Selective Insurance Group SIGI is well-poised for growth based on improving premiums, geographic expansion and strong capital position.
Shares of Selective Insurance Group have rallied 30.7% year to date compared with the industry's growth of 2.5% and the Zacks S&P 500 composite’s rise of 15%. The company has seen its estimates for 2019 move up 1.6% in the past 30 days, reflecting investor optimism over the stock.
The company has an impressive VGM Score of B. This style score helps to find the most attractive value, best growth, and most promising momentum stock. Back-tested results show that stocks with a VGM Score of A or B and a Zacks Rank #1 (Strong Buy) or 2 (Buy) offer the best investment opportunities.
Selective Insurance Group’s return on equity was 13.5% in a year’s time, higher than the industry average of 6.8%. Return on equity is a profitability measure that identifies the company’s efficiency in utilizing its shareholders’ funds.
Renewal pure price increases, new business premium written, new business opportunities and higher retention ratio should continue to fuel premium growth for Selective Insurance.
Active portfolio management, stellar operating cash flow and high net proceeds from Senior Note issuance have been helping the company generate improved net investment income. For 2019, Selective Insurance projects investment income of $180 million, up from the earlier expectation of $175 million.
These should help Selective Insurance Group retain revenue growth momentum, which witnessed a five-year CAGR of 4.9%.
Further, the company has been expanding geographically. Its commercial line has a presence in 27 states. Also, as part of its long-term growth strategy, the company intends to increase standard commercial lines market held by its Ivy League distribution partners to at least 25% as well as grow its share of the business within these distribution partners. All these should drive top-line growth.
A sturdy balance sheet helps the company to improve financial strength, underwriting capabilities and effectively deploy capital. Its dividend has increased at a five-year CAGR of 9%. Its dividend yield of 1% betters the industry average of 0.4%, making the stock an attractive pick for yield-seeking investors.
The Zacks Rank #2 provider of insurance products and services across the United States has a decent history of delivering positive surprise, with the average beat being 12.65%.
The Zacks Consensus Estimate for 2019 and 2020 earnings indicates 18.9% and 2.9% growth, respectively, from the year-ago reported figure. The expected long-term earnings growth is 10.6%, better than the industry average of 10.5%.
Other Stocks to Consider
Some other top-ranked property and casualty insurance stocks are Alleghany Y, CNA Financial CNA and Cincinnati Financial CINF.
Alleghany provides property and casualty reinsurance and insurance products in the United States and internationally. The company delivered positive surprise of 30.80% in the last reported quarter. The stock sports a Zacks Rank #1. 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 delivered positive surprise of 6.93% in the last reported quarter. The stock carries a Zacks Rank #2.
Cincinnati Financial provides property casualty insurance products in the United States. The company delivered positive surprise of 32.81% in the last reported quarter. The stock carries a Zacks Rank #2.
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