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Selective (SIGI) Stock Up 48.7% in a Year: More Room to Run?
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Shares of Selective Insurance Group, Inc. (SIGI - Free Report) have gained 48.7% in a year compared with the industry's increase of 24.9%. The Zacks S&P 500 composite has rallied 30.9% in the said time frame. With a market capitalization of $5.1 billion, average volume of shares traded in the last three months was 0.2 million.
Image Source: Zacks Investment Research
The rally was largely driven by stable retention and renewal pure price increases, sufficient liquidity and effective capital deployment.
The Zacks Consensus Estimate for 2021 earnings per share is pegged at $6.05, indicating year-over-year increase of nearly 45.7%.
It has a decent earnings surprise history. Its bottom-line beat estimates in three of the last four quarters, the average being 42.1%.
Will the Bull Run Continue?
Estimates for 2021 and 2022 have moved up nearly 12.7% and 3.9%, respectively, in the past 30 days that reflects investors’ optimism.
Premium growth continues to be driven by new business growth, stable retention and renewal pure price increases and business improvement across the company’s segments.
Alternative investments in other investments portfolio and improvement in the equity markets are likely to drive the investment income. For 2021, 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 property and casualty insurer boasts significant financial flexibility with $505 million of cash and investments. Banking on strong capital position, it has the financial flexibility to grow at rates well above 7% to 9% sustainable growth rate in the long run. Its capital position remains strong with $2.9 billion of GAAP equity. Debt to total capitalization improved 70 bps to 16% from 2020 end level.
Combined ratio continues to benefit from better-than-expected non-cat property losses, lower-than-expected expense ratio, moderate catastrophe losses and favorable prior year casualty reserve development.
In the first half of 2021, the insurer repurchased shares for $3.4 million. Currently, it has $96.6 million of remaining under its authorization at quarter end. It raised dividend at a eight-year (2013-2021) CAGR of 8.5% and the current dividend yield is 1.2%, which is better than the industry average of 0.4%. Thus, the stock is an attractive pick for yield-seeking investors.
Furthermore, its 15.4% return on equity (ROE) is better than the industry average of 5.7%, reflecting its efficiency in utilizing shareholders’ funds. Annualized operating return on equity improved 1270 points year over year in the second quarter.
Selective Insurance currently carries a Zacks Rank #2 (Buy) and is well poised for progress, as is evident from its favorable VGM Score of B. Here V stands for Value, G for Growth and M for Momentum, with the score being a weighted combination of all three factors.
Also, it has an impressive Value Score of B. Back-tested results show that stocks with a Value Score of A or B, when combined with a Zacks Rank #1 (Strong Buy) or 2 offer the best opportunities in the value investing space.
Image: Bigstock
Selective (SIGI) Stock Up 48.7% in a Year: More Room to Run?
Shares of Selective Insurance Group, Inc. (SIGI - Free Report) have gained 48.7% in a year compared with the industry's increase of 24.9%. The Zacks S&P 500 composite has rallied 30.9% in the said time frame. With a market capitalization of $5.1 billion, average volume of shares traded in the last three months was 0.2 million.
Image Source: Zacks Investment Research
The rally was largely driven by stable retention and renewal pure price increases, sufficient liquidity and effective capital deployment.
The Zacks Consensus Estimate for 2021 earnings per share is pegged at $6.05, indicating year-over-year increase of nearly 45.7%.
It has a decent earnings surprise history. Its bottom-line beat estimates in three of the last four quarters, the average being 42.1%.
Will the Bull Run Continue?
Estimates for 2021 and 2022 have moved up nearly 12.7% and 3.9%, respectively, in the past 30 days that reflects investors’ optimism.
Premium growth continues to be driven by new business growth, stable retention and renewal pure price increases and business improvement across the company’s segments.
Alternative investments in other investments portfolio and improvement in the equity markets are likely to drive the investment income. For 2021, 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 property and casualty insurer boasts significant financial flexibility with $505 million of cash and investments. Banking on strong capital position, it has the financial flexibility to grow at rates well above 7% to 9% sustainable growth rate in the long run. Its capital position remains strong with $2.9 billion of GAAP equity. Debt to total capitalization improved 70 bps to 16% from 2020 end level.
Combined ratio continues to benefit from better-than-expected non-cat property losses, lower-than-expected expense ratio, moderate catastrophe losses and favorable prior year casualty reserve development.
In the first half of 2021, the insurer repurchased shares for $3.4 million. Currently, it has $96.6 million of remaining under its authorization at quarter end. It raised dividend at a eight-year (2013-2021) CAGR of 8.5% and the current dividend yield is 1.2%, which is better than the industry average of 0.4%. Thus, the stock is an attractive pick for yield-seeking investors.
Furthermore, its 15.4% return on equity (ROE) is better than the industry average of 5.7%, reflecting its efficiency in utilizing shareholders’ funds.
Annualized operating return on equity improved 1270 points year over year in the second quarter.
Selective Insurance currently carries a Zacks Rank #2 (Buy) and is well poised for progress, as is evident from its favorable VGM Score of B. Here V stands for Value, G for Growth and M for Momentum, with the score being a weighted combination of all three factors.
Also, it has an impressive Value Score of B. Back-tested results show that stocks with a Value Score of A or B, when combined with a Zacks Rank #1 (Strong Buy) or 2 offer the best opportunities in the value investing space.
Other Stocks to Consider
Some other top-ranked stocks from the same space include Cincinnati Financial Corporation (CINF - Free Report) , Everest Re Group, Ltd. and Chubb Limited (CB - Free Report) , each sporting a Zacks Rank #1. You can see the complete list of today’s Zacks #1 Rank stocks here.
Cincinnati Financial surpassed estimates in three of the last four quarters and missed in the other one, the average earnings surprise being 36.01%.
The bottom line of Everest Re surpassed estimates in two of the last four quarters and missed in the other two, the average being 20.33%.
Chubb’s earnings surpassed estimates in three of the last four quarters, the average being 7.14%.