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Selective Insurance (SIGI) Q2 Earnings Top, Premiums Rise Y/Y

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Selective Insurance Group, Inc. (SIGI - Free Report) reported second-quarter 2021 operating income of $1.85 per share, which beat the Zacks Consensus Estimate by 36%. The bottom line improved more than fourfold from the year-ago period.

The reported quarter witnessed higher premiums written and improved net investment income, offset by higher expenses.

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

Behind the Headlines

Total revenues of $840.5 million were up 23% from the year-ago quarter’s figure. Moreover, the top line beat the Zacks Consensus Estimate by 4.1%.

Net premiums written increased 15% year over year to $833.2 million driven by strong new business growth of 16%, renewal pure price increases of 5.1%, and continued solid retention.

Net investment income more than doubled year over year to $67 million, driven by alternative investment gains of $16 million after-tax, which are reported on a one-quarter lag.

Total expenses increased 7.2% year over year to $687.3 million, primarily due to higher loss and loss expense incurred, amortization of deferred policy acquisition costs, other insurance expense and corporate expenses.

Combined ratio improved 860 basis points (bps) on a year-over-year basis to 89.8%.

Segmental Results

Standard Commercial Lines net premiums written were up 16% year over year to $677.1 million, driven by renewal pure price increases that averaged 5.5%, new business growth of 17%, and retention of 85%.

Combined ratio improved 800 bps to 88.7% from the prior-year quarter’s level due to lower catastrophe losses as well as non-catastrophe property losses and loss expenses.

Standard Personal Lines net premiums written were $78.6 million, flat year over year as renewal pure price increases and solid retention were offset by lower new business. Combined ratio improved 1650 bps to 89.6 from the year-ago period’s count due to lower catastrophe losses.

Excess & Surplus Lines net premiums written grew 23% year over year to $77.5 million, driven by new business growth of 19% and renewal pure price increases that averaged 6.9%. Combined ratio improved 430 bps to 96.6 from the prior-year quarter’s level due to lower catastrophe losses.

Financial Update

Selective Insurance exited the second quarter with total assets of $10.2 billion, which climbed 5% above the level at the end of December 2020.

Debt to total capitalization improved 70 bps to 16% from 2020 end level.

As of Jun 30, 2021, book value per share was $44.78, up 6% from the level as of 2020 end.

Annualized operating return on equity was 17.1% in the quarter under review, up 1270 points year over year.

2021 Guidance

The company estimates catastrophe loss of 4 points on the combined ratio.

The company projects an after-tax net investment income of approximately $220 million, up from the previous guidance of $195 million. It includes $55 million in after-tax net investment income from alternative investments, up from $31 million guided earlier.

The company expects an overall effective tax rate of approximately 20.5% that includes an effective tax rate of 19% for net investment income and 21% for all other items.

The company expects GAAP combined ratio, excluding catastrophe losses, of 89% (prior guidance 90%) that assumes no additional prior year casualty reserve development;

Zacks Rank

Selective Insurance currently 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 P&C Insurers

Among other insurers that have already reported their second-quarter results, the bottom line at The Progressive Corporation (PGR - Free Report) , The Travelers Companies (TRV - Free Report) and RLI Corp. (RLI - Free Report) beat the respective Zacks Consensus Estimate.