Selective Insurance Q2 2020 Earnings Report
Key Takeaways
Selective Insurance Group reported a decrease in net income per diluted share to $0.57 and non-GAAP operating income per diluted share to $0.40 for the second quarter ended June 30, 2020. The results were impacted by elevated catastrophe losses and a decline in alternative investment income, but the underlying profitability remained excellent with a combined ratio of 98.4%.
Net premiums written increased by 3% compared to the second quarter of 2019.
GAAP combined ratio was 98.4%.
Annualized return on equity was 6.2%, and non-GAAP operating ROE was 4.4%.
Overall renewal pure price increased by 3.9%.
Selective Insurance
Selective Insurance
Selective Insurance Revenue by Segment
Forward Guidance
Selective provided revised full-year guidance for 2020, reflecting the current estimated full-year impact of COVID-19.
Positive Outlook
- A GAAP combined ratio, excluding catastrophe losses, of between 90% and 91%, an improvement from the first quarter guidance.
- After-tax net investment income of approximately $170 million, a $10 million improvement from the first quarter guidance.
- Up to $5 million in after-tax net investment income from alternative investments is expected.
- An overall effective tax rate of approximately 18.5% is anticipated.
- Weighted average shares of 60.5 million on a diluted basis.
Challenges Ahead
- Guidance has a higher degree of uncertainty than prior years due to the dynamic and fluid nature of the impact of the COVID-19 pandemic.
- Potential reduction in premium and adverse impact on underwriting results due to voluntary premium credits and regulatory directives.
- Possible increase in loss and loss expenses due to litigation or changes in statutory or common law related to COVID-19.
- Potential impact on net investment income due to financial market volatility.
- Catastrophe losses of 6.0 points on the combined ratio, reflecting higher than expected losses through the first half of the year.
Revenue & Expenses
Visualization of income flow from segment revenue to net income