Recently, A.M. Best Co. affirmed the issuer credit rating (ICR) of Selective Insurance Group Inc. (SIGI) at “bbb+” along with all the debt ratings of the company. The rating agency also affirmed the financial strength rating (FSR) and ICR of Selective Insurance’s subsidiary – Selective Insurance Company of America – and its 9 pooled affiliates at “A” and “a+”, respectively.
All ratings of Selective Insurance, its subsidiary and the affiliates carry a stable outlook.
The rating affirmation of Selective Insurance’s subsidiary and its affiliates were based on their sustained operating profitability, which resulted in a strong risk-adjusted capitalization even after dividend payments. Additionally, these companies’ strong market position in the property and casualty insurance market, a proficient management team and the financial support provided by Selective Insurance also supported the ratings.
These positive factors were partly offset by significant variance in Selective Insurance Company of America and its affiliates’ underwriting results, which sometimes led to below-average operating results, along with lower-than-composite average returns and investment yield and high underwriting leverage.
Ratings for Selective Insurance Company of America and its affiliates might be revised upward by A. M. Best if they generate above-average operating results over the long term. On the other hand, a significant downturn in operating profits or risk-adjusted capitalization may lead to a rating downgrade.
Rating affirmations or upgrades from credit rating agencies play an important part in retaining investor confidence in the stock as well as maintaining credit worthiness in the market. We believe the strong ratings scores will help Selective Insurance to retain investor confidence and help it write more businesses going forward, thereby boosting its results.
Selective Insurance currently carries a Zacks Rank #3 (Hold). Some other companies worth considering in the property and casualty insurance business are Montpelier Re Holdings Ltd. (MRH), XL Group plc (XL) and White Mountains Insurance Group, Ltd. (WTM). All these companies carry a Zacks Rank #1 (Strong Buy).
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