Selective announces preliminary second quarter catastrophe losses and earnings per share
Selective Insurance Group announced preliminary second quarter 2020 pre-tax net catastrophe losses totaling approximately $83 million. The losses relate to numerous catastrophe events designated by Property Claims Services during the quarter, including two April storms ($43 million) and claims related to civil unrest ($18 million).
Mainly due to higher than expected catastrophe losses, the Company expects its second quarter combined ratio to be in the range of 98% to 99%, with a combined ratio excluding catastrophe losses in a range of 85% to 86%. The combined ratio reflects: (i) $15 million of net prior year favorable casualty reserve development; (ii) better than expected non-catastrophe property losses; (iii) ongoing expense initiatives; and partially offset by (iv) the previously disclosed COVID-19 related charges. Selective also projects second quarter diluted earnings per share (“EPS”) to be in the range of $0.55 to $0.60 and non-GAAP operating EPS to be in the range of $0.35 to $0.40, with the difference principally reflecting net realized and unrealized investment gains.
“We experienced a record level of catastrophe losses for the second quarter, driven by industry-wide U.S. catastrophe loss activity that significantly exceeded the 10-year historical median,” said President and Chief Executive Officer John J. Marchioni. “Our claims team is working closely with our distribution partners to process these claims and help our policyholders restore their property. Despite the higher level of catastrophe losses, our underlying performance was strong, as our combined ratio indicates. In addition, our combined ratio guidance continues to reflect our estimates of the full-year impact of COVID-19.”
Based on the preliminary second quarter results, the Company made the following changes to its full-year 2020 guidance.
- A GAAP combined ratio, excluding catastrophe losses, of between 90.0% and 91.0%, which is an improvement from our prior guidance of a range of 92.0% to 93.0%. Our combined ratio estimate assumes no additional prior-year casualty reserve development in the second half of the year;
- Catastrophe losses of 6.0 points on the combined ratio, reflecting higher than expected catastrophe losses through the first half of the year; and
- After-tax net investment income of $170.0 million, a $10.0 million improvement from our prior guidance, which includes after-tax alternative investment income of between $Nil and $5.0 million.