Selective Q4 CR worsens 4.8 pts to 98.5% on $100mn casualty reserve charge

By Michael Loney

Jan 29 - (The Insurer) - Selective Insurance Group has reported an earnings miss and a 4.8 point combined ratio deterioration to 98.5 percent for the fourth quarter, with the results hit by $100mn of reserve strengthening in general liability and excess and surplus lines.

Branchville, New Jersey-based Selective reported non-Gaap operating income of $99.6mn for the fourth quarter, down from $118.6mn in the same period of 2023.

The operating income per diluted common share of $1.62 missed the $1.99 consensus estimate of 10 analysts as per MarketWatch and was down from $1.94 in the prior-year period.

Net underwriting income for the quarter fell to $13.3mn, from $50.2mn in Q4 2023.

The Q4 2024 combined ratio of 98.5 percent was a 4.8 point deterioration from 93.7 percent in the same period of 2023.

Net unfavourable prior-year casualty reserve development of $100mn increased the combined ratio by 8.8 points, compared with a 1.0 point impact in Q4 2023.

Selective said the reserve development in Q4 2024 was driven by recent accident years in general liability and excess and surplus lines. This was partially offset by lower catastrophe and non-catastrophe property losses and a lower expense ratio.

Net premiums written (NPW) increased 10 percent to $1.09bn, up from $991.5mn in Q4 2023.

Selective said the NPW growth was driven by renewal pure price increases of 10.7 percent in Q4 2024, which was a slight sequential acceleration from 10.5 percent in Q3 2024 and up 3.3 points from Q4 2023.

Net investment income generated 13.2 points of annualised ROE in the quarter, increasing to $97mn after-tax, up 24 percent from a year ago.

For the full year, the 2024 combined ratio was 103.0 percent including prior year casualty reserve strengthening of $311mn, which increased the combined ratio by 7.1 points.

The 2024 combined ratio was up 6.5 points from the 96.5 percent in 2023.

NPW increased 12 percent in 2024 to $4.63bn, with renewal pure price increases of 9.5 percent for the year.

“Despite strong investment results, overall financial performance in 2024 did not meet our expectations,” said John Marchioni, chairman, president and CEO of Selective.

“Within insurance operations, we delivered solid underlying profitability but took meaningful actions to strengthen casualty reserves in response to social inflation. We also increased standard commercial lines renewal pure pricing, achieving 8.8 percent in the fourth quarter and 8.3 percent for the year,” he continued.

Marchioni said his company continues to focus on returning performance to the combination of growth and profitability investors expect.

“With these pricing actions and our ability to manage renewal pure price and retention at a granular level, we are well positioned to capitalize on our competitive strengths. These include our unique field model, the strength of our distribution partner relationships, and our customer experience focus,” he said.

The executive also highlighted that Selective exceeded $500mn of NPW in excess and surplus lines in 2024, as well as adding five states to the standard commercial lines operating footprint and repositioning the personal lines business toward improved profitability.

Selective provided 2025 guidance that includes a Gaap combined ratio of 96 percent to 97 percent, including net catastrophe losses of 6 points.