On Wednesday, RBC Capital maintained its Sector Perform rating on shares of Selective Insurance Group (NASDAQ: NASDAQ:SIGI) shares while increasing the price target to $99.00 from the previous $96.00.
The firm's analysis indicated that Selective Insurance's third-quarter results demonstrated signs of stability when compared to the past several quarters. This was seen as a positive signal that reserving practices for recently written business may be more robust.
The analyst noted improvements in core margins year-over-year across all three of Selective's business units, crediting some of the enhancement to lower non-catastrophic property losses. Despite this, loss trends were described as fairly elevated. However, the rate of premium increases is accelerating in key segments, such as general liability, which is deemed necessary by the analyst.
Selective Insurance Group has also announced an increase in its quarterly dividend by 9%, alongside executing modest stock buybacks. These actions reflect the company's financial strategies and commitment to returning value to shareholders.
The updated stock price target of $99.00 represents RBC Capital's adjusted expectation for the stock's future performance. Despite the positive observations, there has been no change to the Sector Perform rating, suggesting that the analyst believes the stock is fairly valued given its current market conditions and company fundamentals.
In other recent news, Selective Insurance Group reported mixed results for Q3, with an operating earnings per share of $1.40 and a 12.1% operating return on equity.
Despite achieving these figures, the company was adversely impacted by significant catastrophe losses, leading to a combined ratio of 99.5%. The full-year guidance anticipates a high single-digit return on equity, falling short of the targeted 12%, due to these unexpected losses and prior reserving actions.
Selective Insurance Group also reported a 9.1% increase in renewal pricing in standard commercial lines and a 28% growth in net premiums written in the excess and surplus lines segment. However, personal lines experienced a 2% decrease in net premiums written.
Despite the decrease, the company maintained a strong capital position, with GAAP equity at $3.2 billion and a 7% increase in book value per share. The company also announced a share repurchase and a 9% increase in the quarterly dividend to $0.38 per share.
These are the latest developments for Selective Insurance Group, which continues to focus on long-term value creation and profitability, despite the challenges posed by catastrophe losses and a combined ratio that exceeded targets.
The company is refining its reserving process to better manage commercial auto reserving strategies and is considering a shift towards home insurance due to higher average premiums and less competition in the mass affluent market.
InvestingPro Insights
Selective Insurance Group's financial health and market position are further illuminated by recent data from InvestingPro. The company's market capitalization stands at $5.68 billion, with a P/E ratio of 26.1, indicating investor confidence in its earnings potential. Notably, Selective Insurance has demonstrated strong revenue growth, with a 15.77% increase over the last twelve months as of Q3 2024, reaching $4.72 billion.
Two key InvestingPro Tips underscore the company's financial stability and shareholder-friendly policies. Firstly, Selective Insurance "has raised its dividend for 11 consecutive years," aligning with the recent 9% dividend increase mentioned in the article. Secondly, it "has maintained dividend payments for 50 consecutive years," showcasing a long-term commitment to shareholder returns.
These insights complement the article's discussion on Selective Insurance's financial strategies and reinforce the company's focus on shareholder value. For investors seeking a deeper understanding, InvestingPro offers 7 additional tips that could provide further context to the company's performance and outlook.
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