Selective Reports Second Quarter 2024 Results
Selective Insurance Group (NASDAQ: SIGI) reported challenging Q2 2024 results with a net loss of $1.08 per diluted share and a non-GAAP operating loss of $1.10 per share. The company faced a combined ratio of 116.1%, up 15.9 points year-over-year, primarily due to $176 million in unfavorable prior year casualty reserve development. Despite challenges, net premiums written increased 13% to $1.23 billion, and after-tax net investment income grew 11% to $86 million. Selective is responding with additional price increases, with renewal pure price across all segments at 9.1% in Q2. The company maintains a strong capital position but has revised its 2024 GAAP combined ratio expectation to 101.5%, up from 96.5% previously.
- Net premiums written increased 13% year-over-year to $1.23 billion
- After-tax net investment income grew 11% to $86 million
- Average renewal pure price increased 9.1%, up 2.7 points from a year ago
- Strong new business growth, particularly in Excess and Surplus Lines segment (54% increase)
- Net loss of $1.08 per diluted share, compared to net income of $0.92 per share in Q2 2023
- Combined ratio deteriorated to 116.1%, up 15.9 points year-over-year
- Unfavorable prior year casualty reserve development of $176 million
- Revised 2024 GAAP combined ratio guidance to 101.5%, up from 96.5%
- Book value per common share decreased 1% to $44.74 in the first half of 2024
Insights
Selective Insurance Group's second-quarter results present a mixed bag for investors. The company reported a net loss per diluted common share of $1.08 and a non-GAAP operating loss per diluted common share of $1.10. This is a significant reversal from the previous year's earnings, highlighting considerable challenges in the current period.
The most concerning aspect is the company's combined ratio of 116.1%. This metric, which measures the ratio of claims and expenses to premiums, suggests that Selective is spending more than it earns from premiums. A combined ratio above 100% typically indicates underwriting losses. The sharp increase from
Despite these losses, there are some positives. Net premiums written (NPW) increased by
Investors should be cautious as the company has also adjusted its guidance upwards for the GAAP combined ratio to
In the short term, Selective may face pressure on its stock due to the reported losses and revised guidance. Long-term investors need to look for signs of improved underwriting discipline and effective risk management to mitigate future reserve development issues.
The insurance sector is inherently cyclical and influenced by factors such as natural disasters, litigation trends and macroeconomic conditions. Selective's latest results reflect significant challenges but also some noteworthy strategic responses. One important metric is the Standard Commercial Lines renewal pure price increase of 7.9%. Pricing actions are important in mitigating the impact of rising loss costs and maintaining profitability. The company's emphasis on risk selection, pricing and claims management signals a disciplined approach to underwriting, which is critical in a volatile environment.
The loss and loss expense ratio jumped to
Interestingly, the Excess and Surplus Lines segment displayed resilience, with a combined ratio of
Long-term, the ability of Selective to adapt to loss cost trends and effectively manage reserves will be key. Investors should monitor the company's progress in executing its pricing strategies and maintaining its capital position to weather ongoing industry challenges.
Net Loss of
Quarterly Analyst Conference Call Rescheduled for Friday, July 19, 2024, at 8:00 AM ET
In the second quarter of 2024:
- Net premiums written ("NPW") increased
13% compared to the second quarter of 2023; - The GAAP combined ratio was
116.1% , compared to100.2% in the second quarter of 2023; - Commercial Lines renewal pure price increases averaged
7.9% , up 1.2 points from6.7% in the second quarter of 2023; - After-tax net investment income was
$86 million 11% from the second quarter of 2023; - Book value per common share was
$44.74 3% from last quarter; and - Adjusted book value per common share¹ was
$49.67 3% from last quarter.
For the quarter, Selective reported a combined ratio of
"This was a challenging quarter. We did not meet our high standard as underwriting performance fell below our target. The unfavorable prior year casualty reserve development was driven by elevated loss emergence in the quarter reflecting higher severity that we attribute to social inflation. Our reserving action is predicated on our in-depth quarterly reserve review and further strengthening to address elevated and uncertain loss trends," said John J. Marchioni, Chairman, President and Chief Executive Officer.
"We have a very stable underwriting portfolio. To address our updated view of loss costs, we are responding with additional price increases. Our renewal pure price increase across all insurance segments was
"We maintain our disciplined focus and execution in the areas of risk selection, pricing, and claims management in the face of this challenging and dynamic loss trend environment. Our capital position remains strong and our underlying combined ratio of
Operating Highlights
Consolidated Financial Results | Quarter ended June 30, | Change | Year-to-Date June 30, | Change | ||||||
$ and shares in millions, except per share data | 2024 | 2023 | 2024 | 2023 | ||||||
Net premiums written | 1,084.9 | 13 | % | 2,084.7 | 14 | % | ||||
Net premiums earned | 1,080.2 | 942.2 | 15 | 2,131.2 | 1,844.5 | 16 | ||||
Net investment income earned | 108.6 | 97.7 | 11 | 216.5 | 189.2 | 14 | ||||
Net realized and unrealized gains (losses), pre-tax | 1.3 | (5.4) | (124) | (0.3) | (2.1) | (84) | ||||
Total revenues | 1,196.0 | 1,040.5 | 15 | 2,361.0 | 2,040.3 | 16 | ||||
Net underwriting income (loss), after-tax | (137.2) | (1.2) | NM | (122.2) | 29.7 | (511) | ||||
Net investment income, after-tax | 86.3 | 77.8 | 11 | 171.9 | 150.9 | 14 | ||||
Net income (loss) available to common stockholders | (65.6) | 56.3 | (217) | 14.6 | 146.6 | (90) | ||||
Non-GAAP operating income (loss)1 | (66.6) | 60.6 | (210) | 14.9 | 148.2 | (90) | ||||
Combined ratio | 116.1 | % | 100.2 | 15.9 | pts | 107.3 | % | 98.0 | 9.3 | pts |
Loss and loss expense ratio | 85.7 | 68.6 | 17.1 | 76.5 | 65.8 | 10.7 | ||||
Underwriting expense ratio | 30.3 | 31.4 | (1.1) | 30.6 | 32.0 | (1.4) | ||||
Dividends to policyholders ratio | 0.1 | 0.2 | (0.1) | 0.2 | 0.2 | — | ||||
Net catastrophe losses | 8.4 | pts | 10.6 | (2.2) | 6.8 | pts | 8.4 | (1.6) | ||
Non-catastrophe property losses and loss expenses | 17.2 | 16.7 | 0.5 | 16.7 | 16.6 | 0.1 | ||||
(Favorable) unfavorable prior year reserve development on casualty lines | 16.3 | (0.4) | 16.7 | 9.9 | (0.9) | 10.8 | ||||
Net income (loss) available to common stockholders per diluted common share | $ (1.08) | 0.92 | (217) | % | $ 0.24 | 2.41 | (90) | % | ||
Non-GAAP operating income (loss) per diluted common share1 | (1.10) | 0.99 | (211) | 0.24 | 2.44 | (90) | ||||
Weighted average diluted common shares | 60.9 | 60.9 | — | 61.2 | 60.9 | 1 | ||||
Book value per common share | $ 44.74 | 40.81 | 10 | 44.74 | 40.81 | 10 | ||||
Adjusted book value per common share1 | 49.67 | 47.34 | 5 | 49.67 | 47.34 | 5 | ||||
NM = not meaningful | ||||||||||
Overall Insurance Operations
For the second quarter, overall NPW increased
Overall, our insurance segments reduced ROE by 19.9 points in the second quarter of 2024.
Standard Commercial Lines Segment
For the second quarter, Standard Commercial Lines premiums (representing
Prior year casualty reserve development in the quarter was an unfavorable
The following table shows the variances in key quarter-to-date and year-to date measures:
Standard Commercial Lines Segment | Quarter ended June 30, | Change | Year-to-Date June 30, | Change | ||||||
$ in millions | 2024 | 2023 | 2024 | 2023 | ||||||
Net premiums written | $ 963.1 | 870.1 | 11 | % | 1,683.5 | 13 | % | |||
Net premiums earned | 853.5 | 762.7 | 12 | 1,687.6 | 1,494.3 | 13 | ||||
Combined ratio | 118.8 | % | 97.1 | 21.7 | pts | 108.9 | % | 95.9 | 13.0 | pts |
Loss and loss expense ratio | 87.6 | 65.0 | 22.6 | 77.2 | 63.1 | 14.1 | ||||
Underwriting expense ratio | 31.1 | 31.9 | (0.8) | 31.4 | 32.6 | (1.2) | ||||
Dividends to policyholders ratio | 0.1 | 0.2 | (0.1) | 0.3 | 0.2 | 0.1 | ||||
Net catastrophe losses | 6.0 | pts | 8.2 | (2.2) | 5.3 | pts | 6.5 | (1.2) | ||
Non-catastrophe property losses and loss expenses | 14.6 | 14.6 | — | 14.2 | 14.5 | (0.3) | ||||
(Favorable) unfavorable prior year reserve development on casualty lines | 20.6 | (1.0) | 21.6 | 12.5 | (1.2) | 13.7 | ||||
Standard Personal Lines Segment
For the second quarter, Standard Personal Lines premiums (representing
The following table shows the variances in key quarter-to-date and year-to date measures:
Standard Personal Lines Segment | Quarter ended June 30, | Change | Year-to-Date June 30, | Change | ||||||
$ in millions | 2024 | 2023 | 2024 | 2023 | ||||||
Net premiums written | $ 116.1 | 109.1 | 6 | % | $ 216.1 | 194.4 | 11 | % | ||
Net premiums earned | 106.4 | 87.2 | 22 | 210.3 | 169.0 | 24 | ||||
Combined ratio | 118.1 | % | 126.5 | (8.4) | pts | 111.7 | % | 121.4 | (9.7) | pts |
Loss and loss expense ratio | 95.3 | 101.0 | (5.7) | 88.3 | 95.4 | (7.1) | ||||
Underwriting expense ratio | 22.8 | 25.5 | (2.7) | 23.4 | 26.0 | (2.6) | ||||
Net catastrophe losses | 23.9 | pts | 24.3 | (0.4) | 17.7 | pts | 21.2 | (3.5) | ||
Non-catastrophe property losses and loss expenses | 42.6 | 43.3 | (0.7) | 41.5 | 42.4 | (0.9) | ||||
Unfavorable prior year reserve development on casualty lines | — | 4.6 | (4.6) | — | 3.5 | (3.5) | ||||
Excess and Surplus Lines Segment
For the second quarter, Excess and Surplus Lines premiums (representing
The following table shows the variances in key quarter-to-date and year-to date measures:
Excess and Surplus Lines Segment | Quarter ended June 30, | Change | Year-to-Date June 30, | Change | ||||||
$ in millions | 2024 | 2023 | 2024 | 2023 | ||||||
Net premiums written | $ 146.8 | 105.7 | 39 | % | $ 271.9 | 206.8 | 31 | % | ||
Net premiums earned | 120.3 | 92.3 | 30 | 233.3 | 181.1 | 29 | ||||
Combined ratio | 94.6 | % | 100.7 | (6.1) | pts | 91.2 | % | 93.0 | (1.8) | pts |
Loss and loss expense ratio | 63.3 | 67.9 | (4.6) | 60.1 | 60.5 | (0.4) | ||||
Underwriting expense ratio | 31.3 | 32.8 | (1.5) | 31.1 | 32.5 | (1.4) | ||||
Net catastrophe losses | 11.9 | pts | 17.6 | (5.7) | 8.2 | pts | 12.1 | (3.9) | ||
Non-catastrophe property losses and loss expenses | 13.0 | 8.8 | 4.2 | 12.8 | 9.4 | 3.4 | ||||
(Favorable) prior year reserve development on casualty lines | — | — | — | — | (2.8) | 2.8 | ||||
Investments Segment
For the second quarter, after-tax net investment income of
Investments Segment | Quarter ended June 30, | Change | Year-to-Date June 30, | Change | ||||||
$ in millions, except per share data | 2024 | 2023 | 2024 | 2023 | ||||||
Net investment income earned, after-tax | $ 86.3 | 77.8 | 11 | % | $ 171.9 | 150.9 | 14 | % | ||
Net investment income per common share | 1.42 | 1.28 | 11 | 2.81 | 2.48 | 13 | ||||
Effective tax rate | 20.6 | % | 20.4 | 0.2 | pts | 20.6 | % | 20.3 | 0.3 | pts |
Average yields: | ||||||||||
Portfolio: | ||||||||||
Pre-tax | 4.9 | 4.9 | — | 4.9 | 4.7 | 0.2 | ||||
After-tax | 3.9 | 3.9 | — | 3.9 | 3.8 | 0.1 | ||||
Fixed income securities: | ||||||||||
Pre-tax | 4.9 | % | 4.9 | — | pts | 5.0 | % | 4.8 | 0.2 | pts |
After-tax | 3.9 | 3.9 | — | 3.9 | 3.8 | 0.1 | ||||
Annualized ROE contribution | 12.5 | 12.6 | (0.1) | 12.5 | 12.5 | — | ||||
Balance Sheet
$ in millions, except per share data | June 30, 2024 | December 31, 2023 | Change | |||||
Total assets | $ 12,565.5 | 11,802.5 | 6 % | |||||
Total investments | 9,021.8 | 8,693.7 | 4 | |||||
Long-term debt | 508.8 | 503.9 | 1 | |||||
Stockholders' equity | 2,922.7 | 2,954.4 | (1) | |||||
Common stockholders' equity | 2,722.7 | 2,754.4 | (1) | |||||
Invested assets per dollar of common stockholders' equity | 3.31 | 3.16 | 5 | |||||
Net premiums written to policyholders' surplus | 1.64 | 1.51 | 9 | |||||
Book value per common share | 44.74 | 45.42 | (1) | |||||
Adjusted book value per common share1 | 49.67 | 50.03 | (1) | |||||
Debt to total capitalization | 14.8 | % | 14.6 | % | 0.2 | pts | ||
Book value per common share decreased 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, we increased our expected GAAP combined ratio to
- A GAAP combined ratio of
101.5% , up five points from our prior guidance of96.5% . Our combined ratio estimate includes net catastrophe losses of 5.5 points, up from prior guidance of 5.0 points. Our combined ratio estimate assumes no additional 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 has been brought forward and will now be simulcast at 8:00 AM ET, on Friday, July 19, 2024, on www.Selective.com. The webcast will be available for rebroadcast until the close of business on August 16, 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 2024 and certification as a Great Place to Work® in 2024 for the fifth consecutive year. For more information about Selective, visit www.Selective.com.
1Reconciliation of Net Income (Loss) Available to Common Stockholders to Non-GAAP Operating Income (Loss) and Certain Other Non-GAAP Measures
Non-GAAP operating income (loss), non-GAAP operating income (loss) per diluted common share, and non-GAAP operating return on common equity differ from net income (loss) available to common stockholders, net income (loss) 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 (loss). 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 income (loss). 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 (loss) available to common stockholders, net income (loss) 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 (Loss) Available to Common Stockholders to Non-GAAP Operating Income (Loss) | |||||||
$ in millions | Quarter ended June 30, | Year-to-Date June 30, | |||||
2024 | 2023 | 2024 | 2023 | ||||
Net income (loss) available to common stockholders | $ (65.6) | 56.3 | 14.6 | 146.6 | |||
Net realized and unrealized investment (gains) losses included in net income, before tax | (1.3) | 5.4 | 0.3 | 2.1 | |||
Tax on reconciling items | 0.3 | (1.1) | (0.1) | (0.4) | |||
Non-GAAP operating income (loss) | $ (66.6) | 60.6 | 14.9 | 148.2 | |||
Reconciliation of Net Income (Loss) Available to Common Stockholders per Diluted Common Share to Non-GAAP Operating Income (Loss) per Diluted Common Share | |||||||
Quarter ended June 30, | Year-to-Date June 30, | ||||||
2024 | 2023 | 2024 | 2023 | ||||
Net income (loss) available to common stockholders per diluted common share | $ (1.08) | 0.92 | 0.24 | 2.41 | |||
Net realized and unrealized investment (gains) losses included in net income, before tax | (0.02) | 0.09 | — | 0.04 | |||
Tax on reconciling items | — | (0.02) | — | (0.01) | |||
Non-GAAP operating income (loss) per diluted common share | $ (1.10) | 0.99 | 0.24 | 2.44 | |||
Reconciliation of Return on Common Equity to Non-GAAP Operating Return on Common Equity | ||||||||
Quarter ended June 30, | Year-to-Date June 30, | |||||||
2024 | 2023 | 2024 | 2023 | |||||
Return on Common Equity | (9.5) | % | 9.1 | 1.1 | 12.1 | |||
Net realized and unrealized investment (gains) losses included in net income, before tax | (0.2) | 0.9 | — | 0.1 | ||||
Tax on reconciling items | 0.1 | (0.2) | — | — | ||||
Non-GAAP Operating Return on Common Equity | (9.6) | % | 9.8 | 1.1 | 12.2 | |||
Reconciliation of Book Value per Common Share to Adjusted Book Value per Common Share | |||||||
Quarter ended June 30, | Year-to-Date June 30, | ||||||
2024 | 2023 | 2024 | 2023 | ||||
Book value per common share | $ 44.74 | 40.81 | 44.74 | 40.81 | |||
Total unrealized investment (gains) losses included in accumulated other comprehensive (loss) income, before tax | 6.25 | 8.27 | 6.25 | 8.27 | |||
Tax on reconciling items | (1.32) | (1.74) | (1.32) | (1.74) | |||
Adjusted book value per common share | $ 49.67 | 47.34 | 49.67 | 47.34 | |||
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," "attribute," "confident," "strong," "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, political, or judicial conditions or actions, including social inflation;
- 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
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