Selective Reports Second Quarter 2023 Results

Net Income of $0.92 per Diluted Common Share and Non-GAAP Operating Income¹ of $0.99 per Diluted Common Share

Return on Common Equity ("ROE") of 9.1% and Non-GAAP Operating ROE¹ of 9.8%

In the second quarter of 2023:

• Net premiums written ("NPW") increased 17% compared to the second quarter of 2022;
• GAAP combined ratio was 100.2%, inclusive of $100 million, or 10.6 points, of pre-tax net catastrophe losses, compared to 95.5% in the second quarter of 2022;
• Commercial Lines renewal pure price increases averaged 6.7%, compared to 5.3% in the second quarter of 2022;
• After-tax net investment income of $78 million, up 37% compared to the second quarter of 2022;
• Book value per common share was $40.81, unchanged in the second quarter; and
• Adjusted book value per common share¹ was $47.34, up 2% in the second quarter.

BRANCHVILLE, N.J., Aug. 2, 2023 /PRNewswire/ -- Selective Insurance Group, Inc. (NASDAQ: SIGI) reported financial results for the second quarter ended June 30, 2023, with net income per diluted common share of $0.92 and non-GAAP operating income¹ per diluted common share of $0.99. The second quarter combined ratio was 100.2%, including 10.6 points of catastrophe losses. Elevated catastrophe losses impacted each of our underwriting segments, driven mainly by storms affecting our Midwest and East Coast footprint states.

In the quarter, NPW grew 17% from a year ago with renewal pure price increases, exposure growth, stable retention, and strong new business. The investments segment generated 12.6 points of annualized ROE in the quarter, benefiting from higher interest rates and our active portfolio management.

"We delivered exceptional growth in the quarter, and I am pleased with our team's commitment to serving customers through many challenging weather events. Despite these elevated catastrophe losses, we benefited from our consistent, disciplined underwriting and excellent distribution partner relationships. We continue to execute our long-term strategy for profitable growth," said John J. Marchioni, Chairman, President and Chief Executive Officer.

"Our unique operating model, with regionally-based underwriting, claims, and safety management professionals, is a competitive differentiator for Selective, enabling us to navigate successfully through various market environments," added Mr. Marchioni.

Mr. Marchioni concluded, "We are well-positioned, with a strong balance sheet, sophisticated underwriting capabilities, and robust risk management, to deliver profitable growth through our existing distribution partners and state footprint expansion."

Operating Highlights

Overall Insurance Operations

For the second quarter, overall NPW increased 17%, or $154 million, from a year ago reflecting robust new business and effective management of our renewal portfolio. Average renewal pure price increased 6.4%, with strong retention and exposure growth. Our 100.2% combined ratio in the quarter was up from 95.5% a year ago, driven principally by higher catastrophe losses and lower prior year favorable casualty reserve development. Catastrophe losses totaled $100.0 million pre-tax in the quarter, up from $45.6 million in the second quarter of 2022. Results in the current quarter were impacted by 19 named events, with no single storm large enough to attach to our catastrophe reinsurance treaty. Prior year favorable casualty reserve development totaled $3.5 million, including $7.5 million from our workers compensation line of business that was partially offset by $4.0 million of unfavorable development in our personal auto line of business. In the second quarter of 2022, prior year favorable casualty reserve development totaled $12.0 million.

Standard Commercial Lines Segment

For the second quarter, Standard Commercial Lines premiums (representing 80% of total NPW) increased 14% compared to a year ago. The premium growth reflected average renewal pure price increases of 6.7%, new business growth of 23%, strong exposure growth, and consistent retention of 85%. The second quarter combined ratio was 97.1%. The following table shows the variances relative to the 93.1% combined ratio a year ago:

Standard Personal Lines Segment

For the second quarter, Standard Personal Lines premiums (representing 10% of total NPW) increased 32% compared to a year ago. Renewal pure price increases averaged 3.4%, retention was 88%, and new business was up $19.0 million compared to last year as we continued our transition to the mass affluent market. The second quarter combined ratio was 126.5%, including 24.3 points of catastrophe losses and 4.6 points of unfavorable casualty reserve development from the personal auto line of business. The following table shows the variances relative to the 116.9% combined ratio a year ago:

Excess and Surplus Lines Segment

For the second quarter, Excess and Surplus Lines premiums (representing 10% of total NPW) increased 20% compared to the prior-year period, driven by average renewal pure price increases of 7.5% and new business growth of 27%. The second quarter combined ratio was 100.7%, including 17.6 points of catastrophe losses. The following table shows the variances relative to the 95.8% combined ratio a year ago:

Investments Segment

For the second quarter, after-tax net investment income of $78 million was 37% higher than the prior year period. Pre-tax investment income from our fixed income securities portfolio was up 35% compared to the second quarter of 2022, driven by higher book yields and the investment of operating and investing cash flows over the past year. Pre-tax alternative investment income of $11 million was $2 million higher than the prior-year period. Invested assets per dollar of common stockholders' equity was $3.29 on June 30, 2023, and the investment portfolio generated 12.6 points of non-GAAP operating ROE for the quarter.

Balance Sheet