Selective Insurance Group, Inc. (SIGI) Q4 2025 Earnings Call Transcript
Access earnings results, analyst expectations, report, slides, earnings call, and transcript.
Overview
The earnings call summary and Q&A reveal strong financial performance and strategic growth plans, particularly in E&S and personal lines. Despite some uncertainties, optimistic guidance on combined ratios, investment income, and strategic expansion outweighs concerns. Shareholder returns are stable with no additional repurchases, and technology investments indicate future efficiency gains. The absence of negative surprises or guidance cuts suggests a positive stock price reaction.
Key Financial Performance
Return on Equity (ROE) 14.4% in 2025, with an operating ROE of 14.2%. This exceeded the 10-year average operating ROE of 12.1% and the 5-year average of 12.5%. The improvement was attributed to strong investment performance and operational efficiency.
Book Value Per Share Increased by 18% in 2025. This growth was supported by $182 million returned to shareholders through dividends and share repurchases.
Combined Ratio 93.8% for Q4 2025, reducing the full-year combined ratio to 97.2% from 103% in 2024. The improvement was due to lower prior year casualty reserve development and catastrophe losses.
Net Premiums Written Growth 5% for 2025. This was driven by deliberate actions to improve underwriting profitability and expand geographic footprint.
Commercial Auto Reserves Strengthened by approximately $190 million in 2025, primarily for 2024 and 2025 accident years. This was due to increased severity trends and loss cost assumptions.
Fully Diluted EPS $2.52 for Q4 2025, up 66% year-over-year. Non-GAAP operating EPS was $2.57, up 59%. The increase was driven by strong investment performance and operational improvements.
Standard Commercial Lines Combined Ratio 92.9% for Q4 2025, which included 1.6 points of favorable prior year casualty development and 3.2 points of higher current year casualty loss costs.
Personal Lines Combined Ratio 103% for Q4 2025, up from 91.7% in Q4 2024. The deterioration was due to 6.2 points higher catastrophe losses and 8.1 points higher current year casualty loss costs.
Net Investment Income $114 million after-tax for Q4 2025, up 17% year-over-year. This was attributed to a conservatively positioned investment portfolio with an average credit quality of A+.
Excess and Surplus (E&S) Lines Combined Ratio 93.1% for Q4 2025 and 87.8% for the full year. This reflected strong performance in E&S casualty and general liability.
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Operating Highlights
Telematics Rollout: Focused rollout in specific segments and states for commercial auto.
Geographic Expansion: Expanding geographic footprint and broadening E&S distribution capabilities with retail access.
Underwriting Profitability: Deliberate actions to improve underwriting profitability, including tighter guidelines for fleet exposures and state-specific tactics.
Technology Investments: Strategic investments in technology to support scale, enhance decision-making, and improve operational efficiency.
Reserve Strengthening: Strengthened commercial auto reserves by approximately $190 million in 2025, focusing on 2024 and 2025 accident years.
Mix Improvement: Improving mix by achieving stronger rate and retention differentiation based on expected profitability.
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Risk or Challenges
Commercial Auto Liability: Increased expected severity trend to approximately 10%, reflecting higher loss costs. Strengthened reserves by approximately $190 million in 2025, primarily for 2024 and 2025 accident years. Actions include tighter underwriting guidelines and focused telematics rollout.
General Liability: Managing limits in challenging jurisdictions and trimming underperforming classes. Prioritizing new business in better-performing segments and strengthening new business pricing.
Personal Lines: Deterioration in combined ratio due to higher catastrophe losses and casualty loss costs, particularly in New Jersey Personal Auto. Net premiums written declined 8%.
Casualty Loss Trends: Embedded an overall expected loss trend of approximately 7.5% for 2026, with casualty trends closer to 10% excluding workers' compensation. Reflects increasing loss costs.
Technology Investments: Expense ratio expected to increase by 0.5 points in 2026 due to strategic technology investments aimed at enhancing decision-making and operational efficiency.
Reserve Development: Unfavorable prior year emergence in commercial and personal auto lines and E&S casualty. Actions taken to strengthen reserves for recent accident years.
Catastrophe Losses: Higher catastrophe losses impacted Personal Lines combined ratio, particularly in New Jersey.
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Guidance & Outlook
2026 GAAP Combined Ratio: Expected to be between 96.5% and 97.5%, assuming 6 points of catastrophe losses.
2026 After-Tax Net Investment Income: Projected to be $465 million, up 10% from 2025, reflecting growth in invested assets.
2026 Effective Tax Rate: Estimated to be approximately 21.5%.
2026 Weighted Average Shares: Expected to be approximately 61 million on a fully diluted basis, without assumptions about share repurchases.
2026 Underlying Combined Ratio: Guidance implies a range of 90.5% to 91.5%, compared to 91.8% in 2025. Improvement expected in Personal Lines and Commercial Lines, with strong performance in E&S.
2026 Loss Trend Assumptions: Overall expected loss trend of approximately 7.5%, with 3.5% for property and 9% for casualty (closer to 10% excluding workers' compensation).
2026 Expense Ratio: Expected to increase by about 0.5 point due to strategic technology investments.
2026 Operating ROE: Implied to be in the 14% range.
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Shareholder Return Plan
Total dividends returned to shareholders: $182 million in 2025
Dividend policy: Aims to return 20% to 25% of earnings to shareholders through dividends
Total share repurchases in 2025: $86 million
Share repurchases in Q4 2025: $30 million
Remaining share repurchase authorization: $170 million at year-end 2025
Share repurchase strategy: Opportunistic repurchases at attractive valuations
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Key Q&A
Q:Can you talk about the confidence you have in maintaining or improving the commercial line margins given price deceleration, elevated casualty loss picks, and noise on PYD and commercial auto and GL?
A:The company has confidence in its guidance due to continued rate increases on casualty lines, strong pricing on casualty side within auto liability and general liability, and leveraging tools for pricing and risk selection. They expect an 80 basis point improvement in the underlying combined ratio, with a 50 basis point increase in the expense ratio.
Q:What changes might be taking place in your initial setting of case reserves given higher paid activity in casualty business?
A:The company has seen movement in incurred basis similar to paid side, reflecting case reserves. They conducted external studies on actuarial reserving and claims processes, which showed strong performance and opportunities for improvement. They use multiple methods (paid and incurred) to project ultimate reserves.
Q:Can you provide more detail on the reserve development of the personalized business and how it differs from commercial lines?
A:In personal auto, prior year development is entirely driven by New Jersey, which represents 30% of the portfolio. The 2024 accident year had a 3.7-point impact on the combined ratio. New Jersey's litigation environment and regulatory challenges have driven up costs, impacting both personal and commercial lines.
Q:Is there any change in how you think about target operating leverage given capital buybacks and current stock levels?
A:There is no change in target operating leverage, which remains at 1.35x to 1.55x. The peer group has moved closer to this range over the last decade. Operating leverage is one of many capital metrics used to ensure sufficient capital while maintaining an efficient balance sheet.
Q:Can you unpack the drivers behind the E&S casualty reserves and how this impacts your appetite for growing the E&S platform?
A:The reserve action in E&S was $10 million, spread across 2020-2023 accident years, and is considered de minimis. The full-year E&S combined ratio was 87.8%, indicating strong profitability. There is no noteworthy impact on accident year, geography, or segment, and the company expects continued strong operating margins in E&S.
Q:What contribution are newer territories making to top-line growth and margin profile?
A:Newer territories have contributed 1-2 points of growth on average since 2017-2018. Profitability in newer states initially runs worse than legacy books but improves as they mature. The performance has been within expectations and aligns with the overall portfolio.
Q:What accident years pertain to the workers' comp releases, and what are the drivers?
A:Workers' comp releases are driven by a tail study evaluating long-term development for decades of accident years, contributing about half of the favorable emergence. The other half comes from accident years 2022 and prior, with better-than-expected frequency emergence.
Q:Was there any movement on the 2024 GL charges this year?
A:No, the GL adjustments for the quarter and full year were predominantly umbrella-related, driven by auto lines. Core GL lines and booked levels for prior years have held up well.
Q:What is the long-term ROE target, and how does it relate to current interest rate levels?
A:The long-term ROE target is 12%, based on long-term investment returns. Current after-tax book yield is about 4%, but a long-term assumption is closer to 3%. The 95% combined ratio target supports achieving or exceeding the 12% ROE target.
Q:How does the underlying loss ratio in workers' comp roll up into the combined ratio guide for next year?
A:The company does not provide individual line guidance but maintains severity assumptions with slight upward pressure from medical severities. Frequency trends have improved, and rate levels are slightly negative. These factors will influence planned loss ratios.
Q:Is the expense ratio increase a one-time step-up or part of ongoing investments?
A:The increase in the expense ratio reflects ongoing investments in technology, not a one-time step-up. The company expects technology investments to rise as a percentage of premium, offset by labor cost reductions and improved decision-making and outcomes.
Q:Should we expect retention ratios to stay around current levels?
A:Retention ratios are not guided, but the company focuses on granular execution of pricing strategy to maintain stable retentions. Market behavior will influence retention levels.
Q:What are the growth aspirations for the E&S segment, and how do you view its future?
A:The company expects E&S to become a larger part of overall premium but will maintain pricing and underwriting discipline. Growth may face near-term pressure due to market behavior, but long-term potential exists through product and underwriting expansion and retail access channels.
Q:What are the differences in loss cost trends between standard commercial and E&S casualty?
A:E&S casualty has more transient business, allowing quicker portfolio turnover and mix improvements, leading to more significant frequency declines. Severity trends and social inflation dynamics are consistent across both segments.
Q:Review of Unclear Management Responses
A:Management avoided providing direct answers to questions about individual combined ratio guidance by segment, specific retention ratio expectations, and detailed long-term ROE targets beyond general assumptions. They also used vague language when discussing the impact of technology investments on expense ratios and the exact drivers of E&S casualty reserve adjustments.
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Earnings Word Cloud
The most frequently occurring keywords in this quarter's earning call
Auto Personal
Commercial Lines
ES casualty
ES distribution
ES ratio
Full Conference
Jersey Personal
Lines ratio
Lines segment
New Jersey
Personal Auto
Personal Lines
Property market
ROE average
Relations Full
Relations supplement
Standard Commercial
action accident
adjustment
auto pricing
capability
capital position
condition
conference
differentiation
dividend
equity investment
line premium
margin improvement
mix
point casualty
rating
repurchase valuation
review
stock
term value
tool
trend auto
SIGI Transcript
Selective Insurance Group, Inc. (SIGI) Q4 2025 Earnings Call Transcript
Positive1-30
The earnings call summary and Q&A reveal strong financial performance and strategic growth plans, particularly in E&S and personal lines. Despite some uncertainties, optimistic guidance on combined ratios, investment income, and strategic expansion outweighs concerns. Shareholder returns are stable with no additional repurchases, and technology investments indicate future efficiency gains. The absence of negative surprises or guidance cuts suggests a positive stock price reaction.
Selective Insurance Group, Inc. (SIGI) Q3 2025 Earnings Call Transcript
Unknown10-23
The earnings call presents a mixed picture: strong growth in Excess and Surplus Lines and an increase in book value per share are positive. However, issues in commercial auto, particularly in New Jersey, and the need for corrective actions indicate challenges. The Q&A reveals management's confidence in reserves but also highlights industry-wide pressures. The guidance reflects stable but not overly optimistic expectations. Overall, the sentiment is balanced, suggesting a neutral stock price movement.
Selective Insurance Group, Inc. (SIGI) Q2 2025 Earnings Call Transcript
Unknown7-24
The earnings call presents a mixed picture. Financial performance is stable with a 13% ROE, and book value growth is positive. However, concerns like broad-based issues affecting retention rates, social inflation, and reserve adjustments temper optimism. The Q&A reveals management's cautious stance on these challenges, indicating potential risks. The absence of a clear new partnership or guidance changes further supports a neutral outlook, as the market may remain cautious given uncertainties in risk selection and claims decisions.
Selective Insurance Group, Inc. (NASDAQ:SIGI) Q1 2025 Earnings Call Transcript
Unknown4-25
The earnings call summary presents mixed financial performance with a 34% increase in net income and a positive EPS growth. However, the guidance for a higher combined ratio and increased expense ratio, along with macroeconomic and regulatory challenges, weighs negatively. The Q&A highlights concerns about loss trends and competitive pressures. Despite share repurchase activity, the risks and uncertainties, especially in underwriting margins and investment income, suggest a negative sentiment, likely leading to a stock price decline of -2% to -8% over the next two weeks.
SIGI Slides
SIGI Report
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