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Retirement Plans | 12 Months Ended
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Dec. 31, 2018
Retirement Benefits [Abstract] |
Retirement Plans | Retirement Plans (a) Selective Insurance Retirement Savings Plan (“Retirement Savings Plan”) SICA offers a voluntary defined contribution 401(k) plan that is available to most of our employees and is a tax-qualified retirement plan subject to ERISA. Expense recorded for this plan was $15.8 million in both 2018 and 2017, and $15.0 million in 2016. (b) Deferred Compensation Plan SICA offers a non-qualified deferred compensation plan, the Selective Insurance Company of America Deferred Compensation Plan ("Deferred Compensation Plan") to a group of management or highly compensated employees as a method of recognizing and retaining such employees. The Deferred Compensation Plan provides these employees the opportunity to elect to defer receipt of specified portions of compensation and to have such deferred amounts deemed to be invested in specified investment options. In addition to the employee deferrals, SICA may choose to make matching contributions to some or all of the participants in this plan to the extent the participant did not receive the maximum matching or non-elective contributions permissible under the Retirement Savings Plan due to limitations under the Internal Revenue Code or the Retirement Savings Plan. Expense recorded for these contributions was $0.4 million in 2018, $0.2 million in 2017, and $0.3 million in 2016. (c) Retirement Income Plan and Retirement Life Plan SICA maintains a defined benefit pension plan, the Retirement Income Plan for Selective Insurance Company of America (the "Pension Plan"). This qualified, noncontributory plan is closed to new entrants and existing participants ceased accruing benefits after March 31, 2016. In addition to the Pension Plan, SICA also sponsors the Supplemental Excess Retirement Plan (the "Excess Plan") and a life insurance benefit plan (the "Retirement Life Plan"). Both of these plans are closed to new entrants and participants in the Excess Plan ceased accruing benefits after March 31, 2016. The Retirement Life Plan does not accrue benefits and this plan applies only to retirees who terminated employment with SICA on or before March 31, 2009. These are both unfunded plans with benefit obligations as of December 31, 2018 and December 31, 2017 of $9.5 million and $10.1 million, respectively, for the Excess Plan and $5.8 million and $6.4 million, respectively, for the Retirement Life Plan. Expense recorded for the Excess Plan was $0.4 million in both 2018 and 2017, and $0.5 million in 2016. Expense recorded for the Retirement Life Plan was $0.3 million in each of 2018, 2017, and 2016. The following tables provide details on the Pension Plan for 2018 and 2017:
December 31, |  | Pension Plan
($ in thousands) |  | 2018 |  | 2017
Change in Benefit Obligation: |  |  |  |  |  |
Benefit obligation, beginning of year |  | $ | 364,411 |  |  | 330,588 |
Service cost |  | — |  |  | — |
Interest cost |  | 12,428 |  |  | 12,490 |
Actuarial (gains) losses |  | (31,738 | ) |  | 31,158 |
Benefits paid |  | (10,422 | ) |  | (9,825 | )
Benefit obligation, end of year |  | $ | 334,679 |  |  | 364,411 |
Change in Fair Value of Assets: |  |  |  |  |  |
Fair value of assets, beginning of year |  | $ | 363,673 |  |  | 316,515 |
Actual return on plan assets, net of expenses |  | (21,571 | ) |  | 46,983 |
Contributions by the employer to funded plans |  | — |  |  | 10,000 |
Benefits paid |  | (10,422 | ) |  | (9,825 | )
Fair value of assets, end of year |  | $ | 331,680 |  |  | 363,673 |
Funded status |  | $ | (2,999 | ) |  | (738 | )
Amounts Recognized in the Consolidated Balance Sheet: |  |  |  |  |  |
Liabilities |  | $ | (2,999 | ) |  | (738 | )
Net pension liability, end of year |  | $ | (2,999 | ) |  | (738 | )
Amounts Recognized in AOCI: |  |  |  |  |  |
Net actuarial loss |  | $ | 98,057 |  |  | 87,438 |
Total |  | $ | 98,057 |  |  | 87,438 |
Other Information as of December 31: |  |  |  |  |  |
Accumulated benefit obligation |  | $ | 334,679 |  |  | 364,411 |
Weighted-Average Liability Assumptions as of December 31: |  |  |  |  |
Discount rate |  | 4.46 | % |  | 3.78
|  | Pension Plan
($ in thousands) |  | 2018 |  | 2017 |  | 2016
Components of Net Periodic Benefit Cost and Other Amounts Recognized in Other Comprehensive Income: |  |  |  |  |  |  |  |  |
Net Periodic Benefit Cost: |  |  |  |  |  |  |  |  |
Service cost |  | $ | — |  |  | — |  |  | 1,647 |
Interest cost |  | 12,428 |  |  | 12,490 |  |  | 12,336 |
Expected return on plan assets |  | (22,767 | ) |  | (19,419 | ) |  | (17,309 | )
Amortization of unrecognized actuarial loss |  | 1,981 |  |  | 2,001 |  |  | 6,299 |
Total net periodic cost |  | $ | (8,358 | ) |  | (4,928 | ) |  | 2,973 |
Other Changes in Plan Assets and Benefit Obligations Recognized in Other Comprehensive Income: |  |  |  |  |  |  |  |  |
Net actuarial loss (gain) |  | $ | 12,600 |  |  | 3,594 |  |  | 11,316 |
Reversal of amortization of net actuarial loss |  | (1,981 | ) |  | (2,001 | ) |  | (6,299 | )
Total recognized in other comprehensive income |  | $ | 10,619 |  |  | 1,593 |  |  | 5,017 |
Total recognized in net periodic benefit cost and other comprehensive income |  | $ | 2,261 |  |  | (3,335 | ) |  | 7,990 |
The estimated net actuarial loss for the Pension Plan that will be amortized from AOCI into net periodic benefit cost during the 2019 fiscal year is $2.6 million.
|  | Pension Plan
|  | 2018 |  | 2017 |  | 2016
Weighted-Average Expense Assumptions for the years ended December 31: |  |  |  |  |  |  |
Discount rate |  | 3.78 | % |  | 4.41 |  | 4.69
Expected return on plan assets |  | 6.36 |  |  | 6.24 |  | 6.37
Rate of compensation increase 1 |  | — |  |  | — |  | —
1 This assumption was 4.00% through March 31, 2016, the date after which benefits ceased accruing for all participants of the Pension Plan. Our latest measurement date was December 31, 2018, at which time we increased our expected return on plan assets to 6.50%, reflecting a higher expected allocation to risk-seeking assets in the portfolio. When determining the most appropriate discount rate to be used in the valuation, we consider, among other factors, our expected payout patterns of the Pension Plan's obligations as well as our investment strategy, and we ultimately select the rate that we believe best represents our estimate of the inherent interest rate at which our pension and post-retirement life benefits can be effectively settled. The approach we utilize discounts the individual expected cash flows using the applicable spot rates derived from the yield curve over the projected cash flow period. The weighted average discount rate used to determine 2019 interest cost is 4.12%. Pension Plan Assets Assets of the Pension Plan are invested to adequately support the liability associated with the Pension Plan's defined benefit obligation. Our return objective is to exceed the returns of the plan's policy benchmark, which is the return the plan would have earned if the assets were invested according to the target asset class weightings and earned index returns shown below. In 2019, we will continue to phase in adjustments to the asset allocation to steadily close the gap between the duration of the assets and the duration of the liabilities, provided certain improved funding targets are achieved. Over time, the target and actual asset allocations may change based on the funded status of the Pension Plan and market return expectations. The Pension Plan’s target ranges, as well as the actual weighted average asset allocation by strategy, at December 31 were as follows:
|  | 2018 |  | 2017
|  | Target Percentage 2 |  | Actual Percentage |  | Actual Percentage
Return seeking assets 1 |  | 15%-70% |  |  | 43 | % |  | 58 | %
Liability hedging assets |  | 35%-75% |  |  | 38 | % |  | 40 | %
Short-term investments 3 |  | 0%-2% |  |  | 19 | % |  | 2 | %
Total |  | 100 | % |  | 100 | % |  | 100 | %
1 Includes limited partnerships. 2 Target percent allocations may change over time based on the funded status of the plan and market return expectations. 3 The actual percentage of assets allocated to short-term investments is higher than our target as of December 31, 2018 due to portfolio rebalancing initiatives that are expected to be completed during 2019. As part of this rebalancing initiative, $49 million, or 15%, of plan assets were redeployed into risk seeking assets in January 2019. Excluding the impact of this redeployment, our short-term investments represented 5% of plan assets at December 31, 2018. The use of derivative instruments is permitted under certain circumstances for the Pension Plan portfolio, but may not be used for unrelated speculative purposes or to create exposures that are not permitted in the Pension Plan's investment guidelines. Within the liability hedging assets, derivatives may be used to mitigate interest rate risk and reduce the interest duration mismatch between assets and liabilities of the Pension Plan to help insulate the funded status of the plan. We currently invest in a U.S. Treasury overlay derivative strategy, within the funds in our liability hedging assets, to manage the interest rate duration mismatch between the assets and liabilities of the Pension Plan. Considering the impact of this derivative overlay, the liability hedging assets provide for an approximate 50% hedge against the projected benefit obligation. The Pension Plan had no investments in the Parent’s common stock as of December 31, 2018 or 2017. For information regarding investments in funds of our related parties, refer to Note 16. "Related Party Transactions" below. The techniques used to determine the fair value of the Pension Plan's invested assets that appear on the following page are as follows:
• | The investments in the global equity and liability hedging funds are collective investment funds that utilize a market approach wherein the published prices in the active market for identical assets are used. These investments are traded at their net asset value per share. There are no restrictions as to the redemption of these investments nor do we have any contractual obligations for further investment. These investments are classified as Level 1 in the fair value hierarchy.
• | The investments in private limited partnerships and other private equity securities are valued utilizing net asset value as a practical expedient for fair value. These investments are not classified in the fair value hierarchy.
• | Short-term investments are carried at cost, which approximates fair value. Given that these investments are listed on active exchanges, coupled with their liquid nature, these investments are classified as Level 1 in the fair value hierarchy.
• | The deposit administration contract is carried at cost, which approximates fair value. Given the liquid nature of the underlying investments in overnight cash deposits and other short-term duration products, we have determined that a correlation exists between the deposit administration contract and other short-term investments, such as money market funds. As such, this investment is classified as Level 2 in the fair value hierarchy.
For discussion regarding the levels within the fair value hierarchy, see Note 2. "Summary of Significant Accounting Policies." In addition, refer to Note 5. "Investments" for discussion regarding the limited partnership investment strategies, excluding the middle market lending strategy, as these investments are not part of the Pension Plan. The Pension Plan invests in hedge funds, as part of its overall private asset strategy, with diversified exposure to a number of underlying systematic strategies that include arbitrage, macro-oriented, and equity-related strategies. These positions are expected to improve the risk-adjusted return of the portfolio given their lower volatility profile than public equities, with returns that are generally uncorrelated to traditional asset classes over a complete market cycle. The following tables provide quantitative disclosures of the Pension Plan’s invested assets that are measured at fair value on a recurring basis:
December 31, 2018 |  |  |  | Fair Value Measurements at 12/31/18 Using
($ in thousands) |  | Assets Measured at Fair Value At 12/31/18 |  | Quoted Prices in Active Markets for Identical Assets/ Liabilities (Level 1) |  | Significant Other Observable Inputs (Level 2) |  | Significant Unobservable Inputs (Level 3)
Description |  |  |  |  |  |  |  |  |  |  |  |
Return seeking assets: |  |  |  |  |  |  |  |
Global equity |  | $ | 113,409 |  |  | 113,409 |  |  | — |  |  | — |
Private assets 1: |  |  |  |  |  |  |  |  |
Limited partnerships (at net asset value): |  |  |  |  |  |  |  |
Real assets |  | 16,818 |  |  | — |  |  | — |  |  | — |
Private equity |  | 878 |  |  | — |  |  | — |  |  | — |
Private credit |  | 262 |  |  | — |  |  | — |  |  | — |
Hedge fund |  | 7,889 |  |  | — |  |  | — |  |  | — |
Total limited partnerships |  | 25,847 |  |  | — |  |  | — |  |  | — |
Other private assets |  | 3,780 |  |  | — |  |  | — |  |  | — |
Total private assets |  | 29,627 |  |  | — |  |  | — |  |  | — |
Total return seeking assets |  | 143,036 |  |  | 113,409 |  |  | — |  |  | — |
Liability hedging assets: |  |  |  |  |  |  |  |
Fixed income |  | 106,000 |  |  | 106,000 |  |  | — |  |  | — |
U.S. Treasury overlay |  | 18,528 |  |  | 18,528 |  |  | — |  |  | — |
Total liability hedging assets |  | 124,528 |  |  | 124,528 |  |  | — |  |  | — |
Cash and short-term investments: |  |  |  |  |  |  |  |
Short-term investments |  | 62,788 |  |  | 62,788 |  |  | — |  |  | — |
Deposit administration contracts |  | 1,482 |  |  | — |  |  | 1,482 |  |  | — |
Total cash and short-term investments |  | 64,270 |  |  | 62,788 |  |  | 1,482 |  |  | — |
Total invested assets |  | $ | 331,834 |  |  | 300,725 |  |  | 1,482 |  |  | — |
December 31, 2017 |  |  |  | Fair Value Measurements at 12/31/17 Using
($ in thousands) |  | Assets Measured at Fair Value At 12/31/17 |  | Quoted Prices in Active Markets for Identical Assets/ Liabilities (Level 1) |  | Significant Other Observable Inputs (Level 2) |  | Significant Unobservable Inputs (Level 3)
Description |  |  |  |  |  |  |  |  |  |  |  |
Return seeking assets: |  |  |  |  |  |  |  |
Long-duration fixed income: |  |  |  |  |  |  |  |  |  |  |  |
Global asset allocation fund |  | $ | 41,309 |  |  | 41,309 |  |  | — |  |  | — |
Global equity: |  |  |  |  |  |  |  |
Non-U.S. equity |  | 67,989 |  |  | 67,989 |  |  | — |  |  | — |
U.S. equity |  | 66,353 |  |  | 66,353 |  |  | — |  |  | — |
Total global equity |  | 134,342 |  |  | 134,342 |  |  | — |  |  | — |
Private assets (limited partnerships, at net asset value)1: |  |  |  |  |  |  |  |  |
Real assets |  | 16,305 |  |  | — |  |  | — |  |  | — |
Private equity |  | 1,096 |  |  | — |  |  | — |  |  | — |
Private credit |  | 460 |  |  | — |  |  | — |  |  | — |
Hedge fund |  | 15,192 |  |  | — |  |  | — |  |  | — |
Total limited partnerships |  | 33,053 |  |  | — |  |  | — |  |  | — |
Other private assets |  | 980 |  |  | — |  |  | — |  |  | 980 |
Total private assets |  | 34,033 |  |  | — |  |  | — |  |  | 980 |
Total return seeking assets |  | 209,684 |  |  | 175,651 |  |  | — |  |  | 980 |
Liability hedging assets: |  |  |  |  |  |  |  |
Long-duration fixed income: |  |  |  |  |  |  |  |
Extended duration fixed income |  | 146,837 |  |  | 146,837 |  |  | — |  |  | — |
Total liability hedging assets |  | 146,837 |  |  | 146,837 |  |  | — |  |  | — |
Cash and short-term investments: |  |  |  |  |  |  |  |
Short-term investments |  | 4,939 |  |  | 4,939 |  |  | — |  |  | — |
Deposit administration contracts |  | 1,615 |  |  | — |  |  | 1,615 |  |  | — |
Total cash and short-term investments |  | 6,554 |  |  | 4,939 |  |  | 1,615 |  |  | — |
Total invested assets |  | $ | 363,075 |  |  | 327,427 |  |  | 1,615 |  |  | 980 |
1 In accordance with ASU 2015-07, certain investments that are measured at fair value using the net asset value per share (or its practical expedient) have not been classified in the fair value hierarchy. The fair value amounts presented in this table are intended to permit reconciliation of the fair value hierarchy to total Pension Plan invested assets. Contributions We presently do not anticipate contributing to the Pension Plan in 2019, as we have no minimum required contribution amounts. Benefit Payments
($ in thousands) |  | Pension Plan
Benefits Expected to be Paid in Future |  |  |
Fiscal Years: |  |  |
2019 |  | $ | 13,920 |
2020 |  | 13,869 |
2021 |  | 15,026 |
2022 |  | 16,159 |
2023 |  | 17,134 |
2024-2028 |  | 99,197 |

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