Le Lézard
Classified in: Business, Covid-19 virus
Subjects: ERN, ERP

Selective Reports Third Quarter 2023 Results


Net Income of $1.42 per Diluted Common Share and Non-GAAP Operating Income1 of $1.51 per Diluted Common Share
Return on Common Equity ("ROE") of 14.1% and Non-GAAP Operating ROE1 of 15.0%
Quarterly Dividend Increased 17%, to $0.35 per Common Share

In the third quarter of 2023:

BRANCHVILLE, N.J., Nov. 1, 2023 /PRNewswire/ -- Selective Insurance Group, Inc. (NASDAQ: SIGI) reported financial results for the third quarter ended September 30, 2023, with net income per diluted common share of $1.42 and non-GAAP operating income1 per diluted common share of $1.51. The third quarter combined ratio was 96.8%, including 6.6 points of catastrophe losses.

In the quarter, NPW grew 17% compared to a year ago from renewal pure price increases, exposure growth, stable retention, and strong new business. After-tax net investment income in the quarter generated 13.1 points of annualized ROE, benefiting from higher interest rates, active portfolio management, and operating and investing cash flow deployment. Within our Insurance Operations, Standard Commercial Lines grew 15% and Excess and Surplus Lines increased 25% with profitable combined ratios. In Standard Personal Lines, initiatives to improve profitability continue to be executed as we transition to the mass affluent market.

"With a non-GAAP operating ROE of 15.0% in the quarter and 13.2% year to date, we are well positioned to achieve our 10th consecutive year of double-digit operating ROEs. Our disciplined underwriting strategy and commitment to uniquely servicing our customers continue to drive our performance in a challenging external environment with uncertain loss trends and elevated inflation," said John J. Marchioni, Chairman, President and Chief Executive Officer.

"We have a strong and flexible capital position and are actively focused on long-term, profitable growth. This includes continuing our deliberate growth strategy, with the expectation to extend our Commercial Lines footprint into West Virginia and Maine in early 2024, then Washington, Oregon, and Nevada later in the year," added Mr. Marchioni.

Mr. Marchioni concluded, "Our unique, field-based operating model, deep distribution partner relationships, and sophisticated tools for risk selection, pricing, and claims management differentiate us in the marketplace. We have excellent prospects for continued strong performance."

Operating Highlights

Consolidated Financial Results

Quarter ended
September 30,

Change

Year-to-Date
September 30,

Change

$ and shares in millions, except per share data

2023

2022

2023

2022

Net premiums written

$ 1,058.3


903.4

17

%

$ 3,143.0


2,723.9

15

%

Net premiums earned

981.9


853.9

15


2,826.4


2,500.6

13


Net investment income earned

100.9


63.9

58


290.1


206.7

40


Net realized and unrealized gains (losses), pre-tax

(6.9)


(25.7)

(73)


(9.0)


(108.9)

(92)


Total revenues

1,081.1


895.0

21


3,121.4


2,605.9

20


Net underwriting income (loss), after-tax

25.0


21.4

16


54.7


95.3

(43)


Net investment income, after-tax

80.2


51.5

56


231.1


166.7

39


Net income available to common stockholders

86.9


40.2

116


233.5


131.5

78


Non-GAAP operating income1

92.3


60.5

53


240.6


217.5

11


Combined ratio

96.8

%

96.8

?

pts

97.5

%

95.2

2.3

pts

Loss and loss expense ratio

65.8


64.1

1.7


65.7


62.7

3.0


Underwriting expense ratio

30.9


32.6

(1.7)


31.6


32.4

(0.8)


Dividends to policyholders ratio

0.1


0.1

?


0.2


0.1

0.1


Net catastrophe losses

6.6

pts

4.0

2.6


7.8

pts

4.0

3.8


Non-catastrophe property losses and loss expenses

17.6


19.6

(2.0)


16.9


18.3

(1.4)


(Favorable) prior year reserve development on casualty lines

?


(1.9)

1.9


(0.6)


(1.9)

1.3


Net income available to common stockholders per diluted common share

$     1.42


0.66

115

%

$     3.83


2.16

77

%

Non-GAAP operating income per diluted common share1

1.51


0.99

53


3.95


3.57

11


Weighted average diluted common shares

61.0


60.8

?


60.9


60.8

?


Book value per common share

$    40.35


36.96

9


40.35


36.96

9


Adjusted book value per common share1

48.54


44.59

9


48.54


44.59

9


Overall Insurance Operations

For the third quarter, overall NPW increased 17%, or $155 million, from a year ago, reflecting new business growth and effective management of our renewal portfolio. Average renewal pure price increased 7.0%, with stable retention and increased exposure. Our 96.8% combined ratio in the quarter was in line with the 96.8% reported a year ago, with excellent improvement in our underlying combined ratio offset by higher catastrophe losses and no net prior year casualty reserve development. Catastrophe losses totaled $64.6 million pre-tax in the quarter, up from $34.1 million in the third quarter of 2022. There was no prior year casualty reserve development as workers compensation favorable development of $7.0 million was offset by unfavorable development of $4.0 million in commercial auto and $3.0 million in personal auto. In the third quarter of 2022, prior year favorable casualty reserve development totaled $16.0 million.

Standard Commercial Lines Segment

For the third quarter, Standard Commercial Lines premiums (representing 79% of total NPW) increased 15% compared to a year ago. The premium growth reflected average renewal pure price increases of 7.1%, new business growth of 13%, strong exposure growth, and consistent retention of 86%. The third quarter combined ratio was 94.7%, reflecting lower non-catastrophe property losses and an improved expense ratio compared to the prior period. The following table shows the variances relative to the 96.8% combined ratio a year ago:

Standard Commercial Lines Segment

Quarter ended
September 30,

Change

Year-to-Date
September 30,

Change

$ in millions

2023

2022

2023

2022

Net premiums written

$    833.6


727.5

15

%

$ 2,517.0


2,225.4

13

%

Net premiums earned

785.3


692.4

13


2,279.7


2,034.1

12


Combined ratio

94.7

%

96.8

(2.1)

pts

95.5

%

94.5

1.0

pts

Loss and loss expense ratio

62.8


63.4

(0.6)


63.0


61.1

1.9


Underwriting expense ratio

31.7


33.3

(1.6)


32.3


33.2

(0.9)


Dividends to policyholders ratio

0.2


0.1

0.1


0.2


0.2

?


Net catastrophe losses

4.7

pts

2.6

2.1


5.9

pts

2.7

3.2


Non-catastrophe property losses and loss expenses

15.6


18.7

(3.1)


14.9


16.9

(2.0)


(Favorable) prior year reserve development on casualty lines

(0.4)


(2.3)

1.9


(0.9)


(2.4)

1.5


Standard Personal Lines Segment

For the third quarter, Standard Personal Lines premiums (representing 11% of total NPW) increased 30% compared to a year ago. Renewal pure price increases averaged 6.1%, retention was 88%, and new business was up $14.3 million compared to last year as we continued our transition to the mass affluent market. The third quarter combined ratio was 127.4%, including 25.6 points of catastrophe losses and 3.2 points of unfavorable casualty reserve development from the personal auto line of business. The following table shows the variances relative to the 101.8% combined ratio a year ago:

Standard Personal Lines Segment

Quarter ended
September 30,

Change

Year-to-Date
September 30,

Change

$ in millions

2023

2022

2023

2022

Net premiums written

$    113.2


86.8

30

%

$    307.5


234.5

31

%

Net premiums earned

95.2


75.6

26


264.2


221.6

19


Combined ratio

127.4

%

101.8

25.6

pts

123.6

%

103.3

20.3

pts

Loss and loss expense ratio

104.5


75.7

28.8


98.7


77.8

20.9


Underwriting expense ratio

22.9


26.1

(3.2)


24.9


25.5

(0.6)


Net catastrophe losses

25.6

pts

14.9

10.7


22.8

pts

16.5

6.3


Non-catastrophe property losses and loss expenses

44.7


38.4

6.3


43.2


36.8

6.4


Unfavorable prior year reserve development on casualty lines

3.2


?

3.2


3.4


?

3.4


Excess and Surplus Lines Segment

For the third quarter, Excess and Surplus Lines premiums (representing 10% of total NPW) increased 25% compared to the prior-year period, driven by average renewal pure price increases of 6.6% and new business growth of 43%. The third quarter combined ratio improved 9.1 points from a year ago to 83.9%, including 3.5 points of catastrophe losses. Both catastrophe and non-catastrophe property losses were lower than the same period last year. The following table shows the variances relative to the 93.0% combined ratio a year ago:

Excess and Surplus Lines Segment

Quarter ended
September 30,

Change

Year-to-Date
September 30,

Change

$ in millions

2023

2022

2023

2022

Net premiums written

$    111.6


89.1

25

%

$    318.4


264.1

21

%

Net premiums earned

101.4


85.8

18


282.5


244.8

15


Combined ratio

83.9

%

93.0

(9.1)

pts

89.7

%

93.3

(3.6)

pts

Loss and loss expense ratio

51.9


61.0

(9.1)


57.4


61.2

(3.8)


Underwriting expense ratio

32.0


32.0

?


32.3


32.1

0.2


Net catastrophe losses

3.5

pts

5.4

(1.9)


9.0

pts

3.3

5.7


Non-catastrophe property losses and loss expenses

7.4


10.1

(2.7)


8.7


12.4

(3.7)


(Favorable) prior year reserve development on casualty lines

?


?

?


(1.8)


?

(1.8)


Investments Segment

For the third quarter, after-tax net investment income of $80 million was 56% higher than the prior-year period. Pre-tax investment income from our fixed-income securities portfolio was up 32% compared to the third quarter of 2022, driven by higher book yields and the deployment of operating and investing cash flows over the past year. Pre-tax alternative investment income of $6 million was $12 million higher than the $6 million loss in the prior-year period. With the increased yield of our portfolio and invested assets per dollar of common stockholders' equity of $3.35 on September 30, 2023, the investment portfolio generated 13.1 points of non-GAAP operating ROE for the quarter.

Investments Segment

Quarter ended
September 30,

Change

Year-to-Date
September 30,

Change

$ in millions, except per share data

2023

2022

2023

2022

Net investment income earned, after-tax

$     80.2


51.5

56

%

$    231.1


166.7

39

%

Net investment income per common share

1.31


0.85

54


3.79


2.74

38


Effective tax rate

20.5

%

19.3

1.2

pts

20.3

%

19.4

0.9

pts

Average yields:











Portfolio:











Pre-tax

4.9


3.4

1.5


4.8


3.5

1.3


After-tax

3.9


2.7

1.2


3.8


2.9

0.9


Fixed income securities:











Pre-tax

5.1

%

4.2

0.9

pts

5.0

%

3.7

1.3

pts

After-tax

4.1


3.4

0.7


4.0


3.0

1.0


Annualized ROE contribution

13.1


8.9

4.2


12.7


8.9

3.8


Balance Sheet

$ in millions, except per share data

September 30, 2023


December 31, 2022


Change

Total assets

$                11,428.0



10,802.3



6 %


Total investments

8,195.9



7,837.5



5


Long-term debt

504.6



504.7



?


Stockholders' equity

2,644.4



2,527.6



5


Common stockholders' equity

2,444.4



2,327.6



5


Invested assets per dollar of common stockholders' equity

3.35



3.37



(1)


Net premiums written to policyholders' surplus

1.53



1.44



0.09


Book value per common share

$                     40.35



38.57



5


Adjusted book value per common share1

48.54



45.49



7


Debt to total capitalization

16.0

%


16.6

%


(0.6)

pts

During the first nine months of 2023, book value per common share increased by $1.78, or 5%. The increase was primarily driven by $3.83 of net income per diluted common share, partially offset by a $1.31 increase in after-tax net unrealized losses on our fixed income securities portfolio and $0.90 of dividends on our common stock paid to shareholders. The increase in after-tax net unrealized losses on our fixed-income portfolio was primarily driven by the rise in interest rates during the third quarter. Through the first nine months of 2023, the Company did not repurchase any shares of common stock. Capacity under our existing repurchase authorization was $84.2 million as of September 30, 2023.

Selective's Board of Directors declared:

Guidance

For 2023, our full-year expectations are as follows:

The supplemental investor package, with 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 11:00 AM ET, on Thursday, November 2, 2023, on www.Selective.com. The webcast will be available for rebroadcast until the close of business on December 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.

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 excluding 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 to be 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 September 30,


Year-to-Date September 30,

2023


2022


2023


2022

Net income available to common stockholders

$            86.9


40.2


233.5


131.5

Net realized and unrealized investment (gains) losses included in net income, before tax

6.9


25.7


9.0


108.9

Tax on reconciling items

(1.4)


(5.4)


(1.9)


(22.9)

Non-GAAP operating income

$            92.3


60.5


240.6


217.5

Reconciliation of Net Income Available to Common Stockholders per Diluted Common Share to Non-GAAP Operating Income per Diluted Common Share


Quarter ended September 30,


Year-to-Date September 30,

2023


2022


2023


2022

Net income available to common stockholders per diluted common share

$            1.42


0.66


3.83


2.16

Net realized and unrealized investment (gains) losses included in net income, before tax

0.11


0.42


0.15


1.79

Tax on reconciling items

(0.02)


(0.09)


(0.03)


(0.38)

Non-GAAP operating income per diluted common share

$            1.51


0.99


3.95


3.57

Reconciliation of Return on Common Equity to Non-GAAP Operating Return on Common Equity


Quarter ended September 30,


Year-to-Date September 30,

2023


2022


2023


2022

Return on Common Equity

14.1

%


7.0


12.8


7.0

Net realized and unrealized investment (gains) losses included in net income, before tax

1.1



4.4


0.5


5.8

Tax on reconciling items

(0.2)



(0.9)


(0.1)


(1.2)

Non-GAAP Operating Return on Common Equity

15.0

%


10.5


13.2


11.6

Reconciliation of Book Value per Common Share to Adjusted Book Value per Common Share


Quarter ended September 30,


Year-to-Date September 30,

2023


2022


2023


2022

Book value per common share

$           40.35


36.96


40.35


36.96

Total unrealized investment (gains) losses included in accumulated other comprehensive

(loss) income, before tax

10.38


9.67


10.38


9.67

Tax on reconciling items

(2.19)


(2.04)


(2.19)


(2.04)

Adjusted book value per common share

48.54


44.59


48.54


44.59


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" 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:

 

SOURCE Selective Insurance Group, Inc.


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