Safety Insurance Group (NASDAQ:SAFT) reported earnings of $15.4 million, or $1.03 per share in the third quarter, missing the average analyst estimate by $0.01 per share, according to Reuters. Earnings were down from the year-ago period, in which the small Massachusetts-based insurer earned $1.14 per share.

The company reported that net written premiums jumped 6.2% over last year, helped by pricing and written policy growth in its commercial auto and homeowners insurance lines.

What caused the earnings miss?
Pricing is up, and written premiums are up, so where's the miss? It's all in the losses.

Safety reported a combined ratio of 96.6% this quarter, down from the 94.1% combined ratio reported last year. The difference is driven primarily by a 3 percentage point increase in its loss ratio, and a half-point decrease in its expense ratio.

There were some bright spots, though. Safety continued on its history of careful and conservative underwriting. The company reported prior-year favorable developments -- reversals of losses Safety previously expected to incur -- of $9.4 million in the third quarter.

The company has a history of reserving for more insurance losses than it experiences, resulting in later favorable developments. The practice is worthy of applause, given that it has the impact of making current earnings appear worse than they actually are.

Continuing on a "boring" history
This very sleepy insurance company has a long history of single-digit growth and profitable underwriting, which continued into the third quarter -- even if its losses were slightly higher than last year.

Admittedly, Safety's underwriting profits are more important in a low-rate environment like today. Given the company's paltry 3.8% yield on its investment portfolio at the end of the third quarter, small swings in its combined ratio have a larger impact on its bottom line than they would if interest rates were significantly higher.

Expanding your focus to the last nine months may help put this quarter in perspective. Although losses were higher than last year, Safety's combined ratio of 95.7% through September is just slightly higher than the 95% ratio during the first nine months of 2013.