A month has gone by since the last earnings report for Selective Insurance (SIGI Quick QuoteSIGI - Free Report) . Shares have added about 0.5% in that time frame, underperforming the S&P 500.

Will the recent positive trend continue leading up to its next earnings release, or is Selective Insurance due for a pullback? Before we dive into how investors and analysts have reacted as of late, let's take a quick look at the most recent earnings report in order to get a better handle on the important catalysts.

Selective Insurance Q1 Earnings Beat, Revenues Rise Y/Y

Selective Insurance Group, Inc. reported first-quarter 2022 operating income of $1.41 per share, which beat the Zacks Consensus Estimate by 2.2%. The bottom line however declined 17.1% from the year-ago quarter.

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

Behind the Headlines

Total revenues of $886 million increased 11% 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 7.6%.
On a year-over-year basis, NPW increased 11% to $889.8 million, driven by renewal pure price increases, solid retention rates, exposure growth and strong new business growth.

Net investment income improved 4% year over year to $59 million, driven by strong gains on alternative investments. Underwriting income dropped 28% to $44.1 million. Net catastrophe loss of $20.9 million was narrower than a loss of $29.9 million incurred in the year-ago quarter. Non catastrophe loss of $150.4 million was wider than a loss of $115.6 million incurred in the year-ago quarter

The combined ratio deteriorated 380 basis points (bps) on a year-over-year basis to 93.1, attributable to higher non-catastrophe property losses and less favorable prior year casualty reserve development, partially offset by lower catastrophe losses.

Total expenses increased 16.1% year over year to $776.2 million, primarily due to higher loss and loss expense incurred, other insurance expense, corporate expense and amortization of deferred policy acquisition costs.

Segmental Results

Standard Commercial Lines’ NPW was up 11% year over year to $737.6 million. Average renewal pure price increases of 4.8%, solid retention of 87%, and new business growth of 12% drove the improvement in NPW. The combined ratio deteriorated 540 bps to 93.6.

Standard Personal Lines’ NPW remained flat year over year at $65.1 million, Renewal pure price increases averaged 0.6%, retention was 84%, and new business was down 2% year over year. The combined ratio deteriorated 140 bps on a year-over-year basis to 91.

Excess & Surplus Lines’ NPW was up 29% year over year to $873.1 million, driven by average renewal pure price increases of 7.7% and new business growth of 25%. The combined ratio also improved 810 bps to 91.1.

Financial Update

Selective Insurance exited first-quarter 2022 with total assets of $10.3 billion, which was 1% below the level at December 2021 end. Long-term debt of $505.6 million was flat with the 2021 level. Debt to total capitalization deteriorated 90 bps to 15.4% at first-quarter 2022 end.

As of Mar 31, 2022, book value per share was $43.80, up 1% from the level as of 2021 end. Annualized non-GAAP operating return on equity was 12.8% in the first quarter of 2022, down 340 bps year over year.

Selective Insurance bought back shares worth $0.1 million and had $96.5 million remaining under authorization as of Mar 31, 2022.

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 $205 million (upped from $200 million guided earlier) including $15 million (down from $20 million guided earlier) 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. Shares outstanding totaled 61 million.

How Have Estimates Been Moving Since Then?

It turns out, fresh estimates have trended downward during the past month.

The consensus estimate has shifted -14.04% due to these changes.

VGM Scores

At this time, Selective Insurance has an average Growth Score of C, though it is lagging a lot on the Momentum Score front with an F. However, the stock was allocated a grade of A on the value side, putting it in the top 20% for this investment strategy.

Overall, the stock has an aggregate VGM Score of B. If you aren't focused on one strategy, this score is the one you should be interested in.

Outlook

Estimates have been broadly trending downward for the stock, and the magnitude of this revision indicates a downward shift. Notably, Selective Insurance has a Zacks Rank #3 (Hold). We expect an in-line return from the stock in the next few months.

Performance of an Industry Player

Selective Insurance belongs to the Zacks Insurance - Property and Casualty industry. Another stock from the same industry, Cincinnati Financial (CINF Quick QuoteCINF - Free Report) , has gained 1.2% over the past month. More than a month has passed since the company reported results for the quarter ended March 2022.

Cincinnati Financial reported revenues of $1.88 billion in the last reported quarter, representing a year-over-year change of +9.2%. EPS of $1.58 for the same period compares with $1.37 a year ago.

For the current quarter, Cincinnati Financial is expected to post earnings of $1.02 per share, indicating a change of -43% from the year-ago quarter. The Zacks Consensus Estimate remained unchanged over the last 30 days.

Cincinnati Financial has a Zacks Rank #3 (Hold) based on the overall direction and magnitude of estimate revisions. Additionally, the stock has a VGM Score of C.