SAFETY INSURANCE GROUP INC [SAFT] Filings

10-Q 1 saft-20240630x10q.htm 10-Q

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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, 2024

☐

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 1, 2024 there were 14,837,481 shares of common stock with a par value of $0.01 per share outstanding.

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SAFETY INSURANCE GROUP, INC.

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	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	23
Item 3.	Quantitative and Qualitative Information about Market Risk	41
Item 4.	Controls and Procedures	42
Part II. Other Information
Item 1	Legal Proceedings	43
Item 1A.	Risk Factors	43
Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	43
Item 3.	Defaults upon Senior Securities	43
Item 4.	Mine Safety Disclosures	43
Item 5.	Other Information	43
Item 6.	Exhibits	43
EXHIBIT INDEX		45
SIGNATURE		46

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Safety Insurance Group, Inc. and Subsidiaries

Consolidated Balance Sheets

(Dollars in thousands, except share data)


	June 30,		December 31,
	2024		2023
	(Unaudited)
Assets
Investments:
Fixed maturities, available for sale, at fair value (amortized cost: $1,120,235 and $1,120,682, allowance for expected credit losses of $1,387 and $1,208)	$	1,043,097	$	1,052,145
Equity securities, at fair value (cost: $196,039 and $221,809)		216,434		238,022
Other invested assets		154,195		133,946
Total investments		1,413,726		1,424,113
Cash and cash equivalents		44,579		38,152
Accounts receivable, net of allowance for expected credit losses of $939 and $1,053		312,361		256,687
Receivable for securities sold		2,908		124
Accrued investment income		7,281		7,261
Taxes recoverable		2,233		623
Receivable from reinsurers related to paid loss and loss adjustment expenses		27,187		13,129
Receivable from reinsurers related to unpaid loss and loss adjustment expenses		126,747		112,623
Ceded unearned premiums		35,969		32,346
Deferred policy acquisition costs		100,599		91,917
Deferred income taxes		14,328		12,150
Equity and deposits in pools		6,947		35,247
Operating lease right-of-use-assets		17,966		19,756
Goodwill		17,093		17,093
Intangible assets		7,130		7,551
Other assets		24,863		25,232
Total assets	$	2,161,917	$	2,094,004

Liabilities
Loss and loss adjustment expense reserves	$	621,637	$	603,081
Unearned premium reserves		586,577		528,150
Accounts payable and accrued liabilities		68,301		64,235
Payable for securities purchased		11,521		1,863
Payable to reinsurers		15,736		15,941
Short-term debt		30,000		—
Long-term debt		—		30,000
Operating lease liabilities		17,966		19,756
Other liabilities		—		26,711
Total liabilities		1,351,738		1,289,737

Commitments and contingencies (Note 8)

Shareholders’ equity
Common stock: $0.01 par value; 30,000,000 shares authorized; 17,993,947 and 17,949,484 shares issued		180		179
Additional paid-in capital		228,817		226,380
Accumulated other comprehensive loss, net of taxes		(59,843)		(53,191)
Retained earnings		791,318		781,192
Treasury stock, at cost: 3,157,577 shares		(150,293)		(150,293)
Total shareholders’ equity		810,179		804,267
Total liabilities and shareholders’ equity	$	2,161,917	$	2,094,004

The accompanying notes are an integral part of these financial statements.

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Safety Insurance Group, Inc. and Subsidiaries

Consolidated Statements of Operations

(Unaudited)

(Dollars in thousands, except per share data)


	Three Months Ended June 30,				Six Months Ended June 30,
	2024		2023		2024		2023

Net earned premiums	$	246,944	$	202,225	$	482,997	$	393,960
Net investment income		13,500		13,836		28,731		27,490
Earnings from partnership investments		2,480		553		4,252		2,719
Net realized gains on investments		2,715		108		3,207		841
Change in net unrealized gains on equity securities		(3,483)		6,266		4,182		7,036
Credit loss expense		(37)		(35)		(179)		(957)
Commission income		2,027		1,758		3,835		3,241
Finance and other service income		5,637		4,732		10,991		8,872
Total revenue		269,783		229,443		538,016		443,202

Losses and loss adjustment expenses		172,742		143,523		341,141		310,676
Underwriting, operating and related expenses		73,921		62,582		146,188		122,615
Other expense		1,747		1,523		3,584		3,193
Interest expense		138		348		261		558
Total expenses		248,548		207,976		491,174		437,042

Income before income taxes		21,235		21,467		46,842		6,160
Income tax expense		4,599		4,466		10,128		1,496
Net income	$	16,636	$	17,001	$	36,714	$	4,664

Earnings per weighted average common share:
Basic	$	1.13	$	1.15	$	2.49	$	0.32
Diluted	$	1.13	$	1.15	$	2.48	$	0.31

Cash dividends paid per common share	$	0.90	$	0.90	$	1.80	$	1.80

Number of shares used in computing earnings per share:
Basic		14,698,770		14,681,034		14,682,937		14,681,766
Diluted		14,722,209		14,720,520		14,709,398		14,741,076

The accompanying notes are an integral part of these financial statements.

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Safety Insurance Group, Inc. and Subsidiaries

Consolidated Statements of Comprehensive Income

(Unaudited)

(Dollars in thousands)


	Three Months Ended June 30,				Six Months Ended June 30,
	2024		2023		2024		2023
Net income	$	16,636	$	17,001	$	36,714	$	4,664

Other comprehensive income, net of tax:
Unrealized holding (losses) gains during the period, net of income tax benefit (expense) of $247, ($2,309), ($1,096) and $1,899.		928		(8,687)		(4,118)		7,147
Reclassification adjustment for net realized gains on investments included in net income, net of income tax expense of ($570), ($23), ($674) and ($177).		(2,145)		(85)		(2,534)		(664)
Other comprehensive income (loss), net of tax:		(1,217)		(8,772)		(6,652)		6,483

Comprehensive income	$	15,419	$	8,229	$	30,062	$	11,147

The accompanying notes are an integral part of these financial statements.

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Safety Insurance Group, Inc. and Subsidiaries

Consolidated Statements of Changes in Shareholders’ Equity

(Unaudited)

(Dollars in thousands)


					Accumulated
					Other
			Additional		Comprehensive						Total
	Common		Paid-in		Income (Loss),		Retained		Treasury		Shareholders’
	Stock		Capital		Net of Taxes		Earnings		Stock		Equity
Balance at December 31, 2022	$	179	$	222,049	$	(80,538)	$	815,309	$	(145,000)	$	811,999
Net loss, January 1 to March 31, 2023		—		—		—		(12,337)		—		(12,337)
Unrealized gains on securities available for sale, net of deferred federal income taxes		—		—		15,255		—		—		15,255
Restricted share awards issued		—		522		—		—		—		522
Recognition of employee share-based compensation, net of deferred federal income taxes		—		733		—		—		—		733
Dividends paid and accrued		—		—		—		(13,247)		—		(13,247)
Balance at March 31, 2023		179		223,304		(65,283)		789,725		(145,000)		802,925
Net income, April 1 to June 30, 2023		—		—		—		17,001		—		17,001
Unrealized gains on securities available for sale, net of deferred federal income taxes		—		—		(8,772)		—		—		(8,772)
Restricted share awards issued		—		72								72
Recognition of employee share-based compensation, net of deferred federal income taxes		—		1,100		—		—		—		1,100
Dividends paid and accrued		—		—		—		(13,283)		—		(13,283)
Acquisition of treasury stock		—		—		—		—		(5,293)		(5,293)
Balance at June 30, 2023	$	179	$	224,476	$	(74,055)	$	793,443	$	(150,293)	$	793,750


					Accumulated
					Other
			Additional		Comprehensive						Total
	Common		Paid-in		Income (Loss),		Retained		Treasury		Shareholders’
			Capital		Net of Taxes		Earnings		Stock		Equity
Balance at December 31, 2023	$	179	$	226,380	$	(53,191)	$	781,192	$	(150,293)	$	804,267
Net income, January 1 to March 31, 2024		—		—		—		20,078		—		20,078
Unrealized gains on securities available for sale, net of deferred federal income taxes		—		—		(5,435)		—		—		(5,435)
Restricted share awards issued		—		599		—		—		—		599
Recognition of employee share-based compensation, net of deferred federal income taxes		1		841		—		—		—		842
Dividends paid and accrued		—		—		—		(13,280)		—		(13,280)
Balance at March 31, 2024		180		227,820		(58,626)		787,990		(150,293)		807,071
Net income, April 1 to June 30, 2024		—		—		—		16,636		—		16,636
Unrealized losses on securities available for sale, net of deferred federal income taxes		—		—		(1,217)		—		—		(1,217)
Recognition of employee share-based compensation, net of deferred federal income taxes		—		997		—		—		—		997
Dividends paid and accrued		—		—		—		(13,308)		—		(13,308)
Balance at June 30, 2024	$	180	$	228,817	$	(59,843)	$	791,318	$	(150,293)	$	810,179

The accompanying notes are an integral part of these financial statements.

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Safety Insurance Group, Inc. and Subsidiaries

Consolidated Statements of Cash Flows

(Unaudited)

(Dollars in thousands)


	Six Months Ended June 30,
	2024		2023
Cash flows from operating activities:
Net income	$	36,714	$	4,664
Adjustments to reconcile net income to net cash used for operating activities:
Investment amortization, net		33		(193)
Fixed asset depreciation, net		4,613		3,339
Stock based compensation		2,438		2,428
Credit for deferred income taxes		(410)		(1,163)
Net realized gains on investments		(3,207)		(841)
Credit loss expense		179		957
Earnings from partnership investments		(2,482)		(2,403)
Change in net unrealized gains on equity securities		(4,182)		(7,036)
Changes in assets and liabilities:
Accounts receivable, net		(55,674)		(46,021)
Accrued investment income		(20)		1,012
Receivable from reinsurers		(28,182)		(17,892)
Ceded unearned premiums		(3,623)		(1,520)
Deferred policy acquisition costs		(8,682)		(8,841)
Taxes recoverable/payable		(1,610)		(4,911)
Other assets		13,156		(1,890)
Loss and loss adjustment expense reserves		18,556		15,429
Unearned premium reserves		58,427		55,413
Accounts payable and accrued liabilities		4,326		(13,920)
Payable to reinsurers		(205)		1,625
Other liabilities		(25,711)		8,326
Net cash provided by (used for) operating activities		4,454		(13,438)

Cash flows from investing activities:
Fixed maturities purchased		(71,351)		(30,126)
Short term investments purchased		—		(79)
Equity securities purchased		(24,294)		(21,382)
Other invested assets purchased		(6,935)		(12,782)
Proceeds from sales and paydowns of fixed maturities		49,891		63,243
Proceeds from maturities, redemptions, and calls of fixed maturities		28,717		5,320
Proceed from sales of equity securities		53,152		39,638
Proceeds from other invested assets redeemed		4,249		2,414
Acquisition, net of cash received		(1,000)		—
Fixed assets purchased		(3,608)		(552)
Net cash provided by investing activities		28,821		45,694

Cash flows from financing activities:
Proceeds from FHLB loan		15,000		20,000
Payments on FHLB loan		(15,000)		(20,000)
Dividends paid to shareholders		(26,848)		(26,928)
Acquisition of treasury stock		—		(5,240)
Net cash used for financing activities		(26,848)		(32,168)

Net increase in cash and cash equivalents		6,427		88
Cash and cash equivalents at beginning of year		38,152		25,300
Cash and cash equivalents at end of period	$	44,579	$	25,388

The accompanying notes are an integral part of these financial statements.

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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 (“SMC”), which is SNIA’s holding company. All intercompany commission transactions, including commission income and other expense, have been eliminated. Eliminated commission income totaled $292 and $531 for the three and six months ended June 30, 2024, respectively. As of June 30, 2024, fiduciary assets held by SNIA were immaterial and less than $150.

The financial information for the three and six months ended June 30, 2024 and 2023 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, 2023 is derived from the audited consolidated financial statements included in the Company's 2023 Annual Report on Form 10-K filed with the U.S. Securities and Exchange Commission (“SEC”) on February 28, 2024.

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 2023 Annual Report on Form 10-K filed with the SEC on February 28, 2024.

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 (together referred to as the “Insurance Subsidiaries”).

Since 1998, the Company has been a member company of the Massachusetts Property Insurance Underwriting Association (“FAIR Plan”). The FAIR Plan is a residual market insurance association in which all companies writing basic property insurance in the Commonwealth of Massachusetts are required to participate with profits and losses shared among member companies on a written premium basis. On April 1, 2024, the Massachusetts Division of Insurance approved a restructuring of the FAIR Plan (“FAIR Plan Restructuring”), transforming it from a partnership that shares profit and losses with member companies to a stand-alone, risk bearing entity, and distributing the accumulated members’ equity.

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 is effective for fiscal years starting January 1, 2024, and for interim periods starting January 1, 2025, and will be applied on a retrospective basis. The ASU will not

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have a material impact on the Company’s consolidated financial position, results of operations or cash flows, but the ASU will require additional disclosures to our 2024 annual and 2025 interim consolidated financial statements.

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 is effective for fiscal years starting January 1, 2025, and will be applied on a prospective basis. The ASU will not have a material impact on the Company’s consolidated financial position, results of operations or cash flows, but the ASU will require additional disclosures for our 2025 consolidated financial statements.

3. Earnings per Weighted Average Common Share

Basic earnings per weighted average common share (“EPS”) are calculated by dividing net income by the weighted average number of basic common shares outstanding during the period. Diluted earnings per share amounts are based on the weighted average number of common shares including non-vested performance stock grants.

The following table sets forth the computation of basic and diluted EPS for the periods indicated.


	Three Months Ended June 30,				Six Months Ended June 30,
	2024		2023		2024		2023
Earnings attributable to common shareholders - basic and diluted:
Net income from continuing operations	$	16,636	$	17,001	$	36,714	$	4,664
Allocation of income for participating shares		(73)		(78)		(162)		(21)
Net income from continuing operations attributed to common shareholders	$	16,563	$	16,923	$	36,552	$	4,643
Earnings per share denominator - basic and diluted
Total weighted average common shares outstanding, including participating shares		14,763,268		14,748,502		14,747,491		14,748,430
Less: weighted average participating shares		(64,498)		(67,468)		(64,554)		(66,664)
Basic earnings per share denominator		14,698,770		14,681,034		14,682,937		14,681,766
Common equivalent shares- non-vested performance stock grants		23,439		39,486		26,461		59,310
Diluted earnings per share denominator		14,722,209		14,720,520		14,709,398		14,741,076

Basic earnings per share	$	1.13	$	1.15	$	2.49	$	0.32
Diluted earnings per share	$	1.13	$	1.15	$	2.48	$	0.31

Undistributed earnings attributable to common shareholders - basic and diluted:
Net income from continuing operations attributable to common shareholders -Basic	$	1.13	$	1.15	$	2.49	$	0.32
Dividends declared		(0.90)		(0.90)		(1.80)		(1.80)
Undistributed earnings	$	0.23	$	0.25	$	0.69	$	(1.48)

Net income from continuing operations attributable to common shareholders -Diluted	$	1.13	$	1.15	$	2.48	$	0.31
Dividends declared		(0.90)		(0.90)		(1.80)		(1.80)
Undistributed earnings	$	0.23	$	0.25	$	0.68	$	(1.49)

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 190 anti-dilutive shares related to non-vested stock grants for the three months ended June 30, 2024 and 2,731 anti-dilutive shares related to non-vested stock grants for the three months ended June 30, 2023, respectively. There were no anti-dilutive shares related to non-vested stock grants for the six months ended June 30, 2024 and 2023, respectively.

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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.

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, 2024, there were 366,422 shares available for future grant.

Accounting and Reporting for Stock-Based Awards

Accounting Standards Codification (“ASC”) 718, Compensation — Stock Compensation, requires the Company to measure and recognize the cost of employee services received in exchange for an award of equity instruments. Under the provisions of ASC 718, share-based compensation cost is measured at the grant date, based on the fair value of the award, and is recognized as an expense over the requisite service period (generally the vesting period of the equity grant).

Restricted Stock

Service-based restricted stock awarded in the form of unvested shares is recorded at the market value of the Company’s common stock on the grant date and amortized ratably as compensation expense over the requisite service period. Service-based restricted stock awards generally vest over a 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

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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, 2024 assuming a target payout for the 2024 performance-based shares.


	Shares	Weighted		Performance-based		Weighted
	Under	Average		Shares Under		Average
	Restriction	Fair Value		Restriction		Fair Value
Outstanding at beginning of year	66,929	$	81.58	78,991		$	81.40
Granted	38,221		85.61	25,390	(1)		85.61
Vested and unrestricted	(38,971)		82.03	(13,912)			79.27
Forfeited	(1,784)		81.93	(17,364)			79.91
Outstanding at end of period	64,395	$	83.68	73,105		$	83.62

(1)	Includes an update of previously awarded performance-based restricted share awards. The updated shares were calculated based on the attainment of pre-established performance objectives and granted under the Amended 2018 Plan.

As of June 30, 2024, there was $6,776 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, 2024 and 2023 was $4,300 and $5,456, respectively. For the six months ended June 30, 2024 and 2023, the Company recorded compensation expense related to restricted stock of $1,926 and $1,918, net of income tax benefits of $512 and $510, 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, 2024

Cost or

Allowance for

Gross Unrealized

Estimated

Amortized

Expected Credit

Fair

Cost

Losses

Gains

Losses (3)

Value

U.S. Treasury securities

2,419

—

(114)

2,306

Obligations of states and political subdivisions

38,470

—

189

(2,674)

35,985

Residential mortgage-backed securities (1)

279,750

—

698

(26,690)

253,758

Commercial mortgage-backed securities

144,908

—

(13,814)

131,164

Other asset-backed securities

52,265

—

159

(2,369)

50,055

Corporate and other securities

602,423

(1,387)