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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973
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948-3000
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(Registrant’s Telephone Number, Including Area Code)
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(Former Name, Former Address and Former Fiscal Year, if Changed Since Last Report)
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Title of each class
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Trading Symbol
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Name of each exchange on which registered
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Common Stock, par value $2 per share
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SIGI
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NASDAQ Global Select Market
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Large accelerated filer
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☒
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Accelerated filer ☐
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Non-accelerated filer ☐
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Smaller reporting company
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☐
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Emerging growth company
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☐
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SELECTIVE INSURANCE GROUP, INC.
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Table of Contents
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Page No.
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PART I. FINANCIAL INFORMATION
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ITEM 1. FINANCIAL STATEMENTS.
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SELECTIVE INSURANCE GROUP, INC.
CONSOLIDATED BALANCE SHEETS
|
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Unaudited
|
|
|
|||
($ in thousands, except share amounts)
|
|
March 31,
2020 |
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December 31,
2019 |
|||
ASSETS
|
|
|
|
|
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Investments:
|
|
|
|
|
|
|
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Fixed income securities, held-to-maturity – at carrying value (fair value: $21,921 – 2020; $21,975 – 2019)
|
|
$
|
20,408
|
|
|
20,800
|
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Less: allowance for credit losses
|
|
(28
|
)
|
|
—
|
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Fixed income securities, held-to-maturity, net of allowance for credit losses
|
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20,380
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20,800
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Fixed income securities, available-for-sale – at fair value
(allowance for credit losses: $15,787 – 2020; amortized cost: $5,877,779 – 2020 and $5,879,986 – 2019)
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5,945,360
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6,095,620
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|
|||
Commercial mortgage loans - at carrying value (fair value: $13,856 – 2020)
|
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14,096
|
|
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—
|
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Less: allowance for credit losses
|
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(240
|
)
|
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—
|
|
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Commercial mortgage loans, net of allowance for credit losses
|
|
13,856
|
|
|
—
|
|
|
|
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|
|||
Equity securities – at fair value (cost: $116,249 – 2020; $72,061 – 2019)
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99,989
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72,937
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Short-term investments (at cost which approximates fair value)
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517,558
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|
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282,490
|
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Other investments
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244,934
|
|
|
216,807
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|
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Total investments (Note 4 and 6)
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|
6,842,077
|
|
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6,688,654
|
|
|
Cash
|
|
9,429
|
|
|
300
|
|
|
Restricted cash
|
|
5,177
|
|
|
7,675
|
|
|
Interest and dividends due or accrued
|
|
43,893
|
|
|
44,846
|
|
|
|
|
|
|
|
|||
Premiums receivable
|
|
815,271
|
|
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830,301
|
|
|
Less: allowance for credit losses (Note 7)
|
|
(18,000
|
)
|
|
(6,400
|
)
|
|
Premiums receivable, net of allowance for credit losses
|
|
797,271
|
|
|
823,901
|
|
|
|
|
|
|
|
|||
Reinsurance recoverable
|
|
565,036
|
|
|
577,635
|
|
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Less: allowance for credit losses (Note 8)
|
|
(1,502
|
)
|
|
(4,400
|
)
|
|
Reinsurance recoverable, net of allowance for credit losses
|
|
563,534
|
|
|
573,235
|
|
|
|
|
|
|
|
|||
Prepaid reinsurance premiums
|
|
162,491
|
|
|
166,705
|
|
|
Deferred federal income tax (Note 14)
|
|
43,099
|
|
|
6,776
|
|
|
Property and equipment – at cost, net of accumulated depreciation and amortization of:
$231,651 – 2020; $227,566 – 2019 |
|
80,061
|
|
|
77,409
|
|
|
Deferred policy acquisition costs
|
|
269,581
|
|
|
271,186
|
|
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Goodwill
|
|
7,849
|
|
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7,849
|
|
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Other assets
|
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150,588
|
|
|
128,614
|
|
|
Total assets
|
|
$
|
8,975,050
|
|
|
8,797,150
|
|
|
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|
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|
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LIABILITIES AND STOCKHOLDERS’ EQUITY
|
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Liabilities:
|
|
|
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|
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Reserve for loss and loss expense (Note 9)
|
|
$
|
4,103,635
|
|
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4,067,163
|
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Unearned premiums
|
|
1,514,577
|
|
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1,523,167
|
|
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Short-term debt (Note 5)
|
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302,000
|
|
|
—
|
|
|
Long-term debt (Note 5)
|
|
550,577
|
|
|
550,597
|
|
|
Current federal income tax
|
|
12,352
|
|
|
2,987
|
|
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Accrued salaries and benefits
|
|
74,031
|
|
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126,753
|
|
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Other liabilities
|
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321,422
|
|
|
331,547
|
|
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Total liabilities
|
|
$
|
6,878,594
|
|
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6,602,214
|
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|
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Stockholders’ Equity:
|
|
|
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Preferred stock of $0 par value per share:
|
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$
|
—
|
|
|
—
|
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Authorized shares 5,000,000; no shares issued or outstanding
|
|
|
|
|
|||
Common stock of $2 par value per share:
|
|
|
|
|
|||
Authorized shares 360,000,000
|
|
|
|
|
|||
Issued: 103,832,370 – 2020; 103,484,159 – 2019
|
|
207,665
|
|
|
206,968
|
|
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Additional paid-in capital
|
|
427,328
|
|
|
418,521
|
|
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Retained earnings
|
|
2,083,340
|
|
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2,080,529
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|
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Accumulated other comprehensive income (loss) (Note 12)
|
|
(22,117
|
)
|
|
81,750
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Treasury stock – at cost (shares: 44,124,825 – 2020; 44,023,006 – 2019)
|
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(599,760
|
)
|
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(592,832
|
)
|
|
Total stockholders’ equity
|
|
$
|
2,096,456
|
|
|
2,194,936
|
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Commitments and contingencies
|
|
|
|
|
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|
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Total liabilities and stockholders’ equity
|
|
$
|
8,975,050
|
|
|
8,797,150
|
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SELECTIVE INSURANCE GROUP, INC.
UNAUDITED CONSOLIDATED STATEMENTS OF INCOME
|
|
Quarter Ended March 31,
|
|||||
($ in thousands, except per share amounts)
|
|
2020
|
|
2019
|
|||
Revenues:
|
|
|
|
|
|
|
|
Net premiums earned
|
|
$
|
651,703
|
|
|
632,573
|
|
Net investment income earned
|
|
55,967
|
|
|
50,618
|
|
|
Net realized and unrealized (losses) gains:
|
|
|
|
|
|
|
|
Net realized investment gains on disposals
|
|
4,100
|
|
|
3,444
|
|
|
Unrealized (losses) gains on equity securities
|
|
(17,137
|
)
|
|
10,111
|
|
|
Other-than-temporary impairments
|
|
(31,629
|
)
|
|
(104
|
)
|
|
Total net realized and unrealized (losses) gains
|
|
(44,666
|
)
|
|
13,451
|
|
|
Other income
|
|
1,825
|
|
|
2,320
|
|
|
Total revenues
|
|
664,829
|
|
|
698,962
|
|
|
|
|
|
|
|
|||
Expenses:
|
|
|
|
|
|
|
|
Loss and loss expense incurred
|
|
400,324
|
|
|
386,579
|
|
|
Amortization of deferred policy acquisition costs
|
|
136,501
|
|
|
129,674
|
|
|
Other insurance expenses
|
|
95,346
|
|
|
85,079
|
|
|
Interest expense
|
|
7,601
|
|
|
11,526
|
|
|
Corporate expenses
|
|
9,060
|
|
|
12,410
|
|
|
Total expenses
|
|
648,832
|
|
|
625,268
|
|
|
|
|
|
|
|
|||
Income before federal income tax
|
|
15,997
|
|
|
73,694
|
|
|
|
|
|
|
|
|||
Federal income tax expense:
|
|
|
|
|
|
|
|
Current
|
|
9,886
|
|
|
12,581
|
|
|
Deferred
|
|
(9,125
|
)
|
|
(235
|
)
|
|
Total federal income tax expense
|
|
761
|
|
|
12,346
|
|
|
|
|
|
|
|
|||
Net income
|
|
$
|
15,236
|
|
|
61,348
|
|
|
|
|
|
|
|||
Earnings per share:
|
|
|
|
|
|
|
|
Basic net income
|
|
$
|
0.26
|
|
|
1.04
|
|
|
|
|
|
|
|||
Diluted net income
|
|
$
|
0.25
|
|
|
1.02
|
|
|
|
|
|
|
SELECTIVE INSURANCE GROUP, INC.
UNAUDITED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME
|
|
Quarter Ended March 31,
|
|||||
($ in thousands)
|
|
2020
|
|
2019
|
|||
Net income
|
|
$
|
15,236
|
|
|
61,348
|
|
|
|
|
|
|
|||
Other comprehensive (loss) income, net of tax:
|
|
|
|
|
|
|
|
Unrealized (losses) gains on investment securities:
|
|
|
|
|
|
|
|
Unrealized holding (losses) gains arising during period
|
|
(74,245
|
)
|
|
81,313
|
|
|
Non-credit portion of OTTI recognized in OCI
|
|
(51,658
|
)
|
|
—
|
|
|
Amounts reclassified into net income:
|
|
|
|
|
|||
Held-to-maturity securities
|
|
20
|
|
|
(7
|
)
|
|
Net realized losses (gains) on disposals and intent-to-sell OTTI on AFS securities
|
|
8,948
|
|
|
(851
|
)
|
|
Credit loss expense recognized in OTTI
|
|
12,472
|
|
|
—
|
|
|
Total unrealized (losses) gains on investment securities
|
|
(104,463
|
)
|
|
80,455
|
|
|
|
|
|
|
|
|||
Defined benefit pension and post-retirement plans:
|
|
|
|
|
|
|
|
Amounts reclassified into net income:
|
|
|
|
|
|||
Net actuarial loss
|
|
596
|
|
|
525
|
|
|
Total defined benefit pension and post-retirement plans
|
|
596
|
|
|
525
|
|
|
Other comprehensive (loss) income
|
|
(103,867
|
)
|
|
80,980
|
|
|
Comprehensive (loss) income
|
|
$
|
(88,631
|
)
|
|
142,328
|
|
SELECTIVE INSURANCE GROUP, INC.
UNAUDITED CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY
|
|
Quarter Ended March 31,
|
|||||
($ in thousands, except share and per share amounts)
|
|
2020
|
|
2019
|
|||
Common stock:
|
|
|
|
|
|||
Beginning of period
|
|
$
|
206,968
|
|
|
205,697
|
|
Dividend reinvestment plan
|
|
14
|
|
|
11
|
|
|
Stock purchase and compensation plans
|
|
683
|
|
|
743
|
|
|
End of period
|
|
207,665
|
|
|
206,451
|
|
|
|
|
|
|
|
|||
Additional paid-in capital:
|
|
|
|
|
|||
Beginning of period
|
|
418,521
|
|
|
390,315
|
|
|
Dividend reinvestment plan
|
|
408
|
|
|
365
|
|
|
Stock purchase and compensation plans
|
|
8,399
|
|
|
8,201
|
|
|
End of period
|
|
427,328
|
|
|
398,881
|
|
|
|
|
|
|
|
|||
Retained earnings:
|
|
|
|
|
|||
Beginning of period, as previously reported
|
|
2,080,529
|
|
|
1,858,414
|
|
|
Cumulative effect adjustment due to adoption of lease guidance, net of tax (Note 2)
|
|
—
|
|
|
342
|
|
|
Cumulative effect adjustment due to adoption of guidance on allowance for credit losses, net of tax (Note 2)
|
|
1,435
|
|
|
—
|
|
|
Balance at beginning of period, as adjusted
|
|
2,081,964
|
|
|
1,858,756
|
|
|
Net income
|
|
15,236
|
|
|
61,348
|
|
|
Dividends to stockholders
|
|
(13,860
|
)
|
|
(11,985
|
)
|
|
End of period
|
|
2,083,340
|
|
|
1,908,119
|
|
|
|
|
|
|
|
|||
Accumulated other comprehensive (loss) income:
|
|
|
|
|
|||
Beginning of period
|
|
81,750
|
|
|
(77,956
|
)
|
|
Other comprehensive (loss) income
|
|
(103,867
|
)
|
|
80,980
|
|
|
End of period
|
|
(22,117
|
)
|
|
3,024
|
|
|
|
|
|
|
|
|||
Treasury stock:
|
|
|
|
|
|||
Beginning of period
|
|
(592,832
|
)
|
|
(584,668
|
)
|
|
Acquisition of treasury stock
|
|
(6,928
|
)
|
|
(6,585
|
)
|
|
End of period
|
|
(599,760
|
)
|
|
(591,253
|
)
|
|
Total stockholders’ equity
|
|
$
|
2,096,456
|
|
|
1,925,222
|
|
|
|
|
|
|
|||
Dividends declared per share to stockholders
|
|
$
|
0.23
|
|
|
0.20
|
|
|
|
|
|
|
|||
Common stock, shares outstanding:
|
|
|
|
|
|||
Beginning of period
|
|
59,461,153
|
|
|
58,948,554
|
|
|
Dividend reinvestment plan
|
|
6,975
|
|
|
5,694
|
|
|
Stock purchase and compensation plan
|
|
341,236
|
|
|
371,628
|
|
|
Acquisition of treasury stock
|
|
(101,819
|
)
|
|
(102,971
|
)
|
|
End of period
|
|
59,707,545
|
|
|
59,222,905
|
|
SELECTIVE INSURANCE GROUP, INC.
UNAUDITED CONSOLIDATED STATEMENTS OF CASH FLOWS
|
|
Quarter Ended March 31,
|
|||||
($ in thousands)
|
|
2020
|
|
2019
|
|||
Operating Activities
|
|
|
|
|
|
|
|
Net income
|
|
$
|
15,236
|
|
|
61,348
|
|
|
|
|
|
|
|||
Adjustments to reconcile net income to net cash provided by (used in) operating activities:
|
|
|
|
|
|
|
|
Depreciation and amortization
|
|
15,415
|
|
|
16,278
|
|
|
Stock-based compensation expense
|
|
7,038
|
|
|
6,677
|
|
|
Undistributed gains of equity method investments
|
|
(5,602
|
)
|
|
(971
|
)
|
|
Distributions in excess of current year income of equity method investments
|
|
614
|
|
|
1,771
|
|
|
Net realized and unrealized losses (gains)
|
|
44,666
|
|
|
(13,451
|
)
|
|
Loss on disposal of fixed assets
|
|
14
|
|
|
—
|
|
|
|
|
|
|
|
|||
Changes in assets and liabilities:
|
|
|
|
|
|
|
|
Increase in reserve for loss and loss expense, net of reinsurance recoverable
|
|
49,077
|
|
|
68,607
|
|
|
(Decrease) increase in unearned premiums, net of prepaid reinsurance
|
|
(4,376
|
)
|
|
40,374
|
|
|
Decrease in net federal income taxes
|
|
276
|
|
|
12,044
|
|
|
Decrease (increase) in premiums receivable
|
|
25,572
|
|
|
(44,396
|
)
|
|
Decrease (increase) in deferred policy acquisition costs
|
|
1,605
|
|
|
(8,142
|
)
|
|
Decrease (increase) in interest and dividends due or accrued
|
|
880
|
|
|
(491
|
)
|
|
Decrease in accrued salaries and benefits
|
|
(52,722
|
)
|
|
(38,529
|
)
|
|
Decrease (increase) in other assets
|
|
4,583
|
|
|
(8,711
|
)
|
|
Decrease in other liabilities
|
|
(62,959
|
)
|
|
(45,769
|
)
|
|
Net cash provided by operating activities
|
|
39,317
|
|
|
46,639
|
|
|
|
|
|
|
|
|||
Investing Activities
|
|
|
|
|
|
|
|
Purchase of fixed income securities, available-for-sale
|
|
(319,539
|
)
|
|
(474,962
|
)
|
|
Purchase of commercial mortgage loans
|
|
(14,096
|
)
|
|
—
|
|
|
Purchase of equity securities
|
|
(45,511
|
)
|
|
(6,702
|
)
|
|
Purchase of other investments
|
|
(27,433
|
)
|
|
(12,178
|
)
|
|
Purchase of short-term investments
|
|
(2,086,599
|
)
|
|
(2,416,285
|
)
|
|
Sale of fixed income securities, available-for-sale
|
|
101,671
|
|
|
218,411
|
|
|
Sale of short-term investments
|
|
1,851,532
|
|
|
2,449,725
|
|
|
Redemption and maturities of fixed income securities, held-to-maturity
|
|
405
|
|
|
579
|
|
|
Redemption and maturities of fixed income securities, available-for-sale
|
|
227,686
|
|
|
86,572
|
|
|
Sale of equity securities
|
|
1,320
|
|
|
3,721
|
|
|
Sale of other investments
|
|
—
|
|
|
4,995
|
|
|
Distributions from other investments
|
|
3,152
|
|
|
11,350
|
|
|
Purchase of property and equipment
|
|
(8,416
|
)
|
|
(7,955
|
)
|
|
Net cash used in investing activities
|
|
(315,828
|
)
|
|
(142,729
|
)
|
|
|
|
|
|
|
|||
Financing Activities
|
|
|
|
|
|
|
|
Dividends to stockholders
|
|
(13,313
|
)
|
|
(11,462
|
)
|
|
Acquisition of treasury stock
|
|
(6,928
|
)
|
|
(6,585
|
)
|
|
Net proceeds from stock purchase and compensation plans
|
|
1,525
|
|
|
1,760
|
|
|
Proceeds from borrowings
|
|
387,000
|
|
|
341,256
|
|
|
Repayments of borrowings
|
|
(85,000
|
)
|
|
(235,000
|
)
|
|
Repayments of finance lease obligations
|
|
(142
|
)
|
|
(284
|
)
|
|
Net cash provided by financing activities
|
|
283,142
|
|
|
89,685
|
|
|
Net increase (decrease) in cash and restricted cash
|
|
6,631
|
|
|
(6,405
|
)
|
|
Cash and restricted cash, beginning of year
|
|
7,975
|
|
|
16,919
|
|
|
Cash and restricted cash, end of period
|
|
$
|
14,606
|
|
|
10,514
|
|
•
|
For our held-to-maturity ("HTM") portfolio, the allowance for credit losses is calculated as the shortfall between amortized cost at the reporting date and the present value of future cash flows calculated in the DCF analysis.
|
•
|
For our available-for-sale ("AFS") portfolio and fixed income securities included in our short-term investment portfolio, the allowance for credit losses is calculated in the same manner as for the HTM portfolio; but the allowance amount is limited to the difference between the security’s amortized cost and fair value, or the fair value floor. This treatment is appropriate as we have the ability to recover the amortized cost of an AFS security either through: (i) collection of the contractual cash flows; or (ii) sale of the security.
|
|
|
Quarter Ended March 31,
|
|||||
($ in thousands)
|
|
2020
|
|
2019
|
|||
Cash paid during the period for:
|
|
|
|
|
|
|
|
Interest
|
|
$
|
8,854
|
|
|
4,477
|
|
Federal income tax
|
|
—
|
|
|
—
|
|
|
|
|
|
|
|
|||
Cash paid for amounts included in the measurement of lease liabilities:
|
|
|
|
|
|||
Operating cash flows from operating leases
|
|
2,130
|
|
|
1,983
|
|
|
Operating cash flows from financing leases
|
|
6
|
|
|
—
|
|
|
Financing cash flows from finance leases
|
|
142
|
|
|
284
|
|
|
|
|
|
|
|
|||
Non-cash items:
|
|
|
|
|
|||
Corporate actions related to fixed income securities, AFS1
|
|
8,040
|
|
|
18,447
|
|
|
Tax-free exchange of fixed income securities, HTM
|
|
2,596
|
|
|
—
|
|
|
Assets acquired under finance lease arrangements
|
|
29
|
|
|
—
|
|
|
Assets acquired under operating lease arrangements
|
|
3,828
|
|
|
6,136
|
|
|
Non-cash purchase of property and equipment
|
|
5
|
|
|
162
|
|
($ in thousands)
|
|
March 31, 2020
|
|
December 31, 2019
|
|||
Cash
|
|
$
|
9,429
|
|
|
300
|
|
Restricted cash
|
|
5,177
|
|
|
7,675
|
|
|
Total cash and restricted cash shown in the Statements of Cash Flows
|
|
$
|
14,606
|
|
|
7,975
|
|
March 31, 2020
|
|
|
|
|
|
|
|
|
|
|
||||||
($ in thousands)
|
|
Cost/
Amortized
Cost
|
|
Allowance for Credit Losses
|
|
Unrealized
Gains
|
|
Unrealized
Losses
|
|
Fair
Value
|
||||||
AFS fixed income securities:
|
|
|
|
|
|
|
|
|
|
|
||||||
U.S. government and government agencies
|
|
$
|
134,569
|
|
|
—
|
|
|
7,668
|
|
|
—
|
|
|
142,237
|
|
Foreign government
|
|
12,987
|
|
|
(21
|
)
|
|
172
|
|
|
(252
|
)
|
|
12,886
|
|
|
Obligations of states and political subdivisions
|
|
1,146,160
|
|
|
(29
|
)
|
|
52,516
|
|
|
(1,434
|
)
|
|
1,197,213
|
|
|
Corporate securities
|
|
1,911,377
|
|
|
(13,412
|
)
|
|
44,397
|
|
|
(32,858
|
)
|
|
1,909,504
|
|
|
Collateralized loan obligations ("CLO") and other asset-backed securities ("ABS")
|
|
789,240
|
|
|
(1,565
|
)
|
|
2,084
|
|
|
(67,498
|
)
|
|
722,261
|
|
|
Commercial mortgage-backed securities ("CMBS")
|
|
516,702
|
|
|
(38
|
)
|
|
26,511
|
|
|
(12,142
|
)
|
|
531,033
|
|
|
Residential mortgage-backed securities ("RMBS")
|
|
1,366,744
|
|
|
(722
|
)
|
|
66,931
|
|
|
(2,727
|
)
|
|
1,430,226
|
|
|
Total AFS fixed income securities
|
|
$
|
5,877,779
|
|
|
(15,787
|
)
|
|
200,279
|
|
|
(116,911
|
)
|
|
5,945,360
|
|
December 31, 2019
|
|
|
|
|
|
|
|
|
|||||
($ in thousands)
|
|
Cost/
Amortized
Cost
|
|
Unrealized
Gains
|
|
Unrealized
Losses
|
|
Fair
Value
|
|||||
AFS fixed income securities:
|
|
|
|
|
|
|
|
|
|||||
U.S. government and government agencies
|
|
$
|
112,680
|
|
|
3,506
|
|
|
—
|
|
|
116,186
|
|
Foreign government
|
|
18,011
|
|
|
533
|
|
|
(2
|
)
|
|
18,542
|
|
|
Obligations of states and political subdivisions
|
|
1,168,185
|
|
|
62,175
|
|
|
(270
|
)
|
|
1,230,090
|
|
|
Corporate securities
|
|
1,866,881
|
|
|
81,906
|
|
|
(1,310
|
)
|
|
1,947,477
|
|
|
CLO and other ABS
|
|
790,517
|
|
|
7,929
|
|
|
(5,434
|
)
|
|
793,012
|
|
|
CMBS
|
|
514,709
|
|
|
23,902
|
|
|
(267
|
)
|
|
538,344
|
|
|
RMBS
|
|
1,409,003
|
|
|
43,421
|
|
|
(455
|
)
|
|
1,451,969
|
|
|
Total AFS fixed income securities
|
|
$
|
5,879,986
|
|
|
223,372
|
|
|
(7,738
|
)
|
|
6,095,620
|
|
March 31, 2020
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||
($ in thousands)
|
|
Beginning Balance
|
|
Current Provision for Securities without Prior Allowance
|
|
Increase or (Decrease) on Securities with Prior Allowance, excluding intent (or Requirement) to Sell Securities
|
|
Reductions for Securities Sold
|
|
Reductions for Securities Identified as Intent (or Requirement) to Sell during the Period
|
|
Ending Balance
|
|||||||
Foreign government
|
|
—
|
|
|
21
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
21
|
|
|
Obligations of states and political subdivisions
|
|
—
|
|
|
29
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
29
|
|
|
Corporate securities
|
|
—
|
|
|
13,412
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
13,412
|
|
|
CLO and other ABS
|
|
—
|
|
|
1,565
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
1,565
|
|
|
CMBS
|
|
—
|
|
|
38
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
38
|
|
|
RMBS
|
|
—
|
|
|
722
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
722
|
|
|
Total AFS fixed income securities
|
|
$
|
—
|
|
|
15,787
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
15,787
|
|
March 31, 2020
|
|
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:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||
Foreign government
|
|
4,376
|
|
|
(252
|
)
|
|
—
|
|
|
—
|
|
|
4,376
|
|
|
(252
|
)
|
|
Obligations of states and political subdivisions
|
|
70,830
|
|
|
(1,434
|
)
|
|
—
|
|
|
—
|
|
|
70,830
|
|
|
(1,434
|
)
|
|
Corporate securities
|
|
553,419
|
|
|
(31,677
|
)
|
|
8,185
|
|
|
(1,181
|
)
|
|
561,604
|
|
|
(32,858
|
)
|
|
CLO and other ABS
|
|
445,676
|
|
|
(49,404
|
)
|
|
136,413
|
|
|
(18,094
|
)
|
|
582,089
|
|
|
(67,498
|
)
|
|
CMBS
|
|
144,010
|
|
|
(11,119
|
)
|
|
11,373
|
|
|
(1,023
|
)
|
|
155,383
|
|
|
(12,142
|
)
|
|
RMBS
|
|
71,741
|
|
|
(2,561
|
)
|
|
1,974
|
|
|
(166
|
)
|
|
73,715
|
|
|
(2,727
|
)
|
|
Total AFS fixed income securities
|
|
$
|
1,290,052
|
|
|
(96,447
|
)
|
|
157,945
|
|
|
(20,464
|
)
|
|
1,447,997
|
|
|
(116,911
|
)
|
December 31, 2019
|
|
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:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||
Foreign government
|
|
1,416
|
|
|
(2
|
)
|
|
—
|
|
|
—
|
|
|
1,416
|
|
|
(2
|
)
|
|
Obligations of states and political subdivisions
|
|
35,838
|
|
|
(270
|
)
|
|
—
|
|
|
—
|
|
|
35,838
|
|
|
(270
|
)
|
|
Corporate securities
|
|
84,832
|
|
|
(480
|
)
|
|
20,182
|
|
|
(830
|
)
|
|
105,014
|
|
|
(1,310
|
)
|
|
CLO and other ABS
|
|
205,191
|
|
|
(1,938
|
)
|
|
204,385
|
|
|
(3,496
|
)
|
|
409,576
|
|
|
(5,434
|
)
|
|
CMBS
|
|
62,893
|
|
|
(264
|
)
|
|
828
|
|
|
(3
|
)
|
|
63,721
|
|
|
(267
|
)
|
|
RMBS
|
|
126,089
|
|
|
(425
|
)
|
|
5,375
|
|
|
(30
|
)
|
|
131,464
|
|
|
(455
|
)
|
|
Total AFS fixed income securities
|
|
$
|
516,259
|
|
|
(3,379
|
)
|
|
230,770
|
|
|
(4,359
|
)
|
|
747,029
|
|
|
(7,738
|
)
|
|
|
AFS
|
|
HTM
|
||||||
($ in thousands)
|
|
Fair Value
|
|
Carrying Value
|
|
Fair Value
|
||||
Due in one year or less
|
|
$
|
295,885
|
|
|
929
|
|
|
965
|
|
Due after one year through five years
|
|
3,471,503
|
|
|
13,943
|
|
|
15,115
|
|
|
Due after five years through 10 years
|
|
1,925,970
|
|
|
5,508
|
|
|
5,841
|
|
|
Due after 10 years
|
|
252,002
|
|
|
—
|
|
|
—
|
|
|
Total fixed income securities
|
|
$
|
5,945,360
|
|
|
20,380
|
|
|
21,921
|
|
Other Investments
|
|
March 31, 2020
|
|
December 31, 2019
|
|||||||||||||||
($ in thousands)
|
|
Carrying Value
|
|
Remaining Commitment
|
|
Maximum Exposure to Loss1
|
|
Carrying Value
|
|
Remaining Commitment
|
|
Maximum Exposure to Loss1
|
|||||||
Alternative Investments
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||
Private equity
|
|
$
|
131,936
|
|
|
102,801
|
|
|
234,737
|
|
|
118,352
|
|
|
93,138
|
|
|
211,490
|
|
Private credit
|
|
46,515
|
|
|
101,587
|
|
|
148,102
|
|
|
42,532
|
|
|
105,340
|
|
|
147,872
|
|
|
Real assets
|
|
23,385
|
|
|
23,406
|
|
|
46,791
|
|
|
23,256
|
|
|
20,741
|
|
|
43,997
|
|
|
Total alternative investments
|
|
201,836
|
|
|
227,794
|
|
|
429,630
|
|
|
184,140
|
|
|
219,219
|
|
|
403,359
|
|
|
Other securities
|
|
43,098
|
|
|
—
|
|
|
43,098
|
|
|
32,667
|
|
|
—
|
|
|
32,667
|
|
|
Total other investments
|
|
$
|
244,934
|
|
|
227,794
|
|
|
472,728
|
|
|
216,807
|
|
|
219,219
|
|
|
436,026
|
|
Income Statement Information
|
|
Quarter Ended March 31,
|
|||||
($ in millions)
|
|
2020
|
|
2019
|
|||
Net investment (loss) income
|
|
$
|
12.7
|
|
|
(150.0
|
)
|
Realized (losses) gains
|
|
164.8
|
|
|
143.3
|
|
|
Net change in unrealized appreciation (depreciation)
|
|
1,204.0
|
|
|
554.3
|
|
|
Net income
|
|
$
|
1,381.5
|
|
|
547.6
|
|
Insurance Subsidiaries’ alternative investments income
|
|
$
|
6.3
|
|
|
0.6
|
|
($ in millions)
|
|
FHLBI Collateral
|
|
FHLBNY Collateral
|
|
State and Regulatory Deposits
|
|
Total
|
|||||
U.S. government and government agencies
|
|
$
|
—
|
|
|
—
|
|
|
23.4
|
|
|
23.4
|
|
Obligations of states and political subdivisions
|
|
—
|
|
|
—
|
|
|
4.0
|
|
|
4.0
|
|
|
Corporate securities
|
|
—
|
|
|
—
|
|
|
0.3
|
|
|
0.3
|
|
|
CMBS
|
|
7.1
|
|
|
28.1
|
|
|
—
|
|
|
35.2
|
|
|
RMBS
|
|
139.7
|
|
|
225.7
|
|
|
—
|
|
|
365.4
|
|
|
Total pledged as collateral
|
|
$
|
146.8
|
|
|
253.8
|
|
|
27.7
|
|
|
428.3
|
|
|
|
Quarter Ended March 31,
|
|||||
($ in thousands)
|
|
2020
|
|
2019
|
|||
Fixed income securities
|
|
$
|
50,253
|
|
|
49,033
|
|
CMLs
|
|
62
|
|
|
—
|
|
|
Equity securities
|
|
1,552
|
|
|
1,640
|
|
|
Short-term investments
|
|
1,166
|
|
|
2,044
|
|
|
Other investments
|
|
6,342
|
|
|
660
|
|
|
Investment expenses
|
|
(3,408
|
)
|
|
(2,759
|
)
|
|
Net investment income earned
|
|
$
|
55,967
|
|
|
50,618
|
|
|
|
Quarter Ended March 31,
|
||||||||||
|
|
2020
|
|
2019
|
||||||||
($ in thousands)
|
|
Credit Loss Expense
|
|
Other Impairment Charges
|
|
Recognized in Earnings
|
|
Recognized in Earnings
|
||||
AFS fixed income securities:
|
|
|
|
|
|
|
|
|
||||
U.S. government and government agencies
|
|
—
|
|
|
14
|
|
|
14
|
|
|
—
|
|
Foreign government
|
|
21
|
|
|
—
|
|
|
21
|
|
|
—
|
|
Obligations of states and political subdivisions
|
|
29
|
|
|
62
|
|
|
91
|
|
|
65
|
|
Corporate securities
|
|
13,412
|
|
|
11,603
|
|
|
25,015
|
|
|
—
|
|
CLO and other ABS
|
|
1,565
|
|
|
2,000
|
|
|
3,565
|
|
|
—
|
|
CMBS
|
|
38
|
|
|
1,852
|
|
|
1,890
|
|
|
—
|
|
RMBS
|
|
722
|
|
|
71
|
|
|
793
|
|
|
—
|
|
Total AFS fixed income securities
|
|
15,787
|
|
|
15,602
|
|
|
31,389
|
|
|
65
|
|
CMLs
|
|
240
|
|
|
—
|
|
|
240
|
|
|
—
|
|
Other Investments
|
|
—
|
|
|
—
|
|
|
—
|
|
|
39
|
|
Total OTTI
|
|
16,027
|
|
|
15,602
|
|
|
31,629
|
|
|
104
|
|
|
|
Quarter Ended March 31,
|
|||||
($ in thousands)
|
|
2020
|
|
2019
|
|||
Net realized gains (losses) on the disposals of securities:
|
|
|
|
|
|||
Fixed income securities
|
|
$
|
4,276
|
|
|
1,143
|
|
Equity securities
|
|
(3
|
)
|
|
2,280
|
|
|
Short-term investments
|
|
(168
|
)
|
|
14
|
|
|
Other investments
|
|
(5
|
)
|
|
7
|
|
|
Net realized gains (losses) on the disposal of securities
|
|
4,100
|
|
|
3,444
|
|
|
OTTI charges
|
|
(31,629
|
)
|
|
(104
|
)
|
|
Net realized gains (losses)
|
|
(27,529
|
)
|
|
3,340
|
|
|
Unrealized (losses) gains recognized in income on equity securities
|
|
(17,137
|
)
|
|
10,111
|
|
|
Total net realized and unrealized investment (losses) gains
|
|
$
|
(44,666
|
)
|
|
13,451
|
|
|
|
Quarter Ended March 31,
|
|||||
($ in thousands)
|
|
2020
|
|
2019
|
|||
Unrealized (losses) gains recognized in income on equity securities:
|
|
|
|
|
|||
On securities remaining in our portfolio at March 31, 2020
|
|
$
|
(17,140
|
)
|
|
12,055
|
|
On securities sold in each respective period
|
|
3
|
|
|
(1,944
|
)
|
|
Total unrealized (losses) gains recognized in income on equity securities
|
|
$
|
(17,137
|
)
|
|
10,111
|
|
|
|
Quarter Ended March 31,
|
|||||
($ in thousands)
|
|
2020
|
|
2019
|
|||
HTM fixed income securities
|
|
|
|
|
|||
Gains
|
|
$
|
1
|
|
|
—
|
|
Losses
|
|
—
|
|
|
—
|
|
|
AFS fixed income securities
|
|
|
|
|
|
|
|
Gains
|
|
5,653
|
|
|
1,844
|
|
|
Losses
|
|
(1,378
|
)
|
|
(701
|
)
|
|
Equity securities
|
|
|
|
|
|
|
|
Gains
|
|
—
|
|
|
2,280
|
|
|
Losses
|
|
(3
|
)
|
|
—
|
|
|
Short-term investments
|
|
|
|
|
|||
Gains
|
|
22
|
|
|
14
|
|
|
Losses
|
|
(190
|
)
|
|
—
|
|
|
Other investments
|
|
|
|
|
|||
Gains
|
|
—
|
|
|
7
|
|
|
Losses
|
|
(5
|
)
|
|
—
|
|
|
Total net realized gains on disposals of securities
|
|
$
|
4,100
|
|
|
3,444
|
|
Outstanding Debt
|
|
Issuance Date
|
|
Maturity Date
|
|
Interest Rate
|
|
Original Amount
|
|
2020
|
|
Carry Value
|
||||||||||
($ in thousands)
|
|
|
|
|
|
Unamortized Issuance Costs
|
|
Debt Discount
|
|
March 31, 2020
|
|
December 31, 2019
|
||||||||||
Description
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||
Short-term
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||
Issuance:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||
FHLBNY
|
|
3/12/2020
|
|
9/14/2020
|
|
0.78
|
%
|
|
100,000
|
|
|
—
|
|
|
—
|
|
|
100,000
|
|
|
—
|
|
FHLBNY
|
|
3/18/2020
|
|
9/18/2020
|
|
0.68
|
%
|
|
85,000
|
|
|
—
|
|
|
—
|
|
|
85,000
|
|
|
—
|
|
FHLBI
|
|
3/19/2020
|
|
12/14/2020
|
|
0.58
|
%
|
|
67,000
|
|
|
—
|
|
|
—
|
|
|
67,000
|
|
|
—
|
|
Line of Credit
|
|
3/24/2020
|
|
9/24/2020
|
|
2.244
|
%
|
|
50,000
|
|
|
—
|
|
|
—
|
|
|
50,000
|
|
|
—
|
|
Total short-term debt
|
|
|
|
|
|
|
|
|
|
—
|
|
|
—
|
|
|
302,000
|
|
|
—
|
|
||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||
Other Outstanding:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||
FHLBI
|
|
12/16/2016
|
|
12/16/2026
|
|
3.03
|
%
|
|
60,000
|
|
|
—
|
|
|
—
|
|
|
60,000
|
|
|
60,000
|
|
FHLBNY
|
|
8/15/2016
|
|
8/16/2021
|
|
1.56
|
%
|
|
25,000
|
|
|
—
|
|
|
—
|
|
|
25,000
|
|
|
25,000
|
|
FHLBNY
|
|
7/21/2016
|
|
7/21/2021
|
|
1.61
|
%
|
|
25,000
|
|
|
—
|
|
|
—
|
|
|
25,000
|
|
|
25,000
|
|
Senior Notes
|
|
11/3/2005
|
|
11/1/2035
|
|
6.70
|
%
|
|
100,000
|
|
|
346
|
|
|
515
|
|
|
99,139
|
|
|
99,125
|
|
Senior Notes
|
|
11/16/2004
|
|
11/15/2034
|
|
7.25
|
%
|
|
50,000
|
|
|
180
|
|
|
89
|
|
|
49,731
|
|
|
49,725
|
|
Senior Notes
|
|
3/1/2019
|
|
3/1/2049
|
|
5.375
|
%
|
|
300,000
|
|
|
3,092
|
|
|
5,823
|
|
|
291,085
|
|
|
291,010
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||
Finance lease obligations
|
|
|
|
|
|
|
|
|
|
|
|
|
|
622
|
|
|
737
|
|
||||
Total long-term debt
|
|
|
|
|
|
|
|
|
|
3,618
|
|
|
6,427
|
|
|
550,577
|
|
|
550,597
|
|
||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||
Total debt
|
|
|
|
|
|
|
|
|
|
3,618
|
|
|
6,427
|
|
|
852,577
|
|
|
550,597
|
|
•
|
On February 18, 2020, Selective Insurance Company of America (“SICA”) borrowed short-term funds of $85 million from the FHLBNY at an interest rate of 1.81%. This borrowing was refinanced upon its maturity on March 18, 2020, at a lower interest rate of 0.68%. This borrowing matures on September 18, 2020.
|
•
|
On March 12, 2020, SICA borrowed $100 million from the FHLBNY at an interest rate of 0.78%. This borrowing matures on September 14, 2020.
|
•
|
On March 19, 2020 Selective Insurance Company of South Carolina ("SISC") and Selective Insurance Company of the Southeast ("SISE") borrowed $39 million and $28 million, respectively, from the FHLBI at an interest rate of 0.58%. These borrowings mature on December 14, 2020.
|
•
|
On March 24, 2020, Selective Insurance Group ("SIGI") borrowed $50 million on its line of credit issued by the Bank of Montreal at an interest rate of 2.244%. The borrowings can be repaid at anytime, without a prepayment penalty, through the December 20, 2022 maturity of the line of credit. The interest rate is based on a spread over 180 LIBOR and will reset on September 24, 2020 if the borrowings under the line of credit remain outstanding at that time.
|
|
|
March 31, 2020
|
|
December 31, 2019
|
|||||||||
($ in thousands)
|
|
Carrying Amount
|
|
Fair Value
|
|
Carrying Amount
|
|
Fair Value
|
|||||
Financial Liabilities
|
|
|
|
|
|
|
|
|
|||||
Short-term debt:
|
|
|
|
|
|
|
|
|
|||||
0.78% Borrowings from FHLBNY
|
|
$
|
100,000
|
|
|
100,096
|
|
|
—
|
|
|
—
|
|
0.68% Borrowings from FHLBNY
|
|
85,000
|
|
|
85,039
|
|
|
—
|
|
|
—
|
|
|
0.58% Borrowings from FHLBI
|
|
67,000
|
|
|
67,006
|
|
|
—
|
|
|
—
|
|
|
2.244% Line of Credit1
|
|
50,000
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
Total short-term debt
|
|
302,000
|
|
|
252,141
|
|
|
—
|
|
|
—
|
|
|
|
|
|
|
|
|
|
|
|
|||||
Long-term debt:
|
|
|
|
|
|
|
|
|
|||||
7.25% Senior Notes
|
|
49,911
|
|
|
61,134
|
|
|
49,910
|
|
|
66,365
|
|
|
6.70% Senior Notes
|
|
99,485
|
|
|
118,561
|
|
|
99,480
|
|
|
123,104
|
|
|
5.375% Senior Notes
|
|
294,177
|
|
|
316,400
|
|
|
294,157
|
|
|
357,025
|
|
|
1.61% borrowings from FHLBNY
|
|
25,000
|
|
|
25,261
|
|
|
25,000
|
|
|
24,901
|
|
|
1.56% borrowings from FHLBNY
|
|
25,000
|
|
|
25,260
|
|
|
25,000
|
|
|
24,875
|
|
|
3.03% borrowings from FHLBI
|
|
60,000
|
|
|
65,404
|
|
|
60,000
|
|
|
63,002
|
|
|
Subtotal long-term debt
|
|
553,573
|
|
|
612,020
|
|
|
553,547
|
|
|
659,272
|
|
|
Unamortized debt issuance costs
|
|
(3,618
|
)
|
|
|
|
(3,687
|
)
|
|
|
|||
Finance lease obligations
|
|
622
|
|
|
|
|
737
|
|
|
|
|||
Total long-term debt
|
|
$
|
550,577
|
|
|
|
|
550,597
|
|
|
|
March 31, 2020
|
|
|
|
Fair Value Measurements Using
|
|||||||||
($ in thousands)
|
|
Assets
Measured at Fair Value |
|
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
|
|
$
|
142,237
|
|
|
44,093
|
|
|
98,144
|
|
|
—
|
|
Foreign government
|
|
12,886
|
|
|
—
|
|
|
12,886
|
|
|
—
|
|
|
Obligations of states and political subdivisions
|
|
1,197,213
|
|
|
—
|
|
|
1,194,323
|
|
|
2,890
|
|
|
Corporate securities
|
|
1,909,504
|
|
|
—
|
|
|
1,885,319
|
|
|
24,185
|
|
|
CLO and other ABS
|
|
722,261
|
|
|
—
|
|
|
685,889
|
|
|
36,372
|
|
|
RMBS
|
|
1,430,226
|
|
|
—
|
|
|
1,430,226
|
|
|
—
|
|
|
CMBS
|
|
531,033
|
|
|
—
|
|
|
531,033
|
|
|
—
|
|
|
Total AFS fixed income securities
|
|
5,945,360
|
|
|
44,093
|
|
|
5,837,820
|
|
|
63,447
|
|
|
Equity securities:
|
|
|
|
|
|
|
|
|
|||||
Common stock1
|
|
98,410
|
|
|
59,175
|
|
|
—
|
|
|
—
|
|
|
Preferred stock
|
|
1,579
|
|
|
1,579
|
|
|
—
|
|
|
—
|
|
|
Total equity securities
|
|
99,989
|
|
|
60,754
|
|
|
—
|
|
|
—
|
|
|
Short-term investments
|
|
517,558
|
|
|
504,243
|
|
|
13,315
|
|
|
—
|
|
|
Total assets measured at fair value
|
|
$
|
6,562,907
|
|
|
609,090
|
|
|
5,851,135
|
|
|
63,447
|
|
December 31, 2019
|
|
|
|
Fair Value Measurements Using
|
|||||||||
($ in thousands)
|
|
Assets
Measured at Fair Value |
|
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
|
|
$
|
116,186
|
|
|
41,083
|
|
|
75,103
|
|
|
—
|
|
Foreign government
|
|
18,542
|
|
|
—
|
|
|
18,542
|
|
|
—
|
|
|
Obligations of states and political subdivisions
|
|
1,230,090
|
|
|
—
|
|
|
1,230,090
|
|
|
—
|
|
|
Corporate securities
|
|
1,947,477
|
|
|
—
|
|
|
1,930,426
|
|
|
17,051
|
|
|
CLO and other ABS
|
|
793,012
|
|
|
3,635
|
|
|
772,343
|
|
|
17,034
|
|
|
RMBS
|
|
1,451,969
|
|
|
—
|
|
|
1,451,969
|
|
|
—
|
|
|
CMBS
|
|
538,344
|
|
|
—
|
|
|
538,344
|
|
|
—
|
|
|
Total AFS fixed income securities
|
|
6,095,620
|
|
|
44,718
|
|
|
6,016,817
|
|
|
34,085
|
|
|
Equity securities:
|
|
|
|
|
|
|
|
|
|||||
Common stock1
|
|
69,900
|
|
|
32,145
|
|
|
—
|
|
|
—
|
|
|
Preferred stock
|
|
3,037
|
|
|
3,037
|
|
|
—
|
|
|
—
|
|
|
Total equity securities
|
|
72,937
|
|
|
35,182
|
|
|
—
|
|
|
—
|
|
|
Short-term investments
|
|
282,490
|
|
|
265,306
|
|
|
17,184
|
|
|
—
|
|
|
Total assets measured at fair value
|
|
$
|
6,451,047
|
|
|
345,206
|
|
|
6,034,001
|
|
|
34,085
|
|
March 31, 2020
|
|
|
|
|
|
|
|
|
||||
($ in thousands)
|
|
Obligations of states and political subdivisions
|
|
Corporate Securities
|
|
CLO and Other ABS
|
|
Total
|
||||
Fair value, December 31, 2019
|
|
—
|
|
|
17,051
|
|
|
17,034
|
|
|
34,085
|
|
Total net (losses) gains for the period included in:
|
|
|
|
|
|
|
|
|
||||
OCI
|
|
—
|
|
|
1
|
|
|
(1,756
|
)
|
|
(1,755
|
)
|
Net realized and unrealized (losses) gains
|
|
—
|
|
|
(61
|
)
|
|
(214
|
)
|
|
(275
|
)
|
Purchases
|
|
—
|
|
|
3,002
|
|
|
4,831
|
|
|
7,833
|
|
Sales
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
Issuances
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
Settlements
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
Transfers into Level 3
|
|
2,890
|
|
|
4,192
|
|
|
20,107
|
|
|
27,189
|
|
Transfers out of Level 3
|
|
—
|
|
|
—
|
|
|
(3,630
|
)
|
|
(3,630
|
)
|
Fair value, March 31, 2020
|
|
2,890
|
|
|
24,185
|
|
|
36,372
|
|
|
63,447
|
|
|
|
|
|
|
|
|
|
|
||||
Change in unrealized (losses) gains for the period included in earnings for assets held at period end
|
|
—
|
|
|
(61
|
)
|
|
(214
|
)
|
|
(275
|
)
|
Change in unrealized gains (losses) for the period included in other comprehensive income for assets held at period end
|
|
—
|
|
|
1
|
|
|
(1,756
|
)
|
|
(1,755
|
)
|
March 31, 2019
|
|
|
|
|
|
|
|||
($ in thousands)
|
|
Corporate Securities
|
|
CLO and Other ABS
|
|
Total
|
|||
Fair value, December 31, 2018
|
|
—
|
|
|
7,409
|
|
|
7,409
|
|
Total net (losses) gains for the period included in:
|
|
|
|
|
|
|
|||
OCI
|
|
—
|
|
|
(225
|
)
|
|
(225
|
)
|
Net realized and unrealized (losses) gains
|
|
—
|
|
|
—
|
|
|
—
|
|
Purchases
|
|
—
|
|
|
12,434
|
|
|
12,434
|
|
Sales
|
|
—
|
|
|
—
|
|
|
—
|
|
Issuances
|
|
—
|
|
|
—
|
|
|
—
|
|
Settlements
|
|
—
|
|
|
—
|
|
|
—
|
|
Transfers into Level 3
|
|
16,419
|
|
|
11,674
|
|
|
28,093
|
|
Transfers out of Level 3
|
|
—
|
|
|
—
|
|
|
—
|
|
Fair value, March 31, 2019
|
|
16,419
|
|
|
31,292
|
|
|
47,711
|
|
|
|
|
|
|
|
|
|||
Change in unrealized gains (losses) for the period included in earnings for assets held at period end
|
|
—
|
|
|
—
|
|
|
—
|
|
March 31, 2020
|
|
|
|
Fair Value Measurements Using
|
|||||||||
($ in thousands)
|
|
Assets/
Liabilities Disclosed at Fair Value |
|
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
|
|
$
|
4,871
|
|
|
—
|
|
|
4,871
|
|
|
—
|
|
Corporate securities
|
|
17,050
|
|
|
—
|
|
|
17,050
|
|
|
—
|
|
|
Total HTM fixed income securities
|
|
$
|
21,921
|
|
|
—
|
|
|
21,921
|
|
|
—
|
|
|
|
|
|
|
|
|
|
|
|||||
CMLs
|
|
13,856
|
|
|
—
|
|
|
—
|
|
|
13,856
|
|
|
|
|
|
|
|
|
|
|
|
|||||
Financial Liabilities
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Short-term debt:
|
|
|
|
|
|
|
|
|
|||||
0.78% Borrowings from FHLBNY
|
|
100,096
|
|
|
—
|
|
|
100,096
|
|
|
—
|
|
|
0.68% Borrowings from FHLBNY
|
|
85,039
|
|
|
—
|
|
|
85,039
|
|
|
—
|
|
|
0.58% Borrowings from FHLBI
|
|
67,006
|
|
|
—
|
|
|
67,006
|
|
|
—
|
|
|
Total short-term debt
|
|
252,141
|
|
|
—
|
|
|
252,141
|
|
|
—
|
|
|
|
|
|
|
|
|
|
|
|
|||||
Long-term debt:
|
|
|
|
|
|
|
|
|
|||||
7.25% Senior Notes
|
|
$
|
61,134
|
|
|
—
|
|
|
61,134
|
|
|
—
|
|
6.70% Senior Notes
|
|
118,561
|
|
|
—
|
|
|
118,561
|
|
|
—
|
|
|
5.375% Senior Notes
|
|
316,400
|
|
|
—
|
|
|
316,400
|
|
|
—
|
|
|
1.61% borrowings from FHLBNY
|
|
25,261
|
|
|
—
|
|
|
25,261
|
|
|
—
|
|
|
1.56% borrowings from FHLBNY
|
|
25,260
|
|
|
—
|
|
|
25,260
|
|
|
—
|
|
|
3.03% borrowings from FHLBI
|
|
65,404
|
|
|
—
|
|
|
65,404
|
|
|
—
|
|
|
Total long-term debt
|
|
$
|
612,020
|
|
|
—
|
|
|
612,020
|
|
|
—
|
|
December 31, 2019
|
|
|
|
Fair Value Measurements Using
|
|||||||||
($ in thousands)
|
|
Assets/
Liabilities Disclosed at Fair Value |
|
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
|
|
$
|
4,921
|
|
|
—
|
|
|
4,921
|
|
|
—
|
|
Corporate securities
|
|
17,054
|
|
|
—
|
|
|
17,054
|
|
|
—
|
|
|
Total HTM fixed income securities
|
|
$
|
21,975
|
|
|
—
|
|
|
21,975
|
|
|
—
|
|
|
|
|
|
|
|
|
|
|
|||||
Financial Liabilities
|
|
|
|
|
|
|
|
|
|
||||
Long-term debt:
|
|
|
|
|
|
|
|
|
|||||
7.25% Senior Notes
|
|
$
|
66,365
|
|
|
—
|
|
|
66,365
|
|
|
—
|
|
6.70% Senior Notes
|
|
123,104
|
|
|
—
|
|
|
123,104
|
|
|
—
|
|
|
5.375% Senior Notes
|
|
357,025
|
|
|
—
|
|
|
357,025
|
|
|
—
|
|
|
1.61% borrowings from FHLBNY
|
|
24,901
|
|
|
—
|
|
|
24,901
|
|
|
—
|
|
|
1.56% borrowings from FHLBNY
|
|
24,875
|
|
|
—
|
|
|
24,875
|
|
|
—
|
|
|
3.03% borrowings from FHLBI
|
|
63,002
|
|
|
—
|
|
|
63,002
|
|
|
—
|
|
|
Total long-term debt
|
|
$
|
659,272
|
|
|
—
|
|
|
659,272
|
|
|
—
|
|
($ in thousands)
|
March 31, 2020
|
||
Balance, December 31, 2019
|
$
|
6,400
|
|
Cumulative effect adjustment1
|
1,058
|
|
|
Balance, January 1, 2020
|
$
|
7,458
|
|
Current period provision for expected credit losses
|
11,195
|
|
|
Write-offs charged against the allowance
|
(653
|
)
|
|
Recoveries
|
—
|
|
|
Allowance for credit losses, end of period
|
$
|
18,000
|
|
|
|
March 31, 2020
|
||||||||||
($ in thousands)
|
|
Current
|
|
Past Due
|
|
Total Reinsurance Recoverables
|
||||||
Financial strength rating of rated reinsurers1
|
|
|
|
|
|
|
||||||
A++
|
|
$
|
20,835
|
|
|
$
|
—
|
|
|
$
|
20,835
|
|
A+
|
|
428,354
|
|
|
3,229
|
|
|
431,583
|
|
|||
A
|
|
25,915
|
|
|
—
|
|
|
25,915
|
|
|||
A-
|
|
508
|
|
|
—
|
|
|
508
|
|
|||
B++
|
|
316
|
|
|
94
|
|
|
410
|
|
|||
B+
|
|
21
|
|
|
—
|
|
|
21
|
|
|||
Total rated reinsurers
|
|
$
|
475,949
|
|
|
$
|
3,323
|
|
|
$
|
479,272
|
|
|
|
|
|
|
|
|
||||||
Non-rated reinsurers
|
|
|
|
|
|
|
||||||
Federal and state pools
|
|
80,245
|
|
|
60
|
|
|
80,305
|
|
|||
Other than federal and state pools
|
|
5,459
|
|
|
—
|
|
|
5,459
|
|
|||
Total non-rated reinsurers
|
|
$
|
85,704
|
|
|
$
|
60
|
|
|
$
|
85,764
|
|
|
|
|
|
|
|
|
||||||
Total reinsurance recoverable, gross
|
|
$
|
561,653
|
|
|
$
|
3,383
|
|
|
$
|
565,036
|
|
Less: allowance for credit losses2
|
|
(1,502
|
)
|
|
—
|
|
|
(1,502
|
)
|
|||
Total reinsurance recoverable, net
|
|
$
|
560,151
|
|
|
$
|
3,383
|
|
|
$
|
563,534
|
|
($ in thousands)
|
|
March 31, 2020
|
||
Balance, December 31, 2019
|
|
$
|
4,400
|
|
Cumulative effect adjustment1
|
|
(2,903
|
)
|
|
Balance, January 1, 2020
|
|
$
|
1,497
|
|
Current period provision for expected credit losses
|
|
5
|
|
|
Write-offs charged against the allowance
|
|
—
|
|
|
Recoveries
|
|
—
|
|
|
Allowance for credit losses, end of period
|
|
$
|
1,502
|
|
|
|
Quarter Ended March 31,
|
|||||
($ in thousands)
|
|
2020
|
|
2019
|
|||
Premiums written:
|
|
|
|
|
|
|
|
Direct
|
|
$
|
746,431
|
|
|
766,394
|
|
Assumed
|
|
6,043
|
|
|
6,555
|
|
|
Ceded
|
|
(105,147
|
)
|
|
(100,002
|
)
|
|
Net
|
|
$
|
647,327
|
|
|
672,947
|
|
Premiums earned:
|
|
|
|
|
|
|
|
Direct
|
|
$
|
754,892
|
|
|
728,037
|
|
Assumed
|
|
6,173
|
|
|
6,562
|
|
|
Ceded
|
|
(109,362
|
)
|
|
(102,026
|
)
|
|
Net
|
|
$
|
651,703
|
|
|
632,573
|
|
Loss and loss expenses incurred:
|
|
|
|
|
|
|
|
Direct
|
|
$
|
425,795
|
|
|
424,657
|
|
Assumed
|
|
4,898
|
|
|
5,265
|
|
|
Ceded
|
|
(30,369
|
)
|
|
(43,343
|
)
|
|
Net
|
|
$
|
400,324
|
|
|
386,579
|
|
Ceded to NFIP
|
|
Quarter Ended March 31,
|
|||||
($ in thousands)
|
|
2020
|
|
2019
|
|||
Ceded premiums written
|
|
$
|
(62,087
|
)
|
|
(60,013
|
)
|
Ceded premiums earned
|
|
(66,861
|
)
|
|
(62,263
|
)
|
|
Ceded loss and loss expenses incurred
|
|
(5,096
|
)
|
|
(13,686
|
)
|
|
|
Quarter Ended March 31,
|
|||||
($ in thousands)
|
|
2020
|
|
2019
|
|||
Gross reserve for loss and loss expense, at beginning of year
|
|
$
|
4,067,163
|
|
|
3,893,868
|
|
Less: reinsurance recoverable on unpaid loss and loss expense, at beginning of year1
|
|
547,066
|
|
|
537,388
|
|
|
Net reserve for loss and loss expense, at beginning of year
|
|
3,520,097
|
|
|
3,356,480
|
|
|
Incurred loss and loss expense for claims occurring in the:
|
|
|
|
|
|
|
|
Current year
|
|
407,276
|
|
|
397,253
|
|
|
Prior years
|
|
(6,952
|
)
|
|
(10,674
|
)
|
|
Total incurred loss and loss expense
|
|
400,324
|
|
|
386,579
|
|
|
Paid loss and loss expense for claims occurring in the:
|
|
|
|
|
|
|
|
Current year
|
|
70,610
|
|
|
73,964
|
|
|
Prior years
|
|
281,736
|
|
|
246,168
|
|
|
Total paid loss and loss expense
|
|
352,346
|
|
|
320,132
|
|
|
Net reserve for loss and loss expense, at end of period
|
|
3,568,075
|
|
|
3,422,927
|
|
|
Add: Reinsurance recoverable on unpaid loss and loss expense, at end of period
|
|
535,560
|
|
|
543,582
|
|
|
Gross reserve for loss and loss expense at end of period
|
|
$
|
4,103,635
|
|
|
3,966,509
|
|
•
|
Our Standard Commercial Lines, Standard Personal Lines, and E&S Lines are evaluated on before and after-tax underwriting results (net premiums earned, incurred loss and loss expense, policyholder dividends, policy acquisition costs, and other underwriting expenses), return on equity ("ROE") contribution, and combined ratios.
|
•
|
Our Investments segment is primarily evaluated on after-tax net investment income and its ROE contribution. After-tax net realized and unrealized gains and losses, which are not included in non-GAAP operating income, are also included in our Investment segment results.
|
Revenue by Segment
|
|
Quarter Ended March 31,
|
|||||
($ in thousands)
|
|
2020
|
|
2019
|
|||
Standard Commercial Lines:
|
|
|
|
|
|
|
|
Net premiums earned:
|
|
|
|
|
|
|
|
Commercial automobile
|
|
$
|
149,690
|
|
|
131,186
|
|
Workers compensation
|
|
66,706
|
|
|
78,715
|
|
|
General liability
|
|
164,580
|
|
|
161,525
|
|
|
Commercial property
|
|
93,869
|
|
|
86,067
|
|
|
Businessowners’ policies
|
|
27,036
|
|
|
26,081
|
|
|
Bonds
|
|
9,639
|
|
|
8,904
|
|
|
Other
|
|
5,060
|
|
|
4,706
|
|
|
Miscellaneous income
|
|
1,391
|
|
|
2,044
|
|
|
Total Standard Commercial Lines revenue
|
|
517,971
|
|
|
499,228
|
|
|
Standard Personal Lines:
|
|
|
|
|
|||
Net premiums earned:
|
|
|
|
|
|||
Personal automobile
|
|
42,487
|
|
|
43,163
|
|
|
Homeowners
|
|
31,490
|
|
|
32,130
|
|
|
Other
|
|
2,151
|
|
|
2,014
|
|
|
Miscellaneous income
|
|
434
|
|
|
276
|
|
|
Total Standard Personal Lines revenue
|
|
76,562
|
|
|
77,583
|
|
|
E&S Lines:
|
|
|
|
|
|||
Net premiums earned:
|
|
|
|
|
|||
Casualty lines
|
|
44,072
|
|
|
44,528
|
|
|
Property lines
|
|
14,923
|
|
|
13,554
|
|
|
Miscellaneous income
|
|
—
|
|
|
—
|
|
|
Total E&S Lines revenue
|
|
58,995
|
|
|
58,082
|
|
|
Investments:
|
|
|
|
|
|
|
|
Net investment income
|
|
55,967
|
|
|
50,618
|
|
|
Net realized and unrealized investment (losses) gains
|
|
(44,666
|
)
|
|
13,451
|
|
|
Total Investments revenue
|
|
11,301
|
|
|
64,069
|
|
|
Total revenues
|
|
$
|
664,829
|
|
|
698,962
|
|
Income Before and After Federal Income Tax
|
|
Quarter Ended March 31,
|
|||||
($ in thousands)
|
|
2020
|
|
2019
|
|||
Standard Commercial Lines:
|
|
|
|
|
|
|
|
Underwriting gain, before federal income tax
|
|
$
|
17,126
|
|
|
25,815
|
|
Underwriting gain, after federal income tax
|
|
13,529
|
|
|
20,394
|
|
|
Combined ratio
|
|
96.7
|
%
|
|
94.8
|
|
|
ROE contribution
|
|
2.4
|
|
|
4.4
|
|
|
|
|
|
|
|
|||
Standard Personal Lines:
|
|
|
|
|
|||
Underwriting gain, before federal income tax
|
|
$
|
387
|
|
|
3,167
|
|
Underwriting gain, after federal income tax
|
|
306
|
|
|
2,502
|
|
|
Combined ratio
|
|
99.5
|
%
|
|
95.9
|
|
|
ROE contribution
|
|
0.1
|
|
|
0.5
|
|
|
|
|
|
|
|
|||
E&S Lines:
|
|
|
|
|
|||
Underwriting gain, before federal income tax
|
|
$
|
3,844
|
|
|
4,579
|
|
Underwriting gain, after federal income tax
|
|
3,037
|
|
|
3,617
|
|
|
Combined ratio
|
|
93.5
|
%
|
|
92.1
|
|
|
ROE contribution
|
|
0.6
|
|
|
0.8
|
|
|
|
|
|
|
|
|||
Investments:
|
|
|
|
|
|
|
|
Net investment income
|
|
$
|
55,967
|
|
|
50,618
|
|
Net realized and unrealized investment (losses) gains
|
|
(44,666
|
)
|
|
13,451
|
|
|
Total investment segment income, before federal income tax
|
|
11,301
|
|
|
64,069
|
|
|
Tax on investment segment income
|
|
1,104
|
|
|
12,120
|
|
|
Total investment segment income, after federal income tax
|
|
$
|
10,197
|
|
|
51,949
|
|
ROE contribution of after-tax net investment income
|
|
8.5
|
|
|
8.9
|
|
Reconciliation of Segment Results to Income Before Federal Income Tax
|
|
Quarter Ended March 31,
|
|||||
($ in thousands)
|
|
2020
|
|
2019
|
|||
Underwriting gain
|
|
|
|
|
|||
Standard Commercial Lines
|
|
$
|
17,126
|
|
|
25,815
|
|
Standard Personal Lines
|
|
387
|
|
|
3,167
|
|
|
E&S Lines
|
|
3,844
|
|
|
4,579
|
|
|
Investment income
|
|
11,301
|
|
|
64,069
|
|
|
Total all segments
|
|
32,658
|
|
|
97,630
|
|
|
Interest expense
|
|
(7,601
|
)
|
|
(11,526
|
)
|
|
Corporate expenses
|
|
(9,060
|
)
|
|
(12,410
|
)
|
|
Income, before federal income tax
|
|
$
|
15,997
|
|
|
73,694
|
|
|
|
Pension Plan
|
|||||
|
|
Quarter Ended March 31,
|
|||||
($ in thousands)
|
|
2020
|
|
2019
|
|||
Net Periodic Pension Cost (Benefit):
|
|
|
|
|
|||
Interest cost
|
|
$
|
2,828
|
|
|
3,377
|
|
Expected return on plan assets
|
|
(5,477
|
)
|
|
(5,279
|
)
|
|
Amortization of unrecognized net actuarial loss
|
|
704
|
|
|
644
|
|
|
Total net periodic pension cost (benefit)1
|
|
$
|
(1,945
|
)
|
|
(1,258
|
)
|
|
|
Pension Plan
|
||||
|
|
Quarter Ended March 31,
|
||||
|
|
2020
|
|
2019
|
||
Weighted-Average Expense Assumptions:
|
|
|
|
|
||
Discount rate
|
|
3.33
|
%
|
|
4.46
|
%
|
Effective interest rate for calculation of interest cost
|
|
2.95
|
|
|
4.12
|
|
Expected return on plan assets
|
|
5.80
|
|
|
6.50
|
|
First Quarter 2020
|
|
|
|
|
|
|
||||
($ in thousands)
|
|
Gross
|
|
Tax
|
|
Net
|
||||
Net income
|
|
$
|
15,997
|
|
|
761
|
|
|
15,236
|
|
Components of other comprehensive loss:
|
|
|
|
|
|
|
|
|
|
|
Unrealized losses on investment securities:
|
|
|
|
|
|
|
|
|
|
|
Unrealized holding losses during the period
|
|
(93,981
|
)
|
|
(19,736
|
)
|
|
(74,245
|
)
|
|
Non-credit portion of OTTI recognized in OCI
|
|
(65,390
|
)
|
|
(13,732
|
)
|
|
(51,658
|
)
|
|
Amounts reclassified into net income:
|
|
|
|
|
|
|
||||
HTM securities
|
|
25
|
|
|
5
|
|
|
20
|
|
|
Realized losses on disposals and intent-to-sell OTTI on AFS securities
|
|
11,327
|
|
|
2,379
|
|
|
8,948
|
|
|
Credit loss expense recognized in OTTI
|
|
15,787
|
|
|
3,315
|
|
|
12,472
|
|
|
Total unrealized losses on investment securities
|
|
(132,232
|
)
|
|
(27,769
|
)
|
|
(104,463
|
)
|
|
Defined benefit pension and post-retirement plans:
|
|
|
|
|
|
|
|
|
|
|
Amounts reclassified into net income:
|
|
|
|
|
|
|
|
|
|
|
Net actuarial loss
|
|
754
|
|
|
158
|
|
|
596
|
|
|
Total defined benefit pension and post-retirement plans
|
|
754
|
|
|
158
|
|
|
596
|
|
|
Other comprehensive loss
|
|
(131,478
|
)
|
|
(27,611
|
)
|
|
(103,867
|
)
|
|
Comprehensive loss
|
|
$
|
(115,481
|
)
|
|
(26,850
|
)
|
|
(88,631
|
)
|
|
|
|
|
|
|
|
||||
|
|
|
|
|
|
|
||||
First Quarter 2019
|
|
|
|
|
|
|
||||
($ in thousands)
|
|
Gross
|
|
Tax
|
|
Net
|
||||
Net income
|
|
$
|
73,694
|
|
|
12,346
|
|
|
61,348
|
|
Components of OCI:
|
|
|
|
|
|
|
|
|
|
|
Unrealized gains on investment securities:
|
|
|
|
|
|
|
|
|
|
|
Unrealized holding gains during the period
|
|
102,926
|
|
|
21,613
|
|
|
81,313
|
|
|
Amounts reclassified into net income:
|
|
|
|
|
|
|
||||
HTM securities
|
|
(9
|
)
|
|
(2
|
)
|
|
(7
|
)
|
|
Realized gains on disposals and OTTI of AFS securities
|
|
(1,077
|
)
|
|
(226
|
)
|
|
(851
|
)
|
|
Total unrealized gains on investment securities
|
|
101,840
|
|
|
21,385
|
|
|
80,455
|
|
|
Defined benefit pension and post-retirement plans:
|
|
|
|
|
|
|
|
|
|
|
Amounts reclassified into net income:
|
|
|
|
|
|
|
|
|
|
|
Net actuarial loss
|
|
664
|
|
|
139
|
|
|
525
|
|
|
Total defined benefit pension and post-retirement plans
|
|
664
|
|
|
139
|
|
|
525
|
|
|
Other comprehensive income
|
|
102,504
|
|
|
21,524
|
|
|
80,980
|
|
|
Comprehensive income
|
|
$
|
176,198
|
|
|
33,870
|
|
|
142,328
|
|
March 31, 2020
|
|
|
|
Defined Benefit
Pension and Post-Retirement Plans
|
|
|
|||||||||||||
|
|
Net Unrealized Gains (Losses) on Investment Securities
|
|
|
Total AOCI
|
||||||||||||||
($ in thousands)
|
|
OTTI
Related1
|
|
HTM
Related
|
|
All
Other
|
|
Investments
Subtotal
|
|
|
|||||||||
Balance, December 31, 2019
|
|
$
|
(71
|
)
|
|
25
|
|
|
170,439
|
|
|
170,393
|
|
|
(88,643
|
)
|
|
81,750
|
|
OCI before reclassifications
|
|
(51,658
|
)
|
|
—
|
|
|
(74,245
|
)
|
|
(125,903
|
)
|
|
—
|
|
|
(125,903
|
)
|
|
Amounts reclassified from AOCI
|
|
12,472
|
|
|
20
|
|
|
8,948
|
|
|
21,440
|
|
|
596
|
|
|
22,036
|
|
|
Net current period OCI
|
|
(39,186
|
)
|
|
20
|
|
|
(65,297
|
)
|
|
(104,463
|
)
|
|
596
|
|
|
(103,867
|
)
|
|
Balance, March 31, 2020
|
|
$
|
(39,257
|
)
|
|
45
|
|
|
105,142
|
|
|
65,930
|
|
|
(88,047
|
)
|
|
(22,117
|
)
|
|
|
Quarter Ended March 31,
|
||||
($ in thousands)
|
|
2020
|
2019
|
|||
Operating lease cost, included in Other insurance expenses on the Consolidated Statements of Income
|
|
$
|
2,259
|
|
2,152
|
|
Finance lease cost:
|
|
|
|
|||
Amortization of assets, included in Other insurance expenses on the Consolidated Statements of Income
|
|
142
|
|
284
|
|
|
Interest on lease liabilities, included in Interest expense on the Consolidated Statements of Income
|
|
6
|
|
—
|
|
|
Total finance lease cost
|
|
148
|
|
284
|
|
|
|
|
|
|
|||
Variable lease cost, included in Other insurance expenses on the Consolidated Statements of Income
|
|
176
|
|
788
|
|
|
|
|
|
|
|||
Short-term lease cost, included in Other insurance expenses on the Consolidated Statements of Income
|
|
476
|
|
739
|
|
|
March 31, 2020
|
|
December 31, 2019
|
|
Weighted-average remaining lease term
|
|
|
|
|
Operating leases
|
6
|
years
|
6
|
years
|
Finance leases
|
2
|
|
2
|
|
Weighted-average discount rate
|
|
|
|
|
Operating leases
|
3.2
|
%
|
3.4
|
%
|
Finance leases
|
2.2
|
|
2.1
|
|
($ in thousands)
|
March 31, 2020
|
|
December 31, 2019
|
||||
Operating leases
|
|
|
|
||||
Other assets
|
$
|
28,270
|
|
|
$
|
26,535
|
|
Other liabilities
|
29,364
|
|
|
27,506
|
|
||
Finance leases
|
|
|
|
||||
Property and equipment - at cost, net of accumulated depreciation and amortization
|
615
|
|
|
731
|
|
||
Long-term debt
|
622
|
|
|
737
|
|
March 31, 2020
|
|
|
|
|
||||
($ in thousands)
|
|
Finance Leases
|
Operating Leases
|
Total
|
||||
Year ended December 31,
|
|
|
|
|
||||
2020 (excluding the three months ended March 31, 2020)
|
|
$
|
332
|
|
6,291
|
|
6,623
|
|
2021
|
|
248
|
|
6,372
|
|
6,620
|
|
|
2022
|
|
54
|
|
4,798
|
|
4,852
|
|
|
2023
|
|
—
|
|
3,434
|
|
3,434
|
|
|
2024
|
|
—
|
|
2,920
|
|
2,920
|
|
|
Thereafter
|
|
—
|
|
8,638
|
|
8,638
|
|
|
Total lease payments
|
|
634
|
|
32,453
|
|
33,087
|
|
|
Less: imputed interest
|
|
12
|
|
3,089
|
|
3,101
|
|
|
Total lease liabilities
|
|
$
|
622
|
|
29,364
|
|
29,986
|
|
December 31, 2019
|
|
|
|
|
||||
($ in thousands)
|
|
Finance Leases
|
Operating Leases
|
Total
|
||||
2020
|
|
$
|
451
|
|
8,244
|
|
8,695
|
|
2021
|
|
248
|
|
6,168
|
|
6,416
|
|
|
2022
|
|
54
|
|
4,590
|
|
4,644
|
|
|
2023
|
|
—
|
|
3,329
|
|
3,329
|
|
|
2024
|
|
—
|
|
2,920
|
|
2,920
|
|
|
Thereafter
|
|
—
|
|
8,638
|
|
8,638
|
|
|
Total lease payments
|
|
753
|
|
33,889
|
|
34,642
|
|
|
Less: imputed interest
|
|
16
|
|
2,995
|
|
3,011
|
|
|
Less: leases that have not yet commenced
|
|
—
|
|
3,388
|
|
3,388
|
|
|
Total lease liabilities
|
|
$
|
737
|
|
27,506
|
|
28,243
|
|
|
|
Quarter Ended March 31,
|
|||||
($ in thousands)
|
|
2020
|
|
2019
|
|||
Tax at statutory rate (21% in 2020 and 2019)
|
|
$
|
3,359
|
|
|
15,476
|
|
Tax-advantaged interest
|
|
(1,214
|
)
|
|
(1,253
|
)
|
|
Dividends received deduction
|
|
(55
|
)
|
|
(83
|
)
|
|
Executive compensation
|
|
351
|
|
|
473
|
|
|
Stock-based compensation
|
|
(1,881
|
)
|
|
(2,635
|
)
|
|
Other
|
|
201
|
|
|
368
|
|
|
Federal income tax expense
|
|
$
|
761
|
|
|
12,346
|
|
•
|
Standard Commercial Lines;
|
•
|
Standard Personal Lines;
|
•
|
E&S Lines; and
|
•
|
Investments.
|
•
|
Current Events and economic impacts from the COVID-19-related government directives;
|
•
|
Critical Accounting Policies and Estimates;
|
•
|
Financial Highlights of Results for the First Quarters ended March 31, 2020 (“First Quarter 2020”) and March 31, 2019 (“First Quarter 2019”);
|
•
|
Results of Operations and Related Information by Segment;
|
•
|
Federal Income Taxes;
|
•
|
Financial Condition, Liquidity, and Capital Resources;
|
•
|
Ratings;
|
•
|
Off-Balance Sheet Arrangements; and
|
•
|
Contractual Obligations, Contingent Liabilities, and Commitments.
|
•
|
A $75 million increase in our return audit and mid-term endorsement premium accrual to reflect the anticipated decline in sales and payroll exposures on the workers compensation and general liability lines of business based on our estimate of reduced exposures due to the significant economic slowdown. Net of reduced losses and commissions, we expect the earned impact of the return audit and mid-term endorsement premium accrual to reduce pre-tax underwriting results for the full year by $15 million, of which $4 million was recorded in First Quarter 2020;
|
•
|
A $10 million pre-tax incurred but not reported ("IBNR") reserve estimate for losses related to a small portion of our policies that include a $25,000 sub-limited coverage for specified extra expenses to clean or disinfect a property when ordered by a Board of Health; and
|
•
|
An additional allowance for uncollectible premiums receivable of $10.5 million, pre-tax, after evaluating the recoverability of our premiums receivable in light of the COVID-19-related billing accommodations we announced in First Quarter 2020 and the impact of recent state regulations that provided for the deferral of payments without cancellation for a period up to 90 days in certain states, which will increase earned but uncollected premiums. We have offered customers, sometimes in collaboration with or at the direction of our regulators, individualized payment flexibility and suspended the effect of policy cancellations, late payment notices, and late or reinstatement fees.
|
•
|
We recognized $31.6 million in pre-tax net other-than-temporary impairments ("OTTI"), $15.6 million of which represents impairments on securities we intend to sell to provide our investment managers with flexibility to trade and optimize our investment portfolio given the uncertainty of the financial markets and their continued volatility. The remaining $16.0 million in OTTI losses were credit-related impairment losses under the new ASU 2016-13, Financial Instruments - Credit Losses ("CECL") accounting standard. The CECL impairments reflect the significant widening of credit spreads and reduced future economic activity over the near-term due to COVID-19. For more details about these and other items related to our financial results, see the "Financial Highlights of Results for First Quarter 2020 and First Quarter 2019" section below.
|
•
|
Due to the unprecedented financial market volatility and resulting significant decline in fixed income and equity market valuations in March, combined with the COVID-19-related governmental orders, and out of abundance of caution, we increased our short-term debt by $302 million in March 2020 through borrowings from the Federal Home Loan Bank of New York ("FHLBNY") and the the Federal Home Loan Bank of Indianapolis (“FHLBI”) and our Credit Agreement ("Line of Credit"). Our primary objective was to increase liquidity and operating flexibility at the Parent and Insurance Subsidiaries. We expect to repay these short-term borrowings, which were invested in highly liquid money market funds, in the short- to medium-term. For further details, see Note 5. "Indebtedness" in Item 1. "Financial Statements." of this Form 10-Q.
|
•
|
As our other investment portfolio largely consists of alternative investments that are recorded on a one quarter lag, the impact of the First Quarter 2020 financial market volatility on those alternative investments will not be reflected in our consolidated financial statements until the second quarter of 2020. While it is extremely difficult to accurately estimate the potential losses associated with this portion of our investment portfolio, we performed a sensitivity analysis that indicates a potential pre-tax loss of between $15 million and $20 million. However, while these are our current estimates, our second quarter net investment income will reflect the actual decrease reported by these alternative investments as of March 31, 2020.
|
($ and shares in thousands, except per share amounts)
|
|
Quarter Ended March 31,
|
|
Change
% or Points
|
|
||||||
|
2020
|
|
2019
|
|
|
||||||
Financial Data:
|
|
|
|
|
|
|
|
||||
Revenues
|
|
$
|
664,829
|
|
|
698,962
|
|
|
(5
|
)
|
%
|
After-tax net investment income
|
|
45,483
|
|
|
41,323
|
|
|
10
|
|
|
|
After-tax underwriting income
|
|
16,872
|
|
|
26,513
|
|
|
(36
|
)
|
|
|
Net income before federal income tax
|
|
15,997
|
|
|
73,694
|
|
|
(78
|
)
|
|
|
Net income
|
|
15,236
|
|
|
61,348
|
|
|
(75
|
)
|
|
|
|
|
|
|
|
|
|
|
||||
Key Metrics:
|
|
|
|
|
|
|
|
||||
Combined ratio
|
|
96.7
|
%
|
|
94.7
|
|
|
2.0
|
|
pts
|
|
Invested assets per dollar of stockholders' equity
|
|
$
|
3.26
|
|
|
3.24
|
|
|
1
|
|
%
|
ROE
|
|
2.8
|
|
|
13.2
|
|
|
(10.4
|
)
|
pts
|
|
Statutory premiums to surplus ratio
|
|
1.4x
|
|
|
1.4x
|
|
|
—
|
|
|
|
|
|
|
|
|
|
|
|
||||
Per Share Amounts:
|
|
|
|
|
|
|
|
||||
Diluted net income per share
|
|
0.25
|
|
|
1.02
|
|
|
(75
|
)
|
%
|
|
Book value per share
|
|
$
|
35.11
|
|
|
32.51
|
|
|
8
|
|
|
Dividends declared per share to stockholders
|
|
0.23
|
|
|
0.20
|
|
|
15
|
|
|
|
|
|
|
|
|
|
|
|
||||
Non-GAAP Information:
|
|
|
|
|
|
|
|
||||
Non-GAAP operating income2
|
|
$
|
50,522
|
|
|
54,020
|
|
|
(6
|
)
|
%
|
Diluted non-GAAP operating income per share2
|
|
0.84
|
|
|
0.90
|
|
|
(7
|
)
|
|
|
Annualized non-GAAP operating ROE2
|
|
9.4
|
%
|
|
11.6
|
|
|
(2.2
|
)
|
pts
|
1
|
Refer to the Glossary of Terms attached to our 2019 Annual Report as Exhibit 99.1 for definitions of terms used of this Form 10-Q.
|
2
|
Non-GAAP operating income is an important financial measure that we, analysts, and investors use because the timing of the realization of net investment gains and losses on sales of securities in any given period is largely discretionary. In addition, net realized investment gains and losses, OTTI charged to earnings, unrealized gains and losses on equity securities, and debt retirement costs could distort the analysis of trends.
|
Reconciliation of net income to non-GAAP operating income
|
|
Quarter Ended March 31,
|
|||||
($ in thousands)
|
|
2020
|
|
2019
|
|||
Net income
|
|
$
|
15,236
|
|
|
61,348
|
|
Net realized and unrealized losses (gains), before tax
|
|
44,666
|
|
|
(13,451
|
)
|
|
Debt retirement costs, before tax
|
|
—
|
|
|
4,175
|
|
|
Tax on reconciling items
|
|
(9,380
|
)
|
|
1,948
|
|
|
Non-GAAP operating income
|
|
$
|
50,522
|
|
|
54,020
|
|
Reconciliation of net income per diluted share to non-GAAP operating income per diluted share
|
|
Quarter Ended March 31,
|
|||||
|
|
2020
|
|
2019
|
|||
Net income per diluted share
|
|
$
|
0.25
|
|
|
1.02
|
|
Net realized and unrealized losses (gains), before tax
|
|
0.74
|
|
|
(0.22
|
)
|
|
Debt retirement costs, before tax
|
|
—
|
|
|
0.07
|
|
|
Tax on reconciling items
|
|
(0.15
|
)
|
|
0.03
|
|
|
Non-GAAP operating income per diluted share
|
|
$
|
0.84
|
|
|
0.90
|
|
Reconciliation of annualized ROE to annualized non-GAAP operating ROE
|
|
Quarter Ended March 31,
|
||||
|
|
2020
|
|
2019
|
||
Annualized ROE
|
|
2.8
|
%
|
|
13.2
|
|
Net realized and unrealized losses (gains), before tax
|
|
8.3
|
|
|
(2.9
|
)
|
Debt retirement costs, before tax
|
|
—
|
|
|
0.9
|
|
Tax on reconciling items
|
|
(1.7
|
)
|
|
0.4
|
|
Annualized non-GAAP operating ROE
|
|
9.4
|
%
|
|
11.6
|
|
Annualized ROE Components
|
|
Quarter Ended March 31,
|
|
Change Points
|
|||||
|
|
2020
|
|
2019
|
|
||||
Standard Commercial Lines Segment
|
|
2.4
|
%
|
|
4.4
|
|
|
(2.0
|
)
|
Standard Personal Lines Segment
|
|
0.1
|
|
|
0.5
|
|
|
(0.4
|
)
|
E&S Lines Segment
|
|
0.6
|
|
|
0.8
|
|
|
(0.2
|
)
|
Total insurance operations
|
|
3.1
|
|
|
5.7
|
|
|
(2.6
|
)
|
|
|
|
|
|
|
|
|||
Investment income
|
|
8.5
|
|
|
8.9
|
|
|
(0.4
|
)
|
Net realized and unrealized (losses) gains
|
|
(6.6
|
)
|
|
2.3
|
|
|
(8.9
|
)
|
Total investments segment
|
|
1.9
|
|
|
11.2
|
|
|
(9.3
|
)
|
|
|
|
|
|
|
|
|||
Other
|
|
(2.2
|
)
|
|
(3.7
|
)
|
|
1.5
|
|
|
|
|
|
|
|
|
|||
Annualized ROE
|
|
2.8
|
%
|
|
13.2
|
|
|
(10.4
|
)
|
All Lines
|
|
Quarter Ended March 31,
|
|
Change % or Points
|
|
||||||
($ in thousands)
|
|
2020
|
|
2019
|
|
|
|||||
Insurance Operations Results:
|
|
|
|
|
|
||||||
Net premiums written ("NPW")
|
|
$
|
647,327
|
|
|
672,947
|
|
|
(4
|
)
|
%
|
Net premiums earned (“NPE”)
|
|
651,703
|
|
|
632,573
|
|
|
3
|
|
|
|
Less:
|
|
|
|
|
|
|
|
|
|||
Loss and loss expense incurred
|
|
400,324
|
|
|
386,579
|
|
|
4
|
|
|
|
Net underwriting expenses incurred
|
|
229,237
|
|
|
210,653
|
|
|
9
|
|
|
|
Dividends to policyholders
|
|
785
|
|
|
1,780
|
|
|
(56
|
)
|
|
|
Underwriting income
|
|
$
|
21,357
|
|
|
33,561
|
|
|
(36
|
)
|
%
|
Combined Ratios:
|
|
|
|
|
|
|
|
|
|||
Loss and loss expense ratio
|
|
61.4
|
|
%
|
61.1
|
|
|
0.3
|
|
pts
|
|
Underwriting expense ratio
|
|
35.2
|
|
|
33.3
|
|
|
1.9
|
|
|
|
Dividends to policyholders ratio
|
|
0.1
|
|
|
0.3
|
|
|
(0.2
|
)
|
|
|
Combined ratio
|
|
96.7
|
|
|
94.7
|
|
|
2.0
|
|
|
|
First Quarter 2020
|
|
First Quarter 2019
|
|
|
|||||||||||
($ in millions)
|
Loss and Loss Expense Incurred
|
Impact on
Loss and Loss Expense Ratio |
|
|
Loss and Loss
Expense Incurred |
Impact on
Loss and Loss Expense Ratio |
|
Change in Ratio
|
|
|||||||
Catastrophe losses
|
$
|
33.2
|
|
5.1
|
|
pts
|
|
$
|
20.9
|
|
3.3
|
|
pts
|
1.8
|
|
pts
|
(Favorable) prior year casualty reserve development
|
(10.0
|
)
|
(1.5
|
)
|
|
|
(10.0
|
)
|
(1.6
|
)
|
|
0.1
|
|
|
||
Non-catastrophe property loss and loss expenses1
|
108.1
|
|
16.6
|
|
|
|
108.0
|
|
17.1
|
|
|
(0.5
|
)
|
|
||
Total
|
131.3
|
|
20.2
|
|
|
|
118.9
|
|
18.8
|
|
|
1.4
|
|
|
(Favorable)/Unfavorable Prior Year Casualty Reserve Development
|
Quarter Ended March 31,
|
|||||
($ in millions)
|
2020
|
|
2019
|
|||
General liability
|
$
|
—
|
|
|
(2.0
|
)
|
Workers compensation
|
(10.0
|
)
|
|
(8.0
|
)
|
|
Total Standard Commercial Lines
|
(10.0
|
)
|
|
(10.0
|
)
|
|
|
|
|
|
|||
Total (favorable) prior year casualty reserve development
|
$
|
(10.0
|
)
|
|
(10.0
|
)
|
|
|
|
|
|||
(Favorable) impact on loss ratio
|
(1.5
|
)
|
pts
|
(1.6
|
)
|
•
|
Actively managing the investment portfolio to minimize the impact of lower interest rates on after-tax yields while managing credit, duration, and liquidity risk through our international external investment managers with great depth of expertise. The sharp decline in equity markets and expected values of alternative investments during the First Quarter 2020, and a prolonged low interest rate environment, partially offset by widening credit spreads, continue to put downward pressure on industry-wide investment portfolio returns. Lower investment returns will force the industry to improve its underwriting results to generate adequate returns. We are well positioned with sophisticated underwriting and pricing tools, and appropriately priced in-force book of business to continue to generate profitable underwriting results.
|
•
|
Continuing to achieve written renewal pure price increases that meet or exceed expected loss trend and delivering on our strategy for continued disciplined growth. Our first quarter overall renewal pure pricing was 4.0%. While we continue to navigate a challenging economic environment, we are comfortable with the overall price adequacy of our book of business, obtaining renewal pure price increases that have been in line with expected loss trend. As we look forward, we will continue to maintain adequate profitability by providing relief to our customers and balancing the need for pricing.
|
•
|
Delivering on our strategy for continued disciplined growth. We have consistently maintained a disciplined underwriting appetite over the past decade. In the current economic environment, we continue to work with our agents to provide our policyholders the support they need. Our field-based model, which provides high-touch service to our policyholders and agents for safety management, claims handling, and underwriting, is a clear advantage in the current environment. We will continue working to achieve our longer-term Standard Commercial Lines target to attain a 3% market share in the states in which we operate, by appointing distribution partners representing approximately 25% of their markets and seeking an average share of wallet of 12% with these partners. This goal represents an additional premium opportunity of about $3 billion.
|
•
|
Identifying opportunities to enhance operational efficiencies, and evaluating process improvements by better leveraging technologies, automation, and robotics, to lower our expense ratio over time. While we recognize it is essential to continue investing in initiatives related to our technology platforms, sophisticated underwriting tools, and customer experience, we are committed to balancing these goals with an efficient operating structure. As previously discussed, our expense ratio was elevated this quarter due to COVID-19 impacts, and in the short-term, we have taken actions to reduce our expenses. Over the longer term, we will focus on right-sizing our expense structure to meet the business opportunity set, and we will seek meaningful opportunities to generate efficiencies through process re-design and technological improvements.
|
•
|
A GAAP combined ratio, excluding catastrophe losses, of between 92% and 93%. This represents an increase from our prior guidance of 91.5% and is primarily due to pressure on the expense ratio from the estimated full-year impact of COVID-19. This also assumes no additional prior year development;
|
•
|
Catastrophe losses of 4.5 points on the combined ratio, reflecting higher than expected catastrophe losses through April, combined with lower earned premium. Because COVID-19 has not been designated a catastrophe event by the Insurance Services Office's Property Claims Services unit, such losses are not included in this ratio;
|
•
|
After-tax net investment income of approximately $160 million, down from our prior guidance of $185 million, principally due to an expected change in our full-year after-tax net investment income from alternative investments. We now expect a range of between $10 million and $15 million in after-tax net investment losses from our alternative investments, compared to our prior estimate of a $14 million gain;
|
•
|
An overall effective tax rate of approximately 18.5%, which includes an effective tax rate of 18.5% for net investment income, reflecting a tax rate of 5.25% for tax-advantaged municipal bonds and a tax rate of 21% for all other items; and
|
•
|
Weighted average shares of 60.5 million on a diluted basis.
|
|
|
Quarter Ended March 31,
|
|
Change
% or
Points
|
|
||||||
($ in thousands)
|
|
2020
|
|
2019
|
|
|
|||||
Insurance Segments Results:
|
|
|
|
|
|
|
|
|
|
|
|
NPW
|
|
$
|
518,432
|
|
|
546,683
|
|
|
(5
|
)
|
%
|
NPE
|
|
516,580
|
|
|
497,184
|
|
|
4
|
|
|
|
Less:
|
|
|
|
|
|
|
|
|
|
||
Loss and loss expense incurred
|
|
312,158
|
|
|
298,809
|
|
|
4
|
|
|
|
Net underwriting expenses incurred
|
|
186,511
|
|
|
170,780
|
|
|
9
|
|
|
|
Dividends to policyholders
|
|
785
|
|
|
1,780
|
|
|
(56
|
)
|
|
|
Underwriting income
|
|
$
|
17,126
|
|
|
25,815
|
|
|
(34
|
)
|
%
|
Combined Ratios:
|
|
|
|
|
|
|
|
|
|
|
|
Loss and loss expense ratio
|
|
60.4
|
|
%
|
60.1
|
|
|
0.3
|
|
pts
|
|
Underwriting expense ratio
|
|
36.1
|
|
|
34.3
|
|
|
1.8
|
|
|
|
Dividends to policyholders ratio
|
|
0.2
|
|
|
0.4
|
|
|
(0.2
|
)
|
|
|
Combined ratio
|
|
96.7
|
|
|
94.8
|
|
|
1.9
|
|
|
|
|
Quarter Ended March 31,
|
|
Change
% or Points |
|
|||||
($ in millions)
|
|
2020
|
|
2019
|
|
|
||||
Direct new business
|
|
$
|
115.4
|
|
|
109.0
|
|
|
6
|
%
|
Renewal pure price increases
|
|
4.0
|
|
|
3.4
|
|
|
0.6
|
|
|
Retention
|
|
85
|
|
%
|
84
|
|
|
1
|
pts
|
|
First Quarter 2020
|
|
First Quarter 2019
|
|
|
||||||||||
($ in millions)
|
Loss and Loss Expense Incurred
|
Impact on
Loss and Loss Expense Ratio |
|
|
Loss and Loss
Expense Incurred |
Impact on
Loss and Loss Expense Ratio |
|
Change in Ratio
|
|
||||||
Catastrophe losses
|
$
|
20.7
|
|
4.0
|
|
pts
|
|
$
|
16.0
|
|
3.2
|
|
pts
|
0.8
|
pts
|
Non-catastrophe property loss and loss expenses1
|
79.6
|
|
15.4
|
|
|
|
74.4
|
|
15.0
|
|
|
0.4
|
|
||
(Favorable) prior year casualty reserve development
|
(10.0
|
)
|
(1.9
|
)
|
|
|
(10.0
|
)
|
(2.0
|
)
|
|
0.1
|
|
||
Total
|
90.3
|
|
17.5
|
|
|
|
80.4
|
|
16.2
|
|
|
1.3
|
|
General Liability
|
|||||||||||
|
|
Quarter Ended March 31,
|
|
Change
% or
Points
|
|
||||||
($ in thousands)
|
|
2020
|
|
2019
|
|
|
|||||
NPW1
|
|
$
|
150,794
|
|
|
178,699
|
|
|
(16
|
)
|
%
|
Direct new business
|
|
35,886
|
|
|
32,185
|
|
|
11
|
|
|
|
Retention
|
|
86
|
|
%
|
85
|
|
|
1
|
|
pts
|
|
Renewal pure price increases
|
|
3.8
|
|
|
2.4
|
|
|
1.4
|
|
|
|
NPE
|
|
$
|
164,580
|
|
|
161,525
|
|
|
2
|
|
%
|
Underwriting income
|
|
13,074
|
|
|
19,049
|
|
|
(31
|
)
|
|
|
Combined ratio
|
|
92.1
|
|
%
|
88.2
|
|
|
3.9
|
|
pts
|
|
% of total Standard Commercial Lines NPW
|
|
29
|
|
|
33
|
|
|
|
|
|
|
First Quarter 2020
|
First Quarter 2019
|
|
|
|||||||||
($ in millions)
|
Loss and Loss Expense Incurred
|
Impact on
Combined Ratio |
|
Loss and Loss Expense Incurred
|
Impact on
Combined Ratio |
|
Change
Points
|
|
|||||
(Favorable) prior year casualty reserve development
|
$
|
—
|
|
—
|
pts
|
$
|
(2.0
|
)
|
(1.2
|
)
|
pts
|
1.2
|
pts
|
Commercial Automobile
|
|||||||||||
|
|
Quarter Ended March 31,
|
|
Change
% or
Points
|
|
||||||
($ in thousands)
|
|
2020
|
|
2019
|
|
|
|||||
NPW
|
|
$
|
168,310
|
|
|
147,245
|
|
|
14
|
|
%
|
Direct new business
|
|
28,857
|
|
|
28,190
|
|
|
2
|
|
|
|
Retention
|
|
85
|
|
%
|
82
|
|
|
3
|
|
pts
|
|
Renewal pure price increases
|
|
7.6
|
|
|
7.3
|
|
|
0.3
|
|
|
|
NPE
|
|
$
|
149,690
|
|
|
131,186
|
|
|
14
|
|
%
|
Underwriting loss
|
|
(774
|
)
|
|
(8,721
|
)
|
|
91
|
|
|
|
Combined ratio
|
|
100.5
|
|
%
|
106.6
|
|
|
(6.1
|
)
|
pts
|
|
% of total Standard Commercial Lines NPW
|
|
32
|
|
|
27
|
|
|
|
|
|
|
First Quarter 2020
|
|
First Quarter 2019
|
|
|
|
|||||||||||
($ in millions)
|
Loss and Loss Expense Incurred
|
Impact on
Combined Ratio |
|
|
Loss and Loss Expense Incurred
|
Impact on
Combined Ratio |
|
|
Change in Ratio
|
|
|||||||
Non-catastrophe property loss and loss expenses
|
$
|
23.0
|
|
15.4
|
|
pts
|
|
$
|
25.1
|
|
19.1
|
|
pts
|
|
(3.7
|
)
|
pts
|
Catastrophe losses
|
0.3
|
|
0.2
|
|
|
|
0.2
|
|
0.1
|
|
|
|
0.1
|
|
|
||
Total
|
23.3
|
|
15.6
|
|
|
|
25.3
|
|
19.2
|
|
|
|
(3.6
|
)
|
|
Workers Compensation
|
|||||||||||
|
|
Quarter Ended March 31,
|
|
Change
% or
Points
|
|
||||||
($ in thousands)
|
|
2020
|
|
2019
|
|
|
|||||
NPW1
|
|
$
|
51,196
|
|
|
85,065
|
|
|
(40
|
)
|
%
|
Direct new business
|
|
15,357
|
|
|
16,948
|
|
|
(9
|
)
|
|
|
Retention
|
|
84
|
|
%
|
84
|
|
|
—
|
|
pts
|
|
Renewal pure price decreases
|
|
(2.6
|
)
|
|
(1.6
|
)
|
|
(1.0
|
)
|
|
|
NPE
|
|
$
|
66,706
|
|
|
78,715
|
|
|
(15
|
)
|
%
|
Underwriting income
|
|
11,035
|
|
|
10,719
|
|
|
3
|
|
|
|
Combined ratio
|
|
83.5
|
|
%
|
86.4
|
|
|
(2.9
|
)
|
pts
|
|
% of total Standard Commercial Lines NPW
|
|
10
|
|
|
16
|
|
|
|
|
|
|
First Quarter 2020
|
First Quarter 2019
|
|
|
|
|||||||||||
($ in millions)
|
Loss and Loss Expense Incurred
|
Impact on
Combined Ratio |
|
Loss and Loss Expense Incurred
|
Impact on
Combined Ratio |
|
|
Change
Points
|
|
|||||||
(Favorable) prior year casualty reserve development
|
$
|
(10.0
|
)
|
(15.0
|
)
|
pts
|
$
|
(8.0
|
)
|
(10.2
|
)
|
pts
|
|
(4.8
|
)
|
pts
|
Commercial Property
|
|
|
|
|
|
|
|
||||
|
|
Quarter Ended March 31,
|
|
Change
% or
Points
|
|
||||||
($ in thousands)
|
|
2020
|
|
2019
|
|
|
|||||
NPW
|
|
$
|
103,126
|
|
|
93,029
|
|
|
11
|
|
%
|
Direct new business
|
|
24,586
|
|
|
21,042
|
|
|
17
|
|
|
|
Retention
|
|
84
|
|
%
|
83
|
|
|
1
|
|
pts
|
|
Renewal pure price increases
|
|
4.2
|
|
|
3.5
|
|
|
0.7
|
|
|
|
NPE
|
|
$
|
93,869
|
|
|
86,067
|
|
|
9
|
|
%
|
Underwriting (loss) income
|
|
(8,552
|
)
|
|
1,903
|
|
|
(549
|
)
|
|
|
Combined ratio
|
|
109.1
|
|
%
|
97.8
|
|
|
11.3
|
|
pts
|
|
% of total Standard Commercial Lines NPW
|
|
20
|
|
|
17
|
|
|
|
|
|
|
First Quarter 2020
|
|
First Quarter 2019
|
|
|
|
||||||||
($ in millions)
|
Loss and Loss Expense Incurred
|
Impact on
Combined Ratio |
|
|
Loss and Loss Expense Incurred
|
Impact on
Combined Ratio |
|
|
Change
% or
Points
|
|
||||
Catastrophe losses
|
$
|
19.7
|
|
20.9
|
pts
|
|
$
|
12.5
|
|
14.6
|
pts
|
|
6.3
|
pts
|
Non-catastrophe property loss and loss expenses1
|
45.6
|
|
48.6
|
|
|
39.1
|
|
45.5
|
|
|
3.1
|
|
||
Total
|
65.3
|
|
69.5
|
|
|
51.6
|
|
60.1
|
|
|
9.4
|
|
|
|
Quarter Ended March 31,
|
|
Change
% or
Points
|
|
|
||||||
($ in thousands)
|
|
2020
|
|
2019
|
|
|
|
|||||
Insurance Segments Results:
|
|
|
|
|
|
|
|
|
|
|
|
|
NPW
|
|
$
|
67,640
|
|
|
69,369
|
|
|
(2
|
)
|
|
%
|
NPE
|
|
76,128
|
|
|
77,307
|
|
|
(2
|
)
|
|
|
|
Less:
|
|
|
|
|
|
|
|
|
|
|||
Loss and loss expense incurred
|
|
54,332
|
|
|
53,070
|
|
|
2
|
|
|
|
|
Net underwriting expenses incurred
|
|
21,409
|
|
|
21,070
|
|
|
2
|
|
|
|
|
Underwriting (loss) income
|
|
$
|
387
|
|
|
3,167
|
|
|
(88
|
)
|
|
%
|
Combined Ratios:
|
|
|
|
|
|
|
|
|
|
|||
Loss and loss expense ratio
|
|
71.4
|
|
%
|
68.6
|
|
|
2.8
|
|
|
pts
|
|
Underwriting expense ratio
|
|
28.1
|
|
|
27.3
|
|
|
0.8
|
|
|
|
|
Combined ratio
|
|
99.5
|
|
|
95.9
|
|
|
3.6
|
|
|
|
|
|
Quarter Ended March 31,
|
Change
% or Points |
|
||||||
($ in millions)
|
|
2020
|
|
2019
|
|
|||||
Direct new business
|
|
$
|
9.9
|
|
|
10.3
|
|
(4
|
)
|
%
|
Retention
|
|
83
|
|
%
|
84
|
|
(1
|
)
|
pts
|
|
Renewal pure price increases
|
|
3.7
|
|
|
5.2
|
|
(1.5
|
)
|
|
|
First Quarter 2020
|
|
First Quarter 2019
|
|
|
|||||||||||
($ in millions)
|
Loss and Loss Expense Incurred
|
Impact on
Loss and Loss Expense Ratio
|
|
|
Loss and Loss
Expense
Incurred
|
Impact on
Loss and Loss Expense Ratio
|
|
Change in Ratio
|
|
|||||||
Catastrophe losses
|
12.0
|
|
15.7
|
|
|
|
4.1
|
|
5.3
|
|
|
10.4
|
|
pts
|
||
Non-catastrophe property loss and loss expenses
|
$
|
22.8
|
|
30.0
|
|
pts
|
|
$
|
29.1
|
|
37.6
|
|
pts
|
(7.6
|
)
|
|
Total
|
34.8
|
|
45.7
|
|
|
|
33.2
|
|
42.9
|
|
|
2.8
|
|
|
|
|
Quarter Ended March 31,
|
|
Change
% or
Points
|
|
||||||
($ in thousands)
|
|
2020
|
|
2019
|
|
|
|||||
Insurance Segments Results:
|
|
|
|
|
|
|
|
|
|
|
|
NPW
|
|
$
|
61,255
|
|
|
56,895
|
|
|
8
|
|
%
|
NPE
|
|
58,995
|
|
|
58,082
|
|
|
2
|
|
|
|
Less:
|
|
|
|
|
|
|
|
|
|
|
|
Loss and loss expense incurred
|
|
33,834
|
|
|
34,700
|
|
|
(2
|
)
|
|
|
Net underwriting expenses incurred
|
|
21,317
|
|
|
18,803
|
|
|
13
|
|
|
|
Underwriting income
|
|
$
|
3,844
|
|
|
4,579
|
|
|
(16
|
)
|
%
|
Combined Ratios:
|
|
|
|
|
|
|
|
|
|
|
|
Loss and loss expense ratio
|
|
57.4
|
|
%
|
59.7
|
|
|
(2.3
|
)
|
pts
|
|
Underwriting expense ratio
|
|
36.1
|
|
|
32.4
|
|
|
3.7
|
|
|
|
Combined ratio
|
|
93.5
|
|
|
92.1
|
|
|
1.4
|
|
|
|
First Quarter 2020
|
|
|
First Quarter 2019
|
|
|
|
|||||
($ in millions)
|
Loss and Loss Expense Incurred
|
Impact on
Loss and Loss Expense Ratio |
|
|
Loss and Loss
Expense Incurred |
Impact on
Loss and Loss Expense Ratio |
|
Change in Ratio
|
|
|||
Catastrophe losses
|
0.5
|
|
0.8
|
|
|
0.8
|
|
1.4
|
|
(0.6
|
)
|
pts
|
Non-catastrophe property loss and loss expenses
|
5.7
|
|
9.7
|
|
|
4.5
|
|
7.8
|
|
1.9
|
|
|
Total
|
6.2
|
|
10.5
|
|
|
5.3
|
|
9.2
|
|
1.3
|
|
|
Total Invested Assets
|
|
|
|
|
|
|
|
||||
($ in thousands)
|
|
March 31, 2020
|
|
December 31, 2019
|
|
Change
|
|
||||
Total invested assets
|
|
$
|
6,842,077
|
|
|
6,688,654
|
|
|
2
|
|
%
|
Invested assets per dollar of stockholders' equity
|
|
3.26
|
|
|
3.05
|
|
|
7
|
|
|
|
Unrealized gain – before tax1
|
|
67,195
|
|
|
216,564
|
|
|
(69
|
)
|
|
|
Unrealized gain – after tax1
|
|
53,084
|
|
|
171,085
|
|
|
(69
|
)
|
|
|
|
Quarter Ended March 31,
|
|
Change
% or Points |
|
||||||
($ in thousands)
|
|
2020
|
|
2019
|
|
||||||
Fixed income securities
|
|
$
|
50,253
|
|
|
49,033
|
|
|
2
|
%
|
|
Commercial mortgage loans ("CMLs")
|
|
62
|
|
|
—
|
|
|
NM
|
|
|
|
Equity securities
|
|
1,552
|
|
|
1,640
|
|
|
(5
|
)
|
|
|
Short-term investments
|
|
1,166
|
|
|
2,044
|
|
|
(43
|
)
|
|
|
Other investments
|
|
6,342
|
|
|
660
|
|
|
861
|
|
|
|
Investment expenses
|
|
(3,408
|
)
|
|
(2,759
|
)
|
|
(24
|
)
|
|
|
Net investment income earned – before tax
|
|
55,967
|
|
|
50,618
|
|
|
11
|
|
|
|
Net investment income tax expense
|
|
(10,484
|
)
|
|
(9,295
|
)
|
|
(13
|
)
|
|
|
Net investment income earned – after tax
|
|
$
|
45,483
|
|
|
41,323
|
|
|
10
|
|
|
Effective tax rate
|
|
18.7
|
%
|
|
18.4
|
|
|
0.3
|
|
pts
|
|
Annualized after-tax yield on fixed income securities
|
|
2.7
|
|
|
3.0
|
|
|
(0.3
|
)
|
|
|
Annualized after-tax yield on investment portfolio
|
|
2.7
|
|
|
2.8
|
|
|
(0.1
|
)
|
|
|
|
Quarter Ended March 31,
|
|
Change %
|
||||||
($ in thousands)
|
|
2020
|
|
2019
|
||||||
Net realized gains on disposals, excluding OTTI
|
|
$
|
4,100
|
|
|
3,444
|
|
|
19
|
%
|
Unrealized (losses) gains recognized in income on equity securities
|
|
(17,137
|
)
|
|
10,111
|
|
|
(269
|
)%
|
|
OTTI charges1
|
|
(31,629
|
)
|
|
(104
|
)
|
|
NM
|
|
|
Total net realized and unrealized (losses) gains
|
|
$
|
(44,666
|
)
|
|
13,451
|
|
|
(432
|
)%
|
|
Quarter Ended March 31,
|
|||||
($ in millions)
|
2020
|
|
2019
|
|||
Federal income tax expense
|
$
|
0.8
|
|
|
12.3
|
|
Effective tax rate
|
4.8
|
%
|
|
16.8
|
|
Branch
|
Insurance Subsidiary Member
|
FHLBI
|
Selective Insurance Company of South Carolina ("SICSC")1
Selective Insurance Company of the Southeast ("SICSE")1
|
FHLBNY
|
Selective Insurance Company of America ("SICA")
Selective Insurance Company of New York ("SICNY")
|
NRSRO
|
|
Financial Strength Rating
|
|
Outlook
|
AM Best
|
|
A
|
|
Positive
|
Moody's Investor Services ("Moody's")
|
|
A2
|
|
Stable
|
Fitch
|
|
A+
|
|
Stable
|
Standard & Poor's Global Ratings ("S&P")
|
|
A
|
|
Stable
|
Contractual Obligations
|
|
Payment Due by Period
|
||||||||||||||
|
|
|
|
Less than
1 year
|
|
1-3
years
|
|
3-5
years
|
|
More than
5 years
|
||||||
($ in millions)
|
|
Total
|
|
|
|
|
||||||||||
Notes payable
|
|
$
|
862.0
|
|
|
302.0
|
|
|
50.0
|
|
|
—
|
|
|
510.0
|
|
Interest on debt obligations
|
|
644.4
|
|
|
30.7
|
|
|
56.9
|
|
|
56.6
|
|
|
500.2
|
|
|
Total
|
|
$
|
1,506.4
|
|
|
332.7
|
|
|
106.9
|
|
|
56.6
|
|
|
1,010.2
|
|
($ in millions)
|
|
Amount of Obligation
|
Year of Expiration of Obligation
|
||
Alternative and other investments
|
|
$
|
227.8
|
|
2036
|
Non-publicly traded collateralized loan obligations in our fixed income securities portfolio
|
|
31.6
|
|
2030
|
|
Non-publicly traded common stock within our equity portfolio
|
|
2.4
|
|
2021
|
|
CMLs
|
|
2.9
|
|
Less than a year
|
|
Privately-placed corporate securities
|
|
$
|
2.0
|
|
Less than a year
|
Total
|
|
$
|
266.7
|
|
|
March 31, 2020
|
|
|
|
|
|
|
|
|
|
Credit Rating
|
|||||||||||||||||||||||
($ in millions)
|
Amortized Cost
|
Fair Value
|
% of Invested Assets
|
Yield to Worst
|
Effective Duration in Years
|
Average Life in Years
|
|
AAA
|
AA
|
A
|
BBB
|
Non-Investment Grade
|
Not Rated
|
||||||||||||||||||||
Short-term investments
|
$
|
518
|
|
$
|
518
|
|
7.6
|
%
|
1.0
|
%
|
0.0
|
|
0.0
|
|
|
$
|
494
|
|
$
|
23
|
|
$
|
—
|
|
$
|
—
|
|
$
|
1
|
|
$
|
—
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||||||||
Fixed income securities:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||||||||
U.S. government obligations
|
134
|
|
142
|
|
2.1
|
|
1.1
|
|
3.9
|
|
4.4
|
|
|
142
|
|
—
|
|
—
|
|
—
|
|
—
|
|
—
|
|
||||||||
Foreign government obligations
|
13
|
|
13
|
|
0.2
|
|
4.0
|
|
3.6
|
|
4.2
|
|
|
—
|
|
1
|
|
4
|
|
8
|
|
—
|
|
—
|
|
||||||||
State and municipal obligations
|
1,151
|
|
1,202
|
|
17.6
|
|
1.8
|
|
5.3
|
|
5.4
|
|
|
216
|
|
622
|
|
306
|
|
58
|
|
—
|
|
—
|
|
||||||||
Corporate securities
|
1,927
|
|
1,927
|
|
28.2
|
|
4.1
|
|
4.0
|
|
5.5
|
|
|
14
|
|
89
|
|
803
|
|
837
|
|
184
|
|
—
|
|
||||||||
Mortgage-backed securities:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||||||||
Residential mortgage-backed securities ("RMBS"):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||||||||
Agency RMBS
|
1,287
|
|
1,353
|
|
19.8
|
|
1.3
|
|
2.0
|
|
3.3
|
|
|
1,353
|
|
—
|
|
—
|
|
—
|
|
—
|
|
—
|
|
||||||||
Non-agency RMBS
|
80
|
|
77
|
|
1.1
|
|
5.6
|
|
1.4
|
|
3.6
|
|
|
32
|
|
7
|
|
33
|
|
—
|
|
5
|
|
—
|
|
||||||||
Total RMBS
|
1,367
|
|
1,430
|
|
20.9
|
|
1.6
|
|
2.0
|
|
3.3
|
|
|
1,385
|
|
7
|
|
33
|
|
—
|
|
5
|
|
—
|
|
||||||||
Commercial mortgage-backed securities ("CMBS")
|
517
|
|
531
|
|
7.8
|
|
3.2
|
|
5.0
|
|
6.5
|
|
|
478
|
|
22
|
|
23
|
|
8
|
|
—
|
|
—
|
|
||||||||
Total mortgage-backed securities
|
1,884
|
|
1,961
|
|
28.7
|
|
2.0
|
|
2.8
|
|
4.2
|
|
|
1,863
|
|
29
|
|
56
|
|
8
|
|
5
|
|
—
|
|
||||||||
Collateralized loan obligations ("CLO") and other asset-backed securities ("ABS"):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||||||||
Auto
|
45
|
|
45
|
|
0.7
|
|
3.8
|
|
2.5
|
|
2.4
|
|
|
36
|
|
5
|
|
4
|
|
—
|
|
—
|
|
—
|
|
||||||||
Aircraft
|
57
|
|
42
|
|
0.6
|
|
13.3
|
|
3.3
|
|
4.2
|
|
|
—
|
|
2
|
|
40
|
|
—
|
|
—
|
|
—
|
|
||||||||
CLOs
|
512
|
|
469
|
|
6.8
|
|
5.5
|
|
1.1
|
|
4.7
|
|
|
287
|
|
111
|
|
26
|
|
35
|
|
9
|
|
1
|
|
||||||||
Credit cards
|
19
|
|
19
|
|
0.3
|
|
1.7
|
|
1.9
|
|
2.2
|
|
|
19
|
|
—
|
|
—
|
|
—
|
|
—
|
|
—
|
|
||||||||
Other ABS
|
156
|
|
147
|
|
2.2
|
|
5.8
|
|
2.4
|
|
5.2
|
|
|
23
|
|
2
|
|
90
|
|
25
|
|
7
|
|
—
|
|
||||||||
Total CLOs and Other ABS
|
789
|
|
722
|
|
10.5
|
|
5.8
|
|
1.6
|
|
4.5
|
|
|
365
|
|
120
|
|
160
|
|
60
|
|
16
|
|
1
|
|
||||||||
Total securitized assets
|
2,673
|
|
2,683
|
|
39.2
|
|
3.0
|
|
2.5
|
|
4.3
|
|
|
2,228
|
|
149
|
|
216
|
|
68
|
|
21
|
|
1
|
|
||||||||
Total fixed income securities and short-term investments
|
6,416
|
|
6,485
|
|
94.8
|
|
2.9
|
|
3.3
|
|
4.5
|
|
|
3,094
|
|
884
|
|
1,329
|
|
971
|
|
206
|
|
1
|
|
||||||||
Total fixed income securities and short-term investments by credit rating percentage
|
|
|
|
|
|
|
|
|
|
47.7
|
%
|
13.6
|
%
|
20.5
|
%
|
15.0
|
%
|
3.2
|
%
|
—
|
%
|
||||||||||||
Commercial mortgage loans
|
14
|
|
14
|
|
0.2
|
|
3.7
|
|
7.5
|
|
4.7
|
|
|
—
|
|
—
|
|
12
|
|
2
|
|
—
|
|
—
|
|
||||||||
Equity securities:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||||||||
Common stock1
|
114
|
|
98
|
|
1.4
|
|
0.8
|
|
—
|
|
—
|
|
|
—
|
|
—
|
|
—
|
|
—
|
|
—
|
|
98
|
|
||||||||
Preferred stock
|
2
|
|
2
|
|
—
|
|
5.4
|
|
—
|
|
—
|
|
|
—
|
|
—
|
|
—
|
|
—
|
|
2
|
|
—
|
|
||||||||
Total equity securities
|
116
|
|
100
|
|
1.4
|
|
0.9
|
|
—
|
|
—
|
|
|
—
|
|
—
|
|
—
|
|
—
|
|
2
|
|
98
|
|
||||||||
Other investments:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||||||||
Alternative investments:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||||||||
Private equity
|
132
|
|
132
|
|
1.9
|
|
—
|
|
—
|
|
—
|
|
|
—
|
|
—
|
|
—
|
|
—
|
|
—
|
|
132
|
|
||||||||
Private credit
|
47
|
|
47
|
|
0.7
|
|
—
|
|
—
|
|
—
|
|
|
—
|
|
—
|
|
—
|
|
—
|
|
—
|
|
47
|
|
||||||||
Real assets
|
23
|
|
23
|
|
0.3
|
|
—
|
|
—
|
|
—
|
|
|
—
|
|
—
|
|
—
|
|
—
|
|
—
|
|
23
|
|
||||||||
Total alternative investments
|
202
|
|
202
|
|
2.9
|
|
—
|
|
—
|
|
—
|
|
|
—
|
|
—
|
|
—
|
|
—
|
|
—
|
|
202
|
|
||||||||
Other investments
|
43
|
|
43
|
|
0.7
|
|
—
|
|
—
|
|
—
|
|
|
—
|
|
—
|
|
—
|
|
—
|
|
—
|
|
43
|
|
||||||||
Total other investments
|
245
|
|
245
|
|
3.6
|
|
—
|
|
—
|
|
—
|
|
|
—
|
|
—
|
|
—
|
|
—
|
|
—
|
|
245
|
|
||||||||
Total invested assets
|
$
|
6,791
|
|
$
|
6,844
|
|
100
|
|
—
|
|
—
|
|
—
|
|
|
$
|
3,094
|
|
$
|
884
|
|
$
|
1,341
|
|
$
|
973
|
|
$
|
208
|
|
$
|
344
|
|
|
March 31, 2020
|
|
December 31, 2019
|
|
||
Asset Category
|
Percentage of Invested Assets
|
|
Percentage of Invested Assets
|
|
||
Highly-liquid assets
|
74
|
|
%
|
74
|
|
%
|
Generally liquid assets, may become less liquid with market stress1
|
22
|
|
|
22
|
|
|
Generally illiquid assets2
|
4
|
|
|
4
|
|
|
Total
|
100
|
|
%
|
100
|
|
%
|
|
|
|
|
March 31, 2020
|
|||||
($ in thousands)
|
|
Date of
Maturity
|
|
Carrying
Amount
|
|
Fair
Value
|
|||
Financial liabilities
|
|
|
|
|
|
|
|
|
|
Short-term debt
|
|
|
|
|
|
|
|
|
|
0.78% Borrowings from FHLBNY
|
|
9/14/2020
|
|
$
|
100,000
|
|
|
100,096
|
|
0.68% Borrowings from FHLBNY
|
|
9/18/2020
|
|
85,000
|
|
|
85,039
|
|
|
0.58% Borrowings from FHLBI
|
|
12/14/2020
|
|
67,000
|
|
|
67,006
|
|
|
2.244% Borrowings from Bank of Montreal "Line of Credit"1
|
|
9/24/2020
|
|
50,000
|
|
|
—
|
|
|
Total short-term debt
|
|
|
|
302,000
|
|
|
252,141
|
|
•
|
Negatively impacted the global and United States domestic economies, with some sectors such as travel and leisure, retail, energy, and real estate more significantly affected than others;
|
•
|
Increased unemployment;
|
•
|
Increased international, federal, state, and local governmental budget deficits, which has led to adverse rating actions against certain governmental units and increased the general risk of governmental debt default that could impact the value of related fixed income securities;
|
•
|
Induced significant volatility in financial markets;
|
•
|
Decreased valuations in markets for equity, fixed income, and alternative investments;
|
•
|
Impacted individual income and business revenue, and increased the number of individuals and businesses experiencing financial distress with the potential for insolvency;
|
•
|
Decreased premium collections, late payment fees, and reinstatement fees;
|
•
|
Generated other state and federal legislative or executive branch proposals to (i) require insurance policies to retroactively cover COVID-19-related losses that were expressly excluded under the terms of some property insurance policies, and (ii) presume that COVID-19 is a work-related illness for certain employees under workers compensation policies;
|
•
|
Generated state insurance department bulletins or orders requesting or mandating premium credits and rebates on certain insurance policies that may exceed actual COVID-19-related frequency experience decreases;
|
•
|
Disrupted regular commerce, supply chains, and travel;
|
•
|
Increased expense management focus by individuals and all-sized businesses;
|
•
|
Increased the demand for and/or limited the availability of medical resources; and
|
•
|
Increased e-commerce, video, phone, and other methods of remote trade and business transaction.
|
•
|
Because our general liability and workers compensation policies provide for premium audit, we must estimate the amount of return premium that we may owe policyholders for revenues and payrolls lowered due to the extent and duration of the COVID-19-related governmental directives and any related economic contraction. Such return premiums could be significant and will impact our underwriting results.
|
•
|
To help our customers maintain insurance coverages, we are offering - sometimes in collaboration with or at the direction of our regulators - individualized payment flexibility and suspension of policy cancellations, late payment notices, and late or reinstatement fees. Customers afforded this treatment have until the later of May 31, 2020 or the end of the grace period established by the customers’ home state insurance commissioner.
|
•
|
In the second quarter of 2020, we are offering a credit equal to 15% of insureds’ premiums for commercial automobile and personal automobile lines of insurance for April and May. This two-month premium-based credit was based on a limited amount of claim's reporting data about the impact of the COVID-19-related governmental directives on miles driven, which has reduced claims frequencies. We do not have traditional actuarial analysis to support these credits. The actual impact of the COVID-19-related governmental actions will not be fully known until some point in the future. Should the various governmental directives be extended beyond May 31, 2020, it is possible that we will give further premium credit to our customers to the extent supported by further data. Based on the continued COVID-19-related economic impact, it is possible that state insurance commissioners may take other regulatory actions requiring premium-based credit in lines other than commercial and personal automobile, and we face the risk that we may be required to return more premium than is warranted by our filed rating plans and actual loss experience.
|
•
|
All of our commercial property and businessowners policies require direct physical loss of or damage to insured property by a covered cause of loss. Whether COVID-19-related contamination, the existence of a pandemic, and/or the resulting government shutdown orders cause physical loss of or damage to property is already the subject of much debate and litigation. We cannot predict the outcome of that litigation. It also is our practice to attach to all standard lines commercial property and businessowners policies an exclusion that states that all loss or property damage caused by or resulting from any virus, bacterium or other microorganism that induces or is capable of inducing physical distress, illness, or disease is not a covered cause of loss. We offer some limited coverages that could apply in COVID-19-related claims and circumstances, primarily tied to clean-up and food-contamination that are subject to sub-limits. Approximately 95% of our commercial property and businessowners policies include the very specific and regulatory approved virus exclusion.
|
•
|
There currently are various public policy debates and legislative proposals at both the federal and state levels that would impose liability (including retroactively) for COVID-19-related business interruption losses on policies that do not provide such coverage terms. We cannot predict the outcome of such proposals, which may be influenced by media attention on and lobbying efforts by property and casualty insurance policyholders whose policies do not provide coverage for business interruption losses connected with the COVID-19-related governmental directives. We are aware of meritorious arguments that such proposals, if enacted, would be unconstitutional and impair future commercial activity. Nonetheless, if such proposals were enacted and upheld as constitutional, they would have a material impact on our profitability, liquidity and overall financial condition.
|
•
|
Limited availability of medical resources could result in medical inflation and complicate, delay and/or extend medical treatment that could impact exposure on workers’ compensation, general liability, and personal and commercial automobile claims.
|
•
|
We may have increased workers’ compensation loss and loss expenses if policyholder employees in high-risk roles with essential businesses contracted COVID-19 in the workplace. We may experience higher frequency in workers’ compensation claims, particularly if any of the various state legislative or executive order proposals are enacted to create presumptions that the contraction of COVID-19 by an essential industry employee who interacted with the public is work-related. We may also see an extension of workers' compensation benefits if employees do not have jobs to which they can return.
|
•
|
We may also experience elevated loss frequency and severity in our liability coverages from efforts by the plaintiff’s bar to generate COVID-19-related claim activity that impacts our policyholders.
|
•
|
Frequency and severity could also increase with respect to our auto and property coverages due to, among other things, disruptions in supply chains and changes in business practices and individual behaviors resulting from the stay-at-home and social distancing measures, such as arson and fraud.
|
•
|
Due to the COVID-19-related governmental orders, we may experience delayed reporting of losses, settlement negotiations, and trial of disputed claims that may disrupt our normal claims resolution trends.
|
•
|
Service levels could deteriorate if significant numbers of our remote employees or key business partners are unable to work effectively while sheltering-in-place. Examples of potential work impacts include local Internet disruption that prevents access to our virtual private network, widespread employee contraction of the COVID-19 illness, other governmental directives, or similar unavoidable events. Because our employees are working remotely, it also is possible that we will be subject to increased cybersecurity attacks from bad actors.
|
•
|
The significant equity and debt financial market volatility from the COVID-19 pandemic and the related governmental orders may impact our net investment income due to the following:
|
•
|
Financial market volatility is reflected in our alternative investment portfolio performance;
|
•
|
Increased spreads on fixed income securities may create mark-to-market investment valuation losses and reduce unrealized capital gains, which will impact GAAP equity;
|
•
|
OTTI losses may increase due to securities we intend to sell, as we give our third-party investment managers flexibility to take advantage of the spread widening in fixed income securities, particularly in asset classes more significantly impacted by COVID-19-related governmental directives and to which the Federal Reserve Board is providing liquidity and structural support; and
|
•
|
Inflation related to COVID-19 issues could be higher or lower than our expectations and impact our investment returns.
|
Period
|
|
Total Number of
Shares Purchased1
|
|
Average Price
Paid per Share
|
|
Total Number of
Shares Purchased as Part of Publicly
Announced Programs
|
|
Maximum Number of
Shares that May Yet Be Purchased Under the Announced Programs |
|||||
January 1 – 31, 2020
|
|
16
|
|
|
$
|
66.25
|
|
|
—
|
|
|
—
|
|
February 1 - 29, 2020
|
|
101,544
|
|
|
68.07
|
|
|
—
|
|
|
—
|
|
|
March 1 - 31, 2020
|
|
259
|
|
|
55.78
|
|
|
—
|
|
|
—
|
|
|
Total
|
|
101,819
|
|
|
$
|
68.04
|
|
|
—
|
|
|
—
|
|
Exhibit No.
|
|
|
|
Description of the Company's Securities Registered Under Section 12 of the Securities Exchange Act of 1934.
|
|
|
Amendment No. 2 to Selective Insurance Supplemental Pension Plan, As Amended and Restated Effective as of January 1, 2005.
|
|
|
Employment Agreement between Selective Insurance Company of America and Michael H. Lanza, dated as of March 2, 2020 (incorporated by reference herein to Exhibit 10.1 of the Company's Current Report on Form 8-K filed March 2, 2020, File No. 001-33067).
|
|
|
Statement Re: Computation of Per Share Earnings.
|
|
|
Certification of Chief Executive Officer in accordance with Section 302 of the Sarbanes-Oxley Act of 2002.
|
|
|
Certification of Chief Financial Officer in accordance with Section 302 of the Sarbanes-Oxley Act of 2002.
|
|
|
Certification of Chief Executive Officer in accordance with Section 906 of the Sarbanes-Oxley Act of 2002.
|
|
|
Certification of Chief Financial Officer in accordance with Section 906 of the Sarbanes-Oxley Act of 2002.
|
|
*101
|
|
The following financial statements from the Company's Quarterly Report on Form 10-Q for the quarter ended March 31, 2020, formatted in Inline Extensible Business Reporting Language (iXBRL): (i) Consolidated Balance Sheets, (ii) Consolidated Statements of Income, (iii) Consolidated Statements of Comprehensive Income, (iv) Consolidated Statements of Stockholders' Equity, (v) Consolidated Statements of Cash Flows and (vi) Notes to Consolidated Financial Statements.
|
*104
|
|
The cover page from the Company's Quarterly Report on Form 10-Q for the quarter ended March 31, 2020, formatted in iXBRL.
|
Date:
|
May 6, 2020
|
|
By: /s/ John J. Marchioni
|
|
|
|
John J. Marchioni
|
|
|
|
President and Chief Executive Officer
|
|
|
|
(principal executive officer)
|
|
|
|
|
Date:
|
May 6, 2020
|
|
By: /s/ Mark A. Wilcox
|
|
|
|
Mark A. Wilcox
|
|
|
|
Executive Vice President and Chief Financial Officer
|
|
|
|
(principal financial officer)
|
|
|||||||||||
First Quarter 2020
|
|
Income
(Numerator)
|
|
Shares
(Denominator)
|
|
Per Share
Amount
|
|||||
(in thousands, except per share amounts)
|
|
|
|
||||||||
Basic Earnings Per Share ("EPS"):
|
|
|
|
|
|
|
|||||
Net income available to common stockholders
|
|
$
|
15,236
|
|
|
59,712
|
|
|
$
|
0.26
|
|
|
|
|
|
|
|
|
|||||
Effect of dilutive securities:
|
|
|
|
|
|
|
|||||
Stock compensation plans
|
|
—
|
|
|
495
|
|
|
|
|||
|
|
|
|
|
|
|
|||||
Diluted EPS:
|
|
|
|
|
|
|
|||||
Net income available to common stockholders
|
|
$
|
15,236
|
|
|
60,207
|
|
|
$
|
0.25
|
|
|
|
|
|
|
|
|
|||||
First Quarter 2019
|
|
Income
(Numerator) |
|
Shares
(Denominator) |
|
Per Share
Amount |
|||||
(in thousands, except per share amounts)
|
|
|
|
||||||||
Basic EPS:
|
|
|
|
|
|
|
|||||
Net income available to common stockholders
|
|
$
|
61,348
|
|
|
59,252
|
|
|
$
|
1.04
|
|
|
|
|
|
|
|
|
|||||
Effect of dilutive securities:
|
|
|
|
|
|
|
|||||
Stock compensation plans
|
|
—
|
|
|
624
|
|
|
|
|||
|
|
|
|
|
|
|
|||||
Diluted EPS:
|
|
|
|
|
|
|
|||||
Net income available to common stockholders
|
|
$
|
61,348
|
|
|
59,876
|
|
|
$
|
1.02
|
|
(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:
|
May 6, 2020
|
|
By: /s/ John J. Marchioni
|
|
|
|
John J. Marchioni
|
|
|
|
President 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:
|
May 6, 2020
|
|
By: /s/ Mark A. Wilcox
|
|
|
|
Mark A. Wilcox
|
|
|
|
Executive Vice President and Chief Financial Officer
|
Date:
|
May 6, 2020
|
|
By: /s/ John J. Marchioni
|
|
|
|
John J. Marchioni
|
|
|
|
President and Chief Executive Officer
|
Date:
|
May 6, 2020
|
|
By: /s/ Mark A. Wilcox
|
|
|
|
Mark A. Wilcox
|
|
|
|
Executive Vice President and Chief Financial Officer
|