Selective Insurance Group, Inc.

Good day and welcome to the Selective Insurance Group Second Quarter 2025 Earnings Conference Call. At this time, all participants are in listen-only mode. After the speaker's presentation, there will be a question and answer session. Instructions will be given at that time. As a reminder, this call may be recorded. I would like to turn the call over to Brad Wilson, Senior Vice President, Investor Relations and Treasurer. Please go ahead.

Good morning. Thank you for joining Selective's second quarter 2025 earnings conference call. Yesterday, we posted our earnings press release, financial supplement, and investor presentation on Selective.com's investor section. 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 discuss second quarter results and take your questions. John and Patrick will reference non-GAAP measures that 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. The financial supplements on our website include GAAP reconciliations to any reference non-GAAP financial measures. 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 over to John.

Thanks, Brad, and good morning. We delivered an operating return on equity of 10.3% this quarter, with excellent investment income, which increased 18% from the prior year period. Excessive surplus and personal lines produced strong results in the quarter, with both segments reporting quarterly and year-to-date combined ratios at or below our 95% long-term target. Overall, our insurance segments grew 5%, reflecting our disciplined underwriting and pricing strategy in an increasingly competitive market. In standard commercial lines, Renewal pure price increased 8.9%, and we continued to execute targeted underwriting and claims actions that I will describe later in more detail. We recorded $45 million, or 3.8 points, of unfavorable prior year casualty reserve development related to general liability and commercial auto. This pushed our overall combined ratio for the quarter to 100.2. It also caused us to increase our combined ratio guidance for the year by one point, to a range of 97 to 98, including an assumed six points of catastrophe losses. Given this reserving action and those in 2024, I want to provide context around our process, current risks, and how we respond when new loss data emerges. In addition to comprehensive quarterly reserve reviews, we conduct semiannual independent reserve assessments and periodically engage third parties for benchmarking and methodology reviews. Ultimately, reserve development reflects the quality of our initial loss picks. Historically, those have held up quite well. Focusing on the more mature 2015 to 2019 accident years, as of year end 2024, we increased our other liability occurrence ultimate losses by 5.5% from our initial picks compared to an average 14% increase for the industry. In the 2021 to 2023 accident years, we increased our ultimate losses by 13% compared to the industry's 5%. While industry trends in recent years have not matched pre-pandemic levels, there have been significant reserving actions, which we believe point to industry-wide pressure on this line of business. Schedule P data confirms that we tend to respond early to loss emergence, even for relatively immature accident years for longer tail lines. We added new slides in our investor presentation to highlight this point. For more mature accident years and other liability occurrence and commercial auto liability, our book loss ratio at the third year end evaluation for a given accident year is similar to the loss ratio at year end 2024. For the industry, there has been a more meaningful amount of unfavorable development after the third year end evaluation. This responsiveness informs our view when setting prospective loss trends and pricing strategy. Our casualty mix of business is higher than our peers. This has been a benefit when property lines have been challenged, and our historical catastrophe losses and volatility are lower than the industry average. However, the ongoing industry-wide social inflationary environment has an outsized impact on casualty lines, particularly on claims involving bodily injury. We have been steadily increasing our loss trend estimates for cash delines in recent years, largely in anticipation of social inflationary impacts on claim severities. Those assumptions are embedded in the current accident year loss ratios we are reporting. In our quarterly reserve review, the frequency and severity estimates included in our ultimate loss selections are key metrics. Claim frequencies are our earliest profitability indicator, And we have a robust monitoring process that includes reviewing actual and expected claim counts. Through the first half of the year, overall accident year 2025 casualty claim frequencies are consistent with or in some cases better than our initial expectations. Workers' compensation claim counts in particular have been notably lower than expected. However, we responded to elevated recent accident year paid emergence this quarter. In general liability, we recorded $20 million of unfavorable prior year development, primarily tied to the 2022 and 2023 accident years in the umbrella and product sublines. Higher auto liability severities have increased the frequency of claims piercing the umbrella layer. The products line has also experienced elevated litigation rates and paid severities in recent years, impacting both loss and allocated loss adjustment expenses. In commercial auto, we responded to elevated paid severity emergence in the quarter, strengthening reserves $25 million, primarily related to the 2022 through 2024 accident years. The loss trends we are seeing are broad-based, with impacts that cross most geographies and major industry groups. Our 2025 loss ratio includes assumptions for escalating severity trends. Even with the reserve increases in commercial auto and general liability for prior accident years this quarter, we remain comfortable with the ultimate severity trend implied by our current year loss ratio selections. We have adopted several strategies in recent years to address social inflation's challenges. They involve pricing, underwriting, and claims. Related to pricing, we continue to seek and achieve overall renewal pure price increases above expected loss trend. I'll discuss pricing in more detail in our segment results. where we continue to execute these increases in a granular fashion. Within underwriting, we continue to take actions to maximize our well-known strategic competitive advantages, our strong distribution partner relationships, our unique field-based operating model, and our sophisticated tools. These actions include tightening underwriting guidelines for select liability exposures, including certain contractors' coverage offerings, managing limits in challenging jurisdictions, reducing the number of new umbrella lines with a particular focus on reducing limits greater than $5 million, increasing minimum premiums in general liability and umbrella, trimming underperforming classes or risks with emerging exposures, and prioritizing new business and better performing segments. Contractors is our largest industry segment and has a higher mix of general liability and commercial auto exposure. We have built strong expertise in this industry segment and remain comfortable in our ability to produce consistent growth and profitability. However, we continue to invest in diversifying our business mix and geographic footprint. In addition to diversification within commercial lines, our efforts to expand our E&S business and personal lines mass affluence strategy will contribute to a more balanced portfolio in the future. We remain focused on the fundamentals and claims. Our adjusters specialize by claim type, size, and jurisdiction. For example, we have a limited number of adjusters assigned to Georgia bodily injury or New York labor law cases to drive greater insight into best practices in analyzing these higher risk claims and defending related litigation. To address social inflation, we have increased the review of cases going to trial, boosting the use of second opinions, engaging jury consultants, conducting mock trials, and using round tables to gain further insights about potential outcomes. We also have created an internal task force to evaluate our fraud data review processes and gain insights about where to invest additional investigatory resources. And we're currently in the process of developing attorney representations claims models to replace our existing claims litigation models to more quickly identify which claimants are likely to seek representation. Our pricing strategies and underwriting refinements contributed to slower premium growth in the quarter. Overall renewal pure pricing across our three insurance segments was 9.9% of 80 basis points from a year ago. We will continue to maintain a balanced approach and make investments to support future growth. However, we believe emphasizing improving underwriting margins and tempering the top line in the current environment is prudent. Turning to segment performance, Standard commercial lines reported a 102.8 combined ratio, including 4.8 points of unfavorable prior year casualty development. Renewal pure price increased from a year ago to 8.9%, led by general liability at 11.9%. Commercial auto renewal pure price was 10.4%, and property was 7.8%. Property renewal pure price increases slowed in the quarter compared to our recent run rate, reflecting broader market conditions and improved profitability. Renewal pure price excluding workers' compensation was 10.2%. Retention for the quarter fell two points to 83% due to our rate increases and underwriting actions, along with an increasingly competitive environment. Excess and surplus lines grew 9% this quarter, driven by an average renewal pure price increase of 9.3%. The segment's combined ratio was 89.8, and we see continued growth opportunities for this segment. We have deployed deliberate ENS strategies and introduced new products over time, expanded our brokerage business, and invested in operational efficiency. We are now in the early stages of giving our retail agents access to our ENS offerings. We do not expect to realize immediate significant growth in this latest effort, but believe it will facilitate additional growth capacity over time. The personalized combined ratio was 91.6, 26.5 points better than a year ago. Our rating and non-rating actions to reposition this book are continuing to gain traction. We are emphasizing growth in states with adequate rate levels, and as a result, personalized net premiums written declined 5%. However, target business grew 16% in the quarter, with nearly all new business being in our target mass affluent market. Renewal pure price for the quarter was 19%. We expect rate changes will remain above loss trends, but moderate in comparison to those achieved in 2024 as the portfolio moves closer to achieving long-term target profitability. In summary, we delivered a 12.3% operating ROE through the first half of the year, and remain focused on executing our risk management strategies while driving long-term profitable growth. Loss trends remain elevated, but we are confident in our ability to quickly identify and address areas within our control and deliver consistent underwriting margins over the long term. Now I will turn the call over to Patrick, who will provide more details about our financial results.