SIGI - Earnings call transcript Q4 2017 | Selective Insurance Group, Inc.

Due to licensing restrictions, you must log in to view earnings call transcripts.

Operator

Good day, everyone. Welcome to Selective Insurance Group fourth quarter 2017 earnings call. At this time, for opening remarks and introduction, I would like to turn the call over to Senior Vice President, Investor Relations and Treasurer, Rohan Pai.

Rohan Pai

Good morning, everyone, and thank you for joining the call. This call is being simulcast on our website and the replay will be available through March 2, 2018. www.selective.com. which on reconciliations on this page our package, measures non-GAAP the investor of to referred call website, supplemental includes of GAAP financial Investors A is available in Certain the in GAAP previously report Form and annual Form filed will XX-Q financial be reports. our call are also measures that included XX-K quarterly on stated losses deferred To in our of income, asset income net is after-tax was analyze XXXX operations, impact operating recognized the the if trends in tax excluding realized of net on charge that or relation any. gains which operations, discontinued tax reform we use investments, result the in non-GAAP and to providing evaluate for this that makes measures investors believe our it to business. easier We insurance non-GAAP

projections statements Reform are made during As reminder, XXXX. a this as Securities Litigation by and forward-looking the Act Private of some of statements defined call the

of Form risks not uncertainties. report and Forward-looking Please detailed any and We guarantees revise these with Commission obligation discussion and for or of note you a statement. uncertainties. Exchange object and any on to to refer statements future undertakes Selective's annual no the US Selective XX-Qs to update XX-K risk forward-looking that Securities and performance are filed Form are

Chief Selective's Wilcox, call Financial the the Officer; President Officer. Marchioni, on Chief today Joining Executive John Mark team following executive members are – of management Officer; Murphy, Operating Greg and and Chief

the Now, turn call I'll over Greg. to

Gregory Murphy

our we introductory initiatives. more proud make results color for Thank XXXX. financial will underwriting our and We're Rohan, will discuss the Mark for you, in XXXX. detail, on some financial focus of John remarks year then on and operations additional good first I'll results extremely high-levels key review full generated morning. then providing some themes and insurance our

of catastrophe ongoing our of long-term new non-GAAP Lines Our weighted competitive expected cost industrywide underwriting given environment level with average return interest of basis low points in losses, and return was achieving above rates. an the goal record capital, impressive of sustained XXX on equity line XX.X% result our operating Commercial money

excellent basis, ratio on was combined casualty adjusting statutory XX.X%. underlying reserve And XX.X%. statutory was an strong XXXX extremely after Our an an losses and development, prior-year or

XX% In income addition, year. million, up our net last was over $XXX investment after-tax

we've of high as XXXX, as catastrophe of seen hurricanes billion. quarter. followed quarter, devastating experienced insured the wild global portions Irma third fires damage industry For significant estimates and the losses causing by California In $XXX Harvey, the in the in fourth Maria,

risks. raise year expect ongoing the for pricing significant weather, property activity this industry-wide severe of With capacity volatility carriers on and loss to we pressure

combined pure highlighting generate to will overall that points not industry losses loss For for adequate renewal Remember, on achieving X.X several average not produce industry averages. order additional Higher ratio. money capital. volatility, you're below pace Selective, increases inflation returns claims in rate catastrophe you with the for continue ten-year new keep yields. low We've on to must was claim capacity the and industry expecting after-tax accounted quarters been points, support inflation. that XXXX price ratings And X.X our well needs

rate for federal coupled strong with establishes X.X% with by effective were points rates US lower estimated new after-tax strong excellent that achieving that future of stable premiums for including, to that excess renewal improving X.X%; our Commercial objectives table quality, set difficult underwriting several performance, will written. and cash XX for maintaining underwriting All tax and growth. on these money four, corporate investment XXXX our flows successfully profitability; execute to segment strong while ongoing of base in three, achievements a two, of results surplus a income renewal continue taxpayers written sustained net one, increase price and We XX% operating and improve tax actions targeted the profitable pure Lines approximately standard retention; lines reduce

estimated Colorado appointments. geographic year. of which as to efforts in by opportunity. financial is later outperformance premium position the Selective additional number January A are expect and add and share us track represented we should Line Lines truly state for bring our X% The New for Hampshire. to these expansion entered high-caliber Commercial $XX implies premium two This by In we will states Commercial And states, market to of investing total make our always of XXXX, unique of We're Utah the Arizona company Mexico Commercial Line industry XX five billion. the XXXX close Our long-term this total and opened we end partners million amount sustained distribution and attract best. in an new $XXX on to New XXXXX.

of company the Some of as advantages key follows. are competitive the

League First, empowered is partners, of our which true Ivy the model enabled our franchise model, underwriting a marketplace. differentiator field distribution by in

products state. the We in agents have relationships be and need to resources among and with the and distribute per Commercial through partners, partners our distribution our the best about successful. industry X,XXX tools, averaging Lines entirely best on with services We the focused XX product they providing are distribution

X.X distribution for a Our as scale rated on XX-point are partners overall satisfaction.

and coupled to Second, best our that by XX% market-leading price pure sophisticated and business. Commercial out underwriting Lines allow tools our with written faster, This better enhancing people retention. X.X%, is for of our make an processes outcomes renewal build we while renewal decisions demonstrated increases new to continue

at significant an expectations how recognize they customers' making evolving. of Selective focused in environment. we our with on is centricity we're and engage omnichannel enhancing the us rapidly overall on that investments the experience Customer heart are Third, customer

XXX-day service We in XX-hour, continue environment. to providing strive towards customer best-in-class a

area are to goals enhanced business. lead business new this quality of our retention time Our higher over customer should volumes centered rates, improve which and to technology around leveraging in

increasing operating in overall X.X% our on plans footprints. assets a excess our premiums net percentage XXXX, three, investment growth market corporate share ROE. one, our X% higher portfolio Lines profile a of In we share, non-GAAP written. include, after-tax representation; of had and two, had as wallet; in Our was date, League of states performance per equity, distribution long-term dollar Ivy geographic billion which $X X.X we're XX Commercial contributing To in create expansion yield excellent partner points $X.XX of stockholders' of our to investment of

managers securities during fixed Our output effective duration short-term increasing of investments remains the including income The or generated low without X.X risk. year significant credit duration portfolio years. relatively at

targets. achievements each be not us who tools technologies the exceed improve, and investments to our Dufala, as been roles focus Chip has future. and have and meet Selective's Vice best-in-class management XXXX and hire day Our history making for Lines in could commercial work, employees, continually today most for accomplished industry team, hard dedication and the leadership to established without we're Personal latest strive segments. of position of The I grow President, well the leveraging the executive while to also the to want business and Operations. our Executive Chip Insurance welcome long responsible will in recent a

duration. hope versus expected When As strategy; versus increases key the income new closely it this must down many effective times, and comes a after-tax industry, monitored. stated earned performance inflation I've the is to has in following no pure one, rates renewal not claims mercy. improving money fixed two, and price arithmetic drivers Overall, be

approximately losses turn of net One, marketplace income approximately inclusive to million our of combined securities rate tax approximately losses Two, XX% losses I'll $XXX a of current includes the the inclusive following. X.X combined incorporates tax which and currently the of which X.X% of after-tax shares investment prior-year based catastrophe effective casualty basis. review X.X average for items. GAAP XX%. outstanding an investment five, and diluted of portfolio. million Three, our catastrophe corresponds reserve statutory weighted XX% ratio other from GAAP a all no points. XXXX, of Now, in of development. are advantage And of municipal shares This of combined Four, assumes ratio XXXX catastrophe on on XX.X investment to of a ratio million, our rate of investments, guidance income alternative XX. after-tax of points The on $XX expectations excluding XX.X tax

the the Now, call I'll to results for the review turn to quarter. Mark over

Mark Wilcox

Greg. you, Good morning. And thank

of diluted fourth losses Tax XX Despite after-tax from a XX% Cuts at the the XXXX. tax federal of our which will of lower we rate. value earnings share is for earnings deferred tax For Or of period pay-back is were expectation operating reported Act one-time approximately charge $X.XX income from million, it tax income less value overall net tax per and non-GAAP a implementation the assets $X.XX quarter, the net points Jobs should full the $XXX,XXX up effective per operating of for now and $XX non-GAAP fully one-time XX per charge, forward, asset the XXXX, XX% which effective share. percentage book of it value rate going quarter expected current of share, to in our months. and an to rate investment of and a in our reduction be is than be realized of Excluded the result than of for deferred lower neutral, net book the be realized which the

tax-advantage assuming were all on XX%. fourth XX% allocation annualized non-GAAP other effective XX% tax ROE bit items. will an and municipal we we on going income mentioned, depending investment the operating a to forward, this a Greg As our around quarter, on move generated rate although securities In approximately of

non-GAAP which operating our is of up we of ROE XX.X% XX.X%. essentially year, year with full operating The XXXX. income a financial of XX% the from non-GAAP For generated target ROE million, and line in non-GAAP is for full XXXX operating $XXX

average financial target X.X% has into increased our therefore weighted Going and X% estimated from increased cost have to we capital our XXXX, XX%. of to

with fourth and points percentage portfolio ROE. net generated our of ROE. $XX coupled For investment X.XX investment which of income after-tax generated million, the ratio equity of income of $XX times, X.X underwriting of quarter, X.X million points The generated to totaled assets after-tax

written development, quarter points and XX-state GAAP quarter pure premium our combined quarter our by basis. quarter. investment full was year, two The while prior-year XX.X% XXXX, business the basis, points X.X for driven statutory consolidated with premiums casualty consolidated good from quarter a an basis and was of an a income full in and elevated on the the XX.X% for was for driving X.X losses stable generated levels contributed footprint, For reserve ROE, includes which mainly catastrophe statutory in our in the the renewal fourth a with It combined or comparative ratio opportunities to prior the losses strong non-catastrophe to XX.X% growth year on estates. of ratio and new points. quarter, On property additional fourth up of growth, X% net XX.X% X.X premium somewhat difference underwriting underlying retention X% the by strong compared new pricing, the performance in at

property XX.X% expense from basis than have non-cat margin points all-in year, for full as as excluding our year in initial an improvement elevated on XXXX was driven current impacting improved XXXX a losses in Overall, XX.X% statutory our of year, the combined the in are of the line For our basis an in record basis to combined level the business. the underlying XX.X% improvement, accident XXXX, points losses. ratio, for in point of pleased for is catastrophe in Of XX or statutory for basis. commercial ratio our delivered margins an by forecast auto underwriting we which came deterioration very well to ratio about which in XX us XX.X% XX majority XXXX, better underlying

million casualty $X line our the line percentage workers' prior-year of quarter, million million auto trends. $XX favorable lowered development of combined offset X.X $XX of the of driven which in claims by net adverse commercial which and development, emerging by resulted in million Better-than-expected During fourth partially favorable business experienced quarter, the in compensation in reserve of auto, is personal we by quarter's points. $XX ratio business of development our unfavorable

million of casualty For net development. reserve $XX prior-year the year, favorable we experienced

underwriting pleased Commercial performance was but growth continuing by generate E&S increase with each of impacted targeted prices strong premiums with Profitability segments Net Personal are segments, for results. implement to the Lines We premium our was each segment, and efforts and our during in the was volume changes. written Line exceptional of solid quarter. operating commercial across to

easier Moving between underwriting there expenses. cost, note of on corporate analyze The was presented the main it and begun calculate project now prior to from to expenses not expenses you been segment income acquisition can our our change. our the other calculating that reflect splitting for and have related All this been makes to is and specifically, results. to expenses, expenses, we've ratio a expenses. made expense any directly corporate More include change do you the amortization now deferred which when expenses expense reporting, please insurance previously periods statement ratio our policy insurance hopefully change to had allocated reclassified which

down insurance expense the and points from continuing ratio, employees initiatives other after-tax efficiency our over quarter basis GAAP our fourth in hiring, of enhancing quarter. overall to Overall, the see overall including continue the quarter, and experience. was million while severance categories were for elevated expenses XX% tools that is expansion, to Our key fourth quarter. comparative XX which the of expenses underwriting savings, to and our several dividends, and Included the other items related around cost in we geographic invest for customer $X

more expense XXXX, work with made be in We ratio there's still the to progress we've reducing recognize pleased are done. during but

basis XX For XX.X% points expense XXXX. year XXXX, XX.X% is compared to down statutory to in the full the ratio

to Corporate stock continue up drive holding relative costs our relative elevated and and comprised compensation, are to pre-tax which quarter of down ratio remain over this $X expectations. to were generally to expenses, the XX% to comparative long-term time. expect company billion We longer-term

program, As from stated recent in our our the costs in calls, strong this stock our share compensation to arising XXXX. the primarily related price higher due is to long-term appreciation on

our volatility last level changes savings property our were highlighted long-term work renewed successfully this line expect that we to compensation These in will savings the XXXX should in way lower our item expense program. result line a conditions. million of program to level. with due retention while We XXXX early catastrophe $XXX an shield and quarter, well. expense modest rate sale and time we a through expanded As terms stock their corporate over very billion the of item as made in distribution, program increase tax to the exposure-adjusted corporate resulting into the take million losses and and maintained lower improvement price in to $XXX tax We for our reinsurance we from the for to $XX account

events footprint. that in our our reinsurance geo We events would with to also our and heavy we XX benefits per in E&S pleased million reduces specific of partnership million our the $X approach management, Arizona, process cat treaty Colorado. year renewed New volatility geographic and potential Hampshire and includes outside superior expansion state of Overall, catastrophe excess reflects catastrophic [indiscernible] it specifically initiatives, of to $XX states be book This of of the recent occurrence our risk underwriting are to also a outcome believe the our account renewal and long-term loss-free managing relationships. from

million Turning to our represent net investments was ago. year from book from resulting in a after-tax higher for securities, yield. the quarter, of income which income after-tax experienced net increase investment up mostly income XX% Fixed an investment totaled and $XX a XX% portfolio,

alternative quarter income quarter investments. from very lag, income pretax for fourth effective average a portfolio yield equities the on investments, and portfolio, of allocation been X.X% our portfolio an and private the time year of and income gradually fixed the to for a the rated during solid Risk the short-term The at fixed opportunities. modestly our portfolio AA X% results year reported securities, and will the compared was to total over modestly to portfolio our investment during return increase strong a Our include continue market credit overall rating X.X%. gain up money investment year diversifying solid with X.X-year We've principally X.X% a million is the after-tax a conditions Alternative year. of which new were minus assets duration, X.X% including likely performance The depending highly on end ago. after-tax on quarter. asset a high-yield assets, averaged fixed X.X% yield ago. in on was public which total report income on fixed The one-quarter driven equity $X The portfolio. by portfolio were

unrealized in earnings of balance by investment year. dividends $X.X Our and for per cap per with remains share strong up benefiting part net the billion share Book offset was $X.XX for from strong year, the value XX% gains, sheet equity. of

approximately our ratio are expected times, about continue to industry target We twice adequately the premiums which surplus of capitalized a support to X.X to average. and growth is

as maintain to tax model post of adopt operating and operating as risk we us higher our point continue rate, rate each reinsurance a to basis well reserving portfolio, managing we to XX% growth XXX our This now reform. combined environment. investment low respect as positions underwriting if is catastrophe calculate the operating risk to sustainable in to industry the Our equating plan around ROE, to stance points conservative of appetite, processes, whole, which leverage with today's superior interest management. allows This with returns X% ROE generate ratio

spread between our improvements XX.X%. and improvement by to GAAP XXXX, compares our part XXXX combined of ratio of This mix Greg inflation. in underlying driven ratio. combined our loss as basis GAAP claims for by margin mix earned is improvements and ratio a The forecast is points mentioned, XXX offset XXXX expected relatively rate, for improvements, The evenly of loss XX%. underlying and underwriting Turning is to forecast ratio ratio expense claim improvement

majority discussions John turn basis, I'll to With and on a Before I focus. this to our will insurance change, to the conclude, going we disclosures line the of level we conjunction to corresponding and business we want to our operations. accounting a I focus accounting from of focus discuss GAAP plan call that, disclosures. commentary GAAP and forward, statutory with segment a and from and the consolidated numbers statutory our eliminate move In that, over mention ratios

John Marchioni

Thanks, Mark. morning. And good

price namely strategy our by As We'd XXXX, on relationships, enabled leveraging to focus for our and our risk allow opportunities underwriting we and field tools, to us into basis agency to and franchise our capitalize remains superior customer our we strengths, the competitive a execute customers. our model, granular underwriting on sophisticated by look agents provide move unique experience segment growth. which our profitable

discipline the focused in generating culture is this on a our that of shareholders is on for of returns All a risk-adjusted underwriting context adequate basis.

share premium Commercial our achieve often market markets share to our available wallet current partners. appoint Commercial growing to have Lines of footprint represent Lines. plans, XX% in agents to of appointed a our states distribution a for XX% growth seek talked X% We about long-term our within to with We and new

Arizona. During XXXX, partners footprint states, we Hampshire appointed and New XXX distribution our new in excluding

XX% legacy July Lines Our current approximately In last in New in launched stands approximately agency states. we wallet of year, our our at market X% share is of our and and Arizona product share Commercial Hampshire.

are We early performance, million receptivity our just exceeding and of six extremely with both pleased $X the in for premium with the volume operation. year months of expectations at

office regional on our the year. by Our to Lines January underwriting for serves Mexico ongoing end On in track expansion. this and Arizona business opened for as Commercial we Southwest are and open Colorado hub Utah New of the X,

plan with validates and actively to Personal are from proposition also open to do who receptivity for We business. and Selective our Arizona our value the agents these Utah in reputation. new markets seeking strength Lines Strong business

addition, to our are enhance the we footprint, a XXXX, we the compete better us. share underwriters. new multistate to underwriting our positioned of right unavailable of as present able basis our to account. to overall to insights we business risk deployed geographic previously strategy for selection. increase ability to The is integral In us given segment the existing price development our business are we for tools our allows Also, stool on accounts to underwriting as In increase a to deployment states in and granular wallet leading

We dynamics. similar they've better providing regardless positions to with real-time long the each how to into guidance piece us had, new addition of grow that In already market it insights the business believe overall model-driven accounts in the tool portfolio. of compares business provides

purchase, to Finally, and organization experience across an we customers goods customer challenge experience a insurance. on to of make rapid what develop front. the not all customer just that continue services We rivals strides as ourselves they model experience

transactions providing and across remain of around initiating with is the them. accessing ensuring focused and for customer all experience customers of multiple investments Our avenues level information consistent

experience. to partners distribution our customers with ensure our closely working present with are a we seamless We

our represented results. written XX% produced to which standard our of Turning Lines premiums Commercial segment, XXXX net operations, extremely strong again total

premiums of price net driven was of for stable Solid increases and retention written pure XX% growth by X% averaging X.X%. renewal the quarter

our the year The pricing profitability tool. We For Commercial Lines XX.X% XX% full of fourth manager the renewal level dynamic constantly written monitor based the underwriting our XXXX, year. and the X%. quarter GAAP segment premiums for on increased for on combined a net portfolio full using ratio granular was for expectations

standard of of of quality, represented accounts, in we pure point renewal highest XX.X%. quarter, renewal of X.X% retention XX% the and Lines achieved the our For Commercial rate which premiums

continuing to to On mix Commercial loss rate while equal did any allows XX% of experience additional the our lower business, rate general retaining reserve Lines, quality achieved line for renewal pure Drilling by improvement pricing pure liability, development accounts, down achieve changes, while claims that X.X%, This granular which approach of of increases we the strategy represented expected ratio XX.X%. to deliver business not our us premium, of during inflation. the administering results to line through quarter. largest

the XXXX, price experienced renewal line accident reserve years X% and totaling primarily of $XX million and year XXXX. For full of this lower-than-anticipated claim for relating increases favorable achieved XXXX prior. for approximately pure to in We severities development frequencies we

million lower expected result for severities for quarter the line comp accident XXXX favorable of of $XX workers' reserve and experienced Our as prior-year development years casualty prior. than a

financial was $XX and full flat state bureaus year by cost results. year for the an XXXX, have line reserve loss NCCI development other area steps auto favorable the been For to negative Commercial pricing remains improve the as Workers' and for million. compensation we totaled of trending focus take overall full overall. the filings individual

experienced XXXX quarter, accident the casualty unfavorable reserve to fourth relating for severities of years. million to development, commercial prior-year higher the primarily $XX For auto XXXX

current million, recent higher-than-expected we $X the this reserves frequencies line strengthened addition, for for by accident In year quarters. reflecting

this profitability In million. million. elevated For remain we're by actively averaged line, we've approximately price Loss trends the implementing should year, which XXXX. prior-year accident and in unfavorable address X% casualty $XX of the in year, was $XX additional increases To strengthened rate support XXXX. it been current by reserve development

price in been also increases, increasing we've industry reducing higher on to targeted hazard and the addition and renewal price new In classes. books actively exposures segments, managing

property commercial despite statutory combined competitive past experienced the pricing generated line and an for several ratio results over Our extremely XXXX. XX.X% has years environment profitable an

from While activity loss catastrophe property benefited footprint, our in results. on which benign put an non-catastrophe pressure book, results have activity in generally have seen geographic in the loss we has increase underlying

takes catastrophe As of losses in incurred XXXX line, the industry this the in the and severe stock we generally will anemic offered strengthen. returns pricing believe

written, XX.X% of homeowners Lines strong a ratio The XX% which fourth represented ratio full full fourth profitability year. premiums year. XX.X% were experienced GAAP for the the line and GAAP year overall combined Personal quarter premiums quarter combined for a XX.X% Our XX% combined with and XXXX. for ratio the the XX% growth of in for growth profitable total Underwriting fourth segment, quarter margins net for XXXX and the with generate of the X% GAAP

our normal We or catastrophe in auto during and or to continue we of across premiums. that ratio a of driven new pure following auto, book price increase by liability catastrophe increases improved XX Renewal our has averaged target continue one for damage a losses. price on physical XX% In year, X% X% points book XXXX. declining years combined personal homeowners personal see pure to volume, XXXX. business growth, Renewal flat in approximately average

this efficiencies, $X primarily year from $X expected full development inflation. excess accident year, quarter improve the line prior-year for million along of scale unfavorable claim by driven million for should of with casualty of reserve XXXX. and earn greater the benefit and generating in experienced rate we Profitability However, and for

filings XXXX approximately for X.X%. averaging plans rate Our incorporate

the generated of price Our comfortable averaged where and rate the which premiums our continuing to the XXXX We of profit of underperforming with our segments with quarter total full of meet price our combined and and the taking been are let in steps written, XXX% that in pockets XX.X% a business. We've business casualty appropriate lines go address targets. significantly to renewal remain E&S does increases GAAP deliberate increases rate ratio X% Overall, business new represented adequacy year-to-date obtain net for increases the X% segment, inventory. in higher of for year. of

been if consistent market Our strategy focused profitable on and strategy we has not growth. flow into generating the our does XXXX, profit line let stance. the implementing Heading our top drive pricing improvement to of down support remain

agency invest out continue the our that, our high-tech, we our our franchise model. questions. which building strengthening open operating tools We and enhancing for experience the sophisticated relationships, call underwriting With to customer high-touch underlie up in will Operator? capabilities, together

Operator

[Operator Soleimani Arash go with you. question. is from with the Please question And Instructions] ahead first Thank KBW. your

Arash Soleimani

Hi, thanks.

So, first commercial, bit question ratio. guys property looking I have is, in quite a had think you non-cat I loss uptick the at standard an of

the in you uptick ratio. core the XX back ratio looks in improvement I if out, that So, like actually about had of loss basis points

basis improvement, initial XX you auto of were was light especially in of terms I what mentioning of picks? within wondering drove loss in just the points commercial that higher So, strengthening your

Mark Wilcox

in. and then Good Why I don't Greg morning, is Arash. This John jump start, Wilcox. Mark can

improvement basis current what in number, underlying development. I'm Lines, increase think in what And you're ratio, driven do ratio. non-cat accident the out there your think losses. year by point really a is the seeing quarterly I the combined the standard about close you're underlying which XX for that, you ratio property And combined if pretty Commercial to backing is loss referring I is the to

of the quarter loss So, difference we but a basis, in in a XXXX, we our did have raised had higher in accident in is the uptick. on picks, uptick The the for quarters fourth real quarter, in XXXX, comparative both of we an the current loss fourth know the XXXX, in current perform – year we in the difference workers' of auto. pick business And comparative had workers' fourth for quarter year we comp the loss basis. a the picks which see But than for a book commercial slight reduction continue we on expected. comp better accident to

Arash Soleimani

Okay, that makes Thanks. sense.

terms comp lower to continued loss the is picture workers' year-over-year? where that going forward, of something be In then, initial

Gregory Murphy

that, line Others I'll start. add an is me in. a as concerned tell about. Let can This organization, we're you.

seeing This that biggest line This the conditions we're that can a highly that the is seeing very in we the commission of of tail. competitive turn has is quickly. You're rates terms a mindful of. marketplace. line inflationary in that line lot the is are This

systematic don't to the because And this amount see so, we you're starting rate – can you least that line expect in got in. think is ratio of drops the rates the I

the to would [indiscernible] you that at John when the see overall, look got. So, talked for about year you And we that comp zero. it you was

you've talk to a And zero about rate. remember, can't rate. overall So, out we you got put always

overall, rate zero that and when at frequency So, that and line you on rates matters some look the other in can [indiscernible] you in relative this auto affect And we in the business. inflation employment to the at start got point line and fact saw same year. to for claim drivers you expected of a get

And would anything, the say, ratios I say, you anything, if comps of, industrywide. kind that up start out. pick I if So, see bottomed to would should actually

John Marchioni

is this Arash, John. And,

which for a lower gone to time we harder smaller really at In that line that We add like really points, reinforce The flat continuing intensified. constrained cost cost the state by this everything medical to which to workers' negative. Greg another rates filings competition on any a it's build And I think really negative dramatically, the do inflation Commission driving continue, line pricing years, into is where for the Let been negative but have have expectations. flattened a been me and will normal are is very line has said, hazard your forward by it's of or do those few have that various cases, increased. And right. certain been just for bureaus. anticipate company quite that and additional this trends exactly forward. where for has couple the line And hard direction. because move especially in those anybody comp, a frequency manage to going you're anticipate is made pricing us and are loss other underlying

take altogether, book with we of when the that are happy So, business. we

style We've of been writing an on a been good. account performance Our lower very focused business. has on basis, hazard

because claims fundamentals may but suggest this our very operation, drive start to we're moving of to line mindful that improvements just what some deteriorate continue through We of outcomes towards. are indicators in the that

Arash Soleimani

answers. Thanks for those

ratio. between the in I you on the improvement think on While we're remarks, in you wanted XXX points this evenly that and again. have GAAP mentioned be may ratio, combined basis the on expense guidance say split prepared that just your of core loss And XXX a to basis the but I loss the will ratio? points know basis the did is of touch topic ratio

Mark Wilcox

right. is That's this Arash, Mark again. exactly

on a when we at in development, XX.X. going our So, back and basis for ratio cats XX.X. you came When XXXX XX.X. GAAP is favorable guidance The combined underlying XXXX, you at out look into was the

split margin ratio And the we continue GAAP about of ratio as to points equally in it's basis which improvement, expense improvement. XXX to the it's loss expect So, on down XXXX, between basis a improvement. well drive as

Gregory Murphy

have again, heard of know If I effective little rate combined I about the to don't points you on get comments, you – bit X this that guys look times, you just many line. We and add right ratio. goes just rate me and the have to just the say bottom a can more at think when so

You this biggest because you pretty companies an are dialed going of cost you of in, get right is other. rate when And fact non-variable versus of not the got XX%. got general have part non-variable, question, neutral, labor. other water top get But just is you you I'm insurance much cost that you they earned core to information, but labor wage higher. sitting to have your very inflation even are variable have And flow your in basically look on is and loss the trend our premium and at this each just for Selective, saying they – are and something we on you charts, that see matters

more So, when from coming in into at happening rest you're are rate pretty which, are on what going improvement offsets that into things and numbers basis, the GAAP lag. then, seeing – improvements the getting from our articulated, that bit expense expense XXXX, much obviously, getting Mark little And XXXX you're you claim look as That's then, actually we're the trend. a of and underwriting that's But what need on going drive down performance. is Earned you to you to basis this standpoint, why to XXXX. And think what's pure rate. business. I we normally GAAP basis. when on on. dialed it, than you a a really rate it matters very on in statutory that's see focus that's in are And earned pure from Nothing what your would else

Arash Soleimani

would And kind E&S of more it driven? when segments, between of be – you three How I would think I across that guess points the about look XXX three at the terms the segments? split basis in

Gregory Murphy

is you Personal then, higher. higher a home I tracking bit rate but And would up, E&S expectation a in auto see because our think our the Lines, little is thing. more

the a would I bit Lines. in little E&S say, than – would to maybe in higher you Commercial proportionately somewhat So, get get –

So, underneath. different were I think But among huge them. Lines I'm understand to top. on isn't is ranking Slightly you want segmentation. them, do. probably want to would you the if trying underneath a I that. And put to those next Commercial that's there that them I'd the Lines put order I calibration don't Personal three calibration. E&S in there epic thanking some what that just and I'm

Arash Soleimani

month year-to-date it Okay. had does fourth so the that like it's in but X.X% look been like up quarter upwards? headed only increase know rate does moving standard the we've that far? And you commercial, a into that year, look I within is

John Marchioni

John. is this Arash,

a consistent the So, XXXX was was the in quarter pricing. fourth quarter what pretty of in relative you saw and to –

and property prepared year just of at Pricing one was been I reported have the for on you byline not think the a commercial number industry. X% throughout lines underperforming comments, And price We saw under has But couple basis. references a for this for a it us, on point. January of the the the more cat down. for and in to line all has whereas the we a power slightly a flat that quarter. on And get about the pricing both with of comp anticipate activity basis to starting little would same forward, of the all been and bit going that industry commentary, non-cat a

other note saw disclosed and prepared now entire you our this commercial of line think of we is level that strong has I auto in we also rate years – a rate. And and of our had couple highlighted case. frequency, the to based X% we with believe commentary to under be industry, continue we for that, that the expect that the quarter regard the on for what's at just severity would to happening trends comments

January market number for on own your you based can that. we So, to saw in relative a haven't you conclusions what put yet, commentary fourth quarter draw out the outlook, and our but on

Arash Soleimani

the And losses was each driving? segments. what three up that thought curious, non-cat across before. I Okay. I mentioned just had was property that of the ratio the I'm

John Marchioni

Actually, just one clarification.

and But of look expectations. volatility focus. is needs the time, is was volatility. biggest overall, actually look if our fire and long For normal XXXX. Commercial our think a feel property to about be the We budget. again, Lines in our Large noise standard there losses underlying that's there normal about core commercial, below book continue year, bit we But, the at and quality Below that But little fire personal we're driver. line driver. And at of rate performance and over you period of it seeing line. the And standard that it. good that's certainly saw be for non-cat continue biggest – in to losses the –

and talking both So, a the a industry in larger about non-cat we a some tick because try of little expect that rate in what volatility on basis. up losses, to of bit and is that's a and cat that line,

Gregory Murphy

John you sit in versus you and what stay have to when expectation said about can there XXXX, by XXXX XXXX what that left and Mark [indiscernible] not just earlier, said dialed we've we've think back. you non-cat and tell listen done what elevated this So,

increase So, have We're driving the more that trying to we're of monitoring properties rate the the we and through looking the safety systematically book, constantly management at are rate to changes. book. find ways

Arash Soleimani

your from go make Thanks. on – are long-term, that tax that? reform about you And how looking thinking the think do think you something tax at If just increased to or that will Just that you bottom kind guys the over see last fall something that's away? benefits that? of looking guys you my question, reform, is you even how will line are coming that competition

Mark Wilcox

John don't why and and jump I Arash, then as in and well. can start George comment

Obviously, benefit. big the is picture. without of year was like I domestic the you that what benefits. compared it package what for to they think, US look was reform tax ago, you And at the a list approved a looked companies. overall, insurance down exception, When are almost great go

been on of bit tax side. a little in a some the have the negative year items ago, could So, whereas the package

good think our overall for increases So, customer big for premium. exposure think economy. an picture, think we perspective, and we And it's We good just from overall it base. increases it's the that industry

about a perspective, pretty to XX%. effective we're about down talked tax our excited about that. rate So, From Selective we from coming XX%

to that bottom XX line. we expect a full of drop So, percentage profitability the to points additional would

and well Over a But data the it is turn That's go the how into capital as a cost to you we below long-term, – XXXX expecting We about industry, our will the overall print don't can I X% for think all a you as have industry hard some to only ROE. when there is out. look speculate. expectation the at of whole.

back an of amount customers. the goes isn't think, to will returned less of returns. believe shareholders. of be than a be mix of accrue perhaps required that should and I returns tell. expected our But But that over most down and time, to could shareholders will sort the and get bit that And what to little that watered benefit customers. between a probably employees excess their that competitors have majority So, profits therefore, We the could time

Gregory Murphy

over capital. happening is weighted weighted core cake. a XXX year, every pieces. It's all yield. for but on There after-tax cost your not XXX it's of XXX start our capital. say you, the over thesis of cake. be our The – your Taxes is over the I generate where's cost would basic duration in I doesn't still many sold. our tell target to kinds hit different. target ingredients portfolio. goods so are of starting Look, Selective, What's And will goal cost the happening change. over. ingredient of average Taxes to is And And the There's impact what's one to your we that. the average of in with point long-term other to There's

market price of things. our just cost So, and our capital for of our stock went standpoint, higher other because

So, pull performance. are there at things push that and that

doesn't the our goal This standpoint. just And said to earlier, That's a So, to positive indicate. Mark this favorable it And the tax from our levels X.XX from more reform product field. different look taxable to opportunities the very a shareholders department generate because down is change. return us, came and X.XX. standpoint. equivalency in playing at invest really loads. now from for of as tax selective our overall ingredient bit to lessens – gives actually to It to is our very little it And investment

And So, This at we managers increases we the that in. bandwidth trade on the in invest in earlier marketplace. of actually product our can the were that look year. opportunities

So, they've thing got this whole been on once that trait, crystallized.

here. share fair another to gotten in I – think, to up you've we've operator, questions got than open more your of

Arash Soleimani

much. the you No, I it. have. GAAP. for Thank I thanks appreciate very switching to And

Gregory Murphy

All right. Thank you.

Operator

with from Markets. Mike Capital Instructions]. question the Dwelle RBC comes next Mr. [Operator And

Gregory Murphy

to to musical you're going up wait what this month. theme see pick How today? you are I can't

Mark Dwelle

to for like it wait everybody else. have We

so, either. don't I know And

Gregory Murphy

be All waiting. I'll hanging on. would I How's it going, Mark? Thank right? Alright. be you.

Mark Dwelle

areas I are guess, the you Doing or than get you you've I years to talk is market What the covering. we've that new thinking no share. about the say, do will addressing. secondly, that of think there the of that ones main normally I normally into number of? markets there, fine. what of to the that Lines X% and different then singular gave I'm underway. know I answer. as, you're assume of Commercial a What already the started about expansions. all you kind ones takes maybe soon the of months territories, slightly underway And the first, are And expansion I'd question do couple these like think been a both or be it have size

thinking tell. and about tax broadly? it Obviously, you're how will circumstances Just

John Marchioni

John. I'll that. is this Mark, on Yeah. start

of more questions a me Let and of the direct couple the more here complicated take last. questions out the answer gate

our by end So, and the now mentioned, the soon our then and process of the expansion also in be expansion, and to to Colorado commercial specifically of this Lines point, states New in we're Mexico Utah investing standard in Arizona. the I of some Personal But states. Hampshire New and Arizona, year, in Utah

We haven't those from point, And that our this add committed are diversification at states two footprint us looking for some to some give anything perspective. catastrophe beyond to to but also states a loss that's and states some around economic we in made present existing the to the which states, Lines of expansion also growth some choices higher Commercial footprint logic drove and enter our that into. our

legacy if to In the or in you versus how we XX% us a at open our current share, and state but path X% terms which another, approach footprint only our to getting ultimately from time, of this mid-XXs, to in, talk heard X% an you've point, look varies about of to early are to the the is we XX% these share overall. of about our goal that over states agency states one open at Midwestern XX% our in markets

put pricing realize are we profitability underwriter, that new a hey, and a and discipline. may premium the we've into employees you would other that focus part, least in going ones the at market We're to premium statement business we seen footprint new expect ramp question, have of generally, allow expansions we've underwriting which For to that. bit little that's New indicate the Arizona, that in as out of we seen to other picked for were which state that our that And, company with our we've levels existing abundant. of And our states, our good quickly XX% component were access to pricing we legacy the come specifically that target field Arizona states we our states. include a continue. that quality I new that Hampshire. any business at opportunities of partners up around agency a lead timeframe? said, so But available right as far to range, early, on And indicated more lot in what to don't we very XX% access pleased have share in a And don't most and than and to to opened the we've per our these up would us is

to So, put date out I'm not there. going a

volume geographies, overall you're be to this to gotten the going excess I continues growth our see And growth, you've in certainly, to those rate it. that and years. in Commercial be disciplined good over of disciplined the about seen Lines to of the saw if couple point. solid last think growth But You we've market we're going

Gregory Murphy

about it of think It's $X to billion $X but round Arizona, billion, this the $X.X you billion Commercial If sake a market. like conversation. for let's Lines

just I'm round. So, A trying market. to share $X billion is X% –

so, And operation. points John I million And of is I three made that marketplace. don't doing X% the best share months. that. we through, did extrapolate six the $X in went greenfield. got $XXX being want straight-line as we're – that make million just field just you a to underwriter this sure the to But We've want in

comfortable the we've XXX% with that absolutely, are geolocation. agents in Ivy got that We League

whole bought systems, about out another highest company at got, regional the we've is are operation level we feel Selective clear has running managing level, and what level, and really the the a the whole that different the and infrastructure The are clear. people of that culture, we of like the we at our is office. brought relative they're sight the So, fact integration And ones gone a to build. haven't good now on different that existing people, line that that

do you think is we rationally, want to to demonstrates the to But, telling systematically, how importantly, can of take the agencies proposition you our table. operations it how style when it John want brings it do grow, you want to more Selective as that you how you about do in business us there unique clearly states. other So, and want the this that to do, to value we

Mark Dwelle

I color. helpful That's appreciate that.

we've in far winter in give had the the that seeing you claims me – quick so any easy are first Let weather various the from activity of month-ish Any particular a year? uptick you one.

Mark Wilcox

month heavy here. be just this loss a one us. Mark January Mark, cat month in will pretty a It's is for quarter.

we a has fair with much in the losses on level Northeast, really specificity. cat was big which our created So, overall of book of storm don't want But winter the activity too property to PCS XXXX, comment number within of the business.

So, dropped for a in has The an heavy we're team on be off this point. January will claims quarter. it. that. pretty is at activity eye claims one month just a keeping on us, The But three-month but month

Gregory Murphy

going hold And, our cat down start Mark, NTE our points you and you of you of to And of really as high sit pot to the rate pretty one I'd year, isn't X.X to in that dollars when ours get try who think too the NTE. disaggregate we same, ratio terms getting is. year, just the every that as other budget keep may about thing when into probably liability much actually their our that at your every companies premium put larger and our than absolute but earned is like is increases, faster

saying just point hang not should want I'm gets that I So, that that you on, but anything sure that's hat made. to make your

XXXX stronger Our XXXX in or X.X XXXX. that it points was XXXX in or is

Mark Dwelle

average last responding rate people – are getting, limits Okay. reaction. or it, pure Are kind that. Good question they market just How's of get broad the feedback you that changing X% you again, you're point this then, of their the approach customer sort accepting, a they question, but to some the their are retentions? increases kind as on customer on of rate? how And X% is, for customers is

John Marchioni

this Mark, is John.

of – I'll the your part first. thing First question take last

areas bit beyond three getting do generally think also up. close those as the because of a number our additions retentions, factors articulate policy rate a representing to retention occasional agent to more period how manage the condition customers specifically indicative ability strong. it, cohort, others agents' the they've with It's connection with style from challenges But, happening don't flat, of way X% coverage we are I that becomes practices portfolio on builds rate is little term should where lot cyber XX just are three, of what's in I and has even handling had that even we loss, about that liability going other has days policies the We've Our because of things approach number in is down free, in may just what's a which term retentions. loss we our their With sell But think very pointed But to a better small don't the you policies reasons one things. happening been sophisticated next. There changes increases not customers a appropriate issue the increase. account order And ability account not renewing or predict It's the and be midmarket an are business. increase of the our increases to sorts agent it pricing with for are ahead, were customers' the then, to the a though with premium from a of to who think account certain getting see think granular customer to we basis, who work that they've that experience with of an negotiate which of number loss. And that by most at lot look employment on That's have customer, experience. one like increases. unfortunately, and And it direct occasion, to reduction. of that of – who a or But our or or loss and competitors account's depends earned And decrease. And in the upcoming easier our profitability a and in the last more future to isn't forward. loss just certainly an a individual gotten our loss struggle. XX experience see the agents. the it the earned price is perspective. by decreases to experience generate loss and customer a to change And driven loss years. that's why loss overall the who on a regard

it's message it's So, retention agent conversation resonating, a constant suggest customer. by that account the an between And and struggle. is account but

Gregory Murphy

XX% X% increase. got And this let me about average just book went you Mark, add. John of when just on our other through, way. In what of think think about it words,

about think extremely can't X% a a XXX little on you you delivering granular our increase. little customer. hey, over an level. done Half point that are So, how – was to – of basis a got increase book And even over a

that. the of had we your specificity when with management to that why ability to at conversations the we're So, is level able insider retention have agents are have that in portfolio underwriters achieve

were doing So, – if rate X% socializing I this you board. across mean what socializing, the you're

in cycle that of interpret absolutely condition that the can terms So, happening and the retention on around end very to I'm they flex had pricing. we end, data on focused the so people rate on you'd what's have be It's that that stay cohort, to we an that different agile result increase they're going terms, we than the market worst had. best data what It's on this make sure have. the where firm got hard have and hey, to that on that's this in you've in be

Mark Dwelle

That's answers. the color. great Appreciate

Operator

questions. would time, back I closing hand are call you. remarks. to any the Greg there Murphy And no for to at Thank further this like

Gregory Murphy

Thank participation. Great. your for you much very

questions. and you are your follow-up have Thank participation you to follow-ups, answer any morning. you. Rohan available Thank this for any If very much Mark clearly

Operator

you participating. Group's Selective for Thank XXXX call. you. concludes fourth Insurance that earnings And quarter Thank

disconnect. now You may

Selective Insurance (SIGI) 2 Feb 182017 Q4 Earnings call transcript