BRANCHVILLE, N.J., May 4, 2016 /PRNewswire/ --
In the first quarter of 2016:
- Net premiums written grew 9%
- GAAP combined ratio was 92.2%
- Statutory combined ratio was 90.7%
- After-tax net investment income increased 11%
- Total return on equity was 10.3% and operating return on
equity1 was 10.8%
Selective Insurance Group, Inc. (NASDAQ: SIGI) today reported
its financial results for the first quarter ended March 31, 2016. Net income per diluted
share was $0.63 for the quarter,
compared to $0.69 in 2015 which
included realized gains of $0.21
driven by last year's strategic reallocation within our equity
portfolio. Operating income1 per diluted share
grew 38% in the quarter to $0.66,
compared to $0.48 in 2015. The
increase in operating income was driven by improved underwriting
results and net investment income. Book value per share
increased by 11% from the first quarter of 2015, to $25.61.
"We generated a profitable first quarter statutory combined
ratio of 90.7%, or 87.9% excluding catastrophe losses," said
Gregory E. Murphy, Chairman and
Chief Executive Officer. "Our growth in the first three
months of the year was strong. Overall net premiums written
increased 9% driven by solid renewal pure price increases of 3.1%
and increased retention in standard lines, and stable overall new
business production."
Murphy added, "We continue to demonstrate our ability to
outperform industry growth rates and drive sustainable
profitability in a competitive market. This quarter's results
are a clear indication of our competitive advantages. We have
true franchise value with 'ivy-league' distribution partners, a
unique field model coupled with sophisticated underwriting and
claims capabilities, and a commitment to providing superior
customer experience through our best-in-class employees."
Consolidated
Financial Results
$ in millions,
except per share data
|
Quarter
Ended
March
31,
|
Change
|
2016
|
2015
|
Net premiums
written
|
$565.4
|
$518.1
|
9%
|
Net premiums
earned
|
$522.5
|
$476.1
|
10%
|
Net investment income
earned
|
$30.8
|
$26.9
|
14%
|
Net realized (losses)
gains, pre-tax
|
$(2.7)
|
$18.9
|
(114)%
|
Total
revenues
|
$551.5
|
$523.9
|
5%
|
Operating
income1
|
$38.8
|
$27.4
|
41%
|
Net realized (losses)
gains, net of tax
|
$(1.8)
|
$12.3
|
(114)%
|
Net income
|
$37.0
|
$39.7
|
(7)%
|
Statutory combined
ratio
|
90.7%
|
93.0%
|
(2.3) pts
|
Catastrophe
losses
|
2.8 pts
|
5.3 pts
|
(2.5) pts
|
Non-catastrophe
property losses
|
12.7 pts
|
14.9 pts
|
(2.2) pts
|
(Favorable) prior
year statutory reserve development on casualty lines
|
(3.3) pts
|
(4.2) pts
|
0.9 pts
|
GAAP combined
ratio
|
92.2%
|
94.5%
|
(2.3) pts
|
Operating income per
diluted share1
|
$0.66
|
$0.48
|
38%
|
Net income per
diluted share
|
$0.63
|
$0.69
|
(9)%
|
Weighted average
diluted shares
|
58.5M
|
57.7M
|
1%
|
Book value per
share
|
$25.61
|
$23.11
|
11%
|
|
1Operating
income differs from net income by the exclusion of realized gains
and losses on investments. Management, analysts, and investors use
operating income as an important financial measure because of the
largely discretionary timing of realized investment gains and
losses on sales in any given period and the distorted analysis of
trends created by the charges to earnings from these realized
investment gains and losses and other-than-temporary investment
impairments. 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 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, which represent 80% of total
net premiums written, were up 10% compared to first quarter last
year, driven by excellent 85% retention, strong renewal pure price
increases of 2.8%, and stable new business production. The
quarter's statutory combined ratio of 89.7% was in-line with the
prior year period and included favorable prior year casualty
reserve development of 4.5 points, compared to 5.7 points a year
ago. Catastrophe losses added 2.9 points to the combined
ratio, down from 5.1 points in the first quarter of 2015.
Standard
Commercial Lines
$ in millions,
statutory results
|
Quarter
Ended
March
31,
|
Change
|
2016
|
2015
|
Net premiums
written
|
$455.1
|
$415.3
|
10%
|
Net premiums
earned
|
$402.9
|
$365.5
|
10%
|
Statutory loss &
loss expense ratio
|
55.2%
|
56.5%
|
(1.3) pts
|
Statutory
underwriting expense ratio
|
34.1%
|
32.8%
|
1.3 pts
|
Statutory dividends
to policyholders ratio
|
0.4%
|
0.4%
|
- pts
|
Statutory combined
ratio
|
89.7%
|
89.7%
|
- pts
|
GAAP combined
ratio
|
92.3%
|
91.8%
|
0.5 pts
|
Standard Personal Lines
Standard Personal Lines premiums, which represent 11% of total
net premiums written, decreased 5% compared to the first quarter of
2015. The decline was primarily driven by new business that
was on par with a year ago but not sufficient to offset premium
that was not retained. Retention of 82% remained consistent
with the prior-year period and renewal pure price was strong at
5.1%.
The statutory combined ratio in the first quarter for Standard
Personal Lines was 90.6%, which included 3.2 points of catastrophe
losses and compared favorably to last year's 105.1%, which included
8.7 points of catastrophe losses. Non-catastrophe property
losses were 10.1 points lower in the first quarter of 2016 than in
the first quarter of 2015.
Standard Personal
Lines
$ in millions,
statutory results
|
Quarter
Ended
March
31,
|
Change
|
2016
|
2015
|
Net premiums
written
|
$62.0
|
$65.0
|
(5)%
|
Net premiums
earned
|
$70.2
|
$72.5
|
(3)%
|
Statutory loss &
loss expense ratio
|
56.5%
|
73.5%
|
(17.0) pts
|
Statutory
underwriting expense ratio
|
34.1%
|
31.6%
|
2.5 pts
|
Statutory combined
ratio
|
90.6%
|
105.1%
|
(14.5) pts
|
GAAP combined
ratio
|
87.7%
|
103.4%
|
(15.7) pts
|
Excess and Surplus Lines
Our Excess and Surplus lines business, which represents 9% of
net premiums written, reported a 28% increase in net premiums
written in the quarter driven by a 3.3% price increase for this
segment of business coupled with higher audit premium. The
statutory combined ratio in the first quarter improved by 3.7
points to 98.4%.
Excess &
Surplus Lines
$ in millions,
statutory results
|
Quarter
Ended
March
31,
|
Change
|
2016
|
2015
|
Net premiums
written
|
$48.3
|
$37.8
|
28%
|
Net premiums
earned
|
$49.4
|
$38.1
|
30%
|
Statutory loss &
loss expense ratio
|
68.9%
|
67.7%
|
1.2 pts
|
Statutory
underwriting expense ratio
|
29.5%
|
34.4%
|
(4.9) pts
|
Statutory combined
ratio
|
98.4%
|
102.1%
|
(3.7) pts
|
GAAP combined
ratio
|
97.1%
|
104.1%
|
(7.0) pts
|
Investment Income
After-tax investment income in the first quarter was
$24 million, up 11% compared to a
year ago. Results for fixed income, equities, and alternative
investments improved compared to the first quarter of 2015 and the
after-tax portfolio yield increased to 1.8%, from 1.7%. Fixed
income investment income benefited from a higher invested asset
base and new money rates that modestly exceeded our
expectation.
Investments
$ in millions,
except per share data
|
Quarter
Ended
March
31,
|
Change
|
2016
|
2015
|
Invested assets per
dollar of stockholders' equity
|
$3.50
|
$3.72
|
(6)%
|
Net investment income
earned, after-tax
|
$23.6
|
$21.2
|
11%
|
Net investment income
per share
|
$0.40
|
$0.37
|
8%
|
Effective tax
rate
|
23.4%
|
21.2%
|
2.2 pts
|
Average
yields:
|
|
|
|
Fixed Income
Securities:
|
|
|
|
Pre-tax
|
2.7%
|
2.8%
|
(0.1) pts
|
After-tax
|
2.0%
|
2.1%
|
(0.1) pts
|
Portfolio:
|
|
|
|
Pre-tax
|
2.4%
|
2.2%
|
0.2 pts
|
After-tax
|
1.8%
|
1.7%
|
0.1 pts
|
Balance Sheet
Balance
Sheet
$ in millions,
except per share data
|
March
31,
|
December
31,
|
Change
|
2016
|
2015
|
Total
assets
|
$7,022.5
|
$6,904.4
|
2%
|
Investment
portfolio
|
$5,163.9
|
$5,089.3
|
1%
|
Debt
|
$388.3
|
$388.2
|
-
|
Statutory
surplus
|
$1,461.3
|
$1,426.3
|
2%
|
Stockholders'
equity
|
$1,476.0
|
$1,398.0
|
6%
|
Book value per
share
|
$25.61
|
$24.37
|
5%
|
The increase in book value per share reflects net income of
$0.63 and a $0.77 increase in unrealized investment gains,
partially offset by $0.15 in
shareholders' dividends.
Selective's Board of Directors declared a $0.15 per share quarterly cash dividend on common
stock payable June 1, 2016, to
stockholders of record as of May 16,
2016.
Guidance
After one quarter of better-than-expected results, we are
maintaining our full year expectations as follows:
- A statutory combined ratio excluding catastrophes of
approximately 91%, which assumes no additional prior year casualty
reserve development;
- Catastrophe losses of 3.5 points;
- After-tax investment income of approximately $100 million; and
- Weighted average shares of approximately 58.5
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
Thursday, May 5, 2016 at
www.selective.com. The webcast will be available for rebroadcast
until the close of business on Monday, June
6, 2016.
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 Investors
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.