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Selective Insurance Group, Inc. (SIGI - Free Report) reported fourth-quarter 2020 operating income of $1.84 per share, beating the Zacks Consensus Estimate by 67.3%. Moreover, the bottom line increased 34.3% from the year-ago period’s number.
Selective Insurance witnessed higher net premium written and net investment income, offset by higher catastrophe losses and higher expenses.
Selective Insurance Group, Inc. Price, Consensus and EPS Surprise
For 2020, Selective Insurance came up with operating income of $4.15 per share, down 5.7% from the year-earlier quarter.
Moreover, total revenues of $2.9 billion grew 3.4% year over year.
Behind the Headlines
Total revenues of $778 million were up 6.6% from the year-ago quarter’s figure, primarily due to higher premiums earned and improved net investment income. Moreover, the same beat the Zacks Consensus Estimate by 4.1%.
Net investment income increased 18% year over year to $55 million. The upside was driven by alternative investment gains of $14 million after-tax, which are reported on a one-quarter lag.
Net premiums written increased 8% year over year to $681.5 million attributable to solid retention, new business growth, and strong renewal pure price increases.
Total expenses increased 1.9% year over year to $639.4 million primarily due to higher amortization of deferred policy acquisition costs, interest expenses, corporate expenses and other insurance expenses.
Catastrophe losses increased 200% year over year to $19.5 million. Combined ratio improved 370 basis points (bps) on a year-over-year basis to 88.1% in the quarter under review, driven by favorable reserve development, generating 10.8 points of annualized return on equity.
Segmental Results
Standard Commercial Lines net premiums written were up 10% year over year to $551.1 million, driven by 5.1% renewal pure price increases, 2% increase in new business and strong retention of 86%.
Combined ratio improved 320 bps to 86.8% from the prior-year quarter’s level.
Standard Personal Lines net premiums written declined 2% year over year to $69.7 million. The downside was partially offset by increase in new business, renewal pure price and higher retention.
Combined ratio improved 490 bps on a year-over-year basis to 93.6% in the quarter under review.
Excess & Surplus Lines net premiums written grew 6% year over year to $60.7 million, primarily attributable to strong new business growth of 23% and renewal pure price increases of 7.4%. Combined ratio improved 610 bps to 93.4% due to lower catastrophe losses.
Financial Update
Selective Insurance exited the fourth quarter with total assets of $9.7 billion, which was 10% above the level at December 2019 end.
As of Dec 31, 2020, book value per share was $42.38, up 15% from the level as of 2019 end.
Annualized operating return on equity was 20.6% in the quarter under review, up 550 basis points year over year.
2021 Guidance
The company estimates GAAP combined ratio, excluding catastrophe losses, of 91%. The combined ratio estimate assumes no prior-year casualty reserve development.
Catastrophe losses of 4 points on the combined ratio have been estimated.
The company projects an after-tax investment income of $182 million, which includes $16 million in after-tax net investment income from alternative investments.
Overall effective tax rate is expected to be approximately 20.5%, which includes an effective tax rate of 19% for net investment income and 21% for all other items.
Fourth-quarter earnings of The Progressive Corporation (PGR - Free Report) , W.R. Berkley Corporation (WRB - Free Report) , and Brown & Brown (BRO - Free Report) beat the respective Zacks Consensus Estimate.
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Selective Insurance (SIGI) Q4 Earnings & Revenues Beat
Selective Insurance Group, Inc. (SIGI - Free Report) reported fourth-quarter 2020 operating income of $1.84 per share, beating the Zacks Consensus Estimate by 67.3%. Moreover, the bottom line increased 34.3% from the year-ago period’s number.
Selective Insurance witnessed higher net premium written and net investment income, offset by higher catastrophe losses and higher expenses.
Selective Insurance Group, Inc. Price, Consensus and EPS Surprise
Selective Insurance Group, Inc. price-consensus-eps-surprise-chart | Selective Insurance Group, Inc. Quote
Full-Year Highlights
For 2020, Selective Insurance came up with operating income of $4.15 per share, down 5.7% from the year-earlier quarter.
Moreover, total revenues of $2.9 billion grew 3.4% year over year.
Behind the Headlines
Total revenues of $778 million were up 6.6% from the year-ago quarter’s figure, primarily due to higher premiums earned and improved net investment income. Moreover, the same beat the Zacks Consensus Estimate by 4.1%.
Net investment income increased 18% year over year to $55 million. The upside was driven by alternative investment gains of $14 million after-tax, which are reported on a one-quarter lag.
Net premiums written increased 8% year over year to $681.5 million attributable to solid retention, new business growth, and strong renewal pure price increases.
Total expenses increased 1.9% year over year to $639.4 million primarily due to higher amortization of deferred policy acquisition costs, interest expenses, corporate expenses and other insurance expenses.
Catastrophe losses increased 200% year over year to $19.5 million. Combined ratio improved 370 basis points (bps) on a year-over-year basis to 88.1% in the quarter under review, driven by favorable reserve development, generating 10.8 points of annualized return on equity.
Segmental Results
Standard Commercial Lines net premiums written were up 10% year over year to $551.1 million, driven by 5.1% renewal pure price increases, 2% increase in new business and strong retention of 86%.
Combined ratio improved 320 bps to 86.8% from the prior-year quarter’s level.
Standard Personal Lines net premiums written declined 2% year over year to $69.7 million. The downside was partially offset by increase in new business, renewal pure price and higher retention.
Combined ratio improved 490 bps on a year-over-year basis to 93.6% in the quarter under review.
Excess & Surplus Lines net premiums written grew 6% year over year to $60.7 million, primarily attributable to strong new business growth of 23% and renewal pure price increases of 7.4%. Combined ratio improved 610 bps to 93.4% due to lower catastrophe losses.
Financial Update
Selective Insurance exited the fourth quarter with total assets of $9.7 billion, which was 10% above the level at December 2019 end.
As of Dec 31, 2020, book value per share was $42.38, up 15% from the level as of 2019 end.
Annualized operating return on equity was 20.6% in the quarter under review, up 550 basis points year over year.
2021 Guidance
The company estimates GAAP combined ratio, excluding catastrophe losses, of 91%. The combined ratio estimate assumes no prior-year casualty reserve development.
Catastrophe losses of 4 points on the combined ratio have been estimated.
The company projects an after-tax investment income of $182 million, which includes $16 million in after-tax net investment income from alternative investments.
Overall effective tax rate is expected to be approximately 20.5%, which includes an effective tax rate of 19% for net investment income and 21% for all other items.
Zacks Rank
Selective Insurance carries a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
Performance of Other Insurers
Fourth-quarter earnings of The Progressive Corporation (PGR - Free Report) , W.R. Berkley Corporation (WRB - Free Report) , and Brown & Brown (BRO - Free Report) beat the respective Zacks Consensus Estimate.
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Imagine getting in early on a young industry primed to skyrocket from $17.7 billion in 2019 to an expected $73.6 billion by 2027.
Although marijuana stocks did better as the pandemic took hold than the market as a whole, they’ve been pushed down. This is exactly the right time to get in on selected strong companies at a fraction of their value before COVID struck. Zacks’ Special Report, Marijuana Moneymakers, reveals 10 exciting tickers for urgent consideration.
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