The Navigators Group, Inc. (NGHC) reported its first-quarter revenue at $1.29 billion, slightly below market expectations of $1.31 billion. However, the company demonstrated robust operational performance, with an operating return on equity (ROE) of 14.4% for the quarter, setting a promising tone for the rest of the year. The company reaffirmed its full-year combined ratio guidance between 96% and 97%.
Notably, the company's renewal pure price surged by 10.3% during the quarter, marking a significant increase from the previous year's 8.1%. The underwriting portfolio remained stable, with the growth primarily driven by the most profitable segments. Excess and surplus lines experienced a substantial 20% growth in net premiums written, achieving a combined ratio of 92.5%.
Standard Commercial Lines, which constitute 81% of the net premiums written, saw an 8% growth with a combined ratio of 96.4%. In this segment, quarterly renewal pure pricing stood at 9.1%, complemented by a steady retention rate of 85%. Additionally, General Liability pricing continued its upward trend, accelerating to 12.0%, which is a notable increase from 10.6% in the previous quarter and 6.5% compared to the same period last year.
Wall Street Analysts Forecast
Based on the one-year price targets offered by 6 analysts, the average target price for Selective Insurance Group Inc (SIGI, Financial) is $93.67 with a high estimate of $105.00 and a low estimate of $85.00. The average target implies an upside of 3.04% from the current price of $90.90. More detailed estimate data can be found on the Selective Insurance Group Inc (SIGI) Forecast page.
Based on the consensus recommendation from 8 brokerage firms, Selective Insurance Group Inc's (SIGI, Financial) average brokerage recommendation is currently 2.6, indicating "Hold" status. The rating scale ranges from 1 to 5, where 1 signifies Strong Buy, and 5 denotes Sell.
Based on GuruFocus estimates, the estimated GF Value for Selective Insurance Group Inc (SIGI, Financial) in one year is $127.11, suggesting a upside of 39.83% from the current price of $90.9. GF Value is GuruFocus' estimate of the fair value that the stock should be traded at. It is calculated based on the historical multiples the stock has traded at previously, as well as past business growth and the future estimates of the business' performance. More detailed data can be found on the Selective Insurance Group Inc (SIGI) Summary page.
Key Business Developments
Release Date: January 30, 2025
- Underlying Combined Ratio: 89.4%, a 90-basis-point improvement from 2023.
- Commercial Lines Renewal Pure Pricing: 8.8% with retention of 85%.
- Excess and Surplus Lines Growth: 29%, exceeding $500 million of net premiums written.
- Personal Lines Net Premiums Written: Increased 4% for the year, 3% decrease in the fourth quarter.
- Fully Diluted EPS (Q4): $52; Non-GAAP Operating EPS (Q4): $62.
- Return on Equity (Q4): 12.7%; Operating Return on Equity (Q4): 13.5%.
- Fully Diluted EPS (Full Year): $3.23; Non-GAAP Operating EPS (Full Year): $3.27, down 44% from a year ago.
- Return on Equity (Full Year): 7.0%; Operating Return on Equity (Full Year): 7.1%.
- GAAP Combined Ratio (Q4): 98.5%, including 8.8 points of prior year reserve strengthening.
- Catastrophe Losses Impact: Reduced combined ratio by 90 basis points.
- After Tax Net Investment Income (Q4): $97 million, up 24% from a year ago.
- After Tax Net Investment Income (Full Year): $363 million, up 17% from 2023.
- Book Value Per Share (Full Year): Increased 6%; Adjusted Book Value Per Share: Up 4%.
- Debt-to-Capital Ratio: 14%.
- 2025 Guidance - GAAP Combined Ratio: 96% to 97%, including 6 points of catastrophe losses.
- 2025 Guidance - After Tax Net Investment Income: Expected to be $405 million, a 12% increase over 2024.
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
Positive Points
- Selective Insurance Group Inc (SIGI, Financial) reported a 90-basis-point improvement in their 2024 underlying combined ratio, excluding catastrophe losses and prior year casualty development.
- The company achieved strong price changes in recent years, with commercial lines renewal pure pricing at 8.8% and retention at 85%.
- Excess and surplus lines experienced a robust year with 29% growth, exceeding $500 million of net premiums written for the first time.
- After tax net investment income for the fourth quarter was $97 million, up 24% from a year ago, and for the year, it was $363 million, slightly above their 2024 guidance.
- Selective Insurance Group Inc (SIGI) successfully renewed their property catastrophe reinsurance program with improved terms and conditions, maintaining a $100 million retention while increasing coverage exhaustion point to $1.4 billion.
Negative Points
- The company's fully diluted EPS for the full year was $3.23, down 44% from the previous year, with a return on equity of 7.0%, which was disappointing after 10 consecutive years of double-digit operating ROE.
- The GAAP combined ratio for the quarter was 98.5%, including 8.8 points of prior year reserve strengthening, which was higher than their original guidance.
- Catastrophe losses exceeded original guidance by 1.5 points, contributing to a full-year combined ratio of 103%, 7.5 points higher than expected.
- Net prior year casualty reserve strengthening was $100 million, with significant strengthening in general liability and E&S lines.
- The expense ratio for the year was 30.6%, and the 2025 guidance assumes an increase to approximately 31.5%, partially due to greater profit-based compensation from expected underwriting improvement.
