Selective Insurance Group (SIGI)

Property and casualty insurer Selective Insurance Group (NASDAQ:SIGI) met Wall Streets revenue expectations in Q4 CY2025, with sales up 8.6% year on year to $1.36 billion. Its non-GAAP profit of $2.57 per share was 17.7% above analysts’ consensus estimates.

Company Overview

Founded in 1926 during the early days of automobile insurance, Selective Insurance Group (NASDAQ:SIGI) is a property and casualty insurance company that sells commercial, personal, and excess and surplus lines insurance products through independent agents.

Property & Casualty (P&C) insurers protect individuals and businesses against financial loss from damage to property or from legal liability. This is a cyclical industry, and the sector benefits when there is 'hard market', characterized by strong premium rate increases that outpace loss and cost inflation, resulting in robust underwriting margins. The opposite is true in a 'soft market'. Interest rates also matter, as they determine the yields earned on fixed-income portfolios. On the other hand, P&C insurers face a major secular headwind from the increasing frequency and severity of catastrophe losses due to climate change. Furthermore, the liability side of the business is pressured by 'social inflation'—the trend of rising litigation costs and larger jury awards.

Selective Insurance Group competes with larger national property and casualty insurers like Travelers (NYSE:TRV), Chubb (NYSE:CB), and The Hartford (NYSE:HIG), as well as regional insurers such as Cincinnati Financial (NASDAQ:CINF) and Erie Indemnity (NASDAQ:ERIE).

Insurers earn revenue three ways. The core insurance business itself, often called underwriting and represented in the income statement as premiums earned, is one way. Investment income from investing the “float” (premiums collected upfront not yet paid out as claims) in assets such as fixed-income assets and equities is the second way. Fees from various sources such as policy administration, annuities, or other value-added services is the third. Luckily, Selective Insurance Group’s revenue grew at an excellent 12.8% compounded annual growth rate over the last five years. Its growth beat the average insurance company and shows its offerings resonate with customers.

We at StockStory place the most emphasis on long-term growth, but within financials, a half-decade historical view may miss recent interest rate changes, market returns, and industry trends. Selective Insurance Group’s annualized revenue growth of 12.3% over the last two years aligns with its five-year trend, suggesting its demand was predictably strong. Note: Quarters not shown were determined to be outliers, impacted by outsized investment gains/losses that are not indicative of the recurring fundamentals of the business.

This quarter, Selective Insurance Group grew its revenue by 8.6% year on year, and its $1.36 billion of revenue was in line with Wall Street’s estimates.

Net premiums earned made up 90.6% of the company’s total revenue during the last five years, meaning Selective Insurance Group lives and dies by its underwriting activities because non-insurance operations barely move the needle.

Markets consistently prioritize net premiums earned growth over investment and fee income, recognizing its superior quality as a core indicator of the company’s underwriting success and market penetration.

Insurers sell policies then use reinsurance (insurance for insurance companies) to protect themselves from large losses. Net premiums earned are therefore what's collected from selling policies less what’s paid to reinsurers as a risk mitigation tool.

Selective Insurance Group’s net premiums earned has grown at a 12.2% annualized rate over the last five years, better than the broader insurance industry and in line with its total revenue.

When analyzing Selective Insurance Group’s net premiums earned over the last two years, we can paint a similar picture as it recorded an annual growth rate of 11.6%. This performance was similar to its total revenue.

This quarter, Selective Insurance Group’s net premiums earned was $1.22 billion, up 7.4% year on year and in line with Wall Street Consensus estimates.

Revenue growth is one major determinant of business quality, and the efficiency of operations is another. For insurance companies, we look at the combined ratio rather than the operating expenses and margins that define sectors such as consumer, tech, and industrials.

The combined ratio sums the costs of underwriting (salaries, commissions, overhead) as well as what an insurer pays out in claims (losses) and divides it by net premiums earned. If a company boasts a combined ratio under 100%, it is underwriting profitably. If above 100%, it is losing money on its core operations of selling insurance policies.

Given the calculation, a lower expense ratio is better. Over the last five years, Selective Insurance Group’s combined ratio has increased by 2.1 percentage points, going from 92.7% to 97.2%. Expenses have stabilized more recently as the company’s combined ratio was flat on a two-year basis.

In Q4, Selective Insurance Group’s combined ratio was 93.8%, beating analysts’ expectations by 302.5 basis points (100 basis points = 1 percentage point). This result was 4.6 percentage points better than the same quarter last year.

We track the long-term change in earnings per share (EPS) for the same reason as long-term revenue growth. Compared to revenue, however, EPS highlights whether a company’s growth is profitable.

Selective Insurance Group’s decent 12.3% annual EPS growth over the last five years aligns with its revenue performance. This tells us its incremental sales were profitable.

Like with revenue, we analyze EPS over a shorter period to see if we are missing a change in the business.

For Selective Insurance Group, its two-year annual EPS growth of 12.1% is similar to its five-year trend, implying stable earnings.

In Q4, Selective Insurance Group reported adjusted EPS of $2.57, up from $1.62 in the same quarter last year. This print easily cleared analysts’ estimates, and shareholders should be content with the results. Over the next 12 months, Wall Street expects Selective Insurance Group’s full-year EPS of $7.39 to grow 7.9%.

Insurers are balance sheet businesses, collecting premiums upfront and paying out claims over time. Premiums collected but not yet paid out, often referred to as the float, are invested and create an asset base supported by a liability structure. Book value per share (BVPS) captures this dynamic by measuring these assets (investment portfolio, cash, reinsurance recoverables) less liabilities (claim reserves, debt, future policy benefits). BVPS is essentially the residual value for shareholders.

We therefore consider BVPS very important to track for insurers and a metric that sheds light on business quality. While other (and more commonly known) per-share metrics like EPS can sometimes be lumpy due to reserve releases or one-time items and can be managed or skewed while still following accounting rules, BVPS reflects long-term capital growth and is harder to manipulate.

Selective Insurance Group’s BVPS grew at a mediocre 6% annual clip over the last five years. However, BVPS growth has accelerated recently, growing by 11.8% annually over the last two years from $45.42 to $56.74 per share.

Over the next 12 months, Consensus estimates call for Selective Insurance Group’s BVPS to grow by 13.6% to $59.06, solid growth rate.

The debt-to-equity ratio is a widely used measure to assess a company's balance sheet health. A higher ratio means that a business aggressively financed its growth with debt. This can result in higher earnings (if the borrowed funds are invested profitably) but also increases risk.

If debt levels are too high, there could be difficulties in meeting obligations, especially during economic downturns or periods of rising interest rates if the debt has variable-rate payments.

Selective Insurance Group currently has $901.9 million of debt and $3.61 billion of shareholder's equity on its balance sheet, and over the past four quarters, has averaged a debt-to-equity ratio of 0.3×. We think this is safe and raises no red flags. In general, we’re comfortable with any ratio below 1.0× for an insurance business. Anything below 0.5× is a bonus.

Return on equity (ROE) is a crucial yardstick for insurance companies, measuring their ability to generate returns on the capital provided by shareholders. Insurers that consistently deliver superior ROE tend to create more value for their investors over time through strategic capital allocation and shareholder-friendly policies.

Over the last five years, Selective Insurance Group has averaged an ROE of 11.4%, uninspiring for a company operating in a sector where the average shakes out around 12.5%.

It was good to see Selective Insurance Group beat analysts’ EPS expectations this quarter. Revenue and net premiums earned were both just in line. On the negative side, its book value per share missed. Zooming out, we think this was a mixed quarter. The stock remained flat at $84.03 immediately following the results.

Updated: January 30, 2026 at 12:51 PM EST

Are you wondering whether to buy Selective Insurance Group or pass? We urge investors to not only consider the latest earnings results but also longer-term business quality and valuation as well.

Selective Insurance Group’s business quality ultimately falls short of our standards. Although its revenue growth was impressive over the last five years, it’s expected to deteriorate over the next 12 months and its projected EPS for the next year is lacking. And while the company’s estimated BVPS growth for the next 12 months is great, the downside is its BVPS growth was uninspiring over the last five years.

Selective Insurance Group’s P/B ratio based on the next 12 months is 1.4x. While this valuation is reasonable, we don’t really see a big opportunity at the moment. We're fairly confident there are better investments elsewhere.

Wall Street analysts have a consensus one-year price target of $83.71 on the company (compared to the current share price of $82.46).