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Selective Insurance (SIGI) Beats on Q3 Earnings, Updates View

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Selective Insurance Group, Inc. (SIGI - Free Report) reported third-quarter 2018 operating income of 99 cents per share, beating the Zacks Consensus Estimate by 12.5%. Also, the bottom line surged 37.5% from the year-ago period’s number.

Selective Insurance Group, Inc. Price, Consensus and EPS Surprise

The quarter benefited from disciplined underwriting franchise and a strong underlying insurance operations performance.

Behind the Headlines

Total revenues of $667 million inched up 0.3% from the year-ago quarter’s figure.

Net investment income surged 45% year over year to $43 million, driven by higher pre-tax yields on core fixed income securities portfolio, higher levels of alternative investment income and lower taxes.

Net premiums written climbed 8% year over year to $651.7 million. Combined ratio deteriorated 30 basis points (bps) on a year-over-year basis to 94.6%.

Segment Results

Standard Commercial Lines net premiums written were up 6% year over year to $502.3 million on the back of solid renewal pure price improvement as well as retention. Combined ratio deteriorated 240 bps to 94.5% from the prior-year quarter’s level.

Standard Personal Lines net premiums written grew 4% year over year to $84.7 million, mainly aided by a strong renewal pure price increase and solid retention. Combined ratio deteriorated 720 bps to 95.9% from the year-ago period’s count.

Excess & Surplus Lines net premiums written improved 27% year over year to $64.6 million, primarily attributable to new business. Combined ratio improved 2670 bps to 9.7%. Lower current-year loss costs drove this upside.

Financial Update

Selective Insurance exited the third quarter with total assets of nearly $8 billion, which increased 4% over the level at December 2017 end.

As of Sep 30, 2018, book value per share was $29.52, having slid 1% year over year.

Annualized return on equity was 13.8% in the reported quarter, expanding 370 points year over year.

Dividend Raised

Selective Insurance’s board of directors approved an 11% increase in its quarterly dividend to 20 cents per share, payable Dec 3 to stockholders of record as of Nov 15, 2018.

2018 Guidance Revised

Selective Insurance anticipates delivering a combined ratio (excluding catastrophe loss) of about 92%.

The company projects an after-tax investment income of $156 million, up from $150 million, predicted earlier.

The P&C insurer estimates an overall effective tax rate of nearly 18% including the same of 17% for net investment income, which reflects a tax rate of 5.25% for tax-advantaged municipal bonds and a tax rate of approximately 21% for all other investments.

Weighted average shares outstanding of 59.6 million have been anticipated.

Zacks Rank

Selective Insurance carries a Zacks Rank #4 (Sell).

You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

Performance of Other P&C Insurers

Among other players from the insurance industry having reported third-quarter earnings so far, the bottom line of The Progressive Corp. (PGR - Free Report) and MGIC Investment Corp. (MTG - Free Report) beat the respective Zacks Consensus Estimate while that of RLI Corp. (RLI - Free Report) missed the same.

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