SELECTIVE
[Logo Graphic Omitted]
Selective Insurance Group, Inc.
40 Wantage Avenue
Branchville, New Jersey 07890
www.selective.com
FOR RELEASE AT 4:15 P.M. (EST) ON JULY 26, 2005
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
SECOND QUARTER 2005 EARNINGS
GAAP combined ratio 96%
Commercial lines net premiums written up 9%
Investment income, after-tax, up 17%
Branchville, NJ - July 26, 2005 - Selective Insurance Group, Inc. (NASDAQ:
SIGI), today reported its financial results for the second quarter ended June
30, 2005.
Compared with the second quarter of 2004:
- - Net income increased 11%, to $32.1 million, or $1.02 per diluted share;
- - Operating income(1) increased 10% to $31.7 million, or $1.01 per
diluted share;
- - The GAAP combined ratio increased 0.3 points to 96.0%;
- - The statutory combined ratio improved 0.1 points to 94.9%
- The commercial lines statutory combined ratio improved 3.1 points
to 92.4%
- The personal lines statutory combined ratio increased 16.8 points,
mainly due to a $7.5 million increase in reserves for currently
estimated increased claim costs related to the New Jersey Supreme
Court's decision to eliminate the serious life impact requirement
of the verbal tort threshold. This action accounted for 14.4 points
of the overall personal lines statutory combined ratio and reduced
diluted earnings per share by $0.15;
________________________
(1) Operating income differs from net income by the exclusion of realized gains
or losses on investment sales and the cumulative effect of change in accounting
principle. 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.
- - Net premiums written (NPW) increased 6% to $369.6 million
- Commercial lines NPW increased 9% to $317.5 million
- Personal lines NPW declined 11% to $52.1 million; and
- - Total revenue was up 8% to $414.4 million.
Weather-related catastrophe losses accounted for only 0.2 points of the GAAP
and statutory combined ratios for the second quarter of 2005, or $0.5 million,
after-tax, compared to 0.8 points, or $1.7 million, after-tax, for the second
quarter of 2004.
Gregory E. Murphy, Selective Insurance Group Chairman, President and CEO,
stated: "We delivered another solid performance this quarter, led by strong
results from our commercial lines operation and a 17% increase in after-tax
investment income. We continue to build upon the successful strategies that
have made Selective one of the premier super-regional property and casualty
companies in the industry. Our 6% premium growth is about three times higher
than the A.M. Best estimated industry average and clearly reflects the quality
of our field-based underwriting and claims strategies, and our business-driven
technology initiatives. The commercial lines operation, which represents 85% of
our business, delivered strong net premiums written growth of 9%, including
almost $71 million of net new business, and a strong 92.4% statutory combined
ratio. These results highlight our ability to compete successfully in changing
market conditions.
"Of significant note, on June 1, 2005, A.M. Best affirmed Selective's "A+"
(Superior) rating for the 44th consecutive year. We remain one of only 7% of
commercial lines carriers rated "A+" or higher. A.M. Best made reference, in
part, to our solid capitalization, historically favorable operating
performance, quality management team, disciplined underwriting culture and
strong regional market presence within the small commercial lines business
segment. A.M. Best also noted the significant advancements we have made in
web-based technology that make it even easier for agents and customers to do
business with us.
"We continue to execute our geographic diversification strategy and refine our
personal lines operation. Personal automobile business in New Jersey now
represents only 7% of company-wide premium volume, down from 22% a decade ago.
Our New Jersey personal auto business was profitable the past four quarters;
this quarter was unprofitable, at a statutory combined ratio of 123.4%, due to
estimated higher claim costs that reflect a New Jersey Supreme Court decision
eliminating the serious life impact requirement of the verbal tort threshold."
The Company's Diversified Insurance Services contributed $0.11 in earnings per
diluted share for the quarter. Revenue at these fee-based businesses was up
13%, to $29.7 million, compared to second quarter 2004. Return on revenue was
12%, compared to 8.5% in the second quarter of 2004.
For the six months ended June 30, 2005, the Company reported net income of
$68.2 million, or $2.17 per diluted share. Operating income(1) was $64.3
million, or $2.05 per diluted share. For the comparable period last year,
the Company reported net income of $56.4 million, or $1.80 per diluted
share, and operating income of $52.8 million, or $1.69
per diluted share. Selective's GAAP combined ratio improved to 95.6% for the
first six months of 2005, compared to 96.7% for the six-month period ended June
30, 2004. For the same period, the statutory combined ratio improved to 94.2%
in 2005, compared to 95.3% in 2004.
After-tax investment income for the second quarter 2005 increased 17%, to $25.2
million, compared to the same period last year. At June 30, 2005, Selective's
consolidated assets reached $4.2 billion, including $3.0 billion in the
Company's investment portfolio; stockholders' equity was $942.3 million; and
book value per share was up 18% to $33.20, compared to second quarter 2004.
During the quarter, the Company repurchased approximately 70,000 shares of its
stock at an average price per share of $47.55. There are approximately 4.9
million shares available for repurchase under Selective's stock repurchase plan.
The Board of Directors declared a $0.19 per share quarterly cash dividend on
Selective's common stock payable Sept. 1, 2005, to stockholders of record on
Aug. 15, 2005.
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. Selective's quarterly analyst conference
call will be simulcast at 8:30am EST, on July 27, 2005, at www.selective.com.
The webcast will be available for rebroadcast until the close of business on
Aug. 26, 2005.
Selective Insurance Group, Inc., headquartered in Branchville, New Jersey, is a
holding company for six 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.
In this press release, Selective and its management discuss and make statements
based on currently available information regarding their intentions, beliefs,
current expectations, and projections regarding Selective's future operations
and performance. Such statements are "forward-looking" statements as defined in
the Private Securities Litigation Reform Act of 1995, which provides a safe
harbor under the Securities Act of 1933 and the Securities Exchange Act of 1934
for forward-looking statements. These forward-looking statements are often
identified by words such as "may," "will," "could," "would," "should,"
"expect," "plan," "anticipate," "target," "project," "intend," "believe,"
"estimate," "predict," "potential," "pro forma," "seek," "likely," or
"continue," or other comparable terminology and their negatives. Selective and
its management assume no obligation to update these forward-looking statements
due to changes in underlying factors, new information, future developments or
otherwise.
Selective and its management caution investors that such forward-looking
statements are not guarantees of future performance. Risks and uncertainties
are inherent in Selective's future performance. Factors that could cause
Selective's actual results to differ materially from those indicated by such
forward-looking statements, include,
among other things, those discussed or identified from time to time in our
public filings with the United States Securities and Exchange Commission
("SEC") and those associated with:
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 the concentration of our business in a number of East Coast and
Midwestern states;
o the adequacy of our loss reserves;
o the cost and availability of reinsurance;
o our ability to collect on reinsurance and the solvency of our 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, S&P, Moody's and
Fitch;
o fluctuations in interest rates and the performance of the financial
markets which may affect our investment income; and
o our entry into new markets and businesses.
Selective's SEC filings can be accessed through the Investors and Corporate
Governance sections of the company's website, www.selective.com, or through the
SEC's EDGAR Database at www.sec.gov (Selective EDGAR CIK No. 0000230557).
Selective Insurance Group, Inc. (Nasdaq: SIGI) *
GAAP Highlights and Reconciliation of Non-GAAP Measures to Comparable
GAAP Measures
(in thousands, except per share data)
- -------------------------------------------------------------------------------------------------------
3 months ended June 30: 2005 2004
- ----------------------- ---- ----
Net premiums written $ 369,621 349,250
Net premiums earned 350,452 325,986
Net investment income 32,747 28,662
Diversified insurance services revenue 29,697 26,395
Total revenues 414,359 382,137
Operating income 31,714 28,774
Capital gain, after-tax 364 100
------------- -----------
Net income $ 32,078 28,874
============= ===========
Statutory combined ratio 94.9% 95.0%
GAAP combined ratio 96.0% 95.7%
Operating income per diluted share $ 1.01 0.92
Net income per diluted share 1.02 0.92
Weighted average diluted shares 32,172 32,402
Book value per share $ 33.20 28.03
6 months ended June 30: 2005 2004
- ----------------------- ---- ----
Net premiums written $ 766,399 724,512
Net premiums earned 693,192 641,292
Net investment income 65,109 58,122
Diversified insurance services revenue 57,449 50,626
Total revenues 822,665 757,257
Operating income 64,332 52,827
Capital gain, after-tax 3,352 3,575
Cumulative effect of change in accounting principle, net of tax 495 -
------------- -----------
Net income $ 68,179 56,402
============= ===========
Statutory combined ratio 94.2% 95.3%
GAAP combined ratio 95.6% 96.7%
Operating income per diluted share $ 2.05 1.69
Net income per diluted share 2.17 1.80
Weighted average diluted shares 32,225 32,311
Book value per share $ 33.20 28.03
*All amounts included in this release exclude inter-company transactions.