Selective Adds $200 Million Buyback Authorization, But CFO Won't Say How Much It Will Use
The insurer raised its dividend 12% and has about $253 million of repurchase capacity while premiums shrink.
Selective Insurance Group's board approved a new $200 million share repurchase program, CFO Patrick Brennan said on the company's third-quarter earnings call on Friday. Pressed by analysts on why buybacks were "opportunistic" while commercial premiums fall, he would not say what comes next.
$253 million of firepower
Selective, an insurance holding company that sells commercial and personal property and casualty coverage through independent agents and brokers, had $53 million left on its old authorization as of September 30. Brennan said that brings total capacity to about $253 million.
The company returned about 63% of after-tax net income to shareholders in the quarter, through its regular dividend and $55 million of share repurchases. It also raised its quarterly dividend 12%, which Brennan said marks its 13th consecutive annual increase.
Brennan put statutory surplus at $3.7 billion and GAAP equity at $3.4 billion. He said capital priorities are unchanged: fund organic growth first, return 20% to 25% of earnings through dividends, and buy back stock when capital exceeds needs and valuation is attractive.
Analysts press on "opportunistic"
An RBC Capital Markets analyst asked whether the buybacks reflected the stock price or excess capital given slower growth. Brennan said capital moves through cycles of consumption and production, and that a company expecting to grow wants capital on hand. CEO John Marchioni added that the buybacks were opportunistic given the current view, but the company wants capital to "restore the growth profile" investors expect.
A BMO Capital Markets analyst asked whether to read the repurchase valuation as a guide to future buying. Brennan replied: "I'm not going to forecast where and what we're going to do." He said each quarter's decision rests on whether the price is attractive relative to long-term prospects.
The same analyst asked whether less growth capital is needed now that policy counts are falling. Marchioni said he was not sure he fully understood the question, then argued the near-term pressure "will be short-lived" because the market must come to grips with casualty loss ratios that property and specialty lines have been subsidizing.
Why premiums are shrinking
Marchioni said net premiums written in standard commercial lines fell 8%, with about five points of that from deliberate retention actions on the weakest cohorts, roughly 10% of premium. Retention there dropped to 52% from 79% a year earlier, while renewal pure price in those cohorts rose 17.2%. The rest of the decline came from lower new business.
Operating return on equity was 16.9%, and the combined ratio was 96.8, 1.8 points better than a year ago, with 5.4 points of catastrophe losses. Operating EPS was $2.37. The company kept its full-year combined ratio guidance of 96.5 to 97.5 and raised expected after-tax net investment income to $490 million from $480 million.
Brennan said the company expects its full-year underwriting expense ratio to be about 31.5%, with the fourth quarter near 32%.
Sources
- Selective Insurance Gr Q3 2026 Earnings Call Transcript — benzinga.com
- Here's What Key Metrics Tell Us About Selective Insurance (SIGI) Q3 Earnings — Yahoo Finance
- Selective Insurance (SIGI) Q3 Earnings Top Estimates — Yahoo Finance
- Selective Reports Third Quarter 2026 Results – Company Announcement - FT.com — Financial Times
- Selective Insurance Non-GAAP EPS of $2.37 beats by $0.44, revenue of $1.33B misses by $20M (NASDAQ:SIGI) — seekingalpha.com
