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Selective Insurance (SIGI) Q3 Earnings Miss, Decline Y/Y

Zacks Equity Research

Selective Insurance Group, Inc. SIGI reported third-quarter 2019 operating income of 97 cents, missing the Zacks Consensus Estimate by 12.6% due to increased levels of non-catastrophe property losses and employee-related severance costs. Moreover, the bottom line declined 2% from the year-ago period’s number.

Selective Insurance Group, Inc. Price, Consensus and EPS Surprise

Selective Insurance Group, Inc. Price, Consensus and EPS Surprise

Selective Insurance Group, Inc. price-consensus-eps-surprise-chart | Selective Insurance Group, Inc. Quote

Behind the Headlines

Total revenues of $713 million were up 6.9% from the year-ago quarter’s figure. However, the same missed the Zacks Consensus Estimate by 0.7%.

Net investment income rose 6% year over year to $45.4 million, attributable to solid cash flow from operations and net proceeds from senior notes issuance in the first quarter of 2019.

Net premiums written increased 4% year over year to $676.9 million driven by solid growth in Standard Commercial Lines segment. It was partially offset by lower Standard Personal Lines and Excess and Surplus Lines premiums.

Combined ratio deteriorated 60 basis points (bps) on a year-over-year basis to 95.2% in the quarter under review.

Segmental Results

Standard Commercial Lines net premiums written were up 6% year over year to $532.9 million, attributable to retention, increase in new business generation and solid renewal pure price rise.

Combined ratio improved 30 bps to 94.2% from the prior-year quarter’s level.

Standard Personal Lines net premiums written dipped 4% year over year to $81.6 million due to 22% reduction in new business. Combined ratio also deteriorated 490 bps to 100.8%.

Excess & Surplus Lines net premiums written decreased 3% year over year to $62.4 million, due to a 28% decrease in new business. Combined ratio also deteriorated 320 bps to 96.9%.

Financial Update

Selective Insurance exited the third quarter with total assets of $8.7 billion, which climbed 10% above the level at December 2018 end.

As of Sep 30, 2019, book value per share was $35.98, up 18% from the level as of 2018 end.

Annualized operating return on equity was 11.2% in the quarter under review, contracting 260 basis points year over year.

2019 Guidance

The company’s estimates catastrophe loss of 3.5 points.

The company’s estimates GAAP combined ratio, excluding catastrophe losses, of 91.0%.

The company projects an after-tax investment income of $180 million, consisting of $14 million of after-tax net investment income from other investments.

An overall effective tax rate of approximately 19%, which includes an effective tax rate of 18.5% for net investment income, reflects a tax rate of 5.25% for tax-advantaged municipal bonds and a tax rate of 21% for all other items

Outstanding weighted average shares are estimated to be 60 million.

Zacks Rank

Selective Insurance carries a Zacks Rank #4 (Sell).

You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

Other Insurance Releases

Of the insurance industry players that have reported third-quarter results so far, American Financial Group, Inc. AFG, Arthur J. Gallagher AJG and CNA Financial Corporation CNA beat the respective Zacks Consensus Estimate for earnings.

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