Selective Insurance signals full year underlying combined ratio of 91%–92% while strengthening underwriting and portfolio diversification

Earnings Call Insights: Selective Insurance Group, Inc. (SIGI) Q3 2025

MANAGEMENT VIEW

* John J. Marchioni, CEO, President & Chairman, reported an operating return on equity of 13.2% for the quarter, attributing this performance to an 18% year-over-year increase in investment income. He stated the company is “on track to deliver full year operating ROE in the 14% range.” Marchioni addressed higher-than-target combined ratio guidance of 97% to 98%, above the long-term 95% target, and emphasized a shift in focus: “We are prioritizing profit improvement and moderating premium growth.” He outlined three strategic priorities: improving fundamentals in risk selection and pricing, diversifying revenue across insurance segments, and leveraging data, analytics, and AI for operational efficiency.
* Marchioni detailed $40 million in unfavorable prior year casualty reserve development, mostly tied to commercial auto in New Jersey, with recent trends leading to an increase in current year casualty loss cost estimates. He described targeted underwriting actions for commercial auto, including a new rating plan, updated predictive modeling, and enhanced telematics adoption.
* Marchioni highlighted continued geographic expansion, noting strategic additions of 14 states since 2017 and plans to add two more in 2026. He reiterated commitment to returning 20% to 25% of earnings via dividends and referenced $36 million in share repurchases during the quarter, a new $200 million repurchase authorization, and a 13% dividend increase as signals of management’s confidence.
* Patrick Brennan, Executive VP & CFO, stated, “For the quarter, fully diluted EPS was $1.85, up 26% from a year ago. Non-GAAP operating EPS was $1.75, up 25%. Our return on equity was 14% and our operating return on equity was 13.2%, with continued strong performance from the investment portfolio.” Brennan reported a GAAP combined ratio of 98.6%, with catastrophe losses notably lower than anticipated.

OUTLOOK

* The company revised its full year 2025 guidance to a GAAP combined ratio of 97% to 98%, in line with prior guidance, but now assumes 4 points of catastrophe losses, down from 6 points previously. Management stated, “Our full year guidance implies an underlying combined ratio of 91% to 92%, up 1 point from our expectation at the beginning of the year, driven by our actions to strengthen the current accident year.” After-tax net investment income is now expected at $420 million. There was no explicit comparison to analysts' estimates due to unavailable data.

FINANCIAL RESULTS

* Fully diluted EPS for the quarter was $1.85, and non-GAAP operating EPS was $1.75. The company reported a combined ratio of 98.6%, driven higher by 3.3 points of unfavorable prior year casualty reserve development and increased current year casualty loss costs. Catastrophe losses were 2.1 points, substantially improved from the prior year period. The Standard Commercial Lines segment posted a 101.1% combined ratio, with premium growth slowing to 4%. Excess and surplus lines grew 14%, posting a 76.2% combined ratio. Book value per share rose 13% in the first nine months of the year. The company ended the quarter with $3.5 billion in GAAP equity and $3.4 billion in statutory surplus.

Q&A

* Michael Phillips, Oppenheimer: Asked about the shift in commercial auto trends, particularly in New Jersey. Marchioni explained that “a reacceleration of severity trend, particularly in the state of New Jersey” was the main driver, noting the state represents about 15% of commercial auto premium.
* Phillips queried the impact of third-party reserve reviews. Marchioni clarified, external reviews “confirm that our actuarial processes are reasonable and consistent with best practices,” and that elevated trends are industry-wide.
* Michael Zaremski, BMO: Asked about the rationale for share repurchases amid reserve uncertainty. Marchioni stated, “We book our best estimates, and we continue to book our best estimates, and we have high conviction in those estimates, and that conviction has only been reinforced by the external reviews.”
* Jon Paul Newsome, Piper Sandler: Asked about premium growth implications from actions in New Jersey. Marchioni responded that growth is an outcome, not a target, and “when we have underperforming pockets of business...we will take aggressive action to address that. And that will impact growth without question, and that's a trade-off we're willing to make.”
* Jian Huang, Morgan Stanley: Inquired about 2025 claim trends. Marchioni reaffirmed that claim frequencies “have been running in line with or better than expected,” with workers’ comp driving favorable claim counts.

SENTIMENT ANALYSIS

* Analysts adopted a cautious tone, probing reserve adequacy, premium growth implications, and the rationale for capital returns amid uncertainties. Their questions focused on the persistence of adverse trends and balance sheet resilience.
* Management’s tone during prepared remarks was confident and procedural. In Q&A, Marchioni frequently reinforced conviction in reserving practices and responded thoroughly to questions, but also acknowledged industry headwinds and specific state challenges. Compared to the previous quarter, both management and analysts expressed heightened concern about casualty trends but maintained a constructive dialogue.

QUARTER-OVER-QUARTER COMPARISON

* The combined ratio guidance remained at 97% to 98%, but the catastrophe load was lowered from 6 to 4 points, referencing improved results. The underlying combined ratio guidance increased by 1 point, indicating higher current year casualty loss costs. Premium growth slowed further in Standard Commercial Lines and retention declined as underwriting tightened. In contrast, investment income gains and book value growth strengthened capital metrics. Analysts’ focus shifted further toward reserve adequacy and the impact of state-specific challenges, especially in New Jersey. Management’s tone remained steady but more focused on detailing corrective actions and the rationale behind capital management decisions.

RISKS AND CONCERNS

* Management cited continued pressure from commercial auto severity trends, particularly in New Jersey, and elevated social inflation industry-wide. Unfavorable prior year casualty reserve development was noted as a significant challenge. The company is implementing targeted underwriting actions, enhanced predictive modeling, and regulatory engagement to address these issues. Analysts questioned the potential for further reserve charges and the impact on future growth and profitability.

FINAL TAKEAWAY

Selective Insurance Group’s Q3 2025 call emphasized a commitment to long-term value creation through disciplined underwriting, targeted corrective actions in challenging lines and geographies, and ongoing diversification across segments and markets. Management outlined a clear path for portfolio expansion, operational efficiency, and capital returns, while addressing persistent casualty trends and industry-wide pressures that are influencing current results and future outlook.

Read the full Earnings Call Transcript [https://seekingalpha.com/symbol/sigi/earnings/transcripts]

MORE ON SELECTIVE INSURANCE

* Selective Insurance Group, Inc. (SIGI) Q3 2025 Earnings Call Transcript [https://seekingalpha.com/article/4832443-selective-insurance-group-inc-sigi-q3-2025-earnings-call-transcript]
* Selective Insurance Group, Inc. 2025 Q3 - Results - Earnings Call Presentation [https://seekingalpha.com/article/4832382-selective-insurance-group-inc-2025-q3-results-earnings-call-presentation]
* Selective Insurance Non-GAAP EPS of $1.75 misses by $0.24, revenue of $1.36B beats by $10M [https://seekingalpha.com/news/4507136-selective-insurance-non-gaap-eps-of-1_75-misses-by-0_24-revenue-of-1_36b-beats-by-10m]
* Seeking Alpha’s Quant Rating on Selective Insurance [https://seekingalpha.com/symbol/SIGI/ratings/quant-ratings]
* Historical earnings data for Selective Insurance [https://seekingalpha.com/symbol/SIGI/earnings]