Selective Insurance Group, Inc.

Good day, everyone. Welcome to Selective Insurance Group's first quarter 2023 earnings call. At this time, for opening remarks and introductions, I would like to turn the call over to investor relations analyst, Hailey Krobach.

Good morning. We are simulcasting this call on our website, selective.com. Replay is available until June 2nd. 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 measures, which we believe make it easier for investors to evaluate our insurance business. Non-GAAP operating income is net income available to common stockholders, excluding the after-tax 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. Adjusted book value per common share differs from book value per common share by the exclusion of total after-tax unrealized gains and losses on investments included in accumulated other comprehensive losses. GAAP reconciliations to any reference non-GAAP financial measures are in our supplemental investor package found on the investor's page of our website. Third, we make statements and projections about our future 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 risks and uncertainties. We discuss these risks and uncertainties in detail in our annual, quarterly, and current reports filed with the SEC. We undertake no obligation to update or revise any forward-looking statement. Now I'll turn the call over to John Marchione, our Chairman of the Board, President, and Chief Executive Officer, who will be followed by Mark Wilcox, our Executive Vice President, Chief Financial Officer, and Treasurer.

Thank you, Haley. Good morning, and thank you for joining us. We've had an excellent start to the year. The headline for the quarter is that we continue to deliver strong earnings and remain very well positioned to effectively navigate the economic uncertainty and elevated loss trends that our industry faces. In the quarter, we had strong growth in all three insurance segments. Our all-in combined ratio is 95.7, despite higher than expected catastrophe losses. After-tax net investment income was up 25% over Q1 2022, driven by active management of our core fixed income portfolio over the past few quarters, and we produced a non-GAAP operating ROE of 14.6%, outperforming the 12% average we generated over the past nine years. Let me provide some additional color on our top line growth in the quarter. Net premium is written in our core business, standard commercial lines grew 10%. New business in this segment was up 15% as we continued finding opportunities within our traditional risk profile and pricing expectations. Renewal premium change was a positive 12 percent as pure pricing increased by 7 percent and exposure was up 4.7 percent. Our standard commercial lines footprint has expanded by eight states over the past five years, and that expansion contributed two points of overall growth in the quarter. Our early success in these markets is driven by the unique operating model we employ and the strength of the new distribution partnerships we established. In addition to bolstering top line growth, This expansion also benefits the bottom line through greater geographic diversification. We are working toward opening an additional five states over the next two to three years. Net premiums written in our E&S segment grew 16%, with new business growth of 9%, renewal pure rate of 7.4%, and stable retention. Our mix of business has remained relatively stable in terms of limits profile and the lines of business and hazard mix. Net premiums written in our standard personal line segment grew 31 percent as we continued our transition to the mass affluent market. The mass affluent market now represents about half of our in-force book, and we expect that target business allocation to increase over the next several quarters. I am particularly pleased with our profitability in the face of elevated catastrophe losses. In a quarter where industry losses were significantly above long-term averages, Our catastrophe losses were six points on the combined ratio or about one point above expected. Our combined ratio of 95.7 was only slightly above our 95% long-term target. Our underlying combined ratio was 91. Let me make some further comments about profitability. Standard commercial lines produced a 94.7 combined ratio and a 91.3 underlying combined ratio. Non-CAT losses were about three points lower than last year and our budget, reversing the trend of increases we saw throughout 2022. Despite this favorable outcome, our view of overall loss trends remains in line with last quarter and continues to drive our pricing targets. Commercial lines pricing moved meaningfully from 5.6% in Q4 2022 to 7% in the first quarter, driven by increases in the property and auto line. Retentions remain strong and stable. Commercial property renewal pure rate was up 11.8% in the quarter, and exposure increased 5.1%, producing a renewal premium change of 17.5%. We expect this pricing trend to continue. Commercial auto renewal pure rate was up 10%, and exposure grew by 4.9%, resulting in a total premium change of 15.4%. E&S continued to deliver strong margins with a combined ratio of 85 and an underlying combined ratio of 84.3. Like standard commercial lines, non-cap property improved year over year and was better than expected for the quarter. The strong rate we've earned and underwriting improvements we've made over the past few years have favorably impacted E&S casualty loss ratios. Standard personal lines profitability remains challenged. Excess CAT losses largely drove the quarter's 116 combined ratio, but the 95.7 underlying combined ratio was about 10 points over target. Profitability improvement will be driven primarily by price increases as we continue to transition to the mass affluent market. In the quarter, 15 file rate changes became effective across the auto and home lines with an average increase of 9.4%. We expect this pace to continue over the next several months. While there is a lagged impact on renewal pricing, new business pricing was up over 5% in Q1 and over 7% in the month of April. Investments was another bright spot in the quarter. The portfolio produced $73 million of after-tax income in the quarter, up 25 percent over Q1 2022. Our investment team has been actively positioning the portfolio to increase book yield, which is up by 137 basis points since the start of 2022, while also moving up in credit quality. To reiterate a point made last quarter, when investment returns exceed their long-term average, as we are currently experiencing, we expect to outperform our 12% operating ROE target, and we did that this quarter. While pleased with our strong start to 2023, we fully recognize that one quarter does not make a year. We continue to operate with great discipline in executing our growth and profitability initiatives. Our team of highly skilled and fully aligned employees, leveraging our sophisticated tools and technologies, has positioned us as a market of choice for our top-notch distribution partners. Our executive and regional management teams hosted six regional agency council meetings in March, as we do each year. These sessions, each of which includes 12 to 15 agency principals, are a great opportunity to solicit feedback on our performance, understand the challenges they face in their local markets, and align on opportunities for additional profitable growth. They routinely tell us that the strength of our talent, the uniqueness of our operating model, and the consistent approach we take to managing growth and profitability are the primary reasons why they make us their market of choice. In closing, we in the industry continue to face headwinds from economic and lost trend uncertainty. However, I am confident we have built the organizational muscle to successfully navigate through any potential economic and market challenges. Our long-term track record of consistent, strong performance, along with industry-low volatility, backs up that claim. Now let me turn the call over to Mark.