Last Update31 Jul 25
With net profit margin steady at 9.84% and consensus revenue growth forecasts unchanged at 6.5%, analysts have left their fair value estimate for Selective Insurance Group unchanged at $88.67.
What's in the News
- From April 1, 2025 to June 30, 2025, Selective Insurance Group repurchased 0 shares, indicating no buyback activity in this tranche.
- The company has completed the repurchase of 554,551 shares for $44.74 million under the buyback announced in December 2020, representing 0.92% of shares.
Valuation Changes
Summary of Valuation Changes for Selective Insurance Group
- The Consensus Analyst Price Target remained effectively unchanged, at $88.67.
- The Net Profit Margin for Selective Insurance Group remained effectively unchanged, at 9.84%.
- The Consensus Revenue Growth forecasts for Selective Insurance Group remained effectively unchanged, at 6.5% per annum.
Key Takeaways
- Investments in digital tools and underwriting strategies are expected to boost efficiency, margins, and earnings while moderating volatility.
- Business diversification and expansion into specialty and underserved markets should support resilient revenue growth and reduced underwriting risk.
- Heavy exposure to rising casualty claim severities and outdated business practices poses ongoing risks to earnings stability, growth, and long-term competitive positioning.
Catalysts
About Selective Insurance Group- Provides insurance products and services in the United States.
- The company's ongoing focus and investments in operational efficiency-including data analytics, digital claims management, and underwriting tools-are expected to drive improved combined ratios and support margin expansion, leading to long-term net margin and earnings growth.
- Expansion of Selective's Excess & Surplus (E&S) segment, along with plans to offer these products to retail agents, positions the company to capture growth opportunities from emerging specialty risks, supporting both revenue diversification and premium growth.
- The broader societal shift toward automation and digitalization across industries is increasing demand for technology risk and cyber liability insurance, representing a significant, durable premium growth opportunity that should positively impact future revenue.
- The company's deliberate strategy to diversify its business mix and geographic footprint, including growth in the mass affluent personal lines and underserved regional markets, is likely to generate a more resilient and balanced revenue stream, while moderating catastrophe and underwriting volatility.
- Selective's consistent application of granular underwriting and pricing-demonstrated by targeted rate actions greater than loss trends in key casualty lines-positions the company to weather industry-wide loss cost inflation, supporting stable underwriting profits and long-term ROE.
Selective Insurance Group Future Earnings and Revenue Growth
Assumptions
How have these above catalysts been quantified?- Analysts are assuming Selective Insurance Group's revenue will grow by 6.5% annually over the next 3 years.
- Analysts assume that profit margins will increase from 7.3% today to 9.8% in 3 years time.
- Analysts expect earnings to reach $607.3 million (and earnings per share of $8.85) by about July 2028, up from $374.5 million today.
- In order for the above numbers to justify the analysts price target, the company would need to trade at a PE ratio of 10.6x on those 2028 earnings, down from 13.2x today. This future PE is lower than the current PE for the US Insurance industry at 14.2x.
- Analysts expect the number of shares outstanding to remain consistent over the next 3 years.
- To value all of this in today's terms, we will use a discount rate of 6.4%, as per the Simply Wall St company report.
Selective Insurance Group Future Earnings Per Share Growth
Risks
What could happen that would invalidate this narrative?- The persistently high and increasing trend in casualty claim severities-primarily due to social inflation (increased litigation and higher jury awards)-continues to drive unfavorable prior year reserve developments, especially in general liability and commercial auto, which together represent over 50% of Selective's total premium; this increases the risk of ongoing earnings volatility and unpredictability in future net margins.
- The company's business mix is more heavily weighted to casualty lines relative to peers, particularly in the contractors segment, making Selective especially vulnerable to industry-wide issues such as social inflation and claim severity trends, which could result in higher claims costs and pressure on underwriting profit.
- Selective's need to constantly boost loss trend assumptions and the recurring pattern of reserve increases in immature accident years highlight the uncertainty and difficulty in accurately forecasting loss trends, raising the risk of future reserve charges that could further impair net earnings and undermine investor confidence in financial guidance.
- Management's response to adverse loss emergence by implementing aggressive price increases and stricter underwriting is leading to declining retention rates and slower premium growth, particularly in core Commercial Lines, which could inhibit topline revenue growth as competition intensifies and peers may underprice risk.
- Broader industry trends-such as the growing adoption of direct-to-consumer insurtech models and increased regulatory scrutiny over pricing, data usage, and climate risk-may expose Selective's reliance on traditional agency distribution and legacy risk models, potentially compressing margins due to increased compliance/technology costs and weakening revenue and customer acquisition over the long term.
Valuation
How have all the factors above been brought together to estimate a fair value?- The analysts have a consensus price target of $88.667 for Selective Insurance Group based on their expectations of its future earnings growth, profit margins and other risk factors. However, there is a degree of disagreement amongst analysts, with the most bullish reporting a price target of $97.0, and the most bearish reporting a price target of just $79.0.
- In order for you to agree with the analyst's consensus, you'd need to believe that by 2028, revenues will be $6.2 billion, earnings will come to $607.3 million, and it would be trading on a PE ratio of 10.6x, assuming you use a discount rate of 6.4%.
- Given the current share price of $81.02, the analyst price target of $88.67 is 8.6% higher. The relatively low difference between the current share price and the analyst consensus price target indicates that they believe on average, the company is fairly priced.
- We always encourage you to reach your own conclusions though. So sense check these analyst numbers against your own assumptions and expectations based on your understanding of the business and what you believe is probable.
How well do narratives help inform your perspective?
Disclaimer
AnalystConsensusTarget is a tool utilizing a Large Language Model (LLM) that ingests data on consensus price targets, forecasted revenue and earnings figures, as well as the transcripts of earnings calls to produce qualitative analysis. The narratives produced by AnalystConsensusTarget are general in nature and are based solely on analyst data and publicly-available material published by the respective companies. These scenarios are not indicative of the company's future performance and are exploratory in nature. Simply Wall St has no position in the company(s) mentioned. Simply Wall St may provide the securities issuer or related entities with website advertising services for a fee, on an arm's length basis. These relationships have no impact on the way we conduct our business, the content we host, or how our content is served to users. The price targets and estimates used are consensus data, and do not constitute a recommendation to buy or sell any stock, and they do not take account of your objectives, or your financial situation. Note that AnalystConsensusTarget's analysis may not factor in the latest price-sensitive company announcements or qualitative material.