Selective Insurance Group, Inc.

Good day, everyone. Welcome to Selective Insurance Group's third quarter 2021 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.

Good morning. We're simulcasting this call on our website, selective.com. The replay is available until November 27th. We used three measures to discuss our results and business operations. First, we use GAAP financial measures reported in our annual, quarterly, and current reports filed with the SEC. Second, we use non-GAAP operating income and non-GAAP operating return on common equity to analyze trends in operations. We believe these measures make it easier for investors to evaluate our insurance business. Non-GAAP operating income is net income available to common stockholders, excluding the up-to-date impact of net realized gains or losses on investments and unrealized gains or losses on equity securities. Non-GAAP operating return on common equity is non-GAAP operating income divided by average common stockholders' equity. And GAAP reconciliations to any reference non-GAAP financial measures are in our supplemental investor package found on our website investor's page. Third, we make statements and projections about our forward performance. These are forward-looking statements under the Private Securities Litigation Reform Act of 1995. They are not guarantees of future performance and are subject to risk and uncertainties. We discuss these risks and uncertainties, including supplemental disclosures about the COVID-19 pandemic and detail in our annual, quarterly, and current reports filed with the SEC. And we undertake no obligation to update or revise any forward-looking statements. Now, I'll turn the call over to John Marchione, our President and Chief Executive Officer, who will be followed by Mark Wilcox, our EVP and Chief Financial Officer.

Thank you, Rohan. Good morning. I'll make some introductory comments about our results and highlight some of the higher-level themes impacting the industry and our company. Mark will discuss our financial results, and then I'll return with some brief closing comments before opening the call-up for questions. We delivered another strong quarter despite elevated catastrophe losses principally related to Hurricane Ida. Our strong underlying profitability allows us to generate an underwriting profit even when net catastrophe losses are elevated. as was the case in the third quarter. While negatively impacting our quarterly results, tragic events like Hurricane Ida provide us the opportunity to deliver great value to our customers at their time of greatest need. And I'm proud to say that is exactly what our claims professionals have done. We generated a solid annualized operating ROE of 10.6% for the quarter. For the first nine months of the year, our annualized non-GAAP operating ROE was 14.5%. well above our full-year operating ROE target of 11 percent. It also builds on our seven-year track record of generating consistent, double-digit operating ROEs, putting us among a very small group of peers that have achieved similar results. I'm pleased to announce that our board of directors, underscoring our strong financial and operating performance, approved a 12 percent quarterly dividend increase to 28 cents per share. Our underlying underwriting performance remains at expected levels, and our investment performance, particularly from alternative investments, contributed meaningfully to overall results for the quarter and year-to-date. For the quarter, our strong net premiums written growth of 13 percent was driven by renewal pure price increases averaging 5.3 percent for commercial lines and 5.6 percent for E&S, exposure growth of approximately 3 percent on a renewal book for commercial lines, solid commercial lines retention of 86 percent, and new business growth of 24 percent for commercial lines and 20 percent for E&S. Our 98.6 combined ratio for the quarter included 10 points of net catastrophe losses, partially offset by 1.8 points of favorable prior year casualty reserve development. The underlying combined ratio is 90.4, reinforcing the high quality of our book of business. Net investment income after tax was $75 million in the quarter, benefiting from the exceptional performance from our alternative investments, particularly unrealized gains on our private equity limited partnership portfolio. I'd like to highlight a few key themes. First, property losses across the industry remain volatile, and the third quarter was no exception. There is nothing to suggest that this trend of increased volatility will reverse, and industry pricing does not currently reflect this reality. individual company results should not be evaluated on an xcat basis but rather over time inclusive of an expected cat load in our case that catalog is four points in a typical year and as noted in our updated guidance we expect 2021 to be above that level as hurricane ida is likely to be one of the costliest events in u.s history we seek to manage our catastrophe risk through strong risk modeling and oversight discipline underwriting guidelines and pricing actions and prudent reinsurance purchases. Second, the industry faces increasing headwinds and higher uncertainty relative to loss trends, driven by both economic and social inflation. Neither is a new phenomenon, but both have increased of late. Additional uncertainty has been introduced by the pandemic-related reduction to claim frequencies that meaningfully impacted loss experience in 2020 and continued, albeit at a less significant level, through the first nine months of 2021. These factors call for strong discipline around establishing forward loss selections and pricing targets and consistently achieving those targets over the long term. For 10 consecutive years, our renewal of pure price increases have met or exceeded expected loss trend. Third, the industry continues to face lower after-tax book yields on their investment portfolios as new money rates on core fixed income portfolios remain close to record lows. Many companies, including Selective, have benefited in recent quarters from the strong returns in alternative investments. These returns are likely to normalize in coming quarters, lowering the ROE contribution from investment income. The ongoing industry-wide pressure on after-tax investment portfolio book yields must be offset by improving underwriting results. It is the strong underwriting companies like Selective that are best positioned to thrive in this environment. Finally, we continue to execute on balancing our objectives around growth and profitability. Our consistent success is a testament to our excellent distribution partner relationships, sophisticated underwriting, and superior customer service and capabilities. For the first nine months of the year, Commercial Lines Renewal Pure price increases averaged 5.5%, new business was up 13%, and the renewal retention was a solid 85%. For smaller Commercial Lines accounts, With policy premium of less than $10,000, renewal pure price increased 4.7 percent in the first nine months of the year, while larger accounts in excess of $100,000 in premium generated renewal pure price increases of 6.1 percent. Across all size cohorts, our highest quality accounts based on future profitability expectations, which constituted 25 percent of our renewal premiums for the first nine months, produced 3.2 percent pure rate and point of renewal retention of 93 percent. Our most challenged accounts comprising 11 percent of our renewal premium generated 10 percent pure rate and point of renewal retention of 85 percent. Our ability to understand and price risk on a granular basis has allowed us to maintain strong retention while generating loss ratio improvement through an improved mix of business over time. We remain extremely well positioned from an operating and financial standpoint. We continue to deliver on our plans to generate consistent profitable growth. Now I'll turn the call over to Mark to review the results for the quarter and return with some additional commentary before taking questions.