Selective Insurance shares tumble on Q4 earnings miss

Investing.com -- Selective Insurance Group (NASDAQ: NASDAQ:SIGI) shares fell 12% after the company reported fourth quarter earnings that fell short of analyst expectations. The insurer’s earnings per share (EPS) of $1.62 were significantly lower than the anticipated $1.99, prompting a negative response from the market.

The New Jersey-based insurer’s financial performance for the fourth quarter ended December 31, 2024, revealed a net income per diluted common share of $1.52 and non-GAAP operating income of $1.62 per share. Despite a 10% increase in net premiums written (NPW) from the same quarter the previous year, and a 24% rise in after-tax net investment income, the company’s combined ratio deteriorated to 98.5% from 93.7% in the fourth quarter of 2023.

Selective Insurance’s full-year results also reflected challenges, with a combined ratio for 2024 standing at 103.0%, including prior year casualty reserve strengthening of $311 million, which negatively impacted the ratio by 7.1 points. The insurer’s NPW saw a 12% year-over-year (YoY) increase, while after-tax net investment income grew by 17% from the previous year.

The company’s CEO, John J. Marchioni, acknowledged that the financial results for 2024 did not meet expectations, citing significant actions to strengthen casualty reserves in response to social inflation and an increase in Standard Commercial Lines renewal pure pricing to 8.8% in the fourth quarter.

JPM analyst Matthew J. Carletti commented on the results, stating, "results that missed both our and consensus expectations, driven by adverse prior-period reserve development in the general liability book." Carletti reaffirmed a Market Perform rating on Selective Insurance Group, highlighting the discrepancy between the reported operating EPS and estimates due to worse-than-expected prior-year reserve development.

Selective Insurance’s stock decline reflects investor concerns over the company’s reserve practices and the impact on its general liability book. The insurer’s strategic initiatives, such as exceeding $500 million of NPW in Excess & Surplus Lines and expanding its Standard Commercial Lines operating footprint, are aimed at positioning the company for long-term profitable growth. However, the recent reserve charges and the ongoing scrutiny of the general casualty book may continue to influence market sentiment.

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