Selective Insurance Group, Inc.

Good day and thank you for standing by. Welcome to Selective's second quarter 2024 earnings conference call. At this time, all participants are in a listen-only mode. After the speaker's presentation, there will be a question and answer session. To ask a question during the session, you will need to press star 11 on your telephone. You will then hear an automated message advising your hand is raised. To withdraw your question, please press star 11 again. Please be advised that today's conference is being recorded. I would now like to hand the conference over to your speaker today, Brad Wilson, Senior Vice President, Investor Relations and Treasurer. Please go ahead. Good morning.

Thank you for joining Selective's second quarter 2024 earnings conference call on short notice. Yesterday, we posted our earnings press release, financial supplement, and investor presentation on the investor section of our website, Selective.com. The investor presentation includes a new exhibit highlighting our historical reserve development and relevant comparisons. Our replay of the webcast will be posted there shortly after this call. Today we will discuss our financial performance, market conditions, and expectations for the rest of 2024. John Marcioni, our Chairman of the Board, President, and Chief Executive Officer, and Tony Harnett, our Senior Vice President, Chief Accounting Officer, and Interim Chief Financial Officer, We'll make remarks before we move to our question and answer session. Our commentary today references non-GAAP measures we and the investment community use to make it easier to evaluate our insurance business. These non-GAAP measures include operating income, operating return on common equity, and adjusted book value per common share. We include GAAP reconciliations to any referenced non-GAAP financial measures in the financial supplements posted on our website. We will also make statements and projections about our future performance. These are forward-looking statements under the Private Securities Litigation Reform Act of 1995, not guarantees of future performance. These statements are subject to risks and uncertainties that we disclose in our annual, quarterly, and current reports filed with the SEC. We undertake no obligation to update or revise any forward-looking statements. With those introductory remarks, I'll now turn the call to John.

Thanks, Brad, and good morning. This is a challenging quarter. We hold ourselves to a high standard exhibited by the profitability and growth we strive for and have consistently achieved over the long term. Our consistent and disciplined approach to underwriting, pricing, and reserving is the foundation underlying our strong track record. That foundation remains as strong as ever. However, the industry-wide social inflationary trends have continued to put upward pressure on average severities in the general liability line of business. Catastrophe losses and our reserve strengthening drove the 116.1 combined ratio in the quarter. As a result, we had an operating loss of $1.10 per diluted common share and an operating ROE of negative 9.6%. This brought our year-to-date operating ROE to 1.1%. Our revised full-year guidance implies an ROE in the upper single-digit range. below our 12% target. Although earnings this quarter were challenged, our capital position remains strong, and our underlying combined ratio of 91.4, which includes an updated run rate for general liability, positions us well moving forward. We maintain our discipline, focus, and execution in the areas of risk selection, pricing, and claims management in the face of this challenging and dynamic loss trend environment. This has positioned us as an industry leader, With our run rate profitability, we are confident in our ability to quickly reestablish our earnings profile that consistently meets or exceeds our 12% operating ROE target. We've been very transparent about our assumed loss trend, which we have consistently increased over the past several years. For general liability, we increased our assumed loss trend to 9% for 2024 from 4% in 2020. While reported frequencies in the more recent accident years continue to emerge at or better than our expectations, we continue to see average severities exceed our elevated expectations. The most recent accident years are still relatively immature, but rather than hope these severity trends flatten as those years mature, we believe it was prudent to react to the early severity emergence we are experiencing. While we reacted to the actual emergence, Our action this quarter also contemplated some potential continuation of these trends. Specifically, we recorded $176 million or 16.3 points of net unfavorable prior year casualty development within our commercial line segment. 166 million was in the general liability line of business. 90% of this quarter's general liability action relates to accident years 2020 through 2023. similar to the action we took in the first quarter. Our year-end 2023 actions were mostly associated with accident years 2020 and prior. As older accident years continue to mature, we gain greater confidence in our estimates, and further development has been modest in 2019 and prior. This increases our confidence in the adjustments we are now making to accident years 2020 and subsequent, which puts us in a stronger overall reserve position. Given the consistency in our underwriting appetite and risk profile over time, our corrective actions are primarily focused on achieving additional rate with a continued emphasis on prudent underwriting. Taking a step back, our full year 2023 standard commercial lines combined ratio was 94.9% in line with our 95% target. Excluding the impact of prior year casualty reserve development, Our 2024 year-to-date standard commercial lines combined ratio is 96.4. Consequently, we must get additional rate to achieve our 95% target. In the second quarter, general liability renewal pure price increased to 7.6%. This is 110 basis points higher than the first quarter's 6.5%, and 220 basis points above full-year 2023's 5.4%. we expect that general liability pricing will further increase in the second half of the year. We entered 2024 with an overall expected loss trend of 7%, with casualty at 8% and property at 4%. In the second quarter, standard commercial lines renewal pure price was 7.9%, up 30 basis points from the first quarter, 7.6%, and 120 basis points higher than a year ago. Excluding workers' compensation, commercial lines pricing increased 9.1%. Exposure growth added 4.3 points, contributing to a total renewal premium change of 12.6%. In addition, commercial property at 12.1% and commercial auto at 10.8% continue to generate the highest pure rate increases within our standard commercial line segment. Let me now shift to our other segments. Excess and surplus continued strong performance with excellent top line growth and a 94.6% combined ratio despite elevated catastrophe losses. In total, E&S net premiums were an increased 39% in the quarter with strong contributions from our contract binding and brokerage operations. The E&S market opportunity continues to be robust with elevated submissions within our existing appetite at attractive pricing. Our E&S technology investments are paying dividends. We modernized our rate, quote, and bind platform, which has improved operational efficiency. We are focused on investments to build scale and continue taking advantage of attractive market conditions. Personalized net premiums were at an increased 6% in the quarter due to strong renewal pure pricing of 20.7% and larger average policy size, partially offset by declining new business and lower retention. Retention in the quarter was 78%, down 10 points from the second quarter of 2023, and in line with our expectations given our actions to shift to the mass affluent market. We are taking a balanced approach in personal lines, promoting growth in areas where rates are adequate and limiting new business in states needing additional rate approvals. Overall, we are making progress towards profitability in this segment as the quarter's underlying combined ratio improved by 3.4 points compared to the second quarter of 2023. Nonetheless, we have more work to do and remain highly focused on strengthening our rate plans and achieving rate adequacy. Across our three insurance segments, we will continue to balance growth and profitability with a goal of consistently achieving a 95% combined ratio. Our pricing discipline, strong relationships with our distribution partners, and sophisticated analytical tools have enabled us to effectively balance rate and retention over the long term. we see the same opportunity going forward. With that, I'll now turn the call to Tony to discuss our quarterly financial results in more detail.