BRANCHVILLE, N.J., July 26, 2017 /PRNewswire/ --
In the second quarter of 2017:
- Net premiums written grew 6%
- GAAP combined ratio was 94.7%
- Statutory combined ratio was 93.1%
- After-tax net investment income was $30.3 million
- Annualized return on average equity ("ROE") was 10.2% and
operating ROE1 was 9.9%
Selective Insurance Group, Inc. (NASDAQ: SIGI) today reported
its financial results for the second quarter ended June 30, 2017. Net income per diluted share
was $0.70, compared to $0.74 a year ago, and operating
income1 per diluted share was $0.68, compared to $0.72 a year ago.
"Our solid results this year reflect the successful execution of
our strategy to generate disciplined and profitable growth.
We reported a profitable second quarter statutory combined
ratio of 93.1%," said Gregory E.
Murphy, Chairman and Chief Executive Officer. "Our net
premiums written growth of 6% was driven by renewal pure price
increases of 3.0% in our standard lines, new standard lines
business opportunities, and overall growth in E&S. For
the first six months of 2017, our statutory combined ratio was an
excellent 91.4%, net premiums written were up 6%, after-tax net
investment income grew 23% to $57.8
million, and our annualized operating ROE was 11.5%."
Mr. Murphy continued, "Effective July
1, we began quoting new business in Arizona and New
Hampshire, where our respective 16 and 9 appointed
agents control about 25% of the available commercial lines
premium. We continue to invest in our franchise value by
enhancing our relationships with 'ivy-league' distribution
partners, implementing sophisticated underwriting tools and
technologies, and providing superior experience to our customers
and agents through our best-in-class employees."
Operating
Highlights
|
|
|
|
|
|
Quarter
Ended
|
Change
|
Year
Ended
|
Change
|
Consolidated
Financial Results
|
June
30,
|
June
30,
|
$ in millions,
except per share data
|
2017
|
2016
|
2017
|
2016
|
Net premiums
written
|
$613.8
|
$578.1
|
6%
|
$1,212.5
|
$1,143.5
|
6%
|
Net premiums
earned
|
$568.0
|
$531.9
|
7%
|
$1,128.9
|
$1,054.4
|
7%
|
Net investment income
earned
|
$41.4
|
$31.2
|
33%
|
$78.8
|
$62.0
|
27%
|
Net realized gains
(losses), pre-tax
|
$1.7
|
$1.8
|
(2)%
|
$0.7
|
$(0.9)
|
173%
|
Total
revenues
|
$614.5
|
$568.7
|
8%
|
$1,215.0
|
$1,120.2
|
8%
|
Net underwriting
income, after-tax
|
$19.7
|
$28.5
|
(31)%
|
$51.7
|
$55.1
|
(6)%
|
Net investment
income, after-tax
|
$30.3
|
$23.5
|
29%
|
$57.8
|
$47.1
|
23%
|
Net income
|
$41.4
|
$43.6
|
(5)%
|
$91.9
|
$80.6
|
14%
|
Operating
income1
|
$40.3
|
$42.5
|
(5)%
|
$91.4
|
$81.2
|
13%
|
GAAP combined
ratio
|
94.7%
|
91.8%
|
2.9 pts
|
93.0%
|
92.0%
|
1.0 pt
|
Statutory combined
ratio
|
93.1%
|
90.1%
|
3.0 pts
|
91.4%
|
90.4%
|
1.0 pt
|
Catastrophe
losses
|
5.2 pts
|
1.6 pts
|
3.6 pts
|
3.7 pts
|
2.2 pts
|
1.5 pts
|
Non-catastrophe
property losses
|
12.9 pts
|
12.1 pts
|
0.8 pts
|
12.8 pts
|
12.4 pts
|
0.4 pts
|
(Favorable) prior
year statutory reserve development on casualty lines
|
(2.5) pts
|
(1.9) pts
|
(0.6) pts
|
(2.5) pts
|
(2.6) pts
|
0.1 pts
|
Net income per
diluted share
|
$0.70
|
$0.74
|
(5)%
|
$1.55
|
$1.38
|
12%
|
Operating income per
diluted share1
|
$0.68
|
$0.72
|
(6)%
|
$1.54
|
$1.39
|
11%
|
Weighted average
diluted shares
|
59.2M
|
58.6M
|
1%
|
59.2M
|
58.6M
|
1%
|
Book value per
share
|
|
|
|
$28.32
|
$26.86
|
5%
|
Standard Commercial Lines
Standard Commercial Lines premiums, which represent 78% of total
second quarter 2017 net premiums written, were up 7% compared to
the second quarter of 2016. This growth reflects strong
renewal pure price increases of 3.1%, retention of 83%, and a 3%
increase in new business to $98
million. The quarter's statutory combined ratio was
90.6%, up 2.0 points from a year ago, reflecting an increase of 2.9
points in catastrophe losses and an increase of 0.8 points of
non-catastrophe losses, which was partially offset by a 1.0 point
increase in favorable prior year casualty reserve development.
In addition, the expense ratio was 1.1 points lower than in
the second quarter of 2016.
|
Quarter
Ended
|
Change
|
Year
Ended
|
Change
|
Standard
Commercial Lines
|
June
30,
|
June
30,
|
$ in millions,
statutory results
|
2017
|
2016
|
2017
|
2016
|
Net premiums
written
|
$478.9
|
$449.0
|
7%
|
$962.5
|
$904.1
|
6%
|
Net premiums
earned
|
$443.6
|
$411.3
|
8%
|
$882.0
|
$814.2
|
8%
|
GAAP combined
ratio
|
92.2%
|
90.2%
|
2.0 pts
|
91.2%
|
91.3%
|
(0.1) pts
|
Statutory loss &
loss expense ratio
|
56.9%
|
53.8%
|
3.1 pts
|
56.0%
|
54.5%
|
1.5
pts
|
Statutory
underwriting expense ratio
|
33.3%
|
34.4%
|
(1.1) pts
|
33.3%
|
34.2%
|
(0.9) pts
|
Statutory dividends
to policyholders ratio
|
0.4%
|
0.4%
|
-
|
0.2%
|
0.4%
|
(0.2) pts
|
Statutory combined
ratio
|
90.6%
|
88.6%
|
2.0 pts
|
89.5%
|
89.1%
|
0.4 pts
|
Catastrophe
losses
|
3.8 pts
|
0.9 pts
|
2.9 pts
|
2.7 pts
|
1.9 pts
|
0.8 pts
|
(Favorable) prior
year statutory reserve development on casualty lines
|
(3.9) pts
|
(2.9) pts
|
(1.0) pt
|
(3.8) pts
|
(3.7) pts
|
(0.1) pts
|
Standard Personal Lines
Standard Personal Lines premiums, which represent 13% of total
second quarter 2017 net premiums written, increased 3% compared to
the second quarter of 2016, largely driven by a 37% increase in new
business to $13 million. The
statutory combined ratio in the second quarter was 105.9%, a
16.0-point increase from the same period last year.
Catastrophe losses were 13.0 points compared to 3.0 points in
the second quarter of 2016. In addition, adverse prior year
casualty reserve development of $3
million added 4.2 points to the combined ratio compared to
no prior year casualty reserve development in the second quarter of
2016.
|
Quarter
Ended
|
Change
|
Year
Ended
|
Change
|
Standard Personal
Lines
|
June
30,
|
June
30,
|
$ in millions,
statutory results
|
2017
|
2016
|
2017
|
2016
|
Net premiums
written
|
$78.1
|
$75.6
|
3%
|
$142.8
|
$137.5
|
4%
|
Net premiums
earned
|
$71.7
|
$70.8
|
1%
|
$142.9
|
$141.0
|
1%
|
GAAP combined
ratio
|
108.0%
|
91.4%
|
16.6 pts
|
100.5%
|
89.6%
|
10.9 pts
|
Statutory loss &
loss expense ratio
|
76.4%
|
59.6%
|
16.8 pts
|
69.3%
|
58.1%
|
11.2 pts
|
Statutory
underwriting expense ratio
|
29.5%
|
30.3%
|
(0.8) pts
|
30.5%
|
32.0%
|
(1.5) pts
|
Statutory combined
ratio
|
105.9%
|
89.9%
|
16.0 pts
|
99.8%
|
90.1%
|
9.7 pts
|
Catastrophe
losses
|
13.0 pts
|
3.0 pts
|
10.0 pts
|
9.3 pts
|
3.1 pts
|
6.2 pts
|
Unfavorable prior
year statutory reserve development on casualty lines
|
4.2 pts
|
-
|
4.2 pts
|
3.5 pts
|
-
|
3.5
pts
|
Excess and Surplus Lines
Excess and Surplus Lines premiums, which account for 9% of total
second quarter 2017 net premiums written, increased by 6% in the
second quarter of 2017. The principal drivers of this growth
were a 3.7% overall price increase coupled with higher retention
rates. The statutory combined ratio for the second quarter
was 97.0%, down 5.7 points from a year ago, primarily due to no
prior year casualty reserve development, which was 4.0 points
unfavorable a year ago.
|
Quarter
Ended
|
Change
|
Year
Ended
|
Change
|
Excess and Surplus
Lines
|
June
30,
|
June
30,
|
$ in millions,
statutory results
|
2017
|
2016
|
2017
|
2016
|
Net premiums
written
|
$56.8
|
$53.6
|
6%
|
$107.2
|
$101.9
|
5%
|
Net premiums
earned
|
$52.8
|
$49.8
|
6%
|
$104.0
|
$99.2
|
5%
|
GAAP combined
ratio
|
97.5%
|
105.1%
|
(7.6) pts
|
97.2%
|
101.1%
|
(3.9) pts
|
Statutory loss &
loss expense ratio
|
64.3%
|
69.6%
|
(5.3) pts
|
63.2%
|
69.3%
|
(6.1) pts
|
Statutory
underwriting expense ratio
|
32.7%
|
33.1%
|
(0.4) pts
|
33.3%
|
31.3%
|
2.0 pts
|
Statutory combined
ratio
|
97.0%
|
102.7%
|
(5.7) pts
|
96.5%
|
100.6%
|
(4.1) pts
|
Catastrophe
losses
|
5.7 pts
|
5.4 pts
|
0.3 pts
|
4.2 pts
|
3.2 pts
|
1.0 pt
|
Unfavorable prior
year statutory reserve development on casualty lines
|
-
|
4.0 pts
|
(4.0) pts
|
-
|
3.0 pts
|
(3.0) pts
|
Investment Income
After-tax investment income in the second quarter was
$30 million, up 29% compared to a
year ago. The improvement was driven by higher yields on our
core fixed income portfolio. In addition, our alternative
investment portfolio generated $5.2
million in pre-tax income compared to a $0.6 million loss in the second quarter of
2016. After-tax new money yields averaged 2.2% during the
quarter.
|
Quarter
Ended
|
Change
|
Year
Ended
|
Change
|
Investments
|
June
30,
|
June
30,
|
$ in millions,
except per share data
|
2017
|
2016
|
2017
|
2016
|
Net investment income
earned, after-tax
|
$30.3
|
$23.5
|
29%
|
$57.8
|
$47.1
|
23%
|
Net investment income
per share
|
$0.51
|
$0.40
|
28%
|
$0.98
|
$0.80
|
23%
|
Effective tax
rate
|
26.9%
|
24.6%
|
2.3 pts
|
26.8%
|
24.0%
|
2.8 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
|
|
|
|
2.9%
|
2.4%
|
0.5 pts
|
After-tax
|
|
|
|
2.1%
|
1.8%
|
0.3 pts
|
Balance
Sheet
|
|
|
|
Balance
Sheet
|
June
30,
|
December
31,
|
Change
|
$ in millions,
except per share data
|
2017
|
2016
|
Total
assets
|
$7,528.2
|
$7,355.8
|
2%
|
Total
investments
|
$5,503.0
|
$5,364.9
|
3%
|
Long-term
debt
|
$438.9
|
$438.7
|
-
|
Stockholders'
equity
|
$1,652.6
|
$1,531.4
|
8%
|
Invested assets per
dollar of stockholders' equity
|
$3.33
|
$3.50
|
(5)%
|
Statutory
surplus
|
$1,653.2
|
$1,583.8
|
4%
|
Book value per
share
|
$28.32
|
$26.42
|
7%
|
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 September 01,
2017, to stockholders of record as of August 15, 2017.
Guidance
After two quarters of better than expected results, we are
revising our full-year expectations to the following:
- A statutory combined ratio excluding catastrophe losses, of
89.5%, an improvement of 100 basis points from our original
guidance. This assumes no additional prior year casualty
reserve development;
- Catastrophe losses of 3.5 points;
- After-tax investment income of $113
million, up from our original guidance 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 10:00 a.m. ET, on
Thursday, July 27, 2017 at
www.Selective.com. The webcast will be available for
rebroadcast until the close of business on August 28, 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 income per diluted share, and operating return on equity
differ from net income, net income per diluted 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, net income per diluted share, and return on equity to
operating income, operating income per diluted 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
|
Year
Ended
|
June
30,
|
June
30,
|
2017
|
2016
|
2017
|
2016
|
Net income
|
$41.4
|
$43.6
|
$91.9
|
$80.6
|
Exclude: Net realized
(gains) losses
|
$(1.7)
|
$(1.8)
|
$(0.7)
|
$0.9
|
Exclude: Tax on net
realized (gains) losses
|
$0.6
|
$0.7
|
$0.2
|
$(0.3)
|
Operating
income
|
$40.3
|
$42.5
|
$91.4
|
$81.2
|
Reconciliation of
Net Income per Diluted Share to Operating Income per Diluted
Share
|
|
|
|
Quarter
Ended
|
Year
Ended
|
June
30,
|
June
30,
|
2017
|
2016
|
2017
|
2016
|
Net income per
diluted share
|
$0.70
|
$0.74
|
$1.55
|
$1.38
|
Exclude: Net realized
(gains) losses
|
$(0.03)
|
$(0.03)
|
$(0.01)
|
$0.02
|
Exclude: Tax on net
realized (gains) losses
|
$0.01
|
$0.01
|
-
|
$(0.01)
|
Operating income per
diluted share
|
$0.68
|
$0.72
|
$1.54
|
$1.39
|
Reconciliation of
ROE and Operating ROE
|
|
|
|
Quarter
Ended
|
Year
Ended
|
June
30,
|
June
30,
|
2017
|
2016
|
2017
|
2016
|
Return on average
equity
|
10.2%
|
11.5%
|
11.5%
|
10.9%
|
Exclude: Net realized
(gains) losses
|
(0.4)%
|
(0.5)%
|
(0.1)%
|
0.1%
|
Exclude: Tax on net
realized (gains) losses
|
0.1%
|
0.2%
|
0.1%
|
-
|
Operating return on
average equity
|
9.9%
|
11.2%
|
11.5%
|
11.0%
|
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.