Selective Insurance Group, Inc. (NASDAQ:SIGI) Q1 2024 Results Conference Call May 2, 2024 11:00 AM ET
Company Participants
Brad Wilson - SVP, IR and Treasurer
John Marchioni - Chairman, President and Chief Executive Officer
Tony Harnett - SVP, Chief Accounting Officer and Interim Chief Financial Officer
Conference Call Participants
Mike Zaremski - BMO Capital Markets
Michael Phillips - Oppenheimer
Dean Criscitiello - KBW
Matt Carletti - Citizens JMP
Grace Carter - Bank of America
Bob Farnam - Janney
Operator
Hello, and thank you for standing by. My name is Regina, and I will be your conference operator today. At this time, I would like to welcome everyone to the Selective Insurance Group First Quarter 2024 Earnings Conference Call [Operator Instructions].
I would now like to turn the conference over to Brad Wilson, Senior Vice President, Investor Relations and Treasurer. Please go ahead.
Brad Wilson
Good morning, and thank you for joining Selective's First Quarter 2024 Earnings Conference Call. Yesterday, we posted our earnings press release and financial supplement on the Investors section of our Web site, selective.com. A replay of this webcast will be posted there shortly after this call. Today, we will discuss our financial performance, market conditions and expectations for the next three quarters of 2024. John Marchioni, our Chairman of the Board, President and Chief Executive Officer; and Tony Harnett, our Senior Vice President, Chief Accounting Officer, and Interim Chief Financial Officer, will make remarks before we move to our question-and-answer session. Our commentary today references non-GAAP measures, which we believe make it easier for investors to evaluate our insurance business. These non-GAAP measures include operating income, operating return on common equity and adjusted book value per common share. We include GAAP reconciliations to any referenced non-GAAP financial measures in the financial supplements posted on our Web site. We will also make statements and projections about our future performance. These are forward-looking statements under the Private Securities Litigation Reform Act of 1995, and not guarantees of future performance. They are subject to risks and uncertainties that we disclosed in our annual, quarterly and current reports filed with the SEC. We undertake no obligation to update or revise any forward-looking statements. With those introductory remarks, I'll now turn the call to John.
John Marchioni
Thanks, Brad, and good morning, everyone. In the first quarter, we generated an operating ROE of 11.7% and grew net premiums written 16%. Our growth was driven by strong pricing, continued exposure increases and stable retention. The combined ratio was elevated at 98.2% and well above our 95% target due to the reserving actions we took in the quarter. We pride ourselves on maintaining a consistent and disciplined posture relative to planning, underwriting, pricing and reserving. When we see adverse trends emerge, we respond. We reported $35 million of net unfavorable prior year casualty reserve development during the quarter. The main driver was $50 million of unfavorable Standard Commercial Lines' general liability development, partially offset by $15 million of favorable workers' compensation development. 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 points of operating ROE in the quarter, below our expectations. We previously discussed how we increased our expected casualty loss trend in recent years. Entering this year, our 2024 combined ratio guidance reflected an overall expected loss trend of approximately 7%, consisting of 4% for property and 8% for casualty. Excluding workers' compensation, 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. The ex-workers' compensation number is approximately 0.5 point to 1 point higher than the expected loss trend we typically discuss for all casualty lines.