Selective Insurance Group SIGI
Q4 2011 Earnings Call Transcript

Operator: (Ron Bobman, Capital Returns).

Ron Bobman - Capital Returns: I patiently waited throughout the whole prepared remarks so it was fine for my end except for this little lapse. I had a couple of questions, one of the gentlemen in the prepared remarks was talking about competitors raising rates – I think the words were used within a socialized manner. I didn't understand what he meant by that?

John J. Marchioni - EVP, Insurance Operations: This is John Marchioni. Those were in my prepared comments, and what we mean by that is socialized rate increasing is across the board. So not differentiating between quality of accounts and I think as the markets started to firm, there is no question market wide, rates need to higher, but it's still important that you recognize which accounts need the greatest level of rate increases and which require the least amounts them out and really just keeping up with loss trends. So we've been very targeted over the last three years in terms of how we've done that, making sure that we've targeted the right accounts for a rate and making sure we focused on retentions of the greatest quality accounts and that covenant is that you don't necessarily see that with others and I think the other part of that too when it ties into the new business commentary is as that happens, you're starting to see business that despite a multiyear soft market is coming out to the markets that is overpriced. So there is an opportunity to write that because of that socialized approach to raising prices.

Ron Bobman - Capital Returns: Then I think maybe with you John as well, I'm positive, at one point you mentioned that new business suffered, in other words, sort of, an adverse impact as far as new business but then I thought later in your comments that there was positive comment regarding either January or most recently new business. If I heard that right, could you – is there, now, sort of a transition or inflection or just anything like that?

John J. Marchioni - EVP, Insurance Operations: Yes, you did hear that correctly. So the pressure that we had on new business was earlier in our strategy to raise rates. So back in 2009, 2010, when we started to be able to obtain a little bit of rate, two to three points, when the rest of the market wasn't moving, it did put pressure on our producers and therefore it really did hurt in terms of new business submission activity as the rest of the market was still very aggressive relative to new business pricing in particular. What we've now seen is as the rest of the market has started to move towards firming price that the quality opportunity has started to flow again and that drag on new business has started to turn the corner. I think the other important point to remember and you heard this in the prepared comments as well as is from a year-to-year perspective, it does look like a big increase. But from historical new business levels, these are about where we'd expect them to be, and they were prior to 2009.

Gregory E. Murphy - Chairman, President and CEO: And if I could, this is Greg Murphy. Just to kind of give you an idea, little background, I would tell you that, sophisticated underwriting, granular pricing, and commercial lines has really only been around for – or more significantly around for the past several years, and I would say that the difficulty in executing that strategy on a market that continued, when (break) was under pressure, very-very difficult to do; because you need some momentum in the market to be able raise and lower prices and you can't lower prices unless you can raise prices. So you are starting to see a transition now where we will better be able to execute our granular pricing capability in the marketplace and you need a more performing market to be able to do that. So I hope that's an important concept to garner, because rate in Commercial Lines, there is a whole lot of mispriced business out of there and what sophisticated underwriting and granular pricing gives you, is the capability to better identify that. But it's going to take a while to work through that, but this is the first part of the cycle that you are starting to see that execution happening.