Selective Insurance Group, Inc. SIGI reported a second-quarter 2023 operating income of 99 cents per share, which matched the Zacks Consensus Estimate. The bottom line declined 15% from the year-ago quarter.
The quarter witnessed renewal pure price increases, exposure growth, stable retention and strong new business. Higher catastrophe losses and escalating costs were offsets.
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 $1 billion increased 15.2% from the year-ago quarter’s figure, primarily due to higher premiums earned, net investment income and net premiums written. The top line outpaced the Zacks Consensus Estimate by 0.8%.
On a year-over-year basis, NPW increased 17% to $1 billion, driven by renewal pure price increases, exposure growth, stable retention and strong new business. The figure matched our estimate.
After-tax net investment income increased 37% year over year to $77.8 million. The increase was due to higher pre-tax investment income from fixed income securities portfolio, driven by higher book yields and the investment of operating and investing cash flows over the past year and higher pre-tax alternative investment income.
After-tax net underwriting loss were $1.2 million against the year-ago underwriting income of $29.8 million. Pre-tax catastrophe losses doubled year over year to $100 million. Non-catastrophe property loss and loss expenses of $138.6 million increased 13.4% year over year.
The combined ratio deteriorated 470 basis points (bps) on a year-over-year basis to 100.2, driven principally by higher catastrophe losses and lower prior year favorable casualty reserve development.
Total expenses increased 18.6% year over year to $966.4 million, primarily due to higher loss and loss expenses incurred, other insurance expenses, amortization of deferred policy acquisition costs and corporate expenses. The figure was higher than our estimate of $882.9 million.
Segmental Results
Standard Commercial Lines’ NPW was up 14% year over year to $870.1 million. Average renewal pure price increases of 6.7%, new business growth of 23%, strong exposure growth and consistent retention of 85% drove the improvement in NPW. The figure was higher than our estimate of $852.9 million.
The combined ratio deteriorated 400 bps to 97.1. The Zacks Consensus Estimate was pegged at 95, while our estimate was 94.9.
Standard Personal Lines’ NPW increased 32% year over year to $109.1 million. Renewal pure price increases averaged 3.4%, retention was 88% and new business was up $19.0 million, which drove the improvement in NPW. The figure was higher than our estimate of $84.9 million.
The combined ratio deteriorated 960 bps on a year-over-year basis to 126.5. The Zacks Consensus Estimate was pegged at 110, while our estimate was 109.6.
Excess & Surplus Lines’ NPW was up 20% year over year to $105.7 million, driven by average renewal pure price increases of 7.5% and new business growth of 27%. The figure was higher than our estimate of $103.7 million.
The combined ratio deteriorated 490 bps to 100.7. The Zacks Consensus Estimate was pegged at 96, while our estimate was 96.2.
Financial Update
Selective Insurance exited second-quarter 2023 with total assets of $11.2 billion, which was 4% below the level at December 2022 end. Long-term debt of $503.6 million was flat with the 2022 level.
Debt-to-total capitalization improved 70 bps to 15.9% from the level as of 2022 end.
As of Jun 30, 2023, book value per share was $40.81, up 2.8% year over year.
Annualized non-GAAP operating return on equity was 9.8% in the second quarter of 2023, which contracted 160 bps year over year.
In the first half of 2023, Selective Insurance did not repurchase any shares. It had $84.2 million remaining under authorization as of Jun 30, 2023.
2023 Guidance
SIGI estimates a GAAP combined ratio of 96.5%, including net catastrophe losses of 6 points, up from prior guidance of 4.5 points. The combined ratio estimate assumes no additional prior-year casualty reserve development.
Selective Insurance estimates after-tax net investment income of $300 million that includes $30 million of after-tax net investment income from alternative investments.
The overall effective tax rate is expected to be around 21%, which assumes an effective tax rate of 20% for net investment income and 21% for all other items.
Weighted average shares were 61 million on a fully diluted basis.
Zacks Rank
Selective Insurance currently 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 Property & Casualty Insurers
Arch Capital Group Ltd. ACGL reported second-quarter 2023 operating income of $1.92 per share, beating the Zacks Consensus Estimate by 16.4%. The bottom line increased 43.3% year over year. Gross premiums written improved 25.2% year over year to $4.8 billion. Net premiums written climbed 27.7% year over year to $3.4 billion on higher premiums written across its Insurance and Reinsurance segments and beat our estimate of $3.1 billion.
Net investment income increased 128.3% year over year to $242 million and beat our estimate of $115.3 million. The Zacks Consensus Estimate was pegged at $185 million. Operating revenues of $3.2 billion rose 32.6% year over year. It beat the Zacks Consensus Estimate by 2.3%. Pre-tax current accident year catastrophic losses, net of reinsurance and reinstatement premiums, were $119 million. Arch Capital’s underwriting income increased 13.1% year over year to $606 million. Our estimate was $686.8 million.
NMI Holdings Inc. NMIH reported second-quarter 2023 operating net income per share of 95 cents, which beat the Zacks Consensus Estimate by 9.2%. The bottom line increased 10.4% year over year. NMI Holdings’ total operating revenues of $143 million increased 8.3% year over year on higher net premiums earned (up 4.2%) and net investment income (up 51.2%). Revenues beat the Zacks Consensus Estimate by 2.1%.
Primary insurance-in-force increased 13.5% to $191.3 billion. Annual persistency was 86%, up 1000 bps year over year. New insurance written was $11.5 billion, down 30.9% year over year. Underwriting and operating expenses totaled $27.4 million, down 10.7% year over year. Insurance claims and claim expenses were $2.9 million compared with a benefit of $3 million in the year-ago quarter. The loss ratio was 2.3 against (2.5) in the year-ago quarter. The adjusted expense ratio of 21.8 improved 360 bps year over year, while the adjusted combined ratio of 24.1 deteriorated 120 bps year over year.
Kinsale Capital Group KNSL delivered second-quarter 2023 net operating earnings of $2.88 per share, which outpaced the Zacks Consensus Estimate by 14.7%. The bottom line improved 50% year over year. Total revenues rose about 60.8% year over year to $295.7 million. Gross written premiums of $438.2 million rose 58.2% year over year. Our estimate was $343.2 million. Net written premiums climbed 41% year over year to $242.3 million in the quarter. Our estimate for net written premiums was pegged at a loss of $282.2 million. Net investment income more than doubled year over year to $24.2 million in the quarter and beat our estimate of $14.9 million. The Zacks Consensus Estimate was pegged at $20.7 million.
Total expenses increased 35.8% year over year to $205.6 million due to a rise in losses and loss adjustment expenses, underwriting, acquisition and insurance expenses, interest expense and other expenses. Our estimate was pinned at $197.9 million. Kinsale Capital’s underwriting income of $61.5 million soared 39.3% year over year. Our estimate was $50.8 million. The combined ratio improved 70 bps to 76.7 in the quarter under review. While the expense ratio improved 150 bps to 21 in the quarter, the loss ratio deteriorated 80 bps to 55.7.
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