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, 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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Registrant’s telephone number, including area code:
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(973) 948-3000
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Title of each class
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Name of each exchange on which registered
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Common Stock, par value $2 per share
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NASDAQ Global Select Market
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5.875% Senior Notes due February 9, 2043
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New York Stock Exchange
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Large accelerated filer
x
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Accelerated filer
¨
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Non-accelerated filer
¨
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Smaller reporting company
¨
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(Do not check if a smaller reporting company)
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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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PART I
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Item 1.
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Business
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Item 1A.
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Risk Factors
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Item 1B.
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Unresolved Staff Comments
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Item 2.
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Properties
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Item 3.
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Legal Proceedings
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PART II
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Item 5.
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Market For Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities
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Item 6.
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Selected Financial Data
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Item 7.
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Management’s Discussion and Analysis of Financial Condition and Results of Operations
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Forward-looking Statements
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Introduction
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Critical Accounting Policies and Estimates
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Financial Highlights of Results for Years Ended December 31, 2014, 2013, and 2012
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Results of Operations and Related Information by Segment
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Federal Income Taxes
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Financial Condition, Liquidity, Short-term Borrowings, and Capital Resources
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Off-Balance Sheet Arrangements
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Contractual Obligations, Contingent Liabilities, and Commitments
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Ratings
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Item 7A.
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Quantitative and Qualitative Disclosures About Market Risk
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Item 8.
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Financial Statements and Supplementary Data
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Consolidated Balance Sheets as of December 31, 2014 and 2013
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Consolidated Statements of Income for the Years Ended
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December 31, 2014, 2013, and 2012
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Consolidated Statements of Comprehensive Income for the Years Ended
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December 31, 2014, 2013, and 2012
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Consolidated Statements of Stockholders’ Equity for the Years Ended
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December 31, 2014, 2013, and 2012
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Consolidated Statements of Cash Flow for the Years Ended
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December 31, 2014, 2013, and 2012
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Notes to Consolidated Financial Statements
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Item 9.
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Changes in and Disagreements With Accountants on Accounting and Financial Disclosure
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Item 9A.
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Controls and Procedures
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Item 9B.
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Other Information
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PART III
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Item 10.
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Directors, Executive Officers and Corporate Governance
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Item 11.
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Executive Compensation
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Item 12.
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Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters
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Item 13.
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Certain Relationships and Related Transactions, and Director Independence
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Item 14.
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Principal Accounting Fees and Services
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Part IV
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Item 15.
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Exhibits and Financial Statement Schedules
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Rating Agency
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Financial Strength Rating
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Outlook
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A.M. Best
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A
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Stable
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Standard & Poor’s Ratings Services (“S&P”)
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A-
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Positive
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Moody’s Investors Service (“Moody’s”)
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A2
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Negative
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Fitch Ratings (“Fitch”)
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A+
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Stable
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•
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Standard Commercial Lines - comprised of insurance products and services provided in the standard marketplace to our commercial customers, who are typically businesses, non-profit organizations, and local government agencies. This business represents about 76% of our total insurance segments’ net premiums written.
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•
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Standard Personal Lines - comprised of insurance products and services, including flood insurance coverage that we write through the National Flood Insurance Program (“NFIP”), provided primarily to individuals acquiring coverage in the standard marketplace. This business represents about 16% of our total insurance segments’ net premiums written.
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•
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E&S Lines - comprised of insurance products and services provided to customers who have not obtained coverage in the standard marketplace. We currently only write commercial lines E&S coverages and this business represents about 8% of our total insurance segments’ net premiums written.
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Investments - invests the premiums collected by our insurance segments, as well as amounts generated through our capital management strategies, which may include the issuance of debt and equity securities.
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Underwriting income from our three insurance segments
. Underwriting income is comprised of revenues, which are the premiums earned on our insurance products and services, less expenses. Gross premiums are direct premium written (“DPW”) plus premiums assumed from other insurers. Gross premiums less premium ceded to reinsurers, is net premiums written (“NPW”). NPW is recognized as revenue ratably over a policy’s term as net premiums earned (“NPE”). Expenses related to our insurance segments fall into three main categories: (i) losses associated with claims and various loss expenses incurred for adjusting claims (referred to as “loss and loss expenses”); (ii) expenses related to insurance policy issuance, such as commissions to our distribution partners, premium taxes, and other expenses incurred in issuing and maintaining policies, including employee compensation and benefits (referred to as “underwriting expenses”); and (iii) policyholder dividends.
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•
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Net investment income from the investment segment
. We generate income from investing insurance premiums and amounts generated through our capital management strategies. Net investment income consists primarily of interest earned on fixed income investments, dividends earned on equity securities, and other income primarily generated from our alternative investment portfolio.
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•
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Net realized gains and losses on investment securities from the investments segment
. Realized gains and losses from the investment portfolios of the Insurance Subsidiaries and the Parent are typically the result of sales, calls, and redemptions. They also include write downs from other-than-temporary impairments (“OTTI”).
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•
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With regard to the underwriting expense ratio
: As noted above, NPE is the denominator for GAAP; whereas NPW is the denominator for SAP.
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With regard to certain income
:
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•
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Underwriting expenses that are incremental and directly related to the successful acquisition of insurance policies are deferred and amortized to expense over the life of an insurance policy under GAAP; whereas they are recognized when incurred under SAP.
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Deferred taxes are recognized in our Consolidated Statements of Income as either a deferred tax expense or a deferred tax benefit under GAAP; whereas they are recorded directly to surplus under SAP.
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Changes in the value of our alternative investments, which are part of our other investment portfolio on our Consolidated Balance Sheets, are recognized in income under GAAP; whereas they are recorded directly to surplus under SAP and only recognized in income when cash is received.
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•
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With regard to loss and loss expense reserves
:
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Under GAAP, reinsurance recoverables, net of a provision for uncollectible reinsurance, are presented as an asset on the Consolidated Balance Sheet, whereas under SAP, this amount is netted within the liability for loss and loss expense reserves.
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Under GAAP, for those structured settlements for which we did not obtain a release, a deposit asset and the related loss reserve are included on the Consolidated Balance Sheet, whereas under SAP, the structured settlement transaction is recorded as a paid loss.
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($ in thousands)
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2014
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2013
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Statutory losses and loss expense reserves
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$
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2,892,041
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2,797,459
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Provision for uncollectible reinsurance
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6,900
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5,100
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Structured settlements
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6,951
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6,372
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GAAP losses and loss expense reserves – net
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2,905,892
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2,808,931
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Reinsurance recoverables on unpaid losses and loss expenses
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571,978
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540,839
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GAAP losses and loss expense reserves – gross
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$
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3,477,870
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3,349,770
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•
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With regard to equity under GAAP and statutory surplus under SAP
:
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The timing difference in income due to the GAAP/SAP differences in expense recognition creates a difference between GAAP equity and SAP statutory surplus.
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Regarding unrealized gains and losses on fixed income securities:
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Under GAAP, unrealized gains and losses on available-for-sale (“AFS”) fixed income securities are recognized in equity; but they are not recognized in equity on purchased held-to-maturity (“HTM”) securities. Unrealized gains and losses on HTM securities transferred from an AFS designation are amortized from equity as a yield adjustment.
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Under SAP, unrealized gains and losses on fixed income securities assigned certain NAIC Security Valuation Office ratings (specifically designations of one or two, which generally equate to investment grade bonds) are not recognized in statutory surplus. However, unrealized losses on fixed income securities that have a designation of three or higher are recognized as an adjustment to statutory surplus.
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Certain assets are designated under insurance regulations as “non-admitted,” including, but not limited to, certain deferred tax assets, overdue premium receivables, furniture and equipment, and prepaid expenses. These assets are excluded from statutory surplus under SAP, but are recorded in the Consolidated Balance Sheets net of applicable allowances under GAAP.
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Regarding the recognition of the liability for our defined benefit plans, under both GAAP and SAP, the liability is recognized in an amount equal to the excess of the projected benefit obligation over the fair value of the plan assets. However, changes in this balance not otherwise recognized in income are recognized in equity as a component of other comprehensive income (“OCI”) under GAAP and in statutory surplus under SAP.
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Year Ended December 31,
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($ in thousands)
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2014
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2013
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2012
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Combined Insurance Segments Results
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NPW
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$
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1,885,280
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1,810,159
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1,666,883
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NPE
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$
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1,852,609
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1,736,072
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1,584,119
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Losses and loss expenses incurred
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1,157,501
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1,121,738
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1,120,990
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Net underwriting expenses incurred
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610,783
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571,294
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523,688
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Policyholder dividends
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6,182
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4,274
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3,448
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Underwriting income (loss)
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$
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78,143
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38,766
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(64,007
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)
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Ratios:
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Loss and loss expense ratio
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62.5
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%
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64.6
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70.8
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Underwriting expense ratio
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33.0
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33.0
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33.0
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Policyholder dividends ratio
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0.3
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0.2
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0.2
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GAAP combined ratio
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95.8
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%
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97.8
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104.0
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Statutory combined ratio
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95.7
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%
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97.5
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103.5
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•
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Property insurance, which generally covers the financial consequences of accidental loss of an insured’s real and/or personal property. Property claims are generally reported and settled in a relatively short period of time.
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Casualty insurance, which generally covers the financial consequences of employee injuries in the course of employment and bodily injury and/or property damage to a third party as a result of an insured’s negligent acts, omissions, or legal liabilities. Casualty claims may take several years to be reported and settled.
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Flood insurance, which generally covers property losses under the Federal Government's Write Your Own ("WYO") program of the NFIP. Flood insurance premiums and losses are 100% ceded to the NFIP.
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Types of Policies
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Category of Insurance
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Standard Commercial Lines
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Standard Personal Lines
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E&S Lines
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Commercial Property
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Property
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X
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X
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Commercial Automobile
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Property/Casualty
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X
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X
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General Liability (including Excess Liability/Umbrella)
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Casualty
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X
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X
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Workers Compensation
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Casualty
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X
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Businessowners' Policy
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Property/Casualty
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X
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Bonds (Fidelity and Surety)
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Casualty
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X
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Homeowners
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Property/Casualty
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X
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Personal Automobile
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Property/Casualty
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X
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Personal Umbrella
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Casualty
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X
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Flood
1
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Flood/Property
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X
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Percentage of Standard Commercial Lines
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Description
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Manufacturing and Wholesale
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18%
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Includes manufacturers, wholesalers, and distributors
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Contracting
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34%
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General contractors and subcontractors
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Community and Public Services
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23%
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Focuses on public entities, social services, golf courses, and religious institutions
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Mercantile and Services
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24%
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Focuses on retail, office, service businesses, restaurants, and hotels
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Bonds
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1%
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Includes fidelity and surety
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Total Standard Commercial Lines
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100%
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•
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The average Standard Commercial Lines account size is approximately $10,000.
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The average Standard Personal Lines account size is approximately $1,500.
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The average E&S Lines policy is approximately $3,100.
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Standard Commercial Lines products and services are primarily sold in 22 states and the District of Columbia in the Eastern and Midwestern regions of the United States.
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Standard Personal Lines products and services are primarily sold in 13 states in the Eastern and Midwestern regions of the United States, except for the flood portion of this segment, which is sold in all 50 states and the District of Columbia.
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E&S Lines are sold in all 50 states and the District of Columbia.
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Region
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Office Location
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Heartland
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Carmel, Indiana
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New Jersey
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Hamilton, New Jersey
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Northeast
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Branchville, New Jersey
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Mid-Atlantic
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Allentown, Pennsylvania and Hunt Valley, Maryland
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Southern
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Charlotte, North Carolina
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E&S
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Horsham, Pennsylvania and Scottsdale, Arizona
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•
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Use an empowered field model to provide our retail distribution partners with resources within close geographic proximity to their businesses and our customers. For further discussion on this, see the “Field Model and Technology” section below.
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Develop close relationships with each distribution partner, as well as their principals and producers: (i) by soliciting their feedback on products and services; (ii) by advising them concerning product developments; and (iii) through interaction with them focusing on producer recruitment, sales training, enhancing customer experience, online marketing, and distribution operations.
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Develop with each distribution partner, and then carefully monitor, annual goals regarding: (i) types and mix of risks placed with us; (ii) amount of premium or number of policies placed with us; (iii) customer service and retention levels; and (iv) profitability of business placed with us.
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•
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Develop brand recognition with our customers through our marketing efforts, which include radio and television advertising, as well as advertising at certain national and local sporting events.
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Our distribution partners and our customers with access to accurate business information and the ability to process certain transactions from their locations, seamlessly integrating those transactions into our systems;
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Our underwriters with targeted underwriting and pricing tools to enhance profitability while growing the business;
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Our Special Investigations Unit ("SIU") investigators access our business intelligence systems to better identify claims with potential fraudulent activities;
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Our claims recovery and subrogation departments with the ability to expand and enhance their models through the use of our business intelligence systems; and
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Our customers with 24/7 access to transactional capabilities and information through a web-based customer portal and a customer mobile app.
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Our distribution partners, who provide front-line underwriting, our Agency Management Specialists (“AMSs”) and Safety Management Specialists (“SMSs”), our Standard Personal Lines marketing representatives, and our corporate and regional underwriters. Our AMSs continue to be a central focus of the field model, with responsibility for: (i) managing the growth and profitability of their distribution partners with us; and (ii) performing field underwriting for new Standard Commercial Lines business. In the fourth quarter of 2014, a strategic decision was made to eliminate our field marketing specialist role, which had been a multi-purpose role focused on Standard Personal Lines, small Standard Commercial Lines business, and technology training. This role was replaced with dedicated Standard Personal Lines marketing representatives with the primary responsibility of growing Standard Personal Lines, dedicated field technical coordinators responsible solely for technology assistance and training and over a dozen additional AMSs. In addition, we broadened the scope of, and enhanced the talent in, our small business teams. These teams were previously responsible for handling business in need of review that was submitted through our automated underwriting platform, One & Done
®
. They now also handle small accounts with low underwriting complexity, which enables our AMSs to spend more time underwriting middle market accounts.
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Our 5,000 flood distribution partners for our Standard Personal Lines business under the NFIP's WYO program.
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Our corporate underwriting department, which develops our products, policy forms, pricing, and underwriting guidelines in conjunction with the Regions.
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Our Regions, which establish: (i) annual premium and pricing goals in consultation with the corporate underwriting department; (ii) new business targets for our distribution partners; and (iii) profit improvement plans for our distribution partners.
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Our Actuarial Department, located primarily in our corporate headquarters, which assists in the determination of rate and pricing levels, while monitoring pricing and profitability.
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Workers compensation claim handling is centralized in Charlotte, North Carolina. Jurisdictionally trained and aligned medical only and lost-time adjusters manage non-complex workers compensation claims within our footprint. Claims with high exposure and/or significant escalation risk are referred to the workers compensation strategic case management unit.
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Property claims with high severity or technically complex losses are handled by either the Property Flex Unit or the Large Loss Unit. Both of these groups specifically handle only higher exposure property claims. The Large Loss Unit, which is comprised of seasoned general adjusters, handles claims above $100,000. During 2014, we established the Property Flex Unit to: (i) handle claims between $25,000 to $100,000; and (ii) form the core of a catastrophe team.
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Liability claims with high severity or technically complex losses are handled by the Complex Claims Unit ("CCU"). The CCU specialists are primarily field based and handle losses based on injury type or with severities greater than $250,000. Litigated matters not meeting the CCU criteria are handled within our regional offices by our litigation teams. These teams are aligned based upon jurisdictional knowledge and technical experience.
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•
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All asbestos and environmental claims are referred to our specialized corporate Environmental Unit, which also handles latent claims.
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•
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Regional insurers
, such as Cincinnati Financial Corporation, Erie Indemnity Company, The Hanover Insurance Group, Inc., and United Fire Group, Inc.; and
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•
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National insurers
, such as Liberty Mutual Holding Company Inc., The Travelers Companies, Inc., The Hartford Financial Services Group, Inc., Nationwide Mutual Insurance Company, and Zurich Insurance Group, Ltd.
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Simple
Average of
All Periods
Presented
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2014
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2013
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2012
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2011
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2010
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Insurance Operations Ratios:
1
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Loss and loss expense
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68.3
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62.4
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64.5
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70.7
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74.6
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69.3
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Underwriting expense
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32.4
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33.0
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32.8
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32.6
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31.7
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32.0
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Policyholder dividends
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0.3
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0.3
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0.2
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0.2
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0.4
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0.3
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Statutory combined ratio
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101.0
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|
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95.7
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97.5
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103.5
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106.7
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101.6
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Growth in NPW
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5.9
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4.1
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8.7
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12.2
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7.0
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(2.4
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)
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|||||
Industry Ratios:
1, 2
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|
|||||
Loss and loss expense
|
|
72.2
|
|
|
|
69.6
|
|
|
67.7
|
|
|
|
73.7
|
|
|
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77.9
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|
|
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72.0
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Underwriting expense
|
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27.9
|
|
|
|
27.0
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|
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28.0
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|
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28.2
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28.0
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28.5
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Policyholder dividends
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0.6
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|
|
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0.6
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0.7
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0.6
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0.6
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0.7
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Statutory combined ratio
|
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100.7
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|
97.2
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96.4
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102.5
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|
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106.5
|
|
|
|
101.1
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Growth in NPW
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3.4
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3.9
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4.4
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4.4
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3.3
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|
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0.9
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Favorable (Unfavorable) to Industry:
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|
|||||
Statutory combined ratio
|
|
(0.3
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)
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1.5
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(1.1
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)
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(1.0
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)
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(0.2
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)
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(0.5
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)
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Growth in NPW
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2.5
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0.2
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4.3
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7.8
|
|
|
|
3.7
|
|
|
|
(3.3
|
)
|
|
•
|
The Insurance Regulatory Information System (“IRIS”). IRIS identifies 13 industry financial ratios and specifies “usual values” for each ratio. Departure from the usual values on four or more of the financial ratios can lead to inquiries from individual state insurance departments about certain aspects of the insurer's business. Our Insurance Subsidiaries have consistently met the majority of the IRIS ratio tests.
|
•
|
Risk-Based Capital. Risk-based capital is measured by four major areas of risk to which property and casualty insurers are exposed: (i) asset risk; (ii) credit risk; (iii) underwriting risk; and (iv) off-balance sheet risk. Insurers face a steadily increasing amount of regulatory scrutiny and potential intervention as their total adjusted capital declines below two times their "Authorized Control Level". Based on our 2014 statutory financial statements, which have been prepared in accordance with SAP, the total adjusted capital for each of our Insurance Subsidiaries substantially exceeded two times their Authorized Control Level at 4.5:1.
|
•
|
Annual Financial Reporting Regulation (referred to as the "Model Audit Rule"). The Model Audit Rule, which is modeled closely on the Sarbanes-Oxley Act of 2002, as amended, regulates: (i) auditor independence; (ii) corporate governance; and (iii) internal control over financial reporting. As permitted under the Model Audit Rule, the Audit Committee of the Board of Directors (the “Board”) of the Parent also serves as the audit committee of each of our Insurance Subsidiaries.
|
•
|
Own Risk Solvency Assessment ("ORSA") Model Law. ORSA requires insurers to maintain a framework for identifying, assessing, monitoring, managing, and reporting on the “material and relevant risks” associated with the insurers' (or insurance groups') current and future business plans. ORSA, which has been adopted by the state insurance regulators of our Insurance Subsidiaries, requires companies to file an internal assessment of their solvency with insurance regulators annually beginning in 2015. Although no specific capital adequacy standard is currently articulated in ORSA, it is possible that such standard will be developed over time and may increase insurers' minimum capital requirements, which could adversely impact our growth and return on equity.
|
•
|
The establishment of the Federal Insurance Office (“FIO”) under the United States Department of the Treasury;
|
•
|
Federal Reserve oversight of financial services firms designated as systemically important; and
|
•
|
Corporate governance reforms for publicly traded companies.
|
Category of Investment
|
|
|
|
|
|
|
($ in millions)
|
|
Carrying Value
|
|
% of Investment
Portfolio
|
||
Fixed income securities
|
|
$
|
4,384.3
|
|
|
91
|
Equity securities
|
|
191.4
|
|
|
4
|
|
Short-term investments
|
|
131.9
|
|
|
3
|
|
Other investments, including alternatives
|
|
99.2
|
|
|
2
|
|
Total
|
|
$
|
4,806.8
|
|
|
100
|
•
|
Being disciplined in our underwriting practices;
|
•
|
Being prudent in our claims management practices, establishing adequate loss and loss expense reserves, and placing appropriate reliance on our claims analytics;
|
•
|
Continuing to develop and implement various underwriting tools and automated analytics to examine historical statistical data regarding our customers and their loss experience to: (i) classify such policies based on that information; (ii) apply that information to current and prospective accounts; and (iii) better predict account profitability;
|
•
|
Continuing to develop our customer experience platform as we grow in our understanding of customer segmentation;
|
•
|
Purchasing reinsurance and using catastrophe modeling;
|
•
|
Being prudent in managing our investment portfolio, which supports our liabilities and underwriting strategies; and
|
•
|
Being prudent in our financial planning process,which supports our underwriting strategies.
|
•
|
Our reinsurers, who are obligated to us under our reinsurance agreements. The relatively small size of the reinsurance market and our objective to maintain an average weighted rating of “A” by A.M. Best on our current reinsurance programs constrains our ability to diversify this credit risk. However, some of our reinsurance credit risk is collateralized.
|
•
|
Certain life insurance companies that are obligated to our customers, as we have purchased annuities from them under structured settlement agreements.
|
•
|
Some of our distribution partners, who collect premiums from our customers and are required to remit the collected premium to us.
|
•
|
Some of our customers, who are responsible for payment of deductibles and/or premiums directly to us.
|
•
|
The invested assets in our defined benefit plan, which partially serve to fund the insurance segments liability associated with this plan. To the extent that credit risk adversely impacts the valuation and performance of the invested assets within our defined benefit plan, the funded status of the defined benefit plan could be adversely impacted and, as result, could increase the cost of the plan to us.
|
NRSRO
|
|
Financial Strength Rating
|
|
Outlook
|
A.M. Best
|
|
“A”
|
|
Stable
|
Standard & Poor's
|
|
“A-”
|
|
Positive
|
Moody’s Investor Services
|
|
“A2”
|
|
Negative
|
Fitch Ratings
|
|
“A+”
|
|
Stable
|
NRSRO
|
|
Credit Rating
|
|
Long Term Credit Outlook
|
A.M. Best
|
|
“bbb+”
|
|
Stable
|
Standard & Poor's
|
|
“BBB-”
|
|
Positive
|
Moody’s Investor Services
|
|
“Baa2”
|
|
Negative
|
Fitch Ratings
|
|
“BBB+”
|
|
Stable
|
•
|
A pure price decline of approximately 1% would increase our statutory combined ratio by approximately 0.77 points;
|
•
|
A 3% increase in our expected claim costs for the year would cause our loss and loss expense ratio to increase by approximately two points; and
|
•
|
A combination of the two could raise the combined ratio by approximately three points.
|
•
|
Related to our financial condition, review and approval of such matters as minimum capital and surplus requirements, standards of solvency, security deposits, methods of accounting, form and content of statutory financial statements, reserves for unpaid loss and loss adjustment expenses, reinsurance, payment of dividends and other distributions to shareholders, periodic financial examinations, and annual and other report filings.
|
•
|
Related to our general business, review and approval of such matters as certificates of authority and other insurance company licenses, licensing and compensation of distribution partners, premium rates (which may not be excessive, inadequate, or unfairly discriminatory), policy forms, policy terminations, reporting of statistical information regarding our premiums and losses, periodic market conduct examinations, unfair trade practices, participation in mandatory shared market mechanisms, such as assigned risk pools and reinsurance pools, participation in mandatory state guaranty funds, and mandated continuing workers compensation coverage post-termination of employment.
|
•
|
Related to our ownership of the Insurance Subsidiaries, we are required to register as an insurance holding company system in each state where an insurance subsidiary is domiciled and report information concerning all of our operations that may materially affect the operations, management, or financial condition of the insurers. As an insurance holding company, the appropriate state regulatory authority may: (i) examine us or our Insurance Subsidiaries at any time; (ii) require disclosure or prior approval of material transactions of any of the Insurance Subsidiaries with its affiliates; and (iii) require prior approval or notice of certain transactions, such as payment of dividends or distributions to us.
|
•
|
Repeal of the McCarran-Ferguson Act
. While recent proposals for McCarran-Ferguson Act repeal have been directed primarily at health insurers, if enacted and applicable to property and casualty insurers, such repeal would significantly reduce our ability to compete and materially affect our results of operations because we rely on the anti-trust exemptions the law provides to obtain loss data from third party aggregators, such as ISO and NCCI, to predict future losses. Our inability to access data from ISO and NCCI would put us at a competitive disadvantage compared to larger insurers who have more sufficient loss experience data with their own customers.
|
•
|
Healthcare reform
. The enactment of the Patient Protection and Affordable Care Act of 2010 (the “Healthcare Act”) may have an impact on various aspects of our business, including our insurance segments. The Healthcare Act reduces the reimbursement to healthcare providers, which may result in healthcare providers charging more to insurers not covered under the Healthcare Act. This could increase our cost to provide workers compensation, automobile Personal Injury Protection ("PIP") and general liability coverages, among others. In addition, we will continue to be impacted as a business enterprise by potential tax issues and changes in employee benefits. The Healthcare Act has been adopted, its implementation is ongoing, and we continue to monitor and assess its impact.
|
•
|
Changes in rules for Department of Housing and Urban Development ("HUD")
.
In 2013, HUD finalized a new "Disparate Impact" regulation that may adversely impact insurers' ability to differentiate pricing for homeowners policies using traditional risk selection analysis. Three insurance industry trade associations are challenging the regulation in two separate Federal lawsuits, one by the American Insurance Association (“AIA”) and the National Association of Mutual Insurance Companies (“NAMIC”) in the District of Columbia and the other by Property Casualty Insurers Association of America (“PCI”) in Chicago. In the PCI case, the court ruled that HUD acted arbitrarily in considering comments regarding the application of the McCarran-Ferguson Act and has remanded the regulation back to HUD for review and reconsideration. Subsequently, the court in the AIA and NAMIC case vacated the regulation on summary judgment. HUD has filed an appeal of this ruling. It is uncertain to what extent the application of this regulation will impact the property and casualty industry and underwriting practices, but it could increase litigation costs, force changes in underwriting practices, and impair our ability to write homeowners business profitably. The outcome of the litigations and potential rulemaking cannot be predicted at this time.
|
•
|
State Regulatory and Legislative Limits to Underwriting
. From time-to-time, there are proposals in various states seeking to limit the ability of insurers to use certain factors or predictive measures in the underwriting of property and casualty risks. Among the proposed legislation and regulation have been limits on the use of insurance scores and marketplace considerations. These proposals, if enacted, could impact underwriting pricing and results.
|
•
|
After-market parts;
|
•
|
Urban homeowner insurance underwriting practices, including those related to architectural or structural features and attempts by federal regulators to expand the Federal Housing Administration's guidelines to determine unfair discrimination;
|
•
|
Credit scoring and predictive modeling pricing;
|
•
|
Cybersecurity breaches;
|
•
|
Investment disclosure;
|
•
|
Managed care practices;
|
•
|
Timing and discounting of personal injury protection claims payments;
|
•
|
Direct repair shop utilization practices;
|
•
|
Flood insurance claim practices; and
|
•
|
Shareholder class action suits.
|
•
|
Being prudent in establishing our investment policy and appropriately diversifying our investments;
|
•
|
Using complex financial and investment models to analyze historic investment performance and predict future investment performance under a variety of scenarios using asset concentration, asset volatility, asset correlation, and systematic risk; and
|
•
|
Closely monitoring investment performance, general economic and financial conditions, and other relevant factors.
|
•
|
Supermajority shareholder voting requirements to approve certain business combinations with interested shareholders (as defined in the Amended and Restated Certificate of Incorporation) unless certain other conditions are satisfied; and
|
•
|
Supermajority shareholder voting requirements to amend the foregoing provisions in our Amended and Restated Certificate of Incorporation.
|
|
|
2014
|
|
2013
|
|||||||||
|
|
High
|
|
Low
|
|
High
|
|
Low
|
|||||
First quarter
|
|
$
|
26.99
|
|
|
21.38
|
|
|
24.13
|
|
|
19.53
|
|
Second quarter
|
|
25.42
|
|
|
22.14
|
|
|
24.75
|
|
|
19.58
|
|
|
Third quarter
|
|
25.46
|
|
|
21.97
|
|
|
25.95
|
|
|
22.61
|
|
|
Fourth quarter
|
|
27.65
|
|
|
22.01
|
|
|
28.31
|
|
|
23.55
|
|
Dividend Per Share
|
|
2014
|
|
2013
|
|||
First quarter
|
|
$
|
0.13
|
|
|
0.13
|
|
Second quarter
|
|
0.13
|
|
|
0.13
|
|
|
Third quarter
|
|
0.13
|
|
|
0.13
|
|
|
Fourth quarter
|
|
0.14
|
|
|
0.13
|
|
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
|
||||||
October 1 – 31, 2014
|
|
$
|
695
|
|
|
$
|
23.02
|
|
|
—
|
|
|
—
|
|
November 1 – 30, 2014
|
|
13,077
|
|
|
26.66
|
|
|
—
|
|
|
—
|
|
||
December 1 – 31, 2014
|
|
10,214
|
|
|
27.24
|
|
|
—
|
|
|
—
|
|
||
Total
|
|
$
|
23,986
|
|
|
$
|
26.80
|
|
|
—
|
|
|
—
|
|
•
|
Standard Commercial Lines - comprised of insurance products and services provided in the standard marketplace to our commercial customers, who are typically businesses, non-profit organizations, and local government agencies.
|
•
|
Standard Personal Lines - comprised of insurance products and services, including flood insurance coverage, provided primarily to individuals acquiring coverage in the standard marketplace.
|
•
|
E&S Lines - comprised of insurance products and services provided to customers who have not obtained coverage in the standard marketplace.
|
•
|
Investments - invests the premiums collected by our Standard Commercial Lines, Standard Personal Lines, and E&S Lines, as well as 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 Years Ended December 31, 2014, 2013, and 2012;
|
•
|
Results of Operations and Related Information by Segment;
|
•
|
Federal Income Taxes;
|
•
|
Financial Condition, Liquidity, Short-term Borrowings, and Capital Resources;
|
•
|
Off-Balance Sheet Arrangements;
|
•
|
Contractual Obligations, Contingent Liabilities, and Commitments; and
|
•
|
Ratings.
|
As of December 31, 2014
|
|
|
|
|
|
|
|
|
|
|
||||||
|
|
Losses and Loss Expense Reserves
|
|
|
|
|
||||||||||
($ in thousands)
|
|
Case
Reserves
|
|
IBNR
Reserves
|
|
Total
|
|
Reinsurance Recoverable on Unpaid Losses and Loss Expenses
|
|
Net Reserves
|
||||||
General liability
|
|
$
|
252,294
|
|
|
960,372
|
|
|
1,212,666
|
|
|
138,366
|
|
|
1,074,300
|
|
Workers compensation
|
|
513,069
|
|
|
727,167
|
|
|
1,240,236
|
|
|
232,676
|
|
|
1,007,560
|
|
|
Commercial auto
|
|
156,538
|
|
|
221,605
|
|
|
378,143
|
|
|
19,699
|
|
|
358,444
|
|
|
Businessowners' policies
|
|
42,249
|
|
|
51,918
|
|
|
94,167
|
|
|
7,990
|
|
|
86,177
|
|
|
Commercial property
|
|
55,519
|
|
|
7,611
|
|
|
63,130
|
|
|
16,856
|
|
|
46,274
|
|
|
Other
|
|
5,969
|
|
|
6,484
|
|
|
12,453
|
|
|
2,007
|
|
|
10,446
|
|
|
Total Standard Commercial Lines
|
|
1,025,638
|
|
|
1,975,157
|
|
|
3,000,795
|
|
|
417,594
|
|
|
2,583,201
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||
Personal automobile
|
|
99,595
|
|
|
84,348
|
|
|
183,943
|
|
|
68,150
|
|
|
115,793
|
|
|
Homeowners
|
|
23,195
|
|
|
22,987
|
|
|
46,182
|
|
|
5,205
|
|
|
40,977
|
|
|
Other
|
|
26,756
|
|
|
22,881
|
|
|
49,637
|
|
|
43,317
|
|
|
6,320
|
|
|
Total Standard Personal Lines
|
|
149,546
|
|
|
130,216
|
|
|
279,762
|
|
|
116,672
|
|
|
163,090
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||
E&S Lines
|
|
31,341
|
|
|
165,972
|
|
|
197,313
|
|
|
37,712
|
|
|
159,601
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||
Total
|
|
$
|
1,206,525
|
|
|
2,271,345
|
|
|
3,477,870
|
|
|
571,978
|
|
|
2,905,892
|
|
December 31, 2013
|
|
|
|
|
|
|
|
|
|
|
||||||
|
|
Losses and Loss Expense Reserves
|
|
|
|
|
||||||||||
($ in thousands)
|
|
Case
Reserves
|
|
IBNR
Reserves
|
|
Total
|
|
Reinsurance Recoverable on Unpaid Losses and Loss Expenses
|
|
Net Reserves
|
||||||
General liability
|
|
$
|
227,307
|
|
|
965,095
|
|
|
1,192,402
|
|
|
137,854
|
|
|
1,054,548
|
|
Workers compensation
|
|
532,087
|
|
|
637,738
|
|
|
1,169,825
|
|
|
197,934
|
|
|
971,891
|
|
|
Commercial auto
|
|
136,543
|
|
|
225,387
|
|
|
361,930
|
|
|
18,847
|
|
|
343,083
|
|
|
Businessowners' policies
|
|
32,225
|
|
|
57,636
|
|
|
89,861
|
|
|
7,915
|
|
|
81,946
|
|
|
Commercial property
|
|
43,831
|
|
|
6,143
|
|
|
49,974
|
|
|
9,702
|
|
|
40,272
|
|
|
Other
|
|
6,980
|
|
|
6,115
|
|
|
13,095
|
|
|
2,975
|
|
|
10,120
|
|
|
Total Standard Commercial Lines
|
|
978,973
|
|
|
1,898,114
|
|
|
2,877,087
|
|
|
375,227
|
|
|
2,501,860
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||
Personal automobile
|
|
106,377
|
|
|
89,596
|
|
|
195,973
|
|
|
62,663
|
|
|
133,310
|
|
|
Homeowners
|
|
26,201
|
|
|
27,520
|
|
|
53,721
|
|
|
7,254
|
|
|
46,467
|
|
|
Other
|
|
39,155
|
|
|
23,561
|
|
|
62,716
|
|
|
52,157
|
|
|
10,559
|
|
|
Total Standard Personal Lines
|
|
171,733
|
|
|
140,677
|
|
|
312,410
|
|
|
122,074
|
|
|
190,336
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||
E&S Lines
|
|
25,575
|
|
|
134,698
|
|
|
160,273
|
|
|
43,538
|
|
|
116,735
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||
Total
|
|
$
|
1,176,281
|
|
|
2,173,489
|
|
|
3,349,770
|
|
|
540,839
|
|
|
2,808,931
|
|
•
|
Section I shows the estimated liability recorded at the end of each indicated year for all current and prior accident year’s unpaid loss and loss expenses. The liability represents the estimated amount of loss and loss expenses for unpaid claims, including IBNR reserves. In accordance with GAAP, the liability for unpaid loss and loss expenses is recorded gross of the effects of reinsurance. An estimate of reinsurance recoverables is reported separately as an asset. The net balance represents the estimated amount of unpaid loss and loss expenses outstanding reduced by estimates of amounts recoverable under reinsurance contracts.
|
•
|
Section II shows the re-estimated amount of the previously recorded net liability as of the end of each succeeding year. Estimates of the liability of unpaid loss and loss expenses are increased or decreased as payments are made and more information regarding individual claims and trends, such as overall frequency and severity patterns, becomes known.
|
•
|
Section III shows the cumulative amount of net loss and loss expenses paid relating to recorded liabilities as of the end of each succeeding year.
|
•
|
Section IV shows the re-estimated gross liability and re-estimated reinsurance recoverables through
December 31, 2014
.
|
•
|
Section V shows the cumulative gross and net (deficiency)/redundancy representing the aggregate change in the liability from the original balance sheet dates and the re-estimated liability through
December 31, 2014
.
|
($ in millions)
|
|
2004
|
|
2005
|
|
2006
|
|
2007
|
|
2008
|
|
2009
|
|
2010
|
|
2011
|
|
2012
|
|
2013
|
|
2014
|
|
|||||||||||
I. Gross reserves for unpaid losses and loss expenses at December 31
|
|
1,835.2
|
|
|
2,084.0
|
|
|
2,288.8
|
|
|
2,542.5
|
|
|
2,641.0
|
|
|
2,745.8
|
|
|
2,830.1
|
|
|
3,144.9
|
|
|
4,068.9
|
|
|
3,349.8
|
|
|
3,477.9
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||
Reinsurance recoverables on unpaid losses and loss expenses at December 31
|
|
(218.8
|
)
|
|
(218.2
|
)
|
|
(199.7
|
)
|
|
(227.8
|
)
|
|
(224.2
|
)
|
|
(271.6
|
)
|
|
(313.7
|
)
|
|
(549.5
|
)
|
|
(1,409.7
|
)
|
|
(540.9
|
)
|
|
(572.0
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||
Net reserves for unpaid losses and loss expenses at December 31
|
|
1,616.4
|
|
|
1,865.8
|
|
|
2,089.1
|
|
|
2,314.7
|
|
|
2,416.8
|
|
|
2,474.2
|
|
|
2,516.4
|
|
|
2,595.4
|
|
|
2,659.2
|
|
|
2,808.9
|
|
|
2,905.9
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||
II. Net reserves estimate as of:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||
One year later
|
|
1,621.5
|
|
|
1,858.5
|
|
|
2,070.2
|
|
|
2,295.4
|
|
|
2,387.4
|
|
|
2,430.6
|
|
|
2,477.6
|
|
|
2,569.8
|
|
|
2,633.7
|
|
|
2,749.6
|
|
|
|
|
|
Two years later
|
|
1,637.3
|
|
|
1,845.1
|
|
|
2,024.0
|
|
|
2,237.8
|
|
|
2,324.6
|
|
|
2,368.1
|
|
|
2,428.6
|
|
|
2,531.4
|
|
|
2,554.9
|
|
|
|
|
|
|
||
Three years later
|
|
1,643.7
|
|
|
1,825.2
|
|
|
1,982.4
|
|
|
2,169.7
|
|
|
2,286.0
|
|
|
2,315.0
|
|
|
2,388.8
|
|
|
2,502.2
|
|
|
|
|
|
|
|
|
|||
Four years later
|
|
1,649.8
|
|
|
1,808.9
|
|
|
1,931.1
|
|
|
2,155.8
|
|
|
2,264.9
|
|
|
2,295.3
|
|
|
2,363.3
|
|
|
|
|
|
|
|
|
|
|
|
|||
Five years later
|
|
1,653.6
|
|
|
1,780.7
|
|
|
1,916.0
|
|
|
2,151.5
|
|
|
2,258.1
|
|
|
2,282.3
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||
Six years later
|
|
1,639.5
|
|
|
1,777.3
|
|
|
1,924.4
|
|
|
2,154.6
|
|
|
2,243.6
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||
Seven years later
|
|
1,638.7
|
|
|
1,789.3
|
|
|
1,939.5
|
|
|
2,147.7
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||
Eight years later
|
|
1,648.0
|
|
|
1,810.9
|
|
|
1,936.5
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||
Nine years later
|
|
1,671.7
|
|
|
1,806.4
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||
Ten years later
|
|
1,669.4
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||
Cumulative net redundancy (deficiency)
|
|
(53.0
|
)
|
|
59.4
|
|
|
152.6
|
|
|
167.0
|
|
|
173.2
|
|
|
191.9
|
|
|
153.1
|
|
|
93.2
|
|
|
104.3
|
|
|
59.3
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||
III. Cumulative amount of net reserves paid through:
|
|
|
|
|
|
|
|
|||||||||||||||||||||||||||
One year later
|
|
422.4
|
|
|
468.6
|
|
|
469.4
|
|
|
579.4
|
|
|
584.5
|
|
|
561.3
|
|
|
569.9
|
|
|
632.7
|
|
|
572.4
|
|
|
592.1
|
|
|
|
|
|
Two years later
|
|
729.5
|
|
|
775.0
|
|
|
841.3
|
|
|
945.5
|
|
|
966.8
|
|
|
936.7
|
|
|
990.8
|
|
|
1,003.8
|
|
|
964.0
|
|
|
|
|
|
|
||
Three years later
|
|
942.4
|
|
|
1,026.9
|
|
|
1,080.0
|
|
|
1,201.6
|
|
|
1,238.3
|
|
|
1,235.8
|
|
|
1,248.2
|
|
|
1,293.6
|
|
|
|
|
|
|
|
|
|||
Four years later
|
|
1,101.0
|
|
|
1,174.2
|
|
|
1,235.2
|
|
|
1,388.7
|
|
|
1,439.5
|
|
|
1,409.5
|
|
|
1,443.4
|
|
|
|
|
|
|
|
|
|
|
||||
Five years later
|
|
1,189.2
|
|
|
1,267.1
|
|
|
1,347.0
|
|
|
1,513.0
|
|
|
1,550.3
|
|
|
1,533.4
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||
Six years later
|
|
1,245.4
|
|
|
1,341.8
|
|
|
1,426.8
|
|
|
1,587.7
|
|
|
1,631.7
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||
Seven years later
|
|
1,294.2
|
|
|
1,399.6
|
|
|
1,481.9
|
|
|
1,648.1
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||
Eight years later
|
|
1,333.8
|
|
|
1,438.2
|
|
|
1,525.5
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||
Nine years later
|
|
1,361.7
|
|
|
1,469.4
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||
Ten years later
|
|
1,387.1
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||
IV. Re-estimated gross liability
|
|
2,038.8
|
|
|
2,190.4
|
|
|
2,273.9
|
|
|
2,483.2
|
|
|
2,598.7
|
|
|
2,652.4
|
|
|
2,760.2
|
|
|
3,110.4
|
|
|
4,207.2
|
|
|
3,349.5
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||
Re-estimated reinsurance recoverables
|
|
(369.4
|
)
|
|
(384.0
|
)
|
|
(337.4
|
)
|
|
(335.5
|
)
|
|
(355.1
|
)
|
|
(370.1
|
)
|
|
(396.9
|
)
|
|
(608.2
|
)
|
|
(1,652.3
|
)
|
|
(599.9
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||
Re-estimated net liability
|
|
1,669.4
|
|
|
1,806.4
|
|
|
1,936.5
|
|
|
2,147.7
|
|
|
2,243.6
|
|
|
2,282.3
|
|
|
2,363.3
|
|
|
2,502.2
|
|
|
2,554.9
|
|
|
2,749.6
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||
V. Cumulative gross redundancy (deficiency)
|
|
(203.6
|
)
|
|
(106.4
|
)
|
|
14.9
|
|
|
59.3
|
|
|
42.3
|
|
|
93.4
|
|
|
69.9
|
|
|
34.5
|
|
|
(138.3
|
)
|
|
0.3
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||
Cumulative net redundancy (deficiency)
|
|
(53.0
|
)
|
|
59.4
|
|
|
152.6
|
|
|
167.0
|
|
|
173.2
|
|
|
191.9
|
|
|
153.1
|
|
|
93.2
|
|
|
104.3
|
|
|
59.3
|
|
|
|
|
•
|
Increased focus on reducing workers compensation medical costs through more favorable Preferred Provider Organizations ("PPO") contracts and greater PPO penetration.
|
•
|
The introduction of a Complex Claims Unit to which all significant and complex liability claims are assigned. This unit has been staffed with personnel that have significant experience in handling and settling these types of claims.
|
•
|
Increased activity in the areas of fraud investigation and salvage/subrogation recoveries. These efforts have been supported by the introduction of predictive models that allow us to better focus our efforts.
|
•
|
The centralization of workers compensation claims handling discussed above.
|
•
|
The selection of loss and loss expense development factors;
|
•
|
The weight to be applied to each individual actuarial projection method;
|
•
|
Projected future loss trends; and
|
•
|
Expected ultimate loss and loss expense ratios for the current accident year.
|
•
|
Whether the decline appears to be issuer or industry specific;
|
•
|
The degree to which the issuer is current or in arrears in making principal and interest payments on the fixed income security;
|
•
|
The issuer’s current financial condition and ability to make future scheduled principal and interest payments on a timely basis;
|
•
|
Evaluation of projected cash flows;
|
•
|
Buy/hold/sell recommendations published by outside investment advisors and analysts; and
|
•
|
Relevant rating history, analysis, and guidance provided by rating agencies and analysts.
|
•
|
Whether the decline appears to be issuer or industry specific;
|
•
|
The relationship of market prices per share to book value per share at the date of acquisition and date of evaluation;
|
•
|
The price-earnings ratio at the time of acquisition and date of evaluation;
|
•
|
The financial condition and near-term prospects of the issuer, including any specific events that may influence the issuer’s operations, coupled with our intention to hold the securities in the near term;
|
•
|
The recent income or loss of the issuer;
|
•
|
The independent auditors’ report on the issuer’s recent financial statements;
|
•
|
The dividend policy of the issuer at the date of acquisition and the date of evaluation;
|
•
|
Buy/hold/sell recommendations or price projections published by outside investment advisors;
|
•
|
Rating agency announcements;
|
•
|
The length of time and the extent to which the fair value has been, or is expected to be, less than cost in the near term; and
|
•
|
Our expectation of when the cost of the security will be recovered.
|
•
|
The current investment strategy;
|
•
|
Changes made or future changes to be made to the investment strategy;
|
•
|
Emerging issues that may affect the success of the strategy; and
|
•
|
The appropriateness of the valuation methodology used regarding the underlying investments.
|
($ in thousands, except per share amounts)
|
|
2014
|
|
2013
|
|
2012
|
||||
Operating income
|
|
$
|
124,538
|
|
|
93,939
|
|
|
32,121
|
|
Net realized gains, net of tax
|
|
17,289
|
|
|
13,476
|
|
|
5,842
|
|
|
Loss on discontinued operations, net of tax
|
|
—
|
|
|
(997
|
)
|
|
—
|
|
|
Net income
|
|
$
|
141,827
|
|
|
106,418
|
|
|
37,963
|
|
|
|
|
|
|
|
|
||||
Diluted operating income per share
|
|
$
|
2.17
|
|
|
1.65
|
|
|
0.58
|
|
Diluted net realized gains per share
|
|
0.30
|
|
|
0.24
|
|
|
0.10
|
|
|
Diluted net loss on discontinued operations per share
|
|
—
|
|
|
(0.02
|
)
|
|
—
|
|
|
Diluted net income per share
|
|
$
|
2.47
|
|
|
1.87
|
|
|
0.68
|
|
Operating Return on Average Equity
|
|
2014
|
|
2013
|
|
2012
|
|||
Insurance Segments
|
|
4.2
|
%
|
|
2.3
|
%
|
|
(3.9
|
)%
|
Investment Segment
|
|
8.6
|
%
|
|
9.0
|
%
|
|
9.3
|
%
|
Other
|
|
(2.5
|
)%
|
|
(2.9
|
)%
|
|
(2.4
|
)%
|
Total
|
|
10.3
|
%
|
|
8.4
|
%
|
|
3.0
|
%
|
All Lines
|
|
|
|
|
|
|
2014
|
|
|
|
|
2013
|
|
|||
($ in thousands)
|
|
2014
|
|
2013
|
|
vs. 2013
|
|
2012
|
|
vs. 2012
|
|
|||||
GAAP Insurance Operations Results:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net Premiums Written ("NPW")
|
|
1,885,280
|
|
|
1,810,159
|
|
|
4
|
|
%
|
1,666,883
|
|
|
9
|
|
%
|
Net Premiums Earned ("NPE")
|
|
1,852,609
|
|
|
1,736,072
|
|
|
7
|
|
|
1,584,119
|
|
|
10
|
|
|
Less:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||
Losses and loss expenses incurred
|
|
1,157,501
|
|
|
1,121,738
|
|
|
3
|
|
|
1,120,990
|
|
|
—
|
|
|
Net underwriting expenses incurred
|
|
610,783
|
|
|
571,294
|
|
|
7
|
|
|
523,688
|
|
|
9
|
|
|
Dividends to policyholders
|
|
6,182
|
|
|
4,274
|
|
|
45
|
|
|
3,448
|
|
|
24
|
|
|
Underwriting income (loss)
|
|
78,143
|
|
|
38,766
|
|
|
102
|
|
%
|
(64,007
|
)
|
|
161
|
|
%
|
GAAP Ratios:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Loss and loss expense ratio
|
|
62.5
|
|
%
|
64.6
|
|
|
(2.1
|
)
|
pts
|
70.8
|
|
|
(6.2
|
)
|
pts
|
Underwriting expense ratio
|
|
33.0
|
|
|
33.0
|
|
|
—
|
|
|
33.0
|
|
|
—
|
|
|
Dividends to policyholders ratio
|
|
0.3
|
|
|
0.2
|
|
|
0.1
|
|
|
0.2
|
|
|
—
|
|
|
Combined ratio
|
|
95.8
|
|
|
97.8
|
|
|
(2.0
|
)
|
|
104.0
|
|
|
(6.2
|
)
|
|
Statutory Ratios:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Loss and loss expense ratio
|
|
62.4
|
|
|
64.5
|
|
|
(2.1
|
)
|
|
70.7
|
|
|
(6.2
|
)
|
|
Underwriting expense ratio
|
|
33.0
|
|
|
32.8
|
|
|
0.2
|
|
|
32.6
|
|
|
0.2
|
|
|
Dividends to policyholders ratio
|
|
0.3
|
|
|
0.2
|
|
|
0.1
|
|
|
0.2
|
|
|
—
|
|
|
Combined ratio
|
|
95.7
|
|
%
|
97.5
|
|
|
(1.8
|
)
|
pts
|
103.5
|
|
|
(6.0
|
)
|
pts
|
•
|
Earned rate in excess of expected claims inflation in both 2014 and 2013. Renewal pure price increases of 5.6% in 2014, 7.6% in 2013, and 6.3% in 2012 have earned in at 6.6% in 2014 and 7.1% in 2013, both of which are above loss inflation trends of approximately 3%. After taking into account the incremental expenses associated with the additional premium, the net benefit to the combined ratio is approximately 2.5 points in both years.
|
•
|
Favorable prior year casualty reserve development, the details of which are below:
|
(Favorable)/Unfavorable Prior Year Casualty Reserve Development
|
|
|
|
|
|
|
||||||
($ in millions)
|
2014
|
|
2013
|
|
2012
|
|
||||||
General liability
|
$
|
(43.9
|
)
|
|
(20.0
|
)
|
|
2.5
|
|
|
||
Commercial automobile
|
(4.0
|
)
|
|
(5.0
|
)
|
|
(7.5
|
)
|
|
|||
Workers compensation
|
—
|
|
|
23.5
|
|
|
2.5
|
|
|
|||
Businessowners' policies
|
2.5
|
|
|
(9.5
|
)
|
|
(8.0
|
)
|
|
|||
Other
|
—
|
|
|
—
|
|
|
(1.0
|
)
|
|
|||
Total Standard Commercial Lines
|
(45.4
|
)
|
|
(11.0
|
)
|
|
(11.5
|
)
|
|
|||
|
|
|
|
|
|
|
||||||
Homeowners
|
(0.7
|
)
|
|
(4.0
|
)
|
|
(6.0
|
)
|
|
|||
Personal automobile
|
(8.0
|
)
|
|
(2.0
|
)
|
|
(0.5
|
)
|
|
|||
Total Standard Personal Lines
|
(8.7
|
)
|
|
(6.0
|
)
|
|
(6.5
|
)
|
|
|||
|
|
|
|
|
|
|
||||||
E&S
|
5.8
|
|
|
2.5
|
|
|
—
|
|
|
|||
|
|
|
|
|
|
|
||||||
Total favorable prior year casualty reserve development
|
$
|
(48.3
|
)
|
|
$
|
(14.5
|
)
|
|
$
|
(18.0
|
)
|
|
|
|
|
|
|
|
|
||||||
(Favorable) impact on loss ratio
|
(2.6
|
)
|
pts
|
(0.8
|
)
|
pts
|
(1.1
|
)
|
pts
|
•
|
The March 2014 sale of the renewal rights to our $37 million SIG book of business contributed $8 million to other income and reduced the combined ratio by 0.4 points. Although we did not solicit buyers, we decided to sell this small and specialized book of business when the opportunity presented itself because it had significant production outside of our standard lines footprint, and proved difficult to grow. We however, have retained our substantial individual risk public entity book of business and continue to look for opportunities to grow it.
|
•
|
Catastrophe losses, the details of which are below:
|
Catastrophe Losses
|
|
|
|
|
|
||||
($ in millions)
|
|
|
|
|
(Favorable)/Unfavorable Year-Over-Year Change
|
||||
For the Year ended December 31,
|
|
Loss and Loss Expense Incurred
|
Impact on Loss and Loss Expense Ratio
|
|
|||||
2014
|
|
$
|
60.0
|
|
3.2
|
|
pts
|
0.5
|
|
2013
|
|
47.4
|
|
2.7
|
|
|
(3.5
|
)
|
|
2012
|
|
98.6
|
|
6.2
|
|
|
N/A
|
|
|
|
Superstorm Sandy
|
|
|
($ in thousands)
|
|
2012
|
|
|
Total Insurance Segments (Excluding Flood):
|
|
|
|
|
Gross losses
1
|
$
|
136,000
|
|
|
Reinsurance
|
|
(89,400
|
)
|
|
Net losses
|
|
46,600
|
|
|
|
|
|
|
|
Reinstatement premium
|
|
8,577
|
|
|
|
|
|
|
|
Flood:
|
|
|
|
|
Gross losses
|
|
1,039,155
|
|
|
Reinsurance
|
|
(1,039,155
|
)
|
|
Net losses
|
|
—
|
|
|
|
|
|
|
|
Flood claims handling fees
|
|
(15,587
|
)
|
|
|
|
|
|
|
Net impact of storm
|
$
|
39,590
|
|
|
•
|
Non-catastrophe property losses, the details of which are below:
|
Non-Catastrophe Property Losses
|
|
|
|
|
|
||||
($ in millions)
|
|
|
|
|
(Favorable)/Unfavorable Year-Over-Year Change
|
||||
For the Year ended December 31,
|
|
Loss and Loss Expense Incurred
|
Impact on Loss and Loss Expense Ratio
|
|
|||||
2014
|
|
$
|
287.5
|
|
15.5
|
|
pts
|
2.4
|
|
2013
|
|
226.6
|
|
13.1
|
|
|
(1.4
|
)
|
|
2012
|
|
229.7
|
|
14.5
|
|
|
N/A
|
|
•
|
The size of our company and our field model that provides us with the ability to be agile and responsive to our customer needs;
|
•
|
Our reserve position that reflects the discipline we have always maintained in our reserving practices;
|
•
|
Our customer-centric approach to our business with a focus on our policyholders and the service we bring to them;
|
•
|
The utilization of our capabilities regarding data analytics;
|
•
|
Our demonstrated ability to execute on our strategic cost reduction strategies; and
|
•
|
Our deep bench of talent in the organization and our continuous cultivation of that talent.
|
•
|
An ex-catastrophe combined ratio of 91%, which includes no prior year casualty reserve development;
|
•
|
Four points of catastrophe losses for the year;
|
•
|
After-tax investment income of approximately $105 million; and
|
•
|
Weighted average shares of approximately 58 million.
|
|
||||||||||||||||||
|
|
|
|
|
|
2014
|
|
|
|
2013
|
|
|||||||
($ in thousands)
|
|
2014
|
|
2013
|
|
vs. 2013
|
|
2012
|
|
vs. 2012
|
|
|||||||
GAAP Insurance Segments Results:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||
NPW
|
|
$
|
1,441,047
|
|
|
1,380,740
|
|
|
4
|
|
%
|
$
|
1,263,738
|
|
|
9
|
|
%
|
NPE
|
|
1,415,712
|
|
|
1,316,619
|
|
|
8
|
|
|
1,225,335
|
|
|
7
|
|
|
||
Less:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||
Loss and loss expense incurred
|
|
870,018
|
|
|
831,261
|
|
|
5
|
|
|
853,143
|
|
|
(3
|
)
|
|
||
Net underwriting expenses incurred
|
|
478,291
|
|
|
447,228
|
|
|
7
|
|
|
409,679
|
|
|
9
|
|
|
||
Dividends to policyholders
|
|
6,182
|
|
|
4,274
|
|
|
45
|
|
|
3,448
|
|
|
24
|
|
|
||
Underwriting income (loss)
|
|
$
|
61,221
|
|
|
33,856
|
|
|
81
|
|
%
|
$
|
(40,935
|
)
|
|
183
|
|
%
|
GAAP Ratios:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||
Loss and loss expense ratio
|
|
61.5
|
|
%
|
63.1
|
|
|
(1.6
|
)
|
pts
|
69.6
|
|
%
|
(6.5
|
)
|
pts
|
||
Underwriting expense ratio
|
|
33.8
|
|
|
34.0
|
|
|
(0.2
|
)
|
|
33.4
|
|
|
0.6
|
|
|
||
Dividends to policyholders ratio
|
|
0.4
|
|
|
0.3
|
|
|
0.1
|
|
|
0.3
|
|
|
—
|
|
|
||
Combined ratio
|
|
95.7
|
|
|
97.4
|
|
|
(1.7
|
)
|
|
103.3
|
|
|
(5.9
|
)
|
|
||
Statutory Ratios:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||
Loss and loss expense ratio
|
|
61.3
|
|
|
63.1
|
|
|
(1.8
|
)
|
|
69.6
|
|
|
(6.5
|
)
|
|
||
Underwriting expense ratio
|
|
33.8
|
|
|
33.7
|
|
|
0.1
|
|
|
33.1
|
|
|
0.6
|
|
|
||
Dividends to policyholders ratio
|
|
0.4
|
|
|
0.3
|
|
|
0.1
|
|
|
0.3
|
|
|
—
|
|
|
||
Combined ratio
|
|
95.5
|
|
%
|
97.1
|
|
|
(1.6
|
)
|
pts
|
103.0
|
|
%
|
(5.9
|
)
|
pts
|
|
|
For the Year Ended December 31,
|
|
||||||||
($ in millions)
|
|
2014
|
|
2013
|
|
2012
|
|
|
|||
Retention
|
|
82
|
|
%
|
82
|
|
|
82
|
|
|
|
Renewal pure price increases
|
|
5.6
|
|
|
7.6
|
|
|
6.2
|
|
|
|
Direct new business
|
|
$
|
268.7
|
|
|
277.5
|
|
|
236.1
|
|
|
($ in millions)
|
Non-Catastrophe Property Losses
|
|
Catastrophe Losses
|
|
|
||||||||||||||
For the year ended December 31,
|
Losses and Loss Expense Incurred
|
|
Impact on Losses and Loss Expense Ratio
|
|
Losses and Loss Expense Incurred
|
|
Impact on Losses and Loss Expense Ratio
|
|
Total Impact on Losses and Loss Expense Ratio
|
|
(Favorable)/Unfavorable Year-Over-Year Change
|
||||||||
2014
|
$
|
180.4
|
|
|
12.7
|
|
pts
|
$
|
37.9
|
|
|
2.7
|
|
pts
|
15.4
|
|
|
4.1
|
|
2013
|
126.8
|
|
|
9.6
|
|
|
23.0
|
|
|
1.7
|
|
|
11.3
|
|
|
(4.4
|
)
|
||
2012
|
136.0
|
|
|
11.1
|
|
|
56.4
|
|
|
4.6
|
|
|
15.7
|
|
|
N/A
|
|
General Liability
|
||||||||||||||||||
($ in thousands)
|
|
2014
|
|
2013
|
|
2014
vs. 2013
|
|
2012
|
|
2013
vs. 2012
|
|
|||||||
Statutory NPW
|
|
$
|
453,594
|
|
|
426,244
|
|
|
6
|
|
%
|
$
|
387,888
|
|
|
10
|
|
%
|
Direct new business
|
|
78,124
|
|
|
78,294
|
|
|
—
|
|
|
66,826
|
|
|
17
|
|
|
||
Retention
|
|
82
|
|
%
|
81
|
|
|
1
|
|
pts
|
81
|
|
%
|
—
|
|
pts
|
||
Renewal pure price increases
|
|
6.7
|
|
|
8.9
|
|
|
(2.2
|
)
|
|
6.9
|
|
|
2.0
|
|
|
||
Statutory NPE
|
|
$
|
444,938
|
|
|
405,322
|
|
|
10
|
|
%
|
373,381
|
|
|
9
|
|
%
|
|
Statutory combined ratio
|
|
83.9
|
|
%
|
96.2
|
|
|
(12.3
|
)
|
pts
|
102.7
|
|
%
|
(6.5
|
)
|
pts
|
||
% of total statutory standard commercial NPW
|
|
31
|
|
|
31
|
|
|
|
|
|
31
|
|
|
|
|
|
•
|
2014: favorable prior year development of 9.9 points driven by lower severities in the 2010 through 2012 accident years, within both the premises and operations and products liability coverages. In addition, accident years 2011 and 2012 continued to show lower claim counts, even as they matured.
|
•
|
2013: favorable prior year development of 4.9 points driven by lower severities in 2010 and prior accident years, partially offset by unfavorable development in accident years 2011 and 2012, which showed higher average severities in premises and operations coverage.
|
•
|
2012: unfavorable by 0.8 points, driven by increased severities in the 2010 and 2011 accident years. This unfavorable development was largely offset by continued favorable development in the premises and products coverages in accident years 2007 and 2009, which showed lower frequencies of large losses, particularly in the umbrella coverage.
|
Commercial Automobile
|
||||||||||||||||||
|
|
|
|
|
|
2014
|
|
|
|
2013
|
|
|||||||
($ in thousands)
|
|
2014
|
|
2013
|
|
vs. 2013
|
|
2012
|
|
vs. 2012
|
|
|||||||
Statutory NPW
|
|
$
|
341,926
|
|
|
325,895
|
|
|
5
|
|
%
|
$
|
295,651
|
|
|
10
|
|
%
|
Direct new business
|
|
57,280
|
|
|
59,110
|
|
|
(3
|
)
|
|
50,084
|
|
|
18
|
|
|
||
Retention
|
|
82
|
|
%
|
82
|
|
|
—
|
|
pts
|
82
|
|
%
|
—
|
|
pts
|
||
Renewal pure price increases
|
|
5.5
|
|
|
7.3
|
|
|
(1.8
|
)
|
|
5.1
|
|
|
2.2
|
|
|
||
Statutory NPE
|
|
$
|
333,310
|
|
|
310,994
|
|
|
7
|
|
%
|
$
|
288,010
|
|
|
8
|
|
%
|
Statutory combined ratio
|
|
96.2
|
|
%
|
96.4
|
|
|
(0.2
|
)
|
pts
|
97.1
|
|
%
|
(0.7
|
)
|
pts
|
||
% of total statutory standard commercial NPW
|
|
24
|
|
|
24
|
|
|
|
|
|
23
|
|
|
|
|
|
($ in millions)
|
Non-Catastrophe Property Losses
|
|
Catastrophe Losses
|
|
|
||||||||||||||
For the year ended December 31,
|
Losses and Loss Expense Incurred
|
|
Impact on Losses and Loss Expense Ratio
|
|
Losses and Loss Expense Incurred
|
|
Impact on Losses and Loss Expense Ratio
|
|
Total Impact on Losses and Loss Expense Ratio
|
|
(Favorable)/Unfavorable Year-Over-Year Change
|
||||||||
2014
|
$
|
45.6
|
|
|
13.7
|
|
pts
|
$
|
1.6
|
|
|
0.5
|
|
pts
|
14.2
|
|
|
(0.5
|
)
|
2013
|
46.4
|
|
|
14.9
|
|
|
(0.5
|
)
|
|
(0.2
|
)
|
|
14.7
|
|
|
(2.0
|
)
|
||
2012
|
42.7
|
|
|
14.8
|
|
|
5.4
|
|
|
1.9
|
|
|
16.7
|
|
|
N/A
|
|
•
|
2014: 1.2 points driven by bodily injury liability for accident years 2012 and prior, partially offset by accident year 2013 due to higher frequency of claims.
|
•
|
2013: 1.6 points driven by accident years 2006 through 2010 representing a continued trend of better than expected reported emergence, partially offset by increased severity in accident year 2012.
|
•
|
2012: 2.6 points driven by the 2009 accident year, representing a continued trend driven by better than expected reported emergence. This was partially offset by unfavorable development in the 2011 accident year, due to higher frequency of claims.
|
Workers Compensation
|
||||||||||||||||||
|
|
|
|
|
|
2014
|
|
|
|
2013
|
|
|||||||
($ in thousands)
|
|
2014
|
|
2013
|
|
vs. 2013
|
|
2012
|
|
vs. 2012
|
|
|||||||
Statutory NPW
|
|
$
|
269,130
|
|
|
277,135
|
|
|
(3
|
)
|
%
|
$
|
263,767
|
|
|
5
|
|
%
|
Direct new business
|
|
48,613
|
|
|
55,063
|
|
|
(12
|
)
|
|
44,417
|
|
|
24
|
|
|
||
Retention
|
|
81
|
|
%
|
82
|
|
|
(1
|
)
|
pts
|
81
|
|
%
|
1
|
|
pts
|
||
Renewal pure price increases
|
|
4.8
|
|
|
7.5
|
|
|
(2.7
|
)
|
|
8.0
|
|
|
(0.5
|
)
|
|
||
Statutory NPE
|
|
$
|
274,585
|
|
|
267,612
|
|
|
3
|
|
%
|
$
|
262,108
|
|
|
2
|
|
%
|
Statutory combined ratio
|
|
110.1
|
|
%
|
120.6
|
|
|
(10.5
|
)
|
pts
|
114.5
|
|
%
|
6.1
|
|
pts
|
||
% of total statutory standard commercial NPW
|
|
19
|
|
|
20
|
|
|
|
|
|
21
|
|
|
|
|
•
|
2013: unfavorable prior year development of 8.6 points driven by 2008 and prior accident years reflecting increases in severities for medical costs. These increases largely related to case reserve adjustments to assisted living facility claims, and our review of medical cost development over many years.
|
•
|
2012: unfavorable by 1.1 points driven by the 2011 accident year, due to an increase in the ultimate severity, partially offset by accident years 2007 and 2008, due to a decrease in expected severity for those years.
|
Commercial Property
|
||||||||||||||||||
|
|
|
|
|
|
2014
|
|
|
|
2013
|
|
|||||||
($ in thousands)
|
|
2014
|
|
2013
|
|
vs. 2013
|
|
2012
|
|
vs. 2012
|
|
|||||||
Statutory NPW
|
|
$
|
253,625
|
|
|
237,556
|
|
|
7
|
|
%
|
$
|
213,321
|
|
|
11
|
|
%
|
Direct new business
|
|
58,436
|
|
|
53,678
|
|
|
9
|
|
|
44,553
|
|
|
20
|
|
|
||
Retention
|
|
81
|
|
%
|
81
|
|
|
—
|
|
pts
|
81
|
|
%
|
—
|
|
pts
|
||
Renewal pure price increases
|
|
4.4
|
|
|
5.7
|
|
|
(1.3
|
)
|
|
4.5
|
|
|
1.2
|
|
|
||
Statutory NPE
|
|
$
|
244,792
|
|
|
224,412
|
|
|
9
|
|
%
|
$
|
202,340
|
|
|
11
|
|
%
|
Statutory combined ratio
|
|
97.3
|
|
%
|
78.9
|
|
|
18.4
|
|
pts
|
99.1
|
|
%
|
(20.2
|
)
|
pts
|
||
% of total statutory standard commercial NPW
|
|
18
|
|
|
17
|
|
|
|
|
|
17
|
|
|
|
|
|
($ in millions)
|
Non-Catastrophe Property Losses
|
|
Catastrophe Losses
|
|
|
||||||||||||
For the year ended December 31,
|
Losses and Loss Expense Incurred
|
|
Impact on Losses and Loss Expense Ratio
|
|
Losses and Loss Expense Incurred
|
|
Impact on Losses and Loss Expense Ratio
|
|
Total Impact on Losses and Loss Expense Ratio
|
|
(Favorable)/Unfavorable Year-Over-Year Change
|
||||||
2014
|
$
|
107.3
|
|
|
43.8
|
pts
|
$
|
27.3
|
|
|
11.2
|
pts
|
55.0
|
|
|
18.9
|
|
2013
|
63.0
|
|
|
28.1
|
|
17.8
|
|
|
8.0
|
|
36.1
|
|
|
(19.5
|
)
|
||
2012
|
77.3
|
|
|
38.2
|
|
35.2
|
|
|
17.4
|
|
55.6
|
|
|
N/A
|
|
|
||||||||||||||||||
|
|
|
|
|
|
2014
|
|
|
|
2013
|
|
|||||||
($ in thousands)
|
|
2014
|
|
2013
|
|
vs. 2013
|
|
2012
|
|
vs. 2012
|
|
|||||||
GAAP Insurance Segments Results:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||
NPW
|
|
$
|
292,061
|
|
|
297,757
|
|
|
(2
|
)
|
%
|
$
|
289,848
|
|
|
3
|
|
%
|
NPE
|
|
296,747
|
|
|
294,332
|
|
|
1
|
|
|
279,555
|
|
|
5
|
|
|
||
Less:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||
Losses and loss expenses incurred
|
|
197,182
|
|
|
206,450
|
|
|
(4
|
)
|
|
204,644
|
|
|
1
|
|
|
||
Net underwriting expenses incurred
|
|
83,029
|
|
|
79,237
|
|
|
5
|
|
|
78,425
|
|
|
1
|
|
|
||
Underwriting income (loss)
|
|
$
|
16,536
|
|
|
8,645
|
|
|
91
|
|
%
|
$
|
(3,514
|
)
|
|
346
|
|
%
|
GAAP Ratios:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||
Loss and loss expense ratio
|
|
66.4
|
|
%
|
70.1
|
|
|
(3.7
|
)
|
pts
|
73.2
|
|
%
|
(3.1
|
)
|
pts
|
||
Underwriting expense ratio
|
|
28.0
|
|
|
27.0
|
|
|
1.0
|
|
|
28.1
|
|
|
(1.1
|
)
|
|
||
Combined ratio
|
|
94.4
|
|
|
97.1
|
|
|
(2.7
|
)
|
|
101.3
|
|
|
(4.2
|
)
|
|
||
Statutory Ratios:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||
Loss and loss expense ratio
|
|
66.3
|
|
|
69.9
|
|
|
(3.6
|
)
|
|
73.1
|
|
|
(3.2
|
)
|
|
||
Underwriting expense ratio
|
|
28.2
|
|
|
27.0
|
|
|
1.2
|
|
|
27.6
|
|
|
(0.6
|
)
|
|
||
Combined ratio
|
|
94.5
|
|
%
|
96.9
|
|
|
(2.4
|
)
|
pts
|
100.7
|
|
%
|
(3.8
|
)
|
pts
|
($ in millions)
|
|
2014
|
|
2013
|
|
2012
|
|
||||
Retention
|
|
81
|
|
%
|
85
|
|
%
|
86
|
|
%
|
|
Renewal pure price increase
|
|
6.5
|
|
|
7.8
|
|
|
6.7
|
|
|
|
Direct new business premiums
|
|
$
|
36.1
|
|
|
39.5
|
|
|
49.8
|
|
|
($ in millions)
|
|
|
|
|
|
|
|
||||
For the Year Ended
|
|
Catastrophe Losses
|
|
Impact on
|
|
|
(Favorable)/Unfavorable
|
||||
December 31,
|
|
Incurred
|
|
Loss Ratio
|
|
|
Year-Over-Year Change
|
||||
2014
|
|
$
|
19.3
|
|
|
6.5
|
|
|
pts
|
(0.2
|
)
|
2013
|
|
19.8
|
|
|
6.7
|
|
|
|
(7.8
|
)
|
|
2012
|
|
40.5
|
|
|
14.5
|
|
|
|
N/A
|
|
($ in millions)
|
Non-Catastrophe Property Losses
|
|
Flood Claims Handling Fees
1
|
|
|
||||||||||||||
For the year ended December 31,
|
Losses and Loss Expense Incurred
|
|
Impact on Losses and Loss Expense Ratio
|
|
Losses and Loss Expense Incurred
|
|
Impact on Losses and Loss Expense Ratio
|
|
Total Impact on Losses and Loss Expense Ratio
|
|
(Favorable)/Unfavorable Year-Over-Year Change
|
||||||||
2014
|
$
|
90.1
|
|
|
30.4
|
|
pts
|
$
|
(3.0
|
)
|
|
(1.0
|
)
|
pts
|
29.4
|
|
|
1.2
|
|
2013
|
87.8
|
|
|
29.8
|
|
pts
|
(4.6
|
)
|
|
(1.6
|
)
|
pts
|
28.2
|
|
|
6.8
|
|
||
2012
|
78.2
|
|
|
28.0
|
|
|
(18.3
|
)
|
|
(6.6
|
)
|
|
21.4
|
|
|
N/A
|
|
($ in millions)
|
|
|
|||||||||
|
|
(Favorable)/Unfavorable Prior Year Casualty Reserve Development
|
|
|
(Favorable)/Unfavorable
|
||||||
For the year ended December 31,
|
|
Losses and Loss Expense Incurred
|
|
Impact on Losses and Loss Expense Ratio
|
|
|
Year-Over-Year Change
|
||||
2014
|
|
$
|
(8.7
|
)
|
|
(2.9
|
)
|
|
pts
|
(0.9
|
)
|
2013
|
|
(6.0
|
)
|
|
(2.0
|
)
|
|
|
0.3
|
|
|
2012
|
|
(6.5
|
)
|
|
(2.3
|
)
|
|
|
N/A
|
|
($ in thousands)
|
|
2014
|
|
2013
|
|
2014
vs. 2013
|
|
2012
|
|
2013
vs. 2012
|
|
|||||||
GAAP Insurance Segments Results:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||
NPW
|
|
$
|
152,172
|
|
|
131,662
|
|
|
16
|
|
%
|
$
|
113,297
|
|
|
16
|
|
%
|
NPE
|
|
140,150
|
|
|
125,121
|
|
|
12
|
|
|
79,229
|
|
|
58
|
|
|
||
Less:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||
Losses and loss expenses incurred
|
|
90,301
|
|
|
84,027
|
|
|
7
|
|
|
63,203
|
|
|
33
|
|
|
||
Net underwriting expenses incurred
|
|
49,463
|
|
|
44,829
|
|
|
10
|
|
|
35,584
|
|
|
26
|
|
|
||
Underwriting income (loss)
|
|
$
|
386
|
|
|
(3,735
|
)
|
|
110
|
|
%
|
$
|
(19,558
|
)
|
|
81
|
|
%
|
GAAP Ratios:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||
Loss and loss expense ratio
|
|
64.4
|
|
%
|
67.2
|
|
|
(2.8
|
)
|
pts
|
79.8
|
|
%
|
(12.6
|
)
|
pts
|
||
Underwriting expense ratio
|
|
35.3
|
|
|
35.8
|
|
|
(0.5
|
)
|
|
44.9
|
|
|
(9.1
|
)
|
|
||
Combined ratio
|
|
99.7
|
|
|
103.0
|
|
|
(3.3
|
)
|
|
124.7
|
|
|
(21.7
|
)
|
|
||
Statutory Ratios:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||
Loss and loss expense ratio
|
|
64.5
|
|
|
67.2
|
|
|
(2.7
|
)
|
|
79.3
|
|
|
(12.1
|
)
|
|
||
Underwriting expense ratio
|
|
34.7
|
|
|
35.7
|
|
|
(1.0
|
)
|
|
39.5
|
|
|
(3.8
|
)
|
|
||
Combined ratio
|
|
99.2
|
|
%
|
102.9
|
|
|
(3.7
|
)
|
pts
|
118.8
|
|
%
|
(15.9
|
)
|
pts
|
($ in millions)
|
|
2014
|
|
2013
|
|
|||
Renewal pure price increases
|
|
3.4
|
|
%
|
6.2
|
|
|
|
Direct new business premiums
|
|
$
|
80.9
|
|
|
71.4
|
|
|
•
|
Pool or share proportionately the underwriting profit and loss results of property and casualty insurance underwriting operations through reinsurance;
|
•
|
Prevent any of our Insurance Subsidiaries from suffering undue loss;
|
•
|
Reduce administration expenses; and
|
•
|
Permit all of the Insurance Subsidiaries to obtain a uniform rating from A.M. Best.
|
Insurance Subsidiary
|
|
Pooling Percentage
|
SICA
|
|
32.0%
|
Selective Way Insurance Company ("SWIC")
|
|
21.0%
|
Selective Insurance Company of South Carolina ("SICSC")
|
|
9.0%
|
Selective Insurance Company of the Southeast ("SICSE")
|
|
7.0%
|
Selective Insurance Company of New York ("SICNY")
|
|
7.0%
|
Selective Casualty Insurance Company ("SCIC")
|
|
7.0%
|
Selective Auto Insurance Company of New Jersey ("SAICNJ")
|
|
6.0%
|
Mesa Underwriters Specialty Insurance Company ("MUSIC")
|
|
5.0%
|
Selective Insurance Company of New England ("SICNE")
|
|
3.0%
|
Selective Fire and Casualty Insurance Company ("SFCIC")
|
|
3.0%
|
•
|
Property Reinsurance -
includes our property excess of loss treaties purchased for protection against large individual property losses and our Property Catastrophe treaty purchased to provide protection for the overall property portfolio against severe catastrophic events. Facultative reinsurance is used for property risks that are in excess of our treaty capacity.
|
•
|
Casualty Reinsurance
- purchased to provide protection for both individual large casualty losses and catastrophic casualty losses involving multiple claimants or customers. Facultative reinsurance is also used for casualty risks that are in excess of our treaty capacity.
|
•
|
Terrorism Reinsurance
- available as a federal backstop related to terrorism losses as provided under the TRIPRA. For further information regarding this legislation, see Item 1A. “Risk Factors.” of this Form 10-K.
|
•
|
Flood Reinsurance
- as a servicing carrier in the WYO program, we receive a fee for writing flood business, for which the related premiums and losses are 100% ceded to the federal government.
|
|
|
Actual Gross Loss
|
|
|
Accident
|
Hurricane Name
|
|
($ in millions)
|
|
|
Year
|
Superstorm Sandy
|
|
132.0
1
|
|
|
2012
|
Hurricane Irene
|
|
44.7
|
|
|
2011
|
Hurricane Hugo
|
|
26.4
|
|
|
1989
|
Hurricane Isabel
|
|
25.1
|
|
|
2003
|
Hurricane Floyd
|
|
14.5
|
|
|
1999
|
Occurrence Exceedence Probability
|
|
Four-Model Blend
|
||||
($ in thousands)
|
|
Gross
Losses
|
|
Net
Losses
1
|
|
Net Losses
as a Percent of
Equity
2
|
4.0% (1 in 25 year event)
|
|
$113,973
|
|
29,457
|
|
2%
|
2.0% (1 in 50 year event)
|
|
210,333
|
|
31,106
|
|
2
|
1.0% (1 in 100 year event)
|
|
362,642
|
|
36,522
|
|
3
|
0.67% (1 in 150 year event)
|
|
493,772
|
|
40,840
|
|
3
|
0.5% (1 in 200 year event)
|
|
613,556
|
|
48,841
|
|
4
|
0.4% (1 in 250 year event)
|
|
689,793
|
|
59,617
|
|
5
|
CASUALTY REINSURANCE ON INSURANCE PRODUCTS
|
||||
Treaty Name
|
|
Reinsurance Coverage
|
|
Terrorism Coverage
|
Casualty Excess of Loss
(covers Standard Commercial and Personal Lines) |
|
There are six layers covering 100% of $88 million in excess of $2 million. Losses other than terrorism losses are subject to the following reinstatements and annual aggregate limits:
|
|
All NBCR losses are excluded. All other losses stemming from the acts of terrorism are subject to the following reinstatements and annual aggregate limits:
|
|
- $3 million in excess of $2 million layer
provides 23 reinstatements, $72 million net annual aggregate limit; |
|
- $3 million in excess of $2 million layer provides
four reinstatements for terrorism losses, $15 million net annual aggregate limit; |
|
|
- $7 million in excess of $5 million layer
provides four reinstatements, $35 million annual aggregate limit; |
|
- $7 million in excess of $5 million layer provides
three reinstatements for terrorism losses, $28 million annual aggregate limit; |
|
|
- $9 million in excess of $12 million layer provides
two reinstatements, $27 million annual aggregate limit; |
|
- $9 million in excess of $12 million layer provides
two reinstatements for terrorism losses, $27 million annual aggregate limit; |
|
|
- $9 million in excess of $21 million layer provides
one reinstatement, $18 million annual aggregate limit; |
|
- $9 million in excess of $21 million layer provides
one reinstatement for terrorism losses, $18 million annual aggregate limit; |
|
|
- $20 million in excess of $30 million layer provides
one reinstatement, $40 million annual aggregate limit; and |
|
- $20 million in excess of $30 million layer provides
one reinstatement for terrorism losses, $40 million annual aggregate limit; and |
|
|
- $40 million in excess of $50 million layer provides
one reinstatement, $80 million in net annual aggregate limit. |
|
- $40 million in excess of $50 million layer provides
one reinstatement for terrorism losses, $80 million in net annual aggregate limit. |
|
|
|
|
|
|
Montpelier Re Quota Share and Loss Development Cover
(covers E&S Lines) |
|
As part of the acquisition of MUSIC we entered into several reinsurance agreements that together provide protection for losses on policies written prior to the acquisition and any development on reserves established by MUSIC as of the date of acquisition. The reinsurance recoverables under these treaties are 100% collateralized.
|
|
Provides full terrorism coverage including NBCR.
|
($ in thousands)
|
|
2014
|
|
2013
|
|
Change
|
||||
Total invested assets
|
|
$
|
4,806,834
|
|
|
4,583,312
|
|
|
5
|
%
|
Invested assets per dollar of stockholders' equity
|
|
3.77
|
|
|
3.97
|
|
|
(5
|
)
|
|
Unrealized gain – before tax
|
|
123,682
|
|
|
79,237
|
|
|
56
|
|
|
Unrealized gain – after tax
|
|
80,394
|
|
|
51,504
|
|
|
56
|
|
As of December 31,
|
|
2014
|
|
2013
|
U.S. government obligations
|
|
2
|
%
|
4
|
Foreign government obligations
|
|
1
|
|
1
|
State and municipal obligations
|
|
32
|
|
28
|
Corporate securities
|
|
38
|
|
39
|
Mortgage-backed securities (“MBS”)
|
|
14
|
|
15
|
Asset-backed securities ("ABS")
|
|
4
|
|
3
|
Total fixed income securities
|
|
91
|
|
90
|
Equity securities
|
|
4
|
|
4
|
Short-term investments
|
|
3
|
|
4
|
Other investments
|
|
2
|
|
2
|
Total
|
|
100
|
%
|
100
|
Contractual Maturities
|
|
|
|
|
|
|
||||
($ in thousands)
|
|
Amortized Cost
|
|
Fair Value
|
|
Unrealized Loss
|
||||
One year or less
|
|
$
|
46,238
|
|
|
46,124
|
|
|
114
|
|
Due after one year through five years
|
|
545,504
|
|
|
541,355
|
|
|
4,149
|
|
|
Due after five years through ten years
|
|
316,678
|
|
|
310,754
|
|
|
5,924
|
|
|
Due after ten years
|
|
5,005
|
|
|
4,950
|
|
|
55
|
|
|
Total
|
|
$
|
913,425
|
|
|
903,183
|
|
|
10,242
|
|
Contractual Maturities
|
|
|
|
|
|
|
||||
($ in thousands)
|
|
Amortized Cost
|
|
Fair Value
|
|
Unrecognized/Unrealized Loss
|
||||
One year or less
|
|
$
|
198
|
|
|
196
|
|
|
2
|
|
Due after one year through five years
|
|
2,251
|
|
|
2,235
|
|
|
16
|
|
|
Total
|
|
$
|
2,449
|
|
|
2,431
|
|
|
18
|
|
($ in thousands)
|
|
2014
|
|
2013
|
|
2012
|
||||
Fixed income securities
|
|
$
|
126,489
|
|
|
121,582
|
|
|
124,687
|
|
Equity securities, dividend income
|
|
7,449
|
|
|
6,140
|
|
|
6,215
|
|
|
Short-term investments
|
|
66
|
|
|
117
|
|
|
151
|
|
|
Other investments
|
|
13,580
|
|
|
15,208
|
|
|
8,996
|
|
|
Investment expenses
|
|
(8,876
|
)
|
|
(8,404
|
)
|
|
(8,172
|
)
|
|
Net investment income earned – before tax
|
|
138,708
|
|
|
134,643
|
|
|
131,877
|
|
|
Net investment income tax expense
|
|
34,501
|
|
|
33,233
|
|
|
31,612
|
|
|
Net investment income earned – after tax
|
|
$
|
104,207
|
|
|
101,410
|
|
|
100,265
|
|
Effective tax rate
|
|
24.9
|
%
|
|
24.7
|
|
|
24.0
|
|
|
Annual after-tax yield on fixed income securities
|
|
2.2
|
|
|
2.3
|
|
|
2.5
|
|
|
Annual after-tax yield on investment portfolio
|
|
2.2
|
|
|
2.3
|
|
|
2.4
|
|
($ in millions)
|
|
2014
|
|
2013
|
|
2012
|
|||
Federal income tax expense (benefit) from continuing operations
|
|
55.3
|
|
|
36.4
|
|
|
(0.3
|
)
|
Effective tax rate
|
|
28
|
%
|
|
25
|
|
|
(1
|
)
|
Dividends
|
|
|
|
2015
|
||
($ in millions)
|
|
State of Domicile
|
|
Maximum Ordinary
Dividends
|
||
SICA
|
|
New Jersey
|
|
$
|
62.3
|
|
SWIC
|
|
New Jersey
|
|
32.7
|
|
|
SICSC
|
|
Indiana
|
|
14.0
|
|
|
SICSE
|
|
Indiana
|
|
10.5
|
|
|
SICNY
|
|
New York
|
|
8.3
|
|
|
SICNE
|
|
New Jersey
|
|
4.4
|
|
|
SAICNJ
|
|
New Jersey
|
|
8.9
|
|
|
MUSIC
|
|
New Jersey
|
|
7.3
|
|
|
SCIC
|
|
New Jersey
|
|
9.5
|
|
|
SFCIC
|
|
New Jersey
|
|
4.1
|
|
|
Total
|
|
|
|
$
|
162.0
|
|
|
|
Required as of December 31, 2014
|
|
Actual as of December 31, 2014
|
Consolidated net worth
|
|
$881 million
|
|
$1.3 billion
|
Statutory surplus
|
|
Not less than $750 million
|
|
$1.3 billion
|
Debt-to-capitalization ratio
1
|
|
Not to exceed 35%
|
|
23.2%
|
A.M. Best financial strength rating
|
|
Minimum of A-
|
|
A
|
Contractual Obligations
|
|
Payment Due by Period
|
||||||||||||||
|
|
|
|
Less than
|
|
1-3
|
|
3-5
|
|
More than
|
||||||
($ in millions)
|
|
Total
|
|
1 year
|
|
Years
|
|
years
|
|
5 years
|
||||||
Operating leases
|
|
$
|
39.2
|
|
|
9.1
|
|
|
12.8
|
|
|
8.4
|
|
|
8.9
|
|
Capital leases
|
|
5.7
|
|
|
3.1
|
|
|
2.6
|
|
|
—
|
|
|
—
|
|
|
Notes payable
|
|
380.0
|
|
|
—
|
|
|
45.0
|
|
|
—
|
|
|
335.0
|
|
|
Interest on debt obligations
|
|
521.2
|
|
|
21.8
|
|
|
42.9
|
|
|
42.4
|
|
|
414.1
|
|
|
Subtotal
|
|
946.1
|
|
|
34.0
|
|
|
103.3
|
|
|
50.8
|
|
|
758.0
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||
Gross loss and loss expense payments
|
|
3,477.9
|
|
|
856.6
|
|
|
1,041.2
|
|
|
543.6
|
|
|
1,036.5
|
|
|
Ceded loss and loss expense payments
|
|
572.0
|
|
|
133.2
|
|
|
130.9
|
|
|
81.9
|
|
|
226.0
|
|
|
Net loss and loss expense payments
|
|
2,905.9
|
|
|
723.4
|
|
|
910.3
|
|
|
461.7
|
|
|
810.5
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||
Total
|
|
$
|
3,852.0
|
|
|
757.4
|
|
|
1,013.6
|
|
|
512.5
|
|
|
1,568.5
|
|
•
|
Fitch Ratings ("Fitch") - Our “A+” rating was reaffirmed in the first quarter of 2015, citing our improved underwriting results, solid capitalization with strong growth in shareholders' equity, and continued improvement in leverage and interest coverage metrics. The outlook for the rating remains stable.
|
•
|
Standard & Poor's Ratings Services ("S&P") - During the fourth quarter of 2014, S&P reaffirmed our financial strength rating of “A-” and revised our outlook to positive from stable. The rating reflects S&P's view of our strong business risk profile, strong competitive position, and very strong capital and earnings. The positive outlook for the rating reflects S&P's view of our ongoing efforts to improve geographic and product diversification and reduce risk concentrations in catastrophe prone areas. In addition, the positive outlook reflects S&P's expectation that we will steadily improve our operating performance and that our capital adequacy will remain redundant at a very strong level.
|
•
|
Moody's Investor Service ("Moody's") - Our "A2" financial strength rating was reaffirmed in the third quarter of 2014 by Moody's, which cited our solid regional franchise with established independent agency support, solid risk adjusted capitalization, strong invested asset quality, and recently improving underwriting profitability. Their outlook remains negative, reflecting Moody’s view of challenges in achieving further reductions in segment concentrations and maintaining the pace and consistency of profitability.
|
|
|
|
2014
Interest Rate Shift in Basis Points
|
||||||||||||
($ in thousands)
|
|
|
1
-200
|
|
-100
|
|
0
|
|
100
|
|
200
|
||||
HTM fixed income securities
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Fair value of HTM fixed income securities portfolio
|
|
$
|
n/m
|
|
337,751
|
|
|
333,961
|
|
|
328,280
|
|
|
322,668
|
|
Fair value change
|
|
|
n/m
|
|
3,790
|
|
|
|
|
|
(5,681
|
)
|
|
(11,293
|
)
|
Fair value change from base (%)
|
|
|
n/m
|
|
1.13
|
%
|
|
|
|
|
(1.70
|
)%
|
|
(3.38
|
)%
|
AFS fixed income securities
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Fair value of AFS fixed income securities portfolio
|
|
$
|
n/m
|
|
4,221,546
|
|
|
4,066,122
|
|
|
3,907,358
|
|
|
3,757,890
|
|
Fair value change
|
|
|
n/m
|
|
155,424
|
|
|
|
|
|
(158,764
|
)
|
|
(308,232
|
)
|
Fair value change from base (%)
|
|
|
n/m
|
|
3.82
|
%
|
|
|
|
|
(3.90
|
)%
|
|
(7.58
|
)%
|
|
|
December 31, 2014
|
|
December 31, 2013
|
||||||||||||||
($ in millions)
|
|
Fair
Value
|
|
Unrealized
Gain
(Loss)
|
|
Average
Credit
Quality
|
|
Fair
Value
|
|
Unrealized
Gain
|
|
Average
Credit
Quality
|
||||||
AFS Fixed Income Portfolio:
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||
U.S. government obligations
|
|
$
|
124.1
|
|
|
7.4
|
|
|
AA+
|
|
$
|
173.4
|
|
|
10.1
|
|
|
AA+
|
Foreign government obligations
|
|
27.8
|
|
|
0.8
|
|
|
AA-
|
|
30.6
|
|
|
0.8
|
|
|
AA-
|
||
State and municipal obligations
|
|
1,246.3
|
|
|
37.5
|
|
|
AA
|
|
951.6
|
|
|
5.2
|
|
|
AA
|
||
Corporate securities
|
|
1,799.8
|
|
|
36.4
|
|
|
A-
|
|
1,734.9
|
|
|
27.0
|
|
|
A
|
||
ABS
|
|
177.2
|
|
|
0.4
|
|
|
AAA
|
|
140.9
|
|
|
0.5
|
|
|
AAA
|
||
MBS
|
|
690.9
|
|
|
7.8
|
|
|
AA+
|
|
684.1
|
|
|
(4.0
|
)
|
|
AA+
|
||
Total AFS fixed income portfolio
|
|
$
|
4,066.1
|
|
|
90.3
|
|
|
AA-
|
|
$
|
3,715.5
|
|
|
39.6
|
|
|
AA-
|
State and Municipal Obligations:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||
General obligations
|
|
$
|
563.4
|
|
|
15.9
|
|
|
AA+
|
|
$
|
472.0
|
|
|
2.6
|
|
|
AA+
|
Special revenue obligations
|
|
682.9
|
|
|
21.6
|
|
|
AA
|
|
479.6
|
|
|
2.6
|
|
|
AA
|
||
Total state and municipal obligations
|
|
$
|
1,246.3
|
|
|
37.5
|
|
|
AA
|
|
$
|
951.6
|
|
|
5.2
|
|
|
AA
|
Corporate Securities:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||
Financial
|
|
$
|
565.5
|
|
|
11.3
|
|
|
A
|
|
$
|
534.1
|
|
|
11.7
|
|
|
A
|
Industrials
|
|
146.9
|
|
|
4.2
|
|
|
A-
|
|
135.1
|
|
|
3.7
|
|
|
A-
|
||
Utilities
|
|
151.0
|
|
|
2.0
|
|
|
BBB+
|
|
146.5
|
|
|
(0.3
|
)
|
|
A-
|
||
Consumer discretionary
|
|
207.9
|
|
|
5.1
|
|
|
A-
|
|
190.6
|
|
|
2.7
|
|
|
A-
|
||
Consumer staples
|
|
171.1
|
|
|
3.3
|
|
|
A-
|
|
171.9
|
|
|
3.0
|
|
|
A
|
||
Healthcare
|
|
170.8
|
|
|
4.7
|
|
|
A
|
|
168.5
|
|
|
3.1
|
|
|
A
|
||
Materials
|
|
112.6
|
|
|
2.4
|
|
|
BBB+
|
|
101.2
|
|
|
1.4
|
|
|
A-
|
||
Energy
|
|
103.4
|
|
|
0.2
|
|
|
A-
|
|
93.7
|
|
|
0.9
|
|
|
A-
|
||
Information technology
|
|
116.7
|
|
|
1.9
|
|
|
A+
|
|
121.2
|
|
|
(0.6
|
)
|
|
A+
|
||
Telecommunications services
|
|
51.1
|
|
|
1.0
|
|
|
BBB+
|
|
64.7
|
|
|
1.0
|
|
|
BBB+
|
||
Other
|
|
2.8
|
|
|
0.3
|
|
|
AA
|
|
7.4
|
|
|
0.4
|
|
|
AA+
|
||
Total corporate securities
|
|
$
|
1,799.8
|
|
|
36.4
|
|
|
A-
|
|
$
|
1,734.9
|
|
|
27.0
|
|
|
A
|
ABS:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||
ABS
|
|
$
|
176.7
|
|
|
0.3
|
|
|
AAA
|
|
$
|
140.4
|
|
|
0.4
|
|
|
AAA
|
Sub-prime ABS
1
|
|
0.5
|
|
|
0.1
|
|
|
CCC
|
|
0.5
|
|
|
0.1
|
|
|
D
|
||
Total ABS
|
|
$
|
177.2
|
|
|
0.4
|
|
|
AAA
|
|
$
|
140.9
|
|
|
0.5
|
|
|
AAA
|
MBS:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||
CMBS
|
|
$
|
14.5
|
|
|
0.3
|
|
|
AA+
|
|
$
|
30.0
|
|
|
0.9
|
|
|
AA+
|
Other agency CMBS
|
|
13.6
|
|
|
(0.1
|
)
|
|
AA+
|
|
9.1
|
|
|
(0.3
|
)
|
|
AA+
|
||
Non-agency CMBS
|
|
151.5
|
|
|
1.4
|
|
|
AA+
|
|
132.2
|
|
|
(1.5
|
)
|
|
AA+
|
||
RMBS
|
|
32.4
|
|
|
0.8
|
|
|
AA+
|
|
55.2
|
|
|
1.4
|
|
|
AA+
|
||
Other agency RMBS
|
|
453.5
|
|
|
5.1
|
|
|
AA+
|
|
411.5
|
|
|
(5.1
|
)
|
|
AA+
|
||
Non-agency RMBS
|
|
21.7
|
|
|
0.2
|
|
|
BB+
|
|
41.4
|
|
|
0.6
|
|
|
A-
|
||
Alternative-A ("Alt-A") RMBS
|
|
3.7
|
|
|
0.1
|
|
|
A
|
|
4.7
|
|
|
—
|
|
|
A
|
||
Total MBS
|
|
$
|
690.9
|
|
|
7.8
|
|
|
AA+
|
|
$
|
684.1
|
|
|
(4.0
|
)
|
|
AA+
|
December 31, 2014
($ in millions)
|
|
Fair
Value
|
|
Carry
Value
|
|
Unrecognized
Holding Gain
|
|
Unrealized
Gain (Loss) in
AOCI
|
|
Total
Unrealized/
Unrecognized
Gain
|
|
Average
Credit
Quality
|
||||||
HTM Portfolio:
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||
Foreign government obligations
|
|
$
|
5.4
|
|
|
5.3
|
|
|
0.1
|
|
|
—
|
|
|
0.1
|
|
|
AA+
|
State and municipal obligations
|
|
299.1
|
|
|
287.4
|
|
|
11.7
|
|
|
2.1
|
|
|
13.8
|
|
|
AA
|
|
Corporate securities
|
|
21.4
|
|
|
18.6
|
|
|
2.8
|
|
|
(0.3
|
)
|
|
2.5
|
|
|
A+
|
|
ABS
|
|
2.9
|
|
|
2.4
|
|
|
0.5
|
|
|
(0.5
|
)
|
|
—
|
|
|
AAA
|
|
MBS
|
|
5.2
|
|
|
4.4
|
|
|
0.8
|
|
|
(0.4
|
)
|
|
0.4
|
|
|
AAA
|
|
Total HTM portfolio
|
|
$
|
334.0
|
|
|
318.1
|
|
|
15.9
|
|
|
0.9
|
|
|
16.8
|
|
|
AA
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||
State and Municipal Obligations:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
General obligations
|
|
$
|
97.8
|
|
|
94.6
|
|
|
3.2
|
|
|
1.0
|
|
|
4.2
|
|
|
AA
|
Special revenue obligations
|
|
201.3
|
|
|
192.8
|
|
|
8.5
|
|
|
1.1
|
|
|
9.6
|
|
|
AA
|
|
Total state and municipal obligations
|
|
$
|
299.1
|
|
|
287.4
|
|
|
11.7
|
|
|
2.1
|
|
|
13.8
|
|
|
AA
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||
Corporate Securities:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Financial
|
|
$
|
2.2
|
|
|
1.9
|
|
|
0.3
|
|
|
(0.1
|
)
|
|
0.2
|
|
|
A-
|
Industrials
|
|
6.7
|
|
|
5.7
|
|
|
1.0
|
|
|
(0.2
|
)
|
|
0.8
|
|
|
A+
|
|
Utilities
|
|
12.5
|
|
|
11.0
|
|
|
1.5
|
|
|
—
|
|
|
1.5
|
|
|
A+
|
|
Total corporate securities
|
|
$
|
21.4
|
|
|
18.6
|
|
|
2.8
|
|
|
(0.3
|
)
|
|
2.5
|
|
|
A+
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||
ABS:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
ABS
|
|
$
|
0.6
|
|
|
0.6
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
AA
|
Alt-A ABS
|
|
2.3
|
|
|
1.8
|
|
|
0.5
|
|
|
(0.5
|
)
|
|
—
|
|
|
AAA
|
|
Total ABS
|
|
$
|
2.9
|
|
|
2.4
|
|
|
0.5
|
|
|
(0.5
|
)
|
|
—
|
|
|
AAA
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||
MBS:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Non-agency CMBS
|
|
$
|
5.2
|
|
|
4.4
|
|
|
0.8
|
|
|
(0.4
|
)
|
|
0.4
|
|
|
AAA
|
Total MBS
|
|
$
|
5.2
|
|
|
4.4
|
|
|
0.8
|
|
|
(0.4
|
)
|
|
0.4
|
|
|
AAA
|
December 31, 2013
($ in millions)
|
|
Fair
Value
|
|
Carry
Value
|
|
Unrecognized
Holding Gain
|
|
Unrealized Gain
(Loss) in AOCI
|
|
Total
Unrealized/
Unrecognized
Gain
|
|
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.
|
|
$
|
151,398
|
|
|
AA-
|
|
AA-
|
Assured Guaranty
|
|
117,778
|
|
|
AA
|
|
AA-
|
|
Ambac Financial Group, Inc.
|
|
45,779
|
|
|
AA-
|
|
AA-
|
|
Other
|
|
6,603
|
|
|
AA+
|
|
AA-
|
|
Total
|
|
$
|
321,558
|
|
|
AA
|
|
AA-
|
State Exposures of Municipal Bonds
|
|
General Obligation
|
|
Special
|
|
Fair
|
|
|
|
Weighted Average
|
|||||||
($ in thousands)
|
|
Local
|
|
State
|
|
Revenue
|
|
Value
|
|
% of Total
|
|
Credit Quality
|
|||||
New York
|
|
$
|
15,827
|
|
|
—
|
|
|
115,206
|
|
|
131,033
|
|
|
9%
|
|
AA+
|
Texas
1
|
|
57,452
|
|
|
5,927
|
|
|
57,518
|
|
|
120,897
|
|
|
8%
|
|
AA+
|
|
Washington
|
|
36,811
|
|
|
6,980
|
|
|
47,383
|
|
|
91,174
|
|
|
6%
|
|
AA
|
|
California
|
|
17,003
|
|
|
8,101
|
|
|
59,433
|
|
|
84,537
|
|
|
5%
|
|
AA
|
|
Florida
|
|
—
|
|
|
15,466
|
|
|
51,478
|
|
|
66,944
|
|
|
4%
|
|
AA
|
|
Arizona
|
|
11,768
|
|
|
1,004
|
|
|
45,216
|
|
|
57,988
|
|
|
4%
|
|
AA
|
|
Colorado
|
|
31,427
|
|
|
—
|
|
|
20,975
|
|
|
52,402
|
|
|
3%
|
|
AA-
|
|
Oregon
|
|
21,216
|
|
|
—
|
|
|
26,524
|
|
|
47,740
|
|
|
3%
|
|
AA+
|
|
Missouri
|
|
15,673
|
|
|
10,042
|
|
|
21,384
|
|
|
47,099
|
|
|
3%
|
|
AA+
|
|
North Carolina
|
|
12,949
|
|
|
8,256
|
|
|
22,651
|
|
|
43,856
|
|
|
3%
|
|
AA
|
|
Other
|
|
150,666
|
|
|
162,879
|
|
|
332,466
|
|
|
646,011
|
|
|
42%
|
|
AA
|
|
|
|
370,792
|
|
|
218,655
|
|
|
800,234
|
|
|
1,389,681
|
|
|
90%
|
|
AA
|
|
Pre-refunded/escrowed to maturity bonds
|
|
54,357
|
|
|
17,383
|
|
|
83,975
|
|
|
155,715
|
|
|
10%
|
|
AA+
|
|
Total
|
|
$
|
425,149
|
|
|
236,038
|
|
|
884,209
|
|
|
1,545,396
|
|
|
100%
|
|
AA
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||
% of Total Municipal Portfolio
|
|
27
|
%
|
|
15
|
%
|
|
58
|
%
|
|
100
|
%
|
|
|
|
|
December 31, 2014
($ in thousands)
|
|
Fair
Value
|
|
% of Special
Revenue
Bonds
|
|
Average
Rating
|
|||
Essential Services:
|
|
|
|
|
|
|
|||
Transportation
|
|
$
|
226,612
|
|
|
28
|
|
|
AA
|
Water and sewer
|
|
167,648
|
|
|
21
|
|
|
AA+
|
|
Electric
|
|
119,407
|
|
|
15
|
|
|
AA-
|
|
Total essential services
|
|
513,667
|
|
|
64
|
|
|
AA
|
|
|
|
|
|
|
|
|
|||
Education
|
|
157,225
|
|
|
20
|
|
|
AA
|
|
Special tax
|
|
81,514
|
|
|
10
|
|
|
AA+
|
|
Housing
|
|
17,204
|
|
|
2
|
|
|
AA+
|
|
Other:
|
|
|
|
|
|
|
|
|
|
Leasing
|
|
1,443
|
|
|
1
|
|
|
AA+
|
|
Hospital
|
|
9,744
|
|
|
1
|
|
|
AA-
|
|
Other
|
|
19,437
|
|
|
2
|
|
|
AA+
|
|
Total other
|
|
30,624
|
|
|
4
|
|
|
AA
|
|
Total special revenue bonds
|
|
$
|
800,234
|
|
|
100
|
|
|
AA
|
|
|
Change in Equity Values in Percent
|
||||||||||||||||||||
($ in thousands)
|
|
(30)%
|
|
(20)%
|
|
(10)%
|
|
0
|
%
|
|
10%
|
|
20%
|
|
30%
|
|||||||
Fair value of AFS equity portfolio
|
|
$
|
133,980
|
|
|
153,120
|
|
|
172,260
|
|
|
191,400
|
|
|
210,540
|
|
|
229,680
|
|
|
248,820
|
|
Fair value change
|
|
(57,420
|
)
|
|
(38,280
|
)
|
|
(19,140
|
)
|
|
|
|
|
19,140
|
|
|
38,280
|
|
|
57,420
|
|
|
|
|
|
2014
|
||||||
|
|
Year of
|
|
Carrying
|
|
Fair
|
||||
($ in thousands)
|
|
Maturity
|
|
Amount
|
|
Value
|
||||
Financial liabilities
|
|
|
|
|
|
|
|
|
||
Notes payable
|
|
|
|
|
|
|
|
|
||
1.25% borrowings from FHLBI
|
|
2016
|
|
45,000
|
|
|
45,244
|
|
||
7.25% Senior Notes
|
|
2034
|
|
49,896
|
|
|
59,181
|
|
||
6.70% Senior Notes
|
|
2035
|
|
99,401
|
|
|
114,845
|
|
||
5.875% Senior Notes
|
|
2043
|
|
185,000
|
|
|
185,000
|
|
||
Total notes payable
|
|
|
|
$
|
379,297
|
|
|
$
|
404,270
|
|
Consolidated Balance Sheets
|
|
|
|
|
|
|
|
December 31,
|
|
|
|
|
|
|
|
($ in thousands, except share amounts)
|
|
2014
|
|
2013
|
|||
ASSETS
|
|
|
|
|
|
|
|
Investments:
|
|
|
|
|
|
|
|
Fixed income securities, held-to-maturity – at carrying value
(fair value: $333,961 – 2014; $416,981 – 2013) |
|
$
|
318,137
|
|
|
392,879
|
|
Fixed income securities, available-for-sale – at fair value
(amortized cost: $3,975,786 – 2014; $3,675,977 – 2013) |
|
4,066,122
|
|
|
3,715,536
|
|
|
Equity securities, available-for-sale – at fair value
(cost: $159,011 – 2014; $155,350 – 2013) |
|
191,400
|
|
|
192,771
|
|
|
Short-term investments (at cost which approximates fair value)
|
|
131,972
|
|
|
174,251
|
|
|
Other investments
|
|
99,203
|
|
|
107,875
|
|
|
Total investments (Note 5)
|
|
4,806,834
|
|
|
4,583,312
|
|
|
Cash
|
|
23,959
|
|
|
193
|
|
|
Interest and dividends due or accrued
|
|
38,901
|
|
|
37,382
|
|
|
Premiums receivable, net of allowance for uncollectible
accounts of: $4,137 – 2014; $4,442 – 2013 |
|
558,778
|
|
|
524,870
|
|
|
Reinsurance recoverable, net (Note 8)
|
|
581,548
|
|
|
550,897
|
|
|
Prepaid reinsurance premiums (Note 8)
|
|
146,993
|
|
|
143,000
|
|
|
Current federal income tax (Note 14)
|
|
—
|
|
|
512
|
|
|
Deferred federal income tax (Note 14)
|
|
98,449
|
|
|
122,613
|
|
|
Property and equipment – at cost, net of accumulated
depreciation and amortization of: $172,183 – 2014; $179,192 – 2013 |
|
59,416
|
|
|
50,834
|
|
|
Deferred policy acquisition costs (Note 3)
|
|
185,608
|
|
|
172,981
|
|
|
Goodwill (Note 11)
|
|
7,849
|
|
|
7,849
|
|
|
Other assets
|
|
73,215
|
|
|
75,727
|
|
|
Total assets
|
|
$
|
6,581,550
|
|
|
6,270,170
|
|
|
|
|
|
|
|||
LIABILITIES AND STOCKHOLDERS’ EQUITY
|
|
|
|
|
|
|
|
Liabilities:
|
|
|
|
|
|
|
|
Reserve for losses and loss expenses (Note 9)
|
|
$
|
3,477,870
|
|
|
3,349,770
|
|
Unearned premiums
|
|
1,095,819
|
|
|
1,059,155
|
|
|
Notes payable (Note 10)
|
|
379,297
|
|
|
392,414
|
|
|
Current federal income tax (Note 14)
|
|
3,921
|
|
|
—
|
|
|
Accrued salaries and benefits
|
|
158,382
|
|
|
111,427
|
|
|
Other liabilities
|
|
190,675
|
|
|
203,476
|
|
|
Total liabilities
|
|
$
|
5,305,964
|
|
|
5,116,242
|
|
|
|
|
|
|
|||
Stockholders’ Equity:
|
|
|
|
|
|
||
Preferred stock of $0 par value per share:
|
|
|
|
|
|
|
|
Authorized shares 5,000,000; no shares issued or outstanding
|
|
$
|
—
|
|
|
—
|
|
Common stock of $2 par value per share:
|
|
|
|
|
|||
Authorized shares 360,000,000
|
|
|
|
|
|||
Issued: 99,947,933 – 2014; 99,120,235 – 2013
|
|
199,896
|
|
|
198,240
|
|
|
Additional paid-in capital
|
|
305,385
|
|
|
288,182
|
|
|
Retained earnings
|
|
1,313,440
|
|
|
1,202,015
|
|
|
Accumulated other comprehensive income (Note 6)
|
|
19,788
|
|
|
24,851
|
|
|
Treasury stock – at cost (shares: 43,353,181 – 2014; 43,198,622 – 2013)
|
|
(562,923
|
)
|
|
(559,360
|
)
|
|
Total stockholders’ equity (Note 6)
|
|
1,275,586
|
|
|
1,153,928
|
|
|
Commitments and contingencies (Notes 18 and 19)
|
|
|
|
|
|
|
|
Total liabilities and stockholders’ equity
|
|
$
|
6,581,550
|
|
|
6,270,170
|
|
Consolidated Statements of Income
|
|
|
|
|
|
|
|
|
|
|
December 31,
|
|
|
|
|
|
|
|
|
|
|
($ in thousands, except per share amounts)
|
|
2014
|
|
2013
|
|
2012
|
||||
Revenues:
|
|
|
|
|
|
|
|
|
|
|
Net premiums earned
|
|
$
|
1,852,609
|
|
|
1,736,072
|
|
|
1,584,119
|
|
Net investment income earned
|
|
138,708
|
|
|
134,643
|
|
|
131,877
|
|
|
Net realized gains:
|
|
|
|
|
|
|
|
|
|
|
Net realized investment gains
|
|
37,703
|
|
|
26,375
|
|
|
13,252
|
|
|
Other-than-temporary impairments
|
|
(11,104
|
)
|
|
(5,566
|
)
|
|
(1,711
|
)
|
|
Other-than-temporary impairments on fixed income securities recognized in other comprehensive income
|
|
—
|
|
|
(77
|
)
|
|
(2,553
|
)
|
|
Total net realized gains
|
|
26,599
|
|
|
20,732
|
|
|
8,988
|
|
|
Other income
|
|
16,945
|
|
|
12,294
|
|
|
9,118
|
|
|
Total revenues
|
|
2,034,861
|
|
|
1,903,741
|
|
|
1,734,102
|
|
|
|
|
|
|
|
|
|
||||
Expenses:
|
|
|
|
|
|
|
|
|
|
|
Losses and loss expenses incurred
|
|
1,157,501
|
|
|
1,121,738
|
|
|
1,120,990
|
|
|
Policy acquisition costs
|
|
624,470
|
|
|
579,977
|
|
|
526,143
|
|
|
Interest expense
|
|
22,086
|
|
|
22,538
|
|
|
18,872
|
|
|
Other expenses
|
|
33,673
|
|
|
35,686
|
|
|
30,462
|
|
|
Total expenses
|
|
1,837,730
|
|
|
1,759,939
|
|
|
1,696,467
|
|
|
|
|
|
|
|
|
|
||||
Income from continuing operations, before federal income tax
|
|
197,131
|
|
|
143,802
|
|
|
37,635
|
|
|
|
|
|
|
|
|
|
||||
Federal income tax expense (benefit):
|
|
|
|
|
|
|
|
|
|
|
Current
|
|
28,415
|
|
|
24,147
|
|
|
5,647
|
|
|
Deferred
|
|
26,889
|
|
|
12,240
|
|
|
(5,975
|
)
|
|
Total federal income tax expense (benefit)
|
|
55,304
|
|
|
36,387
|
|
|
(328
|
)
|
|
|
|
|
|
|
|
|
||||
Net income from continuing operations
|
|
141,827
|
|
|
107,415
|
|
|
37,963
|
|
|
|
|
|
|
|
|
|
||||
Loss on disposal of discontinued operations, net of tax of $(538) – 2013
|
|
—
|
|
|
(997
|
)
|
|
—
|
|
|
|
|
|
|
|
|
|
||||
Net income
|
|
$
|
141,827
|
|
|
106,418
|
|
|
37,963
|
|
|
|
|
|
|
|
|
||||
Earnings per share:
|
|
|
|
|
|
|
|
|
|
|
Basic net income from continuing operations
|
|
$
|
2.52
|
|
|
1.93
|
|
|
0.69
|
|
Basic net loss from discontinued operations
|
|
—
|
|
|
(0.02
|
)
|
|
—
|
|
|
Basic net income
|
|
$
|
2.52
|
|
|
1.91
|
|
|
0.69
|
|
|
|
|
|
|
|
|
||||
Diluted net income from continuing operations
|
|
$
|
2.47
|
|
|
1.89
|
|
|
0.68
|
|
Diluted net loss from discontinued operations
|
|
—
|
|
|
(0.02
|
)
|
|
—
|
|
|
Diluted net income
|
|
$
|
2.47
|
|
|
1.87
|
|
|
0.68
|
|
|
|
|
|
|
|
|
||||
Dividends to stockholders
|
|
$
|
0.53
|
|
|
0.52
|
|
|
0.52
|
|
Consolidated Statements of Comprehensive Income
|
|
|
|
|
|
|
||||
December 31,
|
|
|
|
|
|
|
||||
($ in thousands)
|
|
2014
|
|
2013
|
|
2012
|
||||
Net income
|
|
$
|
141,827
|
|
|
106,418
|
|
|
37,963
|
|
|
|
|
|
|
|
|
||||
Other comprehensive income, net of tax:
|
|
|
|
|
|
|
||||
Unrealized gains (losses) on investment securities:
|
|
|
|
|
|
|
||||
Unrealized holding gains (losses) arising during period
|
|
47,411
|
|
|
(54,557
|
)
|
|
30,937
|
|
|
Non-credit portion of other-than-temporary impairments recognized in other comprehensive income
|
|
—
|
|
|
50
|
|
|
1,660
|
|
|
Amount reclassified into net income:
|
|
|
|
|
|
|
||||
Held-to-maturity securities
|
|
(844
|
)
|
|
(1,025
|
)
|
|
(1,581
|
)
|
|
Non-credit other-than-temporary impairment
|
|
1,085
|
|
|
9
|
|
|
182
|
|
|
Realized gains on available for sale securities
|
|
(18,762
|
)
|
|
(15,301
|
)
|
|
(6,118
|
)
|
|
Total unrealized gains (losses) on investment securities
|
|
28,890
|
|
|
(70,824
|
)
|
|
25,080
|
|
|
|
|
|
|
|
|
|
||||
Defined benefit pension and post-retirement plans:
|
|
|
|
|
|
|
||||
Net actuarial (loss) gain
|
|
(35,189
|
)
|
|
38,775
|
|
|
(17,268
|
)
|
|
Amounts reclassified into net income:
|
|
|
|
|
|
|
||||
Net actuarial loss
|
|
1,236
|
|
|
2,843
|
|
|
3,837
|
|
|
Prior service cost
|
|
—
|
|
|
6
|
|
|
97
|
|
|
Curtailment expense
|
|
—
|
|
|
11
|
|
|
—
|
|
|
Total defined benefit pension and post-retirement plans
|
|
(33,953
|
)
|
|
41,635
|
|
|
(13,334
|
)
|
|
Other comprehensive (loss) income
|
|
(5,063
|
)
|
|
(29,189
|
)
|
|
11,746
|
|
|
Comprehensive income
|
|
$
|
136,764
|
|
|
77,229
|
|
|
49,709
|
|
Consolidated Statements of Stockholders’ Equity
|
|
|
|
|
|
|
|
|
|
|
December 31,
|
|
|
|
|
|
|
|
|
|
|
($ in thousands, except share amounts)
|
|
2014
|
|
2013
|
|
2012
|
||||
Common stock:
|
|
|
|
|
|
|
|
|
|
|
Beginning of year
|
|
$
|
198,240
|
|
|
196,388
|
|
|
194,494
|
|
Dividend reinvestment plan
(shares: 58,309 – 2014; 63,349 – 2013; 90,110 – 2012) |
|
117
|
|
|
127
|
|
|
180
|
|
|
Stock purchase and compensation plans
(shares: 769,389 – 2014; 862,662 – 2013; 857,403 – 2012) |
|
1,539
|
|
|
1,725
|
|
|
1,714
|
|
|
End of year
|
|
199,896
|
|
|
198,240
|
|
|
196,388
|
|
|
|
|
|
|
|
|
|
||||
Additional paid-in capital:
|
|
|
|
|
|
|
|
|
|
|
Beginning of year
|
|
288,182
|
|
|
270,654
|
|
|
257,370
|
|
|
Dividend reinvestment plan
|
|
1,306
|
|
|
1,396
|
|
|
1,419
|
|
|
Stock purchase and compensation plans
|
|
15,897
|
|
|
16,132
|
|
|
11,865
|
|
|
End of year
|
|
305,385
|
|
|
288,182
|
|
|
270,654
|
|
|
|
|
|
|
|
|
|
||||
Retained earnings:
|
|
|
|
|
|
|
|
|
|
|
Beginning of year
|
|
1,202,015
|
|
|
1,125,154
|
|
|
1,116,319
|
|
|
Net income
|
|
141,827
|
|
|
106,418
|
|
|
37,963
|
|
|
Dividends to stockholders ($0.53 per share – 2014; $0.52 per share – 2013 and 2012)
|
|
(30,402
|
)
|
|
(29,557
|
)
|
|
(29,128
|
)
|
|
End of year
|
|
1,313,440
|
|
|
1,202,015
|
|
|
1,125,154
|
|
|
|
|
|
|
|
|
|
||||
Accumulated other comprehensive income:
|
|
|
|
|
|
|
|
|
|
|
Beginning of year
|
|
24,851
|
|
|
54,040
|
|
|
42,294
|
|
|
Other comprehensive (loss) income
|
|
(5,063
|
)
|
|
(29,189
|
)
|
|
11,746
|
|
|
End of year
|
|
19,788
|
|
|
24,851
|
|
|
54,040
|
|
|
|
|
|
|
|
|
|
||||
Treasury stock:
|
|
|
|
|
|
|
|
|
|
|
Beginning of year
|
|
(559,360
|
)
|
|
(555,644
|
)
|
|
(552,149
|
)
|
|
Acquisition of treasury stock
(shares: 154,559 – 2014; 167,846 – 2013; 194,575 – 2012) |
|
(3,563
|
)
|
|
(3,716
|
)
|
|
(3,495
|
)
|
|
End of year
|
|
(562,923
|
)
|
|
(559,360
|
)
|
|
(555,644
|
)
|
|
Total stockholders’ equity
|
|
$
|
1,275,586
|
|
|
1,153,928
|
|
|
1,090,592
|
|
Consolidated Statements of Cash Flow
|
|
|
|
|
|
|
|
|
|
|
December 31,
|
|
|
|
|
|
|
|
|
|
|
($ in thousands)
|
|
2014
|
|
2013
|
|
2012
|
||||
Operating Activities
|
|
|
|
|
|
|
|
|
|
|
Net income
|
|
$
|
141,827
|
|
|
106,418
|
|
|
37,963
|
|
|
|
|
|
|
|
|
||||
Adjustments to reconcile net income to net cash provided by operating activities:
|
|
|
|
|
|
|
|
|
|
|
Depreciation and amortization
|
|
45,346
|
|
|
43,461
|
|
|
38,693
|
|
|
Sale of renewal rights
|
|
(8,000
|
)
|
|
—
|
|
|
—
|
|
|
Loss on disposal of discontinued operations
|
|
—
|
|
|
997
|
|
|
—
|
|
|
Stock-based compensation expense
|
|
8,702
|
|
|
8,630
|
|
|
6,939
|
|
|
Undistributed (gains) losses of equity method investments
|
|
(153
|
)
|
|
202
|
|
|
1,651
|
|
|
Net realized gains
|
|
(26,599
|
)
|
|
(20,732
|
)
|
|
(8,988
|
)
|
|
Net gain on disposal of property and equipment
|
|
(104
|
)
|
|
—
|
|
|
—
|
|
|
Retirement income plan curtailment expense
|
|
—
|
|
|
16
|
|
|
—
|
|
|
|
|
|
|
|
|
|
||||
Changes in assets and liabilities:
|
|
|
|
|
|
|
|
|
|
|
Increase in reserves for losses and loss expenses, net of reinsurance recoverables
|
|
97,449
|
|
|
151,037
|
|
|
64,763
|
|
|
Increase in unearned premiums, net of prepaid reinsurance
|
|
32,671
|
|
|
74,086
|
|
|
82,764
|
|
|
Decrease (increase) in net federal income taxes
|
|
31,323
|
|
|
14,834
|
|
|
(7,812
|
)
|
|
Increase in premiums receivable
|
|
(33,908
|
)
|
|
(40,482
|
)
|
|
(18,094
|
)
|
|
Increase in deferred policy acquisition costs
|
|
(12,627
|
)
|
|
(17,458
|
)
|
|
(19,762
|
)
|
|
(Increase) decrease in interest and dividends due or accrued
|
|
(1,536
|
)
|
|
(1,372
|
)
|
|
468
|
|
|
(Decrease) increase in accrued salaries and benefits
|
|
(7,182
|
)
|
|
18,685
|
|
|
6,533
|
|
|
(Decrease) increase in accrued insurance expenses
|
|
(956
|
)
|
|
14,444
|
|
|
8,831
|
|
|
(Decrease) increase in other assets and other liabilities
|
|
(33,490
|
)
|
|
(16,642
|
)
|
|
32,750
|
|
|
Net adjustments
|
|
90,936
|
|
|
229,706
|
|
|
188,736
|
|
|
Net cash provided by operating activities
|
|
232,763
|
|
|
336,124
|
|
|
226,699
|
|
|
|
|
|
|
|
|
|
||||
Investing Activities
|
|
|
|
|
|
|
|
|
|
|
Purchase of fixed income securities, available-for-sale
|
|
(843,616
|
)
|
|
(1,069,387
|
)
|
|
(884,911
|
)
|
|
Purchase of equity securities, available-for-sale
|
|
(186,019
|
)
|
|
(118,072
|
)
|
|
(83,833
|
)
|
|
Purchase of other investments
|
|
(10,617
|
)
|
|
(9,332
|
)
|
|
(12,990
|
)
|
|
Purchase of short-term investments
|
|
(1,410,123
|
)
|
|
(2,056,576
|
)
|
|
(1,735,691
|
)
|
|
Purchase of subsidiary, net of cash acquired
|
|
—
|
|
|
—
|
|
|
255
|
|
|
Sale of subsidiary
|
|
—
|
|
|
1,225
|
|
|
751
|
|
|
Sale of fixed income securities, available-for-sale
|
|
51,002
|
|
|
20,126
|
|
|
103,572
|
|
|
Sale of short-term investments
|
|
1,452,402
|
|
|
2,096,805
|
|
|
1,738,255
|
|
|
Redemption and maturities of fixed income securities, held-to-maturity
|
|
73,415
|
|
|
116,584
|
|
|
118,260
|
|
|
Redemption and maturities of fixed income securities, available-for-sale
|
|
482,816
|
|
|
513,804
|
|
|
439,957
|
|
|
Sale of equity securities, available-for-sale
|
|
208,008
|
|
|
115,782
|
|
|
101,740
|
|
|
Distributions from other investments
|
|
20,774
|
|
|
12,039
|
|
|
24,801
|
|
|
Sale of other investments
|
|
—
|
|
|
—
|
|
|
1
|
|
|
Purchase of property and equipment
|
|
(15,510
|
)
|
|
(14,023
|
)
|
|
(12,879
|
)
|
|
Sale of renewal rights
|
|
8,000
|
|
|
—
|
|
|
—
|
|
|
Net cash used in investing activities
|
|
(169,468
|
)
|
|
(391,025
|
)
|
|
(202,712
|
)
|
|
|
|
|
|
|
|
|
||||
Financing Activities
|
|
|
|
|
|
|
|
|
|
|
Dividends to stockholders
|
|
(28,428
|
)
|
|
(27,416
|
)
|
|
(26,944
|
)
|
|
Acquisition of treasury stock
|
|
(3,563
|
)
|
|
(3,716
|
)
|
|
(3,495
|
)
|
|
Net proceeds from stock purchase and compensation plans
|
|
7,283
|
|
|
7,119
|
|
|
4,840
|
|
|
Proceeds from issuance of notes payable, net of debt issuance costs
|
|
—
|
|
|
178,435
|
|
|
—
|
|
|
Repayment of borrowings
|
|
(13,000
|
)
|
|
—
|
|
|
—
|
|
|
Repayment of notes payable
|
|
—
|
|
|
(100,000
|
)
|
|
—
|
|
|
Excess tax benefits from share-based payment arrangements
|
|
1,020
|
|
|
1,545
|
|
|
1,060
|
|
|
Repayment of capital lease obligations
|
|
(2,841
|
)
|
|
(1,083
|
)
|
|
—
|
|
|
Net cash (used in) provided by financing activities
|
|
(39,529
|
)
|
|
54,884
|
|
|
(24,539
|
)
|
|
Net increase (decrease) in cash
|
|
23,766
|
|
|
(17
|
)
|
|
(552
|
)
|
|
Cash, beginning of year
|
|
193
|
|
|
210
|
|
|
762
|
|
|
Cash, end of year
|
|
$
|
23,959
|
|
|
193
|
|
|
210
|
|
•
|
Standard Commercial Lines - comprised of insurance products and services provided in the standard marketplace to our commercial customers, who are typically businesses, non-profit organizations, and local government agencies.
|
•
|
Standard Personal Lines - comprised of insurance products and services, including flood insurance coverage, provided primarily to individuals acquiring coverage in the standard marketplace.
|
•
|
E&S Lines - comprised of insurance products and services provided to customers who have not obtained coverage in the standard marketplace.
|
•
|
Investments - invests the premiums collected by our Standard Commercial Lines, Standard Personal Lines, and E&S Lines, as well as amounts generated through our capital management strategies, which may include the issuance of debt and equity securities.
|
•
|
Whether the decline appears to be issuer or industry specific;
|
•
|
The degree to which the issuer is current or in arrears in making principal and interest payments on the fixed income security;
|
•
|
The issuer’s current financial condition and ability to make future scheduled principal and interest payments on a timely basis;
|
•
|
Evaluation of projected cash flows;
|
•
|
Buy/hold/sell recommendations published by outside investment advisors and analysts; and
|
•
|
Relevant rating history, analysis, and guidance provided by rating agencies and analysts.
|
•
|
Whether the decline appears to be issuer or industry specific;
|
•
|
The relationship of market prices per share to book value per share at the date of acquisition and date of evaluation;
|
•
|
The price-earnings ratio at the time of acquisition and date of evaluation;
|
•
|
The financial condition and near-term prospects of the issuer, including any specific events that may influence the issuer's operations, coupled with our intention to hold the securities in the near-term;
|
•
|
The recent income or loss of the issuer;
|
•
|
The independent auditors' report on the issuer's recent financial statements;
|
•
|
The dividend policy of the issuer at the date of acquisition and the date of evaluation;
|
•
|
Buy/hold/sell recommendations or price projections published by outside investment advisors;
|
•
|
Rating agency announcements;
|
•
|
The length of time and the extent to which the fair value has been, or is expected to be, less than its cost in the near term; and
|
•
|
Our expectation of when the cost of the security will be recovered.
|
•
|
The current investment strategy;
|
•
|
Changes made or future changes to be made to the investment strategy;
|
•
|
Emerging issues that may affect the success of the strategy; and
|
•
|
The appropriateness of the valuation methodology used regarding the underlying investments.
|
•
|
For valuations of a large portion of our equity securities portfolio, as well as U.S. Treasury Notes held in our fixed income securities portfolio, we receive prices from an independent pricing service that are based on observable market transactions. We validate these prices against a second external pricing service, and if established market value comparison thresholds are breached, further analysis is performed, in conjunction with our external investment managers, to determine the price to be used. These securities are classified as Level 1 in the fair value hierarchy.
|
•
|
For approximately
99%
of our fixed income securities portfolio, we utilize a market approach, using primarily matrix pricing models prepared by external pricing services. Matrix pricing models use mathematical techniques to value debt securities by relying on the securities relationship to other benchmark quoted securities, and not relying exclusively on quoted prices for specific securities, as the specific securities are not always frequently traded. As a matter of policy, we consistently use one pricing service as our primary source and secondary pricing services if prices are not available from the primary pricing service. In conjunction with our external investment portfolio managers, fixed income securities portfolio pricing is reviewed for reasonableness in the following ways: (i) comparing our pricing to other third-party pricing services as well as benchmark indexed pricing; (ii) comparing positions traded directly by the external investment portfolio managers to prices received from the third-party pricing services; (iii) comparing market value fluctuations between months for reasonableness; and (iv) reviewing stale prices. If further analysis is needed, a challenge is sent to the pricing service for review and confirmation of the price. These prices are typically Level 2 in the fair value hierarchy.
|
•
|
For the small portion of our fixed income securities portfolio that we cannot price using our primary or secondary service, we typically use non-binding broker quotes. These prices are from various broker/dealers that use bid or ask prices, or benchmarks to indices, in measuring the fair value of a security. For the small portion of non-public equity securities that we hold, we typically receive prices from a third party pricing service or through statements provided by the security issuer. In conjunction with our external investment portfolio managers, these fair value measurements are reviewed for reasonableness. This review typically includes an analysis of price fluctuations between months with variances over established thresholds being analyzed further. These prices are generally classified as Level 3 in the fair value hierarchy, as the inputs cannot be corroborated by observable market data.
|
•
|
Short-term investments are carried at cost, which approximates fair value. Given the liquid nature of our short-term investments, we generally validate their fair value by way of active trades within approximately one week of the financial statement close. These securities are classified as Level 1 in the fair value hierarchy.
|
•
|
The fair value of the 5.875% Senior Notes due February 9, 2043 is based on quoted market prices.
|
•
|
The fair values of the 7.25% Senior Notes due November 15, 2034 and the 6.70% Senior Notes due November 1, 2035 are based on matrix pricing models prepared by external pricing services.
|
•
|
The fair value of the 1.25% and recently repaid 2.90% borrowings from the Federal Home Loan Bank of Indianapolis (“FHLBI”) are estimated using a DCF based on a current borrowing rate provided by the FHLBI consistent with the remaining term of the borrowing.
|
Asset Category
|
|
Years
|
Computer hardware
|
|
3
|
Computer software
|
|
3 to 5
|
Internally developed software
|
|
5
|
Furniture and fixtures
|
|
10
|
Buildings and improvements
|
|
5 to 40
|
•
|
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.
|
($ in thousands)
|
|
2014
|
|
2013
|
|
2012
|
||||
Cash paid during the period for:
|
|
|
|
|
|
|
|
|
|
|
Interest
|
|
$
|
22,221
|
|
|
21,465
|
|
|
18,779
|
|
Federal income tax
|
|
22,699
|
|
|
20,000
|
|
|
6,421
|
|
|
|
|
|
|
|
|
|
||||
Non-cash items:
|
|
|
|
|
|
|
||||
Tax-free exchange of fixed income securities, AFS
|
|
$
|
20,781
|
|
|
37,965
|
|
|
18,942
|
|
Tax-free exchange of fixed income securities, HTM
|
|
4,289
|
|
|
15,820
|
|
|
25,168
|
|
|
Stock split related to equity securities, AFS
|
|
334
|
|
|
—
|
|
|
—
|
|
|
Assets acquired under capital lease arrangements
|
|
5,642
|
|
|
2,583
|
|
|
2,091
|
|
|
Non-cash purchase of property and equipment
|
|
338
|
|
|
20
|
|
|
—
|
|
($ in thousands)
|
|
2014
|
|
2013
|
|
2012
|
||||
AFS securities:
|
|
|
|
|
|
|
|
|
|
|
Fixed income securities
|
|
$
|
90,336
|
|
|
39,559
|
|
|
165,330
|
|
Equity securities
|
|
32,389
|
|
|
37,421
|
|
|
18,941
|
|
|
Total AFS securities
|
|
122,725
|
|
|
76,980
|
|
|
184,271
|
|
|
|
|
|
|
|
|
|
||||
HTM securities:
|
|
|
|
|
|
|
|
|
|
|
Fixed income securities
|
|
958
|
|
|
2,257
|
|
|
3,926
|
|
|
Total HTM securities
|
|
958
|
|
|
2,257
|
|
|
3,926
|
|
|
|
|
|
|
|
|
|
||||
Total net unrealized gains
|
|
123,683
|
|
|
79,237
|
|
|
188,197
|
|
|
Deferred income tax expense
|
|
(43,289
|
)
|
|
(27,733
|
)
|
|
(65,869
|
)
|
|
Net unrealized gains, net of deferred income tax
|
|
80,394
|
|
|
51,504
|
|
|
122,328
|
|
|
|
|
|
|
|
|
|
||||
Increase (decrease) in net unrealized gains in OCI, net of deferred income tax
|
|
$
|
28,890
|
|
|
(70,824
|
)
|
|
25,080
|
|
December 31, 2014
|
|
|
|
Net
|
|
|
|
|
|
|
|
|
|||||||
|
|
|
|
Unrealized
|
|
|
|
Unrecognized
|
|
Unrecognized
|
|
|
|||||||
|
|
Amortized
|
|
Gains
|
|
Carrying
|
|
Holding
|
|
Holding
|
|
Fair
|
|||||||
($ in thousands)
|
|
Cost
|
|
(Losses)
|
|
Value
|
|
Gains
|
|
Losses
|
|
Value
|
|||||||
Foreign government
|
|
$
|
5,292
|
|
|
47
|
|
|
5,339
|
|
|
55
|
|
|
—
|
|
|
5,394
|
|
Obligations of state and political subdivisions
|
|
285,301
|
|
|
2,071
|
|
|
287,372
|
|
|
11,760
|
|
|
—
|
|
|
299,132
|
|
|
Corporate securities
|
|
18,899
|
|
|
(273
|
)
|
|
18,626
|
|
|
2,796
|
|
|
—
|
|
|
21,422
|
|
|
ABS
|
|
2,818
|
|
|
(455
|
)
|
|
2,363
|
|
|
460
|
|
|
—
|
|
|
2,823
|
|
|
CMBS
|
|
4,869
|
|
|
(432
|
)
|
|
4,437
|
|
|
753
|
|
|
—
|
|
|
5,190
|
|
|
Total HTM fixed income securities
|
|
$
|
317,179
|
|
|
958
|
|
|
318,137
|
|
|
15,824
|
|
|
—
|
|
|
333,961
|
|
December 31, 2013
|
|
|
|
Net
|
|
|
|
|
|
|
|
|
|||||||
|
|
|
|
Unrealized
|
|
|
|
Unrecognized
|
|
Unrecognized
|
|
|
|||||||
|
|
Amortized
|
|
Gains
|
|
Carrying
|
|
Holding
|
|
Holding
|
|
Fair
|
|||||||
($ in thousands)
|
|
Cost
|
|
(Losses)
|
|
Value
|
|
Gains
|
|
Losses
|
|
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
|
|
December 31, 2014
|
|
|
|
|
|
|
|
|
|||||
|
|
Cost/
|
|
|
|
|
|
|
|||||
|
|
Amortized
|
|
Unrealized
|
|
Unrealized
|
|
Fair
|
|||||
($ in thousands)
|
|
Cost
|
|
Gains
|
|
Losses
|
|
Value
|
|||||
U.S. government and government agencies
|
|
$
|
116,666
|
|
|
7,592
|
|
|
(128
|
)
|
|
124,130
|
|
Foreign government
|
|
27,035
|
|
|
796
|
|
|
—
|
|
|
27,831
|
|
|
Obligations of states and political subdivisions
|
|
1,208,776
|
|
|
38,217
|
|
|
(729
|
)
|
|
1,246,264
|
|
|
Corporate securities
|
|
1,763,427
|
|
|
42,188
|
|
|
(5,809
|
)
|
|
1,799,806
|
|
|
ABS
|
|
176,837
|
|
|
760
|
|
|
(373
|
)
|
|
177,224
|
|
|
CMBS
1
|
|
177,932
|
|
|
2,438
|
|
|
(777
|
)
|
|
179,593
|
|
|
RMBS
2
|
|
505,113
|
|
|
8,587
|
|
|
(2,426
|
)
|
|
511,274
|
|
|
AFS fixed income securities
|
|
3,975,786
|
|
|
100,578
|
|
|
(10,242
|
)
|
|
4,066,122
|
|
|
AFS equity securities
|
|
159,011
|
|
|
32,721
|
|
|
(332
|
)
|
|
191,400
|
|
|
Total AFS securities
|
|
$
|
4,134,797
|
|
|
133,299
|
|
|
(10,574
|
)
|
|
4,257,522
|
|
December 31, 2013
|
|
|
|
|
|
|
|
|
|||||
|
|
Cost/
|
|
|
|
|
|
|
|||||
|
|
Amortized
|
|
Unrealized
|
|
Unrealized
|
|
Fair
|
|||||
($ in thousands)
|
|
Cost
|
|
Gains
|
|
Losses
|
|
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
|
|
December 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
|
|
$
|
7,567
|
|
|
(13
|
)
|
|
10,866
|
|
|
(115
|
)
|
Obligations of states and political subdivisions
|
|
47,510
|
|
|
(105
|
)
|
|
64,018
|
|
|
(624
|
)
|
|
Corporate securities
|
|
276,648
|
|
|
(1,734
|
)
|
|
153,613
|
|
|
(4,075
|
)
|
|
ABS
|
|
113,202
|
|
|
(178
|
)
|
|
15,618
|
|
|
(195
|
)
|
|
CMBS
|
|
12,799
|
|
|
(34
|
)
|
|
59,219
|
|
|
(743
|
)
|
|
RMBS
|
|
3,399
|
|
|
(8
|
)
|
|
138,724
|
|
|
(2,418
|
)
|
|
Total fixed income securities
|
|
461,125
|
|
|
(2,072
|
)
|
|
442,058
|
|
|
(8,170
|
)
|
|
Equity securities
|
|
5,262
|
|
|
(336
|
)
|
|
—
|
|
|
—
|
|
|
Subtotal
|
|
$
|
466,387
|
|
|
(2,408
|
)
|
|
442,058
|
|
|
(8,170
|
)
|
|
|
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
|
|
$
|
196
|
|
|
(3
|
)
|
|
1
|
|
|
—
|
|
|
—
|
|
|
—
|
|
ABS
|
|
—
|
|
|
—
|
|
|
—
|
|
|
2,235
|
|
|
(455
|
)
|
|
439
|
|
|
Subtotal
|
|
$
|
196
|
|
|
(3
|
)
|
|
1
|
|
|
2,235
|
|
|
(455
|
)
|
|
439
|
|
Total AFS and HTM
|
|
$
|
466,583
|
|
|
(2,411
|
)
|
|
1
|
|
|
444,293
|
|
|
(8,625
|
)
|
|
439
|
|
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
|
|
$
|
113,266
|
|
|
114,795
|
|
|
Due after one year through five years
|
|
193,983
|
|
|
206,188
|
|
||
Due after five years through 10 years
|
|
10,888
|
|
|
12,978
|
|
||
Total HTM fixed income securities
|
|
$
|
318,137
|
|
|
$
|
333,961
|
|
($ in thousands)
|
|
Fair Value
|
||
Due in one year or less
|
|
$
|
435,190
|
|
Due after one year through five years
|
|
1,961,179
|
|
|
Due after five years through 10 years
|
|
1,593,287
|
|
|
Due after 10 years
|
|
76,466
|
|
|
Total AFS fixed income securities
|
|
$
|
4,066,122
|
|
Other Investments
|
|
Carrying Value
|
|
2014
|
||||||
|
|
December 31,
|
|
December 31,
|
|
Remaining
|
||||
($ in thousands)
|
|
2014
|
|
2013
|
|
Commitment
|
||||
Alternative Investments
|
|
|
|
|
|
|
|
|
|
|
Secondary private equity
|
|
$
|
21,807
|
|
|
25,618
|
|
|
7,001
|
|
Private equity
|
|
20,126
|
|
|
20,192
|
|
|
8,890
|
|
|
Energy/power generation
|
|
14,445
|
|
|
17,361
|
|
|
21,905
|
|
|
Real estate
|
|
11,452
|
|
|
11,698
|
|
|
10,051
|
|
|
Mezzanine financing
|
|
9,853
|
|
|
12,738
|
|
|
13,541
|
|
|
Distressed debt
|
|
8,679
|
|
|
11,579
|
|
|
2,982
|
|
|
Venture capital
|
|
6,606
|
|
|
7,025
|
|
|
350
|
|
|
Total alternative investments
|
|
92,968
|
|
|
106,211
|
|
|
64,720
|
|
|
Other securities
|
|
6,235
|
|
|
1,664
|
|
|
3,711
|
|
|
Total other investments
|
|
$
|
99,203
|
|
|
107,875
|
|
|
68,431
|
|
Income Statement Information
|
|
|
|
|
|
|
||||
12 months ended September 30,
|
|
|
|
|
|
|
||||
($ in millions)
|
|
2014
|
|
2013
|
|
2012
|
||||
Net investment income
|
|
$
|
226
|
|
|
406
|
|
|
226
|
|
Realized gains
|
|
581
|
|
|
913
|
|
|
1,015
|
|
|
Net change in unrealized appreciation (depreciation)
|
|
1,098
|
|
|
382
|
|
|
(100
|
)
|
|
Net income
|
|
$
|
1,905
|
|
|
1,701
|
|
|
1,141
|
|
|
|
|
|
|
|
|
||||
Insurance Subsidiaries' other investments income
|
|
13.6
|
|
|
15.2
|
|
|
9.0
|
|
($ in millions)
|
|
FHLBI Collateral
|
|
Reinsurance Collateral
|
|
State and Regulatory Deposits
|
|
Total
|
|||||
U.S. government and government agencies
|
|
$
|
7.7
|
|
|
—
|
|
|
25.3
|
|
|
33.0
|
|
Obligations of states and political subdivisions
|
|
—
|
|
|
5.7
|
|
|
—
|
|
|
5.7
|
|
|
Corporate securities
|
|
—
|
|
|
5.3
|
|
|
—
|
|
|
5.3
|
|
|
ABS
|
|
—
|
|
|
1.1
|
|
|
—
|
|
|
1.1
|
|
|
CMBS
|
|
2.2
|
|
|
—
|
|
|
—
|
|
|
2.2
|
|
|
RMBS
|
|
50.8
|
|
|
2.3
|
|
|
—
|
|
|
53.1
|
|
|
Total pledged as collateral
|
|
$
|
60.7
|
|
|
14.4
|
|
|
25.3
|
|
|
100.4
|
|
($ in thousands)
|
|
2014
|
|
2013
|
|
2012
|
||||
Fixed income securities
|
|
$
|
126,489
|
|
|
121,582
|
|
|
124,687
|
|
Equity securities, dividend income
|
|
7,449
|
|
|
6,140
|
|
|
6,215
|
|
|
Short-term investments
|
|
66
|
|
|
117
|
|
|
151
|
|
|
Other investments
|
|
13,580
|
|
|
15,208
|
|
|
8,996
|
|
|
Investment expenses
|
|
(8,876
|
)
|
|
(8,404
|
)
|
|
(8,172
|
)
|
|
Net investment income earned
|
|
$
|
138,708
|
|
|
134,643
|
|
|
131,877
|
|
2014
|
|
|
|
|
|
Recognized in
|
||||
($ in thousands)
|
|
Gross
|
|
Included in OCI
|
|
Earnings
|
||||
AFS fixed income securities:
|
|
|
|
|
|
|
||||
RMBS
|
|
$
|
7
|
|
|
—
|
|
|
7
|
|
Total AFS fixed income securities
|
|
7
|
|
|
—
|
|
|
7
|
|
|
Equity securities
|
|
10,517
|
|
|
—
|
|
|
10,517
|
|
|
Total AFS securities
|
|
10,524
|
|
|
—
|
|
|
10,524
|
|
|
Other investments
|
|
580
|
|
|
—
|
|
|
580
|
|
|
OTTI losses
|
|
$
|
11,104
|
|
|
—
|
|
|
11,104
|
|
2013
|
|
|
|
|
|
Recognized in
|
||||
($ in thousands)
|
|
Gross
|
|
Included in OCI
|
|
Earnings
|
||||
HTM fixed income securities:
|
|
|
|
|
|
|
|
|
|
|
ABS
|
|
$
|
(44
|
)
|
|
(47
|
)
|
|
3
|
|
Total HTM fixed income securities
|
|
(44
|
)
|
|
(47
|
)
|
|
3
|
|
|
AFS fixed income securities:
|
|
|
|
|
|
|
||||
RMBS
|
|
16
|
|
|
(30
|
)
|
|
46
|
|
|
Total AFS fixed income securities
|
|
16
|
|
|
(30
|
)
|
|
46
|
|
|
Equity securities
|
|
3,747
|
|
|
—
|
|
|
3,747
|
|
|
Total AFS securities
|
|
3,763
|
|
|
(30
|
)
|
|
3,793
|
|
|
Other investments
|
|
1,847
|
|
|
—
|
|
|
1,847
|
|
|
OTTI losses
|
|
$
|
5,566
|
|
|
(77
|
)
|
|
5,643
|
|
2012
|
|
|
|
|
|
Recognized in
|
||||
($ in thousands)
|
|
Gross
|
|
Included in OCI
|
|
Earnings
|
||||
AFS fixed income securities:
|
|
|
|
|
|
|
|
|
|
|
ABS
|
|
$
|
98
|
|
|
—
|
|
|
98
|
|
CMBS
|
|
(1,525
|
)
|
|
(2,335
|
)
|
|
810
|
|
|
RMBS
|
|
(35
|
)
|
|
(218
|
)
|
|
183
|
|
|
Total AFS fixed income securities
|
|
(1,462
|
)
|
|
(2,553
|
)
|
|
1,091
|
|
|
Equity securities
|
|
3,173
|
|
|
—
|
|
|
3,173
|
|
|
OTTI losses
|
|
$
|
1,711
|
|
|
(2,553
|
)
|
|
4,264
|
|
($ in thousands)
|
|
2014
|
|
2013
|
|
2012
|
||||
Balance, beginning of year
|
|
$
|
7,488
|
|
|
7,477
|
|
|
6,602
|
|
Addition for the amount related to credit loss for which an OTTI was not previously recognized
|
|
—
|
|
|
—
|
|
|
—
|
|
|
Reductions for securities sold during the period
|
|
(2,044
|
)
|
|
—
|
|
|
—
|
|
|
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
|
|
—
|
|
|
11
|
|
|
875
|
|
|
Accretion of credit loss impairments previously recognized due to an increase in cash flows expected to be collected
|
|
—
|
|
|
—
|
|
|
—
|
|
|
Balance, end of year
|
|
$
|
5,444
|
|
|
7,488
|
|
|
7,477
|
|
($ in thousands)
|
|
2014
|
|
2013
|
|
2012
|
||||
HTM fixed income securities
|
|
|
|
|
|
|
|
|
|
|
Gains
|
|
$
|
2
|
|
|
195
|
|
|
194
|
|
Losses
|
|
(20
|
)
|
|
(95
|
)
|
|
(217
|
)
|
|
AFS fixed income securities
|
|
|
|
|
|
|
|
|
|
|
Gains
|
|
1,945
|
|
|
3,340
|
|
|
4,452
|
|
|
Losses
|
|
(392
|
)
|
|
(373
|
)
|
|
(472
|
)
|
|
AFS equity securities
|
|
|
|
|
|
|
|
|
|
|
Gains
|
|
36,871
|
|
|
24,776
|
|
|
10,901
|
|
|
Losses
|
|
(704
|
)
|
|
(408
|
)
|
|
(1,205
|
)
|
|
Short-term investments
|
|
|
|
|
|
|
||||
Losses
|
|
—
|
|
|
—
|
|
|
(2
|
)
|
|
Other investments
|
|
|
|
|
|
|
|
|
|
|
Gains
|
|
1
|
|
|
—
|
|
|
1
|
|
|
Losses
|
|
—
|
|
|
(1,060
|
)
|
|
(400
|
)
|
|
Total other net realized investment gains
|
|
$
|
37,703
|
|
|
26,375
|
|
|
13,252
|
|
(a)
|
Stockholders’ Equity
|
2014
|
|
|
|
|
|
|
||||
($ in thousands)
|
|
Gross
|
|
Tax
|
|
Net
|
||||
Net income
|
|
$
|
197,131
|
|
|
55,304
|
|
|
141,827
|
|
Components of OCI:
|
|
|
|
|
|
|
|
|
|
|
Unrealized gains on investment securities
:
|
|
|
|
|
|
|
|
|
|
|
Unrealized holding gains during the year
|
|
72,940
|
|
|
25,529
|
|
|
47,411
|
|
|
Amounts reclassified into net income:
|
|
|
|
|
|
|
|
|||
HTM securities
|
|
(1,299
|
)
|
|
(455
|
)
|
|
(844
|
)
|
|
Non-credit OTTI
|
|
1,669
|
|
|
584
|
|
|
1,085
|
|
|
Realized gains on AFS securities
|
|
(28,864
|
)
|
|
(10,102
|
)
|
|
(18,762
|
)
|
|
Net unrealized gains
|
|
44,446
|
|
|
15,556
|
|
|
28,890
|
|
|
Defined benefit pension and post-retirement plans:
|
|
|
|
|
|
|
|
|
|
|
Net actuarial loss
|
|
(54,136
|
)
|
|
(18,947
|
)
|
|
(35,189
|
)
|
|
Amounts reclassified into net income:
|
|
|
|
|
|
|
|
|
|
|
Net actuarial loss
|
|
1,902
|
|
|
666
|
|
|
1,236
|
|
|
Defined benefit pension and post-retirement plans
|
|
(52,234
|
)
|
|
(18,281
|
)
|
|
(33,953
|
)
|
|
Other comprehensive loss
|
|
(7,788
|
)
|
|
(2,725
|
)
|
|
(5,063
|
)
|
|
Comprehensive income
|
|
$
|
189,343
|
|
|
52,579
|
|
|
136,764
|
|
2013
|
|
|
|
|
|
|
||||
($ in thousands)
|
|
Gross
|
|
Tax
|
|
Net
|
||||
Net income
|
|
$
|
142,267
|
|
|
35,849
|
|
|
106,418
|
|
Components of OCI:
|
|
|
|
|
|
|
|
|
|
|
Unrealized losses on investment securities
:
|
|
|
|
|
|
|
|
|
|
|
Unrealized holding losses during the period
|
|
(83,934
|
)
|
|
(29,377
|
)
|
|
(54,557
|
)
|
|
Non-credit OTTI recognized in OCI
|
|
77
|
|
|
27
|
|
|
50
|
|
|
Amounts reclassified into net income:
|
|
|
|
|
|
|
|
|||
HTM securities
|
|
(1,577
|
)
|
|
(552
|
)
|
|
(1,025
|
)
|
|
Non-credit OTTI
|
|
14
|
|
|
5
|
|
|
9
|
|
|
Realized gains on AFS securities
|
|
(23,540
|
)
|
|
(8,239
|
)
|
|
(15,301
|
)
|
|
Net unrealized losses
|
|
(108,960
|
)
|
|
(38,136
|
)
|
|
(70,824
|
)
|
|
Defined benefit pension and post-retirement plans:
|
|
|
|
|
|
|
|
|
|
|
Net actuarial gain
|
|
59,654
|
|
|
20,879
|
|
|
38,775
|
|
|
Amounts reclassified into net income:
|
|
|
|
|
|
|
|
|
|
|
Net actuarial loss
|
|
4,374
|
|
|
1,531
|
|
|
2,843
|
|
|
Prior service cost
|
|
10
|
|
|
4
|
|
|
6
|
|
|
Curtailment expense
|
|
16
|
|
|
5
|
|
|
11
|
|
|
Defined benefit pension and post-retirement plans
|
|
64,054
|
|
|
22,419
|
|
|
41,635
|
|
|
Other comprehensive loss
|
|
(44,906
|
)
|
|
(15,717
|
)
|
|
(29,189
|
)
|
|
Comprehensive income
|
|
$
|
97,361
|
|
|
20,132
|
|
|
77,229
|
|
2012
|
|
|
|
|
|
|
||||
($ in thousands)
|
|
Gross
|
|
Tax
|
|
Net
|
||||
Net income
|
|
$
|
37,635
|
|
|
(328
|
)
|
|
37,963
|
|
Components of OCI:
|
|
|
|
|
|
|
|
|
|
|
Unrealized gains on investment securities
:
|
|
|
|
|
|
|
|
|
|
|
Unrealized holding gains during the period
|
|
47,594
|
|
|
16,657
|
|
|
30,937
|
|
|
Non-credit OTTI recognized in OCI
|
|
2,554
|
|
|
894
|
|
|
1,660
|
|
|
Amounts reclassified into net income:
|
|
|
|
|
|
|
|
|||
HTM securities
|
|
(2,432
|
)
|
|
(851
|
)
|
|
(1,581
|
)
|
|
Non-credit OTTI
|
|
280
|
|
|
98
|
|
|
182
|
|
|
Realized gains on AFS securities
|
|
(9,412
|
)
|
|
(3,294
|
)
|
|
(6,118
|
)
|
|
Net unrealized gains
|
|
38,584
|
|
|
13,504
|
|
|
25,080
|
|
|
Defined benefit pension and post-retirement plans:
|
|
|
|
|
|
|
|
|
|
|
Net actuarial loss
|
|
(26,566
|
)
|
|
(9,298
|
)
|
|
(17,268
|
)
|
|
Amounts reclassified into net income:
|
|
|
|
|
|
|
|
|
|
|
Net actuarial loss
|
|
5,903
|
|
|
2,066
|
|
|
3,837
|
|
|
Prior service cost
|
|
150
|
|
|
53
|
|
|
97
|
|
|
Defined benefit pension and post-retirement plans
|
|
(20,513
|
)
|
|
(7,179
|
)
|
|
(13,334
|
)
|
|
Other comprehensive income
|
|
18,071
|
|
|
6,325
|
|
|
11,746
|
|
|
Comprehensive income
|
|
$
|
55,706
|
|
|
5,997
|
|
|
49,709
|
|
|
|
|
Affected Line Item in the Consolidated Statement of Income
|
|||||
($ in thousands)
|
Year ended December 31, 2014
|
|
Year ended
December 31, 2013
|
|
||||
OTTI related
|
|
|
|
|
|
|||
Amortization of non-credit OTTI losses on HTM securities
|
$
|
—
|
|
|
14
|
|
|
Net investment income earned
|
Non-credit OTTI on disposed securities
|
1,669
|
|
|
—
|
|
|
Net realized gains
|
|
|
1,669
|
|
|
14
|
|
|
Income from continuing operations, before federal income tax
|
|
|
(584
|
)
|
|
(5
|
)
|
|
Total federal income tax expense (benefit)
|
|
|
1,085
|
|
|
9
|
|
|
Net income
|
|
HTM related
|
|
|
|
|
|
|||
Unrealized gains and losses on HTM disposals
|
157
|
|
|
390
|
|
|
Net realized investment gains
|
|
Amortization of net unrealized gains on HTM securities
|
(1,456
|
)
|
|
(1,967
|
)
|
|
Net investment income earned
|
|
|
(1,299
|
)
|
|
(1,577
|
)
|
|
Income from continuing operations, before federal income tax
|
|
|
455
|
|
|
552
|
|
|
Total federal income tax expense (benefit)
|
|
|
(844
|
)
|
|
(1,025
|
)
|
|
Net income
|
|
Realized gains and losses on AFS
|
|
|
|
|
|
|||
Realized gains and losses on AFS disposals
|
(28,864
|
)
|
|
(23,540
|
)
|
|
Net realized investment gains
|
|
|
(28,864
|
)
|
|
(23,540
|
)
|
|
Income from continuing operations, before federal income tax
|
|
|
10,102
|
|
|
8,239
|
|
|
Total federal income tax expense (benefit)
|
|
|
(18,762
|
)
|
|
(15,301
|
)
|
|
Net income
|
|
Defined benefit pension and post-retirement life plans
|
|
|
|
|
|
|||
Net actuarial loss
|
331
|
|
|
909
|
|
|
Losses and loss expenses incurred
|
|
|
1,571
|
|
|
3,465
|
|
|
Policy acquisition costs
|
|
|
1,902
|
|
|
4,374
|
|
|
Income from continuing operations, before federal income tax
|
|
|
|
|
|
|
|
|||
Prior service cost
|
—
|
|
|
7
|
|
|
Losses and loss expenses incurred
|
|
|
—
|
|
|
3
|
|
|
Policy acquisition costs
|
|
|
—
|
|
|
10
|
|
|
Income from continuing operations, before federal income tax
|
|
|
|
|
|
|
|
|||
Curtailment expense
|
—
|
|
|
16
|
|
|
Policy acquisition costs
|
|
|
—
|
|
|
16
|
|
|
Income from continuing operations, before federal income tax
|
|
|
|
|
|
|
|
|||
Total defined benefit pension and post-retirement life
|
1,902
|
|
|
4,400
|
|
|
Income from continuing operations, before federal income tax
|
|
|
(666
|
)
|
|
(1,540
|
)
|
|
Total federal income tax expense (benefit)
|
|
|
1,236
|
|
|
2,860
|
|
|
Net income
|
|
|
|
|
|
|
|
|||
Total reclassifications for the period
|
$
|
(17,285
|
)
|
|
(13,457
|
)
|
|
Net income
|
|
|
December 31, 2014
|
|
December 31, 2013
|
|||||||||
($ in thousands)
|
|
Carrying Amount
|
|
Fair Value
|
|
Carrying Amount
|
|
Fair Value
|
|||||
Financial Assets
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Fixed income securities:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
HTM
|
|
$
|
318,137
|
|
|
333,961
|
|
|
392,879
|
|
|
416,981
|
|
AFS
|
|
4,066,122
|
|
|
4,066,122
|
|
|
3,715,536
|
|
|
3,715,536
|
|
|
Equity securities, AFS
|
|
191,400
|
|
|
191,400
|
|
|
192,771
|
|
|
192,771
|
|
|
Short-term investments
|
|
131,972
|
|
|
131,972
|
|
|
174,251
|
|
|
174,251
|
|
|
Financial Liabilities
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Notes payable:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2.90% borrowings from FHLBI
|
|
—
|
|
|
—
|
|
|
13,000
|
|
|
13,319
|
|
|
1.25% borrowings from FHLBI
|
|
45,000
|
|
|
45,244
|
|
|
45,000
|
|
|
45,259
|
|
|
7.25% Senior Notes
|
|
49,896
|
|
|
59,181
|
|
|
49,916
|
|
|
50,887
|
|
|
6.70% Senior Notes
|
|
99,401
|
|
|
114,845
|
|
|
99,498
|
|
|
98,247
|
|
|
5.875% Senior Notes
|
|
185,000
|
|
|
185,000
|
|
|
185,000
|
|
|
146,298
|
|
|
Total notes payable
|
|
$
|
379,297
|
|
|
404,270
|
|
|
392,414
|
|
|
354,010
|
|
December 31, 2014
|
|
|
|
Fair Value Measurements Using
|
|||||||||
($ in thousands)
|
|
Assets Measured at Fair Value 12/31/14
|
|
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
|
|
$
|
124,130
|
|
|
53,199
|
|
|
70,931
|
|
|
—
|
|
Foreign government
|
|
27,831
|
|
|
—
|
|
|
27,831
|
|
|
—
|
|
|
Obligations of states and political subdivisions
|
|
1,246,264
|
|
|
—
|
|
|
1,246,264
|
|
|
—
|
|
|
Corporate securities
|
|
1,799,806
|
|
|
—
|
|
|
1,799,806
|
|
|
—
|
|
|
ABS
|
|
177,224
|
|
|
—
|
|
|
177,224
|
|
|
—
|
|
|
CMBS
|
|
179,593
|
|
|
—
|
|
|
179,593
|
|
|
—
|
|
|
RMBS
|
|
511,274
|
|
|
—
|
|
|
511,274
|
|
|
—
|
|
|
Total fixed income securities
|
|
4,066,122
|
|
|
53,199
|
|
|
4,012,923
|
|
|
—
|
|
|
Equity securities
|
|
191,400
|
|
|
188,500
|
|
|
—
|
|
|
2,900
|
|
|
Total AFS securities
|
|
4,257,522
|
|
|
241,699
|
|
|
4,012,923
|
|
|
2,900
|
|
|
Short-term investments
|
|
131,972
|
|
|
131,972
|
|
|
—
|
|
|
—
|
|
|
Total assets
|
|
$
|
4,389,494
|
|
|
373,671
|
|
|
4,012,923
|
|
|
2,900
|
|
December 31, 2013
|
|
|
|
Fair Value Measurements Using
|
|||||||||
($ in thousands)
|
|
Assets Measured at Fair Value 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 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
|
|
$
|
4,082,558
|
|
|
416,275
|
|
|
3,663,383
|
|
|
2,900
|
|
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
|
|
December 31, 2014
|
|
|
|
Fair Value Measurements Using
|
||||||||||
($ in thousands)
|
|
Assets/Liabilities Disclosed at
Fair Value 12/31/2014
|
|
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
|
|
$
|
5,394
|
|
|
—
|
|
|
5,394
|
|
|
—
|
|
|
Obligations of states and political subdivisions
|
|
299,132
|
|
|
—
|
|
|
299,132
|
|
|
—
|
|
||
Corporate securities
|
|
21,422
|
|
|
—
|
|
|
21,422
|
|
|
—
|
|
||
ABS
|
|
2,823
|
|
|
—
|
|
|
2,823
|
|
|
—
|
|
||
CMBS
|
|
5,190
|
|
|
—
|
|
|
5,190
|
|
|
—
|
|
||
Total HTM fixed income securities
|
|
$
|
333,961
|
|
|
—
|
|
|
333,961
|
|
|
—
|
|
|
Financial Liabilities
|
|
|
|
|
|
|
|
|
||||||
Notes payable:
|
|
|
|
|
|
|
|
|
||||||
1.25% borrowings from FHLBI
|
|
45,244
|
|
|
—
|
|
|
45,244
|
|
|
—
|
|
||
7.25% Senior Notes
|
|
59,181
|
|
|
—
|
|
|
59,181
|
|
|
—
|
|
||
6.70% Senior Notes
|
|
114,845
|
|
|
—
|
|
|
114,845
|
|
|
—
|
|
||
5.875% Senior Notes
|
|
185,000
|
|
|
185,000
|
|
|
—
|
|
|
—
|
|
||
Total notes payable
|
|
$
|
404,270
|
|
|
185,000
|
|
|
219,270
|
|
|
$
|
—
|
|
December 31, 2013
|
|
|
|
Fair Value Measurements Using
|
|||||||||
($ in thousands)
|
|
Assets/Liabilities Disclosed at
Fair Value 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
|
|
|
—
|
|
|
|
As of December 31, 2014
|
|
As of December 31, 2013
|
||||||||||
($ in thousands)
|
|
Reinsurance Balances
|
|
% of Net Unsecured Reinsurance
|
|
Reinsurance Balances
|
|
% of Net
Unsecured Reinsurance |
||||||
Total reinsurance recoverables
|
|
$
|
581,548
|
|
|
|
|
|
$
|
550,897
|
|
|
|
|
Total prepaid reinsurance premiums
|
|
146,993
|
|
|
|
|
|
143,000
|
|
|
|
|
||
Less: collateral
1
|
|
(114,843
|
)
|
|
|
|
|
(119,732
|
)
|
|
|
|
||
Net unsecured reinsurance balances
|
|
613,698
|
|
|
|
|
|
574,165
|
|
|
|
|
||
|
|
|
|
|
|
|
|
|
||||||
Federal and state pools
2
:
|
|
|
|
|
|
|
|
|
|
|
|
|
||
NFIP
|
|
172,547
|
|
|
28
|
|
|
177,637
|
|
|
31
|
|
||
NJ Unsatisfied Claim Judgment Fund
|
|
76,342
|
|
|
13
|
|
|
71,732
|
|
|
12
|
|
||
Other
|
|
2,557
|
|
|
—
|
|
|
3,034
|
|
|
1
|
|
||
Total federal and state pools
|
|
251,446
|
|
|
41
|
|
|
252,403
|
|
|
44
|
|
||
|
|
|
|
|
|
|
|
|
||||||
Remaining unsecured reinsurance
|
|
362,252
|
|
|
59
|
|
|
321,762
|
|
|
56
|
|
||
|
|
|
|
|
|
|
|
|
||||||
Hannover Ruckversicherungs AG (A.M. Best rated “A+”)
|
|
79,864
|
|
|
13
|
|
|
72,565
|
|
|
13
|
|
||
Munich Re Group (A.M. Best rated “A+”)
|
|
78,347
|
|
|
13
|
|
|
69,749
|
|
|
12
|
|
||
Swiss Re Group (A.M. Best rated “A+”)
|
|
55,026
|
|
|
9
|
|
|
48,234
|
|
|
8
|
|
||
AXIS Reinsurance Company (A.M. Best rated “A+”)
|
|
51,014
|
|
|
8
|
|
|
45,114
|
|
|
8
|
|
||
Partner Reinsurance Company of the U.S. (A.M. Best rated “A+”)
|
|
25,424
|
|
|
4
|
|
|
25,730
|
|
|
4
|
|
||
QBE Reinsurance Corporation (A.M. Best rated "A")
|
|
13,069
|
|
|
2
|
|
|
15,665
|
|
|
3
|
|
||
All other reinsurers
|
|
59,508
|
|
|
10
|
|
|
44,705
|
|
|
8
|
|
||
Total
|
|
$
|
362,252
|
|
|
59
|
%
|
|
$
|
321,762
|
|
|
56
|
%
|
($ in thousands)
|
|
2014
|
|
2013
|
|
2012
|
||||
Premiums written:
|
|
|
|
|
|
|
|
|
|
|
Direct
|
|
$
|
2,228,270
|
|
|
2,133,793
|
|
|
1,955,667
|
|
Assumed
|
|
26,306
|
|
|
43,650
|
|
|
50,938
|
|
|
Ceded
|
|
(369,296
|
)
|
|
(367,284
|
)
|
|
(339,722
|
)
|
|
Net
|
|
$
|
1,885,280
|
|
|
1,810,159
|
|
|
1,666,883
|
|
|
|
|
|
|
|
|
||||
Premiums earned:
|
|
|
|
|
|
|
|
|
|
|
Direct
|
|
$
|
2,183,258
|
|
|
2,048,530
|
|
|
1,873,007
|
|
Assumed
|
|
34,653
|
|
|
44,464
|
|
|
65,884
|
|
|
Ceded
|
|
(365,302
|
)
|
|
(356,922
|
)
|
|
(354,772
|
)
|
|
Net
|
|
$
|
1,852,609
|
|
|
1,736,072
|
|
|
1,584,119
|
|
|
|
|
|
|
|
|
||||
Losses and loss expenses incurred:
|
|
|
|
|
|
|
|
|
|
|
Direct
|
|
$
|
1,314,864
|
|
|
1,370,293
|
|
|
2,394,640
|
|
Assumed
|
|
26,187
|
|
|
32,678
|
|
|
29,175
|
|
|
Ceded
|
|
(183,550
|
)
|
|
(281,233
|
)
|
|
(1,302,825
|
)
|
|
Net
|
|
$
|
1,157,501
|
|
|
1,121,738
|
|
|
1,120,990
|
|
Ceded to NFIP ($ in thousands)
|
|
2014
|
|
2013
|
|
2012
|
||||
Ceded premiums written
|
|
$
|
(237,718
|
)
|
|
(236,309
|
)
|
|
(221,094
|
)
|
Ceded premiums earned
|
|
(234,224
|
)
|
|
(228,650
|
)
|
|
(212,177
|
)
|
|
Ceded losses and loss expenses incurred
|
|
(57,323
|
)
|
|
(183,142
|
)
|
|
(1,119,303
|
)
|
($ in thousands)
|
|
2014
|
|
2013
|
|
2012
|
||||
Gross reserves for losses and loss expenses, at beginning of year
|
|
$
|
3,349,770
|
|
|
4,068,941
|
|
|
3,144,924
|
|
Less: reinsurance recoverable on unpaid losses and loss expenses, at beginning of year
|
|
540,839
|
|
|
1,409,755
|
|
|
549,490
|
|
|
Net reserves for losses and loss expenses, at beginning of year
|
|
2,808,931
|
|
|
2,659,186
|
|
|
2,595,434
|
|
|
Incurred losses and loss expenses for claims occurring in the:
|
|
|
|
|
|
|
|
|
|
|
Current year
|
|
1,216,770
|
|
|
1,147,263
|
|
|
1,146,591
|
|
|
Prior years
|
|
(59,269
|
)
|
|
(25,525
|
)
|
|
(25,601
|
)
|
|
Total incurred losses and loss expenses
|
|
1,157,501
|
|
|
1,121,738
|
|
|
1,120,990
|
|
|
Paid losses and loss expenses for claims occurring in the:
|
|
|
|
|
|
|
|
|
|
|
Current year
|
|
468,478
|
|
|
399,559
|
|
|
424,496
|
|
|
Prior years
|
|
592,062
|
|
|
572,434
|
|
|
632,742
|
|
|
Total paid losses and loss expenses
|
|
1,060,540
|
|
|
971,993
|
|
|
1,057,238
|
|
|
Net reserves for losses and loss expenses, at end of year
|
|
2,905,892
|
|
|
2,808,931
|
|
|
2,659,186
|
|
|
Add: Reinsurance recoverable on unpaid losses and loss expenses, at end of year
|
|
571,978
|
|
|
540,839
|
|
|
1,409,755
|
|
|
Gross reserves for losses and loss expenses at end of year
|
|
$
|
3,477,870
|
|
|
3,349,770
|
|
|
4,068,941
|
|
|
|
2014
|
|||||
($ in millions)
|
|
Gross
|
|
Net
|
|||
Asbestos
|
|
$
|
8.8
|
|
|
7.3
|
|
Landfill sites
|
|
11.5
|
|
|
6.6
|
|
|
Leaking underground storage tanks
|
|
10.4
|
|
|
9.1
|
|
|
Total
|
|
$
|
30.7
|
|
|
23.0
|
|
|
|
2014
|
|
2013
|
|
2012
|
|||||||||||||
($ in thousands)
|
|
Gross
|
|
Net
|
|
Gross
|
|
Net
|
|
Gross
|
|
Net
|
|||||||
Asbestos
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Reserves for losses and loss expenses at beginning of year
|
|
$
|
8,897
|
|
|
7,518
|
|
|
9,170
|
|
|
7,791
|
|
|
8,412
|
|
|
6,586
|
|
Incurred losses and loss expenses
|
|
60
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
1,696
|
|
|
2,000
|
|
|
Less: losses and loss expenses paid
|
|
(206
|
)
|
|
(204
|
)
|
|
(273
|
)
|
|
(273
|
)
|
|
(938
|
)
|
|
(795
|
)
|
|
Reserves for losses and loss expenses at the end of year
|
|
$
|
8,751
|
|
|
7,314
|
|
|
8,897
|
|
|
7,518
|
|
|
9,170
|
|
|
7,791
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||
Environmental
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Reserves for losses and loss expenses at beginning of year
|
|
$
|
23,867
|
|
|
17,649
|
|
|
26,405
|
|
|
19,978
|
|
|
27,600
|
|
|
21,330
|
|
Incurred losses and loss expenses
|
|
107
|
|
|
—
|
|
|
347
|
|
|
68
|
|
|
1,363
|
|
|
1,000
|
|
|
Less: losses and loss expenses paid
|
|
(2,072
|
)
|
|
(1,969
|
)
|
|
(2,885
|
)
|
|
(2,397
|
)
|
|
(2,558
|
)
|
|
(2,352
|
)
|
|
Reserves for losses and loss expenses at the end of year
|
|
$
|
21,902
|
|
|
15,680
|
|
|
23,867
|
|
|
17,649
|
|
|
26,405
|
|
|
19,978
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||
Total Asbestos and Environmental Claims
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Reserves for losses and loss expenses at beginning of year
|
|
$
|
32,764
|
|
|
25,167
|
|
|
35,575
|
|
|
27,769
|
|
|
36,012
|
|
|
27,916
|
|
Incurred losses and loss expenses
|
|
167
|
|
|
—
|
|
|
347
|
|
|
68
|
|
|
3,059
|
|
|
3,000
|
|
|
Less: losses and loss expenses paid
|
|
(2,278
|
)
|
|
(2,173
|
)
|
|
(3,158
|
)
|
|
(2,670
|
)
|
|
(3,496
|
)
|
|
(3,147
|
)
|
|
Reserves for losses and loss expenses at the end of year
|
|
$
|
30,653
|
|
|
22,994
|
|
|
32,764
|
|
|
25,167
|
|
|
35,575
|
|
|
27,769
|
|
•
|
In
2011
, the Indiana Subsidiaries borrowed
$45 million
in the aggregate from the FHLBI. The unpaid principal amount accrues interest of
1.25%
, which is paid on the
15th
of every month. The principal amount is due on
December 16, 2016
. These funds were loaned to the Parent for use in the acquisition of Mesa Underwriters Specialty Insurance Company ("MUSIC") on December 31, 2011.
|
•
|
In
2009
, the Indiana Subsidiaries borrowed
$13 million
in the aggregate from the FHLBI. The unpaid principal amount accrues interest of
2.9%
, which was paid on the
15th
of every month. These funds were loaned to the Parent to be used for general corporate purposes. The principal amount was paid in full on
December 15, 2014
.
|
•
|
In January 2015, the Indiana Subsidiaries borrowed
$15 million
in the aggregate from the FHLBI for general corporate purposes. The unpaid principal amount accrues interest of
0.63%
, which is paid on the 15th of every month. The principal amount is due on
July 22, 2016
.
|
|
|
Required as of
|
|
Actual as of
|
|
|
December 31, 2014
|
|
December 31, 2014
|
Consolidated net worth
|
|
$881 million
|
|
$1.3 billion
|
Statutory surplus
|
|
Not less than $750 million
|
|
$1.3 billion
|
Debt-to-capitalization ratio
1
|
|
Not to exceed 35%
|
|
23.2%
|
A.M. Best financial strength rating
|
|
Minimum of A-
|
|
A
|
•
|
Standard Commercial Lines - comprised of insurance products and services provided in the standard marketplace to our commercial customers, who are typically businesses, non-profit organizations, and local government agencies.
|
•
|
Standard Personal Lines - comprised of insurance products and services, including flood insurance coverage, provided primarily to individuals acquiring coverage in the standard marketplace.
|
•
|
E&S Lines - comprised of insurance products and services provided to customers who have not obtained coverage in the standard marketplace.
|
•
|
Investments - invests the premiums collected by our Standard Commercial Lines, Standard Personal Lines, and E&S Lines, as well as amounts generated through our capital management strategies, which may include the issuance of debt and equity securities.
|
•
|
The revised segments reflect the way we currently manage our business and allocate resources and therefore, our previously-reported segment of "Standard Insurance Operations" is now "Standard Commercial Lines" and "Standard Personal Lines." Historically, we focused our service model predominantly on our distribution partners. We now focus our customer service model on our policyholders, the servicing of which is shared by us and our distribution partners. This change in focus not only heightens awareness of our brand with our distribution partners, but it increases our brand recognition with our policyholders.
|
•
|
We implemented changes related to our field model as we realigned the responsibilities of certain management positions and their related field employees. This realignment included redeploying certain field employees to focus solely on Standard Personal Lines marketing, instead of sharing responsibilities between both Standard Personal Lines and Standard Commercial Lines business. Our Agency Management Specialists continue to be a central focus of our field model, with responsibility for managing the growth and profitability of their territories and underwriting new Standard Commercial Lines accounts.
|
•
|
We are in the process of implementing organizational changes that realign executive leadership roles over Standard Personal Lines and Standard Commercial Lines.
|
•
|
Standard Commercial Lines, Standard Personal Lines, and our E&S Lines are evaluated based on statutory underwriting results (net premiums earned, incurred losses 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
|
|
|
|
|
|
|
||||
Years ended December 31,
|
|
|
|
|
|
|
||||
($ in thousands)
|
|
2014
|
|
2013
|
|
2012
|
||||
Standard Commercial Lines:
|
|
|
|
|
|
|
|
|
|
|
Net premiums earned:
|
|
|
|
|
|
|
|
|
|
|
Commercial automobile
|
|
$
|
333,310
|
|
|
310,994
|
|
|
288,010
|
|
Workers compensation
|
|
274,585
|
|
|
267,612
|
|
|
262,108
|
|
|
General liability
|
|
444,938
|
|
|
405,322
|
|
|
373,381
|
|
|
Commercial property
|
|
244,792
|
|
|
224,412
|
|
|
202,340
|
|
|
Businessowners’ policies
|
|
85,788
|
|
|
77,097
|
|
|
68,462
|
|
|
Bonds
|
|
19,288
|
|
|
19,000
|
|
|
18,891
|
|
|
Other
|
|
13,011
|
|
|
12,182
|
|
|
12,143
|
|
|
Miscellaneous income
|
|
14,747
|
|
|
10,253
|
|
|
7,003
|
|
|
Total Standard Commercial Lines revenue
|
|
1,430,459
|
|
|
1,326,872
|
|
|
1,232,338
|
|
|
Standard Personal Lines:
|
|
|
|
|
|
|
||||
Net premiums earned:
|
|
|
|
|
|
|
||||
Personal automobile
|
|
151,317
|
|
|
152,005
|
|
|
152,142
|
|
|
Homeowners
|
|
134,273
|
|
|
127,991
|
|
|
113,850
|
|
|
Other
|
|
11,157
|
|
|
14,336
|
|
|
13,563
|
|
|
Miscellaneous income
|
|
1,834
|
|
|
1,948
|
|
|
1,824
|
|
|
Total Standard Personal Lines revenue
|
|
298,581
|
|
|
296,280
|
|
|
281,379
|
|
|
E&S Lines:
|
|
|
|
|
|
|
||||
Net premiums earned:
|
|
|
|
|
|
|
||||
General liability
|
|
96,142
|
|
|
88,761
|
|
|
59,721
|
|
|
Commercial property
|
|
38,572
|
|
|
32,054
|
|
|
17,698
|
|
|
Commercial automobile
|
|
5,436
|
|
|
4,306
|
|
|
1,810
|
|
|
Miscellaneous income
|
|
17
|
|
|
—
|
|
|
—
|
|
|
Total E&S Lines revenue
|
|
140,167
|
|
|
125,121
|
|
|
79,229
|
|
|
Investments:
|
|
|
|
|
|
|
|
|
|
|
Net investment income
|
|
138,708
|
|
|
134,643
|
|
|
131,877
|
|
|
Net realized investment gains
|
|
26,599
|
|
|
20,732
|
|
|
8,988
|
|
|
Total investment revenues
|
|
165,307
|
|
|
155,375
|
|
|
140,865
|
|
|
Total all segments
|
|
2,034,514
|
|
|
1,903,648
|
|
|
1,733,811
|
|
|
Other income
|
|
347
|
|
|
93
|
|
|
291
|
|
|
Total revenues from continuing operations
|
|
$
|
2,034,861
|
|
|
1,903,741
|
|
|
1,734,102
|
|
Income from Continuing Operations before Federal Income Tax
|
|
|
|
|
|
|
||||
Years ended December 31,
|
|
|
|
|
|
|
||||
($ in thousands)
|
|
2014
|
|
2013
|
|
2012
|
||||
Standard Commercial Lines:
|
|
|
|
|
|
|
|
|
|
|
Underwriting gain (loss), before federal income tax
|
|
$
|
61,221
|
|
|
33,856
|
|
|
(40,935
|
)
|
GAAP combined ratio
|
|
95.7
|
%
|
|
97.4
|
|
|
103.3
|
|
|
Statutory combined ratio
|
|
95.5
|
%
|
|
97.1
|
|
|
103.0
|
|
|
|
|
|
|
|
|
|
||||
Standard Personal Lines:
|
|
|
|
|
|
|
||||
Underwriting gain (loss), before federal income tax
|
|
16,536
|
|
|
8,645
|
|
|
(3,514
|
)
|
|
GAAP combined ratio
|
|
94.4
|
%
|
|
97.1
|
%
|
|
101.3
|
%
|
|
Statutory combined ratio
|
|
94.5
|
%
|
|
96.9
|
%
|
|
100.7
|
%
|
|
|
|
|
|
|
|
|
||||
E&S Lines:
|
|
|
|
|
|
|
||||
Underwriting gain (loss), before federal income tax
|
|
386
|
|
|
(3,735
|
)
|
|
(19,558
|
)
|
|
GAAP combined ratio
|
|
99.7
|
%
|
|
103.0
|
|
|
124.7
|
|
|
Statutory combined ratio
|
|
99.2
|
%
|
|
102.9
|
|
|
118.8
|
|
|
|
|
|
|
|
|
|
||||
Investments:
|
|
|
|
|
|
|
|
|
|
|
Net investment income
|
|
138,708
|
|
|
134,643
|
|
|
131,877
|
|
|
Net realized investment gains
|
|
26,599
|
|
|
20,732
|
|
|
8,988
|
|
|
Total investment income, before federal income tax
|
|
165,307
|
|
|
155,375
|
|
|
140,865
|
|
|
Tax on investment income
|
|
43,811
|
|
|
40,489
|
|
|
34,758
|
|
|
Total investment income, after federal income tax
|
|
$
|
121,496
|
|
|
114,886
|
|
|
106,107
|
|
Reconciliation of Segment Results to Income from Continuing Operations, before Federal Income Tax
|
|
|
|
|
|
|
||||
Years ended December 31,
|
|
|
|
|
|
|
||||
($ in thousands)
|
|
2014
|
|
2013
|
|
2012
|
||||
Underwriting gain (loss), before federal income tax
|
|
|
|
|
|
|
||||
Standard Commercial Lines
|
|
$
|
61,221
|
|
|
33,856
|
|
|
(40,935
|
)
|
Standard Personal Lines
|
|
16,536
|
|
|
8,645
|
|
|
(3,514
|
)
|
|
E&S Lines
|
|
386
|
|
|
(3,735
|
)
|
|
(19,558
|
)
|
|
Investment income, before federal income tax
|
|
165,307
|
|
|
155,375
|
|
|
140,865
|
|
|
Total all segments
|
|
243,450
|
|
|
194,141
|
|
|
76,858
|
|
|
Interest expense
|
|
(22,086
|
)
|
|
(22,538
|
)
|
|
(18,872
|
)
|
|
General corporate and other expenses
|
|
(24,233
|
)
|
|
(27,801
|
)
|
|
(20,351
|
)
|
|
Income from continuing operations, before federal income tax
|
|
$
|
197,131
|
|
|
143,802
|
|
|
37,635
|
|
2014
|
|
Income
|
|
Shares
|
|
Per Share
|
|||||
($ in thousands, except per share amounts)
|
|
(Numerator)
|
|
(Denominator)
|
|
Amount
|
|||||
Basic EPS:
|
|
|
|
|
|
|
|
|
|
||
Net income available to common stockholders
|
|
$
|
141,827
|
|
|
56,310
|
|
|
$
|
2.52
|
|
|
|
|
|
|
|
|
|||||
Effect of dilutive securities:
|
|
|
|
|
|
|
|
|
|
||
Stock compensation plans
|
|
—
|
|
|
1,041
|
|
|
|
|
||
|
|
|
|
|
|
|
|||||
Diluted EPS:
|
|
|
|
|
|
|
|
|
|
||
Net income available to common stockholders
|
|
$
|
141,827
|
|
|
57,351
|
|
|
$
|
2.47
|
|
2013
|
|
Income
|
|
Shares
|
|
Per Share
|
|||||
($ in thousands, except per share amounts)
|
|
(Numerator)
|
|
(Denominator)
|
|
Amount
|
|||||
Basic EPS:
|
|
|
|
|
|
|
|
|
|
||
Net income from continuing operations
|
|
$
|
107,415
|
|
|
55,638
|
|
|
$
|
1.93
|
|
Net loss on disposal of discontinued operations
|
|
(997
|
)
|
|
55,638
|
|
|
(0.02
|
)
|
||
Net income available to common stockholders
|
|
$
|
106,418
|
|
|
55,638
|
|
|
$
|
1.91
|
|
|
|
|
|
|
|
|
|||||
Effect of dilutive securities:
|
|
|
|
|
|
|
|
|
|
||
Stock compensation plans
|
|
—
|
|
|
1,172
|
|
|
|
|
||
|
|
|
|
|
|
|
|||||
Diluted EPS:
|
|
|
|
|
|
|
|
|
|
||
Net income from continuing operations
|
|
$
|
107,415
|
|
|
56,810
|
|
|
$
|
1.89
|
|
Net loss on disposal of discontinued operations
|
|
(997
|
)
|
|
56,810
|
|
|
(0.02
|
)
|
||
Net income available to common stockholders
|
|
$
|
106,418
|
|
|
56,810
|
|
|
$
|
1.87
|
|
2012
|
|
Income
|
|
Shares
|
|
Per Share
|
|||||
($ in thousands, except per share amounts)
|
|
(Numerator)
|
|
(Denominator)
|
|
Amount
|
|||||
Basic EPS:
|
|
|
|
|
|
|
|
|
|
||
Net income available to common stockholders
|
|
$
|
37,963
|
|
|
54,880
|
|
|
$
|
0.69
|
|
|
|
|
|
|
|
|
|||||
Effect of dilutive securities:
|
|
|
|
|
|
|
|
|
|
||
Stock compensation plans
|
|
—
|
|
|
1,053
|
|
|
|
|
||
|
|
|
|
|
|
|
|||||
Diluted EPS:
|
|
|
|
|
|
|
|
|
|
||
Net income available to common stockholders
|
|
$
|
37,963
|
|
|
55,933
|
|
|
$
|
0.68
|
|
($ in thousands)
|
|
2014
|
|
2013
|
|
2012
|
||||
Tax at statutory rate of 35%
|
|
$
|
68,996
|
|
|
50,331
|
|
|
13,172
|
|
Tax-advantaged interest
|
|
(12,926
|
)
|
|
(12,718
|
)
|
|
(13,285
|
)
|
|
Dividends received deduction
|
|
(1,121
|
)
|
|
(1,174
|
)
|
|
(1,260
|
)
|
|
Other
|
|
355
|
|
|
(52
|
)
|
|
1,045
|
|
|
Federal income tax expense (benefit) from continuing operations
|
|
$
|
55,304
|
|
|
36,387
|
|
|
(328
|
)
|
($ in thousands)
|
|
2014
|
|
2013
|
|||
Deferred tax assets:
|
|
|
|
|
|
|
|
Net loss reserve discounting
|
|
$
|
84,502
|
|
|
87,967
|
|
Net unearned premiums
|
|
66,470
|
|
|
64,167
|
|
|
Employee benefits
|
|
33,721
|
|
|
19,912
|
|
|
Long-term incentive compensation plans
|
|
13,625
|
|
|
12,904
|
|
|
Temporary investment write-downs
|
|
3,939
|
|
|
7,586
|
|
|
Net operating loss
|
|
2,136
|
|
|
2,818
|
|
|
Alternative minimum tax and other business tax credits
|
|
7,826
|
|
|
17,042
|
|
|
Other
|
|
8,811
|
|
|
10,088
|
|
|
Total deferred tax assets
|
|
221,030
|
|
|
222,484
|
|
|
Deferred tax liabilities:
|
|
|
|
|
|
|
|
Deferred policy acquisition costs
|
|
63,242
|
|
|
59,164
|
|
|
Unrealized gains on investment securities
|
|
43,289
|
|
|
31,345
|
|
|
Other investment-related items, net
|
|
5,088
|
|
|
618
|
|
|
Accelerated depreciation and amortization
|
|
10,962
|
|
|
8,744
|
|
|
Total deferred tax liabilities
|
|
122,581
|
|
|
99,871
|
|
|
Net deferred federal income tax asset
|
|
$
|
98,449
|
|
|
122,613
|
|
($ in thousands)
|
|
Gross NOL
|
|
Tax Effected NOL
|
|||
2029
|
|
$
|
2,024
|
|
|
708
|
|
2030
|
|
3,999
|
|
|
1,400
|
|
|
2031
|
|
79
|
|
|
28
|
|
|
Total NOL carryforwards
|
|
6,102
|
|
|
2,136
|
|
|
|
As of January 1, 2011
|
|
As of April 5, 2013
|
SICA match
|
|
100% of participant contributions up to the first 3% of defined compensation and 50% up to the next 3%
|
|
100% of participant contributions up to the first 3% of defined compensation and 50% up to the next 3%
|
Non-elective contribution
|
|
Non-elective contributions of 4% of defined compensation for employees not eligible to participate in the Retirement Income Plan due to a date of hire after December 31, 2005
|
|
Non-elective contributions of 4% of defined compensation expanded to include employees impacted by the curtailment of the Retirement Income Plan
|
Vesting of match/non-elective contribution
|
|
Immediately vested
|
|
Immediately vested
|
December 31,
|
|
Retirement Income Plan
|
|
Retirement Life Plan
|
|||||||||
($ in thousands)
|
|
2014
|
|
2013
|
|
2014
|
|
2013
|
|||||
Change in Benefit Obligation:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Benefit obligation, beginning of year
|
|
$
|
256,404
|
|
|
302,647
|
|
|
6,201
|
|
|
6,471
|
|
Service cost
|
|
5,920
|
|
|
7,517
|
|
|
—
|
|
|
—
|
|
|
Interest cost
|
|
13,126
|
|
|
12,477
|
|
|
298
|
|
|
283
|
|
|
Actuarial losses (gains)
|
|
62,935
|
|
|
(29,656
|
)
|
|
180
|
|
|
(224
|
)
|
|
Benefits paid
|
|
(7,344
|
)
|
|
(6,978
|
)
|
|
(307
|
)
|
|
(329
|
)
|
|
Impact of curtailment
|
|
—
|
|
|
(29,603
|
)
|
|
—
|
|
|
—
|
|
|
Benefit obligation, end of year
|
|
$
|
331,041
|
|
|
256,404
|
|
|
6,372
|
|
|
6,201
|
|
|
|
|
|
|
|
|
|
|
|||||
Change in Fair Value of Assets:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Fair value of assets, beginning of year
|
|
$
|
225,817
|
|
|
207,150
|
|
|
—
|
|
|
—
|
|
Actual return on plan assets, net of expenses
|
|
24,649
|
|
|
15,925
|
|
|
—
|
|
|
—
|
|
|
Contributions by the employer to funded plans
|
|
10,210
|
|
|
9,600
|
|
|
—
|
|
|
—
|
|
|
Contributions by the employer to unfunded plans
|
|
121
|
|
|
120
|
|
|
—
|
|
|
—
|
|
|
Benefits paid
|
|
(7,344
|
)
|
|
(6,978
|
)
|
|
—
|
|
|
—
|
|
|
Fair value of assets, end of year
|
|
$
|
253,453
|
|
|
225,817
|
|
|
—
|
|
|
—
|
|
|
|
|
|
|
|
|
|
|
|||||
Funded status
|
|
$
|
(77,588
|
)
|
|
(30,587
|
)
|
|
(6,372
|
)
|
|
(6,201
|
)
|
Amounts Recognized in the Consolidated Balance Sheet:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Liabilities
|
|
$
|
(77,588
|
)
|
|
(30,587
|
)
|
|
(6,372
|
)
|
|
(6,201
|
)
|
Net pension liability, end of year
|
|
$
|
(77,588
|
)
|
|
(30,587
|
)
|
|
(6,372
|
)
|
|
(6,201
|
)
|
Amounts Recognized in AOCI:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net actuarial loss
|
|
$
|
91,758
|
|
|
39,640
|
|
|
1,480
|
|
|
1,363
|
|
Total
|
|
$
|
91,758
|
|
|
39,640
|
|
|
1,480
|
|
|
1,363
|
|
Other Information as of December 31:
|
|
|
|
|
|
|
|
|
|
|
|
|
Accumulated benefit obligation
|
|
326,538
|
|
|
250,546
|
|
|
—
|
|
|
—
|
|
Weighted-Average Liability Assumptions as of December 31:
|
|
|
|
|
|
|
|
|
|
Discount rate
|
|
4.29
|
%
|
|
5.16
|
|
4.08
|
|
4.85
|
Rate of compensation increase
|
|
4.00
|
%
|
|
4.00
|
|
—
|
|
—
|
|
|
Retirement Income Plan
|
|
Retirement Life Plan
|
|||||||||||||||
($ in thousands)
|
|
2014
|
|
2013
|
|
2012
|
|
2014
|
|
2013
|
|
2012
|
|||||||
Components of Net Periodic Benefit Cost and Other Amounts Recognized in Other Comprehensive Income:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||
Net Periodic Benefit Cost:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Service cost
|
|
$
|
5,920
|
|
|
7,517
|
|
|
8,091
|
|
|
—
|
|
|
—
|
|
|
—
|
|
Interest cost
|
|
13,126
|
|
|
12,477
|
|
|
12,981
|
|
|
298
|
|
|
283
|
|
|
302
|
|
|
Expected return on plan assets
|
|
(15,671
|
)
|
|
(15,755
|
)
|
|
(14,206
|
)
|
|
—
|
|
|
—
|
|
|
—
|
|
|
Amortization of unrecognized prior service cost
|
|
—
|
|
|
10
|
|
|
150
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
Amortization of unrecognized actuarial loss
|
|
1,839
|
|
|
4,294
|
|
|
5,863
|
|
|
63
|
|
|
80
|
|
|
40
|
|
|
Curtailment expense
|
|
—
|
|
|
16
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
Total net periodic cost
|
|
$
|
5,214
|
|
|
8,559
|
|
|
12,879
|
|
|
361
|
|
|
363
|
|
|
342
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||
Other Changes in Plan Assets and Benefit Obligations Recognized in Other Comprehensive Income:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net actuarial loss (gain)
|
|
$
|
53,956
|
|
|
(59,430
|
)
|
|
25,906
|
|
|
180
|
|
|
(224
|
)
|
|
660
|
|
Reversal of amortization of net actuarial loss
|
|
(1,839
|
)
|
|
(4,294
|
)
|
|
(5,863
|
)
|
|
(63
|
)
|
|
(80
|
)
|
|
(40
|
)
|
|
Reversal of amortization of prior service cost
|
|
—
|
|
|
(10
|
)
|
|
(150
|
)
|
|
—
|
|
|
—
|
|
|
—
|
|
|
Curtailment expense
|
|
—
|
|
|
(16
|
)
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
Total recognized in other comprehensive income
|
|
$
|
52,117
|
|
|
(63,750
|
)
|
|
19,893
|
|
|
117
|
|
|
(304
|
)
|
|
620
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||
Total recognized in net periodic benefit cost and other comprehensive income
|
|
$
|
57,331
|
|
|
(55,191
|
)
|
|
32,772
|
|
|
478
|
|
|
59
|
|
|
962
|
|
|
|
Retirement Income Plan
|
|
Retirement Life Plan
|
|||||||||
|
|
2014
|
|
2013
|
|
2012
|
|
2014
|
|
2013
|
|
2012
|
|
Weighted-Average Expense Assumptions for the years ended December 31:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Discount rate
1
|
|
5.16
|
%
|
|
4.66
|
|
5.16
|
|
4.85
|
|
4.42
|
|
5.16
|
Expected return on plan assets
|
|
6.92
|
%
|
|
7.40
|
|
7.75
|
|
—
|
|
—
|
|
—
|
Rate of compensation increase
|
|
4.00
|
%
|
|
4.00
|
|
4.00
|
|
—
|
|
—
|
|
—
|
|
|
2014
|
|
2013
|
|||||
|
|
Target Ranges
|
|
Actual Percentage
|
|
Actual Percentage
|
|||
Long duration fixed income
|
|
55%- 100%
|
|
|
59
|
%
|
|
55
|
%
|
Global equity
|
|
0%- 45%
|
|
|
25
|
%
|
|
27
|
%
|
Global Asset Allocation
1
|
|
—
|
%
|
|
11
|
%
|
|
12
|
%
|
Private equity
1,2
|
|
—
|
%
|
|
4
|
%
|
|
5
|
%
|
Cash and short-term investments
1
|
|
—
|
%
|
|
1
|
%
|
|
1
|
%
|
Total
|
|
—
|
%
|
|
100
|
%
|
|
100
|
%
|
•
|
Valuations for the majority of the investment funds utilize the market approach wherein the quoted prices in the active market for identical assets are used. These investment funds are traded in active markets at their net asset value per share. There are no restrictions on the redemption of these investments and we do not have any contractual obligations to further invest in any of the individual mutual funds. These investments are classified as Level 1 in the fair value hierarchy. Valuations of non-publicly traded investment funds are based upon the observable and verifiable market values of the underlying publicly traded securities and therefore are classified as Level 2 within the fair value hierarchy.
|
•
|
The deposit administration contract is carried at cost, which approximates fair value. Given the liquid nature of the underlying investments in overnight cash deposits and other short term duration products, we have determined that a correlation exists between the deposit administration contract and other short-term investments such as money market funds. As such, this investment is classified as Level 2 in the fair value hierarchy.
|
•
|
For valuations of the investments in limited partnerships, fair value is based on the Retirement Income Plan’s ownership interest in the reported net asset values as a practical expedient. The majority of the net asset values are reported to us on a one quarter lag. We assess whether these reported net asset values are indicative of market activity that has occurred since the date of their valuation by the investees: (i) by reviewing the overall market fluctuation and whether a material impact to our investments' valuation could have occurred; and (ii) through routine conversations with the underlying funds' general partners/managers discussing, among other things, conditions or events having significant impacts to their portfolio assets that have occurred subsequent to the reported date, if any. Our limited partnership investments cannot be redeemed with the investees as our partnership agreements require our commitment for the duration of the underlying funds’ lives. There is no active plan to sell any of our remaining interests in the limited partnership investments; however, we may continue to entertain potential opportunities to limit our exposure to these investments through the use of the secondary market. These limited partnerships have been fair valued using Level 3 inputs.
|
|
|||||||||||||
December 31, 2014
|
|
|
|
Fair Value Measurements at 12/31/14 Using
|
|||||||||
($ in thousands)
|
|
Assets Measured at Fair Value At 12/31/14
|
|
Quoted Prices in Active Markets for Identical Assets/ Liabilities
(Level 1)
|
|
Significant Other Observable Inputs
(Level 2)
|
|
Significant Unobservable Inputs
(Level 3)
|
|||||
Description
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Long duration fixed income:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Global asset allocation fund
|
|
$
|
27,782
|
|
|
27,782
|
|
|
—
|
|
|
—
|
|
Extended duration fixed income
|
|
120,532
|
|
|
120,532
|
|
|
—
|
|
|
—
|
|
|
Total long duration fixed income
|
|
148,314
|
|
|
148,314
|
|
|
—
|
|
|
—
|
|
|
Global equity:
|
|
|
|
|
|
|
|
|
|||||
Non-U.S. equity
|
|
16,852
|
|
|
5,438
|
|
|
11,414
|
|
|
—
|
|
|
U.S. equity
|
|
47,719
|
|
|
47,719
|
|
|
—
|
|
|
—
|
|
|
Total global equity
|
|
64,571
|
|
|
53,157
|
|
|
11,414
|
|
|
—
|
|
|
Global asset allocation
|
|
27,842
|
|
|
27,842
|
|
|
—
|
|
|
—
|
|
|
Private equity (limited partnerships):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Equity long/short hedge
|
|
41
|
|
|
—
|
|
|
—
|
|
|
41
|
|
|
Private equity
|
|
8,136
|
|
|
—
|
|
|
—
|
|
|
8,136
|
|
|
Real estate
|
|
2,215
|
|
|
—
|
|
|
—
|
|
|
2,215
|
|
|
Total private equity
|
|
10,392
|
|
|
—
|
|
|
—
|
|
|
10,392
|
|
|
Cash and short-term investments:
|
|
|
|
|
|
|
|
|
|||||
Short-term investments
|
|
1,222
|
|
|
1,222
|
|
|
—
|
|
|
—
|
|
|
Deposit administration contracts
|
|
1,180
|
|
|
—
|
|
|
1,180
|
|
|
—
|
|
|
Total cash and short-term investments
|
|
2,402
|
|
|
1,222
|
|
|
1,180
|
|
|
—
|
|
|
Total invested assets
|
|
$
|
253,521
|
|
|
230,535
|
|
|
12,594
|
|
|
10,392
|
|
December 31, 2013
|
|
|
|
Fair Value Measurements at 12/31/13 Using
|
|||||||||
($ in thousands)
|
|
Assets Measured at Fair Value At 12/31/13
|
|
Quoted Prices in Active Markets for Identical Assets/ Liabilities
(Level 1)
|
|
Significant Other Observable Inputs
(Level 2)
|
|
Significant Unobservable Inputs
(Level 3)
|
|||||
Description
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Long duration fixed income:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Global asset allocation fund
|
|
$
|
26,984
|
|
|
26,984
|
|
|
—
|
|
|
—
|
|
Extended duration fixed income
|
|
96,920
|
|
|
96,920
|
|
|
—
|
|
|
—
|
|
|
Total long duration fixed income
|
|
123,904
|
|
|
123,904
|
|
|
—
|
|
|
—
|
|
|
Global equity:
|
|
|
|
|
|
|
|
|
|||||
Non-U.S. equity
|
|
17,548
|
|
|
5,574
|
|
|
11,974
|
|
|
—
|
|
|
U.S. equity
|
|
43,112
|
|
|
43,112
|
|
|
—
|
|
|
—
|
|
|
Total global equity
|
|
60,660
|
|
|
48,686
|
|
|
11,974
|
|
|
—
|
|
|
Global asset allocation
|
|
27,257
|
|
|
27,257
|
|
|
—
|
|
|
—
|
|
|
Private equity (limited partnerships):
|
|
|
|
|
|
|
|
|
|
|
|
||
Equity long/short hedge
|
|
41
|
|
|
—
|
|
|
—
|
|
|
41
|
|
|
Private equity
|
|
9,899
|
|
|
—
|
|
|
—
|
|
|
9,899
|
|
|
Real estate
|
|
2,219
|
|
|
—
|
|
|
—
|
|
|
2,219
|
|
|
Total private equity
|
|
12,159
|
|
|
—
|
|
|
—
|
|
|
12,159
|
|
|
Cash and short-term investments:
|
|
|
|
|
|
|
|
|
|||||
Short-term investments
|
|
963
|
|
|
963
|
|
|
—
|
|
|
—
|
|
|
Deposit administration contracts
|
|
1,023
|
|
|
—
|
|
|
1,023
|
|
|
—
|
|
|
Total cash and short-term investments
|
|
1,986
|
|
|
963
|
|
|
1,023
|
|
|
—
|
|
|
Total invested assets
|
|
$
|
225,966
|
|
|
200,810
|
|
|
12,997
|
|
|
12,159
|
|
Investments in Limited Partnerships
|
|
|
|
|
|||
($ in thousands)
|
|
2014
|
|
2013
|
|||
Fair value, beginning of year
|
|
$
|
12,159
|
|
|
12,631
|
|
Total gains (realized and unrealized)
|
|
|
|
|
|
|
|
included in changes in net assets
|
|
1,586
|
|
|
2,131
|
|
|
Purchases
|
|
334
|
|
|
560
|
|
|
Sales
|
|
—
|
|
|
—
|
|
|
Issuances
|
|
—
|
|
|
—
|
|
|
Settlements
|
|
(3,687
|
)
|
|
(3,163
|
)
|
|
Transfers into Level 3
|
|
—
|
|
|
—
|
|
|
Transfers out of Level 3
|
|
—
|
|
|
—
|
|
|
Fair value, end of year
|
|
$
|
10,392
|
|
|
12,159
|
|
Alternative Investments
|
|
Carrying Value
|
|
2014
|
||||||
|
|
December 31,
|
|
December 31,
|
|
Remaining
|
||||
($ in thousands)
|
|
2014
|
|
2013
|
|
Amount
|
||||
Equity long/short hedge
|
|
$
|
41
|
|
|
41
|
|
|
—
|
|
Private equity
|
|
8,136
|
|
|
9,899
|
|
|
3,019
|
|
|
Real estate
|
|
2,215
|
|
|
2,219
|
|
|
536
|
|
|
Total alternative investments
|
|
$
|
10,392
|
|
|
12,159
|
|
|
3,555
|
|
($ in thousands)
|
|
Retirement Income Plan
|
|
Retirement Life Plan
|
|||
Benefits Expected to be Paid in Future
|
|
|
|
|
|
|
|
Fiscal Years:
|
|
|
|
|
|
|
|
2015
|
|
$
|
9,240
|
|
|
343
|
|
2016
|
|
10,330
|
|
|
348
|
|
|
2017
|
|
11,400
|
|
|
353
|
|
|
2018
|
|
12,493
|
|
|
357
|
|
|
2019
|
|
13,532
|
|
|
362
|
|
|
2020-2024
|
|
82,802
|
|
|
1,865
|
|
|
|
Number
of Shares |
|
Weighted
Average Exercise Price |
|
Weighted
Average Remaining Contractual Life in Years |
|
Aggregate
Intrinsic Value ($ in thousands) |
|||||
Outstanding at December 31, 2013
|
|
903,439
|
|
|
$
|
19.75
|
|
|
|
|
|
|
|
Granted in 2014
|
|
—
|
|
|
—
|
|
|
|
|
|
|
||
Exercised in 2014
|
|
161,940
|
|
|
20.41
|
|
|
|
|
|
|
||
Forfeited or expired in 2014
|
|
6,960
|
|
|
28.09
|
|
|
|
|
|
|
||
Outstanding at December 31, 2014
|
|
734,539
|
|
|
$
|
19.52
|
|
|
3.42
|
|
$
|
5,695
|
|
Exercisable at December 31, 2014
|
|
734,539
|
|
|
$
|
19.52
|
|
|
3.42
|
|
$
|
5,695
|
|
|
|
Number
of Shares |
|
Weighted
Average Grant Date Fair Value |
|||
Unvested RSU awards at December 31, 2013
|
|
1,096,780
|
|
|
$
|
18.73
|
|
Granted in 2014
|
|
374,963
|
|
|
21.58
|
|
|
Vested in 2014
|
|
378,150
|
|
|
17.47
|
|
|
Forfeited in 2014
|
|
16,583
|
|
|
19.19
|
|
|
Unvested RSU awards at December 31, 2014
|
|
1,077,010
|
|
|
$
|
20.18
|
|
|
|
ESPP
|
|||||
|
|
2014
|
|
2013
|
|
2012
|
|
Risk-free interest rate
|
|
0.07
|
%
|
|
0.11
|
|
0.12
|
Expected term
|
|
6 months
|
|
|
6 months
|
|
6 months
|
Dividend yield
|
|
2.0
|
%
|
|
2.4
|
|
2.9
|
Expected volatility
|
|
21
|
%
|
|
19
|
|
24
|
|
|
2014
|
|
2013
|
|
2012
|
||||
RSUs
|
|
$
|
21.58
|
|
|
21.03
|
|
|
17.62
|
|
ESPP:
|
|
|
|
|
|
|
|
|
||
Six month option
|
|
1.24
|
|
|
0.97
|
|
|
1.05
|
|
|
Discount of grant date market value
|
|
3.87
|
|
|
3.24
|
|
|
2.70
|
|
|
Total ESPP
|
|
5.11
|
|
|
4.21
|
|
|
3.75
|
|
|
Agent Plan:
|
|
|
|
|
|
|
|
|
|
|
Discount of grant date market value
|
|
2.42
|
|
|
2.40
|
|
|
1.76
|
|
•
|
Rue Insurance placed insurance policies with the Insurance Subsidiaries. DPW associated with these policies were
$9.0 million
in
2014
,
$8.2 million
in
2013
, and
$7.7 million
in
2012
. In return, the Insurance Subsidiaries paid standard market commissions to Rue Insurance of
$1.6 million
in
2014
,
$1.3 million
in
2013
, and
$1.3 million
in
2012
including supplemental commissions.
|
•
|
Rue Insurance has placed insurance coverage for us with other insurance companies for which Rue Insurance was paid commission pursuant to its agreements with those carriers in 2012. We paid premiums for such insurance coverage of
$0.2 million
in
2012
.
|
($ in millions)
|
|
Capital Leases
|
Operating Leases
|
Total
|
||||||
2015
|
|
$
|
3.1
|
|
$
|
9.1
|
|
$
|
12.2
|
|
2016
|
|
1.8
|
|
6.9
|
|
8.7
|
|
|||
2017
|
|
0.8
|
|
5.9
|
|
6.7
|
|
|||
2018
|
|
—
|
|
4.7
|
|
4.7
|
|
|||
2019
|
|
—
|
|
3.7
|
|
3.7
|
|
|||
After 2019
|
|
—
|
|
8.9
|
|
8.9
|
|
|||
Total minimum payment required
|
|
$
|
5.7
|
|
$
|
39.2
|
|
$
|
44.9
|
|
|
|
State of Domicile
|
|
Unassigned Surplus
|
|
Statutory Surplus
|
|
Statutory Net Income
|
||||||||||||||||
($ in millions)
|
|
|
|
2014
|
|
2013
|
|
2014
|
|
2013
|
|
2014
|
|
2013
|
|
2012
|
||||||||
SICA
|
|
New Jersey
|
|
$
|
338.8
|
|
|
309.2
|
|
|
493.0
|
|
|
463.4
|
|
|
83.9
|
|
|
53.1
|
|
|
29.8
|
|
Selective Way Insurance Company ("SWIC")
|
|
New Jersey
|
|
201.3
|
|
|
201.3
|
|
|
250.3
|
|
|
250.3
|
|
|
37.0
|
|
|
27.5
|
|
|
10.1
|
|
|
Selective Insurance Company of South Carolina ("SICSC")
|
|
Indiana
|
|
83.9
|
|
|
80.7
|
|
|
115.1
|
|
|
111.9
|
|
|
14.0
|
|
|
8.2
|
|
|
2.8
|
|
|
Selective Insurance Company of the Southeast ("SICSE")
|
|
Indiana
|
|
59.3
|
|
|
56.2
|
|
|
84.9
|
|
|
81.8
|
|
|
10.5
|
|
|
6.0
|
|
|
1.6
|
|
|
Selective Insurance Company of New York ("SICNY")
|
|
New York
|
|
54.9
|
|
|
51.5
|
|
|
82.6
|
|
|
79.3
|
|
|
10.3
|
|
|
6.9
|
|
|
2.7
|
|
|
Selective Insurance Company of New England ("SICNE")
|
|
New Jersey
|
|
5.3
|
|
|
4.7
|
|
|
35.4
|
|
|
34.9
|
|
|
4.4
|
|
|
3.1
|
|
|
0.6
|
|
|
Selective Auto Insurance Company of New Jersey ("SAICNJ")
|
|
New Jersey
|
|
18.4
|
|
|
14.2
|
|
|
61.3
|
|
|
57.0
|
|
|
9.1
|
|
|
2.5
|
|
|
1.5
|
|
|
MUSIC
|
|
New Jersey
|
|
(1.7
|
)
|
|
(6.2
|
)
|
|
66.8
|
|
|
62.3
|
|
|
7.3
|
|
|
5.2
|
|
|
0.9
|
|
|
Selective Casualty Insurance Company ("SCIC")
|
|
New Jersey
|
|
8.2
|
|
|
6.1
|
|
|
82.7
|
|
|
80.5
|
|
|
9.6
|
|
|
6.6
|
|
|
0.2
|
|
|
Selective Fire and Casualty Insurance Company ("SFCIC")
|
|
New Jersey
|
|
3.8
|
|
|
3.1
|
|
|
35.7
|
|
|
35.0
|
|
|
4.2
|
|
|
3.1
|
|
|
0.2
|
|
|
Total
|
|
|
|
$
|
772.2
|
|
|
720.8
|
|
|
1,307.8
|
|
|
1,256.4
|
|
|
190.3
|
|
|
122.2
|
|
|
50.4
|
|
Dividends
|
|
|
|
Twelve Months ended December 31, 2014
|
||
($ in millions)
|
|
State of Domicile
|
|
Ordinary Dividends Paid
|
||
SICA
|
|
New Jersey
|
|
$
|
22.0
|
|
SWIC
|
|
New Jersey
|
|
18.2
|
|
|
SICSC
|
|
Indiana
|
|
5.0
|
|
|
SICSE
|
|
Indiana
|
|
2.0
|
|
|
SICNY
|
|
New York
|
|
2.5
|
|
|
SICNE
|
|
New Jersey
|
|
2.0
|
|
|
SAICNJ
|
|
New Jersey
|
|
1.0
|
|
|
SCIC
|
|
New Jersey
|
|
3.0
|
|
|
SFCIC
|
|
New Jersey
|
|
1.8
|
|
|
Total
|
|
|
|
$
|
57.5
|
|
(unaudited, $ in thousands,
|
|
First Quarter
|
|
Second Quarter
|
|
Third Quarter
|
|
Fourth Quarter
|
||||||||||||||||
except per share data)
|
|
2014
|
|
2013
|
|
2014
|
|
2013
|
|
2014
|
|
2013
|
|
2014
|
|
2013
|
||||||||
Net premiums earned
|
|
456,495
|
|
|
420,940
|
|
|
463,625
|
|
|
426,252
|
|
|
462,639
|
|
|
437,568
|
|
|
469,850
|
|
|
451,312
|
|
Net investment income earned
|
|
35,534
|
|
|
32,870
|
|
|
36,774
|
|
|
34,003
|
|
|
34,292
|
|
|
32,457
|
|
|
32,108
|
|
|
35,313
|
|
Net realized gains (losses)
|
|
7,218
|
|
|
3,355
|
|
|
4,539
|
|
|
5,154
|
|
|
15,231
|
|
|
13,431
|
|
|
(389
|
)
|
|
(1,208
|
)
|
Underwriting (loss) income
|
|
(5,015
|
)
|
|
12,161
|
|
|
10,084
|
|
|
4,483
|
|
|
34,437
|
|
|
10,151
|
|
|
38,637
|
|
|
11,971
|
|
Net income from continuing operations
|
|
17,974
|
|
|
22,305
|
|
|
29,341
|
|
|
27,122
|
|
|
53,162
|
|
|
32,653
|
|
|
41,350
|
|
|
25,335
|
|
Loss on disposal of discontinued operations, net of tax
|
|
—
|
|
|
(997
|
)
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
Net income
|
|
17,974
|
|
|
21,308
|
|
|
29,341
|
|
|
27,122
|
|
|
53,162
|
|
|
32,653
|
|
|
41,350
|
|
|
25,335
|
|
Other comprehensive income (loss)
|
|
16,678
|
|
|
27,881
|
|
|
26,483
|
|
|
(62,643
|
)
|
|
(18,887
|
)
|
|
(2,195
|
)
|
|
(29,337
|
)
|
|
7,768
|
|
Comprehensive income (loss)
|
|
34,652
|
|
|
49,189
|
|
|
55,824
|
|
|
(35,521
|
)
|
|
34,275
|
|
|
30,458
|
|
|
12,013
|
|
|
33,103
|
|
Net income per share:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic
|
|
0.32
|
|
|
0.38
|
|
|
0.52
|
|
|
0.49
|
|
|
0.94
|
|
|
0.59
|
|
|
0.73
|
|
|
0.45
|
|
Diluted
|
|
0.31
|
|
|
0.38
|
|
|
0.51
|
|
|
0.48
|
|
|
0.93
|
|
|
0.57
|
|
|
0.72
|
|
|
0.44
|
|
Dividends to stockholders
1
|
|
0.13
|
|
|
0.13
|
|
|
0.13
|
|
|
0.13
|
|
|
0.13
|
|
|
0.13
|
|
|
0.14
|
|
|
0.13
|
|
Price range of common stock:
2
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||
High
|
|
26.99
|
|
|
24.13
|
|
|
25.42
|
|
|
24.75
|
|
|
25.46
|
|
|
25.95
|
|
|
27.65
|
|
|
28.31
|
|
Low
|
|
21.38
|
|
|
19.53
|
|
|
22.14
|
|
|
19.58
|
|
|
21.97
|
|
|
22.61
|
|
|
22.01
|
|
|
23.55
|
|
•
|
Pertain to the maintenance of records that in reasonable detail accurately and fairly reflect the transactions and dispositions of the assets of the company;
|
•
|
Provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and that receipts and expenditures of the company are being made only in accordance with authorizations of management and directors of the company; and
|
•
|
Provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use, or disposition of the company's assets that could have a material effect on the financial statements.
|
|
Form 10-K
|
|
Page
|
Consolidated Balance Sheets as of December 31, 2014 and 2013
|
|
|
|
Consolidated Statements of Income for the Years ended December 31, 2014, 2013, and 2012
|
|
|
|
Consolidated Statements of Comprehensive Income for the Years ended December 31, 2014, 2013, and 2012
|
|
|
|
Consolidated Statements of Stockholder's Equity for the Years Ended December 31, 2014, 2013, and 2012
|
|
|
|
Consolidated Statements of Cash Flow for the Years ended December 31, 2014, 2013, and 2012
|
|
|
|
Notes to Consolidated Financial Statements, December 31, 2014, 2013, and 2012
|
|
|
Form 10-K
|
|
|
Page
|
Schedule I
|
Summary of Investments – Other than Investments in Related Parties at December 31, 2014
|
|
|
|
|
Schedule II
|
Condensed Financial Information of Registrant at December 31, 2014 and 2013 and for the years ended December 31, 2014, 2013, and 2012
|
|
|
|
|
Schedule III
|
Supplementary Insurance Information for the years ended December 31, 2014, 2013, and 2012
|
|
|
|
|
Schedule IV
|
Reinsurance for the years ended December 31, 2014, 2013, and 2012
|
|
|
|
|
Schedule V
|
Allowance for Uncollectible Premiums and Other Receivables for the years ended December 31, 2014, 2013, and 2012
|
SELECTIVE INSURANCE GROUP, INC.
|
|
|
|
|
|
By: /s/ Gregory E. Murphy
|
|
February 26, 2015
|
Gregory E. Murphy
|
|
|
Chairman of the Board and Chief Executive Officer
|
|
|
|
|
|
By: /s/ Dale A. Thatcher
|
|
February 26, 2015
|
Dale A. Thatcher
|
|
|
Executive Vice President and Chief Financial Officer
|
|
|
(principal accounting officer and principal financial officer)
|
|
By: /s/ Gregory E. Murphy
|
|
February 26, 2015
|
Gregory E. Murphy
|
|
|
Chairman of the Board and Chief Executive Officer
|
|
|
|
|
|
*
|
|
February 24, 2015
|
Paul D. Bauer
|
|
|
Director
|
|
|
|
|
|
*
|
|
February 24, 2015
|
Annabelle G. Bexiga
|
|
|
Director
|
|
|
|
|
|
*
|
|
February 24, 2015
|
A. David Brown
|
|
|
Director
|
|
|
|
|
|
*
|
|
February 24, 2015
|
John C. Burville
|
|
|
Director
|
|
|
|
|
|
*
|
|
February 24, 2015
|
Michael J. Morrissey
|
|
|
Director
|
|
|
|
|
|
*
|
|
February 24, 2015
|
Cynthia S. Nicholson
|
|
|
Director
|
|
|
|
|
|
*
|
|
February 24, 2015
|
Ronald L. O’Kelley
|
|
|
Director
|
|
*
|
|
February 24, 2015
|
William M. Rue
|
|
|
Director
|
|
|
|
|
|
*
|
|
February 24, 2015
|
John S. Scheid
|
|
|
Director
|
|
|
|
|
|
*
|
|
February 24, 2015
|
J. Brian Thebault
|
|
|
Director
|
|
|
|
|
|
*
|
|
February 24, 2015
|
Philip H. Urban
|
|
|
Director
|
|
|
|
|
|
* By: /s/ Michael H. Lanza
|
|
February 26, 2015
|
Michael H. Lanza
|
|
|
Attorney-in-fact
|
|
Types of investment
|
|
|
|
|
|
|
||||
($ in thousands)
|
|
Amortized Cost or Cost
|
|
Fair Value
|
|
Carrying Amount
|
||||
Fixed income securities:
|
|
|
|
|
|
|
|
|
|
|
Held-to-maturity:
|
|
|
|
|
|
|
|
|
|
|
Foreign government obligations
|
|
$
|
5,292
|
|
|
5,394
|
|
|
5,339
|
|
Obligations of states and political subdivisions
|
|
285,301
|
|
|
299,132
|
|
|
287,372
|
|
|
Public utilities
|
|
11,019
|
|
|
12,483
|
|
|
11,000
|
|
|
All other corporate securities
|
|
7,880
|
|
|
8,939
|
|
|
7,626
|
|
|
Asset-backed securities
|
|
2,818
|
|
|
2,823
|
|
|
2,363
|
|
|
Commercial mortgage-backed securities
|
|
4,869
|
|
|
5,190
|
|
|
4,437
|
|
|
Total fixed income securities, held-to-maturity
|
|
317,179
|
|
|
333,961
|
|
|
318,137
|
|
|
|
|
|
|
|
|
|
||||
Available-for-sale:
|
|
|
|
|
|
|
|
|
|
|
U.S. government and government agencies
|
|
116,666
|
|
|
124,130
|
|
|
124,130
|
|
|
Foreign government obligations
|
|
27,035
|
|
|
27,831
|
|
|
27,831
|
|
|
Obligations of states and political subdivisions
|
|
1,208,776
|
|
|
1,246,264
|
|
|
1,246,264
|
|
|
Public utilities
|
|
149,006
|
|
|
150,977
|
|
|
150,977
|
|
|
All other corporate securities
|
|
1,614,421
|
|
|
1,648,829
|
|
|
1,648,829
|
|
|
Asset-backed securities
|
|
176,837
|
|
|
177,224
|
|
|
177,224
|
|
|
Commercial mortgage-backed securities
|
|
177,932
|
|
|
179,593
|
|
|
179,593
|
|
|
Residential mortgage-backed securities
|
|
505,113
|
|
|
511,274
|
|
|
511,274
|
|
|
Total fixed income securities, available-for-sale
|
|
3,975,786
|
|
|
4,066,122
|
|
|
4,066,122
|
|
|
|
|
|
|
|
|
|
||||
Equity securities:
|
|
|
|
|
|
|
|
|
|
|
Common stock:
|
|
|
|
|
|
|
|
|
|
|
Public utilities
|
|
8,815
|
|
|
10,284
|
|
|
10,284
|
|
|
Banks, trust and insurance companies
|
|
30,187
|
|
|
35,348
|
|
|
35,348
|
|
|
Industrial, miscellaneous and all other
|
|
120,009
|
|
|
145,768
|
|
|
145,768
|
|
|
Total equity securities, available-for-sale
|
|
159,011
|
|
|
191,400
|
|
|
191,400
|
|
|
Short-term investments
|
|
131,972
|
|
|
131,972
|
|
|
131,972
|
|
|
Other investments
|
|
99,203
|
|
|
|
|
|
99,203
|
|
|
Total investments
|
|
$
|
4,683,151
|
|
|
|
|
|
4,806,834
|
|
|
|
December 31,
|
|||||
($ in thousands, except share amounts)
|
|
2014
|
|
2013
|
|||
Assets:
|
|
|
|
|
|
|
|
Fixed income securities, available-for-sale – at fair value (amortized cost: $49,890 – 2014; $55,447 – 2013)
|
|
$
|
50,028
|
|
|
55,623
|
|
Short-term investments
|
|
16,605
|
|
|
15,399
|
|
|
Cash
|
|
16,367
|
|
|
193
|
|
|
Investment in subsidiaries
|
|
1,604,162
|
|
|
1,493,996
|
|
|
Current federal income tax
|
|
16,848
|
|
|
28,471
|
|
|
Deferred federal income tax
|
|
15,781
|
|
|
15,122
|
|
|
Other assets
|
|
7,268
|
|
|
9,410
|
|
|
Total assets
|
|
$
|
1,727,059
|
|
|
1,618,214
|
|
|
|
|
|
|
|
|
|
Liabilities:
|
|
|
|
|
|
|
|
Notes payable
|
|
$
|
334,297
|
|
|
334,414
|
|
Intercompany notes payable
|
|
88,961
|
|
|
102,721
|
|
|
Accrued long-term stock compensation
|
|
21,890
|
|
|
20,828
|
|
|
Other liabilities
|
|
6,325
|
|
|
6,323
|
|
|
Total liabilities
|
|
$
|
451,473
|
|
|
464,286
|
|
|
|
|
|
|
|||
Stockholders’ Equity:
|
|
|
|
|
|
|
|
Preferred stock at $0 par value per share:
|
|
|
|
|
|
|
|
Authorized shares 5,000,000; no shares issued or outstanding
|
|
$
|
—
|
|
|
—
|
|
Common stock of $2 par value per share:
|
|
|
|
|
|
|
|
Authorized shares: 360,000,000
|
|
|
|
|
|||
Issued: 99,947,933 – 2014; 99,120,235 – 2013
|
|
199,896
|
|
|
198,240
|
|
|
Additional paid-in capital
|
|
305,385
|
|
|
288,182
|
|
|
Retained earnings
|
|
1,313,440
|
|
|
1,202,015
|
|
|
Accumulated other comprehensive income
|
|
19,788
|
|
|
24,851
|
|
|
Treasury stock – at cost (shares: 43,353,181 – 2014; 43,198,622 – 2013)
|
|
(562,923
|
)
|
|
(559,360
|
)
|
|
Total stockholders’ equity
|
|
1,275,586
|
|
|
1,153,928
|
|
|
Total liabilities and stockholders’ equity
|
|
$
|
1,727,059
|
|
|
1,618,214
|
|
|
|
Year ended December 31,
|
||||||||
($ in thousands)
|
|
2014
|
|
2013
|
|
2012
|
||||
Revenues:
|
|
|
|
|
|
|
|
|
|
|
Dividends from subsidiaries
|
|
$
|
57,511
|
|
|
32,129
|
|
|
196,091
|
|
Net investment income earned
|
|
620
|
|
|
585
|
|
|
495
|
|
|
Other income
|
|
342
|
|
|
55
|
|
|
464
|
|
|
Total revenues
|
|
58,473
|
|
|
32,769
|
|
|
197,050
|
|
|
|
|
|
|
|
|
|
||||
Expenses:
|
|
|
|
|
|
|
|
|
|
|
Interest expense
|
|
23,840
|
|
|
24,309
|
|
|
20,711
|
|
|
Other expenses
|
|
24,575
|
|
|
27,888
|
|
|
20,632
|
|
|
Total expenses
|
|
48,415
|
|
|
52,197
|
|
|
41,343
|
|
|
|
|
|
|
|
|
|
||||
Income (loss) from continuing operations, before federal income tax
|
|
10,058
|
|
|
(19,428
|
)
|
|
155,707
|
|
|
|
|
|
|
|
|
|
||||
Federal income tax benefit:
|
|
|
|
|
|
|
|
|
|
|
Current
|
|
(15,920
|
)
|
|
(22,779
|
)
|
|
(4,602
|
)
|
|
Deferred
|
|
(646
|
)
|
|
4,835
|
|
|
(9,347
|
)
|
|
Total federal income tax benefit
|
|
(16,566
|
)
|
|
(17,944
|
)
|
|
(13,949
|
)
|
|
|
|
|
|
|
|
|
||||
Net income (loss) from continuing operations before equity in undistributed income of subsidiaries
|
|
26,624
|
|
|
(1,484
|
)
|
|
169,656
|
|
|
|
|
|
|
|
|
|
||||
Equity in undistributed income of continuing subsidiaries, net of tax
|
|
115,203
|
|
|
108,899
|
|
|
—
|
|
|
Dividends in excess of continuing subsidiaries’ current year earnings
|
|
—
|
|
|
—
|
|
|
(131,693
|
)
|
|
|
|
|
|
|
|
|
||||
Net income from continuing operations
|
|
141,827
|
|
|
107,415
|
|
|
37,963
|
|
|
|
|
|
|
|
|
|
||||
Loss on disposal of discontinued operations, net of tax of $(538) - 2013
|
|
—
|
|
|
(997
|
)
|
|
—
|
|
|
|
|
|
|
|
|
|
||||
Net income
|
|
$
|
141,827
|
|
|
106,418
|
|
|
37,963
|
|
|
|
Year ended December 31,
|
||||||||
($ in thousands)
|
|
2014
|
|
2013
|
|
2012
|
||||
Operating Activities:
|
|
|
|
|
|
|
|
|
|
|
Net income
|
|
$
|
141,827
|
|
|
106,418
|
|
|
37,963
|
|
|
|
|
|
|
|
|
||||
Adjustments to reconcile net income to net cash provided by operating activities:
|
|
|
|
|
|
|
|
|
|
|
Equity in undistributed income of subsidiaries, net of tax
|
|
(115,203
|
)
|
|
(108,899
|
)
|
|
—
|
|
|
Dividends in excess of continuing subsidiaries’ current year income
|
|
—
|
|
|
—
|
|
|
131,693
|
|
|
Stock-based compensation expense
|
|
8,702
|
|
|
8,630
|
|
|
6,939
|
|
|
Loss on disposal of discontinued operations
|
|
—
|
|
|
997
|
|
|
—
|
|
|
Net realized gains
|
|
(2
|
)
|
|
—
|
|
|
(219
|
)
|
|
Amortization – other
|
|
1,421
|
|
|
4,353
|
|
|
450
|
|
|
|
|
|
|
|
|
|
||||
Changes in assets and liabilities:
|
|
|
|
|
|
|
|
|
|
|
Increase in accrued long-term stock compensation
|
|
1,062
|
|
|
6,791
|
|
|
5,221
|
|
|
Decrease (increase) in net federal income taxes
|
|
10,977
|
|
|
(14,968
|
)
|
|
4,897
|
|
|
Increase (decrease) in other assets and other liabilities
|
|
1,045
|
|
|
1,204
|
|
|
(7,014
|
)
|
|
Net adjustments
|
|
(91,998
|
)
|
|
(101,892
|
)
|
|
141,967
|
|
|
Net cash provided by operating activities
|
|
49,829
|
|
|
4,526
|
|
|
179,930
|
|
|
|
|
|
|
|
|
|
||||
Investing Activities:
|
|
|
|
|
|
|
|
|
|
|
Purchase of fixed income securities, available-for-sale
|
|
(18,511
|
)
|
|
(21,708
|
)
|
|
(148,604
|
)
|
|
Redemption and maturities of fixed income securities, available-for-sale
|
|
23,210
|
|
|
6,432
|
|
|
118,371
|
|
|
Sale of fixed income securities, available-for-sale
|
|
300
|
|
|
—
|
|
|
8,973
|
|
|
Purchase of short-term investments
|
|
(102,717
|
)
|
|
(241,748
|
)
|
|
(106,539
|
)
|
|
Sale of short-term investments
|
|
101,510
|
|
|
253,136
|
|
|
113,700
|
|
|
Capital contribution to subsidiaries
|
|
—
|
|
|
(57,125
|
)
|
|
(139,122
|
)
|
|
Purchase of subsidiary, net of cash acquired
|
|
—
|
|
|
—
|
|
|
255
|
|
|
Sale of subsidiary
|
|
—
|
|
|
1,225
|
|
|
751
|
|
|
Net cash provided by (used in) investing activities
|
|
3,792
|
|
|
(59,788
|
)
|
|
(152,215
|
)
|
|
|
|
|
|
|
|
|
||||
Financing Activities:
|
|
|
|
|
|
|
|
|
|
|
Dividends to stockholders
|
|
(28,428
|
)
|
|
(27,416
|
)
|
|
(26,944
|
)
|
|
Acquisition of treasury stock
|
|
(3,563
|
)
|
|
(3,716
|
)
|
|
(3,495
|
)
|
|
Proceeds from notes payable, net of debt issuance costs
|
|
—
|
|
|
178,435
|
|
|
—
|
|
|
Net proceeds from stock purchase and compensation plans
|
|
7,283
|
|
|
7,119
|
|
|
4,840
|
|
|
Excess tax benefits from share-based payment arrangements
|
|
1,020
|
|
|
1,545
|
|
|
1,060
|
|
|
Repayment of notes payable
|
|
—
|
|
|
(100,000
|
)
|
|
—
|
|
|
Principal payment on borrowings from subsidiaries
|
|
(13,759
|
)
|
|
(722
|
)
|
|
(3,688
|
)
|
|
Net cash (used in) provided by financing activities
|
|
(37,447
|
)
|
|
55,245
|
|
|
(28,227
|
)
|
|
|
|
|
|
|
|
|
||||
Net increase (decrease) in cash
|
|
16,174
|
|
|
(17
|
)
|
|
(512
|
)
|
|
Cash, beginning of year
|
|
193
|
|
|
210
|
|
|
722
|
|
|
Cash, end of year
|
|
$
|
16,367
|
|
|
193
|
|
|
210
|
|
($ in thousands)
|
|
Deferred
policy
acquisition costs
|
|
Reserve
for loss
and loss expenses
|
|
Unearned premiums
|
|
Net
premiums earned
|
|
Net
investment income
1
|
|
Losses
and loss
expenses incurred
|
|
Amortization
of deferred
policy
acquisition costs
2
|
|
Other
operating expenses
3
|
|
Net
premiums written
|
||||||||||
Standard Commercial Lines Segment
|
|
$
|
147,285
|
|
|
3,000,796
|
|
|
734,697
|
|
|
1,415,712
|
|
|
—
|
|
|
870,018
|
|
|
295,774
|
|
|
188,699
|
|
|
1,441,047
|
|
Standard Personal Lines Segment
|
|
17,495
|
|
|
279,761
|
|
|
285,777
|
|
|
296,747
|
|
|
—
|
|
|
197,182
|
|
|
34,851
|
|
|
48,178
|
|
|
292,061
|
|
|
E&S Lines
|
|
20,828
|
|
|
197,313
|
|
|
75,345
|
|
|
140,150
|
|
|
—
|
|
|
90,301
|
|
|
33,670
|
|
|
15,793
|
|
|
152,172
|
|
|
Investments Segment
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
165,307
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
Total
|
|
$
|
185,608
|
|
|
3,477,870
|
|
|
1,095,819
|
|
|
1,852,609
|
|
|
165,307
|
|
|
1,157,501
|
|
|
364,295
|
|
|
252,670
|
|
|
1,885,280
|
|
Policy acquisition costs
|
$
|
624,470
|
|
Other income
3
|
(16,598
|
)
|
|
Other expenses
3
|
9,093
|
|
|
Total
|
$
|
616,965
|
|
($ in thousands)
|
|
Deferred
policy
acquisition costs
|
|
Reserve
for loss
and loss expenses
|
|
Unearned premiums
|
|
Net
premiums earned
|
|
Net
investment income
1
|
|
Losses
and loss
expenses incurred
|
|
Amortization
of deferred
policy
acquisition costs
2
|
|
Other
operating expenses
3
|
|
Net
premiums written
|
||||||||||
Standard Commercial Lines Segment
|
|
$
|
138,397
|
|
|
2,877,087
|
|
|
708,861
|
|
|
1,316,619
|
|
|
—
|
|
|
831,261
|
|
|
270,443
|
|
|
181,059
|
|
|
1,380,740
|
|
Standard Personal Lines Segment
|
|
18,149
|
|
|
312,411
|
|
|
286,969
|
|
|
294,332
|
|
|
—
|
|
|
206,450
|
|
|
33,097
|
|
|
46,140
|
|
|
297,757
|
|
|
E&S Lines
|
|
16,435
|
|
|
160,272
|
|
|
63,325
|
|
|
125,121
|
|
|
—
|
|
|
84,027
|
|
|
28,288
|
|
|
16,541
|
|
|
131,662
|
|
|
Investments Segment
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
155,375
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
Total
|
|
$
|
172,981
|
|
|
3,349,770
|
|
|
1,059,155
|
|
|
1,736,072
|
|
|
155,375
|
|
|
1,121,738
|
|
|
331,828
|
|
|
243,740
|
|
|
1,810,159
|
|
Policy acquisition costs
|
$
|
579,977
|
|
Other income
3
|
(12,201
|
)
|
|
Other expenses
3
|
7,792
|
|
|
Total
|
$
|
575,568
|
|
($ in thousands)
|
|
Deferred
policy
acquisition costs
|
|
Reserve
for loss and loss expenses
|
|
Unearned premiums
|
|
Net
premiums earned
|
|
Net
investment income
1
|
|
Losses
and loss
expenses incurred
|
|
Amortization
of deferred
policy
acquisition costs
2
|
|
Other
operating expenses
3
|
|
Net
premiums written
|
||||||||||
Standard Commercial Lines Segment
|
|
$
|
123,861
|
|
|
2,753,556
|
|
|
642,032
|
|
|
1,225,335
|
|
|
—
|
|
|
853,143
|
|
|
247,016
|
|
|
166,111
|
|
|
1,263,738
|
|
Standard Personal Lines Segment
|
|
17,690
|
|
|
1,195,082
|
|
|
275,886
|
|
|
279,555
|
|
|
—
|
|
|
204,644
|
|
|
33,684
|
|
|
44,741
|
|
|
289,848
|
|
|
E&S Lines
|
|
13,972
|
|
|
120,303
|
|
|
56,788
|
|
|
79,229
|
|
|
—
|
|
|
63,203
|
|
|
17,847
|
|
|
17,737
|
|
|
113,297
|
|
|
Investments Segment
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
140,865
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
Total
|
|
$
|
155,523
|
|
|
4,068,941
|
|
|
974,706
|
|
|
1,584,119
|
|
|
140,865
|
|
|
1,120,990
|
|
|
298,547
|
|
|
228,589
|
|
|
1,666,883
|
|
Policy acquisition costs
|
$
|
526,143
|
|
Other income
3
|
(8,827
|
)
|
|
Other expenses
3
|
9,820
|
|
|
Total
|
$
|
527,136
|
|
($ thousands)
|
|
Direct Amount
|
|
Assumed From Other Companies
|
|
Ceded to Other Companies
|
|
Net Amount
|
|
% of Amount Assumed To Net
|
||||||
2014
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Premiums earned:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Accident and health insurance
|
|
$
|
44
|
|
|
—
|
|
|
44
|
|
|
—
|
|
|
—
|
|
Property and liability insurance
|
|
2,183,214
|
|
|
34,653
|
|
|
365,258
|
|
|
1,852,609
|
|
|
2
|
%
|
|
Total premiums earned
|
|
2,183,258
|
|
|
34,653
|
|
|
365,302
|
|
|
1,852,609
|
|
|
2
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||
2013
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Premiums earned:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Accident and health insurance
|
|
$
|
55
|
|
|
—
|
|
|
55
|
|
|
—
|
|
|
—
|
|
Property and liability insurance
|
|
2,048,475
|
|
|
44,464
|
|
|
356,867
|
|
|
1,736,072
|
|
|
3
|
%
|
|
Total premiums earned
|
|
2,048,530
|
|
|
44,464
|
|
|
356,922
|
|
|
1,736,072
|
|
|
3
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||
2012
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Premiums earned:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Accident and health insurance
|
|
$
|
58
|
|
|
—
|
|
|
58
|
|
|
—
|
|
|
—
|
|
Property and liability insurance
|
|
1,872,949
|
|
|
65,884
|
|
|
354,714
|
|
|
1,584,119
|
|
|
4
|
%
|
|
Total premiums earned
|
|
1,873,007
|
|
|
65,884
|
|
|
354,772
|
|
|
1,584,119
|
|
|
4
|
%
|
($ in thousands)
|
|
2014
|
|
2013
|
|
2012
|
||||
Balance, January 1
|
|
$
|
9,542
|
|
|
8,706
|
|
|
7,668
|
|
Additions
|
|
4,617
|
|
|
3,733
|
|
|
4,536
|
|
|
Deductions
|
|
(3,122
|
)
|
|
(2,897
|
)
|
|
(3,498
|
)
|
|
Balance, December 31
|
|
$
|
11,037
|
|
|
9,542
|
|
|
8,706
|
|
Exhibit
|
|
|
Number
|
|
|
3.1
|
|
Amended and Restated Certificate of Incorporation of Selective Insurance Group, Inc., filed May 4, 2010 (incorporated by reference herein to Exhibit 3.1 of the Company’s Quarterly Report on Form 10-Q for the quarter ended June 30, 2010, File No. 001-33067).
|
|
|
|
3.2*
|
|
By-Laws of Selective Insurance Group, Inc., effective January 29, 2015.
|
|
|
|
4.1
|
|
Indenture, dated as of September 24, 2002, between Selective Insurance Group, Inc. and National City Bank, as Trustee, relating to the Company's 1.6155% Senior Convertible Notes due September 24, 2032 (incorporated by reference herein to Exhibit 4.1 of the Company's Registration Statement on Form S-3 No. 333-101489).
|
|
|
|
4.2
|
|
Indenture, dated as of November 16, 2004, between Selective Insurance Group, Inc. and Wachovia Bank, National Association, as Trustee, relating to the Company's 7.25% Senior Notes due 2034 (incorporated by reference herein to Exhibit 4.1 of the Company's Current Report on Form 8-K filed November 18, 2004, File No. 000-08641).
|
|
|
|
4.3
|
|
Indenture, dated as of November 3, 2005, between Selective Insurance Group, Inc. and Wachovia Bank, National Association, as Trustee, relating to the Company’s 6.70% Senior Notes due 2035 (incorporated by reference herein to Exhibit 4.1 of the Company’s Current Report on Form 8-K filed November 9, 2005, File No. 000-08641).
|
|
|
|
4.4
|
|
Registration Rights Agreement, dated as of November 16, 2004, between Selective Insurance Group, Inc. and Keefe, Bruyette & Woods, Inc. (incorporated by reference herein to Exhibit 4.2 of the Company’s Current Report on Form 8-K filed November 18, 2004, File No. 000-08641).
|
|
|
|
4.5
|
|
Registration Rights Agreement, dated as of November 3, 2005, between Selective Insurance Group, Inc. and Keefe, Bruyette & Woods, Inc. (incorporated by reference herein to Exhibit 4.2 of the Company’s Current Report on Form 8-K filed November 9, 2005, File No. 000-08641).
|
|
|
|
4.6
|
|
Indenture, dated as of February 8, 2013, between Selective Insurance Group, Inc. and U.S. Bank National Association, as Trustee (incorporated by reference herein to Exhibit 4.1 of the Company's Current Report on Form 8-K filed February 8, 2013, File No. 001-33067).
|
|
|
|
4.7
|
|
First Supplemental Indenture, dated as of February 8, 2013, between Selective Insurance Group, Inc. and U.S. Bank National Association, as Trustee, relating to the Company’s 5.875% Senior Notes due 2043 (incorporated by reference herein to Exhibit 4.2 of the Company’s Current Report on Form 8-K filed February 8, 2013, File No. 001-33067).
|
|
|
|
10.1+
|
|
Selective Insurance Supplemental Pension Plan, As Amended and Restated Effective January 1, 2005 (incorporated by reference herein to Exhibit 10.1 of the Company’s Quarterly Report on Form 10-Q for the quarter ended September 30, 2008, File No. 001-33067).
|
|
|
|
10.1a+
|
|
Amendment No. 1 to Selective Insurance Supplemental Pension Plan, As Amended and Restated Effective January 1, 2005 (incorporated by reference herein to Exhibit 10.1 of the Company's Current Report on Form 8-K filed March 25, 2013, File No. 001-33067).
|
|
|
|
10.2+
|
|
Selective Insurance Company of America Deferred Compensation Plan (2005), As Amended and Restated Effective as of January 1, 2010 (incorporated by reference herein to Exhibit 10.2 of the Company’s Quarterly Report on Form 10-Q for the quarter ended September 30, 2011, File No. 001-33067).
|
10.2a
|
|
Amendment No 1. to Selective Insurance Company of America Deferred Compensation Plan (2005) (incorporated by reference herein to Exhibit 10.2a of the Company's Quarterly Report on Form 10-Q for the quarter ended September 30, 2011, File No. 001-33067).
|
|
|
|
Exhibit
|
|
|
Number
|
|
|
10.2b+
|
|
Amendment No. 2 to Selective Insurance Company of America Deferred Compensation Plan (2005), As Amended and Restated Effective as of January 1, 2010 (incorporated by reference herein to Exhibit 10.2 of the Company's Current Report on Form 8-K filed March 25, 2013, File No. 001-33067).
|
|
|
|
10.3+
|
|
Selective Insurance Stock Option Plan III (incorporated by reference herein to Exhibit A to the Company’s Definitive Proxy Statement for its 2002 Annual Meeting of Stockholders filed April 1, 2002, File No. 000-08641).
|
|
|
|
10.3a+
|
|
Amendment to the Selective Insurance Stock Option Plan III, effective as of July 26, 2006 (incorporated by reference herein to Exhibit 10.5 of the Company’s Quarterly Report on Form 10-Q for the quarter ended June 30, 2006, File No. 000-08641).
|
|
|
|
10.4+
|
|
Selective Insurance Group, Inc. 2014 Omnibus Stock Plan, effective May 1, 2014 (incorporated by reference herein to Appendix A-1 to the Company’s Definitive Proxy Statement for its 2014 Annual Meeting of Stockholders filed April 3, 2014, File No. 000-08641).
|
|
|
|
10.5+
|
|
Selective Insurance Group, Inc. 2014 Omnibus Stock Plan Director Stock Option Agreement (incorporated by reference herein to Exhibit 10.1 to the Company’s Quarterly Report on Form 10-Q for the quarter ended March 31, 2014, File No. 000-08641).
|
|
|
|
10.6+
|
|
Selective Insurance Group, Inc. 2014 Omnibus Stock Plan Stock Option Agreement (incorporated by reference herein to Exhibit 10.2 to the Company’s Quarterly Report on Form 10-Q for the quarter ended March 31, 2014, File No. 000-08641).
|
|
|
|
10.7+
|
|
Selective Insurance Group, Inc. 2014 Omnibus Stock Plan Service-Based Restricted Stock Agreement (incorporated by reference herein to Exhibit 10.3 to the Company’s Quarterly Report on Form 10-Q for the quarter ended March 31, 2014 File No. 000-08641).
|
|
|
|
10.8+
|
|
Selective Insurance Group, Inc. 2014 Omnibus Stock Plan Performance-Based Restricted Stock Agreement (incorporated by reference herein to Exhibit 10.4 to the Company’s Quarterly Report on Form 10-Q for the quarter ended March 31, 2014, File No. 000-08641).
|
|
|
|
10.9+
|
|
Selective Insurance Group, Inc. 2014 Omnibus Stock Plan Service-Based Restricted Stock Unit Agreement (incorporated by reference herein to Exhibit 10.5 to the Company’s Quarterly Report on Form 10-Q for the quarter ended March 31, 2014 File No. 000-08641).
|
|
|
|
10.10+
|
|
Selective Insurance Group, Inc. 2014 Omnibus Stock Plan Performance-Based Restricted Stock Unit Agreement (incorporated by reference herein to Exhibit 10.6 to the Company’s Quarterly Report on Form 10-Q for the quarter ended March 31, 2014, File No. 000-08641).
|
|
|
|
10.11+
|
|
Selective Insurance Group, Inc. 2014 Omnibus Stock Plan Director Restricted Stock Unit Agreement (incorporated by reference herein to Exhibit 10.7 to the Company’s Quarterly Report on Form 10-Q for the quarter ended March 31, 2014, File No. 000-08641).
|
|
|
|
10.12+
|
|
Selective Insurance Group, Inc. 2005 Omnibus Stock Plan As Amended and Restated Effective as of May 1, 2010 (incorporated by reference herein to Appendix C of the Company’s Definitive Proxy Statement for its 2010 Annual Meeting of Stockholders filed March 25, 2010, File No. 001-33067).
|
|
|
|
10.13+
|
|
Selective Insurance Group, Inc. 2005 Omnibus Stock Plan Stock Option Agreement (incorporated by reference herein to Exhibit 10.2 to the Company’s Quarterly Report on Form 10-Q for the quarter ended March 31, 2006, File No. 000-08641).
|
|
|
|
10.14+
|
|
Selective Insurance Group, Inc. 2005 Omnibus Stock Plan Director Restricted Stock Unit Agreement (incorporated by reference herein to Exhibit 10.8 of the Company’s Annual Report on Form 10-K for the year ended December 31, 2009, File No. 001-33067).
|
Exhibit
|
|
|
Number
|
|
|
10.15+
|
|
Selective Insurance Group, Inc. 2005 Omnibus Stock Plan Director Stock Option Agreement (incorporated by reference herein to Exhibit 10.9 of the Company’s Annual Report on Form 10-K for the year ended December 31, 2005, File No. 000-08641).
|
|
|
|
10.16+
|
|
Selective Insurance Group, Inc. 2005 Omnibus Stock Plan Restricted Stock Unit Agreement (incorporated by reference herein to Exhibit 10.12 of the Company’s Annual Report on Form 10-K for the year ended December 31, 2009, File No. 001-33067).
|
|
|
|
10.17+
|
|
Selective Insurance Group, Inc. 2005 Omnibus Stock Plan Restricted Stock Unit Agreement (incorporated by reference herein to Exhibit 10.13 of the Company’s Annual Report on Form 10-K for the year ended December 31, 2009, File No. 001-33067).
|
10.18+
|
|
Selective Insurance Group, Inc. 2005 Omnibus Stock Plan Automatic Director Stock Option Agreement (incorporated by reference herein to Exhibit 2 of the Company’s Definitive Proxy Statement for its 2005 Annual Meeting of Stockholders filed April 6, 2005, File No. 000-08641).
|
|
|
|
10.19+
|
|
Selective Insurance Group, Inc. Non-Employee Directors’ Compensation and Deferral Plan, As Amended and Restated Effective as of May 1, 2014 (incorporated by reference herein to Exhibit 10.10 to the Company’s Quarterly Report on Form 10-Q for the quarter ended March 31, 2014, File No. 001-33067).
|
|
|
|
10.20+
|
|
Deferred Compensation Plan for Directors (incorporated by reference herein to Exhibit 10.5 to the Company’s Annual Report on Form 10-K for the year ended December 31, 1993, File No. 000-08641).
|
|
|
|
10.21+
|
|
Selective Insurance Group, Inc. Employee Stock Purchase Plan (2009), amended and restated effective July 1, 2009 (incorporated by reference herein to Appendix A to the Company’s Definitive Proxy Statement for its 2009 Annual Meeting of Stockholders filed March 26, 2009, File No. 001-33067).
|
|
|
|
10.22+
|
|
Selective Insurance Group, Inc. Cash Incentive Plan As Amended and Restated as of May 1, 2014 (incorporated by reference herein to Appendix B to the Company’s Definitive Proxy Statement for its 2014 Annual Meeting of Stockholders filed March 24, 2014, File No. 001-33067).
|
|
|
|
10.23+
|
|
Selective Insurance Group, Inc. Cash Incentive Plan Service-Based Cash Incentive Unit Award Agreement (incorporated by reference herein to Exhibit 10.8 of the Company’s Quarterly Report on Form 10-Q for the quarter ended March 31, 2014, File No. 001-33067).
|
|
|
|
10.24+
|
|
Selective Insurance Group, Inc. Cash Incentive Plan Performance-Based Cash Incentive Unit Award Agreement (incorporated by reference herein to Exhibit 10.9 of the Company’s Quarterly Report on Form 10-Q for the quarter ended March 31, 2014, File No. 001-33067).
|
|
|
|
10.25+
|
|
Selective Insurance Group, Inc. Cash Incentive Plan Cash Incentive Unit Award Agreement (incorporated by reference herein to Exhibit 10.14c of the Company’s Annual Report on Form 10-K for the year ended December 31, 2007, File No. 001-33067).
|
|
|
|
10.26+
|
|
Selective Insurance Group, Inc. Cash Incentive Plan Cash Incentive Unit Award Agreement (incorporated by reference herein to Exhibit 10.14d of the Company’s Annual Report on Form 10-K for the year ended December 31, 2007, File No. 001-33067).
|
|
|
|
10.27
|
|
Amended and Restated Selective Insurance Group, Inc. Stock Purchase Plan for Independent Insurance Agencies (2010) (incorporated by reference herein to Exhibit 10.1 of the Company’s Quarterly Report on Form 10-Q for the quarter ended June 30, 2010, File No. 001-33067).
|
|
|
|
10.28+
|
|
Selective Insurance Group, Inc. Stock Option Plan for Directors (incorporated by reference herein to Exhibit B of the Company’s Definitive Proxy Statement for its 2000 Annual Meeting of Stockholders filed March 31, 2000, File No. 000-08641).
|
|
|
|
10.29+
|
|
Amendment to the Selective Insurance Group, Inc. Stock Option Plan for Directors, as amended, effective as of July 26, 2006, (incorporated by reference herein to Exhibit 10.3 of the Company’s Quarterly Report on Form 10-Q for the quarter ended June 30, 2006, File No. 000-08641).
|
|
|
|
Exhibit
|
|
|
Number
|
|
|
10.30+
|
|
Selective Insurance Group, Inc. Stock Compensation Plan for Nonemployee Directors, (incorporated by reference herein to Exhibit A of the Company’s Definitive Proxy Statement for its 2000 Annual Meeting of Stockholders filed March 31, 2000, File No. 000-08641).
|
|
|
|
10.31+
|
|
Amendment to Selective Insurance Group, Inc. Stock Compensation Plan for Nonemployee Directors, as amended (incorporated by reference herein to Exhibit 10.22a of the Company’s Annual Report on Form 10-K for the year ended December 31, 2008, File No. 001-33067).
|
|
|
|
10.32+
|
|
Employment Agreement between Selective Insurance Company of America and Gregory E. Murphy, dated as of December 23, 2008 (incorporated by reference herein to Exhibit 10.1 of the Company’s Current Report on Form 8-K filed December 30, 2008, File No. 001-33067).
|
|
|
|
10.33+
|
|
Employment Agreement between Selective Insurance Company of America and Dale A. Thatcher, dated as of December 23, 2008 (incorporated by reference herein to Exhibit 10.2 of the Company’s Current Report on Form 8-K filed December 30, 2008, File No. 001-33067).
|
10.34+
|
|
Employment Agreement between Selective Insurance Company of America and Michael H. Lanza, dated as of December 23, 2008 (incorporated by reference herein to Exhibit 10.23e of the Company’s Annual Report on Form 10-K for the year ended December 31, 2008, File No. 001-33067).
|
|
|
|
10.35+
|
|
Employment Agreement between Selective Insurance Company of America and John J. Marchioni, dated as of September 10, 2013 (incorporated by reference herein to Exhibit 10.1 of the Company’s Current Report on Form 8-K filed September 11, 2013, File No. 001-33067).
|
|
|
|
10.36
|
|
Credit Agreement among Selective Insurance Group, Inc., the Lenders Named Therein and Wells Fargo Bank, National Association, as Administrative Agent, dated as of September 26, 2013 (incorporated by reference herein to Exhibit 10.1 of the Company’s Form 10-Q for the quarter ended September 30, 2013, File No. 001-33067).
|
|
|
|
10.37
|
|
Form of Indemnification Agreement between Selective Insurance Group, Inc. and each of its directors and executive officers, as adopted on May 19, 2005 (incorporated by reference herein to Exhibit 10.1 of the Company’s Current Report on Form 8-K filed May 20, 2005, File No. 000-08641).
|
|
|
|
10.38+
|
|
Selective Insurance Group, Inc. Non-Employee Directors’ Deferred Compensation Plan (incorporated by reference herein to Exhibit 10.27 of the Company’s Annual Report on Form 10-K for the year ended December 31, 2009, File No. 001-33067).
|
|
|
|
10.39+
|
|
Amendment No. 1 to the Selective Insurance Group, Inc. Non-Employee Directors’ Deferred Compensation Plan (incorporated by reference herein to Exhibit 10.27a of the Company’s Annual Report on Form 10-K for the year ended December 31, 2010, File No. 001-33067).
|
** 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.
|
Name
|
|
Jurisdiction in which organized
|
|
Parent
|
|
Percentage voting securities owned
|
|
Mesa Underwriters Specialty Insurance Company
|
|
New Jersey
|
|
Selective Insurance Group, Inc.
|
|
100
|
%
|
|
|
|
|
|
|
|
|
Selective Auto Insurance Company of New Jersey
|
|
New Jersey
|
|
Selective Insurance Group, Inc.
|
|
100
|
%
|
|
|
|
|
|
|
|
|
Selective Casualty Insurance Company
|
|
New Jersey
|
|
Selective Insurance Group, Inc.
|
|
100
|
%
|
|
|
|
|
|
|
|
|
Selective Fire and Casualty Insurance Company
|
|
New Jersey
|
|
Selective Insurance Group, Inc.
|
|
100
|
%
|
|
|
|
|
|
|
|
|
Selective Insurance Company of America
|
|
New Jersey
|
|
Selective Insurance Group, Inc.
|
|
100
|
%
|
|
|
|
|
|
|
|
|
Selective Insurance Company of New England
|
|
New Jersey
|
|
Selective Insurance Group, Inc.
|
|
100
|
%
|
|
|
|
|
|
|
|
|
Selective Insurance Company of New York
|
|
New York
|
|
Selective Insurance Group, Inc.
|
|
100
|
%
|
|
|
|
|
|
|
|
|
Selective Insurance Company of South Carolina
|
|
Indiana
|
|
Selective Insurance Group, Inc.
|
|
100
|
%
|
|
|
|
|
|
|
|
|
Selective Insurance Company of the Southeast
|
|
Indiana
|
|
Selective Insurance Group, Inc.
|
|
100
|
%
|
|
|
|
|
|
|
|
|
Selective Way Insurance Company
|
|
New Jersey
|
|
Selective Insurance Group, Inc.
|
|
100
|
%
|
|
|
|
|
|
|
|
|
SRM Insurance Brokerage, LLC.
|
|
New Jersey
|
|
Selective Way Insurance Company
|
|
75
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
Selective Insurance Company of the Southeast
|
|
25
|
%
|
|
|
|
|
|
|
|
|
Wantage Avenue Holding Company, Inc.
|
|
New Jersey
|
|
Selective Insurance Group, Inc.
|
|
100
|
%
|
(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:
|
February 26, 2015
|
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:
|
February 26, 2015
|
By: /s/ Dale A. Thatcher
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Dale A. Thatcher
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Executive Vice President and Chief Financial Officer
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Date:
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February 26, 2015
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By: /s/ Gregory E. Murphy
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Gregory E. Murphy
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Chairman of the Board and Chief Executive Officer
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Date:
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February 26, 2015
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By: /s/ Dale A. Thatcher
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Dale A. Thatcher
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Executive Vice President and Chief Financial Officer
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