Selective shrinks troubled business, expands E&S access
Selective reported third-quarter net premiums written of $1.12 billion, down 7%, as it shed poorer-performing business and wrote fewer new accounts. Its combined ratio improved to 96.8% from 98.6%, while non-GAAP operating income rose 33% to $141.7 million.
Standard commercial lines, which account for 77% of written premiums, drove the decline. Premiums fell 8% to $867.5 million, with renewal price increases averaging 5.7% and retention of 82%.
Selective is taking a more aggressive approach to its weakest accounts. Renewal price increases in its lowest-performing cohorts averaged 17.2%, up from 12.8% a year earlier, while retention fell to 52% from 79%. Targeted retention actions accounted for five percentage points of the commercial segment’s 8% premium decline. Commercial auto premiums fell approximately 11% in the quarter and 7% year to date.
“These actions have affected near-term premium growth, but we believe improving our portfolio’s mix and profitability are the foundation for sustainable, profitable growth over time,” said Chairman, President and CEO John Marchioni.
Standard commercial lines returned to an underwriting profit, with a combined ratio of 97.9%, compared with 101.1% a year earlier. Across the company, there was no prior-year casualty reserve development, versus 3.3 points of adverse development in the comparable quarter. Catastrophe losses increased to 5.4 points from 2.1 points, while the underwriting expense ratio rose to 32.1% from 30.6%.
Personal lines premiums declined 8% to $96 million, despite renewal price increases averaging 8.1%. The segment’s combined ratio improved to 103.2% from 110.1%, but remained unprofitable.
Within that business, Selective is shifting toward affluent homeowners. Average new-business home values exceeded $1.1 million during the first nine months, and target-market accounts now represent approximately 71% of homeowners premium. The company also sees opportunities to expand geographically.
“Year to date, target market homeowners direct premiums written increased 8%, offset by a 12% decline in the more challenged auto line,” Marchioni said.
Excess and surplus lines premiums fell 2% to $159.3 million, with renewal price increases averaging 1.5%. The segment’s combined ratio deteriorated to 86.5% from 76.2%, reflecting higher property losses.
Selective is expanding distribution to support future E&S growth, including giving retail agency partners access to its non-admitted products.
“Our Retail Access Initiative has moved from build-out to execution,” Marchioni said. “The structural investments are largely complete, agency appointments and our underwriting model are in place, and early indicators are encouraging.”
The company is also integrating AI into underwriting and claims, introducing capabilities in stages while measuring effectiveness and maintaining human oversight.
“We are moving beyond individual tools towards integrating analytics and decision support directly into underwriting and claims workflows,” Marchioni said. The aim is to improve decision quality and increase employee capacity.
Investment income remained a major earnings contributor. After-tax net investment income increased 16% to $127.3 million, prompting Selective to raise its full-year investment income outlook to $490 million from $480 million. The company expects a full-year combined ratio of 96.5% to 97.5%.
Selective also increased its quarterly dividend 12% to $0.48 per share and authorized a new $200 million share repurchase program, following $55 million of repurchases during the quarter.
