Earnings call transcript Q3 2022

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Operator

Good day, everyone, and welcome to Selective Insurance Group's Third Quarter 2022 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, Rohan Pai.

Rohan Pai

Good morning, everyone. We're simulcasting this call on our website, selective.com. The replay is available until December 4. to results measures business three use discuss and our operations. We

reported use with annual, GAAP we in the financial filed First, reports measures our current quarterly SEC. and

easier which we business. believe Second, operating to measures, non-GAAP make our use it for insurance investors evaluate we

differs operating Non-GAAP income equity income reconciliations and or available from divided Investors Adjusted losses per net losses to income financial measures after-tax any of by comprehensive stockholders, our -- share the gains to gains is included of website. investments other is the accumulation net operating and gains referenced investor unrealized or the in common common common operating on non-GAAP exclusion book realized on value in package found on impact average common in stockholders' losses page are value unrealized GAAP total Non-GAAP supplemental book return non-GAAP share our securities. And after-tax on excluding equity by of accumulated on common investments equity. income. per

uncertainties and undertake quarterly the detail SEC, revise forward-looking statement. subject statements and the and under performance. no or risks are future future These projections guarantees any of and discuss these our and They're obligation reports filed uncertainties. about statements We of risks in annual, we current our performance in are make and Reform not with Securities forward-looking XXXX. to Litigation Private we update Act to Third,

Chief the John? President Mark will by turn Financial I'll to be Marchioni, who and and Board, our Now over Officer, the Officer. EVP Wilcox, John Executive Chairperson our call Chief of followed

John Marchioni

us Good morning, and joining today. Rohan. Thank thank you you, for

these think to our of quarter the third getting proper and put year-to-date, the the it's I Before in context. for into performance important results details

high economic volatility. levels We environment in elevated by and losses market very challenging inflation, of capital catastrophe a historically defined are operating

up to nine deliver non-GAAP ROE marking full XX% operating top net we premiums Selective backdrop, and Based was for a were our expect first to XX.X%. our the ROEs consistently guidance, written months, of consecutive line double-digit produce operating shareholders. on results. ROE XXXX XX%, ninth Despite Through this year strong our and of challenging continues updated bottom year our

our under to combined in physical our pure underlying damage through with pressure property pleased of remain addressing overall exposure due and been the a higher disciplined of has this ratio While increases. lines combination severities business. We price and in results, auto

book now the interest On also has the impetus allowed the environment. portfolio yield boost in overall and returns higher significant higher investment rate flip side, inflation us This future. is the our pick up for into to and

in and Lines Moving driven retention net and Growth premiums on Excess pricing was by to XX% renewal Commercial in positive growth change. and Personal business new written Standard Lines, in results Lines and strong rates and of in Standard Surplus the quarter. exposure strong Commercial

loss Our the for included our combined losses months. the estimate to ratio the the for quarter, during was with third quarter and net XX.X% a Hurricane accounted expectations for was million related XX.X% points in nine line $XX and which ultimate four in Catastrophe first Ian.

expectations. points property non-catastrophe above losses were our X.X However,

auto the our losses expectations, initial first were For of property non-cat approximately XX% the of to nine the losses X.X points with attributable months year, the above damage excess lines. physical

increase relates While primarily this past to inflationary quarters, we've highlighting economic this been few the pressures.

up were approximately severities year-to-date. year current lines, property XX.X% all Across

line third for generally up they our quarter, While in year-to-date. with the are the in frequencies slightly were expectations

homeowners E&S and Year-to-date was reflect adjusting We continue replacement for property and portfolios. higher XX% to be book and our change repair premium diligent these XX% building for renewal values costs. commercial contents our about and to property

to line, factors vehicles as labor. such repair loss damage reflect auto commercial the parts, and inflationary used for For severities physical continue pressures

on centered profitability challenge ongoing line months quarter have averaged X.X% year. increases, and the price X% address efforts Our nine the the the of for the auto first which to third in in commercial

our ratio we loss confident casualty side, remain the trend. in selections, current X.X% which On year assumed included loss a

emergence favorable frequencies claim continue the pre-pandemic reported current accident In the we prior from better below addition, accident expected year, casualty to years. In levels. to continue than remain see casualty emerge and

first price the points averaged increases XX basis for pure segment higher in Commercial the than basis quarter, XXX quarter. points second which the above Renewal Lines third X.X% was and the quarter

and in of was approximately strong. Commercial XX% Exposure Lines remains our renewal quarter total Our during X.X%, XX%. retention change third growth the rate was book premium

loss to time, intend market We expectations. our over and the disciplined has past approach our cycle This price price forward trend that, the increases the defined appropriate strategy match obtaining to remain decade. long-term seeking for consistent in across

XXXX, towards environment remain the to continues As as trends industry-wide remain the pricing reinsurance lines constructive expect we market firm. look we and elevated commercial to loss

which want losses, catastrophe a I also past to been the industry over thoughts share have years. expectations on for few five above the well

loss significant and Selective, this life of large a not catastrophic reinforced importance loss of was exposure the and property managing understanding Ian for Hurricane event to While events.

the ratio. Over been measured catastrophe losses industry the below our actual by as points XX past on average have years, the combined

the coastal reinsurance management catastrophe on aggregate purchasing catastrophe limits balance around and properties, in the being aggressively losses protect risk markets are disciplined to sheet. modeling event exposure and establishing prudently guidelines expected on centered highest that clear Our around exposed managing bases, extreme present both efforts underwriting our

Turning negatively The our higher value. and so GAAP reported far impacted portfolio have rates investment year the to book of investments. interest value this

of managed enhance have advantage portfolio the and take we portfolio higher However, investment rates yield. to the

was points equity ratio, investment portfolio year. the approximately of XX, of at of return higher X.Xx than the fixed over on on of additional to basis income start the a investments As XXX September to basis With investment every the points XXX basis yield ROE. translates points higher short-term and XX portfolio

increase margins. underwriting underwriting targets, and to an as not ROE opportunity first to our investment We exceed We foremost. opportunity an company, contribution an an are view in forfeit ROE as

updates. business quick few a with close I'll

execute our to major priorities. strategic continue on We

In track. plans discussed geographic understand commercial calls in new well leveraging October, Our lines way and began expansion writing well. lines a is our in lower-risk on grow we the Idaho. of to and remain infrastructure Alabama lines business that expansion skills recent Geographic on commercial we business

We in have second Vermont previously opened quarter. the

to over states will years. additional the open few next We continue

While we solid market. catastrophe marked continue to our lines our by again affluent personal in losses, towards make mass results migrating progress were business the

loss new and segment Our averaged into offset to Filed largely Heading obtain to this we further in exposure quarter increases additional the X%. growth business in expect ongoing migration. the higher reflects third rate rate XXXX, severities. changes

segment It and offer Our E&S business remains a a that is attractive to to our financial flow results. opportunities continues strong margins. contributor business

seeing casualty-driven classes construction, segment. our deliver as competition growth for such positioned well we continued are are Although heightened we to this in

at will do we However, so not expense of profitability. the

year we XXXX, over years. I past this we and look are have consistent challenging to and the to continue and navigate remainder to positioned several the well delivered As strong the results produce environment into of the

With Mark. call over will that, I turn the to

Mark Wilcox

the Thank XXXX. months will financial for the you, first for good guidance morning. we'll of year, John, our finish nine results I discuss operating and and quarter updated our will I position. and with consolidated and our then the for review performance

of deliver our an are XX% XX.X%. which Based the year results non-cat operating reported per diluted EPS net to For stockholders level income loss losses attritional XX% of non-GAAP our non-GAAP a from full to year property a a operating common ROE, high the and a above of $X.XX, reported of share quarter, operating allocation available to we quarter, this annualized is we guidance, positioned small investments Despite on $X.XX. third for solid with we our alternative target. ROE

for Given year. expected ROE next to a higher cost expect operating capital into going target XXXX, of we increase our

South Florida. we four primarily points, to for as combined segments. or consolidated underwriting have catastrophe Turning reserve results. for and ratio in We ultimate in We by losses in landfall reported property million a each Carolina our driven meaningful combined $XX third down not written included ratio of year net of year-to-date, million quarter million the XX.X% casualty period. of the our losses, related development, reported XX% premiums the in growth $XX the X.X We and Ian net state in year the quarter, net of for Hurricane second ago from growth strong favorable do XX.X% for of The consolidated for prior exposure losses booked to in points. accounting a $XX

in Insurance ratio points non-cat Program. losses. In Flood claims FEMA's handling reported principally excluding On the basis from estimated addition, than This period, higher driven fees development, X.X $X.X property million combined higher catastrophes percentage reserve Hurricane was National an year or participation year third with casualty we underlying was XX.X%. quarter by prior our Ian ago from and the

due to driven the commercial For mentioned. the were points combined auto non-cat property period. damage higher by physical The on primarily the losses and factors for accounted XX.X the economic were third which property X.X was John ratio, that higher inflationary severities in losses year ago quarter, than and elevated points

higher somewhat to a first frequency experienced also the level compared quarter the half year. We of to the of third

As reminder, level do to a attritional losses a volatility from of experience property period. period

reinstatement Also on the recognition years. of losses treaty to $X.X in the three quarter million combined was earned and related ceded XXXX impacting the XXXX premium underlying ratio for of casualty development the

reinsured picks premium ratio accident combined otherwise fully stayed quarter. the for While X.X this our XXXX casualty added these points our the reinstatement casualty treaty, loss consolidated losses to on under the are We've year. approximately

underlying of about points an expected X.X reported is we the in Catastrophe our or underlying first is why on expectations accounted property projected higher year-to-date. a losses four combined The than nine combined months, on principal year-to-date be is the than ratio XX.X% for this nine-month ratio the loss to reason expected For ratio is combined period. which ratio, XX.X% This running above non-cat points better for basis. XXXX. XX.X%

to Moving expenses.

with expense which in period. ratio the third year the was XX.X% prior quarter, for line was Our

For expense for in ratio XX.X% our also the was with the of first months, the expectations line nine year.

the inflation year the long-term ratio focused reinsurance collectively economic in in which in put quarter expense are pressure upward XXXX. principally higher ratio, our ago comprised and the million holding costs on impact $X.X our further to expense compensation, we stock for period. of company are some million costs compared potential expenses, may on totaled While the Corporate of reducing and $X.X

Turning favorable accident of also casualty combined The Lines X% $X points by X.X new years X.X%, written XX% million from of the increases business net of accident in XXXX prior; XXXX from year points net and prior X.X workers from the development. $X million year favorable owner's The policy line reserve driven bonds business and for year XXXX. growth or for losses XX%, for growth ratio excellent increased prior; casualty of reserve compensation year of our $XX Lines driven was pure for to million XX.X% development price prior Commercial and catastrophe Standard million $XX retention included accident quarter averaging and exposure segments. premiums Commercial X.X%. approximately and was and quarter, by renewal the

to were severities driven These reserve $XX part in development offset auto the unfavorable by XXXX year. reserve $XX of by with in million higher attributable releases the year million net line prior accident commercial

While in the ultimate action year, this frequencies continue for we the below XXXX to remain line severities now in expect took higher and expectations quarter.

ratio combined higher increase non-cat percentage underlying the losses. property Lines driven quarter. was X.X period the percentage ago principally The to Commercial from XX.X% of was by point X.X year elevated for points

ceded addition, non-cat accident earned Commercial and casualty last year which and in the and expected physical liability to lines, ratio quarter, also remained for X.X loss general the were reinstatement losses points for elevated quarter. highlighted elevated particular. damage severities, than ratios premium property workers current the compensation added higher levels, auto commercial at we In the our combined

lines result strategy as XXX.X% and our was ratio, market. XX.X% The premiums X.X from up at underlying XX%, was much of catastrophe combined year XX.X year however, combined growth period. net losses. points new XX% period. mass was written a points increases was the the pure the of to was prior of our ago relative X.X%, of target successful affluent growth lower prior The than ratio strong. averaged elevated segment, within increased of our at a price as These the reflect In metrics year business retention personal Renewal execution

relative X% and X.X included new ratio points strong losses. Renewal profitable year grew segment higher for increases in written retention non-cat a underlying the remained pure premiums driven The The points XX.X% X%. year ago. net ratio than was prior X.X%, averaged property X.X was combined period, mainly the and XX% up the segment, combined to E&S catastrophe our business by In higher quarter was net price of losses. of in a

Moving investments. to

Our portfolio remains well positioned.

years, XX.X% represented derisk XX% in of continue of uncertain quarter liquidity. invested to as X.X against income of of XX portfolio degree quarter AA-, portfolio was with offering more a our our at points credit investments, down effective duration As of assets rating average basis in and high Risk and macroeconomic backdrop. quarter an end, a we fixed end, us short-term of the an

investment was driven For our ago lag, after-tax by million of $XX.X a the after-tax ago. year generated $XX of alternatives. to $XX.X period, the million losses $X.X to year which income a after-tax Year-to-date, after-tax one-quarter $XX of investments, in million million on Alternative net quarter, gains down generated million from a are relative we've investments. gain compared alternative reported

Our current best full of reflecting fourth alts third million after-tax $X is loss million the for year, in quarter alternatives negative $XX from from the in income markets. implying approximately estimate an quarter, after-tax the for public principally performance

alternative high is best income of after-tax yield which portfolio estimating translated of provide we for X.X quarter, points to a income As any on the The in in while the was X.X% period. given a estimate there the investment alternative ROE investment imprecision our for of contribution. year, full degree total reminder,

While our what to focus, attractive income is generating we underwriting an continue yields market. fixed the investment to income our investment manage in risk-adjusted primary optimize remains portfolio

new fixed securities of in first income year. money during approximately nine $X.X billion invested months We the the of

the money well this X.X% our relative credit opportunity money portfolio. work, our increase up meaningfully The for new taken the As improve and X.X% ago and to in in yield to liquidity period new came to of was yield. year up yield the pretax we average we've to put quarter in the above book pretax move quality,

of basis XX% our income remains securities of And yield benchmark Since portfolio and short-term higher yield XX year-end, rates, third increased portfolio includes the these resetting and investments helping the basis investment points, in income approximately XX increase In invested which at from fixed securities. our approximately floating-rate book fixed pretax by we've addition, points book approximately are income. quarter.

rate increase come this from year-to-date of our has half About floating exposure.

floating We uplift rate resets. expect yield in another book fourth from quarter

maturities, additional an In work expect the organic we from in quarter to fourth and cash addition, operating coupons fixed from in to income purchases put $XXX flow. flows million the cash

to as year-to-date excluding period year. fixed year our After-tax to and quarter the XX% to principally we reflects compared as income, prior income was net next ahead accelerate the are higher to investment which up benefit look results. allocation is in reinvestment these alternatives, will securities, starting our rates XX% up This

fixed significantly negative this portfolio negative the investment market investments, impacted current return environment X.X% in higher portfolio. has The for year. months is the of While investment the and quarter helping total negatively and drive our of the first income from income X.X% nine was the investment total the return

Turning capital. to

and in dividends. unrealized for remains XX. for first by in of within Our surplus the after the capital nine the remaining value trailing was on a XX share and after-tax value X% for X% per statutory GAAP with quarter down increased per losses billion mainly down months year, income. share $X.X XX% adjusting strong months as and levels, September up basis, capital is driven fixed GAAP year-end Adjusted of Despite book the is the position XX% quarter equity book at of

million position Our with well which holding in strong target. is excess remains company cash of of our and cash liquidity longer-term and $XXX investments,

net the to of middle is Our ratio of to premiums range X.XX in target at our written X.XXx, stands X.XXx. surplus which

also is the a conservative. which mark-to-market in position, of me, support and growth. Our losses, capital XX to unrealized we remain investment is Overall, excuse debt -- XX.X% available our ratio capital liquidity point to despite strong

our an per For $XX.X $XX.XX total XXX,XXX for first nine price we average common of shares months repurchased at a share year, stock million. of of the the of

program, share opportunistically. continue our September XX, we remaining using which of As million repurchase $XX.X had to we plan capacity of under

our In increase on stock quarterly Board approved cash common our Directors X% per share. $X.XX a addition, dividend in of common to

months currently conclude first in ratio expect with year. of of nine XX.X%, update excluding this losses, GAAP reserve an I'll the on favorable We of catastrophe the development guidance. our combined inclusive net a year, casualty

no assumes development. additional reserve year guidance accident casualty Our prior

points our puts the with XX% consistent our combined assumption XXXX, at year. ratio. loss combined at for X.X is guidance the year assumes expectations of catastrophe the on start expected That which Our full ratio

have The expense better-than-expected property catastrophe of development component parts, being non-cat lower-than-expected reserve losses, favorable losses. with casualty benefit the however, changed and offset by a ratio higher-than-expected

of investment from remains lower investment income is Our investment income after-tax fixed from net unchanged alternative last assumption after-tax of million higher as $X million $XXX by quarter investments from income offset income.

$XXX reminder, million alternatives. million income, of net investment we a As $XX expectation including of with the year an from started after-tax

An overall of shares rate million which assumes basis, XX.X%, and on under effective rate average items, share diluted no of other we net tax make for income -- investment XX.X% for which includes repurchases weighted authorization. a our of XX% may tax effective all and made we additional XX approximately an

of XX% a a This and solid -- another macroeconomic solid would months updated guidance the loss backdrop for year year year catastrophe result activity ROE first year. this that operating has non-GAAP industry. of and Overall, implies for this year the our around the against nine of presented be a elevated the

we As ahead XXXX, remain delivering we and disciplined, to profitable strong, well continue to positioned look growth.

I'll that, up the operator the questions. call to With for ask open

Operator

question Morgan [Operator line first Instructions] coming Phillips of Stanley. the The Michael from of is

Michael Phillips

I versus up sequentially. get on sense trying to of casualty. pricing of how is, want much focus commercial guess your I property I'm a is to that

you're As compare, I the on casualty still your assuming comments John, loss X.X%. trend,

moving want reflection pretty side assuming that on inflation. are for So up in to that of casualty I'm second. I the property the of kind hard rates focus a the to

as like we next that I easy this a on what might fix and in current think next year year. look want XX.X% the year. over about to the your side much how I is cushion there see So that's assume price casualty pretty

John Marchioni

there's I'll so I question pieces them. a Thanks in of that for through the answering try Sure, Yes. question. lot Mike. to work think And

Just a continues the impact that. level, Lines be X.X% on that the Commercial comp highest pricing, the negative comp in for workers at the quarter to --

pricing workers So comp continues relatively to flat. be

So pricing is comp, year-to-date. X.X% the overall X.X% for quarter on quarter, - excluding at the a

at is X.X%. property Commercial

were higher see an XX% competitors, inflationary this think about commercial you've year. trends I up in we to property, that's of inflationary rate our and loss about exposure the like go blending as exposure from you Now on think when of the heard for expect into area that many the adjustments year. next and impacts move we particular, And

So in terms. think those it again, we'll about

think while call rate increase recognize industry. benefit I for in a provides business a offset, some I the that the sort loss replacing needed inflation, the it's it to impact of But neutralizes this ratio us but exposure be of of important for line mistaken it shouldn't won't that it the of and

look want at them the continues terms yes, business. So rate in need in of to of you severity a that but be to line for changes together

overall. kind that's we So it think how of about

other earlier, market constructive. said our I we as strong think retention you be, when that our continues retention as see, the which remains But And trend picks. cited, I loss and at and constructive your part to will also remain we've to loss look as the that trend the loss embedded you just that the and X.X% in want I our of 'XX point, clarify cited, casualty is

continue of and you we'll XXXX. to forward We always into that loss beginning the a that, as of evaluating with get updated we we'll do guidance and provide our are along view trend

to loss exhibit comp over excluding to different is loss comp, loss little for lines, embedded casualty picks at that price property And our a look at XXXX have casualty I casualty for are a And little But our X/X our and over the in best very this comp, deconstruct it you of way trend a assumed loss loss favorable look company basis, in casualty and on in premium like exclude trend trends, lines. X.X% a our comp X%. we Selective, you ex if that if think trends I casualty continues X%. and those is more say versus that's about would because lines,

as relative I a So that, when for at view think casualty. you that look offset you

true XX% look economic of lines, premium about and and exposure at what for XX.X% year-to-date property that's inflation the primary to uncertainty, E&S I creates that's forward is auto this that I'm property with actual and the physical XX% a is to that you driver range, combination all question. of hit the combination That's severities, parts property rate component the inflation I that, a closely the on And in for XX% of relatively the I lines Because the damage. XX% to our hesitate are period. of expect The hit for the call on the pieces where would not lines. of property economic commercial CPI and in you remaining X/X up our sure but track and the think property of severities for around trend, forward home. actual and it

Michael Phillips

it. Yes, you then investments. appreciate over to I I think switch I'll did. And

money new maybe more positive -- yields -- a take for the You've I'm done It yields. guess into of where was not for some be putting of reconfirm and the there's advantage earned positive Mark reorganize kind done to the it for saying. and sounds like I going work there higher to book your -- next be that of what can from a kind could like yields you're still year. sounds even rates of you're

Mark Wilcox

I We've we've first in portfolio. my book income to X.XX% new some to to to comments, just say in is fixed I it We've see to prepared money mentioned would able increase higher and taken the this right. our investment been continue. three income and from work the up That's embedded within we investing this been quarters fixed Mark expect rates yield environment that short-term we've X.XX% Mike, time. for exactly than year. it's And reinvestment very in here. as in much constructive a quite put seen

you a our LIBOR, can few rate the well. benchmark since curve as And continue that's put increased to to significantly want the with to We funding seen allocation the We cash increase can significantly, constraints, end opportunistically, portfolio. we've we flow quarter And and the SOFR, trade end have have use, to exposure. front whichever we work. with of

to to core a going continue going we're So And to higher number of our income, the over that's risk-adjusted think investment I investment returns next continue of in optimize fixed periods. the level portfolio. income to deliver

John Marchioni

does guess I view think That increase -- well reinforce term, explained investing philosophy just it our about serve But property investment how positive. in as offset point Mark a to on just commentary And bit the we had and an And as combined in inflationary investment ROE underwriting property investing. the focus to pressures. we of improving and the ratio underlying addressing around those around margin that our we remains near the line. pressures in

is we'll and continue us to So to we to margins forward. operating perspective, offset, continue this them a overall great from but underwriting expect to upside ROE an going balance additional boost give

Operator

We Sandler. Newsome next Paul have Piper question of line from the of the

Paul Newsome

to think, I of want business, About was basic we should there. I can XX% think thinking. may sort margin in how my expansion or kind critique contraction about of prospective and to view of the margin return about expansion comp, a may I hoping thinking is the the on prospectively. or I workers you have

ratio, X/X of take in continue margins comp is not about of XX% we seems be about sense, to in other have then right? that at fair what it? it you out, X/X own looks if opinion or business the is math about like I do in way where happens the look sounds there my X/X and as issue about, that's think -- I may the matching property workers And insurance, the liability like whether roughly But business really inflation It And Is rate I I on is rate. a a speak. not the be or and workers' comp? that may your with the guess, to property issue will exceeding the

John Marchioni

look it way it. Paul, to is fair at a

margins I that is of to think, relative assumption way your I think without comp. an and and think the up casualty got point, forward the I comp And is that's split split in right. But what you right exactly to it property, and with the book you've going the is. terms

in the are this losses, year severity driven our nothing estimation, physical that of portfolio direction underwriting being not exposure The non-cat an higher is that's replacing in property auto be those a by where commercial There's you a our rate to purely losses, go-forward shifted. property, damage. plus entirely impact property basis. pressure we've direction ratio seen cost lines the pushed alongside on combined of it that of those property, dramatically underlying and non-cat the personal repairing in and think our by And margin It's property property ought or on of is concern. about

Paul Newsome

in on property So might view property your macro is that other a there would anything, or book opinion, to what just respect change inflation, on than with going that respect happen -- with inflation with what's with industry? to

John Marchioni

parts some portfolio. of and pricing about others, in making for this This is exposure is replacing for there's because underwriting the the our not think I can't portfolio our for our accurate. book is -- about speak book, and sure I concern

value always new the was always not I been dynamic exposure strong, entire reviewed to a We've strong. this Now make our you, to portfolio concept it is will tell has for and insurance individually us. sure and

be focus. to that's So got a

on for do again, is, there's lot But selection, risk management focus here, important point industry on think hurricane, from on. we've I is increased across an frequency severe seen the industry convective I of focused to while us, this think country. goes always have as this the catastrophe And and good and something good exposure activity storm for company a as the a good other an we of severity back pricing of and exposure

about -- pricing. think achieved everybody And the of not may And still about it be for improvement just property in mid-XXs, you I is -- look additional and that's keeping combined through ratio need mid-XXs. those not when is property pricing ratio combined at in think risk-adjusted market the line-by-line risk-adjusted terms, be target that are the the to We these up with underwriting happen. has needs margin inflation. the And target. currently This this a largely to lines your line for that to is lines business that

Paul Newsome

That makes sense.

way the itself. on sort I underwriting with to, to the down it's your property, whether essentially both rising in guess and business this be way about in property general, issue going is summarize I think risk Is that a happening next I think it? inflation convective of storms performance boil So about to what year, if to plus this of to

John Marchioni

to year, on -- dynamics. Selective next about think and own front it. of for understand to want think I and separately. And think different important but I marketplace don't property dynamic too are casualty to Again, far get right the the way think our out and dynamics that's I the about in they're dynamic guidance the

Operator

have the KBW. next Shields line question of from We Meyer the of

Meyer Shields

So I risk selection, a that I the an in ideal inflationary can. the on follow for to about risk up When are less same the change in want as the environment standards risks risks ideal question, the Does talk selection? you if inflationary last environment?

John Marchioni

out should I of you're think yourself inflationary don't a correct. your it want answering your why to of it. I -- as factor on we in you selection. I at long question it thinking about how And that's environment I'm because always answer and -- But as that about interesting as don't differently. I an nothing not terms as again, exposure that, be think shouldn't to And doing jumps pride risk getting I'm sort me

-- where have if rate to be be As understand long down occupancy long times And organizational things, premium roof based basis. about protection, up level underlying good accurate need you it is exposure, exposure both exposures as rate. so on your you of or discipline that those as your again, age right damageability, be consistent characteristics, to in you on underwriting and rate right you a roof be and a getting upfront needs in can shouldn't But have risk selection. get age, an you your type, all they inflation the considered building, of of right, all as difference inflation

Meyer Shields

the more than I whether elevated whether past. wrong helpful. I'm -- but what inflation, of question. sorry, on Okay. was time, was curious social of might No, the that's saying. in I casualty targets look Thinking But I word, they in you're in a the to is different understand completely the as thinking have area

John Marchioni

Yes.

allows a just up do severity be hazard stable, remains Now on inflation. is hazard your us, when mix follow which you business. your and social they look mix focused different, social more think I social and of Meyer, And again, to it at across frequency inflation, actuaries of bit on and our influenced where inflation be by it, for stability lines could that's fairly very little both want casualty our though, to trends,

those it getting fundamentals about shouldn't it's make and a again, But underlying right difference. then

in from that mix portfolio, been shift question you quite shifted. think I pattern stable severity perspective. our different a portfolio but a your casualty your a frequency a hazard because presents mix see bigger the different has and has is, if That's answer,

Meyer Shields

at that And perfect. critical No, Can question I losses this is, line And quarter? product point. Mark. by for then think, help for Right. would get cat a which certainly the production credibility, with I more just the

Mark Wilcox

Sure.

there in up in Commercial add need or let commercial if $XX.X million; Lines, does to should other in the So segments million. With or the me any that rounding, the financial a that's focus $X.X in $X.X of cat million start Did supplement. the little million; the for commercial you year-to-date auto, that... the is BOP, property, $XX.X the Standard losses quarter,

Meyer Shields

personal all -- you the do -- No, mean, I'll I if but I mix? can property lines just I take assume for can assessment's

Mark Wilcox

Yes.

$XX.X E&S, $X to three should the and Personal $XX.X million million; million about So in personal million $X.X that's all add of up the Lines, million it's for and then the so in homeowners for property; $XX.X in in combination quarter. auto;

Meyer Shields

regard hoping us you portfolio. that portion contracting on of then to was or the either could with Okay. rate Perfect. for update plans securities, I the looking floating And expanding forward,

Mark Wilcox

Yes.

excellent look the portfolio strengthen did to an as the purchases, to overall on purchases back put terms of in million overall the And credit $X.X back work prepared opportunity rating comments, our the taken credit at cetera. AA- the that's in average portfolio. my all et Meyer. investment the we From We the mentioned key question, perspective, to today. we in and yield, quality, have the here I the So liquidity, increase book risk portfolio metrics of we in

barbell in bit or to curve. short-term bit go and hiking. run that We room we set a the see significant end entire to we allocation end, of the more curve the to have of a longer. SOFR front allocations. terms of allows have terms in the It little pretty us still At LIBOR little a with And long the still expectations

that's already Some of little bit think built in, there's a but I more to there. room grow

of us. is think not on to one things about the reversing thinking with I get we're But that caught

decisions, But be think to the to down from much. can plan pretty or our too would as of flat. you with exposure period is point, take being all and duration. change want at so rate so some quarter move extend -- markets this at next things don't our expectation investment We that curve the change daily The over period. And is point to duration yield two, mindful I floating

next Some like With securities. of in potential up year, AAA to and AA exposure that to floating is rate a we'd quality. be rated recession

you of all for So well some of execute over quarter the rate X. think and and down the bit together, a if perhaps it market floating are But we need expectations put of exposure to ride exposure. sale mindful that I longer that next as liquidity credit to quality be making the then or in there's it floating take sure to rate little

Operator

We Grace next of of line question the America. have the Carter of Bank from

Grace Carter

we've past deterioration. peers, quite sequential quarters, at of it wondering the us think and to from of Personal from Looking with so I a Appears you ratio might doesn't think of bit light have just lot affluent the of mass we've about was over here attritional few some around be pretty help some that at seem loss your kind trending could Lines, should far towards we that seen, a the in which how just substantial, moved if what has book seen. the in to that volatility do shielding transition pressures. through inflationary

John Marchioni

does don't already anything other is which than you to mass pointed thank the could you've I market the I book specific point market. Grace, affluent to, for the know our present already to evident there don't an our Yes. But trend a for. from that what severity question. has been in that meaningfully plan transitioning is And suggest and to want a loss and from that in that's portfolio. we absolute change perspective that pattern different frequency I anticipate

targeted And business writing. like middle that we're of we the plan didn't for our segment again, peers point cut did. many constructed pandemic specifically in a I of the the think marketplace. We We rate of prices is the like the important other

we appropriate We do to credits was starting were but different. little our didn't our point underlying that premium opted So structure. change a thought rate bit base

compare the rate impact This a higher. think mentioned and as is not to prepared because And But to the remarks, our I of business. home rate suggest filed don't in I changes in are book go we our needs we're taking both little of higher. harder to middle the in going we're this transition auto it's results of think do meaningful of my

Grace Carter

probably renewals. through just reasonable to thinking widespread And when given renew I us versus your things reinsurance you would pretty a of regions I at light in price. you're compare kind reinsurance peers cat-prone to think you for how property lower upcoming help about guess, trying would expectations in if favorably could But in books, exposure substantial and increases of pricing, think, that

John Marchioni

view market. little very basis. I'll So program him they're But about comment we've our to appreciate and your talk let seeing hand to what in agreed, on over relative that bit Mark as should the reinsurers it a we attractive a

Mark Wilcox

question, Good Yes. Grace.

exposure of reinsurance information need the out the in there we've U.S. seen state year. that the for more there's primaries clearly highest to market. So level, on buy this a at I the the of won't industry But on that's back repeat growth the of all

perhaps of investment a then and expect factors and other of of see year alternative markets. next We a lack capacity, to retro lack and clearly, bit little given results,

But you It's for us. and a it and important manage we I our nicely cat to management XOL reinsurance core have our a up capital program summed casualty of well-structured is pro-risk, across well-placed, Reinsurance solvency. volatility program. part then think property property

reinsurance we with partners. And highly-rated trade

to We have of a Bermuda partnership or U.S. panel extensive we take syndicates, approach a an the managing that's whether in relationships. with reinsurance reinsurers, -- that's whether and THE really really our Lloyd's in Europe, in London a view whether long-term that's And

bit one of management is cat, exposure differentiated about the things is comments. mentioned prepared property And that and John the that Selective in the a I think little around

outside going combined whole. happened, property the We loss almost have points loss been running well perils, overall us that's our a that's when aggregation you in about in perspective. last or against as whether ratio XXXX, that's of that's but cat below think two to And from California, differentiates marketing on the an back peer of a having whether reinsurance all I peak that's Florida, years, group whether a industry book in activity cat a six business from Texas, a perspective those managed think, the the

to get we all that as generated we a a strong X/X, recognize say, as that's need sheet, But X/X, X/X it's look suffice we'll happening. I a as look It reduce reinsurers. our And and treaty priced think the we clean. that. we to buyer's look at at for renew do does on price. that market likely are from also and well volatility to purchases perspective, that but earnings profits to is continue has It we reasonable cat through been to there balance protect a ahead But very very the the prices But to to the place reinsurance reinsurance rise to property whole, know, dynamic get cat.

Operator

question We Carletti have of JMP. the next the Matt line of from

Matt Carletti

that X.X% you pure kind is, I I about the just spoke you've -- to with you on had know if rate Could And of and magnitude getting you talk follow-up be and increase, like I Lines. bit us about kind things? in type of kind help exposure what home said features Grace's that helping kind you're features bit pricing be a the policies? particularly in act of to that a a more. there for you Personal exposure bit guard little of pushing might have other quarter, think related question little Can of or inflation might increases a some

John Marchioni

our the start as inflationary rate This And rates people home view book. make think to as we're I we're this. ratio And term increase the serve and to we sure. you Yes, I But your offset to home means. what in acting loss an that. it -- a exposure to seeing, a I like book, question, oftentimes, be we're need to just ratio to filing on We increase that clear to an neutralizer, Matt, impacts rate, to our on increase mitigate sure not in want does use loss know want clear benefit.

So it you're seeing. that addresses the trend

book month is roughly costs actual change the We rely And third on on process. updates Those feed and And that a flows renewal XX%, through to costs XX%. party a replacement lag Our repair there's any year-to-date updates home a exposure basis. automated a right very got into we've process. disciplined our that, in renewal or regular so while automatically on that the portfolio.

our So yes, move -- running around in we're move will and book, exposure still getting exposure it's home the to needs and the increase, pricing but XX%. automated

Operator

of line of Zaremski have next BMO. from We Mike the the question

Mike Zaremski

hits that million. bottom we you the think of majority that On was the the do said And the think should Is to $X fees, still FEMA line? I in -- you coming quarters? come flood Mark, more it that expect

Mark Wilcox

was, million booked happen Mike. in question, right event quarter did Good yes, $X.X the before quarter. It that The end. Yes. we

based on as Florida in but southwest fees collect and an to happened, Our parts Carolinas and other of for that the floods objective that severity that fee is estimate about principally frequency to the Florida expectation well. booking expect think the of ultimate in we

move to So a that right $X.X basis. at with million. so million more reflects a wouldn't that on basis. up highlight I end. come estimates did materially and and claim ultimate fee quite we expect to happen I our will on severity event quarter estimate, income $X.X go-forward that a There expect that to the coming But not was up at frequency few ultimate have But would go-forward

Mike Zaremski

it. Got Okay.

line to it of margin the on core of like income, into it And how make bottom so the to that? did of kind most that in terms used

Mark Wilcox

that's Yes, Yes. exactly right.

expenses. So as in segment shows that it's a loss the in the fully reported. and we of effectively and loss Lines adjustment Personal up is other, owned reduction It

loss shows So benefit that's Personal it's within on that Lines ratio it's a the But of quarter. fully up, when little a the earned. how bit in

Mike Zaremski

read to the I -- the switching Okay, ratio. I expense great. believe will transcript. And

element. about the inflation of talked higher of mix those, or ratio. that outlook and just reinsurance things? changing a expense the You wages Maybe especially you lot Is costs economic unpack on of inflation your a kind can

Mark Wilcox

Mike. Thanks, Yes.

efficiency pick for over think did three to points off If five Selective on years. You ratio the of expense the just second, continue journey meaningful, And and over ratio, a drive to take and expect taken we've back been overall to on I last down operational up correctly. a that we've I time. a expense efficiency is been we the which has step operational improve over

recall, longer-term had guidance. in better next expect XXXX. an year, hope year, embedded the little for expected come in we to take is expected This our might We that expect year full expense we year. And in and updated a our full XX%, going to to which as to a into keep bit you ratio, somewhere guidance was target expectation than our for and of the is which embedded XX.X% close

on will line costs, with reinsurance wages the is you deliver as guidance that don't higher What from about But think think inflation potential fourth potential through know is we items. economic it higher results out when what the But exactly for highlighting when today. come reinsurance we're about the other we costs, for you some pressures coming the also and quarter next year.

past. in and and to markets seen to expect headcount do to cool labor within us we we've have that come we've of having expense level on slightly -- terms ratio in of a attrition had say enjoy, I a higher a shouldn't the also, then of the than little back off But therefore, benefit XXXX little enjoyed organization. And we've in bit bit the right the a

we into expectations, expense up And you wanted going than a to a little are together, thought highlight of put next to quarter two the in all prior that we compared ago. perhaps or bit drift ratio perhaps our just year expecting those we factors

little disappointed on So that. a bit

for going think we're some but expense headwinds look XXXX. into to continue We ratio face I to improvement going time, over

Mike Zaremski

terms pre-pandemic it broader workers more general of you in frequencies lastly, would but cost coming guys maybe And you helpful. you great. by levels. lines? to casualty loss or been and trends, than emerging Any about able color below expected or is that's and so kind great Are better liability? comp talk on -- willing claim all auto unpack provide have there also commercial to of that also Okay, the Is be you casualty color

John Marchioni

Yes.

break fairly little bit -- look would it's behaving think a go to you won't fairly we so individual lines. impact dynamic. that been There's it But a on lines. to similar general they're into pre-pandemic. -- seeing relative adjusting relative I change, casualty all it's down I I It's and down when you the frequencies consistent noise far say across the rule, saw they're of rate a all as if at for what levels we're expectations,

Mike Zaremski

to because higher but loss not negative, most physical industry. of has come Got than better the in job sticking it. the costs. And auto is than damage expected lastly, I context be from the done just that the maybe And feel But guys side. much you you commercial like to have a provided

I then, to it was like you was not feel that's one for and severity I'm And the sure because having extent, commercial lesser hiccups make industry was damage last a an up seeing Or to a industry issues that auto. also the guys, wrong, of maybe nonphysical kind the issue back the -- want too. during in and in of you're creep just the

John Marchioni

No, you're hope have your one industry. been that going auto years one glad us liability think asking the in actually I'm and asking last Severities a and and an few is of Yes. good the for you're I question important higher others. for

auto north generating severity liability part commercial pressure X.X a points actually points, us, continued or on of commercial in response is amount You've for higher auto to got fair me, of again, for X And around loss excuse seen everything basis. that auto the 'XX on-level the that. severity some liability And assumed our on embedded But line. line. of on the picks quarter liability auto in you've commentary of an that total, to we think

can't but But to consistent of seeing part speak can numbers through. achieve severity hasn't that It are level loss reported higher So prudent in that's you're our that liability And you moving to higher or our want I and that in continue commercial why persisting, severity severity do higher. casualty to I I 'XX to been process. that's has, was assuming that's not. that in that we going continue whether don't that our to think that the It's our and it we pick, loss in picks, planning rate philosophy. and you reflect continue our come forward. and others auto tell reflected to expect

Mike Zaremski

-- do pricing is swear in especially industry at kind frequency, commercial that's competitiveness adequate competition, of question. that the Or And has heightened the you given I levels? there? is auto final feel promise, my lull

John Marchioni

Yes.

rate bottom the amount higher keeping about was market, put for commercial talking the the ratio current up target. think pricing with conservatively. way, levels. reasonable is combined starting severity But I let we're The a work more with commercial for there's an is I because industry that not think trends So me done to It's it a aggressive point line auto. industry-wide risk-adjusted auto be still above

which in more it's industry, would is line I it So that suggest seeing, for but as it certainly It's not improvement, irrational. needed. higher severity favorable, the still we're needs rate and think with the trends

Operator

the of Jamie last Inglis of Smith. question the have We line from Philo

James Inglis

-- getting coming type it share that is Lines is Are me that Personal Or of getting the from? where you a just or you your market a you're is Could sense competitor business give of from? business? growth a geography gaining particular you're it

John Marchioni

and growth, coming is alignment is the really mass it. the service of the strategic market. shift better last deemphasizing made we've of in The on pursuing footprint much we to to in model. this think operating sort compete driven that's our places and Personal that higher business the and driving philosophy that It's of coverage pointed Yes. That's our we auto a with by market a growth from. and really existing where the market we had value couple for and personal the It's affluent and our segment Lines, mass quarters, is

James Inglis

you in Right. understand -- Who business I that. are others giving are from? But I that Who's getting that that where business guess? there up, that business. are

John Marchioni

foundational we offering an underwriting good compete compete business So discipline got really we've every deep successfully against. and us personal and lines a market relationships got really organizational the segment result reputation there market, really the benefits the the as I than guess are in in for benefits that strategy. and of And commercial agency we commercial manufacturing and organizational E&S others good pricing no that and we've in that very products, in different construction affluent And market service. it good market. us And

James Inglis

Okay. And to to wanted I swing something.

from you of, to. your run think, that is year. I Is is invested manage X.XX, you measure how I true? per not It's of of you the which business. John, dollar end would that mentioned of noticeably just I assets a assume up result that's equity a your last sort say,

Mark Wilcox

a cetera. then you a denominator buy common activities dividends, back you have It leverage et obviously a invested other to much function is valuation changes the and that function ratio versus invested equities retain also like much is Mark. and exactly That's lot and right. and of growth This Yes. control outcome, assets, how assets stock The not management over. which earnings how in is really a of in of for cash capital flow is you metric

-- that's of the with an management X/XX fact and unless outcome. what really on have the you valuations down, impact is the it the ratio impacted it's run, ratio issuing an But asset significantly more et leverage manage around down over equity the going transactions, think invested it last because to denominator that difficult and it. debt, short the X:X, ratio of pretty to capital significant In leverage. that you've investment increasing quarters couple to move cetera, GAAP is increases are I seen with X.XX So the of including that the not is has overall and at

Operator

there At on are queue. questions this time, speakers, no

may You proceed.

John Marchioni

to you us. follow-ups. forward thank And with reach Well, out speaking we any as free to And for Rohan to again. with Great. you always, joining all look feel

Mark Wilcox

you. Thank

Operator

And that joining. for you much, so today's concludes conference. everyone, Thank

day. a You may now disconnect, and great have

Selective Insurance (SIGI) 3 Nov 222022 Q3 Earnings call transcript