Selective Reports Fourth Quarter and Year-End 2023 Results
- Net premiums written increased 17% from the fourth quarter of 2022.
- After-tax net investment income was $78 million, up 20% compared to the fourth quarter of 2022.
- Book value per common share was $45.42, up 13% from last quarter.
- Selective achieved its 10th consecutive year of double-digit non-GAAP operating ROE.
- The company's annual operating ROE of 14.4% exceeded its 12% target.
- None.
Insights
The reported net income of $2.01 per diluted common share and non-GAAP operating income of $1.94 per diluted common share indicate a robust financial performance by Selective Insurance Group, Inc. The ROE of 18.9% and non-GAAP Operating ROE of 18.2% for the fourth quarter are particularly strong, outperforming many industry peers who typically target an ROE close to 10-15%. These figures suggest that the company has effectively leveraged equity to generate profits. Moreover, the 10th consecutive year of double-digit non-GAAP Operating ROE is a testament to the company's consistent performance and operational efficiency.
The increase in net premiums written (NPW) by 17% from the previous year coupled with the GAAP combined ratio improvement to 93.7% shows effective underwriting discipline and growth in premium revenue. The combined ratio, a key indicator of profitability in the insurance industry, remaining below 100% implies that the company is earning more in premiums than it is paying out in claims and expenses, which is favorable for profitability. Additionally, the increase in after-tax net investment income by 20% reflects a strong investment performance, which can be attributed to higher interest rates and strategic portfolio management.
The growth in Commercial Lines renewal pure price increases to an average of 7.3% indicates a favorable pricing environment for Selective Insurance Group. This pricing power reflects the company's ability to increase premiums without significantly affecting customer retention, which is crucial in a competitive insurance landscape. Furthermore, the 13% increase in book value per common share reflects a strong balance sheet and may positively influence investor perception and the company's intrinsic value.
It's also noteworthy that Selective Insurance Group has successfully navigated an environment of elevated and uncertain loss trends by maintaining disciplined underwriting. This approach has allowed them to consistently achieve their 95% combined ratio target. Their focus on the mass affluent market and the implementation of aggressive profit improvement plans in Standard Personal Lines could signal strategic positioning to tap into higher-value customer segments and improve profitability in those lines.
From an investment perspective, the 20% increase in after-tax net investment income and the 33% increase for the full year are significant contributors to the overall profitability of Selective Insurance Group. The company's ability to capitalize on higher interest rates and effective cash flow deployment suggests a well-managed investment portfolio that complements their core insurance operations. The 12.4 points of non-GAAP operating ROE contributed by the Investments segment in 2023 further underscores the strategic importance of investment activities to the company's financial health.
Looking at the balance sheet, the 18% increase in common stockholders' equity and the reduction in after-tax net unrealized losses on the fixed income securities portfolio are indicative of a solid financial position and may provide a cushion against market volatility. The company's guidance for 2024, including an expected GAAP combined ratio of 95.5% and after-tax net investment income of $360 million, provides a forward-looking perspective that can inform stakeholders about the company's strategic direction and expected performance in the upcoming year.
Net Income of
Full Year 2023 ROE of
In the fourth quarter of 2023:
- Net premiums written ("NPW") increased
17% from the fourth quarter of 2022; - The GAAP combined ratio was
93.7% , 1-point better than the fourth quarter of 2022; - Commercial Lines renewal pure price increases averaged
7.3% , up 1.7 points from5.6% in the fourth quarter of 2022; - After-tax net investment income was
$78 million 20% compared to the fourth quarter of 2022; - Book value per common share was
$45.42 13% from last quarter; and - Adjusted book value per common share¹ was
$50.03 3% from last quarter.
For the quarter, Selective reported a combined ratio of
For the year, Selective generated net income per diluted common share of
"2023 marked a significant milestone for Selective as we achieved our 10th consecutive year of double-digit operating ROE and exceeded
"Our annual operating ROE of
"Selective's consistent ROE, averaging
Operating Highlights
Consolidated Financial Results | Quarter ended | Change | Year-to-Date | Change | ||||||
$ and shares in millions, except per share data | 2023 | 2022 | 2023 | 2022 | ||||||
Net premiums written | $ 991.5 | 849.7 | 17 | % | 3,573.6 | 16 | % | |||
Net premiums earned | 1,001.2 | 872.8 | 15 | 3,827.6 | 3,373.4 | 13 | ||||
Net investment income earned | 98.6 | 81.4 | 21 | 388.7 | 288.2 | 35 | ||||
Net realized and unrealized gains (losses), pre-tax | 5.4 | (5.9) | (192) | (3.6) | (114.8) | (97) | ||||
Total revenues | 1,110.7 | 952.2 | 17 | 4,232.1 | 3,558.1 | 19 | ||||
Net underwriting income (loss), after-tax | 50.2 | 36.4 | 38 | 104.9 | 131.8 | (20) | ||||
Net investment income, after-tax | 78.4 | 65.5 | 20 | 309.5 | 232.2 | 33 | ||||
Net income available to common stockholders | 122.5 | 84.2 | 46 | 356.0 | 215.7 | 65 | ||||
Non-GAAP operating income1 | 118.3 | 88.9 | 33 | 358.8 | 306.4 | 17 | ||||
Combined ratio | 93.7 | % | 94.7 | (1.0) | pts | 96.5 | % | 95.1 | 1.4 | pts |
Loss and loss expense ratio | 62.4 | 62.4 | — | 64.9 | 62.7 | 2.2 | ||||
Underwriting expense ratio | 31.1 | 32.1 | (1.0) | 31.4 | 32.3 | (0.9) | ||||
Dividends to policyholders ratio | 0.2 | 0.2 | — | 0.2 | 0.1 | 0.1 | ||||
Net catastrophe losses | 2.5 | pts | 5.2 | (2.7) | 6.4 | pts | 4.3 | 2.1 | ||
Non-catastrophe property losses and loss expenses | 17.2 | 18.5 | (1.3) | 17.0 | 18.3 | (1.3) | ||||
(Favorable) unfavorable prior year reserve development on casualty lines | 1.0 | (4.4) | 5.4 | (0.2) | (2.5) | 2.3 | ||||
Net income available to common stockholders per diluted common share | $ 2.01 | 1.38 | 46 | % | $ 5.84 | 3.54 | 65 | % | ||
Non-GAAP operating income per diluted common share1 | 1.94 | 1.46 | 33 | 5.89 | 5.03 | 17 | ||||
Weighted average diluted common shares | 61.0 | 60.9 | — | 61.0 | 60.9 | — | ||||
Book value per common share | $ 45.42 | 38.57 | 18 | 45.42 | 38.57 | 18 | ||||
Adjusted book value per common share1 | 50.03 | 45.49 | 10 | 50.03 | 45.49 | 10 | ||||
Overall Insurance Operations
For the fourth quarter, overall NPW increased
For the year, overall NPW increased
Standard Commercial Lines Segment
For the fourth quarter, Standard Commercial Lines premiums (representing
Standard Commercial Lines Segment | Quarter ended | Change | Year-to-Date | Change | ||||||
$ in millions | 2023 | 2022 | 2023 | 2022 | ||||||
Net premiums written | $ 764.3 | 676.6 | 13 | % | 2,902.0 | 13 | % | |||
Net premiums earned | 792.1 | 705.7 | 12 | 3,071.8 | 2,739.8 | 12 | ||||
Combined ratio | 93.1 | % | 95.5 | (2.4) | pts | 94.9 | % | 94.8 | 0.1 | pts |
Loss and loss expense ratio | 61.0 | 62.3 | (1.3) | 62.5 | 61.5 | 1.0 | ||||
Underwriting expense ratio | 31.9 | 33.0 | (1.1) | 32.2 | 33.1 | (0.9) | ||||
Dividends to policyholders ratio | 0.2 | 0.2 | — | 0.2 | 0.2 | — | ||||
Net catastrophe losses | 2.0 | pts | 5.7 | (3.7) | 4.9 | pts | 3.5 | 1.4 | ||
Non-catastrophe property losses and loss expenses | 15.4 | 16.5 | (1.1) | 15.0 | 16.8 | (1.8) | ||||
(Favorable) unfavorable prior year reserve development on casualty lines | 0.6 | (4.7) | 5.3 | (0.5) | (3.0) | 2.5 | ||||
Standard Personal Lines Segment
For the fourth quarter, Standard Personal Lines premiums (representing
Standard Personal Lines Segment | Quarter ended | Change | Year-to-Date | Change | ||||||
$ in millions | 2023 | 2022 | 2023 | 2022 | ||||||
Net premiums written | $ 107.0 | 84.6 | 27 | % | $ 414.6 | 319.1 | 30 | % | ||
Net premiums earned | 101.0 | 77.8 | 30 | 365.2 | 299.4 | 22 | ||||
Combined ratio | 116.9 | % | 99.9 | 17.0 | pts | 121.7 | % | 102.4 | 19.3 | pts |
Loss and loss expense ratio | 91.7 | 75.4 | 16.3 | 96.7 | 77.2 | 19.5 | ||||
Underwriting expense ratio | 25.2 | 24.5 | 0.7 | 25.0 | 25.2 | (0.2) | ||||
Net catastrophe losses | 9.1 | pts | 5.3 | 3.8 | 19.0 | pts | 13.6 | 5.4 | ||
Non-catastrophe property losses and loss expenses | 42.4 | 45.7 | (3.3) | 43.0 | 39.1 | 3.9 | ||||
Unfavorable prior year reserve development on casualty lines | 5.0 | — | 5.0 | 3.8 | — | 3.8 | ||||
Excess and Surplus Lines Segment
For the fourth quarter, Excess and Surplus Lines premiums (representing
Excess and Surplus Lines Segment | Quarter ended | Change | Year-to-Date | Change | ||||||
$ in millions | 2023 | 2022 | 2023 | 2022 | ||||||
Net premiums written | $ 120.2 | 88.5 | 36 | % | $ 438.6 | 352.5 | 24 | % | ||
Net premiums earned | 108.1 | 89.3 | 21 | 390.6 | 334.2 | 17 | ||||
Combined ratio | 76.2 | % | 84.3 | (8.1) | pts | 86.0 | % | 90.9 | (4.9) | pts |
Loss and loss expense ratio | 45.9 | 52.3 | (6.4) | 54.3 | 58.8 | (4.5) | ||||
Underwriting expense ratio | 30.3 | 32.0 | (1.7) | 31.7 | 32.1 | (0.4) | ||||
Net catastrophe losses | (0.7) | pts | 1.6 | (2.3) | 6.3 | pts | 2.9 | 3.4 | ||
Non-catastrophe property losses and loss expenses | 6.8 | 10.5 | (3.7) | 8.2 | 11.9 | (3.7) | ||||
(Favorable) prior year reserve development on casualty lines | — | (5.6) | 5.6 | (1.3) | (1.5) | 0.2 | ||||
Investments Segment
For the fourth quarter, after-tax net investment income of
For the year, after-tax investment income of
Investments Segment | Quarter ended | Change | Year-to-Date | Change | ||||||
$ in millions, except per share data | 2023 | 2022 | 2023 | 2022 | ||||||
Net investment income earned, after-tax | $ 78.4 | 65.5 | 20 | % | $ 309.5 | 232.2 | 33 | % | ||
Net investment income per common share | 1.29 | 1.08 | 19 | 5.08 | 3.81 | 33 | ||||
Effective tax rate | 20.4 | % | 19.6 | 0.8 | pts | 20.4 | % | 19.4 | 1.0 | pts |
Average yields: | ||||||||||
Portfolio: | ||||||||||
Pre-tax | 4.7 | 4.2 | 0.5 | 4.7 | 3.6 | 1.1 | ||||
After-tax | 3.7 | 3.4 | 0.3 | 3.7 | 2.9 | 0.8 | ||||
Fixed income securities: | ||||||||||
Pre-tax | 5.1 | % | 4.6 | 0.5 | pts | 4.9 | % | 3.9 | 1.0 | pts |
After-tax | 4.0 | 3.7 | 0.3 | 3.9 | 3.1 | 0.8 | ||||
Annualized ROE contribution | 12.1 | 11.5 | 0.6 | 12.4 | 9.4 | 3.0 | ||||
Balance Sheet
$ in millions, except per share data | December 31, 2023 | December 31, 2022 | Change | |||||
Total assets | $ 11,802.5 | 10,802.3 | 9 % | |||||
Total investments | 8,693.7 | 7,837.5 | 11 | |||||
Long-term debt | 503.9 | 504.7 | — | |||||
Stockholders' equity | 2,954.4 | 2,527.6 | 17 | |||||
Common stockholders' equity | 2,754.4 | 2,327.6 | 18 | |||||
Invested assets per dollar of common stockholders' equity | 3.16 | 3.37 | (6) | |||||
Net premiums written to policyholders' surplus | 1.51 | 1.44 | 5 | |||||
Book value per common share | 45.42 | 38.57 | 18 | |||||
Adjusted book value per common share1 | 50.03 | 45.49 | 10 | |||||
Debt to total capitalization | 14.6 | % | 16.6 | % | (2.0) | pts | ||
Book value per common share increased by
Selective's Board of Directors declared:
- A quarterly cash dividend on common stock of
$0.35 - A quarterly cash dividend of
$287.50 4.60% Non-Cumulative Preferred Stock, Series B (equivalent to$0.28 750
Guidance
For 2024, our full-year expectations are as follows:
- A GAAP combined ratio of
95.5% , including net catastrophe losses of 5.0 points. Our combined ratio estimate assumes no prior year casualty reserve development; - After-tax net investment income of
$360 million $32 million - An overall effective tax rate of approximately
21.0% , which assumes an effective tax rate of20.5% for net investment income and21% for all other items; and - Weighted average shares of 61.5 million on a fully diluted basis.
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, February 1, 2024, on www.Selective.com. The webcast will be available for rebroadcast until the close of business on March 1, 2024.
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
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 December 31, | Year-to-Date December 31, | |||||
2023 | 2022 | 2023 | 2022 | ||||
Net income available to common stockholders | $ 122.5 | 84.2 | 356.0 | 215.7 | |||
Net realized and unrealized investment (gains) losses included in net income, before tax | (5.4) | 5.9 | 3.6 | 114.8 | |||
Tax on reconciling items | 1.1 | (1.2) | (0.7) | (24.1) | |||
Non-GAAP operating income | $ 118.3 | 88.9 | 358.8 | 306.4 | |||
Reconciliation of Net Income Available to Common Stockholders per Diluted Common Share to Non-GAAP Operating Income per Diluted Common Share
Quarter ended December 31, | Year-to-Date December 31, | ||||||
2023 | 2022 | 2023 | 2022 | ||||
Net income available to common stockholders per diluted common share | $ 2.01 | 1.38 | 5.84 | 3.54 | |||
Net realized and unrealized investment (gains) losses included in net income, before tax | (0.09) | 0.10 | 0.06 | 1.89 | |||
Tax on reconciling items | 0.02 | (0.02) | (0.01) | (0.40) | |||
Non-GAAP operating income per diluted common share | $ 1.94 | 1.46 | 5.89 | 5.03 | |||
Reconciliation of Return on Common Equity to Non-GAAP Operating Return on Common Equity
Quarter ended December 31, | Year-to-Date December 31, | |||||||
2023 | 2022 | 2023 | 2022 | |||||
Return on Common Equity | 18.9 | % | 14.8 | 14.3 | 8.8 | |||
Net realized and unrealized investment (gains) losses included in net income, before tax | (0.8) | 1.0 | 0.1 | 4.7 | ||||
Tax on reconciling items | 0.1 | (0.2) | — | (1.1) | ||||
Non-GAAP Operating Return on Common Equity | 18.2 | % | 15.6 | 14.4 | 12.4 | |||
Reconciliation of Book Value per Common Share to Adjusted Book Value per Common Share
Quarter ended December 31, | Year-to-Date December 31, | ||||||
2023 | 2022 | 2023 | 2022 | ||||
Book value per common share | $ 45.42 | 38.57 | 45.42 | 38.57 | |||
Total unrealized investment (gains) losses included in accumulated other comprehensive | 5.83 | 8.75 | 5.83 | 8.75 | |||
Tax on reconciling items | (1.22) | (1.83) | (1.22) | (1.83) | |||
Adjusted book value per common share | 50.03 | 45.49 | 50.03 | 45.49 | |||
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; 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:
- Challenging conditions in the economy, global capital markets, the banking sector, and commercial real estate, including prolonged higher inflation, could increase loss costs and negatively impact investment portfolios;
- Deterioration in the public debt, public equity, or private investment markets that could lead to investment losses and interest rate fluctuations;
- Ratings downgrades on individual securities we own could affect investment values and, therefore, statutory surplus;
- The adequacy of our loss reserves and loss expense reserves;
- Frequency and severity of catastrophic events, including natural events that may be impacted by climate change, such as hurricanes, severe convective storms, tornadoes, windstorms, earthquakes, hail, severe winter weather, floods, and fires, and man-made events such as criminal and terrorist acts, including cyber-attacks, explosions, and civil unrest;
- Adverse market, governmental, regulatory, legal, or judicial conditions or actions;
- The significant geographic concentration of our business in the eastern portion of
the United States ; - The cost, terms and conditions, and availability of reinsurance;
- Our ability to collect on reinsurance and the solvency of our reinsurers;
- The impact of changes in
U.S. trade policies and imposition of tariffs on imports that may lead to higher than anticipated inflationary trends for our loss and loss expenses; - Related to COVID-19, we have successfully defended against payment of COVID-19-related business interruption losses based on our policies' terms, conditions, and exclusions. However, should the highest courts determine otherwise, our loss and loss expenses may increase, our related reserves may not be adequate, and our financial condition and liquidity may be materially impacted.
- Ongoing wars and conflicts impacting global economic, banking, commodity, and financial markets, exacerbating ongoing economic challenges, including inflation and supply chain disruption, which influences insurance loss costs, premiums, and investment valuations;
- Uncertainties related to insurance premium rate increases and business retention;
- Changes in insurance regulations that impact our ability to write and/or cease writing insurance policies in one or more states;
- The effects of data privacy or cyber security laws and regulations on our operations;
- Major defect or failure in our internal controls or information technology and application systems that result in harm to our brand in the marketplace, increased senior executive focus on crisis and reputational management issues, and/or increased expenses, particularly if we experience a significant privacy breach;
- Potential tax or federal financial regulatory reform provisions that could pose certain risks to our operations;
- Our ability to maintain favorable financial ratings, which may include sustainability considerations, from rating agencies, including AM Best, Standard & Poor's, Moody's, and Fitch;
- Our entry into new markets and businesses; and
- Other risks and uncertainties we identify in filings with the United States Securities and Exchange Commission, including our Annual Report on Form 10-K and other periodic reports.
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SOURCE Selective Insurance Group, Inc.
FAQ
What is the net income per diluted common share for Selective Insurance Group, Inc. in the fourth quarter of 2023?
What was the percentage increase in net premiums written from the fourth quarter of 2022 to the fourth quarter of 2023?
What was the after-tax net investment income in the fourth quarter of 2023?
What was the percentage increase in book value per common share from the previous quarter?
What was the non-GAAP operating ROE for Selective Insurance Group, Inc. in the fourth quarter of 2023?
