SIGI - Earnings call transcript Q4 2020 | 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’s Fourth Quarter 2020 Earnings Call. At this time for opening remarks and introductions, I would like to turn the call over to Senior Vice President, Investor Relations and Treasurer, Rohana Pai.

You may begin.

Rohana Pai

Good morning, everyone, and welcome.

call available website, until this replay and simulcasting be will February are on selective.com our a We XX, XXXX.

package, use referenced statements available business operations investor non-GAAP we will of supplemental are which GAAP forward-looking These Reform on it and projections results reconciliations equity easier Today, GAAP Our gains on investment statements to and insurance Securities financial our to available Act common of guarantees Non-GAAP our for Securities are income, financial stockholders or securities, website. report filed current measures metrics and to excluding quarterly not the unrealized annual, of or and operating operating today on that losses gains of operations in are that trends Private impact is using under Non-GAAP the and the analyze discuss future also Investors losses about realized page also business. and U.S. and performance income filed the which Commission. included is we subject Litigation net income provides our to in performance. our investors net any makes XXXX after-tax uncertainties. Exchange and with believes evaluate the risk of future

discussion COVID-XX the U.S. and to Exchange Securities detailed uncertainties, please include quarterly the with disclosures refer risks related a of For and and Commission, these filed to our reports annual pandemic. supplemental which

team, President Officer. to Chief On or call members Mark today’s and of executive should following that You Financial no John and Chief any revise are be aware Marchioni, statements. forward-looking Officer; undertakes management update Executive Wilcox, Selective the obligation Selective

turn will to John. I the over Now, call

John Marchioni

on with comments turn opening will financial few results an and good the return our in the will provide it details for Rohan, the and I then you, a I make generated fourth quarter excellent call fourth with non-GAAP operating the and results questions. to Mark ROE. to the We to quarter before over Thank closing XX% some morning. opening annualized year. up remarks

our strong significantly the from for was ROE catastrophe year, low rates and the losses. the full of For myriad XX.X% context operating challenges industry, interest including elevated COVID-XX, the non-GAAP record in

XX% interest was In the operating in year book our appreciation resulted consecutive property in per decline companies. of lowered double-digit And operating our an non-GAAP target. long-term by just after-tax rates insurance share, XXXX ROEs. record us elite track and ROE our $X.XX seventh has X.X addition, casualty shy performing operating in top of of while which XXXX points. fell in ROE puts value of This our unrealized group

We accomplishment. are extremely of this proud

of events catastrophic like discussing came insurance lives severe one of together wanted which customers, and affected reinforce of our financial accomplishments, communities back help standpoint. help highlight ways our company proud further, get distribution challenges are XXXX often some our parts carrier. these and as country. what was challenges the from our am an faced by mentioned. in I how results biggest to I our industry many of do however, major extremely get believe not both I Before operational the an navigate many as of businesses after that together our partners COVID-XX help value Times and we to proposition a and the

time. benefit of will by and employees of of performance culture I toward operating team driving took key financial and These shareholders relations, that race part in we the also stakeholders, and working reward inclusion. developing to highly engaged are diversity, conversation creativity. our our continuing our We to around believe and all steps national the elements equity in play with a firmly over innovation that celebrates the build sustained

strong quarter reflected investment performance. fourth and underwriting results Our

rates retention price premium increases by standard driven and an business. was new growth pure renewal overall X.X%, in solid increase Our lines averaging strong

Our relationships a partner and truly franchise sophisticated testament ability profitable our underwriting distribution pricing to to a solid excellent is in and backdrop growth economic tools. challenging generate

and Our year year year XX.X% of combined development prior ratio lower points for the quarter losses. X.X accident benefited of -- points accident from current reserve casualty X favorable

illustrates quarter few of underlying ratio themes. fourth our to like growth. continued Our combined profitable of for highlight the XX.X% strength I’d a positioning key

we First, growth balance our of extremely profitability are consistently proud ability objectives. and our to

X.X% year. quarter, renewal fourth from Lines this in Commercial Our pure earlier was price up the which increased

XXX than able year. are a renewal last Commercial basis to We XX%, higher Lines retention simultaneously achieve of points

with cohorts For pure premium X.X%. size in renewal price of price of smaller accounts and point-of-renewal for quarter, generated produced and pure rate of accounts increased our quality while year, pure retention accounts larger in generated $XXX,XXX renewal our highest of pure all $XX,XXX, on policy than accounts retention excess increases while less expectations of based X.X% XX.X% X.X% rate quality premiums the profitability the XX%, point-of-renewal Across lowest XX%. of future

at pricing above us consistently level to price risk the ability for appropriate business are an increases sophisticated sacrificing has extremely underwriting to allow and or goals. is This business retention granular over us us we assuming. loss with strategies allowed It Our generate ratio and obtain administer our achieve new loss the also this tools that to approach or for from mix changes. renewal in expected trend our price line improvement positions of without a decade

continue the rate the returns low portfolio on to Second, environment will year. investment prolonged coming pressure downward industry-wide ROEs put interest consequently and record in

higher of we that underwriting Every issues. these our increase portfolio. face will we remain costs. conservative same challenges, need will manage competitors one and We reinsurance and in including to the lower investment of our impacts to how offset returns recognize margins We disciplined investment

us of positions environment. type strong underwriting Our thrive of results track to in record delivering this

normalizes in Fourth, our hurricanes, fourth frequency many losses ultimate those start as as pandemic most experienced impacts lines At of terms catastrophic remains XXXX, loss civil the XXXX. same claim and record of resulting unrest. to reminder This view reflective and of severity an of context. a our in number moderate, viewed event, landfall storms, as around assumption and of frequencies reduced was guidance the our economic wildfires of Lines elevated but XXXX environment loss convective the although We will hailstorms, and catastrophe and the for economy pricing of throughout uncertainty serves emerging included as trends well a the of year frequency while ‘XX significantly those potential a and events. the of a lines. severities These much as that single business, many large just the needs reemerge Commercial in Third, quarter not of for the accumulation be will trends smaller is events. catastrophic anomaly

underwriting ratio footprint catastrophe level and to reinsurance which years. included in of points states. XXXX catastrophe in attaches was combined X our XX that Our program close at conservative our risk million through over losses, manage a primary per $XX within our discipline We occurrence highest

years, years higher Over combined forward. prudent close we X.X for were recognize have and a frequency averaged catastrophe of ‘XX the in the events severity manageable and That catastrophe XX industry, ratio. to ‘XX we said, last it’s going to points of expect believe losses and such, all losses record our that XXXX, as

of to assumption We and points to do need additional slightly XXXX X line rate have catastrophe in our increased property level. continue loss as a own for

is to Board on to efficient attractive In of X.X% $XXX early perpetual this quarter. product of some shares strategic took the results extremely which million when intend In the we capital over million $XXX December, Mark the allowing initiatives us. structure. for capital repurchase continue while to call buy of quarter capital us during now to share the issuance, to shareholders. we stock, will preferred an a deploy opportunistically, come build for our conjunction will steps our back we for our issued Finally, with form which more to provide but back I flexibility, commentary program, optimizing XXXX, to review bit I turn our authorized

Mark Wilcox

will you, XXXX. discuss review John, morning. I and finish on consolidated update and results, guidance our Thank and position operating performance for our with segment capital an our good

annualized non-GAAP a per $X.XX, driven ROE net both of the and the quarter, share operating $X.XX. we investment reported and strong an XX.X% the of operations. our earnings insurance diluted XX% per non-GAAP with of to year of For We share finish income ROE a reported by operating

For for cost the ROE by target year and operating on at based XX% XX.X% least Each adjusted spread generated including basis as operating other of we per increased dividends. market share or well value XXX XX% weighted a non-GAAP book a average point full conditions. we our ROE as year, factors established an of capital,

is ROE target average operating non-GAAP XX%, over which to points a of estimated weighted established our XXX have current capital. cost basis close of we XXXX, For

financial strongest record structure and sets invested in a at GAAP aligns the us of financial interests. our equity, including We XXXX are delivering growth X.X% it its increases in we enter X% a new our renewal up target holding high balances cash business history, higher to bar performance. with extremely growth performance company’s We and year consolidated our and that of Standard a believe capital compensation superior assets. company Commercial for Lines, performance, ago, driven well-positioned basis, statutory operating shareholder premiums price with incentive was written Our X%. growth long and a level with strong of surplus and by quarter compared and On net pure averaging continue solid position overall the retention

of which reserve points benefited strong casualty credits. ratio reflects point premium about negative was losses. an by million $XX points. We quarter consolidated to impact For first $XX.X X extremely combined premiums order reported accrual our written catastrophe quarter, This X%, totaled $XX a for the of included related premium growth prior the year, combined and million X.X COVID-XX. that second consolidated of impact Favorable million year net net the development XX.X% the included X quarter ratio but

we in driven million year Lines current in loan Auto a accident from Secondly, and frequencies. reduction loss X.X $XX the or selections ratio recorded point casualty by Commercial a Personal benefit

in reduced property loss of Health million. $XX mandated provision to of reserve which an to in estimate, Additionally, bad the was was date year On the year excluding in in our COVID-XX from the Board XX.X% change or costs quarter, clean-up million There prior period. debt underlying no compared we to basis development, relates quarter. prior ratio combined $X our casualty catastrophes XX.X% ultimate the

than the our losses we experienced X.X X points ratio combined in For combined XX.X% expectations profitable our of year. for was or reflects catastrophe basis, On level ratio higher combined a which ratio XXXX, an full the to the points underlying XX.X%. the elevated our added year,

one-time I provided our that net there benefit that XXXX underlying combined items However, to ratios will shortly. cover are several

reported our impact $X.XX Turning XXXX and percentage ratio points, of $XX.X mainly by These of decreased percentage full COVID-XX This level points. frequencies X.X due a and increased the better our these lower in X.X non-cat claim Offsetting ratios. year specific been underwriting to lower by COVID-XX, totaled economic impacted EPS charges has X.X specific drop-off resulted charges the activity. million by points year, full which than the our in expected. property pre-tax charges COVID-XX losses, in were underwriting of XXXX a the to expense our for level for combined reduced ROE

by addition, Casualty ongoing ratio frequencies claims Auto points. in essentially late partially inherent loan reduced XXXX XXXX, loss reflect frequencies in reported potential combined plan, the Personal uncertainty the reflecting quarter and for which casualty we for the XX by presented fourth a ratios remain the lines and on that business, tail COVID-XX, our Commercial tends of lower including year severities. loss basis In Despite higher selection liability our benefited the full shorter

through these XXXX. monitor to as trends continue progress we will We

Moving to expenses.

earned expense expense the million was debts ratio audit allowance auto items accrual -- full XX.X% for ratio includes premium the products. COVID-XX bad and premium and for Our premium quarter year. specific to points XX.X% premiums year included $XX.X of X.X addition our net The the for and for lower a the

in stock long-term million expenses, environment these from expense Corporate of ago operating over comprised our quarter price XX.X% in up unique stock-based and as next $X.X is in basis We expense well Due due points company years. the about share a fourth of COVID-XX XXXX, ratio as the of couple management by improvement Excluding are do, million of XX XXXX. in increase totaled driven ongoing compensation this was holding the we $X.X ratio expense XXXX, compensation in year quarter, to temporary. expense reductions view to initiatives. which higher items, XX% however, expect these specific principally the of our which underlying reflect COVID-XX the costs

to Turning our segments.

reserve for prior net points Lines The pricing ratio Lines from healthy retention basis a reported point Commercial $XX very year relatively the X.X%, volume The combined in frequencies. XX.X%. year catastrophe pure and Renewal increased premiums general prior XX.X% to price accident increases X.X at to Lines For favorable was combined XX%. extremely and The of profitable Renewal The underlying There and combined underlying line segment a in a our includes The lower strong ratio development we claims loss quarter losses price the premiums XX was frequencies. compensation benefit selection net new Standard was year XXXX and X% Auto by reserve profitable On an ratio for conditions. price ago. development. to competitive was Catastrophe XX% was for loss been X.X% points our includes XX.X% in no of year. year for The and from In ratio increases development. was the continued to ratio a underlying a a also relative at year quarter profitable In to of Personal net business combined The due the our in reserve the fourth combined XXXX X% increased written quarter. growth held segment, the percentage XX.X% XX%. accident year new prior quarter, workers’ a retention XX% ratio business quarter. relative Renewal casualty your includes profitable a reduction million $XX in XX.X% and was Auto the quarter. of driven at business and our market liabilities, XX.X%. pure XX% net development. the business reduction favorable to pure was a increased the reflecting average basis new favorable year growth premiums ratio renewal points basis, our reported X% net the Commercial we X.X was to Personal E&S from X.X the benefit includes Commercial a the has point X.X reported The up for combined points million due accident from pure trending written was reserve year combined added decline selection ratio ratio lower no X.X%. emergence combined there quarter. steady average ratio the impressive XXX over underlying up written, prior an ago, ratio through losses solid combined up

Moving to investments.

Our remains investment well-positioned. portfolio

of strategies a in year-end, net growth from during at conditions. million primarily million XX% alternative attractive lag. income XX% effective investments fixed of our Risk include liquidity. partnership of years, allocation duration third After-tax investment of take gains for The half portfolio in return for investment the X% from total XX.X% from yield spreads investments investment and quarter down portfolio. delivered year. year with the year of very high-yield rates is XXXX real as report limited opportunities of and quarter. contribution of was market X credit million to to income up has quarter, we private the risk quarter the the in year. an securities investment after-tax the an asset private which short-term alternative after-tax $XX.X in points credit $XX investment fixed public and quarter the prior Despite for year the resulted year X.X%, found invested assets ago. As for purchases strong strong this new points portfolio with degree for the pre-tax was and credit rating the portfolio X.X% X.X is in offering markets after-tax increase quarter we of tighten average from quarter X.X% yield decline year year net and our allocation total X.X% million money the average $XX performance, The second equity, the continued of in the finished end equities to continued and an gains, X% quarter to This by factors, and income, a capital low our X.X% a strong allocation AA- performance the ROE on remain investments to high represent $XXX the X.X% we and given XXXX on almost up the and to and of Retention and on with driven the of fourth of fixed comparative one the which The portfolio The a pre-tax X.X year. was within income of during income.

other attractive. A+ from Agency primarily do rated find sectors continued not fixed quarters. portfolio. rated we mentioned I This characteristics anticipate down more AAA notching rating to high-quality, will RMBS but we from But activity as material shift adjusted related to social the AA- non-sales into overall risk result quarter, returns reinvest a in proceeds return non-AAA income in our to modestly As coming average the the the we over credit risk of last

capital. to Turning

GAAP with capital billion million equity, position ago. $XXX up strong a remain Our of year extremely $X.X from

written premiums range at XX% cash net or low and the our our written net times. cash Operating we is built to with flexibility strong ratio have Our holding X.X of target end million premiums at investments significant to million of $XXX in of flow financial company. XXXX of $XXX and is surplus

remaining During the we that our $XXX million Federal borrowed Home the Bank fourth quarter, the in we earlier repaid XXXX. of Loan debt short-term

operations. reinsurance holding liquidity resources ratio to with on raise renewed Xst. continue regards we With strong catastrophe program to to at debt successfully to in Our our financial XX.X%, sheet us debt flexibility our balance insurance and invest the now Overall, our program, January us flexibility company and grow and provides and stands additional our capital appropriate. providing our to business cash

probable maintains a existing a of or net net U.S. a X% risk, manageable PML loss XXX GAAP in at XXX of the GAAP hurricane or in catastrophe have maximum structure We X.X% PML very of from and that X% a X X% retained equity. major X equity our a probability

We stays Lines states that program outside of in market for also loss but U.S. non-footprint million with expansion cat conditions, line our XX retention our $X Pricing five due a in to increased the the states renewed program E&S catastrophe and was on footprint. with accounts our Commercial free previous our Standard

individual and impact As a actual includes to loss reminder, million limits factoring our and risk we losses. are headwind combined increases, With casualty costs. will for the which with some property $X of for about reinsurance both ratio price also on access initial expected program losses our us to our guidance to agreements, XXXX I adjusted forecasting reinsurance our XX-basis-point a XXXX. from to finish higher loans commentary

expect catastrophe is the prior we than casualty while ratio This combined year our reserve higher excluding development, reported First, XX%. in ratio the of losses accident GAAP XXXX. XX% combined assumes no XX.X% underlying

After-tax of losses points expectations points the for on events. than reflects severities million the and items our $XX frequencies of X.X one-time X As point severe is had including weather XXXX combined highlighted, of past expectations would were Catastrophe million, X combined from the of starting net several for XX.X% ratio point in combined and comparison. I a that to investment to ratio XXXX for as underlying investments. gains after-tax our net you income initial point our a benefit there this in better $XXX the over underlying positive alternative in I increased a ratio. higher

of fixed provided effective book low which a we of in And and that continue of to our income XX% weighted income current shares XX.X%, cash we generate income continued diluted throughout to yield for other effective a flows rate million tax of corporate and approximately average tax XX% remains pressure includes the new This offset. an downward very XX% net items. on rate tax rate expect XX.X overall some environment money strong While XXXX, XXXX investment rate federal tax, basis. assumes on for

that, make for a factor under this will we John our share does strategic simplicity, our any over turn to authorization. For initiatives. review I With not repurchases the back may call of in

John Marchioni

strategic of Thanks, through highlight our Mark. as major areas of I we am going focus move some to XXXX.

high profitability. generate to strong a quality of book are We well-positioned business that with continues

With strategically our the for new distribution focused Commercial tailwinds will share partners partners, identifying new expand profitable pricing, we of maximizing opportunities market footprint. with appointing Lines stage to our a be growth, rising and identify on including

distribution technologies We to continue enhance and that our position partners. in invest tools our market with

distribution overall potential. initial full tool their partners only Our partners to with us. on distribution process. and into and seeing volume remains partners out enhance recognizing The Commercial significantly already of X,XXX are ended the We business of premium space this in expand success our roll believe them interface agency in in we tool by of relationship next we provides of million. distribution stages positions new MarketMax few their should with the net We track issuance quoting for the XXX continue of to insights per small with added agency to our our the Lines our and opportunities rolled out substantial $X.X our relationships new and trend streamlining portfolio approximately continue and average expect XXXX and XX We years. a terminations, of

strategy. XXXX restarting also of XXXX expectations. including We performing our a all during southwest timeframe, states to the geographic The new region we opened are five anticipate expansion ahead

states others years. with years the to for three additional we open subsequent Over plan plan two next

that is identifying less opening sensitive approach follow markets. new measured shifting a to and is In Lines, from goal to affluent toward price national we market, long-term coverage a have we Our will and customer and greater although Personal focus value derives base our capabilities, began the and disciplined service.

enhanced our rolled automation in out position competitive for this enhancing in new platform is business important market. XXXX, our late E&S, For

in in our current self-service communications for XX% based We values resulted preferences. able have of differentiator Second, delivering proactive digital which their over significant our been were base. to a omnichannel on to the environment. generate targeted our customers focused customer we superior remain through on Enhancements customer experience, growing has offerings a true utilization and to

efficiency enhance increased through technologies. deployment operational virtual the a servicing and safety management to teams of claims experience customer and Our continued

leaders we building for of to our that biggest the fosters future. generation the innovation a seek team engaged take inclusion bench and deep culture of values contributing of the remains highest as I their is levels. to strategic our one believer idea keeping culture firm company highly that and essential is of a one a equity at diversity, a a Finally, centered employees creating engaged and on core leaders develop priority am of imperatives. employees Building and

We a have of during awareness organization. to for around taken steps issue level us XXXX at increased company, in remain within already as years. the as of number diversity raise priority well the This major the this the will all coming a levels within

As we beyond, I and the tools, to we in platform. the relationships our our am built talent look out which and XXXX and in competitive extremely confident position have on marketplace

Over in the call returns for open have do ability the our I we With questions. the Operator? ability will and our several we to up optimistic industry-leading shareholders for consistent that, generate years. our past demonstrated to continue financial years, am to in so coming

Operator

first question Zaremski from The Mike Suisse. Instructions] [Operator Credit Certainly. is of

Your open. line is

Mike Zaremski

morning. Good Hey.

John Marchioni

morning. Good

Mike Zaremski

can if causing your talk about agencies? question, some quantify, you parse processes digital but maybe to probably, changes growth versus accelerate and the try know, versus have to competitive can been you first of to maybe Maybe exposure tough with the of nicely to what’s I the you maybe topline environment apart improvement speaking kind

John Marchioni

and question your answer to happy am I appreciate the question. Sure. I Yeah.

$XX got we for little recording in more policies. the me in. expected by that for and their of XXX And bit let which on for the front lives, was negative endorsement premium insight change, And of policies us. start the we audit action out a with balance a looking lot QX the think, in million remember accrual one was just topics mid-term of with unearned took enforce you that those a of premiums, exposure I for the are

heard we as of about you took subsequent largely that because we So million don��t up. that our that estimate that -- earlier, we noise drag held accrual. $XX that got And at has and have remaining have out quarters as

range. and X% sometimes would of exposure X% to renewal you positive at again, hard X% overall, for our our and about of do toward And I year include have So a the is lines actually that would think measure. and year comp, a our a closer in if about mix you probably, the to mix I and XX%. auditable in exposure classes, portfolio GL percentage, our is a XX% premium to skewed that higher to of business us and But of exposure of contractor which it’s for on does be with normal think look lot about and characterize is our

So exposure has our rate up hold think that’s better bit the contributed rate. I base on than Certainly, little a growth average. our to helped customers

and we our We have bit approach our which seen and XX% prior little retention my to philosophy. over the at we that think And a administer XXX acceleration points with comments, there. mentioned also year pricing take speaks prepared granularity as in about I was basis to the we continue

there environment year new we X% full we with a industry-wide, the average proud business benefit, up of. a and Now something exposure the even saw for clearly, this lower Lines is and little other in that’s very are over Commercial

and what that franchise in prior think our of because of business, inclined are have the value time to play for of would a ways seen say, think talk I in I you relationships us true and agency relatively I stable of role helped this, we like always model I and of really strength the think the our strength our the evidence those about significant relationships, saw we we seeing to with business certainly continue grow as to were years. from new The well. is they with find partners, mix we

business, premium. as $XX,XXX improvement premium, continues the significant over which pressure an we for of I between bit of middle us. accounts area market in driver commercial small to our and think the is most a non-contract and We us in but little presence, in for small which is commercial, large saw for be define speaking would $XXX,XXX $XXX,XXX generally strong primary us accounting

we I So us. renewal managing growth reinforce I important hit do I is, on other are granularity the of you say, portfolio and the drivers the to were discipline looking deployed the one we point primary want for, business. but it’s use same think most is those for And also our I same an topics have think of would I new on the

So new granular new very we a underwriting are very from. business responsible pricing writer about and level fairly coming where at confident business. measure of feel quality the growth and is We

Mike Zaremski

That’s peers, actions certain be agency All little some say rate or helpful. Would may Selective’s so which to the of less than to right. Selective? more industry corrective that than talking maybe seem be a asking increase potentially you that for partners pushing average kind

John Marchioni

I on competitors. individual won’t comment Well,

I think the areas, is to of lot make large, coming number at headline and access business from. one significant specialty layers important the of D&O that lines a point look you from portfolio. it’s EPL not the In there’s when like in access, the more higher is, and though cases, exposure coming many our price where

have and focus good our the context bit than the average. bit might that’s and I of think in a of more lower the I you pricing GL, and a Auto on little business, main of of lines sort end think, to comp market business, be record Commercial is If this. on workers’ middle property focus our in us been a But I the be of where profitability again, broken And I know position. we think it on put a should small

getting in very our level to partners. an and hurdle not market pricing significant our just our rate disruption is XX rate years level, back terms with improvement. to year-over-year trend can expectation having cause go you a to what look trend loss and recognizing rate price increases our and over explicit out was for guidance put ratio That our will discipline, at and assumption that agency of but around see You could also us strong for disclosures position that has driving a us has that for in good have allowed for at always

Mike Zaremski

am whether performance to levels do over to goals? us I could and these metrics some to about really others out track diversity -- the increasing, too, time tough organization. If increasing expect for you Understood. others investors gears I of diversity there help to put think measure I comments do the within John switch curious, your think Selective you it’s are Are and are

John Marchioni

points the I a the issue We appreciate the companies think we should and is for follow-up us in comments, prepared country. appreciate the do important be and raised across and this to your because for I very all I question,

and and can those of I And make opportunities hiring, and saw employees for I taken opportunities for the we recent to Responsibility new people also the to work available to that’s than right And acknowledge our sure we full actually in more And employees because would our the from higher stand bring. hiring. can Board diverse more backgrounds on where you us diversity. would more the organization we has specific backgrounds four provide from this or than your Board it’s full saw development mentoring to our part a this inclusive and added on as And report, like diverse move we that diverse experiences are discourse the impact probably of of this already have makeup But equally different that have been Corporate the organization. to employee is year late. a terms sure make perspectives feel have and areas. members of say the do training balanced but been backgrounds. been importantly, a different that next-generation, not we work for will and additional you population. on our diverse have very we appropriately to in organization that of think little found and But core of individuals ensure then here we as have access final us, groups next-generation is always of and on Board approach. the I in a very March do they leadership so opportunities made really Number focus a have you and a on four a to lot been practices and a to we which important in a we do, is we been perspective. build the We do in of diversity I which say focus aspect intent but ESG terms which conclusive this of leadership have that front, sure our our think other think data real I has normally with that’s with a has more lot of there of diverse has a willing making our people a excellent this the us think have manner the make big part Report I that I a our year, was our in I an point of last also relative the we are of I has making this could company think most Board, they seen will to our always actions inclusion one think just first for couple our that of programs improve positive as come lead And iteration of more was But much have values level is of Directors one sure topic and you past a

Mike Zaremski

are releasing of about in there? what well. benefits year probably, you of for the and you general Okay. My or the will transcript. were I next that accident can the in last hasn’t -- the prepared releases forward you Maybe current But Mark think can your maybe most seeing go I much it as GL seeing think and was the probably Great. Responsibility from over line. you Report. in Corporate I talk to is industry liability reserve kind Look some of remarks Maybe been mentioned question,

Mark Wilcox

Mike. Sure,

million in liability. had year So, $XX came you and prior are mentioned that compensation reserve quarter, workers’ the We commentary, right. and on million of prepared it from was from $XX the current some million the general $XX accident releases as in I

look lower Personal year by the did the or a XX also the we X.X on that $X year percentage And you net quarter in Auto for and Auto the the million year from in reserve characterized Personal the ratio We look and to the We clearly Commercial increase $XX I’d for of then on we workers’ the in was points and by general Auto. the full lines the some in the million frequency say to the at in tune tail benefit points accident $XX liability XXXX $XX $X as hard year. at comp, releases, out XXXX portion closed when in year respond that it a within action took Commercial frequency did liability. had and in that million -- for Auto basis shorter the loan the Auto a in quarter, current recall, of but of might for $X was third full take year. Commercial returns then the And year, prior million, total million million $XX million, the you combined

John Marchioni

basis. over general I industry And you that, add would liability if very to just line outperformed consistent significantly the at has the look back long-term, our a

or I risk around basis performance. years we contractors on which each XX% we year has the development accident whether strip do have this for straight several you and well. on year of a is line So ride a and -- adjusted rate out year that run of, of very basis reflective again strong And extremely an a that and prior last think bigger us, could prior portion the a

fair real volatility. wholesaling, of to lower. tends the of and creates that heavy be ride some exposure profile but limits it’s manufacturing Our products a that amount We not

just that’s to long-term. are the I and really we underlying a have outperformed you that really a line that we have performance, in and So feel relative the think, good position on like seen over

Mike Zaremski

positive year a prior the or any sprinkled accident years previous to that color was more -- on be And just across years? of the development, lot specific the reserve, accident GL

Mark Wilcox

When two it you and books everything next the February. according GL there statutory follows reserve have at information if plan bit a to goes end quite look we XX-K service filing of that the the so in in at be will of weeks, is

So specificity. accident across GL you all the But was have sprinkled multiple years.

release no of million in quarter have ‘XX, ‘XX the well. years really the seen fourth But year fourth accident of side. that quarter liability. workers’ particular impacts was bigger is review factor We in no in jumps already the so ‘XX older emergence some reserve that specific pre-XXXX the is But and we favorable year annual tail that through. came also that the there a as compensation do $XX back standout typically on accident Going compensation general workers’ and the big, drive years an

Mike Zaremski

very much. you Thank

John Marchioni

Thank you.

Operator

Thank JMP. from question next you. Matt Carletti The is of

Your line is open.

Matt Carletti

morning. Good Thanks. Hi.

John Marchioni

Matt. morning, Good

Matt Carletti

comments hoping in Lines. was your I John, caught Personal I about

we said flip that the kind toward be whether you just might the go in is? expect like could you I was coverage what of or you you product whether hoping I be of how on levels, a see changing, things there little how in toward, timetable shifting think And to deeper levels, service and more market. that? the of then mass should affluent dive kind in kind state-by-state are

John Marchioni

question follow-up Thanks Sure. for again on the No. Yeah. that.

you So do have a correct.

better affluent segment Our the it’s we the a a business market. think and much move the how in for of we space fit market into is Line Personal is mass do

sort It’s worth $X million. and between the So you to $XXX,XXX from of It’s serve $X middle million perspective, not to say we levels net market. net and ultra that or generally worth. in product a talking that I about to worth a of service high the slice high what tier. have would $X in income net we actually majority need that million the

a a of basis in out are there on the start that will we side into that bit in of roll there early additional the to items ‘XX. ‘XX, intend Now items part terms on out rolling service in country-wide part and edges some product of couple is around latter mid-’XX of the little the

to more there need from not and really perspective, more service lot we -- So think I do. a product is a not

it’s they I current agency of desired our our lot say appetite partnerships terms in a that just to This think focus more our on agents of segment. perspective. I our will partners, tends message market And also clarifying to Line Personal positioned. the distribution are well from be and of our what

same up expect year. this in early and starting it quarter calendar roll quickly very really Lines ramp of is allows this us out states on it are this going our third we to Personal of to call So in to that all

Matt Carletti

goes anniversary about stuff. that related we to add renewal way Standard of real growth one-time ‘XX Very helpful. Great. to not audit level kind assume back assume took through and you of quick and QX guys trends. topline asking from had am will How think get trends I and about right, and about should are that, was there? circling notes the one like about in Commercial to right, kind think my it should and kind COVID but right of working ‘XX a as kind macro we if the premium, $XX to we away, Okay. that we starting just QX? then Maybe if of think million kind questions want whatever of How from of of kind for that, QX the can so that’s we that Mike a of back shifting Is endorsements recall or you million to guidance I headwind $XX QX kind that just anything mid-term on as we

Mark Wilcox

Mark. Yeah. is this Matt,

comparison You the are $XX important as to the for get absolutely to sense topline back a to would better NPW for the this QX. right. really number and million what add I is is

went X%, If XXXX impact pretty for to but Line, closer that we X%, QX rate to accrual had you was through and X% at audit negative look growth rate back. actual from underlying down that that premium we significant the at was were a down Commercial the Standard growth X.X% back

in the the in the net reminder, of much just the because It a and life ruined started. tail an way have was well. premiums till into remaining XX, but bit was was as that of those impact I year. highlight the impact fourth two when quarter, annual trickles NPW impact of There’s over of the adjustment of COVID-XX the that little XXXX. March go policies, all owned written fully really a weeks as a would just QX Most million reflected ‘XX, earnings that it Now, versus the XXXX that of which through on basis. number But from $XX

Matt Carletti

were the with XX% what across Great. strokes I should book the there When think where How Commercial. takes? we last ex-cat obviously about broad Is think the about combined. mostly Standard I the presume Okay. -- it accident year lines guidance my some you puts And year, there frequency benefits guess And repeating question, then then Commercial. that presumption some will have and is the you of that’s might whether then the accident lines ahead Standard sticking that, think trend we see be do? favorable on in slope year to ‘XX probably not accident they should where you good about glide keep a of side but auto other assume not, they are the or we results? rate flip of a getting

Mark Wilcox

impact of one-time items COVID-XX you of reported to provide but and these to was then commentary not little starting and But unusual comments. when an because It��s XXXX those point. of as points that detail and in I of point in don’t the tried my there a underlying to I actual will was kind XX%, provide jump best into comments, most the the XX.X% out additional can in question, in but some really XXXX, of clearly both -- guidance the at was I bit to year. good is John adjust the get starting Why provide too provided much reduce But X.X negative commentary. provided John and to Yeah. a prepared some the of look -- Matt start

We the favorable quarter. development, X.X the points favorable by accident property year’s which current the non-cat in is is fourth which have

that underlying back starting ratio is of into of You to you out going ex-COVID-XX you roll the initial that our ‘XX other. points back is XX points XX as kind basis And better into basis points. comparison of expectations when get from XXXX, gets about that a point was by expense ‘XX. which have XX.X%, was about to favorable and The that basis XX

basis for loan year. waterfall and XX.X% mentioned, points, thanks we at be the that points adjusted But rolling don’t the have to reinsurance you roll basis XXXX February basis from that this when will a on XX chart higher worry programs ‘XX and We Now trend. see of XX%, will trend again continue to you is a in our the do when a about with and headwind ‘XX, reflecting early we rate I to from to that our couple provide detailed would pretty on out puts of you Conference in typically probably roll that have expectation our of XXXX. pricing have start comps a Investor we XX risk

drive well. expense then margin We claim in benefit XXXX improvement down underwriting some the and to and have underlying will as we some that ratio expect drive

points put portion all improvement business. really of driven of when by about and it expectations So of line the by year-to-year XX you that of basis net, trend that of is a that margin rate together net varies is of course about

Matt Carletti

Very Great. helpful. Thank you.

John Marchioni

Thank you, Matt.

Operator

Thank you. Shields question The Meyer next is from KBW. of

open. is line Your

Meyer Shields

wanted go in any you capability what higher you. Personal impact the again. you loss I John, the book? between think, that are going Thank despite saying plan have and mix to market the to to this I be understand to Lines ratio back there adequately expense on Is demand. I service

John Marchioni

there. up broke really you Meyer, sorry, am I

You looking between the expense are loss for and ratio that on difference book, sorry.

Meyer Shields

is to losses? than higher ratio of allocation worth words, different a expenses as to Yeah. there the other shift rather you net In customers, combined

John Marchioni

expense, a honestly of be meaningfully significant would lot and be expense driver there commission think the aren’t expense, loss wouldn’t loans, a going which of I to between no. is major the ratio different. servicing Actually, a difference

would have terms this of would wouldn’t which view command expense about you a benefit. book is a generate necessarily bit also a to performance. expect this persistency, is more that’s a of a going in ratio I think segment over ratio of time the to loss But that higher I higher market the little

Mark Wilcox

other have on expense drive is, ratio the down. ratio think point really hard expense for to I worked the Personal the Lines we

XXXX. You bit that we space. can to be see down some to in improvement need a believe in We XXXX competitive versus continue that drive to

John Marchioni

for additional customer certain other in program contained that are is enhancements to extent And a are point base. the there the coverage

loss that coverage adequate should to those underlies incremental going and that coverage and basis. policy-by-policy enhancements assume neutral We were price to ratio the on is be the are that extent added a enhanced

Meyer Shields

an answered. switch helpful. is what it little I are But before bit a take is frequency tailed, in acknowledgment other saying, some it? I will this can -- of or you like will lines benefit longer how the have official Okay. that If wondering be can that’s what are comfort would that okay, and am That’s there compensation before take that workers’ very gears

John Marchioni

accident the And across beyond well is. have we impact for in referencing, same, to I because do of will are certainly that basis. quarterly question of Well, I no decline appreciate Yes, our major lead the frequency remains end very and takes and I the and I lines real? it the view. specific. question review claim a that reserve severity it lines start and mean, included a the the clear severity comment think, to with. on lines longer as obviously, as the company around take that philosophy we the lines to manner all to the we reserving reporting tail offsetting continues year be mentioned business full it’s saw the you full into that And there for all those going Is will be your question, which previously, answer the is to we how on emerge that confidence long a is what well

because to really views ultimate confidence. pattern of So a development by is each the really we with pattern grow quarter the an XXXX those Personal action to in accident to GL line quarter, for question much bit a associated of passing and the we accuracy faster line the maturation ultimate what but process of take -- saw answer can year. say, into and in did make passing Commercial and that and us feature only faster a insight it’s on that get adjustments felt our good level into a the with the gave I comp, that longer and to is way for has fourth a with of a will the each and reserve review in confidence slightly our quarter, We frequency continue little reporting severity slightly small year Automobile, confidence

Meyer Shields

pricing same same Okay. lines putting final assume conservative, for the That’s helpful. is, answer on these yes, a just we then think, place question the underlies of that I but should business? the conservatism you that And are that, in

John Marchioni

Yeah.

all got results of have process reserve we our and So a year the feed review planning. disciplined our of very accident

Our pricing into baked just to also indications filings pricing in years actual guidance our our provide accounts that on we drive our fully then file account-by-account Those from indications rate underwriters Commercial basis. don’t our accident team. Lines. to are our the pricing They an -- pricing

you So process. adjust And accordingly, pricing built into the what are because how you years numbers indication of then reflected that pricing got a we XXXX multiple basis. see in of on accident those in our your pricing is year terms think indications fully about have as view adjust go-forward accident your

Meyer Shields

much. you Thank Excellent. so Okay.

John Marchioni

you, Meyer. Thank

Operator

Bob from Scattergood. Boenning you. The question & next Thank of is Farnam

open. is line Your

Bob Farnam

Thank and Yeah. you good morning.

John Marchioni

morning. Good

Bob Farnam

So, well set given XXXX sounds your pretty up commentary, like you your for is guidance and guys. it

objectives move the through biggest the worry your your regarding do about we year? your are what as What you but reach for to ability the year? concerns So particularly most,

John Marchioni

Yeah.

those our for So impacts, as we certainly and mentioned, in impacting having yield and I think be are economic some some pandemic the of to impacts investment is economic we expectations continue pandemic the and a go-forward on support basis, going we that pricing improvement. a we the margin are for And that for remains assuming to need remains and additional that’s which supports be a us. think environment constructive a obviously tailwind

but the has investment we are continues on, to we of And combined we we objectives, it ROEs pressures, And bit in more need drop everybody’s for could the not as our some market. anomaly could severity that because see view shift it continue make trends knock headwinds manage us competitors corresponding a look sort of this more than be the to and something demonstrated with off that the achieving and I in ultimately frequency XXXX to fundamental that of extent, point. pricing in terms economic drop, the have other then would ratio think risk. it than and up as exposures overall, to market environment a will focused can to what To the impact obviously it we a create difference. at view longer at I go little you start significantly of say In as a regardless

think I yes. concerns, is, think operating you think less open and the leverage, well-positioned way requires is with how But for investment bigger have that of those about are are loss companies improvement even the is lower higher ROE. make to yields for combined X So are loss underwriting to very ratio question a make up gap investment up our X that operating it, we in I other at which to we or and which a it that

Bob Farnam

is on Right. Good. question Thanks for share repurchases. the color. last And my

capital repurchase So excess rather than decision what into use of authorization way? goes some shares your given other your to your new kind

Mark Wilcox

start into attractive we the capital generated is I our with Bob. to and of business to to want question, operations grow that’s Good strong Thanks. what returns to will our continue in franchise. and our Yeah. And very insurance deploy and use our We do. best

So we grow and in are looking profitable disciplined to way. a

excess we -- ways the one a to a would what it using is when into do that including of repurchases. then of a conservative call To business. to buffer, above looked need to with share our think would rate. for Then bit a returnable are use our expansion we position an looking growth get around have, talked of we have in little different what which capital and we the objectives the And excess headroom. ways to where of We the the Lines Personal really run at the to management the access would that of include is we access. the are capital above business new surplus a lines and the into variety capital put tests, technology We have about capital a John to the little strategies the number we company. bit strategy, GL we of like extent continue accelerate about retooling back

look cost at We at terms couple So in metrics. we book calculation capital of accretion at We versus time of different look look IRR repurchases. a at period of share a looking for share repurchases. value

So metrics. look at very different

we program. today So have repurchase share executed the under

long It’s As to we mentioned, when the of we It a our over we us value nice return we to be a being share tool repurchases. strong plus December, over put terms share that disciplined and into dividends view in place run. today. delivering in book accumulated back in as allows it capital opportunistic not only shareholders would kit But part tool growth the to per and the delivering have in time of ROEs.

of double-digit the will seven to make years capital have returnable the good on it’s amount As a also years steward John execute into these company’s to we mentioned program. and we repurchase But do return share ROEs. that consecutive look and good a

Bob Farnam

Thanks, good. Very Mark. Okay.

Mark Wilcox

Thank you.

Operator

Ron next Returns. Capital of from The is you. question Bobman Thank

open. Your line is

Ron Bobman

Hi. good to well. Hope morning Thanks lot and everybody’s a everybody.

Mark Wilcox

Good morning.

John Marchioni

morning. Good

Ron Bobman

basis, and percentage sort had two maybe curious of sort level questions. a the curiosity staff, rough was of headquarters I about the your And even what wholesale application generally the are would -- regular late, a I just figure? what of -- in then competitiveness be a had business, of maybe of competing coming as on of I markets? other your just whether January, recent One, of as in Thanks. sort it the is fourth among far quarter speaking sort question about trend of early count, office

John Marchioni

that remote. Jersey And mail a which our that need work-from-home and With our previously Yeah. percentage regular employees to the do on it’s XX employees, to work of employees percentage. really of this ones and of have have Branchville, come our is pretty our are at are Sure. part and the our mail for And in we to again, some in look this a roughly we and some be a our New very one scanning to folks distributed we out at it’s business E&S always have of just to coming growth. of across distribute employees some performance that all some the happens of here corporate small With said Thanks. electronically model our essential employees, strong and data new also you had to employee in lot but of locations, physical in regards offices, all our regard tools so center, X,XXX headquarters saw who folks considered folks business, basis. year, if strong in

was to more some that we -- little on for and think little on see a I but did we open mix up new had that new XX% business not binding around But for the brokerage activity, year, authority side and bit of pockets the success around just strong a little driven brokerage hazard again are higher the constraints more think is I business. we full is authority volatility side. in offer application topline a we be and And by to binding above the tends us brokerage in bit It submission bit average saw that higher activity. some small business is created total, that’s business our wholesalers. which in higher competitiveness our pressures there pretty have

So flow about any I competitive pretty seen environment. shifts significant business new opportunities. don’t feel the good haven’t of in -- the I I

certainly for a coming wind opportunity are our which property, appetite is for there part Although, E&S. lot and not exposed coastal in more of

I think to down So might as of a that of markets uptick philosophy really on coastal what wind. lot capacity for based segment. significant we It’s for our on not helped us lot underwriting have the appear have tightened be opportunity a just in

Ron Bobman

fourth as the quarter change to in as to not fourth then any compared business E&S again, or submission the whether in, quarter, far And noticeable? far third as the January were even flow trend the Okay. line, the it’s as compared quarter trajectory the

John Marchioni

say would not noticeable. it’s I

latter of expect. space to from and in out the is dynamic out as balance think moving and We it think, we helps pretty on I to platform. of worker do first for well us rolled which with new business the into the Now by the standing our and our easier something really provide small we just in lot expect positioning market part a quarter quarter fourth and the that’s of perspective, makes improving overall what the the this and binding side automation we new ‘XX. us excited are Regardless of the of small in improve ease competitive Selective terms about rolled basis, we the opportunity, in do an doing business business

Ron Bobman

luck Hope again congrats that. and Great. well. with good stay and Well,

John Marchioni

Thank you.

Mark Wilcox

Thank you.

John Marchioni

Thank you, Ron.

Ron Bobman

Good-bye, guys.

Operator

Thank you. Scott The of next Markets. Heleniak from question RBC is Capital

line Your is open.

Scott Heleniak

Hey. Good morning.

John Marchioni

Scott. Hi,

Scott Heleniak

too. -- Personal that’s of be other being Lines the I going out? was And if this is or don’t to, Commercial one still completely wondering states. fine you you ones be will I know three I if curious if those but can the geographic that want or you was of and if not that to share, the that want you are don’t know Lines in expansion to share or in kind I worked if just not those both is mentioned

John Marchioni

Yeah.

I yeah, And specifically we know of happy of we disclosed if But answer but the So, am list the our I the work we states we if the don’t have think I targets. have had gotten. about to three, question. talked on some

we speak for next a half as where in and in same would it, terms Vermont and have have starting which of recent but be Idaho, tranche our the most our as existing have opportunity those states of and obvious out that next the more of They roll evaluating for round will those and to Alabama, of got the and going market ‘XX, are starting we we don’t are players we footprint. states is work that expansion for are launched, ‘XX latter states. to start are really So restart, three to some three But adjacent call these number candidates are earnest in earns others the as out. we the states be work the

Scott Heleniak

is Okay. Lines in And Commercial is so interest... that that --

John Marchioni

only. Lines Commercial

asked... know I Sorry, you

Scott Heleniak

Commercial Lines only.

Okay.

Okay. Got you.

John Marchioni

Commercial Lines only.

Scott Heleniak

Yeah.

to plans. of here then It too what I be have similar years. what XXXX, you on sounds those are like And seen was with seen still just you curious have in kind recent the agency going Okay. for

Personal it of high that... I So that hasn’t you impact that, is how on the really looking like worth Lines Personal net Lines, wondering -- influenced, didn’t COVID-XX sounds so or an have was appointments really if new initiative kind at

John Marchioni

it, long But this we and engage takes appointments good bit lives to wobble Board and that hasn’t, in frame a remote June agents go of make to time was It environment. terms that we There -- pretty before a through time fit. Scott. on and coming actively process it’s a we in, a under scrambling were get an ensure their our to in prospect new of process call April as a appointment

states. small XX number the appointments years and of say of on. that which control least probably net continue doesn’t So lot and more back all about this that is to additive terms expect levers, these make number. share markets of wallet, at continue and robust to longer two to I on X% states is a be a the term of rate But that in context few within But targets this a newer pretty our us talk a the agency obviously the new termination that came would a to pushing of across our of share, number the are we we is when are next of in average will we loaded anticipate allowed appointments. little bit all achieving being states year, we the XX% for and pipeline a market would run

the have We average our headroom across there got are about and footprint. XX% --we on it’s

push we this as still franchise framework our toward So value that strategic within of is XX%.

Scott Heleniak

then Personal Auto. And Understood. on Okay. was just question last just

talked the down some pretty seeing taking are seeing and rates picks frequency. what across declines we states. loss lower about rate hear in Board from the coming you The are increased and competitors much everyone You certain

-- there? just in the you auto coming wondering how the and change competitive seen all have So change big you favorable a down versus since am you are share you the just having and a continuously whether looking in frequency, are you March insurers rates at kind see growth big of appetite COVID-XX can and I environment anything

John Marchioni

and is I set in basis your earlier no to you view definitely of standalone auto pricing XXXX up Auto. has more this discussion the immediately The you the certainly and there how No. based is more changes are quickly you book normalize to their that their havoc frequencies -- renew way and the competitive of for also to cycle Personal actually question. your incorporate Commercial basis severities policy -- managing Yeah. piece an a Personal as in base into on policies. what’s environment basis. And for competitive. The XXXX, the extent happening about file how a on become ties Auto modify fact make which rate base is on go-forward the annual results of equation where rates earned price Unlike just on one the base year-over-year your into

But sort have already market, it’s of sort writing are And the competitive strategy. on the the auto a and you market and the significant where different price to price is ratio that’s business we multi-policy like got it Personal of home mass we compete shift Apple auto we because in -- amount mass fair just and basis significant personal as is writing environment to the think our tough advantages, is unless price yes, that’s a tightened. and underlies Auto. and still are we into been it I business factor also both our a expectation migrate of but in a So, has is a I matters, more of marketplace. have a for migrating game -- And deciding isn’t scale market the in much expense in this think

Scott Heleniak

All luck. Good That’s right. Thanks. very Great. helpful.

John Marchioni

Thank you, Scott.

Mark Wilcox

you. Thank

Operator

proceed. That’s queue. on our you. Thank last may Speakers you question

John Marchioni

Operator, sorry. am time here a we are hard you. having hearing I

Operator

Oh! queue. That’s on our question last

You may proceed.

John Marchioni

reach to you thank very follow-ups, Great. your for Well, out and time Rohan. for you. attending, much Thank questions, please appreciate this morning. as I the any always,

Mark Wilcox

you. Thank

Operator

concludes you. Thank And that Thank joining. conference today’s for call. you all

now disconnect. You may

Selective Insurance (SIGI) 29 Jan 212020 Q4 Earnings call transcript