BRANCHVILLE, N.J., Oct. 26, 2016 /PRNewswire/ --
In the third quarter of 2016:
- Net premiums written grew 6%
- GAAP combined ratio was 94.1%
- Statutory combined ratio was 92.9%
- After-tax net investment income was $25
million
- Total return on equity was 9.8% and operating return on
equity1 was 9.2%
Selective Insurance Group, Inc. (NASDAQ: SIGI) today reported
its financial results for the third quarter ended September 30, 2016. Net income per diluted
share was $0.66, compared to
$0.81 a year ago, and operating
income1 per diluted share declined 23% to $0.62, compared to $0.81 a year ago.
"In the third quarter, we reported a 92.9% statutory combined
ratio, or 91.0% excluding catastrophe losses," said Gregory E. Murphy, Chairman and Chief Executive
Officer. "Growth in the quarter remains solid with a 6%
increase in overall net premiums written driven by steady
retention, new business, and a 2.8% renewal pure price increase in
our standard lines. As the market turns more competitive, we will
remain focused on generating profitable growth. Our
industry-leading relationships with our ivy league agent partners,
and sophisticated technology and underwriting capabilities position
us to continue to generate strong results. We remain committed to
investing in our best in class employee base that supports our
strategic focus on a superior customer experience."
Murphy continued, "Balancing our growth and profitability
objectives is a key strategic priority for Selective. Our core
standard commercial and personal lines results remain extremely
strong. The targeted underwriting initiatives we have been
implementing in our excess and surplus lines should position this
segment for improved results in the coming years. We reported our
best statutory underwriting margins in 2015, and for the first nine
months our results have been 110 basis points better than the same
period a year ago. Reflecting our strong results, we have increased
the dividend on our common stock by 7%. As we look to 2017 and
beyond, I am confident that we have the right people and tools in
place to allow us to continue to generate superior results."
Consolidated
Financial Results
$ in millions,
except per share data
|
Quarter
Ended
September
30,
|
Change
|
Year-to-date
September
30,
|
Change
|
2016
|
2015
|
2016
|
2015
|
Net premiums
written
|
$578.8
|
$545.0
|
6%
|
$1,722.3
|
$1,595.2
|
8%
|
Net premiums
earned
|
$542.4
|
$507.4
|
7%
|
$1,596.8
|
$1,473.8
|
8%
|
Net investment income
earned
|
$33.4
|
$32.1
|
4%
|
$95.3
|
$91.2
|
5%
|
Net realized gains,
pre-tax
|
$3.7
|
$0.3
|
1097%
|
$2.7
|
$15.8
|
(83)%
|
Total
revenues
|
$581.7
|
$540.5
|
8%
|
$1,701.9
|
$1,586.3
|
7%
|
Operating
income1
|
$36.1
|
$46.8
|
(23)%
|
$117.3
|
$110.2
|
6%
|
Net realized gains,
net of tax
|
$2.4
|
$0.2
|
1099%
|
$1.8
|
$10.3
|
(83)%
|
Net income
|
$38.5
|
$47.0
|
(18)%
|
$119.1
|
$120.5
|
(1)%
|
Statutory combined
ratio
|
92.9%
|
90.5%
|
2.4 pts
|
91.2%
|
92.3%
|
(1.1) pts
|
Catastrophe
losses
|
1.9 pts
|
1.3 pts
|
0.6 pts
|
2.1 pts
|
3.8 pts
|
(1.7) pts
|
Non-catastrophe
property losses
|
14.5 pts
|
12.9 pts
|
1.6 pts
|
13.1 pts
|
14.0 pts
|
(0.9) pts
|
(Favorable) prior
year statutory reserve development on casualty lines
|
(3.5) pts
|
(3.0) pts
|
(0.5) pts
|
(2.9) pts
|
(3.7) pts
|
0.8 pts
|
GAAP combined
ratio
|
94.1%
|
91.2%
|
2.9 pts
|
92.7%
|
93.2%
|
(0.5) pts
|
Operating income per
diluted share1
|
$0.62
|
$0.81
|
(23)%
|
$2.00
|
$1.90
|
5%
|
Net income per
diluted share
|
$0.66
|
$0.81
|
(19)%
|
$2.03
|
$2.08
|
(2)%
|
Weighted average
diluted shares
|
58.7M
|
58.0M
|
1%
|
58.6M
|
57.8M
|
1%
|
Book value per
share
|
|
|
|
$27.22
|
$23.77
|
15%
|
1Operating income differs from net income by the
exclusion of realized gains and losses on investments. It is used
as an important financial measure by management,
analysts, and investors, because the realization of investment
gains and losses on sales in any given period is largely
discretionary as to timing. In addition, these investment gains and
losses, as well as other-than-temporary investment impairments that
are charged to earnings and the results of discontinued operations,
could distort the analysis of trends. Operating income is not
intended as a substitute for net income prepared in accordance with
U.S. generally accepted accounting principles (GAAP). A
reconciliation of operating income to net income is provided in the
Consolidated Financial Results table. Statutory data is prepared in
accordance with statutory accounting rules as defined by the
National Association of Insurance Commissioners Accounting
Practices and Procedures Manual and, therefore, is not reconciled
to GAAP.
Note: All amounts included in this release exclude intercompany
transactions.
Operating Highlights
Standard Commercial Lines
Standard Commercial Lines premiums were up 9% in the third
quarter, reflecting renewal pure price increases of 2.5%, steady
retention of 84%, and a 6% increase in new business, to
$89 million. The quarter's
statutory combined ratio deteriorated by 3.6 points, to 92.0%, due
to catastrophe and non-catastrophe property losses that were higher
compared to the prior year period by 1.3 points and 2.5 points,
respectively.
Standard
Commercial Lines
$ in millions,
statutory results
|
Quarter
Ended
September
30,
|
Change
|
Year-to-date
September
30,
|
Change
|
2016
|
2015
|
2016
|
2015
|
Net premiums
written
|
$449.5
|
$414.0
|
9%
|
$1,353.6
|
$1,240.1
|
9%
|
Net premiums
earned
|
$421.6
|
$389.5
|
8%
|
$1,235.8
|
$1,132.3
|
9%
|
Statutory loss &
loss expense ratio
|
56.5%
|
52.2%
|
4.3 pts
|
55.2%
|
54.7%
|
0.5 pts
|
Statutory
underwriting expense ratio
|
35.4%
|
35.7%
|
(0.3) pts
|
34.6%
|
34.2%
|
0.4 pts
|
Statutory dividends
to policyholders ratio
|
0.1%
|
0.5%
|
(0.4) pts
|
0.3%
|
0.5%
|
(0.2)
pts
|
Statutory combined
ratio
|
92.0%
|
88.4%
|
3.6 pts
|
90.1%
|
89.4%
|
0.7 pts
|
GAAP combined
ratio
|
92.9%
|
88.7%
|
4.2 pts
|
91.8%
|
90.3%
|
1.5 pts
|
Standard Personal Lines
Standard Personal Lines premiums were down slightly compared to
the third quarter of 2015, retention remained consistent at 83%,
and renewal pure price was 4.7%.
The statutory combined ratio in the third quarter for Standard
Personal Lines was 92.0%, a 3.0 point improvement from the same
period last year. The profitable combined ratio in the
current quarter benefited from catastrophe losses that were 4.4
points lower than the prior year period.
Standard Personal
Lines
$ in millions,
statutory results
|
Quarter
Ended
September
30,
|
Change
|
Year-to-date
September
30,
|
Change
|
2016
|
2015
|
2016
|
2015
|
Net premiums
written
|
$76.2
|
$76.9
|
(1)%
|
$213.8
|
$217.9
|
(2)%
|
Net premiums
earned
|
$68.7
|
$72.1
|
(5)%
|
$209.7
|
$216.6
|
(3)%
|
Statutory loss &
loss expense ratio
|
60.7%
|
68.7%
|
(8.0) pts
|
58.9%
|
72.4%
|
(13.5) pts
|
Statutory
underwriting expense ratio
|
31.3%
|
26.3%
|
5.0 pts
|
31.8%
|
29.3%
|
2.5 pts
|
Statutory combined
ratio
|
92.0%
|
95.0%
|
(3.0) pts
|
90.7%
|
101.7%
|
(11.0) pts
|
GAAP combined
ratio
|
93.8%
|
96.1%
|
(2.3) pts
|
90.9%
|
102.0%
|
(11.1) pts
|
Excess and Surplus Lines
Excess and Surplus Lines net premiums written decreased by 2% in
the quarter, with a 5.8% overall pure price increase for the
segment. The statutory combined ratio in the third quarter
was 101.4%, which was 0.3 points higher than last year. The
combined ratio in the quarter included catastrophe and
non-catastrophe property losses that were 4.1 points higher, in the
aggregate, and a 3.7 point increase in current year loss costs.
Offsetting these items was unfavorable prior year casualty
reserve development of 8.6 points in the third quarter of 2015,
compared to no prior year casualty reserve development in third
quarter 2016. Continual efforts to improve margins include
shifting our mix of business, claims improvements, and more
aggressive price increases on challenged segments.
Excess and Surplus
Lines
$ in millions,
statutory results
|
Quarter
Ended
September
30,
|
Change
|
Year-to-date
September
30,
|
Change
|
2016
|
2015
|
2016
|
2015
|
Net premiums
written
|
$53.0
|
$54.1
|
(2)%
|
$154.9
|
$137.2
|
13%
|
Net premiums
earned
|
$52.2
|
$45.8
|
14%
|
$151.3
|
$124.9
|
21%
|
Statutory loss &
loss expense ratio
|
70.0%
|
69.9%
|
0.1 pts
|
69.5%
|
68.3%
|
1.2 pts
|
Statutory
underwriting expense ratio
|
31.4%
|
31.2%
|
0.2 pts
|
31.4%
|
33.5%
|
(2.1) pts
|
Statutory combined
ratio
|
101.4%
|
101.1%
|
0.3 pts
|
100.9%
|
101.8%
|
(0.9) pts
|
GAAP combined
ratio
|
104.5%
|
104.4%
|
0.1 pts
|
102.3%
|
104.0%
|
(1.7) pts
|
Investment Income
After-tax investment income in the third quarter was
$25 million, up 1% compared to a year
ago. Pre-tax income increased 6% on our fixed income
securities, which represent 92% of our portfolio, as a higher asset
base and modestly increased allocation to high yield securities
more than offset lower rates.
Investments
$ in millions,
except per share data
|
Quarter
Ended
September
30,
|
Change
|
Year-to-date
September
30,
|
Change
|
2016
|
2015
|
2016
|
2015
|
Invested assets per
dollar of stockholders' equity
|
|
|
|
$3.41
|
$3.69
|
(8)%
|
Net investment income
earned, after-tax
|
$24.9
|
$24.6
|
1%
|
$72.0
|
$70.5
|
2%
|
Net investment income
per share
|
$0.42
|
$0.42
|
-
|
$1.23
|
$1.22
|
1%
|
Effective tax
rate
|
25.4%
|
23.4%
|
2.0 pts
|
24.5%
|
22.7%
|
1.8 pts
|
Average
yields:
|
|
|
|
|
|
|
Fixed Income
Securities:
|
|
|
|
|
|
|
Pre-tax
|
|
|
|
2.7%
|
2.7%
|
-
|
After-tax
|
|
|
|
2.0%
|
2.1%
|
(0.1) pts
|
Portfolio:
|
|
|
|
|
|
|
Pre-tax
|
|
|
|
2.4%
|
2.5%
|
(0.1) pts
|
After-tax
|
|
|
|
1.8%
|
1.9%
|
(0.1) pts
|
Balance Sheet
Balance
Sheet
$ in millions,
except per share data
|
September
30,
|
December
31,
|
Change
|
2016
|
2015
|
Total
assets
|
$7,363.2
|
$6,904.4
|
7%
|
Total
Investments
|
$5,368.4
|
$5,089.3
|
5%
|
Debt
|
$423.6
|
$388.2
|
9%
|
Statutory
surplus
|
$1,551.2
|
$1,426.3
|
9%
|
Stockholders'
equity
|
$1,574.9
|
$1,398.0
|
13%
|
Book value per
share
|
$27.22
|
$24.37
|
12%
|
The increase in book value per share reflects year-to-date net
income of $2.03 and a $1.19 increase in unrealized investment gains,
partially offset by $0.45 in
stockholders' dividends.
Selective's Board of Directors declared a 7% increase to the
quarterly cash dividend on common stock to $0.16 per share, that is payable December 1, 2016, to stockholders of record as of
November 15, 2016.
Guidance
In the first nine months of 2016, our statutory combined ratio
was 91.2%, which included 2.1 points of catastrophe losses and 2.9
points of favorable prior year casualty reserve development.
Based on these results, we provide the following expectations
for full-year 2016:
- A statutory combined ratio excluding catastrophes of
approximately 89.5%. This assumes no fourth quarter prior year
casualty reserve development;
- Catastrophe losses of 3.0 points, down from our previous
guidance of 3.5 points;
- After-tax investment income of approximately $95 million; and
- Weighted average shares of approximately 58.5
million.
Included in the catastrophe loss guidance is our estimate for
Hurricane Matthew, which impacted the Southern United States in October 2016, of a range of $10 - $14 million.
On October 25, 2016, S&P
Global Ratings ("S&P") upgraded our financial strength rating
to "A" from "A-" with a stable outlook. This rating reflects
S&P's view of our strong business risk profile and strong
financial risk profile, built on our strong competitive position
and very strong capital and earnings. In addition, our stable
outlook reflects S&P's expectation that we will sustain our
strong competitive position and operating performance.
The supplemental investor package, including financial
information that is not part of this press release, is available on
the Investors page of Selective's website at www.Selective.com.
Selective's quarterly analyst conference call will be simulcast at
8:30 a.m. ET, on Thursday, October 27, 2016 at www.Selective.com.
The webcast will be available for rebroadcast until the close of
business on November 28, 2016.
About Selective Insurance Group, Inc.
Selective Insurance Group, Inc. is a holding company for ten
property and casualty insurance companies rated "A" (Excellent) by
A.M. Best. Through independent agents, the insurance companies
offer standard and specialty insurance for commercial and personal
risks, and flood insurance underwritten by the National Flood
Insurance Program. Selective maintains a website at
www.Selective.com.
Forward-Looking Statements
In this press release, Selective and its management discuss and
make statements based on currently available information regarding
their intentions, beliefs, current expectations and projections
regarding Selective's future operations and performance.
Certain statements in this report, including information
incorporated by reference, are "forward-looking statements" as that
term is defined in the Private Securities Litigation Reform Act of
1995 ("PSLRA"). The PSLRA provides a safe harbor under the
Securities Act of 1933 and the Securities Exchange Act of 1934 for
forward-looking statements. These statements relate to our
intentions, beliefs, projections, estimations or forecasts of
future events or our future financial performance and involve known
and unknown risks, uncertainties and other factors that may cause
our or our industry's actual results, levels of activity, or
performance to be materially different from those expressed or
implied by the forward-looking statements. In some cases, you can
identify forward-looking statements by use of words such as "may,"
"will," "could," "would," "should," "expect," "plan," "anticipate,"
"target," "project," "intend," "believe," "estimate," "predict,"
"potential," "pro forma," "seek," "likely" or "continue" or other
comparable terminology. These statements are only predictions, and
we can give no assurance that such expectations will prove to be
correct. We undertake no obligation, other than as may be required
under the federal securities laws, to publicly update or revise any
forward-looking statements, whether as a result of new information,
future events or otherwise.
Factors that could cause our actual results to differ materially
from those projected, forecasted or estimated by us in
forward-looking statements, include, but are not limited to:
- difficult conditions in global capital markets and the
economy;
- deterioration in the public debt and equity markets and private
investment marketplace that could lead to investment losses and
fluctuations in interest rates;
- ratings downgrades could affect investment values and,
therefore, statutory surplus;
- the adequacy of our loss reserves and loss expense
reserves;
- the frequency and severity of natural and man-made catastrophic
events, including, but not limited to, hurricanes, tornadoes,
windstorms, earthquakes, hail, terrorism, explosions, severe winter
weather, floods and fires;
- adverse market, governmental, regulatory, legal or judicial
conditions or actions;
- the concentration of our business in the Eastern Region;
- the cost and availability of reinsurance;
- our ability to collect on reinsurance and the solvency of our
reinsurers;
- uncertainties related to insurance premium rate increases and
business retention;
- changes in insurance regulations that impact our ability to
write and/or cease writing insurance policies in one or more
states;
- recent federal financial regulatory reform provisions that
could pose certain risks to our operations;
- our ability to maintain favorable ratings from rating agencies,
including A.M. Best, Standard & Poor's, Moody's and Fitch;
- our entry into new markets and businesses; and
- other risks and uncertainties we identify in filings with the
United States Securities and Exchange Commission, including, but
not limited to, our Annual Report on Form 10-K and other periodic
reports.
These risk factors may not be exhaustive. We operate in a
continually changing business environment, and new risk factors
emerge from time-to-time. We can neither predict such new risk
factors nor can we assess the impact, if any, of such new risk
factors on our businesses or the extent to which any factor or
combination of factors may cause actual results to differ
materially from those expressed or implied in any forward-looking
statements in this report. In light of these risks, uncertainties
and assumptions, the forward-looking events discussed in this
report might not occur.
Selective's SEC filings can be accessed through the Investors
page of Selective's website, www.Selective.com, or through the
SEC's EDGAR Database at www.sec.gov (Selective EDGAR CIK No.
0000230557).
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SOURCE Selective Insurance Group, Inc.