Safety Announces Third Quarter 2009 Results and Declares Fourth Quarter 2009 Dividend

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BOSTON--(Business Wire)--
Safety Insurance Group, Inc. (NASDAQ:SAFT) today reported third quarter 2009
results. Net income for the quarter ended September 30, 2009 was $17.0 million,
or $1.11 per diluted share, compared to $18.4 million, or $1.12 per diluted
share, for the comparable 2008 period. Net income for the nine months ended
September 30, 2009 was $43.9 million, or $2.79 per diluted share, compared to
$58.3 million, or $3.58 per diluted share, for the comparable 2008 period.
Safety`s book value per share increased to $41.21 at September 30, 2009 compared
to $37.17 at December 31, 2008. Safety paid $0.40 per share in dividends to
investors during both the quarters ended September 30, 2009 and 2008. Safety
paid $1.60 per share in dividends to investors during the year ended December
31, 2008.

Direct written premiums for the quarter ended September 30, 2009 increased by
$3.8 million, or 2.7%, to $143.2 million from $139.4 million for the comparable
2008 period primarily due to an increase in our homeowners line of business.
Direct written premiums for the nine months ended September 30, 2009 decreased
by $21.2 million, or 4.6%, to $438.3 million from $459.5 million for the
comparable 2008 period. The 2009 decrease occurred primarily in our personal and
commercial automobile lines, which experienced decreases of 5.7% and 7.1%,
respectively, in average written premium per exposure. The decrease in our
personal automobile line was primarily as a result of rate decreases totaling
6.7% which we filed under the competitive pricing system introduced to the
private passenger automobile market in Massachusetts beginning April 1, 2008.

Net written premiums for the quarter ended September 30, 2009 increased by $4.7
million, or 3.5%, to $137.3 million from $132.6 million for the comparable 2008
period. Net written premiums for the nine months ended September 30, 2009
decreased by $26.0 million, or 5.8%, to $419.2 million from $445.2 million for
the comparable 2008 period. This decrease was due to the factors that decreased
direct written premiums combined with decreases in premiums assumed from
Commonwealth Automobile Reinsurers ("CAR"), and partially offset by decreases in
premiums ceded to CAR. Written premiums assumed from and ceded to CAR decreased
as a result of the phase-out of the CAR personal automobile reinsurance pool,
which was replaced by an assigned risk plan, the Massachusetts Automobile
Insurance Plan ("MAIP"). Beginning with policy effective dates after March 31,
2009, all personal automobile business was eligible for MAIP and could no longer
be ceded to CAR.

Net earned premiums for the quarter ended September 30, 2009 decreased by $8.2
million, or 5.8%, to $133.1 million from $141.3 million for the comparable 2008
period. Although direct and net written premiums increased for the quarter, net
earned premium decreased due to prior quarter decreases and the lag between the
time the premium is written and earned. Net earned premiums for the nine months
ended September 30, 2009 decreased by $39.3 million, or 8.9%, to $399.7 million
from $439.0 million for the comparable 2008 period. This decrease was due to the
factors that decreased direct and net written premiums. The effect of assumed
and ceded premiums on net written and net earned premiums is presented in the
attached tables.

Net investment income for the quarter ended September 30, 2009 was $11.1 million
compared to $11.7 million for the comparable 2008 period. Net investment income
for the nine months ended September 30, 2009 was $32.2 million compared to $34.4
million for the comparable 2008 period. Average cash and investment securities
(at cost) increased by $3.7 million, or less than 1.0%, to $1,059.0 million for
the nine months ended September 30, 2009 from $1,055.3 million for the
comparable 2008 period. Net effective annualized yield on the investment
portfolio was 4.1% during the nine months ended September 30, 2009 compared to
4.4% for the comparable 2008 period. Our duration was 3.2 years at September 30,
2009 and December 31, 2008.

We continue to hold no subprime mortgage debt securities. All of our
mortgage-backed securities are either U.S. Government or Agency guaranteed or
are rated Aaa. During the nine months ended September 30, 2009, we purchased
1,332,535 of our common shares on the open market under our share buyback
program at a cost of $42.2 million. As of September 30, 2009, we maintained
$58.0 million in net cash and cash equivalents and we have no outstanding debt.

Loss, expense and combined ratios calculated under U.S. generally accepted
accounting principles ("GAAP") for the quarter ended September 30, 2009 were
61.8%, 31.6% and 93.4% compared to 62.1%, 30.5% and 92.6% for the comparable
2008 period. The loss ratio decreased for the quarter ending September 30, 2009
primarily as a result of an increase in prior year favorable development. Total
prior year favorable development included in the pre-tax results for the quarter
ended September 30, 2009 was $11.9 million compared to prior year favorable
development of $8.2 million for the comparable 2008 period. Loss, expense and
combined ratios calculated under GAAP for the nine months ended September 30,
2009 were 65.4%, 30.7% and 96.1% compared to 62.6%, 30.1% and 92.7% for the
comparable 2008 period. The loss ratio increased for the nine months ended
September 30, 2008 primarily as a result of a decrease in our personal
automobile earned premiums per exposure. Total prior year favorable development
included in the pre-tax results for the nine months ended September 30, 2009 was
$30.0 million compared to prior year favorable development of $22.9 million for
the comparable 2008 period.

On November 2, 2009, the Board of Directors approved and declared a quarterly
cash dividend of $0.40 per share on the issued and outstanding common stock,
payable on December 15, 2009 to shareholders of record at the close of business
on December 1, 2009.

About Safety: Safety Insurance Group, Inc. is the parent of Safety Insurance
Company, Safety Indemnity Insurance Company, and Safety Property and Casualty
Insurance Company which are Boston, MA, based writers of property and casualty
insurance. Safety is a leading writer of personal automobile insurance in
Massachusetts.

Additional Information: Press releases, announcements, U. S. Securities and
Exchange Commission ("SEC") Filings and investor information are available under
"About Safety", "Investor Information" on our Company website located at
www.SafetyInsurance.com. Safety filed its December 31, 2008 Form 10-K with the
SEC on March 13, 2009 and urges shareholders to refer to those documents for
more complete information concerning Safety`s financial results.

Cautionary Statement under "Safe Harbor" Provision of the Private Securities
Litigation Reform Act of 1995:

This press release contains, and Safety may from time to time make, written or
oral "forward-looking statements" within the meaning of the U.S. federal
securities laws. Forward-looking statements can be identified by the fact that
they do not relate strictly to historical or current facts. They often include
words such as "believe," "expect," "anticipate," "intend," "plan," "estimate,"
"aim," "projects," or words of similar meaning and expressions that indicate
future events and trends, or future or conditional verbs such as "will,"
"would," "should," "could," or "may". All statements that address expectations
or projections about the future, including statements about the Company`s
strategy for growth, product development, market position, expenditures and
financial results, are forward looking statements.

Forward-looking statements are not guarantees of future performance. By their
nature, forward-looking statements are subject to risks and uncertainties. There
are a number of factors, many of which are beyond our control, that could cause
actual future conditions, events, results or trends to differ significantly
and/or materially from historical results or those projected in the
forward-looking statements. These factors include but are not limited to the
competitive nature of our industry and the possible adverse effects of such
competition.Although a number of national insurers that are much larger than we
are do not currently compete in a material way in the Massachusetts private
passenger automobile market, if one or more of these companies decided to
aggressively enter the market it could have a material adverse effect on
us.Other significant factors include conditions for business operations and
restrictive regulations in Massachusetts, the possibility of losses due to
claims resulting from severe weather, the possibility that the Commissioner may
approve future Rule changes that change the operation of the residual market,
our possible need for and availability of additional financing, and our
dependence on strategic relationships, among others, and other risks and factors
identified from time to time in our reports filed with the SEC, such as those
set forth under the caption "Risk Factors" in our Form 10-K for the year ended
December 31, 2008 filed with the SEC on March 13, 2009.

We are not under any obligation (and expressly disclaim any such obligation) to
update or alter our forward-looking statements, whether as a result of new
information, future events, or otherwise.You should carefully consider the
possibility that actual results may differ materially from our forward-looking
statements.

Safety Insurance Group, Inc. and Subsidiaries
Consolidated Balance Sheets
(Unaudited)
(Dollars in thousands, except share data)

September 30, December 31,
2009 2008
Assets
Investment securities available for sale:
Fixed maturities, at fair value (amortized cost: $989,753 and $929,836) $ 1,026,818 $ 920,171
Equity securities, at fair value (cost: $9,645 and $8,419) 9,806 8,040
Short term securities, at amortized cost which approximates fair value - 82,928
Total investment securities 1,036,624 1,011,139
Cash and cash equivalents 73,698 60,451
Accounts receivable, net of allowance for doubtful accounts 148,353 138,792
Accrued investment income 10,027 9,957
Taxes recoverable - 5,300
Receivable from reinsurers related to paid loss and loss adjustment expenses 9,773 10,835
Receivable from reinsurers related to unpaid loss and loss adjustment expenses 67,443 76,489
Ceded unearned premiums 14,688 21,620
Deferred policy acquisition costs 50,755 46,687
Deferred income taxes 1,780 18,986
Equity and deposits in pools 29,019 23,578
Other assets 13,105 13,983
Total assets $ 1,455,265 $ 1,437,817

Liabilities
Loss and loss adjustment expense reserves $ 446,806 $ 467,559
Unearned premium reserves 302,223 289,695
Accounts payable and accrued liabilities 38,903 51,111
Taxes payable 367 -
Payable for securities purchased 15,710 -
Payable to reinsurers 14,397 8,291
Other liabilities 16,625 17,790
Total liabilities 835,031 834,446

Shareholders' equity
Common stock: $0.01 par value; 30,000,000 shares authorized; 16,614,554
and 16,464,530 shares issued 166 165
Additional paid-in capital 143,527 140,261
Accumulated other comprehensive income (loss), net of taxes 24,197 (6,528 )
Retained earnings 502,056 476,989
Treasury stock, at cost; 1,564,548 and 232,013 shares (49,712 ) (7,516 )
Total shareholders' equity 620,234 603,371
Total liabilities and shareholders' equity $ 1,455,265 $ 1,437,817

Safety Insurance Group, Inc. and Subsidiaries
Consolidated Statements of Operations
(Unaudited)
(Dollars in thousands, except share and per share data)

Three Months Ended Nine Months Ended
September 30, September 30,
2009 2008 2009 2008

Net earned premiums $ 133,059 $ 141,251 $ 399,715 $ 439,001
Net investment income 11,093 11,710 32,221 34,445
Net realized (losses) gains on investments (20 ) (1,047 ) (337 ) 1,056
Finance and other service income 4,197 4,584 12,578 13,597
Total revenue 148,329 156,498 444,177 488,099

Losses and loss adjustment expenses 82,280 87,702 261,555 274,650
Underwriting, operating and related expenses 42,061 43,130 122,681 132,069
Interest expenses 23 22 66 59
Total expenses 124,364 130,854 384,302 406,778

Income before income taxes 23,965 25,644 59,875 81,321
Income tax expense 6,941 7,286 15,992 22,987
Net income $ 17,024 $ 18,358 $ 43,883 $ 58,334

Earnings per weighted average common share:
Basic $ 1.11 $ 1.13 $ 2.80 $ 3.59
Diluted $ 1.11 $ 1.12 $ 2.79 $ 3.58

Cash dividends paid per common share $ 0.40 $ 0.40 $ 1.20 $ 1.20

Number of shares used in computing earnings per share:
Basic 15,296,221 16,309,712 15,694,500 16,260,696
Diluted 15,314,552 16,348,525 15,713,733 16,310,448

Safety Insurance Group, Inc. and Subsidiaries
Additional Premium Information
(Unaudited)
(Dollars in thousands)

Three Months Ended Nine Months Ended
September 30, September 30,
2009 2008 2009 2008
Written Premiums
Direct $ 143,210 $ 139,425 $ 438,269 $ 459,543
Assumed 3,059 5,693 12,447 30,685
Ceded (9,009 ) (12,478 ) (31,540 ) (45,069 )
Net written premiums $ 137,260 $ 132,640 $ 419,176 $ 445,159

Earned Premiums
Direct $ 139,101 $ 148,650 $ 415,810 $ 451,367
Assumed 5,778 8,522 22,377 37,517
Ceded (11,820 ) (15,921 ) (38,472 ) (49,883 )
Net earned premiums $ 133,059 $ 141,251 $ 399,715 $ 439,001

Safety Insurance Group, Inc.
Office of Investor Relations
877-951-2522
InvestorRelations@SafetyInsurance.com

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