Core Viewpoint - Selective Insurance reported solid Q1 2025 results, maintaining full-year GAAP guidance of a 96%-97% combined ratio, driven by pricing discipline and portfolio optimization [4][8][11] Financial Performance - Combined ratio for Q1 2025 was 96.1%, including 3.7 points of catastrophe losses and 0.4 points of unfavorable prior year casualty reserve development [11] - Return on equity and operating return on equity were both 14.4% [3][11] - Net premiums written grew by 7%, primarily from excess and surplus lines and standard commercial lines, while personal lines premiums decreased by 12% due to profit improvement actions [8][11] - After-tax net investment income was $96 million, up 12% year-over-year [3][11] - Book value per share increased by 5% during the quarter [3] Pricing and Underwriting - Overall renewal pure pricing increased by 10.3%, up 2.2 points year-over-year, with personal lines renewal pure price at 24.1% [3][4][9] - Standard commercial lines renewal pure price was 9.1%, with general liability at 12% and commercial property and auto both exceeding 10% [3][9] - Workers' compensation pricing remained negative at approximately -3% [5][9] Strategic Initiatives - The company added 30 new agency locations in Q1 2025 and expanded into 13 new states since 2017, contributing $350 million in premiums written for standard commercial lines during 2024 [5][9] - Management expects rate changes to remain above loss trends but moderate compared to 2024 increases [5][9] Market Environment - The insurance industry faces significant macroeconomic uncertainty, including financial market performance and potential recession risks [9][10] - Social inflation continues to impact average casualty severities, prompting the company to focus on restoring consistent underwriting margins and operating ROEs [9][10] Investment Strategy - The investment portfolio remains conservatively positioned, with total fixed income and short-term investments representing 92% of the portfolio at quarter-end [11] - The average credit quality of the portfolio is A plus, with a duration of 4.1 years [11]

Financial Data and Key Metrics Changes - The company reported core income of $443 million, or $1.91 per diluted share, with a core return on equity of 14.5% over the last four quarters, despite significant catastrophe losses from the California wildfires [7][21] - Underlying underwriting income increased to $1.6 billion pre-tax, up more than 30% year-over-year, with a consolidated underlying combined ratio improving by 2.9 percentage points to 84.8% [8][22] - Catastrophe losses totaled $2.3 billion pre-tax, primarily due to the California wildfires, with an unchanged estimate of $1.7 billion for these losses [9][25] Business Line Data and Key Metrics Changes - Business Insurance segment income was $683 million, with a strong underlying combined ratio of 88.2% and net written premiums growing by 2% to a record $5.7 billion [31][32] - Bond and Specialty Insurance generated segment income of $220 million, with a combined ratio of 82.5% and net written premiums increasing by 6% [40][41] - Personal Insurance reported a segment loss of $374 million, with a combined ratio of 115.2%, impacted by the California wildfires, but underlying combined ratio improved to 79.9% [46][47] Market Data and Key Metrics Changes - The company experienced strong production results across all segments, with net written premiums growing to $10.5 billion, driven by strong renewal premium changes [14][17] - In Business Insurance, renewal premium change was 9.2%, with retention improving to 86% [33][15] - In Personal Insurance, net written premiums grew by 5%, particularly in the homeowner's business, with renewal premium change reaching 19.6% [17][50] Company Strategy and Development Direction - The company is positioned for strength in 2025, focusing on a diversified portfolio and maintaining attractive loss and expense ratios [18][19] - Continued investments in technology and strategic initiatives are aimed at enhancing competitive advantages and optimizing operating leverage [23][68] - The company plans to maintain a strong capital position while continuing to return excess capital to shareholders through dividends and share repurchases [11][29] Management's Comments on Operating Environment and Future Outlook - Management expressed confidence in navigating an uncertain macroeconomic environment, highlighting strong cash flow and a robust investment portfolio [20][19] - The company anticipates manageable impacts from tariffs, primarily affecting physical damage repair costs, with a potential mid-single-digit increase in auto severity [55][57] - Management remains focused on maintaining strong underwriting margins and adapting to evolving market conditions [60][70] Other Important Information - The Board of Directors declared a 5% increase in the quarterly cash dividend to $1.10 per share, marking 21 consecutive years of dividend increases [14] - The company reported strong operating cash flows of $1.4 billion for the quarter, despite elevated payouts related to catastrophe losses [10][27] Q&A Session Summary Question: Impact of tariffs across businesses - Management indicated that the direct impacts of tariffs are manageable, primarily affecting physical damage repair costs, particularly in private passenger auto [55][56] Question: Growth in business insurance - Management confirmed that the 2% growth in business insurance should account for a four-point reinsurance drag, indicating strong production levels [61][62] Question: Technology spending - Management clarified that a portion of technology spending is for maintenance of legacy systems, while strategic investments have increased significantly [64][68] Question: Personal insurance pricing and social inflation - Management acknowledged that social inflation continues to impact the industry, with pricing adjustments being made in response to rising replacement costs [104][105] Question: Homeowners and auto business growth - Management noted constraints in California but indicated opportunities for growth in other states, with a focus on managing property capacity [120][121]