BRANCHVILLE, N.J., Feb. 2, 2017 /PRNewswire/ --
In the fourth quarter of 2016:
- Net premiums written grew 9%
- GAAP combined ratio was 93.6%
- Statutory combined ratio was 93.4%
- After-tax net investment income was $26
million
- Annualized return on average equity ("ROE") was 10.1% and
operating ROE1 was 11.4%
Selective Insurance Group, Inc. (NASDAQ: SIGI) today reported
its financial results for the fourth quarter ended December 31, 2016. Net income per diluted
share was $0.67, compared to
$0.78 a year ago, and operating
income1 per diluted share was $0.75, compared to $0.81 a year ago.
"We are very proud of our financial results, including our
full-year operating ROE of 11%, which is in line with our long-term
financial targets," said Gregory E.
Murphy, Chairman and Chief Executive Officer. "We had
another record year of underwriting profitability even as we grew
our business in 2016 by an impressive 8%, well above industry
growth. In addition, net premiums growth reflected standard
commercial lines price increases averaging 2.6% in 2016, strong
retention rates, and new business opportunities."
Mr. Murphy continued, "Looking back on our 90-year history, I am
particularly gratified that Selective today is in its strongest
position from financial and strategic perspectives. We are
proud of our track record of generating solid returns for our
shareholders over time. This has only been achievable due to
our strong relationships with 'ivy league' distribution partners
and best in class employees who strive each day to serve our agents
and customers efficiently. We will continue to invest in the
tools and technologies required to achieve our long-term operating
ROE target."
Consolidated
Financial Results
$ in millions,
except per share data
|
Quarter
Ended
December
31,
|
Change
|
Year
Ended
December
31,
|
Change
|
2016
|
2015
|
2016
|
2015
|
Net premiums
written
|
$515.0
|
$474.7
|
9%
|
$2,237.3
|
$2,069.9
|
8%
|
Net premiums
earned
|
$552.8
|
$516.1
|
7%
|
$2,149.6
|
$1,989.9
|
8%
|
Net investment income
earned
|
$35.4
|
$30.1
|
18%
|
$130.8
|
$121.3
|
8%
|
Net realized (losses)
gains, pre-tax
|
$(7.7)
|
$(2.6)
|
(196)%
|
$(4.9)
|
$13.2
|
(137)%
|
Total
revenues
|
$582.4
|
$545.5
|
7%
|
$2,284.3
|
$2,131.9
|
7%
|
Net underwriting
income, after-tax
|
$22.9
|
$31.9
|
(28)%
|
$98.8
|
$96.9
|
2%
|
Net investment
income, after-tax
|
$26.4
|
$23.3
|
13%
|
$98.4
|
$93.8
|
5%
|
Net income
|
$39.4
|
$45.4
|
(13)%
|
$158.5
|
$165.9
|
(4)%
|
Operating
income1
|
$44.4
|
$47.1
|
(6)%
|
$161.7
|
$157.3
|
3%
|
GAAP combined
ratio
|
93.6%
|
90.5%
|
3.1 pts
|
92.9%
|
92.5%
|
0.4 pts
|
Statutory combined
ratio
|
93.4%
|
93.2%
|
0.2 pts
|
91.8%
|
92.4%
|
(0.6) pts
|
Catastrophe
losses
|
4.8 pts
|
0.6 pts
|
4.2 pts
|
2.8 pts
|
3.0 pts
|
(0.2) pts
|
Non-catastrophe
property losses
|
12.7 pts
|
11.4 pts
|
1.3 pts
|
13.0 pts
|
13.3 pts
|
(0.3) pts
|
(Favorable) prior
year statutory reserve development on casualty lines
|
(4.2) pts
|
(2.3) pts
|
(1.9) pts
|
(3.2) pts
|
(3.4) pts
|
0.2 pts
|
Net income per
diluted share
|
$0.67
|
$0.78
|
(14)%
|
$2.70
|
$2.85
|
(5)%
|
Operating income per
diluted share1
|
$0.75
|
$0.81
|
(7)%
|
$2.75
|
$2.70
|
2%
|
Weighted average
diluted shares
|
58.9M
|
58.4M
|
1%
|
58.7M
|
58.2M
|
1%
|
Book value per
share
|
|
|
|
$26.42
|
$24.37
|
8%
|
Operating Highlights
Standard Commercial Lines
Standard Commercial Lines premiums, which represent 78% of total
net premiums written, were up 10% in the fourth quarter, reflecting
renewal pure price increases of 2.7%, steady retention of 84%, and
a 10% increase in new business to $85
million. The quarter's statutory combined ratio was
89.5% compared to 89.2% last year. Catastrophe losses,
primarily related to Hurricane Matthew and the Tennessee wildfires, accounted for 3.2 points
on the statutory combined ratio in the fourth quarter compared to
0.3 points in the fourth quarter last year. Favorable prior
year casualty reserve development, driven by the workers'
compensation and general liability lines of business, accounted for
6.6 points on the statutory combined ratio in the fourth quarter,
relative to 5.0 points in the year ago period.
For full year 2016, premiums were up 9% driven by a 5% increase
in new business and renewal pure price increases of 2.6%. The
statutory combined ratio was 89.9% compared to 89.2% last
year. Favorable prior year casualty reserve development,
driven by the workers' compensation and general liability lines of
business accounted for 4.7 points on the statutory combined ratio
during the year, relative to 5.3 points last year.
Standard
Commercial Lines
$ in millions,
statutory results
|
Quarter
Ended
December
31,
|
Change
|
Year Ended
December 31,
|
Change
|
2016
|
2015
|
2016
|
2015
|
Net premiums
written
|
$392.2
|
$356.9
|
10%
|
$1,745.8
|
$1,597.0
|
9%
|
Net premiums
earned
|
$429.7
|
$397.2
|
8%
|
$1,665.5
|
$1,529.4
|
9%
|
GAAP combined
ratio
|
89.5%
|
86.1%
|
3.4 pts
|
91.2%
|
89.2%
|
2.0 pts
|
Statutory loss &
loss expense ratio
|
53.6%
|
50.2%
|
3.4 pts
|
54.8%
|
53.6%
|
1.2 pts
|
Statutory
underwriting expense ratio
|
35.9%
|
38.8%
|
(2.9) pts
|
34.9%
|
35.2%
|
(0.3) pts
|
Statutory dividends
to policyholders ratio
|
-
|
0.2%
|
(0.2) pts
|
0.2%
|
0.4%
|
(0.2) pts
|
Statutory combined
ratio
|
89.5%
|
89.2%
|
0.3 pts
|
89.9%
|
89.2%
|
0.7 pts
|
Catastrophe
losses
|
3.2 pts
|
0.3 pts
|
2.9 pts
|
2.1 pts
|
2.2 pts
|
(0.1) pts
|
(Favorable) prior
year statutory reserve development on casualty lines
|
(6.6) pts
|
(5.0) pts
|
(1.6) pts
|
(4.7) pts
|
(5.3) pts
|
0.6 pts
|
Standard Personal Lines
Standard Personal Lines premiums, which represent 13% of total
net premiums written, increased 3% compared to the fourth quarter
of 2015, largely driven by higher levels of new business. The
statutory combined ratio in the fourth quarter for Standard
Personal Lines was 108.5%, a 13.8 point increase from the same
period last year. Similar to our Standard Commercial Lines,
this segment was impacted by Hurricane Matthew and the Tennessee wildfires. In total,
catastrophe losses were 16.0 points in the fourth quarter of 2016
compared to 1.9 points in the fourth quarter last year.
For full year 2016, premiums were down 1%. The statutory
combined ratio was 95.2%, a 4.7 point decrease from last year.
The improvement was largely driven by a reduction in
non-catastrophe property losses of $16
million, or 4.9 points.
Standard Personal
Lines
$ in millions,
statutory results
|
Quarter
Ended
December
31,
|
Change
|
Year Ended
December 31,
|
Change
|
2016
|
2015
|
2016
|
2015
|
Net premiums
written
|
$68.1
|
$66.0
|
3%
|
$281.8
|
$283.9
|
(1)%
|
Net premiums
earned
|
$70.9
|
$71.5
|
(1)%
|
$280.6
|
$288.1
|
(3)%
|
GAAP combined
ratio
|
109.3%
|
92.1%
|
17.2 pts
|
95.6%
|
99.5%
|
(3.9) pts
|
Statutory loss &
loss expense ratio
|
76.5%
|
61.2%
|
15.3 pts
|
63.4%
|
69.6%
|
(6.2) pts
|
Statutory
underwriting expense ratio
|
32.0%
|
33.5%
|
(1.5) pts
|
31.8%
|
30.3%
|
1.5 pts
|
Statutory combined
ratio
|
108.5%
|
94.7%
|
13.8 pts
|
95.2%
|
99.9%
|
(4.7) pts
|
Catastrophe
losses
|
16.0 pts
|
1.9 pts
|
14.1 pts
|
6.5 pts
|
7.5 pts
|
(1.0) pts
|
Unfavorable
(Favorable) prior year statutory reserve development on casualty
lines
|
3.5 pts
|
(2.8) pts
|
6.3 pts
|
0.9 pts
|
(0.7) pts
|
1.6 pts
|
Excess and Surplus Lines
Excess and Surplus Lines premiums, which accounted for 9% of
total net premiums written, increased by 6% in the quarter.
The principal drivers of net premiums written growth were a
4.6% overall price increase for the segment coupled with a 10%
increase in new business. The statutory combined ratio for
the fourth quarter was 105.5%, which was 20.1 points lower than a
year ago. The improvement was principally driven by a 15.3
point reduction in adverse prior year casualty reserve
development. Additionally, lower current year loss costs were
partially offset by higher catastrophe losses in this segment.
Efforts to improve margins include shifting our mix of
business, improving claims outcomes, and implementing more
aggressive price increases in challenged segments.
For full year 2016, premiums were up 11%. The statutory
combined ratio improved to 102.1% from 2015's 108.4%, which was
driven by lower unfavorable prior year reserve development of
$6 million, or 2.9 points, compared
to $16 million, or 9.3 points, last
year.
Excess and Surplus
Lines
$ in millions,
statutory results
|
Quarter
Ended
December
31,
|
Change
|
Year Ended
December 31,
|
Change
|
2016
|
2015
|
2016
|
2015
|
Net premiums
written
|
$54.8
|
$51.8
|
6%
|
$209.7
|
$189.0
|
11%
|
Net premiums
earned
|
$52.1
|
$47.4
|
10%
|
$203.5
|
$172.3
|
18%
|
GAAP combined
ratio
|
106.6%
|
124.8%
|
(18.2) pts
|
103.4%
|
109.8%
|
(6.4) pts
|
Statutory loss &
loss expense ratio
|
73.5%
|
91.6%
|
(18.1) pts
|
70.5%
|
74.7%
|
(4.2) pts
|
Statutory
underwriting expense ratio
|
32.0%
|
34.0%
|
(2.0) pts
|
31.6%
|
33.7%
|
(2.1) pts
|
Statutory combined
ratio
|
105.5%
|
125.6%
|
(20.1) pts
|
102.1%
|
108.4%
|
(6.3) pts
|
Catastrophe
losses
|
3.1 pts
|
1.0 pts
|
2.1 pts
|
3.2 pts
|
1.9 pts
|
1.3
pts
|
Unfavorable prior
year statutory reserve development on casualty lines
|
5.8 pts
|
21.1 pts
|
(15.3) pts
|
2.9 pts
|
9.3 pts
|
(6.4) pts
|
Investment Income
After-tax investment income in the fourth quarter was
$26 million, up 13% compared to a
year ago. For full year 2016, after-tax investment income was
$98 million, up 5% from the prior
year. The improvements in both periods were driven by returns
on our alternative investment portfolio, coupled with a higher
invested asset base from cash flow from operations, and a slightly
increased allocation to high yield fixed income securities.
After-tax new money yields averaged 2.09% in 2016.
Investments
$ in millions,
except per share data
|
Quarter
Ended
December
31,
|
Change
|
Year
Ended
December
31,
|
Change
|
2016
|
2015
|
2016
|
2015
|
Net investment income
earned, after-tax
|
$26.4
|
$23.3
|
13%
|
$98.4
|
$93.8
|
5%
|
Net investment income
per share
|
$0.45
|
$0.40
|
13%
|
$1.68
|
$1.61
|
4%
|
Effective tax
rate
|
25.5%
|
22.6%
|
2.9 pts
|
24.7%
|
22.7%
|
2.0 pts
|
Average
yields:
|
|
|
|
|
|
|
Fixed Income
Securities:
|
|
|
|
|
|
|
|
Pre-tax
|
|
|
|
2.7%
|
2.7%
|
-
|
|
After-tax
|
|
|
|
2.0%
|
2.1%
|
(0.1) pts
|
Portfolio:
|
|
|
|
|
|
|
|
Pre-tax
|
|
|
|
2.5%
|
2.5%
|
-
|
|
After-tax
|
|
|
|
1.9%
|
1.9%
|
-
|
Balance Sheet
Balance
Sheet
$ in millions,
except per share data
|
December
31,
|
December
31,
|
Change
|
2016
|
2015
|
Total
assets
|
$7,355.8
|
$6,904.4
|
7%
|
Total
investments
|
$5,364.9
|
$5,089.3
|
5%
|
Debt
|
$438.7
|
$388.2
|
13%
|
Stockholders'
equity
|
$1,531.4
|
$1,398.0
|
10%
|
Invested assets per
dollar of stockholders' equity
|
3.50
|
3.64
|
(4)%
|
Statutory
surplus
|
$1,583.8
|
$1,426.3
|
11%
|
Book value per
share
|
$26.42
|
$24.37
|
8%
|
The increase in book value per share reflects full year 2016 net
income offset partially by dividends to shareholders.
Selective's Board of Directors declared a $0.16 per share quarterly cash dividend on common
stock that is payable March 1, 2017,
to stockholders of record as of February 15,
2017.
Guidance
For 2017, Selective expects to generate the following
result:
- A statutory combined ratio excluding catastrophe losses of
90.5%. This assumes no prior year reserve development;
- Catastrophe losses of 3.5 points;
- After-tax investment income of $110
million; and
- Weighted average shares outstanding of 59.2 million.
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
Friday, February 3, 2017 at
www.Selective.com. The webcast will be available for
rebroadcast until the close of business on March 7, 2017.
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.
1Reconciliation of Net Income to Operating Income
and Certain Other Non-GAAP Measures
Operating income,
operating earnings per share, and operating return on equity differ
from net income, earnings per share, and return on equity,
respectively, by the exclusion of after-tax net realized gains and
losses on investments and the results of discontinued operations,
if any. They are used as important financial measures by
management, analysts, and investors, because the realization of net
investment gains and losses in any given period is largely
discretionary as to timing. In addition, these net realized
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.
These operating measurements are not intended as a substitute
for net income, earnings per share, or return on equity prepared in
accordance with U.S. generally accepted accounting principles
(GAAP). Reconciliations of net income, earnings per share,
and return on equity to operating income, operating earnings per
share, and operating return on equity, respectively, are provided
in the tables below. 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.
Reconciliation of
Net Income to Operating Income
|
|
$ in
millions
|
Quarter
Ended
December
31,
|
Year
Ended
December
31,
|
2016
|
2015
|
2016
|
2015
|
Net income
|
$39.4
|
$45.4
|
$158.5
|
$165.9
|
Exclude: Net realized
losses (gains)
|
$7.7
|
$2.6
|
$4.9
|
$(13.2)
|
Exclude: Tax on net
realized losses (gains)
|
$(2.7)
|
$(0.9)
|
$(1.7)
|
$4.6
|
Operating
income
|
$44.4
|
$47.1
|
$161.7
|
$157.3
|
Reconciliation of
Net Income per Diluted Share to Operating Income per Diluted
Share
|
|
|
Quarter
Ended
December
31,
|
Year
Ended
December
31,
|
2016
|
2015
|
2016
|
2015
|
Net income per
diluted share
|
$0.67
|
$0.78
|
$2.70
|
$2.85
|
Exclude: Net realized
losses (gains)
|
$0.13
|
$0.04
|
$0.08
|
$(0.23)
|
Exclude: Tax on net
realized losses (gains)
|
$(0.05)
|
$(0.01)
|
$(0.03)
|
$0.08
|
Operating income per
diluted share
|
$0.75
|
$0.81
|
$2.75
|
$2.70
|
Reconciliation of
ROE and Operating ROE
|
|
|
Quarter
Ended
December
31,
|
Year
Ended
December
31,
|
2016
|
2015
|
2016
|
2015
|
Return on Average
Equity
|
10.1%
|
13.2%
|
10.8%
|
12.4%
|
Exclude: Net realized
losses (gains)
|
2.0%
|
0.8%
|
0.3%
|
(1.0)%
|
Exclude: Tax on net
realized losses (gains)
|
(0.7)%
|
(0.3)%
|
(0.1)%
|
0.4%
|
Operating Return on
Average Equity
|
11.4%
|
13.7%
|
11.0%
|
11.8%
|
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).
Selective Insurance Group, Inc.
40 Wantage
Avenue
Branchville, New
Jersey 07890
www.Selective.com
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SOURCE Selective Insurance Group, Inc.