Third Quarter Return on Common
Equity ("ROE") of 7.0% and Non-GAAP Operating ROE1
of 10.5%
In the third quarter of 2022, we reported:
- Net premiums written ("NPW") increased 11% compared to the
third quarter of 2021;
- GAAP combined ratio of 96.8%;
- Commercial Lines renewal pure price increases averaged 5.8%,
compared to 5.3% in the second quarter of 2022;
- After-tax net investment income of $52
million, down 31% compared to the third quarter of
2021;
- Book value per common share of $36.96, down 7% in the third quarter; and
- Adjusted book value per common share¹ of $44.59, up 1% in the third quarter.
![(PRNewsfoto/Selective Insurance Group, Inc.) (PRNewsfoto/Selective Insurance Group, Inc.)](https://mma.prnewswire.com/media/942365/Selective__Logo.jpg)
BRANCHVILLE, N.J., Nov. 2, 2022
/PRNewswire/ -- Selective Insurance Group, Inc. (NASDAQ: SIGI)
reported financial results for the third quarter ended September 30, 2022, with net income per diluted
common share of $0.66 and non-GAAP
operating income1 per diluted common share of
$0.99. The third quarter
combined ratio was a profitable 96.8%, with 4.0% points of
catastrophe losses, including a $10
million ultimate net loss for Hurricane Ian. Non-catastrophe
property losses were 3.5 points above the prior-year period. The
non-GAAP operating ROE was 10.5%, and NPW increased 11% from a year
ago. NPW growth was strong across our Standard Commercial Lines,
Standard Personal Lines, and Excess & Surplus segments, driven
by renewal pure price increases, solid retention, and exposure
growth. For the quarter, the Investments segment contributed
8.9 points of annualized ROE.
"We are proud of our results and ability to effectively navigate
through an environment characterized by capital markets volatility
and historic levels of economic inflation. We have established an
organizational discipline focused on balancing profitability and
growth, as demonstrated by our strong and consistent results
throughout this challenging environment," said John Marchioni, President and CEO.
"We remain focused on maintaining disciplined underwriting and
appropriate risk-based pricing. With an extremely strong balance
sheet, we continue to enhance our market position with our
customers and distribution partners. We are well positioned to meet
our 2022 ROE target of 11%, marking our ninth consecutive year of
double-digit non-GAAP operating returns on common equity," Mr.
Marchioni concluded.
Operating
Highlights
|
|
|
Consolidated
Financial Results
|
Quarter ended
September 30,
|
Change
|
Year-to-Date
September 30,
|
Change
|
$ and shares in
millions, except per share data
|
2022
|
2021
|
2022
|
2021
|
Net premiums
written
|
$
903.4
|
|
812.9
|
11
|
%
|
$ 2,723.9
|
|
2,444.3
|
11
|
%
|
Net premiums
earned
|
853.9
|
|
767.2
|
11
|
|
2,500.6
|
|
2,232.7
|
12
|
|
Net investment income
earned
|
63.9
|
|
93.0
|
(31)
|
|
206.7
|
|
246.5
|
(16)
|
|
Net realized and
unrealized (losses) gains, pre-tax
|
(25.7)
|
|
0.2
|
(14,609)
|
|
(108.9)
|
|
15.4
|
(809)
|
|
Total
revenues
|
895.0
|
|
865.0
|
3
|
|
2,605.9
|
|
2,509.5
|
4
|
|
Net underwriting
income, after-tax
|
21.4
|
|
8.6
|
148
|
|
95.3
|
|
130.0
|
(27)
|
|
Net investment income,
after-tax
|
51.5
|
|
74.7
|
(31)
|
|
166.7
|
|
198.5
|
(16)
|
|
Net income available to
common stockholders
|
40.2
|
|
71.4
|
(44)
|
|
131.5
|
|
297.8
|
(56)
|
|
Non-GAAP operating
income1
|
60.5
|
|
71.3
|
(15)
|
|
217.5
|
|
285.7
|
(24)
|
|
Combined
ratio
|
96.8
|
%
|
98.6
|
(1.8)
|
pts
|
95.2
|
%
|
92.6
|
2.6
|
pts
|
Loss and loss expense
ratio
|
64.1
|
|
65.9
|
(1.8)
|
|
62.7
|
|
60.0
|
2.7
|
|
Underwriting expense
ratio
|
32.6
|
|
32.6
|
—
|
|
32.4
|
|
32.4
|
—
|
|
Dividends to
policyholders ratio
|
0.1
|
|
0.1
|
—
|
|
0.1
|
|
0.2
|
(0.1)
|
|
Net catastrophe
losses
|
4.0
|
pts
|
10.0
|
(6.0)
|
|
4.0
|
pts
|
5.8
|
(1.8)
|
|
Non-catastrophe
property losses and loss expenses
|
19.6
|
|
16.1
|
3.5
|
|
18.3
|
|
15.5
|
2.8
|
|
(Favorable) prior-year
reserve development on casualty lines
|
(1.9)
|
|
(1.8)
|
(0.1)
|
|
(1.9)
|
|
(3.0)
|
1.1
|
|
Net income available to
common stockholders per diluted common share
|
$
0.66
|
|
1.18
|
(44)
|
%
|
$
2.16
|
|
4.92
|
(56)
|
%
|
Non-GAAP operating
income per diluted common share1
|
0.99
|
|
1.18
|
(16)
|
|
3.57
|
|
4.72
|
(24)
|
|
Weighted average
diluted common shares
|
60.8
|
|
60.6
|
—
|
|
60.8
|
|
60.5
|
1
|
|
Book value per common
share
|
$
36.96
|
|
45.27
|
(18)
|
|
36.96
|
|
45.27
|
(18)
|
|
Adjusted book value per
common share¹
|
44.59
|
|
41.56
|
7
|
|
44.59
|
|
41.56
|
7
|
|
Overall Insurance Operations
For the third quarter, overall NPW increased 11% from a
year ago, reflecting average renewal pure price increases of 5.3%,
solid retention, new business, and exposure growth. Our combined
ratio was 96.8% in the quarter, compared with 98.6% a year ago,
with the improvement driven by lower catastrophe losses. Our
underlying combined ratio, which excludes catastrophe losses and
casualty reserve development, was 94.7% this quarter, compared to
90.4% a year ago. The 4.3-point increase was driven principally by
non-catastrophe property losses that were 3.5 points higher than a
year ago. The increase in non-catastrophe property losses was
primarily driven by higher severities from inflationary pressures
on items such as new and used car prices, auto repair costs, and
building materials and labor costs. While our booked casualty loss
ratios remain on plan and unchanged for the 2022 accident year, the
recognition of $9.3 million of ceded
earned casualty reinstatement premium in the quarter, principally
due to development on one large loss from the 2018 treaty year and
two large losses from the 2020 treaty year, added 0.8 points to the
all-lines combined ratio. Our Insurance Operations generated 3.7
points of annualized ROE in the quarter.
Standard Commercial Lines Segment
For the third quarter, Standard Commercial Lines premiums
(representing 80% of total NPW) increased 11% compared to a year
ago. The premium growth reflected average renewal pure price
increases of 5.8%, new business growth of 5%, and consistently
solid retention of 86%. The third quarter combined ratio was 96.8%.
The following table shows the variances relative to the 97.2%
combined ratio a year ago:
Standard Commercial
Lines Segment
|
Quarter ended
September 30,
|
Change
|
Year-to-Date
September 30,
|
Change
|
$ in
millions
|
2022
|
2021
|
2022
|
2021
|
Net premiums
written
|
$
727.5
|
|
652.6
|
11
|
%
|
$ 2,225.4
|
|
1,995.3
|
12
|
%
|
Net premiums
earned
|
692.4
|
|
619.6
|
12
|
|
2,034.1
|
|
1,808.5
|
12
|
|
Combined
ratio
|
96.8
|
%
|
97.2
|
(0.4)
|
pts
|
94.5
|
%
|
91.4
|
3.1
|
pts
|
Loss and loss expense
ratio
|
63.4
|
|
63.5
|
(0.1)
|
|
61.1
|
|
57.9
|
3.2
|
|
Underwriting expense
ratio
|
33.3
|
|
33.5
|
(0.2)
|
|
33.2
|
|
33.3
|
(0.1)
|
|
Dividends to
policyholders ratio
|
0.1
|
|
0.2
|
(0.1)
|
|
0.2
|
|
0.2
|
—
|
|
Net catastrophe
losses
|
2.6
|
pts
|
8.1
|
(5.5)
|
|
2.7
|
pts
|
4.3
|
(1.6)
|
|
Non-catastrophe
property losses and loss expenses
|
18.7
|
|
14.5
|
4.2
|
|
16.9
|
|
13.7
|
3.2
|
|
(Favorable) prior-year
reserve development on casualty lines
|
(2.3)
|
|
(2.3)
|
—
|
|
(2.4)
|
|
(3.3)
|
0.9
|
|
Standard Personal Lines Segment
For the third quarter, Standard Personal Lines premiums
(representing 10% of total NPW) increased 11% compared to a year
ago. Renewal pure price increases averaged 0.5%, retention was 85%,
and new business was up $7.2 million,
or 70%, compared to last year. The third quarter combined
ratio was 101.8%. The following table shows the variances relative
to the 115.2% combined ratio a year ago:
Standard Personal
Lines Segment
|
Quarter ended
September 30,
|
Change
|
Year-to-Date
September 30,
|
Change
|
$ in
millions
|
2022
|
2021
|
2022
|
2021
|
Net premiums
written
|
$
86.8
|
|
78.2
|
11
|
%
|
$
234.5
|
|
221.9
|
6
|
%
|
Net premiums
earned
|
75.6
|
|
73.4
|
3
|
|
221.6
|
|
220.5
|
1
|
|
Combined
ratio
|
101.8
|
%
|
115.2
|
(13.4)
|
pts
|
103.3
|
%
|
99.0
|
4.3
|
pts
|
Loss and loss expense
ratio
|
75.7
|
|
88.8
|
(13.1)
|
|
77.8
|
|
72.7
|
5.1
|
|
Underwriting expense
ratio
|
26.1
|
|
26.4
|
(0.3)
|
|
25.5
|
|
26.3
|
(0.8)
|
|
Net catastrophe
losses
|
14.9
|
pts
|
26.7
|
(11.8)
|
|
16.5
|
pts
|
13.7
|
2.8
|
|
Non-catastrophe
property losses and loss expenses
|
38.4
|
|
39.1
|
(0.7)
|
|
36.8
|
|
34.8
|
2.0
|
|
(Favorable) prior-year
reserve development on casualty lines
|
—
|
|
—
|
—
|
|
—
|
|
—
|
—
|
|
Excess and Surplus Lines Segment
For the third quarter, Excess and Surplus Lines premiums
(representing 10% of total NPW) increased 9% compared to the
prior-year period, driven by average renewal pure price increases
of 6.7% and new business growth of 8%. The third quarter combined
ratio was 93.0%. The following table shows the variances relative
to the 93.7% combined ratio a year ago:
Excess and Surplus
Lines Segment
|
Quarter ended
September 30,
|
Change
|
Year-to-Date
September 30,
|
Change
|
$ in
millions
|
2022
|
2021
|
2022
|
2021
|
Net premiums
written
|
$
89.1
|
|
82.1
|
9
|
%
|
$
264.1
|
|
227.1
|
16
|
%
|
Net premiums
earned
|
85.8
|
|
74.3
|
15
|
|
244.8
|
|
203.8
|
20
|
|
Combined
ratio
|
93.0
|
%
|
93.7
|
(0.7)
|
pts
|
93.3
|
%
|
96.3
|
(3.0)
|
pts
|
Loss and loss expense
ratio
|
61.0
|
|
62.8
|
(1.8)
|
|
61.2
|
|
64.7
|
(3.5)
|
|
Underwriting expense
ratio
|
32.0
|
|
30.9
|
1.1
|
|
32.1
|
|
31.6
|
0.5
|
|
Net catastrophe
losses
|
5.4
|
pts
|
9.2
|
(3.8)
|
|
3.3
|
pts
|
10.5
|
(7.2)
|
|
Non-catastrophe
property losses and loss expenses
|
10.1
|
|
6.5
|
3.6
|
|
12.4
|
|
10.5
|
1.9
|
|
(Favorable) prior-year
reserve development on casualty lines
|
—
|
|
—
|
—
|
|
—
|
|
(3.4)
|
3.4
|
|
Investments Segment
For the third quarter, after-tax net investment income of
$52 million was down $23 million, or 31%, compared to last year.
After-tax alternative investment income was $38 million lower in third quarter 2022 than the
prior-year period. The variance was driven by a $4 million after-tax loss in third quarter 2022
compared to an after-tax gain of $34
million in third quarter 2021. This decline was partially
offset by significantly higher income from our fixed income
securities portfolio due to higher book yields. For the
quarter, the after-tax earned income yield averaged 2.7% for the
overall portfolio, and 3.4% for the fixed income securities
portfolio. The investment portfolio's total return was (2.6)%,
driven by a sharp increase in interest rates during the quarter.
These resulted in $189 million of
after-tax net unrealized losses on our fixed income securities
recorded in accumulated other comprehensive income, and
$20 million of after-tax net realized
and unrealized losses recorded in net income. Invested assets per
dollar of common stockholders' equity was $3.38 at September 30,
2022, and the investment portfolio generated 8.9 points of
non-GAAP operating ROE for the quarter.
Investments
Segment
|
Quarter ended
September 30,
|
Change
|
Year-to-Date
September 30,
|
Change
|
$ in millions,
except per share data
|
2022
|
2021
|
2022
|
2021
|
Net investment income
earned, after-tax
|
$
51.5
|
|
74.7
|
(31)
|
%
|
$
166.7
|
|
198.5
|
(16)
|
%
|
Net investment income
per common share
|
0.85
|
|
1.23
|
(31)
|
|
2.74
|
|
3.28
|
(16)
|
|
Effective tax
rate
|
19.3
|
%
|
19.7
|
(0.4)
|
pts
|
19.4
|
%
|
19.5
|
(0.1)
|
pts
|
Average
yields:
|
|
|
|
|
|
|
|
|
|
|
Portfolio:
|
|
|
|
|
|
|
|
|
|
|
Pre-tax
|
3.4
|
|
4.8
|
(1.4)
|
|
3.5
|
|
4.3
|
(0.8)
|
|
After-tax
|
2.7
|
|
3.8
|
(1.1)
|
|
2.9
|
|
3.4
|
(0.5)
|
|
Fixed income
securities:
|
|
|
|
|
|
|
|
|
|
|
Pre-tax
|
4.2
|
%
|
3.1
|
1.1
|
pts
|
3.7
|
%
|
3.2
|
0.5
|
pts
|
After-tax
|
3.4
|
|
2.5
|
0.9
|
|
3.0
|
|
2.6
|
0.4
|
|
Annualized ROE
contribution
|
8.9
|
|
11.0
|
(2.1)
|
|
8.9
|
|
10.1
|
(1.2)
|
|
Balance
Sheet
|
|
$ in millions, except
per share data
|
September 30,
2022
|
|
December 31,
2021
|
|
Change
|
Total assets
|
$
10,520.5
|
|
|
10,461.4
|
|
|
1 %
|
|
Total
investments
|
7,536.1
|
|
|
8,027.0
|
|
|
(6)
|
|
Long-term
debt
|
505.2
|
|
|
506.1
|
|
|
—
|
|
Stockholders'
equity
|
2,427.5
|
|
|
2,982.9
|
|
|
(19)
|
|
Common stockholders'
equity
|
2,227.5
|
|
|
2,782.9
|
|
|
(20)
|
|
Invested assets per
dollar of common stockholders' equity
|
3.38
|
|
|
2.88
|
|
|
17
|
|
Net premiums written to
policyholders' surplus
|
1.45
|
x
|
|
1.33
|
x
|
|
0.12
|
x
|
Book value per common
share
|
$
36.96
|
|
|
46.24
|
|
|
(20)
|
|
Adjusted book value per
common share¹
|
44.59
|
|
|
43.23
|
|
|
3
|
|
Debt to total
capitalization
|
17.2
|
%
|
|
14.5
|
%
|
|
2.7
|
pts
|
Book value per common share declined by $9.28, or 20%, during the first nine months of
2022. The decline was principally driven by (i) a $10.64 change in after-tax net unrealized losses
on our fixed income securities portfolio from higher interest
rates, and (ii) $0.84 of dividends on
our common stock paid to shareholders, partially offset by
$2.16 of net income per diluted
common share. During the first nine months of 2022, the Company
repurchased 165,159 shares for $12.4
million, or an average price of $75.20 per share. Capacity under our existing
repurchase authorization was $84.2
million as of September 30,
2022.
Selective's Board of Directors declared:
- A 7% increase in the quarterly cash dividend on common stock,
to $0.30 per common share, that is
payable December 1, 2022, to holders
of record on November 15, 2022;
and
- A cash dividend of $287.50 per
share on our 4.60% Non-Cumulative Preferred Stock, Series B
(equivalent to $0.28750 per
depository share) payable on December 15,
2022, to holders of record as of November 30, 2022.
Guidance
Our full-year expectations are as follows:
- A GAAP combined ratio, excluding net catastrophe losses, of
91.5% (prior guidance 90.5%). Our combined ratio estimate assumes
no additional prior-year casualty reserve development;
- Net catastrophe losses of 3.5 points (prior guidance 4.0
points) on the combined ratio;
- After-tax net investment income of $215
million (prior guidance $215
million) that includes after-tax net investment income from
our alternative investments of $7
million (prior guidance $15
million);
- An overall effective tax rate of approximately 20.5%, which
assumes an effective tax rate of 19.5% for net investment income
and 21.0% for all other items; and
- Weighted average shares of 61 million on a fully diluted
basis.
The supplemental investor package, including financial
information not included in this press release, is available on the
Investors page of Selective's website at www.Selective.com.
Selective's quarterly analyst conference call will be simulcast at
10:00 A.M. ET, on Thursday, November 3, 2022, at
www.Selective.com. The webcast will be available for
rebroadcast until the close of business on December 2, 2022.
About Selective Insurance Group, Inc.
Selective Insurance Group, Inc. (Nasdaq: SIGI) is a holding
company for 10 property and casualty insurance companies rated "A+"
(Superior) by AM Best. Through independent agents, the insurance
companies offer standard and specialty insurance for commercial and
personal risks and flood insurance through the National Flood
Insurance Program's Write Your Own Program. Selective's unique
position as both a leading insurance group and an employer of
choice is recognized in a wide variety of awards and honors,
including listing in the Fortune 1000 and certification as a Great
Place to Work® in 2022 for the third consecutive year. For more
information about Selective, visit www.Selective.com.
1Reconciliation of Net Income Available to Common
Stockholders to Non-GAAP Operating Income and Certain Other
Non-GAAP Measures
Non-GAAP operating income, non-GAAP operating income per diluted
common share, and non-GAAP operating return on common equity differ
from net income available to common stockholders, net income
available to common stockholders per diluted common share, and
return on common equity, respectively, by the exclusion of
after-tax net realized and unrealized gains and losses on
investments included in net income. Adjusted book value per common
share differs from book value per common share by the exclusion of
total after-tax unrealized gains and losses on investments included
in accumulated other comprehensive (loss) income. These non-GAAP
measures are used as important financial measures by management,
analysts, and investors, because the timing of realized and
unrealized investment gains and losses on securities in any given
period is largely discretionary. In addition, net realized and
unrealized gains and losses on investments could distort the
analysis of trends. These operating measurements are not intended
as a substitute for net income available to common stockholders,
net income available to common stockholders per diluted common
share, return on common equity, and book value per common share
prepared in accordance with U.S. generally accepted accounting
principles (GAAP). Reconciliations of net income available to
common stockholders, net income available to common stockholders
per diluted common share, return on common equity, and book value
per common share to non-GAAP operating income, non-GAAP operating
income per diluted common share, non-GAAP operating return on
common equity, and adjusted book value per common share,
respectively, are provided in the tables below.
Note: All amounts included in this release exclude intercompany
transactions.
Reconciliation of
Net Income Available to Common Stockholders to Non-GAAP Operating
Income
|
|
$ in
millions
|
Quarter ended
September 30,
|
|
Year-to-Date
September 30,
|
2022
|
|
2021
|
|
2022
|
|
2021
|
Net income available to
common stockholders
|
$
40.2
|
|
71.4
|
|
131.5
|
|
297.8
|
Net realized and
unrealized investment losses (gains) included in net income, before
tax
|
25.7
|
|
(0.2)
|
|
108.9
|
|
(15.4)
|
Tax on reconciling
items
|
(5.4)
|
|
—
|
|
(22.9)
|
|
3.2
|
Non-GAAP operating
income
|
$
60.5
|
|
71.3
|
|
217.5
|
|
285.7
|
Reconciliation of
Net Income Available to Common Stockholders per Diluted Common
Share to Non-GAAP Operating Income per
Diluted Common Share
|
|
|
Quarter ended
September 30,
|
|
Year-to-Date
September 30,
|
2022
|
|
2021
|
|
2022
|
|
2021
|
Net income available to
common stockholders per diluted common share
|
$
0.66
|
|
1.18
|
|
2.16
|
|
4.92
|
Net realized and
unrealized investment losses (gains) included in net income, before
tax
|
0.42
|
|
—
|
|
1.79
|
|
(0.25)
|
Tax on reconciling
items
|
(0.09)
|
|
—
|
|
(0.38)
|
|
0.05
|
Non-GAAP operating
income per diluted common share
|
$
0.99
|
|
1.18
|
|
3.57
|
|
4.72
|
Reconciliation of
Return on Common Equity to Non-GAAP Operating Return on Common
Equity
|
|
|
Quarter ended
September 30,
|
|
Year-to-Date
September 30,
|
2022
|
|
|
2021
|
|
2022
|
|
2021
|
Return on Common
Equity
|
7.0
|
%
|
|
10.6
|
|
7.0
|
|
15.1
|
Net realized and
unrealized investment losses (gains) included in net income, before
tax
|
4.4
|
|
|
—
|
|
5.8
|
|
(0.8)
|
Tax on reconciling
items
|
(0.9)
|
|
|
—
|
|
(1.2)
|
|
0.2
|
Non-GAAP Operating
Return on Common Equity
|
10.5
|
%
|
|
10.6
|
|
11.6
|
|
14.5
|
Reconciliation of
Book Value per Common Share to Adjusted Book Value per Common
Share
|
|
|
Quarter ended
September 30,
|
|
Year-to-Date
September 30,
|
2022
|
|
2021
|
|
2022
|
|
2021
|
Book value per common
share
|
$
36.96
|
|
45.27
|
|
36.96
|
|
45.27
|
Total unrealized
investment losses (gains) included in accumulated other
comprehensive (loss) income, before tax
|
9.67
|
|
(4.71)
|
|
9.67
|
|
(4.71)
|
Tax on reconciling
items
|
(2.04)
|
|
1.00
|
|
(2.04)
|
|
1.00
|
Adjusted book value per
common share
|
44.59
|
|
41.56
|
|
44.59
|
|
41.56
|
Note: Amounts in the tables above may not foot due to
rounding.
Forward-Looking Statements
Certain statements in this report, including information
incorporated by reference, are "forward-looking statements" as
defined by 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 and financial performance. They involve known and
unknown risks, uncertainties, and other factors that may cause our
or industry actual results, activity levels, or performance to
materially differ from those expressed or implied by the
forward-looking statements. In some cases, forward-looking
statements include the words "may," "will," "could," "would,"
"should," "expect," "plan," "anticipate," "target," "project,"
"intend," "believe," "estimate," "predict," "potential," "pro
forma," "seek," "likely," "continue," or comparable terms. Our
forward-looking statements are only predictions, and we can give no
assurance that such expectations will prove correct. We undertake
no obligation, other than as federal securities laws may require,
to publicly update or revise any forward-looking statements for any
reason.
Factors that could cause our actual results to differ materially
from what we project, forecast, or estimate in forward-looking
statements include, without limitation:
- Related to COVID-19:
-
- Governmental directives to contain or delay the spread of the
COVID-19 pandemic have disrupted ordinary business commerce and
impacted financial markets. These governmental actions, the extent,
duration, and possible alteration based on future COVID-19-related
developments that we cannot predict, could materially and adversely
affect our results of operations, net investment income, financial
position, and liquidity.
- The amount of premium we record may be reduced and our
underwriting results may be adversely impacted by (i) voluntary
premium credits on in-force commercial and personal automobile
policies, (ii) state insurance commissioner or other regulatory
directives to implement premium-based credit in lines other than
commercial and personal automobile, and we may be required to
return more premium than warranted by our filed rating plans and
actual loss experience, (iii) the effects of our voluntary efforts
or the directives from various state insurance regulators to extend
individualized payment flexibility and suspend policy
cancellations, late payment notices, and late or reinstatement
fees, (iv) return premiums that could be significant because our
general liability and workers compensation policies provide for
premium audit of revenues and payrolls, and (v) collectability of
premiums, which may be impacted by policyholder financial distress
and insolvency.
- Our loss and loss expenses may increase, our related reserves
may not be adequate, and our financial condition and liquidity may
be materially impacted if litigation or changes in statutory or
common law (i) require payment of COVID-19-related business
interruption losses despite contrary terms, conditions, and
exclusions in our policies or (ii) presume that COVID-19 is a
work-related illness compensable under workers compensation
policies for employees who contract the virus, regardless of
whether they worked in industries defined as essential in various
COVID-19-related governmental directives or interacted with the
public as part of their job duties.
- Our net investment income may be impacted by the significant
equity and debt financial market volatility resulting from the
COVID-19 pandemic and the related governmental orders because (i)
financial market volatility is reflected in our alternative
investments' performance, (ii) increased spreads on fixed income
securities may create mark-to-market investment valuation losses
that reduce unrealized capital gains and impact GAAP equity, and
(iii) net realized losses may increase if we intend to sell more
securities, particularly in asset classes that are more
significantly impacted by COVID-19-related governmental directives
and to which the Federal Reserve Board is providing liquidity and
structural support.
- To varying degrees, the effect, lifting, or lapsing of
COVID-19-related governmental directives have disrupted supply
chains and caused shortages of products, services, and labor. These
shortages may impact our ability to attract and retain labor,
including increasing attrition rates, wages, and the cost and
difficulty of obtaining third-party non-U.S.-based resources.
- The ongoing Russian war against Ukraine is impacting global economic, banking,
commodity, and financial markets, exacerbating ongoing economic
challenges, including inflation and supply chain disruption, which
influences insurance loss costs, premiums and investment
valuation;
- Difficult conditions in global capital markets and the economy,
including the risk of prolonged higher inflation, could increase
loss costs and negatively impact investment portfolios;
- Deterioration in the public debt and equity markets and private
investment marketplace that could lead to investment losses and
interest rate fluctuations;
- Ratings downgrades on individual securities we own could affect
investment values and, therefore, statutory surplus;
- The adequacy of our loss reserves and loss expense
reserves;
- Frequency and severity of catastrophic events, including
natural events such as hurricanes, tornadoes, windstorms,
earthquakes, hail, severe winter weather, floods, and fires and
man-made events such as criminal and terrorist acts, including
cyber-attacks, explosions, and civil unrest;
- Adverse market, governmental, regulatory, legal, or judicial
conditions or actions;
- The geographic concentration of our business in the eastern
portion of the United States;
- The cost, terms and conditions, and availability of
reinsurance;
- Our ability to collect on reinsurance and the solvency of our
reinsurers;
- The impact of changes in U.S. trade policies and imposition of
tariffs on imports that may lead to higher than anticipated
inflationary trends for our loss and loss expenses;
- 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;
- The effects of data privacy or cyber security laws and
regulations on our operations;
- Major defect or failure in our internal controls or information
technology and application systems that result in harm to our brand
in the marketplace, increased senior executive focus on crisis and
reputational management issues and/or increased expenses,
particularly if we experience a significant privacy breach;
- Potential tax or federal financial regulatory reform provisions
that could pose certain risks to our operations;
- Our ability to maintain favorable ratings from rating agencies,
including AM 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
constantly changing business environment, and new risk factors may
emerge any time.
Selective's SEC filings can be accessed through the Investors
page of Selective's website, www.Selective.com, or through the
SEC's EDGAR Database at www.sec.gov (Selective EDGAR CIK No.
0000230557).
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SOURCE Selective Insurance Group, Inc.