Selective Insurance Group (SIGI) Q2 results exceeded expectations and showed "clean" reserves across all business lines, with focus shifting towards go-forward profitability, RBC Capital Markets said in a report emailed Monday.
The firm said the absence of reserve charges marked Selective's second consecutive fully "clean reserving" quarter. However, an increase in commercial auto loss frequency could renew concerns about "reserve adequacy" in that business, according to the report.
Selective's "underwriting actions" are expected to gradually improve return on equity, the firm noted. The company has reduced retention on "low & very low" performing cohorts, while imposing price increases, the report said.
The firm lowered the 2026 operating earnings estimate to $8.06 per share from $8.11 but maintained the 2027 estimate at $9.10. The firm also expects a 2026 combined ratio of 97.6%, "consistent" with the company guidance, and forecasts improvement to 97% in 2027, according to the report.
RBC maintained an outperform rating on Selective and raised its price target to $115 from $110, saying the shares remain "attractive" despite continued concerns about commercial auto reserves.
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