Selective nears $4 billion in annual premiums

Selective shared its Q3’23 financial results on November 2. The highlights:

• Annual non-GAAP operating return on equity (ROE) was 15%, and 13.2% for the year so far. This exceeds Selective’s goal of 12% operating ROE.
• Increased standard Commercial Lines renewal prices by 7.1% in the quarter and 6.9% for the year so far.
• 2023 accident year loss estimates are generally holding up as expected, but pockets of pressure exists, particularly in personal and commercial auto liability.
• Standard Commercial Lines and excess and surplus lines constitute 90% of Selective’s business, while the remaining 10% is in personal lines. The latter is falling short of profit targets and is being addressed through aggressive rate increases.
• Selective expects overall written renewal rate to be approximately 9% in the fourth quarter and in the range of 20% to 25% in 2024, subject to regulatory approvals.
• Selective is working to enhance its homeowners’ insurance performance by updating terms and conditions. This includes switching to actual cash value instead of replacement costs for older roofs, and introducing mandatory wind and hail deductibles in storm-prone states. The carrier anticipates these and other coverage changes will become more prominent as the market evolves.
• Net premiums for the company saw a 17% increase in the quarter, reaching $1.1 billion. With this growth, the company is on track to surpass $4 billion in annual premiums for the first time in its nearly 100-year history.
• In all of Selective’s business areas, it had a 7% increase in renewal rates and a 26% growth in new business this quarter.
• New states added since 2017 contributed about 2% to this quarter’s premium growth.
• In Standard Commercial Lines segment, net premiums written grew by 15% with a 13% increase in new business.
• The Commercial Lines market had 7.1% renewal rate and a retention rate of 86%.
• Property renewals saw a 12.3% rate increase and a 17.6% total premium increase, while commercial auto renewals had a 9.6% rate increase and a 14.3% total premium increase.
• The company is expanding geographically, adding West Virginia and Maine to its Commercial Lines soon, and planning to launch in Washington, Oregon, and Nevada by late 2024. The goal is to cover most of the continuous US.
• Excess and surplus lines saw a 25% premium growth this quarter and maintained a combined ratio of 83.9% (or 80.4% on an underlying basis). For the first nine months, the premium growth was 21%, with a combined ratio of 89.7% and an underlying ratio of 82.5%.
• Selective has a sweet spot with construction-related businesses and isn’t a heavy coastal writer.