Selective(SIGI) - 2019 Q3 - Earnings Call Transcript

Financial Data and Key Metrics Changes - The company reported a combined ratio of 95.2% for Q3 2019, with an annualized operating return on equity (ROE) of 11.2% [11][31] - Non-GAAP fully diluted operating earnings per share were $0.97, while fully diluted earnings per share were $0.93 [31] - After-tax net investment income increased by 6% to $45 million for the quarter, and 15% for the nine months [11][43] Business Line Data and Key Metrics Changes - The standard commercial line segment, representing approximately 80% of premiums, achieved a net premiums written growth of 7% for the first nine months [53] - The combined ratio for the commercial lines was 93.9%, with renewal pure price increases of 3.3% [54] - The personal lines segment reported a 1% decline in net premiums written, with a combined ratio of 96.9% [64] Market Data and Key Metrics Changes - The company experienced a 3.7% increase in renewal pure pricing for commercial lines in Q3, continuing a trend of price increases [13][21] - The E&S segment generated a 7% net premiums written growth for the nine months, with a combined ratio of 94.7% [67] - The competitive environment in personal auto has intensified, impacting new business and retention rates [91] Company Strategy and Development Direction - The company is focused on generating profitable growth through increasing share of wallet within distribution partners and expanding into new states [16][75] - Strategic initiatives include managing pricing in alignment with expected loss trends and leveraging technology for better underwriting and claims decisions [72][78] - The company aims to maintain a disciplined approach to underwriting and pricing, particularly in the workers' compensation and commercial auto lines [19][60] Management's Comments on Operating Environment and Future Outlook - Management noted that the pricing environment for standard commercial lines is expected to increase due to lower interest rates and rising claim trends [19][20] - The company anticipates continued upward momentum in new and renewal pricing, which will enhance underwriting margins in 2020 [13][27] - Management expressed confidence in the company's ability to maintain attractive ROEs despite market challenges [27][82] Other Important Information - The company declared a 15% increase in the quarterly cash dividend on common stock to $0.23 per share [29] - The balance sheet remains strong with $2.1 billion of GAAP equity, reflecting a 19% increase year-to-date [48] Q&A Session Summary Question: Can you discuss the general liability line and rising loss trends? - Management highlighted their disciplined reserving process and expressed confidence in their current position regarding general liability, noting consistent pure price increases over the past decade [84][85] Question: What is the competitive landscape in personal auto? - Management acknowledged that hit ratios remain under pressure due to higher price increases compared to the market, impacting competitive positioning [91][92] Question: What are the trends in the E&S segment? - Management noted that while there is pressure in the E&S segment due to year-over-year comparisons, they expect to see improvement in pricing and growth in core binding authority business [100][125]