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Selective Insurance (SIGI) Q2 Earnings Miss on Higher Expenses
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Selective Insurance Group, Inc. (SIGI - Free Report) reported second-quarter 2024 operating loss of $1.10 per share against the Zacks Consensus Estimate for earnings of $1.56. The company had reported an operating income of 99 cents per share in the prior-year quarter.
The quarterly results reflected poor underwriting performance, unfavorable prior-year casualty reserve development and escalating costs, offset by higher premiums and net investment income.
Selective Insurance Group, Inc. Price, Consensus and EPS Surprise
Total revenues of $1.2 billion increased 15% from the year-ago quarter’s figure, primarily due to higher premiums earned, net investment income and net premiums written. The top line missed the Zacks Consensus Estimate by 1.3%.
On a year-over-year basis, net premium written (NPW) increased 13% to $1.22 billion, driven by new business growth and effective management of renewal portfolio and growth across all three insurance segments. The figure matched our estimate.
After-tax net investment income increased 11% year over year to $86 million. The increase was primarily due to the fixed-income securities portfolio.
After-tax net underwriting loss was $137.2 million against the year-ago underwriting income of $1.2 million. Pre-tax catastrophe losses of $91 million were narrower than a loss of $100 million reported in the year-ago quarter. Non-catastrophe property loss and loss expenses of $185.5 million increased 18% year over year.
The combined ratio deteriorated 1,590 basis points (bps) on a year-over-year basis to 116.1, primarily due to prior year casualty reserve development.
Total expenses increased 32% year over year to $1.27 billion, primarily due to higher loss and loss expenses incurred, other insurance expenses and amortization of deferred policy acquisition costs. The figure was higher than our estimate of $1 billion.
Segmental Results
Standard Commercial Lines’ NPW was up 11% year over year to $963.1 million, driven by an increase of 7.9% in average renewal pure price, a rise of 6% in new business, strong exposure growth and stable retention of 85%. The figure was lower than our estimate of $1 billion.
The combined ratio deteriorated 2,170 bps on a year-over-year basis to 118.8. The Zacks Consensus Estimate was pegged at 95.9, while our estimate was 96.8.
Standard Personal Lines’ NPW increased 6% year over year to $116.1 million. The increase of 20.7% in renewal pure price and higher average policy sizes drove the improvement in NPW. The figure was lower than our estimate of $129.4 million.
The combined ratio improved 840 bps on a year-over-year basis to 118.1. The Zacks Consensus Estimate was pegged at 111.8, while our estimate was 123.6.
Excess & Surplus Lines’ NPW was up 39% year over year to $146.8 million, driven by growth of 54% in new business and an increase of 6.4% in average renewal pure price. The figure was higher than our estimate of $123.4 million.
The combined ratio improved 610 bps year over year to 94.6. The Zacks Consensus Estimate was pegged at 88.7, while our estimate was 91.2.
Financial Update
Selective Insurance exited second-quarter 2024 with total assets of $12.56 billion, which was 6% above the level at the end of December 2023. Long-term debt of $508.8 million increased 1% from the 2023 level.
Debt-to-total capitalization deteriorated 20 bps to 14.8% from the level as of Dec 31, 2023.
As of Jun 30, 2024, book value per share was $40.81, up 10% year over year.
Annualized non-GAAP operating return on equity was negative 9.6% in the second quarter of 2024 against the operating return on equity of positive 9.8% reported in the year-ago quarter.
In the first half of 2024, Selective Insurance did not repurchase any shares. It had $84.2 million remaining under authorization as of Jun 30, 2024.
2024 Guidance
SIGI estimates a GAAP combined ratio of 101.5%, up from the prior guidance of 96.5%. The combined ratio estimate includes net catastrophe losses of 5.5 points, up from the prior guidance of 5 points. The combined ratio estimate assumes no additional prior-year casualty reserve development.
Selective Insurance estimates an after-tax net investment income of $360 million, which includes $32 million from alternative investments.
The insurer projects an overall effective tax rate of around 21%, which assumes an effective tax rate of 20.5% for net investment income and 21% for all other items.
SIGI estimates weighted average shares of 61.5 million on a fully diluted basis.
The Progressive Corporation’s (PGR - Free Report) second-quarter 2024 earnings per share of $2.65 beat the Zacks Consensus Estimate of $1.99. The bottom line improved more than five times year over year. Operating revenues of $18.3 billion beat the Zacks Consensus Estimate by 1.4% and increased 18.9% year over year.
Net premiums earned grew 19% to $17.2 billion and beat our estimate of $16.7 billion. Combined ratio improved 850 bps from the prior-year quarter’s level to 91.9.
The Travelers Companies, Inc. (TRV - Free Report) reported second-quarter 2024 core income of $2.51 per share, which beat the Zacks Consensus Estimate by 25.5%. Travelers’ total revenues increased 12.4% from the year-ago quarter to $11.3 billion. The top-line figure, however, missed the Zacks Consensus Estimate by 1%. Net written premiums increased 8% year over year to a record $11.1 billion. The figure was higher than our estimate of $10.4 billion.
Net investment income increased 24.2% year over year to $885 million. The figure was higher than our estimate of $852.14 million. The Zacks Consensus Estimate was pegged at $861.2 million. Catastrophe loss was $1.51 billion, pre-tax, wider than a loss of $1.18 million, pre-tax, incurred in the year-ago quarter. Travelers witnessed an underwriting loss of $65 million, narrower than a loss of $640 million incurred in the year-ago quarter.
Upcoming Release
RLI Corporation (RLI - Free Report) is set to report second-quarter 2024 results on Jul 22, after market close. The Zacks Consensus Estimate for second-quarter earnings per share is pegged at $1.35, indicating an increase of 16.4% from the year-ago quarter’s reported figure.
RLI’s earnings beat estimates in three of the last four quarters while missing in one.
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Selective Insurance (SIGI) Q2 Earnings Miss on Higher Expenses
Selective Insurance Group, Inc. (SIGI - Free Report) reported second-quarter 2024 operating loss of $1.10 per share against the Zacks Consensus Estimate for earnings of $1.56. The company had reported an operating income of 99 cents per share in the prior-year quarter.
The quarterly results reflected poor underwriting performance, unfavorable prior-year casualty reserve development and escalating costs, offset by higher premiums and net investment income.
Selective Insurance Group, Inc. Price, Consensus and EPS Surprise
Selective Insurance Group, Inc. price-consensus-eps-surprise-chart | Selective Insurance Group, Inc. Quote
Behind the Headlines
Total revenues of $1.2 billion increased 15% from the year-ago quarter’s figure, primarily due to higher premiums earned, net investment income and net premiums written. The top line missed the Zacks Consensus Estimate by 1.3%.
On a year-over-year basis, net premium written (NPW) increased 13% to $1.22 billion, driven by new business growth and effective management of renewal portfolio and growth across all three insurance segments. The figure matched our estimate.
After-tax net investment income increased 11% year over year to $86 million. The increase was primarily due to the fixed-income securities portfolio.
After-tax net underwriting loss was $137.2 million against the year-ago underwriting income of $1.2 million. Pre-tax catastrophe losses of $91 million were narrower than a loss of $100 million reported in the year-ago quarter. Non-catastrophe property loss and loss expenses of $185.5 million increased 18% year over year.
The combined ratio deteriorated 1,590 basis points (bps) on a year-over-year basis to 116.1, primarily due to prior year casualty reserve development.
Total expenses increased 32% year over year to $1.27 billion, primarily due to higher loss and loss expenses incurred, other insurance expenses and amortization of deferred policy acquisition costs. The figure was higher than our estimate of $1 billion.
Segmental Results
Standard Commercial Lines’ NPW was up 11% year over year to $963.1 million, driven by an increase of 7.9% in average renewal pure price, a rise of 6% in new business, strong exposure growth and stable retention of 85%. The figure was lower than our estimate of $1 billion.
The combined ratio deteriorated 2,170 bps on a year-over-year basis to 118.8. The Zacks Consensus Estimate was pegged at 95.9, while our estimate was 96.8.
Standard Personal Lines’ NPW increased 6% year over year to $116.1 million. The increase of 20.7% in renewal pure price and higher average policy sizes drove the improvement in NPW. The figure was lower than our estimate of $129.4 million.
The combined ratio improved 840 bps on a year-over-year basis to 118.1. The Zacks Consensus Estimate was pegged at 111.8, while our estimate was 123.6.
Excess & Surplus Lines’ NPW was up 39% year over year to $146.8 million, driven by growth of 54% in new business and an increase of 6.4% in average renewal pure price. The figure was higher than our estimate of $123.4 million.
The combined ratio improved 610 bps year over year to 94.6. The Zacks Consensus Estimate was pegged at 88.7, while our estimate was 91.2.
Financial Update
Selective Insurance exited second-quarter 2024 with total assets of $12.56 billion, which was 6% above the level at the end of December 2023. Long-term debt of $508.8 million increased 1% from the 2023 level.
Debt-to-total capitalization deteriorated 20 bps to 14.8% from the level as of Dec 31, 2023.
As of Jun 30, 2024, book value per share was $40.81, up 10% year over year.
Annualized non-GAAP operating return on equity was negative 9.6% in the second quarter of 2024 against the operating return on equity of positive 9.8% reported in the year-ago quarter.
In the first half of 2024, Selective Insurance did not repurchase any shares. It had $84.2 million remaining under authorization as of Jun 30, 2024.
2024 Guidance
SIGI estimates a GAAP combined ratio of 101.5%, up from the prior guidance of 96.5%. The combined ratio estimate includes net catastrophe losses of 5.5 points, up from the prior guidance of 5 points. The combined ratio estimate assumes no additional prior-year casualty reserve development.
Selective Insurance estimates an after-tax net investment income of $360 million, which includes $32 million from alternative investments.
The insurer projects an overall effective tax rate of around 21%, which assumes an effective tax rate of 20.5% for net investment income and 21% for all other items.
SIGI estimates weighted average shares of 61.5 million on a fully diluted basis.
Zacks Rank
Selective Insurance currently carries a Zacks Rank #3 (Hold). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
Performance of Other Insurers
The Progressive Corporation’s (PGR - Free Report) second-quarter 2024 earnings per share of $2.65 beat the Zacks Consensus Estimate of $1.99. The bottom line improved more than five times year over year. Operating revenues of $18.3 billion beat the Zacks Consensus Estimate by 1.4% and increased 18.9% year over year.
Net premiums earned grew 19% to $17.2 billion and beat our estimate of $16.7 billion. Combined ratio improved 850 bps from the prior-year quarter’s level to 91.9.
The Travelers Companies, Inc. (TRV - Free Report) reported second-quarter 2024 core income of $2.51 per share, which beat the Zacks Consensus Estimate by 25.5%. Travelers’ total revenues increased 12.4% from the year-ago quarter to $11.3 billion. The top-line figure, however, missed the Zacks Consensus Estimate by 1%. Net written premiums increased 8% year over year to a record $11.1 billion. The figure was higher than our estimate of $10.4 billion.
Net investment income increased 24.2% year over year to $885 million. The figure was higher than our estimate of $852.14 million. The Zacks Consensus Estimate was pegged at $861.2 million. Catastrophe loss was $1.51 billion, pre-tax, wider than a loss of $1.18 million, pre-tax, incurred in the year-ago quarter. Travelers witnessed an underwriting loss of $65 million, narrower than a loss of $640 million incurred in the year-ago quarter.
Upcoming Release
RLI Corporation (RLI - Free Report) is set to report second-quarter 2024 results on Jul 22, after market close. The Zacks Consensus Estimate for second-quarter earnings per share is pegged at $1.35, indicating an increase of 16.4% from the year-ago quarter’s reported figure.
RLI’s earnings beat estimates in three of the last four quarters while missing in one.