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Statutory Financial Information, Capital Requirements, and Restrictions on Dividends and Transfers of Funds | 12 Months Ended
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Dec. 31, 2023
Insurance [Abstract] |
Statutory Financial Information, Capital Requirments, and Retrictions on Dividends and Transfers of Funds | Statutory Financial Information, Capital Requirements, and Restrictions on Dividends and Transfers of Funds (a) Statutory Financial Information The Insurance Subsidiaries prepare their statutory financial statements in accordance with accounting principles prescribed or permitted by the various state insurance departments of domicile. Prescribed statutory accounting principles include state laws, regulations, and general administrative rules, as well as a variety of publications of the National Association of Insurance Commissioners (“NAIC"). Permitted statutory accounting principles encompass all accounting principles that are not prescribed; such principles differ from state to state, may differ from company to company within a state and may change in the future. The Insurance Subsidiaries do not utilize any permitted statutory accounting principles that affect the determination of statutory surplus, statutory net income, or risk-based capital (“RBC”). As of December 31, 2023, the various state insurance departments of domicile have adopted the March 2023 version of the NAIC Accounting Practices and Procedures manual in its entirety, as a component of prescribed or permitted practices. The following table provides statutory data for each of our Insurance Subsidiaries:
|  | State of Domicile |  | Unassigned Surplus |  | Statutory Surplus |  | Statutory Net Income
($ in millions) |  |  |  | 2023 |  | 2022 |  | 2023 |  | 2022 |  | 2023 |  | 2022 |  | 2021
SICA |  | New Jersey |  | $ | 773.6 |  |  | 686.6 |  |  | 938.8 |  |  | 851.8 |  |  | 120.4 |  |  | 103.1 |  |  | 134.7 |
Selective Way Insurance Company ("SWIC") |  | New Jersey |  | 513.5 |  |  | 461.9 |  |  | 569.3 |  |  | 517.8 |  |  | 64.1 |  |  | 69.6 |  |  | 74.5 |
SICSC |  | Indiana |  | 201.3 |  |  | 164.1 |  |  | 235.6 |  |  | 198.4 |  |  | 26.0 |  |  | 17.0 |  |  | 24.2 |
SICSE |  | Indiana |  | 155.1 |  |  | 135.9 |  |  | 182.7 |  |  | 163.5 |  |  | 21.6 |  |  | 14.2 |  |  | 19.4 |
SICNY |  | New York |  | 152.4 |  |  | 137.4 |  |  | 180.1 |  |  | 165.1 |  |  | 16.4 |  |  | 13.2 |  |  | 18.6 |
Selective Insurance Company of New England ("SICNE") |  | New Jersey |  | 45.5 |  |  | 38.2 |  |  | 76.7 |  |  | 69.3 |  |  | 8.3 |  |  | 5.1 |  |  | 7.5 |
Selective Auto Insurance Company of New Jersey ("SAICNJ") |  | New Jersey |  | 119.3 |  |  | 102.2 |  |  | 164.2 |  |  | 147.1 |  |  | 16.2 |  |  | 12.7 |  |  | 16.7 |
Mesa Underwriters Specialty Insurance Company ("MUSIC") |  | New Jersey |  | 64.3 |  |  | 52.8 |  |  | 133.7 |  |  | 122.3 |  |  | 14.4 |  |  | 9.7 |  |  | 13.9 |
Selective Casualty Insurance Company ("SCIC") |  | New Jersey |  | 107.8 |  |  | 91.4 |  |  | 184.3 |  |  | 167.9 |  |  | 24.0 |  |  | 14.0 |  |  | 20.6 |
Selective Fire and Casualty Insurance Company ("SFCIC") |  | New Jersey |  | 43.9 |  |  | 37.6 |  |  | 76.9 |  |  | 70.5 |  |  | 7.4 |  |  | 5.8 |  |  | 8.2 |
Total |  |  |  | $ | 2,176.7 |  |  | 1,908.1 |  |  | 2,742.3 |  |  | 2,473.7 |  |  | 318.8 |  |  | 264.4 |  |  | 338.3 |
(b) Capital Requirements The Insurance Subsidiaries are required to maintain certain minimum amounts of statutory surplus to satisfy the requirements of their various state insurance departments of domicile. RBC requirements for property and casualty insurance companies are designed to assess capital adequacy and to raise the level of protection that statutory surplus provides for policyholders. The Insurance Subsidiaries' combined total adjusted capital exceeded the required level of capital as defined by the NAIC based on their 2023 statutory financial statements. In the fourth quarter of 2020, the NAIC adopted the basic structure of Group Capital Calculation ("GCC"), along with a model law to enable the GCC after state legislative enactment. The GCC expands the existing RBC calculation to include (i) capital requirements for other regulated entities in the group, and (ii) defined capital calculation for other group entities that are unregulated. Our New Jersey state insurance regulators, our lead state, adopted the GCC model law in 2022. Based on our 2023 statutory financial statements, our GCC ratio exceeds the regulatory action minimum threshold. In addition to statutory capital requirements, we are impacted by various rating agency requirements related to certain rating levels. These required capital levels may be higher than statutory requirements. (c) Restrictions on Dividends and Transfers of Funds Our ability to declare and pay dividends on the Parent's common stock is dependent on liquidity at the Parent coupled with the ability of the Insurance Subsidiaries to declare and pay dividends, if necessary, and/or the availability of other sources of liquidity to the Parent. In addition to regulatory restrictions on the availability of dividends that our Insurance Subsidiaries can pay to the Parent, the maximum amount of dividends the Parent can pay our shareholders is limited by certain New Jersey corporate law provisions that limit dividends if either: (i) the Parent would be unable to pay its debts as they became due in the usual course of business; or (ii) the Parent’s total assets would be less than its total liabilities. The Parent’s ability to pay dividends to shareholders also are impacted by (i) covenants in its Line of Credit that obligate it, among other things, to maintain a minimum consolidated net worth and a maximum ratio of consolidated debt to total capitalization, and (ii) the terms of our preferred stock that prohibit dividends to be declared or paid on our common stock if dividends are not declared and paid, or made payable, on all outstanding preferred stock for the latest completed dividend period. As of December 31, 2023, the Parent had an aggregate of $508.0 million in investments and cash available to fund future dividends and interest payments. These amounts are not subject to any regulatory restrictions other than the standard state insolvency restrictions noted above, whereas our consolidated retained earnings of $3 billion are predominately restricted due to regulations applicable to our Insurance Subsidiaries. In 2024, the Insurance Subsidiaries have the ability to provide for $316.2 million in annual dividends to the Parent; however, as regulated entities, these dividends are subject to certain restrictions, which are further discussed below. The Parent also has other potential sources of liquidity, such as: (i) borrowings from our Indiana Subsidiaries; (ii) debt issuances; (iii) common and preferred stock issuances; and (iv) borrowings under our Line of Credit. Borrowings from our Indiana Subsidiaries are governed by approved intercompany lending agreements with the Parent that provide for additional capacity of $114.5 million as of December 31, 2023, based on restrictions in these agreements that limit borrowings to 10% of the admitted assets of the Indiana Subsidiaries. For additional restrictions on the Parent's debt, see Note 11. "Indebtedness" in this Form 10-K. Insurance Subsidiaries Dividend Restrictions As noted above, the restriction on our net assets and retained earnings is predominantly driven by our Insurance Subsidiaries' ability to pay dividends to the Parent under applicable laws and regulations. Under the insurance laws of the domiciliary states of the Insurance Subsidiaries, New Jersey, Indiana, and New York, an insurer can potentially make an ordinary dividend payment if its statutory surplus following such dividend is reasonable in relation to its outstanding liabilities, is adequate to its financial needs, and the dividend does not exceed the insurer's unassigned surplus. In general, New Jersey defines an ordinary dividend as a dividend whose fair market value, together with other dividends made within the preceding 12 months, is less than the greater of 10% of the insurer's statutory surplus as of the preceding December 31, or the insurer's net income (excluding capital gains) for the 12-month period ending on the preceding December 31. Indiana's ordinary dividend calculation is consistent with New Jersey's, except that it does not exclude capital gains from net income. In general, New York defines an ordinary dividend as a dividend whose fair market value, together with other dividends made within the preceding 12 months, is less than the lesser of 10% of the insurer's statutory surplus, or 100% of adjusted net investment income. New Jersey and Indiana require notice of the declaration of any ordinary dividend distribution. During the notice period, the relevant state regulatory authority may disallow all or part of the proposed dividend if it determines that the dividend is not appropriate given the above considerations. New York does not require notice of ordinary dividends. Dividend payments exceeding ordinary dividends are referred to as extraordinary dividends and require review and approval by the applicable domiciliary insurance regulatory authority prior to payment. The table below provides the following information: (i) quantitative data regarding all Insurance Subsidiaries' dividends paid to the Parent in 2023, which was used for debt service, shareholder dividends, and general operating purposes; and (ii) the maximum ordinary dividends that can be paid to the Parent by the Insurance Subsidiaries in 2024, based on the 2023 statutory financial statements.
Dividends |  |  |  | Twelve Months ended December 31, 2023 |  | 2024 |  |  |  |
($ in millions) |  | State of Domicile |  | Ordinary Dividends Paid |  | Maximum Ordinary Dividends |  |  |  |
SICA |  | New Jersey |  | $ | 41.5 |  |  | $ | 117.7 |  |  |  |  |
SWIC |  | New Jersey |  | 16.3 |  |  | 62.4 |  |  |  |  |
SICSC |  | Indiana |  | 3.8 |  |  | 26.0 |  |  |  |  |
SICSE |  | Indiana |  | 4.4 |  |  | 21.6 |  |  |  |  |
SICNY |  | New York |  | 2.0 |  |  | 18.0 |  |  |  |  |
SICNE |  | New Jersey |  | 1.0 |  |  | 8.1 |  |  |  |  |
SAICNJ |  | New Jersey |  | 0.8 |  |  | 16.4 |  |  |  |  |
MUSIC |  | New Jersey |  | 3.5 |  |  | 14.3 |  |  |  |  |
SCIC |  | New Jersey |  | 5.2 |  |  | 24.0 |  |  |  |  |
SFCIC |  | New Jersey |  | 1.5 |  |  | 7.7 |  |  |  |  |
Total |  |  |  | $ | 80.0 |  |  | $ | 316.2 |  |  |  |  |

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