Selective Insurance Group, Inc. Q1 FY2026 earnings call

• Generated an operating ROE of 12%, seventh consecutive quarter of double-digit operating returns. - Prioritize underwriting margins over top-line growth. - Pricing posture on commercial casualty reflects view on loss trends. - Invest in AI for claims underwriting, risk management, improving risk selection, pricing accuracy, and productivity. AI claims ingestion tool processed over half a million documents. Automation supports evaluation of contractual risk transfer adequacy for contractors. - Expand standard lines geographic footprint, grow with existing agency partners and appoint new agency locations. - Portfolio mix shift: Relative exposure to contractors declined in new business mix, but maintain expertise in serving them; more diversified portfolio for long-term performance. - On renewals, tools and operating model to improve portfolio quality, resulting in lower retention on underperforming cohorts and stronger retention on well-performing accounts.

Standard commercial lines: Net premiums written declined 1% year over year. General liability renewal pure price increases in the 10% range over past seven quarters. Commercial auto liability renewal pure price approached 12%. Excess and surplus lines: Premiums grew 1% in the quarter, average renewal pure price increases 4.1%, ENS combined ratio 89.5%, 3 points better than a year ago. Personal lines: Combined ratio improved to 92.8% for the quarter, net premiums written declined 6% year over year, target business up 1%, renewal pure price 10.6%.

Reaffirm guidance communicated in January. Expect GAAP combined ratio between 96.5 and 97.5 assuming six points of catastrophe losses. Expect after-tax net investment income of $465 million. Guidance assumes effective tax rate of approximately 21.5% and fully diluted weighted average share count of approximately 60.5 million.

• Industry-wide elevated commercial casualty loss trends. - Social inflation continues to pressure recent accident years, particularly in general liability, commercial auto liability, and umbrella. - Market pricing in commercial casualty segment, especially other liability occurrence, has not adjusted upward despite ongoing reserve pressure.

Q: Michael Phillips asked about downturn in premium growth and retention cohorts change.

A: John responded new business hit ratios down led to premium drop, retention cohorts change is result of granular pricing strategy execution.

Q: Michael Zaremski asked if would continue pulling back and operating leverage on expense ratio.

A: John said would mitigate top-line impact via renewal portfolio segmentation, technology investments will positively impact expense ratio.

Q: Roland Mayer asked on capital return strategy and difference in combined ratio guide.

A: John said capital management prioritizes profitable business, combined ratio difference mainly due to normal variability in non-CAT property.

Q: Meyer Shields asked on workers' comp development, loss trend consistency across cohorts, and impact of moving away from contractors on surety book.

A: John said favorable emergence in workers' comp from end-of-year health study, severity trend consistent across cohorts with some frequency improvement in preferred bucket, move away from contractors not significant impact on surety book.

Q: Paul Newsom asked on differences within contractors and state-by-state business advantage.

A: John said differences in contractors mainly geographic, New Jersey and other places have elevated loss trends in commercial auto, underwriting construction is consistent considering safety practices and contract risks.