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Share Name | Share Symbol | Market | Type |
---|---|---|---|
Selective Insurance Group Inc | NASDAQ:SIGI | NASDAQ | Common Stock |
Price Change | % Change | Share Price | Bid Price | Offer Price | High Price | Low Price | Open Price | Shares Traded | Last Trade | |
---|---|---|---|---|---|---|---|---|---|---|
-8.74 | -8.54% | 93.545 | 93.47 | 93.62 | 99.21 | 92.06 | 96.86 | 291,648 | 18:39:18 |
New Jersey
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22-2168890
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(State or Other Jurisdiction of Incorporation or Organization)
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(I.R.S. Employer Identification No.)
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40 Wantage Avenue
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Branchville, New Jersey
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07890
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(Address of Principal Executive Offices)
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(Zip Code)
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(973) 948-3000
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(Registrant’s Telephone Number, Including Area Code)
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(Former Name, Former Address and Former Fiscal Year, if Changed Since Last Report)
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Title of each class
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Trading Symbol
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Name of each exchange on which registered
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Common Stock, par value $2 per share
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SIGI
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NASDAQ Global Select Market
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Large accelerated filer
x
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Accelerated filer
o
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Non-accelerated filer
o
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Smaller reporting company
o
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Emerging growth company
o
|
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SELECTIVE INSURANCE GROUP, INC.
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Table of Contents
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Page No.
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Item 5.
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PART I. FINANCIAL INFORMATION
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ITEM 1. FINANCIAL STATEMENTS.
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SELECTIVE INSURANCE GROUP, INC.
CONSOLIDATED BALANCE SHEETS
|
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Unaudited
|
|
|
|||
($ in thousands, except share amounts)
|
|
March 31,
2019 |
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December 31,
2018 |
|||
ASSETS
|
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Investments:
|
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|
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|
|
|
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Fixed income securities, held-to-maturity – at carrying value (fair value: $37,942 – 2019; $38,317 – 2018)
|
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$
|
36,493
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37,110
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Fixed income securities, available-for-sale – at fair value (amortized cost: $5,463,273 – 2019; $5,270,798 – 2018)
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5,567,358
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5,273,100
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Equity securities – at fair value (cost: $143,376 – 2019; $138,144 – 2018)
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163,016
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147,639
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Short-term investments (at cost which approximates fair value)
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290,653
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323,864
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Other investments
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176,225
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178,938
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|
|
Total investments (Note 4 and 6)
|
|
6,233,745
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|
5,960,651
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Cash
|
|
516
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|
505
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|
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Restricted cash
|
|
9,998
|
|
|
16,414
|
|
|
Interest and dividends due or accrued
|
|
42,147
|
|
|
41,620
|
|
|
Premiums receivable, net of allowance for uncollectible accounts of: $9,600 – 2019; $9,400 – 2018
|
|
814,914
|
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|
770,518
|
|
|
Reinsurance recoverable, net of allowance for uncollectible accounts of: $4,100 – 2019; $4,500 – 2018
|
|
553,206
|
|
|
549,172
|
|
|
Prepaid reinsurance premiums
|
|
155,700
|
|
|
157,723
|
|
|
Deferred federal income tax
|
|
32,130
|
|
|
53,540
|
|
|
Property and equipment – at cost, net of accumulated depreciation and amortization of:
$216,071 – 2019; $211,657 – 2018 |
|
68,660
|
|
|
65,248
|
|
|
Deferred policy acquisition costs
|
|
260,754
|
|
|
252,612
|
|
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Goodwill
|
|
7,849
|
|
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7,849
|
|
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Other assets
|
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103,142
|
|
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76,877
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Total assets
|
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$
|
8,282,761
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7,952,729
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LIABILITIES AND STOCKHOLDERS’ EQUITY
|
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Liabilities:
|
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Reserve for loss and loss expense (Note 8)
|
|
$
|
3,966,509
|
|
|
3,893,868
|
|
Unearned premiums
|
|
1,470,283
|
|
|
1,431,932
|
|
|
Long-term debt
|
|
550,104
|
|
|
439,540
|
|
|
Current federal income tax
|
|
13,551
|
|
|
1,302
|
|
|
Accrued salaries and benefits
|
|
78,177
|
|
|
116,706
|
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Other liabilities
|
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278,915
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277,579
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Total liabilities
|
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$
|
6,357,539
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6,160,927
|
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Stockholders’ Equity:
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Preferred stock of $0 par value per share:
|
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$
|
—
|
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|
—
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Authorized shares 5,000,000; no shares issued or outstanding
|
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Common stock of $2 par value per share:
|
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Authorized shares 360,000,000
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Issued: 103,225,716 – 2019; 102,848,394 – 2018
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206,451
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|
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205,697
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|
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Additional paid-in capital
|
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398,881
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390,315
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Retained earnings
|
|
1,908,119
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1,858,414
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Accumulated other comprehensive income (loss) (Note 11)
|
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3,024
|
|
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(77,956
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)
|
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Treasury stock – at cost
(shares: 44,002,811 – 2019; 43,899,840 – 2018) |
|
(591,253
|
)
|
|
(584,668
|
)
|
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Total stockholders’ equity
|
|
$
|
1,925,222
|
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1,791,802
|
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Commitments and contingencies
|
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Total liabilities and stockholders’ equity
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|
$
|
8,282,761
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7,952,729
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SELECTIVE INSURANCE GROUP, INC.
UNAUDITED CONSOLIDATED STATEMENTS OF INCOME
|
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Quarter ended March 31,
|
|||||
($ in thousands, except per share amounts)
|
|
2019
|
|
2018
|
|||
Revenues:
|
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Net premiums earned
|
|
$
|
632,573
|
|
|
591,828
|
|
Net investment income earned
|
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50,618
|
|
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43,231
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Net realized and unrealized gains (losses):
|
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Net realized investment gains on disposals
|
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3,444
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4,731
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Other-than-temporary impairments
|
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(104
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)
|
|
(1,212
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)
|
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Unrealized gains (losses) on equity securities
|
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10,111
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(14,068
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)
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Total net realized and unrealized gains (losses)
|
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13,451
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|
|
(10,549
|
)
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Other income
|
|
2,320
|
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2,179
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Total revenues
|
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698,962
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626,689
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Expenses:
|
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|
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Loss and loss expense incurred
|
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386,579
|
|
|
384,941
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Amortization of deferred policy acquisition costs
|
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129,674
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121,093
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Other insurance expenses
|
|
85,079
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83,240
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Interest expense
|
|
11,526
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|
|
6,152
|
|
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Corporate expenses
|
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12,410
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|
|
11,332
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Total expenses
|
|
625,268
|
|
|
606,758
|
|
|
|
|
|
|
|
|||
Income before federal income tax
|
|
73,694
|
|
|
19,931
|
|
|
|
|
|
|
|
|||
Federal income tax expense:
|
|
|
|
|
|
|
|
Current
|
|
12,581
|
|
|
433
|
|
|
Deferred
|
|
(235
|
)
|
|
573
|
|
|
Total federal income tax expense
|
|
12,346
|
|
|
1,006
|
|
|
|
|
|
|
|
|||
Net income
|
|
$
|
61,348
|
|
|
18,925
|
|
|
|
|
|
|
|||
Earnings per share:
|
|
|
|
|
|
|
|
Basic net income
|
|
$
|
1.04
|
|
|
0.32
|
|
|
|
|
|
|
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Diluted net income
|
|
$
|
1.02
|
|
|
0.32
|
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SELECTIVE INSURANCE GROUP, INC.
UNAUDITED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME
|
|
Quarter ended March 31,
|
|||||
($ in thousands)
|
|
2019
|
|
2018
|
|||
Net income
|
|
$
|
61,348
|
|
|
18,925
|
|
|
|
|
|
|
|||
Other comprehensive income (loss), net of tax:
|
|
|
|
|
|
|
|
Unrealized gains (losses) on investment securities:
|
|
|
|
|
|
|
|
Unrealized holding gains (losses) arising during period
|
|
81,313
|
|
|
(67,398
|
)
|
|
Amounts reclassified into net income:
|
|
|
|
|
|||
Held-to-maturity securities
|
|
(7
|
)
|
|
(10
|
)
|
|
Realized (gains) losses on disposals and other-than-temporary impairments of available-for-sale securities
|
|
(851
|
)
|
|
3,594
|
|
|
Total unrealized gains (losses) on investment securities
|
|
80,455
|
|
|
(63,814
|
)
|
|
|
|
|
|
|
|||
Defined benefit pension and post-retirement plans:
|
|
|
|
|
|
|
|
Amounts reclassified into net income:
|
|
|
|
|
|||
Net actuarial loss
|
|
525
|
|
|
420
|
|
|
Total defined benefit pension and post-retirement plans
|
|
525
|
|
|
420
|
|
|
Other comprehensive income (loss)
|
|
80,980
|
|
|
(63,394
|
)
|
|
Comprehensive income (loss)
|
|
$
|
142,328
|
|
|
(44,469
|
)
|
SELECTIVE INSURANCE GROUP, INC.
UNAUDITED CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY
|
|
Quarter ended March 31,
|
|||||
($ in thousands, except per share amounts)
|
|
2019
|
|
2018
|
|||
Common stock:
|
|
|
|
|
|
|
|
Beginning of year
|
|
$
|
205,697
|
|
|
204,569
|
|
Dividend reinvestment plan (shares: 5,694 – 2019; 6,298 – 2018)
|
|
11
|
|
|
13
|
|
|
Stock purchase and compensation plans (shares: 371,628 – 2019; 349,255 – 2018)
|
|
743
|
|
|
698
|
|
|
End of period
|
|
206,451
|
|
|
205,280
|
|
|
|
|
|
|
|
|||
Additional paid-in capital:
|
|
|
|
|
|
|
|
Beginning of year
|
|
390,315
|
|
|
367,717
|
|
|
Dividend reinvestment plan
|
|
365
|
|
|
353
|
|
|
Stock purchase and compensation plans
|
|
8,201
|
|
|
7,085
|
|
|
End of period
|
|
398,881
|
|
|
375,155
|
|
|
|
|
|
|
|
|||
Retained earnings:
|
|
|
|
|
|
|
|
Beginning of year, as previously reported
|
|
1,858,414
|
|
|
1,698,613
|
|
|
Cumulative effect adjustment due to adoption of equity security guidance, net of tax
|
|
—
|
|
|
30,726
|
|
|
Cumulative effect adjustment due to adoption of stranded deferred tax guidance
|
|
—
|
|
|
(5,707
|
)
|
|
Cumulative effect adjustment due to adoption of lease guidance, net of tax (Note 2)
|
|
342
|
|
|
—
|
|
|
Balance at beginning of year, as adjusted
|
|
1,858,756
|
|
|
1,723,632
|
|
|
Net income
|
|
61,348
|
|
|
18,925
|
|
|
Dividends to stockholders ($0.20 per share – 2019; $0.18 per share – 2018)
|
|
(11,985
|
)
|
|
(10,725
|
)
|
|
End of period
|
|
1,908,119
|
|
|
1,731,832
|
|
|
|
|
|
|
|
|||
Accumulated other comprehensive income (loss):
|
|
|
|
|
|
|
|
Beginning of year, as previously reported
|
|
(77,956
|
)
|
|
20,170
|
|
|
Cumulative effect adjustment due to adoption of equity security guidance, net of tax
|
|
—
|
|
|
(30,726
|
)
|
|
Cumulative effect adjustment due to adoption of stranded deferred tax guidance
|
|
—
|
|
|
5,707
|
|
|
Balance at beginning of year, as adjusted
|
|
(77,956
|
)
|
|
(4,849
|
)
|
|
Other comprehensive income (loss)
|
|
80,980
|
|
|
(63,394
|
)
|
|
End of period
|
|
3,024
|
|
|
(68,243
|
)
|
|
|
|
|
|
|
|||
Treasury stock:
|
|
|
|
|
|
|
|
Beginning of year
|
|
(584,668
|
)
|
|
(578,112
|
)
|
|
Acquisition of treasury stock (shares: 102,971 – 2019; 103,170 – 2018)
|
|
(6,585
|
)
|
|
(6,116
|
)
|
|
End of period
|
|
(591,253
|
)
|
|
(584,228
|
)
|
|
Total stockholders’ equity
|
|
$
|
1,925,222
|
|
|
1,659,796
|
|
SELECTIVE INSURANCE GROUP, INC.
UNAUDITED CONSOLIDATED STATEMENTS OF CASH FLOWS
|
|
Quarter ended March 31,
|
|||||
($ in thousands)
|
|
2019
|
|
2018
|
|||
Operating Activities
|
|
|
|
|
|
|
|
Net income
|
|
$
|
61,348
|
|
|
18,925
|
|
|
|
|
|
|
|||
Adjustments to reconcile net income to net cash provided by (used in) operating activities:
|
|
|
|
|
|
|
|
Depreciation and amortization
|
|
16,278
|
|
|
11,200
|
|
|
Stock-based compensation expense
|
|
6,677
|
|
|
5,820
|
|
|
Undistributed gains of equity method investments
|
|
(971
|
)
|
|
(881
|
)
|
|
Distributions in excess of current year income of equity method investments
|
|
1,771
|
|
|
1,346
|
|
|
Loss on disposal of fixed assets
|
|
—
|
|
|
29
|
|
|
Net realized and unrealized (gains) losses
|
|
(13,451
|
)
|
|
10,549
|
|
|
|
|
|
|
|
|||
Changes in assets and liabilities:
|
|
|
|
|
|
|
|
Increase in reserve for loss and loss expense, net of reinsurance recoverable
|
|
68,607
|
|
|
54,766
|
|
|
Increase in unearned premiums, net of prepaid reinsurance
|
|
40,374
|
|
|
32,732
|
|
|
Decrease in net federal income taxes
|
|
12,044
|
|
|
3,616
|
|
|
Increase in premiums receivable
|
|
(44,396
|
)
|
|
(19,284
|
)
|
|
Increase in deferred policy acquisition costs
|
|
(8,142
|
)
|
|
(4,237
|
)
|
|
Increase in interest and dividends due or accrued
|
|
(491
|
)
|
|
(864
|
)
|
|
Decrease in accrued salaries and benefits
|
|
(38,529
|
)
|
|
(41,363
|
)
|
|
Increase in other assets
|
|
(8,711
|
)
|
|
(9,672
|
)
|
|
Decrease in other liabilities
|
|
(45,769
|
)
|
|
(70,387
|
)
|
|
Net cash provided by (used in) operating activities
|
|
46,639
|
|
|
(7,705
|
)
|
|
|
|
|
|
|
|||
Investing Activities
|
|
|
|
|
|
|
|
Purchase of fixed income securities, available-for-sale
|
|
(474,962
|
)
|
|
(875,016
|
)
|
|
Purchase of equity securities
|
|
(6,702
|
)
|
|
(38,273
|
)
|
|
Purchase of other investments
|
|
(12,178
|
)
|
|
(13,471
|
)
|
|
Purchase of short-term investments
|
|
(2,416,285
|
)
|
|
(754,524
|
)
|
|
Sale of fixed income securities, available-for-sale
|
|
218,411
|
|
|
675,396
|
|
|
Sale of short-term investments
|
|
2,449,725
|
|
|
737,097
|
|
|
Redemption and maturities of fixed income securities, held-to-maturity
|
|
579
|
|
|
484
|
|
|
Redemption and maturities of fixed income securities, available-for-sale
|
|
86,572
|
|
|
160,514
|
|
|
Sale of equity securities
|
|
3,721
|
|
|
40,740
|
|
|
Sale of other investments
|
|
4,995
|
|
|
3,497
|
|
|
Distributions from other investments
|
|
11,350
|
|
|
6,221
|
|
|
Purchase of property and equipment
|
|
(7,955
|
)
|
|
(2,120
|
)
|
|
Net cash used in investing activities
|
|
(142,729
|
)
|
|
(59,455
|
)
|
|
|
|
|
|
|
|||
Financing Activities
|
|
|
|
|
|
|
|
Dividends to stockholders
|
|
(11,462
|
)
|
|
(10,203
|
)
|
|
Acquisition of treasury stock
|
|
(6,585
|
)
|
|
(6,116
|
)
|
|
Net proceeds from stock purchase and compensation plans
|
|
1,760
|
|
|
1,435
|
|
|
Proceeds from borrowings
|
|
341,256
|
|
|
130,000
|
|
|
Repayments of borrowings
|
|
(235,000
|
)
|
|
(75,000
|
)
|
|
Repayments of finance lease obligations
|
|
(284
|
)
|
|
(734
|
)
|
|
Net cash provided by financing activities
|
|
89,685
|
|
|
39,382
|
|
|
Net decrease in cash and restricted cash
|
|
(6,405
|
)
|
|
(27,778
|
)
|
|
Cash and restricted cash, beginning of year
|
|
16,919
|
|
|
44,710
|
|
|
Cash and restricted cash, end of period
|
|
$
|
10,514
|
|
|
16,932
|
|
|
|
Quarter ended March 31,
|
|||||
($ in thousands)
|
|
2019
|
|
2018
|
|||
Cash paid during the period for:
|
|
|
|
|
|
|
|
Interest
|
|
$
|
4,477
|
|
|
3,455
|
|
Federal income tax
|
|
—
|
|
|
(2,807
|
)
|
|
|
|
|
|
|
|||
Cash paid for amounts included in the measurement of lease liabilities:
|
|
|
|
|
|||
Operating cash flows from operating leases
1
|
|
1,983
|
|
|
—
|
|
|
Financing cash flows from finance leases
|
|
284
|
|
|
734
|
|
|
|
|
|
|
|
|||
Non-cash items:
|
|
|
|
|
|||
Corporate actions related to fixed income securities, AFS
2
|
|
18,447
|
|
|
11,347
|
|
|
Assets acquired under operating lease arrangements
1
|
|
6,136
|
|
|
—
|
|
|
Non-cash purchase of property and equipment
|
|
162
|
|
|
—
|
|
($ in thousands)
|
|
March 31, 2019
|
|
December 31, 2018
|
|||
Cash
|
|
$
|
516
|
|
|
505
|
|
Restricted cash
|
|
9,998
|
|
|
16,414
|
|
|
Total cash and restricted cash shown in the Statements of Cash Flows
|
|
$
|
10,514
|
|
|
16,919
|
|
March 31, 2019
|
|
|
|
|
|
|
|
|
|||||
($ in thousands)
|
|
Cost/
Amortized
Cost
|
|
Unrealized
Gains
|
|
Unrealized
Losses
|
|
Fair
Value
|
|||||
AFS fixed income securities:
|
|
|
|
|
|
|
|
|
|||||
U.S. government and government agencies
|
|
$
|
125,664
|
|
|
1,766
|
|
|
(341
|
)
|
|
127,089
|
|
Foreign government
|
|
20,238
|
|
|
299
|
|
|
(11
|
)
|
|
20,526
|
|
|
Obligations of states and political subdivisions
|
|
1,110,504
|
|
|
39,936
|
|
|
(197
|
)
|
|
1,150,243
|
|
|
Corporate securities
|
|
1,651,773
|
|
|
32,355
|
|
|
(6,113
|
)
|
|
1,678,015
|
|
|
Collateralized loan obligations and other asset-backed securities ("CLO and other ABS")
|
|
722,573
|
|
|
5,050
|
|
|
(5,383
|
)
|
|
722,240
|
|
|
Commercial mortgage-backed securities ("CMBS")
|
|
557,148
|
|
|
11,867
|
|
|
(815
|
)
|
|
568,200
|
|
|
Residential mortgage-backed securities (“RMBS”)
|
|
1,275,373
|
|
|
27,100
|
|
|
(1,428
|
)
|
|
1,301,045
|
|
|
Total AFS securities
|
|
$
|
5,463,273
|
|
|
118,373
|
|
|
(14,288
|
)
|
|
5,567,358
|
|
December 31, 2018
|
|
|
|
|
|
|
|
|
|||||
($ in thousands)
|
|
Cost/
Amortized
Cost
|
|
Unrealized
Gains
|
|
Unrealized
Losses
|
|
Fair
Value
|
|||||
AFS fixed income securities:
|
|
|
|
|
|
|
|
|
|||||
U.S. government and government agencies
|
|
$
|
120,092
|
|
|
1,810
|
|
|
(592
|
)
|
|
121,310
|
|
Foreign government
|
|
23,202
|
|
|
36
|
|
|
(107
|
)
|
|
23,131
|
|
|
Obligations of states and political subdivisions
|
|
1,121,615
|
|
|
19,485
|
|
|
(2,631
|
)
|
|
1,138,469
|
|
|
Corporate securities
|
|
1,639,852
|
|
|
5,521
|
|
|
(27,965
|
)
|
|
1,617,408
|
|
|
CLO and other ABS
|
|
720,193
|
|
|
4,112
|
|
|
(6,943
|
)
|
|
717,362
|
|
|
CMBS
|
|
527,409
|
|
|
3,417
|
|
|
(3,748
|
)
|
|
527,078
|
|
|
RMBS
|
|
1,118,435
|
|
|
12,988
|
|
|
(3,081
|
)
|
|
1,128,342
|
|
|
Total AFS securities
|
|
$
|
5,270,798
|
|
|
47,369
|
|
|
(45,067
|
)
|
|
5,273,100
|
|
March 31, 2019
|
|
Less than 12 months
|
|
12 months or longer
|
|
Total
|
|||||||||||||
($ in thousands)
|
|
Fair Value
|
|
Unrealized
Losses
1
|
|
Fair Value
|
|
Unrealized
Losses
1
|
|
Fair Value
|
|
Unrealized
Losses 1 |
|||||||
AFS fixed income securities:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||
U.S. government and government agencies
|
|
$
|
13,443
|
|
|
(41
|
)
|
|
25,774
|
|
|
(300
|
)
|
|
39,217
|
|
|
(341
|
)
|
Foreign government
|
|
—
|
|
|
—
|
|
|
3,509
|
|
|
(11
|
)
|
|
3,509
|
|
|
(11
|
)
|
|
Obligations of states and political subdivisions
|
|
15,257
|
|
|
(71
|
)
|
|
21,676
|
|
|
(126
|
)
|
|
36,933
|
|
|
(197
|
)
|
|
Corporate securities
|
|
158,607
|
|
|
(2,783
|
)
|
|
160,121
|
|
|
(3,330
|
)
|
|
318,728
|
|
|
(6,113
|
)
|
|
CLO and other ABS
|
|
366,775
|
|
|
(4,231
|
)
|
|
79,489
|
|
|
(1,152
|
)
|
|
446,264
|
|
|
(5,383
|
)
|
|
CMBS
|
|
112,025
|
|
|
(505
|
)
|
|
63,774
|
|
|
(310
|
)
|
|
175,799
|
|
|
(815
|
)
|
|
RMBS
|
|
22,881
|
|
|
(258
|
)
|
|
83,792
|
|
|
(1,170
|
)
|
|
106,673
|
|
|
(1,428
|
)
|
|
Total AFS securities
|
|
$
|
688,988
|
|
|
(7,889
|
)
|
|
438,135
|
|
|
(6,399
|
)
|
|
1,127,123
|
|
|
(14,288
|
)
|
December 31, 2018
|
|
Less than 12 months
|
|
12 months or longer
|
|
Total
|
|||||||||||||
($ in thousands)
|
|
Fair
Value
|
|
Unrealized
Losses
1
|
|
Fair Value
|
|
Unrealized
Losses
1
|
|
Fair Value
|
|
Unrealized
Losses 1 |
|||||||
AFS fixed income securities:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||
U.S. government and government agencies
|
|
$
|
6,693
|
|
|
(174
|
)
|
|
23,163
|
|
|
(418
|
)
|
|
29,856
|
|
|
(592
|
)
|
Foreign government
|
|
12,208
|
|
|
(93
|
)
|
|
1,482
|
|
|
(14
|
)
|
|
13,690
|
|
|
(107
|
)
|
|
Obligations of states and political subdivisions
|
|
196,798
|
|
|
(2,074
|
)
|
|
42,821
|
|
|
(557
|
)
|
|
239,619
|
|
|
(2,631
|
)
|
|
Corporate securities
|
|
1,041,952
|
|
|
(23,649
|
)
|
|
78,953
|
|
|
(4,316
|
)
|
|
1,120,905
|
|
|
(27,965
|
)
|
|
CLO and other ABS
|
|
516,106
|
|
|
(6,750
|
)
|
|
16,800
|
|
|
(193
|
)
|
|
532,906
|
|
|
(6,943
|
)
|
|
CMBS
|
|
229,338
|
|
|
(2,548
|
)
|
|
66,294
|
|
|
(1,200
|
)
|
|
295,632
|
|
|
(3,748
|
)
|
|
RMBS
|
|
139,338
|
|
|
(1,660
|
)
|
|
45,661
|
|
|
(1,421
|
)
|
|
184,999
|
|
|
(3,081
|
)
|
|
Total AFS fixed income securities
|
|
$
|
2,142,433
|
|
|
(36,948
|
)
|
|
275,174
|
|
|
(8,119
|
)
|
|
2,417,607
|
|
|
(45,067
|
)
|
|
|
AFS
|
|
HTM
|
||||||
($ in thousands)
|
|
Fair Value
|
|
Carrying Value
|
|
Fair Value
|
||||
Due in one year or less
|
|
$
|
238,650
|
|
|
12,795
|
|
|
12,927
|
|
Due after one year through five years
|
|
2,126,600
|
|
|
17,574
|
|
|
18,728
|
|
|
Due after five years through 10 years
|
|
3,060,270
|
|
|
6,124
|
|
|
6,287
|
|
|
Due after 10 years
|
|
141,838
|
|
|
—
|
|
|
—
|
|
|
Total fixed income securities
|
|
$
|
5,567,358
|
|
|
36,493
|
|
|
37,942
|
|
Other Investments
|
|
March 31, 2019
|
|
December 31, 2018
|
|||||||||||||||
($ in thousands)
|
|
Carrying Value
|
|
Remaining Commitment
|
|
Maximum Exposure to Loss
1
|
|
Carrying Value
|
|
Remaining Commitment
|
|
Maximum Exposure to Loss
1
|
|||||||
Alternative Investments
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||
Private equity
|
|
$
|
92,371
|
|
|
101,297
|
|
|
193,668
|
|
|
84,352
|
|
|
93,688
|
|
|
178,040
|
|
Private credit
|
|
30,518
|
|
|
90,812
|
|
|
121,330
|
|
|
41,682
|
|
|
81,453
|
|
|
123,135
|
|
|
Real assets
|
|
28,844
|
|
|
25,152
|
|
|
53,996
|
|
|
27,862
|
|
|
27,129
|
|
|
54,991
|
|
|
Total alternative investments
|
|
151,733
|
|
|
217,261
|
|
|
368,994
|
|
|
153,896
|
|
|
202,270
|
|
|
356,166
|
|
|
Other securities
|
|
24,492
|
|
|
—
|
|
|
24,492
|
|
|
25,042
|
|
|
—
|
|
|
25,042
|
|
|
Total other investments
|
|
$
|
176,225
|
|
|
217,261
|
|
|
393,486
|
|
|
178,938
|
|
|
202,270
|
|
|
381,208
|
|
Income Statement Information
|
|
Quarter ended March 31,
|
|||||
($ in millions)
|
|
2019
|
|
2018
|
|||
Net investment income (loss)
|
|
$
|
(150.1
|
)
|
|
(56.2
|
)
|
Realized gains (losses)
|
|
143.3
|
|
|
1,003.0
|
|
|
Net change in unrealized appreciation
|
|
554.3
|
|
|
96.2
|
|
|
Net gain
|
|
$
|
547.5
|
|
|
1,043.0
|
|
Selective’s insurance subsidiaries’ alternative investments gain
|
|
$
|
0.6
|
|
|
1.6
|
|
($ in millions)
|
|
FHLBI Collateral
|
|
FHLBNY Collateral
|
|
State and Regulatory Deposits
|
|
Total
|
|||||
U.S. government and government agencies
|
|
$
|
—
|
|
|
—
|
|
|
22.5
|
|
|
22.5
|
|
Obligations of states and political subdivisions
|
|
—
|
|
|
—
|
|
|
3.9
|
|
|
3.9
|
|
|
Corporate securities
|
|
—
|
|
|
—
|
|
|
0.3
|
|
|
0.3
|
|
|
CMBS
|
|
7.2
|
|
|
20.8
|
|
|
—
|
|
|
28.0
|
|
|
RMBS
|
|
57.3
|
|
|
96.6
|
|
|
—
|
|
|
153.9
|
|
|
Total pledged as collateral
|
|
$
|
64.5
|
|
|
117.4
|
|
|
26.7
|
|
|
208.6
|
|
|
|
Quarter ended March 31,
|
|||||
($ in thousands)
|
|
2019
|
|
2018
|
|||
Fixed income securities
|
|
$
|
49,033
|
|
|
42,041
|
|
Equity securities
|
|
1,640
|
|
|
1,977
|
|
|
Short-term investments
|
|
2,044
|
|
|
523
|
|
|
Other investments
|
|
660
|
|
|
1,563
|
|
|
Investment expenses
|
|
(2,759
|
)
|
|
(2,873
|
)
|
|
Net investment income earned
|
|
$
|
50,618
|
|
|
43,231
|
|
|
|
Quarter ended March 31,
|
|||||
($ in thousands)
|
|
2019
|
|
2018
|
|||
Net realized gains (losses) on the disposals of securities:
|
|
|
|
|
|||
Fixed income securities
|
|
$
|
1,143
|
|
|
(3,335
|
)
|
Equity securities
|
|
2,280
|
|
|
8,069
|
|
|
Short-term investments
|
|
14
|
|
|
(3
|
)
|
|
Other investments
|
|
7
|
|
|
—
|
|
|
Net realized gains on the disposal of securities
|
|
3,444
|
|
|
4,731
|
|
|
OTTI charges
|
|
(104
|
)
|
|
(1,212
|
)
|
|
Net realized gains
|
|
3,340
|
|
|
3,519
|
|
|
Unrealized gains (losses) recognized in income on equity securities
1
|
|
10,111
|
|
|
(14,068
|
)
|
|
Total net realized and unrealized investment gains (losses)
|
|
$
|
13,451
|
|
|
(10,549
|
)
|
|
|
Quarter ended March 31,
|
|||||
($ in thousands)
|
|
2019
|
|
2018
|
|||
HTM fixed income securities
|
|
|
|
|
|||
Gains
|
|
$
|
—
|
|
|
2
|
|
Losses
|
|
—
|
|
|
—
|
|
|
AFS fixed income securities
|
|
|
|
|
|
|
|
Gains
|
|
1,844
|
|
|
2,623
|
|
|
Losses
|
|
(701
|
)
|
|
(5,960
|
)
|
|
Equity securities
|
|
|
|
|
|
|
|
Gains
|
|
2,280
|
|
|
8,399
|
|
|
Losses
|
|
—
|
|
|
(330
|
)
|
|
Short-term investments
|
|
|
|
|
|||
Gains
|
|
14
|
|
|
1
|
|
|
Losses
|
|
—
|
|
|
(4
|
)
|
|
Other investments
|
|
|
|
|
|||
Gains
|
|
7
|
|
|
—
|
|
|
Losses
|
|
—
|
|
|
—
|
|
|
Total net realized gains on disposals of securities
|
|
$
|
3,444
|
|
|
4,731
|
|
Outstanding Debt
|
|
Issuance Date
|
|
Maturity Date
|
|
Interest Rate
|
|
Original Amount
|
|
2019
|
|
Carry Value
|
||||||||
($ in thousands)
|
|
|
|
|
|
Debt Discount and Unamortized Issuance Cost
|
|
March 31, 2019
|
|
December 31, 2018
|
||||||||||
Description
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||
Long term
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||
Issuance:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||
Senior Notes
|
|
3/1/2019
|
|
3/1/2049
|
|
5.375
|
%
|
|
$
|
300,000
|
|
|
9,293
|
|
|
290,707
|
|
|
—
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||
Redemption:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||
Senior Notes
|
|
2/8/2013
|
|
2/9/2043
|
|
5.875
|
%
|
|
185,000
|
|
|
—
|
|
|
—
|
|
|
180,771
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||
Other Outstanding:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||
FHLBI
|
|
12/16/2016
|
|
12/16/2026
|
|
3.03
|
%
|
|
60,000
|
|
|
—
|
|
|
60,000
|
|
|
60,000
|
|
|
FHLBNY
|
|
8/15/2016
|
|
8/16/2021
|
|
1.56
|
%
|
|
25,000
|
|
|
—
|
|
|
25,000
|
|
|
25,000
|
|
|
FHLBNY
|
|
7/21/2016
|
|
7/21/2021
|
|
1.61
|
%
|
|
25,000
|
|
|
—
|
|
|
25,000
|
|
|
25,000
|
|
|
Senior Notes
|
|
11/3/2005
|
|
11/1/2035
|
|
6.70
|
%
|
|
100,000
|
|
|
917
|
|
|
99,083
|
|
|
99,069
|
|
|
Senior Notes
|
|
11/16/2004
|
|
11/15/2034
|
|
7.25
|
%
|
|
50,000
|
|
|
293
|
|
|
49,707
|
|
|
49,700
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||
Finance Lease Obligations
1
|
|
|
|
|
|
|
|
|
|
|
|
607
|
|
|
—
|
|
||||
Total long-term debt
|
|
|
|
|
|
|
|
$
|
745,000
|
|
|
10,503
|
|
|
550,104
|
|
|
439,540
|
|
|
|
March 31, 2019
|
|
December 31, 2018
|
||||||||
($ in thousands)
|
|
Carrying Amount
|
|
Fair Value
|
|
Carrying Amount
|
|
Fair Value
|
||||
Financial Liabilities
|
|
|
|
|
|
|
|
|
||||
Long-term debt:
|
|
|
|
|
|
|
|
|
||||
7.25% Senior Notes
|
|
49,907
|
|
|
61,391
|
|
|
49,907
|
|
|
57,032
|
|
6.70% Senior Notes
|
|
99,467
|
|
|
115,671
|
|
|
99,462
|
|
|
107,075
|
|
5.875% Senior Notes
|
|
—
|
|
|
—
|
|
|
185,000
|
|
|
177,230
|
|
5.375% Senior Notes
|
|
294,097
|
|
|
307,215
|
|
|
—
|
|
|
—
|
|
1.61% borrowings from FHLBNY
|
|
25,000
|
|
|
24,474
|
|
|
25,000
|
|
|
24,218
|
|
1.56% borrowings from FHLBNY
|
|
25,000
|
|
|
24,426
|
|
|
25,000
|
|
|
24,162
|
|
3.03% borrowings from FHLBI
|
|
60,000
|
|
|
61,814
|
|
|
60,000
|
|
|
58,905
|
|
Subtotal long-term debt
|
|
553,471
|
|
|
594,991
|
|
|
444,369
|
|
|
448,622
|
|
Unamortized debt issuance costs
|
|
(3,974
|
)
|
|
|
|
(4,829
|
)
|
|
|
||
Finance lease obligations
|
|
607
|
|
|
|
|
—
|
|
|
|
||
Total long-term debt
|
|
550,104
|
|
|
|
|
439,540
|
|
|
|
March 31, 2019
|
|
|
|
Fair Value Measurements Using
|
|||||||||
($ in thousands)
|
|
Assets
Measured at Fair Value |
|
Quoted Prices in
Active Markets for
Identical Assets/
Liabilities (Level 1)
1
|
|
Significant Other
Observable
Inputs
(Level 2)
1
|
|
Significant Unobservable
Inputs
(Level 3)
|
|||||
Description
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Measured on a recurring basis:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
AFS fixed income securities:
|
|
|
|
|
|
|
|
|
|||||
U.S. government and government agencies
|
|
$
|
127,089
|
|
|
68,645
|
|
|
58,444
|
|
|
—
|
|
Foreign government
|
|
20,526
|
|
|
—
|
|
|
20,526
|
|
|
—
|
|
|
Obligations of states and political subdivisions
|
|
1,150,243
|
|
|
—
|
|
|
1,150,243
|
|
|
—
|
|
|
Corporate securities
|
|
1,678,015
|
|
|
—
|
|
|
1,661,596
|
|
|
16,419
|
|
|
CLO and other ABS
|
|
722,240
|
|
|
—
|
|
|
690,948
|
|
|
31,292
|
|
|
CMBS
|
|
568,200
|
|
|
—
|
|
|
568,200
|
|
|
—
|
|
|
RMBS
|
|
1,301,045
|
|
|
—
|
|
|
1,301,045
|
|
|
—
|
|
|
Total AFS fixed income securities
|
|
5,567,358
|
|
|
68,645
|
|
|
5,451,002
|
|
|
47,711
|
|
|
Equity securities:
|
|
|
|
|
|
|
|
|
|||||
Common stock
2
|
|
160,011
|
|
|
119,977
|
|
|
—
|
|
|
—
|
|
|
Preferred stock
|
|
3,005
|
|
|
3,005
|
|
|
—
|
|
|
—
|
|
|
Total equity securities
|
|
163,016
|
|
|
122,982
|
|
|
—
|
|
|
—
|
|
|
Short-term investments
|
|
290,653
|
|
|
289,232
|
|
|
1,421
|
|
|
—
|
|
|
Total assets measured at fair value
|
|
$
|
6,021,027
|
|
|
480,859
|
|
|
5,452,423
|
|
|
47,711
|
|
December 31, 2018
|
|
|
|
Fair Value Measurements Using
|
|||||||||
($ in thousands)
|
|
Assets
Measured at Fair Value |
|
Quoted Prices in
Active Markets for
Identical Assets/Liabilities
(Level 1)
1
|
|
Significant
Other Observable
Inputs
(Level 2)
1
|
|
Significant Unobservable
Inputs
(Level 3)
|
|||||
Description
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Measured on a recurring basis:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
AFS fixed income securities:
|
|
|
|
|
|
|
|
|
|||||
U.S. government and government agencies
|
|
$
|
121,310
|
|
|
78,381
|
|
|
42,929
|
|
|
—
|
|
Foreign government
|
|
23,131
|
|
|
—
|
|
|
23,131
|
|
|
—
|
|
|
Obligations of states and political subdivisions
|
|
1,138,469
|
|
|
—
|
|
|
1,138,469
|
|
|
—
|
|
|
Corporate securities
|
|
1,617,408
|
|
|
—
|
|
|
1,617,408
|
|
|
—
|
|
|
CLO and other ABS
|
|
717,362
|
|
|
—
|
|
|
709,953
|
|
|
7,409
|
|
|
CMBS
|
|
527,078
|
|
|
—
|
|
|
527,078
|
|
|
—
|
|
|
RMBS
|
|
1,128,342
|
|
|
—
|
|
|
1,128,342
|
|
|
—
|
|
|
Total AFS fixed income securities
|
|
5,273,100
|
|
|
78,381
|
|
|
5,187,310
|
|
|
7,409
|
|
|
Equity securities:
|
|
|
|
|
|
|
|
|
|||||
Common stock
2
|
|
144,727
|
|
|
107,397
|
|
|
—
|
|
|
—
|
|
|
Preferred stock
|
|
2,912
|
|
|
2,912
|
|
|
—
|
|
|
—
|
|
|
Total equity securities
|
|
147,639
|
|
|
110,309
|
|
|
—
|
|
|
—
|
|
|
Short-term investments
|
|
323,864
|
|
|
321,370
|
|
|
2,494
|
|
|
—
|
|
|
Total assets measured at fair value
|
|
$
|
5,744,603
|
|
|
510,060
|
|
|
5,189,804
|
|
|
7,409
|
|
1
|
There were no transfers of securities between Level 1 and Level 2.
|
2
|
Investments amounting to
$40.0 million
at
March 31, 2019
, and
$23.7 million
at
December 31, 2018
, were measured at fair value using net asset value per share (or its practical expedient) and have not been classified in the fair value hierarchy. The fair value amounts presented in this table are intended to permit reconciliation of the fair value hierarchy to total assets measured at fair value.
|
March 31, 2019
|
|
|
|
|
|
|
|||
($ in thousands)
|
|
Corporate Securities
|
|
CLO and Other ABS
|
|
Total
|
|||
Fair value, December 31, 2018
|
|
—
|
|
|
7,409
|
|
|
7,409
|
|
Total net (losses) gains for the period included in:
|
|
|
|
|
|
|
|||
OCI
|
|
—
|
|
|
(225
|
)
|
|
(225
|
)
|
Net income
|
|
—
|
|
|
—
|
|
|
—
|
|
Purchases
|
|
—
|
|
|
12,434
|
|
|
12,434
|
|
Sales
|
|
—
|
|
|
—
|
|
|
—
|
|
Issuances
|
|
—
|
|
|
—
|
|
|
—
|
|
Settlements
|
|
—
|
|
|
—
|
|
|
—
|
|
Transfers into Level 3
|
|
16,419
|
|
|
11,674
|
|
|
28,093
|
|
Transfers out of Level 3
|
|
—
|
|
|
—
|
|
|
—
|
|
Fair value, March 31, 2019
|
|
16,419
|
|
|
31,292
|
|
|
47,711
|
|
March 31, 2019
|
|
|
|
Fair Value Measurements Using
|
|||||||||
($ in thousands)
|
|
Assets/
Liabilities Disclosed at Fair Value |
|
Quoted Prices in
Active Markets for
Identical Assets/
Liabilities
(Level 1)
|
|
Significant Other
Observable Inputs
(Level 2)
|
|
Significant
Unobservable
Inputs
(Level 3)
|
|||||
Financial Assets
|
|
|
|
|
|
|
|
|
|
|
|
|
|
HTM:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Obligations of states and political subdivisions
|
|
$
|
17,923
|
|
|
—
|
|
|
17,923
|
|
|
—
|
|
Corporate securities
|
|
20,019
|
|
|
—
|
|
|
20,019
|
|
|
—
|
|
|
Total HTM fixed income securities
|
|
$
|
37,942
|
|
|
—
|
|
|
37,942
|
|
|
—
|
|
|
|
|
|
|
|
|
|
|
|||||
Financial Liabilities
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Long-term debt:
|
|
|
|
|
|
|
|
|
|||||
7.25% Senior Notes
|
|
$
|
61,391
|
|
|
—
|
|
|
61,391
|
|
|
—
|
|
6.70% Senior Notes
|
|
115,671
|
|
|
—
|
|
|
115,671
|
|
|
—
|
|
|
5.375% Senior Notes
|
|
307,215
|
|
|
—
|
|
|
307,215
|
|
|
—
|
|
|
1.61% borrowings from FHLBNY
|
|
24,474
|
|
|
—
|
|
|
24,474
|
|
|
—
|
|
|
1.56% borrowings from FHLBNY
|
|
24,426
|
|
|
—
|
|
|
24,426
|
|
|
—
|
|
|
3.03% borrowings from FHLBI
|
|
61,814
|
|
|
—
|
|
|
61,814
|
|
|
—
|
|
|
Total long-term debt
|
|
$
|
594,991
|
|
|
—
|
|
|
594,991
|
|
|
—
|
|
December 31, 2018
|
|
|
|
Fair Value Measurements Using
|
|||||||||
($ in thousands)
|
|
Assets/
Liabilities Disclosed at Fair Value |
|
Quoted Prices in
Active Markets for
Identical Assets/
Liabilities
(Level 1)
|
|
Significant Other
Observable Inputs
(Level 2)
|
|
Significant
Unobservable
Inputs
(Level 3)
|
|||||
Financial Assets
|
|
|
|
|
|
|
|
|
|
|
|
|
|
HTM:
|
|
|
|
|
|
|
|
|
|
|
|
||
Obligations of states and political subdivisions
|
|
$
|
17,969
|
|
|
—
|
|
|
17,969
|
|
|
—
|
|
Corporate securities
|
|
20,348
|
|
|
—
|
|
|
20,348
|
|
|
—
|
|
|
Total HTM fixed income securities
|
|
$
|
38,317
|
|
|
—
|
|
|
38,317
|
|
|
—
|
|
|
|
|
|
|
|
|
|
|
|||||
Financial Liabilities
|
|
|
|
|
|
|
|
|
|
||||
Long-term debt:
|
|
|
|
|
|
|
|
|
|||||
7.25% Senior Notes
|
|
$
|
57,032
|
|
|
—
|
|
|
57,032
|
|
|
—
|
|
6.70% Senior Notes
|
|
107,075
|
|
|
—
|
|
|
107,075
|
|
|
—
|
|
|
5.875% Senior Notes
|
|
177,230
|
|
|
177,230
|
|
|
—
|
|
|
—
|
|
|
1.61% borrowings from FHLBNY
|
|
24,218
|
|
|
—
|
|
|
24,218
|
|
|
—
|
|
|
1.56% borrowings from FHLBNY
|
|
24,162
|
|
|
—
|
|
|
24,162
|
|
|
—
|
|
|
3.03% borrowings from FHLBI
|
|
58,905
|
|
|
—
|
|
|
58,905
|
|
|
—
|
|
|
Total long-term debt
|
|
$
|
448,622
|
|
|
177,230
|
|
|
271,392
|
|
|
—
|
|
|
|
Quarter ended March 31,
|
|||||
($ in thousands)
|
|
2019
|
|
2018
|
|||
Premiums written:
|
|
|
|
|
|
|
|
Direct
|
|
$
|
766,394
|
|
|
714,234
|
|
Assumed
|
|
6,555
|
|
|
6,271
|
|
|
Ceded
|
|
(100,002
|
)
|
|
(95,945
|
)
|
|
Net
|
|
$
|
672,947
|
|
|
624,560
|
|
Premiums earned:
|
|
|
|
|
|
|
|
Direct
|
|
$
|
728,037
|
|
|
683,733
|
|
Assumed
|
|
6,562
|
|
|
6,124
|
|
|
Ceded
|
|
(102,026
|
)
|
|
(98,029
|
)
|
|
Net
|
|
$
|
632,573
|
|
|
591,828
|
|
Loss and loss expenses incurred:
|
|
|
|
|
|
|
|
Direct
|
|
$
|
424,657
|
|
|
420,916
|
|
Assumed
|
|
5,265
|
|
|
8,004
|
|
|
Ceded
|
|
(43,343
|
)
|
|
(43,979
|
)
|
|
Net
|
|
$
|
386,579
|
|
|
384,941
|
|
Ceded to NFIP
|
|
Quarter ended March 31,
|
|||||
($ in thousands)
|
|
2019
|
|
2018
|
|||
Ceded premiums written
|
|
$
|
(60,013
|
)
|
|
(56,669
|
)
|
Ceded premiums earned
|
|
(62,263
|
)
|
|
(58,991
|
)
|
|
Ceded loss and loss expenses incurred
|
|
(13,686
|
)
|
|
(15,719
|
)
|
|
|
Quarter ended March 31,
|
|||||
($ in thousands)
|
|
2019
|
|
2018
|
|||
Gross reserve for loss and loss expense, at beginning of year
|
|
$
|
3,893,868
|
|
|
3,771,240
|
|
Less: reinsurance recoverable on unpaid loss and loss expense, at beginning of year
|
|
537,388
|
|
|
585,855
|
|
|
Net reserve for loss and loss expense, at beginning of year
|
|
3,356,480
|
|
|
3,185,385
|
|
|
Incurred loss and loss expense for claims occurring in the:
|
|
|
|
|
|
|
|
Current year
|
|
397,253
|
|
|
388,801
|
|
|
Prior years
|
|
(10,674
|
)
|
|
(3,860
|
)
|
|
Total incurred loss and loss expense
|
|
386,579
|
|
|
384,941
|
|
|
Paid loss and loss expense for claims occurring in the:
|
|
|
|
|
|
|
|
Current year
|
|
73,964
|
|
|
79,345
|
|
|
Prior years
|
|
246,168
|
|
|
248,738
|
|
|
Total paid loss and loss expense
|
|
320,132
|
|
|
328,083
|
|
|
Net reserve for loss and loss expense, at end of period
|
|
3,422,927
|
|
|
3,242,243
|
|
|
Add: Reinsurance recoverable on unpaid loss and loss expense, at end of period
|
|
543,582
|
|
|
549,837
|
|
|
Gross reserve for loss and loss expense at end of period
|
|
$
|
3,966,509
|
|
|
3,792,080
|
|
•
|
Our Standard Commercial Lines, Standard Personal Lines, and Excess and Surplus ("E&S") Lines are evaluated based on before and after-tax underwriting results (net premiums earned, incurred loss and loss expense, policyholder dividends, policy acquisition costs, and other underwriting expenses), return on equity ("ROE") contribution, and combined ratios.
|
•
|
Our Investments segment is primarily evaluated based on after-tax net investment income and its ROE contribution. Also included in Investment segment results are after-tax net realized and unrealized gains and losses, which are not included in non-GAAP operating income.
|
Revenue by Segment
|
|
Quarter ended March 31,
|
|||||
($ in thousands)
|
|
2019
|
|
2018
|
|||
Standard Commercial Lines:
|
|
|
|
|
|
|
|
Net premiums earned:
|
|
|
|
|
|
|
|
Commercial automobile
|
|
$
|
131,186
|
|
|
118,231
|
|
Workers compensation
|
|
78,715
|
|
|
78,823
|
|
|
General liability
|
|
161,525
|
|
|
149,829
|
|
|
Commercial property
|
|
86,067
|
|
|
80,326
|
|
|
Businessowners’ policies
|
|
26,081
|
|
|
25,591
|
|
|
Bonds
|
|
8,904
|
|
|
8,134
|
|
|
Other
|
|
4,706
|
|
|
4,430
|
|
|
Miscellaneous income
|
|
2,044
|
|
|
1,826
|
|
|
Total Standard Commercial Lines revenue
|
|
499,228
|
|
|
467,190
|
|
|
Standard Personal Lines:
|
|
|
|
|
|||
Net premiums earned:
|
|
|
|
|
|||
Personal automobile
|
|
43,163
|
|
|
40,442
|
|
|
Homeowners
|
|
32,130
|
|
|
32,201
|
|
|
Other
|
|
2,014
|
|
|
1,613
|
|
|
Miscellaneous income
|
|
276
|
|
|
352
|
|
|
Total Standard Personal Lines revenue
|
|
77,583
|
|
|
74,608
|
|
|
E&S Lines:
|
|
|
|
|
|||
Net premiums earned:
|
|
|
|
|
|||
Casualty lines
|
|
44,528
|
|
|
38,540
|
|
|
Property lines
|
|
13,554
|
|
|
13,668
|
|
|
Miscellaneous income
|
|
—
|
|
|
1
|
|
|
Total E&S Lines revenue
|
|
58,082
|
|
|
52,209
|
|
|
Investments:
|
|
|
|
|
|
|
|
Net investment income
|
|
50,618
|
|
|
43,231
|
|
|
Net realized and unrealized investment gains (losses)
|
|
13,451
|
|
|
(10,549
|
)
|
|
Total Investments revenue
|
|
64,069
|
|
|
32,682
|
|
|
Total revenues
|
|
$
|
698,962
|
|
|
626,689
|
|
Income Before and After Federal Income Tax
|
|
Quarter ended March 31,
|
|||||
($ in thousands)
|
|
2019
|
|
2018
|
|||
Standard Commercial Lines:
|
|
|
|
|
|
|
|
Underwriting gain, before federal income tax
|
|
$
|
25,815
|
|
|
6,804
|
|
Underwriting gain, after federal income tax
|
|
20,394
|
|
|
5,375
|
|
|
Combined ratio
|
|
94.8
|
%
|
|
98.5
|
|
|
ROE contribution
|
|
4.4
|
|
|
1.3
|
|
|
|
|
|
|
|
|||
Standard Personal Lines:
|
|
|
|
|
|||
Underwriting gain (loss), before federal income tax
|
|
$
|
3,167
|
|
|
(1,506
|
)
|
Underwriting gain (loss), after federal income tax
|
|
2,502
|
|
|
(1,190
|
)
|
|
Combined ratio
|
|
95.9
|
%
|
|
102.0
|
|
|
ROE contribution
|
|
0.5
|
|
|
(0.3
|
)
|
|
|
|
|
|
|
|||
E&S Lines:
|
|
|
|
|
|||
Underwriting gain (loss), before federal income tax
|
|
$
|
4,579
|
|
|
(565
|
)
|
Underwriting gain (loss), after federal income tax
|
|
3,617
|
|
|
(446
|
)
|
|
Combined ratio
|
|
92.1
|
%
|
|
101.1
|
|
|
ROE contribution
|
|
0.8
|
|
|
(0.1
|
)
|
|
|
|
|
|
|
|||
Investments:
|
|
|
|
|
|
|
|
Net investment income
|
|
$
|
50,618
|
|
|
43,231
|
|
Net realized and unrealized investment gains (losses)
|
|
13,451
|
|
|
(10,549
|
)
|
|
Total investment segment income, before federal income tax
|
|
64,069
|
|
|
32,682
|
|
|
Tax on investment segment income
|
|
12,120
|
|
|
5,226
|
|
|
Total investment segment income, after federal income tax
|
|
$
|
51,949
|
|
|
27,456
|
|
ROE contribution of after-tax net investment income
|
|
8.9
|
|
|
8.5
|
|
Reconciliation of Segment Results to Income Before Federal Income Tax
|
|
Quarter ended March 31,
|
|||||
($ in thousands)
|
|
2019
|
|
2018
|
|||
Underwriting gain (loss)
|
|
|
|
|
|||
Standard Commercial Lines
|
|
$
|
25,815
|
|
|
6,804
|
|
Standard Personal Lines
|
|
3,167
|
|
|
(1,506
|
)
|
|
E&S Lines
|
|
4,579
|
|
|
(565
|
)
|
|
Investment income
|
|
64,069
|
|
|
32,682
|
|
|
Total all segments
|
|
97,630
|
|
|
37,415
|
|
|
Interest expense
|
|
(11,526
|
)
|
|
(6,152
|
)
|
|
Corporate expenses
|
|
(12,410
|
)
|
|
(11,332
|
)
|
|
Income, before federal income tax
|
|
$
|
73,694
|
|
|
19,931
|
|
|
|
Pension Plan
|
|||||
|
|
Quarter ended March 31,
|
|||||
($ in thousands)
|
|
2019
|
|
2018
|
|||
Net Periodic Benefit Cost:
|
|
|
|
|
|||
Interest cost
|
|
$
|
3,377
|
|
|
3,095
|
|
Expected return on plan assets
|
|
(5,279
|
)
|
|
(5,682
|
)
|
|
Amortization of unrecognized net actuarial loss
|
|
644
|
|
|
494
|
|
|
Total net periodic benefit cost
1
|
|
$
|
(1,258
|
)
|
|
(2,093
|
)
|
|
|
Pension Plan
|
||||
|
|
Quarter ended March 31,
|
||||
|
|
2019
|
|
2018
|
||
Weighted-Average Expense Assumptions:
|
|
|
|
|
||
Discount rate
|
|
4.46
|
%
|
|
3.78
|
%
|
Effective interest rate for calculation of interest cost
|
|
4.12
|
|
|
3.46
|
|
Expected return on plan assets
|
|
6.50
|
|
|
6.36
|
|
First Quarter 2019
|
|
|
|
|
|
|
||||
($ in thousands)
|
|
Gross
|
|
Tax
|
|
Net
|
||||
Net income
|
|
$
|
73,694
|
|
|
12,346
|
|
|
61,348
|
|
Components of OCI:
|
|
|
|
|
|
|
|
|
|
|
Unrealized gains on investment securities
:
|
|
|
|
|
|
|
|
|
|
|
Unrealized holding gains during the period
|
|
102,926
|
|
|
21,613
|
|
|
81,313
|
|
|
Amounts reclassified into net income:
|
|
|
|
|
|
|
||||
HTM securities
|
|
(9
|
)
|
|
(2
|
)
|
|
(7
|
)
|
|
Realized gains on disposals and OTTI of AFS securities
|
|
(1,077
|
)
|
|
(226
|
)
|
|
(851
|
)
|
|
Total unrealized gains on investment securities
|
|
101,840
|
|
|
21,385
|
|
|
80,455
|
|
|
Defined benefit pension and post-retirement plans:
|
|
|
|
|
|
|
|
|
|
|
Amounts reclassified into net income:
|
|
|
|
|
|
|
|
|
|
|
Net actuarial loss
|
|
664
|
|
|
139
|
|
|
525
|
|
|
Total defined benefit pension and post-retirement plans
|
|
664
|
|
|
139
|
|
|
525
|
|
|
Other comprehensive income
|
|
102,504
|
|
|
21,524
|
|
|
80,980
|
|
|
Comprehensive income
|
|
$
|
176,198
|
|
|
33,870
|
|
|
142,328
|
|
|
|
|
|
|
|
|
||||
|
|
|
|
|
|
|
||||
First Quarter 2018
|
|
|
|
|
|
|
||||
($ in thousands)
|
|
Gross
|
|
Tax
|
|
Net
|
||||
Net income
|
|
$
|
19,931
|
|
|
1,006
|
|
|
18,925
|
|
Components of other comprehensive loss:
|
|
|
|
|
|
|
|
|
|
|
Unrealized losses on investment securities
:
|
|
|
|
|
|
|
|
|
|
|
Unrealized holding losses during the period
|
|
(85,315
|
)
|
|
(17,917
|
)
|
|
(67,398
|
)
|
|
Amounts reclassified into net income:
|
|
|
|
|
|
|
||||
HTM securities
|
|
(12
|
)
|
|
(2
|
)
|
|
(10
|
)
|
|
Realized losses on disposals and OTTI of AFS securities
|
|
4,549
|
|
|
955
|
|
|
3,594
|
|
|
Total unrealized losses on investment securities
|
|
(80,778
|
)
|
|
(16,964
|
)
|
|
(63,814
|
)
|
|
Defined benefit pension and post-retirement plans:
|
|
|
|
|
|
|
|
|
|
|
Amounts reclassified into net income:
|
|
|
|
|
|
|
|
|
|
|
Net actuarial loss
|
|
532
|
|
|
112
|
|
|
420
|
|
|
Total defined benefit pension and post-retirement plans
|
|
532
|
|
|
112
|
|
|
420
|
|
|
Other comprehensive loss
|
|
(80,246
|
)
|
|
(16,852
|
)
|
|
(63,394
|
)
|
|
Comprehensive loss
|
|
$
|
(60,315
|
)
|
|
(15,846
|
)
|
|
(44,469
|
)
|
March 31, 2019
|
|
|
|
Defined Benefit
Pension and Post-Retirement Plans
|
|
|
|||||||||||||
|
|
Net Unrealized Gains (Losses) on Investment Securities
|
|
|
Total AOCI
|
||||||||||||||
($ in thousands)
|
|
OTTI
Related
|
|
HTM
Related
|
|
All
Other
|
|
Investments
Subtotal
|
|
|
|||||||||
Balance, December 31, 2018
|
|
$
|
(71
|
)
|
|
71
|
|
|
1,888
|
|
|
1,888
|
|
|
(79,844
|
)
|
|
(77,956
|
)
|
OCI before reclassifications
|
|
—
|
|
|
—
|
|
|
81,313
|
|
|
81,313
|
|
|
—
|
|
|
81,313
|
|
|
Amounts reclassified from AOCI
|
|
—
|
|
|
(7
|
)
|
|
(851
|
)
|
|
(858
|
)
|
|
525
|
|
|
(333
|
)
|
|
Net current period OCI
|
|
—
|
|
|
(7
|
)
|
|
80,462
|
|
|
80,455
|
|
|
525
|
|
|
80,980
|
|
|
Balance, March 31, 2019
|
|
$
|
(71
|
)
|
|
64
|
|
|
82,350
|
|
|
82,343
|
|
|
(79,319
|
)
|
|
3,024
|
|
($ in thousands)
|
|
Quarter ended March 31, 2019
|
||
Operating lease cost, included in Other insurance expenses on the Consolidated Statements of Income
|
|
$
|
2,152
|
|
Finance lease cost:
|
|
|
||
Amortization of assets, included in Other insurance expenses on the Consolidated Statements of Income
|
|
284
|
|
|
Interest on lease liabilities, included in Interest expense on the Consolidated Statements of Income
|
|
—
|
|
|
Total finance lease cost
|
|
284
|
|
|
|
|
|
||
Variable lease cost, included in Other insurance expenses on the Consolidated Statements of Income
|
|
788
|
|
|
|
|
|
||
Short-term lease cost, included in Other insurance expenses on the Consolidated Statements of Income
|
|
739
|
|
|
|
March 31, 2019
|
|
Weighted-average remaining lease term
|
|
|
|
Operating leases
|
|
5
|
years
|
Finance leases
|
|
1
|
|
Weighted-average discount rate
|
|
|
|
Operating leases
|
|
3.3
|
%
|
Finance leases
1
|
|
—
|
|
($ in thousands)
|
|
March 31, 2019
|
||
Operating leases
|
|
|
||
Other assets
|
|
$
|
24,946
|
|
Other liabilities
|
|
25,415
|
|
|
Finance leases
|
|
|
||
Property and equipment - at cost, net of accumulated depreciation and amortization
|
|
607
|
|
|
Long-term debt
|
|
607
|
|
($ in thousands)
|
|
Finance Leases
|
Operating Leases
|
Total
|
||||
Year ended December 31,
|
|
|
|
|
||||
2019 (excluding the three months ended March 31, 2019)
|
|
$
|
444
|
|
5,779
|
|
6,223
|
|
2020
|
|
141
|
|
7,355
|
|
7,496
|
|
|
2021
|
|
22
|
|
5,083
|
|
5,105
|
|
|
2022
|
|
—
|
|
3,641
|
|
3,641
|
|
|
2023
|
|
—
|
|
2,900
|
|
2,900
|
|
|
Thereafter
|
|
—
|
|
9,698
|
|
9,698
|
|
|
Total lease payments
|
|
607
|
|
34,456
|
|
35,063
|
|
|
Less: imputed interest
|
|
—
|
|
3,610
|
|
3,610
|
|
|
Less: leases that have not yet commenced
|
|
—
|
|
5,431
|
|
5,431
|
|
|
Total lease liabilities
|
|
$
|
607
|
|
25,415
|
|
26,022
|
|
($ in thousands)
|
|
Capital Leases
|
Operating Leases
|
Total
|
||||
2019
|
|
$
|
728
|
|
7,762
|
|
8,490
|
|
2020
|
|
141
|
|
7,355
|
|
7,496
|
|
|
2021
|
|
22
|
|
5,083
|
|
5,105
|
|
|
2022
|
|
—
|
|
3,641
|
|
3,641
|
|
|
2023
|
|
—
|
|
2,900
|
|
2,900
|
|
|
Thereafter
|
|
—
|
|
9,698
|
|
9,698
|
|
|
Total minimum payment required
|
|
$
|
891
|
|
36,439
|
|
37,330
|
|
•
|
Standard Commercial Lines;
|
•
|
Standard Personal Lines;
|
•
|
E&S Lines; and
|
•
|
Investments.
|
•
|
Critical Accounting Policies and Estimates;
|
•
|
Financial Highlights of Results for the
first
quarters ended
March 31, 2019
(“
First Quarter 2019
”) and
March 31, 2018
(“
First Quarter 2018
”);
|
•
|
Results of Operations and Related Information by Segment;
|
•
|
Federal Income Taxes;
|
•
|
Financial Condition, Liquidity, and Capital Resources;
|
•
|
Ratings;
|
•
|
Off-Balance Sheet Arrangements; and
|
•
|
Contractual Obligations, Contingent Liabilities, and Commitments.
|
($ and shares in thousands, except per share amounts)
|
|
Quarter ended March 31,
|
|
Change
% or Points
|
|
||||||
|
2019
|
|
2018
|
|
|
||||||
Revenues
|
|
$
|
698,962
|
|
|
626,689
|
|
|
12
|
|
%
|
After-tax net investment income
|
|
41,323
|
|
|
35,790
|
|
|
15
|
|
|
|
After-tax underwriting income
|
|
26,513
|
|
|
3,739
|
|
|
609
|
|
|
|
Net income before federal income tax
|
|
73,694
|
|
|
19,931
|
|
|
270
|
|
|
|
Net income
|
|
61,348
|
|
|
18,925
|
|
|
224
|
|
|
|
Diluted net income per share
|
|
1.02
|
|
|
0.32
|
|
|
219
|
|
|
|
Diluted weighted-average outstanding shares
|
|
59,876
|
|
|
59,563
|
|
|
1
|
|
|
|
Combined ratio
|
|
94.7
|
%
|
|
99.2
|
|
|
(4.5
|
)
|
pts
|
|
Invested assets per dollar of stockholders' equity
|
|
$
|
3.24
|
|
|
3.42
|
|
|
(5
|
)
|
%
|
After-tax yield on investments
|
|
2.8
|
%
|
|
2.5
|
|
|
0.3
|
|
pts
|
|
Annualized return on equity ("ROE")
|
|
13.2
|
|
|
4.5
|
|
|
8.7
|
|
|
|
|
|
|
|
|
|
|
|
||||
Non-Generally Accepted Accounting Principles ("GAAP") operating income
2
|
|
$
|
54,020
|
|
|
27,259
|
|
|
98
|
|
%
|
Diluted non-GAAP operating income per share
2
|
|
0.90
|
|
|
0.46
|
|
|
96
|
|
|
|
Annualized non-GAAP operating ROE
2
|
|
11.6
|
%
|
|
6.5
|
|
|
5.1
|
|
pts
|
1
|
Refer to the Glossary of Terms attached to our
2018
Annual Report as Exhibit 99.1 for definitions of terms used in this Form 10-Q.
|
2
|
Non-GAAP operating income is used as an important financial measure by us, 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, OTTI that are charged to earnings, unrealized gains and losses on equity securities, and the debt retirement costs could distort the analysis of trends.
|
Reconciliation of net income to non-GAAP operating income
|
|
Quarter ended March 31,
|
|||||
($ in thousands)
|
|
2019
|
|
2018
|
|||
Net income
|
|
$
|
61,348
|
|
|
18,925
|
|
Net realized and unrealized (gains) losses, before tax
|
|
(13,451
|
)
|
|
10,549
|
|
|
Debt retirement costs, before tax
|
|
4,175
|
|
|
—
|
|
|
Tax on reconciling items, at 21%
|
|
1,948
|
|
|
(2,215
|
)
|
|
Non-GAAP operating income
|
|
$
|
54,020
|
|
|
27,259
|
|
Reconciliation of net income per diluted share to non-GAAP operating income per diluted share
|
|
Quarter ended March 31,
|
|||||
|
|
2019
|
|
2018
|
|||
Net income per diluted share
|
|
$
|
1.02
|
|
|
0.32
|
|
Net realized and unrealized (gains) losses, before tax
|
|
(0.22
|
)
|
|
0.18
|
|
|
Debt retirement costs, before tax
|
|
0.07
|
|
|
—
|
|
|
Tax on reconciling items, at 21%
|
|
0.03
|
|
|
(0.04
|
)
|
|
Non-GAAP operating income per diluted share
|
|
$
|
0.90
|
|
|
0.46
|
|
Reconciliation of annualized ROE to annualized non-GAAP operating ROE
|
|
Quarter ended March 31,
|
||||
|
|
2019
|
|
2018
|
||
Annualized ROE
|
|
13.2
|
%
|
|
4.5
|
|
Net realized and unrealized (gains) losses, before tax
|
|
(2.9
|
)
|
|
2.5
|
|
Debt retirement costs, before tax
|
|
0.9
|
|
|
—
|
|
Tax on reconciling items, at 21%
|
|
0.4
|
|
|
(0.5
|
)
|
Annualized non-GAAP operating ROE
|
|
11.6
|
%
|
|
6.5
|
|
Annualized ROE Components
|
|
Quarter ended March 31,
|
|
Change Points
|
|||||
|
|
2019
|
|
2018
|
|
||||
Standard Commercial Lines Segment
|
|
4.4
|
%
|
|
1.3
|
|
|
3.1
|
|
Standard Personal Lines Segment
|
|
0.5
|
|
|
(0.3
|
)
|
|
0.8
|
|
E&S Lines Segment
|
|
0.8
|
|
|
(0.1
|
)
|
|
0.9
|
|
Total insurance operations
|
|
5.7
|
|
|
0.9
|
|
|
4.8
|
|
|
|
|
|
|
|
|
|||
Investment income
|
|
8.9
|
|
|
8.5
|
|
|
0.4
|
|
Net realized and unrealized gains (losses)
|
|
2.3
|
|
|
(2.0
|
)
|
|
4.3
|
|
Total investments segment
|
|
11.2
|
|
|
6.5
|
|
|
4.7
|
|
|
|
|
|
|
|
|
|||
Other
|
|
(3.7
|
)
|
|
(2.9
|
)
|
|
(0.8
|
)
|
|
|
|
|
|
|
|
|||
Annualized ROE
|
|
13.2
|
%
|
|
4.5
|
|
|
8.7
|
|
All Lines
|
|
Quarter ended March 31,
|
|
Change % or Points
|
|
||||||
($ in thousands)
|
|
2019
|
|
2018
|
|
|
|||||
Insurance Operations Results:
|
|
|
|
|
|
||||||
Net premiums written ("NPW")
|
|
$
|
672,947
|
|
|
624,560
|
|
|
8
|
|
%
|
Net premiums earned (“NPE”)
|
|
632,573
|
|
|
591,828
|
|
|
7
|
|
|
|
Less:
|
|
|
|
|
|
|
|
|
|||
Loss and loss expense incurred
|
|
386,579
|
|
|
384,941
|
|
|
—
|
|
|
|
Net underwriting expenses incurred
|
|
210,653
|
|
|
199,747
|
|
|
5
|
|
|
|
Dividends to policyholders
|
|
1,780
|
|
|
2,407
|
|
|
(26
|
)
|
|
|
Underwriting income
|
|
$
|
33,561
|
|
|
4,733
|
|
|
609
|
|
%
|
Combined Ratios:
|
|
|
|
|
|
|
|
|
|||
Loss and loss expense ratio
|
|
61.1
|
|
%
|
65.0
|
|
|
(3.9
|
)
|
pts
|
|
Underwriting expense ratio
|
|
33.3
|
|
|
33.8
|
|
|
(0.5
|
)
|
|
|
Dividends to policyholders ratio
|
|
0.3
|
|
|
0.4
|
|
|
(0.1
|
)
|
|
|
Combined ratio
|
|
94.7
|
|
|
99.2
|
|
|
(4.5
|
)
|
|
|
First Quarter 2019
|
|
First Quarter 2018
|
|
|
|||||||||||
($ in millions)
|
Loss and Loss Expense Incurred
|
Impact on
Loss and Loss Expense Ratio |
|
|
Loss and Loss
Expense Incurred |
Impact on
Loss and Loss Expense Ratio |
|
Change in Ratio
|
|
|||||||
Catastrophe losses
|
$
|
20.9
|
|
3.3
|
|
pts
|
|
$
|
26.0
|
|
4.4
|
|
pts
|
(1.1
|
)
|
pts
|
(Favorable) prior year casualty reserve development
|
(10.0
|
)
|
(1.6
|
)
|
|
|
(8.0
|
)
|
(1.4
|
)
|
|
(0.2
|
)
|
|
||
Non-catastrophe property loss and loss expenses
|
108.0
|
|
17.1
|
|
|
|
116.2
|
|
19.6
|
|
|
(2.5
|
)
|
|
||
Total
|
118.9
|
|
18.8
|
|
|
|
134.2
|
|
22.6
|
|
|
(3.8
|
)
|
|
(Favorable)/Unfavorable Prior Year Casualty Reserve Development
|
Quarter ended March 31,
|
|||||
($ in millions)
|
2019
|
|
2018
|
|||
General liability
|
$
|
(2.0
|
)
|
|
—
|
|
Commercial automobile
|
—
|
|
|
8.0
|
|
|
Workers compensation
|
(8.0
|
)
|
|
(16.0
|
)
|
|
Total Standard Commercial Lines
|
(10.0
|
)
|
|
(8.0
|
)
|
|
|
|
|
|
|||
Homeowners
|
—
|
|
|
—
|
|
|
Personal automobile
|
—
|
|
|
—
|
|
|
Total Standard Personal Lines
|
—
|
|
|
—
|
|
|
|
|
|
|
|||
E&S
|
—
|
|
|
—
|
|
|
|
|
|
|
|||
Total (favorable) prior year casualty reserve development
|
$
|
(10.0
|
)
|
|
(8.0
|
)
|
|
|
|
|
|||
(Favorable) impact on loss ratio
|
(1.6
|
)
|
pts
|
(1.4
|
)
|
•
|
Achieving written renewal pure price increases that are in line with expected loss trend. In First Quarter 2019, we achieved overall renewal pure price increases of 3.7%, which was in line with expectations.
|
•
|
Delivering on our strategy for continued disciplined growth, which will be driven by the addition of new agents,
|
•
|
Continuing to enhance the customer experience strategy that we have been highlighting over the past year, including value-added technologies and services such as: (i) our “Selective
®
Drive” program, which was introduced to certain commercial automobile policyholders through our distribution partners in the fourth quarter of 2018; (ii) proactive communications in relation to product recalls, possible loss activity, or policy changes; (iii) technology usage to reduce claim cycle time, such as SWIFT claim-fast tracking and EZ Write; and (v) fully digital self-service capabilities for our customers.
|
•
|
Improving profitability in our lines of business by: (i) generating overall renewal pure price increases that are in line with expected loss trend; (ii) actively managing the new and renewal books in targeted industry segments, which we expect will have a positive impact on profitability through business mix; and (ii) within our E&S segment, exiting some underperforming classes, while entering into new distribution relationships.
|
•
|
Actively managing the investment portfolio to enhance after-tax yields while managing credit, duration, and liquidity
|
•
|
A GAAP combined ratio, excluding catastrophe losses, of
92.0%
. This assumes no additional prior-year casualty reserve development;
|
•
|
Catastrophe losses of
3.5
points;
|
•
|
After-tax net investment income of
$180 million
, which includes $8 million after-tax net investment income from our
|
•
|
An overall effective tax rate of approximately
19%
, which also includes an effective tax rate of
18%
for net investment income, reflecting a tax rate of
5.25%
for tax-advantaged municipal bonds, and a tax rate of
21%
for all other items; and
|
•
|
Weighted average shares of
60 million
on a diluted basis.
|
|
|
Quarter ended March 31,
|
|
Change
% or
Points
|
|
||||||
($ in thousands)
|
|
2019
|
|
2018
|
|
|
|||||
Insurance Segments Results:
|
|
|
|
|
|
|
|
|
|
|
|
NPW
|
|
$
|
546,683
|
|
|
509,076
|
|
|
7
|
|
%
|
NPE
|
|
497,184
|
|
|
465,364
|
|
|
7
|
|
|
|
Less:
|
|
|
|
|
|
|
|
|
|
||
Loss and loss expense incurred
|
|
298,809
|
|
|
293,506
|
|
|
2
|
|
|
|
Net underwriting expenses incurred
|
|
170,780
|
|
|
162,647
|
|
|
5
|
|
|
|
Dividends to policyholders
|
|
1,780
|
|
|
2,407
|
|
|
(26
|
)
|
|
|
Underwriting income
|
|
$
|
25,815
|
|
|
6,804
|
|
|
279
|
|
%
|
Combined Ratios:
|
|
|
|
|
|
|
|
|
|
|
|
Loss and loss expense ratio
|
|
60.1
|
|
%
|
63.0
|
|
|
(2.9
|
)
|
pts
|
|
Underwriting expense ratio
|
|
34.3
|
|
|
35.0
|
|
|
(0.7
|
)
|
|
|
Dividends to policyholders ratio
|
|
0.4
|
|
|
0.5
|
|
|
(0.1
|
)
|
|
|
Combined ratio
|
|
94.8
|
|
|
98.5
|
|
|
(3.7
|
)
|
|
|
First Quarter 2019
|
|
First Quarter 2018
|
|
|
|||||||||||
($ in millions)
|
Loss and Loss Expense Incurred
|
Impact on
Loss and Loss Expense Ratio |
|
|
Loss and Loss
Expense Incurred |
Impact on
Loss and Loss Expense Ratio |
|
Change in Ratio
|
|
|||||||
Catastrophe losses
|
$
|
16.0
|
|
3.2
|
|
pts
|
|
$
|
19.8
|
|
4.3
|
|
pts
|
(1.1
|
)
|
pts
|
Non-catastrophe property loss and loss expenses
|
74.4
|
|
15.0
|
|
|
|
77.4
|
|
16.6
|
|
|
(1.6
|
)
|
|
||
(Favorable) prior year casualty reserve development
|
(10.0
|
)
|
(2.0
|
)
|
|
|
(8.0
|
)
|
(1.7
|
)
|
|
(0.3
|
)
|
|
||
Total
|
80.4
|
|
16.2
|
|
|
|
89.2
|
|
19.2
|
|
|
(3.0
|
)
|
|
•
|
A 0.3-point reduction in employee-related expenses; and
|
•
|
A 0.2-point reduction in profit-based compensation to our distribution partners.
|
General Liability
|
|||||||||||
|
|
Quarter ended March 31,
|
|
Change
% or
Points
|
|
||||||
($ in thousands)
|
|
2019
|
|
2018
|
|
|
|||||
NPW
|
|
$
|
178,699
|
|
|
164,509
|
|
|
9
|
|
%
|
Direct new business
|
|
32,185
|
|
|
29,717
|
|
|
8
|
|
|
|
Retention
|
|
85
|
|
%
|
85
|
|
|
—
|
|
pts
|
|
Renewal pure price increases
|
|
2.4
|
|
|
2.5
|
|
|
n/m
|
|
|
|
NPE
|
|
$
|
161,525
|
|
|
149,829
|
|
|
8
|
|
%
|
Underwriting income
|
|
19,049
|
|
|
13,942
|
|
|
37
|
|
|
|
Combined ratio
|
|
88.2
|
|
%
|
90.7
|
|
|
(2.5
|
)
|
pts
|
|
% of total Standard Commercial Lines NPW
|
|
33
|
|
|
32
|
|
|
|
|
|
|
First Quarter 2019
|
First Quarter 2018
|
|
|
||||||||||
($ in millions)
|
Loss and Loss Expense Incurred
|
Impact on
Combined Ratio |
|
Loss and Loss Expense Incurred
|
Impact on
Combined Ratio |
|
Change
Points
|
|
||||||
(Favorable) prior year casualty reserve development
|
$
|
(2.0
|
)
|
(1.2
|
)
|
pts
|
$
|
—
|
|
—
|
pts
|
(1.2
|
)
|
pts
|
Commercial Automobile
|
|||||||||||
|
|
Quarter ended March 31,
|
|
Change
% or
Points
|
|
||||||
($ in thousands)
|
|
2019
|
|
2018
|
|
|
|||||
NPW
|
|
$
|
147,245
|
|
|
129,845
|
|
|
13
|
|
%
|
Direct new business
|
|
28,190
|
|
|
22,289
|
|
|
26
|
|
|
|
Retention
|
|
82
|
|
%
|
85
|
|
|
n/m
|
|
|
|
Renewal pure price increases
|
|
7.3
|
|
|
7.3
|
|
|
—
|
|
|
|
NPE
|
|
$
|
131,186
|
|
|
118,231
|
|
|
11
|
|
%
|
Underwriting loss
|
|
(8,721
|
)
|
|
(13,364
|
)
|
|
35
|
|
|
|
Combined ratio
|
|
106.6
|
|
%
|
111.3
|
|
|
(4.7
|
)
|
pts
|
|
% of total Standard Commercial Lines NPW
|
|
27
|
|
|
26
|
|
|
|
|
|
|
First Quarter 2019
|
|
First Quarter 2018
|
|
|
|||||||||||
($ in millions)
|
Loss and Loss Expense Incurred
|
Impact on
Combined Ratio |
|
|
Loss and Loss Expense Incurred
|
Impact on
Combined Ratio |
|
Change in Ratio
|
|
|||||||
Non-catastrophe property loss and loss expenses
|
$
|
25.1
|
|
19.1
|
|
pts
|
|
$
|
22.6
|
|
19.1
|
|
pts
|
—
|
|
pts
|
Unfavorable prior year casualty reserve development
|
—
|
|
—
|
|
|
|
8.0
|
|
6.8
|
|
|
(6.8
|
)
|
|
||
Catastrophe losses
|
0.2
|
|
0.1
|
|
|
|
0.9
|
|
0.7
|
|
|
(0.6
|
)
|
|
||
Total
|
25.3
|
|
19.2
|
|
|
|
31.5
|
|
26.6
|
|
|
(7.4
|
)
|
|
Workers Compensation
|
|||||||||||
|
|
Quarter ended March 31,
|
|
Change
% or
Points
|
|
||||||
($ in thousands)
|
|
2019
|
|
2018
|
|
|
|||||
NPW
|
|
$
|
85,065
|
|
|
88,906
|
|
|
(4
|
)
|
%
|
Direct new business
|
|
16,948
|
|
|
17,348
|
|
|
(2
|
)
|
|
|
Retention
|
|
84
|
|
%
|
85
|
|
|
(1
|
)
|
pts
|
|
Renewal pure price (decreases) increases
|
|
(1.6
|
)
|
|
(0.1
|
)
|
|
n/m
|
|
|
|
NPE
|
|
$
|
78,715
|
|
|
78,823
|
|
|
—
|
|
%
|
Underwriting income
|
|
10,719
|
|
|
16,426
|
|
|
(35
|
)
|
|
|
Combined ratio
|
|
86.4
|
|
%
|
79.2
|
|
|
7.2
|
|
pts
|
|
% of total Standard Commercial Lines NPW
|
|
16
|
|
|
18
|
|
|
|
|
|
|
First Quarter 2019
|
First Quarter 2018
|
|
|
||||||||||
($ in millions)
|
Loss and Loss Expense Incurred
|
Impact on
Combined Ratio |
|
Loss and Loss Expense Incurred
|
Impact on
Combined Ratio |
|
Change
Points
|
|
||||||
(Favorable) prior year casualty reserve development
|
$
|
(8.0
|
)
|
(10.2
|
)
|
pts
|
$
|
(16.0
|
)
|
(20.3
|
)
|
pts
|
10.1
|
pts
|
|
First Quarter 2019
|
|
First Quarter 2018
|
|
|
|||||||||
($ in millions)
|
Loss and Loss Expense Incurred
|
Impact on
Combined Ratio |
|
|
Loss and Loss Expense Incurred
|
Impact on
Combined Ratio |
|
Change
% or
Points
|
|
|||||
Catastrophe losses
|
$
|
12.5
|
|
14.6
|
pts
|
|
$
|
14.8
|
|
18.4
|
pts
|
(3.8
|
)
|
pts
|
Non-catastrophe property loss and loss expenses
|
39.1
|
|
45.5
|
|
|
47.1
|
|
58.7
|
|
(13.2
|
)
|
|
||
Total
|
51.6
|
|
60.1
|
|
|
61.9
|
|
77.1
|
|
(17.0
|
)
|
|
|
|
Quarter ended March 31,
|
|
Change
% or
Points
|
|
|
||||||
($ in thousands)
|
|
2019
|
|
2018
|
|
|
|
|||||
Insurance Segments Results:
|
|
|
|
|
|
|
|
|
|
|
|
|
NPW
|
|
$
|
69,369
|
|
|
67,861
|
|
|
2
|
|
|
%
|
NPE
|
|
77,307
|
|
|
74,256
|
|
|
4
|
|
|
|
|
Less:
|
|
|
|
|
|
|
|
|
|
|||
Loss and loss expense incurred
|
|
53,070
|
|
|
55,439
|
|
|
(4
|
)
|
|
|
|
Net underwriting expenses incurred
|
|
21,070
|
|
|
20,323
|
|
|
4
|
|
|
|
|
Underwriting income
|
|
$
|
3,167
|
|
|
(1,506
|
)
|
|
310
|
|
|
%
|
Combined Ratios:
|
|
|
|
|
|
|
|
|
|
|||
Loss and loss expense ratio
|
|
68.6
|
|
%
|
74.6
|
|
|
(6.0
|
)
|
|
pts
|
|
Underwriting expense ratio
|
|
27.3
|
|
|
27.4
|
|
|
(0.1
|
)
|
|
|
|
Combined ratio
|
|
95.9
|
|
|
102.0
|
|
|
(6.1
|
)
|
|
|
|
|
Quarter ended March 31,
|
Change
% or Points |
|
||||||
($ in millions)
|
|
2019
|
|
2018
|
|
|||||
New business
|
|
$
|
10.3
|
|
|
11.8
|
|
(13
|
)
|
%
|
Retention
|
|
84
|
|
%
|
85
|
|
(1
|
)
|
pts
|
|
Renewal pure price increases
|
|
5.2
|
|
|
3.8
|
|
n/m
|
|
|
|
First Quarter 2019
|
|
First Quarter 2018
|
|
|
|||||||||||
($ in millions)
|
Loss and Loss Expense Incurred
|
Impact on
Loss and Loss Expense Ratio
|
|
|
Loss and Loss
Expense
Incurred
|
Impact on
Loss and Loss Expense Ratio
|
|
Change in Ratio
|
|
|||||||
Non-catastrophe property loss and loss expenses
|
$
|
29.1
|
|
37.6
|
|
pts
|
|
$
|
29.0
|
|
39.0
|
|
pts
|
(1.4
|
)
|
pts
|
Catastrophe losses
|
4.1
|
|
5.3
|
|
|
|
6.8
|
|
9.2
|
|
|
(3.9
|
)
|
|
||
Total
|
33.2
|
|
42.9
|
|
|
|
35.8
|
|
48.2
|
|
|
(5.3
|
)
|
|
|
|
Quarter ended March 31,
|
|
Change
% or
Points
|
|
||||||
($ in thousands)
|
|
2019
|
|
2018
|
|
|
|||||
Insurance Segments Results:
|
|
|
|
|
|
|
|
|
|
|
|
NPW
|
|
$
|
56,895
|
|
|
47,623
|
|
|
19
|
|
%
|
NPE
|
|
58,082
|
|
|
52,208
|
|
|
11
|
|
|
|
Less:
|
|
|
|
|
|
|
|
|
|
|
|
Loss and loss expense incurred
|
|
34,700
|
|
|
35,996
|
|
|
(4
|
)
|
|
|
Net underwriting expenses incurred
|
|
18,803
|
|
|
16,777
|
|
|
12
|
|
|
|
Underwriting (loss) income
|
|
$
|
4,579
|
|
|
(565
|
)
|
|
910
|
|
%
|
Combined Ratios:
|
|
|
|
|
|
|
|
|
|
|
|
Loss and loss expense ratio
|
|
59.7
|
|
%
|
69.0
|
|
|
(9.3
|
)
|
pts
|
|
Underwriting expense ratio
|
|
32.4
|
|
|
32.1
|
|
|
0.3
|
|
|
|
Combined ratio
|
|
92.1
|
|
|
101.1
|
|
|
(9.0
|
)
|
|
|
|
Quarter ended March 31,
|
Change
% or Points |
|
|||||
($ in millions)
|
|
2019
|
|
2018
|
|
||||
Direct new business
|
|
$
|
25.7
|
|
|
18.3
|
|
41
|
%
|
Renewal pure price increases
1
|
|
5.6
|
|
%
|
5.0
|
|
n/m
|
|
|
First Quarter 2019
|
|
|
First Quarter 2018
|
|
|
|
||||||
($ in millions)
|
Loss and Loss Expense Incurred
|
Impact on
Loss and Loss Expense Ratio |
|
|
Loss and Loss
Expense Incurred |
Impact on
Loss and Loss Expense Ratio |
|
Change in Ratio
|
|
||||
Non-catastrophe property loss and loss expenses
|
4.5
|
|
7.8
|
|
|
9.8
|
|
18.9
|
|
|
(11.1
|
)
|
|
Catastrophe losses
|
0.8
|
|
1.4
|
|
|
(0.6
|
)
|
(1.2
|
)
|
|
2.6
|
|
|
Total
|
5.3
|
|
9.2
|
|
|
9.2
|
|
17.7
|
|
|
(8.5
|
)
|
|
Total Invested Assets
|
|
|
|
|
|
|
|
||||
($ in thousands)
|
|
March 31, 2019
|
|
December 31, 2018
|
|
Change
|
|
||||
Total invested assets
|
|
$
|
6,233,745
|
|
|
5,960,651
|
|
|
5
|
|
%
|
Invested assets per dollar of stockholders' equity
|
|
3.24
|
|
|
3.33
|
|
|
(3
|
)
|
|
|
Unrealized (loss) gain – before tax
1
|
|
123,871
|
|
|
11,916
|
|
|
940
|
|
|
|
Unrealized (loss) gain – after tax
1
|
|
97,858
|
|
|
9,414
|
|
|
939
|
|
|
|
|
Quarter ended March 31,
|
|
Change
% or Points |
|
||||||
($ in thousands)
|
|
2019
|
|
2018
|
|
||||||
Fixed income securities
|
|
$
|
49,033
|
|
|
42,041
|
|
|
17
|
%
|
|
Equity securities
|
|
1,640
|
|
|
1,977
|
|
|
(17
|
)
|
|
|
Short-term investments
|
|
2,044
|
|
|
523
|
|
|
291
|
|
|
|
Other investments
|
|
660
|
|
|
1,563
|
|
|
(58
|
)
|
|
|
Investment expenses
|
|
(2,759
|
)
|
|
(2,873
|
)
|
|
4
|
|
|
|
Net investment income earned – before tax
|
|
50,618
|
|
|
43,231
|
|
|
17
|
|
|
|
Net investment income tax expense
|
|
(9,295
|
)
|
|
(7,441
|
)
|
|
25
|
|
|
|
Net investment income earned – after tax
|
|
$
|
41,323
|
|
|
35,790
|
|
|
15
|
|
|
Effective tax rate
|
|
18.4
|
%
|
|
17.2
|
|
|
1.2
|
|
pts
|
|
Annualized after-tax yield on fixed income securities
|
|
3.0
|
|
|
2.7
|
|
|
0.3
|
|
|
|
Annualized after-tax yield on investment portfolio
|
|
2.8
|
|
|
2.5
|
|
|
0.3
|
|
|
|
|
Quarter ended March 31,
|
|||||
($ in thousands)
|
|
2019
|
|
2018
|
|||
Net realized gains on disposals, excluding OTTI
|
|
$
|
3,444
|
|
|
4,731
|
|
OTTI charges
|
|
(104
|
)
|
|
(1,212
|
)
|
|
Unrealized gains (losses) recognized in income on equity securities
|
|
10,111
|
|
|
(14,068
|
)
|
|
Total net realized and unrealized gains (losses)
|
|
$
|
13,451
|
|
|
(10,549
|
)
|
|
Quarter ended March 31,
|
|||||
($ in millions)
|
2019
|
|
2018
|
|||
Federal income tax expense
|
$
|
12.3
|
|
|
1.0
|
|
Effective tax rate
|
16.8
|
%
|
|
5.0
|
|
Branch
|
Insurance Subsidiary Member
|
Federal Home Loan Bank of Indianapolis ("FHLBI")
|
Selective Insurance Company of South Carolina ("SICSC")
1
Selective Insurance Company of the Southeast ("SICSE")
1
|
Federal Home Loan Bank of New York ("FHLBNY")
|
Selective Insurance Company of America ("SICA")
Selective Insurance Company of New York ("SICNY")
|
NRSRO
|
|
Financial Strength Rating
|
|
Outlook
|
A.M. Best
|
|
A
|
|
Stable
|
Moody's Investor Services ("Moody's")
|
|
A2
|
|
Stable
|
Fitch Ratings ("Fitch")
|
|
A+
|
|
Stable
|
Standard & Poor's Global Ratings ("S&P")
|
|
A
|
|
Stable
|
Contractual Obligations
|
|
Payment Due by Period
|
||||||||||||||
|
|
|
|
Less than
1 year
|
|
1-3
years
|
|
3-5
years
|
|
More than
5 years
|
||||||
($ in millions)
|
|
Total
|
|
|
|
|
||||||||||
Notes payable
|
|
$
|
560.0
|
|
|
—
|
|
|
50.0
|
|
|
—
|
|
|
510.0
|
|
Interest on debt obligations
|
|
671.9
|
|
|
29.1
|
|
|
57.7
|
|
|
56.6
|
|
|
528.5
|
|
|
Total
|
|
$
|
1,231.9
|
|
|
29.1
|
|
|
107.7
|
|
|
56.6
|
|
|
1,038.5
|
|
Period
|
|
Total Number of
Shares Purchased
1
|
|
Average Price
Paid per Share
|
|
Total Number of
Shares Purchased as Part of Publicly
Announced Programs
|
|
Maximum Number of
Shares that May Yet Be Purchased Under the Announced Programs |
|||||
January 1 – 31, 2019
|
|
9,570
|
|
|
$
|
59.35
|
|
|
—
|
|
|
—
|
|
February 1 - 28, 2019
|
|
93,363
|
|
|
64.42
|
|
|
—
|
|
|
—
|
|
|
March 1 - 31, 2019
|
|
38
|
|
|
63.70
|
|
|
—
|
|
|
—
|
|
|
Total
|
|
102,971
|
|
|
$
|
63.95
|
|
|
—
|
|
|
—
|
|
|
For
|
Against
|
Abstain
|
|||
John C. Burville
|
47,100,809
|
|
942,323
|
|
32,626
|
|
Terrence W. Cavanaugh
|
47,912,263
|
|
133,337
|
|
30,158
|
|
Robert Kelly Doherty
|
47,815,623
|
|
222,401
|
|
37,734
|
|
John J. Marchioni
|
46,680,238
|
|
1,363,356
|
|
32,164
|
|
Thomas A. McCarthy
|
47,823,808
|
|
221,881
|
|
30,069
|
|
H. Elizabeth Mitchell
|
47,358,940
|
|
689,332
|
|
27,486
|
|
Michael J. Morrissey
|
46,820,167
|
|
1,225,720
|
|
29,871
|
|
Gregory E. Murphy
|
46,219,770
|
|
1,827,834
|
|
28,154
|
|
Cynthia S. Nicholson
|
47,594,299
|
|
457,231
|
|
24,228
|
|
Ronald L. O'Kelley
|
47,244,294
|
|
799,163
|
|
32,301
|
|
William M. Rue
|
47,203,590
|
|
842,061
|
|
30,107
|
|
John S. Scheid
|
47,804,166
|
|
241,182
|
|
30,410
|
|
J. Brian Thebault
|
46,500,517
|
|
1,538,006
|
|
37,235
|
|
Philip H. Urban
|
47,566,071
|
|
478,885
|
|
30,802
|
|
Date:
|
May 2, 2019
|
|
By: /s/ Gregory E. Murphy
|
|
|
|
Gregory E. Murphy
|
|
|
|
Chairman of the Board and Chief Executive Officer
|
|
|
|
(principal executive officer)
|
|
|
|
|
Date:
|
May 2, 2019
|
|
By: /s/ Mark A. Wilcox
|
|
|
|
Mark A. Wilcox
|
|
|
|
Executive Vice President and Chief Financial Officer
|
|
|
|
(principal financial officer)
|
1 Year Selective Insurance Chart |
1 Month Selective Insurance Chart |
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