Estimates for Selective Insurance Group, Inc. (SIGI - Free Report) have been revised upward over the past 60 days, buoying analysts’ optimism on the stock. The stock has seen the Zacks Consensus Estimate for 2018 and 2019 earnings being raised 0.6% and 0.5% to $3.40 and $4.15, respectively.
A provider of insurance products and services in the United States, Selective Insurance carries a Zacks Rank #2 (Buy). The stock carries an impressive Value Score of B. Back tested results show that stocks with a favorable Value Score of A or B coupled with a bullish Zacks Rank offer the best investment bets.
Shares of this insurer have rallied nearly 14.8%, outperforming the industry's increase of 8.7% in a year.
Let’s focus on the factors that make Selective Insurance a wealthy choice for fetching fat returns to investors’ portfolio.
Improving Top Line: The company has been generating steady growth in its top line owing to higher premiums and net investment income.
Substantial new business opportunities, high retention ratio as well as pure renewal price increases should continue to drive the premiums higher.
Higher fixed income book yield as well as returns from alternative investments have been boosting investment results. With accelerated pace in rate hikes, the momentum is expected to continue. Selective Insurance projects an after-tax net investment income of $150 million for 2018 including $8 million after-tax net investment income from alternative investments.
Geographic Expansion: The insurer relies on widening geographies for growth and diversification. Last year, it expanded its Commercial Lines footprint to Arizona and New Hampshire. In 2018, the company extended business in Colorado and intends to penetrate in New Mexico, Utah for Commercial Lines and in Arizona as well as Utah again for Personal Lines.
Solid Capital Position: The company has been improving its debt to capital ratio. Leverage was lowered 540 basis points over the last four years. At the end of the first quarter, the debt to capital ratio of 22.9% is trending below the company’s long-term target of about 25%.
Banking on its robust capital position, the company’s dividends have been witnessing a five-year CAGR of 6.7%. Its payout currently yields 1.28%.
Growth Projections: The Zacks Consensus Estimate for current-year earnings per share is pegged at $3.40, representing a year-over-year increase of 9.2% on 7.9% higher revenues of $2.6 billion. For 2019, the consensus mark for EPS stands at $4.15, translating into a 22.1% year-over-year rise while the same for revenues is projected at $2.7 billion, up 4.8%.
Selective Insurance has an expected long-term earnings per share growth rate of 16.2%, outperforming its industry average of 11.4%.
Positive Earnings Surprise History: The company registers an encouraging earnings surprise history, having exceeded the Zacks Consensus Estimate in the last three quarters with an average beat of 4.69%.
Other Stocks to Consider
Investors interested in the insurance industry may also consider other top-ranked stocks like Alleghany Corp. (Y - Free Report) , CNA Financial Corp. (CNA - Free Report) and HCI Group, Inc. (HCI - Free Report) .
Alleghany provides property and casualty reinsurance and insurance products in the United States and internationally. It pulled off an average four-quarter positive surprise of 17.61%. The stock sports a Zacks Rank #1 (Strong Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.
CNA Financial provides commercial property and casualty insurance products, primarily in the United States. The company came up with positive surprises in the last four quarters, the average beat being 47.96%. The stock carries a Zacks Rank of 2.
HCI Group primarily engages in the property and casualty insurance business in Florida. The company delivered an average four-quarter earnings surprise of 1.57%. The stock is a Zacks #2 Ranked player.
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