New Jersey
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22-2168890
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(State or Other Jurisdiction of Incorporation or Organization)
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(I.R.S. Employer Identification No.)
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40 Wantage Avenue, Branchville, New Jersey
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07890
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(Address of Principal Executive Offices)
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(Zip Code)
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Registrant’s telephone number, including area code:
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(973) 948-3000
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Title of each class
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Name of each exchange on which registered
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Common Stock, par value $2 per share
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NASDAQ Global Select Market
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5.875% Senior Notes due February 9, 2043
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New York Stock Exchange
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Large accelerated filer
x
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Accelerated filer
¨
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Non-accelerated filer
¨
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Smaller reporting company
¨
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(Do not check if a smaller reporting company)
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SELECTIVE INSURANCE GROUP, INC.
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Table of Contents
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Page No.
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PART I
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Item 1.
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Item 1A.
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Item 1B.
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Item 2.
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Item 3.
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PART II
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Item 5.
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Item 6.
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Item 7.
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Item 7A.
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Item 8.
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December 31, 2016, 2015, and 2014
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December 31, 2016, 2015, and 2014
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December 31, 2016, 2015, and 2014
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December 31, 2016, 2015, and 2014
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Item 9.
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Item 9A.
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Item 9B.
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PART III
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Item 10.
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Item 11.
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Item 12.
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Item 13.
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Item 14.
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PART IV
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Item 15.
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Rating Agency
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Financial Strength Rating
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Outlook
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A.M. Best
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A
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Stable
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Standard & Poor’s Global Ratings (“S&P”)
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A
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Stable
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Moody’s Investors Services (“Moody’s”)
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A2
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Stable
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Fitch Ratings (“Fitch”)
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A+
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Stable
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•
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Standard Commercial Lines, which is comprised of insurance products and services provided in the standard marketplace to commercial enterprises, which are typically businesses, non-profit organizations, and local government agencies. This business represents
78%
of our total insurance segments’ NPW and is sold in 22 Eastern and Midwestern states and the District of Columbia.
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•
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Standard Personal Lines, which is comprised of insurance products and services provided primarily to individuals acquiring coverage in the standard marketplace. This business represents
13%
of our total insurance segments’ NPW and is primarily sold in 13 Eastern and Midwestern states and the District of Columbia. Standard Personal Lines includes flood insurance coverage. We are the sixth largest writer of this coverage through the National Flood Insurance Program (“NFIP”) and write flood business in all 50 states and the District of Columbia.
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•
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E&S Lines, which is comprised of insurance products and services provided to customers who have not obtained coverage in the standard marketplace. We currently only write commercial lines E&S coverages and this business represents
9%
of our total insurance segments’ NPW and is sold in all 50 states and the District of Columbia.
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•
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Investments, which invests the premiums collected by our insurance segments, as well as amounts generated through our capital management strategies, which includes the issuance of debt and equity securities.
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•
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Underwriting income/loss from our insurance segments
. Underwriting income/loss is comprised of revenues, which are the premiums earned on our insurance products and services, less expenses. Gross premiums are direct premium written (“DPW”) plus premiums assumed from other insurers. Gross premiums less premium ceded to reinsurers, is NPW. NPW is recognized as revenue ratably over a policy’s term as net premiums earned (“NPE”). Expenses related to our insurance segments fall into three main categories: (i) losses associated with claims and various loss expenses incurred for adjusting claims (referred to as “losses and loss expenses”); (ii) expenses related to insurance policy issuance, such as commissions to our distribution partners, premium taxes, and other expenses incurred in issuing and maintaining policies, including employee compensation and benefits (referred to as “underwriting expenses”); and (iii) policyholder dividends.
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•
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Net investment income from the investment segment
. We generate income from investing insurance premiums and amounts generated through our capital management strategies. Net investment income consists primarily of: (i) interest earned on fixed income investments and preferred stocks; (ii) dividends earned on equity securities; and (iii) other income primarily generated from our alternative investment portfolio.
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•
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Net realized gains and losses on investment securities from the investments segment
. Realized gains and losses from the investment portfolios of the Insurance Subsidiaries and the Parent are typically the result of sales, calls, and redemptions. They also include write downs from other-than-temporary impairments (“OTTI”).
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•
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With regard to the underwriting expense ratio
: As noted above, NPE is the denominator for GAAP; whereas NPW is the denominator for SAP.
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•
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With regard to income or expense recognition
:
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Underwriting expenses that are incremental and directly related to the successful acquisition of insurance policies are deferred and amortized to expense over the life of an insurance policy under GAAP; whereas they are recognized when incurred under SAP.
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•
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Deferred taxes are recognized as either a deferred tax expense or a deferred tax benefit in income under GAAP; whereas they are recorded directly to surplus under SAP.
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Changes in the value of our alternative investments, which are part of our other investment portfolio on our Consolidated Balance Sheets, are recognized in income under GAAP; whereas they are recorded directly to surplus under SAP and only recognized in income when cash is received.
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•
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With regard to loss and loss expense reserves
:
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Under GAAP, reinsurance recoverables, net of a provision for uncollectible reinsurance, are presented as an asset on the Consolidated Balance Sheets, whereas under SAP, this amount is netted within the liability for loss and loss expense reserves.
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Under GAAP, for those structured settlements for which we did not obtain a release, a deposit asset and the related loss reserve are included on the Consolidated Balance Sheets, whereas under SAP, the structured settlement transaction is recorded as a paid loss.
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($ in thousands)
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2016
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2015
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GAAP losses and loss expense reserves – net
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$
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3,691,719
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3,517,728
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Statutory reinsurance recoverable on unpaid losses and loss expenses
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(616,700
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)
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(556,719
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)
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Structured settlements
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(12,127
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)
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(9,104
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)
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Statutory losses and loss expense reserves
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$
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3,062,892
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2,951,905
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($ in thousands)
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2016
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2015
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GAAP reinsurance recoverable – net
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$
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621,537
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561,968
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Reinsurance recoverable on paid losses and loss expenses
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(10,337
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)
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(10,949
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)
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GAAP reinsurance recoverable on unpaid losses and loss expenses
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611,200
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551,019
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Provision for uncollectible reinsurance
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5,500
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5,700
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Statutory reinsurance recoverable on unpaid losses and loss expenses
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$
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616,700
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556,719
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•
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With regard to equity under GAAP and statutory surplus under SAP
:
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The timing difference in income due to the GAAP/SAP differences in expense recognition creates a difference between GAAP equity and SAP statutory surplus.
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Regarding unrealized gains and losses on fixed income securities:
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Under GAAP, unrealized gains and losses on available-for-sale (“AFS”) fixed income securities are recognized in equity; but they are not recognized in equity on purchased held-to-maturity (“HTM”) securities. Unrealized gains and losses on HTM securities transferred from an AFS designation are amortized from equity as a yield adjustment.
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Under SAP, unrealized gains and losses on fixed income securities assigned certain NAIC Securities Valuation Office ratings (specifically designations of one or two, which generally equate to investment grade bonds) are not recognized in statutory surplus. However, unrealized losses on fixed income securities that have a designation of three or higher are recognized in statutory surplus.
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Certain assets are designated under insurance regulations as “non-admitted,” including, but not limited to, certain deferred tax assets, overdue premium receivables, furniture and equipment, and prepaid expenses. These assets are recorded in the Consolidated Balance Sheets net of applicable allowances under GAAP but are excluded from statutory surplus under SAP.
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Regarding the recognition of the liability for our defined benefit plans, under both GAAP and SAP, the liability is recognized in an amount equal to the excess of the projected benefit obligation over the fair value of the plan assets. However, changes in this balance not otherwise recognized in income are recognized in equity as a component of other comprehensive income (“OCI”) under GAAP and in statutory surplus under SAP.
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Years ended December 31,
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($ in thousands)
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2016
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2015
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2014
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Combined Insurance Segments Results
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NPW
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$
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2,237,288
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2,069,904
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1,885,280
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NPE
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$
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2,149,572
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1,989,909
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1,852,609
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Losses and loss expenses incurred
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1,234,797
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1,148,541
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1,157,501
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Net underwriting expenses incurred
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759,194
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686,120
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610,783
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Policyholder dividends
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3,648
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6,219
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6,182
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Underwriting income
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$
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151,933
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149,029
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78,143
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Ratios:
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Loss and loss expense ratio
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57.4
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%
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57.7
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62.5
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Underwriting expense ratio
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35.3
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34.5
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33.0
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Policyholder dividends ratio
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0.2
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0.3
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0.3
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GAAP combined ratio
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92.9
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%
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92.5
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95.8
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Statutory combined ratio
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91.8
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%
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92.4
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95.7
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•
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Property insurance, which generally covers the financial consequences of accidental loss of an insured’s real and/or personal property. Property claims are generally reported and settled in a relatively short period of time.
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Casualty insurance, which generally covers the financial consequences of employee injuries in the course of employment and bodily injury and/or property damage to a third party as a result of an insured’s negligent acts, omissions, or legal liabilities. Casualty claims may take several years to be reported and settled.
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Flood insurance, which generally covers property losses under the Federal Government's Write Your Own ("WYO") Program of the NFIP. Flood insurance premiums and losses are 100% ceded to the NFIP.
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Types of Policies
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Category of Insurance
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Standard Commercial Lines
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Standard Personal Lines
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E&S Lines
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Commercial Property (including Inland Marine)
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Property
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X
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X
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Commercial Automobile
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Property/Casualty
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X
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X
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General Liability (including Excess Liability/Umbrella)
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Casualty
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X
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X
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Workers Compensation
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Casualty
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X
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Businessowners' Policy
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Property/Casualty
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X
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Bonds (Fidelity and Surety)
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Casualty
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X
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Homeowners
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Property/Casualty
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X
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Personal Automobile
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Property/Casualty
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X
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Personal Umbrella
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Casualty
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X
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Flood
1
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Flood/Property
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X
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X
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Percentage of Standard Commercial Lines
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Description
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Contractors
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35%
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General contractors and trade contractors
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Mercantile and Services
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26%
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Focuses on retail, office, service businesses, restaurants, golf courses, and hotels
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Community and Public Services
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20%
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Focuses on public entities, social services, and religious institutions
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Manufacturing and Wholesale
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18%
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Includes manufacturers, wholesalers, and distributors
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Bonds
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1%
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Includes fidelity and surety
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Total Standard Commercial Lines
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100%
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•
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The average Standard Commercial Lines account size is approximately
$11,000
.
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The average Standard Personal Lines account size is approximately
$2,000
.
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The average E&S Lines policy is approximately
$3,000
.
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Standard Commercial Lines products and services are primarily sold in
22
states located in the Eastern and Midwestern regions of the United States and the District of Columbia. In 2017, we also plan on expanding into the Southwest region of the United States.
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Standard Personal Lines products and services are primarily sold in
13
states located in the Eastern and Midwestern regions of the United States, except for the flood portion of this segment, which is sold in all
50
states and the District of Columbia.
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E&S Lines are sold in all
50
states and the District of Columbia.
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Region
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Office Location
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Heartland
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Carmel, Indiana
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New Jersey
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Hamilton, New Jersey
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Northeast
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Branchville, New Jersey
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Mid-Atlantic
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Allentown, Pennsylvania and Hunt Valley, Maryland
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Southern
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Charlotte, North Carolina
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E&S
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Horsham, Pennsylvania and Scottsdale, Arizona
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Standard Commercial Lines: independent retail agents;
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Standard Personal Lines: independent retail agents; and
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E&S Lines: wholesale general agents and brokers.
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Use an empowered field underwriting model to provide our Standard Commercial Lines retail distribution partners with resources within close geographic proximity to their businesses and our customers. For further discussion on this, see the “Field Model and Technology” section below.
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Develop close relationships with each distribution partner, as well as their principals and producers: (i) by soliciting their feedback on products and services; (ii) by advising them concerning our product developments; and (iii) through education and development focusing on producer recruitment, sales training, enhancing customer experience, online marketing, and distribution operations.
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•
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Develop with each distribution partner, and then carefully monitor, annual goals regarding: (i) types and mix of risks placed with us; (ii) amount of premium or number of policies placed with us; (iii) customer service and retention levels; and (iv) profitability of business placed with us.
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Develop brand recognition with our customers through our marketing efforts, which include radio and television advertising, as well as advertising at certain national and local sporting events.
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Our distribution partners and customers with access to accurate business information and the ability to process certain transactions from their locations, seamlessly integrating those transactions into our systems;
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Our underwriters with targeted underwriting and pricing tools to enhance profitability while growing the business;
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Our workers compensation claims adjusters with predictive tools to indicate when claims are likely to escalate;
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Our Special Investigations Unit ("SIU") investigators access to our business intelligence systems to better identify claims with potential fraudulent activities;
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Our claims recovery and subrogation departments with the ability to expand and enhance their models through the use of our business intelligence systems; and
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Our customers with 24/7 access to transactional capabilities and information through a web-based customer portal and a customer mobile application.
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NetVu Automation Excellence Award, which recognizes carriers that make it easier for agencies to do business;
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ACORD Leadership Award, which is presented to an organization or an individual demonstrating leadership in the areas of standards development, advocacy, and/or implementation. It recognizes carriers that are guiding the insurance industry towards greater clarity in the sharing of insurance data; and
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IIBA Leadership Excellence in the Advancement of the Practice of Business Analysis, which is presented annually to a company that adapts, optimizes, and evolves business analysis best practices and standards by implementing effective tools, processes, and methodologies that enable better business capabilities.
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Our Regions, which establish and execute upon: (i) annual premium and pricing goals; (ii) specific new business targets by distribution partner; and (iii) profit improvement plans as needed across lines, states, and/or distribution partners;
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Our corporate underwriting department, which develops our underwriting appetite, products, policy forms, pricing, and underwriting guidelines for our standard market and E&S market business;
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Our corporate actuaries who assist in the determination of rate and pricing levels, while monitoring pricing and profitability along with the Regions, corporate underwriting department, and business intelligence staff for our standard market and with E&S market business;
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Our distribution partners, which include independent retail agents for our standard market business and wholesale general agents for our E&S market business, that provide front-line underwriting within our prescribed guidelines;
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Our Agency Management Specialists (“AMSs”), who: (i) manage the growth and profitability of business that their assigned distribution partners write with us; and (ii) perform field underwriting for new Standard Commercial Lines business;
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Our territory managers who have oversight of the AMS production team, ensure that: (i) annual profit and growth plans are developed on a state by state basis; (ii) the achievement of these state plans are monitored at the state, AMS territory and account level; and (iii) individual agency plans are developed and monitored for achievement annually.
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Our Standard Commercial Lines small business teams that are responsible for handling: (i) new business in need of review that was submitted by our distribution partners through our automated underwriting platform, One & Done
®
; and (ii) other new small accounts and middle market accounts with low underwriting complexity;
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Our Safety Management Specialists (“SMSs”), who provide a wide range of front-line safety management services to our Standard Commercial Lines customers as discussed more fully below;
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Our regional underwriters, who manage the in force policies for their assigned distribution partners, including, but not limited to, managing profitability and pricing levels within their portfolios by developing policy-specific pricing;
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Our premium auditors, who supplement the underwriting process by working with insureds to accurately audit exposures for certain policies that we write;
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Our field technical coordinators, who are responsible for technology assistance and training to aid our employees and distribution partners;
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Our Standard Personal Lines Marketing Specialists (“PLMSs”), who have primary responsibility for identifying new opportunities to grow our Standard Personal Lines; and
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Our E&S territory managers, who have primary responsibility for identifying new opportunities to grow our E&S Lines.
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Liability claims with high severity or technically complex losses are handled by the CCU. The CCU specialists are primarily field based and handle losses based on injury type or with severities greater than $250,000.
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•
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Litigated matters not meeting the CCU criteria are handled within our regional offices by our litigation claim units. These teams are aligned based upon jurisdictional knowledge and technical experience. In addition, they are supervised by litigation managers within the regional claim offices. These claims are segregated from the CMSs to allow for focused management.
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Workers compensation claims handling is centralized in Charlotte, North Carolina. Jurisdictionally trained and aligned medical only and lost-time adjusters manage non-complex workers compensation claims within our footprint. Claims with high exposure and/or significant escalation risk are referred to the workers compensation strategic case management unit.
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Low severity/high volume property claims are handled by the CSC. Certain complex claims that do not involve structural damage (i.e. employee dishonesty and equipment breakdown losses) are handled by a small group of specialists in the CSC.
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The Large Loss Unit ("LLU") handles complex property claims, typically those in excess of $100,000.
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All asbestos and environmental claims are referred to our specialized corporate Environmental Unit, which also handles latent claims.
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•
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Regional insurers
, such as Cincinnati Financial Corporation, Erie Indemnity Company, The Hanover Insurance Group, Inc., and United Fire Group, Inc.; and
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•
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National insurers
, such as The Hartford Financial Services Group, Inc., Liberty Mutual Holding Company Inc., Nationwide Mutual Insurance Company, The Travelers Companies, Inc., and Zurich Insurance Group, Ltd.
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•
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Nautilus Insurance Group, a member of W. R. Berkley Company;
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•
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Colony Specialty, a member of the Argo Group International Holding Ltd;
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•
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Western World Insurance Group, a member of the Validus Group;
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•
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Century Insurance Group, a member of the Meadowbrook Insurance Group;
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•
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The Burlington Insurance Company, a member of IFG Companies;
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•
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United States Liability Insurance Group, a member of Berkshire Hathaway, Inc.;
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•
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Scottsdale Insurance Company, a member of Nationwide Mutual Insurance Company; and
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•
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Markel Corporation.
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Simple
Average of
All Periods
Presented
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2016
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2015
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2014
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2013
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2012
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||||
Insurance Operations Ratios:
1
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||||
Loss and loss expense
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62.5
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%
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57.4
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57.7
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62.4
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|
|
64.5
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|
|
70.7
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Underwriting expense
|
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33.4
|
|
|
34.2
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34.4
|
|
33.0
|
|
|
32.8
|
|
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32.6
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|
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Policyholder dividends
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0.2
|
|
|
0.2
|
|
0.3
|
|
0.3
|
|
|
0.2
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|
|
0.2
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|
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Statutory combined ratio
|
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96.2
|
|
|
91.8
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|
92.4
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|
95.7
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|
|
97.5
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|
|
103.5
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|
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Growth in NPW
|
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8.6
|
|
|
8.1
|
|
9.8
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4.1
|
|
|
8.7
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|
12.2
|
|
|
|
|
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|
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|
|
|
|
|
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|
||||
Industry Ratios:
1, 2
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|
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|
||||
Loss and loss expense
|
|
70.7
|
|
|
73.0
|
|
69.8
|
|
69.3
|
|
|
67.7
|
|
|
73.7
|
|
|
Underwriting expense
|
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27.7
|
|
|
27.1
|
|
27.8
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|
27.4
|
|
|
28.0
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28.2
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Policyholder dividends
|
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0.7
|
|
|
0.6
|
|
0.7
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|
0.7
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|
|
0.7
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0.6
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Statutory combined ratio
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99.1
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100.7
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98.3
|
|
97.4
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96.4
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102.5
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Growth in NPW
|
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3.8
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|
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2.7
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3.3
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4.3
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4.4
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4.4
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|
||||
Favorable (Unfavorable) to Industry:
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|
|
|
|
|
|
|
|
|
|
|
||||
Statutory combined ratio
|
|
2.9
|
|
|
8.9
|
|
5.9
|
|
1.7
|
|
|
(1.1
|
)
|
|
(1.0
|
)
|
|
Growth in NPW
|
|
4.8
|
|
|
5.4
|
|
6.5
|
|
(0.2
|
)
|
|
4.3
|
|
|
7.8
|
|
|
•
|
The Insurance Regulatory Information System (“IRIS”). IRIS identifies 13 industry financial ratios and specifies “usual values” for each ratio. Departure from the usual values on four or more of the financial ratios can lead to inquiries from individual state insurance departments about certain aspects of the insurer's business. Our Insurance Subsidiaries have consistently met the majority of the IRIS ratio tests.
|
•
|
Risk-Based Capital. Risk-based capital is measured by four major areas of risk to which property and casualty insurers are exposed: (i) asset risk; (ii) credit risk; (iii) underwriting risk; and (iv) off-balance sheet risk. Insurers face a steadily increasing amount of regulatory scrutiny and potential intervention as their total adjusted capital declines below two times their "Authorized Control Level". Based on our
2016
statutory financial statements, which have been prepared in accordance with SAP, the total adjusted capital for each of our Insurance Subsidiaries substantially exceeded two times their Authorized Control Level.
|
•
|
Annual Financial Reporting Regulation (referred to as the "Model Audit Rule"). The Model Audit Rule, which is modeled closely on the Sarbanes-Oxley Act of 2002, as amended ("Sarbanes-Oxley Act"), regulates: (i) auditor independence; (ii) corporate governance; and (iii) internal control over financial reporting. As permitted under the Model Audit Rule, the Audit Committee of the Board of Directors (the “Board”) of the Parent also serves as the audit committee of each of our Insurance Subsidiaries.
|
•
|
Own Risk and Solvency Assessment ("ORSA"). ORSA requires insurers to maintain a framework for identifying, assessing, monitoring, managing, and reporting on the “material and relevant risks” associated with the insurers' (or insurance groups') current and future business plans. ORSA, which has been adopted by the state insurance regulators of our Insurance Subsidiaries, requires companies to file an internal assessment of their solvency with insurance regulators annually. Although no specific capital adequacy standard is currently articulated in ORSA, it is possible that such standard will be developed over time and may increase insurers' minimum capital requirements, which could adversely impact our growth and return on equity.
|
•
|
The Terrorism Risk Insurance Program Reauthorization Act ("TRIPRA");
|
•
|
The Dodd-Frank Wall Street Reform and Consumer Protection Act (“Dodd-Frank Act”); and
|
•
|
Various privacy laws that apply to us because we have personal non-public information, including the:
|
◦
|
Gramm-Leach-Bliley Act;
|
◦
|
Fair Credit Reporting Act;
|
◦
|
Drivers Privacy Protection Act; and
|
◦
|
Health Insurance Portability and Accountability Act.
|
•
|
The establishment of the Federal Insurance Office (“FIO”) under the United States Department of the Treasury;
|
•
|
Federal Reserve oversight of financial services firms designated as systemically important; and
|
•
|
Corporate governance reforms for publicly traded companies.
|
•
|
In 2014, the International Association of Insurance Supervisors proposed Basic Capital Standards for Global Systemically Important Insurers as well as a uniform capital framework for internationally active insurers; and
|
•
|
The European Union enacted Solvency II, which sets out new requirements on capital adequacy and risk management for insurers operating in Europe, which was implemented in 2016.
|
Category of Investment
|
|
|
|
|
|
|
($ in millions, except invested assets per dollar of stockholders' equity)
|
|
Carrying Value
|
|
% of Investment
Portfolio
|
||
Fixed income securities
|
|
$
|
4,894.1
|
|
|
92
|
Equity securities
|
|
146.7
|
|
|
2
|
|
Short-term investments
|
|
221.7
|
|
|
4
|
|
Other investments, including alternatives
|
|
102.4
|
|
|
2
|
|
Total
|
|
$
|
5,364.9
|
|
|
100
|
Invested assets per dollar of stockholders' equity
|
|
$
|
3.50
|
|
|
|
•
|
Our reinsurers, who are obligated to us under our reinsurance agreements. Amounts recoverable from our reinsurers can increase quickly and significantly during periods of high catastrophe loss activity, such as in the fourth quarter of 2012 due to losses incurred from Superstorm Sandy, and thus our credit risk to our reinsurers can increase significantly and will fluctuate over time. The relatively small size of the reinsurance market and our objective to maintain an average weighted rating of “A” by A.M. Best on our current reinsurance programs constrains our ability to diversify this credit risk. However, some of our reinsurance credit risk is collateralized.
|
•
|
Certain life insurance companies that are obligated to our customers, as we have purchased annuities from them under structured settlement agreements.
|
•
|
Some of our distribution partners, who collect premiums from our customers and are required to remit the collected premium to us.
|
•
|
Some of our customers, who are responsible for payment of premiums and/or deductibles directly to us.
|
•
|
The invested assets in our defined benefit plan, which partially serve to fund our liability associated with this plan. To the extent that credit risk adversely impacts the valuation and performance of the invested assets within our defined benefit plan, the funded status of the defined benefit plan could be adversely impacted and, as result, could increase the cost of the plan to us.
|
NRSRO
|
|
Credit Rating
|
|
Long Term Credit Outlook
|
A.M. Best
|
|
bbb+
|
|
Stable
|
S&P
|
|
BBB
|
|
Stable
|
Moody’s
|
|
Baa2
|
|
Stable
|
Fitch
|
|
BBB+
|
|
Stable
|
•
|
A pure price decline of approximately 1% would increase our statutory combined ratio by approximately
0.75
points;
|
•
|
A 3% increase in our expected claim costs for the year would cause our loss and loss expense ratio to increase by approximately
1.75
points; and
|
•
|
A combination of the two could raise the combined ratio by approximately
2.5
points.
|
•
|
Related to our financial condition, review and approval of such matters as minimum capital and surplus requirements, standards of solvency, security deposits, methods of accounting, form and content of statutory financial statements, reserves for unpaid losses and loss adjustment expenses, reinsurance, payment of dividends and other distributions to shareholders, periodic financial examinations, and annual and other report filings.
|
•
|
Related to our general business, review and approval of such matters as certificates of authority and other insurance company licenses, licensing and compensation of distribution partners, premium rates (which may not be excessive, inadequate, or unfairly discriminatory), policy forms, policy terminations, reporting of statistical information regarding our premiums and losses, periodic market conduct examinations, unfair trade practices, participation in mandatory shared market mechanisms, such as assigned risk pools and reinsurance pools, participation in mandatory state guaranty funds, and mandated continuing workers compensation coverage post-termination of employment.
|
•
|
Related to our ownership of the Insurance Subsidiaries, we are required to register as an insurance holding company system in each state where an insurance subsidiary is domiciled and report information concerning all of our operations that may materially affect the operations, management, or financial condition of the insurers. As an insurance holding company, the appropriate state regulatory authority may: (i) examine our Insurance Subsidiaries or us at any time; (ii) require disclosure or prior approval of material transactions of any of the Insurance Subsidiaries with its affiliates; and (iii) require prior approval or notice of certain transactions, such as payment of dividends or distributions to us.
|
•
|
After-market parts;
|
•
|
Urban homeowner insurance underwriting practices, including those related to architectural or structural features and attempts by federal regulators to expand the Federal Housing Administration's guidelines to determine unfair discrimination;
|
•
|
Credit scoring and predictive modeling pricing;
|
•
|
Cybersecurity breaches;
|
•
|
Investment disclosure;
|
•
|
Managed care practices;
|
•
|
Timing and discounting of personal injury protection claims payments;
|
•
|
Direct repair shop utilization practices;
|
•
|
Flood insurance claim practices; and
|
•
|
Shareholder class action suits.
|
•
|
Supermajority shareholder voting requirements to approve certain business combinations with interested shareholders (as defined in the Amended and Restated Certificate of Incorporation) unless certain other conditions are satisfied; and
|
•
|
Supermajority shareholder voting requirements to amend the foregoing provisions in our Amended and Restated Certificate of Incorporation.
|
•
|
Being disciplined in our underwriting practices;
|
•
|
Being prudent in our claims management practices, establishing adequate loss and loss expense reserves, and placing appropriate reliance on our claims analytics;
|
•
|
Continuing to develop and implement various underwriting tools and automated analytics to examine historical statistical data regarding our customers and their loss experience to: (i) classify such policies based on that information; (ii) apply that information to current and prospective accounts; and (iii) better predict account profitability;
|
•
|
Continuing to develop our customer experience platform as we grow in our understanding of customer segmentation;
|
•
|
Purchasing reinsurance and using catastrophe modeling; and
|
•
|
Being prudent in our financial planning process, which supports our underwriting strategies.
|
•
|
Being prudent in establishing our investment policy and appropriately diversifying our investments, which supports our liabilities and underwriting strategies;
|
•
|
Using complex financial and investment models to analyze historical investment performance and predict future investment performance under a variety of scenarios using asset concentration, asset volatility, asset correlation, and systematic risk; and
|
•
|
Closely monitoring investment performance, general economic and financial conditions, and other relevant factors.
|
•
|
Change in exposures and claims frequency and/or severity due to unanticipated consequences of new technologies and their use. For example, technologies have been developed and are being tested for autonomous self-driving automobiles. It is unclear and we cannot predict the corresponding severity or cost of automobile claims. It is possible that these technological developments will affect the profitability and demand for automobile insurance.
|
•
|
Changes in how insurance products are marketed and purchased due to the availability of new technologies and changes in customer expectations. For example, comparative rating technologies, which are widely used in personal lines insurance, facilitate the process of efficiently generating quotes from multiple insurance companies. This technology makes differentiation other than on pricing more difficult and has increased price comparison and resulted in a higher level of quote activity with a lower percentage of quotes becoming new business written. These trends may continue to accelerate and may affect other lines of business, which could put pressure on our future profitability.
|
•
|
New technologies may require the development of new insurance products without the support of sufficient historical claims data for us to continue to compete effectively for our distribution partners' business and customers.
|
|
|
2016
|
|
2015
|
|||||||||
|
|
High
|
|
Low
|
|
High
|
|
Low
|
|||||
First quarter
|
|
$
|
36.92
|
|
|
29.27
|
|
|
30.10
|
|
|
25.49
|
|
Second quarter
|
|
38.67
|
|
|
33.60
|
|
|
29.60
|
|
|
26.28
|
|
|
Third quarter
|
|
41.30
|
|
|
35.90
|
|
|
32.50
|
|
|
28.10
|
|
|
Fourth quarter
|
|
44.00
|
|
|
34.95
|
|
|
37.91
|
|
|
30.36
|
|
Dividend Per Share
|
|
2016
|
|
2015
|
|||
First quarter
|
|
$
|
0.15
|
|
|
0.14
|
|
Second quarter
|
|
0.15
|
|
|
0.14
|
|
|
Third quarter
|
|
0.15
|
|
|
0.14
|
|
|
Fourth quarter
|
|
0.16
|
|
|
0.15
|
|
Period
|
|
Total Number of Shares Purchased
1
|
|
Average Price Paid Per Share
|
|
Total Number of Shares Purchased as Part of Publicly Announced Programs
|
|
Maximum Number of Shares that May Yet Be Purchased Under the Announced Programs
|
||||||
October 1 – 31, 2016
|
|
$
|
—
|
|
|
$
|
—
|
|
|
—
|
|
|
—
|
|
November 1 – 30, 2016
|
|
203
|
|
|
35.75
|
|
|
—
|
|
|
—
|
|
||
December 1 – 31, 2016
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
||
Total
|
|
$
|
203
|
|
|
$
|
35.75
|
|
|
—
|
|
|
—
|
|
Five-Year Financial Highlights
|
||||||||||||||||||
(All presentations are in accordance with GAAP unless noted otherwise, number of weighted average shares and dollars in thousands, except per share amounts)
|
||||||||||||||||||
|
|
2016
|
|
|
|
2015
|
|
2014
|
|
2013
|
|
2012
|
||||||
Net premiums written
|
|
$
|
2,237,288
|
|
|
|
|
2,069,904
|
|
|
1,885,280
|
|
|
1,810,159
|
|
|
1,666,883
|
|
Net premiums earned
|
|
2,149,572
|
|
|
|
|
1,989,909
|
|
|
1,852,609
|
|
|
1,736,072
|
|
|
1,584,119
|
|
|
Net investment income earned
|
|
130,754
|
|
|
|
|
121,316
|
|
|
138,708
|
|
|
134,643
|
|
|
131,877
|
|
|
Net realized (losses) gains
|
|
(4,937
|
)
|
|
|
|
13,171
|
|
|
26,599
|
|
|
20,732
|
|
|
8,988
|
|
|
Total revenues
|
|
2,284,270
|
|
|
|
|
2,131,852
|
|
|
2,034,861
|
|
|
1,903,741
|
|
|
1,734,102
|
|
|
Catastrophe losses
|
|
59,735
|
|
|
|
|
59,055
|
|
|
59,971
|
|
|
47,415
|
|
|
98,608
|
|
|
Underwriting income (loss)
|
|
151,933
|
|
|
|
|
149,029
|
|
|
78,143
|
|
|
38,766
|
|
|
(64,007
|
)
|
|
Net income
|
|
158,495
|
|
|
|
|
165,861
|
|
|
141,827
|
|
|
106,418
|
|
|
37,963
|
|
|
Comprehensive income
|
|
151,970
|
|
|
|
|
136,648
|
|
|
136,764
|
|
|
77,229
|
|
|
49,709
|
|
|
Total assets
2
|
|
7,355,848
|
|
|
|
|
6,904,433
|
|
|
6,574,942
|
|
|
6,262,585
|
|
|
6,789,373
|
|
|
Short-term debt
2
|
|
—
|
|
|
|
|
60,000
|
|
|
—
|
|
|
13,000
|
|
|
100,000
|
|
|
Long-term debt
2
|
|
438,667
|
|
|
|
|
328,192
|
|
|
372,689
|
|
|
371,829
|
|
|
202,544
|
|
|
Stockholders’ equity
|
|
1,531,370
|
|
|
|
|
1,398,041
|
|
|
1,275,586
|
|
|
1,153,928
|
|
|
1,090,592
|
|
|
Statutory premiums to surplus ratio
|
|
1.4
|
|
|
|
|
1.5
|
|
|
1.4
|
|
|
1.4
|
|
|
1.6
|
|
|
GAAP combined ratio
|
|
92.9
|
|
|
%
|
|
92.5
|
|
|
95.8
|
|
|
97.8
|
|
|
104.0
|
|
|
Impact of catastrophe losses on statutory combined ratio
3
|
|
2.8
|
|
|
pts
|
|
3.0
|
|
|
3.2
|
|
|
2.7
|
|
|
6.2
|
|
|
Statutory combined ratio
|
|
91.8
|
|
|
%
|
|
92.4
|
|
|
95.7
|
|
|
97.5
|
|
|
103.5
|
|
|
Invested assets per dollar of stockholders' equity
|
|
$
|
3.50
|
|
|
|
|
3.64
|
|
|
3.77
|
|
|
3.97
|
|
|
3.97
|
|
Yield on investments, before tax
|
|
2.5
|
|
|
%
|
|
2.5
|
|
|
3.0
|
|
|
3.0
|
|
|
3.1
|
|
|
Debt to capitalization ratio
2
|
|
22.3
|
|
|
|
|
21.7
|
|
|
22.6
|
|
|
25.0
|
|
|
21.7
|
|
|
Return on average equity
|
|
10.8
|
|
|
|
|
12.4
|
|
|
11.7
|
|
|
9.5
|
|
|
3.5
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||
Per share data:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||
Net income from continuing operations
1
:
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||
Basic
|
|
$
|
2.74
|
|
|
|
|
2.90
|
|
|
2.52
|
|
|
1.93
|
|
|
0.69
|
|
Diluted
|
|
2.70
|
|
|
|
|
2.85
|
|
|
2.47
|
|
|
1.89
|
|
|
0.68
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||
Net income:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||
Basic
|
|
$
|
2.74
|
|
|
|
|
2.90
|
|
|
2.52
|
|
|
1.91
|
|
|
0.69
|
|
Diluted
|
|
2.70
|
|
|
|
|
2.85
|
|
|
2.47
|
|
|
1.87
|
|
|
0.68
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||
Dividends to stockholders
|
|
$
|
0.61
|
|
|
|
|
0.57
|
|
|
0.53
|
|
|
0.52
|
|
|
0.52
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||
Stockholders’ equity
|
|
26.42
|
|
|
|
|
24.37
|
|
|
22.54
|
|
|
20.63
|
|
|
19.77
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||
Price range of common stock:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||
High
|
|
44.00
|
|
|
|
|
37.91
|
|
|
27.65
|
|
|
28.31
|
|
|
20.31
|
|
|
Low
|
|
29.27
|
|
|
|
|
25.49
|
|
|
21.38
|
|
|
19.53
|
|
|
16.22
|
|
|
Close
|
|
43.05
|
|
|
|
|
33.58
|
|
|
27.17
|
|
|
27.06
|
|
|
19.27
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||
Number of weighted average shares:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||
Basic
|
|
57,889
|
|
|
|
|
57,212
|
|
|
56,310
|
|
|
55,638
|
|
|
54,880
|
|
|
Diluted
|
|
58,747
|
|
|
|
|
58,156
|
|
|
57,351
|
|
|
56,810
|
|
|
55,933
|
|
•
|
Standard Commercial Lines - comprised of insurance products and services provided in the standard marketplace to our commercial enterprises, which are typically businesses, non-profit organizations, and local government agencies.
|
•
|
Standard Personal Lines - comprised of insurance products and services, including flood insurance coverage, provided primarily to individuals acquiring coverage in the standard marketplace.
|
•
|
Excess and surplus ("E&S") Lines - comprised of insurance products and services provided to customers who have not obtained coverage in the standard marketplace.
|
•
|
Investments - invests the premiums collected by our insurance operations, as well as amounts generated through our capital management strategies, which may include the issuance of debt and equity securities.
|
•
|
Critical Accounting Policies and Estimates;
|
•
|
Financial Highlights of Results for Years Ended
December 31, 2016
,
2015
, and
2014
;
|
•
|
Results of Operations and Related Information by Segment;
|
•
|
Federal Income Taxes;
|
•
|
Financial Condition, Liquidity, and Capital Resources;
|
•
|
Off-Balance Sheet Arrangements;
|
•
|
Contractual Obligations, Contingent Liabilities, and Commitments; and
|
•
|
Ratings.
|
As of December 31, 2016
|
|
|
|
|
|
|
|
|
|
|
||||||
|
|
Losses and Loss Expense Reserves
|
|
|
|
|
||||||||||
($ in thousands)
|
|
Case
Reserves
|
|
IBNR
Reserves
|
|
Total
|
|
Reinsurance Recoverable on Unpaid Losses and Loss Expenses
|
|
Net Reserves
|
||||||
General liability
|
|
$
|
235,329
|
|
|
1,053,400
|
|
|
1,288,729
|
|
|
179,997
|
|
|
1,108,732
|
|
Workers compensation
|
|
463,523
|
|
|
745,590
|
|
|
1,209,113
|
|
|
223,327
|
|
|
985,786
|
|
|
Commercial auto
|
|
170,380
|
|
|
259,861
|
|
|
430,241
|
|
|
17,373
|
|
|
412,868
|
|
|
Businessowners' policies
|
|
40,018
|
|
|
56,894
|
|
|
96,912
|
|
|
7,012
|
|
|
89,900
|
|
|
Commercial property
|
|
50,757
|
|
|
7,910
|
|
|
58,667
|
|
|
13,615
|
|
|
45,052
|
|
|
Other
|
|
5,243
|
|
|
9,647
|
|
|
14,890
|
|
|
2,613
|
|
|
12,277
|
|
|
Total Standard Commercial Lines
|
|
965,250
|
|
|
2,133,302
|
|
|
3,098,552
|
|
|
443,937
|
|
|
2,654,615
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||
Personal automobile
|
|
78,512
|
|
|
72,435
|
|
|
150,947
|
|
|
55,223
|
|
|
95,724
|
|
|
Homeowners
|
|
24,779
|
|
|
19,845
|
|
|
44,624
|
|
|
3,206
|
|
|
41,418
|
|
|
Other
|
|
64,314
|
|
|
26,198
|
|
|
90,512
|
|
|
82,625
|
|
|
7,887
|
|
|
Total Standard Personal Lines
|
|
167,605
|
|
|
118,478
|
|
|
286,083
|
|
|
141,054
|
|
|
145,029
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||
Commercial liability
1
|
|
50,337
|
|
|
241,473
|
|
|
291,810
|
|
|
25,741
|
|
|
266,069
|
|
|
Commercial property
2
|
|
8,253
|
|
|
7,021
|
|
|
15,274
|
|
|
468
|
|
|
14,806
|
|
|
Total E&S Lines
|
|
58,590
|
|
|
248,494
|
|
|
307,084
|
|
|
26,209
|
|
|
280,875
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||
Total
|
|
$
|
1,191,445
|
|
|
2,500,274
|
|
|
3,691,719
|
|
|
611,200
|
|
|
3,080,519
|
|
December 31, 2015
|
|
|
|
|
|
|
|
|
|
|
||||||
|
|
Losses and Loss Expense Reserves
|
|
|
|
|
||||||||||
($ in thousands)
|
|
Case
Reserves
|
|
IBNR
Reserves
|
|
Total
|
|
Reinsurance Recoverable on Unpaid Losses and Loss Expenses
|
|
Net Reserves
|
||||||
General liability
|
|
$
|
247,162
|
|
|
970,541
|
|
|
1,217,703
|
|
|
148,113
|
|
|
1,069,590
|
|
Workers compensation
|
|
479,789
|
|
|
750,238
|
|
|
1,230,027
|
|
|
225,948
|
|
|
1,004,079
|
|
|
Commercial auto
|
|
166,606
|
|
|
227,159
|
|
|
393,765
|
|
|
18,983
|
|
|
374,782
|
|
|
Businessowners' policies
|
|
40,496
|
|
|
54,937
|
|
|
95,433
|
|
|
5,459
|
|
|
89,974
|
|
|
Commercial property
|
|
41,455
|
|
|
6,560
|
|
|
48,015
|
|
|
8,390
|
|
|
39,625
|
|
|
Other
|
|
4,126
|
|
|
9,680
|
|
|
13,806
|
|
|
2,275
|
|
|
11,531
|
|
|
Total Standard Commercial Lines
|
|
979,634
|
|
|
2,019,115
|
|
|
2,998,749
|
|
|
409,168
|
|
|
2,589,581
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||
Personal automobile
|
|
87,589
|
|
|
79,136
|
|
|
166,725
|
|
|
64,258
|
|
|
102,467
|
|
|
Homeowners
|
|
29,072
|
|
|
20,364
|
|
|
49,436
|
|
|
2,129
|
|
|
47,307
|
|
|
Other
|
|
27,149
|
|
|
21,744
|
|
|
48,893
|
|
|
40,338
|
|
|
8,555
|
|
|
Total Standard Personal Lines
|
|
143,810
|
|
|
121,244
|
|
|
265,054
|
|
|
106,725
|
|
|
158,329
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||
Commercial liability
1
|
|
52,376
|
|
|
190,101
|
|
|
242,477
|
|
|
34,355
|
|
|
208,122
|
|
|
Commercial property
2
|
|
6,289
|
|
|
5,159
|
|
|
11,448
|
|
|
771
|
|
|
10,677
|
|
|
E&S Lines
|
|
58,665
|
|
|
195,260
|
|
|
253,925
|
|
|
35,126
|
|
|
218,799
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||
Total
|
|
$
|
1,182,109
|
|
|
2,335,619
|
|
|
3,517,728
|
|
|
551,019
|
|
|
2,966,709
|
|
•
|
Reducing premium leakage by improving the quality of our rating information. This includes validating application information using third party data and using more detailed driver information.
|
•
|
Co-underwriting selected higher hazard classes by the field and home office, providing better recognition of risk drivers and improved pricing. This includes increasing rate targets on these exposures.
|
•
|
Continuing to leverage our predictive modeling and analytical capabilities to provide more granular and actionable rate per exposure unit guidance on new business opportunities, while also developing and executing targeted rate change and underwriting actions on our renewal portfolio.
|
•
|
Effective January 1, 2015, the E&S Claims operation began reporting through our Corporate Claims division in Charlotte, North Carolina.
|
•
|
Complex claims were integrated into our standard lines CCU in August 2015.
|
•
|
Potential complex liability claims are now systematically identified and referred to our CCU.
|
•
|
Effective January 1, 2016, the E&S Claims operation in Scottsdale, Arizona was closed and all open and new claims are now handled out of our standard lines regional claims offices by dedicated E&S claims personnel.
|
•
|
Claims have been segregated into “litigated” versus “non-litigated.” Separate claim handling teams have been created, with the required skill sets, to appropriately handle these two types of claims.
|
•
|
Implemented the following expense improvement initiatives regarding outside adjusters and legal counsel:
|
◦
|
Maximized use of staff counsel when geographically possible;
|
◦
|
Utilized staff coverage attorney for coverage reviews;
|
◦
|
Heightened focus on legal budgeting and expense management;
|
◦
|
Required panel counsel firms to use our electronic legal billing and budgeting system to better manage budgets and expenses associated with litigation; and
|
◦
|
Implemented a panel counsel review process.
|
•
|
In addition to the expense improvement initiatives above, we anticipate implementing the following in 2017 to further improve benefits:
|
◦
|
Expanding the use of staff counsel in high volume, high cost locations; and
|
◦
|
Expanding the use of alternative fee arrangements with panel counsel.
|
•
|
For property claims, similar corporate oversight and referrals have been implemented. In addition, large losses are now adjusted by or overseen by Standard Lines property personnel.
|
•
|
Increased focus on reducing workers compensation medical costs through more favorable PPO contracts and greater PPO penetration.
|
•
|
A more comprehensive approach for handling workers compensation claims, with an emphasis towards improving recovery times, allowing for earlier “return-to-work.” This involves elevated and proactive case management in the areas of medical, pharmaceutical, and physical therapy treatments.
|
•
|
The continued use of our CCU, to which all significant and complex liability claims are assigned. This unit has been staffed with personnel that have significant experience in handling and settling these types of claims.
|
•
|
The strategic realignment of our CMS model to handle property claims under $5,000.
|
•
|
The continued use of our PCSs and our LLU. Our PCSs handle claims between $5,000 and $100,000, while the LLU handles claims above $100,000. Both groups form the core of our catastrophe response team. During 2016, we began increasing the number of property claims specialists to respond to property claims with higher severity and/or complexity. This provides us with more staff to respond to claim volume, including the fluctuations that result from catastrophes, while ensuring we have the highest level of property expertise available to apply to our more complex claims.
|
•
|
Continued efforts in the areas of fraud investigation and salvage/subrogation recoveries. These efforts have been supported by the introduction of predictive models that allow us to better focus our efforts.
|
•
|
The selection of loss and loss expense development factors;
|
•
|
The weight to be applied to each individual actuarial projection method;
|
•
|
Projected future loss trends; and
|
•
|
Expected ultimate loss and loss expense ratios for the current accident year.
|
Reconciliation of net income per share to operating income per share
|
|
2016
|
|
2015
|
|
2014
|
||||
Diluted net income per share
|
|
$
|
2.70
|
|
|
2.85
|
|
|
2.47
|
|
Exclude: Net realized losses (gains) per share
|
|
0.08
|
|
|
(0.23
|
)
|
|
(0.46
|
)
|
|
Exclude: Tax on net realized losses (gains) per share
|
|
(0.03
|
)
|
|
0.08
|
|
|
0.16
|
|
|
Diluted operating income per share
|
|
$
|
2.75
|
|
|
2.70
|
|
|
2.17
|
|
Reconciliation of ROE to operating ROE
|
|
2016
|
|
2015
|
|
2014
|
|||
ROE
|
|
10.8
|
%
|
|
12.4
|
|
|
11.7
|
|
Exclude: Net realized losses (gains)
|
|
0.3
|
|
|
(1.0
|
)
|
|
(2.2
|
)
|
Exclude: Tax on net realized losses (gains)
|
|
(0.1
|
)
|
|
0.4
|
|
|
0.8
|
|
Operating ROE
|
|
11.0
|
%
|
|
11.8
|
|
|
10.3
|
|
Return on Average Equity
|
|
2016
|
|
2015
|
|
2014
|
|||
Insurance segments
|
|
6.7
|
%
|
|
7.3
|
|
|
4.2
|
|
Investment income
|
|
6.7
|
|
|
7.0
|
|
|
8.6
|
|
Other
|
|
(2.4
|
)
|
|
(2.5
|
)
|
|
(2.5
|
)
|
Net realized (losses) gains, net of tax at 35%
|
|
(0.2
|
)
|
|
0.6
|
|
|
1.4
|
|
ROE
|
|
10.8
|
|
|
12.4
|
|
|
11.7
|
|
Exclude: Net realized losses (gains), net of tax at 35%
|
|
0.2
|
|
|
(0.6
|
)
|
|
(1.4
|
)
|
Operating ROE
|
|
11.0
|
%
|
|
11.8
|
|
|
10.3
|
|
Weighted average cost of capital
|
|
8.5
|
%
|
|
8.7
|
|
|
8.9
|
|
All Lines
|
|
|
|
|
|
|
2016
vs. 2015
|
|
|
|
|
2015
vs. 2014
|
|
|||||
($ in thousands)
|
|
2016
|
|
2015
|
|
|
2014
|
|
|
|||||||||
GAAP Insurance Operations Results:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||
Net Premiums Written ("NPW")
|
|
$
|
2,237,288
|
|
|
2,069,904
|
|
|
8
|
|
%
|
$
|
1,885,280
|
|
|
10
|
|
%
|
Net Premiums Earned ("NPE")
|
|
2,149,572
|
|
|
1,989,909
|
|
|
8
|
|
|
1,852,609
|
|
|
7
|
|
|
||
Less:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||
Losses and loss expenses incurred
|
|
1,234,797
|
|
|
1,148,541
|
|
|
8
|
|
|
1,157,501
|
|
|
(1
|
)
|
|
||
Net underwriting expenses incurred
|
|
759,194
|
|
|
686,120
|
|
|
11
|
|
|
610,783
|
|
|
12
|
|
|
||
Dividends to policyholders
|
|
3,648
|
|
|
6,219
|
|
|
(41
|
)
|
|
6,182
|
|
|
1
|
|
|
||
Underwriting income
|
|
$
|
151,933
|
|
|
149,029
|
|
|
2
|
|
%
|
$
|
78,143
|
|
|
91
|
|
%
|
GAAP Ratios:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||
Loss and loss expense ratio
|
|
57.4
|
|
%
|
57.7
|
|
|
(0.3
|
)
|
pts
|
62.5
|
|
%
|
(4.8
|
)
|
pts
|
||
Underwriting expense ratio
|
|
35.3
|
|
|
34.5
|
|
|
0.8
|
|
|
33.0
|
|
|
1.5
|
|
|
||
Dividends to policyholders ratio
|
|
0.2
|
|
|
0.3
|
|
|
(0.1
|
)
|
|
0.3
|
|
|
—
|
|
|
||
Combined ratio
|
|
92.9
|
|
|
92.5
|
|
|
0.4
|
|
|
95.8
|
|
|
(3.3
|
)
|
|
||
Statutory Ratios:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||
Loss and loss expense ratio
|
|
57.4
|
|
|
57.7
|
|
|
(0.3
|
)
|
|
62.4
|
|
|
(4.7
|
)
|
|
||
Underwriting expense ratio
|
|
34.2
|
|
|
34.4
|
|
|
(0.2
|
)
|
|
33.0
|
|
|
1.4
|
|
|
||
Dividends to policyholders ratio
|
|
0.2
|
|
|
0.3
|
|
|
(0.1
|
)
|
|
0.3
|
|
|
—
|
|
|
||
Combined ratio
|
|
91.8
|
|
%
|
92.4
|
|
|
(0.6
|
)
|
pts
|
95.7
|
|
%
|
(3.3
|
)
|
pts
|
•
|
Growth in our net premiums earned, which was driven by the acquisition of new business as well as renewal pure price increases on our standard lines business of
2.9%
in
2016
,
3.5%
in
2015
, and
5.8%
in
2014
. The renewal pure price increases provided earned rate of approximately
3.1%
in
2016
and
4.0%
in
2015
, both of which were above our rate of expected claim inflation and thus contributed to improved combined ratios in each of the three years presented. However, as described below, our combined ratios are also significantly impacted by prior year casualty reserve development, net catastrophe loss activity, and non-catastrophe property losses.
|
•
|
Net favorable prior year casualty reserve development, the details of which are below:
|
(Favorable)/Unfavorable Prior Year Casualty Reserve Development
|
|
|
|
|
|
|
||||
($ in millions)
|
2016
|
|
2015
|
|
2014
|
|
||||
General liability
|
$
|
(45.0
|
)
|
|
(51.0
|
)
|
|
(43.9
|
)
|
|
Commercial automobile
|
25.0
|
|
|
3.0
|
|
|
(4.0
|
)
|
|
|
Workers compensation
|
(56.0
|
)
|
|
(37.0
|
)
|
|
—
|
|
|
|
Businessowners' policies
|
0.5
|
|
|
4.0
|
|
|
2.5
|
|
|
|
Other
|
(2.0
|
)
|
|
—
|
|
|
—
|
|
|
|
Total Standard Commercial Lines
|
(77.5
|
)
|
|
(81.0
|
)
|
|
(45.4
|
)
|
|
|
|
|
|
|
|
|
|
||||
Homeowners
|
1.5
|
|
|
(2.0
|
)
|
|
(0.7
|
)
|
|
|
Personal automobile
|
1.0
|
|
|
—
|
|
|
(8.0
|
)
|
|
|
Total Standard Personal Lines
|
2.5
|
|
|
(2.0
|
)
|
|
(8.7
|
)
|
|
|
|
|
|
|
|
|
|
||||
E&S
|
6.0
|
|
|
16.0
|
|
|
5.8
|
|
|
|
|
|
|
|
|
|
|
||||
Total favorable prior year casualty reserve development
|
$
|
(69.0
|
)
|
|
(67.0
|
)
|
|
(48.3
|
)
|
|
|
|
|
|
|
|
|
||||
(Favorable) impact on loss ratio
|
(3.2
|
)
|
pts
|
(3.4
|
)
|
|
(2.6
|
)
|
|
•
|
Catastrophe losses, the details of which are below:
|
Catastrophe Losses
|
|
|
|
|
|
||||
($ in millions)
|
|
|
|
|
(Favorable)/Unfavorable Year-Over-Year Change
|
||||
For the Year ended December 31,
|
|
Loss and Loss Expense Incurred
|
Impact on Loss and Loss Expense Ratio
|
|
|||||
2016
|
|
$
|
59.7
|
|
2.8
|
|
pts
|
(0.2
|
)
|
2015
|
|
59.1
|
|
3.0
|
|
|
(0.2
|
)
|
|
2014
|
|
60.0
|
|
3.2
|
|
|
0.5
|
|
•
|
Non-catastrophe property losses, the details of which are below:
|
Non-Catastrophe Property Losses
|
|
|
|
|
|
||||
($ in millions)
|
|
|
|
|
(Favorable)/Unfavorable Year-Over-Year Change
|
||||
For the Year ended December 31,
|
|
Loss and Loss Expense Incurred
|
Impact on Loss and Loss Expense Ratio
|
|
|||||
2016
|
|
$
|
279.2
|
|
13.0
|
|
pts
|
(0.3
|
)
|
2015
|
|
265.4
|
|
13.3
|
|
|
(2.2
|
)
|
|
2014
|
|
287.5
|
|
15.5
|
|
|
2.4
|
|
•
|
Improved underwriting profitability that resulted in higher supplemental commission expense to our distribution partners and increased the ratio by 0.3 points;
|
•
|
Improved underwriting profitability that also resulted in higher annual incentive compensation expense to
|
•
|
Pension expense increases due to the accrual of service costs for eligible employees and the negative impact of
|
•
|
The March 2014 sale of the renewal rights to our $37 million Self Insured Group ("SIG") book of business that contributed $8 million to other income and reduced the combined ratio by 0.4 points. Although we did not solicit buyers, we decided to sell this small and specialized book of business when the opportunity presented itself because it had significant production outside of our standard lines footprint, and proved difficult to grow. We however, have retained our substantial individual risk public entity book of business and continue to look for opportunities to grow it.
|
•
|
A statutory combined ratio, excluding catastrophe losses, of approximately 90.5%. This assumes no prior year casualty reserve development;
|
•
|
Catastrophe losses of 3.5 points;
|
•
|
After-tax investment income of approximately $110 million; and
|
•
|
Weighted average shares of approximately 59.2 million.
|
|
||||||||||||||||||
|
|
|
|
|
|
2016
vs. 2015
|
|
|
|
2015
vs. 2014
|
|
|||||||
($ in thousands)
|
|
2016
|
|
2015
|
|
|
2014
|
|
|
|||||||||
GAAP Insurance Segments Results:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||
NPW
|
|
$
|
1,745,782
|
|
|
1,596,965
|
|
|
9
|
|
%
|
$
|
1,441,047
|
|
|
11
|
|
%
|
NPE
|
|
1,665,483
|
|
|
1,529,442
|
|
|
9
|
|
|
1,415,712
|
|
|
8
|
|
|
||
Less:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||
Loss and loss expense incurred
|
|
913,506
|
|
|
819,573
|
|
|
11
|
|
|
870,018
|
|
|
(6
|
)
|
|
||
Net underwriting expenses incurred
|
|
601,894
|
|
|
539,154
|
|
|
12
|
|
|
478,291
|
|
|
13
|
|
|
||
Dividends to policyholders
|
|
3,648
|
|
|
6,219
|
|
|
(41
|
)
|
|
6,182
|
|
|
1
|
|
|
||
Underwriting income
|
|
$
|
146,435
|
|
|
164,496
|
|
|
(11
|
)
|
%
|
$
|
61,221
|
|
|
169
|
|
%
|
GAAP Ratios:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||
Loss and loss expense ratio
|
|
54.8
|
|
%
|
53.6
|
|
|
1.2
|
|
pts
|
61.5
|
|
%
|
(7.9
|
)
|
pts
|
||
Underwriting expense ratio
|
|
36.2
|
|
|
35.2
|
|
|
1.0
|
|
|
33.8
|
|
|
1.4
|
|
|
||
Dividends to policyholders ratio
|
|
0.2
|
|
|
0.4
|
|
|
(0.2
|
)
|
|
0.4
|
|
|
—
|
|
|
||
Combined ratio
|
|
91.2
|
|
|
89.2
|
|
|
2.0
|
|
|
95.7
|
|
|
(6.5
|
)
|
|
||
Statutory Ratios:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||
Loss and loss expense ratio
|
|
54.8
|
|
|
53.6
|
|
|
1.2
|
|
|
61.3
|
|
|
(7.7
|
)
|
|
||
Underwriting expense ratio
|
|
34.9
|
|
|
35.2
|
|
|
(0.3
|
)
|
|
33.8
|
|
|
1.4
|
|
|
||
Dividends to policyholders ratio
|
|
0.2
|
|
|
0.4
|
|
|
(0.2
|
)
|
|
0.4
|
|
|
—
|
|
|
||
Combined ratio
|
|
89.9
|
|
%
|
89.2
|
|
|
0.7
|
|
pts
|
95.5
|
|
%
|
(6.3
|
)
|
pts
|
|
|
For the Year Ended December 31,
|
|
||||||||
($ in millions)
|
|
2016
|
|
2015
|
|
2014
|
|
||||
Retention
|
|
83
|
|
%
|
83
|
|
|
82
|
|
|
|
Renewal pure price increases on NPW
|
|
2.6
|
|
|
3.0
|
|
|
5.6
|
|
|
|
Direct new business
|
|
$
|
357.6
|
|
|
339.6
|
|
|
268.7
|
|
|
($ in millions)
|
Non-Catastrophe Property Losses
|
|
Catastrophe Losses
|
|
|
||||||||||||||
For the year ended December 31,
|
Losses and Loss Expense Incurred
|
|
Impact on Losses and Loss Expense Ratio
|
|
Losses and Loss Expense Incurred
|
|
Impact on Losses and Loss Expense Ratio
|
|
Total Impact on Losses and Loss Expense Ratio
|
|
(Favorable)/Unfavorable Year-Over-Year Change
|
||||||||
2016
|
$
|
182.4
|
|
|
11.0
|
|
pts
|
$
|
35.0
|
|
|
2.1
|
|
pts
|
13.1
|
|
|
0.8
|
|
2015
|
154.7
|
|
|
10.1
|
|
|
34.1
|
|
|
2.2
|
|
|
12.3
|
|
|
(3.1
|
)
|
||
2014
|
180.4
|
|
|
12.7
|
|
|
37.9
|
|
|
2.7
|
|
|
15.4
|
|
|
4.1
|
|
General Liability
|
||||||||||||||||||
($ in thousands)
|
|
2016
|
|
2015
|
|
2016
vs. 2015 |
|
2014
|
|
2015
vs. 2014 |
|
|||||||
Statutory NPW
|
|
$
|
553,579
|
|
|
505,891
|
|
|
9
|
|
%
|
$
|
453,594
|
|
|
12
|
|
%
|
Direct new business
|
|
105,961
|
|
|
99,938
|
|
|
6
|
|
|
78,124
|
|
|
28
|
|
|
||
Retention
|
|
83
|
|
%
|
83
|
|
|
—
|
|
pts
|
82
|
|
%
|
1
|
|
pts
|
||
Renewal pure price increases
|
|
1.8
|
|
|
2.7
|
|
|
(0.9
|
)
|
|
6.7
|
|
|
(4.0
|
)
|
|
||
Statutory NPE
|
|
$
|
527,859
|
|
|
483,291
|
|
|
9
|
|
%
|
$
|
444,938
|
|
|
9
|
|
%
|
Statutory combined ratio
|
|
83.8
|
|
%
|
82.1
|
|
|
1.7
|
|
pts
|
83.9
|
|
%
|
(1.8
|
)
|
pts
|
||
% of total statutory standard commercial NPW
|
|
32
|
|
|
32
|
|
|
|
|
|
31
|
|
|
|
|
|
•
|
2016
: favorable prior year development of
8.5
points attributable to accident years 2008 through 2013 and 2015. This was primarily driven by lower than anticipated claims severities.
|
•
|
2015
: favorable prior year development of
10.6
points attributable to accident years 2013 and prior. This was primarily driven by severities that continued to develop lower than expected, within both the premises and operations and products liability coverages. In addition, the reduction in frequencies exhibited in recent accident years continued into accident year 2015.
|
•
|
2014
: favorable prior year development of
9.9
points driven by lower severities in the 2010 through 2012 accident years, within both the premises and operations and products liability coverages. In addition, accident years 2011 and 2012 continued to show lower claim counts, even as they matured.
|
Commercial Automobile
|
|||||||||||||||||
|
|
|
|
|
|
2016
vs. 2015
|
|
|
|
2015
vs. 2014
|
|
||||||
($ in thousands)
|
|
2016
|
|
2015
|
|
|
2014
|
|
|
||||||||
Statutory NPW
|
|
$
|
422,013
|
|
|
376,064
|
|
|
12
|
%
|
$
|
341,926
|
|
|
10
|
|
%
|
Direct new business
|
|
77,255
|
|
|
70,556
|
|
|
9
|
|
57,280
|
|
|
23
|
|
|
||
Retention
|
|
84
|
|
%
|
83
|
|
|
1
|
pts
|
82
|
|
%
|
1
|
|
pts
|
||
Renewal pure price increases
|
|
4.9
|
|
|
3.8
|
|
|
1.1
|
|
5.5
|
|
|
(1.7
|
)
|
|
||
Statutory NPE
|
|
$
|
398,942
|
|
|
358,909
|
|
|
11
|
%
|
$
|
333,310
|
|
|
8
|
|
%
|
Statutory combined ratio
|
|
109.3
|
|
%
|
101.9
|
|
|
7.4
|
pts
|
96.2
|
|
%
|
5.7
|
|
pts
|
||
% of total statutory standard commercial NPW
|
|
24
|
|
|
24
|
|
|
|
|
24
|
|
|
|
|
|
($ in millions)
|
Non-Catastrophe Property Losses
|
|
Catastrophe Losses
|
|
|
||||||||||||||
For the year ended December 31,
|
Losses and Loss Expense Incurred
|
|
Impact on Losses and Loss Expense Ratio
|
|
Losses and Loss Expense Incurred
|
|
Impact on Losses and Loss Expense Ratio
|
|
Total Impact on Losses and Loss Expense Ratio
|
|
Unfavorable Year-Over-Year Change
|
||||||||
2016
|
$
|
64.4
|
|
|
16.1
|
|
pts
|
$
|
1.3
|
|
|
0.3
|
|
pts
|
16.4
|
|
|
1.0
|
|
2015
|
54.7
|
|
|
15.2
|
|
|
0.9
|
|
|
0.2
|
|
|
15.4
|
|
|
1.2
|
|
||
2014
|
45.6
|
|
|
13.7
|
|
|
1.6
|
|
|
0.5
|
|
|
14.2
|
|
|
(0.5
|
)
|
•
|
2016
: Unfavorable development of
6.3
points, which was driven primarily by bodily injury liability for accident years 2014 and 2015. The unfavorable development in accident year 2014 was driven by higher than expected severity, whereas accident year 2015 was driven by higher than expected frequency and severity.
|
•
|
2015
: Unfavorable development of
0.8
points, which was driven by bodily injury liability for accident years 2013 and 2014. This was partially offset by favorable development in accident years 2010 and 2011. The unfavorable development in accident years 2013 and 2014 was driven by severities that were greater than expected.
|
•
|
2014
: Favorable development of
1.2
points driven by bodily injury liability for accident years 2012 and prior, partially offset by accident year 2013 due to higher frequency of claims.
|
Workers Compensation
|
||||||||||||||||||
|
|
|
|
|
|
2016
vs. 2015 |
|
|
|
2015
vs. 2014 |
|
|||||||
($ in thousands)
|
|
2016
|
|
2015
|
|
|
2014
|
|
|
|||||||||
Statutory NPW
|
|
$
|
319,807
|
|
|
299,686
|
|
|
7
|
|
%
|
$
|
269,130
|
|
|
11
|
|
%
|
Direct new business
|
|
67,102
|
|
|
68,971
|
|
|
(3
|
)
|
|
48,613
|
|
|
42
|
|
|
||
Retention
|
|
84
|
|
%
|
83
|
|
|
1
|
|
pts
|
81
|
|
%
|
2
|
|
pts
|
||
Renewal pure price increases
|
|
1.2
|
|
|
2.6
|
|
|
(1.4
|
)
|
|
4.8
|
|
|
(2.2
|
)
|
|
||
Statutory NPE
|
|
$
|
308,233
|
|
|
290,075
|
|
|
6
|
|
%
|
$
|
274,585
|
|
|
6
|
|
%
|
Statutory combined ratio
|
|
80.7
|
|
%
|
88.2
|
|
|
(7.5
|
)
|
pts
|
110.1
|
|
%
|
(21.9
|
)
|
pts
|
||
% of total statutory standard commercial NPW
|
|
18
|
|
|
19
|
|
|
|
|
|
19
|
|
|
|
|
•
|
Favorable prior year casualty reserve development of
$56.0 million
, or
18.2
points, compared $37.0 million and 12.8 points in 2015. The favorable development in both periods was attributable to virtually all prior accident years.
|
•
|
Favorable prior year casualty reserve development of
$37.0 million
, or
12.8
points, attributable to virtually all prior accident years, compared to no development in
2014
.
|
•
|
Lower expected loss costs for the current accident year that resulted in an improvement of
9.3
-points in
2015
, reflecting our ongoing focus on improving this competitive line of business through pricing and claims initiatives, as discussed further above.
|
•
|
Centralization of workers compensations claims handling;
|
•
|
The implementation of a strategic case management unit for the handling of workers compensation claims with high exposure and/or significant escalation risk;
|
•
|
A more proactive case management in areas of medical, pharmaceutical, and physical therapy treatments.
|
Commercial Property
|
||||||||||||||||||
|
|
|
|
|
|
2016
vs. 2015
|
|
|
|
2015
vs. 2014
|
|
|||||||
($ in thousands)
|
|
2016
|
|
2015
|
|
|
2014
|
|
|
|||||||||
Statutory NPW
|
|
$
|
308,140
|
|
|
282,731
|
|
|
9
|
|
%
|
$
|
253,625
|
|
|
11
|
|
%
|
Direct new business
|
|
74,901
|
|
|
72,118
|
|
|
4
|
|
|
58,436
|
|
|
23
|
|
|
||
Retention
|
|
82
|
|
%
|
82
|
|
|
—
|
|
pts
|
81
|
|
%
|
1
|
|
pts
|
||
Renewal pure price increases
|
|
2.4
|
|
|
2.8
|
|
|
(0.4
|
)
|
|
4.4
|
|
|
(1.6
|
)
|
|
||
Statutory NPE
|
|
$
|
293,438
|
|
|
269,022
|
|
|
9
|
|
%
|
$
|
244,792
|
|
|
10
|
|
%
|
Statutory combined ratio
|
|
84.3
|
|
%
|
82.6
|
|
|
1.7
|
|
pts
|
97.3
|
|
%
|
(14.7
|
)
|
pts
|
||
% of total statutory standard commercial NPW
|
|
18
|
|
|
18
|
|
|
|
|
|
18
|
|
|
|
|
|
($ in millions)
|
Non-Catastrophe Property Losses
|
|
Catastrophe Losses
|
|
|
||||||||||||
For the year ended December 31,
|
Losses and Loss Expense Incurred
|
|
Impact on Losses and Loss Expense Ratio
|
|
Losses and Loss Expense Incurred
|
|
Impact on Losses and Loss Expense Ratio
|
|
Total Impact on Losses and Loss Expense Ratio
|
|
(Favorable)/Unfavorable Year-Over-Year Change
|
||||||
2016
|
$
|
95.9
|
|
|
32.7
|
pts
|
$
|
23.7
|
|
|
8.1
|
pts
|
40.8
|
|
|
2.1
|
|
2015
|
78.4
|
|
|
29.1
|
|
25.8
|
|
|
9.6
|
|
38.7
|
|
|
(16.3
|
)
|
||
2014
|
107.3
|
|
|
43.8
|
|
27.3
|
|
|
11.2
|
|
55.0
|
|
|
18.9
|
|
|
|
|
|
|
|
2016
vs. 2015
|
|
|
|
2015
vs. 2014
|
|
|||||||
($ in thousands)
|
|
2016
|
|
2015
|
|
|
2014
|
|
|
|||||||||
GAAP Insurance Segments Results:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||
NPW
|
|
$
|
281,822
|
|
|
283,926
|
|
|
(1
|
)
|
%
|
$
|
292,061
|
|
|
(3
|
)
|
%
|
NPE
|
|
280,607
|
|
|
288,134
|
|
|
(3
|
)
|
|
296,747
|
|
|
(3
|
)
|
|
||
Less:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||
Losses and loss expenses incurred
|
|
177,749
|
|
|
200,237
|
|
|
(11
|
)
|
|
197,182
|
|
|
2
|
|
|
||
Net underwriting expenses incurred
|
|
90,439
|
|
|
86,561
|
|
|
5
|
|
|
83,029
|
|
|
4
|
|
|
||
Underwriting income (loss)
|
|
$
|
12,419
|
|
|
1,336
|
|
|
830
|
|
%
|
$
|
16,536
|
|
|
(92
|
)
|
%
|
GAAP Ratios:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||
Loss and loss expense ratio
|
|
63.3
|
|
%
|
69.5
|
|
|
(6.2
|
)
|
pts
|
66.4
|
|
%
|
3.1
|
|
pts
|
||
Underwriting expense ratio
|
|
32.3
|
|
|
30.0
|
|
|
2.3
|
|
|
28.0
|
|
|
2.0
|
|
|
||
Combined ratio
|
|
95.6
|
|
|
99.5
|
|
|
(3.9
|
)
|
|
94.4
|
|
|
5.1
|
|
|
||
Statutory Ratios:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||
Loss and loss expense ratio
|
|
63.4
|
|
|
69.6
|
|
|
(6.2
|
)
|
|
66.3
|
|
|
3.3
|
|
|
||
Underwriting expense ratio
|
|
31.8
|
|
|
30.3
|
|
|
1.5
|
|
|
28.2
|
|
|
2.1
|
|
|
||
Combined ratio
|
|
95.2
|
|
%
|
99.9
|
|
|
(4.7
|
)
|
pts
|
94.5
|
|
%
|
5.4
|
|
pts
|
($ in millions)
|
|
2016
|
|
2015
|
|
2014
|
|
||||
Retention
|
|
82
|
|
%
|
82
|
|
|
81
|
|
|
|
Renewal pure price increases on NPW
|
|
4.8
|
|
|
5.8
|
|
|
6.5
|
|
|
|
Direct new business premiums
|
|
$
|
39.7
|
|
|
32.9
|
|
|
36.1
|
|
|
($ in millions)
|
Non-Catastrophe Property Losses
|
|
Catastrophe Losses
|
|
|
||||||||||||||
For the year ended December 31,
|
Losses and Loss Expense Incurred
|
|
Impact on Losses and Loss Expense Ratio
|
|
Losses and Loss Expense Incurred
|
|
Impact on Losses and Loss Expense Ratio
|
|
Total Impact on Losses and Loss Expense Ratio
|
|
(Favorable)/Unfavorable Year-Over-Year Change
|
||||||||
2016
|
$
|
71.2
|
|
|
25.4
|
|
pts
|
$
|
18.2
|
|
|
6.5
|
|
pts
|
31.9
|
|
|
(5.9
|
)
|
2015
|
87.2
|
|
|
30.3
|
|
|
21.7
|
|
|
7.5
|
|
|
37.8
|
|
|
0.9
|
|
||
2014
|
90.1
|
|
|
30.4
|
|
|
19.3
|
|
|
6.5
|
|
|
36.9
|
|
|
0.4
|
|
($ in millions)
|
|
|
|||||||||
|
|
(Favorable)/Unfavorable Prior Year Casualty Reserve Development
|
|
|
Unfavorable
Year-Over-Year Change
|
||||||
For the year ended December 31,
|
|
Losses and Loss Expense Incurred
|
|
Impact on Losses and Loss Expense Ratio
|
|
|
|||||
2016
|
|
$
|
2.5
|
|
|
0.9
|
|
|
pts
|
1.6
|
|
2015
|
|
(2.0
|
)
|
|
(0.7
|
)
|
|
|
2.2
|
|
|
2014
|
|
(8.7
|
)
|
|
(2.9
|
)
|
|
|
(0.9
|
)
|
($ in thousands)
|
|
2016
|
|
2015
|
|
2016
vs. 2015 |
|
2014
|
|
2015
vs. 2014 |
|
|||||||
GAAP Insurance Segments Results:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||
NPW
|
|
$
|
209,684
|
|
|
189,013
|
|
|
11
|
|
%
|
$
|
152,172
|
|
|
24
|
|
%
|
NPE
|
|
203,482
|
|
|
172,333
|
|
|
18
|
|
|
140,150
|
|
|
23
|
|
|
||
Less:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||
Losses and loss expenses incurred
|
|
143,542
|
|
|
128,731
|
|
|
12
|
|
|
90,301
|
|
|
43
|
|
|
||
Net underwriting expenses incurred
|
|
66,861
|
|
|
60,405
|
|
|
11
|
|
|
49,463
|
|
|
22
|
|
|
||
Underwriting income (loss)
|
|
$
|
(6,921
|
)
|
|
(16,803
|
)
|
|
59
|
|
%
|
$
|
386
|
|
|
(4,453
|
)
|
%
|
GAAP Ratios:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||
Loss and loss expense ratio
|
|
70.5
|
|
%
|
74.7
|
|
|
(4.2
|
)
|
pts
|
64.4
|
|
%
|
10.3
|
|
pts
|
||
Underwriting expense ratio
|
|
32.9
|
|
|
35.1
|
|
|
(2.2
|
)
|
|
35.3
|
|
|
(0.2
|
)
|
|
||
Combined ratio
|
|
103.4
|
|
|
109.8
|
|
|
(6.4
|
)
|
|
99.7
|
|
|
10.1
|
|
|
||
Statutory Ratios:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||
Loss and loss expense ratio
|
|
70.5
|
|
|
74.7
|
|
|
(4.2
|
)
|
|
64.5
|
|
|
10.2
|
|
|
||
Underwriting expense ratio
|
|
31.6
|
|
|
33.7
|
|
|
(2.1
|
)
|
|
34.7
|
|
|
(1.0
|
)
|
|
||
Combined ratio
|
|
102.1
|
|
%
|
108.4
|
|
|
(6.3
|
)
|
pts
|
99.2
|
|
%
|
9.2
|
|
pts
|
($ in millions)
|
|
2016
|
|
2015
|
2014
|
||||
Price increases
|
|
4.9
|
|
%
|
2.9
|
|
4.5
|
|
|
Direct new business premiums
|
|
$
|
100.0
|
|
|
99.6
|
|
80.9
|
|
($ in millions)
|
Non-Catastrophe Property Losses
|
|
Catastrophe Losses
|
|
|
||||||||||||||
For the year ended December 31,
|
Losses and Loss Expense Incurred
|
|
Impact on Losses and Loss Expense Ratio
|
|
Losses and Loss Expense Incurred
|
|
Impact on Losses and Loss Expense Ratio
|
|
Total Impact on Losses and Loss Expense Ratio
|
|
Unfavorable Year-Over-Year Change
|
||||||||
2016
|
$
|
25.6
|
|
|
12.6
|
|
pts
|
$
|
6.5
|
|
|
3.2
|
|
pts
|
15.8
|
|
|
0.2
|
|
2015
|
23.6
|
|
|
13.7
|
|
|
3.2
|
|
|
1.9
|
|
|
15.6
|
|
|
1.5
|
|
||
2014
|
17.0
|
|
|
12.1
|
|
|
2.8
|
|
|
2.0
|
|
|
14.1
|
|
|
0.8
|
|
($ in millions)
|
|
Unfavorable Prior Year Casualty Reserve Development
|
|
|
(Favorable)/Unfavorable
Year-Over-Year
Change
|
||||||
For the year ended December 31,
|
|
Losses and Loss Expense Incurred
|
|
Impact on Losses and Loss Expense Ratio
|
|
|
|||||
2016
|
|
$
|
6.0
|
|
|
2.9
|
|
|
pts
|
(6.4
|
)
|
2015
|
|
16.0
|
|
|
9.3
|
|
|
|
5.2
|
|
|
2014
|
|
5.8
|
|
|
4.1
|
|
|
|
2.2
|
|
•
|
Pool or share proportionately the underwriting profit and loss results of property and casualty insurance underwriting operations through reinsurance;
|
•
|
Prevent any of our Insurance Subsidiaries from suffering undue loss;
|
•
|
Reduce administration expenses; and
|
•
|
Permit all of the Insurance Subsidiaries to obtain a uniform rating from A.M. Best.
|
Insurance Subsidiary
|
|
Pooling Percentage
|
Selective Insurance Company of America ("SICA")
|
|
32.0%
|
Selective Way Insurance Company ("SWIC")
|
|
21.0%
|
Selective Insurance Company of South Carolina ("SICSC")
|
|
9.0%
|
Selective Insurance Company of the Southeast ("SICSE")
|
|
7.0%
|
Selective Insurance Company of New York ("SICNY")
|
|
7.0%
|
Selective Casualty Insurance Company ("SCIC")
|
|
7.0%
|
Selective Auto Insurance Company of New Jersey ("SAICNJ")
|
|
6.0%
|
Mesa Underwriters Specialty Insurance Company ("MUSIC")
|
|
5.0%
|
Selective Insurance Company of New England ("SICNE")
|
|
3.0%
|
Selective Fire and Casualty Insurance Company ("SFCIC")
|
|
3.0%
|
•
|
Property Reinsurance -
includes our property excess of loss treaties purchased for protection against large individual property losses and our property catastrophe treaties purchased to provide protection for the overall property portfolio against severe catastrophic events. Facultative reinsurance is used for property risks that are in excess of our treaty capacity.
|
•
|
Casualty Reinsurance
- purchased to provide protection for both individual large casualty losses and catastrophic casualty losses involving multiple claimants or customers. Facultative reinsurance is also used for casualty risks that are in excess of our treaty capacity.
|
•
|
Terrorism Reinsurance
- in addition to protection built into our property and casualty reinsurance treaties, terrorism protection is available as a federal backstop related to terrorism losses as provided under the Terrorism Risk Insurance Program Reauthorization Act (“TRIPRA”). For further information regarding this legislation, see Item 1A. “Risk Factors.” of this Form 10-K.
|
•
|
Flood Reinsurance
- as a servicing carrier in the WYO Program, we receive a fee for writing flood business, for which the related premiums and losses are 100% ceded to the federal government.
|
($ in millions)
|
|
Actual Gross Loss
|
|
Net Loss
2
|
|
Accident
Year
|
Hurricane Name
|
|
|
|
|||
Superstorm Sandy
|
|
125.4
1
|
|
45.5
|
|
2012
|
Hurricane Irene
|
|
44.8
|
|
40.2
|
|
2011
|
Hurricane Hugo
|
|
26.4
|
|
3.0
|
|
1989
|
Hurricane Isabel
|
|
25.1
|
|
15.7
|
|
2003
|
Hurricane Floyd
|
|
14.5
|
|
14.5
|
|
1999
|
Occurrence Exceedence Probability
|
|
Four-Model Blend
|
||||
($ in thousands)
|
|
Gross
Losses
|
|
Net
Losses
1
|
|
Net Losses
as a Percent of
Equity
2
|
4.0% (1 in 25 year event)
|
|
$124,207
|
|
29,215
|
|
2%
|
2.0% (1 in 50 year event)
|
|
224,781
|
|
31,598
|
|
2
|
1.0% (1 in 100 year event)
|
|
386,755
|
|
37,091
|
|
2
|
0.67% (1 in 150 year event)
|
|
515,584
|
|
41,964
|
|
3
|
0.5% (1 in 200 year event)
|
|
631,404
|
|
47,636
|
|
3
|
0.4% (1 in 250 year event)
|
|
704,793
|
|
52,893
|
|
3
|
0.2% (1 in 500 year event)
|
|
1,029,687
|
|
251,137
|
|
16
|
CASUALTY REINSURANCE ON INSURANCE PRODUCTS
|
||||
Treaty Name
|
|
Reinsurance Coverage
|
|
Terrorism Coverage
|
Casualty Excess of Loss
(covers all insurance segments) |
|
There are six layers covering 100% of $88 million in excess of $2 million. Losses other than terrorism losses are subject to the following reinstatements and annual aggregate limits:
|
|
All NBCR losses are excluded. All other losses stemming from the acts of terrorism are subject to the following reinstatements and annual aggregate limits:
|
|
- $3 million in excess of $2 million layer
with $72 million annual aggregate limit; |
|
- $3 million in excess of $2 million layer with
$15 million net annual terrorism aggregate limit; |
|
|
- $7 million in excess of $5 million layer
with $35 million annual aggregate limit; |
|
- $7 million in excess of $5 million layer with
$28 million net annual terrorism aggregate limit; |
|
|
- $9 million in excess of $12 million layer
with $27 million annual aggregate limit; |
|
- $9 million in excess of $12 million layer with
$27 million net annual terrorism aggregate limit; |
|
|
- $9 million in excess of $21 million layer
with $18 million annual aggregate limit; |
|
- $9 million in excess of $21 million layer with
$18 million net annual terrorism aggregate limit; |
|
|
- $20 million in excess of $30 million layer
with $40 million annual aggregate limit; |
|
- $20 million in excess of $30 million layer with
$40 million net annual terrorism aggregate limit; |
|
|
- $40 million in excess of $50 million layer
with $80 million annual aggregate limit; |
|
- $40 million in excess of $50 million layer with
$80 million net annual terrorism aggregate limit; |
|
|
|
|
|
|
Montpelier Re Quota Share and Loss Development Cover
(covers E&S Lines) |
|
As part of the acquisition of MUSIC we entered into several reinsurance agreements that together provide protection for losses on policies written prior to the acquisition and any development on reserves established by MUSIC as of the date of acquisition. The reinsurance recoverables under these treaties are 100% collateralized. Montpelier Re was acquired by Endurance Specialty on December 29, 2015.
|
|
Provides full terrorism coverage including NBCR.
|
($ in thousands)
|
|
2016
|
|
2015
|
|
Change
|
||||
Total invested assets
|
|
$
|
5,364,947
|
|
|
5,089,269
|
|
|
5
|
%
|
Invested assets per dollar of stockholders' equity
|
|
3.50
|
|
|
3.64
|
|
|
(4
|
)
|
|
Unrealized gain – before tax
|
|
64,803
|
|
|
69,224
|
|
|
(6
|
)
|
|
Unrealized gain – after tax
|
|
42,122
|
|
|
44,996
|
|
|
(6
|
)
|
As of December 31,
|
|
2016
|
|
2015
|
Fixed income securities:
|
|
|
|
|
U.S. government obligations
|
|
2
|
%
|
2
|
Foreign government obligations
|
|
1
|
|
—
|
State and municipal obligations
|
|
27
|
|
30
|
Corporate securities
1
|
|
37
|
|
38
|
Mortgage-backed securities (“MBS”)
|
|
15
|
|
16
|
Collateralized loan obligations ("CLO") and other asset-backed securities ("ABS")
|
|
10
|
|
5
|
Total fixed income securities
|
|
92
|
|
91
|
Equity securities:
|
|
|
|
|
Common stock
|
|
2
|
|
4
|
Preferred stock
1
|
|
—
|
|
—
|
Total equity securities
|
|
2
|
|
4
|
Short-term investments
|
|
4
|
|
4
|
Other investments
|
|
2
|
|
1
|
Total
|
|
100
|
%
|
100
|
Contractual Maturities
|
|
|
|
|
|
|
||||
($ in thousands)
|
|
|
|
|
|
|
||||
Available-for-sale ("AFS") fixed income securities:
|
|
Amortized Cost
|
|
Fair Value
|
|
Unrealized Loss
|
||||
One year or less
|
|
$
|
24,522
|
|
|
24,349
|
|
|
(173
|
)
|
Due after one year through five years
|
|
520,626
|
|
|
517,830
|
|
|
(2,796
|
)
|
|
Due after five years through ten years
|
|
740,795
|
|
|
730,764
|
|
|
(10,031
|
)
|
|
Due after ten years
|
|
85,752
|
|
|
83,355
|
|
|
(2,397
|
)
|
|
Total
|
|
$
|
1,371,695
|
|
|
1,356,298
|
|
|
(15,397
|
)
|
($ in thousands)
|
|
2016
|
|
2015
|
|
2014
|
||||
Fixed income securities
|
|
$
|
129,306
|
|
|
123,230
|
|
|
126,489
|
|
Equity securities
|
|
7,368
|
|
|
9,161
|
|
|
7,449
|
|
|
Short-term investments
|
|
686
|
|
|
112
|
|
|
66
|
|
|
Other investments
|
|
2,940
|
|
|
(1,890
|
)
|
|
13,580
|
|
|
Investment expenses
|
|
(9,546
|
)
|
|
(9,297
|
)
|
|
(8,876
|
)
|
|
Net investment income earned – before tax
|
|
130,754
|
|
|
121,316
|
|
|
138,708
|
|
|
Net investment income tax expense
|
|
32,349
|
|
|
27,480
|
|
|
34,501
|
|
|
Net investment income earned – after tax
|
|
$
|
98,405
|
|
|
93,836
|
|
|
104,207
|
|
Effective tax rate
|
|
24.7
|
%
|
|
22.7
|
|
|
24.9
|
|
|
Annual after-tax yield on fixed income securities
|
|
2.0
|
|
|
2.1
|
|
|
2.2
|
|
|
Annual after-tax yield on investment portfolio
|
|
1.9
|
|
|
1.9
|
|
|
2.2
|
|
($ in thousands)
|
|
2016
|
|
2015
|
|
2014
|
||||
Net realized gains, excluding OTTI
|
|
$
|
3,562
|
|
|
31,537
|
|
|
37,703
|
|
OTTI
|
|
(8,499
|
)
|
|
(18,366
|
)
|
|
(11,104
|
)
|
|
Total net realized (losses) gains
|
|
$
|
(4,937
|
)
|
|
13,171
|
|
|
26,599
|
|
($ in millions)
|
|
2016
|
|
2015
|
|
2014
|
||||
Federal income tax expense
|
|
$
|
61.5
|
|
|
66.8
|
|
|
55.3
|
|
Effective tax rate
|
|
27.9
|
%
|
|
28.7
|
|
|
28.1
|
|
($ in millions)
|
Admitted Assets
as of December 31, 2016
|
|
Borrowing Limitation
|
|
Amount Borrowed
|
|
Remaining Capacity
|
|
Additional Stock Requirements
|
|||||||
As of December 31, 2016
|
|
|
|
|
||||||||||||
SICSC
|
$
|
644.9
|
|
|
$
|
64.5
|
|
|
32.0
|
|
|
32.5
|
|
|
1.4
|
|
SICSE
|
490.7
|
|
|
49.1
|
|
|
28.0
|
|
|
21.1
|
|
|
0.9
|
|
||
SICA
|
2,314.2
|
|
|
115.7
|
|
|
50.0
|
|
|
65.7
|
|
|
3.0
|
|
||
SICNY
|
424.3
|
|
|
21.2
|
|
|
—
|
|
|
21.2
|
|
|
1.0
|
|
||
Total
|
|
|
$
|
250.5
|
|
|
110.0
|
|
|
140.5
|
|
|
6.3
|
|
($ in millions)
|
Admitted Assets
as of December 31, 2016
|
|
Borrowing Limitation
|
|
Amount Borrowed
|
|
Remaining Capacity
|
||||||
As of December 31, 2016
|
|
|
|
||||||||||
SICSC
|
$
|
644.9
|
|
|
$
|
64.5
|
|
|
27.0
|
|
|
37.5
|
|
SICSE
|
490.7
|
|
|
49.1
|
|
|
18.0
|
|
|
31.1
|
|
||
Total
|
|
|
$
|
113.6
|
|
|
45.0
|
|
|
68.6
|
|
Contractual Obligations
|
|
Payment Due by Period
|
||||||||||||||
|
|
|
|
Less than
1 year
|
|
1-3
years
|
|
3-5
years
|
|
More than
5 years
|
||||||
($ in millions)
|
|
Total
|
|
|
|
|
||||||||||
Operating leases
|
|
$
|
34.4
|
|
|
9.1
|
|
|
13.3
|
|
|
7.3
|
|
|
4.7
|
|
Capital leases
|
|
6.3
|
|
|
4.0
|
|
|
2.3
|
|
|
—
|
|
|
—
|
|
|
Notes payable
|
|
445.0
|
|
|
—
|
|
|
—
|
|
|
50.0
|
|
|
395.0
|
|
|
Interest on debt obligations
|
|
500.5
|
|
|
23.8
|
|
|
47.7
|
|
|
47.5
|
|
|
381.5
|
|
|
Subtotal
|
|
986.2
|
|
|
36.9
|
|
|
63.3
|
|
|
104.8
|
|
|
781.2
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||
Gross losses and loss expense payments
|
|
3,691.7
|
|
|
969.6
|
|
|
1,115.9
|
|
|
562.9
|
|
|
1,043.3
|
|
|
Ceded losses and loss expense payments
|
|
611.2
|
|
|
180.4
|
|
|
139.9
|
|
|
77.3
|
|
|
213.6
|
|
|
Net losses and loss expense payments
|
|
3,080.5
|
|
|
789.2
|
|
|
976.0
|
|
|
485.6
|
|
|
829.7
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||
Total
|
|
$
|
4,066.7
|
|
|
826.1
|
|
|
1,039.3
|
|
|
590.4
|
|
|
1,610.9
|
|
•
|
Fitch Ratings ("Fitch") - Our "A+" Rating was reaffirmed in the third quarter of 2016 with a "stable"outlook by Fitch. In taking this action, Fitch cited our strong underwriting results, solid capitalization with growth in stockholders' equity, stable leverage metrics, and improved interest coverage metrics.
|
•
|
S&P Global Ratings ("S&P") - During the fourth quarter of 2016, S&P upgraded our financial strength rating to "A" from "A-" with a stable outlook. This rating change reflects S&P's view of our strong business risk profile and strong financial risk profile, built on our strong competitive position and very strong capital and earnings. In addition, our stable outlook reflects S&P's expectation that we will sustain our strong competitive position and operating performance.
|
•
|
Moody's Investor Service ("Moody's") - Our "A2" financial strength rating was reaffirmed in the second quarter of 2015 by Moody's. In taking this action, Moody's 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.
|
|
|
|
2016
Interest Rate Shift in Basis Points |
|||||||||||||
($ in thousands)
|
|
|
-200
|
|
-100
|
|
0
|
|
100
|
|
200
|
|||||
HTM fixed income securities
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Fair value of HTM fixed income securities portfolio
|
|
$
|
108,081
|
|
|
106,993
|
|
|
105,211
|
|
|
103,401
|
|
|
101,563
|
|
Fair value change
|
|
|
2,869
|
|
|
1,782
|
|
|
|
|
|
(1,810
|
)
|
|
(3,649
|
)
|
Fair value change from base (%)
|
|
|
2.73
|
%
|
|
1.69
|
%
|
|
|
|
|
(1.72
|
)%
|
|
(3.47
|
)%
|
AFS fixed income securities
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Fair value of AFS fixed income securities portfolio
|
|
$
|
5,094,678
|
|
|
4,963,644
|
|
|
4,792,540
|
|
|
4,610,774
|
|
|
4,420,642
|
|
Fair value change
|
|
|
302,138
|
|
|
171,104
|
|
|
|
|
|
(181,766
|
)
|
|
(371,898
|
)
|
Fair value change from base (%)
|
|
|
6.30
|
%
|
|
3.57
|
%
|
|
|
|
|
(3.79
|
)%
|
|
(7.76
|
)%
|
December 31, 2016
($ in millions)
|
|
Fair
Value
|
|
Carry
Value
|
|
Unrealized/
Unrecognized
Gain (Loss)
|
|
Weighted Average
Credit
Quality
|
||||
U.S. government obligations
|
|
$
|
77.3
|
|
|
77.3
|
|
|
2.2
|
|
|
AAA
|
Foreign government obligations
|
|
26.9
|
|
|
26.9
|
|
|
0.3
|
|
|
A
|
|
State and municipal obligations
|
|
1,459.5
|
|
|
1,457.4
|
|
|
15.7
|
|
|
AA
|
|
Corporate securities
|
|
2,021.8
|
|
|
2,020.3
|
|
|
22.6
|
|
|
A-
|
|
CLO and Other ABS
|
|
529.0
|
|
|
529.0
|
|
|
1.1
|
|
|
AA+
|
|
CMBS
|
|
258.0
|
|
|
258.0
|
|
|
0.5
|
|
|
AAA
|
|
RMBS
|
|
525.2
|
|
|
525.2
|
|
|
0.2
|
|
|
AA+
|
|
Total fixed income portfolio
|
|
$
|
4,897.7
|
|
|
4,894.1
|
|
|
42.6
|
|
|
AA-
|
December 31, 2015
($ in millions)
|
|
Fair
Value
|
|
Carry
Value
|
|
Unrealized/
Unrecognized
Gain (Loss)
|
|
Weighted Average
Credit
Quality
|
||||
U.S. government obligations
|
|
$
|
104.1
|
|
|
104.1
|
|
|
4.6
|
|
|
AA+
|
Foreign government obligations
|
|
15.2
|
|
|
15.2
|
|
|
0.3
|
|
|
AA-
|
|
State and municipal obligations
|
|
1,541.0
|
|
|
1,535.3
|
|
|
51.0
|
|
|
AA
|
|
Corporate securities
|
|
1,922.2
|
|
|
1,920.2
|
|
|
9.7
|
|
|
A-
|
|
CLO and Other ABS
|
|
245.2
|
|
|
245.1
|
|
|
(0.4
|
)
|
|
AAA
|
|
CMBS
|
|
248.2
|
|
|
247.9
|
|
|
(1.6
|
)
|
|
AAA
|
|
RMBS
|
|
541.8
|
|
|
541.8
|
|
|
0.6
|
|
|
AA+
|
|
Total fixed income portfolio
|
|
$
|
4,617.7
|
|
|
4,609.6
|
|
|
64.2
|
|
|
AA-
|
State Exposures of Municipal Bonds
|
|
General Obligation
|
|
Special
Revenue
|
|
Fair
Value
|
|
|
|
Weighted Average
Credit Quality
|
|||||||
($ in thousands)
|
|
Local
|
|
State
|
|
|
|
% of Total
|
|
||||||||
New York
|
|
$
|
17,929
|
|
|
—
|
|
|
123,385
|
|
|
141,314
|
|
|
10%
|
|
AA
|
California
|
|
32,236
|
|
|
12,503
|
|
|
81,004
|
|
|
125,743
|
|
|
9%
|
|
AA-
|
|
Texas
1
|
|
37,875
|
|
|
19,324
|
|
|
63,965
|
|
|
121,164
|
|
|
8%
|
|
AA
|
|
Washington
|
|
29,806
|
|
|
12,765
|
|
|
33,980
|
|
|
76,551
|
|
|
5%
|
|
AA+
|
|
Arizona
|
|
11,243
|
|
|
—
|
|
|
57,979
|
|
|
69,222
|
|
|
5%
|
|
AA
|
|
Pennsylvania
|
|
—
|
|
|
37,371
|
|
|
23,899
|
|
|
61,270
|
|
|
4%
|
|
AA-
|
|
Florida
|
|
5,454
|
|
|
9,116
|
|
|
45,042
|
|
|
59,612
|
|
|
4%
|
|
AA
|
|
Virginia
|
|
26,767
|
|
|
—
|
|
|
32,180
|
|
|
58,947
|
|
|
4%
|
|
AA+
|
|
Massachusetts
|
|
—
|
|
|
878
|
|
|
48,467
|
|
|
49,345
|
|
|
3%
|
|
AA+
|
|
Colorado
|
|
22,155
|
|
|
—
|
|
|
23,901
|
|
|
46,056
|
|
|
3%
|
|
AA-
|
|
Other
|
|
144,042
|
|
|
70,129
|
|
|
366,106
|
|
|
580,277
|
|
|
40%
|
|
AA
|
|
|
|
327,507
|
|
|
162,086
|
|
|
899,908
|
|
|
1,389,501
|
|
|
95%
|
|
AA
|
|
Pre-refunded/escrowed to maturity bonds
|
|
26,639
|
|
|
3,248
|
|
|
40,121
|
|
|
70,008
|
|
|
5%
|
|
AA+
|
|
Total
|
|
$
|
354,146
|
|
|
165,334
|
|
|
940,029
|
|
|
1,459,509
|
|
|
100%
|
|
AA
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||
% of Total Municipal Portfolio
|
|
24
|
%
|
|
11
|
%
|
|
65
|
%
|
|
100
|
%
|
|
|
|
|
December 31, 2016
|
|
Fair
Value |
|
Carry
Value |
|
Unrealized/ Unrecognized Gain (Loss) |
|
Weighted Average
Credit Quality |
||||
($ in millions)
|
|
|
|
|
||||||||
Investment grade
|
|
$
|
1,892.4
|
|
|
1,890.9
|
|
|
21.0
|
|
|
A-
|
Non-investment grade
|
|
129.4
|
|
|
129.4
|
|
|
1.6
|
|
|
B+
|
|
Total corporate securities
|
|
$
|
2,021.8
|
|
|
2,020.3
|
|
|
22.6
|
|
|
A-
|
December 31, 2015
|
|
Fair
Value |
|
Carry
Value |
|
Unrealized/ Unrecognized Gain (Loss) |
|
Weighted Average
Credit Quality |
||||
($ in millions)
|
|
|
|
|
||||||||
Investment grade
|
|
$
|
1,901.6
|
|
|
1,899.6
|
|
|
9.8
|
|
|
A-
|
Non-investment grade
|
|
20.6
|
|
|
20.6
|
|
|
(0.2
|
)
|
|
BB
|
|
Total corporate securities
|
|
$
|
1,922.2
|
|
|
1,920.2
|
|
|
9.6
|
|
|
A-
|
December 31, 2016
|
|
Fair
Value |
|
Carry
Value |
|
Unrealized/ Unrecognized Gain (Loss) |
|
Weighted Average
Credit Quality |
||||
($ in millions)
|
|
|
|
|
||||||||
Investment grade:
|
|
|
|
|
|
|
|
|
||||
CLO
|
|
$
|
341.9
|
|
|
341.9
|
|
|
0.1
|
|
|
AAA
|
Other ABS
|
|
170.2
|
|
|
170.2
|
|
|
0.2
|
|
|
AA+
|
|
Total investment grade
|
|
512.1
|
|
|
512.1
|
|
|
0.3
|
|
|
AA+
|
|
|
|
|
|
|
|
|
|
|
||||
Non-investment grade:
|
|
|
|
|
|
|
|
|
||||
CLO
|
|
16.9
|
|
|
16.9
|
|
|
0.8
|
|
|
BB-
|
|
Other ABS
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
Total non-investment grade
|
|
16.9
|
|
|
16.9
|
|
|
0.8
|
|
|
BB-
|
|
Total CLO and other ABS
|
|
$
|
529.0
|
|
|
529.0
|
|
|
1.1
|
|
|
AA+
|
December 31, 2015
|
|
Fair
Value |
|
Carry
Value |
|
Unrealized/ Unrecognized Gain (Loss) |
|
Weighted Average
Credit Quality |
||||
($ in millions)
|
|
|
|
|
||||||||
Investment grade:
|
|
|
|
|
|
|
|
|
||||
CLO
|
|
$
|
21.0
|
|
|
20.9
|
|
|
(0.1
|
)
|
|
AAA
|
Other ABS
|
|
223.9
|
|
|
223.9
|
|
|
(0.4
|
)
|
|
AAA
|
|
Total investment grade
|
|
244.9
|
|
|
244.8
|
|
|
(0.5
|
)
|
|
AAA
|
|
|
|
|
|
|
|
|
|
|
||||
Non-investment grade:
|
|
|
|
|
|
|
|
|
||||
CLO
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
Other ABS
|
|
0.3
|
|
|
0.3
|
|
|
0.1
|
|
|
CCC
|
|
Total non-investment grade
|
|
0.3
|
|
|
0.3
|
|
|
0.1
|
|
|
CCC
|
|
Total CLO and other ABS
|
|
$
|
245.2
|
|
|
245.1
|
|
|
(0.4
|
)
|
|
AAA
|
|
|
Change in Equity Values in Percent
|
||||||||||||||||||||
($ in thousands)
|
|
(30)%
|
|
(20)%
|
|
(10)%
|
|
0%
|
|
10%
|
|
20%
|
|
30%
|
||||||||
Fair value of AFS equity portfolio
|
|
$
|
102,727
|
|
|
117,402
|
|
|
132,078
|
|
|
146,753
|
|
|
161,428
|
|
|
176,104
|
|
|
190,779
|
|
Fair value change
|
|
(44,026
|
)
|
|
(29,351
|
)
|
|
(14,675
|
)
|
|
|
|
|
14,675
|
|
|
29,351
|
|
|
44,026
|
|
|
|
|
|
2016
|
|||||
($ in thousands)
|
|
Year of
Maturity
|
|
Carrying
Amount
|
|
Fair
Value
|
|||
Financial liabilities
|
|
|
|
|
|
|
|
|
|
Long-term debt
|
|
|
|
|
|
|
|
|
|
1.61% Borrowings from FHLBNY
|
|
2021
|
|
$
|
25,000
|
|
|
24,286
|
|
1.56% Borrowings from FHLBNY
|
|
2021
|
|
25,000
|
|
|
24,219
|
|
|
3.03% Borrowings from FHLBI
|
|
2026
|
|
60,000
|
|
|
59,313
|
|
|
7.25% Senior Notes
|
|
2034
|
|
49,901
|
|
|
56,148
|
|
|
6.70% Senior Notes
|
|
2035
|
|
99,430
|
|
|
108,333
|
|
|
5.875% Senior Notes
|
|
2043
|
|
185,000
|
|
|
176,860
|
|
|
Subtotal
|
|
|
|
444,331
|
|
|
449,159
|
|
|
Unamortized debt issuance costs
|
|
|
|
(5,664
|
)
|
|
|
||
Total notes payable
|
|
|
|
$
|
438,667
|
|
|
|
Consolidated Balance Sheets
|
|
|
|
|
|
|
|
December 31,
|
|
|
|
|
|
|
|
($ in thousands, except share amounts)
|
|
2016
|
|
2015
|
|||
ASSETS
|
|
|
|
|
|
|
|
Investments:
|
|
|
|
|
|
|
|
Fixed income securities, held-to-maturity – at carrying value
(fair value: $105,211 – 2016; $209,544 – 2015) |
|
$
|
101,556
|
|
|
201,354
|
|
Fixed income securities, available-for-sale – at fair value
(amortized cost: $4,753,759 – 2016; $4,352,514 – 2015) |
|
4,792,540
|
|
|
4,408,203
|
|
|
Equity securities, available-for-sale – at fair value
(cost: $120,889 – 2016; $193,816 – 2015) |
|
146,753
|
|
|
207,051
|
|
|
Short-term investments (at cost which approximates fair value)
|
|
221,701
|
|
|
194,819
|
|
|
Other investments
|
|
102,397
|
|
|
77,842
|
|
|
Total investments (Notes 5 and 7)
|
|
5,364,947
|
|
|
5,089,269
|
|
|
Cash
|
|
458
|
|
|
898
|
|
|
Interest and dividends due or accrued
|
|
40,164
|
|
|
38,501
|
|
|
Premiums receivable, net of allowance for uncollectible
accounts of: $5,980 – 2016; $4,422 – 2015 |
|
681,611
|
|
|
615,164
|
|
|
Reinsurance recoverable, net of allowance for uncollectible
accounts of: $5,500 – 2016; $5,700 – 2015 (Note 8) |
|
621,537
|
|
|
561,968
|
|
|
Prepaid reinsurance premiums (Note 8)
|
|
146,282
|
|
|
140,889
|
|
|
Current federal income tax (Note 13)
|
|
2,486
|
|
|
—
|
|
|
Deferred federal income tax (Note 13)
|
|
84,840
|
|
|
92,696
|
|
|
Property and equipment – at cost, net of accumulated
depreciation and amortization of: $198,729 – 2016; $188,548 – 2015 |
|
69,576
|
|
|
65,701
|
|
|
Deferred policy acquisition costs (Note 2)
|
|
222,564
|
|
|
213,159
|
|
|
Goodwill (Note 11)
|
|
7,849
|
|
|
7,849
|
|
|
Other assets
|
|
113,534
|
|
|
78,339
|
|
|
Total assets
|
|
$
|
7,355,848
|
|
|
6,904,433
|
|
|
|
|
|
|
|||
LIABILITIES AND STOCKHOLDERS’ EQUITY
|
|
|
|
|
|
|
|
Liabilities:
|
|
|
|
|
|
|
|
Reserve for losses and loss expenses (Note 9)
|
|
$
|
3,691,719
|
|
|
3,517,728
|
|
Unearned premiums
|
|
1,262,819
|
|
|
1,169,710
|
|
|
Short-term debt (Note 10)
|
|
—
|
|
|
60,000
|
|
|
Long-term debt (Note 10)
|
|
438,667
|
|
|
328,192
|
|
|
Current federal income tax (Note 13)
|
|
—
|
|
|
7,442
|
|
|
Accrued salaries and benefits
|
|
132,880
|
|
|
167,336
|
|
|
Other liabilities
|
|
298,393
|
|
|
255,984
|
|
|
Total liabilities
|
|
$
|
5,824,478
|
|
|
5,506,392
|
|
|
|
|
|
|
|||
Stockholders’ Equity:
|
|
|
|
|
|
||
Preferred stock of $0 par value per share:
|
|
|
|
|
|
|
|
Authorized shares 5,000,000; no shares issued or outstanding
|
|
$
|
—
|
|
|
—
|
|
Common stock of $2 par value per share:
|
|
|
|
|
|||
Authorized shares 360,000,000
|
|
|
|
|
|||
Issued: 101,620,436 – 2016; 100,861,372 – 2015
|
|
203,241
|
|
|
201,723
|
|
|
Additional paid-in capital
|
|
347,295
|
|
|
326,656
|
|
|
Retained earnings
|
|
1,568,881
|
|
|
1,446,192
|
|
|
Accumulated other comprehensive loss (Note 6)
|
|
(15,950
|
)
|
|
(9,425
|
)
|
|
Treasury stock – at cost (shares: 43,653,237 – 2016; 43,500,642 – 2015)
|
|
(572,097
|
)
|
|
(567,105
|
)
|
|
Total stockholders’ equity
|
|
1,531,370
|
|
|
1,398,041
|
|
|
Commitments and contingencies (Notes 17 and 18)
|
|
|
|
|
|
|
|
Total liabilities and stockholders’ equity
|
|
$
|
7,355,848
|
|
|
6,904,433
|
|
Consolidated Statements of Income
|
|
|
|
|
|
|
|
|
|
|
December 31,
|
|
|
|
|
|
|
|
|
|
|
($ in thousands, except per share amounts)
|
|
2016
|
|
2015
|
|
2014
|
||||
Revenues:
|
|
|
|
|
|
|
|
|
|
|
Net premiums earned
|
|
$
|
2,149,572
|
|
|
1,989,909
|
|
|
1,852,609
|
|
Net investment income earned
|
|
130,754
|
|
|
121,316
|
|
|
138,708
|
|
|
Net realized (losses) gains:
|
|
|
|
|
|
|
|
|
|
|
Net realized investment gains
|
|
3,562
|
|
|
31,537
|
|
|
37,703
|
|
|
Other-than-temporary impairments
|
|
(8,509
|
)
|
|
(18,366
|
)
|
|
(11,104
|
)
|
|
Other-than-temporary impairments on fixed income securities recognized in other comprehensive income
|
|
10
|
|
|
—
|
|
|
—
|
|
|
Total net realized (losses) gains
|
|
(4,937
|
)
|
|
13,171
|
|
|
26,599
|
|
|
Other income
|
|
8,881
|
|
|
7,456
|
|
|
16,945
|
|
|
Total revenues
|
|
2,284,270
|
|
|
2,131,852
|
|
|
2,034,861
|
|
|
|
|
|
|
|
|
|
||||
Expenses:
|
|
|
|
|
|
|
|
|
|
|
Losses and loss expenses incurred
|
|
1,234,797
|
|
|
1,148,541
|
|
|
1,157,501
|
|
|
Policy acquisition costs
|
|
763,758
|
|
|
689,820
|
|
|
624,470
|
|
|
Interest expense
|
|
22,771
|
|
|
22,428
|
|
|
23,063
|
|
|
Other expenses
|
|
42,989
|
|
|
38,371
|
|
|
32,696
|
|
|
Total expenses
|
|
2,064,315
|
|
|
1,899,160
|
|
|
1,837,730
|
|
|
|
|
|
|
|
|
|
||||
Income before federal income tax
|
|
219,955
|
|
|
232,692
|
|
|
197,131
|
|
|
|
|
|
|
|
|
|
||||
Federal income tax expense:
|
|
|
|
|
|
|
|
|
|
|
Current
|
|
48,581
|
|
|
45,347
|
|
|
28,415
|
|
|
Deferred
|
|
12,879
|
|
|
21,484
|
|
|
26,889
|
|
|
Total federal income tax expense
|
|
61,460
|
|
|
66,831
|
|
|
55,304
|
|
|
|
|
|
|
|
|
|
||||
Net income
|
|
$
|
158,495
|
|
|
165,861
|
|
|
141,827
|
|
|
|
|
|
|
|
|
||||
Earnings per share:
|
|
|
|
|
|
|
|
|
|
|
Basic net income
|
|
$
|
2.74
|
|
|
2.90
|
|
|
2.52
|
|
|
|
|
|
|
|
|
||||
Diluted net income
|
|
$
|
2.70
|
|
|
2.85
|
|
|
2.47
|
|
|
|
|
|
|
|
|
||||
Dividends to stockholders
|
|
$
|
0.61
|
|
|
0.57
|
|
|
0.53
|
|
Consolidated Statements of Comprehensive Income
|
|
|
|
|
|
|
||||
December 31,
|
|
|
|
|
|
|
||||
($ in thousands)
|
|
2016
|
|
2015
|
|
2014
|
||||
Net income
|
|
$
|
158,495
|
|
|
165,861
|
|
|
141,827
|
|
|
|
|
|
|
|
|
||||
Other comprehensive (loss) income, net of tax:
|
|
|
|
|
|
|
||||
Unrealized (losses) gains on investment securities:
|
|
|
|
|
|
|
||||
Unrealized holding (losses) gains arising during year
|
|
(5,977
|
)
|
|
(26,143
|
)
|
|
47,411
|
|
|
Non-credit portion of other-than-temporary impairments recognized in other comprehensive income
|
|
(6
|
)
|
|
—
|
|
|
—
|
|
|
Amounts reclassified into net income:
|
|
|
|
|
|
|
||||
Held-to-maturity securities
|
|
(92
|
)
|
|
(377
|
)
|
|
(844
|
)
|
|
Non-credit other-than-temporary impairments
|
|
138
|
|
|
232
|
|
|
1,085
|
|
|
Realized losses (gains) on available for sale securities
|
|
3,064
|
|
|
(9,110
|
)
|
|
(18,762
|
)
|
|
Total unrealized (losses) gains on investment securities
|
|
(2,873
|
)
|
|
(35,398
|
)
|
|
28,890
|
|
|
|
|
|
|
|
|
|
||||
Defined benefit pension and post-retirement plans:
|
|
|
|
|
|
|
||||
Net actuarial (loss) gain
|
|
(7,852
|
)
|
|
1,585
|
|
|
(35,189
|
)
|
|
Amounts reclassified into net income:
|
|
|
|
|
|
|
||||
Net actuarial loss
|
|
4,200
|
|
|
4,600
|
|
|
1,236
|
|
|
Total defined benefit pension and post-retirement plans
|
|
(3,652
|
)
|
|
6,185
|
|
|
(33,953
|
)
|
|
Other comprehensive loss
|
|
(6,525
|
)
|
|
(29,213
|
)
|
|
(5,063
|
)
|
|
Comprehensive income
|
|
$
|
151,970
|
|
|
136,648
|
|
|
136,764
|
|
Consolidated Statements of Stockholders’ Equity
|
|
|
|
|
|
|
|
|
|
|
December 31,
|
|
|
|
|
|
|
|
|
|
|
($ in thousands, except share amounts)
|
|
2016
|
|
2015
|
|
2014
|
||||
Common stock:
|
|
|
|
|
|
|
|
|
|
|
Beginning of year
|
|
$
|
201,723
|
|
|
199,896
|
|
|
198,240
|
|
Dividend reinvestment plan
(shares: 38,741 – 2016; 50,013 – 2015; 58,309 – 2014) |
|
77
|
|
|
100
|
|
|
117
|
|
|
Stock purchase and compensation plans
(shares: 720,323 – 2016; 863,426 – 2015; 769,389 – 2014) |
|
1,441
|
|
|
1,727
|
|
|
1,539
|
|
|
End of year
|
|
203,241
|
|
|
201,723
|
|
|
199,896
|
|
|
|
|
|
|
|
|
|
||||
Additional paid-in capital:
|
|
|
|
|
|
|
|
|
|
|
Beginning of year
|
|
326,656
|
|
|
305,385
|
|
|
288,182
|
|
|
Dividend reinvestment plan
|
|
1,389
|
|
|
1,374
|
|
|
1,306
|
|
|
Stock purchase and compensation plans
|
|
19,250
|
|
|
19,897
|
|
|
15,897
|
|
|
End of year
|
|
347,295
|
|
|
326,656
|
|
|
305,385
|
|
|
|
|
|
|
|
|
|
||||
Retained earnings:
|
|
|
|
|
|
|
|
|
|
|
Beginning of year
|
|
1,446,192
|
|
|
1,313,440
|
|
|
1,202,015
|
|
|
Net income
|
|
158,495
|
|
|
165,861
|
|
|
141,827
|
|
|
Dividends to stockholders
($0.61 per share – 2016; $0.57 per share – 2015; $0.53 per share – 2014) |
|
(35,806
|
)
|
|
(33,109
|
)
|
|
(30,402
|
)
|
|
End of year
|
|
1,568,881
|
|
|
1,446,192
|
|
|
1,313,440
|
|
|
|
|
|
|
|
|
|
||||
Accumulated other comprehensive (loss) income:
|
|
|
|
|
|
|
|
|
|
|
Beginning of year
|
|
(9,425
|
)
|
|
19,788
|
|
|
24,851
|
|
|
Other comprehensive loss
|
|
(6,525
|
)
|
|
(29,213
|
)
|
|
(5,063
|
)
|
|
End of year
|
|
(15,950
|
)
|
|
(9,425
|
)
|
|
19,788
|
|
|
|
|
|
|
|
|
|
||||
Treasury stock:
|
|
|
|
|
|
|
|
|
|
|
Beginning of year
|
|
(567,105
|
)
|
|
(562,923
|
)
|
|
(559,360
|
)
|
|
Acquisition of treasury stock
(shares: 152,595 – 2016; 147,461 – 2015; 154,559 – 2014) |
|
(4,992
|
)
|
|
(4,182
|
)
|
|
(3,563
|
)
|
|
End of year
|
|
(572,097
|
)
|
|
(567,105
|
)
|
|
(562,923
|
)
|
|
Total stockholders’ equity
|
|
$
|
1,531,370
|
|
|
1,398,041
|
|
|
1,275,586
|
|
Consolidated Statements of Cash Flows
|
|
|
|
|
|
|
|
|
|
|
December 31,
|
|
|
|
|
|
|
|
|
|
|
($ in thousands)
|
|
2016
|
|
2015
|
|
2014
|
||||
Operating Activities
|
|
|
|
|
|
|
|
|
|
|
Net income
|
|
$
|
158,495
|
|
|
165,861
|
|
|
141,827
|
|
|
|
|
|
|
|
|
||||
Adjustments to reconcile net income to net cash provided by operating activities:
|
|
|
|
|
|
|
|
|
|
|
Depreciation and amortization
|
|
61,671
|
|
|
59,688
|
|
|
45,346
|
|
|
Sale of renewal rights
|
|
—
|
|
|
—
|
|
|
(8,000
|
)
|
|
Stock-based compensation expense
|
|
10,449
|
|
|
8,973
|
|
|
8,702
|
|
|
Undistributed (gains) losses of equity method investments
|
|
(2,316
|
)
|
|
1,889
|
|
|
(153
|
)
|
|
Net realized losses (gains)
|
|
4,937
|
|
|
(13,171
|
)
|
|
(26,599
|
)
|
|
Net gain on disposal of property and equipment
|
|
—
|
|
|
—
|
|
|
(104
|
)
|
|
|
|
|
|
|
|
|
||||
Changes in assets and liabilities:
|
|
|
|
|
|
|
|
|
|
|
Increase in reserves for losses and loss expenses, net of reinsurance recoverables
|
|
114,422
|
|
|
59,438
|
|
|
97,449
|
|
|
Increase in unearned premiums, net of prepaid reinsurance
|
|
87,716
|
|
|
79,995
|
|
|
32,671
|
|
|
Decrease in net federal income taxes
|
|
11,150
|
|
|
25,004
|
|
|
31,323
|
|
|
Increase in premiums receivable
|
|
(66,447
|
)
|
|
(56,386
|
)
|
|
(33,908
|
)
|
|
Increase in deferred policy acquisition costs
|
|
(9,405
|
)
|
|
(27,551
|
)
|
|
(12,627
|
)
|
|
(Increase) decrease in interest and dividends due or accrued
|
|
(1,473
|
)
|
|
407
|
|
|
(1,536
|
)
|
|
(Decrease) increase in accrued salaries and benefits
|
|
(46,536
|
)
|
|
11,392
|
|
|
(7,182
|
)
|
|
(Increase) decrease in other assets
|
|
(30,071
|
)
|
|
(11,523
|
)
|
|
1,186
|
|
|
Increase (decrease) in other liabilities
|
|
9,191
|
|
|
77,564
|
|
|
(35,632
|
)
|
|
Net cash provided by operating activities
|
|
301,783
|
|
|
381,580
|
|
|
232,763
|
|
|
|
|
|
|
|
|
|
||||
Investing Activities
|
|
|
|
|
|
|
|
|
|
|
Purchase of fixed income securities, held-to-maturity
|
|
(4,235
|
)
|
|
(3,316
|
)
|
|
—
|
|
|
Purchase of fixed income securities, available-for-sale
|
|
(1,982,023
|
)
|
|
(1,041,916
|
)
|
|
(843,616
|
)
|
|
Purchase of equity securities, available-for-sale
|
|
(35,490
|
)
|
|
(195,720
|
)
|
|
(186,019
|
)
|
|
Purchase of other investments
|
|
(66,164
|
)
|
|
(12,170
|
)
|
|
(10,617
|
)
|
|
Purchase of short-term investments
|
|
(3,499,380
|
)
|
|
(1,602,327
|
)
|
|
(1,410,123
|
)
|
|
Sale of fixed income securities, available-for-sale
|
|
926,470
|
|
|
61,571
|
|
|
51,002
|
|
|
Sale of short-term investments
|
|
3,470,022
|
|
|
1,539,480
|
|
|
1,452,402
|
|
|
Redemption and maturities of fixed income securities, held-to-maturity
|
|
102,868
|
|
|
106,621
|
|
|
73,415
|
|
|
Redemption and maturities of fixed income securities, available-for-sale
|
|
641,524
|
|
|
567,445
|
|
|
482,816
|
|
|
Sale of equity securities, available-for-sale
|
|
119,617
|
|
|
172,561
|
|
|
208,008
|
|
|
Distributions from other investments
|
|
26,837
|
|
|
32,457
|
|
|
20,774
|
|
|
Purchase of property and equipment
|
|
(18,147
|
)
|
|
(16,229
|
)
|
|
(15,510
|
)
|
|
Sale of renewal rights
|
|
—
|
|
|
—
|
|
|
8,000
|
|
|
Net cash used in investing activities
|
|
(318,101
|
)
|
|
(391,543
|
)
|
|
(169,468
|
)
|
|
|
|
|
|
|
|
|
||||
Financing Activities
|
|
|
|
|
|
|
|
|
|
|
Dividends to stockholders
|
|
(33,758
|
)
|
|
(31,052
|
)
|
|
(28,428
|
)
|
|
Acquisition of treasury stock
|
|
(4,992
|
)
|
|
(4,182
|
)
|
|
(3,563
|
)
|
|
Net proceeds from stock purchase and compensation plans
|
|
7,811
|
|
|
10,089
|
|
|
7,283
|
|
|
Proceeds from borrowings
|
|
165,000
|
|
|
15,000
|
|
|
—
|
|
|
Repayment of borrowings
|
|
(115,000
|
)
|
|
—
|
|
|
(13,000
|
)
|
|
Excess tax benefits from share-based payment arrangements
|
|
1,819
|
|
|
1,736
|
|
|
1,020
|
|
|
Repayment of capital lease obligations
|
|
(5,002
|
)
|
|
(4,689
|
)
|
|
(2,841
|
)
|
|
Net cash provided by (used in) financing activities
|
|
15,878
|
|
|
(13,098
|
)
|
|
(39,529
|
)
|
|
Net (decrease) increase in cash
|
|
(440
|
)
|
|
(23,061
|
)
|
|
23,766
|
|
|
Cash, beginning of year
|
|
898
|
|
|
23,959
|
|
|
193
|
|
|
Cash, end of year
|
|
$
|
458
|
|
|
898
|
|
|
23,959
|
|
•
|
Standard Commercial Lines - comprised of insurance products and services provided in the standard marketplace to commercial enterprises, which are typically businesses, non-profit organizations, and local government agencies.
|
•
|
Standard Personal Lines - comprised of insurance products and services, including flood insurance coverage, provided primarily to individuals acquiring coverage in the standard marketplace.
|
•
|
E&S Lines - comprised of insurance products and services provided to customers who have not obtained coverage in the standard marketplace.
|
•
|
Investments - invests the premiums collected by our insurance operations, as well as amounts generated through our capital management strategies, which may include the issuance of debt and equity securities.
|
•
|
Whether the decline appears to be issuer or industry specific;
|
•
|
The degree to which the issuer is current or in arrears in making principal and interest payments on the fixed income security;
|
•
|
The issuer’s current financial condition and ability to make future scheduled principal and interest payments on a timely basis;
|
•
|
Evaluation of projected cash flows;
|
•
|
Buy/hold/sell recommendations published by outside investment advisors and analysts; and
|
•
|
Relevant rating history, analysis, and guidance provided by rating agencies and analysts.
|
•
|
Whether the decline appears to be issuer or industry specific;
|
•
|
The relationship of market prices per share to book value per share at the date of acquisition and date of evaluation;
|
•
|
The price-earnings ratio at the time of acquisition and date of evaluation;
|
•
|
The financial condition and near-term prospects of the issuer, including any specific events that may influence the issuer's operations, coupled with our intention to hold the securities in the near-term;
|
•
|
The recent income or loss of the issuer;
|
•
|
The independent auditors' report on the issuer's recent financial statements;
|
•
|
The dividend policy of the issuer at the date of acquisition and the date of evaluation;
|
•
|
Buy/hold/sell recommendations or price projections published by outside investment advisors;
|
•
|
Rating agency announcements;
|
•
|
The length of time and the extent to which the fair value has been, or is expected to be, less than its cost in the near term; and
|
•
|
Our expectation of when the cost of the security will be recovered.
|
•
|
The current investment strategy;
|
•
|
Changes made or future changes to be made to the investment strategy;
|
•
|
Emerging issues that may affect the success of the strategy; and
|
•
|
The appropriateness of the valuation methodology used regarding the underlying investments.
|
Security Type
|
Methodology
|
Equity Securities; U.S. Treasury Notes
|
Equity and U.S. Treasury Note prices are received from an independent pricing service that are based on observable market transactions. We validate these prices against a second external pricing service, and if established market value comparison thresholds are breached, further analysis is performed to determine the price to be used.
|
Short-Term Investments
|
Short-term investments are carried at cost, which approximates fair value. Given the liquid nature of our short-term investments, we generally validate their fair value by way of active trades within approximately one week of the financial statement close.
|
Security Type
|
Methodology
|
Corporate Securities
|
These tax credit investments are priced internally using spread-based evaluations.
|
Equity Securities
|
These non-publicly traded stocks are valued by the issuer and reviewed internally.
|
Security Type
|
Methodology
|
5.875% Senior Notes
|
Based on the quoted market prices.
|
Security Type
|
Methodology
|
7.25% Senior Notes; 6.70% Senior Notes
|
Based on matrix pricing models prepared by external pricing services.
|
Borrowings from Federal Home Loan Banks
|
Evaluations are performed using a DCF model based on current borrowing rates provided by the Federal Home Loan Banks that is consistent with the remaining term of the borrowing.
|
Asset Category
|
|
Years
|
Computer hardware
|
|
3
|
Computer software
|
|
3 to 5
|
Internally developed software
|
|
5 to 10
|
Software licenses
|
|
3 to 5
|
Furniture and fixtures
|
|
10
|
Buildings and improvements
|
|
5 to 40
|
•
|
Certain property catastrophe events may be low in frequency and high in severity. These events may affect many insureds simultaneously. Due to the unique nature of these events, ultimate liabilities are estimated for each event, based on surveys of our portfolio of exposures, in conjunction with individual claims estimates. While generally short-tailed, the liabilities associated with these events are subject to a higher degree of uncertainty. We maintain significant reinsurance protection that greatly limits the impact that these extreme events have on net loss and loss adjustment expenses.
|
•
|
In some limited cases, an insured event may span multiple years and multiple policies, as in the case of asbestos and environmental claims, where the injury is deemed to occur over an extended period of time. These claims are analyzed without accident year detail, using alternative methods and metrics. The associated selected ultimate loss and loss adjustment expenses are then allocated to accident year for reporting.
|
•
|
Another example of non-standard methods relate to loss adjustment expenses that cannot be attributed to a specific claim (referred to as “unallocated loss adjustment expenses”). These expenses are first allocated to accident year and alternative projection methods are then applied to these expenses. The resulting ultimate expenses by accident year are then used for reporting purposes.
|
Income Statement Information
|
|
|
|
||||||
Year ended December 31, 2014
|
|
|
|
||||||
($ in thousands)
|
As Originally Reported
|
|
As Restated
|
||||||
Interest Expense
|
$
|
22,086
|
|
|
23,063
|
|
|||
Other Expense
|
33,673
|
|
|
32,696
|
|
($ in thousands)
|
|
2016
|
|
2015
|
|
2014
|
||||
Cash paid during the period for:
|
|
|
|
|
|
|
|
|
|
|
Interest
|
|
$
|
22,098
|
|
|
21,892
|
|
|
22,221
|
|
Federal income tax
|
|
46,405
|
|
|
39,500
|
|
|
22,699
|
|
|
|
|
|
|
|
|
|
||||
Non-cash items:
|
|
|
|
|
|
|
||||
Exchange of fixed income securities, AFS
|
|
23,579
|
|
|
36,792
|
|
|
20,781
|
|
|
Exchange of fixed income securities, HTM
|
|
—
|
|
|
15,257
|
|
|
4,289
|
|
|
Corporate actions related to equity securities, AFS
1
|
|
3,263
|
|
|
4,239
|
|
|
334
|
|
|
Assets acquired under capital lease arrangements
|
|
3,151
|
|
|
6,760
|
|
|
5,642
|
|
|
Non-cash purchase of property and equipment
|
|
78
|
|
|
—
|
|
|
338
|
|
($ in thousands)
|
|
2016
|
|
2015
|
|
2014
|
||||
AFS securities:
|
|
|
|
|
|
|
|
|
|
|
Fixed income securities
|
|
$
|
38,781
|
|
|
55,689
|
|
|
90,336
|
|
Equity securities
|
|
25,864
|
|
|
13,235
|
|
|
32,389
|
|
|
Total AFS securities
|
|
64,645
|
|
|
68,924
|
|
|
122,725
|
|
|
|
|
|
|
|
|
|
||||
HTM securities:
|
|
|
|
|
|
|
|
|
|
|
Fixed income securities
|
|
159
|
|
|
300
|
|
|
958
|
|
|
Total HTM securities
|
|
159
|
|
|
300
|
|
|
958
|
|
|
|
|
|
|
|
|
|
||||
Total net unrealized gains
|
|
64,804
|
|
|
69,224
|
|
|
123,683
|
|
|
Deferred income tax expense
|
|
(22,681
|
)
|
|
(24,228
|
)
|
|
(43,289
|
)
|
|
Net unrealized gains, net of deferred income tax
|
|
42,123
|
|
|
44,996
|
|
|
80,394
|
|
|
|
|
|
|
|
|
|
||||
(Decrease) increase in net unrealized gains in OCI, net of deferred income tax
|
|
$
|
(2,873
|
)
|
|
(35,398
|
)
|
|
28,890
|
|
December 31, 2016
|
|
|
|
Net
|
|
|
|
|
|
|
|
|
|||||||
|
|
|
|
Unrealized
|
|
|
|
Unrecognized
|
|
Unrecognized
|
|
|
|||||||
|
|
Amortized
|
|
Gains
|
|
Carrying
|
|
Holding
|
|
Holding
|
|
Fair
|
|||||||
($ in thousands)
|
|
Cost
|
|
(Losses)
|
|
Value
|
|
Gains
|
|
Losses
|
|
Value
|
|||||||
Obligations of state and political subdivisions
|
|
$
|
77,466
|
|
|
317
|
|
|
77,783
|
|
|
2,133
|
|
|
—
|
|
|
79,916
|
|
Corporate securities
|
|
22,711
|
|
|
(143
|
)
|
|
22,568
|
|
|
1,665
|
|
|
(158
|
)
|
|
24,075
|
|
|
CMBS
|
|
1,220
|
|
|
(15
|
)
|
|
1,205
|
|
|
15
|
|
|
—
|
|
|
1,220
|
|
|
Total HTM fixed income securities
|
|
$
|
101,397
|
|
|
159
|
|
|
101,556
|
|
|
3,813
|
|
|
(158
|
)
|
|
105,211
|
|
December 31, 2015
|
|
|
|
Net
|
|
|
|
|
|
|
|
|
|||||||
|
|
|
|
Unrealized
|
|
|
|
Unrecognized
|
|
Unrecognized
|
|
|
|||||||
|
|
Amortized
|
|
Gains
|
|
Carrying
|
|
Holding
|
|
Holding
|
|
Fair
|
|||||||
($ in thousands)
|
|
Cost
|
|
(Losses)
|
|
Value
|
|
Gains
|
|
Losses
|
|
Value
|
|||||||
Obligations of state and political subdivisions
|
|
175,269
|
|
|
848
|
|
|
176,117
|
|
|
5,763
|
|
|
—
|
|
|
181,880
|
|
|
Corporate securities
|
|
20,228
|
|
|
(185
|
)
|
|
20,043
|
|
|
1,972
|
|
|
—
|
|
|
22,015
|
|
|
CLO and other ABS
|
|
1,030
|
|
|
(120
|
)
|
|
910
|
|
|
118
|
|
|
—
|
|
|
1,028
|
|
|
CMBS
|
|
4,527
|
|
|
(243
|
)
|
|
4,284
|
|
|
337
|
|
|
—
|
|
|
4,621
|
|
|
Total HTM fixed income securities
|
|
$
|
201,054
|
|
|
300
|
|
|
201,354
|
|
|
8,190
|
|
|
—
|
|
|
209,544
|
|
December 31, 2016
|
|
|
|
|
|
|
|
|
|||||
|
|
Cost/
|
|
|
|
|
|
|
|||||
|
|
Amortized
|
|
Unrealized
|
|
Unrealized
|
|
Fair
|
|||||
($ in thousands)
|
|
Cost
|
|
Gains
|
|
Losses
|
|
Value
|
|||||
AFS fixed income securities:
|
|
|
|
|
|
|
|
|
|||||
U.S. government and government agencies
|
|
$
|
75,139
|
|
|
2,230
|
|
|
(36
|
)
|
|
77,333
|
|
Foreign government
|
|
26,559
|
|
|
322
|
|
|
(16
|
)
|
|
26,865
|
|
|
Obligations of states and political subdivisions
|
|
1,366,287
|
|
|
18,610
|
|
|
(5,304
|
)
|
|
1,379,593
|
|
|
Corporate securities
|
|
1,976,556
|
|
|
27,057
|
|
|
(5,860
|
)
|
|
1,997,753
|
|
|
CLO and other ABS
|
|
527,876
|
|
|
1,439
|
|
|
(355
|
)
|
|
528,960
|
|
|
CMBS
|
|
256,356
|
|
|
1,514
|
|
|
(1,028
|
)
|
|
256,842
|
|
|
RMBS
|
|
524,986
|
|
|
3,006
|
|
|
(2,798
|
)
|
|
525,194
|
|
|
Total AFS fixed income securities
|
|
4,753,759
|
|
|
54,178
|
|
|
(15,397
|
)
|
|
4,792,540
|
|
|
AFS equity securities:
|
|
|
|
|
|
|
|
|
|||||
Common stock
|
|
104,663
|
|
|
26,250
|
|
|
(305
|
)
|
|
130,608
|
|
|
Preferred stock
|
|
16,226
|
|
|
274
|
|
|
(355
|
)
|
|
16,145
|
|
|
Total AFS equity securities
|
|
120,889
|
|
|
26,524
|
|
|
(660
|
)
|
|
146,753
|
|
|
Total AFS securities
|
|
$
|
4,874,648
|
|
|
80,702
|
|
|
(16,057
|
)
|
|
4,939,293
|
|
December 31, 2015
|
|
|
|
|
|
|
|
|
|||||
|
|
Cost/
|
|
|
|
|
|
|
|||||
|
|
Amortized
|
|
Unrealized
|
|
Unrealized
|
|
Fair
|
|||||
($ in thousands)
|
|
Cost
|
|
Gains
|
|
Losses
|
|
Value
|
|||||
AFS fixed income securities:
|
|
|
|
|
|
|
|
|
|||||
U.S. government and government agencies
|
|
$
|
99,485
|
|
|
4,721
|
|
|
(91
|
)
|
|
104,115
|
|
Foreign government
|
|
14,885
|
|
|
298
|
|
|
(2
|
)
|
|
15,181
|
|
|
Obligations of states and political subdivisions
|
|
1,314,779
|
|
|
44,523
|
|
|
(160
|
)
|
|
1,359,142
|
|
|
Corporate securities
|
|
1,892,296
|
|
|
23,407
|
|
|
(15,521
|
)
|
|
1,900,182
|
|
|
CLO and other ABS
|
|
244,541
|
|
|
531
|
|
|
(918
|
)
|
|
244,154
|
|
|
CMBS
|
|
245,252
|
|
|
750
|
|
|
(2,410
|
)
|
|
243,592
|
|
|
RMBS
|
|
541,276
|
|
|
4,274
|
|
|
(3,713
|
)
|
|
541,837
|
|
|
Total AFS fixed income securities
|
|
4,352,514
|
|
|
78,504
|
|
|
(22,815
|
)
|
|
4,408,203
|
|
|
AFS equity securities:
|
|
|
|
|
|
|
|
|
|||||
Common stock
|
|
181,991
|
|
|
14,796
|
|
|
(1,998
|
)
|
|
194,789
|
|
|
Preferred stock
|
|
11,825
|
|
|
477
|
|
|
(40
|
)
|
|
12,262
|
|
|
Total AFS equity securities
|
|
193,816
|
|
|
15,273
|
|
|
(2,038
|
)
|
|
207,051
|
|
|
Total AFS securities
|
|
$
|
4,546,330
|
|
|
93,777
|
|
|
(24,853
|
)
|
|
4,615,254
|
|
December 31, 2016
|
|
Less than 12 months
|
|
12 months or longer
|
|
Total
|
|||||||||||||
($ in thousands)
|
|
Fair
Value
|
|
Unrealized
Losses
|
|
Fair
Value
|
|
Unrealized
Losses
|
|
Fair
Value |
|
Unrealized
Losses |
|||||||
AFS fixed income securities:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||
U.S. government and government agencies
|
|
$
|
6,419
|
|
|
(36
|
)
|
|
—
|
|
|
—
|
|
|
6,419
|
|
|
(36
|
)
|
Foreign government
|
|
13,075
|
|
|
(16
|
)
|
|
—
|
|
|
—
|
|
|
13,075
|
|
|
(16
|
)
|
|
Obligations of states and political subdivisions
|
|
306,509
|
|
|
(5,304
|
)
|
|
—
|
|
|
—
|
|
|
306,509
|
|
|
(5,304
|
)
|
|
Corporate securities
|
|
462,902
|
|
|
(5,771
|
)
|
|
4,913
|
|
|
(89
|
)
|
|
467,815
|
|
|
(5,860
|
)
|
|
CLO and other ABS
|
|
189,795
|
|
|
(354
|
)
|
|
319
|
|
|
(1
|
)
|
|
190,114
|
|
|
(355
|
)
|
|
CMBS
|
|
82,492
|
|
|
(1,021
|
)
|
|
1,645
|
|
|
(7
|
)
|
|
84,137
|
|
|
(1,028
|
)
|
|
RMBS
|
|
279,480
|
|
|
(2,489
|
)
|
|
8,749
|
|
|
(309
|
)
|
|
288,229
|
|
|
(2,798
|
)
|
|
Total AFS fixed income securities
|
|
1,340,672
|
|
|
(14,991
|
)
|
|
15,626
|
|
|
(406
|
)
|
|
1,356,298
|
|
|
(15,397
|
)
|
|
AFS equity securities:
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||
Common stock
|
|
11,271
|
|
|
(305
|
)
|
|
—
|
|
|
—
|
|
|
11,271
|
|
|
(305
|
)
|
|
Preferred stock
|
|
6,168
|
|
|
(355
|
)
|
|
—
|
|
|
—
|
|
|
6,168
|
|
|
(355
|
)
|
|
Total AFS equity securities
|
|
17,439
|
|
|
(660
|
)
|
|
—
|
|
|
—
|
|
|
17,439
|
|
|
(660
|
)
|
|
Total AFS securities
|
|
$
|
1,358,111
|
|
|
(15,651
|
)
|
|
15,626
|
|
|
(406
|
)
|
|
1,373,737
|
|
|
(16,057
|
)
|
December 31, 2015
|
|
Less than 12 months
|
|
12 months or longer
|
|
Total
|
|||||||||||||||
($ in thousands)
|
|
Fair
Value
|
|
Unrealized
Losses
|
|
Fair
Value
|
|
Unrealized
Losses
|
|
Fair
Value |
|
Unrealized
Losses |
|||||||||
AFS fixed income securities:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||
U.S. government and government agencies
|
|
$
|
16,006
|
|
|
(87
|
)
|
|
396
|
|
|
(4
|
)
|
|
$
|
16,402
|
|
|
$
|
(91
|
)
|
Foreign government
|
|
1,067
|
|
|
(2
|
)
|
|
—
|
|
|
—
|
|
|
1,067
|
|
|
(2
|
)
|
|||
Obligations of states and political subdivisions
|
|
28,617
|
|
|
(160
|
)
|
|
—
|
|
|
—
|
|
|
28,617
|
|
|
(160
|
)
|
|||
Corporate securities
|
|
761,479
|
|
|
(12,671
|
)
|
|
50,382
|
|
|
(2,850
|
)
|
|
811,861
|
|
|
(15,521
|
)
|
|||
CLO and other ABS
|
|
197,477
|
|
|
(807
|
)
|
|
12,022
|
|
|
(111
|
)
|
|
209,499
|
|
|
(918
|
)
|
|||
CMBS
|
|
146,944
|
|
|
(2,196
|
)
|
|
15,385
|
|
|
(214
|
)
|
|
162,329
|
|
|
(2,410
|
)
|
|||
RMBS
|
|
264,914
|
|
|
(1,992
|
)
|
|
63,395
|
|
|
(1,721
|
)
|
|
328,309
|
|
|
(3,713
|
)
|
|||
Total AFS fixed income securities
|
|
1,416,504
|
|
|
(17,915
|
)
|
|
141,580
|
|
|
(4,900
|
)
|
|
1,558,084
|
|
|
(22,815
|
)
|
|||
AFS equity securities:
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||
Common stock
|
|
31,148
|
|
|
(1,998
|
)
|
|
—
|
|
|
—
|
|
|
31,148
|
|
|
(1,998
|
)
|
|||
Preferred stock
|
|
1,531
|
|
|
(40
|
)
|
|
—
|
|
|
—
|
|
|
1,531
|
|
|
(40
|
)
|
|||
Total AFS equity securities
|
|
32,679
|
|
|
(2,038
|
)
|
|
—
|
|
|
—
|
|
|
32,679
|
|
|
(2,038
|
)
|
|||
Total AFS securities
|
|
$
|
1,449,183
|
|
|
(19,953
|
)
|
|
141,580
|
|
|
(4,900
|
)
|
|
$
|
1,590,763
|
|
|
$
|
(24,853
|
)
|
($ in thousands)
|
|
Carrying Value
|
|
Fair Value
|
|||
Due in one year or less
|
|
$
|
55,505
|
|
|
56,249
|
|
Due after one year through five years
|
|
37,536
|
|
|
39,853
|
|
|
Due after five years through 10 years
|
|
8,515
|
|
|
9,109
|
|
|
Total HTM fixed income securities
|
|
$
|
101,556
|
|
|
105,211
|
|
($ in thousands)
|
|
Fair Value
|
||
Due in one year or less
|
|
$
|
374,080
|
|
Due after one year through five years
|
|
2,141,596
|
|
|
Due after five years through 10 years
|
|
2,090,677
|
|
|
Due after 10 years
|
|
186,187
|
|
|
Total AFS fixed income securities
|
|
$
|
4,792,540
|
|
Other Investments
|
|
December 31, 2016
|
|
December 31, 2015
|
|||||||||||||||
($ in thousands)
|
|
Carrying
Value
|
|
Remaining
Commitment
|
|
Maximum
Exposure to Loss
1
|
|
Carrying
Value
|
|
Remaining
Commitment |
|
Maximum
Exposure to Loss 1 |
|||||||
Alternative Investments
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||
Private equity
|
|
$
|
41,135
|
|
|
76,774
|
|
|
117,909
|
|
|
35,088
|
|
|
30,204
|
|
|
65,292
|
|
Private credit
|
|
28,193
|
|
|
40,613
|
|
|
68,806
|
|
|
13,246
|
|
|
15,129
|
|
|
28,375
|
|
|
Real assets
|
|
14,486
|
|
|
22,899
|
|
|
37,385
|
|
|
19,500
|
|
|
25,820
|
|
|
45,320
|
|
|
Total alternative investments
|
|
83,814
|
|
|
140,286
|
|
|
224,100
|
|
|
67,834
|
|
|
71,153
|
|
|
138,987
|
|
|
Other securities
|
|
18,583
|
|
|
3,400
|
|
|
21,983
|
|
|
10,008
|
|
|
3,200
|
|
|
13,208
|
|
|
Total other investments
|
|
$
|
102,397
|
|
|
143,686
|
|
|
246,083
|
|
|
77,842
|
|
|
74,353
|
|
|
152,195
|
|
•
|
Primary Private Equity
: This strategy makes private equity investments, primarily in established large and middle market companies across diverse industries globally.
|
•
|
Secondary Private Equity
: This strategy purchases seasoned private equity funds from investors desiring liquidity prior to normal fund termination. Investments are made across all sectors of the private equity market, including leveraged buyouts ("LBO"), venture capital, distressed securities, mezzanine financing, real estate, and infrastructure.
|
•
|
Venture Capital
: In general, these investments are made principally by investing in equity securities of privately-held corporations, for long-term capital appreciation. This strategy makes private equity investments in growth equity and buyout partnerships.
|
•
|
Middle Market Lending
:
This strategy provides privately negotiated loans to U.S. middle market companies. Typically, these are floating rate, senior secured loans diversified across industries. Loans can be made to private equity sponsor-backed companies or non-sponsored companies to finance LBOs, recapitalizations, and acquisitions.
|
•
|
Mezzanine Financing
: This strategy provides privately negotiated fixed income securities, generally with an equity component, to LBO firms and private and publicly traded large, mid, and small-cap companies to finance LBOs, recapitalizations, and acquisitions.
|
•
|
Distressed Debt
: This strategy makes direct and indirect investments in debt and equity securities of companies that are experiencing financial and/or operational distress. Investments include buying indebtedness of bankrupt or financially troubled companies, small balance loan portfolios, special situations and capital structure arbitrage trades, commercial real estate mortgages, and similar non-U.S. securities and debt obligations.
|
•
|
Energy & Power Generation
: This strategy makes energy and power generation investments in cash flow generating infrastructure assets. Energy investments are made in a variety of industries including oil, natural gas, and coal. These investments are diversified across the energy supply chain and include assets in the exploration and production, pipeline, and refining sectors. Power generation includes investments in: (i) conventional power, such as natural gas and oil; (ii) renewable power, such as wind and solar; and (iii) electric transmission and distribution.
|
•
|
Real Estate
: This strategy invests opportunistically in real estate in North America, Europe, and Asia via direct property ownership, joint ventures, mortgages, and investments in equity and debt instruments.
|
Balance Sheet Information
|
|
|
|
|
|||
September 30,
|
|
|
|
|
|||
($ in millions)
|
|
2016
|
|
2015
|
|||
Investments
|
|
$
|
11,244
|
|
|
7,527
|
|
Total assets
|
|
12,075
|
|
|
8,515
|
|
|
Total liabilities
|
|
1,802
|
|
|
316
|
|
|
Total partners’ capital
|
|
10,273
|
|
|
8,199
|
|
Income Statement Information
|
|
|
|
|
|
|
||||
12 months ended September 30,
|
|
|
|
|
|
|
||||
($ in millions)
|
|
2016
|
|
2015
|
|
2014
|
||||
Net investment income
|
|
$
|
(44
|
)
|
|
129
|
|
|
226
|
|
Realized gains
|
|
1,374
|
|
|
1,187
|
|
|
581
|
|
|
Net change in unrealized (depreciation) appreciation
|
|
(719
|
)
|
|
(1,364
|
)
|
|
1,098
|
|
|
Net income
|
|
$
|
611
|
|
|
(48
|
)
|
|
1,905
|
|
|
|
|
|
|
|
|
||||
Insurance Subsidiaries' alternative investments income
|
|
3.1
|
|
|
(1.9
|
)
|
|
13.6
|
|
($ in millions)
|
|
FHLBI Collateral
|
|
FHLBNY Collateral
|
|
State and Regulatory Deposits
|
|
Total
|
|||||
U.S. government and government agencies
|
|
$
|
7.4
|
|
|
—
|
|
|
24.8
|
|
|
32.2
|
|
CMBS
|
|
0.5
|
|
|
—
|
|
|
—
|
|
|
0.5
|
|
|
RMBS
|
|
59.6
|
|
|
58.2
|
|
|
—
|
|
|
117.8
|
|
|
Total pledged as collateral
|
|
$
|
67.5
|
|
|
58.2
|
|
|
24.8
|
|
|
150.5
|
|
($ in thousands)
|
|
2016
|
|
2015
|
|
2014
|
||||
Fixed income securities
|
|
$
|
129,306
|
|
|
123,230
|
|
|
126,489
|
|
Equity securities
|
|
7,368
|
|
|
9,161
|
|
|
7,449
|
|
|
Short-term investments
|
|
686
|
|
|
112
|
|
|
66
|
|
|
Other investments
|
|
2,940
|
|
|
(1,890
|
)
|
|
13,580
|
|
|
Investment expenses
|
|
(9,546
|
)
|
|
(9,297
|
)
|
|
(8,876
|
)
|
|
Net investment income earned
|
|
$
|
130,754
|
|
|
121,316
|
|
|
138,708
|
|
2016
|
|
|
|
|
|
Recognized in
Earnings
|
||||
($ in thousands)
|
|
Gross
|
|
Included in OCI
|
|
|||||
AFS fixed income securities:
|
|
|
|
|
|
|
||||
Obligations of states and political subdivisions
|
|
$
|
2,797
|
|
|
—
|
|
|
2,797
|
|
Corporate securities
|
|
1,880
|
|
|
—
|
|
|
1,880
|
|
|
CLO and other ABS
|
|
19
|
|
|
—
|
|
|
19
|
|
|
CMBS
|
|
220
|
|
|
—
|
|
|
220
|
|
|
RMBS
|
|
275
|
|
|
10
|
|
|
265
|
|
|
Total AFS fixed income securities
|
|
5,191
|
|
|
10
|
|
|
5,181
|
|
|
AFS equity securities:
|
|
|
|
|
|
|
||||
Common stock
|
|
3,316
|
|
|
—
|
|
|
3,316
|
|
|
Preferred stock
|
|
2
|
|
|
—
|
|
|
2
|
|
|
Total AFS equity securities
|
|
3,318
|
|
|
—
|
|
|
3,318
|
|
|
Total OTTI losses
|
|
$
|
8,509
|
|
|
10
|
|
|
8,499
|
|
2015
|
|
|
|
|
|
Recognized in
Earnings
|
||||
($ in thousands)
|
|
Gross
|
|
Included in OCI
|
|
|||||
AFS fixed income securities:
|
|
|
|
|
|
|
||||
Corporate securities
|
|
$
|
2,188
|
|
|
—
|
|
|
2,188
|
|
RMBS
|
|
1
|
|
|
—
|
|
|
1
|
|
|
Total AFS fixed income securities
|
|
2,189
|
|
|
—
|
|
|
2,189
|
|
|
AFS equity securities:
|
|
|
|
|
|
|
||||
Common stock
|
|
15,996
|
|
|
—
|
|
|
15,996
|
|
|
Preferred stock
|
|
181
|
|
|
—
|
|
|
181
|
|
|
Total AFS equity securities
|
|
16,177
|
|
|
—
|
|
|
16,177
|
|
|
Total OTTI losses
|
|
$
|
18,366
|
|
|
—
|
|
|
18,366
|
|
2014
|
|
|
|
|
|
Recognized in
Earnings
|
||||
($ in thousands)
|
|
Gross
|
|
Included in OCI
|
|
|||||
AFS fixed income securities:
|
|
|
|
|
|
|
|
|
|
|
RMBS
|
|
$
|
7
|
|
|
—
|
|
|
7
|
|
Total AFS fixed income securities
|
|
7
|
|
|
—
|
|
|
7
|
|
|
AFS equity securities:
|
|
|
|
|
|
|
||||
Common stock
|
|
10,517
|
|
|
—
|
|
|
10,517
|
|
|
Total AFS equity securities
|
|
10,517
|
|
|
—
|
|
|
10,517
|
|
|
Other investments
|
|
580
|
|
|
—
|
|
|
580
|
|
|
Total OTTI losses
|
|
$
|
11,104
|
|
|
—
|
|
|
11,104
|
|
($ in thousands)
|
|
2016
|
|
2015
|
|
2014
|
||||
HTM fixed income securities
|
|
|
|
|
|
|
|
|
|
|
Gains
|
|
$
|
3
|
|
|
5
|
|
|
2
|
|
Losses
|
|
(1
|
)
|
|
(1
|
)
|
|
(20
|
)
|
|
AFS fixed income securities
|
|
|
|
|
|
|
|
|
|
|
Gains
|
|
7,741
|
|
|
4,515
|
|
|
1,945
|
|
|
Losses
|
|
(11,411
|
)
|
|
(312
|
)
|
|
(392
|
)
|
|
AFS equity securities
|
|
|
|
|
|
|
|
|
|
|
Gains
|
|
8,108
|
|
|
29,168
|
|
|
36,871
|
|
|
Losses
|
|
(864
|
)
|
|
(1,347
|
)
|
|
(704
|
)
|
|
Short-term investments
|
|
|
|
|
|
|
||||
Gains
|
|
—
|
|
|
—
|
|
|
—
|
|
|
Losses
|
|
(13
|
)
|
|
—
|
|
|
—
|
|
|
Other investments
|
|
|
|
|
|
|
|
|
|
|
Gains
|
|
3
|
|
|
162
|
|
|
1
|
|
|
Losses
|
|
(4
|
)
|
|
(653
|
)
|
|
—
|
|
|
Total net realized investment gains
|
|
$
|
3,562
|
|
|
31,537
|
|
|
37,703
|
|
•
|
2016
: A repositioning of our equity portfolio partially offset by net losses in our AFS fixed income portfolio related to the change in our strategy to more actively manage this portfolio.
|
•
|
2015
: A change in our dividend strategy from a quantitative, model-driven stock selection strategy to a fundamentally-based stock selection approach that incorporates an assessment of the sustainability and growth rate of a company's dividends and future cash flow.
|
•
|
2014
: A quantitative rebalancing of our dividend yield strategy holdings within our equity portfolio.
|
2016
|
|
|
|
|
|
|
||||
($ in thousands)
|
|
Gross
|
|
Tax
|
|
Net
|
||||
Net income
|
|
$
|
219,955
|
|
|
61,460
|
|
|
158,495
|
|
Components of OCI:
|
|
|
|
|
|
|
|
|
|
|
Unrealized losses (gains) on investment securities
:
|
|
|
|
|
|
|
|
|
|
|
Unrealized holding losses during the year
|
|
(9,195
|
)
|
|
(3,218
|
)
|
|
(5,977
|
)
|
|
Non-credit portion of other-than-temporary impairments recognized in other comprehensive income
|
|
(10
|
)
|
|
(4
|
)
|
|
(6
|
)
|
|
Amounts reclassified into net income:
|
|
|
|
|
|
|
|
|||
HTM securities
|
|
(141
|
)
|
|
(49
|
)
|
|
(92
|
)
|
|
Non-credit OTTI
|
|
213
|
|
|
75
|
|
|
138
|
|
|
Realized losses on AFS securities
|
|
4,713
|
|
|
1,649
|
|
|
3,064
|
|
|
Net unrealized losses
|
|
(4,420
|
)
|
|
(1,547
|
)
|
|
(2,873
|
)
|
|
Defined benefit pension and post-retirement plans:
|
|
|
|
|
|
|
|
|
|
|
Net actuarial loss
|
|
(12,079
|
)
|
|
(4,227
|
)
|
|
(7,852
|
)
|
|
Amounts reclassified into net income:
|
|
|
|
|
|
|
|
|
|
|
Net actuarial loss
|
|
6,462
|
|
|
2,262
|
|
|
4,200
|
|
|
Defined benefit pension and post-retirement plans
|
|
(5,617
|
)
|
|
(1,965
|
)
|
|
(3,652
|
)
|
|
Other comprehensive loss
|
|
(10,037
|
)
|
|
(3,512
|
)
|
|
(6,525
|
)
|
|
Comprehensive income
|
|
$
|
209,918
|
|
|
57,948
|
|
|
151,970
|
|
2015
|
|
|
|
|
|
|
||||
($ in thousands)
|
|
Gross
|
|
Tax
|
|
Net
|
||||
Net income
|
|
$
|
232,692
|
|
|
66,831
|
|
|
165,861
|
|
Components of OCI:
|
|
|
|
|
|
|
|
|
|
|
Unrealized gains on investment securities
:
|
|
|
|
|
|
|
|
|
|
|
Unrealized holding losses during the year
|
|
(40,221
|
)
|
|
(14,078
|
)
|
|
(26,143
|
)
|
|
Amounts reclassified into net income:
|
|
|
|
|
|
|
|
|||
HTM securities
|
|
(580
|
)
|
|
(203
|
)
|
|
(377
|
)
|
|
Non-credit OTTI
|
|
357
|
|
|
125
|
|
|
232
|
|
|
Realized gains on AFS securities
|
|
(14,016
|
)
|
|
(4,906
|
)
|
|
(9,110
|
)
|
|
Net unrealized losses
|
|
(54,460
|
)
|
|
(19,062
|
)
|
|
(35,398
|
)
|
|
Defined benefit pension and post-retirement plans:
|
|
|
|
|
|
|
|
|
|
|
Net actuarial gain
|
|
2,438
|
|
|
853
|
|
|
1,585
|
|
|
Amounts reclassified into net income:
|
|
|
|
|
|
|
|
|
|
|
Net actuarial loss
|
|
7,077
|
|
|
2,477
|
|
|
4,600
|
|
|
Defined benefit pension and post-retirement plans
|
|
9,515
|
|
|
3,330
|
|
|
6,185
|
|
|
Other comprehensive loss
|
|
(44,945
|
)
|
|
(15,732
|
)
|
|
(29,213
|
)
|
|
Comprehensive income
|
|
$
|
187,747
|
|
|
51,099
|
|
|
136,648
|
|
2014
|
|
|
|
|
|
|
||||
($ in thousands)
|
|
Gross
|
|
Tax
|
|
Net
|
||||
Net income
|
|
$
|
197,131
|
|
|
55,304
|
|
|
141,827
|
|
Components of OCI:
|
|
|
|
|
|
|
|
|
|
|
Unrealized gains on investment securities
:
|
|
|
|
|
|
|
|
|
|
|
Unrealized holding gains during the year
|
|
72,940
|
|
|
25,529
|
|
|
47,411
|
|
|
Amounts reclassified into net income:
|
|
|
|
|
|
|
|
|||
HTM securities
|
|
(1,299
|
)
|
|
(455
|
)
|
|
(844
|
)
|
|
Non-credit OTTI
|
|
1,669
|
|
|
584
|
|
|
1,085
|
|
|
Realized gains on AFS securities
|
|
(28,864
|
)
|
|
(10,102
|
)
|
|
(18,762
|
)
|
|
Net unrealized gains
|
|
44,446
|
|
|
15,556
|
|
|
28,890
|
|
|
Defined benefit pension and post-retirement plans:
|
|
|
|
|
|
|
|
|
|
|
Net actuarial loss
|
|
(54,136
|
)
|
|
(18,947
|
)
|
|
(35,189
|
)
|
|
Amounts reclassified into net income:
|
|
|
|
|
|
|
|
|
|
|
Net actuarial loss
|
|
1,902
|
|
|
666
|
|
|
1,236
|
|
|
Defined benefit pension and post-retirement plans
|
|
(52,234
|
)
|
|
(18,281
|
)
|
|
(33,953
|
)
|
|
Other comprehensive loss
|
|
(7,788
|
)
|
|
(2,725
|
)
|
|
(5,063
|
)
|
|
Comprehensive income
|
|
$
|
189,343
|
|
|
52,579
|
|
|
136,764
|
|
($ in thousands)
|
Year ended December 31, 2016
|
|
Year ended December 31, 2015
|
|
Affected Line Item in the Consolidated Statement of Income
|
|||
HTM related
|
|
|
|
|
|
|||
Unrealized losses on HTM disposals
|
$
|
169
|
|
|
308
|
|
|
Net realized (losses) gains
|
Amortization of net unrealized gains on HTM securities
|
(310
|
)
|
|
(888
|
)
|
|
Net investment income earned
|
|
|
(141
|
)
|
|
(580
|
)
|
|
Income before federal income tax
|
|
|
49
|
|
|
203
|
|
|
Total federal income tax expense
|
|
|
(92
|
)
|
|
(377
|
)
|
|
Net income
|
|
OTTI related
|
|
|
|
|
|
|||
Non-credit OTTI on disposed securities
|
213
|
|
|
357
|
|
|
Net realized (losses) gains
|
|
|
213
|
|
|
357
|
|
|
Income before federal income tax
|
|
|
(75
|
)
|
|
(125
|
)
|
|
Total federal income tax expense
|
|
|
138
|
|
|
232
|
|
|
Net income
|
|
Realized (losses) gains on AFS
|
|
|
|
|
|
|||
Realized (losses) gains on AFS disposals
|
4,713
|
|
|
(14,016
|
)
|
|
Net realized (losses) gains
|
|
|
4,713
|
|
|
(14,016
|
)
|
|
Income before federal income tax
|
|
|
(1,649
|
)
|
|
4,906
|
|
|
Total federal income tax expense
|
|
|
3,064
|
|
|
(9,110
|
)
|
|
Net income
|
|
Defined benefit pension and post-retirement life plans
|
|
|
|
|
|
|||
Net actuarial loss
|
1,486
|
|
|
1,538
|
|
|
Losses and loss expenses incurred
|
|
|
4,976
|
|
|
5,539
|
|
|
Policy acquisition costs
|
|
Total defined benefit pension and post-retirement life
|
6,462
|
|
|
7,077
|
|
|
Income before federal income tax
|
|
|
(2,262
|
)
|
|
(2,477
|
)
|
|
Total federal income tax expense
|
|
|
4,200
|
|
|
4,600
|
|
|
Net income
|
|
|
|
|
|
|
|
|||
Total reclassifications for the period
|
$
|
7,310
|
|
|
(4,655
|
)
|
|
Net income
|
|
|
December 31, 2016
|
|
December 31, 2015
|
|||||||||
($ in thousands)
|
|
Carrying Amount
|
|
Fair Value
|
|
Carrying Amount
|
|
Fair Value
|
|||||
Financial Assets
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Fixed income securities:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
HTM
|
|
$
|
101,556
|
|
|
105,211
|
|
|
201,354
|
|
|
209,544
|
|
AFS
|
|
4,792,540
|
|
|
4,792,540
|
|
|
4,408,203
|
|
|
4,408,203
|
|
|
Equity securities, AFS
|
|
146,753
|
|
|
146,753
|
|
|
207,051
|
|
|
207,051
|
|
|
Short-term investments
|
|
221,701
|
|
|
221,701
|
|
|
194,819
|
|
|
194,819
|
|
|
|
|
|
|
|
|
|
|
|
|||||
Financial Liabilities
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Short-term debt:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
0.63% borrowings from FHLBI
|
|
—
|
|
|
—
|
|
|
15,000
|
|
|
14,977
|
|
|
1.25% borrowings from FHLBI
|
|
—
|
|
|
—
|
|
|
45,000
|
|
|
45,083
|
|
|
Total short-term debt
|
|
—
|
|
|
—
|
|
|
60,000
|
|
|
60,060
|
|
|
|
|
|
|
|
|
|
|
|
|||||
Long-term debt:
|
|
|
|
|
|
|
|
|
|||||
7.25% Senior Notes
|
|
49,901
|
|
|
56,148
|
|
|
49,898
|
|
|
56,929
|
|
|
6.70% Senior Notes
|
|
99,430
|
|
|
108,333
|
|
|
99,415
|
|
|
110,363
|
|
|
5.875% Senior Notes
|
|
185,000
|
|
|
176,860
|
|
|
185,000
|
|
|
192,474
|
|
|
1.61% Borrowings from FHLBNY
|
|
25,000
|
|
|
24,286
|
|
|
—
|
|
|
—
|
|
|
1.56% Borrowings from FHLBNY
|
|
25,000
|
|
|
24,219
|
|
|
—
|
|
|
—
|
|
|
3.03% Borrowings from FHLBI
|
|
60,000
|
|
|
59,313
|
|
|
—
|
|
|
—
|
|
|
Subtotal long-term debt
|
|
444,331
|
|
|
449,159
|
|
|
334,313
|
|
|
359,766
|
|
|
Unamortized debt issuance costs
|
|
(5,664
|
)
|
|
|
|
(6,121
|
)
|
|
|
|||
Total long-term debt
|
|
$
|
438,667
|
|
|
|
|
|
328,192
|
|
|
|
|
December 31, 2016
|
|
|
|
Fair Value Measurements Using
|
|||||||||
($ in thousands)
|
|
Assets Measured at Fair Value 12/31/16
|
|
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
|
|
$
|
77,333
|
|
|
27,520
|
|
|
49,813
|
|
|
—
|
|
Foreign government
|
|
26,865
|
|
|
—
|
|
|
26,865
|
|
|
—
|
|
|
Obligations of states and political subdivisions
|
|
1,379,593
|
|
|
—
|
|
|
1,379,593
|
|
|
—
|
|
|
Corporate securities
|
|
1,997,753
|
|
|
—
|
|
|
1,997,753
|
|
|
—
|
|
|
CLO and other ABS
|
|
528,960
|
|
|
—
|
|
|
528,960
|
|
|
—
|
|
|
CMBS
|
|
256,842
|
|
|
—
|
|
|
256,842
|
|
|
—
|
|
|
RMBS
|
|
525,194
|
|
|
—
|
|
|
525,194
|
|
|
—
|
|
|
Total AFS fixed income securities
|
|
4,792,540
|
|
|
27,520
|
|
|
4,765,020
|
|
|
—
|
|
|
AFS equity securities:
|
|
|
|
|
|
|
|
|
|||||
Common stock
|
|
130,608
|
|
|
122,932
|
|
|
—
|
|
|
7,676
|
|
|
Preferred stock
|
|
16,145
|
|
|
16,145
|
|
|
—
|
|
|
—
|
|
|
Total AFS equity securities
|
|
146,753
|
|
|
139,077
|
|
|
—
|
|
|
7,676
|
|
|
Total AFS securities
|
|
4,939,293
|
|
|
166,597
|
|
|
4,765,020
|
|
|
7,676
|
|
|
Short-term investments
|
|
221,701
|
|
|
221,701
|
|
|
—
|
|
|
—
|
|
|
Total assets measured at fair value
|
|
$
|
5,160,994
|
|
|
388,298
|
|
|
4,765,020
|
|
|
7,676
|
|
December 31, 2015
|
|
|
|
Fair Value Measurements Using
|
|||||||||
($ in thousands)
|
|
Assets Measured at Fair Value 12/31/15
|
|
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
|
|
$
|
104,115
|
|
|
42,702
|
|
|
61,413
|
|
|
—
|
|
Foreign government
|
|
15,181
|
|
|
—
|
|
|
15,181
|
|
|
—
|
|
|
Obligations of states and political subdivisions
|
|
1,359,142
|
|
|
—
|
|
|
1,359,142
|
|
|
—
|
|
|
Corporate securities
|
|
1,900,182
|
|
|
—
|
|
|
1,900,182
|
|
|
—
|
|
|
CLO and other ABS
|
|
244,154
|
|
|
—
|
|
|
244,154
|
|
|
—
|
|
|
CMBS
|
|
243,592
|
|
|
—
|
|
|
243,592
|
|
|
—
|
|
|
RMBS
|
|
541,837
|
|
|
—
|
|
|
541,837
|
|
|
—
|
|
|
Total AFS fixed income securities
|
|
4,408,203
|
|
|
42,702
|
|
|
4,365,501
|
|
|
—
|
|
|
AFS equity securities:
|
|
|
|
|
|
|
|
|
|||||
Common stock
|
|
194,789
|
|
|
191,517
|
|
|
—
|
|
|
3,272
|
|
|
Preferred stock
|
|
12,262
|
|
|
12,262
|
|
|
—
|
|
|
—
|
|
|
Total AFS equity securities
|
|
207,051
|
|
|
203,779
|
|
|
—
|
|
|
3,272
|
|
|
Total AFS securities
|
|
4,615,254
|
|
|
246,481
|
|
|
4,365,501
|
|
|
3,272
|
|
|
Short-term investments
|
|
194,819
|
|
|
194,819
|
|
|
—
|
|
|
—
|
|
|
Total assets measured at fair value
|
|
$
|
4,810,073
|
|
|
441,300
|
|
|
4,365,501
|
|
|
3,272
|
|
2016
|
|
|
||
($ in thousands)
|
|
Common Stock
|
||
Fair value, December 31, 2015
|
|
$
|
3,272
|
|
Total net (losses) gains for the period included in:
|
|
|
||
OCI
|
|
—
|
|
|
Net income
|
|
—
|
|
|
Purchases
|
|
6,204
|
|
|
Sales
|
|
(1,800
|
)
|
|
Issuances
|
|
—
|
|
|
Settlements
|
|
—
|
|
|
Transfers into Level 3
|
|
—
|
|
|
Transfers out of Level 3
|
|
—
|
|
|
Fair value, December 31, 2016
|
|
$
|
7,676
|
|
December 31, 2016
|
|
|
|
Fair Value Measurements Using
|
|||||||||
($ in thousands)
|
|
Assets/Liabilities Disclosed at
Fair Value 12/31/2016
|
|
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:
|
|
|
|
|
|
|
|
|
|||||
Obligations of states and political subdivisions
|
|
$
|
79,916
|
|
|
—
|
|
|
79,916
|
|
|
—
|
|
Corporate securities
|
|
24,075
|
|
|
—
|
|
|
16,565
|
|
|
7,510
|
|
|
CMBS
|
|
1,220
|
|
|
—
|
|
|
1,220
|
|
|
—
|
|
|
Total HTM fixed income securities
|
|
$
|
105,211
|
|
|
—
|
|
|
97,701
|
|
|
7,510
|
|
Financial Liabilities
|
|
|
|
|
|
|
|
|
|||||
Long-term debt:
|
|
|
|
|
|
|
|
|
|||||
7.25% Senior Notes
|
|
$
|
56,148
|
|
|
—
|
|
|
56,148
|
|
|
—
|
|
6.70% Senior Notes
|
|
108,333
|
|
|
—
|
|
|
108,333
|
|
|
—
|
|
|
5.875% Senior Notes
|
|
176,860
|
|
|
176,860
|
|
|
—
|
|
|
—
|
|
|
1.61% Borrowings from FHLBNY
|
|
24,286
|
|
|
—
|
|
|
24,286
|
|
|
—
|
|
|
1.56% Borrowings from FHLBNY
|
|
24,219
|
|
|
—
|
|
|
24,219
|
|
|
—
|
|
|
3.03% Borrowings from FHLBI
|
|
59,313
|
|
|
—
|
|
|
59,313
|
|
|
—
|
|
|
Total long-term debt
|
|
$
|
449,159
|
|
|
176,860
|
|
|
272,299
|
|
|
—
|
|
December 31, 2015
|
|
|
|
Fair Value Measurements Using
|
|||||||||
($ in thousands)
|
|
Assets/Liabilities Disclosed at
Fair Value 12/31/2015
|
|
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:
|
|
|
|
|
|
|
|
|
|||||
Obligations of states and political subdivisions
|
|
$
|
181,880
|
|
|
—
|
|
|
181,880
|
|
|
—
|
|
Corporate securities
|
|
22,015
|
|
|
—
|
|
|
18,679
|
|
|
3,336
|
|
|
CLO and other ABS
|
|
1,028
|
|
|
—
|
|
|
1,028
|
|
|
—
|
|
|
CMBS
|
|
4,621
|
|
|
—
|
|
|
4,621
|
|
|
—
|
|
|
Total HTM fixed income securities
|
|
$
|
209,544
|
|
|
—
|
|
|
206,208
|
|
|
3,336
|
|
Financial Liabilities
|
|
|
|
|
|
|
|
|
|||||
Short-term debt:
|
|
|
|
|
|
|
|
|
|||||
0.63% borrowings from FHLBI
|
|
$
|
14,977
|
|
|
—
|
|
|
14,977
|
|
|
—
|
|
1.25% borrowings from FHLBI
|
|
45,083
|
|
|
—
|
|
|
45,083
|
|
|
—
|
|
|
Total short-term debt
|
|
60,060
|
|
|
—
|
|
|
60,060
|
|
|
—
|
|
|
|
|
|
|
|
|
|
|
|
|||||
Long-term debt:
|
|
|
|
|
|
|
|
|
|||||
7.25% Senior Notes
|
|
56,929
|
|
|
—
|
|
|
56,929
|
|
|
—
|
|
|
6.70% Senior Notes
|
|
110,363
|
|
|
—
|
|
|
110,363
|
|
|
—
|
|
|
5.875% Senior Notes
|
|
192,474
|
|
|
192,474
|
|
|
—
|
|
|
—
|
|
|
Total long-term debt
|
|
$
|
359,766
|
|
|
192,474
|
|
|
167,292
|
|
|
—
|
|
|
|
As of December 31, 2016
|
|
As of December 31, 2015
|
||||||||||
($ in thousands)
|
|
Reinsurance Balances
|
|
% of Reinsurance Balance
|
|
Reinsurance Balances
|
|
% of Reinsurance Balance
|
||||||
Total reinsurance recoverables
|
|
$
|
621,537
|
|
|
|
|
|
$
|
561,968
|
|
|
|
|
Total prepaid reinsurance premiums
|
|
146,282
|
|
|
|
|
|
140,889
|
|
|
|
|
||
Total reinsurance balance
|
|
767,819
|
|
|
|
|
|
702,857
|
|
|
|
|
||
|
|
|
|
|
|
|
|
|
||||||
Federal and state pools
1
:
|
|
|
|
|
|
|
|
|
|
|
|
|
||
NFIP
|
|
211,181
|
|
|
27
|
%
|
|
164,130
|
|
|
24
|
%
|
||
New Jersey Unsatisfied Claim Judgment Fund
|
|
65,574
|
|
|
9
|
|
|
71,884
|
|
|
10
|
|
||
Other
|
|
3,227
|
|
|
—
|
|
|
3,136
|
|
|
—
|
|
||
Total federal and state pools
|
|
279,982
|
|
|
36
|
|
|
239,150
|
|
|
34
|
|
||
Remaining reinsurance balance
|
|
$
|
487,837
|
|
|
64
|
|
|
$
|
463,707
|
|
|
66
|
|
|
|
|
|
|
|
|
|
|
||||||
Munich Re Group (A.M. Best rated "A+")
|
|
$
|
119,520
|
|
|
16
|
|
|
$
|
112,889
|
|
|
16
|
|
Hannover Ruckversicherungs AG (A.M. Best rated "A+")
|
|
106,298
|
|
|
13
|
|
|
99,535
|
|
|
14
|
|
||
AXIS Reinsurance Company (A.M. Best rated "A+")
|
|
59,737
|
|
|
8
|
|
|
53,374
|
|
|
8
|
|
||
Swiss Re Group (A.M. Best rated "A+")
|
|
50,494
|
|
|
7
|
|
|
51,340
|
|
|
7
|
|
||
Partner Reinsurance Company of the U.S. (A.M. Best rated “A”)
|
|
21,125
|
|
|
3
|
|
|
20,748
|
|
|
3
|
|
||
All other reinsurers
|
|
130,663
|
|
|
17
|
|
|
125,821
|
|
|
18
|
|
||
Total reinsurers
|
|
487,837
|
|
|
64
|
%
|
|
463,707
|
|
|
66
|
%
|
||
Less: collateral
2
|
|
(113,763
|
)
|
|
|
|
(106,449
|
)
|
|
|
||||
Reinsurers, net of collateral
|
|
$
|
374,074
|
|
|
|
|
$
|
357,258
|
|
|
|
($ in thousands)
|
|
2016
|
|
2015
|
|
2014
|
||||
Premiums written:
|
|
|
|
|
|
|
|
|
|
|
Direct
|
|
$
|
2,577,259
|
|
|
2,403,519
|
|
|
2,228,270
|
|
Assumed
|
|
28,779
|
|
|
23,848
|
|
|
26,306
|
|
|
Ceded
|
|
(368,750
|
)
|
|
(357,463
|
)
|
|
(369,296
|
)
|
|
Net
|
|
$
|
2,237,288
|
|
|
2,069,904
|
|
|
1,885,280
|
|
|
|
|
|
|
|
|
||||
Premiums earned:
|
|
|
|
|
|
|
|
|
|
|
Direct
|
|
$
|
2,484,715
|
|
|
2,330,267
|
|
|
2,183,258
|
|
Assumed
|
|
28,214
|
|
|
23,209
|
|
|
34,653
|
|
|
Ceded
|
|
(363,357
|
)
|
|
(363,567
|
)
|
|
(365,302
|
)
|
|
Net
|
|
$
|
2,149,572
|
|
|
1,989,909
|
|
|
1,852,609
|
|
|
|
|
|
|
|
|
||||
Losses and loss expenses incurred:
|
|
|
|
|
|
|
|
|
|
|
Direct
|
|
$
|
1,560,356
|
|
|
1,274,872
|
|
|
1,314,864
|
|
Assumed
|
|
22,708
|
|
|
16,996
|
|
|
26,187
|
|
|
Ceded
|
|
(348,267
|
)
|
|
(143,327
|
)
|
|
(183,550
|
)
|
|
Net
|
|
$
|
1,234,797
|
|
|
1,148,541
|
|
|
1,157,501
|
|
Ceded to NFIP ($ in thousands)
|
|
2016
|
|
2015
|
|
2014
|
||||
Ceded premiums written
|
|
$
|
(232,245
|
)
|
|
(228,907
|
)
|
|
(237,718
|
)
|
Ceded premiums earned
|
|
(227,882
|
)
|
|
(233,940
|
)
|
|
(234,224
|
)
|
|
Ceded losses and loss expenses incurred
|
|
(239,891
|
)
|
|
(62,078
|
)
|
|
(57,323
|
)
|
($ in thousands)
|
|
2016
|
|
2015
|
|
2014
|
||||
Gross reserves for losses and loss expenses, at beginning of year
|
|
$
|
3,517,728
|
|
|
3,477,870
|
|
|
3,349,770
|
|
Less: reinsurance recoverable on unpaid losses and loss expenses, at beginning of year
|
|
551,019
|
|
|
571,978
|
|
|
540,839
|
|
|
Net reserves for losses and loss expenses, at beginning of year
|
|
2,966,709
|
|
|
2,905,892
|
|
|
2,808,931
|
|
|
Incurred losses and loss expenses for claims occurring in the:
|
|
|
|
|
|
|
|
|
|
|
Current year
|
|
1,300,565
|
|
|
1,217,550
|
|
|
1,216,770
|
|
|
Prior years
|
|
(65,768
|
)
|
|
(69,009
|
)
|
|
(59,269
|
)
|
|
Total incurred losses and loss expenses
|
|
1,234,797
|
|
|
1,148,541
|
|
|
1,157,501
|
|
|
Paid losses and loss expenses for claims occurring in the:
|
|
|
|
|
|
|
|
|
|
|
Current year
|
|
450,811
|
|
|
446,550
|
|
|
468,478
|
|
|
Prior years
|
|
670,176
|
|
|
641,174
|
|
|
592,062
|
|
|
Total paid losses and loss expenses
|
|
1,120,987
|
|
|
1,087,724
|
|
|
1,060,540
|
|
|
Net reserves for losses and loss expenses, at end of year
|
|
3,080,519
|
|
|
2,966,709
|
|
|
2,905,892
|
|
|
Add: Reinsurance recoverable on unpaid losses and loss expenses, at end of year
|
|
611,200
|
|
|
551,019
|
|
|
571,978
|
|
|
Gross reserves for losses and loss expenses at end of year
|
|
$
|
3,691,719
|
|
|
3,517,728
|
|
|
3,477,870
|
|
|
|
2016
|
|||||
($ in millions)
|
|
Gross
|
|
Net
|
|||
Asbestos
|
|
$
|
7.9
|
|
|
6.6
|
|
Landfill sites
|
|
12.8
|
|
|
8.1
|
|
|
Leaking underground storage tanks
|
|
9.3
|
|
|
8.0
|
|
|
Total
|
|
$
|
30.0
|
|
|
22.7
|
|
|
|
2016
|
|
2015
|
|
2014
|
|||||||||||||
($ in thousands)
|
|
Gross
|
|
Net
|
|
Gross
|
|
Net
|
|
Gross
|
|
Net
|
|||||||
Asbestos
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Reserves for losses and loss expenses at beginning of year
|
|
$
|
8,024
|
|
|
6,793
|
|
|
8,751
|
|
|
7,314
|
|
|
8,897
|
|
|
7,518
|
|
Incurred losses and loss expenses
|
|
77
|
|
|
77
|
|
|
(428
|
)
|
|
(77
|
)
|
|
60
|
|
|
—
|
|
|
Less: losses and loss expenses paid
|
|
(254
|
)
|
|
(255
|
)
|
|
(299
|
)
|
|
(444
|
)
|
|
(206
|
)
|
|
(204
|
)
|
|
Reserves for losses and loss expenses at the end of year
|
|
$
|
7,847
|
|
|
6,615
|
|
|
8,024
|
|
|
6,793
|
|
|
8,751
|
|
|
7,314
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||
Environmental
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Reserves for losses and loss expenses at beginning of year
|
|
$
|
22,387
|
|
|
16,368
|
|
|
21,902
|
|
|
15,680
|
|
|
23,867
|
|
|
17,649
|
|
Incurred losses and loss expenses
|
|
1,406
|
|
|
1,303
|
|
|
3,396
|
|
|
3,397
|
|
|
107
|
|
|
—
|
|
|
Less: losses and loss expenses paid
|
|
(1,678
|
)
|
|
(1,570
|
)
|
|
(2,911
|
)
|
|
(2,709
|
)
|
|
(2,072
|
)
|
|
(1,969
|
)
|
|
Reserves for losses and loss expenses at the end of year
|
|
$
|
22,115
|
|
|
16,101
|
|
|
22,387
|
|
|
16,368
|
|
|
21,902
|
|
|
15,680
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||
Total Asbestos and Environmental Claims
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Reserves for losses and loss expenses at beginning of year
|
|
$
|
30,411
|
|
|
23,161
|
|
|
30,653
|
|
|
22,994
|
|
|
32,764
|
|
|
25,167
|
|
Incurred losses and loss expenses
|
|
1,483
|
|
|
1,380
|
|
|
2,968
|
|
|
3,320
|
|
|
167
|
|
|
—
|
|
|
Less: losses and loss expenses paid
|
|
(1,932
|
)
|
|
(1,825
|
)
|
|
(3,210
|
)
|
|
(3,153
|
)
|
|
(2,278
|
)
|
|
(2,173
|
)
|
|
Reserves for losses and loss expenses at the end of year
|
|
$
|
29,962
|
|
|
22,716
|
|
|
30,411
|
|
|
23,161
|
|
|
30,653
|
|
|
22,994
|
|
All Lines
(in thousands)
|
|||||||||||||||||||||
Cumulative Paid Loss and Allocated Loss Adjustment Expenses, Net of Reinsurance
|
|||||||||||||||||||||
Accident Year
|
2007
|
2008
|
2009
|
2010
|
2011
|
2012
|
2013
|
2014
|
2015
|
2016
|
|||||||||||
2007
|
$
|
350,369
|
|
543,949
|
|
665,277
|
|
762,422
|
|
835,347
|
|
877,933
|
|
896,590
|
|
912,683
|
|
920,931
|
|
929,082
|
|
2008
|
|
286,314
|
|
489,633
|
|
609,851
|
|
690,016
|
|
764,196
|
|
798,996
|
|
819,280
|
|
839,392
|
|
853,769
|
|
||
2009
|
|
|
277,275
|
|
442,417
|
|
540,982
|
|
634,902
|
|
695,249
|
|
736,100
|
|
760,589
|
|
775,885
|
|
|||
2010
|
|
|
|
328,826
|
|
509,910
|
|
625,229
|
|
704,895
|
|
773,536
|
|
803,773
|
|
823,770
|
|
||||
2011
|
|
|
|
|
391,944
|
|
585,867
|
|
692,730
|
|
782,655
|
|
852,202
|
|
901,801
|
|
|||||
2012
|
|
|
|
|
|
378,067
|
|
555,819
|
|
651,544
|
|
743,742
|
|
810,135
|
|
||||||
2013
|
|
|
|
|
|
|
335,956
|
|
518,872
|
|
644,475
|
|
748,758
|
|
|||||||
2014
|
|
|
|
|
|
|
|
405,898
|
|
614,075
|
|
736,154
|
|
||||||||
2015
|
|
|
|
|
|
|
|
|
376,641
|
|
581,203
|
|
|||||||||
2016
|
|
|
|
|
|
|
|
|
|
387,272
|
|
||||||||||
|
|
|
|
|
|
|
|
|
Total
|
|
7,547,829
|
|
|||||||||
|
|
|
|
|
All outstanding liabilities before 2007, net of reinsurance
|
|
324,070
|
|
|||||||||||||
|
|
|
|
Liabilities for loss and loss adjustment expenses, net of reinsurance
|
|
2,944,432
|
|
General Liability
(in thousands)
|
|
|
||||||||||||||||||||||||
Incurred Loss and Allocated Loss Adjustment Expenses, Net of Reinsurance
|
|
As of December 31, 2016
|
||||||||||||||||||||||||
Accident Year
|
2007
|
2008
|
2009
|
2010
|
2011
|
2012
|
2013
|
2014
|
2015
|
2016
|
|
IBNR
|
Cumulative Number of Reported Claims
|
|||||||||||||
2007
|
$
|
252,732
|
|
256,627
|
|
255,538
|
|
250,834
|
|
248,807
|
|
242,878
|
|
234,173
|
|
234,697
|
|
231,439
|
|
230,717
|
|
|
17,815
|
|
14,016
|
|
2008
|
|
250,239
|
|
243,755
|
|
243,536
|
|
234,770
|
|
233,712
|
|
224,236
|
|
219,551
|
|
221,640
|
|
221,203
|
|
|
19,939
|
|
13,721
|
|
||
2009
|
|
|
237,913
|
|
241,625
|
|
233,530
|
|
223,146
|
|
212,947
|
|
211,243
|
|
206,387
|
|
205,741
|
|
|
22,858
|
|
13,815
|
|
|||
2010
|
|
|
|
215,208
|
|
228,680
|
|
242,499
|
|
237,154
|
|
222,328
|
|
211,619
|
|
208,968
|
|
|
29,380
|
|
12,629
|
|
||||
2011
|
|
|
|
|
229,967
|
|
228,720
|
|
239,480
|
|
230,785
|
|
217,256
|
|
211,196
|
|
|
36,350
|
|
11,533
|
|
|||||
2012
|
|
|
|
|
|
238,979
|
|
245,561
|
|
215,083
|
|
194,144
|
|
175,305
|
|
|
44,493
|
|
9,864
|
|
||||||
2013
|
|
|
|
|
|
|
250,609
|
|
251,421
|
|
239,776
|
|
225,709
|
|
|
90,026
|
|
10,107
|
|
|||||||
2014
|
|
|
|
|
|
|
|
244,312
|
|
249,946
|
|
257,132
|
|
|
135,883
|
|
10,157
|
|
||||||||
2015
|
|
|
|
|
|
|
|
|
254,720
|
|
245,710
|
|
|
167,995
|
|
9,371
|
|
|||||||||
2016
|
|
|
|
|
|
|
|
|
|
277,214
|
|
|
233,794
|
|
7,790
|
|
||||||||||
|
|
|
|
|
|
|
|
|
Total
|
|
2,258,895
|
|
|
|
|
General Liability
(in thousands)
|
|||||||||||||||||||||
Cumulative Paid Loss and Allocated Loss Adjustment Expenses, Net of Reinsurance
|
|||||||||||||||||||||
Accident Year
|
2007
|
2008
|
2009
|
2010
|
2011
|
2012
|
2013
|
2014
|
2015
|
2016
|
|||||||||||
2007
|
$
|
14,695
|
|
44,356
|
|
80,621
|
|
123,108
|
|
158,424
|
|
181,641
|
|
191,405
|
|
201,842
|
|
204,159
|
|
208,449
|
|
2008
|
|
16,397
|
|
45,595
|
|
82,421
|
|
113,088
|
|
151,055
|
|
166,394
|
|
176,873
|
|
186,896
|
|
194,257
|
|
||
2009
|
|
|
14,346
|
|
37,143
|
|
64,970
|
|
103,213
|
|
130,554
|
|
151,920
|
|
166,767
|
|
176,316
|
|
|||
2010
|
|
|
|
15,726
|
|
46,201
|
|
80,018
|
|
113,050
|
|
143,360
|
|
161,487
|
|
172,394
|
|
||||
2011
|
|
|
|
|
13,924
|
|
42,692
|
|
73,643
|
|
102,978
|
|
135,377
|
|
159,768
|
|
|||||
2012
|
|
|
|
|
|
13,030
|
|
35,241
|
|
56,580
|
|
89,008
|
|
109,448
|
|
||||||
2013
|
|
|
|
|
|
|
12,789
|
|
35,113
|
|
72,127
|
|
104,587
|
|
|||||||
2014
|
|
|
|
|
|
|
|
14,901
|
|
46,825
|
|
79,972
|
|
||||||||
2015
|
|
|
|
|
|
|
|
|
14,665
|
|
39,978
|
|
|||||||||
2016
|
|
|
|
|
|
|
|
|
|
15,684
|
|
||||||||||
|
|
|
|
|
|
|
|
|
Total
|
|
1,260,853
|
|
|||||||||
|
|
|
|
|
All outstanding liabilities before 2007, net of reinsurance
|
|
72,887
|
|
|||||||||||||
|
|
|
|
Liabilities for loss and loss adjustment expenses, net of reinsurance
|
|
1,070,929
|
|
Workers Compensation
(in thousands)
|
|
|
||||||||||||||||||||||||
Incurred Loss and Allocated Loss Adjustment Expenses, Net of Reinsurance
|
|
As of December 31, 2016
|
||||||||||||||||||||||||
Accident Year
|
2007
|
2008
|
2009
|
2010
|
2011
|
2012
|
2013
|
2014
|
2015
|
2016
|
|
IBNR
|
Cumulative Number of Reported Claims
|
|||||||||||||
2007
|
$
|
231,462
|
|
236,993
|
|
231,104
|
|
226,095
|
|
230,109
|
|
225,165
|
|
225,904
|
|
222,623
|
|
218,828
|
|
216,177
|
|
|
23,152
|
|
16,344
|
|
2008
|
|
219,616
|
|
243,186
|
|
255,810
|
|
250,423
|
|
241,921
|
|
245,993
|
|
244,100
|
|
243,512
|
|
238,836
|
|
|
26,983
|
|
14,400
|
|
||
2009
|
|
|
197,504
|
|
215,946
|
|
213,036
|
|
210,109
|
|
210,756
|
|
216,992
|
|
212,536
|
|
208,611
|
|
|
24,238
|
|
12,214
|
|
|||
2010
|
|
|
|
198,371
|
|
214,469
|
|
212,838
|
|
211,030
|
|
214,916
|
|
212,448
|
|
208,155
|
|
|
34,437
|
|
12,181
|
|
||||
2011
|
|
|
|
|
205,238
|
|
218,973
|
|
214,743
|
|
215,114
|
|
210,591
|
|
205,708
|
|
|
38,227
|
|
11,843
|
|
|||||
2012
|
|
|
|
|
|
203,864
|
|
208,036
|
|
199,360
|
|
195,197
|
|
188,596
|
|
|
39,122
|
|
11,601
|
|
||||||
2013
|
|
|
|
|
|
|
199,794
|
|
194,318
|
|
187,658
|
|
173,160
|
|
|
43,058
|
|
11,361
|
|
|||||||
2014
|
|
|
|
|
|
|
|
199,346
|
|
187,065
|
|
182,579
|
|
|
55,599
|
|
10,464
|
|
||||||||
2015
|
|
|
|
|
|
|
|
|
193,729
|
|
194,639
|
|
|
63,496
|
|
10,479
|
|
|||||||||
2016
|
|
|
|
|
|
|
|
|
|
196,774
|
|
|
107,977
|
|
9,910
|
|
||||||||||
|
|
|
|
|
|
|
|
|
Total
|
|
2,013,235
|
|
|
|
|
Workers Compensation
(in thousands)
|
|||||||||||||||||||||
Cumulative Paid Loss and Allocated Loss Adjustment Expenses, Net of Reinsurance
|
|||||||||||||||||||||
Accident Year
|
2007
|
2008
|
2009
|
2010
|
2011
|
2012
|
2013
|
2014
|
2015
|
2016
|
|||||||||||
2007
|
$
|
31,478
|
|
88,786
|
|
123,681
|
|
144,713
|
|
156,320
|
|
164,373
|
|
169,941
|
|
175,205
|
|
179,011
|
|
180,865
|
|
2008
|
|
39,628
|
|
100,678
|
|
139,144
|
|
158,083
|
|
171,403
|
|
180,556
|
|
188,206
|
|
191,265
|
|
195,962
|
|
||
2009
|
|
|
37,885
|
|
87,299
|
|
117,019
|
|
133,116
|
|
145,417
|
|
154,726
|
|
160,529
|
|
164,336
|
|
|||
2010
|
|
|
|
46,795
|
|
93,281
|
|
122,442
|
|
137,184
|
|
149,086
|
|
153,795
|
|
158,078
|
|
||||
2011
|
|
|
|
|
42,941
|
|
90,836
|
|
118,847
|
|
134,646
|
|
139,232
|
|
149,269
|
|
|||||
2012
|
|
|
|
|
|
40,911
|
|
86,909
|
|
108,211
|
|
122,755
|
|
132,052
|
|
||||||
2013
|
|
|
|
|
|
|
36,829
|
|
74,568
|
|
96,376
|
|
109,739
|
|
|||||||
2014
|
|
|
|
|
|
|
|
35,924
|
|
78,944
|
|
100,876
|
|
||||||||
2015
|
|
|
|
|
|
|
|
|
33,857
|
|
77,320
|
|
|||||||||
2016
|
|
|
|
|
|
|
|
|
|
34,525
|
|
||||||||||
|
|
|
|
|
|
|
|
|
Total
|
|
1,303,022
|
|
|||||||||
|
|
|
|
|
All outstanding liabilities before 2007, net of reinsurance
|
|
226,553
|
|
|||||||||||||
|
|
|
|
Liabilities for loss and loss adjustment expenses, net of reinsurance
|
|
936,766
|
|
Commercial Automobile
(in thousands)
|
|
|
||||||||||||||||||||||||
Incurred Loss and Allocated Loss Adjustment Expenses, Net of Reinsurance
|
|
As of December 31, 2016
|
||||||||||||||||||||||||
Accident Year
|
2007
|
2008
|
2009
|
2010
|
2011
|
2012
|
2013
|
2014
|
2015
|
2016
|
|
IBNR
|
Cumulative Number of Reported Claims
|
|||||||||||||
2007
|
$
|
185,733
|
|
194,567
|
|
187,966
|
|
182,030
|
|
179,739
|
|
178,956
|
|
176,049
|
|
175,342
|
|
175,431
|
|
175,894
|
|
|
1,434
|
|
24,074
|
|
2008
|
|
196,370
|
|
195,823
|
|
190,349
|
|
187,100
|
|
187,417
|
|
182,785
|
|
180,902
|
|
183,736
|
|
183,618
|
|
|
1,332
|
|
24,105
|
|
||
2009
|
|
|
199,541
|
|
191,079
|
|
182,724
|
|
169,858
|
|
166,682
|
|
162,911
|
|
161,251
|
|
161,923
|
|
|
1,873
|
|
24,554
|
|
|||
2010
|
|
|
|
187,562
|
|
189,305
|
|
187,778
|
|
181,923
|
|
179,854
|
|
172,969
|
|
173,157
|
|
|
2,318
|
|
25,194
|
|
||||
2011
|
|
|
|
|
174,006
|
|
183,044
|
|
182,325
|
|
178,421
|
|
172,617
|
|
174,882
|
|
|
5,153
|
|
25,146
|
|
|||||
2012
|
|
|
|
|
|
179,551
|
|
191,947
|
|
183,527
|
|
184,289
|
|
184,367
|
|
|
6,421
|
|
23,751
|
|
||||||
2013
|
|
|
|
|
|
|
188,289
|
|
205,282
|
|
209,197
|
|
207,994
|
|
|
18,464
|
|
25,215
|
|
|||||||
2014
|
|
|
|
|
|
|
|
200,534
|
|
212,725
|
|
216,824
|
|
|
37,432
|
|
27,129
|
|
||||||||
2015
|
|
|
|
|
|
|
|
|
220,994
|
|
240,958
|
|
|
65,528
|
|
28,475
|
|
|||||||||
2016
|
|
|
|
|
|
|
|
|
|
255,187
|
|
|
106,894
|
|
28,740
|
|
||||||||||
|
|
|
|
|
|
|
|
|
Total
|
|
1,974,804
|
|
|
|
|
Commercial Automobile
(in thousands)
|
|||||||||||||||||||||
Cumulative Paid Loss and Allocated Loss Adjustment Expenses, Net of Reinsurance
|
|||||||||||||||||||||
Accident Year
|
2007
|
2008
|
2009
|
2010
|
2011
|
2012
|
2013
|
2014
|
2015
|
2016
|
|||||||||||
2007
|
$
|
65,544
|
|
102,233
|
|
126,507
|
|
146,690
|
|
163,629
|
|
170,241
|
|
171,622
|
|
171,839
|
|
173,050
|
|
173,980
|
|
2008
|
|
69,053
|
|
104,711
|
|
130,857
|
|
151,741
|
|
166,487
|
|
173,795
|
|
175,244
|
|
180,779
|
|
181,779
|
|
||
2009
|
|
|
63,126
|
|
94,406
|
|
113,697
|
|
137,564
|
|
149,949
|
|
155,560
|
|
158,303
|
|
159,723
|
|
|||
2010
|
|
|
|
68,098
|
|
99,254
|
|
128,015
|
|
146,913
|
|
163,513
|
|
167,227
|
|
169,100
|
|
||||
2011
|
|
|
|
|
69,849
|
|
99,196
|
|
121,576
|
|
142,507
|
|
157,291
|
|
166,082
|
|
|||||
2012
|
|
|
|
|
|
73,316
|
|
105,371
|
|
127,235
|
|
148,669
|
|
168,114
|
|
||||||
2013
|
|
|
|
|
|
|
76,469
|
|
109,893
|
|
140,015
|
|
169,850
|
|
|||||||
2014
|
|
|
|
|
|
|
|
80,810
|
|
117,169
|
|
148,884
|
|
||||||||
2015
|
|
|
|
|
|
|
|
|
91,347
|
|
132,260
|
|
|||||||||
2016
|
|
|
|
|
|
|
|
|
|
106,022
|
|
||||||||||
|
|
|
|
|
|
|
|
|
Total
|
|
1,575,794
|
|
|||||||||
|
|
|
|
|
All outstanding liabilities before 2007, net of reinsurance
|
|
3,271
|
|
|||||||||||||
|
|
|
|
Liabilities for loss and loss adjustment expenses, net of reinsurance
|
|
402,281
|
|
Businessowners' Policies
(in thousands)
|
|
|
||||||||||||||||||||||||
Incurred Loss and Allocated Loss Adjustment Expenses, Net of Reinsurance
|
|
As of December 31, 2016
|
||||||||||||||||||||||||
Accident Year
|
2007
|
2008
|
2009
|
2010
|
2011
|
2012
|
2013
|
2014
|
2015
|
2016
|
|
IBNR
|
Cumulative Number of Reported Claims
|
|||||||||||||
2007
|
$
|
32,749
|
|
34,011
|
|
33,397
|
|
31,212
|
|
29,270
|
|
29,393
|
|
28,440
|
|
28,503
|
|
29,691
|
|
29,288
|
|
|
124
|
|
2,956
|
|
2008
|
|
39,660
|
|
38,986
|
|
39,334
|
|
32,974
|
|
30,250
|
|
29,793
|
|
31,066
|
|
31,340
|
|
30,967
|
|
|
94
|
|
3,258
|
|
||
2009
|
|
|
48,535
|
|
51,762
|
|
46,645
|
|
43,828
|
|
43,553
|
|
44,938
|
|
44,299
|
|
44,273
|
|
|
730
|
|
3,473
|
|
|||
2010
|
|
|
|
53,669
|
|
49,285
|
|
42,408
|
|
39,915
|
|
40,899
|
|
40,581
|
|
41,239
|
|
|
693
|
|
3,917
|
|
||||
2011
|
|
|
|
|
54,469
|
|
57,083
|
|
51,047
|
|
58,242
|
|
59,256
|
|
58,966
|
|
|
2,177
|
|
4,956
|
|
|||||
2012
|
|
|
|
|
|
54,342
|
|
48,029
|
|
46,303
|
|
44,172
|
|
44,077
|
|
|
834
|
|
5,533
|
|
||||||
2013
|
|
|
|
|
|
|
49,617
|
|
42,618
|
|
41,005
|
|
40,624
|
|
|
4,189
|
|
3,474
|
|
|||||||
2014
|
|
|
|
|
|
|
|
55,962
|
|
60,949
|
|
62,548
|
|
|
10,891
|
|
4,038
|
|
||||||||
2015
|
|
|
|
|
|
|
|
|
52,871
|
|
53,768
|
|
|
12,089
|
|
3,860
|
|
|||||||||
2016
|
|
|
|
|
|
|
|
|
|
52,335
|
|
|
16,027
|
|
3,398
|
|
||||||||||
|
|
|
|
|
|
|
|
|
Total
|
|
458,085
|
|
|
|
|
Businessowners' Policies
(in thousands)
|
|||||||||||||||||||||
Cumulative Paid Loss and Allocated Loss Adjustment Expenses, Net of Reinsurance
|
|||||||||||||||||||||
Accident Year
|
2007
|
2008
|
2009
|
2010
|
2011
|
2012
|
2013
|
2014
|
2015
|
2016
|
|||||||||||
2007
|
$
|
14,051
|
|
18,870
|
|
22,583
|
|
24,978
|
|
25,759
|
|
27,273
|
|
28,073
|
|
28,095
|
|
28,368
|
|
29,048
|
|
2008
|
|
15,019
|
|
21,765
|
|
24,449
|
|
25,738
|
|
28,026
|
|
28,660
|
|
28,589
|
|
29,778
|
|
30,873
|
|
||
2009
|
|
|
18,915
|
|
29,612
|
|
32,689
|
|
36,073
|
|
40,052
|
|
42,895
|
|
43,358
|
|
43,448
|
|
|||
2010
|
|
|
|
20,821
|
|
28,131
|
|
31,027
|
|
34,705
|
|
37,819
|
|
38,900
|
|
40,279
|
|
||||
2011
|
|
|
|
|
27,884
|
|
37,362
|
|
41,011
|
|
46,444
|
|
52,114
|
|
55,856
|
|
|||||
2012
|
|
|
|
|
|
22,199
|
|
31,833
|
|
35,089
|
|
37,215
|
|
38,766
|
|
||||||
2013
|
|
|
|
|
|
|
17,412
|
|
26,592
|
|
30,845
|
|
34,760
|
|
|||||||
2014
|
|
|
|
|
|
|
|
28,914
|
|
40,584
|
|
44,911
|
|
||||||||
2015
|
|
|
|
|
|
|
|
|
24,189
|
|
36,014
|
|
|||||||||
2016
|
|
|
|
|
|
|
|
|
|
24,655
|
|
||||||||||
|
|
|
|
|
|
|
|
|
Total
|
|
378,610
|
|
|||||||||
|
|
|
|
|
All outstanding liabilities before 2007, net of reinsurance
|
|
7,327
|
|
|||||||||||||
|
|
|
|
Liabilities for loss and loss adjustment expenses, net of reinsurance
|
|
86,802
|
|
Commercial Property
(in thousands)
|
|
|
||||||||||||||||||||||||
Incurred Loss and Allocated Loss Adjustment Expenses, Net of Reinsurance
|
|
As of December 31, 2016
|
||||||||||||||||||||||||
Accident Year
|
2007
|
2008
|
2009
|
2010
|
2011
|
2012
|
2013
|
2014
|
2015
|
2016
|
|
IBNR
|
Cumulative Number of Reported Claims
|
|||||||||||||
2007
|
$
|
98,167
|
|
104,160
|
|
100,809
|
|
101,027
|
|
103,183
|
|
103,381
|
|
102,998
|
|
102,732
|
|
102,679
|
|
103,077
|
|
|
2
|
|
6,919
|
|
2008
|
|
97,578
|
|
102,860
|
|
101,436
|
|
101,470
|
|
101,265
|
|
101,702
|
|
101,043
|
|
100,881
|
|
101,043
|
|
|
4
|
|
7,604
|
|
||
2009
|
|
|
82,619
|
|
82,124
|
|
82,025
|
|
82,014
|
|
80,774
|
|
80,455
|
|
80,558
|
|
80,545
|
|
|
10
|
|
7,009
|
|
|||
2010
|
|
|
|
105,647
|
|
96,851
|
|
97,386
|
|
96,127
|
|
95,530
|
|
95,363
|
|
95,178
|
|
|
21
|
|
7,667
|
|
||||
2011
|
|
|
|
|
136,954
|
|
131,667
|
|
130,942
|
|
131,282
|
|
131,353
|
|
131,113
|
|
|
22
|
|
9,035
|
|
|||||
2012
|
|
|
|
|
|
118,464
|
|
114,224
|
|
115,375
|
|
116,658
|
|
117,102
|
|
|
(22
|
)
|
8,512
|
|
||||||
2013
|
|
|
|
|
|
|
88,101
|
|
90,639
|
|
90,103
|
|
90,005
|
|
|
(78
|
)
|
5,704
|
|
|||||||
2014
|
|
|
|
|
|
|
|
141,192
|
|
136,249
|
|
136,820
|
|
|
(1,052
|
)
|
6,503
|
|
||||||||
2015
|
|
|
|
|
|
|
|
|
110,270
|
|
109,513
|
|
|
(1,320
|
)
|
6,380
|
|
|||||||||
2016
|
|
|
|
|
|
|
|
|
|
121,927
|
|
|
7,112
|
|
6,253
|
|
||||||||||
|
|
|
|
|
|
|
|
|
Total
|
|
1,086,323
|
|
|
|
|
Commercial Property
(in thousands)
|
|||||||||||||||||||||
Cumulative Paid Loss and Allocated Loss Adjustment Expenses, Net of Reinsurance
|
|||||||||||||||||||||
Accident Year
|
2007
|
2008
|
2009
|
2010
|
2011
|
2012
|
2013
|
2014
|
2015
|
2016
|
|||||||||||
2007
|
$
|
63,159
|
|
95,050
|
|
99,036
|
|
99,942
|
|
101,805
|
|
102,310
|
|
102,370
|
|
102,532
|
|
102,663
|
|
103,061
|
|
2008
|
|
68,211
|
|
98,921
|
|
100,465
|
|
99,288
|
|
100,213
|
|
100,752
|
|
100,908
|
|
100,868
|
|
101,034
|
|
||
2009
|
|
|
59,933
|
|
78,695
|
|
80,433
|
|
80,894
|
|
80,251
|
|
80,352
|
|
80,529
|
|
80,509
|
|
|||
2010
|
|
|
|
69,543
|
|
91,918
|
|
94,602
|
|
95,111
|
|
95,270
|
|
95,147
|
|
95,156
|
|
||||
2011
|
|
|
|
|
94,538
|
|
127,580
|
|
129,579
|
|
130,681
|
|
131,060
|
|
131,115
|
|
|||||
2012
|
|
|
|
|
|
81,528
|
|
108,834
|
|
111,503
|
|
114,699
|
|
116,291
|
|
||||||
2013
|
|
|
|
|
|
|
60,244
|
|
87,874
|
|
90,446
|
|
90,350
|
|
|||||||
2014
|
|
|
|
|
|
|
|
101,131
|
|
132,909
|
|
136,634
|
|
||||||||
2015
|
|
|
|
|
|
|
|
|
79,048
|
|
106,182
|
|
|||||||||
2016
|
|
|
|
|
|
|
|
|
|
83,966
|
|
||||||||||
|
|
|
|
|
|
|
|
|
Total
|
|
1,044,298
|
|
|||||||||
|
|
|
|
|
All outstanding liabilities before 2007, net of reinsurance
|
|
254
|
|
|||||||||||||
|
|
|
|
Liabilities for loss and loss adjustment expenses, net of reinsurance
|
|
42,279
|
|
Personal Automobile
(in thousands)
|
|
|
||||||||||||||||||||||||
Incurred Loss and Allocated Loss Adjustment Expenses, Net of Reinsurance
|
|
As of December 31, 2016
|
||||||||||||||||||||||||
Accident Year
|
2007
|
2008
|
2009
|
2010
|
2011
|
2012
|
2013
|
2014
|
2015
|
2016
|
|
IBNR
|
Cumulative Number of Reported Claims
|
|||||||||||||
2007
|
$
|
97,161
|
|
102,932
|
|
103,283
|
|
102,325
|
|
101,744
|
|
101,654
|
|
101,814
|
|
101,747
|
|
101,750
|
|
101,714
|
|
|
254
|
|
15,354
|
|
2008
|
|
100,311
|
|
106,999
|
|
106,842
|
|
103,934
|
|
100,213
|
|
99,912
|
|
99,686
|
|
99,255
|
|
99,116
|
|
|
264
|
|
16,042
|
|
||
2009
|
|
|
93,808
|
|
103,319
|
|
105,033
|
|
103,908
|
|
104,734
|
|
103,866
|
|
103,393
|
|
103,412
|
|
|
256
|
|
17,346
|
|
|||
2010
|
|
|
|
103,340
|
|
110,075
|
|
112,346
|
|
109,515
|
|
107,490
|
|
107,405
|
|
107,224
|
|
|
277
|
|
20,821
|
|
||||
2011
|
|
|
|
|
113,232
|
|
116,164
|
|
113,686
|
|
112,993
|
|
114,241
|
|
113,830
|
|
|
644
|
|
22,700
|
|
|||||
2012
|
|
|
|
|
|
113,771
|
|
114,921
|
|
109,832
|
|
109,324
|
|
110,294
|
|
|
988
|
|
22,332
|
|
||||||
2013
|
|
|
|
|
|
|
108,417
|
|
109,620
|
|
106,225
|
|
106,703
|
|
|
2,252
|
|
22,359
|
|
|||||||
2014
|
|
|
|
|
|
|
|
102,250
|
|
109,325
|
|
106,757
|
|
|
6,945
|
|
22,478
|
|
||||||||
2015
|
|
|
|
|
|
|
|
|
96,387
|
|
99,698
|
|
|
13,594
|
|
20,797
|
|
|||||||||
2016
|
|
|
|
|
|
|
|
|
|
92,727
|
|
|
18,187
|
|
19,044
|
|
||||||||||
|
|
|
|
|
|
|
|
|
Total
|
|
1,041,475
|
|
|
|
|
Personal Automobile
(in thousands)
|
|||||||||||||||||||||
Cumulative Paid Loss and Allocated Loss Adjustment Expenses, Net of Reinsurance
|
|||||||||||||||||||||
Accident Year
|
2007
|
2008
|
2009
|
2010
|
2011
|
2012
|
2013
|
2014
|
2015
|
2016
|
|||||||||||
2007
|
$
|
45,846
|
|
66,884
|
|
82,455
|
|
92,019
|
|
97,335
|
|
99,454
|
|
100,539
|
|
100,667
|
|
101,099
|
|
101,134
|
|
2008
|
|
50,396
|
|
73,194
|
|
84,715
|
|
91,834
|
|
95,932
|
|
97,723
|
|
98,174
|
|
98,604
|
|
98,668
|
|
||
2009
|
|
|
51,039
|
|
71,911
|
|
86,431
|
|
96,229
|
|
100,566
|
|
102,187
|
|
102,322
|
|
102,437
|
|
|||
2010
|
|
|
|
58,786
|
|
82,490
|
|
95,300
|
|
101,540
|
|
104,061
|
|
105,849
|
|
106,453
|
|
||||
2011
|
|
|
|
|
61,323
|
|
82,102
|
|
93,878
|
|
105,068
|
|
111,085
|
|
112,732
|
|
|||||
2012
|
|
|
|
|
|
63,704
|
|
82,729
|
|
94,842
|
|
102,977
|
|
107,890
|
|
||||||
2013
|
|
|
|
|
|
|
61,384
|
|
80,861
|
|
92,637
|
|
100,528
|
|
|||||||
2014
|
|
|
|
|
|
|
|
62,519
|
|
83,739
|
|
92,589
|
|
||||||||
2015
|
|
|
|
|
|
|
|
|
58,725
|
|
76,470
|
|
|||||||||
2016
|
|
|
|
|
|
|
|
|
|
57,961
|
|
||||||||||
|
|
|
|
|
|
|
|
|
Total
|
|
956,862
|
|
|||||||||
|
|
|
|
|
All outstanding liabilities before 2007, net of reinsurance
|
|
5,803
|
|
|||||||||||||
|
|
|
|
Liabilities for loss and loss adjustment expenses, net of reinsurance
|
|
90,416
|
|
Homeowners
(in thousands)
|
|
|
||||||||||||||||||||||||
Incurred Loss and Allocated Loss Adjustment Expenses, Net of Reinsurance
|
|
As of December 31, 2016
|
||||||||||||||||||||||||
Accident Year
|
2007
|
2008
|
2009
|
2010
|
2011
|
2012
|
2013
|
2014
|
2015
|
2016
|
|
IBNR
|
Cumulative Number of Reported Claims
|
|||||||||||||
2007
|
$
|
38,589
|
|
36,547
|
|
34,926
|
|
34,273
|
|
34,186
|
|
34,422
|
|
34,566
|
|
34,056
|
|
34,025
|
|
34,010
|
|
|
58
|
|
4,570
|
|
2008
|
|
41,224
|
|
41,747
|
|
39,342
|
|
39,203
|
|
38,062
|
|
38,410
|
|
38,111
|
|
38,042
|
|
38,045
|
|
|
65
|
|
5,139
|
|
||
2009
|
|
|
47,636
|
|
44,511
|
|
42,609
|
|
40,313
|
|
61,927
|
|
40,400
|
|
40,465
|
|
40,457
|
|
|
74
|
|
5,631
|
|
|||
2010
|
|
|
|
68,373
|
|
67,525
|
|
63,285
|
|
97,761
|
|
62,462
|
|
62,402
|
|
62,339
|
|
|
86
|
|
9,128
|
|
||||
2011
|
|
|
|
|
103,804
|
|
98,211
|
|
82,744
|
|
94,167
|
|
94,543
|
|
94,183
|
|
|
143
|
|
15,102
|
|
|||||
2012
|
|
|
|
|
|
87,260
|
|
82,745
|
|
86,560
|
|
86,667
|
|
86,271
|
|
|
251
|
|
16,927
|
|
||||||
2013
|
|
|
|
|
|
|
73,670
|
|
72,528
|
|
71,494
|
|
72,145
|
|
|
1,545
|
|
7,738
|
|
|||||||
2014
|
|
|
|
|
|
|
|
80,111
|
|
82,461
|
|
83,637
|
|
|
1,928
|
|
8,739
|
|
||||||||
2015
|
|
|
|
|
|
|
|
|
76,637
|
|
76,400
|
|
|
2,984
|
|
7,677
|
|
|||||||||
2016
|
|
|
|
|
|
|
|
|
|
60,105
|
|
|
5,646
|
|
6,402
|
|
||||||||||
|
|
|
|
|
|
|
|
|
Total
|
|
647,592
|
|
|
|
|
Homeowners
(in thousands)
|
|||||||||||||||||||||
Cumulative Paid Loss and Allocated Loss Adjustment Expenses, Net of Reinsurance
|
|||||||||||||||||||||
Accident Year
|
2007
|
2008
|
2009
|
2010
|
2011
|
2012
|
2013
|
2014
|
2015
|
2016
|
|||||||||||
2007
|
$
|
20,840
|
|
30,104
|
|
31,846
|
|
32,228
|
|
33,081
|
|
33,862
|
|
33,857
|
|
33,869
|
|
33,953
|
|
33,951
|
|
2008
|
|
21,277
|
|
33,535
|
|
36,271
|
|
37,086
|
|
37,763
|
|
37,837
|
|
37,933
|
|
37,939
|
|
37,930
|
|
||
2009
|
|
|
28,299
|
|
36,965
|
|
38,078
|
|
39,342
|
|
39,731
|
|
39,819
|
|
39,907
|
|
40,189
|
|
|||
2010
|
|
|
|
43,699
|
|
58,638
|
|
60,295
|
|
61,106
|
|
62,155
|
|
62,227
|
|
62,241
|
|
||||
2011
|
|
|
|
|
71,668
|
|
89,963
|
|
91,718
|
|
92,185
|
|
93,312
|
|
93,720
|
|
|||||
2012
|
|
|
|
|
|
69,056
|
|
79,584
|
|
82,720
|
|
84,250
|
|
85,196
|
|
||||||
2013
|
|
|
|
|
|
|
50,664
|
|
65,528
|
|
67,838
|
|
69,775
|
|
|||||||
2014
|
|
|
|
|
|
|
|
61,561
|
|
76,007
|
|
79,751
|
|
||||||||
2015
|
|
|
|
|
|
|
|
|
52,589
|
|
70,078
|
|
|||||||||
2016
|
|
|
|
|
|
|
|
|
|
42,252
|
|
||||||||||
|
|
|
|
|
|
|
|
|
Total
|
|
615,083
|
|
|||||||||
|
|
|
|
|
All outstanding liabilities before 2007, net of reinsurance
|
|
6,469
|
|
|||||||||||||
|
|
|
|
Liabilities for loss and loss adjustment expenses, net of reinsurance
|
|
38,978
|
|
E&S - Liability
(in thousands)
|
|
|
|
|||||||||||||||
Incurred Loss and Loss Adjustment Expenses, Net of Reinsurance
|
|
As of December 31, 2016
|
||||||||||||||||
Accident Year
|
2011
|
2012
|
2013
|
2014
|
2015
|
2016
|
|
IBNR
|
Cumulative Number of Reported Claims
|
|||||||||
2007
|
$
|
—
|
|
—
|
|
—
|
|
—
|
|
—
|
|
—
|
|
|
—
|
|
—
|
|
2008
|
92
|
|
169
|
|
146
|
|
119
|
|
52
|
|
(162
|
)
|
|
(270
|
)
|
35
|
|
|
2009
|
885
|
|
1,053
|
|
938
|
|
728
|
|
710
|
|
96
|
|
|
(630
|
)
|
274
|
|
|
2010
|
3,294
|
|
4,106
|
|
3,369
|
|
4,299
|
|
3,831
|
|
3,055
|
|
|
(1,778
|
)
|
797
|
|
|
2011
|
8,127
|
|
7,102
|
|
9,853
|
|
12,207
|
|
10,273
|
|
9,652
|
|
|
(599
|
)
|
1,303
|
|
|
2012
|
|
|
42,367
|
|
42,621
|
|
43,175
|
|
46,149
|
|
46,165
|
|
|
9,289
|
|
1,982
|
|
|
2013
|
|
|
|
55,468
|
|
60,309
|
|
67,099
|
|
69,112
|
|
|
21,956
|
|
2,128
|
|
||
2014
|
|
|
|
|
55,316
|
|
63,505
|
|
69,929
|
|
|
29,236
|
|
1,888
|
|
|||
2015
|
|
|
|
|
|
75,498
|
|
76,432
|
|
|
48,390
|
|
2,313
|
|
||||
2016
|
|
|
|
|
|
|
94,451
|
|
|
84,328
|
|
1,760
|
|
|||||
|
|
|
|
|
Total
|
|
368,730
|
|
|
|
|
E&S - Liability
(in thousands)
|
|
||||||||||||
Cumulative Paid Loss and Loss Adjustment Expenses, Net of Reinsurance
|
|||||||||||||
Accident Year
|
2011
|
2012
|
2013
|
2014
|
2015
|
2016
|
|||||||
2007
|
$
|
—
|
|
—
|
|
—
|
|
—
|
|
—
|
|
—
|
|
2008
|
—
|
|
24
|
|
70
|
|
80
|
|
79
|
|
92
|
|
|
2009
|
—
|
|
198
|
|
431
|
|
605
|
|
626
|
|
709
|
|
|
2010
|
—
|
|
1,218
|
|
2,570
|
|
3,574
|
|
4,078
|
|
4,513
|
|
|
2011
|
—
|
|
806
|
|
3,200
|
|
6,445
|
|
9,954
|
|
9,912
|
|
|
2012
|
|
|
3,722
|
|
7,914
|
|
16,430
|
|
25,064
|
|
32,343
|
|
|
2013
|
|
|
|
2,715
|
|
9,470
|
|
21,980
|
|
35,200
|
|
||
2014
|
|
|
|
|
|
2,353
|
|
12,234
|
|
25,571
|
|
||
2015
|
|
|
|
|
|
|
|
3,036
|
|
13,057
|
|
||
2016
|
|
|
|
|
|
|
|
|
|
3,720
|
|
||
|
|
|
|
|
Total
|
|
125,117
|
|
|||||
|
All outstanding liabilities before 2007, net of reinsurance
|
|
—
|
|
|||||||||
|
Liabilities for loss and loss adjustment expenses, net of reinsurance
|
|
243,613
|
|
(in thousands)
|
December 31, 2016
|
|
Net outstanding liabilities:
|
|
|
Standard Commercial Lines
|
|
|
General liability
|
1,070,929
|
|
Workers compensation
|
936,766
|
|
Commercial automobile
|
402,281
|
|
Businessowners' policies
|
86,802
|
|
Commercial property
|
42,279
|
|
Other Commercial Lines
|
11,389
|
|
Total Standard Commercial Lines net outstanding liabilities
|
2,550,446
|
|
|
|
|
Standard Personal Lines
|
|
|
Personal automobile
|
90,416
|
|
Homeowners
|
38,978
|
|
Other Personal Lines
|
7,728
|
|
Total Personal Lines net outstanding liabilities
|
137,122
|
|
|
|
|
E&S Lines
|
|
|
Commercial liability
|
243,613
|
|
Commercial property
|
13,251
|
|
Total E&S Lines net outstanding liabilities
|
256,864
|
|
|
|
|
Total liabilities for unpaid loss and loss adjustment expenses, net of reinsurance
|
2,944,432
|
|
|
|
|
Reinsurance recoverable on unpaid claims:
|
|
|
Standard Commercial Lines
|
|
|
General liability
|
179,997
|
|
Workers compensation
|
223,327
|
|
Commercial automobile
|
17,373
|
|
Businessowners' policies
|
7,012
|
|
Commercial property
|
13,615
|
|
Other Commercial Lines
|
2,613
|
|
Total Standard Commercial Lines reinsurance recoverable on unpaid loss
|
443,937
|
|
|
|
|
Standard Personal Lines
|
|
|
Personal automobile
|
55,223
|
|
Homeowners
|
3,206
|
|
Other Personal Lines
|
82,625
|
|
Total Personal Lines reinsurance recoverable on unpaid loss
|
141,054
|
|
|
|
|
E&S Lines
|
|
|
Commercial liability
|
25,741
|
|
Commercial property
|
468
|
|
Total E&S Lines reinsurance recoverable on unpaid loss
|
26,209
|
|
|
|
|
Total reinsurance recoverable on unpaid loss
|
611,200
|
|
|
|
|
Unallocated loss adjustment expenses
|
136,087
|
|
|
|
|
Total gross liability for unpaid loss and loss adjustment expenses
|
3,691,719
|
|
Outstanding Debt
|
|
|
|
|
|
|
|
|
|
2016
|
|
Carry Value
|
||||||||
($ in thousands)
|
|
Issuance Date
|
|
Maturity Date
|
|
Interest Rate
|
|
Original Amount
|
|
Debt Discount and Unamortized Issuance Costs
|
|
December 31, 2016
|
|
December 31, 2015
|
||||||
Description
|
|
|
|
|
|
|
|
|||||||||||||
Short-term:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||
(1) FHLBI
|
|
1/22/2015
|
|
7/22/2016
|
|
0.63
|
%
|
|
$
|
15,000
|
|
|
—
|
|
|
—
|
|
|
15,000
|
|
(2) FHLBI
|
|
12/16/2011
|
|
12/16/2016
|
|
1.25
|
%
|
|
45,000
|
|
|
—
|
|
|
—
|
|
|
45,000
|
|
|
Total short-term debt
|
|
|
|
|
|
|
|
$
|
60,000
|
|
|
—
|
|
|
—
|
|
|
60,000
|
|
|
Long-term:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||
(3) FHLBI
|
|
12/16/2016
|
|
12/16/2026
|
|
3.03
|
%
|
|
$
|
60,000
|
|
|
—
|
|
|
60,000
|
|
|
—
|
|
(4) FHLBNY
|
|
8/15/2016
|
|
8/16/2021
|
|
1.56
|
%
|
|
25,000
|
|
|
—
|
|
|
25,000
|
|
|
—
|
|
|
(5) FHLBNY
|
|
7/21/2016
|
|
7/21/2021
|
|
1.61
|
%
|
|
25,000
|
|
|
—
|
|
|
25,000
|
|
|
—
|
|
|
(6) Senior Notes
|
|
2/8/2013
|
|
2/9/2043
|
|
5.875
|
%
|
|
185,000
|
|
|
(4,932
|
)
|
|
180,068
|
|
|
179,684
|
|
|
(7) Senior Notes
|
|
11/3/2005
|
|
11/1/2035
|
|
6.70
|
%
|
|
100,000
|
|
|
(1,048
|
)
|
|
98,952
|
|
|
98,890
|
|
|
(8) Senior Notes
|
|
11/16/2004
|
|
11/15/2034
|
|
7.25
|
%
|
|
50,000
|
|
|
(353
|
)
|
|
49,647
|
|
|
49,618
|
|
|
Total long-term debt
|
|
|
|
|
|
|
|
|
$
|
445,000
|
|
|
(6,333
|
)
|
|
438,667
|
|
|
328,192
|
|
|
|
Required as of
|
|
Actual as of
|
|
|
December 31, 2016
|
|
December 31, 2016
|
Consolidated net worth
|
|
Not less than $1.1 billion
|
|
$1.5 billion
|
Statutory surplus
|
|
Not less than $750 million
|
|
$1.6 billion
|
Debt-to-capitalization ratio
1
|
|
Not to exceed 35%
|
|
22.5%
|
A.M. Best financial strength rating
|
|
Minimum of A-
|
|
A
|
•
|
Our Standard Commercial Lines, Standard Personal Lines, and E&S Lines are evaluated based on statutory underwriting results (net premiums earned, incurred losses and loss expenses, policyholders dividends, policy acquisition costs, and other underwriting expenses), and statutory combined ratios.
|
•
|
Our Investments segment is evaluated based on after-tax net investment income and net realized gains and losses.
|
Revenue by Segment
|
|
|
|
|
|
|
||||
Years ended December 31,
|
|
|
|
|
|
|
||||
($ in thousands)
|
|
2016
|
|
2015
|
|
2014
|
||||
Standard Commercial Lines:
|
|
|
|
|
|
|
|
|
|
|
Net premiums earned:
|
|
|
|
|
|
|
|
|
|
|
Commercial automobile
|
|
$
|
398,942
|
|
|
358,909
|
|
|
333,310
|
|
Workers compensation
|
|
308,233
|
|
|
290,075
|
|
|
274,585
|
|
|
General liability
|
|
527,859
|
|
|
483,291
|
|
|
444,938
|
|
|
Commercial property
|
|
293,438
|
|
|
269,022
|
|
|
244,792
|
|
|
Businessowners’ policies
|
|
97,754
|
|
|
93,428
|
|
|
85,788
|
|
|
Bonds
|
|
23,227
|
|
|
20,350
|
|
|
19,288
|
|
|
Other
|
|
16,030
|
|
|
14,367
|
|
|
13,011
|
|
|
Miscellaneous income
|
|
7,782
|
|
|
6,343
|
|
|
14,747
|
|
|
Total Standard Commercial Lines revenue
|
|
1,673,265
|
|
|
1,535,785
|
|
|
1,430,459
|
|
|
Standard Personal Lines:
|
|
|
|
|
|
|
||||
Net premiums earned:
|
|
|
|
|
|
|
||||
Personal automobile
|
|
142,876
|
|
|
146,784
|
|
|
151,317
|
|
|
Homeowners
|
|
130,973
|
|
|
134,382
|
|
|
134,273
|
|
|
Other
|
|
6,758
|
|
|
6,968
|
|
|
11,157
|
|
|
Miscellaneous income
|
|
1,098
|
|
|
1,113
|
|
|
1,834
|
|
|
Total Standard Personal Lines revenue
|
|
281,705
|
|
|
289,247
|
|
|
298,581
|
|
|
E&S Lines:
|
|
|
|
|
|
|
||||
Net premiums earned:
|
|
|
|
|
|
|
||||
Commercial liability
|
|
151,638
|
|
|
126,064
|
|
|
99,086
|
|
|
Commercial property
|
|
51,844
|
|
|
46,269
|
|
|
41,064
|
|
|
Miscellaneous income
|
|
1
|
|
|
—
|
|
|
17
|
|
|
Total E&S Lines revenue
|
|
203,483
|
|
|
172,333
|
|
|
140,167
|
|
|
Investments:
|
|
|
|
|
|
|
|
|
|
|
Net investment income
|
|
130,754
|
|
|
121,316
|
|
|
138,708
|
|
|
Net realized investment (losses) gains
|
|
(4,937
|
)
|
|
13,171
|
|
|
26,599
|
|
|
Total investment revenues
|
|
125,817
|
|
|
134,487
|
|
|
165,307
|
|
|
Total all segments
|
|
2,284,270
|
|
|
2,131,852
|
|
|
2,034,514
|
|
|
Other income
|
|
—
|
|
|
—
|
|
|
347
|
|
|
Total revenues
|
|
$
|
2,284,270
|
|
|
2,131,852
|
|
|
2,034,861
|
|
Income before Federal Income Tax
|
|
|
|
|
|
|
||||
Years ended December 31,
|
|
|
|
|
|
|
||||
($ in thousands)
|
|
2016
|
|
2015
|
|
2014
|
||||
Standard Commercial Lines:
|
|
|
|
|
|
|
|
|
|
|
Underwriting gain, before federal income tax
|
|
$
|
146,435
|
|
|
164,496
|
|
|
61,221
|
|
GAAP combined ratio
|
|
91.2
|
%
|
|
89.2
|
%
|
|
95.7
|
%
|
|
Statutory combined ratio
|
|
89.9
|
%
|
|
89.2
|
%
|
|
95.5
|
%
|
|
|
|
|
|
|
|
|
||||
Standard Personal Lines:
|
|
|
|
|
|
|
||||
Underwriting gain, before federal income tax
|
|
12,419
|
|
|
1,336
|
|
|
16,536
|
|
|
GAAP combined ratio
|
|
95.6
|
%
|
|
99.5
|
%
|
|
94.4
|
%
|
|
Statutory combined ratio
|
|
95.2
|
%
|
|
99.9
|
%
|
|
94.5
|
%
|
|
|
|
|
|
|
|
|
||||
E&S Lines:
|
|
|
|
|
|
|
||||
Underwriting (loss) gain, before federal income tax
|
|
(6,921
|
)
|
|
(16,803
|
)
|
|
386
|
|
|
GAAP combined ratio
|
|
103.4
|
%
|
|
109.8
|
%
|
|
99.7
|
%
|
|
Statutory combined ratio
|
|
102.1
|
%
|
|
108.4
|
%
|
|
99.2
|
%
|
|
|
|
|
|
|
|
|
||||
Investments:
|
|
|
|
|
|
|
|
|
|
|
Net investment income
|
|
$
|
130,754
|
|
|
121,316
|
|
|
138,708
|
|
Net realized investment (losses) gains
|
|
(4,937
|
)
|
|
13,171
|
|
|
26,599
|
|
|
Total investment income, before federal income tax
|
|
125,817
|
|
|
134,487
|
|
|
165,307
|
|
|
Tax on investment income
|
|
30,621
|
|
|
32,090
|
|
|
43,811
|
|
|
Total investment income, after federal income tax
|
|
$
|
95,196
|
|
|
102,397
|
|
|
121,496
|
|
Reconciliation of Segment Results to Income before Federal Income Tax
|
|
|
|
|
|
|
||||
Years ended December 31,
|
|
|
|
|
|
|
||||
($ in thousands)
|
|
2016
|
|
2015
|
|
2014
|
||||
Underwriting gain (loss), before federal income tax
|
|
|
|
|
|
|
||||
Standard Commercial Lines
|
|
$
|
146,435
|
|
|
164,496
|
|
|
61,221
|
|
Standard Personal Lines
|
|
12,419
|
|
|
1,336
|
|
|
16,536
|
|
|
E&S Lines
|
|
(6,921
|
)
|
|
(16,803
|
)
|
|
386
|
|
|
Investment income, before federal income tax
|
|
125,817
|
|
|
134,487
|
|
|
165,307
|
|
|
Total all segments
|
|
277,750
|
|
|
283,516
|
|
|
243,450
|
|
|
Interest expense
|
|
(22,771
|
)
|
|
(22,428
|
)
|
|
(23,063
|
)
|
|
General corporate and other expenses
|
|
(35,024
|
)
|
|
(28,396
|
)
|
|
(23,256
|
)
|
|
Income, before federal income tax
|
|
$
|
219,955
|
|
|
232,692
|
|
|
197,131
|
|
2016
|
|
Income
|
|
Shares
|
|
Per Share
|
|||||
($ in thousands, except per share amounts)
|
|
(Numerator)
|
|
(Denominator)
|
|
Amount
|
|||||
Basic EPS:
|
|
|
|
|
|
|
|
|
|
||
Net income available to common stockholders
|
|
$
|
158,495
|
|
|
57,889
|
|
|
$
|
2.74
|
|
|
|
|
|
|
|
|
|||||
Effect of dilutive securities:
|
|
|
|
|
|
|
|
|
|
||
Stock compensation plans
|
|
—
|
|
|
858
|
|
|
|
|
||
|
|
|
|
|
|
|
|||||
Diluted EPS:
|
|
|
|
|
|
|
|
|
|
||
Net income available to common stockholders
|
|
$
|
158,495
|
|
|
58,747
|
|
|
$
|
2.70
|
|
2015
|
|
Income
|
|
Shares
|
|
Per Share
|
|||||
($ in thousands, except per share amounts)
|
|
(Numerator)
|
|
(Denominator)
|
|
Amount
|
|||||
Basic EPS:
|
|
|
|
|
|
|
|
|
|
||
Net income available to common stockholders
|
|
$
|
165,861
|
|
|
57,212
|
|
|
$
|
2.90
|
|
|
|
|
|
|
|
|
|||||
Effect of dilutive securities:
|
|
|
|
|
|
|
|
|
|
||
Stock compensation plans
|
|
—
|
|
|
944
|
|
|
|
|
||
|
|
|
|
|
|
|
|||||
Diluted EPS:
|
|
|
|
|
|
|
|
|
|
||
Net income available to common stockholders
|
|
$
|
165,861
|
|
|
58,156
|
|
|
$
|
2.85
|
|
2014
|
|
Income
|
|
Shares
|
|
Per Share
|
|||||
($ in thousands, except per share amounts)
|
|
(Numerator)
|
|
(Denominator)
|
|
Amount
|
|||||
Basic EPS:
|
|
|
|
|
|
|
|
|
|
||
Net income available to common stockholders
|
|
$
|
141,827
|
|
|
56,310
|
|
|
$
|
2.52
|
|
|
|
|
|
|
|
|
|||||
Effect of dilutive securities:
|
|
|
|
|
|
|
|
|
|
||
Stock compensation plans
|
|
—
|
|
|
1,041
|
|
|
|
|
||
|
|
|
|
|
|
|
|||||
Diluted EPS:
|
|
|
|
|
|
|
|
|
|
||
Net income available to common stockholders
|
|
$
|
141,827
|
|
|
57,351
|
|
|
$
|
2.47
|
|
($ in thousands)
|
|
2016
|
|
2015
|
|
2014
|
||||
Tax at statutory rate of 35%
|
|
$
|
76,984
|
|
|
81,442
|
|
|
68,996
|
|
Tax-advantaged interest
|
|
(12,126
|
)
|
|
(13,164
|
)
|
|
(12,926
|
)
|
|
Dividends received deduction
|
|
(1,114
|
)
|
|
(1,817
|
)
|
|
(1,121
|
)
|
|
Other
|
|
(2,284
|
)
|
|
370
|
|
|
355
|
|
|
Federal income tax expense from continuing operations
|
|
$
|
61,460
|
|
|
66,831
|
|
|
55,304
|
|
($ in thousands)
|
|
2016
|
|
2015
|
|||
Deferred tax assets:
|
|
|
|
|
|
|
|
Net loss reserve discounting
|
|
$
|
70,065
|
|
|
74,436
|
|
Net unearned premiums
|
|
78,201
|
|
|
72,057
|
|
|
Employee benefits
|
|
17,881
|
|
|
30,432
|
|
|
Long-term incentive compensation plans
|
|
17,750
|
|
|
15,551
|
|
|
Temporary investment write-downs
|
|
2,475
|
|
|
5,419
|
|
|
Other investment related items, net
|
|
1,484
|
|
|
—
|
|
|
Net operating loss
|
|
771
|
|
|
1,454
|
|
|
Other
|
|
8,344
|
|
|
8,132
|
|
|
Total deferred tax assets
|
|
196,971
|
|
|
207,481
|
|
|
Deferred tax liabilities:
|
|
|
|
|
|
|
|
Deferred policy acquisition costs
|
|
75,310
|
|
|
72,481
|
|
|
Unrealized gains on investment securities
|
|
22,681
|
|
|
24,228
|
|
|
Other investment-related items, net
|
|
—
|
|
|
5,566
|
|
|
Accelerated depreciation and amortization
|
|
14,140
|
|
|
12,510
|
|
|
Total deferred tax liabilities
|
|
112,131
|
|
|
114,785
|
|
|
Net deferred federal income tax asset
|
|
$
|
84,840
|
|
|
92,696
|
|
($ in thousands)
|
|
Gross NOL
|
|
Tax Effected NOL
|
|||
2030
|
|
$
|
2,124
|
|
|
744
|
|
2031
|
|
79
|
|
|
28
|
|
|
Total NOL carryforwards
|
|
$
|
2,203
|
|
|
772
|
|
December 31,
|
|
Pension Plan
|
|||||
($ in thousands)
|
|
2016
|
|
2015
|
|||
Change in Benefit Obligation:
|
|
|
|
|
|
|
|
Benefit obligation, beginning of year
|
|
$
|
310,308
|
|
|
322,271
|
|
Service cost
|
|
1,647
|
|
|
7,215
|
|
|
Interest cost
|
|
12,336
|
|
|
13,668
|
|
|
Actuarial losses (gains)
|
|
15,086
|
|
|
(24,994
|
)
|
|
Benefits paid
|
|
(8,789
|
)
|
|
(7,852
|
)
|
|
Benefit obligation, end of year
|
|
$
|
330,588
|
|
|
310,308
|
|
|
|
|
|
|
|||
Change in Fair Value of Assets:
|
|
|
|
|
|
|
|
Fair value of assets, beginning of year
|
|
$
|
249,700
|
|
|
253,452
|
|
Actual return on plan assets, net of expenses
|
|
21,079
|
|
|
(7,600
|
)
|
|
Contributions by the employer to funded plans
|
|
54,525
|
|
|
11,700
|
|
|
Benefits paid
|
|
(8,789
|
)
|
|
(7,852
|
)
|
|
Fair value of assets, end of year
|
|
$
|
316,515
|
|
|
249,700
|
|
|
|
|
|
|
|||
Funded status
|
|
$
|
(14,073
|
)
|
|
(60,608
|
)
|
Amounts Recognized in the Consolidated Balance Sheet:
|
|
|
|
|
|
|
|
Liabilities
|
|
$
|
(14,073
|
)
|
|
(60,608
|
)
|
Net pension liability, end of year
|
|
$
|
(14,073
|
)
|
|
(60,608
|
)
|
Amounts Recognized in AOCI:
|
|
|
|
|
|
|
|
Net actuarial loss
|
|
$
|
85,845
|
|
|
80,828
|
|
Total
|
|
$
|
85,845
|
|
|
80,828
|
|
Other Information as of December 31:
|
|
|
|
|
|
|
|
Accumulated benefit obligation
|
|
$
|
330,588
|
|
|
310,307
|
|
Weighted-Average Liability Assumptions as of December 31:
|
|
|
|
|
|
Discount rate
|
|
4.41
|
%
|
|
4.69
|
Rate of compensation increase
|
|
—
|
|
|
4.00
|
|
|
Pension Plan
|
||||||||
($ in thousands)
|
|
2016
|
|
2015
|
|
2014
|
||||
Components of Net Periodic Benefit Cost and Other Amounts Recognized in Other Comprehensive Income:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||
Net Periodic Benefit Cost:
|
|
|
|
|
|
|
|
|
|
|
Service cost
|
|
$
|
1,647
|
|
|
7,215
|
|
|
5,763
|
|
Interest cost
|
|
12,336
|
|
|
13,668
|
|
|
12,776
|
|
|
Expected return on plan assets
|
|
(17,309
|
)
|
|
(15,969
|
)
|
|
(15,671
|
)
|
|
Amortization of unrecognized actuarial loss
|
|
6,299
|
|
|
6,831
|
|
|
1,776
|
|
|
Total net periodic cost
|
|
$
|
2,973
|
|
|
11,745
|
|
|
4,644
|
|
|
|
|
|
|
|
|
||||
Other Changes in Plan Assets and Benefit Obligations Recognized in Other Comprehensive Income:
|
|
|
|
|
|
|
|
|
|
|
Net actuarial loss (gain)
|
|
$
|
11,316
|
|
|
(1,425
|
)
|
|
52,556
|
|
Reversal of amortization of net actuarial loss
|
|
(6,299
|
)
|
|
(6,831
|
)
|
|
(1,776
|
)
|
|
Total recognized in other comprehensive income
|
|
$
|
5,017
|
|
|
(8,256
|
)
|
|
50,780
|
|
|
|
|
|
|
|
|
||||
Total recognized in net periodic benefit cost and other comprehensive income
|
|
$
|
7,990
|
|
|
3,489
|
|
|
55,424
|
|
|
|
Pension Plan
|
|||||
|
|
2016
|
|
2015
|
|
2014
|
|
Weighted-Average Expense Assumptions for the years ended December 31:
|
|
|
|
|
|
|
|
Discount rate
|
|
4.69
|
%
|
|
4.29
|
|
5.16
|
Expected return on plan assets
|
|
6.37
|
|
|
6.27
|
|
6.92
|
Rate of compensation increase
1
|
|
—
|
|
|
4.00
|
|
4.00
|
|
|
2016
|
|
2015
|
|||||
|
|
Target Ranges
|
|
Actual Percentage
|
|
Actual Percentage
|
|||
Long duration fixed income
|
|
40%-100%
|
|
|
53
|
%
|
|
60
|
%
|
Global equity
|
|
0%-40%
|
|
|
33
|
%
|
|
36
|
%
|
Alternatives & other return seeking assets
1
|
|
0%-30%
|
|
|
6
|
%
|
|
3
|
%
|
Cash and short-term investments
|
|
0%-5%
|
|
|
8
|
%
|
|
1
|
%
|
Total
|
|
—
|
%
|
|
100
|
%
|
|
100
|
%
|
•
|
Short-term investments are carried at cost, which approximates fair value. Given that these investments are listed on active exchanges, coupled with their liquid nature, these investments are classified as Level 1 in the fair value hierarchy.
|
•
|
The deposit administration contract is carried at cost, which approximates fair value. Given the liquid nature of the underlying investments in overnight cash deposits and other short-term duration products, we have determined that a correlation exists between the deposit administration contract and other short-term investments, such as money market funds. As such, this investment is classified as Level 2 in the fair value hierarchy.
|
•
|
The long-duration fixed income mutual funds utilize a market approach wherein the quoted prices in the active market for identical assets are used. All of the mutual funds are traded in active markets at their net asset value per share. These investments are classified as Level 1 in the fair value hierarchy.
|
•
|
The investments in global equity collective investment funds and in private equity limited partnerships are valued utilizing net asset value as a practical expedient for fair value. These investments are not classified in the fair value hierarchy.
|
|
|||||||||||||
December 31, 2016
|
|
|
|
Fair Value Measurements at 12/31/16 Using
|
|||||||||
($ in thousands)
|
|
Assets Measured at Fair Value At 12/31/16
|
|
Quoted Prices in Active Markets for Identical Assets/ Liabilities
(Level 1)
|
|
Significant Other Observable Inputs
(Level 2)
|
|
Significant Unobservable Inputs
(Level 3)
|
|||||
Description
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Long-duration fixed income:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Global asset allocation fund
|
|
$
|
37,878
|
|
|
37,878
|
|
|
—
|
|
|
—
|
|
Extended duration fixed income
|
|
131,457
|
|
|
131,457
|
|
|
—
|
|
|
—
|
|
|
Total long duration fixed income
|
|
169,335
|
|
|
169,335
|
|
|
—
|
|
|
—
|
|
|
Cash and short-term investments:
|
|
|
|
|
|
|
|
|
|||||
Short-term investments
|
|
23,722
|
|
|
23,722
|
|
|
—
|
|
|
—
|
|
|
Deposit administration contracts
|
|
1,832
|
|
|
—
|
|
|
1,832
|
|
|
—
|
|
|
Total cash and short-term investments
|
|
25,554
|
|
|
23,722
|
|
|
1,832
|
|
|
—
|
|
|
Global equity, at net asset value
1
:
|
|
|
|
|
|
|
|
|
|||||
Non-U.S. equity
|
|
48,836
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
U.S. equity
|
|
55,073
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
Total global equity
|
|
103,909
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
Private equity (limited partnerships, at net asset value)
1
:
|
|
|
|
|
|
|
|
|
|
||||
Real assets
|
|
15,466
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
Private equity
|
|
1,615
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
Private credit
|
|
1,108
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
Total private equity
|
|
18,189
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
Total invested assets
|
|
$
|
316,987
|
|
|
193,057
|
|
|
1,832
|
|
|
—
|
|
December 31, 2015
|
|
|
|
Fair Value Measurements at 12/31/15 Using
|
|||||||||
($ in thousands)
|
|
Assets Measured at Fair Value At 12/31/15
|
|
Quoted Prices in Active Markets for Identical Assets/ Liabilities
(Level 1)
|
|
Significant Other Observable Inputs
(Level 2)
|
|
Significant Unobservable Inputs
(Level 3)
|
|||||
Description
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Long-duration fixed income:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Global asset allocation fund
|
|
$
|
33,565
|
|
|
33,565
|
|
|
—
|
|
|
—
|
|
Extended duration fixed income
|
|
117,297
|
|
|
117,297
|
|
|
—
|
|
|
—
|
|
|
Total long duration fixed income
|
|
150,862
|
|
|
150,862
|
|
|
—
|
|
|
—
|
|
|
Cash and short-term investments:
|
|
|
|
|
|
|
|
|
|||||
Short-term investments
|
|
1,600
|
|
|
1,600
|
|
|
—
|
|
|
—
|
|
|
Deposit administration contracts
|
|
1,418
|
|
|
—
|
|
|
1,418
|
|
|
—
|
|
|
Total cash and short-term investments
|
|
3,018
|
|
|
1,600
|
|
|
1,418
|
|
|
—
|
|
|
Global equity, at net asset value
1
:
|
|
|
|
|
|
|
|
|
|||||
Non-U.S. equity
|
|
42,603
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
U.S. equity
|
|
46,840
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
Total global equity
|
|
89,443
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
Private equity (limited partnerships, at net asset value)
1
:
|
|
|
|
|
|
|
|
|
|
||||
Private equity
|
|
2,626
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
Real assets
|
|
2,514
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
Private credit
|
|
1,318
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
Total private equity
|
|
6,458
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
Total invested assets
|
|
$
|
249,781
|
|
|
152,462
|
|
|
1,418
|
|
|
—
|
|
($ in thousands)
|
|
Pension Plan
|
||
Benefits Expected to be Paid in Future
|
|
|
|
|
Fiscal Years:
|
|
|
|
|
2017
|
|
$
|
10,830
|
|
2018
|
|
12,041
|
|
|
2019
|
|
13,125
|
|
|
2020
|
|
14,184
|
|
|
2021
|
|
15,124
|
|
|
2022-2026
|
|
89,771
|
|
•
|
The 2014 Omnibus Stock Plan (the "Stock Plan");
|
•
|
The Cash Incentive Plan, amended and restated effective as of May 1, 2014 (the "Cash Plan");
|
•
|
The Employee Stock Purchase Plan (2009) ("ESPP"); and
|
•
|
The Amended and Restated Stock Purchase Plan for Independent Insurance Agencies (the "Agent Plan").
|
Plan
|
Approvals
|
Stock Plan
|
Approved effective as of May 1, 2014 by stockholders on April 23, 2014.
|
Cash Plan
|
Approved effective April 1, 2005 by stockholders on April 27, 2005.
Most recently amended and restated plan was approved effective May 1, 2014 by stockholders on April 23, 2014. |
ESPP
|
Approved by stockholders on April 29, 2009 effective July 1, 2009.
|
Agent Plan
|
Approved by stockholders on April 26, 2006.
Most recently amended and restated plan was approved on December 13, 2016 by the Parent's Board of Directors' Salary and Employee Benefits Committee. The amendment was effective February 1, 2017. |
Plan
|
Types of Share-Based Payments Issued
|
Stock Plan
|
Qualified and nonqualified stock options, stock appreciation rights ("SARs"), restricted stock, restricted stock units ("RSUs"), stock grants, and other awards valued in whole or in part by reference to the Parent's common stock. The maximum exercise period for an option grant under this plan is 10 years from the date of the grant. Dividend equivalent units ("DEUs") are earned during the vesting period on RSU grants. The DEUs are reinvested in the Parent's common stock at fair value on each dividend payment date. The requisite service period for grants to employees under this plan is the lesser of: (i) the stated vested date, which is typically three years from issuance; or (ii) the date the employee becomes eligible to retire.
|
Cash Plan
|
Cash incentive units (“CIUs”). The initial dollar value of each CIU will be adjusted to reflect the percentage increase or decrease in the total shareholder return on the Parent's common stock over a specified performance period. In addition, for certain grants, the number of CIUs granted will be increased or decreased to reflect our performance on specified performance indicators as compared to targeted peer companies. The requisite service period for grants under this plan is the lesser of: (i) the stated vested date, which is typically three years from issuance; or (ii) the date the employee becomes eligible to retire.
|
ESPP
|
Enables employees to purchase shares of the Parent’s common stock. The purchase price is the lower of: (i) 85% of the closing market price at the time the option is granted; or (ii) 85% of the closing price at the time the option is exercised. Shares are generally issued on June 30 and December 31 of each year.
|
Agent Plan
|
Quarterly offerings to purchase the Parent's common stock at a 10% discount with a one year restricted period during which the shares purchased cannot be sold or transferred. Only our independent retail insurance agencies and wholesale general agencies, and certain eligible persons associated with the agencies, are eligible to participate in this plan.
|
December 31, 2016
|
Types of Share-Based Payments Issued
|
Reserve Shares
|
Awards Outstanding
1
|
||
Plan
|
|||||
2005 Omnibus Stock Plan ("2005 Stock Plan")
|
Qualified and nonqualified stock options, SARs, restricted stock, RSUs, phantom stock, stock bonuses, and other awards in such amounts and with such terms and conditions as it determined, subject to the provisions of the 2005 Stock Plan. The maximum exercise period for an option grant under this plan is 10 years from the date of the grant. DEUs are earned during the vesting period on RSU grants. The DEUs are reinvested in the Parent's common stock at fair value on each dividend payment date.
|
2,664,594
|
|
726,394
|
|
Parent's Stock Compensation Plan for Non-employee Directors ("Directors Stock Compensation Plan")
|
Directors could elect to receive a portion of their annual compensation in shares of the Parent's common stock.
|
67,242
|
|
67,242
|
|
|
|
Number
of Shares |
|
Weighted
Average Grant Date Fair Value |
|||
Unvested RSU awards at December 31, 2015
|
|
1,018,530
|
|
|
$
|
22.55
|
|
Granted in 2016
|
|
299,670
|
|
|
32.53
|
|
|
Vested in 2016
|
|
(389,245
|
)
|
|
21.56
|
|
|
Forfeited in 2016
|
|
(12,315
|
)
|
|
24.97
|
|
|
Unvested RSU awards at December 31, 2016
|
|
916,640
|
|
|
$
|
26.20
|
|
|
|
Number
of Shares |
|
Weighted
Average Exercise Price |
|
Weighted
Average Remaining Contractual Life in Years |
|
Aggregate
Intrinsic Value ($ in thousands) |
|||||
Outstanding at December 31, 2015
|
|
493,428
|
|
|
$
|
17.84
|
|
|
|
|
|
|
|
Granted in 2016
|
|
—
|
|
|
—
|
|
|
|
|
|
|
||
Exercised in 2016
|
|
(138,037
|
)
|
|
20.33
|
|
|
|
|
|
|
||
Forfeited or expired in 2016
|
|
—
|
|
|
—
|
|
|
|
|
|
|
||
Outstanding at December 31, 2016
|
|
355,391
|
|
|
$
|
16.87
|
|
|
2.14
|
|
$
|
9,304
|
|
Exercisable at December 31, 2016
|
|
355,391
|
|
|
$
|
16.87
|
|
|
2.14
|
|
$
|
9,304
|
|
|
2016
|
2015
|
2014
|
|||
ESPP Issuances
|
88,432
|
|
100,944
|
|
106,832
|
|
Agent Plan Issuances
|
69,867
|
|
82,142
|
|
78,724
|
|
|
|
ESPP
|
|||||
|
|
2016
|
|
2015
|
|
2014
|
|
Risk-free interest rate
|
|
0.47
|
%
|
|
0.10
|
|
0.07
|
Expected term
|
|
6 months
|
|
|
6 months
|
|
6 months
|
Dividend yield
|
|
1.7
|
%
|
|
2.0
|
|
2.0
|
Expected volatility
|
|
31
|
%
|
|
20
|
|
21
|
|
|
2016
|
|
2015
|
|
2014
|
||||
RSUs
|
|
$
|
32.53
|
|
|
25.22
|
|
|
21.58
|
|
ESPP:
|
|
|
|
|
|
|
|
|
||
Six month option
|
|
2.63
|
|
|
1.26
|
|
|
1.24
|
|
|
Discount of grant date market value
|
|
5.23
|
|
|
4.16
|
|
|
3.87
|
|
|
Total ESPP
|
|
7.86
|
|
|
5.42
|
|
|
5.11
|
|
|
Agent Plan:
|
|
|
|
|
|
|
|
|
|
|
Discount of grant date market value
|
|
3.79
|
|
|
2.94
|
|
|
2.42
|
|
($ in millions)
|
2016
|
|
2015
|
|
2014
|
||||
Share-based compensation expense, pre-tax
|
$
|
30.3
|
|
|
23.8
|
|
|
18.6
|
|
Income tax benefit
|
(10.3
|
)
|
|
(8.0
|
)
|
|
(6.2
|
)
|
|
Share-based compensation expense, after-tax
|
$
|
20.0
|
|
|
15.8
|
|
|
12.4
|
|
($ in millions)
|
|
Capital Leases
|
Operating Leases
|
Total
|
||||
2017
|
|
$
|
4.0
|
|
9.1
|
|
13.1
|
|
2018
|
|
2.2
|
|
7.7
|
|
9.9
|
|
|
2019
|
|
0.1
|
|
5.6
|
|
5.7
|
|
|
2020
|
|
—
|
|
4.4
|
|
4.4
|
|
|
2021
|
|
—
|
|
2.9
|
|
2.9
|
|
|
After 2021
|
|
—
|
|
4.7
|
|
4.7
|
|
|
Total minimum payment required
|
|
$
|
6.3
|
|
34.4
|
|
40.7
|
|
|
|
State of Domicile
|
|
Unassigned Surplus
|
|
Statutory Surplus
|
|
Statutory Net Income
|
||||||||||||||||
($ in millions)
|
|
|
|
2016
|
|
2015
|
|
2016
|
|
2015
|
|
2016
|
|
2015
|
|
2014
|
||||||||
SICA
|
|
New Jersey
|
|
$
|
414.4
|
|
|
366.6
|
|
|
568.6
|
|
|
520.8
|
|
|
72.2
|
|
|
69.6
|
|
|
83.9
|
|
Selective Way Insurance Company ("SWIC")
|
|
New Jersey
|
|
260.5
|
|
|
223.6
|
|
|
309.5
|
|
|
272.6
|
|
|
41.2
|
|
|
42.3
|
|
|
37.0
|
|
|
SICSC
|
|
Indiana
|
|
110.6
|
|
|
96.6
|
|
|
141.9
|
|
|
127.9
|
|
|
17.4
|
|
|
15.9
|
|
|
14.0
|
|
|
SICSE
|
|
Indiana
|
|
83.5
|
|
|
70.7
|
|
|
109.1
|
|
|
96.2
|
|
|
13.4
|
|
|
12.1
|
|
|
10.5
|
|
|
SICNY
|
|
New York
|
|
74.1
|
|
|
65.3
|
|
|
101.8
|
|
|
93.0
|
|
|
12.9
|
|
|
12.7
|
|
|
10.3
|
|
|
Selective Insurance Company of New England ("SICNE")
|
|
New Jersey
|
|
13.6
|
|
|
9.2
|
|
|
43.7
|
|
|
39.4
|
|
|
5.9
|
|
|
5.5
|
|
|
4.4
|
|
|
Selective Auto Insurance Company of New Jersey ("SAICNJ")
|
|
New Jersey
|
|
36.9
|
|
|
26.4
|
|
|
79.8
|
|
|
69.2
|
|
|
11.5
|
|
|
10.8
|
|
|
9.1
|
|
|
MUSIC
|
|
New Jersey
|
|
16.7
|
|
|
7.0
|
|
|
85.2
|
|
|
75.5
|
|
|
9.7
|
|
|
9.5
|
|
|
7.3
|
|
|
Selective Casualty Insurance Company ("SCIC")
|
|
New Jersey
|
|
26.6
|
|
|
17.8
|
|
|
101.0
|
|
|
92.3
|
|
|
12.6
|
|
|
12.1
|
|
|
9.6
|
|
|
Selective Fire and Casualty Insurance Company ("SFCIC")
|
|
New Jersey
|
|
11.3
|
|
|
7.5
|
|
|
43.2
|
|
|
39.4
|
|
|
5.5
|
|
|
5.3
|
|
|
4.2
|
|
|
Total
|
|
|
|
$
|
1,048.2
|
|
|
890.7
|
|
|
1,583.8
|
|
|
1,426.3
|
|
|
202.3
|
|
|
195.8
|
|
|
190.3
|
|
Dividends
|
|
|
|
Twelve Months ended December 31, 2016
|
||
($ in millions)
|
|
State of Domicile
|
|
Ordinary Dividends Paid
|
||
SICA
|
|
New Jersey
|
|
$
|
26.0
|
|
SWIC
|
|
New Jersey
|
|
12.0
|
|
|
SICSC
|
|
Indiana
|
|
5.0
|
|
|
SICSE
|
|
Indiana
|
|
2.0
|
|
|
SICNY
|
|
New York
|
|
5.0
|
|
|
SICNE
|
|
New Jersey
|
|
2.0
|
|
|
SAICNJ
|
|
New Jersey
|
|
1.5
|
|
|
SCIC
|
|
New Jersey
|
|
5.5
|
|
|
SFCIC
|
|
New Jersey
|
|
2.0
|
|
|
Total
|
|
|
|
$
|
61.0
|
|
(unaudited, $ in thousands,
|
|
First Quarter
|
|
Second Quarter
|
|
Third Quarter
|
|
Fourth Quarter
|
|||||||||||||||||
except per share data)
|
|
2016
|
|
2015
|
|
2016
|
|
2015
|
|
2016
|
|
2015
|
|
2016
|
|
2015
|
|||||||||
Net premiums earned
|
|
$
|
522,458
|
|
|
476,123
|
|
|
531,932
|
|
|
490,309
|
|
|
542,429
|
|
|
507,390
|
|
|
552,753
|
|
|
516,087
|
|
Net investment income earned
|
|
30,769
|
|
|
26,917
|
|
|
31,182
|
|
|
32,230
|
|
|
33,375
|
|
|
32,061
|
|
|
35,428
|
|
|
30,108
|
|
|
Net realized (losses) gains
|
|
(2,704
|
)
|
|
18,883
|
|
|
1,765
|
|
|
(3,420
|
)
|
|
3,688
|
|
|
308
|
|
|
(7,686
|
)
|
|
(2,600
|
)
|
|
Underwriting income
|
|
40,955
|
|
|
26,021
|
|
|
43,777
|
|
|
29,124
|
|
|
32,033
|
|
|
44,831
|
|
|
35,168
|
|
|
49,053
|
|
|
Net income
|
|
37,032
|
|
|
39,708
|
|
|
43,601
|
|
|
33,768
|
|
|
38,502
|
|
|
46,996
|
|
|
39,360
|
|
|
45,389
|
|
|
Other comprehensive income (loss)
|
|
45,422
|
|
|
3,827
|
|
|
36,010
|
|
|
(35,944
|
)
|
|
(9,798
|
)
|
|
6,290
|
|
|
(78,159
|
)
|
|
(3,386
|
)
|
|
Comprehensive income (loss)
|
|
82,454
|
|
|
43,535
|
|
|
79,611
|
|
|
(2,176
|
)
|
|
28,704
|
|
|
53,286
|
|
|
(38,799
|
)
|
|
42,003
|
|
|
Net income per share:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic
|
|
0.64
|
|
|
0.70
|
|
|
0.75
|
|
|
0.59
|
|
|
0.66
|
|
|
0.82
|
|
|
0.68
|
|
|
0.79
|
|
|
Diluted
|
|
0.63
|
|
|
0.69
|
|
|
0.74
|
|
|
0.58
|
|
|
0.66
|
|
|
0.81
|
|
|
0.67
|
|
|
0.78
|
|
|
Dividends to stockholders
1
|
|
0.15
|
|
|
0.14
|
|
|
0.15
|
|
|
0.14
|
|
|
0.15
|
|
|
0.14
|
|
|
0.16
|
|
|
0.15
|
|
|
Price range of common stock:
2
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||
High
|
|
36.92
|
|
|
30.10
|
|
|
38.67
|
|
|
29.60
|
|
|
41.30
|
|
|
32.50
|
|
|
44.00
|
|
|
37.91
|
|
|
Low
|
|
29.27
|
|
|
25.49
|
|
|
33.60
|
|
|
26.28
|
|
|
35.90
|
|
|
28.10
|
|
|
34.95
|
|
|
30.36
|
|
•
|
Pertain to the maintenance of records that in reasonable detail accurately and fairly reflect the transactions and dispositions of the assets of the company;
|
•
|
Provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and that receipts and expenditures of the company are being made only in accordance with authorizations of management and directors of the company; and
|
•
|
Provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use, or disposition of the company's assets that could have a material effect on the financial statements.
|
|
Form 10-K
|
|
Page
|
Consolidated Balance Sheets as of December 31, 2016 and 2015
|
|
|
|
Consolidated Statements of Income for the Years Ended December 31, 2016, 2015, and 2014
|
|
|
|
Consolidated Statements of Comprehensive Income for the Years Ended December 31, 2016, 2015, and 2014
|
|
|
|
Consolidated Statements of Stockholders' Equity for the Years Ended December 31, 2016, 2015, and 2014
|
|
|
|
Consolidated Statements of Cash Flows for the Years Ended December 31, 2016, 2015, and 2014
|
|
|
|
Notes to Consolidated Financial Statements, December 31, 2016, 2015, and 2014
|
|
|
Form 10-K
|
|
|
Page
|
Schedule I
|
Summary of Investments – Other than Investments in Related Parties at December 31, 2016
|
|
|
|
|
Schedule II
|
Condensed Financial Information of Registrant at December 31, 2016 and 2015 and for the Years Ended December 31, 2016, 2015, and 2014
|
|
|
|
|
Schedule III
|
Supplementary Insurance Information for the Years Ended December 31, 2016, 2015, and 2014
|
|
|
|
|
Schedule IV
|
Reinsurance for the Years Ended December 31, 2016, 2015, and 2014
|
|
|
|
|
Schedule V
|
Allowance for Uncollectible Premiums and Other Receivables for the Years Ended December 31, 2016, 2015, and 2014
|
SELECTIVE INSURANCE GROUP, INC.
|
|
|
|
|
|
By: /s/ Gregory E. Murphy
|
|
February 21, 2017
|
Gregory E. Murphy
|
|
|
Chairman of the Board and Chief Executive Officer
|
|
|
|
|
|
By: /s/ Mark A. Wilcox
|
|
February 21, 2017
|
Mark A. Wilcox
|
|
|
Executive Vice President and Chief Financial Officer
|
|
|
(principal financial officer)
|
|
|
|
|
|
By: /s/ Anthony D. Harnett
|
|
February 21, 2017
|
Anthony D. Harnett
|
|
|
Senior Vice President and Chief Accounting Officer
|
|
|
(principal accounting officer)
|
|
By: /s/ Gregory E. Murphy
|
|
February 21, 2017
|
Gregory E. Murphy
|
|
|
Chairman of the Board and Chief Executive Officer
|
|
|
|
|
|
*
|
|
February 21, 2017
|
Paul D. Bauer
|
|
|
Director
|
|
|
|
|
|
*
|
|
February 21, 2017
|
A. David Brown
|
|
|
Director
|
|
|
|
|
|
*
|
|
February 21, 2017
|
John C. Burville
|
|
|
Director
|
|
|
|
|
|
*
|
|
February 21, 2017
|
Robert Kelly Doherty
|
|
|
Director
|
|
|
|
|
|
*
|
|
February 21, 2017
|
Michael J. Morrissey
|
|
|
Director
|
|
|
|
|
|
*
|
|
February 21, 2017
|
Cynthia S. Nicholson
|
|
|
Director
|
|
|
|
|
|
*
|
|
February 21, 2017
|
Ronald L. O’Kelley
|
|
|
Director
|
|
*
|
|
February 21, 2017
|
William M. Rue
|
|
|
Director
|
|
|
|
|
|
*
|
|
February 21, 2017
|
John S. Scheid
|
|
|
Director
|
|
|
|
|
|
*
|
|
February 21, 2017
|
J. Brian Thebault
|
|
|
Director
|
|
|
|
|
|
*
|
|
February 21, 2017
|
Philip H. Urban
|
|
|
Director
|
|
|
|
|
|
* By: /s/ Michael H. Lanza
|
|
February 21, 2017
|
Michael H. Lanza
|
|
|
Attorney-in-fact
|
|
Types of investment
|
|
|
|
|
|
|
||||
($ in thousands)
|
|
Amortized Cost or Cost
|
|
Fair Value
|
|
Carrying Amount
|
||||
Fixed income securities:
|
|
|
|
|
|
|
|
|
|
|
Held-to-maturity:
|
|
|
|
|
|
|
|
|
|
|
Obligations of states and political subdivisions
|
|
$
|
77,466
|
|
|
79,916
|
|
|
77,783
|
|
Public utilities
|
|
8,589
|
|
|
9,292
|
|
|
8,579
|
|
|
All other corporate securities
|
|
14,122
|
|
|
14,783
|
|
|
13,989
|
|
|
Commercial mortgage-backed securities
|
|
1,220
|
|
|
1,220
|
|
|
1,205
|
|
|
Total fixed income securities, held-to-maturity
|
|
101,397
|
|
|
105,211
|
|
|
101,556
|
|
|
|
|
|
|
|
|
|
||||
Available-for-sale:
|
|
|
|
|
|
|
|
|
|
|
U.S. government and government agencies
|
|
75,139
|
|
|
77,333
|
|
|
77,333
|
|
|
Foreign government
|
|
26,559
|
|
|
26,865
|
|
|
26,865
|
|
|
Obligations of states and political subdivisions
|
|
1,366,287
|
|
|
1,379,593
|
|
|
1,379,593
|
|
|
Public utilities
|
|
108,664
|
|
|
110,000
|
|
|
110,000
|
|
|
All other corporate securities
|
|
1,867,892
|
|
|
1,887,753
|
|
|
1,887,753
|
|
|
Collateralized loan obligation securities and other asset-backed securities
|
|
527,876
|
|
|
528,960
|
|
|
528,960
|
|
|
Commercial mortgage-backed securities
|
|
256,356
|
|
|
256,842
|
|
|
256,842
|
|
|
Residential mortgage-backed securities
|
|
524,986
|
|
|
525,194
|
|
|
525,194
|
|
|
Total fixed income securities, available-for-sale
|
|
4,753,759
|
|
|
4,792,540
|
|
|
4,792,540
|
|
|
|
|
|
|
|
|
|
||||
Equity securities:
|
|
|
|
|
|
|
|
|
|
|
Common stock:
|
|
|
|
|
|
|
|
|
|
|
Banks, trusts and insurance companies
|
|
14,056
|
|
|
17,648
|
|
|
17,648
|
|
|
Industrial, miscellaneous and all other
|
|
90,607
|
|
|
112,960
|
|
|
112,960
|
|
|
Total common stock, available-for-sale
|
|
104,663
|
|
|
130,608
|
|
|
130,608
|
|
|
|
|
|
|
|
|
|
||||
Preferred stock:
|
|
|
|
|
|
|
||||
Banks, trusts and insurance companies
|
|
16,226
|
|
|
16,145
|
|
|
16,145
|
|
|
Total preferred stock, available-for-sale
|
|
16,226
|
|
|
16,145
|
|
|
16,145
|
|
|
Total equity securities, available-for-sale
|
|
120,889
|
|
|
146,753
|
|
|
146,753
|
|
|
Short-term investments
|
|
221,701
|
|
|
221,701
|
|
|
221,701
|
|
|
Other investments
|
|
102,397
|
|
|
|
|
|
102,397
|
|
|
Total investments
|
|
$
|
5,300,143
|
|
|
|
|
|
5,364,947
|
|
|
|
December 31,
|
|||||
($ in thousands, except share amounts)
|
|
2016
|
|
2015
|
|||
Assets:
|
|
|
|
|
|
|
|
Fixed income securities, available-for-sale – at fair value (amortized cost: $73,471 – 2016; $61,794 – 2015)
|
|
$
|
73,509
|
|
|
61,567
|
|
Short-term investments
|
|
17,777
|
|
|
29,116
|
|
|
Cash
|
|
458
|
|
|
898
|
|
|
Investment in subsidiaries
|
|
1,845,410
|
|
|
1,716,681
|
|
|
Current federal income tax
|
|
19,766
|
|
|
18,297
|
|
|
Deferred federal income tax
|
|
19,562
|
|
|
17,513
|
|
|
Other assets
|
|
840
|
|
|
670
|
|
|
Total assets
|
|
$
|
1,977,322
|
|
|
1,844,742
|
|
|
|
|
|
|
|
|
|
Liabilities:
|
|
|
|
|
|
|
|
Long-term debt
|
|
$
|
328,667
|
|
|
328,192
|
|
Intercompany notes payable
|
|
79,324
|
|
|
86,163
|
|
|
Accrued long-term stock compensation
|
|
32,029
|
|
|
26,465
|
|
|
Other liabilities
|
|
5,932
|
|
|
5,881
|
|
|
Total liabilities
|
|
$
|
445,952
|
|
|
446,701
|
|
|
|
|
|
|
|||
Stockholders’ Equity:
|
|
|
|
|
|
|
|
Preferred stock at $0 par value per share:
|
|
|
|
|
|
|
|
Authorized shares 5,000,000; no shares issued or outstanding
|
|
$
|
—
|
|
|
—
|
|
Common stock of $2 par value per share:
|
|
|
|
|
|
|
|
Authorized shares: 360,000,000
|
|
|
|
|
|||
Issued: 101,620,436 – 2016; 100,861,372 – 2015
|
|
203,241
|
|
|
201,723
|
|
|
Additional paid-in capital
|
|
347,295
|
|
|
326,656
|
|
|
Retained earnings
|
|
1,568,881
|
|
|
1,446,192
|
|
|
Accumulated other comprehensive loss
|
|
(15,950
|
)
|
|
(9,425
|
)
|
|
Treasury stock – at cost (shares: 43,653,237 – 2016; 43,500,642 – 2015)
|
|
(572,097
|
)
|
|
(567,105
|
)
|
|
Total stockholders’ equity
|
|
1,531,370
|
|
|
1,398,041
|
|
|
Total liabilities and stockholders’ equity
|
|
$
|
1,977,322
|
|
|
1,844,742
|
|
|
|
Year ended December 31,
|
||||||||
($ in thousands)
|
|
2016
|
|
2015
|
|
2014
|
||||
Revenues:
|
|
|
|
|
|
|
|
|
|
|
Dividends from subsidiaries
|
|
$
|
61,014
|
|
|
57,752
|
|
|
57,511
|
|
Net investment income earned
|
|
1,259
|
|
|
852
|
|
|
620
|
|
|
Net realized (losses) gains
|
|
(220
|
)
|
|
—
|
|
|
2
|
|
|
Other income
|
|
—
|
|
|
—
|
|
|
340
|
|
|
Total revenues
|
|
62,053
|
|
|
58,604
|
|
|
58,473
|
|
|
|
|
|
|
|
|
|
||||
Expenses:
|
|
|
|
|
|
|
|
|
|
|
Interest expense
|
|
24,030
|
|
|
24,057
|
|
|
24,817
|
|
|
Other expenses
|
|
35,020
|
|
|
28,393
|
|
|
23,598
|
|
|
Total expenses
|
|
59,050
|
|
|
52,450
|
|
|
48,415
|
|
|
|
|
|
|
|
|
|
||||
Income before federal income tax
|
|
3,003
|
|
|
6,154
|
|
|
10,058
|
|
|
|
|
|
|
|
|
|
||||
Federal income tax benefit:
|
|
|
|
|
|
|
|
|
|
|
Current
|
|
(17,924
|
)
|
|
(16,609
|
)
|
|
(15,920
|
)
|
|
Deferred
|
|
(2,143
|
)
|
|
(1,603
|
)
|
|
(646
|
)
|
|
Total federal income tax benefit
|
|
(20,067
|
)
|
|
(18,212
|
)
|
|
(16,566
|
)
|
|
|
|
|
|
|
|
|
||||
Net income before equity in undistributed income of subsidiaries
|
|
23,070
|
|
|
24,366
|
|
|
26,624
|
|
|
|
|
|
|
|
|
|
||||
Equity in undistributed income of subsidiaries, net of tax
|
|
135,425
|
|
|
141,495
|
|
|
115,203
|
|
|
|
|
|
|
|
|
|
||||
Net income
|
|
$
|
158,495
|
|
|
165,861
|
|
|
141,827
|
|
|
|
Year ended December 31,
|
||||||||
($ in thousands)
|
|
2016
|
|
2015
|
|
2014
|
||||
Operating Activities:
|
|
|
|
|
|
|
|
|
|
|
Net income
|
|
$
|
158,495
|
|
|
165,861
|
|
|
141,827
|
|
|
|
|
|
|
|
|
||||
Adjustments to reconcile net income to net cash provided by operating activities:
|
|
|
|
|
|
|
|
|
|
|
Equity in undistributed income of subsidiaries, net of tax
|
|
(135,425
|
)
|
|
(141,495
|
)
|
|
(115,203
|
)
|
|
Stock-based compensation expense
|
|
10,449
|
|
|
8,973
|
|
|
8,702
|
|
|
Net realized losses (gains)
|
|
220
|
|
|
—
|
|
|
(2
|
)
|
|
Amortization – other
|
|
648
|
|
|
740
|
|
|
1,421
|
|
|
|
|
|
|
|
|
|
||||
Changes in assets and liabilities:
|
|
|
|
|
|
|
|
|
|
|
Increase in accrued long-term stock compensation
|
|
5,564
|
|
|
4,575
|
|
|
1,062
|
|
|
(Increase) decrease in net federal income taxes
|
|
(3,612
|
)
|
|
(3,052
|
)
|
|
10,977
|
|
|
(Decrease) increase in other assets
|
|
(202
|
)
|
|
(12
|
)
|
|
1,165
|
|
|
Increase (decrease) in other liabilities
|
|
80
|
|
|
(202
|
)
|
|
(120
|
)
|
|
Net cash provided by operating activities
|
|
36,217
|
|
|
35,388
|
|
|
49,829
|
|
|
|
|
|
|
|
|
|
||||
Investing Activities:
|
|
|
|
|
|
|
|
|
|
|
Purchase of fixed income securities, available-for-sale
|
|
(45,789
|
)
|
|
(33,717
|
)
|
|
(18,511
|
)
|
|
Redemption and maturities of fixed income securities, available-for-sale
|
|
14,983
|
|
|
21,578
|
|
|
23,210
|
|
|
Sale of fixed income securities, available-for-sale
|
|
18,768
|
|
|
—
|
|
|
300
|
|
|
Purchase of short-term investments
|
|
(119,501
|
)
|
|
(106,933
|
)
|
|
(102,717
|
)
|
|
Sale of short-term investments
|
|
130,841
|
|
|
94,422
|
|
|
101,510
|
|
|
Net cash (used in) provided by investing activities
|
|
(698
|
)
|
|
(24,650
|
)
|
|
3,792
|
|
|
|
|
|
|
|
|
|
||||
Financing Activities:
|
|
|
|
|
|
|
|
|
|
|
Dividends to stockholders
|
|
(33,758
|
)
|
|
(31,052
|
)
|
|
(28,428
|
)
|
|
Acquisition of treasury stock
|
|
(4,992
|
)
|
|
(4,182
|
)
|
|
(3,563
|
)
|
|
Net proceeds from stock purchase and compensation plans
|
|
7,811
|
|
|
10,089
|
|
|
7,283
|
|
|
Excess tax benefits from share-based payment arrangements
|
|
1,819
|
|
|
1,736
|
|
|
1,020
|
|
|
Principal payment on borrowings from subsidiaries
|
|
(6,839
|
)
|
|
(2,798
|
)
|
|
(13,759
|
)
|
|
Net cash used in financing activities
|
|
(35,959
|
)
|
|
(26,207
|
)
|
|
(37,447
|
)
|
|
|
|
|
|
|
|
|
||||
Net (decrease) increase in cash
|
|
(440
|
)
|
|
(15,469
|
)
|
|
16,174
|
|
|
Cash, beginning of year
|
|
898
|
|
|
16,367
|
|
|
193
|
|
|
Cash, end of year
|
|
$
|
458
|
|
|
898
|
|
|
16,367
|
|
($ in thousands)
|
|
Deferred
policy
acquisition costs
|
|
Reserve
for losses
and loss expenses
|
|
Unearned premiums
|
|
Net
premiums earned
|
|
Net
investment income
1
|
|
Losses
and loss
expenses incurred
|
|
Amortization
of deferred
policy
acquisition costs
2
|
|
Other
operating expenses
3
|
|
Net
premiums written
|
||||||||||
Standard Commercial Lines Segment
|
|
$
|
181,193
|
|
|
3,098,554
|
|
|
884,976
|
|
|
1,665,483
|
|
|
—
|
|
|
913,506
|
|
|
367,813
|
|
|
237,730
|
|
|
1,745,782
|
|
Standard Personal Lines Segment
|
|
16,664
|
|
|
286,081
|
|
|
282,111
|
|
|
280,607
|
|
|
—
|
|
|
177,749
|
|
|
34,105
|
|
|
56,334
|
|
|
281,822
|
|
|
E&S Lines Segment
|
|
24,707
|
|
|
307,084
|
|
|
95,732
|
|
|
203,482
|
|
|
—
|
|
|
143,542
|
|
|
48,410
|
|
|
18,451
|
|
|
209,684
|
|
|
Investments Segment
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
125,817
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
Total
|
|
$
|
222,564
|
|
|
3,691,719
|
|
|
1,262,819
|
|
|
2,149,572
|
|
|
125,817
|
|
|
1,234,797
|
|
|
450,328
|
|
|
312,515
|
|
|
2,237,288
|
|
Policy acquisition costs
|
$
|
763,758
|
|
Other income
3
|
(8,881
|
)
|
|
Other expenses
3
|
7,966
|
|
|
Total
|
$
|
762,843
|
|
($ in thousands)
|
|
Deferred
policy
acquisition costs
|
|
Reserve
for losses
and loss expenses
|
|
Unearned premiums
|
|
Net
premiums earned
|
|
Net
investment income
1
|
|
Losses
and loss
expenses incurred
|
|
Amortization
of deferred
policy
acquisition costs
2
|
|
Other
operating expenses
3
|
|
Net
premiums written
|
||||||||||
Standard Commercial Lines Segment
|
|
$
|
171,476
|
|
|
2,998,749
|
|
|
803,648
|
|
|
1,529,442
|
|
|
—
|
|
|
819,573
|
|
|
323,753
|
|
|
221,620
|
|
|
1,596,965
|
|
Standard Personal Lines Segment
|
|
17,258
|
|
|
265,054
|
|
|
276,533
|
|
|
288,134
|
|
|
—
|
|
|
200,237
|
|
|
33,638
|
|
|
52,923
|
|
|
283,926
|
|
|
E&S Lines Segment
|
|
24,425
|
|
|
253,925
|
|
|
89,529
|
|
|
172,333
|
|
|
—
|
|
|
128,731
|
|
|
42,044
|
|
|
18,361
|
|
|
189,013
|
|
|
Investments Segment
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
134,487
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
Total
|
|
$
|
213,159
|
|
|
3,517,728
|
|
|
1,169,710
|
|
|
1,989,909
|
|
|
134,487
|
|
|
1,148,541
|
|
|
399,435
|
|
|
292,904
|
|
|
2,069,904
|
|
Policy acquisition costs
|
$
|
689,820
|
|
Other income
3
|
(7,456
|
)
|
|
Other expenses
3
|
9,975
|
|
|
Total
|
$
|
692,339
|
|
($ in thousands)
|
|
Deferred
policy
acquisition costs
|
|
Reserve
for losses and loss expenses
|
|
Unearned premiums
|
|
Net
premiums earned
|
|
Net
investment income
1
|
|
Losses
and loss
expenses incurred
|
|
Amortization
of deferred
policy
acquisition costs
2
|
|
Other
operating expenses
3
|
|
Net
premiums written
|
||||||||||
Standard Commercial Lines Segment
|
|
$
|
147,285
|
|
|
3,000,796
|
|
|
734,697
|
|
|
1,415,712
|
|
|
—
|
|
|
870,018
|
|
|
295,774
|
|
|
188,699
|
|
|
1,441,047
|
|
Standard Personal Lines Segment
|
|
17,495
|
|
|
279,761
|
|
|
285,777
|
|
|
296,747
|
|
|
—
|
|
|
197,182
|
|
|
34,851
|
|
|
48,178
|
|
|
292,061
|
|
|
E&S Lines Segment
|
|
20,828
|
|
|
197,313
|
|
|
75,345
|
|
|
140,150
|
|
|
—
|
|
|
90,301
|
|
|
33,670
|
|
|
15,793
|
|
|
152,172
|
|
|
Investments Segment
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
165,307
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
Total
|
|
$
|
185,608
|
|
|
3,477,870
|
|
|
1,095,819
|
|
|
1,852,609
|
|
|
165,307
|
|
|
1,157,501
|
|
|
364,295
|
|
|
252,670
|
|
|
1,885,280
|
|
Policy acquisition costs
|
$
|
624,470
|
|
Other income
3
|
(16,598
|
)
|
|
Other expenses
3
|
9,093
|
|
|
Total
|
$
|
616,965
|
|
($ thousands)
|
|
Direct Amount
|
|
Assumed From Other Companies
|
|
Ceded to Other Companies
|
|
Net Amount
|
|
% of Amount Assumed To Net
|
||||||
2016
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Premiums earned:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Accident and health insurance
|
|
$
|
32
|
|
|
—
|
|
|
—
|
|
|
32
|
|
|
—
|
|
Property and liability insurance
|
|
2,484,683
|
|
|
28,214
|
|
|
363,357
|
|
|
2,149,540
|
|
|
1
|
%
|
|
Total premiums earned
|
|
2,484,715
|
|
|
28,214
|
|
|
363,357
|
|
|
2,149,572
|
|
|
1
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||
2015
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Premiums earned:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Accident and health insurance
|
|
$
|
37
|
|
|
—
|
|
|
37
|
|
|
—
|
|
|
—
|
|
Property and liability insurance
|
|
2,330,230
|
|
|
23,209
|
|
|
363,530
|
|
|
1,989,909
|
|
|
1
|
%
|
|
Total premiums earned
|
|
2,330,267
|
|
|
23,209
|
|
|
363,567
|
|
|
1,989,909
|
|
|
1
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||
2014
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Premiums earned:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Accident and health insurance
|
|
$
|
44
|
|
|
—
|
|
|
44
|
|
|
—
|
|
|
—
|
|
Property and liability insurance
|
|
2,183,214
|
|
|
34,653
|
|
|
365,258
|
|
|
1,852,609
|
|
|
2
|
%
|
|
Total premiums earned
|
|
2,183,258
|
|
|
34,653
|
|
|
365,302
|
|
|
1,852,609
|
|
|
2
|
%
|
($ in thousands)
|
|
2016
|
|
2015
|
|
2014
|
||||
Balance, January 1
|
|
$
|
10,122
|
|
|
11,037
|
|
|
9,542
|
|
Additions
|
|
4,669
|
|
|
3,604
|
|
|
4,617
|
|
|
Deductions
|
|
(3,311
|
)
|
|
(4,519
|
)
|
|
(3,122
|
)
|
|
Balance, December 31
|
|
$
|
11,480
|
|
|
10,122
|
|
|
11,037
|
|
Exhibit
|
|
|
Number
|
|
|
3.1
|
|
Amended and Restated Certificate of Incorporation of Selective Insurance Group, Inc., filed May 4, 2010 (incorporated by reference herein to Exhibit 3.1 of the Company’s Quarterly Report on Form 10-Q for the quarter ended June 30, 2010, File No. 001-33067).
|
|
|
|
3.2
|
|
By-Laws of Selective Insurance Group, Inc., effective July 29, 2015 (incorporated by reference herein to Exhibit 3.2 of the Company's Quarterly Report on Form 10-Q for the quarter ended June 30, 2015, File No. 001-33067).
|
|
|
|
4.1
|
|
Indenture, dated as of September 24, 2002, between Selective Insurance Group, Inc. and National City Bank, as Trustee, relating to the Company's 1.6155% Senior Convertible Notes due September 24, 2032 (incorporated by reference herein to Exhibit 4.1 of the Company's Registration Statement on Form S-3 No. 333-101489).
|
|
|
|
4.2
|
|
Indenture, dated as of November 16, 2004, between Selective Insurance Group, Inc. and Wachovia Bank, National Association, as Trustee, relating to the Company's 7.25% Senior Notes due 2034 (incorporated by reference herein to Exhibit 4.1 of the Company's Current Report on Form 8-K filed November 18, 2004, File No. 000-08641).
|
|
|
|
4.3
|
|
Indenture, dated as of November 3, 2005, between Selective Insurance Group, Inc. and Wachovia Bank, National Association, as Trustee, relating to the Company’s 6.70% Senior Notes due 2035 (incorporated by reference herein to Exhibit 4.1 of the Company’s Current Report on Form 8-K filed November 9, 2005, File No. 000-08641).
|
|
|
|
4.4
|
|
Registration Rights Agreement, dated as of November 16, 2004, between Selective Insurance Group, Inc. and Keefe, Bruyette & Woods, Inc. (incorporated by reference herein to Exhibit 4.2 of the Company’s Current Report on Form 8-K filed November 18, 2004, File No. 000-08641).
|
|
|
|
4.5
|
|
Registration Rights Agreement, dated as of November 3, 2005, between Selective Insurance Group, Inc. and Keefe, Bruyette & Woods, Inc. (incorporated by reference herein to Exhibit 4.2 of the Company’s Current Report on Form 8-K filed November 9, 2005, File No. 000-08641).
|
|
|
|
4.6
|
|
Indenture, dated as of February 8, 2013, between Selective Insurance Group, Inc. and U.S. Bank National Association, as Trustee (incorporated by reference herein to Exhibit 4.1 of the Company's Current Report on Form 8-K filed February 8, 2013, File No. 001-33067).
|
|
|
|
4.7
|
|
First Supplemental Indenture, dated as of February 8, 2013, between Selective Insurance Group, Inc. and U.S. Bank National Association, as Trustee, relating to the Company’s 5.875% Senior Notes due 2043 (incorporated by reference herein to Exhibit 4.2 of the Company’s Current Report on Form 8-K filed February 8, 2013, File No. 001-33067).
|
|
|
|
10.1+
|
|
Selective Insurance Supplemental Pension Plan, As Amended and Restated Effective January 1, 2005 (incorporated by reference herein to Exhibit 10.1 of the Company’s Quarterly Report on Form 10-Q for the quarter ended September 30, 2008, File No. 001-33067).
|
|
|
|
10.1a+
|
|
Amendment No. 1 to Selective Insurance Supplemental Pension Plan, As Amended and Restated Effective January 1, 2005 (incorporated by reference herein to Exhibit 10.1 of the Company's Current Report on Form 8-K filed March 25, 2013, File No. 001-33067).
|
|
|
|
10.2+
|
|
Selective Insurance Company of America Deferred Compensation Plan (2005), As Amended and Restated Effective as of January 1, 2010 (incorporated by reference herein to Exhibit 10.2 of the Company’s Quarterly Report on Form 10-Q for the quarter ended September 30, 2011, File No. 001-33067).
|
|
|
|
10.2a
|
|
Amendment No 1. to Selective Insurance Company of America Deferred Compensation Plan (2005) (incorporated by reference herein to Exhibit 10.2a of the Company's Quarterly Report on Form 10-Q for the quarter ended September 30, 2011, File No. 001-33067).
|
Exhibit
|
|
|
Number
|
|
|
10.2b+
|
|
Amendment No. 2 to Selective Insurance Company of America Deferred Compensation Plan (2005), As Amended and Restated Effective as of January 1, 2010 (incorporated by reference herein to Exhibit 10.2 of the Company's Current Report on Form 8-K filed March 25, 2013, File No. 001-33067).
|
|
|
|
10.3+
|
|
Selective Insurance Group, Inc. 2014 Omnibus Stock Plan, effective May 1, 2014 (incorporated by reference herein to Appendix A-1 to the Company’s Definitive Proxy Statement for its 2014 Annual Meeting of Stockholders filed April 3, 2014, File No. 000-08641).
|
|
|
|
10.4+
|
|
Selective Insurance Group, Inc. 2014 Omnibus Stock Plan Director Stock Option Agreement (incorporated by reference herein to Exhibit 10.1 to the Company’s Quarterly Report on Form 10-Q for the quarter ended March 31, 2014, File No. 000-08641).
|
|
|
|
10.5+
|
|
Selective Insurance Group, Inc. 2014 Omnibus Stock Plan Stock Option Agreement (incorporated by reference herein to Exhibit 10.2 to the Company’s Quarterly Report on Form 10-Q for the quarter ended March 31, 2014, File No. 000-08641).
|
|
|
|
10.6+
|
|
Selective Insurance Group, Inc. 2014 Omnibus Stock Plan Service-Based Restricted Stock Agreement (incorporated by reference herein to Exhibit 10.3 to the Company’s Quarterly Report on Form 10-Q for the quarter ended March 31, 2014 File No. 000-08641).
|
|
|
|
10.7+
|
|
Selective Insurance Group, Inc. 2014 Omnibus Stock Plan Performance-Based Restricted Stock Agreement (incorporated by reference herein to Exhibit 10.4 to the Company’s Quarterly Report on Form 10-Q for the quarter ended March 31, 2014, File No. 000-08641).
|
|
|
|
10.8+
|
|
Selective Insurance Group, Inc. 2014 Omnibus Stock Plan Service-Based Restricted Stock Unit Agreement (incorporated by reference herein to Exhibit 10.5 to the Company’s Quarterly Report on Form 10-Q for the quarter ended March 31, 2014 File No. 000-08641).
|
|
|
|
10.9+
|
|
Selective Insurance Group, Inc. 2014 Omnibus Stock Plan Performance-Based Restricted Stock Unit Agreement (incorporated by reference herein to Exhibit 10.6 to the Company’s Quarterly Report on Form 10-Q for the quarter ended March 31, 2014, File No. 000-08641).
|
|
|
|
10.10+
|
|
Selective Insurance Group, Inc. 2014 Omnibus Stock Plan Director Restricted Stock Unit Agreement (incorporated by reference herein to Exhibit 10.7 to the Company’s Quarterly Report on Form 10-Q for the quarter ended March 31, 2014, File No. 000-08641).
|
|
|
|
10.11+
|
|
Selective Insurance Group, Inc. 2005 Omnibus Stock Plan As Amended and Restated Effective as of May 1, 2010 (incorporated by reference herein to Appendix C of the Company’s Definitive Proxy Statement for its 2010 Annual Meeting of Stockholders filed March 25, 2010, File No. 001-33067).
|
|
|
|
10.12+
|
|
Selective Insurance Group, Inc. 2005 Omnibus Stock Plan Stock Option Agreement (incorporated by reference herein to Exhibit 10.2 to the Company’s Quarterly Report on Form 10-Q for the quarter ended March 31, 2006, File No. 000-08641).
|
|
|
|
10.13+
|
|
Selective Insurance Group, Inc. 2005 Omnibus Stock Plan Director Restricted Stock Unit Agreement (incorporated by reference herein to Exhibit 10.8 of the Company’s Annual Report on Form 10-K for the year ended December 31, 2009, File No. 001-33067).
|
|
|
|
10.14+
|
|
Selective Insurance Group, Inc. 2005 Omnibus Stock Plan Director Stock Option Agreement (incorporated by reference herein to Exhibit 10.9 of the Company’s Annual Report on Form 10-K for the year ended December 31, 2005, File No. 000-08641).
|
|
|
|
10.15+
|
|
Selective Insurance Group, Inc. 2005 Omnibus Stock Plan Restricted Stock Unit Agreement (incorporated by reference herein to Exhibit 10.12 of the Company’s Annual Report on Form 10-K for the year ended December 31, 2009, File No. 001-33067).
|
Exhibit
|
|
|
Number
|
|
|
10.16+
|
|
Selective Insurance Group, Inc. 2005 Omnibus Stock Plan Restricted Stock Unit Agreement (incorporated by reference herein to Exhibit 10.13 of the Company’s Annual Report on Form 10-K for the year ended December 31, 2009, File No. 001-33067).
|
|
|
|
10.17+
|
|
Selective Insurance Group, Inc. 2005 Omnibus Stock Plan Automatic Director Stock Option Agreement (incorporated by reference herein to Exhibit 2 of the Company’s Definitive Proxy Statement for its 2005 Annual Meeting of Stockholders filed April 6, 2005, File No. 000-08641).
|
|
|
|
10.18*
|
|
Selective Insurance Group, Inc. Non-Employee Directors’ Compensation and Deferral Plan, As Amended and Restated Effective as of January 1, 2017.
|
|
|
|
10.19+
|
|
Deferred Compensation Plan for Directors (incorporated by reference herein to Exhibit 10.5 to the Company’s Annual Report on Form 10-K for the year ended December 31, 1993, File No. 000-08641).
|
|
|
|
10.20+
|
|
Selective Insurance Group, Inc. Employee Stock Purchase Plan (2009), amended and restated effective July 1, 2009 (incorporated by reference herein to Appendix A to the Company’s Definitive Proxy Statement for its 2009 Annual Meeting of Stockholders filed March 26, 2009, File No. 001-33067).
|
|
|
|
10.21+
|
|
Selective Insurance Group, Inc. Cash Incentive Plan As Amended and Restated as of May 1, 2014 (incorporated by reference herein to Appendix B to the Company’s Definitive Proxy Statement for its 2014 Annual Meeting of Stockholders filed March 24, 2014, File No. 001-33067).
|
|
|
|
10.22+
|
|
Selective Insurance Group, Inc. Cash Incentive Plan Service-Based Cash Incentive Unit Award Agreement (incorporated by reference herein to Exhibit 10.8 of the Company’s Quarterly Report on Form 10-Q for the quarter ended March 31, 2014, File No. 001-33067).
|
|
|
|
10.23+
|
|
Selective Insurance Group, Inc. Cash Incentive Plan Performance-Based Cash Incentive Unit Award Agreement (incorporated by reference herein to Exhibit 10.9 of the Company’s Quarterly Report on Form 10-Q for the quarter ended March 31, 2014, File No. 001-33067).
|
|
|
|
10.24+
|
|
Selective Insurance Group, Inc. Cash Incentive Plan Cash Incentive Unit Award Agreement (incorporated by reference herein to Exhibit 10.14c of the Company’s Annual Report on Form 10-K for the year ended December 31, 2007, File No. 001-33067).
|
|
|
|
10.25+
|
|
Selective Insurance Group, Inc. Cash Incentive Plan Cash Incentive Unit Award Agreement (incorporated by reference herein to Exhibit 10.14d of the Company’s Annual Report on Form 10-K for the year ended December 31, 2007, File No. 001-33067).
|
|
|
|
10.26*
|
|
Amended and Restated Selective Insurance Group, Inc. Stock Purchase Plan for Independent Insurance Agencies (2010), Amended and Restated as of February 1, 2017.
|
|
|
|
10.27+
|
|
Selective Insurance Group, Inc. Stock Option Plan for Directors (incorporated by reference herein to Exhibit B of the Company’s Definitive Proxy Statement for its 2000 Annual Meeting of Stockholders filed March 31, 2000, File No. 000-08641).
|
|
|
|
10.28+
|
|
Amendment to the Selective Insurance Group, Inc. Stock Option Plan for Directors, as amended, effective as of July 26, 2006, (incorporated by reference herein to Exhibit 10.3 of the Company’s Quarterly Report on Form 10-Q for the quarter ended June 30, 2006, File No. 000-08641).
|
|
|
|
10.29+
|
|
Selective Insurance Group, Inc. Stock Compensation Plan for Nonemployee Directors, (incorporated by reference herein to Exhibit A of the Company’s Definitive Proxy Statement for its 2000 Annual Meeting of Stockholders filed March 31, 2000, File No. 000-08641).
|
Exhibit
Number
|
|
|
10.30+
|
|
Amendment to Selective Insurance Group, Inc. Stock Compensation Plan for Nonemployee Directors, as amended (incorporated by reference herein to Exhibit 10.22a of the Company’s Annual Report on Form 10-K for the year ended December 31, 2008, File No. 001-33067).
|
|
|
|
10.31+
|
|
Employment Agreement between Selective Insurance Company of America and Gregory E. Murphy, dated as of December 23, 2008 (incorporated by reference herein to Exhibit 10.1 of the Company’s Current Report on Form 8-K filed December 30, 2008, File No. 001-33067).
|
|
|
|
10.32+
|
|
Employment Agreement between Selective Insurance Company of America and Michael H. Lanza, dated as of December 23, 2008 (incorporated by reference herein to Exhibit 10.23e of the Company’s Annual Report on Form 10-K for the year ended December 31, 2008, File No. 001-33067).
|
|
|
|
10.33+
|
|
Employment Agreement between Selective Insurance Company of America and John J. Marchioni, dated as of September 10, 2013 (incorporated by reference herein to Exhibit 10.1 of the Company’s Current Report on Form 8-K filed September 11, 2013, File No. 001-33067).
|
|
|
|
10.34+
|
|
Employment Agreement between Selective Insurance Company of America and Mark A. Wilcox, dated as of October 28, 2016 (incorporated by reference herein to Exhibit 10.1 of the Company’s Current Report on Form 8-K filed October 31, 2016, File No. 001-33067).
|
|
|
|
10.35
|
|
Credit Agreement among Selective Insurance Group, Inc., the Lenders Named Therein and Wells Fargo Bank, National Association, as Administrative Agent, dated as of December 1, 2015.
|
|
|
|
10.36
|
|
Form of Indemnification Agreement between Selective Insurance Group, Inc. and each of its directors and executive officers, as adopted on May 19, 2005 (incorporated by reference herein to Exhibit 10.1 of the Company’s Current Report on Form 8-K filed May 20, 2005, File No. 000-08641).
|
|
|
|
10.37+
|
|
Selective Insurance Group, Inc. Non-Employee Directors’ Deferred Compensation Plan (incorporated by reference herein to Exhibit 10.27 of the Company’s Annual Report on Form 10-K for the year ended December 31, 2009, File No. 001-33067).
|
|
|
|
10.38+
|
|
Amendment No. 1 to the Selective Insurance Group, Inc. Non-Employee Directors’ Deferred Compensation Plan (incorporated by reference herein to Exhibit 10.27a of the Company’s Annual Report on Form 10-K for the year ended December 31, 2010, File No. 001-33067).
|
** 101.INS
|
|
XBRL Instance Document.
|
** 101.SCH
|
|
XBRL Taxonomy Extension Schema Document.
|
** 101.CAL
|
|
XBRL Taxonomy Extension Calculation Linkbase Document.
|
** 101.LAB
|
|
XBRL Taxonomy Extension Label Linkbase Document.
|
** 101.PRE
|
|
XBRL Taxonomy Extension Presentation Linkbase Document.
|
** 101.DEF
|
|
XBRL Taxonomy Extension Definition Linkbase Document.
|
1.
|
Establishment, Purpose and Restatement.
|
2.
|
Definitions.
|
3.
|
Election of Form of Payment of Annual Retainer.
|
4.
|
Deferral of Receipt of Director Compensation.
|
5.
|
Form of Payment.
|
6.
|
Effect of Change in Control.
|
7.
|
Election Changes.
|
8.
|
Accounts.
|
9.
|
Dividends and Interest.
|
10.
|
Account Statements.
|
11.
|
Administration.
|
12.
|
Amendment and Termination of the Plan.
|
13.
|
General Provisions.
|
1.
|
PURPOSE; GENERAL
|
Written Premiums
|
Maximum Contribution Amounts
|
Less than $2,000,000
|
$30,000
|
$2,000,000 or more but less than $5,000,000
|
$50,000
|
$5,000,000 or more
|
$75,000
|
1.
|
Premiums for policies written through pools, associations, or syndicates;
|
2.
|
Premiums for insurance written in any reinsurance facility, joint underwriting association, or other insurance program required by law;
|
3.
|
Policyholder dividends, expense fees, surcharges, and other like charges;
|
4.
|
Premiums from any accident and health, systems breakdown, and flood policies;
|
5.
|
Premiums for alternative market business, including, but not limited to, retrospectively rated policies and assumed business; and
|
6.
|
Premiums for policies, coverages, or plans that the Committee (as defined in Section 6 hereof) may exclude from this Plan.
|
2.
|
PARTICIPATION IN THE PLAN
|
(a)
|
Eligibility
|
•
|
principals, general partners, officers, and stockholders of, and designated by, an Eligible Agency (collectively, “
Principals
”);
|
•
|
key employees of an Eligible Agency designated by such Eligible Agency (“
Key Employees
”); and
|
•
|
individual retirement plans of Principals and Key Employees, Keogh plans of Principals and Key Employees, and employee benefit plans of, and designated by, an Eligible Agency (collectively, the “
Benefit Plans
”).
|
(b)
|
Enrollment in the Plan
|
•
|
a copy of the Plan;
|
•
|
an enrollment/purchase form;
|
•
|
a copy of a prospectus and any prospectus supplements; and
|
•
|
a copy of the most recent Annual Report of the Company.
|
(c)
|
Purchasing Shares of Common Stock
|
•
|
such Participant’s full name and address;
|
•
|
such Participant’s social security or taxpayer identification number; and
|
•
|
the amount of cash and/or electronic funds through ACH, if any, and the percentage of Profit Sharing Program payments, if any, to be invested in shares of Common Stock for each Eligible Person for whom purchase instructions are submitted.
|
(d)
|
Purchased Shares and Participants’ Accounts
|
(e)
|
Restrictions on Shares Purchased under the Plan
|
3.
|
SHARES AVAILABLE UNDER THE PLAN
|
4.
|
DIVIDENDS; DIVIDEND REINVESTMENT
|
5.
|
OTHER STOCKHOLDER RIGHTS; INFORMATION REPORTING
|
6.
|
ADMINISTRATION OF THE PLAN, INQUIRIES, AND CORRESPONDENCE
|
•
|
construe and interpret the Plan;
|
•
|
make adjustments in response to changes in applicable laws, regulations, or accounting principles, or for any other reason;
|
•
|
prescribe, amend, and rescind rules and regulations relating to the Plan and appoint such agents as it shall deem appropriate for the proper administration of the Plan, in accordance with Section 7 hereof; and
|
•
|
make all other determinations deemed necessary or advisable for the administration of the Plan.
|
7.
|
AMENDMENT OR TERMINATION OF THE PLAN
|
8.
|
RIGHTS NOT TRANSFERABLE
|
9.
|
RIGHT TO CONTINUED EMPLOYMENT OR AGENCY STATUS
|
10.
|
APPLICABLE OR GOVERNING LAW; SEVERABILITY
|
Name
|
|
Jurisdiction in which organized
|
|
Parent
|
|
Percentage voting securities owned
|
|
Mesa Underwriters Specialty Insurance Company
|
|
New Jersey
|
|
Selective Insurance Group, Inc.
|
|
100
|
%
|
|
|
|
|
|
|
|
|
Selective Auto Insurance Company of New Jersey
|
|
New Jersey
|
|
Selective Insurance Group, Inc.
|
|
100
|
%
|
|
|
|
|
|
|
|
|
Selective Casualty Insurance Company
|
|
New Jersey
|
|
Selective Insurance Group, Inc.
|
|
100
|
%
|
|
|
|
|
|
|
|
|
Selective Fire and Casualty Insurance Company
|
|
New Jersey
|
|
Selective Insurance Group, Inc.
|
|
100
|
%
|
|
|
|
|
|
|
|
|
Selective Insurance Company of America
|
|
New Jersey
|
|
Selective Insurance Group, Inc.
|
|
100
|
%
|
|
|
|
|
|
|
|
|
Selective Insurance Company of New England
|
|
New Jersey
|
|
Selective Insurance Group, Inc.
|
|
100
|
%
|
|
|
|
|
|
|
|
|
Selective Insurance Company of New York
|
|
New York
|
|
Selective Insurance Group, Inc.
|
|
100
|
%
|
|
|
|
|
|
|
|
|
Selective Insurance Company of South Carolina
|
|
Indiana
|
|
Selective Insurance Group, Inc.
|
|
100
|
%
|
|
|
|
|
|
|
|
|
Selective Insurance Company of the Southeast
|
|
Indiana
|
|
Selective Insurance Group, Inc.
|
|
100
|
%
|
|
|
|
|
|
|
|
|
Selective Way Insurance Company
|
|
New Jersey
|
|
Selective Insurance Group, Inc.
|
|
100
|
%
|
|
|
|
|
|
|
|
|
SRM Insurance Brokerage, LLC.
|
|
New Jersey
|
|
Selective Way Insurance Company
|
|
75
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
Selective Insurance Company of the Southeast
|
|
25
|
%
|
|
|
|
|
|
|
|
|
Wantage Avenue Holding Company, Inc.
|
|
New Jersey
|
|
Selective Insurance Group, Inc.
|
|
100
|
%
|
(a)
|
|
Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;
|
(b)
|
|
Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;
|
(c)
|
|
Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and
|
(d)
|
|
Disclosed in this report any change in the registrant's internal control over financial reporting that occurred during the registrant's most recent fiscal quarter (the registrant's fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant's internal control over financial reporting; and
|
(a)
|
|
All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant's ability to record, process, summarize and report financial information; and
|
(b)
|
|
Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal control over financial reporting.
|
Date:
|
February 21, 2017
|
By: /s/ Gregory E. Murphy
|
|
|
Gregory E. Murphy
|
|
|
Chairman of the Board and Chief Executive Officer
|
(a)
|
|
Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;
|
(b)
|
|
Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;
|
(c)
|
|
Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and
|
(d)
|
|
Disclosed in this report any change in the registrant's internal control over financial reporting that occurred during the registrant's most recent fiscal quarter (the registrant's fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant's internal control over financial reporting; and
|
(a)
|
|
All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant's ability to record, process, summarize and report financial information; and
|
(b)
|
|
Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal control over financial reporting.
|
Date:
|
February 21, 2017
|
By: /s/ Mark A. Wilcox
|
|
|
Mark A. Wilcox
|
|
|
Executive Vice President and Chief Financial Officer
|
Date:
|
February 21, 2017
|
By: /s/ Gregory E. Murphy
|
|
|
Gregory E. Murphy
|
|
|
Chairman of the Board and Chief Executive Officer
|
Date:
|
February 21, 2017
|
By: /s/ Mark A. Wilcox
|
|
|
Mark A. Wilcox
|
|
|
Executive Vice President and Chief Financial Officer
|
Glossary of Terms
|
|
Exhibit 99.1
|
Accident Year:
accident year reporting focuses on the cost of the losses that occurred in a given year regardless of when reported. These losses are calculated by adding all payments that have been made for those losses occurring in a given calendar year (regardless of the year in which they were paid) to any current reserve that remains for losses that occurred in that given calendar year.
Agent (Independent Retail Insurance Agent):
a distribution partner who recommends and markets insurance to individuals and businesses; usually represents several insurance companies. Insurance companies pay agents for business production.
Allocated loss adjustment expenses:
defense, litigation, and medical cost containment expense, whether internal or external, that can be attributed to a specific claim.
Audit Premium:
premiums based on data from an insured’s records, such as payroll data. Insured’s records are subject to periodic audit for purposes of verifying premium amounts.
Catastrophe Loss:
severe loss, as defined by the Insurance Services Office's Property Claims Service (PCS) unit, either natural or man-made, usually involving, but not limited to, many risks from one occurrence such as fire, hurricane, tornado, earthquake, windstorm, explosion, hail, severe winter weather, and terrorism.
Combined Ratio:
measure of underwriting profitability determined by dividing the sum of all GAAP expenses (losses, loss expenses, underwriting expenses, and dividends to policyholders) by GAAP net premiums earned for the period. A ratio over 100% is indicative of an underwriting loss, and a ratio below 100% is indicative of an underwriting profit.
Contract Binding Authority:
business that is written in accordance with a well-defined underwriting strategy that clearly delineates risk eligibility, rates, and coverages; generally distributed through wholesale general agents.
Credit Risk:
risk that a financially-obligated party will default on any type of debt by failing to make payment obligations. Examples include: (i) a bond issuer does not make a payment on a coupon or principal payment when due; or (ii) a reinsurer does not pay policy obligations.
Credit Spread Risk:
represent the risk premium required by market participants for a given credit quality and debt issuer. Spread is the difference between the yield on a particular debt instrument and the yield of a similar maturity U.S. Treasury debt security. Changes in credit spreads may arise from changes in economic conditions and perceived risk of default or downgrade of individual debt issuers.
Customers:
another term for policyholders; individuals or entities that purchase our insurance products or services.
Diluted Weighted Average Shares Outstanding:
represents weighted-average common shares outstanding adjusted for the impact of any dilutive common stock equivalents.
Distribution Partners:
insurance consultants that we partner with in selling our insurance products and services. Independent retail insurance agents are our distribution partners for standard market business and wholesale general agents are our distribution partners for E&S market business.
Earned Premiums:
portion of a premium that is recognized as income based on the expired portion of the policy period.
Effective Duration:
expressed in years, provides an approximate measure of the portfolio's price sensitivity to a change in interest rates, taking into consideration how the change in interest rates may impact the timing of expected cash flows.
Frequency:
likelihood that a loss will occur. Expressed as low frequency (meaning the loss event is possible but has rarely happened in the past and is not likely to occur in the future), moderate frequency (meaning the loss event has happened once in a while and can be expected to occur sometime in the future), or high frequency (meaning the loss event happens regularly and can be expected to occur regularly in the future).
Generally Accepted Accounting Principles (GAAP):
accounting practices used in the United States of America determined by the Financial Accounting Standards Board. Public companies use GAAP when preparing financial statements to be filed with the United States Securities and Exchange Commission.
Incurred But Not Reported (IBNR) Reserves:
reserves for estimated losses that have been incurred by insureds but not yet reported plus provisions for future emergence on known claims and reopened claims.
Interest Rate Risk:
exposure to interest rate risk relates primarily to market price and cash flow variability associated with changes in interest rates. A rise in interest rates may decrease the fair value of our existing fixed maturity investments and declines in interest rates may result in an increase in the fair value of our existing fixed maturity investments.
Invested Assets per Dollar of Stockholders' Equity Ratio:
measure of investment leverage calculated by dividing invested assets by stockholders' equity.
|
|
Liquidity Spread:
represents the risk premium that flows to a market participant willing to provide liquidity to another market participant that is demanding it. The spread is the difference between the price a seller is willing to accept to sell the asset and the price the buyer is willing to pay for the asset.
Loss Expenses:
expenses incurred in the process of evaluating, defending, and paying claims.
Loss and Loss Expense Reserves:
amount of money an insurer expects to pay for claim obligations and related expenses resulting from losses that have occurred and are covered by insurance policies it has sold.
Operating Income:
non-GAAP measure that is comparable to net income with the exclusion of capital gains and losses and the results of discontinued operations. 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. Realized investment gains and losses, and other-than-temporary impairment charges included in earnings, and the results of discontinued operations, could distort the analysis of trends.
Operating Income per Diluted Share:
non-GAAP measure that is comparable to net income per diluted share with the exclusion of capital gains and losses and the results of discontinued operations.
Operating Return on Average Equity:
measurement of profitability that reveals the amount of operating income generated by dividing operating income by average stockholders’ equity during the period.
Reinsurance:
insurance company assuming all or part of a risk undertaken by another insurance company. Reinsurance spreads the risk among insurance companies to reduce the impact of losses on individual companies. Types of reinsurance include proportional, excess of loss, treaty, and facultative.
Premiums Written:
premiums for all policies sold during a specific accounting period.
Renewal Pure Price:
estimated average premium change on renewal policies (excludes exposure changes).
Reported claim count:
amount of reported claims, including those closed without payment.
Retention:
measures how well an insurance company retains business by count; is expressed as a ratio of renewed over expired policies.
Risk:
two distinct and frequently used meanings in insurance: (i) the chance that a claim loss will occur; or (ii) an insured or the property covered by a policy.
Severity:
amount of damage that is, or may be, inflicted by a loss or catastrophe.
Statutory Accounting Principles (SAP):
accounting practices prescribed and required by the National Association of Insurance Commissioners (“NAIC”) and state insurance departments that stress evaluation of a company’s solvency.
Statutory Combined Ratio:
measurement commonly used within the property and casualty insurance industry to measure underwriting profit or loss; combination of underwriting expense ratio, loss and loss expense ratio, and dividends to policyholders ratio. The loss and loss expense ratio and dividends to policyholders ratio are calculated by dividing expenses by statutory net premiums earned. The underwriting expense ratio is calculated by dividing underwriting expenses by net premiums written.
Statutory Premiums to Surplus Ratio:
statutory measure of solvency risk calculated by dividing net statutory premiums written for the year by the ending statutory surplus.
Statutory Surplus:
amount left after an insurance company’s liabilities are subtracted from its assets. Statutory surplus is not based on GAAP, but SAP prescribed or permitted by state and foreign insurance regulators.
Unallocated loss adjustment expenses:
loss adjustment expenses other than allocated loss adjustment expenses.
Underwriting:
insurer’s process of reviewing applications submitted for insurance coverage, deciding whether to provide all or part of the coverage requested, and determining applicable premiums and terms and conditions of coverage.
Underwriting Result:
underwriting income or loss; represents premiums earned less insurance losses and loss expenses, underwriting expenses, and dividends to policyholders (determined on a GAAP or SAP basis). Also referred to as the GAAP underwriting result or the statutory underwriting result. This measure of performance is used by management and analysts to evaluate profitability of underwriting operations and is not intended to replace GAAP net income.
Unearned Premiums:
portion of a premium that a company has written but has yet to earn because a portion of the policy is unexpired.
Wholesale General Agent:
distribution partner authorized to underwrite on behalf of a surplus lines insurer through binding authority agreements. Insurance companies pay wholesale general agents for business production.
|