New Jersey
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22-2168890
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(State or Other Jurisdiction of Incorporation or Organization)
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(I.R.S. Employer Identification No.)
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40 Wantage Avenue
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Branchville, New Jersey
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07890
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(Address of Principal Executive Offices)
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(Zip Code)
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(973) 948-3000
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(Registrant’s Telephone Number, Including Area Code)
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(Former Name, Former Address and Former Fiscal Year, if Changed Since Last Report)
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Large accelerated filer
x
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Accelerated filer
o
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Non-accelerated filer
o
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Smaller reporting company
o
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SELECTIVE INSURANCE GROUP, INC.
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Table of Contents
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Page No.
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Financial Highlights of Results for First Quarter 2014
and First Quarter 2013
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Federal Income Taxes
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Item 5.
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Other Information
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PART I. FINANCIAL INFORMATION
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ITEM 1. FINANCIAL STATEMENTS
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SELECTIVE INSURANCE GROUP, INC.
CONSOLIDATED BALANCE SHEETS
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Unaudited
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($ in thousands, except share amounts)
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March 31,
2014 |
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December 31,
2013 |
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ASSETS
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Investments:
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Fixed income securities, held-to-maturity – at carrying value (fair value: $403,536 – 2014; $416,981 – 2013)
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$
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382,056
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392,879
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Fixed income securities, available-for-sale – at fair value (amortized cost: $3,748,456 – 2014; $3,675,977 – 2013)
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3,815,853
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3,715,536
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Equity securities, available-for-sale – at fair value (cost: $162,370 – 2014; $155,350 – 2013)
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197,687
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192,771
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Short-term investments (at cost which approximates fair value)
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137,733
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174,251
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Other investments
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106,720
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107,875
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Total investments (Note 5)
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4,640,049
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4,583,312
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Cash
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245
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193
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Interest and dividends due or accrued
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36,967
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37,382
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Premiums receivable, net of allowance for uncollectible accounts of: $3,771 – 2014; $4,442 – 2013
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553,912
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524,870
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Reinsurance recoverables, net
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574,621
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550,897
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Prepaid reinsurance premiums
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141,603
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143,000
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Current federal income tax
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—
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512
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Deferred federal income tax
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113,061
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122,613
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Property and equipment – at cost, net of accumulated depreciation and amortization of:
$181,959 – 2014; $179,192 – 2013 |
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53,725
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50,834
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Deferred policy acquisition costs
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177,678
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172,981
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Goodwill
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7,849
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7,849
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Other assets
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70,526
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75,727
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Total assets
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$
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6,370,236
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6,270,170
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LIABILITIES AND STOCKHOLDERS’ EQUITY
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Liabilities:
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Reserve for loss and loss expenses
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$
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3,432,432
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3,349,770
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Unearned premiums
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1,078,012
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1,059,155
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Notes payable
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392,420
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392,414
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Current federal income tax
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3,249
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—
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Accrued salaries and benefits
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89,558
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111,427
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Other liabilities
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189,034
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203,476
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Total liabilities
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$
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5,184,705
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5,116,242
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Stockholders’ Equity:
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Preferred stock of $0 par value per share:
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$
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—
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—
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Authorized shares 5,000,000; no shares issued or outstanding
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Common stock of $2 par value per share:
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Authorized shares 360,000,000
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Issued: 99,536,697 – 2014; 99,120,235 – 2013
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199,073
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198,240
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Additional paid-in capital
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294,365
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288,182
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Retained earnings
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1,212,577
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1,202,015
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Accumulated other comprehensive income (Note 10)
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41,529
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24,851
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Treasury stock – at cost
(shares: 43,317,498– 2014; 43,198,622 – 2013) |
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(562,013
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)
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(559,360
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)
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Total stockholders’ equity
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1,185,531
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1,153,928
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Commitments and contingencies
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Total liabilities and stockholders’ equity
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$
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6,370,236
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6,270,170
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SELECTIVE INSURANCE GROUP, INC.
UNAUDITED CONSOLIDATED STATEMENTS OF INCOME
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Quarter ended March 31,
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($ in thousands, except per share amounts)
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2014
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2013
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Revenues:
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Net premiums earned
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$
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456,495
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420,940
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Net investment income earned
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35,534
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32,870
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Net realized gains:
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Net realized investment gains
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8,181
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5,304
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Other-than-temporary impairments
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(963
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)
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(1,919
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)
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Other-than-temporary impairments on fixed income securities recognized in other comprehensive income
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—
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(30
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)
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Total net realized gains
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7,218
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3,355
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Other income
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9,824
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2,784
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Total revenues
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509,071
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459,949
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Expenses:
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Loss and loss expense incurred
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320,546
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269,849
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Policy acquisition costs
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149,266
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139,528
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Interest expense
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5,561
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5,831
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Other expenses
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8,614
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15,873
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Total expenses
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483,987
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431,081
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Income from continuing operations, before federal income tax
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25,084
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28,868
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Federal income tax expense (benefit):
|
|
|
|
|
|
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Current
|
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6,538
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7,453
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Deferred
|
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572
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(890
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)
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Total federal income tax expense
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7,110
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6,563
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|
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Net income from continuing operations
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17,974
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22,305
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Loss on disposal of discontinued operations, net of tax of $(538) - 2013
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—
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(997
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)
|
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|
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|
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Net income
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$
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17,974
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21,308
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Earnings per share:
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Basic net income from continuing operations
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$
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0.32
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0.40
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Basic net loss from discontinued operations
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—
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(0.02
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)
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Basic net income
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$
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0.32
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|
|
0.38
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|
|
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|
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Diluted net income from continuing operations
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$
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0.31
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0.40
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Diluted net loss from discontinued operations
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—
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(0.02
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)
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Diluted net income
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$
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0.31
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|
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0.38
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Dividends to stockholders
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$
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0.13
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0.13
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SELECTIVE INSURANCE GROUP, INC.
UNAUDITED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME
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Quarter ended
March 31,
|
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($ in thousands)
|
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2014
|
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2013
|
|||
Net income
|
|
$
|
17,974
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|
|
21,308
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|
|
|
|
|
|
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Other comprehensive income, net of tax:
|
|
|
|
|
|
|
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Unrealized gains (losses) on investment securities:
|
|
|
|
|
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Unrealized holding gains arising during period
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21,426
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2,394
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|
|
Non-credit portion of other-than-temporary impairments recognized in other comprehensive income
|
|
—
|
|
|
20
|
|
|
Amount reclassified into net income:
|
|
|
|
|
|||
Held-to-maturity securities
|
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(296
|
)
|
|
(466
|
)
|
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Non-credit other-than-temporary impairments
|
|
—
|
|
|
4
|
|
|
Realized gains on available for sale securities
|
|
(4,699
|
)
|
|
(3,884
|
)
|
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Total unrealized gains (losses) on investment securities
|
|
16,431
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(1,932
|
)
|
|
|
|
|
|
|
|||
Defined benefit pension and post-retirement plans:
|
|
|
|
|
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|
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Net actuarial gain
|
|
—
|
|
|
28,600
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|
|
Amounts reclassified into net income:
|
|
|
|
|
|||
Net actuarial loss
|
|
247
|
|
|
1,196
|
|
|
Prior service cost
|
|
—
|
|
|
6
|
|
|
Curtailment expense
|
|
—
|
|
|
11
|
|
|
Total defined benefit pension and post-retirement plans
|
|
247
|
|
|
29,813
|
|
|
Other comprehensive income
|
|
16,678
|
|
|
27,881
|
|
|
Comprehensive income
|
|
$
|
34,652
|
|
|
49,189
|
|
SELECTIVE INSURANCE GROUP, INC.
UNAUDITED CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY
|
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Three Months ended March 31,
|
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($ in thousands)
|
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2014
|
|
2013
|
|||
Common stock:
|
|
|
|
|
|
|
|
Beginning of year
|
|
$
|
198,240
|
|
|
196,388
|
|
Dividend reinvestment plan (shares: 15,283 – 2014; 17,314 – 2013)
|
|
31
|
|
|
35
|
|
|
Stock purchase and compensation plans (shares: 401,179 – 2014; 496,647 – 2013)
|
|
802
|
|
|
993
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End of period
|
|
199,073
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|
|
197,416
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|
|
|
|
|
|
|
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Additional paid-in capital:
|
|
|
|
|
|
|
|
Beginning of year
|
|
288,182
|
|
|
270,654
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|
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Dividend reinvestment plan
|
|
320
|
|
|
349
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|
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Stock purchase and compensation plans
|
|
5,863
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|
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5,714
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End of period
|
|
294,365
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|
|
276,717
|
|
|
|
|
|
|
|
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Retained earnings:
|
|
|
|
|
|
|
|
Beginning of year
|
|
1,202,015
|
|
|
1,125,154
|
|
|
Net income
|
|
17,974
|
|
|
21,308
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|
|
Dividends to stockholders ($0.13 per share – 2014 and 2013)
|
|
(7,412
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)
|
|
(7,351
|
)
|
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End of period
|
|
1,212,577
|
|
|
1,139,111
|
|
|
|
|
|
|
|
|||
Accumulated other comprehensive income:
|
|
|
|
|
|
|
|
Beginning of year
|
|
24,851
|
|
|
54,040
|
|
|
Other comprehensive income
|
|
16,678
|
|
|
27,881
|
|
|
End of period
|
|
41,529
|
|
|
81,921
|
|
|
|
|
|
|
|
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Treasury stock:
|
|
|
|
|
|
|
|
Beginning of year
|
|
(559,360
|
)
|
|
(555,644
|
)
|
|
Acquisition of treasury stock (shares: 118,876 – 2014; 146,436 – 2013)
|
|
(2,653
|
)
|
|
(3,176
|
)
|
|
End of period
|
|
(562,013
|
)
|
|
(558,820
|
)
|
|
Total stockholders’ equity
|
|
$
|
1,185,531
|
|
|
1,136,345
|
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SELECTIVE INSURANCE GROUP, INC.
UNAUDITED CONSOLIDATED STATEMENTS OF CASH FLOW
|
|
Three Months ended March 31,
|
|||||
($ in thousands)
|
|
2014
|
|
2013
|
|||
Operating Activities
|
|
|
|
|
|
|
|
Net income
|
|
$
|
17,974
|
|
|
21,308
|
|
|
|
|
|
|
|||
Adjustments to reconcile net income to net cash provided by operating activities:
|
|
|
|
|
|
|
|
Depreciation and amortization
|
|
10,578
|
|
|
13,148
|
|
|
Sale of renewal rights
|
|
(8,000
|
)
|
|
—
|
|
|
Loss on disposal of discontinued operations
|
|
—
|
|
|
997
|
|
|
Stock-based compensation expense
|
|
4,176
|
|
|
3,692
|
|
|
Undistributed (gains) losses of equity method investments
|
|
(33
|
)
|
|
426
|
|
|
Net realized gains
|
|
(7,218
|
)
|
|
(3,355
|
)
|
|
Retirement income plan curtailment expense
|
|
—
|
|
|
16
|
|
|
|
|
|
|
|
|||
Changes in assets and liabilities:
|
|
|
|
|
|
|
|
Increase in reserve for loss and loss expenses, net of reinsurance recoverables
|
|
58,938
|
|
|
38,556
|
|
|
Increase in unearned premiums, net of prepaid reinsurance and advance premiums
|
|
19,875
|
|
|
30,106
|
|
|
Decrease in net federal income taxes
|
|
4,332
|
|
|
5,290
|
|
|
Increase in premiums receivable
|
|
(29,042
|
)
|
|
(36,202
|
)
|
|
Increase in deferred policy acquisition costs
|
|
(4,697
|
)
|
|
(2,963
|
)
|
|
Decrease in interest and dividends due or accrued
|
|
414
|
|
|
384
|
|
|
Decrease in accrued salaries and benefits
|
|
(21,869
|
)
|
|
(4,528
|
)
|
|
Decrease in accrued insurance expenses
|
|
(26,957
|
)
|
|
(12,378
|
)
|
|
Other-net
|
|
17,293
|
|
|
(26,357
|
)
|
|
Net adjustments
|
|
17,790
|
|
|
6,832
|
|
|
Net cash provided by operating activities
|
|
35,764
|
|
|
28,140
|
|
|
|
|
|
|
|
|||
Investing Activities
|
|
|
|
|
|
|
|
Purchase of fixed income securities, available-for-sale
|
|
(182,809
|
)
|
|
(308,289
|
)
|
|
Purchase of equity securities, available-for-sale
|
|
(61,360
|
)
|
|
(2
|
)
|
|
Purchase of other investments
|
|
(4,615
|
)
|
|
(2,329
|
)
|
|
Purchase of short-term investments
|
|
(398,348
|
)
|
|
(644,274
|
)
|
|
Sale of subsidiary
|
|
—
|
|
|
225
|
|
|
Sale of fixed income securities, available-for-sale
|
|
1,302
|
|
|
6,851
|
|
|
Sale of short-term investments
|
|
434,865
|
|
|
695,313
|
|
|
Redemption and maturities of fixed income securities, held-to-maturity
|
|
9,396
|
|
|
28,644
|
|
|
Redemption and maturities of fixed income securities, available-for-sale
|
|
104,358
|
|
|
124,975
|
|
|
Sale of equity securities, available-for-sale
|
|
61,523
|
|
|
—
|
|
|
Distributions from other investments
|
|
5,704
|
|
|
3,447
|
|
|
Purchase of property and equipment
|
|
(5,699
|
)
|
|
(3,673
|
)
|
|
Sale of renewal rights
|
|
8,000
|
|
|
—
|
|
|
Net cash used in investing activities
|
|
(27,683
|
)
|
|
(99,112
|
)
|
|
|
|
|
|
|
|||
Financing Activities
|
|
|
|
|
|
|
|
Dividends to stockholders
|
|
(6,948
|
)
|
|
(6,824
|
)
|
|
Acquisition of treasury stock
|
|
(2,653
|
)
|
|
(3,176
|
)
|
|
Net proceeds from stock purchase and compensation plans
|
|
1,261
|
|
|
1,164
|
|
|
Proceeds from issuance of notes payable, net of debt issuance costs
|
|
—
|
|
|
178,623
|
|
|
Repayment of notes payable
|
|
—
|
|
|
(100,000
|
)
|
|
Excess tax benefits from share-based payment arrangements
|
|
770
|
|
|
1,271
|
|
|
Repayments of capital lease obligations
|
|
(459
|
)
|
|
—
|
|
|
Net cash (used in) provided by financing activities
|
|
(8,029
|
)
|
|
71,058
|
|
|
Net increase in cash
|
|
52
|
|
|
86
|
|
|
Cash, beginning of year
|
|
193
|
|
|
210
|
|
|
Cash, end of period
|
|
$
|
245
|
|
|
296
|
|
•
|
Our Standard Insurance Operations segment, which is comprised of both commercial lines ("Commercial Lines") and personal lines ("Personal Lines") business, sells property and casualty insurance products and services in the standard market, including flood insurance through the National Flood Insurance Program's ("NFIPs") write-your-own ("WYO") program;
|
•
|
Our E&S Insurance Operations segment sells Commercial Lines property and casualty insurance products and services to insureds who have not obtained coverage in the standard market; and
|
•
|
Our Investments segment, which invests the premiums collected by our Standard and E&S Insurance Operations and amounts generated through our capital management strategies, which may include the issuance of debt and equity securities.
|
•
|
An NOL carryforward, a similar tax loss, or a tax credit carryfoward is not available as of the reporting date under the governing tax law to settle taxes that would result from the disallowance of the tax position; or
|
•
|
The entity does not intend to use the deferred tax asset for this purpose.If either of these conditions exists, an entity should present an unrecognized tax benefit in the financial statements as a liability and should not net the unrecognized tax benefit with a deferred tax asset.
|
|
|
Three Months ended March 31,
|
|||||
($ in thousands)
|
|
2014
|
|
2013
|
|||
Cash paid during the period for:
|
|
|
|
|
|
|
|
Interest
|
|
$
|
2,973
|
|
|
1,964
|
|
Federal income tax
|
|
2,000
|
|
|
—
|
|
|
|
|
|
|
|
|||
Non-cash items:
|
|
|
|
|
|||
Tax-free exchange of fixed income securities, AFS
|
|
—
|
|
|
8,470
|
|
|
Tax-free exchange of fixed income securities, HTM
|
|
15
|
|
|
7,168
|
|
March 31, 2014
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||
($ in thousands)
|
|
Amortized
Cost
|
|
Net
Unrealized Gains
(Losses)
|
|
Carrying
Value
|
|
Unrecognized
Holding
Gains
|
|
Unrecognized Holding
Losses
|
|
Fair
Value
|
|||||||
Foreign government
|
|
$
|
5,292
|
|
|
110
|
|
|
5,402
|
|
|
150
|
|
|
—
|
|
|
5,552
|
|
Obligations of state and political subdivisions
|
|
344,360
|
|
|
3,475
|
|
|
347,835
|
|
|
16,472
|
|
|
—
|
|
|
364,307
|
|
|
Corporate securities
|
|
21,903
|
|
|
(341
|
)
|
|
21,562
|
|
|
2,902
|
|
|
—
|
|
|
24,464
|
|
|
Asset-backed securities (“ABS”)
|
|
3,347
|
|
|
(621
|
)
|
|
2,726
|
|
|
640
|
|
|
—
|
|
|
3,366
|
|
|
Commercial mortgage-backed securities (“CMBS”)
|
|
5,353
|
|
|
(822
|
)
|
|
4,531
|
|
|
1,316
|
|
|
—
|
|
|
5,847
|
|
|
Total HTM fixed income securities
|
|
$
|
380,255
|
|
|
1,801
|
|
|
382,056
|
|
|
21,480
|
|
|
—
|
|
|
403,536
|
|
December 31, 2013
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||
($ in thousands)
|
|
Amortized
Cost
|
|
Net
Unrealized Gains
(Losses)
|
|
Carrying
Value
|
|
Unrecognized
Holding
Gains
|
|
Unrecognized Holding
Losses
|
|
Fair
Value
|
|||||||
Foreign government
|
|
$
|
5,292
|
|
|
131
|
|
|
5,423
|
|
|
168
|
|
|
—
|
|
|
5,591
|
|
Obligations of state and political subdivisions
|
|
348,109
|
|
|
4,013
|
|
|
352,122
|
|
|
17,634
|
|
|
—
|
|
|
369,756
|
|
|
Corporate securities
|
|
28,174
|
|
|
(346
|
)
|
|
27,828
|
|
|
2,446
|
|
|
—
|
|
|
30,274
|
|
|
ABS
|
|
3,413
|
|
|
(655
|
)
|
|
2,758
|
|
|
657
|
|
|
—
|
|
|
3,415
|
|
|
CMBS
|
|
5,634
|
|
|
(886
|
)
|
|
4,748
|
|
|
3,197
|
|
|
—
|
|
|
7,945
|
|
|
Total HTM fixed income securities
|
|
$
|
390,622
|
|
|
2,257
|
|
|
392,879
|
|
|
24,102
|
|
|
—
|
|
|
416,981
|
|
March 31, 2014
|
|
|
|
|
|
|
|
|
|||||
($ in thousands)
|
|
Cost/
Amortized
Cost
|
|
Unrealized
Gains
|
|
Unrealized
Losses
|
|
Fair
Value
|
|||||
U.S. government and government agencies
|
|
$
|
161,428
|
|
|
10,007
|
|
|
(370
|
)
|
|
171,065
|
|
Foreign government
|
|
31,538
|
|
|
912
|
|
|
(29
|
)
|
|
32,421
|
|
|
Obligations of states and political subdivisions
|
|
963,237
|
|
|
26,617
|
|
|
(10,687
|
)
|
|
979,167
|
|
|
Corporate securities
|
|
1,777,186
|
|
|
48,305
|
|
|
(9,793
|
)
|
|
1,815,698
|
|
|
ABS
|
|
131,386
|
|
|
908
|
|
|
(360
|
)
|
|
131,934
|
|
|
CMBS
1
|
|
172,386
|
|
|
4,686
|
|
|
(2,256
|
)
|
|
174,816
|
|
|
Residential mortgage-backed
securities (“RMBS”)
2
|
|
511,295
|
|
|
7,210
|
|
|
(7,753
|
)
|
|
510,752
|
|
|
AFS fixed income securities
|
|
3,748,456
|
|
|
98,645
|
|
|
(31,248
|
)
|
|
3,815,853
|
|
|
AFS equity securities
|
|
162,370
|
|
|
35,434
|
|
|
(117
|
)
|
|
197,687
|
|
|
Total AFS securities
|
|
$
|
3,910,826
|
|
|
134,079
|
|
|
(31,365
|
)
|
|
4,013,540
|
|
December 31, 2013
|
|
|
|
|
|
|
|
|
|||||
($ in thousands)
|
|
Cost/
Amortized
Cost
|
|
Unrealized
Gains
|
|
Unrealized
Losses
|
|
Fair
Value
|
|||||
U.S. government and government agencies
|
|
$
|
163,218
|
|
|
10,661
|
|
|
(504
|
)
|
|
173,375
|
|
Foreign government
|
|
29,781
|
|
|
906
|
|
|
(72
|
)
|
|
30,615
|
|
|
Obligations of states and political subdivisions
|
|
946,455
|
|
|
25,194
|
|
|
(20,025
|
)
|
|
951,624
|
|
|
Corporate securities
|
|
1,707,928
|
|
|
44,004
|
|
|
(17,049
|
)
|
|
1,734,883
|
|
|
ABS
|
|
140,430
|
|
|
934
|
|
|
(468
|
)
|
|
140,896
|
|
|
CMBS
1
|
|
172,288
|
|
|
2,462
|
|
|
(3,466
|
)
|
|
171,284
|
|
|
RMBS
2
|
|
515,877
|
|
|
7,273
|
|
|
(10,291
|
)
|
|
512,859
|
|
|
AFS fixed income securities
|
|
3,675,977
|
|
|
91,434
|
|
|
(51,875
|
)
|
|
3,715,536
|
|
|
AFS equity securities
|
|
155,350
|
|
|
37,517
|
|
|
(96
|
)
|
|
192,771
|
|
|
Total AFS securities
|
|
$
|
3,831,327
|
|
|
128,951
|
|
|
(51,971
|
)
|
|
3,908,307
|
|
March 31, 2014
|
|
Less than 12 months
|
|
12 months or longer
|
|||||||||
($ in thousands)
|
|
Fair Value
|
|
Unrealized
Losses
1
|
|
Fair Value
|
|
Unrealized
Losses
1
|
|||||
AFS securities
|
|
|
|
|
|
|
|
|
|
|
|
|
|
U.S. government and government agencies
|
|
$
|
13,119
|
|
|
(370
|
)
|
|
—
|
|
|
—
|
|
Foreign government
|
|
1,753
|
|
|
(9
|
)
|
|
2,978
|
|
|
(20
|
)
|
|
Obligations of states and political subdivisions
|
|
373,064
|
|
|
(9,984
|
)
|
|
20,096
|
|
|
(703
|
)
|
|
Corporate securities
|
|
464,163
|
|
|
(8,636
|
)
|
|
17,713
|
|
|
(1,157
|
)
|
|
ABS
|
|
23,855
|
|
|
(360
|
)
|
|
—
|
|
|
—
|
|
|
CMBS
|
|
72,437
|
|
|
(1,962
|
)
|
|
7,466
|
|
|
(294
|
)
|
|
RMBS
|
|
221,314
|
|
|
(7,294
|
)
|
|
4,823
|
|
|
(459
|
)
|
|
Total fixed income securities
|
|
1,169,705
|
|
|
(28,615
|
)
|
|
53,076
|
|
|
(2,633
|
)
|
|
Equity securities
|
|
1,938
|
|
|
(117
|
)
|
|
—
|
|
|
—
|
|
|
Subtotal
|
|
$
|
1,171,643
|
|
|
(28,732
|
)
|
|
53,076
|
|
|
(2,633
|
)
|
|
|
Less than 12 months
|
|
12 months or longer
|
|||||||||||||||
($ in thousands)
|
|
Fair
Value
|
|
Unrealized
Losses
1
|
|
Unrecognized
Gains
2
|
|
Fair
Value
|
|
Unrealized
Losses
1
|
|
Unrecognized
Gains
2
|
|||||||
HTM securities
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Obligations of states and political subdivisions
|
|
$
|
—
|
|
|
—
|
|
|
—
|
|
|
445
|
|
|
(19
|
)
|
|
18
|
|
ABS
|
|
—
|
|
|
—
|
|
|
—
|
|
|
2,495
|
|
|
(621
|
)
|
|
592
|
|
|
Subtotal
|
|
$
|
—
|
|
|
—
|
|
|
—
|
|
|
2,940
|
|
|
(640
|
)
|
|
610
|
|
Total AFS and HTM
|
|
$
|
1,171,643
|
|
|
(28,732
|
)
|
|
—
|
|
|
56,016
|
|
|
(3,273
|
)
|
|
610
|
|
December 31, 2013
|
|
Less than 12 months
|
|
12 months or longer
|
|||||||||
($ in thousands)
|
|
Fair
Value
|
|
Unrealized
Losses
1
|
|
Fair Value
|
|
Unrealized
Losses
1
|
|||||
AFS securities
|
|
|
|
|
|
|
|
|
|
|
|
|
|
U.S. government and government agencies
|
|
$
|
16,955
|
|
|
(500
|
)
|
|
507
|
|
|
(4
|
)
|
Foreign government
|
|
2,029
|
|
|
(30
|
)
|
|
2,955
|
|
|
(42
|
)
|
|
Obligations of states and political subdivisions
|
|
442,531
|
|
|
(19,120
|
)
|
|
13,530
|
|
|
(905
|
)
|
|
Corporate securities
|
|
511,100
|
|
|
(15,911
|
)
|
|
14,771
|
|
|
(1,138
|
)
|
|
ABS
|
|
68,725
|
|
|
(468
|
)
|
|
—
|
|
|
—
|
|
|
CMBS
|
|
100,396
|
|
|
(2,950
|
)
|
|
6,298
|
|
|
(516
|
)
|
|
RMBS
|
|
268,943
|
|
|
(10,031
|
)
|
|
2,670
|
|
|
(260
|
)
|
|
Total fixed income securities
|
|
1,410,679
|
|
|
(49,010
|
)
|
|
40,731
|
|
|
(2,865
|
)
|
|
Equity securities
|
|
1,124
|
|
|
(96
|
)
|
|
—
|
|
|
—
|
|
|
Subtotal
|
|
$
|
1,411,803
|
|
|
(49,106
|
)
|
|
40,731
|
|
|
(2,865
|
)
|
|
|
Less than 12 months
|
|
12 months or longer
|
|||||||||||||||
($ in thousands)
|
|
Fair
Value
|
|
Unrealized
Losses
1
|
|
Unrecognized
Gains
2
|
|
Fair
Value
|
|
Unrealized
Losses
1
|
|
Unrecognized
Gains
2
|
|||||||
HTM securities
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Obligations of states and political subdivisions
|
|
$
|
65
|
|
|
(5
|
)
|
|
5
|
|
|
441
|
|
|
(20
|
)
|
|
14
|
|
ABS
|
|
—
|
|
|
—
|
|
|
—
|
|
|
2,490
|
|
|
(655
|
)
|
|
621
|
|
|
Subtotal
|
|
65
|
|
|
(5
|
)
|
|
5
|
|
|
2,931
|
|
|
(675
|
)
|
|
635
|
|
|
Total AFS and HTM
|
|
$
|
1,411,868
|
|
|
(49,111
|
)
|
|
5
|
|
|
43,662
|
|
|
(3,540
|
)
|
|
635
|
|
($ in thousands)
|
|
Carrying Value
|
|
Fair Value
|
|||
Due in one year or less
|
|
$
|
80,337
|
|
|
81,332
|
|
Due after one year through five years
|
|
270,608
|
|
|
287,045
|
|
|
Due after five years through 10 years
|
|
31,111
|
|
|
35,159
|
|
|
Total HTM fixed income securities
|
|
$
|
382,056
|
|
|
403,536
|
|
($ in thousands)
|
|
Fair Value
|
||
Due in one year or less
|
|
$
|
425,744
|
|
Due after one year through five years
|
|
1,991,515
|
|
|
Due after five years through 10 years
|
|
1,345,666
|
|
|
Due after 10 years
|
|
52,928
|
|
|
Total AFS fixed income securities
|
|
$
|
3,815,853
|
|
Other Investments
|
|
Carrying Value
|
|
March 31,
2014 |
||||||
($ in thousands)
|
|
March 31,
2014 |
|
December 31,
2013 |
|
Remaining Commitment
|
||||
Alternative Investments
|
|
|
|
|
|
|
|
|
|
|
Secondary private equity
|
|
$
|
23,595
|
|
|
25,618
|
|
|
6,479
|
|
Private equity
|
|
21,117
|
|
|
20,192
|
|
|
9,959
|
|
|
Energy/power generation
|
|
17,978
|
|
|
17,361
|
|
|
6,984
|
|
|
Mezzanine financing
|
|
13,831
|
|
|
12,738
|
|
|
15,038
|
|
|
Distressed debt
|
|
10,882
|
|
|
11,579
|
|
|
2,971
|
|
|
Real estate
|
|
10,728
|
|
|
11,698
|
|
|
10,178
|
|
|
Venture capital
|
|
7,019
|
|
|
7,025
|
|
|
350
|
|
|
Total alternative investments
|
|
105,150
|
|
|
106,211
|
|
|
51,959
|
|
|
Other securities
|
|
1,570
|
|
|
1,664
|
|
|
597
|
|
|
Total other investments
|
|
$
|
106,720
|
|
|
107,875
|
|
|
52,556
|
|
Income Statement Information
|
|
Quarter ended December 31,
|
|
|||||
($ in millions)
|
|
2013
|
|
2012
|
|
|||
Net investment income
|
|
$
|
65.1
|
|
|
204.8
|
|
|
Realized gains
|
|
63.3
|
|
|
593.4
|
|
|
|
Net change in unrealized appreciation (depreciation)
|
|
505.9
|
|
|
(417.5
|
)
|
|
|
Net income
|
|
$
|
634.3
|
|
|
380.7
|
|
|
Selective’s insurance subsidiaries’ other investments income
|
|
$
|
5.2
|
|
|
3.6
|
|
|
|
|
Quarter ended March 31,
|
|
|||||
($ in thousands)
|
|
2014
|
|
2013
|
|
|||
Fixed income securities
|
|
$
|
31,028
|
|
|
30,089
|
|
|
Equity securities
|
|
1,449
|
|
|
1,207
|
|
|
|
Short-term investments
|
|
19
|
|
|
52
|
|
|
|
Other investments
|
|
5,218
|
|
|
3,602
|
|
|
|
Investment expenses
|
|
(2,180
|
)
|
|
(2,080
|
)
|
|
|
Net investment income earned
|
|
$
|
35,534
|
|
|
32,870
|
|
|
First Quarter 2014
|
|
Gross
|
|
Included in Other
Comprehensive
Income (“OCI”)
|
|
Recognized in
Earnings
|
||||
($ in thousands)
|
|
|
|
|||||||
AFS securities
|
|
|
|
|
|
|
||||
Equity securities
|
|
$
|
963
|
|
|
—
|
|
|
963
|
|
Total AFS Securities
|
|
963
|
|
|
—
|
|
|
963
|
|
|
OTTI losses
|
|
$
|
963
|
|
|
—
|
|
|
963
|
|
First Quarter 2013
|
|
Gross
|
|
Included in OCI
|
|
Recognized in Earnings
|
||||
($ in thousands)
|
|
|
|
|||||||
AFS fixed income securities
|
|
|
|
|
|
|
|
|
|
|
RMBS
|
|
$
|
(22
|
)
|
|
(30
|
)
|
|
8
|
|
Total AFS fixed income securities
|
|
(22
|
)
|
|
(30
|
)
|
|
8
|
|
|
Equity securities
|
|
217
|
|
|
—
|
|
|
217
|
|
|
Total AFS securities
|
|
195
|
|
|
(30
|
)
|
|
225
|
|
|
Other investments
|
|
1,724
|
|
|
—
|
|
|
1,724
|
|
|
OTTI losses
|
|
$
|
1,919
|
|
|
(30
|
)
|
|
1,949
|
|
|
|
Quarter ended March 31,
|
|||||
($ in thousands)
|
|
2014
|
|
2013
|
|||
Balance, beginning of period
|
|
$
|
7,488
|
|
|
7,477
|
|
Addition for the amount related to credit loss for which an OTTI was not previously recognized
|
|
—
|
|
|
—
|
|
|
Reductions for securities sold during the period
|
|
—
|
|
|
—
|
|
|
Reductions for securities for which the amount previously recognized in OCI was recognized in earnings because of intention or potential requirement to sell before recovery of amortized cost
|
|
—
|
|
|
—
|
|
|
Reductions for securities for which the entire amount previously recognized in OCI was recognized in earnings due to a decrease in cash flows expected
|
|
—
|
|
|
—
|
|
|
Additional increases to the amount related to credit loss for which an OTTI was previously recognized
|
|
—
|
|
|
9
|
|
|
Accretion of credit loss impairments previously recognized due to an increase in cash flows expected to be collected
|
|
—
|
|
|
—
|
|
|
Balance, end of period
|
|
$
|
7,488
|
|
|
7,486
|
|
|
|
Quarter ended March 31,
|
|||||
($ in thousands)
|
|
2014
|
|
2013
|
|||
HTM fixed income securities
|
|
|
|
|
|||
Gains
|
|
$
|
—
|
|
|
—
|
|
Losses
|
|
(11
|
)
|
|
(37
|
)
|
|
AFS fixed income securities
|
|
|
|
|
|
|
|
Gains
|
|
158
|
|
|
951
|
|
|
Losses
|
|
(112
|
)
|
|
(253
|
)
|
|
AFS equity securities
|
|
|
|
|
|
|
|
Gains
|
|
8,317
|
|
|
5,671
|
|
|
Losses
|
|
(171
|
)
|
|
(168
|
)
|
|
Other investments
|
|
|
|
|
|||
Gains
|
|
—
|
|
|
—
|
|
|
Losses
|
|
—
|
|
|
(860
|
)
|
|
Total other net realized investment gains
|
|
8,181
|
|
|
5,304
|
|
|
Total OTTI charges recognized in earnings
|
|
(963
|
)
|
|
(1,949
|
)
|
|
Total net realized gains
|
|
$
|
7,218
|
|
|
3,355
|
|
|
|
March 31, 2014
|
|
December 31, 2013
|
|||||||||
($ in thousands)
|
|
Carrying Amount
|
|
Fair
Value
|
|
Carrying Amount
|
|
Fair
Value
|
|||||
Financial Assets
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Fixed income securities:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
HTM
|
|
$
|
382,056
|
|
|
403,536
|
|
|
392,879
|
|
|
416,981
|
|
AFS
|
|
3,815,853
|
|
|
3,815,853
|
|
|
3,715,536
|
|
|
3,715,536
|
|
|
Equity securities, AFS
|
|
197,687
|
|
|
197,687
|
|
|
192,771
|
|
|
192,771
|
|
|
Short-term investments
|
|
137,733
|
|
|
137,733
|
|
|
174,251
|
|
|
174,251
|
|
|
Financial Liabilities
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Notes payable:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2.90% borrowings from FHLBI
|
|
13,000
|
|
|
13,243
|
|
|
13,000
|
|
|
13,319
|
|
|
1.25% borrowings from FHLBI
|
|
45,000
|
|
|
45,226
|
|
|
45,000
|
|
|
45,259
|
|
|
7.25% Senior Notes
|
|
49,917
|
|
|
53,065
|
|
|
49,916
|
|
|
50,887
|
|
|
6.70% Senior Notes
|
|
99,503
|
|
|
102,810
|
|
|
99,498
|
|
|
98,247
|
|
|
5.875% Senior Notes
|
|
185,000
|
|
|
165,316
|
|
|
185,000
|
|
|
146,298
|
|
|
Total notes payable
|
|
$
|
392,420
|
|
|
379,660
|
|
|
392,414
|
|
|
354,010
|
|
March 31, 2014
|
|
|
|
Fair Value Measurements Using
|
|||||||||
($ in thousands)
|
|
Assets
Measured at
Fair Value
at 3/31/2014
|
|
Quoted Prices in
Active Markets for
Identical Assets/
Liabilities (Level 1)
1
|
|
Significant Other
Observable
Inputs
(Level 2)
1
|
|
Significant Unobservable
Inputs
(Level 3)
|
|||||
Description
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Measured on a recurring basis:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
AFS:
|
|
|
|
|
|
|
|
|
|||||
U.S. government and government agencies
|
|
$
|
171,065
|
|
|
51,796
|
|
|
119,269
|
|
|
—
|
|
Foreign government
|
|
32,421
|
|
|
—
|
|
|
32,421
|
|
|
—
|
|
|
Obligations of states and political subdivisions
|
|
979,167
|
|
|
—
|
|
|
979,167
|
|
|
—
|
|
|
Corporate securities
|
|
1,815,698
|
|
|
—
|
|
|
1,815,698
|
|
|
—
|
|
|
ABS
|
|
131,934
|
|
|
—
|
|
|
131,934
|
|
|
—
|
|
|
CMBS
|
|
174,816
|
|
|
—
|
|
|
174,816
|
|
|
—
|
|
|
RMBS
|
|
510,752
|
|
|
—
|
|
|
510,752
|
|
|
—
|
|
|
Total AFS fixed income securities
|
|
3,815,853
|
|
|
51,796
|
|
|
3,764,057
|
|
|
—
|
|
|
Equity securities
|
|
197,687
|
|
|
194,787
|
|
|
—
|
|
|
2,900
|
|
|
Total AFS Securities
|
|
4,013,540
|
|
|
246,583
|
|
|
3,764,057
|
|
|
2,900
|
|
|
Short-term investments
|
|
137,733
|
|
|
137,733
|
|
|
—
|
|
|
—
|
|
|
Total assets measured at fair value
|
|
$
|
4,151,273
|
|
|
384,316
|
|
|
3,764,057
|
|
|
2,900
|
|
1
|
There were no transfers of securities between Level 1 and Level 2.
|
December 31, 2013
|
|
|
|
Fair Value Measurements Using
|
|||||||||
($ in thousands)
|
|
Assets
Measured at
Fair Value
at 12/31/13
|
|
Quoted Prices in
Active Markets for
Identical Assets/Liabilities
(Level 1)
1
|
|
Significant
Other Observable
Inputs
(Level 2)
1
|
|
Significant Unobservable
Inputs
(Level 3)
|
|||||
Description
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Measured on a recurring basis:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
AFS:
|
|
|
|
|
|
|
|
|
|||||
U.S. government and government agencies
|
|
$
|
173,375
|
|
|
52,153
|
|
|
121,222
|
|
|
—
|
|
Foreign government
|
|
30,615
|
|
|
—
|
|
|
30,615
|
|
|
—
|
|
|
Obligations of states and political subdivisions
|
|
951,624
|
|
|
—
|
|
|
951,624
|
|
|
—
|
|
|
Corporate securities
|
|
1,734,883
|
|
|
—
|
|
|
1,734,883
|
|
|
—
|
|
|
ABS
|
|
140,896
|
|
|
—
|
|
|
140,896
|
|
|
—
|
|
|
CMBS
|
|
171,284
|
|
|
—
|
|
|
171,284
|
|
|
—
|
|
|
RMBS
|
|
512,859
|
|
|
—
|
|
|
512,859
|
|
|
—
|
|
|
Total AFS fixed income securities
|
|
3,715,536
|
|
|
52,153
|
|
|
3,663,383
|
|
|
—
|
|
|
Equity securities
|
|
192,771
|
|
|
189,871
|
|
|
—
|
|
|
2,900
|
|
|
Total AFS Securities
|
|
3,908,307
|
|
|
242,024
|
|
|
3,663,383
|
|
|
2,900
|
|
|
Short-term investments
|
|
174,251
|
|
|
174,251
|
|
|
—
|
|
|
—
|
|
|
Total assets measured at fair value
|
|
$
|
4,082,558
|
|
|
416,275
|
|
|
3,663,383
|
|
|
2,900
|
|
1
|
There were no transfers of securities between Level 1 and Level 2.
|
December 31, 2013
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||||
($ in thousands)
|
|
Government
|
|
Corporate
|
|
ABS
|
|
CMBS
|
|
Equity
|
|
Receivable for
Proceeds
Related to Sale
of Selective HR Solutions ("Selective HR")
|
|
Total
|
||||||||||||||
Fair value, December 31, 2012
|
|
$
|
19,789
|
|
|
2,946
|
|
|
6,068
|
|
|
7,162
|
|
|
3,607
|
|
|
2,705
|
|
|
42,277
|
|
||||||
Total net (losses) gains for the period included in:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||
OCI
1
|
|
(537
|
)
|
|
(7
|
)
|
|
(74
|
)
|
|
772
|
|
|
3,935
|
|
|
—
|
|
|
4,089
|
|
|||||||
Net income
2,3
|
|
(76
|
)
|
|
—
|
|
|
—
|
|
|
361
|
|
|
—
|
|
|
(1,480
|
)
|
|
(1,195
|
)
|
|||||||
Purchases
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|||||||
Sales
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|||||||
Issuances
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|||||||
Settlements
|
|
(1,847
|
)
|
|
(168
|
)
|
|
—
|
|
|
(2,420
|
)
|
|
—
|
|
|
(225
|
)
|
|
(4,660
|
)
|
|||||||
Transfers into Level 3
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|||||||
Transfers out of Level 3
|
|
(17,329
|
)
|
|
(2,771
|
)
|
|
(5,994
|
)
|
|
(5,875
|
)
|
|
(4,642
|
)
|
|
(1,000
|
)
|
|
(37,611
|
)
|
|||||||
Fair value, December 31, 2013
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
2,900
|
|
|
$
|
—
|
|
|
$
|
2,900
|
|
March 31, 2014
|
|
|
|
Fair Value Measurements Using
|
|||||||||
($ in thousands)
|
|
Assets/
Liabilities
Disclosed at
Fair Value at 3/31/2014
|
|
Quoted Prices in
Active Markets for
Identical Assets/
Liabilities
(Level 1)
|
|
Significant Other
Observable
Inputs
(Level 2)
|
|
Significant
Unobservable
Inputs
(Level 3)
|
|||||
Financial Assets
|
|
|
|
|
|
|
|
|
|
|
|
|
|
HTM:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Foreign government
|
|
$
|
5,552
|
|
|
—
|
|
|
5,552
|
|
|
—
|
|
Obligations of states and political subdivisions
|
|
364,307
|
|
|
—
|
|
|
364,307
|
|
|
—
|
|
|
Corporate securities
|
|
24,464
|
|
|
—
|
|
|
24,464
|
|
|
—
|
|
|
ABS
|
|
3,366
|
|
|
—
|
|
|
3,366
|
|
|
—
|
|
|
CMBS
|
|
5,847
|
|
|
—
|
|
|
5,847
|
|
|
—
|
|
|
Total HTM fixed income securities
|
|
$
|
403,536
|
|
|
—
|
|
|
403,536
|
|
|
—
|
|
Financial Liabilities
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Notes payable:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2.90% borrowings from FHLBI
|
|
$
|
13,243
|
|
|
—
|
|
|
13,243
|
|
|
—
|
|
1.25% borrowings from FHLBI
|
|
45,226
|
|
|
—
|
|
|
45,226
|
|
|
—
|
|
|
7.25% Senior Notes
|
|
53,065
|
|
|
—
|
|
|
53,065
|
|
|
—
|
|
|
6.70% Senior Notes
|
|
102,810
|
|
|
—
|
|
|
102,810
|
|
|
—
|
|
|
5.875% Senior Notes
|
|
165,316
|
|
|
165,316
|
|
|
—
|
|
|
—
|
|
|
Total notes payable
|
|
$
|
379,660
|
|
|
165,316
|
|
|
214,344
|
|
|
—
|
|
December 31, 2013
|
|
|
|
Fair Value Measurements Using
|
|||||||||
($ in thousands)
|
|
Assets/
Liabilities
Disclosed at
Fair Value at 12/31/2013
|
|
Quoted Prices in
Active Markets for
Identical Assets/
Liabilities
(Level 1)
|
|
Significant Other
Observable
Inputs
(Level 2)
|
|
Significant
Unobservable
Inputs
(Level 3)
|
|||||
Financial Assets
|
|
|
|
|
|
|
|
|
|
|
|
|
|
HTM:
|
|
|
|
|
|
|
|
|
|
|
|
||
Foreign government
|
|
$
|
5,591
|
|
|
—
|
|
|
5,591
|
|
|
—
|
|
Obligations of states and political subdivisions
|
|
369,756
|
|
|
—
|
|
|
369,756
|
|
|
—
|
|
|
Corporate securities
|
|
30,274
|
|
|
—
|
|
|
30,274
|
|
|
—
|
|
|
ABS
|
|
3,415
|
|
|
—
|
|
|
3,415
|
|
|
—
|
|
|
CMBS
|
|
7,945
|
|
|
—
|
|
|
7,945
|
|
|
—
|
|
|
Total HTM fixed income securities
|
|
$
|
416,981
|
|
|
—
|
|
|
416,981
|
|
|
—
|
|
Financial Liabilities
|
|
|
|
|
|
|
|
|
|
||||
Notes payable:
|
|
|
|
|
|
|
|
|
|
||||
2.90% borrowings from FHLBI
|
|
$
|
13,319
|
|
|
—
|
|
|
13,319
|
|
|
—
|
|
1.25% borrowings from FHLBI
|
|
45,259
|
|
|
—
|
|
|
45,259
|
|
|
—
|
|
|
7.25% Senior Notes
|
|
50,887
|
|
|
—
|
|
|
50,887
|
|
|
—
|
|
|
6.70% Senior Notes
|
|
98,247
|
|
|
—
|
|
|
98,247
|
|
|
—
|
|
|
5.875% Senior Notes
|
|
146,298
|
|
|
146,298
|
|
|
—
|
|
|
—
|
|
|
Total notes payable
|
|
$
|
354,010
|
|
|
146,298
|
|
|
207,712
|
|
|
—
|
|
|
|
Quarter ended March 31,
|
|||||
($ in thousands)
|
|
2014
|
|
2013
|
|||
Premiums written:
|
|
|
|
|
|
|
|
Direct
|
|
$
|
557,891
|
|
|
528,816
|
|
Assumed
|
|
7,850
|
|
|
8,482
|
|
|
Ceded
|
|
(88,991
|
)
|
|
(87,174
|
)
|
|
Net
|
|
$
|
476,750
|
|
|
450,124
|
|
Premiums earned:
|
|
|
|
|
|
|
|
Direct
|
|
$
|
536,700
|
|
|
494,066
|
|
Assumed
|
|
10,185
|
|
|
12,463
|
|
|
Ceded
|
|
(90,390
|
)
|
|
(85,589
|
)
|
|
Net
|
|
$
|
456,495
|
|
|
420,940
|
|
Loss and loss expense incurred:
|
|
|
|
|
|
|
|
Direct
|
|
$
|
358,349
|
|
|
365,646
|
|
Assumed
|
|
7,479
|
|
|
9,074
|
|
|
Ceded
|
|
(45,282
|
)
|
|
(104,871
|
)
|
|
Net
|
|
$
|
320,546
|
|
|
269,849
|
|
NFIP
|
|
Quarter ended March 31,
|
|||||
($ in thousands)
|
|
2014
|
|
2013
|
|||
Ceded premiums written
|
|
$
|
(57,303
|
)
|
|
(56,707
|
)
|
Ceded premiums earned
|
|
(58,286
|
)
|
|
(55,327
|
)
|
|
Ceded loss and loss expense incurred
|
|
(7,379
|
)
|
|
(76,176
|
)
|
•
|
Our Standard Insurance Operations segment and our E&S Insurance Operations segment are evaluated based on statutory underwriting results (net premiums earned, incurred loss and loss expenses, policyholders dividends, policy acquisition costs, and other underwriting expenses), and statutory combined ratios; and
|
•
|
Our Investments segment is evaluated based on after-tax net investment income and net realized gains and losses.
|
Revenue by Segment
|
|
Quarter ended March 31,
|
|||||
($ in thousands)
|
|
2014
|
|
2013
|
|||
Standard Insurance Operations:
|
|
|
|
|
|
|
|
Net premiums earned:
|
|
|
|
|
|
|
|
Commercial automobile
|
|
$
|
82,216
|
|
|
74,347
|
|
Workers compensation
|
|
69,413
|
|
|
66,084
|
|
|
General liability
|
|
108,818
|
|
|
97,703
|
|
|
Commercial property
|
|
60,186
|
|
|
53,415
|
|
|
Businessowners’ policies
|
|
20,869
|
|
|
18,540
|
|
|
Bonds
|
|
4,756
|
|
|
4,764
|
|
|
Other
|
|
3,183
|
|
|
2,992
|
|
|
Total Standard Commercial Lines
|
|
349,441
|
|
|
317,845
|
|
|
Personal automobile
|
|
38,226
|
|
|
38,393
|
|
|
Homeowners
|
|
33,298
|
|
|
31,135
|
|
|
Other
|
|
3,294
|
|
|
3,508
|
|
|
Total Standard Personal Lines
|
|
74,818
|
|
|
73,036
|
|
|
Total Standard Insurance Operations net premiums earned
|
|
424,259
|
|
|
390,881
|
|
|
Miscellaneous income
|
|
9,819
|
|
|
2,720
|
|
|
Total Standard Insurance Operations revenue
|
|
434,078
|
|
|
393,601
|
|
|
E&S Insurance Operations:
|
|
|
|
|
|||
Net premiums earned
|
|
32,236
|
|
|
30,059
|
|
|
Investments:
|
|
|
|
|
|
|
|
Net investment income
|
|
35,534
|
|
|
32,870
|
|
|
Net realized investment gains
|
|
7,218
|
|
|
3,355
|
|
|
Total investment revenues
|
|
42,752
|
|
|
36,225
|
|
|
Total all segments
|
|
509,066
|
|
|
459,885
|
|
|
Other income
|
|
5
|
|
|
64
|
|
|
Total revenues from continuing operations
|
|
$
|
509,071
|
|
|
459,949
|
|
Income from Continuing Operations before Federal Income Tax
|
|
Quarter ended March 31,
|
|||||
($ in thousands)
|
|
2014
|
|
2013
|
|||
Standard Insurance Operations:
|
|
|
|
|
|
|
|
Commercial Lines underwriting (loss) gain
|
|
$
|
(3,630
|
)
|
|
6,102
|
|
Personal Lines underwriting (loss) gain
|
|
(2,360
|
)
|
|
5,973
|
|
|
Total Standard Insurance Operations underwriting (loss) gain, before federal income tax
|
|
(5,990
|
)
|
|
12,075
|
|
|
GAAP combined ratio
|
|
101.4
|
%
|
|
96.9
|
%
|
|
Statutory combined ratio
|
|
101.1
|
%
|
|
96.8
|
%
|
|
|
|
|
|
|
|||
E&S Insurance Operations:
|
|
|
|
|
|||
Underwriting gain
|
|
975
|
|
|
86
|
|
|
GAAP combined ratio
|
|
97.0
|
%
|
|
99.7
|
%
|
|
Statutory combined ratio
|
|
97.9
|
%
|
|
98.2
|
%
|
|
|
|
|
|
|
|||
Investments:
|
|
|
|
|
|
|
|
Net investment income
|
|
35,534
|
|
|
32,870
|
|
|
Net realized investment gains
|
|
7,218
|
|
|
3,355
|
|
|
Total investment income, before federal income tax
|
|
42,752
|
|
|
36,225
|
|
|
Tax on investment income
|
|
11,575
|
|
|
9,205
|
|
|
Total investment income, after federal income tax
|
|
31,177
|
|
|
27,020
|
|
Reconciliation of Segment Results to Income from Continuing Operations,
before Federal Income Tax
|
|
Quarter ended March 31,
|
|||||
($ in thousands)
|
|
2014
|
|
2013
|
|||
Standard Insurance Operations underwriting (loss) gain, before federal income tax
|
|
$
|
(5,990
|
)
|
|
12,075
|
|
E&S Insurance Operations underwriting gain, before federal income tax
|
|
975
|
|
|
86
|
|
|
Investment income, before federal income tax
|
|
42,752
|
|
|
36,225
|
|
|
Total all segments
|
|
37,737
|
|
|
48,386
|
|
|
Interest expense
|
|
(5,561
|
)
|
|
(5,831
|
)
|
|
General corporate and other expenses
|
|
(7,092
|
)
|
|
(13,687
|
)
|
|
Income from continuing operations, before federal income tax
|
|
$
|
25,084
|
|
|
28,868
|
|
|
|
Retirement Income Plan
Quarter ended March 31, |
|
Retirement Life Plan
Quarter ended March 31, |
|||||||||
($ in thousands)
|
|
2014
|
|
2013
|
|
2014
|
|
2013
|
|||||
Components of Net Periodic Benefit Cost:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||
Net Periodic Benefit Cost:
|
|
|
|
|
|
|
|
|
|||||
Service cost
|
|
$
|
1,627
|
|
|
2,449
|
|
|
—
|
|
|
—
|
|
Interest cost
|
|
3,254
|
|
|
3,303
|
|
|
73
|
|
|
70
|
|
|
Expected return on plan assets
|
|
(3,919
|
)
|
|
(3,848
|
)
|
|
—
|
|
|
—
|
|
|
Amortization of unrecognized prior service cost
|
|
—
|
|
|
10
|
|
|
—
|
|
|
—
|
|
|
Amortization of unrecognized net actuarial loss
|
|
367
|
|
|
1,822
|
|
|
13
|
|
|
18
|
|
|
Curtailment expense
|
|
—
|
|
|
16
|
|
|
—
|
|
|
—
|
|
|
Total net periodic cost
|
|
$
|
1,329
|
|
|
3,752
|
|
|
86
|
|
|
88
|
|
|
|
Retirement Income Plan
Quarter ended March 31, |
|
Retirement Life Plan
Quarter ended March 31, |
||||||
|
|
2014
|
|
2013
|
|
2014
|
|
2013
|
||
Weighted-Average Expense Assumptions:
|
|
|
|
|
|
|
|
|
||
Discount rate
|
|
5.16
|
%
|
|
4.42
|
|
4.85
|
%
|
|
4.42
|
Expected return on plan assets
|
|
6.92
|
|
|
7.40
|
|
—
|
|
|
—
|
Rate of compensation increase
|
|
4.00
|
|
|
4.00
|
|
—
|
|
|
—
|
First Quarter 2014
|
|
|
|
|
|
|
||||
($ in thousands)
|
|
Gross
|
|
Tax
|
|
Net
|
||||
Net income
|
|
$
|
25,084
|
|
|
7,110
|
|
|
17,974
|
|
Components of OCI:
|
|
|
|
|
|
|
|
|
|
|
Unrealized gains on investment securities
:
|
|
|
|
|
|
|
|
|
|
|
Unrealized holding gains during the period
|
|
32,964
|
|
|
11,538
|
|
|
21,426
|
|
|
Amounts reclassified into net income:
|
|
|
|
|
|
|
||||
HTM securities
|
|
(456
|
)
|
|
(160
|
)
|
|
(296
|
)
|
|
Realized gains on AFS securities
|
|
(7,229
|
)
|
|
(2,530
|
)
|
|
(4,699
|
)
|
|
Net unrealized gains
|
|
25,279
|
|
|
8,848
|
|
|
16,431
|
|
|
Defined benefit pension and post-retirement plans:
|
|
|
|
|
|
|
|
|
|
|
Amounts reclassified into net income:
|
|
|
|
|
|
|
|
|
|
|
Net actuarial loss
|
|
380
|
|
|
133
|
|
|
247
|
|
|
Prior service cost
|
|
—
|
|
|
—
|
|
|
—
|
|
|
Defined benefit pension and post-retirement plans
|
|
380
|
|
|
133
|
|
|
247
|
|
|
Other comprehensive income
|
|
25,659
|
|
|
8,981
|
|
|
16,678
|
|
|
Comprehensive income
|
|
$
|
50,743
|
|
|
16,091
|
|
|
34,652
|
|
First Quarter 2013
|
|
|
|
|
|
|
||||
($ in thousands)
|
|
Gross
|
|
Tax
|
|
Net
|
||||
Net income
|
|
$
|
27,333
|
|
|
6,025
|
|
|
21,308
|
|
Components of OCI:
|
|
|
|
|
|
|
|
|
|
|
Unrealized gains on investment securities
:
|
|
|
|
|
|
|
|
|
|
|
Unrealized holding gains during the period
|
|
3,684
|
|
|
1,290
|
|
|
2,394
|
|
|
Non-credit OTTI recognized in OCI
|
|
30
|
|
|
10
|
|
|
20
|
|
|
Amounts reclassified into net income:
|
|
|
|
|
|
|
||||
HTM securities
|
|
(717
|
)
|
|
(251
|
)
|
|
(466
|
)
|
|
Non-credit OTTI
|
|
7
|
|
|
3
|
|
|
4
|
|
|
Realized gains on AFS securities
|
|
(5,976
|
)
|
|
(2,092
|
)
|
|
(3,884
|
)
|
|
Net unrealized losses
|
|
(2,972
|
)
|
|
(1,040
|
)
|
|
(1,932
|
)
|
|
Defined benefit pension and post-retirement plans:
|
|
|
|
|
|
|
|
|
|
|
Net actuarial losses
|
|
44,000
|
|
|
15,400
|
|
|
28,600
|
|
|
Amounts reclassified into net income:
|
|
|
|
|
|
|
|
|
|
|
Net actuarial loss
|
|
1,840
|
|
|
644
|
|
|
1,196
|
|
|
Prior service cost
|
|
10
|
|
|
4
|
|
|
6
|
|
|
Curtailment expense
|
|
16
|
|
|
5
|
|
|
11
|
|
|
Defined benefit pension and post-retirement plans
|
|
45,866
|
|
|
16,053
|
|
|
29,813
|
|
|
Other comprehensive income
|
|
42,894
|
|
|
15,013
|
|
|
27,881
|
|
|
Comprehensive income
|
|
$
|
70,227
|
|
|
21,038
|
|
|
49,189
|
|
March 31, 2014
|
|
Net Unrealized (Loss) Gain on Investment Securities
|
|
|
|
|
|||||||||||||
($ in thousands)
|
|
OTTI
Related
|
|
HTM
Related
|
|
All
Other
|
|
Investments
Subtotal
|
|
Defined Benefit
Pension and Post-Retirement Plans
|
|
Total AOCI
|
|||||||
Balance, December 31, 2013
|
|
$
|
(1,599
|
)
|
|
1,467
|
|
|
51,635
|
|
|
51,503
|
|
|
(26,652
|
)
|
|
24,851
|
|
OCI before reclassifications
|
|
—
|
|
|
—
|
|
|
21,426
|
|
|
21,426
|
|
|
—
|
|
|
21,426
|
|
|
Amounts reclassified from AOCI
|
|
—
|
|
|
(296
|
)
|
|
(4,699
|
)
|
|
(4,995
|
)
|
|
247
|
|
|
(4,748
|
)
|
|
Net current period OCI
|
|
—
|
|
|
(296
|
)
|
|
16,727
|
|
|
16,431
|
|
|
247
|
|
|
16,678
|
|
|
Balance, March 31, 2014
|
|
$
|
(1,599
|
)
|
|
1,171
|
|
|
68,362
|
|
|
67,934
|
|
|
(26,405
|
)
|
|
41,529
|
|
($ in thousands)
|
Quarter ended March 31, 2014
|
|
Affected Line Item in the Unaudited Consolidated Statement of Income
|
||
HTM related
|
|
|
|
||
Unrealized losses on HTM disposals
|
24
|
|
|
Net realized gains
|
|
Amortization of net unrealized gains on HTM securities
|
(480
|
)
|
|
Net investment income earned
|
|
|
(456
|
)
|
|
Income from continuing operations, before federal income tax
|
|
|
160
|
|
|
Total federal income tax expense
|
|
|
(296
|
)
|
|
Net income
|
|
Realized gains and losses on AFS
|
|
|
|
||
Realized gains on AFS disposals and OTTI
|
(7,229
|
)
|
|
Net realized gains
|
|
|
(7,229
|
)
|
|
Income from continuing operations, before federal income tax
|
|
|
2,530
|
|
|
Total federal income tax expense
|
|
|
(4,699
|
)
|
|
Net income
|
|
Defined benefit pension and post-retirement life plans
|
|
|
|
||
Net actuarial loss
|
87
|
|
|
Loss and loss expense incurred
|
|
|
293
|
|
|
Policy acquisition costs
|
|
Total defined benefit pension and post-retirement life plans
|
380
|
|
|
Income from continuing operations, before federal income tax
|
|
|
(133
|
)
|
|
Total federal income tax expense
|
|
|
247
|
|
|
Net income
|
|
|
|
|
|
||
Total reclassifications for the period
|
$
|
(4,748
|
)
|
|
Net income
|
•
|
Our Standard Insurance Operations segment, which is comprised of both commercial lines ("Commercial Lines") and personal lines ("Personal Lines") business, sells property and casualty insurance products and services in the standard market, including flood insurance through the National Flood Insurance Program's ("NFIPs") write-your-own ("WYO") program;
|
•
|
Our E&S Insurance Operations segment sells Commercial Lines property and casualty insurance products and services to insureds who have not obtained coverage in the standard market; and
|
•
|
Our Investments segment, which invests the premiums collected by our Standard and E&S Insurance Operations and amounts generated through our capital management strategies, which may include the issuance of debt and equity securities.
|
•
|
Critical Accounting Policies and Estimates;
|
•
|
Financial Highlights of Results for First Quarter 2014 and First Quarter 2013;
|
•
|
Results of Operations and Related Information by Segment;
|
•
|
Federal Income Taxes;
|
•
|
Financial Condition, Liquidity, Short-term Borrowings, and Capital Resources;
|
•
|
Ratings;
|
•
|
Off-Balance Sheet Arrangements; and
|
•
|
Contractual Obligations, Contingent Liabilities, and Commitments.
|
|
|
Quarter ended March 31,
|
|
|
||||||||
($ and shares in thousands, except per share amounts)
|
|
2014
|
|
2013
|
|
Change
% or Points
|
|
|
||||
Generally Accepted Accounting Principles ("GAAP") measures:
|
|
|
|
|
|
|
|
|
||||
Revenues
|
|
$
|
509,071
|
|
|
459,949
|
|
|
11
|
|
|
%
|
Pre-tax net investment income
|
|
35,534
|
|
|
32,870
|
|
|
8
|
|
|
|
|
Pre-tax net income
|
|
25,084
|
|
|
27,333
|
|
|
(8
|
)
|
|
|
|
Net income
|
|
17,974
|
|
|
21,308
|
|
|
(16
|
)
|
|
|
|
Diluted net income per share
|
|
0.31
|
|
|
0.38
|
|
|
(18
|
)
|
|
|
|
Diluted weighted-average outstanding shares
|
|
57,172
|
|
|
56,455
|
|
|
1
|
|
|
|
|
GAAP combined ratio
|
|
101.1
|
%
|
|
97.1
|
|
|
4.0
|
|
|
pts
|
|
Statutory combined ratio
2
|
|
100.8
|
%
|
|
96.8
|
|
|
4.0
|
|
|
|
|
Return on average equity
|
|
6.1
|
%
|
|
7.7
|
|
|
(1.6
|
)
|
|
|
|
Non-GAAP measures:
|
|
|
|
|
|
|
|
|
||||
Operating income
3
|
|
$
|
13,283
|
|
|
20,124
|
|
|
(34
|
)
|
|
%
|
Diluted operating income per share
3
|
|
0.23
|
|
|
0.36
|
|
|
(36
|
)
|
|
|
|
Operating return on average equity
3
|
|
4.5
|
%
|
|
7.2
|
|
|
(2.7
|
)
|
|
pts
|
1
|
Refer to the Glossary of Terms attached to our
2013 Annual Report
as Exhibit 99.1 for definitions of terms used in this Form 10-Q.
|
2
|
The statutory combined ratio for First Quarter 2013 included 1.3 points related to the Retirement Income Plan amendments that curtailed the accrual of additional benefits for all eligible employees participating in the plans after March 31, 2016.
|
3
|
Operating income is used as an important financial measure by us, analysts, and investors, because the realization of investment gains and losses on sales in any given period is largely discretionary as to timing. In addition, these realized investment gains and losses, as well as other-than-temporary impairments (“OTTI”) that are charged to earnings and the results of discontinued operations, could distort the analysis of trends. See below for a reconciliation of operating income to net income in accordance with GAAP. Operating return on average equity is calculated by dividing annualized operating income by average stockholders’ equity.
|
|
|
Quarter ended March 31,
|
|||||
($ in thousands, except per share amounts)
|
|
2014
|
|
2013
|
|||
Operating income
|
|
$
|
13,283
|
|
|
20,124
|
|
Net realized gains, net of tax
|
|
4,691
|
|
|
2,181
|
|
|
Loss on disposal of discontinued operations, net of tax
|
|
—
|
|
|
(997
|
)
|
|
Net income
|
|
$
|
17,974
|
|
|
21,308
|
|
|
|
|
|
|
|||
Diluted operating income per share
|
|
$
|
0.23
|
|
|
0.36
|
|
Diluted net realized gains per share
|
|
0.08
|
|
|
0.04
|
|
|
Diluted net loss from disposal of discontinued operations per share
|
|
—
|
|
|
(0.02
|
)
|
|
Diluted net income per share
|
|
$
|
0.31
|
|
|
0.38
|
|
Operating Return on Average Equity
|
|
Quarter ended March 31,
|
||||
|
|
2014
|
|
2013
|
||
Standard Insurance Operations
|
|
(1.3
|
)%
|
|
2.8
|
%
|
E&S Insurance Operations
|
|
0.2
|
%
|
|
—
|
|
Investments
|
|
9.1
|
%
|
|
8.9
|
%
|
Other
|
|
(3.5
|
)%
|
|
(4.5
|
)%
|
Total
|
|
4.5
|
%
|
|
7.2
|
%
|
•
|
Catastrophe losses for First Quarter 2014 were $34 million, or 7.5 points, compared to $1.6 million, or 0.4 points, in First Quarter 2013. The majority of these catastrophe losses were attributed to weather events defined by Insurance Services Office property claims service ("PCS") as CATs 31 and 32 in January, which brought freezing temperatures and snowstorms to our 22-state standard lines footprint.
|
•
|
Non-catastrophe property losses in First Quarter 2014 that were at one of the highest levels that we have experienced in recent years. The impact varied by line but, for both standard lines and E&S, non-catastrophe property losses for First Quarter 2014 were approximately $91 million, or 20 points, on our total combined ratio. This was about 5 points higher than First Quarter 2013 and 6 points higher than the non-catastrophe property loss quarterly average over the last three-year period. These non-catastrophe property losses were primarily the result of roof collapses, frozen pipes, and fires which were often related to the extreme weather experienced throughout our footprint states.
|
•
|
Renewal pure price increases of 7.6% that we achieved in full-year 2013, which are currently earning in at about 7.3%. This earned rate is above the loss cost trend of approximately 3%. After taking into account the incremental expenses associated with the additional premium, the net benefit to the combined ratio is about 2.5 points.
|
•
|
Favorable prior year casualty development in First Quarter 2014 that was $14 million, or 3.1 points, compared to favorable prior year casualty development of $2 million, or 0.4 points, in First Quarter 2013. We experienced stable workers compensation trends in the quarter with no development either favorable or unfavorable. The level of releases in First Quarter 2014 was driven by improving claim trends within our general liability line of business for the 2009 through 2012 accident years.
|
•
|
$8 million, or 1.8 points, in other income for the March 2014 sale of the renewal rights to our self-insured group, or "SIG," book of pooled public entity business. Although we did not solicit buyers, we decided to sell this very small and specialized book of business when the opportunity presented itself because it had significant production outside of our standard lines footprint, and proved difficult to grow. We, however, have retained our substantial individual risk public entity book of business and we will continue to look for opportunities to grow it.
|
All Lines
|
|
Quarter ended March 31,
|
||||||||||
($ in thousands)
|
|
2014
|
|
2013
|
|
Change % or Points
|
|
|
||||
GAAP Insurance Operations Results:
|
|
|
|
|
|
|
||||||
Net premiums written ("NPW")
|
|
$
|
476,750
|
|
|
450,124
|
|
|
6
|
|
|
%
|
Net premiums earned (“NPE”)
|
|
456,495
|
|
|
420,940
|
|
|
8
|
|
|
|
|
Less:
|
|
|
|
|
|
|
|
|
|
|||
Loss and loss expense incurred
|
|
320,546
|
|
|
269,849
|
|
|
19
|
|
|
|
|
Net underwriting expenses incurred
|
|
139,726
|
|
|
137,844
|
|
|
1
|
|
|
|
|
Dividends to policyholders
|
|
1,238
|
|
|
1,086
|
|
|
14
|
|
|
|
|
Underwriting (loss) gain
|
|
$
|
(5,015
|
)
|
|
12,161
|
|
|
(141
|
)
|
|
%
|
GAAP Ratios:
|
|
|
|
|
|
|
|
|
|
|||
Loss and loss expense ratio
|
|
70.2
|
|
%
|
64.1
|
|
|
6.1
|
|
|
pts
|
|
Underwriting expense ratio
|
|
30.6
|
|
|
32.7
|
|
|
(2.1
|
)
|
|
|
|
Dividends to policyholders ratio
|
|
0.3
|
|
|
0.3
|
|
|
—
|
|
|
|
|
Combined ratio
|
|
101.1
|
|
|
97.1
|
|
|
4.0
|
|
|
|
|
Statutory Ratios:
|
|
|
|
|
|
|
|
|
|
|||
Loss and loss expense ratio
1
|
|
70.2
|
|
|
64.1
|
|
|
6.1
|
|
|
|
|
Underwriting expense ratio
1
|
|
30.3
|
|
|
32.4
|
|
|
(2.1
|
)
|
|
|
|
Dividends to policyholders ratio
|
|
0.3
|
|
|
0.3
|
|
|
—
|
|
|
|
|
Combined ratio
1
|
|
100.8
|
|
%
|
96.8
|
|
|
4.0
|
|
|
pts
|
•
|
A full-year combined ratio of 92% excluding catastrophe losses and assuming no additional prior year casualty reserve development;
|
•
|
Four points of catastrophe losses for the year;
|
•
|
After-tax investment income of approximately $100 million; and
|
•
|
Weighted-average shares of approximately 57.4 million.
|
|
|
Quarter ended March 31,
|
|
|
|
|
||||||
($ in thousands)
|
|
2014
|
|
2013
|
|
Change
% or
Points
|
|
|
||||
GAAP Insurance Operations Results:
|
|
|
|
|
|
|
|
|
||||
NPW
|
|
$
|
446,688
|
|
|
421,744
|
|
|
6
|
|
|
%
|
NPE
|
|
424,259
|
|
|
390,881
|
|
|
9
|
|
|
|
|
Less:
|
|
|
|
|
|
|
|
|
|
|||
Loss and loss expense incurred
|
|
300,666
|
|
|
250,731
|
|
|
20
|
|
|
|
|
Net underwriting expenses incurred
|
|
128,345
|
|
|
126,989
|
|
|
1
|
|
|
|
|
Dividends to policyholders
|
|
1,238
|
|
|
1,086
|
|
|
14
|
|
|
|
|
Underwriting (loss) gain
|
|
$
|
(5,990
|
)
|
|
12,075
|
|
|
(150
|
)
|
|
%
|
GAAP Ratios:
|
|
|
|
|
|
|
|
|
|
|||
Loss and loss expense ratio
|
|
70.9
|
|
%
|
64.1
|
|
|
6.8
|
|
|
pts
|
|
Underwriting expense ratio
|
|
30.2
|
|
|
32.5
|
|
|
(2.3
|
)
|
|
|
|
Dividends to policyholders ratio
|
|
0.3
|
|
|
0.3
|
|
|
—
|
|
|
|
|
Combined ratio
|
|
101.4
|
|
|
96.9
|
|
|
4.5
|
|
|
|
|
Statutory Ratios:
|
|
|
|
|
|
|
|
|
|
|||
Loss and loss expense ratio
1
|
|
70.9
|
|
|
64.2
|
|
|
6.7
|
|
|
|
|
Underwriting expense ratio
1
|
|
29.9
|
|
|
32.3
|
|
|
(2.4
|
)
|
|
|
|
Dividends to policyholders ratio
|
|
0.3
|
|
|
0.3
|
|
|
—
|
|
|
|
|
Combined ratio
1
|
|
101.1
|
|
%
|
96.8
|
|
|
4.3
|
|
|
pts
|
1
|
Statutory ratios for First Quarter 2013 included 0.3 points in the loss and loss expense ratio, 1.1 points in the underwriting ratio, and 1.4 points in the combined ratio related to the Retirement Income Plan amendments that curtailed the accrual of additional benefits for all eligible employees participating in the plans after March 31, 2016.
|
|
|
Quarter ended March 31, 2014
|
|
|
Quarter ended March 31, 2013
|
|
||||
($ in millions)
|
|
Renewal Pure Price Increase
|
|
Retention
|
|
|
Renewal Pure Price Increase
|
|
Retention
|
|
Standard Commercial Lines
|
|
6.4
|
%
|
84
|
%
|
|
7.5
|
%
|
83
|
%
|
Standard Personal Lines
|
|
6.8
|
|
82
|
|
|
8.5
|
|
87
|
|
|
First Quarter 2014
|
|
|
First Quarter 2013
|
|
|
||||||||
($ in millions)
|
Loss and Loss Expense Incurred
|
Impact on
Loss and Loss Expense Ratio
|
|
|
Loss and Loss Expense Incurred
|
Impact on
Loss and Loss Expense Ratio
|
|
Change in Ratio
|
||||||
Catastrophe losses
|
$
|
34.2
|
|
8.1
|
|
pts
|
|
1.3
|
|
0.3
|
|
pts
|
7.8
|
|
Non-catastrophe property losses
|
86.2
|
|
20.3
|
|
|
|
60.7
|
|
15.5
|
|
|
4.8
|
|
|
Favorable prior year casualty reserve development
|
(14.0
|
)
|
(3.3
|
)
|
|
|
(2.5
|
)
|
(0.6
|
)
|
|
(2.7
|
)
|
Favorable/(Unfavorable) Prior Year Casualty Reserve Development
|
|
Quarter ended March 31,
|
|
|||||
($ in millions)
|
|
2014
|
|
2013
|
|
|||
General liability
|
|
$
|
11.0
|
|
|
4.0
|
|
|
Commercial automobile
|
|
—
|
|
|
—
|
|
|
|
Workers compensation
|
|
—
|
|
|
(7.5
|
)
|
|
|
Businessowners' policies
|
|
1.0
|
|
|
3.0
|
|
|
|
Homeowners
|
|
—
|
|
|
1.5
|
|
|
|
Personal automobile
|
|
2.0
|
|
|
1.0
|
|
|
|
Other
|
|
$
|
—
|
|
|
0.5
|
|
|
Total favorable prior year casualty reserve development
|
|
$
|
14.0
|
|
|
2.5
|
|
|
|
|
|
|
|
|
|||
Favorable impact on loss ratio
|
|
3.3
|
|
pts
|
0.6
|
|
pts
|
Standard Commercial Lines
|
|
|
|
|
|
|
|
||||
|
|
Quarter ended March 31,
|
|
|
|
||||||
($ in thousands)
|
|
2014
|
|
2013
|
|
Change
% or
Points
|
|
||||
GAAP Insurance Operations Results:
|
|
|
|
|
|
|
|
|
|
|
|
NPW
|
|
$
|
379,350
|
|
|
353,189
|
|
|
7
|
|
%
|
NPE
|
|
349,441
|
|
|
317,845
|
|
|
10
|
|
|
|
Less:
|
|
|
|
|
|
|
|
|
|
||
Loss and loss expense incurred
|
|
242,639
|
|
|
203,139
|
|
|
19
|
|
|
|
Net underwriting expenses incurred
|
|
109,194
|
|
|
107,518
|
|
|
2
|
|
|
|
Dividends to policyholders
|
|
1,238
|
|
|
1,086
|
|
|
14
|
|
|
|
Underwriting (loss) gain
|
|
$
|
(3,630
|
)
|
|
6,102
|
|
|
159
|
|
%
|
GAAP Ratios:
|
|
|
|
|
|
|
|
|
|
|
|
Loss and loss expense ratio
|
|
69.4
|
|
%
|
63.9
|
|
|
5.5
|
|
pts
|
|
Underwriting expense ratio
|
|
31.2
|
|
|
33.9
|
|
|
(2.7
|
)
|
|
|
Dividends to policyholders ratio
|
|
0.4
|
|
|
0.3
|
|
|
0.1
|
|
|
|
Combined ratio
|
|
101.0
|
|
|
98.1
|
|
|
2.9
|
|
|
|
Statutory Ratios:
|
|
|
|
|
|
|
|
|
|
|
|
Loss and loss expense ratio
1
|
|
69.4
|
|
|
63.9
|
|
|
5.5
|
|
|
|
Underwriting expense ratio
1
|
|
30.5
|
|
|
33.4
|
|
|
(2.9
|
)
|
|
|
Dividends to policyholders ratio
|
|
0.4
|
|
|
0.3
|
|
|
0.1
|
|
|
|
Combined ratio
1
|
|
100.3
|
|
%
|
97.6
|
|
|
2.7
|
|
pts
|
|
|
Quarter ended March 31,
|
||
($ in millions)
|
|
2014
|
|
2013
|
Retention
|
|
84
|
%
|
83
|
Renewal pure price increases
|
|
6.4
|
|
7.5
|
|
First Quarter 2014
|
|
First Quarter 2013
|
|
|
|
|||||||||
($ in millions)
|
Losses Incurred
|
Impact on
Loss Ratio
|
|
|
Losses
Incurred
|
Impact on
Loss Ratio
|
|
Change in Ratio
|
|
||||||
Catastrophe losses
|
$
|
25.9
|
|
7.4
|
|
pts
|
|
0.7
|
|
0.2
|
|
pts
|
7.2
|
|
pts
|
Non-catastrophe property losses
|
58.8
|
|
16.8
|
|
|
|
37.0
|
|
11.6
|
|
|
5.2
|
|
|
|
Favorable prior year casualty reserve development
|
(12.0
|
)
|
(3.5
|
)
|
|
|
(0.5
|
)
|
(0.1
|
)
|
|
(3.4
|
)
|
|
General Liability
|
|||||||||||
|
|
Quarter ended March 31,
|
|
|
|
||||||
($ in thousands)
|
|
2014
|
|
2013
|
|
Change
% or
Points
|
|
||||
Statutory NPW
|
|
$
|
119,504
|
|
|
109,405
|
|
|
9
|
|
%
|
Direct new business
|
|
19,835
|
|
|
19,781
|
|
|
—
|
|
|
|
Retention
|
|
84
|
|
%
|
83
|
|
|
1
|
|
pts
|
|
Renewal pure price increases
|
|
7.6
|
|
%
|
8.5
|
|
|
(0.9
|
)
|
|
|
Statutory NPE
|
|
108,818
|
|
|
97,703
|
|
|
11
|
|
%
|
|
Statutory combined ratio
|
|
80.7
|
|
%
|
95.9
|
|
|
(15.2
|
)
|
pts
|
|
% of total statutory standard Commercial Lines NPW
|
|
32
|
|
%
|
31
|
|
|
|
|
|
|
First Quarter 2014
|
First Quarter 2013
|
|
|
|
|||||||||
($ in millions)
|
(Benefit) Expense
|
Impact on
Combined Ratio |
|
(Benefit) Expense
|
Impact on
Combined Ratio |
|
Change
Points
|
|
||||||
Favorable prior year casualty reserve development
|
$
|
(11.0
|
)
|
(10.1
|
)
|
pts
|
(4.0
|
)
|
(4.1
|
)
|
pts
|
(6.0
|
)
|
pts
|
Sale of SIG renewal rights
|
(2.1
|
)
|
(1.8
|
)
|
|
—
|
|
—
|
|
|
(1.8
|
)
|
|
|
Retirement Income Plan curtailment charge
|
—
|
|
—
|
|
|
1.4
|
|
1.3
|
|
|
(1.3
|
)
|
|
Commercial Automobile
|
|||||||||||
|
|
Quarter ended March 31,
|
|
|
|
||||||
($ in thousands)
|
|
2014
|
|
2013
|
|
Change
% or
Points
|
|
||||
Statutory NPW
|
|
$
|
89,122
|
|
|
81,872
|
|
|
9
|
|
%
|
Direct new business
|
|
14,806
|
|
|
14,904
|
|
|
(1
|
)
|
|
|
Retention
|
|
83
|
|
%
|
83
|
|
|
—
|
|
pts
|
|
Renewal pure price increases
|
|
6.2
|
|
%
|
7.0
|
|
|
(0.8
|
)
|
|
|
Statutory NPE
|
|
82,216
|
|
|
74,347
|
|
|
11
|
|
%
|
|
Statutory combined ratio
|
|
94.9
|
|
%
|
98.0
|
|
|
(3.1
|
)
|
pts
|
|
% of total statutory standard Commercial Lines NPW
|
|
23
|
|
%
|
23
|
|
|
|
|
|
Workers Compensation
|
|||||||||||
|
|
Quarter ended March 31,
|
|
|
|
||||||
($ in thousands)
|
|
2014
|
|
2013
|
|
Change
% or
Points
|
|
||||
Statutory NPW
|
|
$
|
75,971
|
|
|
75,405
|
|
|
1
|
|
%
|
Direct new business
|
|
13,658
|
|
|
13,879
|
|
|
(2
|
)
|
|
|
Retention
|
|
82
|
|
%
|
82
|
|
|
—
|
|
pts
|
|
Renewal pure price increases
|
|
4.9
|
|
%
|
8.1
|
|
|
(3.2
|
)
|
|
|
Statutory NPE
|
|
69,413
|
|
|
66,084
|
|
|
5
|
|
%
|
|
Statutory combined ratio
|
|
105.9
|
|
%
|
118.9
|
|
|
(13.0
|
)
|
pts
|
|
% of total statutory standard Commercial Lines NPW
|
|
20
|
|
%
|
21
|
|
|
|
|
|
|
First Quarter 2014
|
First Quarter 2013
|
|
|
|
||||||||||
($ in millions)
|
(Benefit) Expense
|
Impact on
Combined Ratio |
|
(Benefit) Expense
|
Impact on
Combined Ratio |
|
Change
Points
|
|
|||||||
Unfavorable prior year casualty reserve development
|
$
|
—
|
|
—
|
|
pts
|
$
|
7.4
|
|
11.1
|
|
pts
|
(11.1
|
)
|
pts
|
Sale of SIG renewal rights
|
(1.5
|
)
|
(2.0
|
)
|
|
—
|
|
—
|
|
|
(2.0
|
)
|
|
||
Retirement Income Plan curtailment charge
|
—
|
|
—
|
|
|
1.2
|
|
1.7
|
|
|
(1.7
|
)
|
|
Commercial Property
|
|
|
|
|
|
|
|
||||
|
|
Quarter ended March 31,
|
|
|
|
||||||
($ in thousands)
|
|
2014
|
|
2013
|
|
Change
% or
Points
|
|
||||
Statutory NPW
|
|
$
|
64,096
|
|
|
57,760
|
|
|
11
|
|
%
|
Direct new business
|
|
14,495
|
|
|
14,385
|
|
|
1
|
|
|
|
Retention
|
|
83
|
|
%
|
82
|
|
|
1
|
|
pts
|
|
Renewal pure price increases
|
|
5.5
|
|
%
|
5.6
|
|
|
(0.1
|
)
|
|
|
Statutory NPE
|
|
60,186
|
|
|
53,415
|
|
|
13
|
|
%
|
|
Statutory combined ratio
|
|
131.4
|
|
%
|
86.6
|
|
|
44.8
|
|
pts
|
|
% of total statutory standard Commercial Lines NPW
|
|
17
|
|
%
|
16
|
|
|
|
|
|
|
First Quarter 2014
|
|
First Quarter 2013
|
|
|
|
||||||||
($ in millions)
|
(Benefit) Expense
|
Impact on
Combined Ratio |
|
|
(Benefit) Expense
|
Impact on
Combined Ratio |
|
Change
% or
Points
|
|
|||||
Catastrophe losses
|
$
|
18.9
|
|
31.5
|
|
pts
|
|
1.8
|
|
3.4
|
pts
|
28.1
|
|
pts
|
Non-catastrophe property losses
|
36.4
|
|
60.5
|
|
|
|
20.6
|
|
38.6
|
|
21.9
|
|
|
|
Sale of SIG renewal rights
|
(1.4
|
)
|
(2.2
|
)
|
|
|
—
|
|
—
|
|
(2.2
|
)
|
|
|
Retirement Income Plan curtailment charge
|
—
|
|
—
|
|
|
|
0.8
|
|
1.5
|
|
(1.5
|
)
|
|
Standard Personal Lines
|
|
|
|
|
|
|
|
|
||||
|
|
Quarter ended March 31,
|
|
|
|
|
||||||
($ in thousands)
|
|
2014
|
|
2013
|
|
Change
% or
Points
|
|
|
||||
GAAP Insurance Operations Results:
|
|
|
|
|
|
|
|
|
|
|
|
|
NPW
|
|
$
|
67,338
|
|
|
68,555
|
|
|
(2
|
)
|
|
%
|
NPE
|
|
74,818
|
|
|
73,036
|
|
|
2
|
|
|
|
|
Less:
|
|
|
|
|
|
|
|
|
|
|||
Loss and loss expense incurred
|
|
58,027
|
|
|
47,592
|
|
|
22
|
|
|
|
|
Net underwriting expenses incurred
|
|
19,151
|
|
|
19,471
|
|
|
(2
|
)
|
|
|
|
Underwriting (loss) gain
|
|
$
|
(2,360
|
)
|
|
5,973
|
|
|
(140
|
)
|
|
%
|
GAAP Ratios:
|
|
|
|
|
|
|
|
|
|
|||
Loss and loss expense ratio
|
|
77.6
|
|
%
|
65.2
|
|
|
12.4
|
|
|
pts
|
|
Underwriting expense ratio
|
|
25.6
|
|
|
26.6
|
|
|
(1.0
|
)
|
|
|
|
Combined ratio
|
|
103.2
|
|
|
91.8
|
|
|
11.4
|
|
|
|
|
Statutory Ratios:
|
|
|
|
|
|
|
|
|
|
|||
Loss and loss expense ratio
1
|
|
77.6
|
|
|
65.3
|
|
|
12.3
|
|
|
|
|
Underwriting expense ratio
1
|
|
26.9
|
|
|
27.1
|
|
|
(0.2
|
)
|
|
|
|
Combined ratio
1
|
|
104.5
|
|
%
|
92.4
|
|
|
12.1
|
|
|
pts
|
|
|
Quarter ended March 31,
|
||
($ in millions)
|
|
2014
|
|
2013
|
Retention
|
|
82
|
%
|
87
|
Renewal pure price increase
|
|
6.8
|
|
8.5
|
|
First Quarter 2014
|
|
|
First Quarter 2013
|
|
|
|
|||||
($ in millions)
|
Loss and Loss Expense Incurred
|
Impact on
Loss and Loss Expense Ratio
|
|
|
Loss and Loss
Expense
Incurred
|
Impact on
Loss and Loss Expense Ratio
|
|
Change in Ratio
|
|
|||
Catastrophe losses
|
$
|
8.3
|
|
11.1
|
pts
|
|
0.5
|
|
0.7
|
pts
|
10.4
|
pts
|
Non-catastrophe property losses
|
27.4
|
|
36.6
|
|
|
23.8
|
|
32.5
|
|
4.1
|
|
|
|
Quarter ended March 31,
|
|
|
|
||||||
($ in thousands)
|
|
2014
|
|
2013
|
|
Change
% or
Points
|
|
||||
GAAP Insurance Operations Results:
|
|
|
|
|
|
|
|
|
|
|
|
NPW
|
|
$
|
30,062
|
|
|
28,380
|
|
|
6
|
|
%
|
NPE
|
|
32,236
|
|
|
30,059
|
|
|
7
|
|
|
|
Less:
|
|
|
|
|
|
|
|
|
|
|
|
Loss and loss expense incurred
|
|
19,880
|
|
|
19,118
|
|
|
4
|
|
|
|
Net underwriting expenses incurred
|
|
11,381
|
|
|
10,855
|
|
|
5
|
|
|
|
Underwriting gain
|
|
$
|
975
|
|
|
86
|
|
|
1,034
|
|
%
|
GAAP Ratios:
|
|
|
|
|
|
|
|
|
|
|
|
Loss and loss expense ratio
|
|
61.7
|
|
%
|
63.6
|
|
|
(1.9
|
)
|
pts
|
|
Underwriting expense ratio
|
|
35.3
|
|
|
36.1
|
|
|
(0.8
|
)
|
|
|
Combined ratio
|
|
97.0
|
|
|
99.7
|
|
|
(2.7
|
)
|
|
|
Statutory Ratios:
|
|
|
|
|
|
|
|
|
|
|
|
Loss and loss expense ratio
|
|
61.7
|
|
|
63.6
|
|
|
(1.9
|
)
|
|
|
Underwriting expense ratio
|
|
36.2
|
|
|
34.6
|
|
|
1.6
|
|
|
|
Combined ratio
|
|
97.9
|
|
%
|
98.2
|
|
|
(0.3
|
)
|
pts
|
Total Invested Assets
|
|
|
|
|
|
|
||||
($ in thousands)
|
|
March 31, 2014
|
|
December 31, 2013
|
|
Change %
|
||||
Total invested assets
|
|
$
|
4,640,049
|
|
|
4,583,312
|
|
|
1
|
%
|
Unrealized gain – before tax
|
|
104,515
|
|
|
79,236
|
|
|
32
|
|
|
Unrealized gain – after tax
|
|
67,935
|
|
|
51,504
|
|
|
32
|
|
|
|
March 31, 2014
|
|
December 31, 2013
|
|
U.S. government obligations
|
|
4
|
%
|
4
|
|
Foreign government obligations
|
|
1
|
|
1
|
|
State and municipal obligations
|
|
29
|
|
28
|
|
Corporate securities
|
|
39
|
|
39
|
|
Mortgage-backed securities (“MBS”)
|
|
15
|
|
15
|
|
Asset-backed securities (“ABS”)
|
|
3
|
|
3
|
|
Total fixed income securities
|
|
91
|
|
90
|
|
Equity securities
|
|
4
|
|
4
|
|
Short-term investments
|
|
3
|
|
4
|
|
Other investments
|
|
2
|
|
2
|
|
Total
|
|
100
|
%
|
100
|
|
Fixed Income Security Rating
|
|
March 31, 2014
|
|
December 31, 2013
|
|
Aaa/AAA
|
|
16
|
%
|
15
|
|
Aa/AA
|
|
45
|
|
45
|
|
A/A
|
|
25
|
|
26
|
|
Baa/BBB
|
|
13
|
|
13
|
|
Ba/BB or below
|
|
1
|
|
1
|
|
Total
|
|
100
|
%
|
100
|
|
|
|
March 31, 2014
|
|
December 31, 2013
|
|||||||||||||
($ in millions)
|
|
Fair
Value
|
|
Unrealized
Gain (Loss)
|
|
Weighted
Average Credit
Quality
|
|
Fair
Value
|
|
Unrealized
Gain (Loss)
|
|
Weighted Average Credit Quality
|
|||||
AFS Fixed Income Portfolio:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
U.S. government obligations
|
|
$
|
171.1
|
|
|
9.6
|
|
|
AA+
|
|
173.4
|
|
|
10.1
|
|
|
AA+
|
Foreign government obligations
|
|
32.4
|
|
|
0.9
|
|
|
AA-
|
|
30.6
|
|
|
0.8
|
|
|
AA-
|
|
State and municipal obligations
|
|
979.2
|
|
|
15.9
|
|
|
AA+
|
|
951.6
|
|
|
5.2
|
|
|
AA
|
|
Corporate securities
|
|
1,815.7
|
|
|
38.5
|
|
|
A
|
|
1,734.9
|
|
|
27.0
|
|
|
A
|
|
ABS
|
|
131.9
|
|
|
0.5
|
|
|
AAA
|
|
140.9
|
|
|
0.5
|
|
|
AAA
|
|
MBS
|
|
685.6
|
|
|
1.9
|
|
|
AA+
|
|
684.1
|
|
|
(4.0
|
)
|
|
AA+
|
|
Total AFS fixed income portfolio
|
|
$
|
3,815.9
|
|
|
67.3
|
|
|
AA-
|
|
3,715.5
|
|
|
39.6
|
|
|
AA-
|
State and Municipal Obligations:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
General obligations
|
|
$
|
478.6
|
|
|
7.2
|
|
|
AA+
|
|
472.0
|
|
|
2.6
|
|
|
AA+
|
Special revenue obligations
|
|
500.6
|
|
|
8.7
|
|
|
AA
|
|
479.6
|
|
|
2.6
|
|
|
AA
|
|
Total state and municipal obligations
|
|
$
|
979.2
|
|
|
15.9
|
|
|
AA+
|
|
951.6
|
|
|
5.2
|
|
|
AA
|
Corporate Securities:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Financial
|
|
$
|
568.5
|
|
|
13.2
|
|
|
A
|
|
534.1
|
|
|
11.7
|
|
|
A
|
Industrials
|
|
135.9
|
|
|
4.4
|
|
|
A-
|
|
135.1
|
|
|
3.7
|
|
|
A-
|
|
Utilities
|
|
155.1
|
|
|
1.7
|
|
|
A-
|
|
146.5
|
|
|
(0.3
|
)
|
|
A-
|
|
Consumer discretionary
|
|
213.9
|
|
|
5.1
|
|
|
A-
|
|
190.6
|
|
|
2.7
|
|
|
A-
|
|
Consumer staples
|
|
176.4
|
|
|
3.7
|
|
|
A
|
|
171.9
|
|
|
3.0
|
|
|
A
|
|
Healthcare
|
|
174.7
|
|
|
4.2
|
|
|
A
|
|
168.5
|
|
|
3.1
|
|
|
A
|
|
Materials
|
|
104.1
|
|
|
2.3
|
|
|
A-
|
|
101.2
|
|
|
1.4
|
|
|
A-
|
|
Energy
|
|
104.2
|
|
|
1.7
|
|
|
A-
|
|
93.7
|
|
|
0.9
|
|
|
A-
|
|
Information technology
|
|
125.5
|
|
|
0.7
|
|
|
A+
|
|
121.2
|
|
|
(0.6
|
)
|
|
A+
|
|
Telecommunications services
|
|
50.0
|
|
|
1.1
|
|
|
BBB+
|
|
64.7
|
|
|
1.0
|
|
|
BBB+
|
|
Other
|
|
7.4
|
|
|
0.4
|
|
|
AA+
|
|
7.4
|
|
|
0.4
|
|
|
AA+
|
|
Total corporate securities
|
|
$
|
1,815.7
|
|
|
38.5
|
|
|
A
|
|
1,734.9
|
|
|
27.0
|
|
|
A
|
ABS:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
ABS
|
|
$
|
131.5
|
|
|
0.5
|
|
|
AAA
|
|
140.4
|
|
|
0.4
|
|
|
AAA
|
Sub-prime ABS
1
|
|
0.4
|
|
|
—
|
|
|
D
|
|
0.5
|
|
|
0.1
|
|
|
D
|
|
Total ABS
|
|
131.9
|
|
|
0.5
|
|
|
AAA
|
|
140.9
|
|
|
0.5
|
|
|
AAA
|
|
MBS:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Government guaranteed agency commercial mortgage-backed securities ("CMBS")
|
|
$
|
24.5
|
|
|
0.5
|
|
|
AA+
|
|
30.0
|
|
|
0.9
|
|
|
AA+
|
Other agency CMBS
|
|
10.6
|
|
|
(0.2
|
)
|
|
AA+
|
|
9.1
|
|
|
(0.3
|
)
|
|
AA+
|
|
Non-agency CMBS
|
|
139.7
|
|
|
2.1
|
|
|
AA+
|
|
132.2
|
|
|
(1.5
|
)
|
|
AA+
|
|
Government guaranteed agency residential MBS ("RMBS")
|
|
48.3
|
|
|
1.3
|
|
|
AA+
|
|
55.2
|
|
|
1.4
|
|
|
AA+
|
|
Other agency RMBS
|
|
417.6
|
|
|
(2.3
|
)
|
|
AA+
|
|
411.5
|
|
|
(5.1
|
)
|
|
AA+
|
|
Non-agency RMBS
|
|
40.5
|
|
|
0.4
|
|
|
A-
|
|
41.4
|
|
|
0.6
|
|
|
A-
|
|
Alternative-A (“Alt-A”) RMBS
|
|
4.4
|
|
|
0.1
|
|
|
A
|
|
4.7
|
|
|
—
|
|
|
A
|
|
Total MBS
|
|
$
|
685.6
|
|
|
1.9
|
|
|
AA+
|
|
684.1
|
|
|
(4.0
|
)
|
|
AA+
|
March 31, 2014
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||
($ in millions)
|
|
Fair
Value
|
|
Carry
Value
|
|
Unrecognized Holding Gain (Loss)
|
|
Unrealized Gain (Loss) in Accumulated Other Comprehensive Income ("AOCI")
|
|
Total Unrealized/ Unrecognized Gain (Loss)
|
|
Weighted Average Credit Quality
|
||||||
HTM Fixed Income Portfolio:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Foreign government obligations
|
|
$
|
5.6
|
|
|
5.4
|
|
|
0.2
|
|
|
0.1
|
|
|
0.3
|
|
|
AA+
|
State and municipal obligations
|
|
364.3
|
|
|
347.9
|
|
|
16.4
|
|
|
3.4
|
|
|
19.8
|
|
|
AA
|
|
Corporate securities
|
|
24.5
|
|
|
21.6
|
|
|
2.9
|
|
|
(0.3
|
)
|
|
2.6
|
|
|
A+
|
|
ABS
|
|
3.3
|
|
|
2.7
|
|
|
0.6
|
|
|
(0.6
|
)
|
|
—
|
|
|
AA+
|
|
MBS
|
|
5.8
|
|
|
4.5
|
|
|
1.3
|
|
|
(0.8
|
)
|
|
0.5
|
|
|
AAA
|
|
Total HTM fixed income portfolio
|
|
$
|
403.5
|
|
|
382.1
|
|
|
21.4
|
|
|
1.8
|
|
|
23.2
|
|
|
AA
|
State and Municipal Obligations:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
General obligations
|
|
$
|
117.5
|
|
|
112.6
|
|
|
4.9
|
|
|
1.7
|
|
|
6.6
|
|
|
AA
|
Special revenue obligations
|
|
246.8
|
|
|
235.3
|
|
|
11.5
|
|
|
1.7
|
|
|
13.2
|
|
|
AA
|
|
Total state and municipal obligations
|
|
$
|
364.3
|
|
|
347.9
|
|
|
16.4
|
|
|
3.4
|
|
|
19.8
|
|
|
AA
|
Corporate Securities:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Financial
|
|
$
|
2.3
|
|
|
1.9
|
|
|
0.4
|
|
|
(0.1
|
)
|
|
0.3
|
|
|
A-
|
Industrials
|
|
7.1
|
|
|
6.0
|
|
|
1.1
|
|
|
(0.2
|
)
|
|
0.9
|
|
|
A+
|
|
Utilities
|
|
13.6
|
|
|
12.2
|
|
|
1.4
|
|
|
—
|
|
|
1.4
|
|
|
A+
|
|
Consumer discretionary
|
|
1.5
|
|
|
1.5
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
AA
|
|
Total corporate securities
|
|
$
|
24.5
|
|
|
21.6
|
|
|
2.9
|
|
|
(0.3
|
)
|
|
2.6
|
|
|
A+
|
ABS:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
ABS
|
|
$
|
0.8
|
|
|
0.8
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
AA
|
Alt-A ABS
|
|
2.5
|
|
|
1.9
|
|
|
0.6
|
|
|
(0.6
|
)
|
|
—
|
|
|
AAA
|
|
Total ABS
|
|
$
|
3.3
|
|
|
2.7
|
|
|
0.6
|
|
|
(0.6
|
)
|
|
—
|
|
|
AA+
|
MBS:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Non-agency CMBS
|
|
$
|
5.8
|
|
|
4.5
|
|
|
1.3
|
|
|
(0.8
|
)
|
|
0.5
|
|
|
AAA
|
Total MBS
|
|
$
|
5.8
|
|
|
4.5
|
|
|
1.3
|
|
|
(0.8
|
)
|
|
0.5
|
|
|
AAA
|
December 31, 2013
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||
($ in millions)
|
|
Fair
Value
|
|
Carry
Value
|
|
Unrecognized Holding Gain (Loss)
|
|
Unrealized Gain (Loss) in AOCI
|
|
Total Unrealized/ Unrecognized Gain (Loss)
|
|
Weighted Average Credit Quality
|
||||||
HTM Portfolio:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Foreign government obligations
|
|
$
|
5.6
|
|
|
5.4
|
|
|
0.2
|
|
|
0.1
|
|
|
0.3
|
|
|
AA+
|
State and municipal obligations
|
|
369.8
|
|
|
352.2
|
|
|
17.6
|
|
|
4.0
|
|
|
21.6
|
|
|
AA
|
|
Corporate securities
|
|
30.3
|
|
|
27.8
|
|
|
2.5
|
|
|
(0.3
|
)
|
|
2.2
|
|
|
A
|
|
ABS
|
|
3.4
|
|
|
2.8
|
|
|
0.6
|
|
|
(0.6
|
)
|
|
—
|
|
|
AA+
|
|
MBS
|
|
7.9
|
|
|
4.7
|
|
|
3.2
|
|
|
(0.9
|
)
|
|
2.3
|
|
|
AA-
|
|
Total HTM portfolio
|
|
$
|
417.0
|
|
|
392.9
|
|
|
24.1
|
|
|
2.3
|
|
|
26.4
|
|
|
AA
|
State and Municipal Obligations:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
General obligations
|
|
$
|
118.5
|
|
|
113.1
|
|
|
5.4
|
|
|
2.0
|
|
|
7.4
|
|
|
AA
|
Special revenue obligations
|
|
251.3
|
|
|
239.1
|
|
|
12.2
|
|
|
2.0
|
|
|
14.2
|
|
|
AA
|
|
Total state and municipal obligations
|
|
$
|
369.8
|
|
|
352.2
|
|
|
17.6
|
|
|
4.0
|
|
|
21.6
|
|
|
AA
|
Corporate Securities:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Financial
|
|
$
|
7.3
|
|
|
6.8
|
|
|
0.5
|
|
|
(0.1
|
)
|
|
0.4
|
|
|
BBB+
|
Industrials
|
|
7.8
|
|
|
6.8
|
|
|
1.0
|
|
|
(0.2
|
)
|
|
0.8
|
|
|
A+
|
|
Utilities
|
|
13.2
|
|
|
12.2
|
|
|
1.0
|
|
|
—
|
|
|
1.0
|
|
|
A+
|
|
Consumer discretionary
|
|
2.0
|
|
|
2.0
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
AA
|
|
Total corporate securities
|
|
$
|
30.3
|
|
|
27.8
|
|
|
2.5
|
|
|
(0.3
|
)
|
|
2.2
|
|
|
A
|
ABS:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
ABS
|
|
$
|
0.9
|
|
|
0.9
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
A
|
Alt-A ABS
|
|
2.5
|
|
|
1.9
|
|
|
0.6
|
|
|
(0.6
|
)
|
|
—
|
|
|
AAA
|
|
Total ABS
|
|
$
|
3.4
|
|
|
2.8
|
|
|
0.6
|
|
|
(0.6
|
)
|
|
—
|
|
|
AA+
|
MBS:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Non-agency CMBS
|
|
$
|
7.9
|
|
|
4.7
|
|
|
3.2
|
|
|
(0.9
|
)
|
|
2.3
|
|
|
AA-
|
Total MBS
|
|
$
|
7.9
|
|
|
4.7
|
|
|
3.2
|
|
|
(0.9
|
)
|
|
2.3
|
|
|
AA-
|
Insurers of Municipal Bond Securities
|
|
|
|
|
|
|
||
($ in thousands)
|
|
Fair Value
|
|
Ratings
with
Insurance
|
|
Ratings
without
Insurance
|
||
National Public Finance Guarantee Corporation, a subsidiary of MBIA, Inc.
|
|
$
|
196,191
|
|
|
AA-
|
|
AA-
|
Assured Guaranty
|
|
142,463
|
|
|
AA
|
|
AA-
|
|
Ambac Financial Group, Inc.
|
|
58,800
|
|
|
AA
|
|
AA
|
|
Other
|
|
10,631
|
|
|
AA
|
|
A+
|
|
Total
|
|
$
|
408,085
|
|
|
AA
|
|
AA-
|
($ in thousands)
|
|
Amortized
Cost
|
|
Fair
Value
|
Unrealized Loss
|
||||
One year or less
|
|
$
|
4,002
|
|
|
3,923
|
|
79
|
|
Due after one year through five years
|
|
456,443
|
|
|
450,103
|
|
6,340
|
|
|
Due after five years through ten years
|
|
786,554
|
|
|
761,899
|
|
24,655
|
|
|
Due after ten years
|
|
7,030
|
|
|
6,856
|
|
174
|
|
|
Total
|
|
$
|
1,254,029
|
|
|
1,222,781
|
|
31,248
|
|
($ in thousands)
|
|
Amortized
Cost
|
|
Fair
Value
|
Unrecognized/Unrealized Loss
|
||||
One year or less
|
|
$
|
446
|
|
|
445
|
|
1
|
|
Due after one year through five years
|
|
2,524
|
|
|
2,495
|
|
29
|
|
|
Total
|
|
$
|
2,970
|
|
|
2,940
|
|
30
|
|
|
|
Quarter ended March 31,
|
|||||
($ in thousands)
|
|
2014
|
|
2013
|
|||
Fixed income securities
|
|
$
|
31,028
|
|
|
30,089
|
|
Equity securities
|
|
1,449
|
|
|
1,207
|
|
|
Short-term investments
|
|
19
|
|
|
52
|
|
|
Other investments
|
|
5,218
|
|
|
3,602
|
|
|
Investment expenses
|
|
(2,180
|
)
|
|
(2,080
|
)
|
|
Net investment income earned – before tax
|
|
35,534
|
|
|
32,870
|
|
|
Net investment income tax expense
|
|
(9,048
|
)
|
|
(8,031
|
)
|
|
Net investment income earned – after tax
|
|
$
|
26,486
|
|
|
24,839
|
|
Effective tax rate
|
|
25.5
|
%
|
|
24.4
|
|
|
Annual after-tax yield on fixed income securities
|
|
2.2
|
%
|
|
2.3
|
|
|
Annual after-tax yield on investment portfolio
|
|
2.3
|
%
|
|
2.3
|
|
|
Quarter ended March 31,
|
|||||
($ in million)
|
2014
|
|
2013
|
|||
Federal income tax expense from continuing operations
|
$
|
7.1
|
|
|
6.6
|
|
Effective tax rate
|
28
|
%
|
|
23
|
|
|
Required as of
March 31, 2014 |
Actual as of
March 31, 2014 |
Consolidated net worth
|
$813 million
|
$1.2 billion
|
Statutory surplus
|
Not less than $750 million
|
$1.3 billion
|
Debt-to-capitalization ratio
1
|
Not to exceed 35%
|
25.1%
|
A.M. Best financial strength rating
|
Minimum of A-
|
A
|
1
|
Calculated in accordance with the Line of Credit agreement.
|
•
|
Fitch Ratings ("Fitch") - Our “A+” rating was reaffirmed in First Quarter 2014, citing our improved underwriting results, strong independent agency relationships, solid loss reserve position, and enhanced diversification through continued efforts to reduce our concentration in New Jersey. Our outlook remained negative citing increased levels of statutory and financial leverage, a moderate decline in the National Association of Insurance Commissioners ("NAIC") risk-based capital levels, and a moderate decline of our operating earnings-based interest coverage, although Fitch noted that this measure has shown improvement in 2013.
|
•
|
S&P Ratings Services ("S&P") - In the third quarter of 2013, S&P lowered our financial strength rating to “A-” from “A” under their recently revised rating criteria. The rating reflects our strong business risk profile and moderately strong financial risk profile, built on a strong competitive position in the regional small to midsize commercial insurance markets in Mid-Atlantic states and strong capital and earnings. The rating revision reflects S&P's view of our capital and earnings volatility relative to our peers. The outlook for the rating is stable citing the expectation that we will sustain our strong competitive position and business risk profile while maintaining a strong capital and earnings profile.
|
•
|
Moody's Investor Service ("Moody's") - Our "A2" financial strength rating was reaffirmed in First Quarter 2013 by Moody's, which cited our strong regional franchise with established independent agency support, along with solid risk adjusted capitalization and strong invested asset quality. Our outlook was revised to negative, citing that our underwriting results have lagged similarly rated peers.
|
Period
|
|
Total Number of
Shares Purchased
1
|
|
Average Price
Paid per Share
|
|
Total Number of
Shares Purchased as Part of Publicly
Announced Programs
|
|
Maximum Number of
Shares that May Yet Be Purchased Under the Announced Programs |
|||||
January 1 – 31, 2014
|
|
—
|
|
|
$
|
—
|
|
|
—
|
|
|
—
|
|
February 1 – 28, 2014
|
|
118,009
|
|
|
22.31
|
|
|
—
|
|
|
—
|
|
|
March 1 – 31, 2014
|
|
867
|
|
|
22.93
|
|
|
—
|
|
|
—
|
|
|
Total
|
|
118,876
|
|
|
$
|
22.31
|
|
|
—
|
|
|
—
|
|
Exhibit No.
|
|
|
*10.1+
|
|
Selective Insurance Group, Inc. 2014 Omnibus Stock Plan Director Stock Option Agreement.
|
*10.2+
|
|
Selective Insurance Group, Inc. 2014 Omnibus Stock Plan Stock Option Agreement.
|
*10.3+
|
|
Selective Insurance Group, Inc. 2014 Omnibus Stock Plan Service-Based Restricted Stock Agreement.
|
*10.4+
|
|
Selective Insurance Group, Inc. 2014 Omnibus Stock Plan Performance-Based Restricted Stock Agreement.
|
*10.5+
|
|
Selective Insurance Group, Inc. 2014 Omnibus Stock Plan Service-Based Restricted Stock Unit Agreement.
|
*10.6+
|
|
Selective Insurance Group, Inc. 2014 Omnibus Stock Plan Performance-Based Restricted Stock Unit Agreement.
|
*10.7+
|
|
Selective Insurance Group, Inc. 2014 Omnibus Stock Plan Director Restricted Stock Unit Agreement.
|
*10.8+
|
|
Selective Insurance Group, Inc. Cash Incentive Plan Service-Based Cash Incentive Unit Award Agreement.
|
*10.9+
|
|
Selective Insurance Group, Inc. Cash Incentive Plan Performance-Based Cash Incentive Unit Award Agreement.
|
*10.10+
|
|
Selective Insurance Group, Inc. Non-Employee Directors’ Compensation and Deferral Plan, As Amended and Restated Effective as of May 1, 2014.
|
* 11
|
|
Statement Re: Computation of Per Share Earnings.
|
* 31.1
|
|
Certification of Chief Executive Officer in accordance with Section 302 of the Sarbanes-Oxley Act of 2002.
|
* 31.2
|
|
Certification of Chief Financial Officer in accordance with Section 302 of the Sarbanes-Oxley Act of 2002.
|
* 32.1
|
|
Certification of Chief Executive Officer in accordance with Section 906 of the Sarbanes-Oxley Act of 2002.
|
* 32.2
|
|
Certification of Chief Financial Officer in accordance with Section 906 of the Sarbanes-Oxley Act of 2002.
|
** 101.INS
|
|
XBRL Instance Document.
|
** 101.SCH
|
|
XBRL Taxonomy Extension Schema Document.
|
** 101.CAL
|
|
XBRL Taxonomy Extension Calculation Linkbase Document.
|
** 101.LAB
|
|
XBRL Taxonomy Extension Label Linkbase Document.
|
** 101.PRE
|
|
XBRL Taxonomy Extension Presentation Linkbase Document.
|
** 101.DEF
|
|
XBRL Taxonomy Extension Definition Linkbase Document.
|
By: /s/ Gregory E. Murphy
|
April 24, 2014
|
Gregory E. Murphy
|
|
Chairman of the Board and Chief Executive Officer
|
|
|
|
By: /s/ Dale A. Thatcher
|
April 24, 2014
|
Dale A. Thatcher
|
|
Executive Vice President and Chief Financial Officer
|
|
(principal accounting officer and principal financial officer)
|
|
Number of Shares of Common Stock
Subject to the Option
|
Vesting Date(s)
|
[NUMBER]
[NUMBER]
[NUMBER]
|
[DATE]
4
[DATE]
[DATE]
|
Vesting Date
[Third anniversary from the Date of Grant]
|
Percentage Vested
1
[100%]
|
Vesting Date
|
Percentage Vested
|
|
|
Performance Goals
|
|
Vesting Date
|
Percentage Vested
|
[Third anniversary of the Date of Grant]
|
[100%]
2
|
Ending Date
|
|
Percentage Vested
|
[Third anniversary of the Date of Grant]
|
|
100%
2
|
|
SELECTIVE INSURANCE GROUP, INC.
|
|
|
|
|
|
By:
|
|
Title:
|
|
|
|
|
|
[EMPLOYEE]
|
|
|
|
|
|
__________________________________________
Current Date
|
Date
|
Percentage Settled
|
|
|
|
|
|
|
1.
|
Establishment, Purpose and Restatement.
|
2.
|
Definitions.
|
3.
|
Election of Form of Payment of Annual Retainer.
|
4.
|
Deferral of Receipt of Director Compensation.
|
5.
|
Form of Payment.
|
6.
|
Effect of Change in Control.
|
7.
|
Election Changes.
|
8.
|
Accounts.
|
9.
|
Dividends and Interest.
|
10.
|
Account Statements.
|
11.
|
Administration.
|
12.
|
Amendment and Termination of the Plan.
|
13.
|
General Provisions.
|
By:
|
/s/ Michael H. Lanza
|
Name:
|
Michael H. Lanza
|
Title:
|
Executive Vice President and
|
|
General Counsel
|
|
|||||||||||
First Quarter 2014
|
|
Income
|
|
Shares
|
|
Per Share
|
|||||
(in thousands, except per share amounts)
|
|
(Numerator)
|
|
(Denominator)
|
|
Amount
|
|||||
Basic EPS:
|
|
|
|
|
|
|
|||||
Net income available to common shareholders
|
|
$
|
17,974
|
|
|
56,091
|
|
|
$
|
0.32
|
|
|
|
|
|
|
|
|
|||||
Effect of dilutive securities:
|
|
|
|
|
|
|
|||||
Stock compensation plans
|
|
—
|
|
|
1,081
|
|
|
|
|||
|
|
|
|
|
|
|
|||||
Diluted EPS:
|
|
|
|
|
|
|
|||||
Net income available to common stockholders
|
|
$
|
17,974
|
|
|
57,172
|
|
|
$
|
0.31
|
|
First Quarter 2013
|
|
Income
|
|
Shares
|
|
Per Share
|
|||||
(in thousands, except per share amounts)
|
|
(Numerator)
|
|
(Denominator)
|
|
Amount
|
|||||
Basic EPS:
|
|
|
|
|
|
|
|||||
Net income from continuing operations
|
|
$
|
22,305
|
|
|
55,370
|
|
|
0.40
|
|
|
Net loss from discontinued operations
|
|
$
|
(997
|
)
|
|
55,370
|
|
|
(0.02
|
)
|
|
Net income available to common shareholders
|
|
$
|
21,308
|
|
|
55,370
|
|
|
0.38
|
|
|
|
|
|
|
|
|
|
|||||
Effect of dilutive securities:
|
|
|
|
|
|
|
|||||
Stock compensation plans
|
|
—
|
|
|
1,085
|
|
|
|
|||
|
|
|
|
|
|
|
|||||
Diluted EPS:
|
|
|
|
|
|
|
|||||
Net income from continuing operations
|
|
$
|
22,305
|
|
|
56,455
|
|
|
0.40
|
|
|
Net loss from discontinued operations
|
|
$
|
(997
|
)
|
|
56,455
|
|
|
(0.02
|
)
|
|
Net income available to common stockholders
|
|
$
|
21,308
|
|
|
56,455
|
|
|
$
|
0.38
|
|
(a)
|
Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;
|
(b)
|
Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;
|
(c)
|
Evaluated the effectiveness of the registrant's disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and
|
(d)
|
Disclosed in this report any change in the registrant's internal control over financial reporting that occurred during the registrant's most recent fiscal quarter (the registrant's fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant's internal control over financial reporting; and
|
(a)
|
All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant's ability to record, process, summarize and report financial information; and
|
(b)
|
Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal control over financial reporting.
|
Date:
|
April 24, 2014
|
|
By: /s/ Gregory E. Murphy
|
|
|
|
Gregory E. Murphy
|
|
|
|
Chairman of the Board and Chief Executive Officer
|
(a)
|
Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;
|
(b)
|
Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;
|
(c)
|
Evaluated the effectiveness of the registrant's disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and
|
(d)
|
Disclosed in this report any change in the registrant's internal control over financial reporting that occurred during the registrant's most recent fiscal quarter (the registrant's fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant's internal control over financial reporting; and
|
(a)
|
All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant's ability to record, process, summarize and report financial information; and
|
(b)
|
Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal control over financial reporting.
|
Date:
|
April 24, 2014
|
|
By: /s/ Dale A. Thatcher
|
|
|
|
Dale A. Thatcher
|
|
|
|
Executive Vice President and Chief Financial Officer
|
Date:
|
April 24, 2014
|
|
By: /s/ Gregory E. Murphy
|
|
|
|
Gregory E. Murphy
|
|
|
|
Chairman of the Board and Chief Executive Officer
|
Date:
|
April 24, 2014
|
|
By: /s/ Dale A. Thatcher
|
|
|
|
Dale A. Thatcher
|
|
|
|
Executive Vice President and Chief Financial Officer
|