Selective Reports Results for the Second Quarter of 2018 – Record Net Income per Diluted Share of $0.99; Record Non-GAAP Operating Income(1) per Diluted Share of $1.01

BRANCHVILLE, N.J., Aug. 1, 2018 /PRNewswire/ — 

In the second quarter of 2018:

• Net premiums written grew 7%
• GAAP Combined ratio was 93.7%
• After-tax net investment income was up 24%, to $38 million
• Annualized return on equity was 14.0% and non-GAAP return on equity was 14.3%

Selective Insurance Group, Inc. (NASDAQ: SIGI) today reported its financial results for the second quarter ended June 30, 2018.  Net income per diluted share was a company record $0.99, compared to $0.70 a year ago. Non-GAAP operating income¹ per diluted share was also a company record $1.01, compared to $0.68 a year ago.

“In the second quarter, we generated record non-GAAP operating income per diluted share for the company and an excellent 93.7% GAAP combined ratio, or 90.6% excluding catastrophe losses,” said Gregory E. Murphy, Chairman and Chief Executive Officer.  “Our non-GAAP operating return on average equity (‘ROE’)¹ was 14.3%, a solid result in the context of an overall competitive marketplace and continued low interest rate environment for investment portfolios.  On a year-to-date basis, our non-GAAP operating ROE was 10.2%, compared to our long-term financial target of 12% for 2018.”

Mr. Murphy continued, “Growth in the quarter was robust, as net premiums written increased 7%, driven by commercial lines renewal pure price increases of 3.5% and stable retention of 84%.  Our ability to drive price increases in excess of expected claims inflation while maintaining solid growth rates and retention is a testament to our strong relationships with our ‘ivy league’ distribution partners.  After-tax net investment income increased 24% in the quarter to $38 million, benefiting from higher interest rates, active portfolio management and security selection, and a lower Federal income tax rate.”

Operating Highlights

Standard Commercial Lines

Standard Commercial Lines premiums, which represented 79% of our second quarter 2018 net premiums written, were up 8% in the quarter compared to a year ago.  This growth reflects strong renewal pure price increases of 3.5%, excellent retention of 84%, and new business growth of 3%, to $101 million.  The combined ratio in the second quarter was 91.4%, a decrease of 0.8 points from a year ago, the drivers of which are outlined in the table below.

Standard Personal Lines

Standard Personal Lines premiums, which represented 13% of our second quarter 2018 net premiums written, increased 7%  compared to a year ago, driven largely by strong renewal pure price increases of 3.4%, excellent retention of 85%, and a 20% increase in new business.  The combined ratio in the second quarter was 93.7%, a 14.3-point improvement from a year ago, the drivers of which are outlined in the table below.

Excess and Surplus Lines

Excess and Surplus Lines premiums, which represented 8% of our second quarter 2018 net premiums written, decreased 1% in the second quarter compared to a year ago, driven by a 19% reduction in new business, reflecting the highly competitive marketplace and targeted underwriting actions we are taking to improve profitability.  The combined ratio for the second quarter was 114.7%, which was 17.2 points higher than a year ago.  In addition to the drivers outlined in the table below, higher current year loss costs increased the combined ratio 4.7 points compared to last year.  The unfavorable prior year casualty reserve development outlined in the table below was primarily driven by increased frequencies and severities in accident years 2015 and 2016.