Selective Insurance Group's premium decline accelerated in the second quarter as the insurer reduced new business and retained fewer poorer-performing accounts, while casualty loss costs continued to rise.
Net premiums written fell 5% year on year to $1.22 billion in the three months ended June 30, 2026. That followed a 1% decline in the first quarter, indicating that the reduction in business gathered pace.
The decline was led by standard commercial lines, which accounted for 79% of total written premiums. Premiums in the segment fell 6%, compared with a 1% decrease in the first quarter, as new business declined.
Commercial renewal price increases also slowed to 6.5%, from 7.1% in the first quarter and 8.9% a year earlier. Retention fell to 81%, from 82% in the previous quarter.
The results come as the US commercial insurance market moves in two directions. Overall rates fell 2% in the second quarter, following a 1% decline in the first, according to Marsh.
Property rates dropped 13% as capacity increased and insurers competed more heavily for business. Casualty rates, however, rose 7% as claims costs and litigation pressures remained high. Excluding workers' compensation, casualty rates increased 11%.
Selective's 5% premium decline was also steeper than the results reported by some larger peers, although differences in business mix limit direct comparisons. Travelers increased business insurance premiums by 3%, while Chubb's North American commercial premiums fell 2.3%. Chubb still recorded 8.9% growth in its middle-market and small-commercial business, with its overall decline driven by reduced major accounts and specialty property business.
Selective said it was seeking to keep more of its better-performing accounts while accepting lower retention on poorer-performing business.
"Over the last two years, we have taken deliberate actions to improve the quality and long-term profitability of our underwriting portfolio. While those decisions contributed to lower premium in the quarter, they reflect the underwriting discipline that has long differentiated Selective and our commitment to pursuing growth where risk-adjusted returns are most attractive."
Despite the premium decline, Selective returned to an underwriting profit. Its combined ratio improved to 98%, from 100.2% a year earlier, producing after-tax underwriting income of $19.3 million. The company had recorded a $1.9 million underwriting loss in the second quarter of 2025.
The improvement did not reflect stronger performance across the entire portfolio. It was helped by lower property losses and the absence of adverse development on claims from previous years.
Selective recorded no prior-year casualty reserve development, compared with 3.8 percentage points of unfavorable development a year earlier. Catastrophe losses also fell by 1.1 points to 5.6 points of the combined ratio, while non-catastrophe property losses improved by 0.6 points. These gains were partly offset by higher current-year casualty losses. The current-year casualty loss-cost ratio rose by 3.4 percentage points to 47.6%.
The same pattern was visible in standard commercial lines. Its combined ratio improved to 99.3%, from 102.8%, as lower property losses and the absence of adverse reserve development outweighed a 3.1-point increase in current-year casualty loss costs.
Excess and Surplus Lines remained Selective's strongest underwriting segment, with a combined ratio of 91.8%. However, that was two points worse than a year earlier as current-year casualty loss costs rose by 5.1 points and non-catastrophe property losses also increased.
The reduction in business extended to personal lines. Written premiums fell 8%, while new business declined 36% from a year earlier. That compared with a 15% fall in new business in the first quarter. The Personal Lines combined ratio rose to 95.5%, from 91.6%, as higher non-catastrophe losses and expenses outweighed lower catastrophe losses.
While Selective remained profitable from underwriting, investment income accounted for most of its return on equity during the quarter. After-tax net investment income rose 18% to $119.2 million and contributed 13.9 percentage points of annualized return on equity. Insurance operations contributed 2.3 points.
The investment portfolio's average after-tax yield increased to 4.2%, from 3.9% a year earlier. Selective raised its full-year forecast for after-tax investment income to $480 million, from $465 million.
Net income available to common shareholders rose 52% to $127.1 million, or $2.11 per diluted share. Non-GAAP operating income increased 46% to $117.6 million, while non-GAAP operating return on equity reached 13.7%.
"Our results reflect disciplined execution in an increasingly competitive environment. Operating ROE in the quarter was 13.7%, which marked our eighth consecutive quarter of double-digit operating returns. With our strong capital position and commitment to delivering long-term value, we returned 45% of after-tax net income through our regular dividend and $32 million of share repurchases. Even with this capital return, book value per share grew 3% in the quarter," Selective president and CEO John J. Marchioni said.
Selective repurchased 376,131 shares for $32 million during the quarter, at an average price of $84.72. Book value per common share increased 3% during the quarter to $58.13, while adjusted book value rose 3% to $60.56.
The company also marked its 100th year in business and its 50th year as a publicly traded company during the quarter. Marchioni tied that milestone directly to the underwriting discipline the quarter's results reflect: "During the second quarter, we celebrated our 100th year in business and 50th year as a publicly traded company -- milestones made possible by the talented employees, high-quality distribution partners, customers, and investors who have fueled our success. Having successfully navigated a century of market cycles, we remain confident in our ability to adapt, execute, and create long-term value," Marchioni said. "The actions we are taking to strengthen our portfolio reflect the same disciplined approach that has guided Selective's success and position us well to deliver sustainable, profitable growth over the long-term."
Selective maintained its full-year combined-ratio forecast of between 96.5% and 97.5%. The guidance includes six percentage points of catastrophe losses and assumes no prior-year casualty reserve development.
