Selective(US:SIGI)2024-05-04 15:31Financial Data and Key Metrics Changes - The company reported an operating return on equity (ROE) of 11.7% and a net premium written growth of 16% in the first quarter [25] - The combined ratio was elevated at 98.2%, above the target of 95%, primarily due to $35 million in net unfavorable prior year casualty reserve development [25][47] - Catastrophe losses contributed 5.3 points to the combined ratio, which was 0.8 points better than the first quarter of 2023 [47] - The company experienced a decrease in fully diluted EPS to $1.31, down 11% year-over-year, while non-GAAP operating EPS was $1.33, down 8% [47] Business Line Data and Key Metrics Changes - The Standard Commercial Lines experienced $50 million of unfavorable general liability reserve development, partially offset by $15 million of favorable workers' compensation development [25][47] - The combined ratio for the Excess and Surplus lines was reported at 87.6%, with net premiums written growth of 24% [45] - Personal Lines saw a 17% increase in net premiums written, driven by strong rate increases and larger average policy sizes, although new business premiums declined by 19% [74] Market Data and Key Metrics Changes - Renewal pure pricing for general liability and umbrella increased to 6.5%, up from 5.7% in the previous quarter [26] - Overall renewal pure price was 8.1% in the quarter, up from 7.4% in the fourth quarter of 2023 [45] - The company expects full-year 2024 personalized renewal pure pricing to exceed 20% [74] Company Strategy and Development Direction - The company emphasizes a unique field model that empowers underwriting staff to maintain strong relationships with distribution partners, which is seen as a competitive advantage [27] - Geographic expansion continues to be a strategic focus, with plans to launch in additional states in the coming years [46] - The company aims to achieve a combined ratio target of 95% across its insurance segments while responding to adverse trends in a disciplined manner [25][45] Management's Comments on Operating Environment and Future Outlook - Management highlighted the impact of social inflation on claims severity, indicating that this trend is expected to continue affecting the industry [26][18] - The company acknowledged elevated uncertainty in the loss trend environment but remains confident in its ability to manage pricing and underwriting actions effectively [30][45] - The management anticipates that the general liability pricing will accelerate further in the coming months due to ongoing social inflationary pressures [26] Other Important Information - The company reported a debt-to-capital ratio of 14.3%, well below the internal threshold of 25%, providing financial flexibility for growth initiatives [48] - After-tax net investment income was $86 million, up 17% from the previous year, contributing significantly to ROE [64] Q&A Session Summary Question: Can you break out the cat losses within Standard Commercial? - The company reported $38.5 million of cat losses, with $32.9 million from commercial property, $4.2 million from BOP, and $1.4 million from commercial auto [4] Question: How are you thinking about casualty reinsurance renewals? - Management indicated that they are early in the renewal process and will evaluate pricing and terms before making structural changes [12][14] Question: Is litigation funding impacting claims? - Management acknowledged that while litigation funding is not the primary driver, it does have an impact across various accounts, particularly in states with challenging litigation environments [5][16] Question: What is the outlook for general liability pricing? - Management expects general liability pricing to accelerate further, driven by social inflation and increased claims severity [26][45] Question: How does the company view the current accident year reserves? - The company is reacting to paid data and adjusting reserves based on historical development factors, indicating a proactive approach to reserve management [36][37]