Q1 2024 Selective Insurance Group Inc Earnings Call

May 2, 2024

John Joseph Marchioni: The net adverse development added 3.3 points to our overall combined ratio and 4.2 points to the standard commercial lines combined ratio in the quarter. Consequently, our insurance segments produced a 2.2 operating ROE in the quarter, below our expectations.

The net adverse development added three three points to our overall combined ratio and four two points to the standard commercial lines combined ratio in the quarter.

John Joseph Marchioni: Consequently, our insurance segments produced a two two points of operating ROE in the quarter below our expectations.

John Joseph Marchioni: We previously discussed how we increased our expected casualty loss trend in recent years. Entering this year, our 2024 combined ratio of guidance reflected an overall expected loss trend of approximately 7%, consisting of 4% for property and 8% for cash. Excluding workers' compensation, our expected casualty loss trend was closer to 9% for 2024. For context, our forward casualty loss trend assumptions excluding workers' compensation were approximately 5% for 2021, 6.5% for 2022, and 7% for 2023.

John Joseph Marchioni: We previously discussed how we increased our expected casualty loss trend in recent years.

John Joseph Marchioni: Entering this year, our 2024 combined ratio guidance reflected an overall expected loss trend of approximately 7%.

John Joseph Marchioni: Consisting of 4% for property and 8% for casualty.

John Joseph Marchioni: Excluding workers' compensation expected casualty loss trend was closer to 9% for 2024.

John Joseph Marchioni: For context, our forward casualty loss trend assumptions, excluding workers' compensation or approximately 5% for 2021.

John Joseph Marchioni: Six 5% for 2022 and 7% for 2023.

John Joseph Marchioni: The ex-workers' compensation number is approximately half a point to a point higher than the expected loss trend we typically discuss for all casualties. Despite these higher underlying assumptions, we have strengthened our reserves and general liability for the years 2020 through 2023 in response to further increases in average paid severity. We also increased our general liability loss ratio pick for the 2024 accident year by about one point. Our trend assumptions for the commercial auto and workers' compensation lines held up well. Every quarter, we undertake an in-depth reserve review and book our best estimates.

John Joseph Marchioni: The ex Workers' compensation number is approximately half a point to a point higher than the expected loss trend, we typically discuss for all casualty lines.

John Joseph Marchioni: Despite these higher underlying assumptions, we have strengthened our reserves in general liability for the years 2020 through 2023 and response to further emergence of average paid severities.

John Joseph Marchioni: We also increased our general liability loss ratio pick for the 2024 accident year by about one point.

John Joseph Marchioni: Our trend assumptions for the commercial auto and workers' compensation lines held up well.

John Joseph Marchioni: Every quarter, we undertake an in depth Reserve review and book our best estimate.

John Joseph Marchioni: Our portfolio has remained relatively stable in terms of hazard mix, limits profile, and industry segment, and pricing of our book relative to indicated levels has remained stable. Therefore, we believe the increased severities relate to elevated social inflation, which we consider widespread and is evidenced by a higher propensity for claimants to retain attorneys and litigate, longer settlement times, and higher settlement values. Certain jurisdictions pose heightened challenges, evidenced by expanded liability theories and higher, sometimes extraordinarily higher, damage awareness.

John Joseph Marchioni: Our portfolio has remained relatively stable in terms of hazard mix limits profile and industry segment and pricing of our book relative to indicated levels has remained stable.

John Joseph Marchioni: Therefore, we believe the increased severity related to elevated social inflation.

John Joseph Marchioni: Which we consider widespread and evidenced by our higher propensity for claimants to retain attorneys and litigate lager settlement times and higher settlement values.

John Joseph Marchioni: Certain jurisdictions post heightened challenges evidenced by expanded liability theories and higher sometimes extraordinarily higher damage awards we.

John Joseph Marchioni: We are closely monitoring these jurisdictions and the broader trends across our book. We think the social inflation and elevated loss trends we are seeing are industry-wide and will lead to an acceleration of rate increases in general liability. During the quarter, the pure price for general liability and umbrella renewal was 6.5%, up from 5.7% last quarter and 5.4% for full year 2023. We expect our general liability pricing to accelerate further in the coming months.

John Joseph Marchioni: We are closely monitoring these jurisdictions in the broader trends across our book.

John Joseph Marchioni: We think the social inflation and elevated loss trends. We are seeing are industry wide and will lead to an acceleration of rate increases in general liability.

John Joseph Marchioni: During the quarter general liability and umbrella renewal pure price was six 5% up from five 7% last quarter and five 4% for full year 2023.

John Joseph Marchioni: We expect our general liability pricing will accelerate further in the coming months.

John Joseph Marchioni: To understand the quality and pricing of our book, we regularly monitor our mix of business by industry classification, hazard grade, limits profile, jurisdiction, and other individual risk attributes. Our sophisticated tools and highly talented employees allow us to identify the areas of our book most in need of action, with our unique operating model and strong distribution partner relationships. We have a proven track record of executing rate and underwriting actions in a disciplined and targeted manner, and we remain comfortable with our ability to continue doing so in this dynamic environment.

John Joseph Marchioni: To understand the quality and pricing of our book, we regularly monitor our mix of business by industry classification, as our grade limits profile jurisdiction and other individual risk attributes.

John Joseph Marchioni: Our sophisticated tools and highly talented employees allow us to identify the areas of our book most in need of action.

John Joseph Marchioni: With our unique operating model and strong distribution partner relationships, we have a proven track record of executing rate and underwriting actions in a disciplined and targeted manner.

John Joseph Marchioni: And comfortable with our ability to continue doing so in this dynamic environment.

John Joseph Marchioni: Consistently achieving our 95 combined ratio target across our three insurance segments remains our primary goal. We continue to prioritize achieving renewal pure price that matches or exceeds our expected future losses. Overall, the renewal pure price was 8.1% in the quarter, up from 7.4% in the fourth quarter 2023 and 6.8% for full year 2020. Renewable fuel price for standard commercial lines increased to 7.6%, accelerating each month within the quarter. Excluding workers' compensation, commercial lines pricing increased 8.8 percent.

John Joseph Marchioni: Consistently achieving our 95 combined ratio target across our three insurance segments remains our primary goal.

John Joseph Marchioni: We continue to prioritize achieving renewal pure price that matches or exceeds our expected future loss trends.

John Joseph Marchioni: Overall renewal pure price was eight 1% in the quarter up from seven 4% in fourth quarter 2023, and six 8% for full year 2023.

John Joseph Marchioni: Renewal pure price for standard commercial lines increased to seven 6%.

John Joseph Marchioni: Accelerating each month within the quarter.

John Joseph Marchioni: Excluding workers' compensation commercial lines pricing increased eight 8%.

John Joseph Marchioni: Exposure growth added 4.2 points, contributing to a total renewal premium change of 12.3%. At the line level, property renewal pure rate was up 13.3%, with exposure increasing 4%, and total renewal premium up 17.5%. In commercial auto, the renewal period was up 10.4%, with exposure increasing 5.1%, and total renewal premium up 16%. Even with accelerating pricing, retention remains stable as our regional teams manage our renewal book in a targeted and granular fashion. Excess and surplus lines continue this excellent performance, with 24% net previous written growth and an 87.6% combined ratio.

John Joseph Marchioni: Exposure growth added four two points contributing to total renewal premium change of 12, 3%.

John Joseph Marchioni: At the line level property renewal pure rate was up 13, 3% with exposure, increasing 4% and total renewal premium up 17, 8%.

John Joseph Marchioni: In commercial auto renewal pure rate was up 10, 4% with exposure, increasing five 1% and total renewal premium up 16%.

John Joseph Marchioni: Even with accelerating pricing retention remained stable as our regional teams manage our renewal book in a targeted and granular fashion.

John Joseph Marchioni: Excess and surplus lines continued its excellent performance with 24% net premiums written growth and an 87, 6% combined ratio.

John Joseph Marchioni: Despite strong underwriting results and prior year reserve stability, we increased our current year loss pick by approximately one point based on the severity dynamics impacting recent prior accident years in Standard Line's general liability business. The E&S market continues to present profitable growth opportunities, and we expect to continue to grow this book. We are beginning to see signs of improved performance in personal lines as we continue our transition to the mass affluent market and execute profit improvement plans.

John Joseph Marchioni: The E&S market continues to present profitable growth opportunities and we expect to continue to grow this book.

John Joseph Marchioni: We are beginning to see signs of improved performance in personal lines as we continue our transition to the mass affluent market and execute profit improvement plans.

John Joseph Marchioni: The combined ratio in the quarter was 105.1, a 10.9 point improvement from the first quarter of 2023. The underlying combined ratio improved in the quarter by two points to 93.7. Personalized Net Preview increased 17% in the quarter due to strong rate increases and larger average policies.

John Joseph Marchioni: The combined ratio in the quarter was 105, one a 10 nine point improvement from the first quarter 2023, the underlying.

John Joseph Marchioni: Combined ratio improved in the quarter by two points to 93, 7%.

John Joseph Marchioni: Personalized net premiums written increased 17% in the quarter due to strong rate increases and larger average policy size.

John Joseph Marchioni: Renewal pure pricing in the quarter was 14.3%. We continue to expect full year 2024 personalized renewal pure pricing to be in excess of $20,000. As expected, retention decreased from these strategic profit improvement actions and was 83% at the end of the first quarter, approximately four points below last year's run rate. However, retention is higher for target business. New business premiums and personal lines declined 19%, with new policy counts down 37% as we took deliberate steps to curtail production of non-target business.

John Joseph Marchioni: Renewal pure pricing in the quarter was 14, 3%.

John Joseph Marchioni: Continue to expect full year 2020 for personal lines renewal pure pricing to be in excess of 20%.

John Joseph Marchioni: As expected retention decreased from the strategic profit improvement actions and was 83% at the end of the first quarter approximately four points below last year's run rate.

John Joseph Marchioni: Retention is higher for target business.

John Joseph Marchioni: New business premiums in personal lines declined 19% with new policy counts down 37% as we took deliberate steps to curtail production of non target business.

Tony: For the quarter, nearly 90% of new home business had coverage values of $500,000 or greater. On the strategic front, we often speak of our competitive advantage of a unique field model that places empowered underwriting staff near our distribution partners and customers. We just wrapped up our annual agency council meetings, and we continue to receive feedback that our operating model is a meaningful differentiator. Staying close to the market and having strong relationships with our distribution partners serves us well.

John Joseph Marchioni: For the quarter, nearly 90% of new home business had coverage values of $500,000 or greater. On the strategic front, we often speak of our competitive advantage of a unique field model that places empowered underwriting staff near our distribution partners and customers. We just wrapped up our annual agency council meetings, and we continue to receive feedback that our operating model is a meaningful differentiator. Staying close to the market and having strong relationships with our distribution partners serves us well.

John Joseph Marchioni: For the quarter, nearly 90% of new home business had covered J values of $500000 or greater.

John Joseph Marchioni: On the strategic front, we often speak of our competitive advantage of our unique field model that places empowered underwriting staff near our distribution partners and customers.

John Joseph Marchioni: We just wrapped up our annual agency Council meetings, we continue to receive feedback that our operating model as a meaningful differentiator.

John Joseph Marchioni: Staying close to the market and having strong relationships with our distribution partner serves as well.

Tony: Our customers and distribution partners value consistency, clarity, and transparency in our communication as we navigate this challenging environment. Our methodical geographic expansion continues to represent an attractive long-term growth opportunity and further diversifies our portfolio. We have a repeatable process and successful approach that has allowed us to accelerate this important strategic initiative in recent years. In April, we added Maine and West Virginia to our standard commercial lines footprint, now covering 32 states.

John Joseph Marchioni: Our customers and distribution partners value consistency, clarity, and transparency in our communication as we navigate this challenging environment. Our methodical geographic expansion continues to represent an attractive long-term growth opportunity and further diversifies our portfolio. We have a repeatable process and successful approach that has allowed us to accelerate this important strategic initiative in recent years. In April, we added Maine and West Virginia to our standard commercial lines footprint, now covering 32 states.

John Joseph Marchioni: Our customers in distribution and distribution partners value consistency clarity and transparency transparency in our communication as we navigate the challenging environment.

John Joseph Marchioni: Our methodical geographic expansion continues to represent an attractive long term growth opportunity and further diversifies our portfolio.

John Joseph Marchioni: We have a repeatable process and successful approach that has allowed us to accelerate this important strategic initiative in recent years.

John Joseph Marchioni: In April we added main in West Virginia to our standard commercial lines footprint now covering 32 states.

Tony: We expect to launch Oregon, Washington, and Nevada later in 2024, and Kansas, Montana, and Wyoming in 2025. Our revised guidance, which Tony will discuss in more detail, implies an ROE exceeding our 12% target for the full year. With that, I'll turn the call over to Tony.

John Joseph Marchioni: We expect to launch Oregon, Washington, and Nevada later in 2024, and Kansas, Montana, and Wyoming in 2025. Our revised guidance, which Tony will discuss in more detail, implies an ROE exceeding our 12% target for the full year. With that, I'll turn the call over to Tony.

John Joseph Marchioni: We expect to launch, Oregon, Washington, and Nevada later in 2024, and Kansas, Montana, and Wyoming in 2025.

John Joseph Marchioni: Our revised guidance, which Tony will discuss in more detail implies an roe exceeding our 12% target for the full year.

John Joseph Marchioni: With that I'll turn the call over to Tony.

Tony: Thank you, John, and good morning, everyone. We reported $1.31, a fully diluted EPS, in the first quarter, down 11% from a year ago. Non-GAAP operating EPS was $1.33, down 8%. This translated to a return on equity of 11.5% and an operating return on equity of 11.7%. Our gap combined ratio was 98.2% in the quarter, up two and a half points from a year ago. Catastrophe losses of 5.3 points were 0.8 points better than the first quarter of 2023, and we continued to see a lower expense ratio.

Tony: Thank you John and good morning, everyone. We reported $1 31, a fully diluted EPS in the first quarter down 11% from a year ago non.

Tony: non-GAAP operating EPS was $1 33 down 8%. This translated to a return on equity of 11, 5% and an operating return on equity of 11, 7%.

Tony: Our GAAP combined ratio was 98, 2% in the quarter up two five points from a year ago.

Tony: <unk> losses of five three points were 0.8 points better than the first quarter of 2023, and we continued to see a lower expense ratio.

Tony: Underlying performance, which I will return to later, continues to be strong. However, net adverse prior year casualty reserve development of $35 million, or $0.45 per share, impacted our results. This reduced our annualized operating ROE by 4 points and added 3.3 points to the combined ratio.

Tony: Underlying performance, which I will return to later continues to be strong.

Tony: However, net adverse prior year casualty reserve development of $35 million were <unk> 45 per share impacted our results.

Tony: This reduced our annualized operating ROE by four points and added three three points to the combined ratio.

Tony: $15 million of general liability adverse development was partially offset by $15 million of favorable development in workers' compensation. [inaudible] Reserving, strengthening, and general liability were severity-driven as we experienced increased paid loss emergence in the quarter. We attribute this mainly to the continued elevated impacts of social inflation.

Tony: $50 million of general liability adverse development was partially offset by $15 million of favorable development in workers' compensation as.

Tony: As John just for.

Tony: Reserving strengthening in general liability with severity driven as we experienced increased paid loss emergence in the quarter we.

Tony: We attribute this mainly to the continued elevated impacts of social inflation.

Tony: Frequencies continue to remain in line with, or somewhat better than, expectations. In fourth quarter 2023, we strengthened general liability reserves by $55 million, attributed to the 2015 through 2020 accident. This quarter's $50 million increase was spread mainly across accident years 2020-2023, with 80% attributed to accident years 2021 and forward. The reserve adjustment is 3% of our net reserves for general liability and represented approximately one and a half to two points on the combined ratio across each of the impacted accidents. Workers' Compensation produced $15 million of favorable prior year reserve development in the quarter.

Tony: Frequencies continue to remain in line with where somewhat better than expectations.

Tony: In fourth quarter 2023, we strengthened general liability reserves by $55 million attributed to the 2015 through 2020 accident years. This quarter's 50 million increase with spread mainly across accident years 2020 through 2023 with 80% attributed to accident years 2021 and forward.

Tony: The reserve adjustment is 3% of our net reserves for general liability and represented approximately one five to two points on the combined ratio across each of the impacted accident years.

Tony: Workers compensation produced $15 million of favorable prior year reserve development in the quarter.

Tony: This was primarily due to lower loss severities in action years 2021 and prior. In personal lines, $5 million of adverse prior year auto reserve development offset $5 million of favorable prior year homeowner's debt. For the current accident year, we took action in general liability and excess and surplus lines, impacting each line's combined ratio by approximately one point. Severity dynamics and standard lines impacting recent prior accident years drove the adjustment.

Tony: This was primarily due to lower loss severities in accident years 2021 and prior.

Tony: In personal lines $5 million of adverse prior year Auto reserve development offset $5 million of favorable prior year homeowners development.

Tony: The current accident year, we took action in general liability and excess and surplus lines impacting each lines combined ratio by approximately one point.

Tony: Severity dynamics in standard lines impacting recent prior accident years drove the adjustments.

Tony: As a reminder, we have various reinsurance treaties in place to manage our net exposure to individual large losses and catastrophic events. In the context of social inflation and its impact on severity, our Casualty Excess of Loss Treaty, which renewed on July 1, 2023, covers 100 percent of $88 million in excess of our $2 million retention. The treaty covers our standard market and E&S business.

Tony: As a reminder, we have various reinsurance treaties in place to manage our net exposure to individual large losses and catastrophic events in.

Tony: In the context of social inflation and its impact on severity, our casualty excess of loss Treaty, which renewed on July one 2023 covers 100% of $88 million in excess of our $2 million retention.

Tony: The treaty covers our standard market and E&S business.

Tony: The overall underlying combined ratio was a strong 89.6%, 1.4 points better than the first quarter of 2023 and slightly better than approximately 90% run rate in recent quarters. Our expense ratio was better than our expectation and improved 1.7 points compared to the prior year period, benefiting from our disciplined expense management and elevated top-line growth. Additionally, non-capacity property losses were better than our expectation and 0.1 points lower than the first quarter of 2023, as we achieved substantial rate increases in the property and commercial auto lines.

Tony: The overall underlying combined ratio was a strong 89, 6% for the quarter one.

Tony: One four points better than the first quarter of 2023 and slightly better than approximately 90% run rate in recent quarters.

Tony: Our expense ratio was better than our expectation and improved one seven points compared to the prior year period benefiting from our disciplined expense management and elevated top line growth.

Tony: Additionally, non catastrophe property losses were better than our expectation and 0.1 points lower than the first quarter of 2023.

Tony: As we earn substantial rate increases in the property and commercial auto lines.

Tony: After-tax investment income was $86 million in the first quarter, up 17% from last year and contributing 12.3 points of ROE. Alternative investments, which report on a one-quarter lag, generated $5.4 million of after-tax income in the quarter, down slightly from $6.1 million a year ago.

Tony: After tax net investment income was $86 million in the first quarter up 17% from last year and contributing 12 three points of ROE.

Tony: Alternative investments, which report on a one quarter lag generated $5 $4 million of after tax income in the quarter down slightly from $6 1 million a year ago.

Tony: We invested $581 million of new money at an average pre-tax yield of 5.8% in the first quarter. The fixed income portfolio's overall pre-tax book yield increased modestly in the quarter, ending at approximately 4.8%. The meaningfully higher book yield embedded in our portfolio provides a durable source of income as we move forward. The portfolio remains conservatively positioned. The higher interest rate environment allows us to deploy capital in investment-grade securities at attractive levels, raising the bar for investing in risk assets.

Tony: We invested $581 million of new money at an average pre tax yield of five 8% in the first quarter.

Tony: The fixed income portfolios overall pre tax book yield increased modestly in the quarter ending at approximately four 8%.

Tony: The meaningfully higher book yield embedded in our portfolio provides a durable source of income as we move forward.

Tony: The portfolio remains conservatively positioned.

Tony: Higher interest rate environment allows us to deploy capital in investment grade securities at attractive levels, raising the bar for investing in risk assets.

Tony: Fixed income and short-term investments represented 92% of the portfolio at March 31, with an average credit quality of A+ and a duration of 4 years. Our capital position remains strong, with GAAP equity exceeding $3 billion and a statutory surplus of $2.8 billion. Book value and adjusted book value per share increased 2% from year end, and our premium to surplus ratio ended the quarter at 1.55 times. This is at the top end of our internal operating target of 1.35 to 1.55 times. Although we are comfortable moving above that range if attractive growth opportunities persist, debt-to-capital was 14.3% at the end of the quarter, well below our internal threshold of 25%.

Tony: Fixed income and short term investments represented 92% of the portfolio at March 31, with an average credit quality of a plus and a duration of four years.

Tony: Our capital position remains strong with GAAP equity exceeding $3 billion in statutory surplus of $2 8 billion.

Tony: Book value and adjusted book value per share increased 2% from year end and our premium to surplus ratio ended the quarter at 155 times.

Tony: This is at the top end of our internal operating target of 135 to one five times.

Tony: Although we are comfortable moving above that range, if attractive growth opportunities persist.

Tony: Debt to capital was 14, 3% at the end of the quarter well below our internal threshold of 25%.

Tony: This ratio, together with our operating cash flows, provides us with the financial flexibility to support organic growth and execute our strategic initiatives. We did not repurchase any shares during the quarter and had $84.2 million remaining under our share repurchase authorization. We expect to take an opportunistic approach to share repurchases and view organic growth within our insurance operations as the most attractive opportunity to deploy capital. For 2024, we now expect our gap combined ratio to be 96.5%, up from our original guidance of 95.5%.

Tony: This ratio together with our operating cash flows provides us the financial flexibility to support organic growth and execute our strategic initiatives.

Tony: We did not repurchase any shares during the quarter and had $84 $2 million remaining under our share repurchase authorization.

Tony: We expect to take an opportunistic approach to share repurchases and view organic growth within our insurance operations as the most attractive opportunities to deploy capital.

Tony: For 2024, we now expect our GAAP combined ratio to be 96, 5% up from our original guidance of 95, 5%. The one point increase reflects the full year 80 basis point impact of the first quarter adverse prior year development.

Tony: The one point increase reflects the full year, 80 basis point impact of the first quarter adverse prior year development. Current accident year bookings in general liability and E&S casualty in the first quarter drove the remainder of the increase.

Tony: Current accident year bookings in general liability and E&S casualty in the first quarter drove the remainder of the increase.

Operator: We assume no additional prior action at your reserve. While our planning and monitoring process allow us to respond quickly to trends, we acknowledge the elevated uncertainty of the lost trends environment in which we are operating. Other key estimates remain unchanged, with five points of catastrophes and after-tax net investment income of $360 million, including $32 million from alternative investments. Our guidance includes an overall effective tax rate of 21%, with a 20.5% effective tax rate on investments and 21% on all other items.

Tony: We assume no additional prior action at your reserve. While our planning and monitoring process allow us to respond quickly to trends, we acknowledge the elevated uncertainty of the lost trends environment in which we are operating. Other key estimates remain unchanged, with five points of catastrophes and after-tax net investment income of $360 million, including $32 million from alternative investments. Our guidance includes an overall effective tax rate of 21%, with a 20.5% effective tax rate on investments and 21% on all other items.

Tony: We assume no additional prior accident year reserve development, while our planning and monitoring process allow us to respond quickly to trends.

Tony: We acknowledge the elevated uncertainty of the loss trend environment in which we're operating.

Tony: Other key estimates remain unchanged with five points of catastrophes and after tax net investment income of $360 million, including $32 million from alternative investments.

Tony: Our guidance includes an overall effective tax rate of 21% with a 25% effective tax rate on investments and 21% on all other items fully diluted weighted average shares are estimated to be 61 5 million. This does not reflect any assumptions for share repurchases, we may make under our existing <unk>.

Operator: The fully diluted weighted average shares are estimated to be $61.5 million. This does not reflect any assumptions for share repurchases we may make under our existing authorization. I'll now ask the operator to open our question and answer session.

Tony: The fully diluted weighted average shares are estimated to be $61.5 million. This does not reflect any assumptions for share repurchases we may make under our existing authorization. I'll now ask the operator to open our question and answer session.

Tony: Authorization.

Speaker Change: I'll now ask the operator to open our question and answer session.

Operator: At this time, I'd like to remind everyone, in order to ask a question, press the star followed by the number one on your telephone keypad. Our first question will come from the line of Mike Zaremski with BMO Capital Markets. Please go ahead.

Speaker Change: At this time I would like to remind everyone in order to ask a question press star followed by the number one on your telephone keypad. Our first question will come from the line of Mike Zaremski with BMO capital markets. Please go ahead.

Michael Zaremski: Hey, good morning and thanks for moving the call up till 8 a.m. First question, and thank you for all the color you guys give on kind of how you changed all the action years on the reserves and whatnot and lost trend, but I'm trying to just, this is something we've seen a lot of other carriers, and this isn't a selective thing I'm asking about, but if we look at the underlying intercommercial loss ratio, it didn't change much year over year despite, you know, all the commentary you've given us about kind of expecting a higher loss trend and what happened with reserves. Maybe I'm just focusing too much on the underlying loss ratio, but why would that be kind of stable-ish given what transpired over the course of the year to date?

Operator: Okay.

Operator: And.

Michael Zaremski: Thanks for moving the call up till eight a M.

Michael Zaremski: First question.

Michael Zaremski: And thanks for all the color you guys gave on.

Michael Zaremski: How you change all the accident years on the reserves and whatnot and loss trend but.

Michael Zaremski: I'm trying to just this is a this is something we've seen a lot of other carriers.

Michael Zaremski: This isn't a selective thing I'm asking about but we look at the underlying and our commercial loss ratio.

Michael Zaremski: It didn't change much year over year despite.

Michael Zaremski: All of the commentary you've given us about kind of expecting.

Michael Zaremski: Loss trend and what happened with reserves.

Michael Zaremski: Maybe I'm, just focusing too much on the underlying loss ratio, but why would that be kind of stable ish.

Michael Zaremski: But what transpired over the course of the year to date.

John Joseph Marchioni: Yeah, Mike, thank you for the question. I'll try to break it down for you. And we're focused on the current year and the current year underlying. So the first thing we want to do is separate out property and cash. So property, and specifically non-capitalized property, came in better than expected in Q1. So I think, let's put that off to the side, so that drives some of the underlying stability.

Speaker Change: Yes, Mike. Thank you for the question I'll try to break it down into the pieces for you and we're focused on the current year and the current year underlying so the first thing we want to do is separate out property and casualty so property and specifically non cap property came in better than expected in Q1, So I think let's put that off to the side.

John Joseph Marchioni: That drives some of the underlying stability with regard to casualty.

John Joseph Marchioni: With regard to casualty and general liability, in particular, and Tony's prepared comments, he talked about the impact on guidance. We did make an adjustment to the current year. So, you've got a couple of offsetting factors there, and I think that's the primary driver. But now, let me just take it one step further, because I think if you look at that and tie it back to the loss trend commentary, So, we've been giving you casualty loss trend assumptions or expected casualty loss trend assumptions very consistently year over year.

John Joseph Marchioni: And general liability in particular, and Tony prepared tonnage prepared comments he talked about the impact on guidance, we did make an adjustment to the current year, which on an annualized basis raise as the current year or on an all in basis by 80 basis points. So you've got a couple of offsetting factors, there and I think thats the <unk>.

John Joseph Marchioni: Mary driver, but now let me just take it one step further because I think if you look at that and tie it back to the loss trend commentary. So we've been giving you casualty loss trend assumptions are expected casualty loss trend assumptions very consistently year over year and if you look at what we gave.

John Joseph Marchioni: And if you look at what we gave you for the 24-year period, we had an assumption of an 8% casualty trend. And, as we disclosed in our prepared comments, if you exclude workers' comp from that, which gets you focused more on GL and auto liability, it was closer to nine. Now, while we don't update our current year loss trend assumptions quarterly, we do that on an annual basis, the effective impact of that roughly one point loss ratio move is about the equivalent of having moved your trend assumption by about two points.

John Joseph Marchioni: Have you for the 24 year, we had an assumption of 8% casualty trend and as we disclosed in our prepared comments. If you exclude workers comp from that which gets you focus more on GL and auto liability. It was closer to nine now while we don't update our current year loss trend assumptions quarterly we do it on an annual.

John Joseph Marchioni: Basis, the effective impact of that one point roughly one point loss ratio move is about the equivalent of having moved your trend assumption by about two points. So I think that's you've got the.

John Joseph Marchioni: So I think that's you've got the minus or the increase in the loss ratio underlying from the casualty adjustment we made, and you've got an offsetting impact from your non-capital property going in the other direction. And Mike, just to clarify.

John Joseph Marchioni: The minus or the increase on the loss ratio underlying from the casualty adjustment, we made and you've got an offsetting impact from your non cap property going in the other direction.

John Joseph Marchioni: Mike, just to clarify one point, the impact that we made to the current action here was 20 basis points within our guidance. The 80 basis points was the prior development.

John Joseph Marchioni: Mike just to clarify one point the impact that we've made to the current accident year was 20 basis points within our guidance. The 80 basis points was the prior year development.

Michael Zaremski: Okay, okay, that's great context. My follow-up, I'll be mindful of other people in the queue, it's just, you know, Now that you've, I guess, just, time has gone on and you've been upping your loss trend for a little while, is it, you know, emanating out of, you think, any certain classes of business, like other than just business lines, right? GL, and you said Umbrella. Is it coming out of anything, you think, certain?

Speaker Change: Okay. Okay, that's great that's great context.

Michael Zaremski: Follow up I'll be mindful of other people in the queue is just.

Michael Zaremski: Yes.

Michael Zaremski: Now that you've I guess.

Michael Zaremski: Time has gone on and you've been upping your loss trend for for for a little while is it.

Michael Zaremski: Is it emanating out of any certain classes of business other than just business line right. <unk> you said umbrella is it coming out of any certain.

Michael Zaremski: types of business. I know Selective has a very strong niche in construction. Are there any macro portfolio trends you guys have been able to hone in on that you think this could be emanating from? And I guess lastly, you also talk about Umbrella a lot. What percentage of your reserves, if you're able to tell us, is Umbrella? Because I don't think we can see that on a stat basis.

Michael Zaremski: Types of business slipped.

Michael Zaremski: <unk> has a very strong niche in construction.

Michael Zaremski: Or is there kind of any macro.

Michael Zaremski: <unk> portfolio of brands.

Michael Zaremski: <unk> been able to hone in on that that you think this could be.

Michael Zaremski: Emanating from.

Michael Zaremski: And our next.

Michael Zaremski: Lastly.

Michael Zaremski: But you also break out let's talk about umbrella a lot what percentage of your reserves, if youre able to tell us is.

Michael Zaremski: Based on bulk salt that we can see that on a stat basis. Thanks.

John Joseph Marchioni: Thanks.

Michael Zaremski: Okay.

Speaker Change: I'll handle the first part of the question then I will come back to you with regard to the umbrella question, but just with regard to where this might be emanating from.

John Joseph Marchioni: Okay, so I'll handle the first part of the question, and then we'll come back to you with regard to the umbrella question. But just with regard to where this might be emanating from, I would say at the highest level, we continue to view this as kind of a market-wide shift in average severities. Now, I'll go a little deeper on that, because there's no question, and I think this has always been the case, and this is also an industry dynamic: there are certain jurisdictions, or at least in recent memory, have had more tough legal environments.

John Joseph Marchioni: I would say at the highest level, we continue to view this as kind of a market wide shifts and average severity.

John Joseph Marchioni: Go a little deeper on that because there is no question and I think this has always been the case and this is also an industry dynamic there are certain jurisdictions that have and have always had or.

John Joseph Marchioni: Or at least in more recent memory have had more tough legal environment. So things states like Georgia, and South Carolina, and New York, New Jersey, Pennsylvania, Illinois, and I think when you have social inflationary trends like we're seeing if you have more challenging legal environments in cases, where you have either.

John Joseph Marchioni: So I think states like Georgia and South Carolina, New York, New Jersey, Pennsylvania, Illinois, and I think when you have social inflationary trends like we're seeing, if you have more challenging legal environments and cases where you have either case law or statute that has expanded theories of liability, I think you do see a more outsized impact as these social inflationary factors hit. But the states I just took you through are pretty large states and pretty consistent in most companies' portfolios. So I think that's point number one.

John Joseph Marchioni: This law or statue that has expanded theories of liability I think you do see a more outsized impact as these social inflation inflationary factors hit but the space I just took you through a pretty large states and pretty consistently in most companies portfolio. So I think that's point number one there are certainly some geographic.

John Joseph Marchioni: There are certainly some geographic differences in the magnitude of the impacts, but I think that what we're talking about in terms of social inflationary trends is pretty evident across the board. I think the other important point to highlight is, and I think this is where we gain confidence in viewing this as a social inflationary trend, in addition to the fact that it's hit pretty consistently across all accident years, all open accident years over the last several years.

John Joseph Marchioni: Differences in the magnitude of the impacts, but I think that what we're talking about in terms of social social social inflationary trends are pretty evident across the board I think the other important point to highlight is and I think this is where we gain confidence and viewing this as a social inflationary trends.

John Joseph Marchioni: In addition to the fact that it's hit pretty consistently across all accident years, all open accident years over the last several years, if you look at our mix of business.

John Joseph Marchioni: If you look at our mix of business, over the last decade and including the more recent years, the limit profile of our book has been very consistent. Over that time frame, in addition to the underlying limit profile, our reinsurance attachment point on casualty has remained at 2 million. So you've got stability there. From an industry classification perspective, percent contractors versus percent manufacturing and wholesaling or mercantile and service has also remained quite consistent. Hazard grade, distribution, low, medium, and high hazard has remained very consistent.

John Joseph Marchioni: Over the last decade, and including the more recent years the limit profile of our book has been very consistent over that timeframe. In addition to the underlying limits profile.

John Joseph Marchioni: Our reinsurance attachment point on casualty has remained at $2 million. So you've got stability there from an industry classification perspective percent contractors versus percent manufacturing and wholesaling or mercantile's <unk> service has also remained quite consistent or.

John Joseph Marchioni: Our hazard grade.

John Joseph Marchioni: Distribution low medium high hazard has remained very consistent so theres no shifts in the underlying portfolio and the one shift and honestly it hasn't been all that dramatic as as we've expanded geographically.

John Joseph Marchioni: So there are no shifts in the underlying portfolio. And the one shift, and honestly, it hasn't been all that dramatic, is that as we've expanded geographically, we've seen a little bit of a shift in our geographic footprint. But based on the states I just took you through that tend to be the hotter spots from a litigation environment perspective, you would generally view that geo-expansion as a diversifier from that

John Joseph Marchioni: We've seen a little bit of a shift in our geographic footprint, but based on the states I. Just took you through that tend to be the hotter spots from a litigation environment perspective, you would generally view that that geo expansion as a diversified are from that vantage point. So I think when you put all those pieces together.

John Joseph Marchioni: It gives us the confidence to make the statements around the overall dynamics at play here.

Tony: And Tony, you want to just touch on...

John Joseph Marchioni: And Tony, you want to just touch on...

John Joseph Marchioni: And then how do you want to just touch on the cost.

Tony: We can follow up after the call. We don't have the split right in front of us on the umbrella versus GL, but as a total, I would just sit there and say our general liability reserves represent about 40 to 50 percent of our reserve position. And, as I mentioned, that $2 million retention.

John Joseph Marchioni: We can follow up after the call. We don't have the split right in front of us on the umbrella versus GL, but as a total, I would just sit there and say our general liability reserves represent about 40 to 50 percent of our reserve position. And, as I mentioned, that $2 million retention.

John Joseph Marchioni: Yes.

John Joseph Marchioni: We can follow back up after the call. We don't have the split right in front of us on the umbrella versus GL, but.

John Joseph Marchioni: As a total I would just sit there and say our general liability reserves represent about 40, 40% to 50% of our reserve position.

Operator: And as I mentioned, that $2 million retention means that our umbrella exposure, as we review that quarterly in our reserve adjustment, is really that one X to one layer.

John Joseph Marchioni: And as I mentioned, that $2 million retention means that our umbrella exposure, as we review that quarterly in our reserve adjustment, is really that one X to one layer.

John Joseph Marchioni: And as I mentioned that $2 million retention means that our umbrella exposure as we view that quarterly in our reserve adjustment is really that one extra one layer.

Speaker Change: I appreciate the color.

Michael Phillips: Your next question will come from the line of Michael Phillips with Oppenheimer. Please go ahead.

John Joseph Marchioni: Your next question will come from the line of Michael Phillips with Oppenheimer. Please go ahead.

Michael Phillips: Thanks. Good morning, everybody.

Michael Phillips: Thanks, Good morning.

Michael Phillips: John Jonathan question relates to kind of timing of.

John Joseph Marchioni: Jon, the question relates to the kind of timing of reserve reviews. I think this kind of comes up every now and then, but maybe a refresher here. You know, what you give us for general liability reserve changes, obviously, that's a kind of total of what you do because of all the granular data you have inside the house that we don't have, right? So, you know, I don't know how many segments there were that feed into your general liability when you do independent reviews of each one of those individual pieces, but whatever that number is, rolls up to your general liability that we see.

Michael Phillips: Of reserve reviews, I think this kind of comes up every now and then but maybe a refresher here. What you gave us for general liability reserve changes, obviously, thats a kind of a total of what you do because of all the granular data you have inside the house that we don't have right. So.

John Joseph Marchioni: How many segments of where that feed into your general liability. When you do independent reviews of each one of those.

John Joseph Marchioni: Individual pieces, but whatever that number is rolls up to year general liability that we see so when you give us a charge like today or favorable or whatever it is that on a quarterly basis.

John Joseph Marchioni: So, when you give us a charge like today or, you know, whatever it is on a quarterly basis, does that mean each quarter you've looked at all those individual pieces, or is there some done one quarter, some done another? So, what's that like?

John Joseph Marchioni: Does that mean.

John Joseph Marchioni: Each quarter you look at all those individual pieces or is there. Some then one quarter some done another.

John Joseph Marchioni: And I ask Jon because, you know, two parts really. What did you see this quarter for the current accident years that maybe you didn't see last quarter when you took the older accident year charge? Is it because there were just some timing changes that you didn't see or you didn't review? And then, obviously, the second part of that: what does that mean going forward? Are there other pieces that you haven't looked at yet that might impact the future? Thanks.

John Joseph Marchioni: So what's that like and I ask John because.

John Joseph Marchioni: Two parts really.

John Joseph Marchioni: What did you see this quarter for the current accident years that maybe you didn't see last quarter. When you took the order accident year charge.

John Joseph Marchioni: Is it because it was just some timing changes that you didn't see or you Didnt review and then obviously the second part of that what does that mean going forward are there other pieces that you haven't looked at yet that might impact future quarters. Thanks.

John Joseph Marchioni: We do a reserve evaluation at a somewhat segmented level within GL, so excess and then products and non-product GL exposure. And that's done consistently every quarter.

Jon: Yeah, Yeah no I appreciate the question. So we do we do a reserve evaluation at a somewhat segmented level with NGL.

John Joseph Marchioni: So access and then products and non product GL exposure and Thats done consistently every quarter.

John Joseph Marchioni: So it's not that there's something that happens in Q1 that's different from Q4. There are a couple of things we do. We mentioned the workers' comp TAIL study that's done annually in Q4. But generally speaking, and the emergence we saw this quarter comes through what is a quarterly exercise. So I think that's the key point to the first part of your question.

John Joseph Marchioni: So it's not that there's something that happens in Q1, that's different from Q4. There are a couple of things. We do we mentioned that workers comp tail study thats done annually in Q4, but generally speaking and the emergence. We saw this quarter comes through what is a quarterly exercise. So I think that's.

John Joseph Marchioni: The key point to you the first part of your question.

John Joseph Marchioni: With regard to the second part of your question, with regard to Q1, what we saw, and you saw this in the prepared comments, is that we were reacting to an emergence with regard to pay severity. And I think this is an important point because when you think about the immaturity of these accident years and think about the fact that the percent paid, at this point in the maturity of those years, relative to the ultimate expected percent paid, is quite low.

John Joseph Marchioni: With regard to the second part of your question with regard to in Q1, what we saw and you saw this in the prepared comments is we were reacting to our merchants with regard to paid severities.

John Joseph Marchioni: And I think this is an important point because when you think about the immaturity of these accident years and think about the fact that the percent paid.

John Joseph Marchioni: At this point and the maturity of those years relative to the ultimate expected percent paid is quite low. So for the 20th then I'll give you approximate numbers not exact numbers, but for the 23 accident year, the expected paid or the paint the paid percentage relative to expected is probably in the upper single digits to 10% at the most and when you go.

John Joseph Marchioni: So for the 20, and I'll give you approximate numbers, not exact numbers, but for the 23 accident year, the expected paid, or the paid percentage relative to expected, is probably in the upper single digits to 10% at the most. And when you go all the way back to 21, your percent paid at this point is probably somewhere in the 30 to 40%. So we're reacting to paid data, and then you look at your historical development factors based on what you know relative to paid, and you respond accordingly.

John Joseph Marchioni: All the way back to 21% paid at this point is probably somewhere in the in the 30% to 40% range. So we're reacting to pay data and then you look at your historical development factors based on what you know relative to paid and you'll respond accordingly, so that's an important point.

John Joseph Marchioni: So that's an important point; when we say we're reacting quickly, that's what we're talking about. It's a relatively small portion of the paid percentage relative to the ultimate that you expect. But I also want to reinforce the point that the actuaries provide us with various methods. They're looking at paid claims on an unadjusted and adjusted level, and they're looking at incurred losses, which include paid and case reserves on an unadjusted and adjusted level.

John Joseph Marchioni: They were reacting quickly that's what we're talking about it's a relatively small portion of the paid percentage relative to the ultimate that you would expect.

John Joseph Marchioni: But I also want to reinforce the point that the actuaries provide us with various methods. They are looking at paid on an on an unadjusted and adjusted level and are looking at incurred losses, which include paid and case reserves on an unadjusted and adjusted level and then those adjusted methods respond to things.

John Joseph Marchioni: And then those adjusted methods respond to things like changes in reporting patterns, changes in disposal rates, case reserve strengthening or weakening, to those outcomes based on what you know about the environment. But it was really the change in the paid methods, recognizing they're immature, and it's a small percentage of paid activity, but we felt it was appropriate to respond to them at the time.

John Joseph Marchioni: Like changes in reporting patterns changes in disposal rates K strength.

John Joseph Marchioni: Through reserve strengthening or weakening and then you apply different weights to those outcomes based on what you know about the environment, but it was really the change in the paid methods recognizing they're immature and it's a small percentage of paid activity or we felt appropriate was appropriate to respond to them at this point.

John Joseph Marchioni: Yeah, Mike, maybe I would just add that in the current year, there's nothing specific we observe. It's a fairly immature accident year at this point. However, if you look at the years that we did make adjustments to, it's those years that are informing our position on the current accident year and the adjustment we made.

Speaker Change: Yes, Mike maybe I would just add that in the current year. There's nothing specific we observed it's a very immature accident year at this point. However, if you look at the years that we did make adjustments to its those years that are informing our position on the current accident year in the adjustment we made.

Michael Phillips: Okay, good. Thank you. Thank you both very much.

Speaker Change: Okay. Good. Thank you thanks, both for much.

Michael Phillips: Second question, different tone, is your growth in commercial lines, around 15%. I'll say, while it's driven by two parts, you're getting pretty strong pricing and pretty strong exposure growth. I don't know how much underneath that is pure new customer count. You talk about new business growth, but I think that's also because of exposure. How much are you really pushing to get more customers in the door on commercial lines at a time when there's so much uncertainty?

Speaker Change: Second question different tone.

Michael Phillips: Is your growth in commercial lines it will around 15%.

Michael Phillips: It's driven by two parts that youre getting pretty strong pricing and pretty strong exposure growth.

Michael Phillips: I don't know how much underneath that is pure new customer count and you talk about new business growth, but I think that's also because of exposure.

Michael Phillips: How much are you really pushing let's get more customers in the door and commercial lines.

Michael Phillips: At a time when there's so much uncertainty coupled that with your expanded into new states, which you kind of always do which is great, but I guess the question really is.

Michael Phillips: Couple that with you're expanding to new states, which you kind of always do, which is great. But I guess the question really is, how many new customers are you really trying to push for right now? And is that a focus, or is it maybe more of a time to kind of take a pause and let's get this Wall Street thing under our belts? Thanks.

John Joseph Marchioni: Thanks. Yep. No, I appreciate that.

John Joseph Marchioni: How much new customers or are you really trying to push for rate now and is that.

John Joseph Marchioni: Is that a focus.

John Joseph Marchioni: Is it maybe more of a time to kind of take a pause and let's get this wall Street.

John Joseph Marchioni: Bill.

Speaker Change: Yes, no I appreciate that I appreciate the question, Mike and listen I think we're not a growth on growth off company. The way, we think about it is we have pricing expectations for new business.

John Joseph Marchioni: I appreciate the question, Mike. And listen, I think we're not a growth-on, growth-off company. The way we think about it is we have pricing expectations for new business, and where those pricing expectations are relative to where the market might be, will drive our hit ratio and ultimately drive our new business production. If you look at the pieces underneath that growth, and I think we had this in the prepared comments, but just to reiterate it, the total renewal premium change for commercial lines was 12.3%. Retentions were strong and stable.

John Joseph Marchioni: And where those pricing expectations are relative to where the market might be will drive our hit ratio and ultimately drive our new business production.

John Joseph Marchioni: If you look at the pieces underneath that growth.

John Joseph Marchioni: We had this in the prepared comments, but just to reiterate the total renewal premium change for commercial lines was 12, 3%.

John Joseph Marchioni: Retentions were strong and stable.

John Joseph Marchioni: Generally speaking, policy count is up in the low single digits. And remember, we continue to add agents in our existing footprint. We've continued to open up new states. That will create some organic growth opportunities. But we're not sitting there saying, "Put the pedal down on growth."

Mike: Generally speaking policy count is up in the low single digits and remember we continue to add agents in our existing footprint. We've continued to open up new states that will create some organic.

John Joseph Marchioni: Growth opportunities, but we're not sitting there, saying put the pedal down on growth and when I look at our new business pricing diagnostics. So we don't we don't disclose these because they're not as as specific.

John Joseph Marchioni: And when I look at our new business pricing diagnostics, so we don't we don't disclose these because they're not as specific because you've got a different basket of policies relative to your renewal book. Our new business pricing metrics show that pricing has continued to be strong. On new business. So, what that tells you is we're writing new business at the price point. We want to be writing it at. And the growth is really driven by how it's currently perceived in the marketplace, but it's really driven by rate and exposure and strong retention on an overall basis.

John Joseph Marchioni: Specific because you've got a different basket of policies relative to your renewal book, our new business pricing metrics show that pricing has continued to be strong on new business. So what that tells you is we're writing business new at the price point, we wanted to be writing it at and the growth is really driven by how that's that's currently.

John Joseph Marchioni: Perceived in the marketplace, but it's really driven by rate and exposure and strong retention on an overall basis.

Michael Phillips: Okay, thank you, John. That makes a lot of sense. Thank you.

Speaker Change: Okay. Thank you gentlemen that makes all of them. Thank you.

Michael Phillips: Thank you.

Dean Cristiello: Your next question comes from the line of Dean Cristiello with KBW. Please go ahead.

Michael Phillips: Your next question comes from the line of Bean Cristiano with <unk>. Please go ahead.

John Joseph Marchioni: Hi, you guys talked about looking for rate increases within the general liability line, and I was wondering if there are maybe any states that are likely to either oppose or slow approval of such a rating.

Dean Cristiello: Hi, you guys talked about.

John Joseph Marchioni: Looking for rate increases within the general liability line and I was wondering it.

John Joseph Marchioni: Maybe any states that are likely to either like a poseur slow approval of such rate increases.

Dean Cristiello: Now, that issue is more of an issue for personal lines. Generally speaking, with regard to commercial lines, you have a number of other pricing tools that you evaluate on an individual risk basis through scheduled debits and credits. And you've got multiple companies filed in any individual state, which gives you a lot of pricing flexibility. And our pricing expectations in commercial lines are well within the ability of us to use those tools to achieve that.

Speaker Change: No. That's that issue is more of an issue for personal lines generally speaking with regard to commercial lines you have a number of other pricing tools that you evaluate on an individual risk basis through.

Dean Cristiello: <unk> schedule Debits and credits and you have got multiple companies filed in any individual state that gives you a lot of pricing flexibility.

Dean Cristiello: Our pricing expectations in commercial lines are well within the ability of us to use those tools to achieve that.

Dean Cristiello: Yes.

John Joseph Marchioni: Okay, and my next question was about sort of the profit improvement plan and personal lines. And yeah, obviously, this quarter, both new business and retention ticked down a bit. Were there fundamental changes in this quarter that you didn't see that didn't happen in the last quarter? And I'm sort of asking in the context of slowing growth within personal auto, like, how should we think about growth going forward? And like, how long do you think these corrective actions are going to exist within the personal lines?

Dean Cristiello: Okay.

Dean Cristiello: My next question was on sort of the profit improvement plan in personal lines and obviously this quarter, both new business and retention click down a bit.

John Joseph Marchioni: Were there fundamental changes.

John Joseph Marchioni: That happened in this quarter that you didnt that didnt happened in the last quarter and I'm sort of asking in the context of slowing growth within personal auto like how should we think about growth going forward in like how long do you think these corrective actions.

John Joseph Marchioni: Personal lines.

John Joseph Marchioni: Yeah, I think, similar to the answer that I gave on the commercial lines growth question that Mike asked, I think it's a similar story in personal lines. If you look at our renewal pricing, which was about 9% in Q4, it's about a little over 14%, 14.3% in Q1, and new business pricing, where you don't have the lag between the effective date of the filing and the impact on premium, new business pricing has been about 18.4% in the quarter.

Speaker Change: Yes, I think similar to the answer that I gave on the on the commercial lines growth question that Mike asked I think it's a similar story in personal lines. If you look at our renewal pricing has continued to move higher it was about 9% in Q4, it's about a little over 14% 14, 3% in Q1.

John Joseph Marchioni: And new business pricing, where you don't have the lag between the effective date of the filing and the impact on premium new business pricing has been about 18, 4% in the quarter I think that's driving hit ratios. That's driving overall growth is driving to a certain extent retention and as we've talked about we <unk>.

John Joseph Marchioni: I think that's driving hit ratios, that's driving overall growth, and to a certain extent, retention. And as we've talked about, you know, we expected that to continue to build over the course of the year. And I think we reiterated in the prepared comments that we expect full year pricing to be in excess of 20%. So I think that pressure will continue with regard to the top line. As we expect to earn that rate and start to approach our target combined ratio for that segment, I think you'll see that settle into a more normal growth rate for next year.

John Joseph Marchioni: <unk> that to continue to build over the course of the year and I think we reiterated in the prepared comments that we expect to have full year pricing in excess of 20%. So I think that pressure will continue with regard to the top line, but as we expect to earn that right and start to approach our target combined ratio for that segment.

John Joseph Marchioni: I think youll see that settle in to a more normal growth rate into next year.

Dean Cristiello: That's great. Thanks, John.

Speaker Change: Okay. Thanks, Tom.

Matthew John Carletti: Your next question will come from the line of Matt Carletti with Citizens JNP. Please go ahead.

Dean Cristiello: Your next question will come from the line of Matt <unk> with citizens JMP. Please go ahead.

Matthew John Carletti: Hey, Thanks, good morning.

Matthew John Carletti: Thanks. Good morning. Going back to the reserve charges and general liability, as you kind of look at the last couple quarters in total, can you help us with? I'm just trying to get a feel for kind of how much more, maybe, management conservatism has been put into the view of those reserves. So can you help us with a little bit of maybe how much of that is kind of actuals versus reported, or I guess maybe one way to think of it is maybe where you sit today versus say the actual midpoint or some metric like that versus maybe where you sat, you know, six months ago before you took these charges?

Matthew John Carletti: Going back to the reserve charges and general liability as you kind of look at the last couple of quarters in total.

Matthew John Carletti: Can you help us with I'm, just trying to get a feel for kind of how much more maybe management conservatism has been put into the view of those reserves. So could you help us with a little bit of maybe how much of that is.

Matthew John Carletti: Kind of actuals versus reported.

Matthew John Carletti: Maybe one way to think of it as maybe where you sit today versus in versus say after a midpoint or some metric like that versus maybe where you sat six months ago before you.

Matthew John Carletti: These charges.

Matthew John Carletti: Okay.

John Joseph Marchioni: Yeah, I guess what I would say is we continue to have a consistent approach and philosophy with regard to the reserve decisions that we make. And I realize this might not be satisfying, but... Based on the different methods we evaluate, and you have to weight those different methods, we're reacting to early paid emergence in the last few accident years. And I think that's about as much as I could tell you.

Matthew John Carletti: Yes, I guess, what I would say is we continue to have a consistent approach and philosophy with regard to the reserve decisions that we make.

John Joseph Marchioni: And I realize this might not be satisfying but based on the different methods, we evaluate and you have to wait those different methods. We're reacting early paid emergence in the last few accident years and I think that's about as much as I can tell you that we had a trend assumption for each of the last few accident years.

John Joseph Marchioni: That, you know, we had a trend assumption for each of the last few accident years. You can now start to get more insight into what's actually happening with average severity change. That's what we're responding to, and that's what we've been responding to by increasing our forward trend assumptions over each of the last five years. And I think it was even a bigger move into 2024 when we raised that casualty trend assumption embedded in our law specs to eight and above that for X comp.

John Joseph Marchioni: You are now start to get more insight into what's actually happening with average severity change that's what we're responding to and that's what we've been responding to by increasing our forward trend assumptions over each of the last five years and I think it was even a bigger move into 2024, when we raise that casualty trend assumption.

John Joseph Marchioni: Better than our loss picks to eight and above that for ex comp.

John Joseph Marchioni: I think that's how you want to think about it from our perspective, a very consistent underwriting portfolio, as I mentioned earlier, from a limits industry classification perspective, a very consistent approach to evaluating and booking reserves, and that a very consistent approach relative to establishing and updating our trend assumptions. And all of that goes into the process. And I think that process has remained fairly consistent, and how we think about reserve booking decisions is always in the context of what we think about in terms of the risk factors to reserves that are out there that we need to make sure we're contemplating.

John Joseph Marchioni: That's how you want to think about it from our perspective is very consistent underwriting portfolio as I mentioned earlier from our limits industry classification perspective, very consistent approach to evaluating and booking reserves and that a very consistent approach relative to establishing and updating.

John Joseph Marchioni: Our trend assumptions and all of that goes into the process and I think that process has remained fairly consistent and how do we think about reserve booking decisions is always in the context of what we think about in terms of the risk factors to reserves that are out there that we need to make sure we are contemplating and the risk factors we've been highlighting.

John Joseph Marchioni: And the risk factors we've been highlighting over the last couple of years are not just elevated loss trends but more uncertain loss trends driven by social inflation and driven by what is still the pandemic effect in your experience period, the 20 and 21 years in particular.

John Joseph Marchioni: Over the last couple of years is not just elevated loss trends, but more on certain loss trends driven by social inflation and driven by the what's still is the pandemic effect in your experience period in the 2020 one years in particular.

Speaker Change: Okay. That's helpful. Thank you and then just a quick numbers question, if I could could you break out the <unk>.

John Joseph Marchioni: That's helpful. Thank you. And then just a quick numbers question, if I could, could you break out the cap losses within the standard commercial just by the sub lines that, I mean, commercial auto, and commercial property involved? Sure.

John Joseph Marchioni: Cat losses within.

John Joseph Marchioni: Standard commercial just by the sub lines that in the.

John Joseph Marchioni: Commercial auto commercial property it Bob.

John Joseph Marchioni: Within standard commercial, we had $38.5 million in cat losses.

John Joseph Marchioni: Sure. Within standard commercial, we had $38.5 million in cat losses. Commercial property was $32.9 million. Our bot line of business was $4.2 million, and commercial auto was $1.4 million.

John Joseph Marchioni: Sure within standard commercial we had $38 5 million of Cat losses commercial property was $32 9 million or bought line of business was $4 two.

John Joseph Marchioni: $1 million in commercial auto was $1 4 million.

Speaker Change: Great. Thanks very much.

Grace Helen Carter: Our next question will come from the line of Grace Carter with Bank of America. Please go ahead.

John Joseph Marchioni: Our next question will come from the line of Greg Carter with Bank of America. Please go ahead.

Grace Helen Carter: Hi everyone. Good morning.

Grace Helen Carter: Hi, everyone. Good morning.

Grace Helen Carter: Wanted to dig into the updated guidance for the combined ratio a little bit just kind of considering the.

Grace Helen Carter: I wanted to dig into the updated guidance for the combined ratio a little bit. Just kind of considering the 58.4% core loss ratio this quarter, if I assume flat expenses year-over-year or flat expense ratio year-over-year, I get roughly 59% implied core loss ratio for the year. I know you all mentioned some favorable non-capital property losses this quarter, but I just kind of wanted to make sure that my assumptions on that are correct as we think about sort of the competing impacts of the higher liability loss cost trends that you all are thinking about versus potential tailwinds from improvement in the personal lines book and just kind of where that deterioration might come from. Thanks.

Grace Helen Carter: The 58, 4% core loss ratio this quarter, if I assume flat expenses year over year.

Grace Helen Carter: Expense ratio year over year like I get roughly 59% implied core loss ratio for the year I know you mentioned some favorable.

Grace Helen Carter: Non cat property losses this quarter by just kind of wanted to make sure that my assumptions on that or correct. Just kind of as we think about sort of the competing impacts of the higher liability loss cost trends that you all are thinking about versus potential tailwind from improvement in the personal lines book, and just kind of where that deterioration Mike might come from.

Grace Helen Carter: Thanks.

Tony: Yeah, just in, Grace, this is Tony. In terms of the non-CAT that you mentioned, I just want to point out that in our ongoing assumption, the favorable developments or the favorable variance we saw in the non-CAT in the first quarter, relative to our expectation, we neutralize that in our assumptions over the course of the remainder of the year. So we don't assume that this benefit will carry through over the course of the year due to the natural volatility of property.

Grace Helen Carter: Yes, just didn't Gregg this is Tony in terms of the non cat that you mentioned, so I just wanted to point out that in our ongoing assumption are favorable.

Tony: The favorable variance we saw in the non cat in the first quarter relative to our expectation, we neutralize that in our assumptions over the course of the remainder of the year. So we don't assume that benefit will.

Tony: We will carry through over the course of the year due to the natural volatility of property.

Grace Helen Carter: And that's the primary difference.

Tony: And Thats the primary difference.

Grace Helen Carter: Okay, thank you. And you also mentioned your casualty reinsurance. I was just curious about the upcoming renewals. We've heard some commentary suggesting that reinsurers are getting a bit more cautious on casualty lines. I was just wondering how you're thinking about that renewal and, just in light of the social inflation environment, if there's any tweaks that you would like to implement and just kind of how you're thinking about that versus potential tightening from the reinsurers.

Speaker Change: Okay. Thank you and you also mentioned Youre casualty reinsurance I was just curious at the upcoming renewals we've heard some.

Grace Helen Carter: Commentary, suggesting that reinsurers are getting a bit more cautious on casualty lines. I was just wondering how you all are thinking about that renewal and just in light of the social inflation environment. If there's any tweaks that you.

Grace Helen Carter: All I would like to implement and just kind of how youre thinking about that versus potential.

Grace Helen Carter: Lightning and from from the from the reinsurers.

John Joseph Marchioni: Yeah, Grace. I think so.

John Joseph Marchioni: Yeah, Grace, I think, and obviously, we're early in the process. Our program renews on July 1, but we've started to have some early conversations. And I think, like we do with all of our reinsurance programs, we're going to ultimately evaluate our view of where pricing actually comes in on our proposed program terms and make a decision around whether or not it makes sense for us to make any structural changes. That's always been our process; that $2 million retention has been there for a very long time, I think back into the late 1990s.

Speaker Change: Yeah, Grace I think and obviously, we're early in the process our program renews on July one, but clearly we've started to have some early conversations I think like we do with all of our reinsurance programs, we're going to ultimately evaluate our view of where pricing actually comes in on our proposed program terms.

John Joseph Marchioni: And make a decision around whether or not it makes sense for us to make any structural changes that's always been our process that $2 million retention has been there for a very long time I think back into the late nineties.

John Joseph Marchioni: And we'll evaluate that based on price. It's sort of the same philosophy we adopted when the property market started to move. You're ultimately evaluating the indicated rates online relative to the expected seeded losses, so seeded premiums relative to seeded losses, and making a decision based on the economics of that. And also how we think about managing the volatility profile in our combined ratio results. So it's early in the process. We're obviously having those early conversations, and it will be fluid as we go through that process and ultimately make a decision.

John Joseph Marchioni: We will evaluate that based on pricing at sort of the same philosophy, we took when the property market started to move Youre ultimately evaluating the indicated.

John Joseph Marchioni: Rates online relative to the expected ceded losses associated premiums relative to ceded losses and make a decision based on the economics of that and then also how do we think about managing the volatility profile.

John Joseph Marchioni: And our combined ratio results. So it's early in the process. We are obviously, having those early conversations and will be fluid as we go through that process and ultimately make a decision.

Speaker Change: Thank you.

Operator: Again, to ask a question, press star 1 on your telephone keypad. Your next question will come from the line of Bob Farnam with Janie. Please go ahead.

John Joseph Marchioni: Again to ask a question press star one on your telephone keypad. Your next question will come from the line of Bob Farnam with Janney. Please go ahead.

Robert Edward Farnam: Yeah, hi there. Good morning. So not to pile on with the general liability preserves, but I'm just trying to get a feel for, do you sense litigation funding is backing some of the claims that are coming through your book business? I wasn't quite sure if it's the size of claims that, for you versus maybe some of your peers, just kind of curious if you get a sense that litigation funding is behind things.

Robert Edward Farnam: Yes, hi, there good morning, so not the not the pie of lineup with the general liabilities preserves but I'm just trying to get a feel for do you sense litigation funding is backing some of the claims that are coming through your book of business, but I wasn't quite sure if it's.

Robert Edward Farnam: The size of claims for you versus maybe some of your peers. Just just kind of curious if you could get a sense that litigation funding behind thanks.

Speaker Change: Yeah, I think litigation funding is an impact across the board I am not going to suggest that is the primary driver, but I will say I don't litigation funding is not just about the real high exposure cases.

John Joseph Marchioni: I think litigation funding is an impact across the board. I'm not going to suggest that it's the primary driver, but I will say litigation funding is not just about the really high exposure cases on the product side. I think there's no question that litigation funding is a little bit more broad than that. But I will say, when you look at our litigation rates, we've only seen a very modest increase in actual litigation rates.

John Joseph Marchioni: On the product side I think Theres no question that litigation funding is a little bit more broad than that now I will say when you look at our litigation rates, we've only seen a very modest increase in actual litigation rates and that comment applies to both general liability and auto liability, but theres no question and in certain states.

John Joseph Marchioni: And that comment applies to both general liability and auto liability. But I think there's no question. And in certain states, I think you see a much more active plaintiff's bar, and especially in states where you have a more challenging litigation environment, where you see things like the expansion of liability theories that are statutory in nature. I think that's where you tend to see the litigation financing tent focus their investments. So I think it does impact accounts of all sizes and books of all sizes, but I think there's no question that they all do.

John Joseph Marchioni: I think you see a much more active plaintiffs bar.

John Joseph Marchioni: And especially in states, where you have a more challenging litigation environment, where you see things like Phantom damages are allowed expanded premises liability exposures.

John Joseph Marchioni: Expansion of liability theories that are statutory in nature, I think thats, where you tend to see the litigation financing tenant focus their investments. So I think it does impact accounts of all sizes and books of all sizes, but I think there's no question that they all are focused on larger limits and our limits profile as a <unk>.

John Joseph Marchioni: A little bit below average.

Robert Edward Farnam: Yeah, that's what I was, that's what I was kind of getting at. I didn't know if having your, you know, two million and under limits was as attractive as maybe some of the larger, larger limit companies. Do you get a sense that, going forward, you're probably going to get even more attorney involvement with claims? Does that just seem to be like a trend that's going to keep going up as long as the plaintiff's bar is successful in this endeavor, or do you think that you're going to basically be facing more... litigation going forward?

Speaker Change: Yeah, that's what I was thats, what I was kind of getting at I didn't know if having year.

Robert Edward Farnam: $2 million and under limits.

Robert Edward Farnam: As attractive as maybe some of the larger larger limit companies.

Robert Edward Farnam: Do you get a sense that going forward, you're probably going to get even more.

Robert Edward Farnam: The attorney involvement with claims is that they seem to be like a trend that's going to keep going up as long as it.

Robert Edward Farnam: Plaintiffs' bar is successful in this endeavor I think that you're going to basically be facing work more litigation going forward.

Robert Edward Farnam: I think and Thats one of the reasons, we talked about the uncertainty going forward is because of our challenge as an industry to get behind what long term social inflationary trends look like now and this is nothing more than a data point, if you look at commercial auto.

John Joseph Marchioni: I think one of the reasons we talk about uncertainty going forward is because of our challenges in industry to get behind what long-term social inflationary trends look like. But this is nothing more than a data point.

John Joseph Marchioni: If you look at commercial auto, I think the severity impact from social inflation hit more quickly because it's a little shorter tail, and we are seeing a little bit more moderation or leveling out of severity trends in commercial auto, but the pricing environment in commercial auto has also been stronger than it's been in general liability, but that might be an early indication that these severities do find their level and settle out, but I also say that the trial bar is The trial bar is going to continue to look for fertile ground, and ultimately, you need one or two things to happen. You need legislative change, statutory change, whether that's to unwind bad statutes or to address bad case law, or you need precedent-setting case law that unwinds bad case law that exists in that state.

John Joseph Marchioni: I think the severity impact from social inflation hit more quickly because it's a little shorter tail and we are seeing a little bit more moderation or leveling out of severity trends in commercial auto, but the pricing environment in commercial auto has also been stronger than it's been in general liability, but.

John Joseph Marchioni: That might be an early indication that these severity as do find their level and settle out but I also say that the trial bar is not going to stop the trial bar is going to continue to look for fertile grounds and ultimately you need one or two things to happen you need legislative change statutory change.

John Joseph Marchioni: Whether that's to unwind bad statute or to address bad case law.

John Joseph Marchioni: You need precedent setting case law that unwind bad case, let exists in that state.

John Joseph Marchioni: From a public policy perspective, I think the industry is going to be fighting an uphill battle on that front until such time as this becomes a consumer-driven issue. And I think that's the most important point, is that in the near term, this winds up impacting underwriting companies' results. But in the relatively near term going forward, it ultimately makes its way into the cost of goods sold, and it's borne by consumers, both personal and business consumers. And I think once that connection is made more strongly and consumers start to drive this conversation, I think it changes the landscape relative to court reform on a state-by-state level.

John Joseph Marchioni: From a public policy perspective, I think the industry is going to be fighting an uphill battle on that front until such time as this becomes a consumer driven issue.

John Joseph Marchioni: And I think that's the most important point is in the near term this winds up impacting underwriting companies results, but in the relatively near term going forward. It ultimately makes its way into the cost of goods sold and is borne by consumers, both personal and business consumers.

John Joseph Marchioni: And I think once that connection is made more strongly and consumers start to drive this conversation I think it changes the landscape relative to tort reform on a state by state level.

Robert Edward Farnam: Great. Yeah, that's a very good color. Thanks, John.

John Joseph Marchioni: Great.

Speaker Change: That's very good color. Thanks, John.

John Joseph Marchioni: And we have no further questions at this time. I'll turn the call back over to John for any closing remarks.

Robert Edward Farnam: And we have no further questions at this time I will turn the call back over to John for any closing remarks.

John Joseph Marchioni: Well, thank you all very much for your participation. And, as always, please feel free to reach out to Brad for any follow-ups. Thank you.

John: Well. Thank you all very much for your participation and as always please feel free to reach out to Brad for any follow ups. Thank you.

Ladies and gentlemen, that will conclude today's call. We thank you all for joining, and you may now disconnect.

Operator: Ladies and gentlemen, that will conclude today's call. We thank you all for joining, and you may now disconnect.

Speaker Change: Ladies and gentlemen that will conclude today's call. We thank you all for joining and you may now disconnect.

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