Safety Insurance Reports Net Income Up for First Half But Down for Second Quarter

August 5, 2004

Safety Insurance Group, Inc. (NASDAQ:SAFT) of Boston, Mass. reported second quarter 2004 net income for the three months ended June 30, 2004 was $10.3 million, or $0.66 per diluted share, compared to $13.1 million, or $0.86 per diluted share, for the comparable 2003 period.

Net realized gains on investment after tax decreased to $0.1 million, or $0.00 per diluted share, for the three months ended June 30, 2004 from $6.6 million, or $0.43 per diluted share, for the comparable 2003 period.

Net income for the six months ended June 30, 2004 was $16.7 million, or $1.08 per diluted share, compared to $16.0 million, or $1.05 per diluted share, for the comparable 2003 period. Net realized gains on investment after tax decreased to $0.4 million, or $0.03 per diluted share, for the six months ended June 30, 2004 from $6.1 million, or $0.40 per diluted share, for the comparable 2003 period.

Safety’s book value per share increased to $17.69 at June 30, 2004 after paying $0.20 per share in dividends to investors during the first half of 2004, compared to $17.56 at December 31, 2003 after paying $0.34 per share in dividends during 2003.

Direct written premiums for the three months ended June 30, 2004 increased by $15.5 million, or 10.6 percent, to $161.6 million from $146.1 million for the comparable 2003 period. Direct written premiums for the six months ended June 30, 2004 increased by $28.6 million, or 9.1 percent, to $342.1 million from $313.5 million for the comparable 2003 period. These increases occurred primarily the personal automobile line, which experienced a 6.0 percent increase in average written premium and a 2.5 percent increase in written exposures. In addition, Safety’s commercial automobile line experienced an 8.2 percent increase in average written premium and a 4.3 percent increase in written exposures, while homeowners showed a 7.9 percent increase in average written premium, which was partly offset by a 0.6 percent decrease in written exposures.

Net written premiums for the three months ended June 30, 2004 increased by $16.0 million, or 11.1 percent, to $160.5 million. Net written premiums for the six months ended June 30, 2004 increased by $25.3 million, or 8.1 percent. These increases were primarily due to an increase in direct written premiums, partly offset by an increase in premiums ceded to Commonwealth Automobile Reinsurers (CAR).

GAAP loss, expense and combined ratios for the three months ended June 30, 2004 were 72.1 percent, 24.9 percent and 97.0 percent compared to 76.9 percent, 24.5% and 101.4 percent for the comparable 2003 period.

GAAP loss, expense and combined ratios for the six months ended June 30, 2004 were 74.7 percent, 24.2 percent and 98.9 percent compared to 78.8 percent, 24.3 percent and 103.1 percent for the comparable 2003 period. The second quarter 2004 and the first half of 2004 combined ratios decreased primarily as a result of an increase in average written premium and a decrease in claim frequency in the personal automobile, commercial automobile and homeowners lines of business.

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

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