BRANCHVILLE, N.J.,
Oct. 25, 2017 /PRNewswire/ --
In the third quarter of 2017:
- Net premiums written grew 4%
- GAAP combined ratio was 94.3%
- Statutory combined ratio was 93.7%
- After-tax net investment income was $29.6 million
- Annualized return on average equity ("ROE") was 11.2% and
operating ROE1 was 10.1%
Selective Insurance Group, Inc. (NASDAQ: SIGI) today reported
its financial results for the third quarter ended
September 30, 2017. Net income per diluted share was
$0.79, up 20% compared to
$0.66 a year ago, and operating
income1 per diluted share was $0.72, up 16% compared to $0.62 a year ago.
"We had strong results - a profitable 93.7% statutory combined
ratio - in a quarter with record industry-wide catastrophe losses,"
said Gregory E. Murphy, Chairman and
Chief Executive Officer. "While Hurricanes Harvey and Irma
added 2.5 points to our combined ratio, our overall financial
results this quarter are a testament to the strength of our
disciplined underwriting franchise and prudent risk appetite.
Net premiums written grew 4%, driven by renewal pure price
increases of 2.7% in our standard commercial lines, and new
standard lines business opportunities."
Mr. Murphy continued, "For the first nine months of 2017, our
annualized operating ROE was 11.0%. Our state expansion
efforts in Arizona and
New Hampshire are on track.
We remain committed to maintaining underwriting discipline as we
continue to seek growth opportunities. We continue to invest
in sophisticated underwriting tools and technologies to provide
superior experiences to our customers and agents through our
best-in-class employees, which should generate financial
outperformance relative to the industry over time. As we move
into 2018, we are well positioned to produce strong operating
returns on equity for several reasons: (i) Commercial
Lines written renewal pure price increases for 2017 of 2.9%;
(ii) underwriting and claim improvements; and (iii) an after-tax
fixed income portfolio new money yield of 2.2%, which has run at or
above our sales and maturity rate."
Selective's Board of Directors declared a 13% increase in the
quarterly cash dividend on common stock, to $0.18 per share, that is payable December 1,
2017, to stockholders of record as of November 15, 2017.
Operating
Highlights
|
|
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|
|
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|
|
|
|
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|
|
|
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Consolidated
Financial Results
|
Quarter ended
September 30,
|
Change
|
Year to Date
September 30,
|
Change
|
$ and shares in
millions, except per share data
|
2017
|
2016
|
2017
|
2016
|
Net premiums
written
|
$
|
604.3
|
|
578.8
|
|
4
|
%
|
$
|
1,816.8
|
|
1,722.3
|
|
5
|
%
|
Net premiums
earned
|
572.1
|
|
542.4
|
|
5
|
|
1,700.9
|
|
1,596.8
|
|
7
|
|
Net investment income
earned
|
40.4
|
|
33.4
|
|
21
|
|
119.3
|
|
95.3
|
|
25
|
|
Net realized gains,
pre-tax
|
6.8
|
|
3.7
|
|
84
|
|
7.5
|
|
2.7
|
|
172
|
|
Total
revenues
|
621.3
|
|
581.7
|
|
7
|
|
1,836.2
|
|
1,701.9
|
|
8
|
|
Net underwriting
income, after-tax
|
21.1
|
|
20.8
|
|
1
|
|
72.8
|
|
75.9
|
|
(4)
|
|
Net investment
income, after-tax
|
29.6
|
|
24.9
|
|
19
|
|
87.3
|
|
72.0
|
|
21
|
|
Net income
|
46.7
|
|
38.5
|
|
21
|
|
138.6
|
|
119.1
|
|
16
|
|
Operating
income1
|
42.3
|
|
36.1
|
|
17
|
|
133.7
|
|
117.3
|
|
14
|
|
GAAP combined
ratio
|
94.3
|
%
|
94.1
|
|
0.2
|
pts
|
93.4
|
%
|
92.7
|
|
0.7
|
pts
|
Statutory combined
ratio
|
93.7
|
|
92.9
|
|
0.8
|
|
92.2
|
|
91.2
|
|
1.0
|
|
Catastrophe
losses
|
4.1
|
pts
|
1.9
|
|
2.2
|
|
3.8
|
pts
|
2.1
|
|
1.7
|
|
Non-catastrophe
property losses
|
12.6
|
|
14.5
|
|
(1.9)
|
|
12.7
|
|
13.1
|
|
(0.4)
|
|
(Favorable) prior
year statutory reserve development on
casualty lines
|
(1.7)
|
|
(3.5)
|
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1.8
|
|
(2.3)
|
|
(2.9)
|
|
0.6
|
|
Net income per
diluted share
|
$
|
0.79
|
|
0.66
|
|
20
|
%
|
$
|
2.34
|
|
2.03
|
|
15
|
%
|
Operating income per
diluted share1
|
0.72
|
|
0.62
|
|
16
|
|
2.26
|
|
2.00
|
|
13
|
|
Weighted average
diluted shares
|
59.3
|
|
58.7
|
|
1
|
|
59.2
|
|
58.6
|
|
1
|
|
Book value per
share
|
$
|
29.10
|
|
27.22
|
|
7
|
|
29.10
|
|
27.22
|
|
7
|
|
Standard Commercial Lines
Standard Commercial Lines premiums, which represent 78% of total
third quarter 2017 net premiums written, were up 5% compared to a
year ago. This growth reflects strong renewal pure price
increases of 2.7%, excellent retention of 85%, and a 9% increase in
new business. The statutory combined ratio in the third
quarter was 91.7%, down 0.3 points from a year ago. The 1.3
point decrease in the expense ratio and lower non-catastrophe
property losses were partially offset by an increase of 1.7 points
in catastrophe losses. Favorable prior year casualty reserve
development was 4.5 points, in line with the third quarter of
2016.
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Standard
Commercial Lines
|
Quarter ended
September 30,
|
Change
|
Year to Date
September 30,
|
Change
|
$ in millions,
statutory results
|
2017
|
2016
|
2017
|
2016
|
Net premiums
written
|
$
|
472.1
|
|
449.5
|
|
5
|
%
|
$
|
1,434.5
|
|
1,353.6
|
|
6
|
%
|
Net premiums
earned
|
445.3
|
|
421.6
|
|
6
|
|
1,327.3
|
|
1,235.8
|
|
7
|
|
GAAP combined
ratio
|
92.1
|
%
|
92.9
|
|
(0.8)
|
pts
|
91.5
|
%
|
91.8
|
|
(0.3)
|
pts
|
Statutory loss &
loss expense ratio
|
57.4
|
|
56.5
|
|
0.9
|
|
56.5
|
|
55.2
|
|
1.3
|
|
Statutory
underwriting expense ratio
|
34.1
|
|
35.4
|
|
(1.3)
|
|
33.5
|
|
34.6
|
|
(1.1)
|
|
Statutory dividends
to policyholders ratio
|
0.2
|
|
0.1
|
|
0.1
|
|
0.2
|
|
0.3
|
|
(0.1)
|
|
Statutory combined
ratio
|
91.7
|
|
92.0
|
|
(0.3)
|
|
90.2
|
|
90.1
|
|
0.1
|
|
Catastrophe
losses
|
3.2
|
pts
|
1.5
|
|
1.7
|
|
2.9
|
pts
|
1.7
|
|
1.2
|
|
(Favorable) prior
year statutory reserve development on
casualty lines
|
(4.5)
|
|
(4.5)
|
|
—
|
|
(4.0)
|
|
(4.0)
|
|
—
|
|
Standard Personal Lines
Standard Personal Lines premiums, which represent 13% of total
third quarter 2017 net premiums written, increased 7% compared to a
year ago, driven largely by a 14% increase in new business, to
$14 million. The statutory
combined ratio in the third quarter was 86.4%, a 5.6-point decrease
from a year ago. This improvement reflected a 2.9 point
decrease in the expense ratio and a lower level of catastrophe and
non-catastrophe property losses.
|
|
|
|
|
|
|
|
|
|
|
|
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|
Standard Personal
Lines
|
Quarter ended
September 30,
|
Change
|
Year to Date
September 30,
|
Change
|
$ in millions,
statutory results
|
2017
|
2016
|
2017
|
2016
|
Net premiums
written
|
$
|
81.2
|
|
76.2
|
|
7
|
%
|
$
|
224.0
|
|
213.8
|
|
5
|
%
|
Net premiums
earned
|
72.6
|
|
68.7
|
|
6
|
|
215.5
|
|
209.7
|
|
3
|
|
GAAP combined
ratio
|
88.7
|
%
|
93.8
|
|
(5.1)
|
pts
|
96.5
|
%
|
90.9
|
|
5.6
|
pts
|
Statutory loss &
loss expense ratio
|
58.0
|
|
60.7
|
|
(2.7)
|
|
65.5
|
|
58.9
|
|
6.6
|
|
Statutory
underwriting expense ratio
|
28.4
|
|
31.3
|
|
(2.9)
|
|
29.7
|
|
31.8
|
|
(2.1)
|
|
Statutory combined
ratio
|
86.4
|
|
92.0
|
|
(5.6)
|
|
95.2
|
|
90.7
|
|
4.5
|
|
Catastrophe
losses
|
3.0
|
pts
|
3.6
|
|
(0.6)
|
|
7.2
|
pts
|
3.2
|
|
4.0
|
|
Unfavorable prior
year statutory reserve development on
casualty lines
|
—
|
|
—
|
|
—
|
|
2.3
|
|
—
|
|
2.3
|
|
Excess and Surplus Lines
Excess and Surplus ("E&S") Lines premiums, which accounted
for 9% of total third quarter 2017 net premiums written, decreased
4% compared to a year ago. Written premium in this segment
was negatively impacted by highly competitive market conditions,
particularly for new business, which was down 15% from a year
ago. The statutory combined ratio for the third quarter was
120.1%, up 18.7 points from a year ago. This increase was
mainly due to 18.4 points of adverse prior year casualty reserve
development and a 10.2 point increase in catastrophe losses
compared to a year ago, primarily related to Hurricane Harvey,
partially offset by a lower level of non-catastrophe property
losses.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Excess and Surplus
Lines
|
Quarter ended
September 30,
|
Change
|
Year to Date
September 30,
|
Change
|
$ in millions,
statutory results
|
2017
|
2016
|
2017
|
2016
|
Net premiums
written
|
$
|
51.0
|
|
53.0
|
|
(4)
|
%
|
$
|
158.3
|
|
154.9
|
|
2
|
%
|
Net premiums
earned
|
54.2
|
|
52.2
|
|
4
|
|
158.2
|
|
151.3
|
|
5
|
|
GAAP combined
ratio
|
120.4
|
%
|
104.5
|
|
15.9
|
pts
|
105.2
|
%
|
102.3
|
|
2.9
|
pts
|
Statutory loss &
loss expense ratio
|
87.8
|
|
70.0
|
|
17.8
|
|
71.6
|
|
69.5
|
|
2.1
|
|
Statutory
underwriting expense ratio
|
32.3
|
|
31.4
|
|
0.9
|
|
33.0
|
|
31.4
|
|
1.6
|
|
Statutory combined
ratio
|
120.1
|
|
101.4
|
|
18.7
|
|
104.6
|
|
100.9
|
|
3.7
|
|
Catastrophe
losses
|
13.5
|
pts
|
3.3
|
|
10.2
|
|
7.4
|
pts
|
3.2
|
|
4.2
|
|
Unfavorable prior
year statutory reserve development on
casualty lines
|
18.4
|
|
—
|
|
18.4
|
|
6.3
|
|
2.0
|
|
4.3
|
|
Investment Income
After-tax net investment income in the third quarter was
$30 million, up 19% compared to a
year ago. The improvement was driven by higher yields on our
core fixed income securities portfolio. Our alternative
investments portfolio generated $2.7
million in pre-tax income, compared to $1.6 million in the third quarter of 2016.
After-tax new money yields averaged 2.3% during the quarter.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Investments
|
Quarter ended
September 30,
|
Change
|
Year to Date
September 30,
|
Change
|
$ in millions,
except per share data
|
2017
|
2016
|
2017
|
2016
|
Net investment income
earned, after-tax
|
$
|
29.6
|
|
24.9
|
|
19
|
%
|
$
|
87.3
|
|
72.0
|
|
21
|
%
|
Net investment income
per share
|
0.50
|
|
0.42
|
|
19
|
|
1.47
|
|
1.23
|
|
20
|
|
Effective tax
rate
|
26.8
|
%
|
25.4
|
|
1.4
|
pts
|
26.8
|
%
|
24.5
|
|
2.3
|
pts
|
Average
yields:
|
|
|
|
|
|
|
|
|
|
|
Fixed income
securities:
|
|
|
|
|
|
|
|
|
|
|
Pre-tax
|
|
|
|
|
|
3.0
|
%
|
2.7
|
|
0.3
|
pts
|
After-tax
|
|
|
|
|
|
2.2
|
|
2.0
|
|
0.2
|
|
Portfolio:
|
|
|
|
|
|
|
|
|
|
|
Pre-tax
|
|
|
|
|
|
2.9
|
|
2.4
|
|
0.5
|
|
After-tax
|
|
|
|
|
|
|
|
2.1
|
|
1.8
|
|
0.3
|
|
Balance
Sheet
|
|
|
|
$ in millions,
except per share data
|
September 30,
2017
|
December 31,
2016
|
Change
|
Total
assets
|
$
|
7,812.1
|
|
7,355.8
|
|
6
|
%
|
Total
investments
|
5,710.8
|
|
5,364.9
|
|
6
|
|
Long-term
debt
|
439.0
|
|
438.7
|
|
—
|
|
Stockholders'
equity
|
1,699.4
|
|
1,531.4
|
|
11
|
|
Invested assets per
dollar of stockholders' equity
|
3.36
|
|
3.50
|
|
(4)
|
|
Statutory
surplus
|
1,684.4
|
|
1,583.8
|
|
6
|
|
Book value per
share
|
29.10
|
|
26.42
|
|
10
|
|
The 10% increase in book value per share reflects net income and
unrealized gains on our investment portfolio, partially offset by
dividends to shareholders.
Third Quarter Catastrophe Loss Activity
Losses from Hurricanes Harvey and Irma totaled $14 million in the quarter. This includes
$6 million of net losses from
Hurricane Harvey, of which $5 million
was in our E&S Lines. Hurricane Irma's impact was
$8 million, of which $7 million was in our Standard Commercial
Lines.
Guidance
After three quarters of results, we are increasing our full-year
2017 after-tax net investment income guidance by $2 million, to $115
million, with all other assumptions remaining the
same. Our full-year expectations are as follows:
- A statutory combined ratio, excluding catastrophe losses, of
approximately 89.5%. This assumes no prior year casualty reserve
development in the fourth quarter;
- Catastrophe losses of 3.5 points;
- After-tax net investment income of $115
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, October 26, 2017 at
www.Selective.com. The webcast will be available for
rebroadcast until the close of business on November 27, 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
September 30,
|
|
Year to Date
September 30,
|
2017
|
|
2016
|
|
2017
|
|
2016
|
Net income
|
$
|
46.7
|
|
|
38.5
|
|
|
$
|
138.6
|
|
|
119.1
|
|
Exclude: Net realized
gains
|
(6.8)
|
|
|
(3.7)
|
|
|
(7.5)
|
|
|
(2.7)
|
|
Exclude: Tax on net
realized gains
|
2.4
|
|
|
1.3
|
|
|
2.6
|
|
|
0.9
|
|
Operating
income
|
$
|
42.3
|
|
|
36.1
|
|
|
$
|
133.7
|
|
|
117.3
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Reconciliation of
Net Income per Diluted Share to Operating Income per Diluted
Share
|
|
|
|
|
|
Quarter ended
September 30,
|
|
Year to Date
September 30,
|
2017
|
|
2016
|
|
2017
|
|
2016
|
Net income per
diluted share
|
$
|
0.79
|
|
|
0.66
|
|
|
$
|
2.34
|
|
|
2.03
|
|
Exclude: Net realized
gains
|
(0.11)
|
|
|
(0.06)
|
|
|
(0.13)
|
|
|
(0.05)
|
|
Exclude: Tax on net
realized gains
|
0.04
|
|
|
0.02
|
|
|
0.05
|
|
|
0.02
|
|
Operating income per
diluted share
|
$
|
0.72
|
|
|
0.62
|
|
|
$
|
2.26
|
|
|
2.00
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Reconciliation of
ROE to Operating ROE
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Quarter ended
September 30,
|
|
Year to Date
September 30,
|
2017
|
|
2016
|
|
|
2017
|
2016
|
Return on Average
Equity
|
11.2
|
%
|
|
9.8
|
|
|
11.4
|
%
|
|
10.7
|
|
Exclude: Net realized
gains
|
(1.6)
|
|
|
(0.9)
|
|
|
(0.6)
|
|
|
(0.2)
|
|
Exclude: Tax on net
realized gains
|
0.5
|
|
|
0.3
|
|
|
0.2
|
|
|
—
|
|
Operating Return on
Average Equity
|
10.1
|
%
|
|
9.2
|
|
|
11.0
|
%
|
|
10.5
|
|
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.