Selective Insurance Beats Q4 Earnings on Higher Premiums

Selective Insurance Group, Inc. SIGI reported fourth-quarter 2015 operating income of 81 cents per diluted share. The bottom line not only surpassed the Zacks Consensus Estimate of 70 cents by 15.7% but also improved year over year by 13%.
 

The outperformance was fueled primarily by higher net premiums written.

Including net realized losses, net income came in at 78 cents per share, up 1.4% year over year.

Operational Update

Selective Insurance reported total revenue of $545.6 million, up 8.3% year over year. Top-line growth was driven by higher net premiums earned, partially offset a decline in net investment income.

Total net premiums written for the company grew 9.5% year over year to $474.7 million in the fourth quarter. The improvement was driven by increase in premiums written in Standard Commercial lines (11%) and Excess and Surplus lines (15.9%) operations. However, a decline of 2% net premiums written in Standard Personal Lines was a partial dampener. Retentions remained strong.

Statutory combined ratio of 93.2% remained flat year over year. This was due to an improvement in combined ratio of Standard Commercial Lines, which declined 680 basis points (bps) to 89.2%. The improvement, however, was offset by deterioration in Standard Personal Lines (increase of 1650 bps to 94.7%) as well as Excess and Surplus Lines (increase of 2900 bps to 125.6%).

Full-Year Highlights

Selective Insurance reported operating income of $2.70 per share for 2015, up 24% year over year.

Total revenue grossed $2.13 billion, up 5% from 2014. The improvement was driven by higher net premiums earned. However, lower investment income limited the upside.
 
Financial Update

Total assets of Selective Insurance as of year-end 2015 were $6.9 billion, up 5% from year-end 2014.

Statutory surplus of the company climbed 9% from year-end 2014 to $1.4 billion as of Dec 31, 2015.

Book value per share was $24.37 as of Dec 31, 2015, up 8% from $22.54 at year-end 2014.

Dividend

Selective Insurance’s board of directors declared a quarterly cash dividend of 15 cents per share, which will be payable on Mar 1 to shareholders on record as of Feb 16, 2016.

Guidance

Selective Insurance expects 2016 statutory combined ratio (excluding catastrophes) to be about 91%.

The company estimates 350 bps of catastrophe losses for 2016. After-tax investment income is estimated to be around $100 million and shares outstanding are expected to be 58.5 million by year-end 2016.

Zacks Rank

Selective Insurance carries a Zacks Rank #3 (Hold).

Performance of Other Property and Casualty Insurers

RLI Corp. RLI reported fourth-quarter 2015 operating earnings of 56 cents per share that missed the Zacks Consensus Estimate by 13.8%.

The Travelers Companies Inc. TRV posted operating earnings of $2.90 per share in the fourth quarter of 2015, outperforming the Zacks Consensus Estimate by 7%.

Progressive Corp.’s PGR earnings per share for fourth-quarter 2015 came in at 54 cents, 12.5% above the Zacks Consensus Estimate.

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