Selective Insurance Group Q4 Profit Jumps to $25M

By | January 31, 2014

Selective Insurance Group, based in Branchville, N.J., posted $25.3 million in net income for its 2013 fourth quarter, up from $1.3 million net income posted during the 2012 fourth quarter which included impacts of Superstorm Sandy. For the full year 2013, the net income was $106.4 million, a 180 percent increase from $38.0 million for the full year 2012.

The insurer said total net premiums written for the fourth quarter were $405.1 million, up 9.3 percent compared to $370.6 million during the prior year fourth quarter. The GAAP combined ratio for the fourth quarter was 97.3 percent, improving from 109.0 percent a year ago.

For the full year 2013, the total net premiums were $1.810 billion, up 8.6 percent from $1.667 billion for 2012. The GAAP combined ratio for 2013 was 97.8 percent, improving from 104.0 percent in 2012.

The net investment income for the fourth quarter was $26.4 million, in line with $26.3 million reported a year ago. For the full year 2013, the net investment income was $101.4 million, up 1.1 percent from $100.3 million in 2012.

Gregory E. Murphy, chairman and chief executive officer, said the 2013 fourth quarter was a solid end to a very strong year for his company. “We met or exceeded our primary operational and financial targets for the year,” he said.

On commercial lines pricing, Murphy said the company achieved standard commercial lines renewal pure price increases of 7.5 percent during the 2013 fourth quarter, making it Selective’s 19th consecutive quarter of increases.

“With the current low investment yields, less favorable industry reserve development and expectations for a return to higher catastrophe losses, we see no compelling scenario to justify a softening of commercial lines rates, which many in the industry are predicting,” he said.

In the company’s standard commercial lines, net premiums written were up 10 percent in the fourth quarter, driven by continued price increases and 82 percent retention, Murphy said. The statutory combined ratio was 100.2 percent for the quarter, down from 110.7 percent a year ago.

In the standard personal lines, renewal pure price increased 7.2 percent for the fourth quarter while retention remained at 85 percent. The statutory net premiums written grew 4 percent in the quarter while the combined ratio was 94.9 percent. “We continue to drive profitability in the homeowners’ line by increasing rate across the book and cost sharing through increased deductibles,” Murphy said.

In the excess and surplus lines, net premiums written for the fourth quarter grew 20 percent from a year ago. “We increased renewal rate 7.5 percent and continue to see business migrate back to this market from standard lines,” Murphy observed. The statutory combined ratio for the fourth quarter was 105.6 percent, improving from 114.8 percent a year ago, due to a decrease in property losses and significant underwriting actions to improve profitability, he said.

CEO Murphy said the company’s 2014 commercial lines renewal pure price target is 6-to-7 percent. And the company’s commercial lines renewal pure price increase for January is expected to be up 6.2 percent based on latest figures, he said during an earnings conference call.

He also said the company is confident it can achieve expected renewal pure price increases of 6.25 percent in personal lines and 8.5 percent in excess and surplus lines for 2014.

The company also provided a preliminary loss estimate for this month’s severe winter weather.

“As a result of the extreme winter weather that has been in the headline news since the New Year began, we are providing a preliminary estimate for the severe weather losses including catastrophes for January 2014, of between $28 million and $32 million — or roughly 6 points on the first quarter combined ratio,” Chief Financial Officer Dale A. Thatcher said during the conference call.

These losses are due to the weather experienced throughout its 22 Eastern and Midwestern states footprint and are related to freezing temperatures and snow storms, Thatcher said. The estimates for the broader, industry-wide impact are not yet clear, he added.

In January, there were very prolonged severe temperatures, coupled with very high winds — so any weak spots in any structures were exposed to the result of the severe weather, the company said.

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