Selective(US:SIGI)2022-02-04 20:59Financial Data and Key Metrics Changes - The company reported a non-GAAP operating ROE of 14.3% for the full year, significantly above the target of 11% [7] - For Q4, the non-GAAP operating ROE was 13.8% [7] - Net income available to common stockholders per diluted share was $1.59 for Q4 and $6.50 for the full year, with non-GAAP operating EPS of $1.56 for Q4 and $6.27 for the full year, reflecting a 51% increase from 2020 [19][19] Business Line Data and Key Metrics Changes - Standard commercial lines net premiums written increased by 8% in Q4 and 16% for the full year [23] - Personal lines net premiums written increased by 1% in Q4 but decreased by 1% for the full year [24] - E&S segment net premiums written grew by 27% in Q4 and 23% for the full year [25] Market Data and Key Metrics Changes - The company achieved an overall renewal pure price increase averaging 4.7%, with commercial lines at 5% and E&S at 5.9% [8] - The combined ratio for the commercial lines was 93.1% for Q4 and 91.9% for the full year, indicating strong profitability [23][23] Company Strategy and Development Direction - The company plans to expand its commercial lines footprint by entering three additional states in the latter half of the year [10] - Strategic initiatives include enhancing technology platforms and expanding the MarketMax agency-facing platform to identify new business opportunities [9][10] - The company aims to maintain a disciplined approach to underwriting and pricing while leveraging sophisticated tools for risk selection and claims management [11][15] Management's Comments on Operating Environment and Future Outlook - Management highlighted uncertainties in forward loss trends due to economic inflation, social inflation, and unusual frequency and severity patterns from recent accident years [12][13] - The expected loss trend for 2022 has been increased from approximately 4% to 5% due to these factors [13] - The company remains confident in sustaining superior financial performance and achieving its 11% non-GAAP operating ROE target for 2022 [32][38] Other Important Information - The company reported a strong capital position with $3 billion of GAAP equity and a book value per share increase of 9% during the year [30] - The expense ratio for the year was 32.5%, down from 33.8% in the prior year, with expectations for it to remain flat in 2022 [21][21] Q&A Session Summary Question: Can you elaborate on the increase in the expected loss trend from 4% to 5%? - Management explained that the increase is driven by economic inflation, social inflation, and unusual frequency and severity patterns from the last two accident years [44][44] Question: Is the upward movement in trend due to Selective's exposure in commercial auto? - Management acknowledged that while commercial auto has a higher expected forward trend, the overall expected loss trend is influenced by various factors across different lines of business [50][51] Question: What is the outlook for the E&S segment given its strong premium growth? - Management expressed confidence in the E&S segment, noting strong new business and retention rates, while maintaining a focus on lower limits profile business [71] Question: Are there plans for significant rate actions in personal auto? - Management indicated that while profitability needs improvement, they expect to begin increasing rate levels in personal auto on a go-forward basis [74] Question: What is the target for the expense ratio in 2023? - Management stated that the long-term target for the expense ratio is 32%, with plans to achieve this by 2023 [77]