BRANCHVILLE, N.J., April 26, 2017 /PRNewswire/ --
In the first quarter of 2017:
- Net premiums written grew 6%
- GAAP combined ratio was 91.2%
- Statutory combined ratio was 89.7%
- After-tax net investment income was $27.5 million
- Annualized return on average equity ("ROE") was 12.9% and
operating ROE1 was 13.1%
Selective Insurance Group, Inc. (NASDAQ: SIGI) today reported
its financial results for the first quarter ended March 31, 2017. Net income per diluted
share was $0.85, compared to
$0.63 a year ago, and operating
income1 per diluted share was $0.86, compared to $0.66 a year ago.
"We are very proud of the quarter's financial results, which
reflect continued momentum from our record levels of profitability
in 2016. Our consolidated statutory combined ratio was 89.7%
and annualized operating ROE was 13.1%," said Gregory E. Murphy, Chairman and Chief Executive
Officer. "We continue to grow new business and are
successfully balancing rate increases with retention on a very
granular level. Net premiums written grew 6%, benefiting from
standard commercial lines renewal pure price increases averaging
3.0% in the quarter, strong retention rates, and new business
opportunities."
Mr. Murphy continued, "We are off to a strong start in 2017 and
will continue to execute on our strategy of disciplined, profitable
growth. We remain focused on enhancing what truly
distinguishes Selective in the marketplace – our relationships with
"ivy-league" distribution partners, sophisticated underwriting
tools and technologies, and the superior experience we provide to
our customers and agents through our best-in-class employees."
Operating Highlights
Consolidated
Financial Results
$ in millions,
except per share data
|
Quarter
Ended
March
31,
|
Change
|
2017
|
2016
|
Net premiums
written
|
$598.7
|
$565.4
|
6%
|
Net premiums
earned
|
$560.9
|
$522.5
|
7%
|
Net investment income
earned
|
$37.4
|
$30.8
|
22%
|
Net realized
(losses), pre-tax
|
$(1.0)
|
$(2.7)
|
61%
|
Total
revenues
|
$600.5
|
$551.5
|
9%
|
Net underwriting
income, after-tax
|
$32.0
|
$26.6
|
20%
|
Net investment
income, after-tax
|
$27.5
|
$23.6
|
17%
|
Net income
|
$50.4
|
$37.0
|
36%
|
Operating
income1
|
$51.1
|
$38.8
|
32%
|
GAAP combined
ratio
|
91.2%
|
92.2%
|
(1.0) pts
|
Statutory combined
ratio
|
89.7%
|
90.7%
|
(1.0) pts
|
Catastrophe
losses
|
2.2 pts
|
2.8 pts
|
(0.6) pts
|
Non-catastrophe
property losses
|
12.7 pts
|
12.7 pts
|
-
|
(Favorable) prior
year statutory reserve development on casualty lines
|
(2.6) pts
|
(3.3) pts
|
0.7 pts
|
Net income per
diluted share
|
$0.85
|
$0.63
|
35%
|
Operating income per
diluted share1
|
$0.86
|
$0.66
|
30%
|
Weighted average
diluted shares
|
59.1M
|
58.5M
|
1%
|
Book value per
share
|
$27.34
|
$25.61
|
7%
|
Standard Commercial Lines
Standard Commercial Lines premiums, which represent 81% of total
first quarter 2017 net premiums written, were up 6% compared to the
first quarter of 2016. The growth reflects strong renewal
pure price increases of 3.0%, retention of 85%, and a 2% increase
in new business to $89.5
million. The quarter's statutory combined ratio was
88.3%, which compares favorably to 89.7% a year ago and reflects a
0.9 point reduction in the expense ratio and a 1.3 point reduction
in catastrophe losses. These benefits were partially offset
by a lower level of favorable casualty reserve development of 3.7
points.
Standard
Commercial Lines
$ in millions,
statutory results
|
Quarter
Ended
March
31,
|
Change
|
2017
|
2016
|
Net premiums
written
|
$483.5
|
$455.1
|
6%
|
Net premiums
earned
|
$438.4
|
$402.9
|
9%
|
GAAP combined
ratio
|
90.3%
|
92.3%
|
(2.0) pts
|
Statutory loss &
loss expense ratio
|
55.1%
|
55.2%
|
(0.1) pts
|
Statutory
underwriting expense ratio
|
33.2%
|
34.1%
|
(0.9) pts
|
Statutory dividends
to policyholders ratio
|
-
|
0.4%
|
(0.4) pts
|
Statutory combined
ratio
|
88.3%
|
89.7%
|
(1.4) pts
|
Catastrophe
losses
|
1.6 pts
|
2.9 pts
|
(1.3) pts
|
(Favorable) prior
year statutory reserve development on casualty lines
|
(3.7) pts
|
(4.5) pts
|
0.8 pts
|
Standard Personal Lines
Standard Personal Lines premiums, which represent 11% of total
first quarter 2017 net premiums written, increased 4% in first
quarter 2017 compared to the first quarter of 2016, largely driven
by a 55% increase in new business to $11.4
million. The statutory combined ratio in the first
quarter for Standard Personal Lines was 93.9%, a 3.3 point increase
from the same period last year. Catastrophe losses were 5.5
points in the first quarter of 2017 compared to 3.2 points in the
first quarter last year. In addition, adverse prior year
casualty reserve development added 2.8 points to the combined ratio
while there was no prior year casualty reserve development in the
first quarter last year. These impacts were partially offset
by a reduction in the expense ratio of 2.4 points driven by lower
direct commissions and other underwriting expense initiatives.
Standard Personal
Lines
$ in millions,
statutory results
|
Quarter
Ended
March
31,
|
Change
|
2017
|
2016
|
Net premiums
written
|
$64.7
|
$62.0
|
4%
|
Net premiums
earned
|
$71.2
|
$70.2
|
1%
|
GAAP combined
ratio
|
92.8%
|
87.7%
|
5.1 pts
|
Statutory loss &
loss expense ratio
|
62.2%
|
56.5%
|
5.7 pts
|
Statutory
underwriting expense ratio
|
31.7%
|
34.1%
|
(2.4) pts
|
Statutory combined
ratio
|
93.9%
|
90.6%
|
3.3 pts
|
Catastrophe
losses
|
5.5 pts
|
3.2 pts
|
2.3 pts
|
Unfavorable prior
year statutory reserve development on casualty lines
|
2.8 pts
|
-
|
2.8 pts
|
Excess and Surplus Lines
Excess and Surplus Lines premiums, which account for 8% of total
first quarter 2017 net premiums written, increased by 4% in first
quarter 2017. The principal drivers of net premiums written
growth were a 7.1% overall price increase coupled with a 6%
increase in new business. The statutory combined ratio for
the first quarter was 95.9%, down 2.5 points from a year ago
primarily due to non-catastrophe property losses that were lower by
2.8 points and no prior year casualty reserve development, which
was 2.0 points unfavorable a year ago. These improvements
were partially offset by catastrophe losses that were 1.7 points
higher than last year. We continue to focus our efforts to
improve margins by shifting our mix of business, improving claims
outcomes, and implementing more aggressive price increases in
challenged classes.
Excess and Surplus
Lines
$ in millions,
statutory results
|
Quarter
Ended
March
31,
|
Change
|
2017
|
2016
|
Net premiums
written
|
$50.5
|
$48.3
|
4%
|
Net premiums
earned
|
$51.2
|
$49.4
|
4%
|
GAAP combined
ratio
|
96.9%
|
97.1%
|
(0.2) pts
|
Statutory loss &
loss expense ratio
|
61.8%
|
68.9%
|
(7.1) pts
|
Statutory
underwriting expense ratio
|
34.1%
|
29.5%
|
4.6 pts
|
Statutory combined
ratio
|
95.9%
|
98.4%
|
(2.5) pts
|
Catastrophe
losses
|
2.7 pts
|
1.0 pts
|
1.7 pts
|
Unfavorable prior
year statutory reserve development on casualty lines
|
-
|
2.0 pts
|
(2.0) pts
|
Investment Income
After-tax investment income in the first quarter was
$27 million, up 17% compared to a
year ago. The improvement was driven by higher yields on our
core fixed income portfolio coupled with an increasing invested
asset base from cash flows from operations. In addition, our
alternative investment portfolio generated $1.6 million in pre-tax income compared to a
$1.1 million loss in the first
quarter of 2016. After-tax new money yields averaged 2.1%
during the quarter.
Investments
$ in millions,
except per share data
|
Quarter
Ended
March
31,
|
Change
|
2017
|
2016
|
Net investment income
earned, after-tax
|
$27.5
|
$23.6
|
17%
|
Net investment income
per share
|
$0.46
|
$0.40
|
15%
|
Effective tax
rate
|
26.6%
|
23.4%
|
3.2 pts
|
Average
yields:
|
|
|
|
Fixed Income
Securities:
|
|
|
|
Pre-tax
|
3.0%
|
2.7%
|
0.3 pts
|
After-tax
|
2.2%
|
2.0%
|
0.2 pts
|
Portfolio:
|
|
|
|
Pre-tax
|
2.8%
|
2.4%
|
0.4 pts
|
After-tax
|
2.0%
|
1.8%
|
0.2 pts
|
Balance Sheet
Balance
Sheet
$ in millions,
except per share data
|
March
31,
|
December
31,
|
Change
|
2017
|
2016
|
Total
assets
|
$7,404.1
|
$7,355.8
|
1%
|
Total
investments
|
$5,460.8
|
$5,364.9
|
2%
|
Debt
|
$438.8
|
$438.7
|
-
|
Stockholders'
equity
|
$1,592.6
|
$1,531.4
|
4%
|
Invested assets per
dollar of stockholders' equity
|
3.43
|
3.50
|
(2)%
|
Statutory
surplus
|
$1,622.3
|
$1,583.8
|
2%
|
Book value per
share
|
$27.34
|
$26.42
|
3%
|
The increase in book value per share reflects net income and
unrealized gains on our investment portfolio, partially offset by
dividends to shareholders.
Selective's Board of Directors declared a $0.16 per share quarterly cash dividend on common
stock that is payable June 1, 2017,
to stockholders of record as of May 15,
2017.
Guidance
After one quarter of better than expected results, we are
maintaining our full-year expectations as follows:
- A statutory combined ratio excluding catastrophe losses of
90.5%. This assumes no additional 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
Thursday, April 27, 2017 at
www.Selective.com. The webcast will be available for
rebroadcast until the close of business on May 30, 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
March
31,
|
2017
|
2016
|
Net income
|
$50.4
|
$37.0
|
Exclude: Net realized
losses
|
$1.0
|
$2.7
|
Exclude: Tax on net
realized losses
|
$(0.3)
|
$(0.9)
|
Operating
income
|
$51.1
|
$38.8
|
Reconciliation of Net Income per Diluted Share to Operating
Income per Diluted Share
|
Quarter
Ended
March
31,
|
2017
|
2016
|
Net income per
diluted share
|
$0.85
|
$0.63
|
Exclude: Net realized
losses
|
$0.02
|
$0.05
|
Exclude: Tax on net
realized losses
|
$(0.01)
|
$(0.02)
|
Operating income per
diluted share
|
$0.86
|
$0.66
|
Reconciliation of ROE and Operating ROE
|
Quarter
Ended
March
31,
|
2017
|
2016
|
Return on Average
Equity
|
12.9%
|
10.3%
|
Exclude: Net realized
losses
|
0.3%
|
0.8%
|
Exclude: Tax on net
realized losses
|
(0.1)%
|
(0.3)%
|
Operating Return on
Average Equity
|
13.1%
|
10.8%
|
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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visit:http://www.prnewswire.com/news-releases/selective-reports-first-quarter-2017-net-income-per-diluted-share-of-085-and-operating-income1-per-diluted-share-of-086-300446479.html
SOURCE Selective Insurance Group, Inc.