Selective Insurance Group Income Falls 45% on Investments

Tue. August 04, 2009; Posted: 12:37 PM

BRANCHVILLE, N.J., Aug 04, 2009 (A. M. Best via COMTEX) -- SIGI | Quote | Chart | News | PowerRating -- Due largely to a 27% drop in net investment income, Selective Insurance Group Inc. reported net income of $15.7 million, down about 45% compared with the same period a year ago.

Net investment income decreased to $21.9 million during the second quarter primarily due to a $5.8 million loss on alternative investments compared with a gain of $200,000 during the second quarter 2008, said the company's earnings release.

In addition to investment losses, Selective (NASDAQ: SIGI | Quote | Chart | News | PowerRating) experienced an overall 6% drop in net premiums written, including an 8% drop in net premiums written in commercial lines.

"It is still a very competitive commercial lines marketplace, and we're concentrating on the factors we can control such as using predictive modeling on all lines of business," said Gregory E. Murphy, chairman, president and chief executive officer of Selective. "As the economy stabilizes, the drag from return audit and endorsement premiums will be mitigated. This, combined with a stronger pricing environment, should contribute to overall premium growth."

Despite the drop in premiums, Murphy said Selective saw a 0.6% renewal rate in commercial lines "that beat our expectations." It was the first quarterly increase in commercial renewals since the first quarter of 2005, he said.

Selective Insurance Group currently has a Best's Financial Strength rating of A+ (Superior).

In May, while affirming the financial strength rating, A.M. Best Co. revised the outlook to negative from stable of Selective Insurance Group and its seven property/casualty pooling members. The revised outlook reflects Selective's weakened operating results as well as its sizable investment losses and impairment charges at year-end 2008, which resulted in deteriorating risk-adjusted capitalization (BestWire, May 20, 2009).

Shares of Selective were trading at $15.85 midday on Aug. 4, up 0.70% from the previous close.

(By Chad Hemenway, associate editor, BestWeek: Chad.Hemenway@ambest.com)

For full details on Selective Insurance Gr (SIGI) click here. Selective Insurance Gr (SIGI) has Short Term PowerRatings of 6. Details on Selective Insurance Gr (SIGI) Short Term PowerRatings is available at This Link.

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