Release Date: October 22, 2024
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
Positive Points
- Selective Insurance Group Inc (SIGI, Financial) reported an operating earnings per share of $40 and an operating return on equity (ROE) of 12.1% for the quarter, demonstrating strong underlying profitability.
- The company achieved a significant increase in general liability pricing from 7.6% in the second quarter to 10.2% in the third quarter, indicating effective pricing strategies.
- Selective Insurance Group Inc (SIGI) expanded its geographic footprint by adding Washington, Oregon, and Nevada to its standard commercial line states, enhancing market opportunities.
- The company's excess and surplus lines segment showed strong performance with a 28% increase in net premiums written and an 83.2 combined ratio.
- Selective Insurance Group Inc (SIGI) maintained a strong capital position with a GAAP equity of $3.2 billion and statutory surplus of $2.8 billion, providing financial flexibility.
Negative Points
- The company faced elevated catastrophe losses, which added 13.4 points to the combined ratio, impacting overall profitability.
- Year-to-date operating ROE is 4.8%, below the company's 12% target, primarily due to reserving actions and higher-than-expected catastrophe losses.
- Personal lines net premiums written decreased by 2% in the quarter, reflecting challenges in improving profitability in this segment.
- The company's GAAP combined ratio was 99.5% in the quarter, including 13.4 points of catastrophe losses, indicating pressure on underwriting performance.
- Retention in personal lines decreased to 75%, down 13 points from the third quarter of 2023, highlighting challenges in maintaining customer loyalty.
Q & A Highlights
Q: Can you confirm if $10 million was added to the current year for commercial auto reserves?
A: Yes, that's correct. We added $10 million to the commercial auto reserves for the current accident year. - Tony Harnett, Senior Vice President and Chief Accounting Officer
Q: How confident are you that social inflation impacts won't spread more extensively to commercial auto?
A: The trends in commercial auto have been persistent for longer, and we've responded with pricing adjustments. Our commercial auto pricing remains strong, and we believe the trends are stable, albeit elevated. - John Marchioni, Chairman of the Board, President and CEO
Q: Will Patrick Brennan be conducting a deep dive into reserves following his recent appointment as CFO?
A: Patrick Brennan's experience will be beneficial, but our reserving process has been consistent over time. The Chief Actuary reports directly to the CEO, and multiple voices, including the CFO, are involved in reserve decisions. - John Marchioni, Chairman of the Board, President and CEO
Q: How should we think about non-catastrophe property losses and their variability?
A: Non-catastrophe property losses are inherently volatile. We expect a normalization in the fourth quarter, which is reflected in our guidance. - Tony Harnett, Senior Vice President and Chief Accounting Officer
Q: What is the outlook for personal lines rate trajectory and retention?
A: We are updating pricing indications regularly and filing accordingly. Our goal is to achieve rate adequacy on a state-by-state basis, and we expect new business growth from states that are rate adequate. - John Marchioni, Chairman of the Board, President and CEO
Q: How do you view the premium to surplus ratio, and is it a priority to return to the target range?
A: While the premium to surplus ratio is important, it is one of several metrics we consider. We have a path to return to our desired range, but it is viewed in the context of overall capital adequacy. - John Marchioni, Chairman of the Board, President and CEO
Q: How do you determine if lower-than-expected non-cat weather losses are not due to elevated catastrophe losses?
A: Non-cat property losses include various components like auto physical damage and fire losses, which are independent of catastrophe losses. There shouldn't be a favorable impact on non-cat property when cat losses are higher. - John Marchioni, Chairman of the Board, President and CEO
Q: What is the impact of elevated catastrophe losses on incentive compensation?
A: Our incentive compensation program for employees is driven by the all-in combined ratio, including cat losses. High cat years put downward pressure on the incentive comp pool. - John Marchioni, Chairman of the Board, President and CEO
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
