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Here's Why You Should Hold Selective Insurance (SIGI) Stock

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Selective Insurance Group Inc. (SIGI - Free Report) is well poised for growth, given its international expansion, higher investment income and prudent capital deployment.

The company remains focused on geographic expansion for growth and diversification. It has increased its presence in New Hampshire, Arizona, Colorado, Utah and Mexico. Currently, it has commercial lines presence in 27 states.

Active portfolio management, stellar operating cash flow and high net proceeds from Senior Note issuance led to 17% increase in investment income in the first nine months of 2019.

This Zacks Rank #3 (Hold) property and casualty insurer effectively deploys capital. The company has been continuously hiking dividend, which witnessed a five-year CAGR (2014-2018) of nearly 9%. Its current dividend yield of 1.4% betters the industry average of 0.4%.

However, Selective Insurance is exposed to catastrophe loss due to natural disasters, which pose a threat to the P&C insurance business.
Also, elevated expenses owing to higher loss expense incurred and amortization of deferred policy acquisition costs remain a concern for the company.

Shares of Selective Insurance have rallied 12% in the past two years, outperforming the industry’s increase of 6%.

Selective Insurance’s return on equity was 12.8% in the trailing 12-month period, higher than the industry average of 6.9%. Return on equity is a profitability measure that identifies a company’s efficiency in utilizing its shareholders’ funds.

The company also has a decent history of beating estimates in two of the last four quarters with the average being 6.37%.

The Zacks Consensus Estimate for 2019 and 2020 earnings per share is pegged at $4.18 and $4.20, indicating increase of nearly 14.2% and 0.6%, respectively from the year-ago reported figures. The expected long-term earnings growth rate is 7.5%. The stock also carries a favorable Value Score of B.

Stocks to Consider

Some better-ranked stocks from the same space are Markel Corporation (MKL - Free Report) , W. R. Berkley Corporation (WRB - Free Report) and Fidelity National Financial, Incorporation (FNF - Free Report) each sporting a Zacks Rank #1 (Strong Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.

Markel is a diverse financial holding company. It markets and underwrites specialty insurance products in the United States, the United Kingdom, Canada, and internationally. The company beat earnings estimates in two of the last four reported quarters, the positive surprise being 17.05% on average.

W. R. Berkley Corporation is an insurance holding company. It operates as a commercial lines writer in the United States and internationally. The company came up with average four-quarter positive surprise of 32.31%.

Fidelity National Financial offers various insurance products in the United States. It offers title insurance, escrow, other title related services and home warranty insurance. The company beat earnings estimates in three of the last four reported quarters, the average being 8.67%.

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