Reasons Why You Should Hold Selective Insurance (SIGI) Stock
Selective Insurance Group, Inc. SIGI is well-poised to gain from strong renewal, fuel price increases, exposure growth, favorable excess and surplus (E&S) lines marketplace conditions, higher income earned on fixed-income securities portfolio and prudent capital deployment.
Growth Projections
The Zacks Consensus Estimate for Selective Insurance’s 2023 earnings is pegged at $5.84 per share, indicating a 16.1% increase from the year-ago reported figure on 15.4% higher revenues of $4.24 billion. The consensus estimate for 2024 earnings is pegged at $7.71 per share, indicating a 31.9% increase from the year-ago reported figure on 11.5% higher revenues of $4.73 billion.
The expected long-term earnings growth rate is pegged at 23.8%, outperforming the industry average of 12.3%.
Zacks Rank & Price Performance
SIGI currently carries a Zacks Rank #3 (Hold). Year to date, the stock has gained 11.7% compared with the industry’s rise of 12.2%.
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Return on Equity (ROE)
ROE is a profitability measure reflecting how effectively the company is utilizing its shareholders’ funds. Annualized non-GAAP operating return on common equity was 13.2% in the first half of 2023, which expanded 1,400 basis points year over year. Based on guidance for 2023, the company remains on track to deliver solid results for 2023 with operating ROE with above the 12% target.
Business Tailwinds
Strong renewal, fuel price increases, exposure growth, solid retention rates and higher new business gains in standard commercial and E&S lines should drive premium growth.
Steady betterment of premiums has resulted in top-line improvement. Over the past six years (2017-2022), total revenues witnessed a CAGR of 6.3% and another 19.8% in the first nine months of 2023.
The E&S Lines segment of Selective Insurance is likely to improve because of renewal pure price increases, higher direct new business and favorable E&S Lines marketplace conditions.
Given impressive investment results, SIGI projects an after-tax net investment income of $300 million, which includes $30 million of after-tax net investment income from alternative investments. Higher income earned on fixed-income securities portfolio due to improved book yields received from the investment of operating and investing cash flows over the past year in the higher interest rate environment are likely to drive the metric.
Riding on a solid capital position, the company has been hiking dividends, which registered a nine-year CAGR (2015-2023) of nearly 8.8%. It had $84.2 million of shares remaining under its authorization as of Sep 30, 2023. Riding on strong financial and operating performance, the board has approved a 7% hike in the quarterly cash dividend in November 2022. Such steadfast endeavors buoy confidence among investors, making it an attractive pick for yield-seeking investors.
The Zacks Consensus Estimate for Selective Insurance’s 2024 earnings has moved 0.9% north in the past 30 days. This should instill investors' confidence in the stock.
Stocks to Consider
Some better-ranked stocks from the property and casualty insurance industry are Arch Capital Group Ltd. ACGL, CNA Financial Corporation CNA and Kinsale Capital Group, Inc. KNSL, each sporting a Zacks Rank #1 (Strong Buy) at present. You can see the complete list of today’s Zacks #1 Rank stocks here.
Arch Capital has a solid track record of beating earnings estimates in each of the last trailing four quarters, the average being 35.16%. Year to date, ACGL has surged 31.2%.
The Zacks Consensus Estimate for ACGL’s 2023 and 2024 earnings per share is pegged at $7.70 and $7.77, indicating a year-over-year increase of 58.1% and 1%, respectively.
CNA Financial has a solid track record of beating earnings estimates in three of the last four quarters, while missing in one, the average being 9.24%. Year to date, CNA has lost 2.1.
The Zacks Consensus Estimate for CNA’s 2023 and 2024 earnings has moved 2.8% and 5.3% north, respectively, in the past 30 days.
Kinsale Capital beat estimates in each of the last four quarters, the average being 14.25%. Year to date, KNSL has rallied 32.6%.
The Zacks Consensus Estimate for KNSL’s 2023 and 2024 has moved 8.5% and 7.8% north, respectively, in the past 30 days, reflecting analysts’ optimism.
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CNA Financial Corporation (CNA) : Free Stock Analysis Report
Selective Insurance Group, Inc. (SIGI) : Free Stock Analysis Report
Arch Capital Group Ltd. (ACGL) : Free Stock Analysis Report
Kinsale Capital Group, Inc. (KNSL) : Free Stock Analysis Report
