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Selective Insurance (SIGI) Up 0.1% Since Last Earnings Report: Can It Continue?
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It has been about a month since the last earnings report for Selective Insurance (SIGI - Free Report) . Shares have added about 0.1% in that time frame, underperforming the S&P 500.
Will the recent positive trend continue leading up to its next earnings release, or is Selective Insurance due for a pullback? Before we dive into how investors and analysts have reacted as of late, let's take a quick look at the most recent earnings report in order to get a better handle on the important catalysts.
Selective Insurance Group, Inc. reported first-quarter 2024 operating income of $1.33 per share, which missed the Zacks Consensus Estimate by 29.3%. The bottom line decreased 7.6% from the year-ago quarter.
The company’s performance in the quarter suffered due to higher non-catastrophe property loss and loss expenses. However, it witnessed average renewal pure price increases, new business growth, solid net investment income as well as lower catastrophe losses in the quarter, which limited the downside.
Behind the Headlines
Total revenues of $1.2 billion increased 17.2% from the year-ago quarter’s figure, primarily due to higher premiums earned, net investment income and other income. The top line missed the Zacks Consensus Estimate by 0.1%.
On a year-over-year basis, net premiums written (NPW) increased 16% to $991 million, reflecting new business growth and effective management of the renewal portfolio. Average renewal pure price increased 8.1%, with stable retention and increased exposure. The figure was lower than our estimate of $1.1 billion. Net investment income increased 17% year over year to $86 million.
After-tax net underwriting income was $15 million, which decreased 51% year over year. Net catastrophe losses of $55.2 million were lower than the year-ago loss of $55.3 million. Non-catastrophe property loss and loss expenses were $171.2 million, higher than the year-ago loss of $148.2 million. The combined ratio of 98.2 deteriorated 250 basis points year over year due to prior year casualty reserve development, partially offset by an improved expense ratio and lower catastrophe losses. The Zacks Consensus Estimate was 94 and our estimate was 93.8.
Total expenses increased 20% year over year to $1.1 billion, primarily due to higher loss and loss expenses incurred, other insurance expenses, amortization of deferred policy acquisition costs and corporate expenses. The figure was higher than our estimate of $1 billion.
Segmental Results
Standard Commercial Lines’ NPW was up 15% year over year to $931.7 million. The premium growth reflected average renewal pure price increases of 7.6%, new business growth of 17%, strong exposure growth and stable retention of 86%. The figure was higher than our estimate of $923.5 million. The combined ratio deteriorated 410 basis points (bps) to 98.8. The Zacks Consensus Estimate was 93 and our estimate was 93.4.
Standard Personal Lines’ NPW increased 17% year over year to $99.9 million, driven by renewal pure price increases of 14.3% and higher average policy sizes. However, retention was down to 83%. New business decreased 19%. The figure was higher than our estimate of $98.6 million. The combined ratio improved 1090 bps on a year-over-year basis to 105.1. The Zacks Consensus Estimate was pegged at 108, while our estimate was 103.5.
Excess & Surplus Lines’ NPW was up 24% year over year to $125 million, driven by new business growth of 57% and average renewal pure price increases of 5.2%. The figure was higher than our estimate of $124 million. The combined ratio deteriorated 260 bps to 87.6. The Zacks Consensus Estimate was pegged at 87, while our estimate was 87.6.
Financial Update
Selective Insurance exited the first quarter of 2024 with total assets of $12.1 billion, 2% above the level at December 2023 end. Long-term debt of $503.3 million was flat with the 2023 end level.Debt-to-total capitalization improved 30 bps to 14.3% from the first-quarter 2023 level.
As of Mar 31, 2024, adjusted book value per share was $50.97, up 9% year over year. SIGI achieved the 10th consecutive year of double-digit operating ROE of 11.7%, which contracted 290 basis points year over year.
Share Repurchase and Dividend Update
No shares were bought back in the first quarter of 2024. SIGI had $84.2 million remaining under authorization as of Mar 31, 2024. The board of directors authorized a quarterly cash dividend of 35 cents per share. The dividend will be paid out on Jun 3 to shareholders of record at the close of business on May 15, 2024.
2024 Guidance
SIGI estimates a GAAP combined ratio of 96.5%, up from the prior guidance of 95.5. This includes net catastrophe losses of 500 basis points and assumes no additional prior-year casualty reserve development. Selective Insurance estimates an after-tax net investment income of $360 million and includes $32 million of after-tax net investment income from alternative investments.
The overall effective tax rate is expected to be around 21%, which assumes an effective tax rate of 20.5% for net investment income and 21% for all other items. Weighted average shares were 61.5 million on a fully diluted basis.
How Have Estimates Been Moving Since Then?
It turns out, fresh estimates have trended downward during the past month.
The consensus estimate has shifted -7.06% due to these changes.
VGM Scores
At this time, Selective Insurance has an average Growth Score of C, though it is lagging a bit on the Momentum Score front with a D. Charting a somewhat similar path, the stock was allocated a grade of C on the value side, putting it in the middle 20% for this investment strategy.
Overall, the stock has an aggregate VGM Score of C. If you aren't focused on one strategy, this score is the one you should be interested in.
Outlook
Estimates have been broadly trending downward for the stock, and the magnitude of these revisions indicates a downward shift. It's no surprise Selective Insurance has a Zacks Rank #5 (Strong Sell). We expect a below average return from the stock in the next few months.
Performance of an Industry Player
Selective Insurance belongs to the Zacks Insurance - Property and Casualty industry. Another stock from the same industry, Arch Capital Group (ACGL - Free Report) , has gained 6.6% over the past month. More than a month has passed since the company reported results for the quarter ended March 2024.
Arch Capital reported revenues of $3.76 billion in the last reported quarter, representing a year-over-year change of +21.7%. EPS of $2.45 for the same period compares with $1.73 a year ago.
For the current quarter, Arch Capital is expected to post earnings of $2.21 per share, indicating a change of +15.1% from the year-ago quarter. The Zacks Consensus Estimate has changed -0.7% over the last 30 days.
Arch Capital has a Zacks Rank #3 (Hold) based on the overall direction and magnitude of estimate revisions. Additionally, the stock has a VGM Score of A.
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Selective Insurance (SIGI) Up 0.1% Since Last Earnings Report: Can It Continue?
It has been about a month since the last earnings report for Selective Insurance (SIGI - Free Report) . Shares have added about 0.1% in that time frame, underperforming the S&P 500.
Will the recent positive trend continue leading up to its next earnings release, or is Selective Insurance due for a pullback? Before we dive into how investors and analysts have reacted as of late, let's take a quick look at the most recent earnings report in order to get a better handle on the important catalysts.
Selective Insurance Q1 Earnings Miss, Premiums Rise Y/Y
Selective Insurance Group, Inc. reported first-quarter 2024 operating income of $1.33 per share, which missed the Zacks Consensus Estimate by 29.3%. The bottom line decreased 7.6% from the year-ago quarter.
The company’s performance in the quarter suffered due to higher non-catastrophe property loss and loss expenses. However, it witnessed average renewal pure price increases, new business growth, solid net investment income as well as lower catastrophe losses in the quarter, which limited the downside.
Behind the Headlines
Total revenues of $1.2 billion increased 17.2% from the year-ago quarter’s figure, primarily due to higher premiums earned, net investment income and other income. The top line missed the Zacks Consensus Estimate by 0.1%.
On a year-over-year basis, net premiums written (NPW) increased 16% to $991 million, reflecting new business growth and effective management of the renewal portfolio. Average renewal pure price increased 8.1%, with stable retention and increased exposure. The figure was lower than our estimate of $1.1 billion. Net investment income increased 17% year over year to $86 million.
After-tax net underwriting income was $15 million, which decreased 51% year over year. Net catastrophe losses of $55.2 million were lower than the year-ago loss of $55.3 million. Non-catastrophe property loss and loss expenses were $171.2 million, higher than the year-ago loss of $148.2 million. The combined ratio of 98.2 deteriorated 250 basis points year over year due to prior year casualty reserve development, partially offset by an improved expense ratio and lower catastrophe losses. The Zacks Consensus Estimate was 94 and our estimate was 93.8.
Total expenses increased 20% year over year to $1.1 billion, primarily due to higher loss and loss expenses incurred, other insurance expenses, amortization of deferred policy acquisition costs and corporate expenses. The figure was higher than our estimate of $1 billion.
Segmental Results
Standard Commercial Lines’ NPW was up 15% year over year to $931.7 million. The premium growth reflected average renewal pure price increases of 7.6%, new business growth of 17%, strong exposure growth and stable retention of 86%. The figure was higher than our estimate of $923.5 million. The combined ratio deteriorated 410 basis points (bps) to 98.8. The Zacks Consensus Estimate was 93 and our estimate was 93.4.
Standard Personal Lines’ NPW increased 17% year over year to $99.9 million, driven by renewal pure price increases of 14.3% and higher average policy sizes. However, retention was down to 83%. New business decreased 19%. The figure was higher than our estimate of $98.6 million. The combined ratio improved 1090 bps on a year-over-year basis to 105.1. The Zacks Consensus Estimate was pegged at 108, while our estimate was 103.5.
Excess & Surplus Lines’ NPW was up 24% year over year to $125 million, driven by new business growth of 57% and average renewal pure price increases of 5.2%. The figure was higher than our estimate of $124 million. The combined ratio deteriorated 260 bps to 87.6. The Zacks Consensus Estimate was pegged at 87, while our estimate was 87.6.
Financial Update
Selective Insurance exited the first quarter of 2024 with total assets of $12.1 billion, 2% above the level at December 2023 end. Long-term debt of $503.3 million was flat with the 2023 end level.Debt-to-total capitalization improved 30 bps to 14.3% from the first-quarter 2023 level.
As of Mar 31, 2024, adjusted book value per share was $50.97, up 9% year over year. SIGI achieved the 10th consecutive year of double-digit operating ROE of 11.7%, which contracted 290 basis points year over year.
Share Repurchase and Dividend Update
No shares were bought back in the first quarter of 2024. SIGI had $84.2 million remaining under authorization as of Mar 31, 2024. The board of directors authorized a quarterly cash dividend of 35 cents per share. The dividend will be paid out on Jun 3 to shareholders of record at the close of business on May 15, 2024.
2024 Guidance
SIGI estimates a GAAP combined ratio of 96.5%, up from the prior guidance of 95.5. This includes net catastrophe losses of 500 basis points and assumes no additional prior-year casualty reserve development. Selective Insurance estimates an after-tax net investment income of $360 million and includes $32 million of after-tax net investment income from alternative investments.
The overall effective tax rate is expected to be around 21%, which assumes an effective tax rate of 20.5% for net investment income and 21% for all other items. Weighted average shares were 61.5 million on a fully diluted basis.
How Have Estimates Been Moving Since Then?
It turns out, fresh estimates have trended downward during the past month.
The consensus estimate has shifted -7.06% due to these changes.
VGM Scores
At this time, Selective Insurance has an average Growth Score of C, though it is lagging a bit on the Momentum Score front with a D. Charting a somewhat similar path, the stock was allocated a grade of C on the value side, putting it in the middle 20% for this investment strategy.
Overall, the stock has an aggregate VGM Score of C. If you aren't focused on one strategy, this score is the one you should be interested in.
Outlook
Estimates have been broadly trending downward for the stock, and the magnitude of these revisions indicates a downward shift. It's no surprise Selective Insurance has a Zacks Rank #5 (Strong Sell). We expect a below average return from the stock in the next few months.
Performance of an Industry Player
Selective Insurance belongs to the Zacks Insurance - Property and Casualty industry. Another stock from the same industry, Arch Capital Group (ACGL - Free Report) , has gained 6.6% over the past month. More than a month has passed since the company reported results for the quarter ended March 2024.
Arch Capital reported revenues of $3.76 billion in the last reported quarter, representing a year-over-year change of +21.7%. EPS of $2.45 for the same period compares with $1.73 a year ago.
For the current quarter, Arch Capital is expected to post earnings of $2.21 per share, indicating a change of +15.1% from the year-ago quarter. The Zacks Consensus Estimate has changed -0.7% over the last 30 days.
Arch Capital has a Zacks Rank #3 (Hold) based on the overall direction and magnitude of estimate revisions. Additionally, the stock has a VGM Score of A.