BRANCHVILLE, N.J. - Selective Insurance Group, Inc. (NASDAQ: NASDAQ:SIGI) experienced a significant downturn as shares fell 7% following the release of their second-quarter financial results, which revealed a more substantial loss than analysts had anticipated.
The insurance firm reported a loss of $1.10 per diluted common share, a stark contrast to the analyst consensus estimate of a $1.55 profit. Despite this, the company's revenue saw an increase, reaching $1.23 billion, narrowly surpassing the $1.22 billion consensus estimate.
The company's quarterly performance was notably impacted by an increase in net premiums written (NPW) of 13% compared to the same period last year. However, the GAAP combined ratio deteriorated to 116.1%, up from 100.2% in the second quarter of 2023, indicating higher losses and expenses relative to premiums. The unfavorable prior year casualty reserve development, which was driven by higher loss severity attributed to social inflation, contributed significantly to this result.
John J. Marchioni, Chairman, President, and CEO, acknowledged the challenges faced in the quarter, stating, "This was a challenging quarter. We did not meet our high standard as underwriting performance fell below our target." He further explained the company's proactive measures to address the updated view of loss costs, including implementing additional price increases.
Selective Insurance's after-tax net investment income showed resilience, increasing by 11% YoY to $86 million. Despite the positive aspects, such as growth across all three insurance segments and a stable underwriting portfolio, the company's overall insurance operations reduced return on equity (ROE) by 19.9 points in the second quarter of 2024.
The company's outlook for 2024 has been adjusted, with the expected GAAP combined ratio now increased to 101.5%, reflecting the impact of unfavorable prior year casualty reserve development and elevated catastrophe losses in the first half of the year. The company's capital position remains robust, with a strong focus on disciplined risk selection, pricing, and claims management to navigate the dynamic loss trend environment.
Selective Insurance's balance sheet also showed a decrease in book value per common share by 1% during the first half of 2024, primarily due to dividends and an increase in after-tax net unrealized losses on the fixed income securities portfolio, partially offset by net income per diluted common share.
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