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Investing.com - BMO Capital downgraded Selective Insurance Group (NASDAQ:SIGI), a $4.7 billion property and casualty insurer, from Outperform to Market Perform, while setting a price target of $81.00. According to InvestingPro analysis, the stock appears undervalued despite trading at a modest P/E ratio of 11.8x.
The downgrade follows BMO Capital’s analysis suggesting Selective Insurance continues to face challenges with commercial auto reserve deficiencies, which has placed the stock in a "penalty box" from a valuation perspective.
BMO Capital noted that the stock is currently trading more than 25% below its historical valuation levels, according to the firm’s analysis referenced in Exhibits 9-10 of their report.
Following Selective’s third-quarter earnings report, BMO Capital lowered its earnings estimates by 12% through 2026, bringing their projections approximately 7% below consensus expectations.
The revised estimates reflect an approximately 110 basis point deterioration in BMO’s underlying loss ratio assumption and anticipated continued reserve additions of about $75 million through 2026 in Selective’s Commercial Auto segment.
In other recent news, Selective Insurance Group, Inc. reported its third-quarter financial results, revealing a mixed performance. The company posted non-GAAP operating income of $1.75 per diluted share, which fell short of analyst expectations set at $1.94. However, revenue for the quarter exceeded forecasts, reaching $1.36 billion compared to the consensus estimate of $1.24 billion. The combined ratio, a key measure of profitability in the insurance sector, improved slightly to 98.6% from 99.5% in the previous year. These results highlight the company’s ability to generate higher revenue, even as earnings per share did not meet projections. Investors and analysts will likely be interested in how Selective Insurance plans to address the earnings shortfall while maintaining revenue growth. The earnings miss has drawn attention, overshadowing the positive revenue outcome.
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