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Selective Insurance Group, Inc. (SIGI - Free Report) reported second-quarter 2022 operating income of $1.17 per share, which missed the Zacks Consensus Estimate by 6.4%. The bottom line declined 37% from the year-ago quarter.
The quarter witnessed average renewal pure price increases, solid retention, higher new business and exposure growth. Lower after-tax alternative investment income, higher non-catastrophe losses and escalating costs were offsets.
Selective Insurance Group, Inc. Price, Consensus and EPS Surprise
Total revenues of $908 million increased 9.4% from the year-ago quarter’s figure, primarily due to higher premiums earned and net premiums written. The top line outpaced the Zacks Consensus Estimate by 3.3%.
On a year-over-year basis, NPW increased 12% to $930.7 million, driven by average renewal pure price increases of 5%, solid retention and exposure growth.
After-tax net investment income declined 16% year over year to $57 million due to decreased after-tax alternative investment income, partially offset by higher income from fixed income securities portfolio from higher book yields.
Net underwriting income, after-tax, dropped 50% to $29.8 million. Net catastrophe loss of $45.6 million doubled year over year. Non-catastrophe property loss and loss expenses of $138.6 million increased 29.2% year over year due to higher severity, driven by inflationary pressure on new and used car prices, auto repair costs, and building materials and labor costs.
The combined ratio deteriorated 570 basis points (bps) on a year-over-year basis to 95.5, attributable to higher catastrophe losses and lower favorable casualty reserve development.
Total expenses increased 18.6% year over year to $814.9 million, primarily due to higher loss and loss expenses incurred, other insurance expenses and amortization of deferred policy acquisition costs.
Segmental Results
Standard Commercial Lines’ NPW was up 12% year over year to $760.3 million. Average renewal pure price increases of 5.3% and higher retention of 86% drove the improvement in NPW.
The combined ratio deteriorated 440 bps to 93.1.
Standard Personal Lines’ NPW increased 5% year over year to $82.6 million. Average renewal pure price increases of 0.6%, higher retention of 85%, and higher new business of 23% drove the improvement in NPW.
The combined ratio deteriorated 2460 bps on a year-over-year basis to 116.9. Excess & Surplus Lines’ NPW was up 13% year over year to $87.9 million, driven by average renewal pure price increases of 6.9% and new business growth of 17%.
The combined ratio improved 80 bps to 95.8.
Financial Update
Selective Insurance exited second-quarter 2022 with total assets of $10.3 billion, which was 1% below the level at December 2021 end. Long-term debt of $505.1 million was flat with the 2021 level.
Debt to total capitalization deteriorated 180 bps to 16.3% at second-quarter 2022 end.
As of Jun 30, 2022, the book value per share was $39.68, down 14% from the level as of 2021 end.
Annualized non-GAAP operating return on equity was 11.4% in the second quarter of 2022, down 570 bps year over year.
In the first half of 2022, Selective Insurance repurchased shares for $6.5 million. It had $90.1 million remaining under authorization as of Jun 30, 2022.
2022 Guidance
Selective Insurance estimates a GAAP combined ratio, excluding net catastrophe losses, of 90.5% (prior guidance 91.0%). The combined ratio estimate assumes no additional prior-year casualty reserve development.
Selective Insurance estimates net catastrophe losses of 4 points on the combined ratio.
After-tax net investment income was $215 million (prior guidance $205 million), including after-tax net investment 4 income from its alternative investments of $15 million (prior guidance $15 million);
The overall effective tax rate is expected to be around 20.5%, which assumes an effective tax rate of 19.5% for net investment income and 21% for all other items. Weighted average shares were 61 million on a fully diluted basis.
Of the insurance industry players that have reported second-quarter results so far, The Hartford Financial Services Group, Inc. (HIG - Free Report) , NMI Holdings (NMIH - Free Report) and Chubb Limited (CB - Free Report) beat the respective Zacks Consensus Estimate for earnings.
The Hartford Financial Services Group reported second-quarter 2022 adjusted operating earnings of $2.15 per share, which beat the Zacks Consensus Estimate by 41.5%. The bottom line, however, decreased 8% year over year.
Hartford Financial’s operating revenues amounted to $3,765 million, which improved from $3,568 million in the second quarter of 2022. Also, the top line beat the consensus mark by 1.5%. The total earned premium of $4,810 million beat the consensus mark of $4,776.3 million and increased from $4,460 million a year ago. Net investment income of $541 million declined from $581 million a year ago due to lower annualized return on alternative investments. The reported figure was below the Zacks Consensus Estimate of $564.5 million.
NMI Holdings reported second-quarter 2022 operating net income per share of 86 cents, which beat the Zacks Consensus Estimate by 11.7%. The bottom line increased 28.4% year over year.
NMI Holdings’ total operating revenues of $132.2 million increased 9.5% year over year on higher net premiums earned (up 9%) and net investment income (up 16.4%). Revenues beat the Zacks Consensus Estimate by 1.3%. Primary insurance-in-force increased 23% to $168.6 billion. Annual persistency was 71.5%, up 1760 basis points year over year. New insurance written was $16.6 billion, down 27% year over year, reflecting a decline in refinancing origination volume year on year.
Chubb reported second-quarter 2022 core operating income of $2.40 per share, which outpaced the Zacks Consensus Estimate by about 17%. The bottom line also improved 16% from the year-ago quarter. Net premiums written improved 7.9% year over year to $10.3 billion in the quarter. Net premiums earned rose 8.4% to $9.6 billion. Adjusted net investment income was a record $950 million, up 0.5%.
Property and casualty underwriting income was a record $1.4 billion, up 21.1% from the year-ago quarter. Chubb incurred an after-tax catastrophe loss of $241 million, 6.6% wider year over year. The combined ratio improved 150 bps on a year-over-year basis to a record 84% in the quarter under review.
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Selective Insurance (SIGI) Q2 Earnings Miss, Revenues Beat
Selective Insurance Group, Inc. (SIGI - Free Report) reported second-quarter 2022 operating income of $1.17 per share, which missed the Zacks Consensus Estimate by 6.4%. The bottom line declined 37% from the year-ago quarter.
The quarter witnessed average renewal pure price increases, solid retention, higher new business and exposure growth. Lower after-tax alternative investment income, higher non-catastrophe losses and escalating costs were offsets.
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 $908 million increased 9.4% from the year-ago quarter’s figure, primarily due to higher premiums earned and net premiums written. The top line outpaced the Zacks Consensus Estimate by 3.3%.
On a year-over-year basis, NPW increased 12% to $930.7 million, driven by average renewal pure price increases of 5%, solid retention and exposure growth.
After-tax net investment income declined 16% year over year to $57 million due to decreased after-tax alternative investment income, partially offset by higher income from fixed income securities portfolio from higher book yields.
Net underwriting income, after-tax, dropped 50% to $29.8 million. Net catastrophe loss of $45.6 million doubled year over year. Non-catastrophe property loss and loss expenses of $138.6 million increased 29.2% year over year due to higher severity, driven by inflationary pressure on new and used car prices, auto repair costs, and building materials and labor costs.
The combined ratio deteriorated 570 basis points (bps) on a year-over-year basis to 95.5, attributable to higher catastrophe losses and lower favorable casualty reserve development.
Total expenses increased 18.6% year over year to $814.9 million, primarily due to higher loss and loss expenses incurred, other insurance expenses and amortization of deferred policy acquisition costs.
Segmental Results
Standard Commercial Lines’ NPW was up 12% year over year to $760.3 million. Average renewal pure price increases of 5.3% and higher retention of 86% drove the improvement in NPW.
The combined ratio deteriorated 440 bps to 93.1.
Standard Personal Lines’ NPW increased 5% year over year to $82.6 million. Average renewal pure price increases of 0.6%, higher retention of 85%, and higher new business of 23% drove the improvement in NPW.
The combined ratio deteriorated 2460 bps on a year-over-year basis to 116.9.
Excess & Surplus Lines’ NPW was up 13% year over year to $87.9 million, driven by average renewal pure price increases of 6.9% and new business growth of 17%.
The combined ratio improved 80 bps to 95.8.
Financial Update
Selective Insurance exited second-quarter 2022 with total assets of $10.3 billion, which was 1% below the level at December 2021 end. Long-term debt of $505.1 million was flat with the 2021 level.
Debt to total capitalization deteriorated 180 bps to 16.3% at second-quarter 2022 end.
As of Jun 30, 2022, the book value per share was $39.68, down 14% from the level as of 2021 end.
Annualized non-GAAP operating return on equity was 11.4% in the second quarter of 2022, down 570 bps year over year.
In the first half of 2022, Selective Insurance repurchased shares for $6.5 million. It had $90.1 million remaining under authorization as of Jun 30, 2022.
2022 Guidance
Selective Insurance estimates a GAAP combined ratio, excluding net catastrophe losses, of 90.5% (prior guidance 91.0%). The combined ratio estimate assumes no additional prior-year casualty reserve development.
Selective Insurance estimates net catastrophe losses of 4 points on the combined ratio.
After-tax net investment income was $215 million (prior guidance $205 million), including after-tax net investment 4 income from its alternative investments of $15 million (prior guidance $15 million);
The overall effective tax rate is expected to be around 20.5%, which assumes an effective tax rate of 19.5% for net investment income and 21% for all other items.
Weighted average shares were 61 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 Some Other Insurers
Of the insurance industry players that have reported second-quarter results so far, The Hartford Financial Services Group, Inc. (HIG - Free Report) , NMI Holdings (NMIH - Free Report) and Chubb Limited (CB - Free Report) beat the respective Zacks Consensus Estimate for earnings.
The Hartford Financial Services Group reported second-quarter 2022 adjusted operating earnings of $2.15 per share, which beat the Zacks Consensus Estimate by 41.5%. The bottom line, however, decreased 8% year over year.
Hartford Financial’s operating revenues amounted to $3,765 million, which improved from $3,568 million in the second quarter of 2022. Also, the top line beat the consensus mark by 1.5%. The total earned premium of $4,810 million beat the consensus mark of $4,776.3 million and increased from $4,460 million a year ago. Net investment income of $541 million declined from $581 million a year ago due to lower annualized return on alternative investments. The reported figure was below the Zacks Consensus Estimate of $564.5 million.
NMI Holdings reported second-quarter 2022 operating net income per share of 86 cents, which beat the Zacks Consensus Estimate by 11.7%. The bottom line increased 28.4% year over year.
NMI Holdings’ total operating revenues of $132.2 million increased 9.5% year over year on higher net premiums earned (up 9%) and net investment income (up 16.4%). Revenues beat the Zacks Consensus Estimate by 1.3%. Primary insurance-in-force increased 23% to $168.6 billion. Annual persistency was 71.5%, up 1760 basis points year over year. New insurance written was $16.6 billion, down 27% year over year, reflecting a decline in refinancing origination volume year on year.
Chubb reported second-quarter 2022 core operating income of $2.40 per share, which outpaced the Zacks Consensus Estimate by about 17%. The bottom line also improved 16% from the year-ago quarter. Net premiums written improved 7.9% year over year to $10.3 billion in the quarter. Net premiums earned rose 8.4% to $9.6 billion. Adjusted net investment income was a record $950 million, up 0.5%.
Property and casualty underwriting income was a record $1.4 billion, up 21.1% from the year-ago quarter. Chubb incurred an after-tax catastrophe loss of $241 million, 6.6% wider year over year. The combined ratio improved 150 bps on a year-over-year basis to a record 84% in the quarter under review.