Selective Insurance Group, Inc. (Nasdaq: SIGI) today reported net income of $11.1 million, or $0.41 per diluted share, for the third quarter ended September 30, 2002, compared with $2.1 million, or $0.08 per diluted share for the third quarter of 2001.
Operating income from continuing operations was $10.1 million, or $0.38 per diluted share for the quarter, up from $0.4 million, or $0.02 per diluted share, for the same period last year. Charges taken in the third quarter of 2001 represented $0.29 per diluted share of net income and operating income.
According to Selective Insurance Group, Inc., Chairman, President and CEO Gregory E. Murphy: “Ongoing improvements in our core commercial lines operation which represents more than 80 percent of our business, drove our strong performance this quarter. With commercial price increases of 19 percent for the period, we successfully narrowed our commercial lines statutory combined ratio by 1.5 points to 102.4 percent, despite a 1.1 point increase in weather-related catastrophes compared to this period last year. Clearly, the three-year commercial lines pricing strategy we initiated in 2000 is having a positive impact. Furthermore, despite the pressure of declining interest rates on our investment portfolio, we are generating significantly higher cash flow, a sign of a fundamental turnaround in our business.”
Murphy continued, “Net premiums written grew 15 percent for the quarter in our core commercial lines business, and contributed to overall net premiums written growth of 13 percent, to $267 million. Although personal lines price increases continue to lag behind commercial lines, we are encouraged by the broad-based 8 percent renewal price increases experienced in our personal lines operation this year. For the quarter, our personal lines net premiums written were up 6 percent. More importantly, our average New Jersey personal automobile premiums per car were up over 10 percent for the quarter, and the actions we have taken on this book of business have started to generate improving underwriting results. Although still unacceptable, our overall personal lines statutory combined ratio, which includes flood operations, was 104.8 percent for the quarter. Improving commercial and personal lines results, both driven by higher prices, generated an overall statutory combined ratio of 102.9 percent for the quarter.”
Strong operating cash flow for the nine months of $130 million attributed to higher cash flow from underwriting activities, together with proceeds from the company’s $100 million convertible bond offering, pushed invested assets to $2.1 billion, up 17 percent over invested assets at year-end. After-tax investment income was $18.1 million for the quarter, consistent with the third quarter last year. Revenue from continuing operations for the third quarter increased 12 percent to $300 million, led by a 13 percent increase in net premiums earned. Revenue for Selective’s continuing Diversified Insurance Services businesses was $21 million for the third quarter 2002, up 17 percent over the prior year period. These businesses contributed $1.3 million in net income from continuing operations for the quarter, with return on revenue of 5.9 percent.
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