Selective Insurance Group, Inc. Q3 FY2025 earnings call

• Prioritize profit improvement and moderate premium growth, focusing on risk selection, individual policy pricing, and claim outcomes. - Unfavorable prior year casualty reserve development of $40 million in the quarter, $35M related to commercial auto and $5M to personal auto, attributed to the 2024 accident year and New Jersey. - Engaged independent parties for semiannual reserve reviews, confirming reserves are reasonable. - Actions in commercial auto include updating rating plans, tighter underwriting guidelines, targeting telematics, and promoting self-assessments. - Geographic expansion in Standard Commercial Lines, with 14 states added since 2017 and 2 more planned in 2026. - Increased dividend by 13%, repurchased $36M in stock, and authorized a new $200M share repurchase program.

Standard Commercial Lines: This quarter, the combined ratio was 101.1%, including 3.7 points of unfavorable prior year casualty development and 6.6 points of higher current year casualty loss costs. Premium growth slowed to 4%, renewal pure price increased, and retention was 82%. Excess and Surplus Lines: Grew 14% in the quarter, with a combined ratio of 76.2% and an average renewal pure price increase of 8.3%. Personal Lines: The combined ratio was 110.1% this quarter, 12 points better than a year ago. However, New Jersey personal auto reserving actions added 4.9 points of unfavorable prior year casualty development. Net premiums written declined 6%, but target business grew 12%.

• Full year operating return on equity expected in the 14% range. - Combined ratio guidance 97%-98%, exceeding the long-term target of 95%. - 2025 GAAP combined ratio expected 97%-98%, including 4 points of catastrophe losses and 2 points of prior year casualty reserve development. - After-tax net investment income expected $420M, up from prior guidance of $415M. - Dividend increased 13%, new $200M share repurchase program authorized.

• Unfavorable prior year casualty reserve development, particularly in New Jersey for commercial and personal auto. - Elevated severity trends in commercial auto, linked to social inflation impacts. - Competitive market affecting retention and premium growth.

Q: Comments on commercial auto and New Jersey's impact A: John Marchioni mentions reacceleration of severity trend in New Jersey for commercial auto, a bigger state for the company, and higher severity emerging there.

Q: External reserves reviews and industry warnings A: Independent parties confirm elevated trends industry-wide, with reinsurance partners also noting this.

Q: Share buybacks and reserves A: Board is confident in forward earnings, with book value building despite current results.

Q: New state expansions A: Geographic expansion has been favorable, with agency reaction positive and performance in line with expectations.

Q: Premium growth and New Jersey action A: Aggressive action in underperforming areas like New Jersey commercial auto will impact growth, but it's a trade-off the company is willing to make.

Q: Property RPC acceleration A: Property results improving but risk-adjusted margins target lower, with pricing drifting down slightly but remaining strong.

Q: Corrective actions and retention A: Granular execution of pricing and underwriting strategies to mitigate retention impact.

Q: Reserves for casualty and LPT A: Evaluate reinsurance opportunities but not attractive for immature accident years as they command unfavorable economics.