Selective Reports Third Quarter 2022 Results, Including Net Income of $0.66 per Diluted Common Share and Non-GAAP Operating Income(1) of $0.99 per Diluted Common Share
Selective Insurance Group reported Q3 2022 results with a Return on Common Equity (ROE) of 7.0% and Non-GAAP Operating ROE at 10.5%. Key highlights include an 11% increase in Net Premiums Written (NPW) to $903.4 million, and an improved GAAP combined ratio of 96.8%. Despite strong premiums, after-tax net investment income fell 31% to $52 million, contributing to a 44% drop in net income per share to $0.66. Book value per share decreased 20% to $36.96. The company remains on track to meet its 2022 ROE target of 11%.
- Net Premiums Written increased by 11% YoY.
- GAAP combined ratio improved to 96.8%, down from 98.6% last year.
- Strong performance in Standard Commercial Lines with premiums up 11%.
- After-tax net investment income decreased 31% compared to Q3 2021.
- Net income available to common stockholders fell by 44%, significantly impacting earnings.
- Book value per common share declined by 20% due to unrealized losses.
Third Quarter Return on Common Equity ("ROE") of
In the third quarter of 2022, we reported:
- Net premiums written ("NPW") increased
11% compared to the third quarter of 2021; - GAAP combined ratio of
96.8% ; - Commercial Lines renewal pure price increases averaged
5.8% , compared to5.3% in the second quarter of 2022; - After-tax net investment income of
$52 million , down31% compared to the third quarter of 2021; - Book value per common share of
$36.96 , down7% in the third quarter; and - Adjusted book value per common share¹ of
$44.59 , up1% in the third quarter.
BRANCHVILLE, N.J., Nov. 2, 2022 /PRNewswire/ -- Selective Insurance Group, Inc. (NASDAQ: SIGI) reported financial results for the third quarter ended September 30, 2022, with net income per diluted common share of
"We are proud of our results and ability to effectively navigate through an environment characterized by capital markets volatility and historic levels of economic inflation. We have established an organizational discipline focused on balancing profitability and growth, as demonstrated by our strong and consistent results throughout this challenging environment," said John Marchioni, President and CEO.
"We remain focused on maintaining disciplined underwriting and appropriate risk-based pricing. With an extremely strong balance sheet, we continue to enhance our market position with our customers and distribution partners. We are well positioned to meet our 2022 ROE target of
Operating Highlights | ||||||||||
Consolidated Financial Results | Quarter ended September 30, | Change | Year-to-Date September 30, | Change | ||||||
$ and shares in millions, except per share data | 2022 | 2021 | 2022 | 2021 | ||||||
Net premiums written | $ 903.4 | 812.9 | 11 | % | $ 2,723.9 | 2,444.3 | 11 | % | ||
Net premiums earned | 853.9 | 767.2 | 11 | 2,500.6 | 2,232.7 | 12 | ||||
Net investment income earned | 63.9 | 93.0 | (31) | 206.7 | 246.5 | (16) | ||||
Net realized and unrealized (losses) gains, pre-tax | (25.7) | 0.2 | (14,609) | (108.9) | 15.4 | (809) | ||||
Total revenues | 895.0 | 865.0 | 3 | 2,605.9 | 2,509.5 | 4 | ||||
Net underwriting income, after-tax | 21.4 | 8.6 | 148 | 95.3 | 130.0 | (27) | ||||
Net investment income, after-tax | 51.5 | 74.7 | (31) | 166.7 | 198.5 | (16) | ||||
Net income available to common stockholders | 40.2 | 71.4 | (44) | 131.5 | 297.8 | (56) | ||||
Non-GAAP operating income1 | 60.5 | 71.3 | (15) | 217.5 | 285.7 | (24) | ||||
Combined ratio | 96.8 | % | 98.6 | (1.8) | pts | 95.2 | % | 92.6 | 2.6 | pts |
Loss and loss expense ratio | 64.1 | 65.9 | (1.8) | 62.7 | 60.0 | 2.7 | ||||
Underwriting expense ratio | 32.6 | 32.6 | — | 32.4 | 32.4 | — | ||||
Dividends to policyholders ratio | 0.1 | 0.1 | — | 0.1 | 0.2 | (0.1) | ||||
Net catastrophe losses | 4.0 | pts | 10.0 | (6.0) | 4.0 | pts | 5.8 | (1.8) | ||
Non-catastrophe property losses and loss expenses | 19.6 | 16.1 | 3.5 | 18.3 | 15.5 | 2.8 | ||||
(Favorable) prior-year reserve development on casualty lines | (1.9) | (1.8) | (0.1) | (1.9) | (3.0) | 1.1 | ||||
Net income available to common stockholders per diluted common share | $ 0.66 | 1.18 | (44) | % | $ 2.16 | 4.92 | (56) | % | ||
Non-GAAP operating income per diluted common share1 | 0.99 | 1.18 | (16) | 3.57 | 4.72 | (24) | ||||
Weighted average diluted common shares | 60.8 | 60.6 | — | 60.8 | 60.5 | 1 | ||||
Book value per common share | $ 36.96 | 45.27 | (18) | 36.96 | 45.27 | (18) | ||||
Adjusted book value per common share¹ | 44.59 | 41.56 | 7 | 44.59 | 41.56 | 7 |
Overall Insurance Operations
For the third quarter, overall NPW increased
Standard Commercial Lines Segment
For the third quarter, Standard Commercial Lines premiums (representing
Standard Commercial Lines Segment | Quarter ended September 30, | Change | Year-to-Date September 30, | Change | ||||||
$ in millions | 2022 | 2021 | 2022 | 2021 | ||||||
Net premiums written | $ 727.5 | 652.6 | 11 | % | $ 2,225.4 | 1,995.3 | 12 | % | ||
Net premiums earned | 692.4 | 619.6 | 12 | 2,034.1 | 1,808.5 | 12 | ||||
Combined ratio | 96.8 | % | 97.2 | (0.4) | pts | 94.5 | % | 91.4 | 3.1 | pts |
Loss and loss expense ratio | 63.4 | 63.5 | (0.1) | 61.1 | 57.9 | 3.2 | ||||
Underwriting expense ratio | 33.3 | 33.5 | (0.2) | 33.2 | 33.3 | (0.1) | ||||
Dividends to policyholders ratio | 0.1 | 0.2 | (0.1) | 0.2 | 0.2 | — | ||||
Net catastrophe losses | 2.6 | pts | 8.1 | (5.5) | 2.7 | pts | 4.3 | (1.6) | ||
Non-catastrophe property losses and loss expenses | 18.7 | 14.5 | 4.2 | 16.9 | 13.7 | 3.2 | ||||
(Favorable) prior-year reserve development on casualty lines | (2.3) | (2.3) | — | (2.4) | (3.3) | 0.9 |
Standard Personal Lines Segment
For the third quarter, Standard Personal Lines premiums (representing
Standard Personal Lines Segment | Quarter ended September 30, | Change | Year-to-Date September 30, | Change | ||||||
$ in millions | 2022 | 2021 | 2022 | 2021 | ||||||
Net premiums written | $ 86.8 | 78.2 | 11 | % | $ 234.5 | 221.9 | 6 | % | ||
Net premiums earned | 75.6 | 73.4 | 3 | 221.6 | 220.5 | 1 | ||||
Combined ratio | 101.8 | % | 115.2 | (13.4) | pts | 103.3 | % | 99.0 | 4.3 | pts |
Loss and loss expense ratio | 75.7 | 88.8 | (13.1) | 77.8 | 72.7 | 5.1 | ||||
Underwriting expense ratio | 26.1 | 26.4 | (0.3) | 25.5 | 26.3 | (0.8) | ||||
Net catastrophe losses | 14.9 | pts | 26.7 | (11.8) | 16.5 | pts | 13.7 | 2.8 | ||
Non-catastrophe property losses and loss expenses | 38.4 | 39.1 | (0.7) | 36.8 | 34.8 | 2.0 | ||||
(Favorable) prior-year reserve development on casualty lines | — | — | — | — | — | — |
Excess and Surplus Lines Segment
For the third quarter, Excess and Surplus Lines premiums (representing
Excess and Surplus Lines Segment | Quarter ended September 30, | Change | Year-to-Date September 30, | Change | ||||||
$ in millions | 2022 | 2021 | 2022 | 2021 | ||||||
Net premiums written | $ 89.1 | 82.1 | 9 | % | $ 264.1 | 227.1 | 16 | % | ||
Net premiums earned | 85.8 | 74.3 | 15 | 244.8 | 203.8 | 20 | ||||
Combined ratio | 93.0 | % | 93.7 | (0.7) | pts | 93.3 | % | 96.3 | (3.0) | pts |
Loss and loss expense ratio | 61.0 | 62.8 | (1.8) | 61.2 | 64.7 | (3.5) | ||||
Underwriting expense ratio | 32.0 | 30.9 | 1.1 | 32.1 | 31.6 | 0.5 | ||||
Net catastrophe losses | 5.4 | pts | 9.2 | (3.8) | 3.3 | pts | 10.5 | (7.2) | ||
Non-catastrophe property losses and loss expenses | 10.1 | 6.5 | 3.6 | 12.4 | 10.5 | 1.9 | ||||
(Favorable) prior-year reserve development on casualty lines | — | — | — | — | (3.4) | 3.4 |
Investments Segment
For the third quarter, after-tax net investment income of
Investments Segment | Quarter ended September 30, | Change | Year-to-Date September 30, | Change | ||||||
$ in millions, except per share data | 2022 | 2021 | 2022 | 2021 | ||||||
Net investment income earned, after-tax | $ 51.5 | 74.7 | (31) | % | $ 166.7 | 198.5 | (16) | % | ||
Net investment income per common share | 0.85 | 1.23 | (31) | 2.74 | 3.28 | (16) | ||||
Effective tax rate | 19.3 | % | 19.7 | (0.4) | pts | 19.4 | % | 19.5 | (0.1) | pts |
Average yields: | ||||||||||
Portfolio: | ||||||||||
Pre-tax | 3.4 | 4.8 | (1.4) | 3.5 | 4.3 | (0.8) | ||||
After-tax | 2.7 | 3.8 | (1.1) | 2.9 | 3.4 | (0.5) | ||||
Fixed income securities: | ||||||||||
Pre-tax | 4.2 | % | 3.1 | 1.1 | pts | 3.7 | % | 3.2 | 0.5 | pts |
After-tax | 3.4 | 2.5 | 0.9 | 3.0 | 2.6 | 0.4 | ||||
Annualized ROE contribution | 8.9 | 11.0 | (2.1) | 8.9 | 10.1 | (1.2) |
Balance Sheet | ||||||||
$ in millions, except per share data | September 30, 2022 | December 31, 2021 | Change | |||||
Total assets | $ 10,520.5 | 10,461.4 | 1 % | |||||
Total investments | 7,536.1 | 8,027.0 | (6) | |||||
Long-term debt | 505.2 | 506.1 | — | |||||
Stockholders' equity | 2,427.5 | 2,982.9 | (19) | |||||
Common stockholders' equity | 2,227.5 | 2,782.9 | (20) | |||||
Invested assets per dollar of common stockholders' equity | 3.38 | 2.88 | 17 | |||||
Net premiums written to policyholders' surplus | 1.45 | x | 1.33 | x | 0.12 | x | ||
Book value per common share | $ 36.96 | 46.24 | (20) | |||||
Adjusted book value per common share¹ | 44.59 | 43.23 | 3 | |||||
Debt to total capitalization | 17.2 | % | 14.5 | % | 2.7 | pts |
Book value per common share declined by
Selective's Board of Directors declared:
- A
7% increase in the quarterly cash dividend on common stock, to$0.30 per common share, that is payable December 1, 2022, to holders of record on November 15, 2022; and - A cash dividend of
$287.50 per share on our4.60% Non-Cumulative Preferred Stock, Series B (equivalent to$0.28 750 per depository share) payable on December 15, 2022, to holders of record as of November 30, 2022.
Guidance
Our full-year expectations are as follows:
- A GAAP combined ratio, excluding net catastrophe losses, of
91.5% (prior guidance90.5% ). Our combined ratio estimate assumes no additional prior-year casualty reserve development; - Net catastrophe losses of 3.5 points (prior guidance 4.0 points) on the combined ratio;
- After-tax net investment income of
$215 million (prior guidance$215 million ) that includes after-tax net investment income from our alternative investments of$7 million (prior guidance$15 million ); - An overall effective tax rate of approximately
20.5% , which assumes an effective tax rate of19.5% for net investment income and21.0% for all other items; and - Weighted average shares of 61 million on a fully diluted basis.
The supplemental investor package, including 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 10:00 A.M. ET, on Thursday, November 3, 2022, at www.Selective.com. The webcast will be available for rebroadcast until the close of business on December 2, 2022.
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 the Fortune 1000 and certification as a Great Place to Work® in 2022 for the third 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 the exclusion of 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 as a substitute for net income available to common stockholders, net income available to common stockholders per diluted common share, return on common equity, and book value per common share prepared in accordance with U.S. generally accepted accounting principles (GAAP). Reconciliations of net income available to common stockholders, net income available to common stockholders per diluted common share, return on common equity, and book value per common share to non-GAAP operating income, non-GAAP operating income per diluted common share, non-GAAP operating return on common equity, and adjusted book value per common share, respectively, are provided in the tables below.
Note: All amounts included in this release exclude intercompany transactions.
Reconciliation of Net Income Available to Common Stockholders to Non-GAAP Operating Income | |||||||
$ in millions | Quarter ended September 30, | Year-to-Date September 30, | |||||
2022 | 2021 | 2022 | 2021 | ||||
Net income available to common stockholders | $ 40.2 | 71.4 | 131.5 | 297.8 | |||
Net realized and unrealized investment losses (gains) included in net income, before tax | 25.7 | (0.2) | 108.9 | (15.4) | |||
Tax on reconciling items | (5.4) | — | (22.9) | 3.2 | |||
Non-GAAP operating income | $ 60.5 | 71.3 | 217.5 | 285.7 |
Reconciliation of Net Income Available to Common Stockholders per Diluted Common Share to Non-GAAP Operating Income per | |||||||
Quarter ended September 30, | Year-to-Date September 30, | ||||||
2022 | 2021 | 2022 | 2021 | ||||
Net income available to common stockholders per diluted common share | $ 0.66 | 1.18 | 2.16 | 4.92 | |||
Net realized and unrealized investment losses (gains) included in net income, before tax | 0.42 | — | 1.79 | (0.25) | |||
Tax on reconciling items | (0.09) | — | (0.38) | 0.05 | |||
Non-GAAP operating income per diluted common share | $ 0.99 | 1.18 | 3.57 | 4.72 |
Reconciliation of Return on Common Equity to Non-GAAP Operating Return on Common Equity | ||||||||
Quarter ended September 30, | Year-to-Date September 30, | |||||||
2022 | 2021 | 2022 | 2021 | |||||
Return on Common Equity | 7.0 | % | 10.6 | 7.0 | 15.1 | |||
Net realized and unrealized investment losses (gains) included in net income, before tax | 4.4 | — | 5.8 | (0.8) | ||||
Tax on reconciling items | (0.9) | — | (1.2) | 0.2 | ||||
Non-GAAP Operating Return on Common Equity | 10.5 | % | 10.6 | 11.6 | 14.5 |
Reconciliation of Book Value per Common Share to Adjusted Book Value per Common Share | |||||||
Quarter ended September 30, | Year-to-Date September 30, | ||||||
2022 | 2021 | 2022 | 2021 | ||||
Book value per common share | $ 36.96 | 45.27 | 36.96 | 45.27 | |||
Total unrealized investment losses (gains) included in accumulated other comprehensive (loss) income, before tax | 9.67 | (4.71) | 9.67 | (4.71) | |||
Tax on reconciling items | (2.04) | 1.00 | (2.04) | 1.00 | |||
Adjusted book value per common share | 44.59 | 41.56 | 44.59 | 41.56 |
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" as defined by the Private Securities Litigation Reform Act of 1995 ("PSLRA"). The PSLRA provides a safe harbor under the Securities Act of 1933 and the Securities Exchange Act of 1934 for forward-looking statements. These statements relate to 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 industry actual results, activity levels, or performance to materially differ from those expressed or implied by the forward-looking statements. In some cases, forward-looking statements include the words "may," "will," "could," "would," "should," "expect," "plan," "anticipate," "target," "project," "intend," "believe," "estimate," "predict," "potential," "pro forma," "seek," "likely," "continue," or comparable terms. Our forward-looking statements are only predictions, and we can give no assurance that such expectations will prove correct. We undertake no obligation, other than as federal securities laws may require, 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:
- Related to COVID-19:
- Governmental directives to contain or delay the spread of the COVID-19 pandemic have disrupted ordinary business commerce and impacted financial markets. These governmental actions, the extent, duration, and possible alteration based on future COVID-19-related developments that we cannot predict, could materially and adversely affect our results of operations, net investment income, financial position, and liquidity.
- The amount of premium we record may be reduced and our underwriting results may be adversely impacted by (i) voluntary premium credits on in-force commercial and personal automobile policies, (ii) state insurance commissioner or other regulatory directives to implement premium-based credit in lines other than commercial and personal automobile, and we may be required to return more premium than warranted by our filed rating plans and actual loss experience, (iii) the effects of our voluntary efforts or the directives from various state insurance regulators to extend individualized payment flexibility and suspend policy cancellations, late payment notices, and late or reinstatement fees, (iv) return premiums that could be significant because our general liability and workers compensation policies provide for premium audit of revenues and payrolls, and (v) collectability of premiums, which may be impacted by policyholder financial distress and insolvency.
- Our loss and loss expenses may increase, our related reserves may not be adequate, and our financial condition and liquidity may be materially impacted if litigation or changes in statutory or common law (i) require payment of COVID-19-related business interruption losses despite contrary terms, conditions, and exclusions in our policies or (ii) presume that COVID-19 is a work-related illness compensable under workers compensation policies for employees who contract the virus, regardless of whether they worked in industries defined as essential in various COVID-19-related governmental directives or interacted with the public as part of their job duties.
- Our net investment income may be impacted by the significant equity and debt financial market volatility resulting from the COVID-19 pandemic and the related governmental orders because (i) financial market volatility is reflected in our alternative investments' performance, (ii) increased spreads on fixed income securities may create mark-to-market investment valuation losses that reduce unrealized capital gains and impact GAAP equity, and (iii) net realized losses may increase if we intend to sell more securities, particularly in asset classes that are more significantly impacted by COVID-19-related governmental directives and to which the Federal Reserve Board is providing liquidity and structural support.
- To varying degrees, the effect, lifting, or lapsing of COVID-19-related governmental directives have disrupted supply chains and caused shortages of products, services, and labor. These shortages may impact our ability to attract and retain labor, including increasing attrition rates, wages, and the cost and difficulty of obtaining third-party non-U.S.-based resources.
- The ongoing Russian war against Ukraine is 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 valuation;
- Difficult conditions in global capital markets and the economy, including the risk of prolonged higher inflation, could increase loss costs and negatively impact investment portfolios;
- Deterioration in the public debt and equity markets and private investment marketplace 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 such as hurricanes, 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 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;
- 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 ratings 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, but not limited to, our Annual Report on Form 10-K and other periodic reports.
These risk factors may not be exhaustive. We operate in a constantly changing business environment, and new risk factors may emerge any 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).
View original content to download multimedia:https://www.prnewswire.com/news-releases/selective-reports-third-quarter-2022-results-including-net-income-of-0-66-per-diluted-common-share-and-non-gaap-operating-income1-of-0-99-per-diluted-common-share-301666573.html
SOURCE Selective Insurance Group, Inc.
FAQ
What were Selective Insurance Group's Q3 2022 financial results?
How did Selective's GAAP combined ratio perform in Q3 2022?
What challenges did Selective face regarding net investment income in Q3 2022?
What is Selective Insurance Group's updated ROE target for 2022?