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Selective Insurance (SIGI) Q4 Earnings Beat, Improve Y/Y

Zacks Equity Research

Selective Insurance Group, Inc. SIGI reported fourth-quarter 2018 operating income of $1.20 per share, beating the Zacks Consensus Estimate by 27.7%. Also, the bottom line surged nearly 40% from the year-ago period’s number.

The reported quarter benefited from disciplined underwriting franchise and a strong underlying insurance operations performance.

Full-Year Highlights

For 2018, Selective Insurance came up with operating income of $3.66 per share, surpassing the Zacks Consensus Estimate by 7.9% and also improving 17.7% from the year-earlier quarter.

Moreover, total revenues of $2.6 billion grew 7.2% year over year.

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

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

Behind the Headlines

Total revenues of $680.9 million were up 7.2% from the year-ago quarter’s figure. Also, the top line beat the Zacks Consensus Estimate by 2.9%.

Net investment income rose 41.7% year over year to $44 million, driven by higher interest rates, active portfolio management, stellar operating cash flow (18% of Net premiums written), increase in alternative investment returns and lower tax.

Net premiums written increased 5.2% year over year to $582.8 million. Combined ratio improved 10 basis points (bps) on a year-over-year basis to 92.7%.

Segment Results

Standard Commercial Lines net premiums written were up 5.9% year over year to $449.4 million on the back of solid renewal pure price improvement as well as retention and strength in new business. Combined ratio deteriorated 90 bps to 92.9% from the prior-year quarter’s level.

Standard Personal Lines net premiums written remained flat year over year at $72.7 million, reflecting higher renewal pure price and solid retention. Combined ratio improved 340 bps to 91.8% from the year-ago period’s count.

Excess & Surplus Lines net premiums written grew 6.7% year over year to $60.7 million, primarily attributable to a substantial uptick in new business. Combined ratio improved 360 bps to 92.9%.

Financial Update

Selective Insurance exited the fourth quarter with total assets of $7.9 billion, which climbed 3.5% above the level at December 2017 end.

As of Dec 31, 2018, book value per share was $30.40, having improved 3.8% year over year.

Annualized operating return on equity was 16.3% in the quarter under review, expanding 430 points year over year.

2019 Guidance

Selective Insurance projects a combined ratio (excluding catastrophe loss) of about 92% that assumes no prior-year casualty reserve development.

Catastrophe loss of 3.5 points has been estimated.

The company projects an after-tax investment income of $175 million, which comprises $8 million of after-tax net investment income from alternative investments.

The P&C insurer expects an overall effective tax rate of nearly 19% including the same of 18% for net investment income, which represents a tax rate of 5.25% for tax-advantaged municipal bonds and a tax rate of approximately 21% for all other items.

Weighted average shares outstanding of 60 million have been anticipated.

Zacks Rank

Selective Insurance carries a Zacks Rank #3 (Hold). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here .

Performance of Other P&C Insurers

Among other players from the same space having reported fourth-quarter earnings so far, the bottom line of MGIC Investment Corp. MTG and RLI Corp. RLI beat the respective Zacks Consensus Estimate while that of The Progressive Corp. PGR missed the same.

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