On Feb 19, Zacks Investment Research downgraded
Selective Insurance Group Inc.
) by a notch to a Zacks Rank #5 (Strong Sell).
Why the Downgrade?
Selective Insurance has been experiencing declining earnings
estimates on account of soft market reaction attributable to
unfavorable reserve environment and anticipation of higher
catastrophe losses in 2014. Moreover, consistent low investment
yields have impelled management to project lower investment
income in the upcoming quarters.
Furthermore, higher level of debt continues to adversely
affect the financial leverage, which currently stands at 26%.
Higher leverage will further raise risks on cash flow and healthy
Additionally, this property casualty insurer underperformed
the one-year Nasdaq index, which posed a growth of 33.9% against
Selective Insurance's 8.8%.
On Jan 30, Selective Insurance reported fourth-quarter 2013
operating earnings per share of 45 cents, which beat the Zacks
Consensus Estimate of 41 cents and rebounded from the prior-year
quarter loss of 4 cents.
Higher premiums and investment income were partially offset by
net realized losses. Meanwhile, Selective Insurance
continues to incur losses in property insurance.
Predictions of higher catastrophe losses ($28-32 million) in
first-quarter 2014 have pulled down the quarter's estimate by 45%
to 24 cents a share in the last 30 days. Meanwhile, the Zacks
Consensus Estimate for 2014 plunged 9.4% to $1.63 per share over
the same period.
Meanwhile, the Most Accurate Estimate for Total System's
first-quarter 2014 and full-year 2014 earnings stands at 13 cents
and $1.52 a share, resulting in an
of -45.8% and -6.8%, respectively. No upward revision in
estimates was witnessed for both the periods.
Other Stocks to Consider
While we prefer to avoid Selective Insurance for the time
being, some better-ranked insurers in the industry are
AmTrust Financial Services Inc.
). All these stocks sport a Zacks Rank #1 (Strong Buy).
ACE LIMITED (ACE): Free Stock Analysis Report
AMTRUST FIN SVC (AFSI): Free Stock Analysis
RLI CORP (RLI): Free Stock Analysis Report
SELECT INS GRP (SIGI): Free Stock Analysis
To read this article on Zacks.com click here.