First Quarter 2023 Return on
Common Equity ("ROE") of 15.1% and Non-GAAP Operating
ROE1 of 14.6%
In the first quarter of 2023, we reported:
- Net premiums written ("NPW") increased 12% compared to the
first quarter of 2022;
- GAAP combined ratio of 95.7%, compared to 93.1% in the first
quarter of 2022;
- Commercial Lines renewal pure price increases averaged 7.0%,
compared to 4.8% in the first quarter of 2022;
- After-tax net investment income of $73
million, up 25% compared to the first quarter of 2022;
- Book value per common share of $40.82, up 5.8% in the first quarter; and
- Adjusted book value per common share¹ of $46.61, up 2.5% in the first quarter.
BRANCHVILLE, N.J., May 3, 2023
/PRNewswire/ -- Selective Insurance Group, Inc. (NASDAQ: SIGI)
reported financial results for the first quarter ended March 31, 2023, with net income per diluted
common share of $1.48 and non-GAAP
operating income1 per diluted common share of
$1.44. The first quarter
combined ratio was a profitable 95.7%, inclusive of 6.1 points of
catastrophe losses.
NPW increased 12% from a year ago and growth was strong across
all our underwriting segments, driven by renewal pure price
increases, solid retention, new business, and strong exposure
growth. For the quarter, the Investments segment contributed 12.2
points of annualized ROE.
"We are pleased with our strong start to 2023, delivering
excellent growth and solid underwriting margins despite elevated
catastrophe losses. Our underwriting discipline and long-term
approach to managing price increases relative to projected loss
trends are the primary drivers of our consistent success. We are
well positioned to navigate the challenging economic and insurance
loss cost environments, with a strong balance sheet, sophisticated
underwriting capabilities, and excellent distribution partner
relationships," said John J.
Marchioni, Chairman, President and Chief Executive
Officer.
Operating Highlights
Consolidated
Financial Results
|
Quarter ended March
31,
|
Change
|
$ and shares in
millions, except per share data
|
2023
|
2022
|
Net premiums
written
|
$
999.8
|
|
889.8
|
12
|
%
|
Net premiums
earned
|
902.3
|
|
812.3
|
11
|
|
Net investment income
earned
|
91.5
|
|
72.6
|
26
|
|
Net realized and
unrealized gains (losses), pre-tax
|
3.3
|
|
(40.4)
|
(108)
|
|
Total
revenues
|
999.8
|
|
846.1
|
18
|
|
Net underwriting
income, after-tax
|
31.0
|
|
44.1
|
(30)
|
|
Net investment income,
after-tax
|
73.1
|
|
58.5
|
25
|
|
Net income available to
common stockholders
|
90.3
|
|
54.0
|
67
|
|
Non-GAAP operating
income1
|
87.6
|
|
85.9
|
2
|
|
Combined
ratio
|
95.7
|
%
|
93.1
|
2.6
|
pts
|
Loss and loss expense
ratio
|
62.9
|
|
60.8
|
2.1
|
|
Underwriting expense
ratio
|
32.6
|
|
32.1
|
0.5
|
|
Dividends to
policyholders ratio
|
0.2
|
|
0.2
|
—
|
|
Net catastrophe
losses
|
6.1
|
pts
|
2.5
|
3.6
|
|
Non-catastrophe
property losses and loss expenses
|
16.4
|
|
18.5
|
(2.1)
|
|
(Favorable) prior year
reserve development on casualty lines
|
(1.4)
|
|
(2.5)
|
1.1
|
|
Net income available to
common stockholders per diluted common share
|
$
1.48
|
|
0.89
|
66
|
%
|
Non-GAAP operating
income per diluted common share1
|
1.44
|
|
1.41
|
2
|
|
Weighted average
diluted common shares
|
60.9
|
|
60.8
|
—
|
|
Book value per common
share
|
$
40.82
|
|
42.73
|
(4)
|
|
Adjusted book value per
common share1
|
46.61
|
|
43.80
|
6
|
|
Overall Insurance Operations
For the first quarter, overall NPW increased 12% from a
year ago, reflecting average renewal pure price increases of 6.6%,
solid retention, new business, and strong exposure growth. Our
95.7% combined ratio in the quarter was up from 93.1% a year ago,
driven principally by higher catastrophe losses and lower prior
year favorable casualty reserve development. The quarter's
catastrophe losses were driven by three large storms totaling
$39 million in ultimate pre-tax losses. Prior year favorable
casualty reserve development totaled $13.0
million, and included $10.0
million from our workers compensation line of business and
$5.0 million from our excess and
surplus casualty line of business, partially offset by $2.0 million of unfavorable development in our
personal auto line of business. Our Insurance Operations generated
5.2 points of annualized ROE in the quarter.
Standard Commercial Lines Segment
For the first quarter, Standard Commercial Lines premiums
(representing 81% of total NPW) increased 10% compared to a year
ago. The premium growth reflected average renewal pure price
increases of 7.0%, new business growth of 15%, strong exposure
growth, and consistently solid retention of 86%. The first quarter
combined ratio was 94.7%. The following table shows the variances
relative to the 93.6% combined ratio a year ago:
Standard Commercial
Lines Segment
|
Quarter ended March
31,
|
Change
|
$ in
millions
|
2023
|
2022
|
Net premiums
written
|
$
813.3
|
|
737.6
|
10
|
%
|
Net premiums
earned
|
731.6
|
|
661.5
|
11
|
|
Combined
ratio
|
94.7
|
%
|
93.6
|
1.1
|
pts
|
Loss and loss expense
ratio
|
61.2
|
|
60.4
|
0.8
|
|
Underwriting expense
ratio
|
33.3
|
|
33.0
|
0.3
|
|
Dividends to
policyholders ratio
|
0.2
|
|
0.2
|
—
|
|
Net catastrophe
losses
|
4.8
|
pts
|
2.3
|
2.5
|
|
Non-catastrophe
property losses and loss expenses
|
14.4
|
|
17.5
|
(3.1)
|
|
(Favorable) prior year
reserve development on casualty lines
|
(1.4)
|
|
(3.0)
|
1.6
|
|
Standard Personal Lines Segment
For the first quarter, Standard Personal Lines premiums
(representing 9% of total NPW) increased 31% compared to a year
ago. Renewal pure price increases averaged 1.8%, retention was 87%,
and new business was up $16.7
million, compared to last year. The first quarter
combined ratio was 116.0% and included 17.9 points of catastrophe
losses and 2.4 points of unfavorable reserve development. The
following table shows the variances relative to the 91.0% combined
ratio a year ago:
Standard Personal
Lines Segment
|
Quarter ended March
31,
|
Change
|
$ in
millions
|
2023
|
2022
|
Net premiums
written
|
$
85.3
|
|
65.1
|
31
|
%
|
Net premiums
earned
|
81.9
|
|
72.6
|
13
|
|
Combined
ratio
|
116.0
|
%
|
91.0
|
25.0
|
pts
|
Loss and loss expense
ratio
|
89.4
|
|
66.8
|
22.6
|
|
Underwriting expense
ratio
|
26.6
|
|
24.2
|
2.4
|
|
Net catastrophe
losses
|
17.9
|
pts
|
6.0
|
11.9
|
|
Non-catastrophe
property losses and loss expenses
|
41.3
|
|
35.2
|
6.1
|
|
Unfavorable prior year
reserve development on casualty lines
|
2.4
|
|
—
|
2.4
|
|
Excess and Surplus Lines Segment
For the first quarter, Excess and Surplus Lines premiums
(representing 10% of total NPW) increased 16% compared to the
prior-year period, driven by average renewal pure price increases
of 7.4% and new business growth of 9%. The first quarter combined
ratio was 85.0%. The following table shows the variances relative
to the 91.1% combined ratio a year ago:
Excess and Surplus
Lines Segment
|
Quarter ended March
31,
|
Change
|
$ in
millions
|
2023
|
2022
|
Net premiums
written
|
$
101.2
|
|
87.1
|
16
|
%
|
Net premiums
earned
|
88.9
|
|
78.2
|
14
|
|
Combined
ratio
|
85.0
|
%
|
91.1
|
(6.1)
|
pts
|
Loss and loss expense
ratio
|
52.8
|
|
59.1
|
(6.3)
|
|
Underwriting expense
ratio
|
32.2
|
|
32.0
|
0.2
|
|
Net catastrophe
losses
|
6.3
|
pts
|
1.7
|
4.6
|
|
Non-catastrophe
property losses and loss expenses
|
10.1
|
|
11.6
|
(1.5)
|
|
(Favorable) prior year
reserve development on casualty lines
|
(5.6)
|
|
—
|
(5.6)
|
|
Investments Segment
For the first quarter, after-tax net investment income of
$73 million was 25% higher than the
prior year period. Investment income from our fixed income
securities portfolio was up 49% compared to the prior year, driven
by higher book yields from the investment of operating and
investing cash flows over the past year in the higher interest rate
environment. After-tax alternative investment income of
$6 million was $9 million lower than in the prior-year period.
For the quarter, the after-tax income yield averaged 3.7% for the
overall portfolio, and 3.8% for the fixed income securities
portfolio. Invested assets per dollar of common stockholders'
equity was $3.25 at March 31, 2023, and the investment portfolio
generated 12.2 points of non-GAAP operating ROE for the
quarter.
Investments
Segment
|
Quarter ended March
31,
|
Change
|
$ in millions,
except per share data
|
2023
|
2022
|
Net investment income
earned, after-tax
|
$
73.1
|
|
58.5
|
25
|
%
|
Net investment income
per common share
|
1.20
|
|
0.96
|
25
|
|
Effective tax
rate
|
20.2
|
%
|
19.4
|
0.8
|
pts
|
Average
yields:
|
|
|
|
|
|
Portfolio:
|
|
|
|
|
|
Pre-tax
|
4.6
|
|
3.7
|
0.9
|
|
After-tax
|
3.7
|
|
3.0
|
0.7
|
|
Fixed income
securities:
|
|
|
|
|
|
Pre-tax
|
4.7
|
%
|
3.2
|
1.5
|
pts
|
After-tax
|
3.8
|
|
2.6
|
1.2
|
|
Annualized ROE
contribution
|
12.2
|
|
8.7
|
3.5
|
|
Balance Sheet
$ in millions, except
per share data
|
March 31,
2023
|
|
December 31,
2022
|
|
Change
|
Total assets
|
$
11,015.0
|
|
|
10,802.3
|
|
|
2 %
|
|
Total
investments
|
8,029.4
|
|
|
7,837.5
|
|
|
2
|
|
Long-term
debt
|
504.2
|
|
|
504.7
|
|
|
—
|
|
Stockholders'
equity
|
2,669.4
|
|
|
2,527.6
|
|
|
6
|
|
Common stockholders'
equity
|
2,469.4
|
|
|
2,327.6
|
|
|
6
|
|
Invested assets per
dollar of common stockholders' equity
|
3.25
|
|
|
3.37
|
|
|
(4)
|
|
Net premiums written to
policyholders' surplus
|
1.46
|
|
|
1.44
|
|
|
0.02
|
|
Book value per common
share
|
$
40.82
|
|
|
38.57
|
|
|
6
|
|
Adjusted book value per
common share1
|
46.61
|
|
|
45.49
|
|
|
2
|
|
Debt to total
capitalization
|
15.9
|
%
|
|
16.6
|
%
|
|
(0.7)
|
pts
|
Book value per common share increased by $2.25, or 5.8%, during the first quarter of 2023.
The increase was principally driven by $1.48 of net income per diluted common share and
a $1.10 reduction in after-tax net
unrealized losses on our fixed income securities portfolio from
lower interest rates, partially offset by $0.30 of dividends on our common stock paid to
shareholders. During the first quarter of 2023, the Company did not
repurchase any shares of common stock. Capacity under our existing
repurchase authorization was $84.2
million as of March 31,
2023.
Selective's Board of Directors declared:
- A quarterly cash dividend on common stock of $0.30 per common share that is payable
June 1, 2023, to holders of record on
May 15, 2023; and
- A cash dividend of $287.50 per
share on our 4.60% Non-Cumulative Preferred Stock, Series B
(equivalent to $0.28750 per
depository share) payable on June 15,
2023, to holders of record as of May
31, 2023.
Guidance
For 2023, our full-year expectations remained unchanged and are
as follows:
- A GAAP combined ratio of 96.5%, including net catastrophe
losses 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 after-tax net investment income from
our alternative investments of $30
million;
- 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.
The supplemental investor package, including financial
information not included in 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, May 4, 2023, at www.Selective.com. The
webcast will be available for rebroadcast until the close of
business on June 2, 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 has been
honored and awarded for its unique position as a leading insurance
group and employer of choice, including listing in the Fortune 1000
and three consecutive years as a certified Great Place to Work®.
For more information about Selective, visit www.Selective.com.
1Reconciliation of Net Income Available to Common
Stockholders to Non-GAAP Operating Income and Certain Other
Non-GAAP Measures
Non-GAAP operating income, non-GAAP operating income per diluted
common share, and non-GAAP operating return on common equity differ
from net income available to common stockholders, 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. Adjusted book value per common
share differs from book value per common share by the exclusion of
total after-tax unrealized gains and losses on investments included
in accumulated other comprehensive (loss) 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
as a substitute for net income available to common stockholders,
net income available to common stockholders per diluted common
share, return on common equity, and book value per common share
prepared in accordance with U.S. generally accepted accounting
principles (GAAP). Reconciliations of net income available to
common stockholders, net income available to common stockholders
per diluted common share, return on common equity, and book value
per common share to non-GAAP operating income, non-GAAP operating
income per diluted common share, non-GAAP operating return on
common equity, and adjusted book value per common share,
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 to Non-GAAP Operating
Income
|
$ in
millions
|
Quarter ended March
31,
|
2023
|
|
2022
|
Net income available to
common stockholders
|
$
90.3
|
|
54.0
|
Net realized and
unrealized investment (gains) losses included in net income, before
tax
|
(3.3)
|
|
40.4
|
Tax on reconciling
items
|
0.7
|
|
(8.5)
|
Non-GAAP operating
income
|
$
87.6
|
|
85.9
|
Reconciliation of
Net Income Available to Common Stockholders per Diluted Common
Share to Non-GAAP Operating Income per Diluted Common
Share
|
|
Quarter ended March
31,
|
2023
|
|
2022
|
Net income available to
common stockholders per diluted common share
|
$
1.48
|
|
0.89
|
Net realized and
unrealized investment (gains) losses included in net income, before
tax
|
(0.05)
|
|
0.66
|
Tax on reconciling
items
|
0.01
|
|
(0.14)
|
Non-GAAP operating
income per diluted common share
|
$
1.44
|
|
1.41
|
Reconciliation of
Return on Common Equity to Non-GAAP Operating Return on Common
Equity
|
|
Quarter ended March
31,
|
2023
|
|
2022
|
Return on Common
Equity
|
15.1
|
%
|
|
8.1
|
Net realized and
unrealized investment (gains) losses included in net income, before
tax
|
(0.6)
|
|
|
6.0
|
Tax on reconciling
items
|
0.1
|
|
|
(1.3)
|
Non-GAAP Operating
Return on Common Equity
|
14.6
|
%
|
|
12.8
|
Reconciliation of
Book Value per Common Share to Adjusted Book Value per Common
Share
|
|
Quarter ended March
31,
|
2023
|
|
2022
|
Book value per common
share
|
$
40.82
|
|
42.73
|
Total unrealized
investment (gains) losses included in accumulated other
comprehensive (loss) income, before tax
|
7.32
|
|
1.35
|
Tax on reconciling
items
|
(1.53)
|
|
(0.28)
|
Adjusted book value per
common share
|
46.61
|
|
43.80
|
Note: Amounts in the tables above may not foot due to
rounding.
Forward-Looking Statements
Certain statements in this report, including information
incorporated by reference, are "forward-looking statements" as
defined by 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 and financial performance. They involve known and
unknown risks, uncertainties, and other factors that may cause our
or industry actual results, activity levels, or performance to
materially differ from those expressed 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 can give no
assurance that such expectations will prove correct. We undertake
no obligation, other than as federal securities laws may require,
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:
- Difficult conditions in global capital markets, the banking
sector, commercial real estate, and the economy, 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 such as hurricanes, 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 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 to date 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
valuation;
- 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 ratings 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, 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
constantly changing business environment, and new risk factors may
emerge any 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.