New Jersey
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22-2168890
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(State or Other Jurisdiction of Incorporation or Organization)
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(I.R.S. Employer Identification No.)
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40 Wantage Avenue
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Branchville, New Jersey
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07890
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(Address of Principal Executive Offices)
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(Zip Code)
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(973) 948-3000
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(Registrant’s Telephone Number, Including Area Code)
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(Former Name, Former Address and Former Fiscal Year, if Changed Since Last Report)
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Large accelerated filer
x
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Accelerated filer
o
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Non-accelerated filer
o
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Smaller reporting company
o
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SELECTIVE INSURANCE GROUP, INC.
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Table of Contents
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Page No.
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Federal Income Taxes
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Item 5.
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Other Information
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PART I. FINANCIAL INFORMATION
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ITEM 1. FINANCIAL STATEMENTS.
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SELECTIVE INSURANCE GROUP, INC.
CONSOLIDATED BALANCE SHEETS
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Unaudited
|
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($ in thousands, except share amounts)
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June 30,
2015 |
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December 31,
2014 |
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ASSETS
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Investments:
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Fixed income securities, held-to-maturity – at carrying value (fair value: $259,702 – 2015; $333,961 – 2014)
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$
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247,859
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318,137
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Fixed income securities, available-for-sale – at fair value (amortized cost: $4,133,223 – 2015; $3,975,786 – 2014)
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4,192,818
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4,066,122
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Equity securities, available-for-sale – at fair value (cost: $218,138 – 2015; $159,011 – 2014)
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228,883
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191,400
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Short-term investments (at cost which approximates fair value)
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168,349
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131,972
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Other investments
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85,420
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99,203
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Total investments (Note 4)
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4,923,329
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4,806,834
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Cash
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368
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23,959
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Interest and dividends due or accrued
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38,488
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38,901
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Premiums receivable, net of allowance for uncollectible accounts of: $4,210 – 2015; $4,137 – 2014
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647,591
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558,778
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Reinsurance recoverables, net
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572,502
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581,548
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Prepaid reinsurance premiums
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145,286
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146,993
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Deferred federal income tax
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106,152
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98,449
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Property and equipment – at cost, net of accumulated depreciation and amortization of:
$180,146 – 2015; $172,183 – 2014 |
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62,182
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59,416
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Deferred policy acquisition costs
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203,224
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185,608
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Goodwill
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7,849
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7,849
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Other assets
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77,342
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73,215
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Total assets
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$
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6,784,313
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6,581,550
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LIABILITIES AND STOCKHOLDERS’ EQUITY
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Liabilities:
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Reserve for loss and loss expenses
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$
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3,535,433
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3,477,870
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Unearned premiums
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1,177,901
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1,095,819
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Notes payable
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394,305
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379,297
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Current federal income tax
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13,562
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3,921
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Accrued salaries and benefits
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140,211
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158,382
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Other liabilities
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212,588
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190,675
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Total liabilities
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$
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5,474,000
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5,305,964
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Stockholders’ Equity:
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Preferred stock of $0 par value per share:
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$
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—
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—
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Authorized shares 5,000,000; no shares issued or outstanding
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Common stock of $2 par value per share:
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Authorized shares 360,000,000
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Issued: 100,585,852 – 2015; 99,947,933 – 2014
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201,172
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199,896
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Additional paid-in capital
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317,295
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305,385
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Retained earnings
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1,370,681
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1,313,440
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Accumulated other comprehensive (loss) income (Note 10)
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(12,329
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)
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19,788
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Treasury stock – at cost
(shares: 43,482,533 – 2015; 43,353,181 – 2014) |
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(566,506
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)
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(562,923
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)
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Total stockholders’ equity
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$
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1,310,313
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1,275,586
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Commitments and contingencies
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Total liabilities and stockholders’ equity
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$
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6,784,313
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6,581,550
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SELECTIVE INSURANCE GROUP, INC.
UNAUDITED CONSOLIDATED STATEMENTS OF INCOME
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Quarter ended June 30,
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Six Months ended June 30,
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($ in thousands, except per share amounts)
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2015
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2014
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2015
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2014
|
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Revenues:
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Net premiums earned
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$
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490,309
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463,625
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966,432
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920,120
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Net investment income earned
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32,230
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36,774
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59,147
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72,308
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Net realized (losses) gains:
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Net realized investment gains
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1,031
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4,958
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22,008
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13,139
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Other-than-temporary impairments
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(4,451
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)
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(419
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)
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(6,545
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)
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(1,382
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)
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Total net realized (losses) gains
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(3,420
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)
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4,539
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15,463
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11,757
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Other income
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2,854
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1,911
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4,823
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11,735
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Total revenues
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521,973
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506,849
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1,045,865
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1,015,920
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Expenses:
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Loss and loss expense incurred
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291,561
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297,795
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576,560
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618,341
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|
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Policy acquisition costs
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169,770
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155,173
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334,493
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304,439
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Interest expense
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5,490
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|
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5,425
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|
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10,969
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|
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10,986
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|
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Other expenses
|
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8,387
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|
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8,935
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|
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20,788
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|
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17,549
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Total expenses
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475,208
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|
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467,328
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|
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942,810
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951,315
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Income before federal income tax
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46,765
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39,521
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103,055
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64,605
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|
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|
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Federal income tax expense:
|
|
|
|
|
|
|
|
|
|
|
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Current
|
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7,733
|
|
|
8,781
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|
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19,987
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|
|
15,319
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|
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Deferred
|
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5,264
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|
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1,399
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|
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9,592
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|
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1,971
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Total federal income tax expense
|
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12,997
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|
|
10,180
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|
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29,579
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17,290
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Net income
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$
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33,768
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29,341
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73,476
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47,315
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Earnings per share:
|
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|
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Basic net income
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$
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0.59
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|
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0.52
|
|
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$
|
1.29
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|
|
0.84
|
|
|
|
|
|
|
|
|
|
|
||||||
Diluted net income
|
|
$
|
0.58
|
|
|
0.51
|
|
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$
|
1.27
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|
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0.83
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|
|
|
|
|
|
|
|
|
|
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Dividends to stockholders
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$
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0.14
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|
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0.13
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0.28
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0.26
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SELECTIVE INSURANCE GROUP, INC.
UNAUDITED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME
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Quarter ended June 30,
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Six Months ended June 30,
|
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($ in thousands)
|
|
2015
|
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2014
|
|
2015
|
|
2014
|
|||||
Net income
|
|
$
|
33,768
|
|
|
29,341
|
|
|
73,476
|
|
|
47,315
|
|
|
|
|
|
|
|
|
|
|
|||||
Other comprehensive (loss) income, net of tax:
|
|
|
|
|
|
|
|
|
|
|
|||
Unrealized (losses) gains on investment securities:
|
|
|
|
|
|
|
|
|
|
|
|||
Unrealized holding (losses) gains arising during period
|
|
(39,160
|
)
|
|
29,329
|
|
|
(23,574
|
)
|
|
50,755
|
|
|
Amount reclassified into net income:
|
|
|
|
|
|
|
|
|
|||||
Held-to-maturity securities
|
|
(120
|
)
|
|
(144
|
)
|
|
(290
|
)
|
|
(440
|
)
|
|
Non-credit other-than-temporary impairments
|
|
—
|
|
|
305
|
|
|
232
|
|
|
305
|
|
|
Realized losses (gains) on available-for-sale securities
|
|
2,225
|
|
|
(3,255
|
)
|
|
(10,707
|
)
|
|
(7,954
|
)
|
|
Total unrealized (losses) gains on investment securities
|
|
(37,055
|
)
|
|
26,235
|
|
|
(34,339
|
)
|
|
42,666
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|
|
|
|
|
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|
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Defined benefit pension and post-retirement plans:
|
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|
|
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|
|
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Amounts reclassified into net income:
|
|
|
|
|
|
|
|
|
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Net actuarial loss
|
|
1,111
|
|
|
248
|
|
|
2,222
|
|
|
495
|
|
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Total defined benefit pension and post-retirement plans
|
|
1,111
|
|
|
248
|
|
|
2,222
|
|
|
495
|
|
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Other comprehensive (loss) income
|
|
(35,944
|
)
|
|
26,483
|
|
|
(32,117
|
)
|
|
43,161
|
|
|
Comprehensive (loss) income
|
|
$
|
(2,176
|
)
|
|
55,824
|
|
|
41,359
|
|
|
90,476
|
|
SELECTIVE INSURANCE GROUP, INC.
UNAUDITED CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY
|
|
Six Months ended June 30,
|
|||||
($ in thousands)
|
|
2015
|
|
2014
|
|||
Common stock:
|
|
|
|
|
|
|
|
Beginning of year
|
|
$
|
199,896
|
|
|
198,240
|
|
Dividend reinvestment plan (shares: 26,843 – 2015; 29,949 – 2014)
|
|
54
|
|
|
60
|
|
|
Stock purchase and compensation plans (shares: 611,076 – 2015; 547,190 – 2014)
|
|
1,222
|
|
|
1,095
|
|
|
End of period
|
|
201,172
|
|
|
199,395
|
|
|
|
|
|
|
|
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Additional paid-in capital:
|
|
|
|
|
|
|
|
Beginning of year
|
|
305,385
|
|
|
288,182
|
|
|
Dividend reinvestment plan
|
|
677
|
|
|
642
|
|
|
Stock purchase and compensation plans
|
|
11,233
|
|
|
9,528
|
|
|
End of period
|
|
317,295
|
|
|
298,352
|
|
|
|
|
|
|
|
|||
Retained earnings:
|
|
|
|
|
|
|
|
Beginning of year
|
|
1,313,440
|
|
|
1,202,015
|
|
|
Net income
|
|
73,476
|
|
|
47,315
|
|
|
Dividends to stockholders ($0.28 per share – 2015; $0.26 per share – 2014)
|
|
(16,235
|
)
|
|
(14,868
|
)
|
|
End of period
|
|
1,370,681
|
|
|
1,234,462
|
|
|
|
|
|
|
|
|||
Accumulated other comprehensive (loss) income:
|
|
|
|
|
|
|
|
Beginning of year
|
|
19,788
|
|
|
24,851
|
|
|
Other comprehensive (loss) income
|
|
(32,117
|
)
|
|
43,161
|
|
|
End of period
|
|
(12,329
|
)
|
|
68,012
|
|
|
|
|
|
|
|
|||
Treasury stock:
|
|
|
|
|
|
|
|
Beginning of year
|
|
(562,923
|
)
|
|
(559,360
|
)
|
|
Acquisition of treasury stock (shares: 129,352 – 2015; 124,819 – 2014)
|
|
(3,583
|
)
|
|
(2,786
|
)
|
|
End of period
|
|
(566,506
|
)
|
|
(562,146
|
)
|
|
Total stockholders’ equity
|
|
$
|
1,310,313
|
|
|
1,238,075
|
|
SELECTIVE INSURANCE GROUP, INC.
UNAUDITED CONSOLIDATED STATEMENTS OF CASH FLOW
|
|
Six Months ended June 30,
|
|||||
($ in thousands)
|
|
2015
|
|
2014
|
|||
Operating Activities
|
|
|
|
|
|
|
|
Net income
|
|
$
|
73,476
|
|
|
47,315
|
|
|
|
|
|
|
|||
Adjustments to reconcile net income to net cash provided by operating activities:
|
|
|
|
|
|
|
|
Depreciation and amortization
|
|
29,085
|
|
|
18,912
|
|
|
Sale of renewal rights
|
|
—
|
|
|
(8,000
|
)
|
|
Stock-based compensation expense
|
|
6,049
|
|
|
6,102
|
|
|
Undistributed losses (gains) of equity method investments
|
|
2,117
|
|
|
(138
|
)
|
|
Net realized gains
|
|
(15,463
|
)
|
|
(11,757
|
)
|
|
|
|
|
|
|
|||
Changes in assets and liabilities:
|
|
|
|
|
|
|
|
Increase in reserve for loss and loss expenses, net of reinsurance recoverables
|
|
66,609
|
|
|
93,675
|
|
|
Increase in unearned premiums, net of prepaid reinsurance
|
|
83,789
|
|
|
36,453
|
|
|
Decrease in net federal income taxes
|
|
19,232
|
|
|
12,634
|
|
|
Increase in premiums receivable
|
|
(88,813
|
)
|
|
(64,747
|
)
|
|
Increase in deferred policy acquisition costs
|
|
(17,616
|
)
|
|
(9,106
|
)
|
|
Decrease (increase) in interest and dividends due or accrued
|
|
395
|
|
|
(361
|
)
|
|
Decrease in accrued salaries and benefits
|
|
(18,171
|
)
|
|
(26,557
|
)
|
|
Decrease in accrued insurance expenses
|
|
(5,091
|
)
|
|
(16,872
|
)
|
|
Increase (decrease) in other assets and other liabilities
|
|
29,999
|
|
|
(4,881
|
)
|
|
Net adjustments
|
|
92,121
|
|
|
25,357
|
|
|
Net cash provided by operating activities
|
|
165,597
|
|
|
72,672
|
|
|
|
|
|
|
|
|||
Investing Activities
|
|
|
|
|
|
|
|
Purchase of fixed income securities, available-for-sale
|
|
(463,758
|
)
|
|
(339,362
|
)
|
|
Purchase of equity securities, available-for-sale
|
|
(177,386
|
)
|
|
(111,886
|
)
|
|
Purchase of other investments
|
|
(2,947
|
)
|
|
(6,039
|
)
|
|
Purchase of short-term investments
|
|
(732,278
|
)
|
|
(764,692
|
)
|
|
Sale of fixed income securities, available-for-sale
|
|
22,323
|
|
|
19,557
|
|
|
Sale of short-term investments
|
|
695,901
|
|
|
772,455
|
|
|
Redemption and maturities of fixed income securities, held-to-maturity
|
|
68,704
|
|
|
28,595
|
|
|
Redemption and maturities of fixed income securities, available-for-sale
|
|
254,995
|
|
|
222,568
|
|
|
Sale of equity securities, available-for-sale
|
|
135,548
|
|
|
111,996
|
|
|
Distributions from other investments
|
|
17,840
|
|
|
7,726
|
|
|
Purchase of property and equipment
|
|
(7,591
|
)
|
|
(6,628
|
)
|
|
Sale of renewal rights
|
|
—
|
|
|
8,000
|
|
|
Net cash used in investing activities
|
|
(188,649
|
)
|
|
(57,710
|
)
|
|
|
|
|
|
|
|||
Financing Activities
|
|
|
|
|
|
|
|
Dividends to stockholders
|
|
(15,211
|
)
|
|
(13,914
|
)
|
|
Acquisition of treasury stock
|
|
(3,583
|
)
|
|
(2,786
|
)
|
|
Net proceeds from stock purchase and compensation plans
|
|
4,037
|
|
|
3,091
|
|
|
Proceeds from borrowings
|
|
15,000
|
|
|
—
|
|
|
Excess tax benefits from share-based payment arrangements
|
|
1,549
|
|
|
955
|
|
|
Repayments of capital lease obligations
|
|
(2,331
|
)
|
|
(954
|
)
|
|
Net cash used in financing activities
|
|
(539
|
)
|
|
(13,608
|
)
|
|
Net (decrease) increase in cash
|
|
(23,591
|
)
|
|
1,354
|
|
|
Cash, beginning of year
|
|
23,959
|
|
|
193
|
|
|
Cash, end of period
|
|
$
|
368
|
|
|
1,547
|
|
|
|
Six Months ended June 30,
|
|||||
($ in thousands)
|
|
2015
|
|
2014
|
|||
Cash paid during the period for:
|
|
|
|
|
|
|
|
Interest
|
|
$
|
10,947
|
|
|
11,113
|
|
Federal income tax
|
|
8,500
|
|
|
3,699
|
|
|
|
|
|
|
|
|||
Non-cash items:
|
|
|
|
|
|||
Tax-free exchange of fixed income securities, available-for-sale ("AFS")
|
|
17,120
|
|
|
9,180
|
|
|
Tax-free exchange of fixed income securities, held-to-maturity ("HTM")
|
|
—
|
|
|
15
|
|
|
Corporate actions related to equity securities, AFS
1
|
|
884
|
|
|
334
|
|
|
Assets acquired under capital lease arrangements
|
|
3,478
|
|
|
2,124
|
|
June 30, 2015
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||
($ in thousands)
|
|
Amortized
Cost
|
|
Net
Unrealized Gains
(Losses)
|
|
Carrying
Value
|
|
Unrecognized
Holding
Gains
|
|
Unrecognized Holding
Losses
|
|
Fair
Value
|
|||||||
Foreign government
|
|
$
|
5,292
|
|
|
3
|
|
|
5,295
|
|
|
—
|
|
|
(3
|
)
|
|
5,292
|
|
Obligations of states and political subdivisions
|
|
216,870
|
|
|
1,395
|
|
|
218,265
|
|
|
8,441
|
|
|
—
|
|
|
226,706
|
|
|
Corporate securities
|
|
18,532
|
|
|
(265
|
)
|
|
18,267
|
|
|
2,565
|
|
|
—
|
|
|
20,832
|
|
|
Asset-backed securities (“ABS”)
|
|
1,976
|
|
|
(280
|
)
|
|
1,696
|
|
|
285
|
|
|
—
|
|
|
1,981
|
|
|
Commercial mortgage-backed securities (“CMBS”)
|
|
4,676
|
|
|
(340
|
)
|
|
4,336
|
|
|
555
|
|
|
—
|
|
|
4,891
|
|
|
Total HTM fixed income securities
|
|
$
|
247,346
|
|
|
513
|
|
|
247,859
|
|
|
11,846
|
|
|
(3
|
)
|
|
259,702
|
|
December 31, 2014
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||
($ in thousands)
|
|
Amortized
Cost
|
|
Net
Unrealized Gains
(Losses)
|
|
Carrying
Value
|
|
Unrecognized
Holding
Gains
|
|
Unrecognized Holding
Losses
|
|
Fair
Value
|
|||||||
Foreign government
|
|
$
|
5,292
|
|
|
47
|
|
|
5,339
|
|
|
55
|
|
|
—
|
|
|
5,394
|
|
Obligations of states 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
|
|
June 30, 2015
|
|
|
|
|
|
|
|
|
|||||
($ in thousands)
|
|
Cost/
Amortized
Cost
|
|
Unrealized
Gains
|
|
Unrealized
Losses
|
|
Fair
Value
|
|||||
AFS fixed income securities:
|
|
|
|
|
|
|
|
|
|||||
U.S. government and government agencies
|
|
$
|
109,506
|
|
|
6,420
|
|
|
(65
|
)
|
|
115,861
|
|
Foreign government
|
|
22,026
|
|
|
693
|
|
|
—
|
|
|
22,719
|
|
|
Obligations of states and political subdivisions
|
|
1,277,635
|
|
|
23,242
|
|
|
(4,819
|
)
|
|
1,296,058
|
|
|
Corporate securities
|
|
1,794,698
|
|
|
36,201
|
|
|
(6,324
|
)
|
|
1,824,575
|
|
|
ABS
|
|
213,662
|
|
|
990
|
|
|
(155
|
)
|
|
214,497
|
|
|
CMBS
1
|
|
213,497
|
|
|
1,861
|
|
|
(1,180
|
)
|
|
214,178
|
|
|
Residential mortgage-backed
securities (“RMBS”)
2
|
|
502,199
|
|
|
6,224
|
|
|
(3,493
|
)
|
|
504,930
|
|
|
Total AFS fixed income securities
|
|
4,133,223
|
|
|
75,631
|
|
|
(16,036
|
)
|
|
4,192,818
|
|
|
AFS equity securities:
|
|
|
|
|
|
|
|
|
|||||
Common stock
|
|
200,150
|
|
|
15,159
|
|
|
(4,190
|
)
|
|
211,119
|
|
|
Preferred stock
|
|
17,988
|
|
|
23
|
|
|
(247
|
)
|
|
17,764
|
|
|
Total AFS equity securities
|
|
218,138
|
|
|
15,182
|
|
|
(4,437
|
)
|
|
228,883
|
|
|
Total AFS securities
|
|
$
|
4,351,361
|
|
|
90,813
|
|
|
(20,473
|
)
|
|
4,421,701
|
|
December 31, 2014
|
|
|
|
|
|
|
|
|
|||||
($ in thousands)
|
|
Cost/
Amortized
Cost
|
|
Unrealized
Gains
|
|
Unrealized
Losses
|
|
Fair
Value
|
|||||
AFS fixed income securities:
|
|
|
|
|
|
|
|
|
|||||
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
|
|
|
Total AFS fixed income securities
|
|
3,975,786
|
|
|
100,578
|
|
|
(10,242
|
)
|
|
4,066,122
|
|
|
AFS equity securities:
|
|
|
|
|
|
|
|
|
|||||
Common stock
|
|
159,011
|
|
|
32,725
|
|
|
(336
|
)
|
|
191,400
|
|
|
Total AFS equity securities
|
|
159,011
|
|
|
32,725
|
|
|
(336
|
)
|
|
191,400
|
|
|
Total AFS securities
|
|
$
|
4,134,797
|
|
|
133,303
|
|
|
(10,578
|
)
|
|
4,257,522
|
|
June 30, 2015
|
|
Less than 12 months
|
|
12 months or longer
|
|||||||||
($ in thousands)
|
|
Fair Value
|
|
Unrealized
Losses
1
|
|
Fair Value
|
|
Unrealized
Losses
1
|
|||||
AFS fixed income securities:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
U.S. government and government agencies
|
|
$
|
7,513
|
|
|
(62
|
)
|
|
398
|
|
|
(3
|
)
|
Obligations of states and political subdivisions
|
|
398,429
|
|
|
(4,819
|
)
|
|
—
|
|
|
—
|
|
|
Corporate securities
|
|
440,510
|
|
|
(4,939
|
)
|
|
50,187
|
|
|
(1,385
|
)
|
|
ABS
|
|
40,185
|
|
|
(40
|
)
|
|
15,071
|
|
|
(115
|
)
|
|
CMBS
|
|
80,860
|
|
|
(1,057
|
)
|
|
15,579
|
|
|
(123
|
)
|
|
RMBS
|
|
172,482
|
|
|
(1,763
|
)
|
|
67,336
|
|
|
(1,730
|
)
|
|
Total AFS fixed income securities
|
|
1,139,979
|
|
|
(12,680
|
)
|
|
148,571
|
|
|
(3,356
|
)
|
|
AFS equity securities:
|
|
|
|
|
|
|
|
|
|||||
Common stock
|
|
103,352
|
|
|
(4,190
|
)
|
|
—
|
|
|
—
|
|
|
Preferred stock
|
|
8,432
|
|
|
(247
|
)
|
|
—
|
|
|
—
|
|
|
Total AFS equity securities
|
|
111,784
|
|
|
(4,437
|
)
|
|
—
|
|
|
—
|
|
|
Subtotal
|
|
$
|
1,251,763
|
|
|
(17,117
|
)
|
|
148,571
|
|
|
(3,356
|
)
|
|
|
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
|
|
180
|
|
|
(2
|
)
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
ABS
|
|
—
|
|
|
—
|
|
|
—
|
|
|
1,540
|
|
|
(280
|
)
|
|
272
|
|
|
Subtotal
|
|
$
|
180
|
|
|
(2
|
)
|
|
—
|
|
|
1,540
|
|
|
(280
|
)
|
|
272
|
|
Total AFS and HTM
|
|
$
|
1,251,943
|
|
|
(17,119
|
)
|
|
—
|
|
|
150,111
|
|
|
(3,636
|
)
|
|
272
|
|
December 31, 2014
|
|
Less than 12 months
|
|
12 months or longer
|
|||||||||
($ in thousands)
|
|
Fair
Value
|
|
Unrealized
Losses
1
|
|
Fair Value
|
|
Unrealized
Losses
1
|
|||||
AFS fixed income 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 AFS fixed income securities
|
|
461,125
|
|
|
(2,072
|
)
|
|
442,058
|
|
|
(8,170
|
)
|
|
AFS equity securities:
|
|
|
|
|
|
|
|
|
|||||
Common stock
|
|
5,262
|
|
|
(336
|
)
|
|
—
|
|
|
—
|
|
|
Total AFS 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
|
|
($ in thousands)
|
|
Carrying Value
|
|
Fair Value
|
|||
Due in one year or less
|
|
$
|
87,104
|
|
|
88,688
|
|
Due after one year through five years
|
|
149,865
|
|
|
158,092
|
|
|
Due after five years through 10 years
|
|
10,890
|
|
|
12,922
|
|
|
Total HTM fixed income securities
|
|
$
|
247,859
|
|
|
259,702
|
|
($ in thousands)
|
|
Fair Value
|
||
Due in one year or less
|
|
$
|
447,462
|
|
Due after one year through five years
|
|
2,146,816
|
|
|
Due after five years through 10 years
|
|
1,504,185
|
|
|
Due after 10 years
|
|
94,355
|
|
|
Total AFS fixed income securities
|
|
$
|
4,192,818
|
|
Other Investments
|
|
Carrying Value
|
|
June 30, 2015
|
||||||
($ in thousands)
|
|
June 30,
2015 |
|
December 31,
2014 |
|
Remaining Commitment
|
||||
Alternative Investments
|
|
|
|
|
|
|
|
|
|
|
Secondary private equity
|
|
$
|
18,997
|
|
|
21,807
|
|
|
7,072
|
|
Private equity
|
|
16,027
|
|
|
20,126
|
|
|
8,823
|
|
|
Energy/power generation
|
|
9,662
|
|
|
14,445
|
|
|
19,610
|
|
|
Real estate
|
|
8,242
|
|
|
11,452
|
|
|
9,975
|
|
|
Mezzanine financing
|
|
7,563
|
|
|
9,853
|
|
|
13,383
|
|
|
Distressed debt
|
|
7,000
|
|
|
8,679
|
|
|
3,048
|
|
|
Venture capital
|
|
6,697
|
|
|
6,606
|
|
|
350
|
|
|
Total alternative investments
|
|
74,188
|
|
|
92,968
|
|
|
62,261
|
|
|
Other securities
|
|
11,232
|
|
|
6,235
|
|
|
2,269
|
|
|
Total other investments
|
|
$
|
85,420
|
|
|
99,203
|
|
|
64,530
|
|
Income Statement Information
|
|
Quarter ended March 31,
|
|
Six Months ended March 31,
|
||||||||||
($ in millions)
|
|
2015
|
|
2014
|
|
2015
|
|
2014
|
||||||
Net investment income
|
|
$
|
8.5
|
|
|
22.8
|
|
|
$
|
95.6
|
|
|
85.7
|
|
Realized gains
|
|
279.4
|
|
|
74.2
|
|
|
592.5
|
|
|
197.6
|
|
||
Net change in unrealized (depreciation) appreciation
|
|
(223.4
|
)
|
|
207.6
|
|
|
(866.9
|
)
|
|
842.4
|
|
||
Net (loss) income
|
|
$
|
64.5
|
|
|
304.6
|
|
|
$
|
(178.8
|
)
|
|
1,125.7
|
|
Selective’s insurance subsidiaries’ other investments income (loss)
|
|
$
|
1.4
|
|
|
3.6
|
|
|
$
|
(2.1
|
)
|
|
8.8
|
|
($ in millions)
|
|
FHLBI Collateral
|
|
Reinsurance Collateral
|
|
State and Regulatory Deposits
|
|
Total
|
|||||
U.S. government and government agencies
|
|
$
|
7.7
|
|
|
—
|
|
|
24.7
|
|
|
32.4
|
|
Obligations of states and political subdivisions
|
|
—
|
|
|
4.9
|
|
|
—
|
|
|
4.9
|
|
|
Corporate securities
|
|
—
|
|
|
4.8
|
|
|
—
|
|
|
4.8
|
|
|
CMBS
|
|
1.5
|
|
|
—
|
|
|
—
|
|
|
1.5
|
|
|
RMBS
|
|
54.5
|
|
|
2.0
|
|
|
—
|
|
|
56.5
|
|
|
Total pledged as collateral
|
|
$
|
63.7
|
|
|
11.7
|
|
|
24.7
|
|
|
100.1
|
|
|
|
Quarter ended June 30,
|
|
Six Months ended June 30,
|
|||||||||||
($ in thousands)
|
|
2015
|
|
2014
|
|
2015
|
|
2014
|
|||||||
Fixed income securities
|
|
$
|
30,659
|
|
|
33,781
|
|
|
$
|
61,626
|
|
|
$
|
64,809
|
|
Equity securities
|
|
2,384
|
|
|
1,736
|
|
|
4,176
|
|
|
3,185
|
|
|||
Short-term investments
|
|
23
|
|
|
14
|
|
|
48
|
|
|
33
|
|
|||
Other investments
|
|
1,422
|
|
|
3,553
|
|
|
(2,118
|
)
|
|
8,771
|
|
|||
Investment expenses
|
|
(2,258
|
)
|
|
(2,310
|
)
|
|
(4,585
|
)
|
|
(4,490
|
)
|
|||
Net investment income earned
|
|
$
|
32,230
|
|
|
36,774
|
|
|
59,147
|
|
|
72,308
|
|
Second Quarter 2015
|
|
Gross
|
|
Included in Other Comprehensive Income ("OCI")
|
|
Recognized in
Earnings |
||||
($ in thousands)
|
|
|
|
|||||||
AFS fixed income securities:
|
|
|
|
|
|
|
||||
Corporate securities
|
|
$
|
183
|
|
|
—
|
|
|
183
|
|
Total AFS fixed income securities
|
|
183
|
|
|
—
|
|
|
183
|
|
|
AFS equity securities:
|
|
|
|
|
|
|
||||
Common stock
|
|
4,088
|
|
|
—
|
|
|
4,088
|
|
|
Preferred stock
|
|
180
|
|
|
—
|
|
|
180
|
|
|
Total AFS equity securities
|
|
4,268
|
|
|
—
|
|
|
4,268
|
|
|
Total OTTI losses
|
|
$
|
4,451
|
|
|
—
|
|
|
4,451
|
|
Second Quarter 2014
|
|
Gross
|
|
Included in OCI
|
|
Recognized in Earnings
|
||||
($ in thousands)
|
|
|
|
|||||||
AFS equity securities:
|
|
|
|
|
|
|
|
|
|
|
Common stock
|
|
$
|
419
|
|
|
—
|
|
|
419
|
|
Total OTTI losses
|
|
$
|
419
|
|
|
—
|
|
|
419
|
|
Six Months 2015
|
|
Gross
|
|
Included in Other Comprehensive Income ("OCI")
|
|
Recognized in
Earnings |
||||
($ in thousands)
|
|
|
|
|||||||
AFS fixed income securities:
|
|
|
|
|
|
|
||||
Corporate securities
|
|
$
|
1,192
|
|
|
—
|
|
|
1,192
|
|
RMBS
|
|
1
|
|
|
—
|
|
|
1
|
|
|
Total AFS fixed income securities
|
|
1,193
|
|
|
—
|
|
|
1,193
|
|
|
AFS equity securities:
|
|
|
|
|
|
|
||||
Common stock
|
|
5,172
|
|
|
—
|
|
|
5,172
|
|
|
Preferred stock
|
|
180
|
|
|
—
|
|
|
180
|
|
|
Total AFS equity securities
|
|
5,352
|
|
|
—
|
|
|
5,352
|
|
|
Total OTTI losses
|
|
$
|
6,545
|
|
|
—
|
|
|
6,545
|
|
Six Months 2014
|
|
Gross
|
|
Included in OCI
|
|
Recognized in Earnings
|
||||
($ in thousands)
|
|
|
|
|||||||
AFS equity securities:
|
|
|
|
|
|
|
|
|
|
|
Common stock
|
|
$
|
1,382
|
|
|
—
|
|
|
1,382
|
|
Total OTTI losses
|
|
$
|
1,382
|
|
|
—
|
|
|
1,382
|
|
|
|
Quarter ended June 30,
|
|||||
($ in thousands)
|
|
2015
|
|
2014
|
|||
Balance, beginning of period
|
|
$
|
1,013
|
|
|
7,488
|
|
Addition for the amount related to credit loss for which an OTTI was not previously recognized
|
|
—
|
|
|
—
|
|
|
Reductions for securities sold during the period
|
|
—
|
|
|
(1,954
|
)
|
|
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
|
|
—
|
|
|
—
|
|
|
Additional increases to the amount related to credit loss for which an OTTI was previously recognized
|
|
—
|
|
|
—
|
|
|
Accretion of credit loss impairments previously recognized due to an increase in cash flows expected to be collected
|
|
—
|
|
|
—
|
|
|
Balance, end of period
|
|
$
|
1,013
|
|
|
5,534
|
|
|
|
Six Months ended June 30,
|
|||||
($ in thousands)
|
|
2015
|
|
2014
|
|||
Balance, beginning of period
|
|
$
|
5,444
|
|
|
7,488
|
|
Addition for the amount related to credit loss for which an OTTI was not previously recognized
|
|
—
|
|
|
—
|
|
|
Reductions for securities sold during the period
|
|
(4,431
|
)
|
|
(1,954
|
)
|
|
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
|
|
—
|
|
|
—
|
|
|
Additional increases to the amount related to credit loss for which an OTTI was previously recognized
|
|
—
|
|
|
—
|
|
|
Accretion of credit loss impairments previously recognized due to an increase in cash flows expected to be collected
|
|
—
|
|
|
—
|
|
|
Balance, end of period
|
|
$
|
1,013
|
|
|
5,534
|
|
|
|
Quarter ended June 30,
|
|
Six Months ended June 30,
|
|||||||||
($ in thousands)
|
|
2015
|
|
2014
|
|
2015
|
|
2014
|
|||||
HTM fixed income securities
|
|
|
|
|
|
|
|
|
|||||
Gains
|
|
$
|
2
|
|
|
3
|
|
|
2
|
|
|
3
|
|
Losses
|
|
—
|
|
|
(3
|
)
|
|
(1
|
)
|
|
(14
|
)
|
|
AFS fixed income securities
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Gains
|
|
487
|
|
|
780
|
|
|
1,989
|
|
|
938
|
|
|
Losses
|
|
(18
|
)
|
|
(31
|
)
|
|
(130
|
)
|
|
(143
|
)
|
|
AFS equity securities
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Gains
|
|
830
|
|
|
4,362
|
|
|
22,148
|
|
|
12,679
|
|
|
Losses
|
|
(270
|
)
|
|
(153
|
)
|
|
(1,346
|
)
|
|
(324
|
)
|
|
Other investments
|
|
|
|
|
|
|
|
|
|||||
Gains
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
Losses
|
|
—
|
|
|
—
|
|
|
(654
|
)
|
|
—
|
|
|
Total net realized gains (excluding OTTI charges)
|
|
$
|
1,031
|
|
|
4,958
|
|
|
22,008
|
|
|
13,139
|
|
|
|
June 30, 2015
|
|
December 31, 2014
|
|||||||||
($ in thousands)
|
|
Carrying Amount
|
|
Fair
Value
|
|
Carrying Amount
|
|
Fair
Value
|
|||||
Financial Assets
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Fixed income securities:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
HTM
|
|
$
|
247,859
|
|
|
259,702
|
|
|
318,137
|
|
|
333,961
|
|
AFS
|
|
4,192,818
|
|
|
4,192,818
|
|
|
4,066,122
|
|
|
4,066,122
|
|
|
Equity securities, AFS
|
|
228,883
|
|
|
228,883
|
|
|
191,400
|
|
|
191,400
|
|
|
Short-term investments
|
|
168,349
|
|
|
168,349
|
|
|
131,972
|
|
|
131,972
|
|
|
Financial Liabilities
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Notes payable:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
0.63% borrowings from FHLBI
|
|
15,000
|
|
|
14,999
|
|
|
—
|
|
|
—
|
|
|
1.25% borrowings from FHLBI
|
|
45,000
|
|
|
45,290
|
|
|
45,000
|
|
|
45,244
|
|
|
7.25% Senior Notes
|
|
49,897
|
|
|
56,607
|
|
|
49,896
|
|
|
59,181
|
|
|
6.70% Senior Notes
|
|
99,408
|
|
|
109,656
|
|
|
99,401
|
|
|
114,845
|
|
|
5.875% Senior Notes
|
|
185,000
|
|
|
183,742
|
|
|
185,000
|
|
|
185,000
|
|
|
Total notes payable
|
|
$
|
394,305
|
|
|
410,294
|
|
|
379,297
|
|
|
404,270
|
|
June 30, 2015
|
|
|
|
Fair Value Measurements Using
|
|||||||||
($ in thousands)
|
|
Assets
Measured at
Fair Value
at 6/30/2015
|
|
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 fixed income securities:
|
|
|
|
|
|
|
|
|
|||||
U.S. government and government agencies
|
|
$
|
115,861
|
|
|
52,361
|
|
|
63,500
|
|
|
—
|
|
Foreign government
|
|
22,719
|
|
|
—
|
|
|
22,719
|
|
|
—
|
|
|
Obligations of states and political subdivisions
|
|
1,296,058
|
|
|
—
|
|
|
1,296,058
|
|
|
—
|
|
|
Corporate securities
|
|
1,824,575
|
|
|
—
|
|
|
1,824,575
|
|
|
—
|
|
|
ABS
|
|
214,497
|
|
|
—
|
|
|
214,497
|
|
|
—
|
|
|
CMBS
|
|
214,178
|
|
|
—
|
|
|
214,178
|
|
|
—
|
|
|
RMBS
|
|
504,930
|
|
|
—
|
|
|
504,930
|
|
|
—
|
|
|
Total AFS fixed income securities
|
|
4,192,818
|
|
|
52,361
|
|
|
4,140,457
|
|
|
—
|
|
|
AFS equity securities:
|
|
|
|
|
|
|
|
|
|||||
Common stock
|
|
211,119
|
|
|
208,334
|
|
|
—
|
|
|
2,785
|
|
|
Preferred stock
|
|
17,764
|
|
|
17,764
|
|
|
—
|
|
|
—
|
|
|
Total AFS equity securities
|
|
228,883
|
|
|
226,098
|
|
|
—
|
|
|
2,785
|
|
|
Total AFS securities
|
|
4,421,701
|
|
|
278,459
|
|
|
4,140,457
|
|
|
2,785
|
|
|
Short-term investments
|
|
168,349
|
|
|
168,349
|
|
|
—
|
|
|
—
|
|
|
Total assets measured at fair value
|
|
$
|
4,590,050
|
|
|
446,808
|
|
|
4,140,457
|
|
|
2,785
|
|
1
|
There were no transfers of securities between Level 1 and Level 2.
|
December 31, 2014
|
|
|
|
Fair Value Measurements Using
|
|||||||||
($ in thousands)
|
|
Assets
Measured at
Fair Value
at 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 AFS fixed income securities
|
|
4,066,122
|
|
|
53,199
|
|
|
4,012,923
|
|
|
—
|
|
|
AFS equity securities:
|
|
|
|
|
|
|
|
|
|||||
Common stock
|
|
191,400
|
|
|
188,500
|
|
|
—
|
|
|
2,900
|
|
|
Total AFS 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 measured at fair value
|
|
$
|
4,389,494
|
|
|
373,671
|
|
|
4,012,923
|
|
|
2,900
|
|
1
|
There were no transfers of securities between Level 1 and Level 2.
|
June 30, 2015
|
Common Stock
|
||
($ in thousands)
|
|||
Fair value, December 31, 2014
|
$
|
2,900
|
|
Total net (losses) gains for the period included in:
|
|
||
OCI
|
—
|
|
|
Net income
|
—
|
|
|
Purchases
|
—
|
|
|
Sales
|
(115
|
)
|
|
Issuances
|
—
|
|
|
Settlements
|
—
|
|
|
Transfers into Level 3
|
—
|
|
|
Transfers out of Level 3
|
—
|
|
|
Fair value, June 30, 2015
|
$
|
2,785
|
|
June 30, 2015
|
|
|
|
Fair Value Measurements Using
|
|||||||||
($ in thousands)
|
|
Assets/
Liabilities
Disclosed at
Fair Value at 6/30/2015
|
|
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
|
|
$
|
5,292
|
|
|
—
|
|
|
5,292
|
|
|
—
|
|
Obligations of states and political subdivisions
|
|
226,706
|
|
|
—
|
|
|
226,706
|
|
|
—
|
|
|
Corporate securities
|
|
20,832
|
|
|
—
|
|
|
20,832
|
|
|
—
|
|
|
ABS
|
|
1,981
|
|
|
—
|
|
|
1,981
|
|
|
—
|
|
|
CMBS
|
|
4,891
|
|
|
—
|
|
|
4,891
|
|
|
—
|
|
|
Total HTM fixed income securities
|
|
$
|
259,702
|
|
|
—
|
|
|
259,702
|
|
|
—
|
|
Financial Liabilities
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Notes payable:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
0.63% borrowings from FHLBI
|
|
$
|
14,999
|
|
|
—
|
|
|
14,999
|
|
|
—
|
|
1.25% borrowings from FHLBI
|
|
45,290
|
|
|
—
|
|
|
45,290
|
|
|
—
|
|
|
7.25% Senior Notes
|
|
56,607
|
|
|
—
|
|
|
56,607
|
|
|
—
|
|
|
6.70% Senior Notes
|
|
109,656
|
|
|
—
|
|
|
109,656
|
|
|
—
|
|
|
5.875% Senior Notes
|
|
183,742
|
|
|
183,742
|
|
|
—
|
|
|
—
|
|
|
Total notes payable
|
|
$
|
410,294
|
|
|
183,742
|
|
|
226,552
|
|
|
—
|
|
December 31, 2014
|
|
|
|
Fair Value Measurements Using
|
|||||||||
($ in thousands)
|
|
Assets/
Liabilities
Disclosed at
Fair Value at 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
|
|
|
—
|
|
|
|
Quarter ended June 30,
|
|
Six Months ended June 30,
|
|||||||||
($ in thousands)
|
|
2015
|
|
2014
|
|
2015
|
|
2014
|
|||||
Premiums written:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Direct
|
|
$
|
621,408
|
|
|
572,314
|
|
|
1,220,191
|
|
|
1,130,205
|
|
Assumed
|
|
4,960
|
|
|
5,837
|
|
|
11,041
|
|
|
13,687
|
|
|
Ceded
|
|
(94,235
|
)
|
|
(98,328
|
)
|
|
(181,011
|
)
|
|
(187,319
|
)
|
|
Net
|
|
$
|
532,133
|
|
|
479,823
|
|
|
1,050,221
|
|
|
956,573
|
|
Premiums earned:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Direct
|
|
$
|
576,107
|
|
|
544,913
|
|
|
1,138,149
|
|
|
1,081,613
|
|
Assumed
|
|
5,093
|
|
|
10,385
|
|
|
11,001
|
|
|
20,570
|
|
|
Ceded
|
|
(90,891
|
)
|
|
(91,673
|
)
|
|
(182,718
|
)
|
|
(182,063
|
)
|
|
Net
|
|
$
|
490,309
|
|
|
463,625
|
|
|
966,432
|
|
|
920,120
|
|
Loss and loss expense incurred:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Direct
|
|
$
|
316,648
|
|
|
332,707
|
|
|
628,894
|
|
|
691,056
|
|
Assumed
|
|
4,228
|
|
|
7,377
|
|
|
8,890
|
|
|
14,856
|
|
|
Ceded
|
|
(29,315
|
)
|
|
(42,289
|
)
|
|
(61,224
|
)
|
|
(87,571
|
)
|
|
Net
|
|
$
|
291,561
|
|
|
297,795
|
|
|
576,560
|
|
|
618,341
|
|
Ceded to NFIP
|
|
Quarter ended June 30,
|
|
Six Months ended June 30,
|
|||||||||
($ in thousands)
|
|
2015
|
|
2014
|
|
2015
|
|
2014
|
|||||
Ceded premiums written
|
|
$
|
(62,479
|
)
|
|
(65,775
|
)
|
|
(116,321
|
)
|
|
(123,078
|
)
|
Ceded premiums earned
|
|
(58,781
|
)
|
|
(59,213
|
)
|
|
(117,779
|
)
|
|
(117,499
|
)
|
|
Ceded loss and loss expense incurred
|
|
(14,684
|
)
|
|
(26,712
|
)
|
|
(20,933
|
)
|
|
(34,091
|
)
|
•
|
Standard Commercial Lines - comprised of insurance products and services provided in the standard marketplace to
|
•
|
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
|
•
|
Investments - invests the premiums collected by our Standard Commercial Lines, Standard Personal Lines, and E&S
|
Revenue by Segment
|
|
Quarter ended June 30,
|
|
Six Months ended June 30,
|
|||||||||
($ in thousands)
|
|
2015
|
|
2014
|
|
2015
|
|
2014
|
|||||
Standard Commercial Lines:
|
|
|
|
|
|
|
|
|
|
|
|||
Net premiums earned:
|
|
|
|
|
|
|
|
|
|
|
|||
Commercial automobile
|
|
$
|
88,658
|
|
|
83,472
|
|
|
175,013
|
|
|
165,688
|
|
Workers compensation
|
|
70,954
|
|
|
68,992
|
|
|
139,431
|
|
|
138,405
|
|
|
General liability
|
|
119,207
|
|
|
111,591
|
|
|
234,178
|
|
|
220,409
|
|
|
Commercial property
|
|
66,549
|
|
|
61,226
|
|
|
131,112
|
|
|
121,412
|
|
|
Businessowners’ policies
|
|
23,178
|
|
|
21,279
|
|
|
45,877
|
|
|
42,148
|
|
|
Bonds
|
|
5,106
|
|
|
4,734
|
|
|
10,106
|
|
|
9,490
|
|
|
Other
|
|
3,553
|
|
|
3,213
|
|
|
7,021
|
|
|
6,396
|
|
|
Miscellaneous income
|
|
2,563
|
|
|
1,571
|
|
|
4,232
|
|
|
10,485
|
|
|
Total Standard Commercial Lines revenue
|
|
379,768
|
|
|
356,078
|
|
|
746,970
|
|
|
714,433
|
|
|
Standard Personal Lines:
|
|
|
|
|
|
|
|
|
|||||
Net premiums earned:
|
|
|
|
|
|
|
|
|
|||||
Personal automobile
|
|
36,740
|
|
|
38,022
|
|
|
73,750
|
|
|
76,248
|
|
|
Homeowners
|
|
33,731
|
|
|
33,576
|
|
|
67,452
|
|
|
66,874
|
|
|
Other
|
|
1,600
|
|
|
2,946
|
|
|
3,348
|
|
|
6,240
|
|
|
Miscellaneous income
|
|
291
|
|
|
337
|
|
|
591
|
|
|
1,242
|
|
|
Total Standard Personal Lines revenue
|
|
72,362
|
|
|
74,881
|
|
|
145,141
|
|
|
150,604
|
|
|
E&S Lines:
|
|
|
|
|
|
|
|
|
|||||
Net premiums earned:
|
|
|
|
|
|
|
|
|
|||||
General liability
|
|
28,793
|
|
|
23,936
|
|
|
55,519
|
|
|
45,867
|
|
|
Commercial property
|
|
10,464
|
|
|
9,379
|
|
|
20,119
|
|
|
18,496
|
|
|
Commercial automobile
|
|
1,776
|
|
|
1,259
|
|
|
3,506
|
|
|
2,447
|
|
|
Total E&S Lines revenue
|
|
41,033
|
|
|
34,574
|
|
|
79,144
|
|
|
66,810
|
|
|
Investments:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net investment income
|
|
32,230
|
|
|
36,774
|
|
|
59,147
|
|
|
72,308
|
|
|
Net realized investment (losses) gains
|
|
(3,420
|
)
|
|
4,539
|
|
|
15,463
|
|
|
11,757
|
|
|
Total Investments revenue
|
|
28,810
|
|
|
41,313
|
|
|
74,610
|
|
|
84,065
|
|
|
Total segments revenue
|
|
521,973
|
|
|
506,846
|
|
|
1,045,865
|
|
|
1,015,912
|
|
|
Other income
|
|
—
|
|
|
3
|
|
|
—
|
|
|
8
|
|
|
Total revenues
|
|
$
|
521,973
|
|
|
506,849
|
|
|
1,045,865
|
|
|
1,015,920
|
|
Income Before Federal Income Tax
|
|
Quarter ended June 30,
|
|
Six Months ended June 30,
|
|||||||||
($ in thousands)
|
|
2015
|
|
2014
|
|
2015
|
|
2014
|
|||||
Standard Commercial Lines:
|
|
|
|
|
|
|
|
|
|
|
|||
Underwriting gain
|
|
$
|
35,241
|
|
|
15,703
|
|
|
65,277
|
|
|
12,073
|
|
GAAP combined ratio
|
|
90.7
|
%
|
|
95.6
|
|
|
91.2
|
|
|
98.3
|
|
|
Statutory combined ratio
|
|
90.1
|
|
|
95.5
|
|
|
89.9
|
|
|
97.8
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||
Standard Personal Lines:
|
|
|
|
|
|
|
|
|
|||||
Underwriting loss
|
|
$
|
(4,655
|
)
|
|
(5,582
|
)
|
|
(7,121
|
)
|
|
(7,942
|
)
|
GAAP combined ratio
|
|
106.5
|
%
|
|
107.5
|
|
|
104.9
|
|
|
105.3
|
|
|
Statutory combined ratio
|
|
105.4
|
|
|
106.1
|
|
|
105.2
|
|
|
105.3
|
|
|
|
|
|
|
|
|
|
|
|
|||||
E&S Insurance Operations:
|
|
|
|
|
|
|
|
|
|||||
Underwriting (loss) gain
|
|
$
|
(1,462
|
)
|
|
(37
|
)
|
|
(3,011
|
)
|
|
938
|
|
GAAP combined ratio
|
|
103.6
|
%
|
|
100.1
|
|
|
103.8
|
|
|
98.6
|
|
|
Statutory combined ratio
|
|
102.7
|
|
|
99.9
|
|
|
102.5
|
|
|
98.8
|
|
|
|
|
|
|
|
|
|
|
|
|||||
Investments:
|
|
|
|
|
|
|
|
|
|
|
|||
Net investment income
|
|
$
|
32,230
|
|
|
36,774
|
|
|
59,147
|
|
|
72,308
|
|
Net realized investment (losses) gains
|
|
(3,420
|
)
|
|
4,539
|
|
|
15,463
|
|
|
11,757
|
|
|
Total investment income, before federal income tax
|
|
28,810
|
|
|
41,313
|
|
|
74,610
|
|
|
84,065
|
|
|
Tax on investment income
|
|
6,254
|
|
|
10,941
|
|
|
18,572
|
|
|
22,516
|
|
|
Total investment income, after federal income tax
|
|
$
|
22,556
|
|
|
30,372
|
|
|
56,038
|
|
|
61,549
|
|
Reconciliation of Segment Results to Income
Before Federal Income Tax
|
|
Quarter ended June 30,
|
|
Six Months ended June 30,
|
|||||||||
($ in thousands)
|
|
2015
|
|
2014
|
|
2015
|
|
2014
|
|||||
Underwriting gain (loss), before federal income tax
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Standard Commercial Lines
|
|
$
|
35,241
|
|
|
15,703
|
|
|
65,277
|
|
|
12,073
|
|
Standard Personal Lines
|
|
(4,655
|
)
|
|
(5,582
|
)
|
|
(7,121
|
)
|
|
(7,942
|
)
|
|
E&S Lines
|
|
(1,462
|
)
|
|
(37
|
)
|
|
(3,011
|
)
|
|
938
|
|
|
Investment income, before federal income tax
|
|
28,810
|
|
|
41,313
|
|
|
74,610
|
|
|
84,065
|
|
|
Total all segments
|
|
57,934
|
|
|
51,397
|
|
|
129,755
|
|
|
89,134
|
|
|
Interest expense
|
|
(5,490
|
)
|
|
(5,425
|
)
|
|
(10,969
|
)
|
|
(10,986
|
)
|
|
General corporate and other expenses
|
|
(5,679
|
)
|
|
(6,451
|
)
|
|
(15,731
|
)
|
|
(13,543
|
)
|
|
Income before federal income tax
|
|
$
|
46,765
|
|
|
39,521
|
|
|
103,055
|
|
|
64,605
|
|
|
|
Retirement Income Plan
Quarter ended June 30, |
|
Retirement Life Plan
Quarter ended June 30, |
|||||||||
($ in thousands)
|
|
2015
|
|
2014
|
|
2015
|
|
2014
|
|||||
Components of Net Periodic Benefit Cost:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||
Net Periodic Benefit Cost:
|
|
|
|
|
|
|
|
|
|||||
Service cost
|
|
$
|
1,963
|
|
|
1,626
|
|
|
—
|
|
|
—
|
|
Interest cost
|
|
3,501
|
|
|
3,253
|
|
|
63
|
|
|
73
|
|
|
Expected return on plan assets
|
|
(3,990
|
)
|
|
(3,918
|
)
|
|
—
|
|
|
—
|
|
|
Amortization of unrecognized net actuarial loss
|
|
1,695
|
|
|
368
|
|
|
14
|
|
|
13
|
|
|
Total net periodic cost
|
|
$
|
3,169
|
|
|
1,329
|
|
|
77
|
|
|
86
|
|
|
|||||||||||||
|
|
Retirement Income Plan
Six Months ended June 30, |
|
Retirement Life Plan
Six Months ended June 30, |
|||||||||
($ in thousands)
|
|
2015
|
|
2014
|
|
2015
|
|
2014
|
|||||
Components of Net Periodic Benefit Cost:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||
Net Periodic Benefit Cost:
|
|
|
|
|
|
|
|
|
|||||
Service cost
|
|
$
|
3,927
|
|
|
3,253
|
|
|
—
|
|
|
—
|
|
Interest cost
|
|
7,003
|
|
|
6,507
|
|
|
126
|
|
|
146
|
|
|
Expected return on plan assets
|
|
(7,981
|
)
|
|
(7,837
|
)
|
|
—
|
|
|
—
|
|
|
Amortization of unrecognized net actuarial loss
|
|
3,390
|
|
|
735
|
|
|
28
|
|
|
26
|
|
|
Total net periodic cost
|
|
$
|
6,339
|
|
|
2,658
|
|
|
154
|
|
|
172
|
|
|
|
Retirement Income Plan
Six Months ended June 30, |
|
Retirement Life Plan
Six Months ended June 30, |
||||||
|
|
2015
|
|
2014
|
|
2015
|
|
2014
|
||
Weighted-Average Expense Assumptions:
|
|
|
|
|
|
|
|
|
||
Discount rate
|
|
4.29
|
%
|
|
5.16
|
|
4.08
|
%
|
|
4.85
|
Expected return on plan assets
|
|
6.27
|
|
|
6.92
|
|
—
|
|
|
—
|
Rate of compensation increase
|
|
4.00
|
|
|
4.00
|
|
—
|
|
|
—
|
Second Quarter 2015
|
|
|
|
|
|
|
||||
($ in thousands)
|
|
Gross
|
|
Tax
|
|
Net
|
||||
Net income
|
|
$
|
46,765
|
|
|
12,997
|
|
|
33,768
|
|
Components of OCI:
|
|
|
|
|
|
|
|
|
|
|
Unrealized (losses) gains on investment securities
:
|
|
|
|
|
|
|
|
|
|
|
Unrealized holding losses during the period
|
|
(60,244
|
)
|
|
(21,084
|
)
|
|
(39,160
|
)
|
|
Amounts reclassified into net income:
|
|
|
|
|
|
|
||||
HTM securities
|
|
(185
|
)
|
|
(65
|
)
|
|
(120
|
)
|
|
Realized losses on AFS securities
|
|
3,422
|
|
|
1,197
|
|
|
2,225
|
|
|
Net unrealized losses
|
|
(57,007
|
)
|
|
(19,952
|
)
|
|
(37,055
|
)
|
|
Defined benefit pension and post-retirement plans:
|
|
|
|
|
|
|
|
|
|
|
Amounts reclassified into net income:
|
|
|
|
|
|
|
|
|
|
|
Net actuarial loss
|
|
1,709
|
|
|
598
|
|
|
1,111
|
|
|
Defined benefit pension and post-retirement plans
|
|
1,709
|
|
|
598
|
|
|
1,111
|
|
|
Other comprehensive loss
|
|
(55,298
|
)
|
|
(19,354
|
)
|
|
(35,944
|
)
|
|
Comprehensive loss
|
|
$
|
(8,533
|
)
|
|
(6,357
|
)
|
|
(2,176
|
)
|
Second Quarter 2014
|
|
|
|
|
|
|
||||
($ in thousands)
|
|
Gross
|
|
Tax
|
|
Net
|
||||
Net income
|
|
$
|
39,521
|
|
|
10,180
|
|
|
29,341
|
|
Components of OCI:
|
|
|
|
|
|
|
|
|
|
|
Unrealized gains (losses) on investment securities
:
|
|
|
|
|
|
|
|
|
|
|
Unrealized holding gains during the period
|
|
45,122
|
|
|
15,793
|
|
|
29,329
|
|
|
Amounts reclassified into net income:
|
|
|
|
|
|
|
||||
HTM securities
|
|
(221
|
)
|
|
(77
|
)
|
|
(144
|
)
|
|
Non-credit OTTI
|
|
469
|
|
|
164
|
|
|
305
|
|
|
Realized gains on AFS securities
|
|
(5,008
|
)
|
|
(1,753
|
)
|
|
(3,255
|
)
|
|
Net unrealized gains
|
|
40,362
|
|
|
14,127
|
|
|
26,235
|
|
|
Defined benefit pension and post-retirement plans:
|
|
|
|
|
|
|
|
|
|
|
Amounts reclassified into net income:
|
|
|
|
|
|
|
|
|
|
|
Net actuarial loss
|
|
381
|
|
|
133
|
|
|
248
|
|
|
Defined benefit pension and post-retirement plans
|
|
381
|
|
|
133
|
|
|
248
|
|
|
Other comprehensive income
|
|
40,743
|
|
|
14,260
|
|
|
26,483
|
|
|
Comprehensive income
|
|
$
|
80,264
|
|
|
24,440
|
|
|
55,824
|
|
Six Months 2015
|
|
|
|
|
|
|
||||
($ in thousands)
|
|
Gross
|
|
Tax
|
|
Net
|
||||
Net income
|
|
$
|
103,055
|
|
|
29,579
|
|
|
73,476
|
|
Components of OCI:
|
|
|
|
|
|
|
|
|
|
|
Unrealized (losses) gains on investment securities
:
|
|
|
|
|
|
|
|
|
|
|
Unrealized holding losses during the period
|
|
(36,267
|
)
|
|
(12,693
|
)
|
|
(23,574
|
)
|
|
Amounts reclassified into net income:
|
|
|
|
|
|
|
||||
HTM securities
|
|
(446
|
)
|
|
(156
|
)
|
|
(290
|
)
|
|
Non-credit OTTI
|
|
357
|
|
|
125
|
|
|
232
|
|
|
Realized gains on AFS securities
|
|
(16,473
|
)
|
|
(5,766
|
)
|
|
(10,707
|
)
|
|
Net unrealized losses
|
|
(52,829
|
)
|
|
(18,490
|
)
|
|
(34,339
|
)
|
|
Defined benefit pension and post-retirement plans:
|
|
|
|
|
|
|
|
|
|
|
Amounts reclassified into net income:
|
|
|
|
|
|
|
|
|
|
|
Net actuarial loss
|
|
3,418
|
|
|
1,196
|
|
|
2,222
|
|
|
Defined benefit pension and post-retirement plans
|
|
3,418
|
|
|
1,196
|
|
|
2,222
|
|
|
Other comprehensive loss
|
|
(49,411
|
)
|
|
(17,294
|
)
|
|
(32,117
|
)
|
|
Comprehensive income
|
|
$
|
53,644
|
|
|
12,285
|
|
|
41,359
|
|
Six Months 2014
|
|
|
|
|
|
|
||||
($ in thousands)
|
|
Gross
|
|
Tax
|
|
Net
|
||||
Net income
|
|
$
|
64,605
|
|
|
17,290
|
|
|
47,315
|
|
Components of OCI:
|
|
|
|
|
|
|
|
|||
Unrealized gains (losses) on investment securities
:
|
|
|
|
|
|
|
|
|||
Unrealized holding gains during the period
|
|
78,086
|
|
|
27,331
|
|
|
50,755
|
|
|
Amounts reclassified into net income:
|
|
|
|
|
|
|
||||
HTM securities
|
|
(677
|
)
|
|
(237
|
)
|
|
(440
|
)
|
|
Non-credit OTTI
|
|
469
|
|
|
164
|
|
|
305
|
|
|
Realized gains on AFS securities
|
|
(12,237
|
)
|
|
(4,283
|
)
|
|
(7,954
|
)
|
|
Net unrealized gains
|
|
65,641
|
|
|
22,975
|
|
|
42,666
|
|
|
Defined benefit pension and post-retirement plans:
|
|
|
|
|
|
|
|
|
|
|
Amounts reclassified into net income:
|
|
|
|
|
|
|
|
|
|
|
Net actuarial loss
|
|
761
|
|
|
266
|
|
|
495
|
|
|
Defined benefit pension and post-retirement plans
|
|
761
|
|
|
266
|
|
|
495
|
|
|
Other comprehensive income
|
|
66,402
|
|
|
23,241
|
|
|
43,161
|
|
|
Comprehensive income
|
|
$
|
131,007
|
|
|
40,531
|
|
|
90,476
|
|
|
Quarter ended
June 30, |
|
Six Months ended
June 30, |
|
|||||||||
($ in thousands)
|
2015
|
|
2014
|
|
2015
|
|
2014
|
Affected Line Item in the Unaudited Consolidated Statement of Income
|
|||||
OTTI related
|
|
|
|
|
|
|
|
|
|||||
Non-credit OTTI on disposed securities
|
$
|
—
|
|
|
469
|
|
|
357
|
|
|
469
|
|
Net realized (losses) gains
|
|
—
|
|
|
469
|
|
|
357
|
|
|
469
|
|
Income before federal income tax
|
|
|
—
|
|
|
(164
|
)
|
|
(125
|
)
|
|
(164
|
)
|
Total federal income tax expense
|
|
|
—
|
|
|
305
|
|
|
232
|
|
|
305
|
|
Net income
|
|
HTM related
|
|
|
|
|
|
|
|
|
|||||
Unrealized losses on HTM disposals
|
87
|
|
|
51
|
|
|
137
|
|
|
75
|
|
Net realized (losses) gains
|
|
Amortization of net unrealized gains on HTM securities
|
(272
|
)
|
|
(272
|
)
|
|
(583
|
)
|
|
(752
|
)
|
Net investment income earned
|
|
|
(185
|
)
|
|
(221
|
)
|
|
(446
|
)
|
|
(677
|
)
|
Income before federal income tax
|
|
|
65
|
|
|
77
|
|
|
156
|
|
|
237
|
|
Total federal income tax expense
|
|
|
(120
|
)
|
|
(144
|
)
|
|
(290
|
)
|
|
(440
|
)
|
Net income
|
|
Realized gains and losses on AFS and OTTI
|
|
|
|
|
|
|
|
|
|||||
Realized losses (gains) on AFS disposals and OTTI
|
3,422
|
|
|
(5,008
|
)
|
|
(16,473
|
)
|
|
(12,237
|
)
|
Net realized (losses) gains
|
|
|
3,422
|
|
|
(5,008
|
)
|
|
(16,473
|
)
|
|
(12,237
|
)
|
Income before federal income tax
|
|
|
(1,197
|
)
|
|
1,753
|
|
|
5,766
|
|
|
4,283
|
|
Total federal income tax expense
|
|
|
2,225
|
|
|
(3,255
|
)
|
|
(10,707
|
)
|
|
(7,954
|
)
|
Net income
|
|
Defined benefit pension and post-retirement life plans
|
|
|
|
|
|
|
|
|
|||||
Net actuarial loss
|
372
|
|
|
88
|
|
|
743
|
|
|
175
|
|
Loss and loss expense incurred
|
|
|
1,337
|
|
|
293
|
|
|
2,675
|
|
|
586
|
|
Policy acquisition costs
|
|
Total defined benefit pension and post-retirement life
|
1,709
|
|
|
381
|
|
|
3,418
|
|
|
761
|
|
Income before federal income tax
|
|
|
(598
|
)
|
|
(133
|
)
|
|
(1,196
|
)
|
|
(266
|
)
|
Total federal income tax expense
|
|
|
1,111
|
|
|
248
|
|
|
2,222
|
|
|
495
|
|
Net income
|
|
|
|
|
|
|
|
|
|
|
|||||
Total reclassifications for the period
|
$
|
3,216
|
|
|
(2,846
|
)
|
|
(8,543
|
)
|
|
(7,594
|
)
|
Net income
|
•
|
Standard Commercial Lines - comprised of insurance products and services provided in the standard marketplace to
|
•
|
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
|
•
|
Investments - invests the premiums collected by our Standard Commercial Lines, Standard Personal Lines, and E&S
|
•
|
Critical Accounting Policies and Estimates;
|
•
|
Financial Highlights of Results for the
second
quarters ended
June 30, 2015
(“
Second Quarter 2015
”) and
June 30, 2014
(“
Second Quarter 2014
”) and the six-month periods ended June 30, 2015 ("Six Months 2015") and June 30, 2014 ("Six Months 2014");
|
•
|
Results of Operations and Related Information by Segment;
|
•
|
Federal Income Taxes;
|
•
|
Financial Condition, Liquidity, Short-term Borrowings, and Capital Resources;
|
•
|
Ratings;
|
•
|
Off-Balance Sheet Arrangements; and
|
•
|
Contractual Obligations, Contingent Liabilities, and Commitments.
|
|
|
Quarter ended June 30,
|
|
|
|
|
|
Six Months ended June 30,
|
|
|
|
|
||||||||||||
($ and shares in thousands, except per share amounts)
|
|
2015
|
|
2014
|
|
Change
% or Points
|
|
|
|
2015
|
|
2014
|
|
Change
% or Points
|
|
|
||||||||
Generally Accepted Accounting Principles ("GAAP") measures:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||
Revenues
|
|
$
|
521,973
|
|
|
506,849
|
|
|
3
|
|
|
%
|
|
$
|
1,045,865
|
|
|
1,015,920
|
|
|
3
|
|
|
%
|
Net investment income earned
|
|
32,230
|
|
|
36,774
|
|
|
(12
|
)
|
|
|
|
59,147
|
|
|
72,308
|
|
|
(18
|
)
|
|
|
||
Income before federal income tax
|
|
46,765
|
|
|
39,521
|
|
|
18
|
|
|
|
|
103,055
|
|
|
64,605
|
|
|
60
|
|
|
|
||
Net income
|
|
33,768
|
|
|
29,341
|
|
|
15
|
|
|
|
|
73,476
|
|
|
47,315
|
|
|
55
|
|
|
|
||
Diluted net income per share
|
|
0.58
|
|
|
0.51
|
|
|
14
|
|
|
|
|
1.27
|
|
|
0.83
|
|
|
53
|
|
|
|
||
Diluted weighted-average outstanding shares
|
|
57,805
|
|
|
57,260
|
|
|
1
|
|
|
|
|
57,761
|
|
|
57,215
|
|
|
1
|
|
|
|
||
GAAP combined ratio
|
|
94.1
|
%
|
|
97.8
|
|
|
(3.7
|
)
|
|
pts
|
|
94.3
|
%
|
|
99.4
|
|
|
(5.1
|
)
|
|
pts
|
||
Statutory combined ratio
|
|
93.5
|
|
|
97.5
|
|
|
(4.0
|
)
|
|
|
|
93.2
|
|
|
99.2
|
|
|
(6.0
|
)
|
|
|
||
Invested assets per dollar of stockholders' equity
|
|
$
|
3.76
|
|
|
3.83
|
|
|
(1.8
|
)
|
|
%
|
|
$
|
3.76
|
|
|
3.83
|
|
|
(1.8
|
)
|
|
%
|
After-tax yield on investments
|
|
2.0
|
%
|
|
2.3
|
|
|
(0.3
|
)
|
|
pts
|
|
1.9
|
%
|
|
2.3
|
|
|
(0.4
|
)
|
|
pts
|
||
Return on average equity ("ROE")
|
|
10.3
|
|
|
9.7
|
|
|
0.6
|
|
|
|
|
11.4
|
|
|
7.9
|
|
|
3.5
|
|
|
|
||
Non-GAAP measures:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||
Operating income
2
|
|
$
|
35,991
|
|
|
26,390
|
|
|
36
|
|
|
%
|
|
$
|
63,425
|
|
|
39,673
|
|
|
60
|
|
|
%
|
Diluted operating income per share
2
|
|
0.62
|
|
|
0.46
|
|
|
35
|
|
|
|
|
1.10
|
|
|
0.70
|
|
|
57
|
|
|
|
||
Operating ROE
2
|
|
11.0
|
%
|
|
8.7
|
|
|
2.3
|
|
|
pts
|
|
9.8
|
%
|
|
6.6
|
|
|
3.2
|
|
|
pts
|
1
|
Refer to the Glossary of Terms attached to our
2014 Annual Report
as Exhibit 99.1 for definitions of terms used in this Form 10-Q.
|
2
|
Operating income is used as an important financial measure by us, analysts, and investors, because the realization of investment gains and losses on sales in any given period is largely discretionary as to timing. In addition, these realized investment gains and losses, as well as OTTI that are charged to earnings and the results of discontinued operations, could distort the analysis of trends. See below for a reconciliation of operating income to net income in accordance with GAAP. Operating ROE is calculated by dividing annualized operating income by average stockholders’ equity.
|
|
|
Quarter ended June 30,
|
|
Six Months ended June 30,
|
|||||||||
($ in thousands, except per share amounts)
|
|
2015
|
|
2014
|
|
2015
|
|
2014
|
|||||
Operating income
|
|
$
|
35,991
|
|
|
26,390
|
|
|
63,425
|
|
|
39,673
|
|
Net realized (losses) gains, net of tax
|
|
(2,223
|
)
|
|
2,951
|
|
|
10,051
|
|
|
7,642
|
|
|
Net income
|
|
$
|
33,768
|
|
|
29,341
|
|
|
73,476
|
|
|
47,315
|
|
|
|
|
|
|
|
|
|
|
|||||
Diluted operating income per share
|
|
$
|
0.62
|
|
|
0.46
|
|
|
1.10
|
|
|
0.70
|
|
Diluted net realized (losses) gains per share
|
|
(0.04
|
)
|
|
0.05
|
|
|
0.17
|
|
|
0.13
|
|
|
Diluted net income per share
|
|
$
|
0.58
|
|
|
0.51
|
|
|
1.27
|
|
|
0.83
|
|
ROE
|
|
Quarter ended June 30,
|
|
Six Months ended June 30,
|
||||||||
|
|
2015
|
|
2014
|
|
2015
|
|
2014
|
||||
Insurance Segments
|
|
5.8
|
%
|
|
2.2
|
|
|
5.5
|
|
|
0.5
|
|
Investment income
1
|
|
7.5
|
|
|
9.1
|
|
|
7.1
|
|
|
9.0
|
|
Other
|
|
(2.3
|
)
|
|
(2.6
|
)
|
|
(2.8
|
)
|
|
(2.9
|
)
|
Operating ROE
|
|
11.0
|
|
|
8.7
|
|
|
9.8
|
|
|
6.6
|
|
Net realized (losses) gains
1
|
|
(0.7
|
)
|
|
1.0
|
|
|
1.6
|
|
|
1.3
|
|
ROE
|
|
10.3
|
%
|
|
9.7
|
|
|
11.4
|
|
|
7.9
|
|
All Lines
|
|
Quarter ended June 30,
|
|
|
|
|
|
Six Months ended June 30,
|
|
|
|
|
||||||||||||
($ in thousands)
|
|
2015
|
|
2014
|
|
Change % or Points
|
|
|
|
2015
|
|
2014
|
|
Change % or Points
|
|
|
||||||||
GAAP Insurance Operations Results:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||
Net premiums written ("NPW")
|
|
$
|
532,133
|
|
|
479,823
|
|
|
11
|
|
|
%
|
|
$
|
1,050,221
|
|
|
956,573
|
|
|
10
|
|
|
%
|
Net premiums earned (“NPE”)
|
|
490,309
|
|
|
463,625
|
|
|
6
|
|
|
|
|
966,432
|
|
|
920,120
|
|
|
5
|
|
|
|
||
Less:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||
Loss and loss expense incurred
|
|
291,561
|
|
|
297,795
|
|
|
(2
|
)
|
|
|
|
576,560
|
|
|
618,341
|
|
|
(7
|
)
|
|
|
||
Net underwriting expenses incurred
|
|
167,780
|
|
|
154,197
|
|
|
9
|
|
|
|
|
331,358
|
|
|
293,923
|
|
|
13
|
|
|
|
||
Dividends to policyholders
|
|
1,844
|
|
|
1,549
|
|
|
19
|
|
|
|
|
3,369
|
|
|
2,787
|
|
|
21
|
|
|
|
||
Underwriting gain (loss)
|
|
$
|
29,124
|
|
|
10,084
|
|
|
189
|
|
|
%
|
|
$
|
55,145
|
|
|
5,069
|
|
|
988
|
|
|
%
|
GAAP Ratios:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||
Loss and loss expense ratio
|
|
59.5
|
|
%
|
64.2
|
|
|
(4.7
|
)
|
|
pts
|
|
59.7
|
|
%
|
67.2
|
|
|
(7.5
|
)
|
|
pts
|
||
Underwriting expense ratio
|
|
34.2
|
|
|
33.3
|
|
|
0.9
|
|
|
|
|
34.3
|
|
|
31.9
|
|
|
2.4
|
|
|
|
||
Dividends to policyholders ratio
|
|
0.4
|
|
|
0.3
|
|
|
0.1
|
|
|
|
|
0.3
|
|
|
0.3
|
|
|
—
|
|
|
|
||
Combined ratio
|
|
94.1
|
|
|
97.8
|
|
|
(3.7
|
)
|
|
|
|
94.3
|
|
|
99.4
|
|
|
(5.1
|
)
|
|
|
||
Statutory Ratios:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||
Loss and loss expense ratio
|
|
59.5
|
|
|
64.2
|
|
|
(4.7
|
)
|
|
|
|
59.7
|
|
|
67.2
|
|
|
(7.5
|
)
|
|
|
||
Underwriting expense ratio
|
|
33.6
|
|
|
33.0
|
|
|
0.6
|
|
|
|
|
33.2
|
|
|
31.7
|
|
|
1.5
|
|
|
|
||
Dividends to policyholders ratio
|
|
0.4
|
|
|
0.3
|
|
|
0.1
|
|
|
|
|
0.3
|
|
|
0.3
|
|
|
—
|
|
|
|
||
Combined ratio
|
|
93.5
|
|
%
|
97.5
|
|
|
(4.0
|
)
|
|
pts
|
|
93.2
|
|
%
|
99.2
|
|
|
(6.0
|
)
|
|
pts
|
•
|
Lower catastrophe and non-catastrophe property losses as a result of reduced severity in weather-related events in Second Quarter and Six Months 2015 compared to the same periods last year. Quantitative details are as follows:
|
|
Second Quarter 2015
|
|
|
Second Quarter 2014
|
|
|
|
|||||||
($ in millions)
|
Losses Incurred
|
Impact on
Loss Ratio
|
|
|
Losses
Incurred
|
Impact on
Loss Ratio
|
|
Change in Ratio
|
|
|||||
Catastrophe losses
|
$
|
24.0
|
|
4.9
|
pts
|
|
$
|
27.2
|
|
5.9
|
pts
|
(1.0
|
)
|
pts
|
Non-catastrophe property losses
|
70.5
|
|
14.4
|
|
|
73.0
|
|
15.7
|
|
(1.3
|
)
|
|
|
Six Months ended 2015
|
|
|
Six Months ended 2014
|
|
|
|
|||||||
($ in millions)
|
Losses Incurred
|
Impact on
Loss Ratio
|
|
|
Losses
Incurred
|
Impact on
Loss Ratio
|
|
Change in Ratio
|
|
|||||
Catastrophe losses
|
$
|
49.3
|
|
5.1
|
pts
|
|
$
|
61.6
|
|
6.7
|
pts
|
(1.6
|
)
|
pts
|
Non-catastrophe property losses
|
141.5
|
|
14.6
|
|
|
164.4
|
|
17.9
|
|
(3.3
|
)
|
|
•
|
Earned rate in excess of expected loss inflation in Second Quarter and Six Months 2015. Written renewal pure price increases were 3.8% in Six Months 2015 and 5.2% in the last six months of 2014, which provided earned rate of 4.4% in Second Quarter 2015 and 4.8% in Six Months 2015, both above our expected loss inflation of 3%. After taking into account the incremental expenses associated with the additional premium, the net benefit to the combined ratios was approximately 1.0 points in both periods.
|
•
|
Favorable prior year casualty reserve development of approximately $20.0 million, or 4.1 points, in Second Quarter 2015, and $40.0 million, or 4.1 points, in Six Months 2015, primarily driven by accident years 2013 and prior. The overall net favorable development was driven by the general liability and workers compensation lines of business. Refer to the table below for further details:
|
(Favorable)/Unfavorable Prior Year Casualty Reserve Development
|
|
|
|
|
|
|
|
|
|||||
|
Quarter ended June 30,
|
|
Six months ended June 30,
|
|
|||||||||
($ in millions)
|
2015
|
|
2014
|
|
2015
|
|
2014
|
|
|||||
General liability
|
$
|
(16.0
|
)
|
|
(14.0
|
)
|
|
(36.0
|
)
|
|
(25.0
|
)
|
|
Commercial automobile
|
2.0
|
|
|
(4.0
|
)
|
|
3.0
|
|
|
(4.0
|
)
|
|
|
Workers compensation
|
(8.0
|
)
|
|
—
|
|
|
(13.0
|
)
|
|
—
|
|
|
|
Businessowners' policies
|
1.0
|
|
|
2.5
|
|
|
4.0
|
|
|
1.5
|
|
|
|
Total Standard Commercial Lines
|
(21.0
|
)
|
|
(15.5
|
)
|
|
(42.0
|
)
|
|
(27.5
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|||||
Personal automobile
|
—
|
|
|
(2.0
|
)
|
|
—
|
|
|
(4.0
|
)
|
|
|
Total Standard Personal Lines
|
—
|
|
|
(2.0
|
)
|
|
—
|
|
|
(4.0
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|||||
E&S
|
1.0
|
|
|
—
|
|
|
2.0
|
|
|
—
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||
Total (favorable) prior year casualty reserve development
|
$
|
(20.0
|
)
|
|
(17.5
|
)
|
|
(40.0
|
)
|
|
(31.5
|
)
|
|
|
|
|
|
|
|
|
|
|
|||||
(Favorable) impact on loss ratio
|
(4.1
|
)
|
pts
|
(3.8
|
)
|
|
(4.1
|
)
|
|
(3.5
|
)
|
|
•
|
Higher employee-related expenses driven by increases in annual incentive compensation expense to employees, as well as pension expense increases due to the accrual of service costs for eligible employees and the negative impact of declining interest rates last year; and
|
•
|
Increases in commissions due to higher supplemental commission expense to our distribution partners and a change in our mix of business.
|
•
|
The size of our company and our field model that provides us with the ability to be agile and responsive to our customers' 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; and
|
•
|
Our deep bench of talent in the organization and our continuous cultivation of that talent.
|
•
|
Four points of catastrophe losses for the full year; and
|
•
|
Weighted average shares of approximately 58 million.
|
|
|
Quarter ended June 30,
|
|
|
|
|
Six Months ended June 30,
|
|
|
|
||||||||||||
($ in thousands)
|
|
2015
|
|
2014
|
|
Change
% or
Points
|
|
|
2015
|
|
2014
|
|
Change
% or
Points
|
|
||||||||
GAAP Insurance Operations Results:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||
NPW
|
|
$
|
410,821
|
|
|
363,860
|
|
|
13
|
|
%
|
|
$
|
826,079
|
|
|
743,210
|
|
|
11
|
|
%
|
NPE
|
|
377,205
|
|
|
354,507
|
|
|
6
|
|
|
|
742,738
|
|
|
703,948
|
|
|
6
|
|
|
||
Less:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||
Loss and loss expense incurred
|
|
210,088
|
|
|
216,532
|
|
|
(3
|
)
|
|
|
416,236
|
|
|
459,171
|
|
|
(9
|
)
|
|
||
Net underwriting expenses incurred
|
|
130,032
|
|
|
120,723
|
|
|
8
|
|
|
|
257,856
|
|
|
229,917
|
|
|
12
|
|
|
||
Dividends to policyholders
|
|
1,844
|
|
|
1,549
|
|
|
19
|
|
|
|
3,369
|
|
|
2,787
|
|
|
21
|
|
|
||
Underwriting gain
|
|
$
|
35,241
|
|
|
15,703
|
|
|
124
|
|
%
|
|
$
|
65,277
|
|
|
12,073
|
|
|
441
|
|
%
|
GAAP Ratios:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||
Loss and loss expense ratio
|
|
55.7
|
|
%
|
61.1
|
|
|
(5.4
|
)
|
pts
|
|
56.0
|
|
%
|
65.2
|
|
|
(9.2
|
)
|
pts
|
||
Underwriting expense ratio
|
|
34.5
|
|
|
34.1
|
|
|
0.4
|
|
|
|
34.7
|
|
|
32.7
|
|
|
2.0
|
|
|
||
Dividends to policyholders ratio
|
|
0.5
|
|
|
0.4
|
|
|
0.1
|
|
|
|
0.5
|
|
|
0.4
|
|
|
0.1
|
|
|
||
Combined ratio
|
|
90.7
|
|
|
95.6
|
|
|
(4.9
|
)
|
|
|
91.2
|
|
|
98.3
|
|
|
(7.1
|
)
|
|
||
Statutory Ratios:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||
Loss and loss expense ratio
|
|
55.7
|
|
|
61.1
|
|
|
(5.4
|
)
|
|
|
56.1
|
|
|
65.2
|
|
|
(9.1
|
)
|
|
||
Underwriting expense ratio
|
|
33.9
|
|
|
34.0
|
|
|
(0.1
|
)
|
|
|
33.3
|
|
|
32.2
|
|
|
1.1
|
|
|
||
Dividends to policyholders ratio
|
|
0.5
|
|
|
0.4
|
|
|
0.1
|
|
|
|
0.5
|
|
|
0.4
|
|
|
0.1
|
|
|
||
Combined ratio
|
|
90.1
|
|
%
|
95.5
|
|
|
(5.4
|
)
|
pts
|
|
89.9
|
|
%
|
97.8
|
|
|
(7.9
|
)
|
pts
|
|
Second Quarter 2015
|
|
|
Second Quarter 2014
|
|
|
|
|||||||||
($ in millions)
|
Losses Incurred
|
Impact on
Loss Ratio
|
|
|
Losses
Incurred
|
Impact on
Loss Ratio
|
|
Change in Ratio
|
|
|||||||
Catastrophe losses
|
$
|
13.6
|
|
3.6
|
|
pts
|
|
$
|
12.8
|
|
3.6
|
|
pts
|
—
|
|
pts
|
Non-catastrophe property losses
|
42.4
|
|
11.2
|
|
|
|
43.6
|
|
12.3
|
|
|
(1.1
|
)
|
|
||
Favorable prior year casualty reserve development
|
(21.0
|
)
|
(5.6
|
)
|
|
|
(15.5
|
)
|
(4.4
|
)
|
|
(1.2
|
)
|
|
|
Six Months ended 2015
|
|
|
Six Months ended 2014
|
|
|
|
|||||||||
($ in millions)
|
Losses Incurred
|
Impact on
Loss Ratio
|
|
|
Losses
Incurred
|
Impact on
Loss Ratio
|
|
Change in Ratio
|
|
|||||||
Catastrophe losses
|
$
|
32.3
|
|
4.3
|
|
pts
|
|
$
|
38.7
|
|
5.5
|
|
pts
|
(1.2
|
)
|
pts
|
Non-catastrophe property losses
|
82.9
|
|
11.2
|
|
|
|
102.4
|
|
14.5
|
|
|
(3.3
|
)
|
|
||
Favorable prior year casualty reserve development
|
(42.0
|
)
|
(5.7
|
)
|
|
|
(27.5
|
)
|
(3.9
|
)
|
|
(1.8
|
)
|
|
|
Second Quarter 2015
|
|
Second Quarter 2014
|
|
|
|
|||||||||
($ in millions)
|
(Benefit) Expense
|
Impact on
Combined Ratio |
|
(Benefit) Expense
|
Impact on
Combined Ratio |
|
Change
Points
|
|
|||||||
Favorable prior year casualty reserve development
|
$
|
(16.0
|
)
|
(13.4
|
)
|
pts
|
$
|
(14.0
|
)
|
(12.5
|
)
|
pts
|
(0.9
|
)
|
pts
|
|
Six Months ended 2015
|
|
Six Months ended 2014
|
|
|
|
|||||||||
($ in millions)
|
(Benefit) Expense
|
Impact on
Combined Ratio |
|
(Benefit) Expense
|
Impact on
Combined Ratio |
|
Change
Points
|
|
|||||||
Favorable prior year casualty reserve development
|
$
|
(36.0
|
)
|
(15.4
|
)
|
pts
|
$
|
(25.0
|
)
|
(11.3
|
)
|
pts
|
(4.1
|
)
|
pts
|
Sale of SIG renewal rights
|
—
|
|
—
|
|
|
(2.1
|
)
|
(0.9
|
)
|
|
0.9
|
|
|
|
Second Quarter 2015
|
|
|
Second Quarter 2014
|
|
|
|
||||||||
($ in millions)
|
Losses Incurred
|
Impact on
Loss Ratio
|
|
|
Losses
Incurred
|
Impact on
Loss Ratio
|
|
Change in Ratio
|
|
||||||
Catastrophe losses
|
$
|
0.2
|
|
0.3
|
pts
|
|
$
|
1.4
|
|
1.7
|
|
pts
|
(1.4
|
)
|
pts
|
Non-catastrophe property losses
|
12.7
|
|
14.3
|
|
|
10.0
|
|
12.0
|
|
|
2.3
|
|
|
||
Unfavorable/ (Favorable) prior year casualty reserve development
|
2.0
|
|
2.3
|
|
|
(4.0
|
)
|
(4.8
|
)
|
|
7.1
|
|
|
|
Six Months ended 2015
|
|
Six Months ended 2014
|
|
|
||||||||||
($ in millions)
|
Losses Incurred
|
Impact on
Loss Ratio
|
|
|
Losses
Incurred
|
Impact on
Loss Ratio
|
|
Change in Ratio
|
|
||||||
Catastrophe losses
|
$
|
0.2
|
|
0.1
|
pts
|
|
$
|
1.5
|
|
0.9
|
|
pts
|
(0.8
|
)
|
pts
|
Non-catastrophe property losses
|
25.9
|
|
14.8
|
|
|
24.0
|
|
14.5
|
|
|
0.3
|
|
|
||
Unfavorable/ (Favorable) prior year casualty reserve development
|
3.0
|
|
1.7
|
|
|
(4.0
|
)
|
(2.4
|
)
|
|
4.1
|
|
|
||
Sale of SIG renewal rights
|
—
|
|
—
|
|
|
(1.5
|
)
|
(0.9
|
)
|
|
0.9
|
|
|
Workers Compensation
|
|
|
|
|
|
|
|
|||||||||||||||
|
|
Quarter ended June 30,
|
|
|
|
|
Six Months ended June 30,
|
|
|
|
||||||||||||
($ in thousands)
|
|
2015
|
|
2014
|
|
Change
% or
Points
|
|
|
2015
|
|
2014
|
|
Change
% or Points |
|
||||||||
Statutory NPW
|
|
$
|
75,471
|
|
|
65,210
|
|
|
16
|
|
%
|
|
$
|
159,276
|
|
|
141,181
|
|
|
13
|
|
%
|
Direct new business
|
|
18,158
|
|
|
11,069
|
|
|
64
|
|
|
|
38,278
|
|
|
24,727
|
|
|
55
|
|
|
||
Retention
|
|
83
|
|
%
|
81
|
|
|
2
|
|
pts
|
|
83
|
|
%
|
81
|
|
|
2
|
|
pts
|
||
Renewal pure price increases
|
|
2.8
|
|
|
5.7
|
|
|
(2.9
|
)
|
|
|
3.1
|
|
|
5.3
|
|
|
(2.2
|
)
|
|
||
Statutory NPE
|
|
$
|
70,954
|
|
|
68,992
|
|
|
3
|
|
%
|
|
$
|
139,431
|
|
|
138,405
|
|
|
1
|
|
%
|
Statutory combined ratio
|
|
89.2
|
|
%
|
112.1
|
|
|
(22.9
|
)
|
pts
|
|
89.9
|
|
%
|
108.8
|
|
|
(18.9
|
)
|
pts
|
||
% of total statutory standard Commercial Lines NPW
|
|
18
|
|
|
18
|
|
|
|
|
|
|
19
|
|
|
19
|
|
|
|
|
•
|
Favorable prior year casualty reserve development of $8.0 million, or 11.3 points, in Second Quarter 2015, related primarily to accident years 2013 and 2008 and prior, compared to no development in Second Quarter 2014; and
|
•
|
Favorable prior year casualty reserve development of $13.0 million, or 9.3 points, in Six Months 2015, related primarily to accident years 2008 and prior, compared to no development in Six Months 2014.
|
•
|
A 9.3-point decrease in Second Quarter and Six Months 2015 related to lower expected loss costs for the current accident year, which reflect our ongoing focus on improving this competitive line of business through underwriting, pricing, and claims initiatives as further discussed below.
|
•
|
Centralizing all workers compensation claim handling in Charlotte, North Carolina;
|
•
|
Managing non-complex workers compensation claims within our footprint through jurisdictionally-trained and aligned medical only and lost-time adjusters; and
|
•
|
Referring claims with high exposure and/or significant escalation risk to our workers compensation strategic case management unit.
|
Commercial Property
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||
|
|
Quarter ended June 30,
|
|
|
|
|
Six Months ended June 30,
|
|
|
|
||||||||||||
($ in thousands)
|
|
2015
|
|
2014
|
|
Change
% or
Points
|
|
|
2015
|
|
2014
|
|
Change
% or
Points
|
|
||||||||
Statutory NPW
|
|
$
|
70,736
|
|
|
62,630
|
|
|
13
|
|
%
|
|
$
|
141,634
|
|
|
126,726
|
|
|
12
|
|
%
|
Direct new business
|
|
18,832
|
|
|
13,271
|
|
|
42
|
|
|
|
36,727
|
|
|
27,766
|
|
|
32
|
|
|
||
Retention
|
|
82
|
|
%
|
81
|
|
|
1
|
|
pts
|
|
82
|
|
%
|
81
|
|
|
1
|
|
pts
|
||
Renewal pure price increases
|
|
2.7
|
|
|
4.0
|
|
|
(1.3
|
)
|
|
|
2.8
|
|
|
4.8
|
|
|
(2.0
|
)
|
|
||
Statutory NPE
|
|
$
|
66,549
|
|
|
61,226
|
|
|
9
|
|
%
|
|
$
|
131,112
|
|
|
121,412
|
|
|
8
|
|
%
|
Statutory combined ratio
|
|
95.3
|
|
%
|
101.7
|
|
|
(6.4
|
)
|
pts
|
|
96.9
|
|
%
|
116.4
|
|
|
(19.5
|
)
|
pts
|
||
% of total statutory standard Commercial Lines NPW
|
|
17
|
|
|
17
|
|
|
|
|
|
|
17
|
|
|
17
|
|
|
|
|
|
Second Quarter 2015
|
|
|
Second Quarter 2014
|
|
|
|
|||||||
($ in millions)
|
(Benefit)
Expense
|
Impact on
Combined Ratio |
|
|
(Benefit)
Expense
|
Impact on
Combined Ratio |
|
Change
% or
Points
|
|
|||||
Catastrophe losses
|
$
|
11.0
|
|
16.5
|
pts
|
|
$
|
10.1
|
|
16.5
|
pts
|
—
|
|
pts
|
Non-catastrophe property losses
|
23.7
|
|
35.6
|
|
|
26.2
|
|
42.7
|
|
(7.1
|
)
|
|
|
Six Months ended 2015
|
|
|
Six Months ended 2014
|
|
|
|
||||||||
($ in millions)
|
(Benefit)
Expense
|
Impact on
Combined Ratio |
|
|
(Benefit)
Expense
|
Impact on
Combined Ratio |
|
Change
% or
Points
|
|
||||||
Catastrophe losses
|
$
|
26.1
|
|
19.9
|
pts
|
|
$
|
29.0
|
|
23.9
|
|
pts
|
(4.0
|
)
|
pts
|
Non-catastrophe property losses
|
45.2
|
|
34.5
|
|
|
62.6
|
|
51.5
|
|
|
(17.0
|
)
|
|
||
Sale of SIG renewal rights
|
—
|
|
—
|
|
|
(1.4
|
)
|
(1.1
|
)
|
|
1.1
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||
|
|
Quarter ended June 30,
|
|
|
|
|
|
Six Months ended June 30,
|
|
|
|
||||||||||||
($ in thousands)
|
|
2015
|
|
2014
|
|
Change
% or
Points
|
|
|
|
2015
|
|
2014
|
|
Change
% or
Points
|
|
||||||||
GAAP Insurance Operations Results:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||
NPW
|
|
$
|
75,986
|
|
|
78,181
|
|
|
(3
|
)
|
|
%
|
|
$
|
141,010
|
|
|
145,519
|
|
|
(3
|
)
|
%
|
NPE
|
|
72,071
|
|
|
74,544
|
|
|
(3
|
)
|
|
|
|
144,550
|
|
|
149,362
|
|
|
(3
|
)
|
|
||
Less:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||
Loss and loss expense incurred
|
|
53,933
|
|
|
58,863
|
|
|
(8
|
)
|
|
|
|
106,902
|
|
|
116,890
|
|
|
(9
|
)
|
|
||
Net underwriting expenses incurred
|
|
22,793
|
|
|
21,263
|
|
|
7
|
|
|
|
|
44,769
|
|
|
40,414
|
|
|
11
|
|
|
||
Underwriting loss
|
|
$
|
(4,655
|
)
|
|
(5,582
|
)
|
|
17
|
|
|
%
|
|
$
|
(7,121
|
)
|
|
(7,942
|
)
|
|
10
|
|
%
|
GAAP Ratios:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||
Loss and loss expense ratio
|
|
74.8
|
|
%
|
79.0
|
|
|
(4.2
|
)
|
|
pts
|
|
74.0
|
|
%
|
78.3
|
|
|
(4.3
|
)
|
pts
|
||
Underwriting expense ratio
|
|
31.7
|
|
|
28.5
|
|
|
3.2
|
|
|
|
|
30.9
|
|
|
27.0
|
|
|
3.9
|
|
|
||
Combined ratio
|
|
106.5
|
|
|
107.5
|
|
|
(1.0
|
)
|
|
|
|
104.9
|
|
|
105.3
|
|
|
(0.4
|
)
|
|
||
Statutory Ratios:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||
Loss and loss expense ratio
|
|
75.0
|
|
|
79.0
|
|
|
(4.0
|
)
|
|
|
|
74.2
|
|
|
78.3
|
|
|
(4.1
|
)
|
|
||
Underwriting expense ratio
|
|
30.4
|
|
|
27.1
|
|
|
3.3
|
|
|
|
|
31.0
|
|
|
27.0
|
|
|
4.0
|
|
|
||
Combined ratio
|
|
105.4
|
|
%
|
106.1
|
|
|
(0.7
|
)
|
|
pts
|
|
105.2
|
|
%
|
105.3
|
|
|
(0.1
|
)
|
pts
|
|
|
Quarter ended June 30,
|
|
|
Six Months ended June 30,
|
|
||||||||
($ in millions)
|
|
2015
|
|
2014
|
|
|
2015
|
|
2014
|
|
||||
New business
|
|
$
|
8.6
|
|
|
9.7
|
|
|
$
|
15.9
|
|
|
17.7
|
|
Retention
|
|
82
|
|
%
|
82
|
|
|
81
|
|
%
|
82
|
|
||
Renewal pure price increases
|
|
6.7
|
|
|
6.5
|
|
|
6.8
|
|
|
6.2
|
|
|
Second Quarter 2015
|
|
|
Second Quarter 2014
|
|
|
|
|||||||||
($ in millions)
|
Loss and Loss Expense Incurred
|
Impact on
Loss and Loss Expense Ratio
|
|
|
Loss and Loss
Expense
Incurred
|
Impact on
Loss and Loss Expense Ratio
|
|
Change in Ratio
|
|
|||||||
Catastrophe losses
|
$
|
8.3
|
|
11.5
|
|
pts
|
|
$
|
12.7
|
|
17.1
|
|
pts
|
(5.6
|
)
|
pts
|
Non-catastrophe property losses
|
22.8
|
|
31.7
|
|
|
|
24.0
|
|
32.1
|
|
|
(0.4
|
)
|
|
||
Flood claims handling fees
|
0.7
|
|
(1.0
|
)
|
|
|
(1.0
|
)
|
(1.3
|
)
|
|
0.3
|
|
|
||
Favorable prior year casualty development
|
—
|
|
—
|
|
|
|
(2.0
|
)
|
(2.7
|
)
|
|
2.7
|
|
|
|
Six Months ended 2015
|
|
|
Six Months ended 2014
|
|
|
|
|||||||||
($ in millions)
|
Loss and Loss Expense Incurred
|
Impact on
Loss and Loss Expense Ratio
|
|
|
Loss and Loss
Expense
Incurred
|
Impact on
Loss and Loss Expense Ratio
|
|
Change in Ratio
|
|
|||||||
Catastrophe losses
|
$
|
14.6
|
|
10.1
|
|
pts
|
|
$
|
21.0
|
|
14.1
|
|
pts
|
(4.0
|
)
|
pts
|
Non-catastrophe property losses
|
47.0
|
|
32.5
|
|
|
|
51.3
|
|
34.4
|
|
|
(1.9
|
)
|
|
||
Flood claims handling fees
|
(1.2
|
)
|
(0.9
|
)
|
|
|
(1.6
|
)
|
(1.0
|
)
|
|
0.1
|
|
|
||
Favorable prior year casualty development
|
—
|
|
—
|
|
|
|
(4.0
|
)
|
(2.7
|
)
|
|
2.7
|
|
|
•
|
Higher employee-related expenses driven by: (i) staffing additions, such as Standard Personal Lines marketing specialists, to support our growth initiatives; (ii) increases in annual incentive compensation expense to employees; and (iii) pension expense increases, both of which are discussed in "Financial Highlights of Results for Second Quarter and Six Months 2015 and Second Quarter and Six Months 2014" above.
|
•
|
Increased costs associated with capital improvements.
|
|
|
Quarter ended June 30,
|
|
|
|
|
Six Months ended June 30,
|
|
|
|
||||||||||||
($ in thousands)
|
|
2015
|
|
2014
|
|
Change
% or
Points
|
|
|
2015
|
|
2014
|
|
Change
% or
Points
|
|
||||||||
GAAP Insurance Operations Results:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||
NPW
|
|
$
|
45,326
|
|
|
37,782
|
|
|
20
|
|
%
|
|
$
|
83,132
|
|
|
67,844
|
|
|
23
|
|
%
|
NPE
|
|
41,033
|
|
|
34,574
|
|
|
19
|
|
|
|
79,144
|
|
|
66,810
|
|
|
18
|
|
|
||
Less:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||
Loss and loss expense incurred
|
|
27,540
|
|
|
22,400
|
|
|
23
|
|
|
|
53,422
|
|
|
42,280
|
|
|
26
|
|
|
||
Net underwriting expenses incurred
|
|
14,955
|
|
|
12,211
|
|
|
22
|
|
|
|
28,733
|
|
|
23,592
|
|
|
22
|
|
|
||
Underwriting (loss) gain
|
|
$
|
(1,462
|
)
|
|
(37
|
)
|
|
(3,851
|
)
|
%
|
|
$
|
(3,011
|
)
|
|
938
|
|
|
(421
|
)
|
%
|
GAAP Ratios:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||
Loss and loss expense ratio
|
|
67.1
|
|
%
|
64.8
|
|
|
2.3
|
|
pts
|
|
67.5
|
|
%
|
63.3
|
|
|
4.2
|
|
pts
|
||
Underwriting expense ratio
|
|
36.5
|
|
|
35.3
|
|
|
1.2
|
|
|
|
36.3
|
|
|
35.3
|
|
|
1.0
|
|
|
||
Combined ratio
|
|
103.6
|
|
|
100.1
|
|
|
3.5
|
|
|
|
103.8
|
|
|
98.6
|
|
|
5.2
|
|
|
||
Statutory Ratios:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||
Loss and loss expense ratio
|
|
67.2
|
|
|
65.0
|
|
|
2.2
|
|
|
|
67.4
|
|
|
63.4
|
|
|
4.0
|
|
|
||
Underwriting expense ratio
|
|
35.5
|
|
|
34.9
|
|
|
0.6
|
|
|
|
35.1
|
|
|
35.4
|
|
|
(0.3
|
)
|
|
||
Combined ratio
|
|
102.7
|
|
%
|
99.9
|
|
|
2.8
|
|
pts
|
|
102.5
|
|
%
|
98.8
|
|
|
3.7
|
|
pts
|
|
Second Quarter 2015
|
|
|
Second Quarter 2014
|
|
|
|
|||||||
($ in millions)
|
Loss and Loss Expense Incurred
|
Impact on
Loss and Loss Expense Ratio |
|
|
Loss and Loss
Expense Incurred |
Impact on
Loss and Loss Expense Ratio |
|
Change in Ratio
|
|
|||||
Non-catastrophe property losses
|
$
|
5.2
|
|
12.7
|
pts
|
|
$
|
5.4
|
|
15.7
|
pts
|
(3.0
|
)
|
pts
|
Unfavorable prior year casualty development
|
1.0
|
|
2.4
|
|
|
—
|
|
—
|
|
2.4
|
|
|
|
Six Months ended 2015
|
|
|
Six Month ended 2014
|
|
|
|
|||||||
($ in millions)
|
Loss and Loss Expense Incurred
|
Impact on
Loss and Loss Expense Ratio |
|
|
Loss and Loss
Expense Incurred |
Impact on
Loss and Loss Expense Ratio |
|
Change in Ratio
|
|
|||||
Non-catastrophe property losses
|
$
|
11.7
|
|
14.8
|
pts
|
|
$
|
10.7
|
|
16.1
|
pts
|
(1.3
|
)
|
pts
|
Unfavorable prior year casualty development
|
2.0
|
|
2.6
|
|
|
—
|
|
—
|
|
2.6
|
|
|
•
|
The per occurrence cap on the total program is $84.0 million.
|
•
|
The first layer has unlimited reinstatements. The annual aggregate limit for the $30.0 million in excess of $10.0 million second layer is $120.0 million.
|
•
|
The Property Treaty excludes nuclear, biological, chemical, and radiological terrorism losses.
|
•
|
The first through sixth layers provide coverage for 100% of up to $88.0 million in excess of a $2.0 million retention.
|
•
|
The Casualty Treaty excludes nuclear, biological, chemical, and radiological terrorism losses, with the annual aggregate terrorism limits remaining at $208.0 million.
|
Total Invested Assets
|
|
|
|
|
|
|
|
||||
($ in thousands)
|
|
June 30, 2015
|
|
December 31, 2014
|
|
Change % or Points
|
|
||||
Total invested assets
|
|
$
|
4,923,329
|
|
|
4,806,834
|
|
|
2
|
|
%
|
Unrealized gain – before tax
|
|
70,853
|
|
|
123,682
|
|
|
(43
|
)
|
|
|
Unrealized gain – after tax
|
|
46,054
|
|
|
80,394
|
|
|
(43
|
)
|
|
|
Invested assets per dollar of stockholders' equity
|
|
3.76
|
|
|
3.77
|
|
|
—
|
|
|
|
Annualized after-tax yield on investment portfolio
|
|
1.9
|
|
|
2.2
|
|
|
(0.3
|
)
|
pts
|
|
|
June 30, 2015
|
|
December 31, 2014
|
Fixed income securities:
|
|
|
|
|
U.S. government obligations
|
|
2
|
%
|
2
|
Foreign government obligations
|
|
1
|
|
1
|
State and municipal obligations
|
|
31
|
|
32
|
Corporate securities
|
|
37
|
|
38
|
Mortgage-backed securities (“MBS”)
|
|
15
|
|
14
|
Asset-backed securities (“ABS”)
|
|
4
|
|
4
|
Total fixed income securities
|
|
90
|
|
91
|
Equity securities:
|
|
|
|
|
Common stock
|
|
5
|
|
4
|
Preferred stock
1
|
|
—
|
|
—
|
Total equity securities
|
|
5
|
|
4
|
Short-term investments
|
|
3
|
|
3
|
Other investments
|
|
2
|
|
2
|
Total
|
|
100
|
%
|
100
|
Fixed Income Security Rating
|
|
June 30, 2015
|
|
December 31, 2014
|
|
Aaa/AAA
|
|
18
|
%
|
17
|
|
Aa/AA
|
|
42
|
|
44
|
|
A/A
|
|
25
|
|
25
|
|
Baa/BBB
|
|
14
|
|
13
|
|
Ba/BB or below
|
|
1
|
|
1
|
|
Total
|
|
100
|
%
|
100
|
|
|
|
June 30, 2015
|
|
December 31, 2014
|
|||||||||||||
($ in millions)
|
|
Fair
Value
|
|
Net Unrealized
Gains
|
|
Weighted
Average Credit
Quality
|
|
Fair
Value
|
|
Net Unrealized
Gains
|
|
Weighted Average Credit Quality
|
|||||
AFS Fixed Income Portfolio:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
U.S. government and government agencies
|
|
$
|
115.8
|
|
|
6.4
|
|
|
AA+
|
|
124.1
|
|
|
7.4
|
|
|
AA+
|
Foreign government
|
|
22.7
|
|
|
0.7
|
|
|
AA-
|
|
27.8
|
|
|
0.8
|
|
|
AA-
|
|
Obligations of states and political subdivisions
|
|
1,296.1
|
|
|
18.4
|
|
|
AA
|
|
1,246.3
|
|
|
37.5
|
|
|
AA
|
|
Corporate securities
|
|
1,824.6
|
|
|
29.9
|
|
|
A-
|
|
1,799.8
|
|
|
36.4
|
|
|
A-
|
|
ABS
|
|
214.5
|
|
|
0.8
|
|
|
AAA
|
|
177.2
|
|
|
0.4
|
|
|
AAA
|
|
Residential MBS ("RMBS")
|
|
504.9
|
|
|
2.7
|
|
|
AA+
|
|
511.3
|
|
|
6.2
|
|
|
AA+
|
|
Commercial MBS ("CMBS")
|
|
214.2
|
|
|
0.7
|
|
|
AAA
|
|
179.6
|
|
|
1.6
|
|
|
AA+
|
|
Total AFS fixed income portfolio
|
|
$
|
4,192.8
|
|
|
59.6
|
|
|
AA-
|
|
4,066.1
|
|
|
90.3
|
|
|
AA-
|
June 30, 2015
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||
($ in millions)
|
|
Fair
Value
|
|
Carry
Value
|
|
Unrecognized Holding Gains
|
|
Net Unrealized Gains (Losses) in Accumulated Other Comprehensive Income ("AOCI")
|
|
Total Unrealized/ Unrecognized Gains
|
|
Weighted Average Credit Quality
|
||||||
HTM Fixed Income Portfolio:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Foreign government
|
|
$
|
5.3
|
|
|
5.3
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
AA+
|
Obligations of states and political subdivisions
|
|
226.7
|
|
|
218.3
|
|
|
8.4
|
|
|
1.4
|
|
|
9.8
|
|
|
AA
|
|
Corporate securities
|
|
20.8
|
|
|
18.3
|
|
|
2.5
|
|
|
(0.3
|
)
|
|
2.2
|
|
|
A+
|
|
ABS
|
|
2.0
|
|
|
1.7
|
|
|
0.3
|
|
|
(0.3
|
)
|
|
—
|
|
|
AAA
|
|
CMBS
|
|
4.9
|
|
|
4.3
|
|
|
0.6
|
|
|
(0.3
|
)
|
|
0.3
|
|
|
AAA
|
|
Total HTM fixed income portfolio
|
|
$
|
259.7
|
|
|
247.9
|
|
|
11.8
|
|
|
0.5
|
|
|
12.3
|
|
|
AA
|
December 31, 2014
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||
($ in millions)
|
|
Fair
Value
|
|
Carry
Value
|
|
Unrecognized Holding Gains
|
|
Net Unrealized Gains (Losses) in AOCI
|
|
Total Unrealized/ Unrecognized Gains
|
|
Weighted Average Credit Quality
|
||||||
HTM Portfolio:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Foreign government
|
|
$
|
5.4
|
|
|
5.3
|
|
|
0.1
|
|
|
—
|
|
|
0.1
|
|
|
AA+
|
Obligations of states and political subdivisions
|
|
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
|
|
CMBS
|
|
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
|
($ in thousands)
|
|
Amortized
Cost
|
|
Fair
Value
|
Unrealized Loss
|
||||
One year or less
|
|
$
|
40,317
|
|
|
40,275
|
|
42
|
|
Due after one year through five years
|
|
509,759
|
|
|
506,193
|
|
3,566
|
|
|
Due after five years through ten years
|
|
732,903
|
|
|
720,802
|
|
12,101
|
|
|
Due after ten years
|
|
21,607
|
|
|
21,280
|
|
327
|
|
|
Total
|
|
$
|
1,304,586
|
|
|
1,288,550
|
|
16,036
|
|
($ in thousands)
|
|
Amortized
Cost
|
|
Fair
Value
|
Unrecognized/Unrealized Loss
|
||||
One year or less
|
|
$
|
182
|
|
|
180
|
|
2
|
|
Due after one year through five years
|
|
1,548
|
|
|
1,540
|
|
8
|
|
|
Total
|
|
$
|
1,730
|
|
|
1,720
|
|
10
|
|
|
|
Quarter ended June 30,
|
|
Six Months ended June 30,
|
|||||||||
($ in thousands)
|
|
2015
|
|
2014
|
|
2015
|
|
2014
|
|||||
Fixed income securities
|
|
$
|
30,659
|
|
|
33,781
|
|
|
61,626
|
|
|
64,809
|
|
Equity securities
|
|
2,384
|
|
|
1,736
|
|
|
4,176
|
|
|
3,185
|
|
|
Short-term investments
|
|
23
|
|
|
14
|
|
|
48
|
|
|
33
|
|
|
Other investments
|
|
1,422
|
|
|
3,553
|
|
|
(2,118
|
)
|
|
8,771
|
|
|
Investment expenses
|
|
(2,258
|
)
|
|
(2,310
|
)
|
|
(4,585
|
)
|
|
(4,490
|
)
|
|
Net investment income earned – before tax
|
|
32,230
|
|
|
36,774
|
|
|
59,147
|
|
|
72,308
|
|
|
Net investment income tax expense
|
|
(7,451
|
)
|
|
(9,353
|
)
|
|
(13,160
|
)
|
|
(18,401
|
)
|
|
Net investment income earned – after tax
|
|
$
|
24,779
|
|
|
27,421
|
|
|
45,987
|
|
|
53,907
|
|
Effective tax rate
|
|
23.1
|
%
|
|
25.4
|
|
|
22.2
|
|
|
25.4
|
|
|
Annualized after-tax yield on fixed income securities
|
|
2.1
|
|
|
2.4
|
|
|
2.1
|
|
|
2.3
|
|
|
Annualized after-tax yield on investment portfolio
|
|
2.0
|
|
|
2.3
|
|
|
1.9
|
|
|
2.3
|
|
|
Quarter ended June 30,
|
|
Six Months ended June 30,
|
|||||||||
($ in million)
|
2015
|
|
2014
|
|
2015
|
|
2014
|
|||||
Federal income tax expense
|
$
|
13.0
|
|
|
10.2
|
|
|
29.6
|
|
|
17.3
|
|
Effective tax rate
|
28
|
%
|
|
26
|
|
|
29
|
|
|
27
|
|
|
Required as of June 30, 2015
|
Actual as of June 30, 2015
|
Consolidated net worth
|
$924 million
|
$1.3 billion
|
Statutory surplus
|
Not less than $750 million
|
$1.3 billion
|
Debt-to-capitalization ratio
1
|
Not to exceed 35%
|
23.5%
|
A.M. Best financial strength rating
|
Minimum of A-
|
A
|
1
|
Calculated in accordance with the Line of Credit agreement.
|
•
|
Fitch Ratings ("Fitch") – Our “A+” rating was reaffirmed in July 2015 with a stable outlook. Fitch cited our improved underwriting results across all segments, solid capitalization with strong growth in shareholders' equity, and continued improvement in leverage and interest coverage metrics.
|
•
|
S&P's Ratings Services – 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 Second Quarter 2015 by Moody's, which cited our solid regional franchise with established independent agency support, solid risk adjusted capitalization, strong invested asset quality, and good underwriting profitability. The outlook was revised to stable from negative, reflecting Moody's view of our improved profitability as a result of our stronger price adequacy in commercial lines, re-underwriting initiatives, and claims processing improvements.
|
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 |
|||||
April 1 – 30, 2015
|
|
95
|
|
|
$
|
28.70
|
|
|
—
|
|
|
—
|
|
May 1 - 31, 2015
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
June 1 - 30, 2015
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
Total
|
|
95
|
|
|
$
|
28.70
|
|
|
—
|
|
|
—
|
|
Exhibit No.
|
|
|
* 3.2
|
|
By-Laws of Selective Insurance Group, Inc., effective July 29, 2015.
|
* 11
|
|
Statement Re: Computation of Per Share Earnings.
|
* 31.1
|
|
Certification of Chief Executive Officer in accordance with Section 302 of the Sarbanes-Oxley Act of 2002.
|
* 31.2
|
|
Certification of Chief Financial Officer in accordance with Section 302 of the Sarbanes-Oxley Act of 2002.
|
* 32.1
|
|
Certification of Chief Executive Officer in accordance with Section 906 of the Sarbanes-Oxley Act of 2002.
|
* 32.2
|
|
Certification of Chief Financial Officer in accordance with Section 906 of the Sarbanes-Oxley Act of 2002.
|
** 101.INS
|
|
XBRL Instance Document.
|
** 101.SCH
|
|
XBRL Taxonomy Extension Schema Document.
|
** 101.CAL
|
|
XBRL Taxonomy Extension Calculation Linkbase Document.
|
** 101.LAB
|
|
XBRL Taxonomy Extension Label Linkbase Document.
|
** 101.PRE
|
|
XBRL Taxonomy Extension Presentation Linkbase Document.
|
** 101.DEF
|
|
XBRL Taxonomy Extension Definition Linkbase Document.
|
By: /s/ Gregory E. Murphy
|
July 30, 2015
|
Gregory E. Murphy
|
|
Chairman of the Board and Chief Executive Officer
|
|
|
|
By: /s/ Dale A. Thatcher
|
July 30, 2015
|
Dale A. Thatcher
|
|
Executive Vice President and Chief Financial Officer
|
|
(principal accounting officer and principal financial officer)
|
|
|
|||||||||||
Second Quarter 2015
|
|
Income
(Numerator)
|
|
Shares
(Denominator)
|
|
Per Share
Amount
|
|||||
(in thousands, except per share amounts)
|
|
|
|
||||||||
Basic Earnings Per Share ("EPS"):
|
|
|
|
|
|
|
|||||
Net income available to common stockholders
|
|
$
|
33,768
|
|
|
56,988
|
|
|
$
|
0.59
|
|
|
|
|
|
|
|
|
|||||
Effect of dilutive securities:
|
|
|
|
|
|
|
|||||
Stock compensation plans
|
|
—
|
|
|
817
|
|
|
|
|||
|
|
|
|
|
|
|
|||||
Diluted EPS:
|
|
|
|
|
|
|
|||||
Net income available to common stockholders
|
|
$
|
33,768
|
|
|
57,805
|
|
|
$
|
0.58
|
|
Second Quarter 2014
|
|
Income
(Numerator) |
|
Shares
(Denominator) |
|
Per Share
Amount |
|||||
(in thousands, except per share amounts)
|
|
|
|
||||||||
Basic EPS:
|
|
|
|
|
|
|
|||||
Net income available to common stockholders
|
|
$
|
29,341
|
|
|
56,272
|
|
|
$
|
0.52
|
|
|
|
|
|
|
|
|
|||||
Effect of dilutive securities:
|
|
|
|
|
|
|
|||||
Stock compensation plans
|
|
—
|
|
|
988
|
|
|
|
|||
|
|
|
|
|
|
|
|||||
Diluted EPS:
|
|
|
|
|
|
|
|||||
Net income available to common stockholders
|
|
$
|
29,341
|
|
|
57,260
|
|
|
$
|
0.51
|
|
Six Months Ended June 30, 2015
|
|
Income
(Numerator) |
|
Shares
(Denominator) |
|
Per Share
Amount |
|||||
(in thousands, except per share amounts)
|
|
|
|
||||||||
Basic EPS:
|
|
|
|
|
|
|
|||||
Net income available to common stockholders
|
|
$
|
73,476
|
|
|
56,895
|
|
|
$
|
1.29
|
|
|
|
|
|
|
|
|
|||||
Effect of dilutive securities:
|
|
|
|
|
|
|
|||||
Stock compensation plans
|
|
—
|
|
|
866
|
|
|
|
|||
|
|
|
|
|
|
|
|||||
Diluted EPS:
|
|
|
|
|
|
|
|||||
Net income available to common stockholders
|
|
$
|
73,476
|
|
|
57,761
|
|
|
$
|
1.27
|
|
Six Months Ended June 30, 2014
|
|
Income
(Numerator) |
|
Shares
(Denominator) |
|
Per Share
Amount |
|||||
(in thousands, except per share amounts)
|
|
|
|
||||||||
Basic EPS:
|
|
|
|
|
|
|
|||||
Net income available to common stockholders
|
|
$
|
47,315
|
|
|
56,182
|
|
|
$
|
0.84
|
|
|
|
|
|
|
|
|
|||||
Effect of dilutive securities:
|
|
|
|
|
|
|
|||||
Stock compensation plans
|
|
—
|
|
|
1,033
|
|
|
|
|||
|
|
|
|
|
|
|
|||||
Diluted EPS:
|
|
|
|
|
|
|
|||||
Net income available to common stockholders
|
|
$
|
47,315
|
|
|
57,215
|
|
|
$
|
0.83
|
|
(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:
|
July 30, 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:
|
July 30, 2015
|
|
By: /s/ Dale A. Thatcher
|
|
|
|
Dale A. Thatcher
|
|
|
|
Executive Vice President and Chief Financial Officer
|
Date:
|
July 30, 2015
|
|
By: /s/ Gregory E. Murphy
|
|
|
|
Gregory E. Murphy
|
|
|
|
Chairman of the Board and Chief Executive Officer
|
Date:
|
July 30, 2015
|
|
By: /s/ Dale A. Thatcher
|
|
|
|
Dale A. Thatcher
|
|
|
|
Executive Vice President and Chief Financial Officer
|