Q3 Earnings Report: Selective Posts Net Loss

October 31, 2011

Selective Insurance Group, based in Branchville, New Jersey, reported net loss of $20.1 million for the third quarter. The insurer had posted net profit of $17.2 million during the same period one year ago.

The insurer blamed big catastrophe losses for the third quarter, which turned out to be the biggest such loss in the company’s history.

“Catastrophe losses for the quarter were $67 million, the highest Selective has experienced in its 85-year history,” said CEO Gregory Murphy.

“Hurricane Irene’s impact in our top four premium states was the key contributor to our results. However, our claims teams have been working tirelessly in all the states impacted by the storms to pave the road to recovery for our customers. ”

Selective said it expects that pricing discipline should be taking hold industry-wide given the current low interest rate environment as well as the significant level of catastrophe losses.

“We continue to lead the industry with our tenth consecutive quarter of commercial lines renewal price increases which were 2.7% percent,” CEO Murphy said. “In addition, personal lines price increased 5.9 percent in the quarter continuing a nearly four-year trend. Our multi-year price increases for both commercial and personal lines mean we are earning rate increases in excess of expected loss cost trends.”

The insurer said it has demonstrated its disciplined ability to grow the top line in the past two quarters. Total net premiums written were up 8 percent while audit and endorsement were positive this quarter.

Commercial lines retention was 81.6 percent compared to 79.6 percent in third quarter 2010. “We believe that these factors are leading indicators of a more holistic turn in the market,” Murphy said.

Selective’s third-quarter earnings highlights include the following:

• Net loss was $20.1 million, or $0.37 per diluted share, compared to net income of $17.2 million, or $0.32 per diluted share, one year ago;

• Net realized losses on investments were $1.3 million, after tax, or $0.02 per diluted share;

• Operating loss was $18.2 million, or $0.34 per diluted share, compared to operating income of $18.8 million, or $0.35 per diluted share;

• Combined ratio: GAAP: 119.0 percent compared to 101.1 percent one year ago; Statutory: 116.4 percent compared to 100.3 percent one year ago;

• Total net premiums written were up 8 percent to $396.8 million;

• Catastrophe losses were $43.8 million, after tax, versus $7.8 million, after tax, reported during the same period one year ago.

• Net investment income, after tax, increased 7 percent to $27.0 million; and

• Prior year statutory casualty reserve development was favorable at around $10 million, compared to $13 million one year ago.

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