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Should You Retain Selective Insurance (SIGI) in Your Portfolio?

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Selective Insurance Group, Inc. (SIGI - Free Report) has been gaining momentum, given its stable retention, higher direct new business, renewal pure price and exposure growth.

Earnings Surprise History

Selective Insurance has a solid track record of beating earnings estimates in each of the last six quarters.

Zacks Rank & Price Performance

Selective Insurance currently carries a Zacks Rank #3 (Hold). In the past year, the stock has rallied 3.5% against the industry’s decrease of 7.8%.

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Style Score

Selective Insurance is well poised for progress, as is evident from its favorable VGM Score of B. VGM Score helps identify stocks with the most attractive value, best growth and the most promising momentum.

Return on Equity (ROE)

Selective Insurance’s ROE for the trailing 12 months is 13.8%, up 130 basis points year over year. This reflects its efficiency in utilizing shareholders’ funds.

Business Tailwinds

Strong new business growth, stable retention, solid renewal, pure price increases, and exposure growth are expected to drive results of the Commercial Lines segment.

Selective’s renewal pure price increases exceeded the industry average from 2009 to 2018 and steadily increased from 2019 to 2021. An attractively priced book along with solid profitability as well as industry pricing trends should provide an additional tailwind for further increases.

Selective Insurance is shifting the focus of Personal Lines toward the mass-affluent market that is less price-sensitive and places greater value on products and services.

The Excess and Surplus Lines (E&S) segment of Selective Insurance is likely to improve due to higher direct new business, renewal pure price, and exposure growth, driven by favorable market conditions in E&S lines.

For 2022, Selective Insurance projects an investment income of $205 million (upped from the earlier guidance of $200 million). It includes $15 million in net investment income from alternative investments. Higher income earned on fixed-income securities and other investments is likely to drive investment income. These tailwinds are expected to boost the top-line growth of the insurer.

The expense ratio is likely to improve owing to lower-than-expected travel and entertainment, overhead and general and administrative expenses.

Selective Insurance boasts an impressive solvency level. Its financial position remains solid with $518 million of cash and investments, which is above the longer-term target. Solid financial flexibility provides SIGI with better growth opportunities.

Selective Insurance raised dividends at an eight-year (2015-2022) CAGR of 9.1%. The current dividend yield is 1.4%, which is better than the industry average of 0.4%. SIGI had $96.5 million remaining under repurchase authorization. Thus, the stock is an attractive pick for yield-seeking investors.

Stocks to Consider

Some better-ranked stocks from the insurance industry are United Fire Group, Inc. (UFCS - Free Report) , Zurich Insurance Group Ltd. (ZURVY - Free Report) and Fidelity National Financial, Inc. (FNF - Free Report) , each carrying a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

United Fire’s earnings surpassed estimates in each of the last four quarters, the average earnings surprise being 270.8%. In the past year, UFCS' stock has gained 28.2%.

The Zacks Consensus Estimate for UFCS’ 2022 earnings has moved 23.5% north in the past 60 days.

The Zacks Consensus Estimate for Zurich Insurance’s 2022 and 2023 earnings has moved 3% and 5.1% north, respectively, in the past 60 days.  In the past year, ZURVY stock has rallied 6%.

The Zacks Consensus Estimate for Zurich Insurance’s 2022 and 2023 earnings implies 7.5% and 9.6 year-over-year growth, respectively.

Fidelity National’s earnings surpassed estimates in each of the last four quarters, the average earnings surprise being 27.6%. In the past year, FNF stock has lost 17.6%.

The Zacks Consensus Estimate for Fidelity National’s 2022 and 2023 earnings has moved 0.3% and 0.5% north, respectively, in the past 60 days.

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