Safety Announces First Quarter 2006 Results and Declares Second Quarter 2006 Dividend

Safety Insurance Group, Inc. (NASDAQ:SAFT) todayreported first quarter 2006 results. Net income for the quarter endedMarch 31, 2006 was $30.8 million, or $1.94 per diluted share, comparedto $14.5 million, or $0.92 per diluted share, for the comparable 2005period. Safety's book value per share increased to $25.89 at March 31,2006 compared to $24.57 at December 31, 2005. Safety paid $0.18 pershare in dividends to investors during the quarter ended March 31,2006 compared to $0.12 per share during the comparable 2005 period.Safety paid $0.60 per share in dividends to investors during the yearended December 31, 2005.

Direct written premiums for the quarter ended March 31, 2006decreased by $7.8 million, or 4.2%, to $178.0 million from $185.8million for the comparable 2005 period. The 2006 decrease occurredprimarily in our personal automobile line, which experienced a 6.4%decrease in average written premium. Partially offsetting the personalauto line decrease, were increases in our commercial automobile line'saverage written premium of 9.6% and our homeowners line's averagewritten premium of 7.6%.

Net written premiums for the quarter ended March 31, 2006decreased by $10.9 million, or 5.9%, to $173.3 million from $184.2million for the comparable 2005 period due to the factors thatdecreased direct written premiums combined with a decrease in premiumsassumed from Commonwealth Automobile Reinsurers ("CAR"). Net earnedpremiums for the quarter ended March 31, 2006 increased by $1.4million, or 0.9%, to $157.8 million from $156.4 million for thecomparable 2005 period.

Net investment income for the quarter ended March 31, 2006 was$9.4 million compared to $7.5 million for the comparable 2005 period.Average cash and investment securities (at cost) increased by $84.6million, or 10.5%, to $886.8 million for the quarter ended March 31,2006 from $802.2 million for the comparable 2005 period. Net effectiveannualized yield on the investment portfolio increased to 4.2% duringthe first quarter of 2006 from 3.7% during the first quarter of 2005.Our duration increased to 3.7 years at March 31, 2006 from 3.2 yearsat December 31, 2005. Net realized losses on investments was $0.1million for the quarter ended March 31, 2006 compared to net realizedgains of $0.4 million for the comparable 2005 period.

Loss, expense and combined ratios calculated under U.S. generallyaccepted accounting principles ("GAAP") for the quarter ended March31, 2006 were 54.3%, 25.6% and 79.9% compared to 70.4%, 23.4% and93.8% for the comparable 2005 period. The loss ratio improved as aresult of a decrease in personal and commercial automobile bodilyinjury and physical damage claim frequency primarily due to milderwinter weather and favorable loss development in our personalautomobile and homeowners lines prior year results. Total prior yearfavorable development included in the pre-tax results for the quarterended March 31, 2006 was $13.3 million compared to prior yearfavorable development of $8.3 million for the comparable 2005 period.

The Board of Directors today approved and declared a $0.18 pershare quarterly cash dividend on the issued and outstanding commonstock, payable on June 15, 2006 to shareholders of record at the closeof business on June 1, 2006.

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

Additional Information: Press releases, announcements, U. S.Securities and Exchange Commission ("SEC") Filings and investorinformation are available under "About Safety", "Investor Information"on our Company website located at www.SafetyInsurance.com. Safetyfiled its December 31, 2005 Form 10-K with the SEC on March 16, 2006and urges shareholders to refer to that document for more completeinformation concerning Safety's financial results.

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

This press release contains, and Safety may from time to timemake, written or oral "forward-looking statements" within the meaningof the U.S. federal securities laws.

Forward-looking statements might include one or more of thefollowing, among others:

-- Projections of revenues, income, earnings per share, capital expenditures, dividends, capital structure or other financial items;

-- Descriptions of plans or objectives of management for future operations, products or services;

-- Forecasts of future economic performance, liquidity, need for funding and income; and

-- Descriptions of assumptions underlying or relating to any of the foregoing.

Forward-looking statements can be identified by the fact that theydo not relate strictly to historical or current facts. They ofteninclude words such as "believe," "expect," "anticipate," "intend,""plan," "estimate," "aim," "projects," or words of similar meaning andexpressions that indicate future events and trends, or future orconditional verbs such as "will," "would," "should," "could," or"may". All statements that address expectations or projections aboutthe future, including statements about the Company's strategy forgrowth, product development, market position, expenditures andfinancial results, are forward looking statements.

Forward-looking statements are not guarantees of futureperformance. By their nature, forward-looking statements are subjectto risks and uncertainties. There are a number of factors, many ofwhich are beyond our control, that could cause actual futureconditions, events, results or trends to differ significantly and/ormaterially from historical results or those projected in theforward-looking statements. These factors include but are not limitedto the competitive nature of our industry and the possible adverseeffects of such competition. Although a number of national insurersthat are much larger than we are do not currently compete in amaterial way in the Massachusetts private passenger automobile market,if one or more of these companies decided to aggressively enter themarket it could have a material adverse effect on us. Othersignificant factors include conditions for business operations andrestrictive regulations in Massachusetts, the possibility of lossesdue to claims resulting from severe weather, the possibility that theCommissioner may approve future Rule changes that change the operationof the residual market, our possible need for and availability ofadditional financing, and our dependence on strategic relationships,among others, and other risks and factors identified from time to timein our reports filed with the SEC, such as those set forth under thecaption "Risk Factors" in our Form 10-K for the year ended December31, 2005 filed with the SEC on March 16, 2006.

Some other factors, such as market, operational, liquidity,interest rate, equity and other risks, are described elsewhere in ourQuarterly Reports on Form 10-Q and our Annual Reports on Form 10-K.Factors relating to the regulation and supervision of our Company arealso described or incorporated in our Quarterly Reports on Form 10-Qand our Company's Annual Report on Form 10-K filed with the SEC onMarch 16, 2006. There are other factors besides those described orincorporated in this release or in the reports on Form 10-Q and Form10-K that could cause actual conditions, events or results to differfrom those in the forward-looking statements. Readers are cautionednot to place undue reliance on these forward-looking statements, whichspeak only as of the date on which they are made. We do not undertakeany obligation to update publicly or revise any forward-lookingstatements to reflect circumstances or events that occur after thedate the forward-looking statements are made.
Safety Insurance Group, Inc. and Subsidiaries
Consolidated Balance Sheets
(Dollars in thousands, except share data)

March December
31, 31,
2006 2005
----------- -----------
(Unaudited)
Assets
Investment securities available for sale:
Fixed maturities, at fair value (amortized
cost: $811,786 and $713,930) $800,452 $712,538
Equity securities, at fair value (cost:
$3,839 and $1,895) 4,006 2,005
----------- -----------
Total investment securities 804,458 714,543
Cash and cash equivalents 94,376 163,027
Accounts receivable, net of allowance for
doubtful accounts 156,159 154,421
Accrued investment income 8,930 7,856
Taxes recoverable - 318
Receivable from reinsurers related to paid loss
and loss adjustment expenses 17,553 18,750
Receivable from reinsurers related to unpaid
loss and loss adjustment expenses 76,445 80,550
Prepaid reinsurance premiums 38,354 37,174
Deferred policy acquisition costs 48,767 45,480
Deferred income taxes 22,117 18,120
Equity and deposits in pools 16,549 14,631
Other assets 2,408 2,805
----------- -----------
Total assets $1,286,116 $1,257,675
=========== ===========

Liabilities
Loss and loss adjustment expense reserves $435,751 $450,716
Unearned premium reserves 358,284 341,562
Accounts payable and accrued liabilities 23,597 44,372
Taxes payable 10,749 -
Outstanding claims drafts 17,010 19,825
Payable to reinsurers 14,103 12,985
Payable for securities purchased 15,302 -
Capital lease obligations 210 266
----------- -----------
Total liabilities 875,006 869,726
----------- -----------

Shareholders' equity
Common stock: $0.01 par value; 30,000,000
shares authorized; 15,880,717 and 15,787,947
shares issued and outstanding, respectively 159 158

Additional paid-in capital 122,078 120,451
Accumulated other comprehensive loss, net of
taxes (7,259) (833)
Retained earnings 296,132 268,173
----------- -----------
Total shareholders' equity 411,110 387,949
----------- -----------
Total liabilities and shareholders' equity $1,286,116 $1,257,675
=========== ===========

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

For the Three Months
Ended
March 31,
-----------------------
2006 2005
----------- -----------
Net earned premiums $157,778 $156,416
Net investment income 9,378 7,459
Net realized (losses) gains on investments (74) 407
Finance and other service income 3,859 3,969
----------- -----------
Total revenue 170,941 168,251
----------- -----------

Losses and loss adjustment expenses 85,751 110,170
Underwriting, operating and related expenses 40,395 36,591
Interest expenses 24 223
----------- -----------
Total expenses 126,170 146,984
----------- -----------

Income before income taxes 44,771 21,267
Income tax expense 13,969 6,765
----------- -----------
Net income $30,802 $14,502
=========== ===========

Earnings per weighted average common share:
Basic $1.96 $.94
=========== ===========
Diluted $1.94 $.92
=========== ===========

Cash dividends paid per common share $.18 $.12
=========== ===========

Weighted average number of common shares
outstanding:
Basic 15,710,587 15,439,974
=========== ===========
Diluted 15,894,797 15,742,717
=========== ===========