Selective Insurance Group, Inc.

Good day, everyone. Welcome to Selective Insurance Group's third quarter 2020 earnings call. At this time, for opening remarks and introductions, I would like to turn the call over to Senior Vice President, Investor Relations and Treasurer, Rohan Pai.

Thank you, and good morning, everyone. We're simulcasting this call on our website, selective.com, and the replay will be available until November 28, 2020. Our supplemental investor package, which provides GAAP reconciliations of any non-GAAP financial measures referenced today, also is available on the investors page of our website. Today we will discuss our results and business operations using GAAP financial measures that also are included in our filings with our annual, quarterly, and current reports filed with the U.S. Securities and Exchange Commission. Non-GAAP operating income, which we use to analyze trends in operations and belief makes it easier for investors to evaluate our insurance business. Non-GAAP operating income is net income excluding the after-tax impact of net realized gains or losses on investments and unrealized gains or losses on equity securities. And statements and projections about our future performance. These forward-looking statements under the Private Securities Litigation Reform Act of 1995 are not guarantees of future performance and are subject to risk and uncertainties. For a detailed discussion of these risks and uncertainties, please refer to our annual and quarterly reports filed with the U.S. Securities and Exchange Commission, which includes supplemental disclosures related to the COVID-19 pandemic. You should be aware that Selective undertakes no obligation to update or revise any forward-looking statements. On today's call are the following members of Selective's executive management team. John Marcioni, President and Chief Executive Officer, and Mark Wilcox, Chief Financial Officer. Now I'll turn the call over to John.

Thank you, Rohan, and good morning. I'll make some introductory remarks and then turn it over to Mark to provide the details on our results. I'll then return with some closing remarks before opening up the call to questions. We experienced another quarter of elevated catastrophe losses, and while the impact on our results is noteworthy, these events devastated a number of individuals and businesses. Our number one objective in times like these is to help our customers get their lives and businesses back in order, and I can proudly say that our claims team delivered on that mission, as they always do. Despite these elevated catastrophe losses, we generated an extremely strong annualized operating ROE of 10.9% in the quarter. Our premium growth, driven by solid price increases, excellent retention rates, and strong new business volumes is a testament to our unique market position and deep distribution partner relationships. The customer-centric focus of our employees has been essential to our success in navigating this challenging environment. We generated a profitable 97 percent combined ratio for the quarter, despite the significant catastrophe losses, which highlights the excellent underlying profitability of our book. While growth in insurance is easy, generating consistent growth and profitability is much harder to achieve. Our track record on delivering both is a reflection of our unique strategy, depth of distribution relationships, and sophisticated underwriting and pricing tools and capabilities. I want to highlight a few key themes for the quarter. First, our results did include $80 million of catastrophe losses, which accounted for 11.4 points on a combined ratio. Our losses in the quarter related to 21 separate catastrophe events designated by ISO's Property Claim Services, or PCS, the Midwest derecho at $28 million, and Hurricane Isaias at $22 million were the largest drivers. Given their moderate size, none of these individual events reached our Excessive Loss Catastrophe Reinsurance Program, which attaches at $40 million per occurrence. While we have had sizable losses during the last two quarters, our catastrophe exposure over the last 15 years has averaged three points on our combined ratio. Our historical success managing catastrophe loss volatility stems from our focus on geographic diversification, strict underwriting standards for catastrophe exposed zones, and a strong reinsurance program. Despite two consecutive quarters of elevated catastrophe losses, there has been no notable change to our underwriting portfolio and we expect our longer-term catastrophe loss load to remain largely stable. Second, while alternative asset returns strongly contributed to the overall 9.4 percent investment income ROE in the third quarter, the longer-term outlook for overall book yield is challenged. With Treasury rates near record lows, reinvestment yields will reduce forward book yields, putting more pressure on underwriting results to generate adequate ROEs. We will maintain our conservative philosophy to managing our investment portfolio and focus on boosting our strong underwriting margins to achieve target returns. The low interest rate environment benefits strong underwriting companies like Selective. A short-term bounce in pricing from a firming market environment will provide near-term relief to most market participants. However, the winners in our business over the long term must be skilled at underwriting, and sophisticated and granular in their pricing strategy. The long-term winners will consistently manage pricing relative to loss trend, not based on the whims of the marketplace. Our commercial lines renewal pure price increased 4.6 percent in the third quarter, or 5.6 percent excluding workers' compensation, which was up from earlier this year. Overall renewal retention in commercial lines of 86 percent is up 200 basis points for the quarter, and on a year-to-date basis. It is our granular and sophisticated approach to pricing that has allowed us to generate pure renewal price increases in line with or above expected claim trend for the past 10 years without sacrificing policy retention or growth. For smaller accounts with policy premium of less than $10,000, renewal pure price increased 3.9 percent in the quarter, while larger accounts in excess of $100,000 in premium generated renewal pure price increases of 5.8%. Across all size cohorts on a year-to-date basis, our highest quality accounts based on future profitability expectations produced 2.8% pure rate and point of renewal retention of 92%, while our lowest quality accounts generated 9.6% pure rate and retention of 84.5%. Finally, I remain extremely proud of how, despite the challenging economic and health environment, our team has remained focused on executing our objectives. These goals are balanced between delivering near-term profitable growth and positioning us for long-term outperformance. We are confident that the investments in agency and customer experience, underwriting and claims sophistication, and operational efficiency will secure our position as a market leader for the long term. I'll come back to provide a bit more commentary on this front, but first I'll turn the call over to Mark to review the results for the quarter.