Selective(US:SIGI)2022-05-07 21:33Financial Data and Key Metrics Changes - The company reported a net income available to common stockholders per diluted share of $0.89 and non-GAAP operating EPS of $1.41, with an annualized non-GAAP operating ROE of 12.8%, exceeding the 11% target [27][8] - The combined ratio for the quarter was 93.1%, which included 2.5 points of net catastrophe losses and 2.5 points of net favorable prior year casualty reserve development [28][9] - Book value per share declined by 8% during the quarter, driven by $275 million after-tax mark-to-market losses on fixed income securities [23][49] Business Line Data and Key Metrics Changes - In the Commercial Lines segment, net premiums written increased by 11%, driven by renewal pure price increases averaging 4.8%, excellent retention of 87%, and exposure growth of approximately 3.5% [36][9] - The Personal Lines segment saw net premiums written remain flat, with renewal pure price increases averaging 0.6% and retention slightly up at 84% [38] - The E&S segment experienced a 29% growth in net premiums written, with renewal pure price increases averaging 7.7% and new business up 25% [39] Market Data and Key Metrics Changes - The company noted strong growth in the E&S market, with premium growth remaining robust and opportunities for favorable rates continuing [76] - The company is expanding its geographic footprint, with plans to open in Alabama, Idaho, and Vermont, which are expected to contribute to future growth [57][58] Company Strategy and Development Direction - The company is focused on maintaining a disciplined approach to pricing and retention across its Commercial Lines, which has been a key driver of its strong operating results [12][25] - The company is migrating its personal lines business towards the mass affluent market, where it sees competitive advantages [59] - Investment in automation technology for the E&S business aims to enhance underwriting controls and process efficiency [60] Management's Comments on Operating Environment and Future Outlook - Management highlighted ongoing uncertainty in loss trends due to economic inflation, social inflation, and the impact of the COVID-19 pandemic [14][32] - The company remains confident in its ability to navigate an uncertain economic environment while maintaining strong profitability and growth [61] - Management expects to generate about $1 billion of investable cash flow during the remainder of 2022, which will be invested at higher reinvestment rates [45] Other Important Information - The company reported $245 million of after-tax net unrealized investment losses in stockholders' equity during the quarter, but noted no deterioration in overall credit quality [48] - The company has $96.5 million of remaining capacity under its share repurchase program, which it plans to use opportunistically [51] Q&A Session Summary Question: Regarding underlying loss ratio in Commercial Lines - Management indicated that non-cat property losses were primarily driven by auto physical damage severity rather than property-driven items [64][66] Question: Trends in casualty loss - Management confirmed that casualty loss trends are in line with expectations, with some favorable frequencies observed in certain lines [70][72] Question: Rate trends in Commercial Lines and E&S - Management noted strong rate trends in E&S and sequential improvement in Commercial Lines, attributing this to economic inflation pressures [76][78] Question: Commercial auto frequency and severity - Management stated that commercial auto frequency remains slightly better than pre-pandemic levels, with severity being the main concern [80][82] Question: Argo renewal rights deal performance - Management acknowledged that the success rate from the Argo renewal rights deal has been lower than anticipated due to maintaining underwriting discipline [83][85] Question: Workers' compensation and wage impacts - Management indicated that wage growth is assumed in indemnity loss cost assumptions, with potential benefits on the medical side due to wage inflation being above medical inflation [92][94]