Selective Insurance Q4 Earnings Miss Estimates on Poor Underwriting

Selective Insurance Group, Inc. SIGI reported fourth-quarter 2024 operating income of $1.62 per share, which missed the Zacks Consensus Estimate by 18.1%. The bottom line decreased 16% from the year-ago quarter.

The quarterly results reflected average renewal pure price increases and stable retention across Standard Commercial Lines and Excess & Surplus Lines. Soft performance at Standard Personal Lines, higher expenses and poor underwriting income were offsets.

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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 $1.3 billion increased 14.4% from the year-ago quarter’s figure, primarily due to higher premiums earned, net investment income and other income. The top line missed the Zacks Consensus Estimate by 1%.

On a year-over-year basis, net premiums written (NPW) rose 10% to $1.1 billion, driven by renewal pure price increases of 10.7%. The figure matched our estimate. Average renewal pure price increased 10.7%, up 3.3 points from a year ago. After-tax net investment income grew 24% year over year to $97 million.

After-tax net underwriting income was $13.3 million, which decreased 73.5% year over year. Catastrophe events were favorable $10.1 million against the year-ago period’s loss of $24.6 million. Non-catastrophe property loss and loss expenses were $178.2 million, wider than the year-ago loss of $172.1 million.

The combined ratio of 98.5% deteriorated 480 basis points (bps) year over year, while the loss and loss expense ratio deteriorated 540 bps year over year to 67.8%. The Zacks Consensus Estimate was 97.1% and our estimate was 96%.

Total expenses increased 19.2% year over year to $1.1 billion, primarily due to higher loss and loss expenses incurred, other insurance expenses, amortization of deferred policy acquisition costs and corporate expenses. The figure matched our estimate.

Segmental Results

Standard Commercial Lines’ NPW was up 9% year over year to $833.4 million. The premium growth reflected average renewal pure price increases of 8.8% and stable retention of 85%. The figure was lower than our estimate of $868.1 million.

The combined ratio deteriorated 710 bps to 100.2%. This was driven by net unfavorable prior-year casualty reserve development of $75 million. It was partially offset by lower catastrophe and non-catastrophe losses. The Zacks Consensus Estimate was 96 and our estimate was 97.3.

Standard Personal Lines’ NPW decreased 3% year over year to $103.6 million, with a renewal pure price of 27.3% and higher average policy sizes. Retention was 75%, down 12 points from a year ago, and new business decreased 49% due to deliberate profit improvement actions. The figure was lower than our estimate of $132 million.

The combined ratio improved 2,520 bps on a year-over-year basis to 91.7%. The Zacks Consensus Estimate was pegged at 102, while our estimate was 108.4.

Excess & Surplus Lines’ NPW was up 27% year over year to $152.6 million, driven by new business growth of 29% and average renewal pure price increases of 8.2%. The figure was higher than our estimate of $150.4 million.

The combined ratio deteriorated 1,690 bps to 93.1. The Zacks Consensus Estimate was pegged at 85, while our estimate was 84.3.

Full-Year Highlights

Operating earnings of $3.27 per share decreased 44% year over year and missed the Zacks Consensus Estimate by 10%.

NPW was a record $4.6 billion, up 12% year over year. Underwriting loss was $104.7 million against the year-ago period’s income of $104.9 million. The combined ratio deteriorated 650 bps to 103%. The loss and loss expense ratio deteriorated 740 basis points to 72.3%.

Financial Update

Selective Insurance exited 2024 with total assets of $13.5 billion, which was 15% above the level at the end of December 2023. Long-term debt of $507.9 million increased 1% from the 2023 level.

Debt-to-total capitalization improved 60 bps to 14% from the level as of 2023-end.

As of Dec. 31, 2024, book value per share was $47.99, up 6% year over year.

Operating return on common equity of 13.5% contracted 470 basis points year over year.

Share Repurchase and Dividend Update

During 2024, SIGI repurchased shares for $8.7 million. SIGI had $75.5 million remaining under authorization as of Dec. 31, 2024.

The board of directors authorized a quarterly cash dividend of 38 cents per share. The dividend will be paid out on March 3 to shareholders of record at the close of business on Feb. 14, 2025.

2025 Guidance

SIGI estimates a GAAP combined ratio of 96% to 97%, including net catastrophe losses of 6 points. The combined ratio estimate assumes no prior-year casualty reserve development.

Selective Insurance estimates an after-tax net investment income of $405 million.

The company expects an overall effective tax rate of 21.5% as well as weighted average shares of 61.5 million on a fully diluted basis.

Zacks Rank

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

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

Performance of Other Property & Casualty Insurers

The Travelers Companies TRV reported a fourth-quarter 2024 core income of $9.15 per share, which beat the Zacks Consensus Estimate by 39.3% and improved 30.5% year over year. Travelers’ total revenues increased 10.4% from the year-ago quarter to $11.9 billion. The top-line figure beat the Zacks Consensus Estimate by 1%.

Net written premiums increased 7% year over year to a record $10.7 billion, driven by strong growth across all three segments. Our estimate was $10.8 billion. Net investment income increased 26% year over year to $955 million. The figure was higher than our estimate of $884.9 million. The Zacks Consensus Estimate was pegged at $926 million. Travelers witnessed an underwriting gain of $1.4 billion, up 30.5% year over year. The consolidated underlying combined ratio of 84 improved 190 bps year over year.

RLI Corp. RLI reported fourth-quarter 2024 operating earnings of 41 cents per share, which missed the Zacks Consensus Estimate by 14.5%. The bottom line decreased 46.8% from the prior-year quarter. Operating revenues for the reported quarter were $436 million, up 15.3% year over year, driven by higher net premiums earned and net investment income. The top line matched the Zacks Consensus Estimate. Gross premiums written increased 9% year over year to $473.2 million. This uptick can be attributed to the solid performance of the Casualty segment (up 18.3%). Our estimate was $550 million.

Net investment income increased 19% year over year to $38.8 million. The Zacks Consensus Estimate and our estimate for the metric were both pegged at $38.1 million. The investment portfolio’s total return was negative 1.1% in the quarter. Underwriting income of $22.2 million decreased 62.8% year over year. The combined ratio deteriorated 1,170 basis points (bps) year over year to 94.4. The Zacks Consensus Estimate for the metric was pegged at 96, while our estimate was 102.

W.R. Berkley Corporation’s WRB fourth-quarter 2024 operating income of $1.13 per share beat the Zacks Consensus Estimate by 20.2%. The bottom line improved 17.7% year over year.W.R. Berkley’s net premiums written were $2.9 billion, up 8% year over year. The figure was lower than our estimate of $3 billion. Operating revenues came in at $3.5 billion, up 9.2% year over year, on the back of higher net premiums earned as well as improved net investment income, higher insurance service fees and other income. The top line beat the consensus estimate by 4.2%.

Net investment income grew 1.3% to $317.4 million, driven by strong contributions to total return from net unrealized gains on the equity portfolio. The figure was lower than our estimate of $399.5 million. The Zacks Consensus Estimate was pegged at $342 million. Total expenses increased 8% to $2.9 billion due to higher losses and loss expenses. Our estimate was $3 billion. The consolidated combined ratio (a measure of underwriting profitability) deteriorated 180 bps year over year to 90.2. The Zacks Consensus Estimate was 91.

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