Selective Insurance Group, Inc. SIGI is well-poised to gain from strong renewal, fuel price increases, favorable excess and surplus (E&S) lines marketplace conditions and higher income earned on fixed-income securities portfolio.
Exposure growth, solid retention rates and higher new business gains in standard commercial and E&S lines should drive premium growth.
Steady betterment of premiums, improved net investment income and higher other income have resulted in top-line improvement. Over the past seven years (2017-2023), total revenues witnessed a CAGR of 8%.
The E&S Lines segment of Selective Insurance is likely to improve because of renewal pure price increases, higher direct new business and favorable E&S lines marketplace conditions.
Given impressive investment results, Selective Insurance estimates an after-tax net investment income of $360 million for 2024 and includes $32 million of after-tax net investment income from alternative investments. Higher income earned on fixed-income securities portfolio due to improved book yields received from the investment of operating and investing cash flows over the past year in the higher interest rate environment is likely to drive the metric.
Riding on a solid capital position, the company has been hiking dividends, which registered a nine-year (2015-2023) CAGR of nearly 8.8%. It had $84.2 million remaining under authorization as of Mar 31, 2024. Riding on strong financial and operating performance, the board has approved a 17% hike in the quarterly cash dividend in November 2023. Such steadfast endeavors buoy confidence among investors, making it an attractive pick for yield-seeking investors.
However, Selective Insurance remains exposed to catastrophe loss stemming from natural disasters and weather-related events. Such a massive loss poses an inherent risk to the P&C insurance business inducing volatility to its results. In the first half of 2024, the combined ratio of 107.3 deteriorated 930 basis points year over year.
Other Industry Players
Other players in the property and casualty insurance industry include NMI Holdings Inc. NMIH, American Financial Group, Inc. AFG and Arch Capital Group Ltd. ACGL.
NMI Holdings’ earnings surpassed estimates in each of the last four quarters, the average surprise being 10.15%.
NMI Holdings is well-poised for growth on new primary insurance written, direct primary insurance in force and a better risk-based capital ratio. Its mortgage insurance portfolio is expected to create a strong foundation for future earnings. The mortgage insurer should continue to gain from a strong mortgage origination market and increased private mortgage insurance penetration rates.
American Financial’s earnings surpassed estimates in two of the last four quarters and missed in the other two, the average surprise being 0.27%.
American Financial boasts impressive inorganic growth and is prudently investing in businesses. Better industry fundamentals, a high renewal ratio and a favorable combined ratio should drive growth. New business opportunities, increased exposures and a good renewal rate environment in the P&C group bode well.
Arch Capital’s earnings surpassed estimates in each of the last four quarters, the average surprise being 28.93%.
Arch Capital boasts a strong product portfolio and has a solid track record of premium growth. Premiums should benefit from new business opportunities, rate increases, growth in existing accounts and growth in Australian single-premium mortgage insurance. A solid capital position shields it from market volatility.
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Today, See These 5 Potential Home Runs >>American Financial Group, Inc. (AFG) : Free Stock Analysis Report
Selective Insurance Group, Inc. (SIGI) : Free Stock Analysis Report
Arch Capital Group Ltd. (ACGL) : Free Stock Analysis Report
NMI Holdings Inc (NMIH) : Free Stock Analysis Report
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