Download SELECTIVE INSURANCE GROUP INC (Form: 8-K

UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 8-K
CURRENT REPORT PURSUANT
TO SECTION 13 OR 15(D) OF THE
SECURITIES EXCHANGE ACT OF 1934
Date of Report (Date of earliest event reported)
April 29, 2015
SELECTIVE INSURANCE GROUP, INC.
(Exact name of registrant as specified in its charter)
New Jersey
(State or other jurisdiction of incorporation)
001-33067
(Commission File Number)
22-2168890
(I.R.S. Employer Identification No.)
40 Wantage Avenue, Branchville, New Jersey
(Address of principal executive offices)
07890
(Zip Code)
Registrant's telephone number, including area code
(973) 948-3000
Not Applicable
(Former name or former address, if changed since last report.)
Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of
the following provisions:
[ ] Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)
[ ] Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)
[ ] Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b))
[ ] Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c))
Section 2 – Financial Information
Item 2.02.
Results of Operations and Financial Condition.
On April 29, 2015, Selective Insurance Group, Inc. (the “Company”) issued a press release announcing results for the first quarter ended March
31, 2015. The press release is attached hereto as Exhibit 99.1.
Section 7 – Regulation FD
Item 7.01.
Regulation FD Disclosure.
Attached as Exhibit 99.2 is supplemental financial information about the Company.
The information contained in this report on Form 8-K, including the exhibits attached hereto, is being furnished and shall not be deemed “filed”
for the purpose of Section 18 of the Securities Exchange Act of 1934, as amended, or otherwise subject to the liabilities of that section, nor
shall it be deemed incorporated by reference in any filing under the Securities Act of 1933, as amended, except as shall be expressly set forth
by specific reference in such filing. The Company makes no admission as to the materiality of any information in this report or the exhibits
attached hereto.
Section 9 – Financial Statements and Exhibits
Item 9.01.
(d)
Financial Statements and Exhibits.
Exhibits
99.1
99.2
Press Release of Selective Insurance Group, Inc. dated April 29, 2015
Supplemental Investor Package, First Quarter 2015
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its
behalf by the undersigned hereunto duly authorized.
SELECTIVE INSURANCE GROUP,
INC.
Date: April 29, 2015
By: /s/ Michael H. Lanza
Michael H. Lanza
Executive Vice President and General Counsel
EXHIBIT INDEX
Exhibit
No.
99.1
99.2
Description
Press Release of Selective Insurance Group, Inc. dated April 29, 2015
Supplemental Investor Package, First Quarter 2015
EXHIBIT 99.1
Selective Reports Net Income per Diluted Share of $0.69 and Operating
Income per Diluted Share of $0.48 for the First Quarter of 2015
In the first quarter of 2015:
 Net premiums written grew 9%
 GAAP combined ratio was 94.5%
 Statutory combined ratio was 93.0%
 After-tax net investment income declined 20%
 Total return on equity was 12.3% and operating return on equity was 8.5%
Branchville, NJ – April 29, 2015 – Selective Insurance Group, Inc. (NASDAQ: SIGI) today reported its financial results for the first quarter
ended March 31, 2015. Net income per diluted share was $0.69, compared to $0.31 in 2014, and operating income 1 per diluted share was
$0.48, compared to $0.23 in 2014.
“We are seeing the benefits of our strategic initiatives that drive progress towards our longer-term combined ratio and operating return on
equity targets. For the first quarter, we generated a very profitable 93% statutory combined ratio,” said Gregory E. Murphy, Chairman and
Chief Executive Officer. “Written and earned renewal pure price increases above expected claim inflation, stable retention, and our
multi-disciplinary workers compensation efforts will continue to drive profitability improvement.”
“Growth in the quarter was strong, as overall net premiums written increased 9% with 26% growth in Excess and Surplus Lines and excellent
Standard Commercial Lines new business production of $88 million, up 28% from a year ago. Overall renewal pure price increases in the
quarter were 3.9%, in-line with our expectations of 4% increases for 2015.”
Consolidated Financial Results
$ in millions, except per share data
Quarter Ended March 31,
2015
$518.1
$476.1
$26.9
$18.9
$523.9
$27.4
$12.3
$39.7
93.0%
5.3 pts
14.9 pts
(4.2) pts
94.5%
$0.48
$0.69
57.7M
$23.11
Net premiums written
Net premiums earned
Net investment income earned
Net realized gains, pre-tax
Total revenues
Operating income 1
Capital gains, net of tax
Net income
Statutory combined ratio
Catastrophe losses
Non-catastrophe property losses
(Favorable) prior year statutory reserve development on casualty lines
GAAP combined ratio
Operating income per diluted share 1
Net income per diluted share
Weighted average diluted shares
Book value per share
1
2014
$476.8
$456.5
$35.5
$7.2
$509.1
$13.3
$4.7
$18.0
100.8%
7.5 pts
20.0 pts
(3.1) pts
101.1%
$0.23
$0.31
57.2M
$21.09
Change
9%
4%
(24)%
162%
3%
107%
162%
121%
(7.8) pts
(2.2) pts
(5.1) pts
(1.1) pts
(6.6) pts
109%
123%
1%
10%
1 Operating income differs from net income by the exclusion of realized gains or losses on investments. It is used as an important financial
measure by management, analysts, and investors, because the realization of investment gains and losses on sales in any given period is largely
discretionary as to timing. In addition, these investment gains and losses, as well as other-than-temporary investment impairments that are
charged to earnings, could distort the analysis of trends. Operating income is not intended as a substitute for net income prepared in accordance
with U.S. generally accepted accounting principles (GAAP). A reconciliation of operating income to net income is provided in the
Consolidated Financial Results table. Statutory data is prepared in accordance with statutory accounting rules as defined by the National
Association of Insurance Commissioners Accounting Practices and Procedures Manual and, therefore, is not reconciled to GAAP.
Note: All amounts included in this release exclude intercompany transactions.
Operating Highlights
Standard Commercial Lines
Standard Commercial Lines premiums were up 9% in the first quarter, reflecting renewal pure price increases of 3.5%, stable retention at 84%,
and a 28% increase in new business. The quarter’s statutory combined ratio improved by 10.6 points, driven by earned rate exceeding claim
inflation, higher levels of favorable prior year casualty reserve development at $21 million or 5.7 points, and lower catastrophe and
non-catastrophe weather-related losses.
Standard Commercial Lines
$ in millions, statutory results
Quarter Ended March 31,
2015
$415.3
$365.5
56.5%
32.8%
0.4%
89.7%
91.8%
Net premiums written
Net premiums earned
Loss & loss expense ratio
Underwriting expense ratio
Dividends to policyholders ratio
Combined ratio
GAAP combined ratio
2014
$379.4
$349.5
69.4%
30.5%
0.4%
100.3%
101.0%
Change
9%
5%
(12.9) pts
2.3 pts
(10.6) pts
(9.2) pts
Standard Personal Lines
Standard Personal Lines premiums decreased 3% in the quarter compared to a year ago from targeted non-renewals of less profitable accounts
coupled with a decrease in new business. Retention remained at 82% and renewal pure price was 6.4%, including a 9.9% renewal pure price
increase in homeowners. Our rollout of The Selective Edge TM product continues to be well received by our agents and we are encouraged by
early results.
The statutory combined ratio in Standard Personal Lines was 105.1%, which included 8.7 points of catastrophe losses. There was no prior year
casualty reserve development this quarter in Standard Personal Lines, although there was favorable prior year casualty development of $2
million or 2.7 combined ratio points in the first quarter of 2014.
Standard Personal Lines
$ in millions, statutory results
Quarter Ended March 31,
2015
$65.0
$72.5
73.5%
31.6%
105.1%
103.4%
Net premiums written
Net premiums earned
Loss & loss expense ratio
Underwriting expense ratio
Combined ratio
GAAP combined ratio
2
2014
$67.3
$74.8
77.6%
26.9%
104.5%
103.2%
Change
(3)%
(3)%
(4.1) pts
4.7 pts
0.6 pts
0.2 pts
Excess and Surplus Lines
Excess and Surplus Lines continued to generate strong growth, with a 26% increase in net premiums written. We have opportunities to write a
greater share of our retail agents’ Excess and Surplus Lines business and grow through our 50-state footprint of wholesale agents. The
statutory combined ratio in the quarter was 102.1%, including adverse prior year casualty development of $1 million or 2.6 points and the
impact of catastrophe and non-catastrophe losses which increased the combined ratio by 0.9 points compared to a year ago.
Excess & Surplus Lines
$ in millions, statutory results
Quarter Ended March 31,
2015
$37.8
$38.1
67.7%
34.4%
102.1%
104.1%
Net premiums written
Net premiums earned
Loss & loss expense ratio
Underwriting expense ratio
Combined ratio
GAAP combined ratio
2014
$30.1
$32.2
61.7%
36.2%
97.9%
97.0%
Change
26%
18%
6.0 pts
(1.8) pts
4.2 pts
7.1 pts
Investment Income
After-tax investment income in the first quarter was $21 million, down 20% compared to a year ago. The decline was largely driven by losses
in energy-exposed limited partnerships that were negatively impacted by lower oil prices in the fourth quarter of 2014. The decline in
alternative investment income and the continued low interest rate environment reduced earned after tax portfolio yields to 1.7% from 2.3% a
year ago. After-tax new money yields averaged 1.8% in the quarter.
Investments
$ in millions, except per share data
Quarter Ended March 31,
Change
2015
$3.72
$21.2
$0.37
21.2%
2014
$3.91
$26.5
$0.46
25.5%
(5)%
(20)%
(20)%
(4.3) pts
Pre-tax
After-tax
2.8%
2.1%
3.0%
2.2%
(0.2) pts
(0.1) pts
Pre-tax
After-tax
2.2%
1.7%
3.1%
2.3%
(0.9) pts
(0.6) pts
Invested assets per dollar of stockholders’ equity
Net investment income earned, after-tax
Net investment income per share
Effective tax rate
Average yields:
Fixed Income Securities:
Portfolio:
3
Balance Sheet
Balance Sheet
$ in millions, except per share data
Total assets
Investment portfolio
Notes payable
Statutory surplus
Stockholders’ equity
Book value per share
March 31,
December 31,
Change
2015
$6,701
$4,902
$394
$1,322
$1,316
$23.11
2014
$6,582
$4,807
$379
$1,308
$1,276
$22.54
2%
2%
4%
1%
3%
3%
The increase in book value reflects $0.69 in net income, partially offset by $0.14 in shareholders’ dividends.
Selective’s Board of Directors declared a $0.14 per share quarterly cash dividend on common stock payable June 1, 2015 to stockholders of
record as of May 15, 2015.
Guidance
For 2015, Selective expects to generate the following results:

Statutory combined ratio of 91.0%, excluding catastrophes and any further prior year casualty reserve development

4 points of catastrophe losses

After-tax investment income of approximately $100 million

Weighted average shares of approximately 58 million
The supplemental investor package, including financial information that is not part of this press release, is available on the Investor Relations’
page of Selective’s public website at www.selective.com . Selective’s quarterly analyst conference call will be simulcast at 8:30 a.m. ET, on
April 30, 2015 at www.selective.com . The webcast will be available for rebroadcast until the close of business on June 1, 2015.
About Selective Insurance Group, Inc.
Selective Insurance Group, Inc. is a holding company for ten property and casualty insurance companies rated “A” (Excellent) by A.M. Best.
Through independent agents, the insurance companies offer standard and specialty insurance for commercial and personal risks, and flood
insurance underwritten by the National Flood Insurance Program. Selective maintains a website at www.selective.com .
4
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 in this report, including information incorporated by reference, are “forward-looking statements” as that term is defined in
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 or our future financial performance and involve known and unknown risks, uncertainties and other factors that may
cause our or our industry’s actual results, levels of activity, or performance to be materially different from those expressed or implied by the
forward-looking statements. In some cases, you can identify forward-looking statements by use of 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 comparable terminology. These statements are only predictions, and we can give no assurance that such
expectations will prove to be correct. We undertake no obligation, other than as may be required under the federal securities laws, to publicly
update or revise any forward-looking statements, whether as a result of new information, future events or otherwise.
Factors that could cause our actual results to differ materially from those projected, forecasted or estimated by us in forward-looking
statements, include, but are not limited to:
• difficult conditions in global capital markets and the economy;
• deterioration in the public debt and equity markets and private investment marketplace that could lead to investment losses and fluctuations in
interest rates;
• ratings downgrades could affect investment values and therefore statutory surplus;
• the adequacy of our loss reserves and loss expense reserves;
• the frequency and severity of natural and man-made catastrophic events, including, but not limited to, hurricanes, tornadoes, windstorms,
earthquakes, hail, terrorism, explosions, severe winter weather, floods and fires;
• adverse market, governmental, regulatory, legal or judicial conditions or actions;
• the concentration of our business in the Eastern Region;
• the cost and availability of reinsurance;
• our ability to collect on reinsurance and the solvency of our reinsurers;
• 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;
• recent federal financial regulatory reform provisions that could pose certain risks to our operations;
• our ability to maintain favorable ratings from rating agencies, including A.M. 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 continually changing business environment, and new risk factors emerge from
time-to-time. We can neither predict such new risk factors nor can we assess the impact, if any, of such new risk factors on our businesses or
the extent to which any factor or combination of factors may cause actual results to differ materially from those expressed or implied in any
forward-looking statements in this report. In light of these risks, uncertainties and assumptions, the forward-looking events discussed in this
report might not occur.
Selective’s SEC filings can be accessed through the Investor Relations’ section of Selective’s website, www.selective.com , or through the
SEC’s EDGAR Database at www.sec.gov (Selective EDGAR CIK No. 0000230557).
Investor and Media Contact:
Jennifer DiBerardino
973-948-1364
[email protected]
Selective Insurance Group, Inc.
40 Wantage Avenue
Branchville, New Jersey 07890
www.selective.com
5
EXHIBIT 99.2
Supplemental Investor Package
First Quarter 2015
Investor Contact:
Jennifer DiBerardino
Senior Vice President, Investor Relations and Treasurer
Tel: 973-948-1364
[email protected]
Selective Insurance Group, Inc. & Consolidated Subsidiaries
Selected Balance Sheet Data
(unaudited)
March 31,
($ in thousands, except
per share data)
2015
Balance
Sheet
Invested Assets:
Corporate bonds 1
$
Government and
Municipal bonds
Total fixed income
securities
Equities
Short-term
investments
Other investments
Total invested assets $
Invested assets per $ of
stockholders' equity
March 31,
Market
Value
December 31,
2014
Unrecognized/
Unrealized
Gain
2,757,212
2,761,191
69,590
1,713,587
1,724,144
4,470,799
211,571
124,376
95,020
4,901,766
Balance
Sheet
$
Market
Value
2014
Unrecognized/
Unrealized
Gain
2,662,019
2,666,877
44,021
60,852
1,535,890
1,552,512
4,485,335
211,571
130,442
11,954
4,197,909
197,687
124,376
95,020
4,916,302
142,396
137,733
106,720
4,640,049
$
Balance
Sheet
$
Market
Value
2,693,324
2,697,332
47,437
46,657
1,690,935
1,702,751
59,680
4,219,389
197,687
90,678
35,317
4,384,259
191,400
4,400,083
191,400
107,117
32,389
137,733
106,720
4,661,529
125,995
131,972
99,203
4,806,834
131,972
99,203
4,822,658
139,506
$
3.72
3.91
3.77
Total assets
6,701,145
6,370,236
6,581,550
Liabilities:
Reserve for loss and
loss expenses
Unearned premium
reserve
3,516,268
3,432,432
3,477,870
1,132,733
1,078,012
1,095,819
Total liabilities
5,385,207
5,184,705
5,305,964
Stockholders' equity
1,315,938
1,185,531
1,275,586
Total debt to
capitalization ratio
23.1 %
24.9 %
22.9 %
Book value per share
23.11
21.09
22.54
Book value per share
excluding unrealized
gain or loss on fixed
income portfolio
21.78
20.29
21.49
NPW per insurance
segment employee
926
925
908
Statutory premiums to
surplus ratio
1.5 x
1.5 x
1.4 x
Statutory surplus
1
1,322,422
Includes mortgage-backed and asset-backed securities.
1,263,795
Unrecognized/
Unrealized
Gain
1,307,842
Selective Insurance Group, Inc. & Consolidated Subsidiaries
Selected Income Statement Data
(unaudited)
Quarter Ended March 31,
2015
2014
Per diluted
Per diluted
share
share
($ in thousands, except per share amounts)
Consolidated
Revenue
Operating income
Net realized gains, after tax
Net income
Operating return on equity
$ 523,892
27,434
12,274
39,708
8.5 %
Total Insurance
Operations
Gross premiums written
Net premiums
written
Net premiums
earned
Underwriting gain - before tax
- after tax
GAAP combined
ratio
Standard Commercial Lines
Net premiums earned
GAAP combined ratio
Standard Personal Lines
Net premiums earned
GAAP combined ratio
Excess and Surplus Lines
Net premiums earned
GAAP combined ratio
Investments
Net investment
income
- before tax
- after tax
Other expenses (net of other income)
Interest expense - before tax
- after tax
Other Expense after tax
Diluted weighted avg shares outstanding
$
$ 509,071
13,283
4,691
17,974
4.5 %
604,864
565,741
518,088
476,750
476,123
26,021
16,914
456,495
(5,015 )
(3,260 )
0.29
94.5 %
101.1 %
365,533
91.8 %
349,441
101.0 %
72,479
103.4 %
74,818
103.2 %
38,111
104.1 %
32,236
97.0 %
26,917
21,208
21.2 %
1.7 %
1.5 %
3.72
Effective tax rate
Annualized after-tax yield on investment portfolio
Annualized after-tax, after-interest expense yield
Invested assets per $ of stockholders' equity
0.48
0.21
0.69
(5,479 )
(3,561 )
(0.06 )
(7,127 )
(0.12 )
57,720
35,534
26,486
25.5 %
2.3 %
2.0 %
3.91
0.37
$
0.23
0.08
0.31
(0.06 )
0.46
(5,561 )
(3,615 )
(0.06 )
(6,328 )
(0.11 )
57,172
Selective Insurance Group, Inc. & Consolidated Subsidiaries
GAAP Insurance Operations Results
(unaudited)
First Quarter
($ in thousands)
Quarter Ended March 31, 2015
Standard
Commercial
Lines
Net Premiums
Written
Net Premiums
Earned
Loss and Loss
Expense Incurred
Net Underwriting
Expenses Incurred
Dividends to
Policyholders
GAAP
Underwriting
Gain (Loss)
GAAP Ratios
Loss and Loss
Expense Ratio
Underwriting
Expense Ratio
Dividends to
Policyholders
Ratio
Combined Ratio
Standard
Personal
Lines
Excess &
Surplus
Lines
Quarter Ended March 31, 2014
Grand
Total
Standard
Commercial
Lines
Standard
Personal
Lines
Excess &
Surplus
Lines
Grand
Total
415,258
65,024
37,806
518,088
379,350
67,338
30,062
476,750
365,533
72,479
38,111
476,123
349,441
74,818
32,236
456,495
206,148
52,969
25,882
284,999
242,639
58,027
19,880
320,546
127,824
21,976
13,778
163,578
109,194
19,151
11,381
139,726
1,525
-
-
1,525
1,238
-
-
1,238
26,021
(3,630 )
30,036
(2,466 )
(1,549 )
(2,360 )
975
(5,015 )
56.4 %
73.1 %
67.9 %
59.9 %
69.4 %
77.6 %
61.7 %
70.2 %
35.0 %
30.3 %
36.2 %
34.3 %
31.2 %
25.6 %
35.3 %
30.6 %
0.4 %
91.8 %
0.0 %
103.4 %
0.0 %
104.1 %
0.3 %
94.5 %
0.4 %
101.0 %
0.0 %
103.2 %
0.0 %
97.0 %
0.3 %
101.1 %
Selective Insurance Group, Inc. and Consolidated Subsidiaries
GAAP Investment Income
March 2015 (unaudited)
($ in thousands, except per share data)
Investment Income:
Interest:
Fixed Income Securities
Short-term
Other Investments
Dividends
Quarter Ended:
March
March
2015
2014
$
Investment Expense
Net Investment Income Before Tax
Tax
%
Increase/
(Decrease)
30,967
25
(3,540 )
1,792
29,244
31,028
19
5,218
1,449
37,714
(0.2 )
31.6
(167.8 )
23.7
(22.5 )
2,327
2,180
6.7
26,917
35,534
(24.3 )
5,709
9,048
(36.9 )
Net Investment Income After Tax
$
21,208
26,486
(19.9 )
Net Investment Income per Share
$
0.37
0.46
(19.6 )
21.2 %
25.5 %
Fixed Income Securities:
Pre Tax
After Tax
2.80 %
2.12 %
2.99 %
2.24 %
Portfolio:
Pre Tax
After Tax
2.22 %
1.75 %
3.08 %
2.30 %
Effective Tax Rate
Average Yields :
Net Realized Gains (Losses)
Fixed Income Securities
Equity Securities
Other Investments
Total
Net of Tax
Quarter Ended:
March
March
2015
2014
379
35
19,158
7,183
(654 )
18,883
12,274
7,218
4,691
As of March 31, 2015 year-to-date new money rates for fixed income securities were 2.4% on a pre-tax basis and 1.8% on an after tax-basis.
Selective Insurance Group, Inc.
Combined Insurance Company Subsidiaries
2015 Statutory Results by Line of Business
Quarter Ended March 2015 (unaudited)
Net
Premiums
($ in thousands)
Written
Standard Personal Lines:
Homeowners
$
Auto
Other (including
flood)
Total
28,078
35,580
1,366
$
65,024
Net
Premiums
Earned
Percent
Change
)
(2.2 % $
)
(3.4 %
)
(25.0 %
)
(3.4 % $
33,721
Percent
Change
Loss
Ratio
Underwriting
Expense
Ratio
LAE
Ratio
Dividends to
Policyholders
Ratio
Combined
Ratio
2015
Combined
Ratio
2014
1.3 %
)
(3.2 %
)
(46.9 %
)
(3.1 %
67.7 %
7.5 %
38.5 %
0.0 %
113.7 %
61.0 %
11.2 %
0.0 %
65.1 %
%
64.1
6.1 %
%
9.4
34.5 %
)
(189.6 %
%
31.6
0.0 %
%
0.0
106.7 %
)
(118.4 %
%
105.1
56.8 %
5.0 %
36.5 %
0.2 %
68,477
114,971
86,355
7.3 %
)
(1.3 %
5.7 %
5.0 %
48.3 %
22.2 %
59.6 %
14.7 %
17.2 %
8.4 %
25.9 %
33.5 %
31.3 %
9.6 %
22,699
7.1 %
5,000
9.7 %
3,468
9.5 % $ 365,533
8.8 %
5.1 %
9.0 %
4.6 %
69.8 %
16.4 %
0.7 %
44.7 %
11.5 %
4.2 %
0.2 %
11.8 %
18.2 %
48.6 %
19.1 %
37,010
1,748
72,479
Underwriting
Gain/(Loss)
121.7 %
$
(2,442 )
100.9 %
)
(93.4 %
%
104.5
$
(1,978 )
98.5 %
131.4 %
(1,319 )
1.8 %
0.1 %
0.1 %
90.7 %
73.0 %
99.4 %
105.9 %
80.7 %
94.9 %
2,406
25,905
(2,670 )
37.5 %
64.0 %
51.5 %
32.8 %
0.0 %
0.0 %
0.0 %
0.4 %
118.8 %
84.6 %
52.4 %
89.7 %
129.8 %
76.9 %
42.7 %
100.3 % $
(4,852 )
633
1,365
21,467
34.4 %
0.0 %
102.1 %
97.9 % $
(714 )
3,094
)
(1,326
Standard Commercial Lines:
Commerical
property
Workers
compensation
General liability
Auto
Business owners
policies
Bonds
Other
Total
$
70,898
10.6 %
83,805
130,482
96,587
10.3 %
9.2 %
8.4 %
24,252
5,212
4,022
$ 415,258
E&S
$
37,806
Total Insurance
Operations
$ 518,088
$
25.8 % $
64,563
38,111
%
8.7
%
$ 476,123
Note: Some amounts may not foot due to rounding.
Losses
Paid
LAE Paid
Total Paid
2015
2014
$ 194,366
44,994
$ 239,360
$ 213,297
44,764
$ 258,061
4.3
%
48.0
%
12.0
%
32.7
%
0.3
%
93.0
$
%
100.8
$
19,427
Selective Insurance Group, Inc.
Combined Insurance Company Subsidiaries
2015 Net Catastrophe Losses and Prior Year Casualty Reserve Development
Statutory Results by Line of Business
(unaudited)
Quarter Ended
March 31, 2015
March 31, 2014
Impact on
Impact on
Loss and
Loss and
Loss and
Loss and
Loss
Loss
Loss
Loss
Expense
Expense
Expense
Expense
Incurred
Ratio
Incurred
Ratio
Net Catastrophe Losses Incurred
($ in thousands)
Standard Personal Lines
$
6,318
8.7 % $
8,280
11.1 %
Standard Commercial Lines
$
18,650
5.1 % $
25,906
7.4 %
E&S
$
352
0.9 % $
186
0.6 %
$
25,320
5.3 % $
34,372
7.5 %
Total Insurance Operations
Prior Year Casualty Reserve Development
(Favorable) / Unfavorable
($ in thousands)
Quarter Ended
March 31, 2015
March 31, 2014
Impact on
Impact on
Loss and
Loss and
Loss and
Loss and
Loss
Loss
Loss
Loss
Expense
Expense
Expense
Expense
Incurred
Ratio
Incurred
Ratio
0.0 %
$
(2,000 )
)
(2.7 %
(21,000 )
)
(5.7 %
$
(12,000 )
)
(3.4 %
$
1,000
2.6 %
$
$
(20,000 )
Standard Personal Lines
$
Standard Commercial Lines
$
E&S
Total Insurance Operations
Note: Some amounts may not foot due to rounding.
-
)
(4.2 % $
-
(14,000 )
0.0 %
)
(3.1 %
Selective Insurance Group, Inc. & Consolidated Subsidiaries
Consolidated Balance Sheets
($ in thousands, except share amounts)
ASSETS
Investments:
Fixed income securities, held-to-maturity – at carrying value (fair value: $311,093 – 2015; $333,961 –
2014)
Fixed income securities, available-for-sale – at fair value (amortized cost: $4,059,034 – 2015; $3,975,786
– 2014)
Equity securities, available-for-sale – at fair value (cost: $199,617 – 2015; $159,011 – 2014)
Short-term investments (at cost which approximates fair value)
Other investments
Total investments
Cash
Interest and dividends due or accrued
Premiums receivable, net of allowance for uncollectible accounts of: $4,201 – 2015; $4,137 – 2014
Reinsurance recoverable, net
Prepaid reinsurance premiums
Deferred federal income tax
Property and equipment – at cost, net of accumulated depreciation and amortization of: $175,896 – 2015;
$172,183 – 2014
Deferred policy acquisition costs
Goodwill
Other assets
Total assets
LIABILITIES AND STOCKHOLDERS’ EQUITY
Liabilities:
Reserve for loss and loss expenses
Unearned premiums
Notes payable
Current federal income tax
Accrued salaries and benefits
Other liabilities
Total liabilities
Stockholders’ Equity:
Preferred stock of $0 par value per share:
Authorized shares 5,000,000; no shares issued or outstanding
Common stock of $2 par value per share:
Authorized shares: 360,000,000
Issued: 100,430,480 – 2015; 99,947,933 – 2014
Additional paid-in capital
Retained earnings
Accumulated other comprehensive income
Treasury stock – at cost (shares: 43,482,438 – 2015; 43,353,181 – 2014)
Total stockholders’ equity
Commitments and contingencies
Total liabilities and stockholders’ equity
(Unaudited)
March 31,
2015
December 31,
2014
296,557
318,137
4,174,242
211,571
124,376
95,020
4,901,766
14,804
38,416
596,888
574,982
141,941
92,061
4,066,122
191,400
131,972
99,203
4,806,834
23,959
38,901
558,778
581,548
146,993
98,449
61,855
191,956
7,849
78,627
6,701,145
59,416
185,608
7,849
73,215
6,581,550
$
3,516,268
1,132,733
394,301
10,627
142,092
189,186
5,385,207
3,477,870
1,095,819
379,297
3,921
158,382
190,675
5,305,964
$
—
—
$
$
$
$
200,861
312,930
1,345,035
23,615
(566,503 )
1,315,938
199,896
305,385
1,313,440
19,788
(562,923 )
1,275,586
6,701,145
6,581,550
Selective Insurance Group, Inc. & Consolidated Subsidiaries
Unaudited Consolidated Statements of Income
($ in thousands, except per share amounts)
Revenues:
Net premiums earned
Net investment income earned
Net realized gains:
Net realized investment gains
Other-than-temporary impairments
Other-than-temporary impairments on fixed income securities recognized in other comprehensive income
Total net realized gains
Other income
Total revenues
Quarter Ended
March 31,
2014
2015
$ 476,123
26,917
456,495
35,534
20,977
(2,094 )
—
18,883
1,969
523,892
8,181
(963 )
—
7,218
9,824
509,071
284,999
164,723
5,479
12,401
467,602
320,546
149,266
5,561
8,614
483,987
Income before federal income tax
56,290
25,084
Federal income tax expense:
Current
Deferred
Total federal income tax expense
12,254
4,328
16,582
6,538
572
7,110
Expenses:
Loss and loss expense incurred
Policy acquisition costs
Interest expense
Other expenses
Total expenses
Net income
$
39,708
17,974
Earnings per share:
Basic net income
$
0.70
0.32
$
0.69
0.31
$
0.14
0.13
Diluted net income
Dividends to stockholders
Selective Insurance Group, Inc. & Consolidated Subsidiaries
Unaudited Consolidated Statements of Comprehensive Income
($ in thousands)
Net income
Quarter Ended
March 31,
2014
2015
17,974
$ 39,708
Other comprehensive income, net of tax:
Unrealized gains on investment securities:
Unrealized holding gains arising during period
Amount reclassified into net income:
Held-to-maturity securities
Non-credit other-than-temporary impairments
Realized gains on available for sale securities
Total unrealized gains on investment securities
Defined benefit pension and post-retirement plans:
Amounts reclassified into net income:
Net actuarial loss
Total defined benefit pension and post-retirement plans
Other comprehensive income
Comprehensive income
$
15,586
21,426
(170 )
232
(12,932 )
2,716
(296 )
—
(4,699 )
16,431
1,111
1,111
3,827
43,535
247
247
16,678
34,652
Selective Insurance Group, Inc. & Consolidated Subsidiaries
Unaudited Consolidated Statements of Stockholders’ Equity
($ in thousands, except share amounts)
Common stock:
Beginning of year
Dividend reinvestment plan (shares: 13,533 – 2015; 15,283 – 2014)
Stock purchase and compensation plans (shares: 469,014 – 2015; 401,179 – 2014)
End of period
Quarter Ended
March 31,
2014
2015
$
Additional paid-in capital:
Beginning of year
Dividend reinvestment plan
Stock purchase and compensation plans
End of period
Retained earnings:
Beginning of year
Net income
Dividends to stockholders ($0.14 per share – 2015; $0.13 per share – 2014)
End of period
Accumulated other comprehensive income:
Beginning of year
Other comprehensive income
End of period
Treasury stock:
Beginning of year
Acquisition of treasury stock (shares: 129,257 – 2015; 118,876 – 2014)
End of period
Total stockholders’ equity
199,896
27
938
200,861
198,240
31
802
199,073
305,385
346
7,199
312,930
288,182
320
5,863
294,365
1,313,440
39,708
(8,113 )
1,345,035
1,202,015
17,974
(7,412 )
1,212,577
19,788
3,827
23,615
$
(562,923 )
(3,580 )
(566,503 )
1,315,938
24,851
16,678
41,529
(559,360 )
(2,653 )
(562,013 )
1,185,531
Selective Insurance Group, Inc.
Unaudited Consolidated Statements of Cash Flow
Quarter Ended
March 31,
2014
2015
($ in thousands)
Operating Activities:
Net Income
39,708
17,974
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation and amortization
Sale of renewal rights
Stock-based compensation expense
Undistributed losses (gains) of equity method investments
Net realized gains
14,041
—
3,681
3,541
(18,883 )
10,578
(8,000 )
4,176
(33 )
(7,218 )
Changes in assets and liabilities:
Increase in reserves for loss and loss expenses, net of reinsurance recoverables
Increase in unearned premiums, net of prepaid reinsurance
Decrease in net federal income taxes
Increase in premiums receivable
Increase in deferred policy acquisition costs
Decrease in interest and dividends due or accrued
Decrease in accrued salaries and benefits
Decrease in accrued insurance expenses
Increase in other assets and other liabilities
Net adjustments
Net cash provided by operating activities
44,964
41,966
11,034
(38,110 )
(6,348 )
510
(16,290 )
(24,255 )
5,015
20,866
60,574
58,938
20,254
4,332
(29,042 )
(4,697 )
414
(21,869 )
(26,957 )
16,914
17,790
35,764
(238,000 )
(150,500 )
(1,724 )
(333,550 )
9,305
341,146
20,720
145,661
129,052
5,845
(4,064 )
—
(76,109 )
(182,809 )
(61,360 )
(4,615 )
(398,348 )
1,302
434,865
9,396
104,358
61,523
5,704
(5,699 )
8,000
(27,683 )
(7,591 )
(3,580 )
2,271
15,000
1,398
(1,118 )
6,380
(9,155 )
23,959
14,804
(6,948 )
(2,653 )
1,261
—
770
(459 )
(8,029 )
52
193
245
Investing Activities:
Purchase of fixed income securities, available-for-sale
Purchase of equity securities, available-for-sale
Purchase of other investments
Purchase of short-term investments
Sale of fixed maturity securities, available-for-sale
Sale of short-term investments
Redemption and maturities of fixed income securities, held-to-maturity
Redemption and maturities of fixed income securities, available-for-sale
Sale of equity securities, available-for-sale
Distributions from other investments
Purchase of property and equipment
Sale of renewal rights
Net cash used in investing activities
Financing Activities:
Dividends to stockholders
Acquisition of treasury stock
Net proceeds from stock purchase and compensation plans
Proceeds from borrowings
Excess tax benefits from share-based payment arrangements
Repayment of capital lease obligations
Net cash provided by (used in) financing activities
Net (decrease) increase in cash
Cash, beginning of year
Cash, end of period
$
Selective Insurance Group, Inc.
Combined Insurance Company Subsidiaries
Statutory Balance Sheets
(unaudited)
March 31,
2015
($ in thousands)
ASSETS
Bonds
Common stocks
Preferred stocks
Affiliated mortgage loan
Other investments
Short-term investments
Total investments
Cash on hand and in banks
Interest and dividends due and accrued
Premiums receivable
Reinsurance recoverable on paid losses and expenses
Deferred tax recoverable
EDP equipment
Equities and deposits in pools and associations
Receivable for sold securities
Other assets
Total assets
LIABILITIES
Reserve for losses
Reinsurance payable on paid loss and loss expense
Reserve for loss expenses
Unearned premiums
Reserve for commissions payable
Ceded balances payable
Federal income tax payable
Premium and other taxes payable
Borrowed money
Reserve for dividends to policyholders
Reserves for unauthorized reinsurance
Payable for securities
Funds withheld on account of others
Accrued salaries and benefits
Other liabilities
Total liabilities
POLICYHOLDERS' SURPLUS
Capital
Paid in surplus
Unassigned surplus
Total policyholders' surplus
Total liabilities and policyholders' surplus
$
$
$
$
March 31,
2014
December
31,
2014
4,299,029
190,937
20,521
35,765
147,468
113,117
4,806,837
4,072,964
197,688
36,534
172,691
122,118
4,601,995
4,241,580
191,400
35,961
152,154
115,342
4,736,437
1,538
38,376
593,248
10,919
143,060
460
10,373
8
27,206
5,632,025
(40,405 )
36,862
551,784
13,068
154,620
834
8,557
8
26,535
5,353,858
12,381
38,908
556,086
9,570
147,610
518
9,915
34
26,629
5,538,088
2,432,544
3,297
505,752
990,791
46,691
29,303
23,786
19,450
60,031
4,486
7,661
31,790
7,485
48,287
98,249
4,309,603
2,396,417
2,098
463,527
936,409
41,455
29,728
31,587
22,940
58,044
2,019
2,735
1,773
7,724
46,499
47,108
4,090,063
2,398,531
2,957
493,510
948,826
70,259
29,624
20,524
20,137
45,027
3,895
7,661
19,950
7,473
64,207
97,665
4,230,246
42,725
492,869
786,828
1,322,422
5,632,025
42,725
492,869
728,201
1,263,795
5,353,858
42,725
492,869
772,248
1,307,842
5,538,088
Selective Insurance Group, Inc.
Combined Insurance Company Subsidiaries
Statutory Statements Of Income
(unaudited)
Quarter Ended
March
($ in thousands)
UNDERWRITING
Net premiums written
2014
2015
$
518,088
476,750
Net premiums earned
476,123
456,495
Net losses paid
Change in reserve for losses
Net losses incurred
194,366
34,014
228,380
48.0 %
213,297
54,941
268,238
58.8 %
44,994
12,243
57,237
12.0 %
44,764
7,544
52,308
11.4 %
Net underwriting expenses incurred
170,938
33.0 %
153,790
32.2 %
Total deductions
Statutory underwriting gain / (loss)
456,555
19,568
Net loss expenses paid
Change in reserve for loss expenses
Net loss expenses incurred
474,336
(17,840 )
Net loss from premium balances charged off
Finance charges and other income
Total other income
Policyholders' dividends incurred
Total underwriting gain / (loss)
(610 )
1,994
1,384
(1,525 )
19,427
INVESTMENT
Net investment income earned
Net realized gain
Total income before income tax
27,127
18,883
65,437
35,495
7,215
32,796
7,261
5,845
Federal income tax expense
-0.3 %
0.3 %
93.0 %
(874 )
10,038
9,164
(1,238 )
(9,914 )
Net income
$
58,176
26,951
Policyholders' Surplus
Surplus, beginning of period
$
1,307,842
1,256,431
Net income
Change in deferred taxes
Change in net unrealized capital (losses)
Dividends to stockholders
Change in non-admitted assets
Change in Overfunded Contra Asset
Qual Pen Trans Liab
Excess Plan Trans Liab
PRL Plan Trans Liab
Net change in surplus for period
Surplus, end of period
$
58,176
(10,194 )
(12,910 )
(14,438 )
(7,669 )
(281 )
1,846
43
7
26,951
(1,282 )
(1,312 )
(14,376 )
(2,900 )
(1,547 )
1,816
8
6
14,580
7,364
1,322,422
1,263,795
-1.9 %
0.3 %
100.8 %
Statutory underwriting gain / (loss)
Adjustments under GAAP:
Deferred policy acquisition costs
Other, net
GAAP underwriting gain / (loss)
Note: Some amounts or ratios may not foot due to rounding
$
19,427
(9,914 )
$
6,348
246
26,021
4,697
202
(5,015 )
Selective Insurance Group, Inc. and Consolidated Subsidiaries
Alternative Investments
as of March 31, 2015
(unaudited)
TVPI
Fund
Real Estate
Silverpeak RE II
Silverpeak RE III
Total - Real Estate
Inception
Year
Original
Commitment
Remaining
Commitment
Current
Market Value
YTD
Income
DPI (1)
Ratio
(2)
Ratio
2005
2008
20,000,000
15,000,000
35,000,000
2,142,141
7,873,466
10,015,607
9,583,009
2,403,262
11,986,271
708,523
(174,261 )
534,262
0.67
0.07
0.52
1.12
0.41
0.94
Mezzanine Financing
Neovara Euro Mezz
GS Mezz V
New Canaan V
Centerfield Capital
Total - Mezz. Financing
2004
2007
2012
2012
9,000,000
25,000,000
7,000,000
3,000,000
44,000,000
10,143,611
1,611,184
1,843,500
13,598,296
4,513,832
2,871,839
977,414
8,363,086
(56,366 )
(318,713 )
(7,616 )
(382,695 )
0.98
1.08
0.57
0.13
0.94
0.98
1.32
1.06
0.98
1.15
Distressed Debt
Varde VIII
Distressed Managers III
Total - Distressed Debt
2006
2007
10,000,000
15,000,000
25,000,000
2,982,268
2,982,268
1,934,398
5,634,231
7,568,629
39,955
(238,142 )
(198,187 )
1.16
0.79
0.95
1.35
1.21
1.27
1997
5,000,000
-
319,799
36,726
2.82
2.88
2004
2006
10,000,000
15,000,000
1,455,947
1,421,610
2,089,035
5,877,247
(405,995 )
-
1.63
1.02
1.85
1.42
2007
11,098,351
1,382,106
7,126,052
(923,241 )
1.03
1.68
2012
7,000,000
48,098,351
4,619,329
8,878,992
2,107,325
17,519,458
(169,113 )
(1,461,623 )
1.31
0.89
1.73
Private Equity, Secondary Market
NB SOF
2005
Vintage IV
2007
NB SOF II
2008
Total - Pvt. Eq. Sec. Mkt.
12,000,000
20,000,000
12,000,000
44,000,000
899,494
4,200,580
1,939,398
7,039,472
3,567,806
10,517,998
6,122,079
20,207,883
(131 )
(249,716 )
(7,878 )
(257,724 )
1.02
0.81
1.00
0.92
1.34
1.35
1.50
1.39
Energy/Power
Generation
ArcLight I
2002
ArcLight II
2003
ArcLight III
2006
Quintana Energy
2006
ArcLight IV
2007
Arclight VI
2014
Total - Energy/Power Generation
15,000,000
15,000,000
15,000,000
10,000,000
10,000,000
15,000,000
80,000,000
2,295,492
2,037,794
284,272
2,287,578
15,000,000
21,905,136
12,455
280,140
3,174,516
6,636,978
2,289,449
12,393,538
4,325
94,636
(1,696,040 )
(177,507 )
(1,774,586 )
1.81
1.40
1.23
0.60
1.20
1.81
1.41
1.43
1.28
1.42
1.32
1.49
9,600,000
9,600,000
350,000
350,000
6,235,634
6,235,634
0.73
0.73
1.40
1.40
285,698,351
64,769,770
84,274,499
1.05
1.38
Private Equity
Prospector
Trilantic Capital Partners
III
NB Co-Invest
Trilantic Capital Partners
IV
Trilantic Capital Partners
V
Total - Private Equity
Venture Capital
Venture V
Total - Venture Capital
2001
TOTAL - ALTERNATIVE
INVESTMENTS
Distributed to paid in ratio
Total value to paid in ratio
Exhibit may not foot due to rounding
(1)
(2)
$
-
(3,540,554 )
Selective Insurance Group, Inc. and Consolidated Subsidiaries
Credit Quality of Available-for-Sale Fixed Income Securities
March 31, 2015
(unaudited)
($ in millions)
AFS Fixed Income Portfolio:
U.S. government and government agencies
Foreign government
Obligations of states and political subdivisions
Corporate securities
Asset-backed securities (“ABS”)
Mortgage-backed securities (“MBS”)
Total AFS fixed income portfolio
Obligations of States and Political Subdivisions:
General obligations
Special revenue obligations
Total obligations of state and political subdivisions
Corporate Securities:
Financial
Industrials
Utilities
Consumer discretionary
Consumer staples
Healthcare
Materials
Energy
Information technology
Telecommunications services
Other
Total corporate securities
ABS:
ABS
Sub-prime ABS 1
Total ABS
MBS:
Government guaranteed agency commercial MBS (“CMBS”)
Other agency CMBS
Non-agency CMBS
Government guaranteed agency residential MBS (“RMBS”)
Other agency RMBS
Non-agency RMBS
Alternative-A (“Alt-A”) RMBS
Total MBS
Fair
Value
$
$
$
$
$
$
$
$
$
$
Unrealized
Gain
(Loss)
Weighted
Average
Credit
Quality
119.5
27.9
1,294.4
1,824.2
185.4
722.8
4,174.2
7.3
0.9
40.3
53.6
1.1
12.0
115.2
AA+
AAAA
AAAA
AA+
AA-
567.5
726.9
1,294.4
16.8
23.5
40.3
AA+
AA
AA
610.0
144.0
151.3
214.8
165.6
162.2
108.2
97.7
122.2
47.5
0.7
1,824.2
15.4
5.4
4.8
6.8
4.7
6.7
3.2
1.4
3.6
1.5
0.1
53.6
A
ABBB+
AAA
BBB+
AA
BBB+
AA
A-
185.1
0.3
185.4
1.0
0.1
1.1
AAA
D
AAA
12.8
12.4
175.3
29.1
468.5
21.2
3.5
722.8
0.3
0.1
2.9
0.7
7.8
0.2
—
12.0
AA+
AA+
AAA
AA+
AA+
BB+
A
AA+
1 Subprime ABS includes one security whose issuer is currently expected by rating agencies to default on its obligations. We define sub-prime exposure as exposure to direct and
indirect investments in non-agency residential mortgages with average FICO ® scores below 650.
Selective Insurance Group, Inc. and Consolidated Subsidiaries
Credit Quality of Held-to-Maturity Fixed Income Securities
March 31, 2015
(unaudited)
($ in millions)
HTM Fixed Income Portfolio:
Foreign government
Obligations of states and political
subdivisions
Corporate securities
ABS
MBS
Total HTM fixed income
portfolio
Obligations of states and political
subdivisions:
General obligations
Special revenue obligations
Total obligations of states and
political subdivisions
Corporate Securities:
Financial
Industrials
Utilities
Total corporate securities
ABS:
ABS
Alt-A ABS
Total ABS
MBS:
Non-agency CMBS
Total MBS
Fair
Value
Carry
Value
Unrecognized
Holding Gain
5.3
5.3
—
277.0
21.2
2.5
5.1
266.5
18.3
2.1
4.4
10.5
2.9
0.4
0.7
$
311.1
296.6
$
90.3
186.7
$
$
Unrealized
Gain (Loss) in
Accumulated
Other
Comprehensive
Income
Weighted
Average
Credit
Quality
—
AA+
1.7
(0.2 )
(0.4 )
(0.4 )
12.2
2.7
—
0.3
AA
A+
AAA
AAA
14.5
0.7
15.2
AA
87.4
179.1
2.9
7.6
0.8
0.9
3.7
8.5
AA
AA
277.0
266.5
10.5
1.7
12.2
AA
2.2
6.4
12.6
21.2
1.9
5.4
11.0
18.3
0.3
1.0
1.6
2.9
(0.1 )
(0.1 )
—
(0.2 )
0.2
0.9
1.6
2.7
AA+
A+
A+
$
0.5
2.0
2.5
0.5
1.6
2.1
—
0.4
0.4
—
(0.4 )
(0.4 )
—
—
—
AA
AAA
AAA
$
$
5.1
5.1
4.4
4.4
0.7
0.7
(0.4 )
(0.4 )
0.3
0.3
AAA
AAA
$
$
$
—
Total
Unrealized/
Unrecognized
Gain