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Sep 30, 2020
Selective Insurance Q3 2020 Earnings Report
Selective Insurance reported strong results in Q3 2020, with a profitable combined ratio despite catastrophe losses, driven by growth in net premiums written and investment income.
Key Takeaways
Selective Insurance Group reported strong third-quarter results with net income per diluted share of $1.16 and non-GAAP operating income per diluted share of $1.06. The company achieved a 97.0% combined ratio despite significant catastrophe losses. Net premiums written grew by 6%, and investment income increased by 22%.
Net premiums written grew by 6% compared to Q3 2019.
GAAP combined ratio was a profitable 97.0%, despite 11.4 percentage points of catastrophe losses.
Annualized return on equity was 11.9%, and non-GAAP operating ROE was 10.9%.
After-tax net investment income increased by 22% to $55 million compared to Q3 2019.
Revenue by Segment
Forward Guidance
Selective Insurance revised its full-year guidance for 2020 to reflect the current estimated full-year impact of COVID-19.
Positive Outlook
- A GAAP combined ratio, excluding catastrophe losses, between 88% and 89%.
- Combined ratio estimate assumes no additional prior-year casualty reserve development in the fourth quarter.
- After-tax net investment income of $175 million, including $10 million to $15 million from alternative investments.
- Overall effective tax rate of approximately 18.5%.
- Weighted average shares of 60.5 million on a diluted basis.
Challenges Ahead
- Catastrophe losses of 8.0 points on the combined ratio.
- COVID-19 losses are not included as catastrophes.
- Potential reduction in premium due to voluntary credits and regulatory directives.
- Possible increase in loss and loss expenses due to litigation or changes in statutory or common law.
Revenue & Expenses
Visualization of income flow from segment revenue to net income
Historical Earnings Impact
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Avg. Return Before/After Earnings
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