BRANCHVILLE, N.J., July 29, 2020 /PRNewswire/ --
In the second quarter of 2020:
- Net premiums written ("NPW") increased 3% from the second
quarter of 2019;
- GAAP combined ratio was 98.4%;
- Annualized return on equity ("ROE") was 6.2% and non-GAAP
operating ROE1 was 4.4%;
- Overall renewal pure price increased 3.9%; and
- Book value per share increased 9.5% in the quarter.
Selective Insurance Group, Inc. (NASDAQ: SIGI) today reported
financial results for the second quarter ended June 30, 2020,
with net income per diluted share of $0.57 and non-GAAP operating income1
per diluted share of $0.40.
"Our strong underlying results for the second quarter were
obscured by elevated catastrophe losses reflecting heightened
activity for the industry, and a decline in alternative investment
income, which we report on a one-quarter lag. We incurred a
significant level of catastrophe losses in the quarter totaling
$83 million mainly due to: (i)
$43 million of losses related to two
April storms; and (ii) $20 million of
losses related to civil unrest claims," said John Marchioni, President and CEO. "In
addition, we incurred COVID-19-related underwriting items totaling
$9.6 million in the quarter, which
increased the combined ratio by 1.3 points. Despite these
losses, the combined ratio in the quarter was a profitable 98.4%,
reflecting excellent underlying profitability. Our non-GAAP
operating ROE was 4.4% in the quarter and 6.7% year-to-date.
While our overall results through the first half of this year have
not met our expectations, events such as these reinforce the value
we bring to our customers as our claims teams continue to work
tirelessly to help our policyholders get their businesses and lives
back in order."
"I cannot be more proud of our employees who have transitioned
seamlessly into a work from home environment, and have continued to
provide excellent service to our customers and distribution
partners," continued Mr. Marchioni. "We achieved overall NPW
growth of 3% in the quarter despite a challenging economic backdrop
and the personal and commercial automobile credits that reduced our
NPW by $19.7 million and our growth
rate by three percentage points. During these difficult
times, our distribution partners demonstrate the value they bring
to our customers - and I want to personally thank them for their
hard work and dedication. Our capital and liquidity position
remains extremely strong, providing us with the flexibility to
invest in areas where we see opportunities for profitable
growth."
Operating Highlights
Consolidated
Financial Results
|
Quarter ended June
30,
|
Change
|
Year-to-Date June
30,
|
Change
|
$ and shares in
millions, except per share data
|
2020
|
|
|
2019
|
2020
|
|
|
2019
|
Net premiums
written
|
$
|
724.8
|
|
|
701.4
|
|
3
|
|
%
|
$
|
1,372.1
|
|
|
1,374.3
|
|
—
|
|
%
|
Net premiums
earned
|
630.7
|
|
|
642.6
|
|
(2)
|
|
|
1,282.4
|
|
|
1,275.2
|
|
1
|
|
|
Net investment income
earned
|
34.4
|
|
|
58.5
|
|
(41)
|
|
|
90.4
|
|
|
109.1
|
|
(17)
|
|
|
Net realized and
unrealized gains (losses), pre-tax
|
12.6
|
|
|
4.0
|
|
214
|
|
|
(32.0)
|
|
|
17.5
|
|
(283)
|
|
|
Total
revenues
|
682.4
|
|
|
708.2
|
|
(4)
|
|
|
1,347.3
|
|
|
1,407.2
|
|
(4)
|
|
|
Net underwriting
income, after-tax
|
7.8
|
|
|
35.3
|
|
(78)
|
|
|
24.7
|
|
|
61.8
|
|
(60)
|
|
|
Net investment
income, after-tax
|
28.5
|
|
|
47.6
|
|
(40)
|
|
|
74.0
|
|
|
88.9
|
|
(17)
|
|
|
Net income
|
34.2
|
|
|
72.3
|
|
(53)
|
|
|
49.4
|
|
|
133.6
|
|
(63)
|
|
|
Non-GAAP operating
income1
|
24.2
|
|
|
69.1
|
|
(65)
|
|
|
74.7
|
|
|
123.1
|
|
(39)
|
|
|
Combined
ratio
|
98.4
|
|
%
|
93.1
|
|
5.3
|
|
pts
|
97.6
|
|
%
|
93.9
|
|
3.7
|
|
pts
|
Loss and loss expense
ratio
|
64.0
|
|
|
59.4
|
|
4.6
|
|
|
62.8
|
|
|
60.2
|
|
2.6
|
|
|
Underwriting expense
ratio
|
34.3
|
|
|
33.5
|
|
0.8
|
|
|
34.7
|
|
|
33.4
|
|
1.3
|
|
|
Dividends to
policyholders ratio
|
0.1
|
|
|
0.2
|
|
(0.1)
|
|
|
0.1
|
|
|
0.3
|
|
(0.2)
|
|
|
Catastrophe
losses
|
13.2
|
|
pts
|
4.6
|
|
8.6
|
|
|
9.1
|
|
pts
|
3.9
|
|
5.2
|
|
|
Non-catastrophe
property losses and loss expenses
|
13.0
|
|
|
14.4
|
|
(1.4)
|
|
|
14.8
|
|
|
15.7
|
|
(0.9)
|
|
|
(Favorable) prior
year reserve development on casualty
lines
|
(2.4)
|
|
|
(2.6)
|
|
0.2
|
|
|
(1.9)
|
|
|
(2.1)
|
|
0.2
|
|
|
Net income per
diluted share
|
$
|
0.57
|
|
|
1.21
|
|
(53)
|
|
%
|
$
|
0.82
|
|
|
2.23
|
|
(63)
|
|
%
|
Non-GAAP operating
income per diluted share1
|
0.40
|
|
|
1.16
|
|
(66)
|
|
|
1.24
|
|
|
2.06
|
|
(40)
|
|
|
Weighted average
diluted shares
|
60.2
|
|
|
59.9
|
|
—
|
|
|
60.2
|
|
|
59.9
|
|
1
|
|
|
Book value per
share
|
$
|
38.43
|
|
|
34.71
|
|
11
|
|
|
38.43
|
|
|
34.71
|
|
11
|
|
|
Overall Insurance Operations
For the quarter, overall NPW increased 3% compared to the second
quarter of 2019, driven by renewal pure price increases, strong
retention, and new business growth. NPW included $19.7 million of COVID-19-related automobile
premium credits that were accounted for as a reduction in NPW, were
fully earned in the second quarter, and reduced the overall NPW
growth rate by three percentage points. These automobile
premium credits were offset by an equal reduction in losses and
loss expenses. COVID-19-related underwriting items totaling
$9.6 million increased the combined
ratio by 1.3 points in the quarter, including a $6.6 million reduction in pre-tax income from the
earned impact of our first quarter $75
million return audit and mid-term endorsement premium
accrual, and a $3 million increase in
our premium receivables allowance for doubtful accounts.
The combined ratio of 98.4% reflects the COVID-19-related
underwriting impacts discussed above and the elevated level of
catastrophe losses experienced during the quarter, partially offset
by: (i) the impact of net prior year favorable casualty reserve
development; (ii) lower non-catastrophe property losses compared to
the prior year quarter; and (iii) our on-going expense management
initiatives. Net favorable prior year casualty reserve
development in the quarter was driven by our workers compensation
and general liability lines of business, partially offset by
unfavorable prior year casualty reserve development in our
commercial auto line of business. Our insurance operations
generated 1.4 points of non-GAAP operating ROE in the quarter.
Standard Commercial Lines Segment
Standard Commercial Lines premiums, which represented 80% of
total NPW in the quarter, were up 5%, inclusive of $15.4 million of commercial automobile premium
credits, that reduced the NPW growth rate by two percentage
points. Renewal pure price increases remained solid at
3.9%. New business decreased 1% to $110 million compared to the prior year quarter,
but retention increased to 86%, resulting in strong overall
growth. The second quarter combined ratio of 96.7% reflected
catastrophe losses of 10.1 points. Favorable prior year
casualty reserve development in the workers compensation and
general liability lines of business was partially offset by
unfavorable prior year casualty reserve development in our
commercial auto line of business.
Standard
Commercial Lines Segment
|
Quarter ended June
30,
|
Change
|
Year-to-Date June
30,
|
Change
|
$ in
millions
|
2020
|
|
|
2019
|
2020
|
|
|
2019
|
Net premiums
written
|
$
|
583.3
|
|
|
557.4
|
|
5
|
|
%
|
$
|
1,101.8
|
|
|
1,104.1
|
|
—
|
|
%
|
Net premiums
earned
|
501.0
|
|
|
506.6
|
|
(1)
|
|
|
1,017.6
|
|
|
1,003.8
|
|
1
|
|
|
Combined
ratio
|
96.7
|
|
%
|
92.7
|
|
4.0
|
|
pts
|
96.7
|
|
%
|
93.7
|
|
3.0
|
|
pts
|
Loss and loss expense
ratio
|
61.4
|
|
|
57.9
|
|
3.5
|
|
|
60.9
|
|
|
59.0
|
|
1.9
|
|
|
Underwriting expense
ratio
|
35.2
|
|
|
34.5
|
|
0.7
|
|
|
35.7
|
|
|
34.4
|
|
1.3
|
|
|
Dividends to
policyholders ratio
|
0.1
|
|
|
0.3
|
|
(0.2)
|
|
|
0.1
|
|
|
0.3
|
|
(0.2)
|
|
|
Catastrophe
losses
|
10.1
|
|
pts
|
4.2
|
|
5.9
|
|
|
7.0
|
|
pts
|
3.7
|
|
3.3
|
|
|
Non-catastrophe
property losses and loss expenses
|
12.2
|
|
|
12.4
|
|
(0.2)
|
|
|
13.8
|
|
|
13.7
|
|
0.1
|
|
|
(Favorable) prior
year reserve development on casualty
lines
|
(3.0)
|
|
|
(3.4)
|
|
0.4
|
|
|
(2.5)
|
|
|
(2.7)
|
|
0.2
|
|
|
Standard Personal Lines Segment
Standard Personal Lines premiums, which represented 11% of total
NPW in the quarter, were down 5% in the quarter, driven in large
part by COVID-19-related personal automobile premium credits of
$4.3 million, which represented a
five percentage point reduction in NPW growth. This was
partially offset by a 13% increase in new business. Renewal
pure price increases averaged 3.1%, and retention was 84%.
The second quarter combined ratio was 108.8%, up 14.7 points from a
year ago. Elevated catastrophe losses, which were 28.3 points
higher than a year ago, were partially offset by a reduction in
non-catastrophe property losses of 10.3 points.
Standard Personal
Lines Segment
|
Quarter ended June
30,
|
Change
|
Year-to-Date June
30,
|
Change
|
$ in
millions
|
2020
|
|
|
2019
|
2020
|
|
|
2019
|
Net premiums
written
|
$
|
78.2
|
|
|
82.7
|
|
(5)
|
|
%
|
$
|
145.8
|
|
|
152.1
|
|
(4)
|
|
%
|
Net premiums
earned
|
71.6
|
|
|
77.1
|
|
(7)
|
|
|
147.8
|
|
|
154.4
|
|
(4)
|
|
|
Combined
ratio
|
108.8
|
|
%
|
94.1
|
|
14.7
|
|
pts
|
104.0
|
|
%
|
95.0
|
|
9.0
|
|
pts
|
Loss and loss expense
ratio
|
81.1
|
|
|
65.5
|
|
15.6
|
|
|
76.1
|
|
|
67.1
|
|
9.0
|
|
|
Underwriting expense
ratio
|
27.7
|
|
|
28.6
|
|
(0.9)
|
|
|
27.9
|
|
|
27.9
|
|
—
|
|
|
Catastrophe
losses
|
36.2
|
|
pts
|
7.9
|
|
28.3
|
|
|
25.7
|
|
pts
|
6.6
|
|
19.1
|
|
|
Non-catastrophe
property losses and loss expenses
|
21.4
|
|
|
31.7
|
|
(10.3)
|
|
|
25.8
|
|
|
34.7
|
|
(8.9)
|
|
|
Excess and Surplus Lines Segment
Excess and Surplus Lines premiums, which represented 9% of total
NPW, increased 3% in the quarter, and were driven by a 13% increase
in new business. Renewal pure price increases were 5.5%. The
combined ratio was 100.9%, a 5.9-point increase compared to a year
ago. Catastrophe losses were 7.9 points higher than a year
ago, and non-catastrophe property losses were relatively flat.
Excess and Surplus
Lines Segment
|
Quarter ended June
30,
|
Change
|
Year-to-Date June
30,
|
Change
|
$ in
millions
|
2020
|
|
|
2019
|
2020
|
|
|
2019
|
Net premiums
written
|
$
|
63.2
|
|
|
61.3
|
|
3
|
|
%
|
$
|
124.5
|
|
|
118.2
|
|
5
|
|
%
|
Net premiums
earned
|
58.0
|
|
|
58.9
|
|
(1)
|
|
|
117.0
|
|
|
116.9
|
|
—
|
|
|
Combined
ratio
|
100.9
|
|
%
|
95.0
|
|
5.9
|
|
pts
|
97.2
|
|
%
|
93.6
|
|
3.6
|
|
pts
|
Loss and loss expense
ratio
|
66.8
|
|
|
63.3
|
|
3.5
|
|
|
62.1
|
|
|
61.6
|
|
0.5
|
|
|
Underwriting expense
ratio
|
34.1
|
|
|
31.7
|
|
2.4
|
|
|
35.1
|
|
|
32.0
|
|
3.1
|
|
|
Catastrophe
losses
|
11.3
|
|
pts
|
3.4
|
|
7.9
|
|
|
6.0
|
|
pts
|
2.4
|
|
3.6
|
|
|
Non-catastrophe
property losses and loss expenses
|
9.6
|
|
|
9.4
|
|
0.2
|
|
|
9.7
|
|
|
8.6
|
|
1.1
|
|
|
Investments Segment
Net investment income, after-tax, was down 40% in the quarter to
$28.5 million. The decrease was
driven by alternative investment losses of $16 million pre-tax, or $13 million after-tax, which are reported on a
one-quarter lag, and reflect the market decline during the first
quarter. The after-tax earned income yield on the portfolio
averaged 1.6%. Invested assets included an increase in
unrealized gains on our fixed income securities portfolio of
$219.6 million in the quarter, driven
principally by narrowing credit spreads. Invested assets per
dollar of stockholders' equity was $3.10 at June 30,
2020, and the investment portfolio generated 5.2 points of
non-GAAP operating ROE in the quarter.
Investments
Segment
|
Quarter ended June
30,
|
Change
|
Year-to-Date June
30,
|
Change
|
$ in millions,
except per share data
|
2020
|
|
|
2019
|
2020
|
|
|
2019
|
Net investment income
earned, after-tax
|
$
|
28.5
|
|
|
47.6
|
|
(40)
|
|
%
|
$
|
74.0
|
|
|
88.9
|
|
(17)
|
|
%
|
Net investment income
per share
|
0.47
|
|
|
0.79
|
|
(41)
|
|
|
1.23
|
|
|
1.48
|
|
(17)
|
|
|
Effective tax
rate
|
17.1
|
|
%
|
18.6
|
|
(1.5)
|
|
pts
|
18.1
|
|
%
|
18.5
|
|
(0.4)
|
|
pts
|
Average
yields:
|
|
|
|
|
|
|
|
|
|
|
Fixed income
securities:
|
|
|
|
|
|
|
|
|
|
|
Pre-tax
|
3.3
|
|
%
|
3.6
|
|
(0.3)
|
|
pts
|
3.2
|
|
%
|
3.6
|
|
(0.4)
|
|
pts
|
After-tax
|
2.7
|
|
|
2.9
|
|
(0.2)
|
|
|
2.6
|
|
|
2.9
|
|
(0.3)
|
|
|
Portfolio:
|
|
|
|
|
|
|
|
|
|
|
Pre-tax
|
2.0
|
|
|
3.7
|
|
(1.7)
|
|
|
2.6
|
|
|
3.5
|
|
(0.9)
|
|
|
After-tax
|
1.6
|
|
|
3.0
|
|
(1.4)
|
|
|
2.1
|
|
|
2.9
|
|
(0.8)
|
|
|
Annualized ROE
contribution
|
5.2
|
|
|
9.6
|
|
(4.4)
|
|
|
6.6
|
|
|
9.2
|
|
(2.6)
|
|
|
Balance Sheet
$ in millions,
except per share data
|
June 30,
2020
|
December 31,
2019
|
Change
|
Total
assets
|
$
|
9,306.0
|
|
8,797.2
|
|
6
|
%
|
Total
investments
|
7,130.3
|
|
6,688.7
|
|
7
|
|
Short-term
debt
|
252.0
|
|
—
|
|
NA
|
|
Long-term
debt
|
550.6
|
|
550.6
|
|
—
|
|
Stockholders'
equity
|
2,298.7
|
|
2,194.9
|
|
5
|
|
Invested assets per
dollar of stockholders' equity
|
3.10
|
|
3.05
|
|
2
|
|
Net premiums written
to policyholders' surplus
|
1.4x
|
|
1.4x
|
|
-
|
|
Book value per
share
|
38.43
|
|
36.91
|
|
4
|
|
Our long-term debt balance did not change from December 31, 2019. However, we increased
our short-term debt by $302 million
during the first quarter in light of the COVID-19-related
uncertainty and its impact to the financial markets to increase
liquidity and operating flexibility. We repaid the
$50 million borrowing on our line of
credit in May. We currently expect to extend all or a portion
of the remaining short-term borrowings until December 2020 and repay them by year end.
Book value per share increased 4% for the first six months,
driven by $1.15 of net unrealized
gains and $0.82 of net income per
diluted share, partially offset by $0.46 of dividends paid to shareholders.
Selective's Board of Directors declared a $0.23 per share quarterly cash dividend on common
stock that is payable September 1,
2020, to shareholders of record as of August 14, 2020.
Guidance
For 2020, our revised full-year guidance, which reflects the
current estimated full-year impact of COVID-19, is as follows:
- A GAAP combined ratio, excluding catastrophe losses, of between
90% and 91%. This represents an improvement from our first quarter
of 2020 guidance, which was between 92% and 93%. 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 losses through the first half of
the year. As COVID-19 has not been designated a catastrophe event
by the Insurance Services Office's Property Claims Services unit,
such losses are not included in this ratio;
- After-tax net investment income of approximately $170 million, a $10
million improvement from our first quarter of 2020 guidance
of $160 million. We now expect up to
$5 million in after-tax net
investment income from our alternative investments;
- An overall effective tax rate of approximately 18.5%, which
includes an effective tax rate of 18.5% for net investment income,
reflecting a tax rate of 5.25% for tax-advantaged municipal bonds
and a tax rate of 21% for all other items; and
- Weighted average shares of 60.5 million on a diluted
basis.
Our guidance this year has a higher degree of uncertainty than
prior years due to the dynamic and fluid nature of the impact of
the COVID-19 pandemic on the United
States economy, our business, and our operations.
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 10:30 a.m.
ET, on Thursday, July 30, 2020
at www.Selective.com. The webcast will be available for
rebroadcast until the close of business on August 28, 2020.
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.
1Reconciliation of Net Income to Non-GAAP
Operating Income and Certain Other Non-GAAP
Measures
Non-GAAP operating income, non-GAAP operating
income per diluted share, and non-GAAP operating return on equity
differ from net income, net income per diluted share, and return on
equity, respectively, by the exclusion of: (i) after-tax net
realized and unrealized gains and losses on investments; and (ii)
after-tax debt retirement costs. They are used as important
financial measures by management, analysts, and investors, because
the realization of net investment gains and losses on sales of
securities in any given period is largely discretionary as to
timing. In addition, these net realized investment gains and
losses, other-than-temporary investment impairments that are
charged to earnings, unrealized gains and losses on equity
securities, and the debt retirement costs could distort the
analysis of trends. These operating measurements are not
intended as a substitute for net income, income 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
non-GAAP operating income, non-GAAP operating income per diluted
share, and non-GAAP operating return on equity, respectively, are
provided in the tables below.
Note: All amounts included in this release exclude intercompany
transactions.
Reconciliation of Net Income to Non-GAAP Operating
Income
$ in
millions
|
Quarter ended June
30,
|
|
Year-to-Date June
30,
|
2020
|
|
2019
|
|
2020
|
|
2019
|
Net income
|
$
|
34.2
|
|
|
72.3
|
|
|
49.4
|
|
|
133.6
|
|
Net realized and
unrealized (gains) losses, before tax
|
(12.6)
|
|
|
(4.0)
|
|
|
32.0
|
|
|
(17.5)
|
|
Debt retirement
costs, before tax
|
—
|
|
|
—
|
|
|
—
|
|
|
4.2
|
|
Tax on reconciling
items
|
2.7
|
|
|
0.8
|
|
|
(6.7)
|
|
|
2.8
|
|
Non-GAAP operating
income
|
$
|
24.2
|
|
|
69.1
|
|
|
74.7
|
|
|
123.1
|
|
Reconciliation of Net Income per Diluted Share to Non-GAAP
Operating Income per Diluted Share
|
Quarter ended June
30,
|
|
Year-to-Date June
30,
|
2020
|
|
2019
|
|
2020
|
|
2019
|
Net income per
diluted share
|
$
|
0.57
|
|
|
1.21
|
|
|
0.82
|
|
|
2.23
|
|
Net realized and
unrealized (gains) losses, before tax
|
(0.21)
|
|
|
(0.06)
|
|
|
0.53
|
|
|
(0.29)
|
|
Debt retirement
costs, before tax
|
—
|
|
|
—
|
|
|
—
|
|
|
0.07
|
|
Tax on reconciling
items
|
0.04
|
|
|
0.01
|
|
|
(0.11)
|
|
|
0.05
|
|
Non-GAAP operating
income per diluted share
|
$
|
0.40
|
|
|
1.16
|
|
|
1.24
|
|
|
2.06
|
|
Reconciliation of Return on Equity to Non-GAAP Operating
Return on Equity
|
Quarter ended June
30,
|
|
Year-to-Date June
30,
|
2020
|
|
2019
|
|
2020
|
|
2019
|
Annualized Return on
Equity
|
6.2
|
|
%
|
14.5
|
|
|
4.4
|
|
|
13.9
|
|
Net realized and
unrealized (gains) losses, before tax
|
(2.3)
|
|
|
(0.8)
|
|
|
2.9
|
|
|
(1.8)
|
|
Debt retirement
costs, before tax
|
—
|
|
|
—
|
|
|
—
|
|
|
0.4
|
|
Tax on reconciling
items
|
0.5
|
|
|
0.2
|
|
|
(0.6)
|
|
|
0.3
|
|
Annualized Non-GAAP
Operating Return on Equity
|
4.4
|
|
%
|
13.9
|
|
|
6.7
|
|
|
12.8
|
|
Note: Amounts in the tables above may not foot due to
rounding.
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.