[SELECTIVE LOGO]
Selective Insurance Group, Inc.
40 Wantage Avenue
Branchville, New Jersey 07890
www.selective.com
For release at 4:15 p.m. (EST) on Feb. 3, 2004
Media Contact: Sharon Cooper
973-948-1324, sharon.cooper@selective.com
Investor Contact: Dale Thatcher
973-948-1774, dale.thatcher@selective.com
Selective Insurance Group Reports
2003 Fourth Quarter Earnings
Operating income(1) up 90%
15th straight quarter of double-digit commercial renewal pricing
GAAP combined ratio drops below 100.0%
Book value per share up 12% for 2003, to $27.48
Branchville, NJ - Feb 3, 2004 - Selective Insurance Group, Inc. (Nasdaq: SIGI),
today reported net income of $23.8 million, or $0.86 per diluted share, for the
fourth quarter ended December 31, 2003, compared with $12.3 million, or $0.46
per diluted share, for the same period last year. Operating income(1) from
continuing operations increased 90%, to $20.9 million, or $0.75 per diluted
share for the fourth quarter 2003, compared with $11.0 million, or $0.41 per
diluted share for the fourth quarter 2002. Net premiums written increased 15% to
$271.4 million in fourth quarter 2003, compared with the same period last year,
and reached $1.2 billion for the year.
Fifteen consecutive quarters of double-digit commercial renewal price increases
produced more favorable commercial lines results. Strong pricing, together with
an improving personal lines automobile market, resulted in a drop in Selective's
GAAP combined ratio for the quarter to 99.5%, down from 103.2% for the fourth
quarter of 2002. For the same period, the statutory combined ratio improved
almost two points to 101.6%. For the full year, the GAAP combined ratio improved
to 102.2%, from 103.9% at
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<Table>
(1) Operating income from continuing operations differs from net income by the exclusion
of realized gains or losses on investment sales, as well as net income from the
discontinued software operation. It is used as an important financial measure
by management, analysts and investors because the realization of investment gains
and losses in any given period is largely discretionary as to timing and could distort
the analysis of trends; however, it is not intended as a substitute for net income
prepared in accordance with accounting principles generally accepted in the United States
of America (GAAP). A reconciliation of operating income to net income is provided in
the attached GAAP Highlights, and Reconciliation to Comparable GAAP Measures. Statutory
data is prepared in accordance with statutory accounting rules as defined by the
National Association of Insurance Commissioners Accounting Practices and Procedures
Manual and, therefore, is not reconciled to GAAP.
</Table>
the end of 2002, while the statutory combined ratio dropped to 101.5% at
year-end, from 103.2% in 2002.
Selective Insurance Group, Inc., Chairman, President and CEO Gregory E. Murphy
stated: "Our strong fourth quarter capped off a solid year, in which our
distinctive competitive positioning and growth strategies enabled us to reach
our goals, while accelerating our capacity for continued improvement. We
delivered an annual total return to our shareholders of 31.4%, a performance
that surpassed the S&P 500 and the S&P Property and Casualty indices.
"In our core commercial lines operation, which represents 82% of overall premium
volume, premium growth was 17% for the quarter, including $50 million in new
business. Commercial renewal price increases held steady at 11%, and averaged
13% for the full year. Our commercial outlook remains favorable as increases in
premiums continue to outpace loss trends. Operating cash flow also remained
strong during the quarter, up 50% over the prior year period to $74 million, and
reaching $282 million for the full year. We further narrowed the gap in our
personal lines statutory combined ratio, which includes our flood operations,
delivering a 101.8% for the quarter, down from 105.0% for the same period last
year. Our personal lines performance reflects ongoing improvements in our New
Jersey automobile business, which produced a statutory combined ratio below
100.0% for both the quarter and the year," Murphy said.
Revenue from continuing operations for the fourth quarter 2003 increased 16%
over fourth quarter 2002, to $359.2 million. Revenue growth for the quarter,
compared with the same period last year, reflected: continued increases in net
premiums earned, up 17% to $300.2 million; higher net investment income of $30.6
million, up 6%; and a 13% increase in revenue to $22.6 million from the
Company's Diversified Insurance Services operation. Return on revenue for the
diversified businesses improved to 5.3% for the quarter, compared with 3.9% in
fourth quarter 2002. Selective's overall revenue from continuing operations
reached $1.4 billion at year-end.
For the full year 2003, Selective's net income was $66.3 million, or $2.40 per
diluted share, compared with $42.0 million, or $1.56 per diluted share, in 2002.
Realized capital gains, after tax, for 2003 were $8.3 million, or $0.30 per
diluted share, compared with $2.1 million, or $0.08 per diluted share, in 2002.
For 2003, the Company had operating income(1) from continuing operations of
$58.0 million, or $2.10 per diluted share, compared with $40.0 million, or $1.49
per diluted share last year.
At Dec. 31, 2003, total assets reached $3.4 billion, including $2.4 billion in
the company's investment portfolio. Book value per share for the year grew 12%
to $27.48. The Board of Directors has declared a $0.17 per share quarterly cash
dividend on its common stock payable March 1, 2004, to stockholders of record on
Feb. 17, 2004.
The supplemental investor packet, including financial information that is not
part of this press release, is available on the Investors page of Selective's
public website at www.selective.com. The webcast of Selective's quarterly
analyst conference call will be simulcast at 8:30am EST, on Feb. 4, 2004, at
www.selective.com. The webcast will be available for rebroadcast until the close
of business on March 3, 2004.
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Selective Insurance Group, Inc., headquartered in Branchville, New
Jersey, is a holding company for five property and casualty insurance companies
that offer primary and alternative market insurance for commercial and personal
risks. The insurance companies are rated "A+" (Superior) by A.M. Best. Through
other subsidiaries, the company offers medical claim management services; human
resources benefits and administration services; risk management products and
services; and flood insurance policy, administration and claim services.
Selective maintains a website at www.selective.com.
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This press release contains certain statements that are not historical facts and
are considered forward-looking statements as defined in the Private Securities
Litigation Reform Act of 1995, which can be identified by terms such as may,
will, could, would, should, expect, plan, anticipate, target, project, intend,
believe, estimate, predict, potential, seek, likely, or continue or other
comparable terminology. Such forward-looking statements relate to our
intentions, beliefs, projections, estimations or forecasts of future events or
our future financial performance and involve known and unknown risks,
uncertainties and other factors that may cause our actual results to be
materially different from those expressed or implied by the forward-looking
statements. These statements are only predictions and we can give no assurance
that such expectations will prove to be correct. These risks and uncertainties
include, but are not limited to:
o The frequency and severity of catastrophic events, including hurricanes,
tornadoes, windstorms, earthquakes, hail, severe winter weather, fires,
explosions and terrorism;
o Adverse economic, market or regulatory conditions;
o Our concentration in a number of east coast and Midwestern states;
o The adequacy of loss reserves;
o Reinsurance costs and availability;
o Our ability to collect on reinsurance and the solvency of Selective's
reinsurers;
o Uncertainties related to insurance rate increases and business retention;
o Changes in insurance regulations that impact our ability to write and/or
cease writing insurance policies in one or more states, particularly
changes in New Jersey automobile insurance laws and regulations;
o Our ability to maintain favorable ratings from A.M. Best, Standard &
Poor's, Moody's and Fitch;
o Fluctuations in interest rates and the performance of the financial
markets;
o Our entry into new markets and businesses; and
o Other risks and uncertainties we identify in filings with the Securities
and Exchange Commission, including, but not limited to the Annual Report
on Form 10-K; although we do not promise to update such forward-looking
statements to reflect actual results or changes in assumptions or other
factors that could affect these statements.
Selective Insurance Group, Inc. (Nasdaq: SIGI) *
GAAP HIGHLIGHTS AND RECONCILIATION TO COMPARABLE
GAAP MEASURES
(IN THOUSANDS, EXCEPT PER SHARE DATA)
- --------------------------------------------------------------------------------
3 MONTHS ENDED DECEMBER 31: 2003 2002
- --------------------------- ---- ----
Net premiums written $ 271,380 236,316
Net premiums earned 300,203 257,484
Net investment income 30,645 28,970
Diversified insurance services revenue from continuing operations 22,568 19,923
Total revenues from continuing operations 359,202 309,103
Operating income from continuing operations 20,936 11,011
Capital gain, after tax 2,905 1,348
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Income from continuing operations, net of tax 23,841 12,359
Loss from discontinued operations, net of tax - (47)
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Net income $ 23,841 12,312
=============== =============
Statutory combined ratio 101.6% 103.4%
GAAP combined ratio 99.5% 103.2%
Operating income from continuing operations per diluted share $ 0.75 0.41
Net income per diluted share 0.86 0.46
Weighted average diluted shares 27,911 27,064
Book value per share $ 27.48 24.52
12 MONTHS ENDED DECEMBER 31: 2003 2002
- ---------------------------- ---- ----
Net premiums written $ 1,219,159 1,053,487
Net premiums earned 1,133,070 988,268
Net investment income 114,748 103,067
Diversified insurance services revenue from continuing operations 91,840 80,796
Total revenues from continuing operations 1,356,116 1,178,950
Operating income from continuing operations 57,997 39,997
Capital gain, after tax 8,347 2,141
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Income from continuing operations, net of tax 66,344 42,138
Loss from discontinued operations, net of tax - (169)
--------------- -------------
Net income $ 66,344 41,969
=============== =============
Statutory combined ratio 101.5% 103.2%
GAAP combined ratio 102.2% 103.9%
Operating income from continuing operations per diluted share $ 2.10 1.49
Net income per diluted share 2.40 1.56
Weighted average diluted shares 27,645 26,922
Book value per share $ 27.48 24.52
*ALL AMOUNTS INCLUDED IN THIS RELEASE EXCLUDE INTER COMPANY
TRANSACTIONS.
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