FINANCIAL SUPPLEMENT SECOND QUARTER Exhibit 99.2

Transcription

1 FINANCIAL SUPPLEMENT SECOND QUARTER 2018 Exhibit 99.2

2 Forward-Looking Statements Certain statements in this report, including information incorporated by reference, are forward-looking statements as that term is defined in the Private Securities Litigation Reform Act of 1995 ("PSLRA"). The PSLRA provides a safe harbor under the Securities Act of 1933 and the Securities Exchange Act of 1934 for forward-looking statements. These statements relate to our intentions, beliefs, projections, estimations, or forecasts of future events or our future financial performance and involve known and unknown risks, uncertainties, and other factors that may cause our or our industry s actual results, levels of activity, or performance to be materially different from those expressed or implied by the forward-looking statements. In some cases, you can identify forward-looking statements by use of 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. These statements are only predictions, and we can give no assurance that such expectations will prove to be correct. We undertake no obligation, other than as may be required under the federal securities laws, to publicly update or revise any forward-looking statements, whether as a result of new information, future events, or otherwise. Factors that could cause our actual results to differ materially from those projected, forecasted, or estimated by us in forward-looking statements, include, but are not limited to: difficult conditions in global capital markets and the economy; deterioration in the public debt and equity markets and private investment marketplace that could lead to investment losses and fluctuations in interest rates; ratings downgrades could affect investment values and, therefore, statutory surplus; the adequacy of our loss reserves and loss expense reserves; the frequency and severity of natural and man-made catastrophic events, including, but not limited to, hurricanes, tornadoes, windstorms, earthquakes, hail, terrorism, explosions, severe winter weather, floods, and fires; adverse market, governmental, regulatory, legal, or judicial conditions or actions; the concentration of our business in the Eastern Region; the cost and availability of reinsurance; our ability to collect on reinsurance and the solvency of our reinsurers; the impact of changes in U.S. trade policies and imposition of tariffs on imports that may lead to higher than anticipated inflationary trends for our loss and loss adjustment expenses; uncertainties related to insurance premium rate increases and business retention; changes in insurance regulations that impact our ability to write and/or cease writing insurance policies in one or more states; recent federal financial regulatory reform provisions that could pose certain risks to our operations; our ability to maintain favorable ratings from rating agencies, including A.M. Best, Standard & Poor s, Moody s, and Fitch; our entry into new markets and businesses; and other risks and uncertainties we identify in filings with the United States Securities and Exchange Commission, including, but not limited to, our Annual Report on Form 10-K and other periodic reports. These risk factors may not be exhaustive. We operate in a continually changing business environment, and new risk factors emerge from time-to-time. We can neither predict such new risk factors nor can we assess the impact, if any, of such new risk factors on our businesses or the extent to which any factor or combination of factors may cause actual results to differ materially from those expressed or implied in any forward-looking statements in this report. In light of these risks, uncertainties and assumptions, the forwardlooking events discussed in this report might not occur. Selective s SEC filings can be accessed through the Investors page of Selective s website, or through the SEC s EDGAR Database at (Selective EDGAR CIK No ).

3 TABLE OF CONTENTS Consolidated Financial Highlights Consolidated Statements of Operations Consolidated Balance Sheets Financial Metrics Page Consolidated Insurance Operations Statement of Operations Standard Commercial Lines Statement of Operations and Supplemental Data Standard Commercial Lines GAAP Line of Business Results Standard Personal Lines Statement of Operations and Supplemental Data Standard Personal Lines GAAP Line of Business Results Excess and Surplus Lines Statement of Operations and Supplemental Data Excess and Surplus Lines GAAP Line of Business Results Consolidated Investment Income Consolidated Composition of Invested Assets Reconciliation of Net Income to Non-GAAP Operating Income and Certain Other Non-GAAP Measures 14 Ratings and Contact Information 15

4 CONSOLIDATED FINANCIAL HIGHLIGHTS Quarter ended Year-to-date June 30, Mar. 31, Dec. 31, Sept. 30, June 30, June 30, June 30, ($ and shares in millions, except per share data) For Period Ended Gross premiums written $ , ,402.4 Net premiums written , ,212.5 Change in net premiums written, from comparable prior year period 7 % Underwriting income, before-tax $ Net investment income earned, before-tax Net realized and unrealized investment (losses) gains, before-tax* (1.7) (10.5) (1.1) (12.2) 0.7 Net income $ Non-GAAP operating income** At Period End Total assets 7, , , , , , ,528.2 Total invested assets 5, , , , , , ,503.0 Stockholders' equity 1, , , , , , ,652.6 Shares outstanding Per Share and Share Data Net income per diluted share $ Non-GAAP operating income per diluted share** Weighted average diluted shares outstanding Book value per share $ Dividends paid per share Financial Ratios Loss and loss expense ratio 60.5 % Underwriting expense ratio Dividends to policyholders ratio GAAP combined ratio 93.7 % Annualized ROE Annualized non-gaap operating ROE** Debt to total capitalization Net premiums written to policyholders' surplus 1.4 x 1.4x 1.4x 1.4x 1.4x 1.4x 1.4x Invested assets per dollar of stockholders' equity $ * Refer to Page 2 for components of realized and unrealized investment losses and gains. ** Non-GAAP measure. Refer to Page 14 for definition. Page 1

5 CONSOLIDATED STATEMENTS OF OPERATIONS Quarter ended Year-to-date June 30, Mar. 31, Dec. 31, Sept. 30, June 30, June 30, June 30, ($ and shares in millions, except per share data) Revenues Net premiums earned $ , ,128.9 Net investment income earned Net realized and unrealized (losses) gains: Net realized investment gains (losses) on disposals 4.7 (1.0) Other-than-temporary impairments (2.8) (1.2) (0.1) (0.1) (1.2) (4.0) (4.7) Unrealized gains (losses) on equity securities 1.1 (14.1) (13.0) Total net realized and unrealized (losses) gains (1.7) (10.5) (1.1) (12.2) 0.7 Other income Total revenues , ,215.0 Expenses Loss and loss expenses incurred Amortization of deferred policy acquisition costs Other insurance expenses Interest expense Corporate expenses Total expenses , ,088.5 Income before federal income taxes Federal income tax expense Net Income $ Net realized and unrealized investment losses (gains), after tax* (4.4) (1.1) 9.6 (0.4) Tax reform impact - deferred tax write-off* 20.2 Non-GAAP operating income** $ Weighted average shares outstanding (diluted) Net income per share (diluted) $ Non-GAAP operating income per share (diluted)** $ * Amounts are provided to reconcile net income to non-gaap operating income. ** Non-GAAP measure. Refer to Page 14 for definition. Page 2

6 CONSOLIDATED BALANCE SHEETS June 30, Mar. 31, Dec. 31, Sept. 30, June 30, ($ in millions, except per share data) ASSETS Investments Fixed income securities, held-to-maturity, at carrying value $ Fixed income securities, available-for-sale, at fair value 5, , , , ,018.7 Equity securities, at fair value Short-term investments Other investments Total investments 5, , , , ,503.0 Cash Restricted cash Interest and dividends due or accrued Premiums receivable, net of allowance Reinsurance recoverable, net of allowance Prepaid reinsurance premiums Current federal income tax Deferred federal income tax Property and equipment, net of accumulated depreciation and amortization Deferred policy acquisition costs Goodwill Other assets Total assets $ 7, , , , ,528.2 LIABILITIES AND STOCKHOLDERS' EQUITY Liabilities Reserve for loss and loss expense $ 3, , , , ,731.2 Unearned premiums 1, , , , ,352.1 Short-term debt 55.0 Long-term debt Current federal income tax Accrued salaries and benefits Other liabilities Total liabilities $ 6, , , , ,875.6 Stockholders' Equity Preferred stock of $0 par value per share $ Common stock of $2 par value per share Additional paid-in capital Retained earnings 1, , , , ,641.8 Accumulated other comprehensive (loss) income (84.5) (68.2) Treasury stock, at cost (584.4) (584.2) (578.1) (578.1) (578.0) Total stockholders' equity $ 1, , , , ,652.6 Commitments and contingencies Total liabilities and stockholders' equity $ 7, , , , ,528.2 Page 3

7 FINANCIAL METRICS Quarter ended Year-to-date June 30, Mar. 31, Dec. 31, Sept. 30, June 30, June 30, June 30, ($ and shares in millions, except per share data) Book value per share Stockholders' equity $ 1, , , , , , ,652.6 Common shares issued and outstanding, at period end Book value per share $ Book value per share excluding unrealized gain or loss on fixed income securities Financial results (after-tax) Underwriting income Net investment income Interest expense (4.8) (4.9) (4.0) (4.0) (4.0) (9.7) (7.9) Corporate expense (2.7) (7.4) (3.6) (4.4) (5.8) (10.1) (10.1) Net realized and unrealized investment (losses) gains* (1.3) (8.3) (0.7) (9.6) 0.4 Tax reform impact - deferred tax write-off (20.2) Total after-tax net income Return on average equity Insurance segments 7.2 % Net investment income Interest expense (1.2) (1.2) (0.9) (0.9) (1.0) (1.1) (1.0) Corporate expense (0.7) (1.7) (0.9) (1.1) (1.5) (1.3) (1.3) Net realized and unrealized investment (losses) gains, net of tax (0.3) (2.0) (0.2) (1.1) Tax reform impact - deferred tax write-off (4.7) Annualized ROE Net realized and unrealized losses (gains), net of tax** (1.1) (0.3) 1.1 Tax reform impact - deferred tax write-off** 4.7 Annualized Non-GAAP Operating ROE*** 14.3 % Debt and total capitalization Notes payable: 1.61% Borrowings from FHLBNY $ % Borrowings from FHLBNY % Borrowings from FHLBNY % Borrowings from FHLBI % Senior Notes % Senior Notes % Senior Notes Total debt Stockholders' equity 1, , , , , , ,652.6 Total capitalization $ 2, , , , , , ,091.5 Ratio of debt to total capitalization 20.6 % Policyholders' surplus $ 1, , , , , , ,653.2 * Refer to Page 2 for components of realized and unrealized investment losses and gains. ** Amounts are provided to reconcile annualized ROE to annualized non-gaap operating ROE. *** Non-GAAP measure. Refer to Page 14 for definition. Page 4

8 CONSOLIDATED INSURANCE OPERATIONS STATEMENT OF OPERATIONS Quarter ended Year-to-date June 30, Mar. 31, Dec. 31, Sept. 30, June 30, June 30, June 30, ($ in millions) Underwriting results Net premiums written $ , ,212.5 Change in net premiums written, from comparable prior year period 7 % Net premiums earned $ , ,128.9 Losses and loss expenses incurred Net underwriting expenses incurred Dividends to policyholders GAAP underwriting gain $ Catastrophe losses $ (Favorable) prior year casualty reserve development (4.0) (8.0) (10.0) (9.9) (14.3) (12.0) (28.7) Underwriting ratios Loss and loss expense ratio 60.5 % Underwriting expense ratio Dividends to policyholders ratio Combined ratio 93.7 % Catastrophe losses 3.1 pts (Favorable) prior year casualty reserve development (0.7) pts (1.4) (1.7) (1.7) (2.5) (1.0) (2.5) Combined ratio before catastrophe losses 90.6 % Combined ratio before catastrophe losses and prior year casualty development Other Statistics Non-catastrophe property losses $ Non-catastrophe property losses 13.7 pts Direct new business $ Page 5

9 STANDARD COMMERCIAL LINES STATEMENT OF OPERATIONS AND SUPPLEMENTAL DATA Quarter ended Year-to-date June 30, Mar. 31, Dec. 31, Sept. 30, June 30, June 30, June 30, ($ in millions) Underwriting results Net premiums written $ , Change in net premiums written, from comparable prior year period 8 % Net premiums earned $ Losses and loss expenses incurred Net underwriting expenses incurred Dividends to policyholders GAAP underwriting gain $ Catastrophe losses $ (Favorable) prior year casualty reserve development (10.0) (8.0) (13.0) (19.9) (17.3) (18.0) (33.7) Underwriting ratios Loss and loss expense ratio 57.6 % Underwriting expense ratio Dividends to policyholders ratio Combined ratio 91.4 % Catastrophe losses 2.1 pts (Favorable) prior year casualty reserve development (2.1) pts (1.7) (2.8) (4.5) (3.9) (1.9) (3.8) Combined ratio before catastrophe losses 89.3 % Combined ratio before catastrophe losses and prior year casualty development Other Statistics Non-catastrophe property losses $ Non-catastrophe property losses 12.0 pts Direct new business $ Renewal pure price increases 3.5 % Retention 84 % Page 6

10 STANDARD COMMERCIAL LINES GAAP LINE OF BUSINESS RESULTS Quarter Ended June 30, 2018 Quarter Ended June 30, 2017 Commercial Workers General Commercial Commercial Workers General Commercial ($ in millions) Property Compensation Liability Auto BOP Bonds Other Total Property Compensation Liability Auto BOP Bonds Other Total Net premiums written $ Net premiums earned Loss and loss expense ratio 50.1 % (0.2) (11.3) (0.3) 57.1 Underwriting expense ratio Dividend ratio Combined ratio 87.9% Underwriting gain (loss) $ (10.8) (0.5) (1.6) (17.4) Year-to-Date June 30, 2018 Year-to-Date June 30, 2017 Commercial Workers General Commercial Commercial Workers General Commercial ($ in millions) Property Compensation Liability Auto BOP Bonds Other Total Property Compensation Liability Auto BOP Bonds Other Total Net premiums written $ , Net premiums earned Loss and loss expense ratio 63.4 % (0.3) (0.1) 56.0 Underwriting expense ratio Dividend ratio (0.2) 1.6 (0.1) (0.1) 0.2 Combined ratio 101.5% Underwriting (loss) gain $ (2.5) (24.1) (2.0) (25.5) Page 7

11 STANDARD PERSONAL LINES STATEMENT OF OPERATIONS AND SUPPLEMENTAL DATA Quarter ended Year-to-date June 30, Mar. 31, Dec. 31, Sept. 30, June 30, June 30, June 30, ($ in millions) Underwriting results Net premiums written $ Change in net premiums written, from comparable prior year period 7 % Net premiums earned $ Losses and loss expenses incurred Net underwriting expenses incurred GAAP underwriting gain (loss) $ 4.8 (1.5) (5.8) 3.3 (0.7) Catastrophe losses $ Unfavorable prior year casualty reserve development Underwriting ratios Loss and loss expense ratio 65.1 % Underwriting expense ratio Combined ratio 93.7 % Catastrophe losses 7.7 pts Unfavorable prior year casualty reserve development pts Combined ratio before catastrophe losses 86.0 % Combined ratio before catastrophe losses and prior year casualty development Other Statistics Non-catastrophe property losses $ Non-catastrophe property losses 26.2 pts Direct new business $ Renewal pure price increases 3.4 % Retention 85 % Page 8

12 Personal STANDARD PERSONAL LINES GAAP LINE OF BUSINESS RESULTS Quarter Ended June 30, 2018 Quarter Ended June 30, 2017 ($ in millions) Auto Homeowners Other Total Auto Homeowners Other Total Net premiums written $ Net premiums earned Personal Loss and loss expense ratio 70.4 % Underwriting expense ratio (133.2) (142.5) 31.7 Combined ratio 101.5% 94.4 (120.2) (87.0) Underwriting (loss) gain $ (0.6) (5.1) (3.5) 2.9 (5.8) Year-to-Date June 30, 2018 Year-to-Date June 30, 2017 Personal Personal ($ in millions) Auto Homeowners Other Total Auto Homeowners Other Total Net premiums written $ Net premiums earned Loss and loss expense ratio 71.0 % Underwriting expense ratio (173.1) (180.2) 31.2 Combined ratio 104.0% (160.0) (137.3) Underwriting (loss) gain $ (3.3) (1.9) (10.2) (0.7) Page 9

13 EXCESS AND SURPLUS LINES STATEMENT OF OPERATIONS AND SUPPLEMENTAL DATA Quarter ended Year-to-date June 30, Mar. 31, Dec. 31, Sept. 30, June 30, June 30, June 30, ($ in millions) Underwriting results Net premiums written $ Change in net premiums written, from comparable prior year period (1) % (6) 4 (4) 6 (3) 5 Net premiums earned $ Losses and loss expenses incurred Net underwriting expenses incurred GAAP underwriting (loss) gain $ (7.8) (0.6) 1.9 (11.1) 1.3 (8.4) 2.9 Catastrophe losses $ 2.8 (0.6) (0.6) Unfavorable prior year casualty reserve development Underwriting ratios Loss and loss expense ratio 81.2 % Underwriting expense ratio Combined ratio % Catastrophe losses 5.3 pts (1.2) (1.0) Unfavorable prior year casualty reserve development 11.3 pts Combined ratio before catastrophe losses % Combined ratio before catastrophe losses and prior year casualty development Other Statistics Non-catastrophe property losses $ Non-catastrophe property losses 11.5 pts Direct new business $ Casualty new/renewal price increases 5.9 % Page 10

14 EXCESS & SURPLUS LINES GAAP LINE OF BUSINESS RESULTS Quarter Ended June 30, 2018 Quarter Ended June 30, 2017 ($ in millions) Casualty Property Total Casualty Property Total Net premiums written $ Net premiums earned Loss and loss expense ratio 85.4 % Underwriting expense ratio Combined ratio 118.9% Underwriting (loss) gain $ (7.4) (0.4) (7.8) Year-to-Date June 30, 2018 Year-to-Date June 30, 2017 ($ in millions) Casualty Property Total Casualty Property Total Net premiums written $ Net premiums earned Loss and loss expense ratio 77.5 % Underwriting expense ratio Combined ratio 110.1% Underwriting (loss) gain $ (7.8) (0.5) (8.4) Page 11

15 CONSOLIDATED INVESTMENT INCOME Quarter ended Year-to-date June 30, Mar. 31, Dec. 31, Sept. 30, June 30, June 30, June 30, ($ in millions) Net investment income Fixed income securities Taxable $ Tax-exempt Total fixed income securities Equity securities Other investments Short-term investments Investment income Investment expenses (2.7) (2.9) (3.1) (3.1) (3.3) (5.6) (6.1) Investment tax expense (8.0) (7.4) (11.4) (10.9) (11.1) (15.4) (21.1) Total net investment income, after-tax $ Net realized and unrealized capital (losses) gains Fixed income securities $ (1.2) (3.3) (4.5) 4.6 Equity securities (0.6) Short-term investments Other investments (0.8) 0.5 Realized net gains (losses) on the disposal of securities 4.7 (1.0) Other-than-temporary impairment losses (2.8) (1.2) (0.1) (0.1) (1.2) (4.0) (4.7) Unrealized gains (losses) on equity securities 1.1 (14.1) (13.0) Total net realized and unrealized capital (losses) gains recognized in net income, before-tax $ (1.7) (10.5) (1.1) (12.2) 0.7 Change in unrealized (losses) gains recognized in other comprehensive income, before-tax $ (21.1) (80.8) (11.3) (101.9) 61.2 Average investment yields Fixed income securities, before-tax 3.4 % Fixed income securities, after-tax Total portfolio, before-tax 3.2 % Total portfolio, after-tax Effective tax rate on net investment income 17.5 % New money purchase rates for fixed income securities, before-tax New money purchase rates for fixed income securities, after-tax Effective duration of fixed income portfolio including short-term (in years) Page 12

16 CONSOLIDATED COMPOSITION OF INVESTED ASSETS June 30, Mar. 31, Dec. 31, Sept. 30, June 30, ($ in millions) Amount Percent Amount Percent Amount Percent Amount Percent Amount Percent Fixed income securities, at fair value $ 5, % 5, , , , Equity securities, at fair value Other investments Short-term investments Total investments $ 5, % 5, , , , Fixed income portfolio, at carry value U.S. government obligations $ % Foreign government obligations Obligations of state and political subdivisions 1, , , , , Corporate securities 1, , , , , Collateralized loan obligations and other asset-backed securities Residential mortgage-backed securities Commercial mortgage-backed securities Total fixed income securities $ 5, % 5, , , , Weighted average credit quality Investment grade credit quality $ 5, % 5, , , , Non-investment grade credit quality Total fixed income securities, at fair value $ 5, % 5, , , , Weighted average credit quality of fixed income portfolio AA- AA- AA- AA- AA- Expected maturities of fixed income securities at carry value Due in one year or less $ % Due after one year through five years 2, , , , , Due after five years through 10 years 2, , , , , Due after 10 years Total fixed income securities $ 5, % 5, , , , Alternative investments June 30, 2018 Current Number of Original Remaining Market Strategy Funds Commitment Commitment Value Private equity 31 $ Private credit Real assets Total 54 $ Page 13

17 RECONCILIATION OF NET INCOME TO NON-GAAP OPERATING INCOME AND CERTAIN OTHER NON-GAAP MEASURES Quarter ended Year-to-date June 30, Mar. 31, Dec. 31, Sept. 30, June 30, June 30, June 30, ($ in millions, except per share data) Reconciliation of net income to non-gaap operating income Net income $ Net realized losses (gains) and OTTI* 2.8 (3.5) 1.1 (6.8) (1.7) (0.8) (0.7) Net unrealized (gains) losses recognized in income on equity securities* (1.1) Net realized (gains) losses, OTTI, and unrealized (gains) losses* (6.8) (1.7) 12.2 (0.7) Tax expense (benefit) (0.3) (2.2) (0.3) (2.6) 0.2 Tax reform impact - deferred tax write-off 20.2 Non-GAAP operating income $ Reconciliation of net income per diluted share to non-gaap operating income per diluted share Net income per diluted share $ Net realized losses (gains) and OTTI* 0.05 (0.06) 0.02 (0.11) (0.03) (0.01) (0.01) Net unrealized (gains) losses recognized in income on equity securities* (0.02) Net realized (gains) losses, OTTI, and unrealized (gains) losses* (0.11) (0.03) 0.20 (0.01) Tax expense (benefit) (0.01) (0.04) (0.01) (0.04) Tax reform impact - deferred tax write-off 0.34 Non-GAAP operating income per diluted share $ Reconciliation of annualized ROE to annualized non-gaap operating ROE Annualized ROE 14.0 % Net realized losses (gains) and OTTI* 0.7 (0.8) 0.3 (1.6) (0.4) (0.1) (0.1) Net unrealized (gains) losses recognized in income on equity securities* (0.3) Net realized (gains) losses, OTTI, and unrealized (gains) losses* (1.6) (0.4) 1.4 (0.1) Tax expense (benefit) (0.1) (0.5) (0.1) (0.3) 0.1 Tax reform impact - deferred tax write-off 4.7 Annualized non-gaap operating ROE 14.3 % Non-GAAP operating income, non-gaap operating income per diluted share, and non-gaap operating return on average equity differ from net income, income per share, and return on equity, respectively, by the exclusion of after-tax net realized and unrealized gains and losses on investments, if any, and the deferred tax write-off that was recognized in 2017 in relation to tax reform. They are used as important financial measures by management, analysts, and investors, because the realization of investment gains and losses on sales of securities in any given period is largely discretionary as to timing. In addition, these net realized investment gains and losses, the deferred tax write-off, as well as other-than-temporary investment impairments that are charged to earnings, and unrealized gains and losses on equity securities, could distort the analysis of trends. These operating measurements are not intended as a substitute for net income, income per share, or return on equity prepared in accordance with U.S. generally accepted accounting principles (GAAP). Reconciliations of net income, income per share, and return on equity to non-gaap operating income, non-gaap operating income per diluted share, and non-gaap operating return on average equity, respectively, are provided in the tables above. * Refer to Page 2 for components of realized and unrealized investment losses and gains. Page 14

18 RATINGS AND CONTACT INFORMATION Address: As of June 30, Wantage Avenue A.M. Best Standard & Poor's Moody's Fitch Branchville, NJ Financial Strength Ratings: A A A2 A+ Corporate Website: Long-Term Debt Credit Rating: bbb+ BBB Baa2 BBB+ Investor Contact: REGISTRAR AND TRANSFER AGENT Rohan Pai EQ Shareowner Services Senior Vice President P.O. Box Investor Relations & Treasurer St. Paul, MN Phone: Rohan.Pai@Selective.com Media Contact: Jamie M. Beal Vice President Director of Communications Phone: Jamie.Beal@Selective.com Page 15