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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 | |
---|---|---|---|---|---|---|---|---|---|---|
2.18 | 2.22% | 100.25 | 100.13 | 102.78 | 100.78 | 98.87 | 98.87 | 364,510 | 01:00:00 |
BRANCHVILLE, N.J., Oct. 28, 2020 /PRNewswire/ --
In the third quarter of 2020:
Selective Insurance Group, Inc. (NASDAQ: SIGI) today reported financial results for the third quarter ended September 30, 2020, with net income per diluted share of $1.16 and non-GAAP operating income1 per diluted share of $1.06.
"We delivered strong results despite a quarter of unusually high weather-related catastrophe losses for Selective and the industry. We produced a 97.0% combined ratio, an excellent 10.9% non-GAAP operating ROE, and $1.06 of non-GAAP operating income per share, despite experiencing $80 million, or 11.4 points on the combined ratio, of catastrophe losses in the quarter. The Midwest derecho and Hurricane Isaias accounted for a combined $50 million of the catastrophe losses, with 19 smaller events accounting for the remainder," said John Marchioni, President and CEO.
"We grew NPW 6% in the quarter, driven by excellent results in our core business, standard commercial lines. With an average account size of approximately $12,000, this segment produced healthy growth of 8% as renewal pure price increased to 4.6% and retention improved to 86%. Our consistent multi-year track record of generating strong renewal pure price relative to expected claims trend has us well positioned to deliver continued profitable growth. Investment income also was a strong contributor to the results, increasing 22% to $55 million after-tax, as it benefited from a rebound in the value of alternative investments."
"Our solid growth and profitability in a challenging environment reflects our strong relationships with best-in-class distribution partners, our sophisticated underwriting and pricing tools, and excellent customer servicing capabilities," continued Mr. Marchioni. "We are extremely proud of our Claims team for their prompt response and excellent customer service, demonstrating the value we provide to our customers in the most challenging times."
Operating Highlights
Consolidated Financial Results | Quarter ended September 30, | Change | Year-to-Date September 30, | Change | ||||||||||||||
$ and shares in millions, except per share data | 2020 | 2019 | 2020 | 2019 | ||||||||||||||
Net premiums written | $ | 719.5 | 676.9 | 6 | % | $ | 2,091.6 | 2,051.3 | 2 | % | ||||||||
Net premiums earned | 694.5 | 653.6 | 6 | 1,976.9 | 1,928.8 | 2 | ||||||||||||
Net investment income earned | 68.2 | 55.8 | 22 | 158.6 | 164.9 | (4) | ||||||||||||
Net realized and unrealized gains (losses), pre-tax | 7.7 | (2.2) | (454) | (24.3) | 15.3 | (259) | ||||||||||||
Total revenues | 776.6 | 710.4 | 9 | 2,123.8 | 2,117.6 | — | ||||||||||||
Net underwriting income, after-tax | 16.6 | 24.7 | (33) | 41.3 | 86.5 | (52) | ||||||||||||
Net investment income, after-tax | 55.1 | 45.4 | 22 | 129.2 | 134.3 | (4) | ||||||||||||
Net income | 69.9 | 56.2 | 24 | 119.3 | 189.8 | (37) | ||||||||||||
Non-GAAP operating income1 | 63.8 | 58.8 | 9 | 138.5 | 181.9 | (24) | ||||||||||||
Combined ratio | 97.0 | % | 95.2 | 1.8 | pts | 97.4 | % | 94.3 | 3.1 | pts | ||||||||
Loss and loss expense ratio | 64.5 | 60.9 | 3.6 | 63.4 | 60.5 | 2.9 | ||||||||||||
Underwriting expense ratio | 32.4 | 34.1 | (1.7) | 33.9 | 33.6 | 0.3 | ||||||||||||
Dividends to policyholders ratio | 0.1 | 0.2 | (0.1) | 0.1 | 0.2 | (0.1) | ||||||||||||
Catastrophe losses | 11.4 | pts | 3.7 | 7.7 | 9.9 | pts | 3.9 | 6.0 | ||||||||||
Non-catastrophe property losses and loss expenses | 15.2 | 16.7 | (1.5) | 14.9 | 16.1 | (1.2) | ||||||||||||
(Favorable) prior year reserve development on casualty lines | (3.6) | (2.1) | (1.5) | (2.5) | (2.1) | (0.4) | ||||||||||||
Net income per diluted share | $ | 1.16 | 0.93 | 25 | % | $ | 1.98 | 3.16 | (37) | % | ||||||||
Non-GAAP operating income per diluted share1 | 1.06 | 0.97 | 9 | 2.30 | 3.02 | (24) | ||||||||||||
Weighted average diluted shares | 60.4 | 60.1 | — | 60.3 | 60.0 | — | ||||||||||||
Book value per share | $ | 40.00 | 35.98 | 11 | 40.00 | 35.98 | 11 |
Overall Insurance Operations
For the quarter, overall NPW increased 6% compared to the third quarter of 2019, due to increased retention and 4.4% in overall renewal pure price increases. The 97.0% combined ratio reflects the elevated catastrophe losses that were offset partially by (i) the impact of favorable prior year casualty reserve development, (ii) lower non-catastrophe property losses compared to a year ago, and (iii) our on-going expense management initiatives. Insurance operations generated 2.8 points of non-GAAP operating ROE in the quarter.
Standard Commercial Lines Segment
Standard Commercial Lines premiums, which are 80% of total NPW, were up a very strong 8%, driven by (i) 4.6% in renewal pure price increases, (ii) a 3% increase in new business from a year ago, to $99 million, and (iii) strong retention at 86%. The third quarter 92.3% combined ratio included 7.0 points of catastrophe losses. The items in the following table drove the changes in the combined ratio between third quarter 2020 and 2019:
Standard Commercial Lines Segment | Quarter ended September 30, | Change | Year-to-Date September 30, | Change | ||||||||||||||
$ in millions | 2020 | 2019 | 2020 | 2019 | ||||||||||||||
Net premiums written | $ | 577.8 | 532.9 | 8 | % | $ | 1,679.5 | 1,637.0 | 3 | % | ||||||||
Net premiums earned | 558.1 | 515.2 | 8 | 1,575.7 | 1,519.0 | 4 | ||||||||||||
Combined ratio | 92.3 | % | 94.2 | (1.9) | pts | 95.1 | % | 93.9 | 1.2 | pts | ||||||||
Loss and loss expense ratio | 59.3 | 59.0 | 0.3 | 60.3 | 59.0 | 1.3 | ||||||||||||
Underwriting expense ratio | 32.9 | 35.0 | (2.1) | 34.7 | 34.6 | 0.1 | ||||||||||||
Dividends to policyholders ratio | 0.1 | 0.2 | (0.1) | 0.1 | 0.3 | (0.2) | ||||||||||||
Catastrophe losses | 7.0 | pts | 2.9 | 4.1 | 7.0 | pts | 3.4 | 3.6 | ||||||||||
Non-catastrophe property losses and loss expenses | 13.5 | 14.9 | (1.4) | 13.7 | 14.1 | (0.4) | ||||||||||||
(Favorable) prior year reserve development on casualty lines | (4.5) | (3.1) | (1.4) | (3.2) | (2.8) | (0.4) |
Standard Personal Lines Segment
Standard Personal Lines premiums, which are 11% of total NPW, were down 2% in the quarter compared to 2019. Renewal pure price increases were 1.8%, retention was 83%, and new business was up 18% compared to last year. The third quarter combined ratio was 119.0%, up 18.2 points from a year ago, driven by elevated catastrophe losses, which were 27.1 points higher than the third quarter of 2019. A 3.3 point reduction in non-catastrophe property losses was a partial offset.
Standard Personal Lines Segment | Quarter ended September 30, | Change | Year-to-Date September 30, | Change | ||||||||||||||
$ in millions | 2020 | 2019 | 2020 | 2019 | ||||||||||||||
Net premiums written | $ | 79.7 | 81.6 | (2) | % | $ | 225.5 | 233.7 | (4) | % | ||||||||
Net premiums earned | 76.0 | 76.7 | (1) | 223.7 | 231.2 | (3) | ||||||||||||
Combined ratio | 119.0 | % | 100.8 | 18.2 | pts | 109.1 | % | 96.9 | 12.2 | pts | ||||||||
Loss and loss expense ratio | 91.7 | 71.4 | 20.3 | 81.4 | 68.5 | 12.9 | ||||||||||||
Underwriting expense ratio | 27.3 | 29.4 | (2.1) | 27.7 | 28.4 | (0.7) | ||||||||||||
Catastrophe losses | 37.4 | pts | 10.3 | 27.1 | 29.7 | pts | 7.8 | 21.9 | ||||||||||
Non-catastrophe property losses and loss expenses | 29.5 | 32.8 | (3.3) | 27.1 | 34.1 | (7.0) | ||||||||||||
Unfavorable prior year reserve development on casualty lines | — | 2.6 | (2.6) | — | 0.9 | (0.9) |
Excess and Surplus Lines Segment
Excess and Surplus Lines premiums, which represented 9% of total NPW, were stable compared to the third quarter of 2019. Strong new business growth of 29% and renewal pure price increases of 7.0% were offset by a reduction in renewal and endorsement activity. The combined ratio was 112.0%, a 15.1-point increase compared to a year ago, driven by elevated catastrophe losses that were 17.1 points higher than a year ago.
Excess and Surplus Lines Segment | Quarter ended September 30, | Change | Year-to-Date September 30, | Change | ||||||||||||||
$ in millions | 2020 | 2019 | 2020 | 2019 | ||||||||||||||
Net premiums written | $ | 62.1 | 62.4 | — | % | $ | 186.6 | 180.6 | 3 | % | ||||||||
Net premiums earned | 60.5 | 61.7 | (2) | 177.5 | 178.7 | (1) | ||||||||||||
Combined ratio | 112.0 | % | 96.9 | 15.1 | pts | 102.2 | % | 94.7 | 7.5 | pts | ||||||||
Loss and loss expense ratio | 77.8 | 64.5 | 13.3 | 67.4 | 62.5 | 4.9 | ||||||||||||
Underwriting expense ratio | 34.2 | 32.4 | 1.8 | 34.8 | 32.2 | 2.6 | ||||||||||||
Catastrophe losses | 19.5 | pts | 2.4 | 17.1 | 10.6 | pts | 2.4 | 8.2 | ||||||||||
Non-catastrophe property losses and loss expenses | 13.2 | 11.4 | 1.8 | 10.9 | 9.6 | 1.3 |
Investments Segment
Net investment income, after-tax, was up a very strong 22% in the quarter, to $55.1 million. The increase was driven by alternative investment gains of $19 million pre-tax, or $15 million after-tax, which are reported on a one-quarter lag and reflect the market rebound during second quarter 2020. The after-tax earned income yield on the portfolio averaged 3.1%. Invested assets per dollar of stockholders' equity was $3.04 at September 30, 2020, and the investment portfolio generated 9.4 points of non-GAAP operating ROE in the quarter.
Investments Segment | Quarter ended September 30, | Change | Year-to-Date September 30, | Change | ||||||||||||||
$ in millions, except per share data | 2020 | 2019 | 2020 | 2019 | ||||||||||||||
Net investment income earned, after-tax | $ | 55.1 | 45.4 | 22 | % | $ | 129.2 | 134.3 | (4) | % | ||||||||
Net investment income per share | 0.91 | 0.76 | 20 | 2.14 | 2.24 | (4) | ||||||||||||
Effective tax rate | 19.1 | % | 18.7 | 0.4 | pts | 18.6 | % | 18.6 | — | pts | ||||||||
Average yields: | ||||||||||||||||||
Fixed income securities: | ||||||||||||||||||
Pre-tax | 3.2 | % | 3.5 | (0.3) | pts | 3.2 | % | 3.6 | (0.4) | pts | ||||||||
After-tax | 2.6 | 2.8 | (0.2) | 2.6 | 2.9 | (0.3) | ||||||||||||
Portfolio: | ||||||||||||||||||
Pre-tax | 3.8 | 3.4 | 0.4 | 3.0 | 3.5 | (0.5) | ||||||||||||
After-tax | 3.1 | 2.8 | 0.3 | 2.5 | 2.9 | (0.4) | ||||||||||||
Annualized ROE contribution | 9.4 | 8.6 | 0.8 | 7.5 | 9.1 | (1.6) |
Balance Sheet
$ in millions, except per share data | September 30, 2020 | December 31, 2019 | Change | ||||
Total assets | $ | 9,514.9 | 8,797.2 | 8 | % | ||
Total investments | 7,277.5 | 6,688.7 | 9 | ||||
Short-term debt | 167.0 | — | NA | ||||
Long-term debt | 550.6 | 550.6 | — | ||||
Stockholders' equity | 2,393.6 | 2,194.9 | 9 | ||||
Invested assets per dollar of stockholders' equity | 3.04 | 3.05 | — | ||||
Net premiums written to policyholders' surplus | 1.4x | 1.4x | — | ||||
Book value per share | 40.00 | 36.91 | 8 |
Our long-term debt balance did not change from December 31, 2019. We, however, increased our short-term debt by $302 million during the first quarter of 2020 as a contingency in light of the COVID-19-related volatility and uncertainty in the financial markets. We repaid the $50 million borrowing on our line of credit in May and $85 million in Federal Home Loan Bank short-term borrowings in September. We currently expect the remaining short-term borrowings to be repaid by year-end 2020.
Book value per share increased 8% for the first nine months of the year, driven by $1.73 of net unrealized gains on our fixed income securities portfolio and $1.98 of net income per diluted share, partially offset by $0.69 of dividends paid to shareholders. Selective's Board of Directors declared a 9% increase in the quarterly cash dividend on common stock, to $0.25 per share, that is payable December 1, 2020, to stockholders of record as of November 13, 2020.
Guidance
For 2020, our revised full-year guidance to reflect our current estimated full-year impact of COVID-19, is as follows:
The supplemental investor package, including financial information that is not part of this press release, is available on the Investors page of Selective's website at www.Selective.com. Selective's quarterly analyst conference call will be simulcast at 10:00 a.m. ET, on Thursday, October 29, 2020 at www.Selective.com. The webcast will be available for rebroadcast until the close of business on November 28, 2020.
About Selective Insurance Group, Inc.
Selective Insurance Group, Inc. is a holding company for 10 property and casualty insurance companies rated "A" (Excellent) 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 the Fortune 1000 and being named one of "America's Best Mid-Size Employers" by Forbes Magazine. For more information about Selective, visit www.Selective.com.
1Reconciliation of Net Income to Non-GAAP Operating Income and Certain Other Non-GAAP Measures
Non-GAAP operating income, non-GAAP operating income per diluted share, and non-GAAP operating return on equity differ from net income, net income per diluted share, and return on equity, respectively, by the exclusion of: (i) after-tax net realized and unrealized gains and losses on investments; and (ii) after-tax debt retirement costs. They are used as important financial measures by management, 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, other-than-temporary investment impairments that are charged to earnings, unrealized gains and losses on equity securities, and the debt retirement costs could distort the analysis of trends. These operating measurements are not intended as a substitute for net income, income per share, or return on equity prepared in accordance with U.S. generally accepted accounting principles (GAAP). Reconciliations of net income, net income per diluted share, and return on equity to non-GAAP operating income, non-GAAP operating income per diluted share, and non-GAAP operating return on equity, respectively, are provided in the tables below.
Note: All amounts included in this release exclude intercompany transactions.
Reconciliation of Net Income to Non-GAAP Operating Income
$ in millions | Quarter ended September 30, | Year-to-Date September 30, | ||||||||||
2020 | 2019 | 2020 | 2019 | |||||||||
Net income | $ | 69.9 | 56.2 | 119.3 | 189.8 | |||||||
Net realized and unrealized (gains) losses, before tax | (7.7) | 2.2 | 24.3 | (15.3) | ||||||||
Debt retirement costs, before tax | — | — | — | 4.2 | ||||||||
Tax on reconciling items | 1.6 | 0.4 | (5.1) | 3.2 | ||||||||
Non-GAAP operating income | $ | 63.8 | 58.8 | 138.5 | 181.9 |
Reconciliation of Net Income per Diluted Share to Non-GAAP Operating Income per Diluted Share
Quarter ended September 30, | Year-to-Date September 30, | |||||||||||
2020 | 2019 | 2020 | 2019 | |||||||||
Net income per diluted share | $ | 1.16 | 0.93 | 1.98 | 3.16 | |||||||
Net realized and unrealized (gains) losses, before tax | (0.13) | 0.04 | 0.40 | (0.26) | ||||||||
Debt retirement costs, before tax | — | — | — | 0.07 | ||||||||
Tax on reconciling items | 0.03 | — | (0.08) | 0.05 | ||||||||
Non-GAAP operating income per diluted share | $ | 1.06 | 0.97 | 2.30 | 3.02 |
Reconciliation of Return on Equity to Non-GAAP Operating Return on Equity
Quarter ended September 30, | Year-to-Date September 30, | ||||||||||
2020 | 2019 | 2020 | 2019 | ||||||||
Annualized Return on Equity | 11.9 | % | 10.7 | 6.9 | 12.9 | ||||||
Net realized and unrealized (gains) losses, before tax | (1.3) | 0.4 | 1.4 | (1.0) | |||||||
Debt retirement costs, before tax | — | — | — | 0.3 | |||||||
Tax on reconciling items | 0.3 | 0.1 | (0.3) | 0.1 | |||||||
Annualized Non-GAAP Operating Return on Equity | 10.9 | % | 11.2 | 8.0 | 12.3 |
Note: Amounts in the tables above may not foot due to rounding.
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 and information incorporated by reference in this press release are "forward-looking statements" under the Private Securities Litigation Reform Act of 1995. These statements about our intentions, beliefs, projections, estimations, or forecasts of future events or our future financial performance involve known and unknown risks, uncertainties, and other factors that may cause our actual results, levels of activity, or performance to differ materially from what we indicated or implied. In many cases, forward-looking statements contain 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 like terms. These statements are not guarantees of future performance. We undertake no obligation, other than as may be required under the federal securities laws, to publicly update or revise any forward-looking statements for any reason.
Factors that could cause our actual results to differ materially from what we project, forecast, or estimate in forward-looking statements, include without limitation:
These risk factors may not be exhaustive. We operate in a continually changing business environment, and new risk factors that we cannot predict or assess may emerge from time-to-time.
Selective's SEC filings can be accessed through the Investors page of Selective's website, www.Selective.com, or through the SEC's EDGAR Database at www.sec.gov (Selective EDGAR CIK No. 0000230557).
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SOURCE Selective Insurance Group, Inc.
Copyright 2020 PR Newswire
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