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SI

SELECTIVE INSURANCE GROUP INC (SIGI)·Q1 2025 Earnings Summary

Executive Summary

  • Q1 2025 delivered solid underwriting and investment results: combined ratio 96.1% (down 210 bps YoY), ROE 14.4%, and after-tax net investment income $95.6M . EPS was $1.76; revenue was $1.285B. Versus consensus, EPS missed by $0.10 and revenue missed by ~$22M, as estimates were $1.86 and $1.308B respectively (Wall Street consensus via S&P Global)* [functions.GetEstimates].
  • Pricing momentum accelerated: overall renewal pure price 10.3%; Commercial Lines 9.1% with General Liability at 12.0%; E&S NPW +20% and combined ratio 92.5% despite higher catastrophe losses .
  • Guidance reaffirmed: FY25 GAAP combined ratio 96–97% (incl. 6 pts of cats), after-tax net investment income $405M, effective tax rate 21.5%, diluted shares 61.5M .
  • Key stock narrative catalysts: continued price increases above loss trends (management asserts ~300 bps above assumed loss trend), disciplined growth with E&S expansion, and caution that alternative investments could face valuation headwinds near term .

What Went Well and What Went Wrong

What Went Well

  • Pricing strength and margin improvement: “Total renewal pure price increased 10.3%… our full-year combined ratio guidance remains at 96% to 97%” .
  • E&S growth with profitability: E&S NPW +20% YoY; combined ratio 92.5% (underlying ~81%), signaling strong growth opportunities despite competitive markets .
  • Personal Lines improvement: combined ratio fell 7.1 pts YoY to 98.0% on 24.1% renewal pricing and lower cat/non-cat property losses, reflecting targeted profit actions .

What Went Wrong

  • Consensus miss: EPS $1.76 vs $1.86* and revenue $1.285B vs $1.308B*, modestly below expectations (Wall Street consensus via S&P Global)* [functions.GetEstimates].
  • Higher current-year casualty loss costs and slight expense ratio pressure: loss costs up 280 bps YoY to 44.9%, underwriting expense ratio up 70 bps to 31.6% .
  • E&S margin volatility from catastrophes and unfavorable personal auto reserve development (4.8 pts in personal auto), while management cautioned potential near-term pressure in alternative investment income .

Financial Results

MetricQ1 2024Q3 2024Q4 2024Q1 2025
Total Revenues ($USD Billions)$1.165 $1.244 $1.256 $1.285
Diluted EPS ($)$1.31 $1.47 $1.52 $1.76
Combined Ratio (%)98.2% 99.5% 98.5% 96.1%
Net Premiums Written ($USD Billions)$1.157 $1.158 $1.090 $1.240
Net Investment Income, After-Tax ($USD Millions)$85.6 $93.4 $97.3 $95.6
ROE (%)11.5% 12.6% 12.7% 14.4%
EPS vs Consensus ($)———$1.76 vs $1.86* (Miss) [functions.GetEstimates]
Revenue vs Consensus ($USD Billions)———$1.285 vs $1.308* (Miss) [functions.GetEstimates]

Note: Values marked with * are retrieved from S&P Global.

Segment breakdown (Q1 YoY):

SegmentNPW ($USD Millions)NPE ($USD Millions)Combined Ratio (%)Q1 2024 NPWQ1 2024 NPEQ1 2024 Combined Ratio
Standard Commercial Lines$1,003.2 $912.2 96.4% $931.7 $834.1 98.8%
Standard Personal Lines$87.5 $103.7 98.0% $99.9 $103.8 105.1%
Excess & Surplus Lines$149.7 $142.9 92.5% $125.0 $113.0 87.6%

KPIs:

KPIQ1 2024Q1 2025
Overall Renewal Pure Price (%)8.1% 10.3%
Standard Commercial Lines Renewal Price (%)7.6% 9.1%
Standard Commercial Lines Retention (%)86% 85%
General Liability Renewal Price (%)6.5% 12.0%
Personal Lines Renewal Price (%)14.3% 24.1%
E&S Renewal Price (%)5.2% 8.7%
Net Catastrophe Losses (Combined Ratio pts)5.3 pts 3.7 pts

Guidance Changes

MetricPeriodPrevious Guidance (as of 1/29/2025)Current Guidance (as of 4/23/2025)Change
GAAP Combined RatioFY 202596%–97% incl. 6 cat pts 96%–97% incl. 6 cat pts Maintained
After-tax Net Investment IncomeFY 2025$405M $405M Maintained
Effective Tax RateFY 202521.5% 21.5% Maintained
Weighted Avg Diluted SharesFY 202561.5M 61.5M Maintained

Earnings Call Themes & Trends

TopicQ3 2024Q4 2024Q1 2025Trend
Pricing & Loss TrendsPricing accelerated; GL ~10.2%; combined ratio impacted by elevated cats Reserve strengthening $100M; Commercial Lines renewal price 8.8% Overall renewal price 10.3%; GL at 12%; loss trend assumptions unchanged (GL ~9% severity) Strengthening pricing; focus on offsetting elevated casualty severity
AI/Technology InitiativesNot highlighted in release Not highlighted in release “Actively developing and executing AI use cases… underwriting scalability and improving claims outcomes” Increased emphasis on AI enablement
Tariffs/MacroRisk factors include trade/tariffs, economic uncertainty Similar macro/tariff risk disclosure Quantified mitigants; expect manageable low-single-digit overall impact if tariffs implemented Monitoring; potential manageable impact
Personal Lines StrategyElevated cats; repositioning underway; retention 75% Significant improvement; CR 91.7% in Q4 Continued profit actions; CR 98.0% with 24.1% pricing; new business reduced 58% Improving trajectory with disciplined rate actions
E&S GrowthNPW +28%; CR 83.2% NPW +27%; CR 93.1% with PY dev NPW +20%; CR 92.5%; underlying ~81% Strong growth; margin volatility from cats
Workers’ Comp OutlookNot specifically highlighted Favorable PY dev $25M in Q4 2025 ELR set conservatively (>100% accident year starting point); pure rate ~–3%, flat frequency, mid-single-digit medical severity More conservative picks; exposure (wages) offsets rate pressure
Social Inflation & ReservesAcknowledged loss trend uncertainty $311M casualty reserve strengthening in 2024 Focus on restoring underwriting margins; pricing above trend by ~3 pts Ongoing mitigation via pricing/reserving

Management Commentary

  • CEO: “Our operating ROE of 14.4% for the first quarter was a positive start to the year… Total renewal pure price increased 10.3%… General Liability pricing accelerated further to 12.0%” .
  • CEO: “We are absolutely focused on restoring our profile as a company that delivers consistent underwriting margins and operating ROEs… overall renewal pure pricing… approximately 3 points above our loss trend assumption” .
  • CFO: “Underlying combined ratio was 92%… we believe our full year underwriting combined ratio will meet our original 90% to 91% expectation… book value per share increased 5% in the quarter” .
  • CFO: “Alternative investments could face valuation headwinds… heightened risk that alternative investment income could come under pressure when we report second quarter earnings” .

Q&A Highlights

  • Casualty loss trends: Management’s view unchanged—GL all-in loss trend ~9% driven by severity; overall casualty ~8.5% .
  • Commercial auto: Multi-year earned rate above elevated loss trends supports improved picks; auto physical damage tracks property trend (~3.5%), aiding overall line .
  • Seasonality: Q1 underlying combined ratio typically 100 bps higher vs full-year midpoint due to non-cat property; 2025 seasonality viewed as typical .
  • Workers’ comp: Setting 2025 ELR conservatively; pure rate ~–3%, flat frequency, mid-single-digit medical severity; wages are offsetting exposure driver .
  • Tariffs: Impact seen as manageable given labor/materials mix, domestic sourcing, and quick exposure adjustments; largest impact would be in personal/commercial auto physical damage .
  • Retention/pricing dynamics: Willingness to trade some new business/conversion for price adequacy; retention holding up due to granular pricing execution .
  • Reserves: Q1 reserve change isolated to personal auto (New Jersey severities); no commercial lines reserve changes .

Estimates Context

  • Q1 2025 actuals vs consensus: EPS $1.76 vs $1.86* (miss); revenue $1.285B vs $1.308B* (miss). Analyst coverage: 7 EPS estimates; 3 revenue estimates (Wall Street consensus via S&P Global)* [functions.GetEstimates].
  • Implications: Despite the small top/bottom-line misses, pricing above loss trends, a reaffirmed combined ratio outlook, and investment yield tailwinds should support estimate stability on underwriting, while near-term alternative investment variability may drive cautious adjustments to NII modeling .

Note: Values marked with * are retrieved from S&P Global.

Key Takeaways for Investors

  • Price > loss trend: With renewal pure price ~300 bps above assumed loss trend, expect underlying margin expansion if maintained; watch GL pricing sustainability at 12% .
  • E&S growth engine: Strong E&S momentum (+20% NPW) but cat-driven volatility; underlying profitability remains attractive (~81% underlying CR) .
  • Personal lines progressing: CR improved to 98.0% on aggressive pricing and underwriting actions; new business curtailed to prioritize profitability .
  • Guidance confidence: FY25 combined ratio 96–97% reaffirmed with 6 cat pts; $405M NII target intact but alt investments could pressure Q2 reported income .
  • Capital and investment backdrop: February $400M notes boost investable assets; portfolio remains high quality (A+ avg credit, ~4.1-year duration), supporting durable NII .
  • Watch list into Q2: Alternative investment lag effect, cat season exposure, and continued casualty severity trends; reinsurance program and underwriting discipline mitigate tail risks .
  • Tactical: Near-term trading may hinge on evidence of margin trajectory (underlying CR tracking to 90–91%), GL pricing stickiness, and alternative investment marks; medium-term thesis centers on disciplined pricing, E&S growth, and ROE normalization toward long-term averages .