BRANCHVILLE, N.J., July 24,
2023 /PRNewswire/ -- Selective Insurance Group, Inc.
(Nasdaq: SIGI) announced preliminary second quarter 2023 results
and pre-tax net catastrophe loss estimates today.
Selective (the "Company") expects to report second quarter
diluted earnings per share of $0.92
and non-GAAP operating earnings per share of $0.991, with the difference
principally reflecting after-tax net realized and unrealized
investment losses. The Company expects its second quarter combined
ratio to be 100.2%, including catastrophe losses of 10.6 points and
net prior year favorable casualty reserve development of 0.4
points. Net investment income, after-tax, is expected to be
$78 million, including $9 million of after-tax alternative investment
income. We expect to report a 9.1% return on common equity ("ROE")
and 9.8% non-GAAP operating ROE1 in the quarter.
The Company expects pre-tax net catastrophe losses totaling
approximately $100 million. Each
underwriting segment was impacted, with $63
million of pre-tax net catastrophe losses in Standard
Commercial Lines, $21 million in
Standard Personal Lines, and $16
million in Excess and Surplus Lines. Nineteen named events
impacted our results. Most storms were in our Midwest and East
Coast footprint states, and none were large enough to attach to our
catastrophe reinsurance treaty.
"In a challenging operating environment with elevated
catastrophe losses throughout the insurance sector, our team worked
hard to serve our customers and distribution partners. Through the
first half of the year, our expected operating ROE of 12.2% was in
line with our 12% target and we are on track to meet our full-year
guidance of a 96.5% combined ratio and $300
million of after-tax net investment income. In addition, we
produced excellent net premiums written growth," said Chairman,
President and Chief Executive Officer John
J. Marchioni.
Based on the preliminary second quarter results, we increased
our expectations for 2023 net catastrophe losses while maintaining
other full-year expectations as follows:
- A GAAP combined ratio of 96.5%, including net catastrophe
losses of 6.0 points, up from prior guidance of 4.5 points. Our
combined ratio estimate assumes no additional prior year casualty
reserve development;
- After-tax net investment income of $300
million that includes $30
million of after-tax net investment income from our
alternative investments;
- An overall effective tax rate of approximately 21%, which
assumes an effective tax rate of 20% for net investment income and
21% for all other items; and
- Weighted average shares of 61 million on a fully diluted
basis.
We expect to release our second quarter 2023 results after
market close on August 2, 2023. Any
changes in our preliminary estimates, including changes to pre-tax
net catastrophe losses, will be reflected in these results. Our
catastrophe loss estimates are subject to change as the events are
recent, the loss activity is geographically widespread, and the
losses can include complex facts, circumstances, and coverage
analysis.
A conference call to discuss the results will be held on
Thursday, August 3, 2023, at
11:00 AM ET. This call will be
webcast live and accessible on Selective's website at
www.Selective.com. A replay will be available from August 3 to September 1, 2023.
About Selective Insurance Group, Inc.
Selective
Insurance Group, Inc. (Nasdaq: SIGI) is a holding company for 10
property and casualty insurance companies rated "A+" (Superior) 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 Forbes
Best Midsize Employers in 2023 and certification as a Great Place
to Work® in 2023 for the fourth consecutive year. For
more information about Selective, visit www.Selective.com.
1Reconciliations of Net Income Available to Common
Stockholders per Diluted Common Share to Non-GAAP Operating Income
per Diluted Common Share and Certain Other Non-GAAP
Measures
Non-GAAP operating income per diluted common share
and non-GAAP operating return on common equity differ from net
income available to common stockholders per diluted common share
and return on common equity, respectively, by the exclusion of
after-tax net realized and unrealized gains and losses on
investments included in net income. These non-GAAP measures are
used as important financial measures by management, analysts, and
investors, because the timing of realized and unrealized investment
gains and losses on securities in any given period is largely
discretionary. In addition, net realized and unrealized gains and
losses on investments could distort the analysis of trends. These
operating measurements are not intended to be a substitute for net
income available to common stockholders per diluted common share
and return on common equity prepared in accordance with U.S.
generally accepted accounting principles (GAAP). Reconciliations of
net income available to common stockholders per diluted common
share to non-GAAP operating income per diluted common share and
return on common equity to non-GAAP operating return on common
equity respectively, are provided in the tables below.
Note: All amounts included in this release exclude intercompany
transactions.
Reconciliation of Net Income Available to Common Stockholders
per Diluted Common Share to Non-GAAP Operating Income per Diluted
Common Share
|
Quarter ended June
30,
|
|
Year-to-Date June
30,
|
2023
|
|
2022
|
|
2023
|
|
2022
|
Net income available to
common stockholders per diluted common share
|
$
0.92
|
|
0.61
|
|
2.41
|
|
1.50
|
Net realized and
unrealized investment (gains) losses included in net income, before
tax
|
0.09
|
|
0.70
|
|
0.04
|
|
1.37
|
Tax on reconciling
items
|
(0.02)
|
|
(0.14)
|
|
(0.01)
|
|
(0.29)
|
Non-GAAP operating
income per diluted common share
|
$
0.99
|
|
1.17
|
|
2.44
|
|
2.58
|
Reconciliation of Return on Common Equity to Non-GAAP
Operating Return on Common Equity
|
Quarter ended June
30,
|
|
Year-to-Date June
30,
|
2023
|
|
2022
|
|
2023
|
|
2022
|
Return on Common
Equity
|
9.1
|
%
|
|
6.0
|
|
12.1
|
|
7.1
|
Net realized and
unrealized investment (gains) losses included in net income, before
tax
|
0.9
|
|
|
6.9
|
|
0.1
|
|
6.4
|
Tax on reconciling
items
|
(0.2)
|
|
|
(1.5)
|
|
—
|
|
(1.4)
|
Non-GAAP Operating
Return on Common Equity
|
9.8
|
%
|
|
11.4
|
|
12.2
|
|
12.1
|
Forward-Looking Statements
Certain statements in this report, including information
incorporated by reference, are "forward-looking statements" defined
in the Private Securities Litigation Reform Act of 1995
("PSLRA"). The PSLRA provides a forward-looking statement
safe harbor under the Securities Act of 1933 and the Securities
Exchange Act of 1934. These statements discuss our intentions,
beliefs, projections, estimations, or forecasts of future events
and financial performance. They involve known and unknown risks,
uncertainties, and other factors that may cause our or our
industry's actual results, activity levels, or performance to
materially differ from those in or implied by the forward-looking
statements. In some cases, forward-looking statements include
the words "may," "will," "could," "would," "should," "expect,"
"plan," "anticipate," "target," "project," "intend," "believe,"
"estimate," "predict," "potential," "pro forma," "seek," "likely,"
"continue," or comparable terms. Our forward-looking
statements are only predictions, and we cannot guarantee or assure
that such expectations will prove correct. We undertake no
obligation to publicly update or revise any forward-looking
statements for any reason, except as may be required by law.
Factors that could cause our actual results to differ materially
from what we project, forecast, or estimate in forward-looking
statements include, without limitation:
- Challenging conditions in the economy, global capital markets,
the banking sector, and commercial real estate, including prolonged
higher inflation, could increase loss costs and negatively impact
investment portfolios;
- 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 catastrophic events, including
natural events that may be impacted by climate change, such as
hurricanes, severe convective storms, tornadoes, windstorms,
earthquakes, hail, severe winter weather, floods, and fires, and
man-made events such as criminal and terrorist acts, including
cyber-attacks, explosions, and civil unrest;
- Adverse market, governmental, regulatory, legal, or judicial
conditions or actions;
- The significant geographic concentration of our business in the
eastern portion of the United
States;
- The cost, terms and conditions, 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;
- Related to COVID-19:
-
- We have been successful in defending against payment of
COVID-19-related business interruption losses based on our
policies' terms, conditions, and exclusions. However, should the
highest courts determine otherwise, our loss and loss expenses may
increase, our related reserves may not be adequate, and our
financial condition and liquidity may be materially impacted.
- We cannot predict the amount our premiums may be reduced, or
the impact on our underwriting results, from any future (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, (iii) voluntary
efforts or directives from various state insurance regulators to
extend individualized payment flexibility or suspend policy
cancellation, late payment notices, and late or reinstatement fees,
or (iv) litigation brought by policyholders to recover premiums
they allege were excessive during the period of any
governmental directive.
- The ongoing Russian war against Ukraine is impacting global economic, banking,
commodity, and financial markets, exacerbating ongoing economic
challenges, including inflation and supply chain disruption, which
influences insurance loss costs, premiums, and investment
valuations;
- 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;
- Potential tax or federal financial regulatory reform provisions
that could pose certain risks to our operations;
- Our ability to maintain favorable financial ratings, which may
include sustainability considerations, from rating agencies,
including AM 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 our
Annual Report on Form 10-K and other periodic reports.
View original content to download
multimedia:https://www.prnewswire.com/news-releases/selective-insurance-group-inc-announces-preliminary-second-quarter-2023-results-including-catastrophe-loss-estimates-301884353.html
SOURCE Selective Insurance Group, Inc.