Morgan Stanley downgrades Selective Insurance stock rating to Underweight

Investing.com - Morgan Stanley (NYSE:MS) downgraded Selective Insurance Group (NASDAQ:SIGI) from Equalweight to Underweight on Tuesday, while reducing its price target to $72.00 from $86.00. Currently trading at $79.09, the stock has declined nearly 15% year-to-date, despite maintaining a solid dividend track record with 51 consecutive years of payments, according to InvestingPro data.

The downgrade comes as Morgan Stanley anticipates Selective Insurance will face a challenging insurance cycle, citing uncertainties around reserving and a more difficult underwriting environment that could lead to underperformance compared to industry peers.

Morgan Stanley highlighted the need for "more course correction" in Selective’s Commercial Segment, along with an intensifying competitive landscape in commercial property and personal auto underwriting that could put pressure on the company’s share price.

The firm expects Selective Insurance to deliver a weaker return on equity (ROE) than its peers going forward, which Morgan Stanley believes will cause the stock to trade at a discount to other insurers.

The new $72.00 price target represents a significant reduction from the previous $86.00 target, reflecting Morgan Stanley’s diminished outlook for the insurance provider amid these industry headwinds.

In other recent news, Selective Insurance Group, Inc. reported its second-quarter earnings, revealing a non-GAAP operating income of $1.31 per diluted share. This figure fell short of analyst expectations, which had estimated earnings at $1.50 per share. Revenue for the quarter was $1.28 billion, also missing the consensus forecast of $1.33 billion. Despite these misses, the results marked a significant improvement from the same quarter last year when the company experienced a loss of $1.10 per share. In additional company developments, board member Wole Coaxum has resigned to focus on his own company, Mobility Capital Finance Inc. Coaxum’s departure reduces the board to 11 directors, 10 of whom are independent. These recent developments reflect ongoing changes within Selective Insurance.

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