Selective(SIGI)2024-10-22 15:57Financial Data and Key Metrics Changes - The company reported fully diluted net income of 1.40 per share for Q3 2024, with a year-to-date return on equity (ROE) of 5% and operating ROE of 4.8% [18][22] - The GAAP combined ratio for the quarter was 99.5%, including 13.4 points of catastrophe losses, with an underlying combined ratio of 87.7%, which is 2.7 points lower than the previous year [18][14] - The company expects a GAAP combined ratio of 102.5% for 2024, up from previous guidance of 101.5%, reflecting higher catastrophe loss assumptions [23] Business Line Data and Key Metrics Changes - In standard commercial lines, net premiums written grew 8% in the quarter, driven by a 13.4% renewal premium change, with a combined ratio of 99.2% [14][12] - Excess and surplus lines represented 12% of net premiums written, with a 28% increase in net premiums written and an 83.2% combined ratio [15] - Personal lines net premiums written decreased by 2%, with renewal pure pricing at 22.8% and an average policy size increase of 19% [16] Market Data and Key Metrics Changes - The company added Washington, Oregon, and Nevada as standard commercial line states, bringing the total to 35 states since 2017 [13] - The company achieved a meaningful increase in general liability pricing from 7.6% in Q2 to 10.2% in Q3, while commercial property renewal pure pricing was 12% [12] - Commercial lines pricing, excluding workers' compensation, increased by 10.2%, with exposure growth contributing 3.9 points to total renewal premium change [13] Company Strategy and Development Direction - The company aims to deliver combined ratios in line with or better than the 95% target in each insurance segment, focusing on stability for distribution partners and long-term returns for shareholders [9] - The company is willing to trade growth for profitability in the current loss trend environment, emphasizing disciplined underwriting and claims management [11] - The strategic focus includes expanding into new states while managing catastrophe exposure through strict guidelines and conservative reinsurance programs [14] Management's Comments on Operating Environment and Future Outlook - Management acknowledged the challenges of social inflation impacting severity trends and emphasized the importance of continued underwriting discipline [10] - The company remains confident in its ability to create value despite elevated catastrophe losses, with a strong capital position providing flexibility [17] - Management highlighted the stability of their portfolio and the proactive measures taken to address loss trends, particularly in commercial auto [34] Other Important Information - The company repurchased approximately 103,000 shares of common stock at an average price of 75.5 million remaining under the share repurchase authorization [23] - A quarterly dividend of 93 million for the quarter [22] Q&A Session Summary Question: Clarification on commercial auto reserves - The company confirmed a $10 million addition to the current year for commercial auto reserves [26][30] Question: Impact of social inflation on commercial auto - Management noted that commercial auto pricing has been stable and strong, with a long-term track record of consistent pricing responses [28][29] Question: Future of personal lines and growth strategy - Management indicated a focus on executing successfully in the current target market before considering expansion, with potential for state expansion in the future [76] Question: Rate trajectory in personal lines - The company expects to continue filing for rate increases until achieving target combined ratios, with a blended rate of 22.8% in the quarter [55][56] Question: Impact of elevated catastrophe losses on incentive compensation - The incentive compensation program includes catastrophe losses, which can put downward pressure on financial performance-related compensation [71]