A month has gone by since the last earnings report for Selective Insurance (SIGI - Free Report) . Shares have added about 2.3% in that time frame, outperforming 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 drivers.
Selective Insurance Q1 Earnings Miss Mark, Surge Y/Y
Selective Insurance reported first-quarter 2019 operating income of 90 cents per share, missing the Zacks Consensus Estimate by 1.1%. However, the bottom line soared 95.7% from the year-ago period’s number.
The reported quarter benefited from strategic initiatives that drive the company’s performance as well as higher revenues, premiums and net investment income.
Behind the Headlines
Total revenues of $686 million were up 7.7% from the year-ago quarter’s figure. Moreover, the top line exceeded the Zacks Consensus Estimate by 1.1%.
Net investment income rose 15% year over year to $41.3 million, driven by an active portfolio management, stellar operating cash flow and high net proceeds from Senior Note issuance.
Net premiums written increased 8% year over year to $672.9 million. Combined ratio contracted 450 basis points (bps) on a year-over-year basis to 94.7%.
Standard Commercial Lines net premiums written were up 7% year over year to $546.7 million on the back of a solid renewal pure price improvement besides retention and strength in new business. Combined ratio shrank 370 bps to 94.8% from the prior-year quarter’s level.
Standard Personal Lines net premiums written inched up 2% year over year to$69.4 million, reflecting higher renewal pure price and solid retention. Combined ratio contracted 610 bps to 95.9% from the year-ago period’s count.
Excess & Surplus Lines net premiums written grew 19% year over year to $56.9 million, primarily attributable to a substantial uptick in new business. Combined ratio contracted 900 bps to 92.1%.
Selective Insurance exited the first quarter with total assets of $8.3 billion, which climbed 4% above the level at December 2018 end.
As of Mar 31, 2019, book value per share was $32.51, having improved 7% from the level as of 2018 end.
Annualized operating return on equity was 13.2% in the quarter under review, expanding 870 points year over year.
Catastrophe loss of 3.5 points has been estimated.
The company projects an after-tax investment income of $180 million, up from the previous outlook of $175 million owing to net proceeds from Senior Notes issuance.
How Have Estimates Been Moving Since Then?
It turns out, fresh estimates have trended downward during the past month.
At this time, Selective Insurance has an average Growth Score of C, a grade with the same score on the momentum front. Charting a somewhat similar path, the stock was allocated a grade of D on the value side, putting it in the bottom 40% for this investment strategy.
Overall, the stock has an aggregate VGM Score of D. If you aren't focused on one strategy, this score is the one you should be interested in.
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.