Selective Insurance Group, Inc.

Good day and thank you for standing by. Welcome to Selective Insurance Group Inc. Fourth 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 this session, you will need to press star 1-1 on your telephone. You will then hear an automated message advising you your hand is raised. To withdraw your question, please press star 1-1 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 fourth quarter and full year 2024 earnings conference call. Yesterday, we posted our earnings press release, financial supplement, and investor presentation on the investor section of Selective.com. A replay of the webcast will be available there shortly after this call. John Marcioni, our Chairman of the Board, President and Chief Executive Officer, and Patrick Brennan, Executive Vice President and Chief Financial Officer, will speak about results and take your questions. 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 reference 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. Now, I'll turn the call to John.

Thanks, Brad, and good morning. 2024 was a challenging year. Our operating ROE of 7.1% was below our 12% target, but we ended the year with a strong capital position and the financial flexibility to execute our strategy of disciplined profitable growth. Our actions to strengthen our casualty reserves coupled with our solid underlying profitability, have positioned us well to meet and exceed our return targets in the years ahead. For the year, we grew net premiums written by 12%, delivered an underlying combined ratio of 89.4, and increased book value per share by 6%. Investment performance was strong, with after-tax net investment income of $363 million that contributed 12.8 points of return on equity. We advanced important strategic initiatives in 2024, including adding five states to our standard commercial lines operating footprint, achieving significant repositioning and personal lines, and enhancing our technology foundation to support excess and surplus lines. Our combined ratio for the year was 103, up 6.5 points from 96.5 in 2023. The underperformance relates to our reserving actions, addressing elevated severities in recent accident years, particularly in general liability. Social inflation remains a headwind for us and the industry. We've extensively discussed this in previous quarters and continue to operate in an environment where loss trends are elevated. In the quarter, we strengthened prior year casualty reserves by 100 million and added 47 million to the current accident year above our original guidance. In 2024, we took casualty reserving actions totaling 411 million with 311 million or 7.1 points on our combined ratio related to prior accident years. Our 2024 actions were predominantly in general liability for accident years 2020 and subsequent, primarily impacting 2022 and 2023. Recognizing these trends over the course of the year, we increased our 2024 accident year losses by 100 million relative to our original guidance, adding 2.3 points to the combined ratio. Patrick will go through these actions in more detail. Our growth strategies, underwriting targets, performance measurements, and employee profit-based compensation are focused on creating long-term shareholder value. Combined ratio is the primary success measure for our insurance operations. Our 2024 underlying combined ratio, which excludes catastrophe losses and prior year casualty development, was 89.4, a 90 basis point improvement from 2023. Standard commercial lines and excess and surplus lines reported underlying combined ratios in line with 2023, despite actions to increase current year lost cost expectations. The personal lines underlying combined ratio improved 9.6 points in 2024, as we implemented significant price increases, took meaningful underwriting actions to address underperforming business, and continued transitioning to the mass affluent market. We remain comfortable with the overall composition and quality of our underwriting portfolio, despite the adverse emergence in general liability. While rate increases will continue to be our primary focus for profitability improvement, we also have been making underwriting refinements, including managing limits and coverage grants in challenging jurisdictions, driving improved terms and conditions, and focusing production on better performing classes of business. Consequently, new business growth in commercial lines moderated in the past two quarters. This quarter's commercial lines renewal pure pricing of 8.8% and retention of 85% were both in line with last quarter's results. Exposure growth added 3.8 points, contributing to our total renewal premium change of 12.9%. Commercial lines pricing excluding workers' compensation increased 10.1%, the same as in the third quarter. Renewal pure pricing in commercial property was 11.3%, and commercial auto was 10.7%. General liability renewal pure pricing was 10.6%, up from 10.2% in the third quarter, 7.6% in the second quarter, and 6.5% in the first quarter. Excess and surplus lines delivered a strong year with 29% growth, exceeding 500 million of net premiums written for the first time. The 2024 combined ratio was 89.7, including four points of prior year reserve strengthening. The underlying combined ratio was 81.1, in line with last year, despite actions to increase current year loss expectations. We continue to pursue technology and automation investments to increase E&S scalability. While growth has been robust and we continue to see continued market opportunity, we remain mindful of social inflation's broad-based impacts. As a result, we continue to build higher severity increases into our ENS loss picks. We also achieved strong price changes in recent years. While these higher severity assumptions held up relatively well, $20 million of our prior accident year booking actions were from this segment. Growth in brokerage, our middle market ENS business, along with rate and exposure increases, drove the average ENS account size from 4,600 at the end of 2023 to approximately 5,300 at the end of 2024. While the average premium size increased, our appetite is generally unchanged, and we are comfortable with the pricing, terms and conditions, and mix of business. Our 2025 guidance incorporates strong overall profitability assumptions for the E&S segment. In personal lines, net premiums increased 4% for the year. However, we saw a 3% decrease in the fourth quarter. Our strategic repositioning and significant actions to improve personalized profitability contributed to a combined ratio of 91.7 for the quarter and 109.3 for the year. Both are meaningfully better than the prior year. 2024's underlying combined ratio was 89.3 with the quarter at 86. Renewable pure price increased 27.3% for the quarter and 20.6% for the year. In states where we have filed and received approval for adequate rates, we are focusing on growth in the mass affluence segment. With the actions we have taken, we expect personal lines will produce an underwriting profit in 2025. In summary, our team responded well to 2024's challenges, improving our position for 2025. In this uncertain environment, we are focused on rate and non-rate actions to drive underwriting profitability while prudently growing the business. I'll now turn the call over to Patrick, who just completed his first full quarter at Selective. His significant insurance experience and deep background in corporate finance has added a new perspective to our executive leadership team, significantly enhancing our ability to manage the challenging environment and restore our profile of strong and consistent underwriting results. Patrick?