, 2026 and 2025, respectively. Fixed maturities, equity securities, and other invested assets purchased were $216,213 for the six months ended June 30, 2026 compared to $159,014 for the comparable prior year period. Proceeds from maturities, redemptions, calls and sales, of securities were $218,359 during the six months ended June 30, 2026 compared to $141,197 for the comparable prior year period.
Net cash used for financing activities was $26,954 and $26,844 during the six months ended June 30, 2026 and 2025, respectively. Net cash used for financing activities during the six months ended June 30, 2026 consisted of dividend payments to shareholders.
The Insurance Subsidiaries maintain a high degree of liquidity within their respective investment portfolios in fixed maturity and equity securities. We do not anticipate the need to sell these securities to meet the Insurance Subsidiaries cash requirements. We expect the Insurance Subsidiaries to generate sufficient operating cash to meet all short-term and long-term cash requirements. However, there can be no assurance that unforeseen business needs or other items will not occur causing us to have to sell securities before their values fully recover; thereby causing us to recognize additional impairment charges in that time period.
Credit Facility
For information regarding our Credit Facility, please refer to Item 1—Financial Statements, Note 9, Debt, of this Form 10-Q.
Recent Accounting Pronouncements
For information regarding Recent Accounting Pronouncements, please refer to Item 1—Financial Statements, Note 2, Recent Accounting Pronouncements, of this Form 10-Q.
Regulatory Matters
Our Insurance Subsidiaries are subject to various regulatory restrictions that limit the maximum amount of dividends available to be paid to their parent without prior approval of the Commissioner of the Division of Insurance of Massachusetts (the “Commissioner”). The Massachusetts statute limits the dividends an insurer may pay in any twelve-month period, without the prior permission of the Commissioner, to the greater of (i) 10% of the insurer’s surplus as of the preceding December 31 or (ii) the insurer’s net income for the twelve-month period ending the preceding December 31, in each case determined in accordance with statutory accounting practices. Our insurance company subsidiaries may not declare an “extraordinary dividend” (defined as any dividend or distribution that, together with other distributions made within the preceding twelve months, exceeds the limits established by Massachusetts statute) until thirty days after the Commissioner has received notice of the intended dividend and has not objected. As historically administered by the Commissioner, this provision requires the Commissioner’s prior approval of an extraordinary dividend. Under Massachusetts law, an insurer may pay cash dividends only from its unassigned funds, also known as earned surplus, and the insurer’s remaining surplus must be both reasonable in relation to its outstanding liabilities and adequate to its financial needs. At December 31, 2025, the statutory surplus of Safety Insurance was $833,432, and its statutory net income for 2025 was $83,092. As a result, a maximum of $83,343 is available in 2026 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 $750,089 at December 31, 2025. During the six months ended June 30, 2026, Safety Insurance paid dividends to Safety of $26,897.
The maximum dividend permitted by law is not indicative of an insurer’s actual ability to pay dividends, which may be constrained by business and regulatory considerations, such as the impact of dividends on surplus, which could affect an insurer’s ratings or competitive position, the amount of premiums that can be written and the ability to pay future dividends.
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Since the initial public offering of its common stock in November 2002, the Company has paid regular quarterly dividends to shareholders of its common stock. Quarterly dividends paid during 2026 were as follows:
Declaration
Record
Payment
Dividend per
Dividends Paid
Date
Common Share
and Accrued
February 13, 2026
March 2, 2026
March 13, 2026
13,470
May 6, 2026
June 12, 2025
13,485
On August 5, 2026, our Board of Directors approved and declared a quarterly cash dividend of $0.92 per share which will be paid on September 15, 2026 to shareholders of record on September 1, 2026. We plan to continue to declare and pay quarterly cash dividends in 2026, depending on our financial position and the regularity of our cash flows.
On February 23, 2022, the Board of Directors approved a share repurchase program of up to $50,000 of the Company’s outstanding common shares. As of June 30, 2026, the Board of Directors has cumulatively authorized increases to the existing share repurchase program of up to $200,000 of its outstanding common shares. Under the program, the Company may repurchase shares of its common stock for cash in public or private transactions, in the open market or otherwise. The timing of such repurchases and actual number of shares repurchased will depend on a variety of factors including price, market conditions and applicable regulatory and corporate requirements. The program does not require us to repurchase any specific number of shares and may be modified, suspended or terminated at any time without prior notice. No share repurchases were made by the Company under the program during the three and six months ended June 30, 2026. As of June 30, 2026 and December 31, 2025, the Company had purchased 3,478,060 shares of common stock at a cost of $175,240.
Under the program, Safety may repurchase shares of its common stock for cash in public or private transactions, in the open market or otherwise, at management’s discretion. The timing of such repurchases and actual number of shares repurchased will depend on a variety of factors including price, market conditions and applicable regulatory and corporate requirements. The program does not require Safety to repurchase any specific number of shares and may be modified, suspended or terminated at any time without prior notices.
Management believes that the current level of cash flow from operations provides us with sufficient liquidity to meet our operating needs over the next 12 months. We expect to be able to continue to meet our operating needs after the next 12 months from internally generated funds. Since our ability to meet our obligations in the long term (beyond such twelve-month period) is dependent upon such factors as market changes, insurance regulatory changes and economic conditions, no assurance can be given that the available net cash flow will be sufficient to meet our operating needs. We expect that we would need to borrow or issue capital stock if we needed additional funds, for example, to pay for an acquisition or a significant expansion of our operations. There can be no assurance that sufficient funds for any of the foregoing purposes would be available to us at such time.
Risk-Based Capital Requirements
The NAIC has adopted a formula and model law to implement risk-based capital requirements for most property and casualty insurance companies, which are designed to determine minimum capital requirements and to raise the level of protection that statutory surplus provides for policyholder obligations. Under Massachusetts law, insurers having less total adjusted capital than that required by the risk-based capital calculation will be subject to varying degrees of regulatory action, depending on the level of capital inadequacy. The risk-based capital law provides for four levels of regulatory action. The extent of regulatory intervention and action increases as the level of total adjusted capital to risk-based capital falls. As of December 31, 2025, the Insurance Subsidiaries had total capital of $833,432, which is in excess of amounts requiring company or regulatory action at any prescribed risk-based capital action level. Minimum statutory capital and surplus, or company action level risk-based capital, was $232,798 at December 31, 2025.
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Off-Balance Sheet Arrangements
We have no material obligations under a guarantee contract meeting the characteristics identified in Accounting Standards Codification (“ASC”) 460, Guarantees. We have no material retained or contingent interests in assets transferred to an unconsolidated entity. We have no material obligations, including contingent obligations, under contracts that would be accounted for as derivative instruments. We have no obligations, including contingent obligations, arising out of a variable interest in an unconsolidated entity held by, and material to, us, where such entity provides financing, liquidity, market risk or credit risk support to, or engages in leasing, hedging or research and development services with us. We have no direct investments in real estate and no holdings of mortgages secured by commercial real estate. Accordingly, we have no material off-balance sheet arrangements.
Critical Accounting Policies and Estimates
Loss and Loss Adjustment Expense Reserves
Significant periods of time can elapse between the occurrence of an insured loss, the reporting to us of that loss and our final payment of that loss. To recognize liabilities for unpaid losses, we establish reserves as balance sheet liabilities. Our reserves represent estimates of amounts needed to pay reported and estimated losses incurred but not yet reported (“IBNR”) and the expenses of investigating and paying those losses, or loss adjustment expenses. Every quarter, we review our previously established reserves and adjust them, if necessary.
When a claim is reported, claims personnel establish a “case reserve” for the estimated amount of the ultimate payment. The amount of the reserve is primarily based upon an evaluation of the type of claim involved, the circumstances surrounding each claim and the policy provisions relating to the loss. The estimate reflects the informed judgment of such personnel based on general insurance reserving practices and on the experience and knowledge of the claims person. During the loss adjustment period, these estimates are revised as deemed necessary by our claims department based on subsequent developments and periodic reviews of the cases. When a claim is closed with or without a payment, the difference between the case reserve and the settlement amount creates a reserve deficiency if the payment exceeds the case reserve or a reserve redundancy if the payment is less than the case reserve.
In accordance with industry practice, we also maintain reserves for IBNR. IBNR reserves are determined in accordance with commonly accepted actuarial reserving techniques on the basis of our historical information and experience. We review and make adjustments to incurred but not yet reported reserves quarterly. In addition, IBNR reserves can also be expressed as the total loss reserves required less the case reserves on reported claims.
When reviewing reserves, we analyze historical data and estimate the impact of various loss development factors, such as our historical loss experience and that of the industry, trends in claims frequency and severity, our mix of business, our claims processing procedures, legislative enactments, judicial decisions, legal developments in imposition of damages, and changes and trends in general economic conditions, including the effects of inflation. A change in any of these factors from the assumption implicit in our estimate can cause our actual loss experience to be better or worse than our reserves, and the difference can be material. There is no precise method, however, for evaluating the impact of any specific factor on the adequacy of reserves, because the eventual development of reserves is affected by many factors.
In estimating all our loss reserves, we follow the guidance prescribed by ASC 944, Financial Services – Insurance.
Management determines our loss and loss adjustment expense (“LAE”) reserves estimate based upon the analysis of our actuaries. A reasonable estimate is derived by selecting a point estimate within a range of indications as calculated by our actuaries using generally accepted actuarial techniques. The key assumption in most actuarial analysis is that past patterns of frequency and severity will repeat in the future, unless a significant change in the factors described above takes place.
36
Our key factors and resulting assumptions are the ultimate frequency and severity of claims, based upon the most recent ten years of claims reported to the Company, and the data CAR reports to us to calculate our share of the residual market, as of the date of the applicable balance sheet. For each accident year and each coverage within a line of business our actuaries calculate the ultimate losses incurred. Our total reserves are the difference between the ultimate losses incurred and the cumulative loss and loss adjustment payments made to date. Our IBNR reserves are calculated as the difference between our total reserves and the outstanding case reserves at the end of the accounting period. To determine ultimate losses, our actuaries calculate a range of indications and select a point estimation using such actuarial techniques as:
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 $616,475 to $685,439 as of June 30, 2026. In general, the low and high values of the ranges represent reasonable minimum and maximum values of the indications based on the techniques described above. Our selected point estimate of net loss and LAE reserves based upon the analysis of our actuaries was $657,605 as of June 30, 2026.
The following table presents the point estimation of the recorded reserves and the range of estimations by line of business for net loss and LAE reserves as of June 30, 2026.
Low
Recorded
High
Private passenger automobile
287,763
306,207
315,253
Commercial automobile
125,261
137,023
148,449
Homeowners
137,481
141,871
143,569
All other
65,970
72,504
78,168
616,475
685,439
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The following table presents our total net reserves and the corresponding case reserves and IBNR reserves for each line of business as of June 30, 2026.
Case
IBNR
349,863
(43,664)
306,199
CAR assumed private passenger auto
94,608
7,251
101,859
CAR assumed commercial automobile
21,527
13,637
35,164
158,838
(16,967)
59,774
12,730
Total net reserves for losses and LAE
684,611
(27,006)
At June 30, 2026, our total IBNR reserves for our private passenger automobile line of business was comprised of ($85,210) related to estimated ultimate decreases in the case reserves, including anticipated recoveries (i.e. salvage and subrogation), and $41,546 related to our estimation for not yet reported losses.
Our IBNR reserves consist of our estimate of the total loss reserves required less our case reserves. The IBNR reserves for CAR assumed commercial automobile business are 38.8% of our total reserves for CAR assumed commercial automobile business as of June 30, 2026, due to the reporting delays in the information we receive from CAR, as described further in the section on Residual Market Loss and Loss Adjustment Expense Reserves.
The following table presents information by line of business for our total net reserves and the corresponding retained (i.e. direct less ceded) reserves and assumed reserves as of June 30, 2026.
Net
CAR assumed private passenger automobile
Net private passenger automobile
Net commercial automobile
622,433
35,172
Residual Market Loss and Loss Adjustment Expense Reserves
We are a participant in CAR and other various residual markets and assume a portion of losses and LAE on business ceded by the industry participants to the residual markets. We estimate reserves for assumed losses and LAE that have not yet been reported to us by the residual markets. Our estimations are based upon the same factors we use for our own reserves, plus additional factors due to the nature of and the information we receive.
Residual market deficits and gains, consists of premium ceded to the various residual markets less losses and LAE, and is allocated among insurance companies based on a various formulas (the “Participation Ratio”) that takes into consideration a company’s voluntary market share.
Because of the lag in the various residual market estimations, and in order to try to validate to the extent possible the information provided, we must try to estimate the effects of the actions of our competitors in order to establish our Participation Ratio.
Although we rely to a significant extent in setting our reserves on the information the various residual markets provide, we are cautious in our use of that information, because of the delays in receiving data from the various residual markets. As a result, we have to estimate our Participation Ratio and these reserves are subject to significant judgments and estimates.
38
Sensitivity Analysis
Establishment of appropriate reserves is an inherently uncertain process. There can be no certainty that currently established reserves based on our key assumptions regarding frequency and severity in our lines of business, or our assumptions regarding our share of the CAR loss will prove adequate in light of subsequent actual experience. To the extent that reserves are inadequate and are strengthened, the amount of such increase is treated as a charge to earnings in the period that the deficiency is recognized. To the extent that reserves are redundant and are released, the amount of the release is a credit to earnings in the period the redundancy is recognized. For the six months ended June 30, 2026, a 1 percentage-point change in the loss and LAE ratio would result in a change in reserves of $5,825. Each 1 percentage-point change in the loss and LAE ratio would have had a $4,602 effect on net income, or $0.32 per diluted share.
Our assumptions consider that past experience, adjusted for the effects of current developments and anticipated trends, are an appropriate basis for establishing our reserves. Our individual key assumptions could each have a reasonable possible range of plus or minus 5 percentage-points for each estimation, although there is no guarantee that our assumptions will not have more than a 5 percentage point variation. The following sensitivity tables present information for each of our primary lines of business on the effect each 1 percentage-point change in each of our key assumptions on unpaid frequency and severity could have on our retained (i.e., direct minus ceded) loss and LAE reserves and net income for the six months ended June 30, 2026. 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.
39
-1 Percent
No
+1 Percent
Change in
Frequency
Private passenger automobile retained loss and LAE reserves
-1 Percent Change in Severity
Estimated decrease in reserves
(6,124)
(3,062)
Estimated increase in net income
4,838
2,419
No Change in Severity
Estimated (decrease) increase in reserves
3,062
Estimated increase (decrease) in net income
(2,419)
+1 Percent Change in Severity
Estimated increase in reserves
6,124
Estimated decrease in net income
(4,838)
Commercial automobile retained loss and LAE reserves
(2,037)
(1,019)
1,609
805
1,019
(805)
2,037
(1,609)
Homeowners retained loss and LAE reserves
(2,837)
(1,419)
2,241
1,121
1,419
(1,121)
2,837
(2,241)
All other retained loss and LAE reserves
(1,450)
(725)
1,146
573
725
(573)
1,450
(1,146)
Our estimated share of CAR loss and LAE reserves is based on assumptions about our Participation Ratio, the size of CAR, and the resulting deficit. Our assumptions consider that past experience, adjusted for the effects of current developments and anticipated trends, is an appropriate basis for establishing our CAR reserves. Each of our assumptions could have a reasonably possible range of plus or minus 5 percentage-points for each estimation.
The following sensitivity table presents information of the effect each 1 percentage-point change in our assumptions on our share of reserves for CAR and other residual markets could have on our assumed loss and LAE reserves and net income for the six months ended June 30, 2026. In evaluating the information in the table, it should be noted that a 1 percentage-point change in our assumptions would change estimated reserves by 1 percentage-point.
40
Estimation
(352)
352
278
(278)
Reserve Development Summary
The changes we have recorded in our reserves in the past illustrate the uncertainty of estimating reserves. Our prior year reserves decreased by $21,118 and $23,473 during the six months ended June 30, 2026 and 2025, respectively.
The following table presents a comparison of prior year development of our net reserves for losses and LAE for the six months ended June 30, 2026 and 2025. Each accident year represents all claims for an annual accounting period in which loss events occurred, regardless of when the losses are actually reported, booked or paid. Our financial statements reflect the aggregate results of the current and all prior accident years.
Accident Year
2016 & prior
(76)
(907)
2017
(68)
(222)
2018
(531)
(232)
2019
(47)
(1,179)
2020
387
(1,628)
2021
1,864
(1,978)
2022
(2,516)
2023
(1,173)
(7,256)
2024
(6,519)
(7,555)
(15,832)
All prior years
The decreases in prior years’ reserves during the six months ended June 30, 2026 and 2025 resulted from re-estimations of prior year ultimate loss and LAE liabilities. The 2026 decrease is composed of reductions of $7,713 in our private passenger automobile reserves, $3,695 in our commercial automobile reserves, $7,361 in our homeowners reserves, and $2,349 in our other lines reserves. The 2025 decrease is primarily composed of reductions of $3,249 in our private passenger automobile reserves, $3,909 in our commercial automobile reserves, $9,266 in our homeowners reserves, and $7,049 in our other lines reserves.
The following table presents information by line of business for prior year development of our net reserves for losses June 30, 2026.
Private Passenger
Commercial
Automobile
All Other
(42)
(6)
(64)
(19)
(297)
(233)
150
(199)
928
(56)
(235)
(250)
1,776
(133)
(117)
338
735
682
(183)
(357)
646
(565)
(2,133)
879
(1,945)
(1,218)
(2,883)
(473)
(9,979)
(2,374)
(1,517)
(1,962)
(7,713)
(3,695)
(7,361)
(2,349)
The improved private passenger and commercial automobile results were primarily due to fewer claims than previously estimated and better than previously estimated severity on our established bodily injury and property damage
41
case reserves. Our retained other than auto and homeowners lines of business prior year reserves decreased, due primarily to fewer claims than previously estimated.
For further information, see “Results of Operations: Losses and Loss Adjustment Expenses.”
Investment Impairments
We use a systematic methodology to evaluate declines in fair values below cost or amortized cost of our investments. Some of the factors considered in assessing impairment of fixed maturities due to credit losses include the extent to which the fair value is less than amortized cost, the financial condition of and the near and long-term prospects of the issuer, whether the debtor is current on its contractually obligated interest and principal payments, changes to the rating of the security by a rating agency, the historical volatility of the fair value of the security and whether it is more likely than not that we will be required to sell the investment prior to an anticipated recovery in value. This methodology ensures that we evaluate available evidence concerning any declines in a disciplined manner.
For fixed maturities that we do not intend to sell or for which it is more likely than not that we would not be required to sell before an anticipated recovery in value, we separate the expected credit loss component of the impairment from the amount related to all other factors. The expected credit loss component is recognized as an allowance for expected credit losses. The allowance is adjusted for any additional credit losses and subsequent recoveries, which are booked in income as either credit loss expense or credit loss benefit, respectively. Upon recognizing a credit loss, the cost basis is not adjusted. The impairment related to all other factors (non-credit factors) is reported in other comprehensive income.
For further information, see “Results of Operations.”
Forward-Looking Statements
Forward-looking statements might include one or more of the following, among others:
Forward-looking statements can be identified by the fact that they do not relate strictly to historical or current facts. They often include words such as “believe,” “expect,” “anticipate,” “intend,” “plan,” “estimate,” “aim,” “projects,” or words of similar meaning and expressions that indicate future events and trends, or future or conditional verbs such as “will,” “would,” “should,” “could,” or “may.” All statements that address expectations or projections about the future, including statements about the Company’s strategy for growth, product development, market position, expenditures and financial results, are forward-looking statements.
Forward-looking statements are not guarantees of future performance. By their nature, forward-looking statements are subject to risks and uncertainties. There are a number of factors, many of which are beyond our control, that could cause actual future conditions, events, results or trends to differ significantly and/or materially from historical results or those projected in the forward-looking statements. These factors include but are not limited to:
42
Some other factors, such as market, operational, liquidity, interest rate, equity and other risks, are described elsewhere in this Quarterly Report on Form 10-Q. Factors relating to the regulation and supervision of our Company are also described or incorporated in this report. There are other factors besides those described or incorporated in this report that could cause actual conditions, events or results to differ from those in the forward-looking statements.
Readers are cautioned not to place undue reliance on these forward-looking statements, which speak only as of the date on which they are made. We do not undertake any obligation to update publicly or revise any forward-looking statements to reflect circumstances or events that occur after the date the forward-looking statements are made.
Item 3. Quantitative and Qualitative Information about Market Risk (Dollars in thousands)
Market Risk. Market risk is the risk that we will incur losses due to adverse changes in market rates and prices. We have exposure to market risk through our investment activities and our financing activities. Our primary market risk exposure is to changes in interest rates. We use both fixed and variable rate debt as sources of financing. We have not entered, and do not plan to enter, into any derivative financial instruments for trading or speculative purposes.
Interest Rate Risk. Interest rate risk is the risk that we will incur economic losses due to adverse changes in interest rates. Our exposure to interest rate changes primarily results from our significant holdings of fixed rate investments and from our financing activities. Our fixed maturity investments include U.S. and foreign government bonds, securities issued by government agencies, obligations of state and local governments and governmental authorities, corporate bonds and asset-backed securities, most of which are exposed to changes in prevailing interest rates.
We manage our exposure to risks associated with interest rate fluctuations through active review of our investment portfolio by our management and Board of Directors and consultation with third-party financial advisors. As a general matter, we do not attempt to match the durations of our assets with the durations of our liabilities, and the majority of our liabilities are “short tail.” Our goal is to maximize the total after-tax return on all of our investments. An important strategy that we employ to achieve this goal is to try to hold enough in cash and short-term investments in order to avoid liquidating longer-term investments to pay claims.
Based upon the results of interest rate sensitivity analysis, the following table shows the interest rate risk of our investments in fixed maturities, measured in terms of fair value (which is equal to the carrying value for all our fixed maturity securities).
-100 Basis
+100 Basis
Point Change
No Change
Estimated fair value
1,386,528
1,379,117
Estimated increase (decrease) in fair value
57,934
50,523
With respect to floating rate debt, we are exposed to the effects of changes in prevailing interest rates. At June 30, 2026, we had $50,000 of debt outstanding under our credit facility. Assuming the full utilization of our current available credit facility, a 2.0% increase in the prevailing interest rate on our variable rate debt would result in interest expense increasing approximately $2,000 for 2026, assuming that all of such debt is outstanding for the entire year.
In addition, in the current market environment, our investments can also contain liquidity risks.
Equity Risk. Equity risk is the risk that we will incur economic losses due to adverse changes in equity prices. Our exposure to changes in equity prices results from our holdings of common stock and mutual funds held to fund the executive deferred compensation plan. We continuously evaluate market conditions and we expect in the future to purchase additional equity securities. We principally manage equity price risk through industry and issuer diversification and asset allocation techniques.
Item 4. Controls and Procedures
Conclusion Regarding the Effectiveness of Disclosure Controls and Procedures
Under the supervision and with the participation of our management, including our Chief Executive Officer (“CEO”) and Chief Financial Officer (“CFO”), we evaluated the effectiveness of the design and operation of our disclosure controls and procedures [as defined in Rules 13a-15(e) and 15d-15(e) of the Securities Exchange Act of 1934, as amended (the “Exchange Act”)] as of the end of the period covered by this report. Based on that evaluation, our CEO and CFO have concluded that our disclosure controls and procedures are adequate and effective and ensure that all information required to be disclosed by us in the reports that we file or submit under the Exchange Act is recorded, processed, summarized and reported within the time periods specified in the SEC’s rules and that information required to be disclosed in such reports is accumulated and communicated to management, including our CEO and CFO, as appropriate, to allow timely decisions regarding required disclosures.
Changes in Internal Control over Financial Reporting
There have been no changes in our internal control over financial reporting that occurred during our last fiscal quarter that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.
Part II. OTHER INFORMATION
Item 1. Legal Proceedings
Please see “Item 1—Financial Statements, Note 8, Commitments and Contingencies.”
Item 1A. Risk Factors
Except as set forth below, there have been no material changes in our risk factors from those disclosed in the Company’s 2025 Annual Report on Form 10-K. The risk factors disclosed in the 2025 Annual Report on Form 10-K, in addition to the other information set forth in this Quarterly Report, could materially affect our business, financial condition, or results.
The announcement and pendency of our proposed acquisition by Parent could adversely impact our business, financial condition, and results of operations.
On July 23, 2026, we entered into the Merger Agreement. Uncertainty about the effect of the Merger on our employees, customers, and other parties may have an adverse effect on our business, financial condition, and results of operations regardless of whether the Merger is completed. These risks to our business include the following, all of which could be exacerbated by a delay in the completion of the Merger:
The completion of the Merger is subject to certain closing conditions, including stockholder approval and certain regulatory conditions, which may not be satisfied on a timely basis or at all, and the failure to consummate the Merger within the expected timeframe or at all could adversely impact our business, financial condition, and results of operations.
The obligations of the Company, Parent and Merger Subsidiary to consummate the transactions contemplated by the Merger Agreement are subject to the satisfaction or waiver of a number of conditions, including the approval by holders of a majority of the voting power of the Company’s outstanding shares of common stock. In addition, the Merger is subject to the expiration or termination of the applicable waiting period under the Hart-Scott-Rodino Antitrust Improvements Act of 1976, as amended, as well as certain other regulatory approvals. The relevant governmental entities may impose requirements, limitations, costs or place restrictions on the conduct of our or Parent’s business following the Merger as a condition to approval or not grant approval at all.
Other conditions that must be satisfied or waived before one or more of the parties will be obligated to consummate the Merger are: (1) the accuracy of the other party’s representations and warranties, subject to certain materiality standards set forth in the Merger Agreement; (2) compliance by the other party in all material respects with
such other party’s obligations under the Merger Agreement; (3) the absence of any law or order prohibiting consummation of the Merger in specified jurisdictions in which the Company, Parent or their respective subsidiaries have business operations; and (4) in the case of Parent’s and Merger Subsidiary’s obligation to consummate the Merger, a condition that there has not occurred a material adverse effect on the Company since the date of the Merger Agreement that is continuing.
We can provide no assurance that the closing conditions will be fulfilled (or waived, if applicable) in a timely manner or at all, and, if all closing conditions are timely fulfilled (or waived, if applicable), we can provide no assurance as to the terms, conditions, and timing of the completion of the Merger. Many of the conditions to completion of the Merger are not within either our, Parent’s or Merger Subsidiary’s control, and we cannot predict when or if these conditions will be fulfilled (or waived, if applicable).
The Merger Agreement also includes termination provisions for both the Company and Parent. If the Merger Agreement is terminated under specified circumstances, the Company may be required to pay Parent a termination fee of $46.2 million, and if the Merger Agreement is terminated under certain circumstances, including a failure to timely receive required regulatory approvals, Parent may be required to pay the Company a termination fee equal to $111.8 million.
There can be no assurance that a remedy will be available to us in the event of a breach of the Merger Agreement by Parent or its affiliates or that we will wholly or partially recover for any damages incurred by us in connection with the Merger. A failed transaction may result in negative publicity and a negative impression of us among our customers or in the investment community or business community generally. Further, any disruptions to our business resulting from the announcement and pendency of the Merger, including any adverse changes in our relationships with our stockholders, customers, suppliers, lenders, partners, officers, employees, governmental entities, and other third parties could continue or accelerate in the event of a failed transaction. In addition, if the Merger is not completed, and there are no other parties willing and able to acquire the Company at a price of $105.00 per share or higher, on terms acceptable to us, the share price of the Company’s common stock may decline to the extent that the current market price of the common stock reflects an assumption that the Merger will be completed.
Also, we will incur significant costs, expenses, and fees for professional services and other transaction costs in connection with the Merger, for which we will have received little or no benefit if the Merger is not completed. Some of these fees and costs will be payable by us even if the Merger is not completed and may relate to activities that we would not have undertaken other than to complete the Merger.
For additional information related to the Merger Agreement, please refer to our Current Report on Form 8-K filed with the SEC on July 24, 2026 (the “July 24 Form 8-K”). The foregoing description of the Merger Agreement is qualified in its entirety by reference to the full text of the Merger Agreement attached as Exhibit 2.1 to the July 24 Form 8-K.
Lawsuits may be filed against us or our directors or officers challenging the transactions contemplated by the Merger Agreement or the Merger, which could prevent or delay the completion of the Merger or result in the payment of damages.
Litigation relating to the Merger may be filed against us or our directors or officers. Among other remedies, claimants could seek damages and/or to enjoin the Merger and the other transactions contemplated by the Merger Agreement. An adverse ruling in any such lawsuit may delay or prevent the proposed Merger from being completed. Any such actions may create uncertainty relating to the Merger and may be costly and distracting to our management.
If the Merger is not consummated for any reason, litigation could be filed in connection with the failure to consummate the Merger.
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds (Dollars in thousands)
On February 23, 2022, the Board of Directors approved an additional share repurchase of up to $50,000 of the Company’s outstanding common shares. The Board of Directors has cumulatively authorized increases to the existing share repurchase program of up to $200,000 of its outstanding common shares. Under the program, the Company may repurchase shares of its common stock for cash in public or private transactions, in the open market or otherwise. The timing of such repurchases and actual number of shares repurchased will depend on a variety of factors including price, market conditions and applicable regulatory and corporate requirements. The program does not require the Company to repurchase any specific number of shares and it may be modified, suspended or terminated at any time without prior notice. No shares were repurchased during the three and six months ended June 30, 2026.
Total number
Total number of shares
Approximate dollar value of
of shares
price paid
purchased as part of publicly
shares that may yet be purchased
Period
purchase
per share
announced plans or programs
under the plans or programs
April 1-30, 2026
24,760
May 1-31, 2026
June 1-30, 2026
Item 3. Defaults upon Senior Securities
None.
Item 4. Mine Safety Disclosures
Item 5. Other Information
During the three months ended June 30, 2026, none of the officers (as defined in rule 16a-1(f) of the Securities Exchange Act of 1934) or directors of the Company adopted, terminated or modified any contract, instruction or written plan for the purchase and sale of our securities that was intended to satisfy the affirmative defense conditions of Rule 10b5-1(c) or any “non-Rule 10b5-1 trading arrangement,” as such term is defined in Item 408(a) of Regulation S-K.
Item 6. Exhibits
The exhibits are contained herein as listed in the Exhibit Index.
Exhibit
Number
Description
11.0
Statement re: Computation of Per Share Earnings (1)
31.1
CEO Certification Pursuant to Rule 13a-14(a)/15d-14(a), as Adopted Pursuant to Section 302 of the Sarbanes Oxley Act of 2002 (2)
31.2
CFO Certification Pursuant to Rule 13a-14(a)/15d-14(a), as Adopted Pursuant to Section 302 of the Sarbanes Oxley Act of 2002 (2)
32.1
CEO Certification Pursuant to U.S.C. Section 1350, as Adopted Pursuant to Section 906 of the Sarbanes Oxley Act of 2002 (2)
32.2
CFO Certification Pursuant to U.S.C. Section 1350, as Adopted Pursuant to Section 906 of the Sarbanes Oxley Act of 2002 (2)
101.INS
Inline XBRL Instance Document (2)
101.SCH
Inline XBRL Taxonomy Extension Schema (2)
101.CAL
Inline XBRL Taxonomy Extension Calculation Linkbase (2)
101.DEF
Inline XBRL Taxonomy Extension Definition Linkbase (2)
101.LAB
Inline XBRL Taxonomy Extension Label Linkbase (2)
101.PRE
Inline XBRL Taxonomy Extension Presentation Linkbase (2)
The cover page from this Current Report on form 10-Q, formatted in Inline XBRL (2)
Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.
August 7, 2026
SAFETY INSURANCE GROUP, INC. (Registrant)
By:
/s/ CHRISTOPHER T. WHITFORD
Christopher T. Whitford
Vice President, Chief Financial Officer, Secretary and Principal Accounting Officer