SIGI

• Milestones & Geographic Expansion

  • Celebrated 100th anniversary as a company and 50th year as a public company, and opened a new corporate headquarters in Short Hills, New Jersey to improve talent access and connectivity across the expanding geographic footprint; the firm maintains a significant presence in its original Branchville, NJ location, with core underwriting operations remaining in place.
  • Launched operations in Montana and Wyoming on July 1, 2026, with early traction and strong agency engagement reported.

• Overall Financial Performance

  • Marked the 8th consecutive quarter with double-digit operating return on common equity (ROE), delivering 13.7% operating ROE for the quarter. Net investment income grew 18% year-over-year to $119 million, driven by higher market interest rates and active portfolio management. The overall GAAP combined ratio for the firm was 98%, improving 2.2 points year-over-year, with 5.6 points of catastrophe loss included.
  • Fully diluted GAAP EPS was $2.11, and non-GAAP operating EPS was $1.95, with 14.8% GAAP ROE and 13.7% operating ROE for the quarter.

• Portfolio Strategy & Discipline

  • Maintains a deliberate discipline of constraining growth and reducing retention for underperforming risks to improve long-term portfolio profitability, with execution accelerating in Q2 2026. Retention for best-performing renewal cohorts held steady at 89% year-over-year, while retention for worst-performing cohorts fell from 81% to 55%, and renewal rates for these cohorts rose from 11.5% to 18%.
  • Continues to advance diversification across business lines and segments to reduce exposure to volatile casualty lines; contractors' overall retention declined 2 points year-over-year aligned with this strategy.

• Capital Management

  • Maintains a long-term policy of returning 20-25% of annual earnings to shareholders via dividends, with opportunistic additional share repurchases when valuations are attractive. In Q2 2026, the firm returned nearly 50% of after-tax net income to shareholders via regular dividends and $32 million in share repurchases, with $108 million remaining in repurchase authorization at quarter end.
  • The investment portfolio remains conservatively positioned, with an average credit quality of A+ and a duration of 4.3 years.

• Reinsurance

  • Renewed Casualty Excessive Loss and Property Per Risk reinsurance treaties effective July 1, 2026. The casualty treaty now provides $87 million of coverage above a $3 million retention, with reduced co-participation on the first layer (from 20% to 8%) and full placement of all remaining layers. The property treaty now provides $115 million of coverage above a $5 million per-risk retention, a $20 million increase in limit to reflect portfolio growth and higher insured values.

• Pricing & Loss Trends

  • Excluding workers' compensation, overall renewal pure price increased 7.4% in Q2: general liability rose 8.7%, commercial auto rose 9.3% (up 20 basis points sequentially), with auto liability approaching 13%. Property renewal premium increased 7.7%, including 3.3 points of exposure growth. No prior year casualty reserve development was recorded in the quarter. Higher-than-expected commercial auto liability frequency was observed in H1 2026, and current year loss ratios were adjusted to reflect this trend, while general liability severity remained aligned with pre-planned expectations.

• The 2026 full-year GAAP combined ratio guidance range of 96.5% to 97.5% (assuming 6 points of catastrophe losses) is maintained, with management now expecting full-year results to land near the top of this range, reflecting unanticipated current-year commercial auto frequency adjustments.
• After-tax net investment income guidance was revised upward to $480 million, from the original expectation of $465 million, driven by stronger-than-expected yields from higher market interest rates.
• Full-year 2026 expense ratio is still expected to be approximately 31.5%, consistent with prior guidance, as planned technology investments to support future growth are on track.
• Guidance assumes an effective tax rate of 21.5% and a weighted average fully diluted share count of 60.2 million, reflecting year-to-date share repurchases.

Selective Insurance Group operates three core insurance segments, all of which delivered underwriting profits in Q2 2026:

1. Standard Commercial Lines (largest segment): Net premiums written declined 6% year-over-year in Q2 2026, with half of the decline driven by lower new business volume and half driven by intentional non-renewal of underperforming risks. The segment posted a year-to-date combined ratio of 99.7%. Contractors (a historically important casualty-focused vertical) represented 43% of full-year 2025 commercial lines premiums, and fell to 33% of new business in H1 2026 as part of intentional mix diversification. New business premium declined 22% in Q2, matching the Q1 2026 decline.
2. Excess & Surplus (E&S) Lines: Delivered a strong combined ratio of 91.8% in the quarter, with disciplined underwriting across property and casualty lines. Renewal pure price increased 3.4% overall, with continued rate momentum in casualty aligned with loss trend expectations, while property pricing was slightly negative amid competitive market conditions. Net premiums written declined 2% in Q2.
3. Personal Lines: Posted a Q2 2026 combined ratio of 95.5% (up from 91.6% in Q2 2025, driven by higher non-catastrophe property losses), with a year-to-date combined ratio of 94.1% (improving 80 basis points from H1 2025 and beating the company's 95% full-year target). Net premiums written declined 8% in Q2, with target business declining only 2%; the larger overall decline stemmed from intentional restrictions on New Jersey auto exposure to manage risk. Homeowners premium was flat, with target market (average new home values over $1 million) now representing 70% of total homeowners premium. Renewal pure price increased 8.9% overall.

• Commercial casualty lines (general liability and commercial auto liability) continue to face elevated loss severity trends across the industry, with no broad-based near-term improvement expected even as incremental state-level tort reform is passed. Disposal rates for casualty claims have declined meaningfully, lengthening claim cycle times and increasing uncertainty around incurred but not reported (IBNR) reserve adequacy for longer-tailed lines.
• Increased market competition is putting downward pressure on pricing in general liability and excess & surplus lines, as industry peers subsidize casualty underwriting losses with profits from more profitable property and specialty lines, delaying needed market-wide pricing adjustments.
• Non-catastrophe property losses can exhibit quarterly variability, and higher-than-expected non-catastrophe losses in the first half of 2026 contributed to the expectation of full-year results landing at the top of the combined ratio guidance range.
• Commercial auto liability has exhibited higher-than-expected frequency in H1 2026, requiring current-year loss ratio adjustments, though the trend's persistence is still uncertain.

Q: The Q2 commercial lines premium decline was half driven by deliberate portfolio actions. Was this more aggressive than prior quarters, and what does this mean for future growth? / A: The disciplined approach to underpriced risks is not new, and the Q2 new business decline was consistent with Q1 2026. Market dynamics have pushed hit rates (conversion of submissions to policies) down from the mid-30s to the low 30s, and this will persist as long as market pricing does not reflect loss trends, especially for general liability. The firm is actively increasing submission volumes in segments and geographies where it can hit target margins, so it is not waiting for a market turn to grow.

Q: Higher commercial auto frequency in H1 2026 is an anomaly or a sustained trend, and why no reserve additions for prior years? / A: Management observed elevated frequency in the first half, which may be partially tied to a harsh winter in northern U.S. states, but chose to prudently adjust current-year loss ratios rather than rely on that hypothesis. No reserve changes were needed for prior years because the adjustment only applies to the 2026 current accident year; prior year reserves are evaluated separately and remain stable. Management notes that a similar frequency jump a few years ago in workers' compensation ultimately reversed, but is planning for either outcome.

Q: Why is the combined ratio guidance pointing to the top of the range, and how is the competitive environment different than expected? / A: Guidance confirms the original range, and the shift to the top of the range reflects the unanticipated commercial auto frequency adjustment that was not planned for at the start of the year. Management notes the entire industry is running underwriting losses on commercial casualty, but general liability pricing has been declining even as loss trends remain negative, because peers subsidize these losses with profits from other lines. As margins on more profitable lines tighten, management expects pricing pressure on casualty will eventually emerge, and the firm is staying ahead of the curve on discipline.

Q: Given slower top-line growth, will the firm increase its dividend payout ratio from the current 20-25% target range? / A: Management maintains its long-term capital framework: 20-25% of earnings returned via dividends, with opportunistic share repurchases for excess capital. While slower near-term growth reduces near-term capital demand, the firm takes a long-term view of growth opportunities and will continue to invest in profitable expansion when market conditions allow. Repurchases remain attractive at current valuations, and the framework balances capital return with long-term ROE targets.