BRANCHVILLE, N.J., July 14, 2020 /PRNewswire/ -- Selective Insurance
Group, Inc. (NASDAQ: SIGI) today announced preliminary second
quarter 2020 pre-tax net catastrophe losses totaling
approximately $83 million. The losses relate to numerous
catastrophe events designated by Property Claims Services during
the quarter, including two April storms ($43
million) and claims related to civil unrest ($18 million).
Mainly due to higher than expected catastrophe losses, the
Company expects its second quarter combined ratio to be in the
range of 98% to 99%, with a combined ratio excluding catastrophe
losses in a range of 85% to 86%. The combined ratio reflects:
(i) $15 million of net prior year
favorable casualty reserve development; (ii) better than expected
non-catastrophe property losses; (iii) ongoing expense initiatives;
and partially offset by (iv) the previously disclosed COVID-19
related charges. Selective also projects second quarter
diluted earnings per share ("EPS") to be in the range of
$0.55 to $0.60 and non-GAAP operating EPS to be in the
range of $0.35 to $0.40, with the difference principally reflecting
net realized and unrealized investment gains.
"We experienced a record level of catastrophe losses for the
second quarter, driven by industry-wide U.S. catastrophe loss
activity that significantly exceeded the 10-year historical
median," said President and Chief Executive Officer John J. Marchioni. "Our claims team is
working closely with our distribution partners to process these
claims and help our policyholders restore their property.
Despite the higher level of catastrophe losses, our underlying
performance was strong, as our combined ratio indicates. In
addition, our combined ratio guidance continues to reflect our
estimates of the full-year impact of COVID-19."
Based on the preliminary second quarter results, the Company
made the following changes to its full-year 2020 guidance.
- A GAAP combined ratio, excluding catastrophe losses, of between
90.0% and 91.0%, which is an improvement from our prior guidance of
a range of 92.0% to 93.0%. Our combined ratio estimate assumes no
additional prior-year casualty reserve development in the second
half of the year;
- Catastrophe losses of 6.0 points on the combined ratio,
reflecting higher than expected catastrophe losses through the
first half of the year; and
- After-tax net investment income of $170.0 million, a $10.0
million improvement from our prior guidance, which includes
after-tax alternative investment income of between $Nil and
$5.0 million.
About Selective Insurance Group, Inc.
Selective Insurance Group, Inc. is a holding company for 10
property and casualty insurance companies rated "A" (Excellent) by
AM Best. Through independent agents, the insurance companies offer
standard and specialty insurance for commercial and personal risks
and flood insurance through the National Flood Insurance Program's
Write Your Own Program. Selective's unique position as both a
leading insurance group and an employer of choice is recognized in
a wide variety of awards and honors, including listing in the
Fortune 1000 and being named one of "America's Best Mid-Size
Employers" by Forbes Magazine. For more information about
Selective, visit 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 and information incorporated by reference in
this press release are "forward-looking statements" under the
Private Securities Litigation Reform Act of 1995. These statements
about our intentions, beliefs, projections, estimations, or
forecasts of future events or our future financial performance
involve known and unknown risks, uncertainties, and other factors
that may cause our actual results, levels of activity, or
performance to differ materially from what we indicated or implied.
In many cases, forward-looking statements contain 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 like terms. These statements are not guarantees
of future performance. We undertake no obligation, other than as
may be required under the federal securities laws, to publicly
update or revise any forward-looking statements for any reason.
Factors that could cause our actual results to differ materially
from what we project, forecast, or estimate in forward-looking
statements, include without limitation:
- Related to COVID-19:
-
- Governmental directives to contain or delay the spread of the
COVID-19 pandemic have disrupted ordinary business commerce and
impacted financial markets. These governmental actions, the extent,
duration, and possible alteration based on future COVID-19-related
developments that we cannot predict, could materially and adversely
affect our results of operations, net investment income, financial
position, and liquidity.
- The amount of premium we record may be reduced and our
underwriting results may be adversely impacted by (i) voluntary
premium credits on in-force commercial and personal automobile
policies, (ii) state insurance commissioner or other regulatory
directives to implement premium-based credit in lines other than
commercial and personal automobile, and we may be required to
return more premium than warranted by our filed rating plans and
actual loss experience, (iii) the effects of our voluntary efforts
or the directives from various state insurance regulators to extend
individualized payment flexibility and suspend policy
cancellations, late payment notices, and late or reinstatement
fees, (iv) return premiums that could be significant because our
general liability and workers compensation policies provide for
premium audit of revenues and payrolls, and (v) collectability of
premiums, which may be impacted by policyholder financial distress
and insolvency.
- Our loss and loss expenses may increase, our related reserves
may not be adequate, and our financial condition and liquidity may
be materially impacted if litigation or changes in statutory or
common law (i) require payment of COVID-19-related business
interruption losses despite contrary terms, conditions, and
exclusions in our policies or (ii) presume that COVID-19 is a
work-related illness compensable under workers compensation
policies for employees who contract the virus, regardless of
whether they worked in industries defined as essential in various
COVID-19-related governmental directives or interacted with the
public as part of their job duties.
- Our net investment income may be impacted by the significant
equity and debt financial market volatility resulting from the
COVID-19 pandemic and the related governmental orders because (i)
financial market volatility is reflected in our alternative
investments' performance, (ii) increased spreads on fixed income
securities may create mark-to-market investment valuation losses
that reduce unrealized capital gains and impact GAAP equity, and
(iii) OTTI losses may increase if we intend to sell more
securities, particularly in asset classes that are more
significantly impacted by COVID-19-related governmental directives
and to which the Federal Reserve Board is providing liquidity and
structural support.
- 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
interest rate fluctuations;
- Ratings downgrades on individual securities we own could affect
investment values and, therefore, statutory surplus;
- The adequacy of our loss reserves and loss expense
reserves;
- Frequency and severity of natural and man-made catastrophic
events, including without limitation hurricanes, tornadoes,
windstorms, earthquakes, hail, terrorism, including cyber-attacks,
explosions, severe winter weather, floods, and fires;
- Adverse market, governmental, regulatory, legal, or judicial
conditions or actions;
- The geographic concentration of our business in the eastern
portion of the United States;
- The cost and availability of reinsurance;
- Our ability to collect on reinsurance and the solvency of our
reinsurers;
- The impact of changes in U.S. trade policies and imposition of
tariffs on imports that may lead to higher than anticipated
inflationary trends for our loss and loss expenses;
- 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;
- The effects of data privacy or cyber security laws and
regulations on our operations;
- Major defect or failure in our internal controls or information
technology and application systems that result in harm to our brand
in the marketplace, increased senior executive focus on crisis and
reputational management issues and/or increased expenses,
particularly if we experience a significant privacy breach;
- 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
that we cannot predict or assess may emerge from time-to-time.
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.