The selected historical consolidated financial data for the years ended December 31, 2004, 2003 and 2002 and as of December 31, 2004 and 2003 have been derived from the financial statements of Safety Insurance Group, Inc. included in this annual report which have been audited by PricewaterhouseCoopers LLP, an independent registered public accounting firm. The selected historical consolidated financial data as of December 31, 2002 and 2001 and for the successor period October 16, 2001 to December 31, 2001 and for the predecessor period January 1, 2001 to October 15, 2001 have been derived from Safety Insurance Group, Inc.'s consolidated financial statements not included in this
(3)The loss ratio is the ratio of losses and loss adjustment expenses to net earned premiums. The expense ratio, when calculated on a statutory accounting basis, is the ratio of underwriting expenses to net written premiums, and when calculated on a GAAP basis is the ratio of underwriting expense to net earned premiums. The combined ratio is the sum of the loss ratio and the expense ratio. Please refer to page 36 for a discussion on the comparison of the above statutory insurance ratios to our GAAP ratios.
On December 31, 2004, the Commissioner approved new rules for CAR, which became effective on January 1, 2005 (the "Approved Rules"). The Approved Rules replace CAR with an assigned insurance plan, the "Massachusetts Assigned Insurance Plan" (the "MAIP"), similar to those employed in 42 other states. The Approved Rules consist of two parts. One part applies to the operation of the MAIP, which will be phased in during 2006 and 2007 and which will fully replace CAR beginning January 1, 2008. The MAIP will provide for random and equitable distribution to companies of risks unable to obtain insurance in the voluntary market. The second part of the Approved Rules consists of a series of transition rules that are scheduled to take effect in 2005, 2006 and 2007. The Approved Rules include the following provisions:
•Risks that are accident and violation free during the prior three years (so called "Clean in 3") are not eligible for placement in MAIP.
Association (FNMA). The total of these fixed maturity securities was $121,833 at fair value and $120,928 at amortized cost as of December 31, 2003. As such, the asset-backed securities presented exclude such issuers already presented under U.S. Treasury securities and obligations of U.S. Government Agencies.
The gross unrealized appreciation (depreciation) of investments in fixed maturities securities, including redeemable preferred stocks that have characteristics of fixed maturities, and equity securities, including interests in mutual funds, was as follows:
During the year ended December 31, 2004, there was no significant deterioration in the credit quality of any of the Company's holdings and no other-than-temporary impairment charges were recorded related to the Company's portfolio of investment securities. However, during the year ended December 31, 2003, there was a significant deterioration in the credit quality of one of the Company's holdings, Continental Airlines. Accordingly, the Company recorded an other-than-temporary impairment of $837 for this security. During May 2003, this security was sold at a realized gain of $426. During the year ended December 31, 2002, there was a significant deterioration in the credit quality of two of the Company's holdings in the telecommunications sector. The Company recognized a realized loss of $2,020 for one of these securities, which was sold in June 2002. In addition, the Company recorded an other-than-temporary impairment charge of $1,043 for the other telecommunications security. During September 2002, this security was sold at a realized loss of $79.
Grants outstanding under the Incentive Plan as of December 31, 2004 were comprised of 70,271 restricted shares and 711,410 nonqualified stock options. There were no forfeitures of restricted stock during 2004. The following table summarizes option activity during 2004 and 2003: