BRANCHVILLE, N.J., July 29, 2015 /PRNewswire/ --
In the second quarter of 2015:
- Net premiums written grew 11%
- GAAP combined ratio was 94.1%
- Statutory combined ratio was 93.5%
- After-tax net investment income declined 10%
- Total return on equity was 10.3% and operating return on equity
was 11.0%
Selective Insurance Group, Inc. (NASDAQ: SIGI) today reported
its financial results for the second quarter ended June 30, 2015. Net income per diluted share was
$0.58, a 14% increase compared to
$0.51 in 2014, and operating
income1 per diluted share grew 35% to $0.62, compared to $0.46 in 2014.
"Our results this quarter further demonstrate our continued
focus on the value-enhancing initiatives underway and our ability
to drive long-term profitable growth," said Gregory E. Murphy, Chairman and Chief Executive
Officer. "Our strong performance was driven by our efforts to
balance rate and retention, implement claims and underwriting
improvements across the organization while maintaining strong
relationships with our distribution partners. The combination of
our high-tech, high-touch capabilities continues to deliver success
for our shareholders, distribution partners, customers and
employees."
Murphy continued, "For the second quarter, we generated a
profitable 93.5% statutory combined ratio, or 88.6% excluding
catastrophe losses. On the strength of our statutory underwriting
results for the first six months, we are improving our full year
ex-catastrophe statutory combined ratio target to 90% from 91%.
"Growth in the quarter was solid, as overall net premiums
written increased 11% driven by Standard Commercial Lines new
business production of $90 million, a
39% increase from a year ago, and overall year-to-date renewal pure
price increases of 3.8%. For 2015, we expect to achieve
overall renewal pure price of just below 4%. The increase in new
business this year reflects the capacity we have created through
our agency management specialists and small business teams to grow
share of wallet with our distribution partners. We are also
adding agencies to have access to additional market share
throughout our footprint," Murphy concluded.
Consolidated
Financial Results
$ in millions,
except per share data
|
Quarter
Ended
June
30,
|
Change
|
Year-to-date
June
30,
|
Change
|
2015
|
2014
|
2015
|
2014
|
Net premiums
written
|
$532.1
|
$479.8
|
11%
|
$1,050.2
|
$956.6
|
10%
|
Net premiums
earned
|
$490.3
|
$463.6
|
6%
|
$966.4
|
$920.1
|
5%
|
Net investment income
earned
|
$32.2
|
$36.8
|
(12)%
|
$59.1
|
$72.3
|
(18)%
|
Net realized (losses)
gains, pre-tax
|
$(3.4)
|
$4.5
|
(175)%
|
$15.5
|
$11.8
|
32%
|
Total
revenues
|
$522.0
|
$506.8
|
3%
|
$1,045.9
|
$1,015.9
|
3%
|
Operating
income1
|
$36.0
|
$26.4
|
36%
|
$63.4
|
$39.7
|
60%
|
Net realized (losses)
gains, net of tax
|
$(2.2)
|
$3.0
|
(175)%
|
$10.1
|
$7.6
|
32%
|
Net income
|
$33.8
|
$29.3
|
15%
|
$73.5
|
$47.3
|
55%
|
Statutory combined
ratio
|
93.5%
|
97.5%
|
(4.0) pts
|
93.2%
|
99.2%
|
(6.0) pts
|
Catastrophe
losses
|
4.9 pts
|
5.9 pts
|
(1.0) pt
|
5.1 pts
|
6.7 pts
|
(1.6) pts
|
Non-catastrophe
property losses
|
14.4 pts
|
15.7 pts
|
(1.3) pts
|
14.6
pts
|
17.9 pts
|
(3.3) pts
|
(Favorable) prior
year statutory reserve
development on casualty lines
|
(4.1) pts
|
(3.8) pts
|
(0.3) pts
|
(4.1) pts
|
(3.4) pts
|
(0.7) pts
|
GAAP combined
ratio
|
94.1%
|
97.8%
|
(3.7) pts
|
94.3%
|
99.4%
|
(5.1) pts
|
Operating income per
diluted share1
|
$0.62
|
$0.46
|
35%
|
$1.10
|
$0.70
|
57%
|
Net income per
diluted share
|
$0.58
|
$0.51
|
14%
|
$1.27
|
$0.83
|
53%
|
Weighted average
diluted shares
|
57.8M
|
57.3M
|
1%
|
57.8M
|
57.2M
|
1%
|
Book value per
share
|
|
|
|
$22.95
|
$21.96
|
5%
|
|
|
|
|
|
|
|
1Operating
income differs from net income by the exclusion of realized gains
and losses on investments. It is used as an important financial
measure by management, analysts, and investors, because the
realization of investment gains and losses on sales in any given
period is largely discretionary as to timing. In addition, these
investment gains and losses, as well as other-than-temporary
investment impairments that are charged to earnings, could distort
the analysis of trends. Operating income is not intended as a
substitute for net income prepared in accordance with U.S.
generally accepted accounting principles (GAAP). A reconciliation
of operating income to net income is provided in the Consolidated
Financial Results table. 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.
|
Operating Highlights
Standard Commercial Lines
Standard Commercial Lines premiums were up 13% in the second
quarter, reflecting renewal pure price increases of 3.0%, stable
retention at 83%, and a 39% increase in new business to
$90 million. The quarter's
statutory combined ratio improved by 5.4 points, largely due to
earned rate continuing to exceed expected loss inflation, favorable
prior year casualty reserve development of $21 million, or 5.6 points, and lower
non-catastrophe weather-related losses.
Standard
Commercial Lines
$ in millions,
statutory results
|
Quarter
Ended
June
30,
|
Change
|
Year-to-date
June
30,
|
Change
|
2015
|
2014
|
2015
|
2014
|
Net premiums
written
|
$410.8
|
$363.9
|
13%
|
$826.1
|
$743.2
|
11%
|
Net premiums
earned
|
$377.2
|
$354.5
|
6%
|
$742.7
|
$703.9
|
6%
|
Statutory loss &
loss expense ratio
|
55.7%
|
61.1%
|
(5.4) pts
|
56.1%
|
65.2%
|
(9.1) pts
|
Statutory
underwriting expense ratio
|
33.9%
|
34.0%
|
(0.1) pts
|
33.3%
|
32.2%
|
1.1 pts
|
Statutory dividends
to policyholders ratio
|
0.5%
|
0.4%
|
0.1 pts
|
0.5%
|
0.4%
|
0.1 pts
|
Statutory combined
ratio
|
90.1%
|
95.5%
|
(5.4) pts
|
89.9%
|
97.8%
|
(7.9) pts
|
GAAP combined
ratio
|
90.7%
|
95.6%
|
(4.9) pts
|
91.2%
|
98.3%
|
(7.1) pts
|
Standard Personal Lines
Standard Personal Lines premiums decreased 3% in the quarter
compared to a year ago, attributed to the ongoing strategic
non-renewal of underperforming business and a decrease in new
business. Retention remained stable at 82% and renewal pure
price was 6.7%. The Selective Edgeâ„¢ product
continues to be well received by Selective's agents and the Company
is optimistic about the improving take-up rate. We believe
that this business will ultimately outperform the non-Edge
business.
The statutory combined ratio in Standard Personal Lines was
105.4%, which included 11.5 points of catastrophe losses.
There was no prior year casualty reserve development this quarter
in Standard Personal Lines, although there was favorable prior year
casualty reserve development of $2
million, or 2.7 combined ratio points, in the second quarter
of 2014.
Standard Personal
Lines
$ in millions,
statutory results
|
Quarter
Ended
June
30,
|
Change
|
Year-to-date
June
30,
|
Change
|
2015
|
2014
|
2015
|
2014
|
Net premiums
written
|
$76.0
|
$78.2
|
(3)%
|
$141.0
|
$145.5
|
(3)%
|
Net premiums
earned
|
$72.1
|
$74.5
|
(3)%
|
$144.5
|
$149.4
|
(3)%
|
Statutory loss &
loss expense ratio
|
75.0%
|
79.0%
|
(4.0) pts
|
74.2%
|
78.3%
|
(4.1) pts
|
Statutory
underwriting expense ratio
|
30.4%
|
27.1%
|
3.3 pts
|
31.0%
|
27.0%
|
4.0 pts
|
Statutory combined
ratio
|
105.4%
|
106.1%
|
(0.7) pts
|
105.2%
|
105.3%
|
(0.1) pts
|
GAAP combined
ratio
|
106.5%
|
107.5%
|
(1.0) pt
|
104.9%
|
105.3%
|
(0.4) pts
|
Excess and Surplus Lines
Growth in the Company's Excess and Surplus lines business this
quarter was very robust with a 20% increase in net premiums
written, largely attributable to new business growth of 36%.
The statutory combined ratio in the quarter was 102.7%, including
adverse prior year casualty reserve development of $1 million, or 2.4 points.
Excess &
Surplus Lines
$ in millions,
statutory results
|
Quarter
Ended
June
30,
|
Change
|
Year-to-date
June
30,
|
Change
|
2015
|
2014
|
2015
|
2014
|
Net premiums
written
|
$45.3
|
$37.8
|
20%
|
$83.1
|
$67.8
|
23%
|
Net premiums
earned
|
$41.0
|
$34.6
|
19%
|
$79.1
|
$66.8
|
18%
|
Statutory Loss &
loss expense ratio
|
67.2%
|
65.0%
|
2.2 pts
|
67.4%
|
63.4%
|
4.0 pts
|
Statutory
Underwriting expense ratio
|
35.5%
|
34.9%
|
0.6 pts
|
35.1%
|
35.4%
|
(0.3) pts
|
Statutory Combined
ratio
|
102.7%
|
99.9%
|
2.8 pts
|
102.5%
|
98.8%
|
3.7 pts
|
GAAP combined
ratio
|
103.6%
|
100.1%
|
3.5 pts
|
103.8%
|
98.6%
|
5.2 pts
|
Investment Income
After-tax investment income in the second quarter was
$25 million, down 10% compared to a
year ago. The decline was largely driven by lower interest
income from the fixed income portfolio and lower returns from the
alternative portfolio, which continues to be impacted by the
portfolio's exposure to energy-exposed limited partnerships. The
decline in alternative investment income and the continued low
interest rate environment reduced after-tax portfolio yields to
1.9% from 2.3% a year ago. After-tax new money yields
averaged 1.5% in the quarter.
Investments
$ in millions,
except per share data
|
Quarter
Ended
June
30,
|
Change
|
Year-to-date
June
30,
|
Change
|
2015
|
2014
|
2015
|
2014
|
Invested assets per
dollar of stockholders' equity
|
|
|
|
$3.76
|
$3.83
|
(2)%
|
Net investment income
earned, after-tax
|
$24.8
|
$27.4
|
(10)%
|
$46.0
|
$53.9
|
(15)%
|
Net investment income
per share
|
$0.43
|
$0.48
|
(10)%
|
$0.80
|
$0.94
|
(15)%
|
Effective tax
rate
|
23.1%
|
25.4%
|
(2.3) pts
|
22.2%
|
25.4%
|
(3.2) pts
|
Average
yields:
|
|
|
|
|
|
|
Fixed Income
Securities:
|
|
|
|
|
|
|
Pre-tax
|
|
|
|
2.8%
|
3.1%
|
(0.3) pts
|
After-tax
|
|
|
|
2.1%
|
2.3%
|
(0.2) pts
|
Portfolio:
|
|
|
|
|
|
|
Pre-tax
|
|
|
|
2.4%
|
3.1%
|
(0.7) pts
|
After-tax
|
|
|
|
1.9%
|
2.3%
|
(0.4) pts
|
Balance Sheet
Balance
Sheet
$ in millions,
except per share data
|
June
30,
|
December
31,
|
Change
|
2015
|
2014
|
Total
assets
|
$6,784
|
$6,582
|
3%
|
Investment
portfolio
|
$4,923
|
$4,807
|
2%
|
Notes
payable
|
$394
|
$379
|
4%
|
Statutory
surplus
|
$1,345
|
$1,308
|
3%
|
Stockholders'
equity
|
$1,310
|
$1,276
|
3%
|
Book value per
share
|
$22.95
|
$22.54
|
2%
|
The increase in book value reflects $1.27 in net income, partially offset by a
reduction in unrealized gains on the Company's investment portfolio
of $0.60 and $0.28 in shareholders' dividends.
Selective's Board of Directors declared a $0.14 per share quarterly cash dividend on common
stock payable September 1, 2015, to
stockholders of record as of August 14,
2015.
Guidance
For 2015, Selective expects to generate the following
results:
- Statutory combined ratio of 90.0%, an improvement from previous
guidance of 91.0%, excluding catastrophes and any further prior
year casualty reserve development;
- 4 points of catastrophe losses;
- After-tax investment income of between $95 and $100 million; and
- Weighted average shares of approximately 58
million.
The supplemental investor package, including financial
information that is not part of this press release, is available on
the Investor Relations' page of Selective's public website at
www.selective.com. Selective's quarterly analyst conference call
will be simulcast at 8:30 a.m. ET, on
July 30, 2015 at www.selective.com.
The webcast will be available for rebroadcast until the close of
business on September 1, 2015.
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.
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 Investor
Relations' section 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.