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Selective Insurance (SIGI) Q4 Earnings & Revenues Beat

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Selective Insurance Group, Inc. SIGI reported fourth-quarter 2020 operating income of $1.84 per share, beating the Zacks Consensus Estimate by 67.3%. Moreover, the bottom line increased 34.3% from the year-ago period’s number.

Selective Insurance witnessed higher net premium written and net investment income, offset by higher catastrophe losses and higher expenses.

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

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

Full-Year Highlights

For 2020, Selective Insurance came up with operating income of $4.15 per share, down 5.7% from the year-earlier quarter.

Moreover, total revenues of $2.9 billion grew 3.4% year over year.

Behind the Headlines

Total revenues of $778 million were up 6.6% from the year-ago quarter’s figure, primarily due to higher premiums earned and improved net investment income. Moreover, the same beat the Zacks Consensus Estimate by 4.1%.

Net investment income increased 18% year over year to $55 million. The upside was driven by alternative investment gains of $14 million after-tax, which are reported on a one-quarter lag.

Net premiums written increased 8% year over year to $681.5 million attributable to solid retention, new business growth, and strong renewal pure price increases.

Total expenses increased 1.9% year over year to $639.4 million primarily due to higher amortization of deferred policy acquisition costs, interest expenses, corporate expenses and other insurance expenses.

Catastrophe losses increased 200% year over year to $19.5 million. Combined ratio improved 370 basis points (bps) on a year-over-year basis to 88.1% in the quarter under review, driven by favorable reserve development, generating 10.8 points of annualized return on equity.

Segmental Results

Standard Commercial Lines net premiums written were up 10% year over year to $551.1 million, driven by 5.1% renewal pure price increases, 2% increase in new business and strong retention of 86%.

Combined ratio improved 320 bps to 86.8% from the prior-year quarter’s level.

Standard Personal Lines net premiums written declined 2% year over year to $69.7 million. The downside was partially offset by increase in new business, renewal pure price and higher retention.

Combined ratio improved 490 bps on a year-over-year basis to 93.6% in the quarter under review.

Excess & Surplus Lines net premiums written grew 6% year over year to $60.7 million, primarily attributable to strong new business growth of 23% and renewal pure price increases of 7.4%. Combined ratio improved 610 bps to 93.4% due to lower catastrophe losses.

Financial Update

Selective Insurance exited the fourth quarter with total assets of $9.7 billion, which was 10% above the level at December 2019 end.

As of Dec 31, 2020, book value per share was $42.38, up 15% from the level as of 2019 end.

Annualized operating return on equity was 20.6% in the quarter under review, up 550 basis points year over year.

2021 Guidance

The company estimates GAAP combined ratio, excluding catastrophe losses, of 91%. The combined ratio estimate assumes no prior-year casualty reserve development.

Catastrophe losses of 4 points on the combined ratio have been estimated.

The company projects an after-tax investment income of $182 million, which includes $16 million in after-tax net investment income from alternative investments.

Overall effective tax rate is expected to be approximately 20.5%, which includes an effective tax rate of 19% for net investment income and 21% for all other items.

Zacks Rank

Selective Insurance carries a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

Performance of Other Insurers

Fourth-quarter earnings of The Progressive Corporation PGR, W.R. Berkley Corporation WRB, and Brown & Brown BRO beat the respective Zacks Consensus Estimate.

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W.R. Berkley Corporation (WRB) : Free Stock Analysis Report

The Progressive Corporation (PGR) : Free Stock Analysis Report

Selective Insurance Group, Inc. (SIGI) : Free Stock Analysis Report

Brown & Brown, Inc. (BRO) : Free Stock Analysis Report

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