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Selective Insurance (SIGI) Q4 Earnings, Revenues Top Estimates

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Selective Insurance Group, Inc. (SIGI - Free Report) reported fourth-quarter 2021 operating income of $1.56 per share, which beat the Zacks Consensus Estimate by 7.8%. The bottom line declined 15.2% from the year-ago quarter.

The quarter witnessed higher net premiums written (NPW) and increased net investment income. However, higher catastrophe losses, lower favorable prior year casualty reserve development and escalating costs limited the upside.

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

Behind the Headlines

Total revenues of $867 million increased 11.4% from the year-ago quarter’s figure, primarily due to higher premiums earned and improved net investment income. The top line outpaced the Zacks Consensus Estimate by 0.2%.

On a year-over-year basis, NPW increased 9% to $745.4 million, driven by renewal pure price increases, solid retention rates, and strong new business growth.

Net investment income improved 16% year over year to $64.5 million, driven by strong gains on alternative investments.

Underwriting income dropped 35.7% to $54.1 million. Net catastrophe loss of $35.3 million was wider than a loss of $19.5 million incurred in the year-ago quarter.

The combined ratio deteriorated 500 basis points (bps) on a year-over-year basis to 93, attributable to higher net catastrophe losses and less favorable prior year casualty reserve development than the prior-year period.

Total expenses increased 16.6% year over year to $745.9 million, primarily due to higher loss and loss expense incurred and amortization of deferred policy acquisition costs.

Segmental Results

Standard Commercial Lines’ NPW was up 8% year over year to $597.7 million. Renewal pure price increases, which averaged 1.1%, new business growth and solid retention rates drove the improvement in NPW.

The combined ratio deteriorated 630 bps to 93.1.

Standard Personal Lines’ NPW increased 1% year over year to $70.4 million, driven by an increase in renewal pure price and higher retention.

The combined ratio deteriorated 400 bps on a year-over-year basis to 97.6.

Excess & Surplus Lines’ NPW was up 27% year over year to $77.3 million. The segment benefited from an increase in renewal pure price, new business, and increased retention rates.

The combined ratio also improved 460 bps to 88.8.

Full-Year Update

Operating income of $6.6.27 per share beat the Zacks Consensus Estimate of $6.17. The bottom line improved 51.1% year over year.

Total revenues of $3.3 billion increased 15% from the year-ago figure and missed the Zacks Consensus Estimate marginally.

NPW improved 15% to $3.2 billion. The combined ratio improved 210 bps to 92.8.

Financial Update

Selective Insurance exited 2021 with total assets of $10.4 billion, which was 8% above the level at December 2020 end. Long-term debt declined 8% from the 2020 level to $506.1 million at 2021 end.

Debt to total capitalization improved 220 bps to 14.5% at 2021 end.

As of Dec 31, 2021, book value per share was $46.24, up 91% from the level as of 2020 end.

Annualized non-GAAP operating return on equity was 14.3% in 2021, up 380 bps year over year and marked the eighth consecutive year of double-digit non-GAAP operating ROE and above 11% target.

Selective Insurance had $96.6 million remaining under authorization as of Dec 31, 2021.

2022 Guidance

Selective Insurance estimates GAAP combined ratio, excluding catastrophe losses of 91 and includes net catastrophe losses of 400 basis points on the combined ratio.

Investment income was $200 million including $20 million in net investment income from alternative investments.

The overall effective tax rate is expected to be around 20.5%, which comprises an effective tax rate of 19.5% for net investment income and 21% for all other items.

The shares outstanding should total 61 million.

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 P&C Insurers

Of the insurance industry players that have reported fourth-quarter results so far, The Travelers Companies (TRV - Free Report) , RenaissanceRe Holdings Ltd. (RNR - Free Report) and The Progressive Corporation (PGR - Free Report) beat the Zacks Consensus Estimate for earnings.

Travelers’ core income of $5.20 per share surpassed the Zacks Consensus Estimate of $3.86 and increased 6% year over year. Total revenues rose 7% to about $9 billion and beat the Zacks Consensus Estimate of $8.7 billion.

Travelers’ net written premiums increased 10% year over year to a record $8 billion. The combined ratio deteriorated 130 bps year over year to 88.

RenaissanceRe’s operating earnings per share of $4.71 surpassed the Zacks Consensus Estimate by 27% and rebounded from the year-ago loss of $1.59 per share. Total revenues of $1.39 billion dipped 0.1% year over year.

RenaissanceRe’s gross premiums written surged 40.4% year over year to $1.3 billion. The combined ratio improved 3530 bps year over year to 79.4.

Progressive’s earnings per share of $1.05 beat the Zacks Consensus Estimate of 99 cents but declined 43.2% from the year-ago quarter.

Progressive’s net premiums written were $10.7 billion in the quarter, up 13% from $9.5 billion a year ago. The combined ratio deteriorated 630 bps from the prior-year quarter to 94.7.