Selective(US:SIGI)2023-08-05 15:51Financial Data and Key Metrics Changes - The company reported a 17% growth in net premiums written, driven by a 33% increase in new business premiums and a renewal pure price change of 6.4% [27][28] - The operating ROE for the first half of the year was 12.2%, slightly above the 12% target, despite elevated catastrophe losses [26][13] - The consolidated combined ratio for the quarter was 100.2%, impacted by $100 million in net catastrophe losses, contributing 10.6 points to the combined ratio [37][36] - After-tax net investment income for the quarter was $77.8 million, up 37% from the previous year, driven by core fixed income [40] Business Line Data and Key Metrics Changes - In Commercial Lines, new business was up 23%, with a renewal rate of 6.7% and exposure growth of 4.6% [6] - Personal Lines net premiums written grew 32%, although profitability in this segment is still below target [10] - The E&S segment experienced a 20% premium growth, but was negatively impacted by elevated catastrophe losses, resulting in breakeven underwriting results [32] Market Data and Key Metrics Changes - The company has expanded its Standard Commercial Lines footprint by adding 8 states since 2017, contributing 2 points of premium growth in the first half of 2023 [8] - The property renewal pure rate increased by 11.7%, with exposure up 5.8%, leading to an 18.2% total renewal premium increase [9] Company Strategy and Development Direction - The company plans to introduce 5 new states to its Standard Commercial Lines footprint over the next 2 to 3 years, with West Virginia and Maine on track for early 2024 [8] - The strategy includes transitioning to a mass affluent customer base, focusing on less price-sensitive customers who value coverage and service [33] - The company aims to maintain a long-term combined ratio target of 95% and generate ROEs at or above 12% [7] Management's Comments on Operating Environment and Future Outlook - Management acknowledged the impact of elevated catastrophe losses but emphasized the company's strong balance sheet and risk management capabilities to navigate these challenges [26] - The company expects to see a greater number of rate filings with more meaningful increases in the third and fourth quarters [11] - Management remains optimistic about achieving full-year targets despite the challenges faced in the first half of the year [36] Other Important Information - The company has a strong capital position with $2.7 billion of GAAP equity and $2.5 billion of statutory capital and surplus as of quarter end [18] - Book value per share increased by 5.8% this year, or 7.4% adjusted for dividends [18] Q&A Session Summary Question: Can you provide details on agents turning to Selective for property coverage as small competitors pull back? - Management highlighted that Selective is viewed as a consistent underwriting partner, focusing on high-quality accounts and maximizing growth in familiar market segments [50] Question: What are the expectations for the pure renewal rate in standard commercial? - Management noted that the pure renewal rate has remained relatively flat, with expectations for continued strong rates driven by loss trends [57][58] Question: How is the company addressing pricing in personal lines? - Management indicated that they expect new and renewal rates to be in the mid-teens for 2024, with ongoing adjustments based on loss trends [60][61] Question: Can you comment on the reserve development within Commercial Lines? - Management confirmed that they feel confident about their current year loss picks and have seen favorable reserve development trends, although personal auto has been a drag [63][64]