Good day, everyone. Welcome to the Selective Insurance Group’s Fourth Quarter 2015 Earnings Call. At this time for opening remarks and introductions, I would like to turn the call over to Senior Vice President, Investor Relations and Treasurer, Ms. Jennifer DiBerardino. Ma’am, you may begin.

Thank you. Good morning. And welcome to Selective Insurance Group's fourth quarter 2015 conference call. This call is being simulcast on our website and a replay will be available through March 4, 2016. A supplemental investor package, which includes GAAP reconciliations of non-GAAP financial measures referred to on this call, is available on the Investors page of our website selective.com. We use operating income, a non-GAAP measure, to analyze trends and operations. Operating income is net income excluding the after-tax impact of both net realized investment gains or losses and discontinued operations. We believe that providing this non-GAAP measure makes it easier for investors to evaluate our insurance business. As a reminder, some of the statements and projections made during this call are forward-looking statements as defined by the Private Securities Litigation Reform Act of 1995. Forward-looking statements are not guarantees of future performance and are subject to risks and uncertainties. We refer you to Selective's annual report on Form 10-K and any subsequent Form 10-Q filed with the U.S. Securities and Exchange Commission for a detailed discussion of these risks and uncertainties. Please note that Selective undertakes no obligation to update or revise any forward-looking statements. Joining me today on the call are the following members of Selective's executive management team, Greg Murphy, CEO; John Marchioni, President and Chief Operating Officer; Dale Thatcher, CFO; and Ron Zaleski, Chief Actuary. Now, I'll turn the call over to Greg for introductory remarks.

Thank you Jenny, good morning. The fourth quarter marked a conclusion of another great year for Selective, and we're proud of our results. In 2015, we continued to demonstrate our ability to generate profitable growth at 2.5 times the expected industry level. From an underwriting standpoint, 2015 was the best statutory combined ratio for Selective since becoming listed on NASDAQ. Our success was driven by one, true franchise value with IDV distribution partners. Two, our unique field model coupled with sophisticated underwriting and claims capability. And three, providing a superior customer experience. These three pillars have positioned Selective with sustainable competitive advantages that drive our outperformance relative to the industry. In 2012, we laid out a 3 year profit improvement plan to achieve a targeted 92% combined ratio excluding catastrophes. This goal was based on reaching an operating return on equity of 300 basis points over our weighted average cost of capital. In 2014, we achieved a 92.5% combined ratio, and into 2015, drove an additional 3 point improvement. We exceeded our ROE target in 2015 despite the headwinds from a decline in our after tax return on investments. The rate of commercialized renewal price increases is beginning to slow, which makes further underwriting improvements more challenging. However, in the fourth quarter of 2009 and for every quarter since, we have generated commercialized renewal pricing increases that have met or exceeded our expected claim inflation. For 2015, we produced an overall renewal pure price increase of 3.4% for the quarter. For the month of January 2016, we generated a solid 2.8% commercial lines renewal pure price increase. In addition, our underwriting and claims improvement reduced our combined ratio by 2.2 points. This is a relationship business, and we have the best relationships in the industry with our Ivy League agents.…

Thanks Greg and good morning. As Greg highlighted, the fourth quarter marked the conclusion of yet another remarkable year for Selective as we continue to fire on all cylinders. We ended the year at a record 89.4% statutory combined ratio excluding catastrophe losses, in line with our revised 89% guidance. Catastrophe losses added 3 points to the combined ratio for the year, which is below our expectations of 4 points. We reported a very strong operating income per diluted share of $2.70 for the year. Our statutory combined ratio in the fourth quarter was 93.2%, which was even with the same period last year. The underlying combined ratio excluding catastrophes and prior year casualty development was 94.9%. CAT losses for the quarter where 0.6 points, well below our fourth quarter expectations, but higher than last year as the fourth quarter of 2014 included an unexpected $8 million reinsurance recoverable, which resulted in a net benefit from catastrophe losses in the quarter. Non-CAT property losses were also lower compared to the fourth quarter of 2014, resulting in a 2 point favorable impact on the combined ratio. We reported operating income per diluted share in the quarter of $0.81, up from $0.72 a year ago. Favorable prior year casualty reserve development in the quarter was $12 million or 2.3 statutory combined ratio points compared to $9 million or 1.9 points a year ago. For the year, favorable prior year casualty reserve development was $67 million compared to $48.5 million in 2014. 2015 marks the 10th consecutive year of favorable development. The favorable development is largely attributed to a decrease in severity in both the general liability and workers compensation lines of business. Our overall reserve position remains a strong at 12 points above the midpoint of the range. For the quarter, overall…

Thanks Dale. Our insurance operations had another great quarter and closed out an exceptional year with record results. In 2015, we had an overall statutory combined ratio of 92.4%, an ex-catastrophe combined ratio of 89.4% and net premiums written growth of 10%. These results reflect our strong position in the marketplace and demonstrate our ability to drive profitable growth. Standard commercial lines growth was very strong this year at 11%, driven by new business growth of 26% to $340 million and solid renewal pure price increases. For the year, our commercial lines statutory combined ratio was 89.2%, an improvement of 6.3 points from 2014. With the use of our sophisticated underwriting tools and the expansion of our small business underwriting teams and AMSs, we were able to profitably grow our core business by leveraging technology in the relationships we have with our distribution partners. New business growth in standard commercial lines was strong in 2015. We deepened relationships with our existing distribution partners and expanded our investments, which helped drive strategic appointments of new distribution partners, while also enhancing their ability to generate quality new market accounts. Additionally, our small business teams also delivered on growing their business. On the commercial lines renewal portfolio, our success is attributed to disciplined underwriters who use the sophisticated tools and advanced analytics we provide to make the best possible business decisions. In the evolving pricing environment, our results clearly highlight the benefits from the technology and resources we have put in place for our underwriters. In 2015, standard commercial lines retention was strong at 83%, and renewal pure price was 3% on a written basis, in line with expected claim inflation. For our highest quality standard commercial lines accounts, which represent 53% of our premium, we achieved renewal pure rate of 1.9% and…

Thank you, John. At Selective, we strive to be the best. Our dedicated employees leverage our competitive advantages and are highly committed to reaching our goals, driven by true franchise value with Ivy League distribution partners, unique deal model coupled with sophisticated underwriting and claims capability, and delivering a superior customer experience. With that, I'll be happy to answer questions that you have. Operator?

Thank you. [Operator Instructions] Our first question is from Mark Dwelle with RBC Capital Markets. Sir, your line is open.

Yes, good morning. A few questions.

Good morning, Mark. How are you today?

Doing okay. The snow has melted down here.

All right.

The first question I have really relates to the E&S segment. As both Dale and John pointed out, the results have been a little bit disappointing. I guess, I take from your comments and your action plan that you view it as somewhat more of a claims management and handling problem than I'll call it an original underwriting problem, which is to say not writing business that you shouldn't be writing in the first place. Can you talk about that in a little bit more detail and kind of why you are confident that the claims approach is really going to be the winning strategy there?

Yes, thanks, Mark. It’s a great question. This is John. So a couple of points. I think the way you've laid it out, I would absolutely agree with. It’s not an underwriting issue that we are concerned about. We haven't gone into segments of business that our team doesn't know how to underwrite. What I would say is, and this reflects what you heard in the prepared comments. There are some pricing issues, specifically on the renewal inventory that we target. We know where they are, they are in a couple of geographies and a couple of segments and that is where the more aggressive action needs to take place. These are not necessarily segments we don't think we could produce solid margins in. But the pricing levels on those in our renewal inventory need to be more aggressively addressed. I'd also add to that we are also comfortable about our new business pricing levels based on our targeted rate levels are actually coming in very strong. So keep in mind that the retention on this book tends to be lower, and about 50% of our premium in any given year is new. So the fact that we're comfortable with the strength of our new business pricing we think bodes well on that side. Now to your point on the claims improvement, there is a big opportunity there. And as Dale mentioned in his prepared comments, we look to our experience on the workers comp side. We don't write comp in E&S. This is a GL, predominantly GL and a little bit of property in this book. But the experience of our team with our standard Selective operations over the last several years show that they can deliver these kind of results. So we migrated our E&S claims operation into our standard claims operation in the beginning of 2015. And they've instituted a number of changes relative to how we manage both litigated and non-litigated files, how we take advantage of our staff counsel that’s very effective in our standard footprint, how we manage our panel counsel outside of our footprint. We created an entire expansion of controls to make sure that supervisory structure is in place to drive better outcomes. And because this is GL, we actually feel that we can achieve better outcomes more quickly than we did in workers comp, because you can in fact influence the outcomes of the existing inventory of file. So we remain confident in the approach we laid out. We still view this as a business segment that we can be successful in. We believe we've got a plan to get us there.

Mark, if I could, this is Greg. The other part, to reemphasize, you've got to remember this is E&S light. This is low hazard, low limit. So normally when you guys start to see the edges of E&S issues, they have a tendency to have a lot underneath it. This is not high-hazard E&S book. This is what we do every day. Its construction. It is a lot of habitational. So there is not - nothing really unusual in this book per se. So I think it is pretty much as John laid out. It's some renewal pricing that we need to get more aggressive on, and it’s for the most part claim activities, which I can only say to you, you saw what we did in comp. And I would say that you'll see the same type of actions that we had in comp manifest themselves throughout the E&S book.

One more point I would add, Mark, is much like we have on our standard commercial lines and personal lines side, which we highlighted over the years as a competitive advantage as our relationship with a smaller group of distribution partners, we have the same approach on the E&S side. So we distributed that product through a group of about 90 wholesale relationships. Those are very strong partnerships. And that’s an indication to us that they will continue to work closely with us to address these targeted areas.

Okay thank you. That's very thorough and helpful. Hopefully it will have the same results that the workers comp did. It is certainly a big area of leverage. That brings me to my second question, specific to the guidance. I guess I assume that as per your custom, the 91% statutory guidance for combined ratio is excluding any possibility of favorable reserve development?

Yes.

That is correct. We sign off on the quality of our balance sheet at the end of any given year, so our assumption is for no reserve development either positive or negative.

Understood. The question I guess that I would pose, then, it seems like you're, I'll say it this way. I guess, it seems like it’s not a terribly aggressive target considering the opportunities that you have on the E&S side and the run rates that you are already achieving on the commercial book? Is there something, and likewise, I guess the rate increases that you are getting across the book, which seem to track at or above loss trend. I guess the question I have is why wouldn't '16 be a bit more comparable to '15's actual realized results?

So let me walk you through that, but when you look at - let's talk about the 2015 year. And I know you’ve seen a lot of our competitors talk about 2016 relative to 2015 on the - or they refer to as the underlying combined ratio. So when you look at our underlying combined ratio, it's a 92.8%, and you get there by simply taking the reported combined ratio of 92.4%, adding 3.4 points of development and subtracting CAT losses of 3 points. So when you look at what we call underlying, which is what many of our competitors call underlying, its a 92.8%, and we are taking that down by 180 basis points to get to a 91%. So I think there is way more improvement in our guidance than I am hearing more from our competitors. So there is a lot of improvement in there. Its just I think you are stacking up a forecasted 2016 against the calendar year combined ratio that has been lowered by almost 350 basis points of favorable development. So therein lies a little bit of it, and I will tell you that that reflects earned rate in excess of trend, and it also reflects underwriting and claim improvement, and all of those things are in there. So again, I just want to make sure when you are comparing our numbers to other street numbers, there is 180 basis points of improvement in there.

Okay. That's helpful. Thank you. The last question that I have is really related to the winter storms of I guess a couple weeks ago now. Are you seeing any kind of - you are definitely write heavily in the most impacted areas? Are you seeing any notable up-ticks in claims volume or claims activity or - I know you aren't going to guide this early on it, but some thoughts there would be helpful?

I mean, the obviously it hit in our footprint, so clearly we will have losses. But also as you indicate, we have not pre-released any information with regards to that. So that’s really about all that we can say. Its a normal thing to have happen is winter storms in the winter in our footprint. So it is our expectation, and we price for that within how we sell our product.

Maybe let me ask it a different way. Compared to some of the more significant loss events last year, is the claims activity running at or below what we saw in some of the larger losses last year?

Mark, that would be providing guidance that we haven't done publicly to this point. So I don't like orange jumpsuits.

All right. Then I'll leave it there. Thank you.

Thank you, speakers. [Operator Instructions]

Operator, are you still there?

Yes. At this time, sir we don't have any other questions queued up.

All right. Well thank you for participating on the call this morning. If you have any follow-up items, please contact Dale and or Jennifer. So thank you very much for participating today.

Thank you. That concludes today's conference and thank you all for joining. You may now disconnect.