Good day, everyone. Welcome to Selective Insurance Group’s Second Quarter 2017 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, Rohan Pai. Sir you may begin.

Good morning and welcome to Selective Insurance Group’s second quarter 2017 conference call. My name is Rohan Pai, Senior Vice President, Investor Relations and Treasurer. This call is being simulcast on our website and the replay will be available through August 28, 2017. 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, www.selective.com. Certain GAAP financial measures will be stated during the prepared remarks that are also included in our previously filed Annual Report on Form 10-K and quarterly Form 10-Q reports. To analyze trends in our operations, we use operating income, which is a non-GAAP measure. Operating income is net income excluding the after-tax impact of both net realized investment gains or losses. 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 Form 10-Qs 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 statement. Joining today on the call are the following members of Selective’s executive management team. Greg Murphy, Chief Executive Officer; John Marchioni, President and Chief Operating Officer; and Mark Wilcox, Chief Financial Officer. Now, I'll turn the call over to Greg.

Thank you, Rohan and good morning. I'll begin with introductory comments and remarks and focus on some high level themes for the second quarter, Mark will then discuss our financial results, and John will review our insurance operations in more detail and provide additional color on key underwriting initiatives. Selective's second quarter results remain solid, in spite of higher level of catastrophe losses. During the first half of the year, we continue to execute on our strategy of maintaining underwriting discipline while balancing our objectives around retention and topline growth. Our six month consolidated statutory combined ratio was an excellent 91.41 or about 900 basis points better than what A.M. Best expects the industry to report for 2017. 89.7. On an underlying basis, which adjust for catastrophe losses of reserve development, our year-to-date combined ratio was 90.2. Our Standard Commercial Lines segment continue to produce excellent overall results and we're pleased with our ongoing efforts to improve probability in both our E&S and Personal Lines segments. Our annualized operating return on equity was 9.9 for the second quarter and 11.5 for the first half of the year. Our year-to-date results are in line with a long-term goal of achieving returns that are 300 basis points above our weighted average cost of capital. Selective's financial results reflect our continued commitment to seeking adequate pricing for the risk we are assuming. We continue to invest in our field on based underlying model that empowers local decision-making authority, building sophisticated underwriting tools and capabilities, as well as enhancing customer experience with an omnichannel focus. These initiatives underline our high-tech, high-touch operating model and drive our strategic competitive advantages. We obtain targeted renewable pure price increases in our Standard Commercial Lines business averaging 3.1 for both the second quarter and six months of the…

Thank you, Greg and good morning. I'll discuss our financial results beginning with some key metrics and trends for the company as a whole and then will also touch on our segments. But before I begin, I'd like to highlight that we have enhanced our financial disclosures with the rollout of a new more detailed financial supplement this quarter. We strive to maintain a high level of financial disclosure and transparency and hopefully, this new supplement helps you better understand the model Selective's financial result. This is a presentation-change only and there were no changes to our historical numbers on that track. For the quarter, we reported $0.70 of fully diluted earnings per share and $0.68 of operating earnings per share. We generated an annualized return on equity of 10.2% and an operating ROE of 9.9%. Through the first six months, we've generated operating income of $91.4 million, which is up 13% from 2016. Overall, our annualized operating ROE of 11.5% for the first half of the year is in line with our long-term financial target and improved from the year-ago period. For the second quarter, GAAP underwriting income totaled $20 million after-tax and accounted for 4.9 points on operating ROE. The investment portfolio generated after-tax net investment income of $30 million. The strong investment performance coupled with our ratio of invested asset to equity is 3.3 times resulted in 7.5 percentage points of annualized investment income contribution to the operating ROW. Consolidated net premiums written were up 6% for both the second quarter and year-to-date period. The combined ratio was 94.7% in the second quarter on a GAAP basis and 93.1% on a statutory basis. On an underlying basis, or proactive asset losses and reserve development, our stat combined ratio was 90.4% for the quarter and 90.2% year-to-date, both…

Thanks, Mark and good morning. We continue to move forward with various initiatives to drive our strategy to position the company for sustaining our performance. We remained focused on generating disciplined and profitable topline growth. The three drivers of our growth will be new agent appointments in our current markets, increase share of wallet with our existing agents and geographic extension into new state. Our longer term commercialized targets of building agent relationships representing 25% percent of their markets and seeking a 12% share of wallet within each agency together translate to a goal of 3% market share in Commercial Lines for an additional premium opportunity in excess of $2 billion. We've appointed 45 new agents during 2017 in our current footprint as we continue to drive our market share higher. In addition we continue to execute our geographic expansion plans. Selective has appointed 16 agencies in Arizona and nine in New Hampshire. These agencies control about 25% of the available commercialized premium in their respective states. We begin quoting Arizona and New Hampshire business opportunities actively through the second quarter leading up to our July 1st opening of these two new states and we are pleased with the early performance in both markets. We deployed our new underwriting tool Underwriting Insights to our new business underwriters. This tool incorporates our predictive modeling capabilities and provides our new business underwriters with real-time insights into how each prospective account compares to similar accounts already in the portfolio. This is in keeping with our goal of constantly improving the deployment and utilization of our sophisticated pricing tools. We complement our underwriting tools and technology with strong agency relationships that are built around our field base underwriting model and our regional small business teams. On the customer experience front, we continue to make…

Thank you. [Operator Instructions] Our first question is from Arash Soleimani from KBW. Your line is open.

Thanks. Good morning.

Yes, good morning to you.

So, few questions. So, I saw you took the guidance down by a point; I just want to make sure I'm interpreting the core combined ratio portion of it properly. So, I know you had -- I think if I annualized it, it's about 1.3 point of favorable, so that would imply that core combined is going from 90.5% to 90.8% is the point that it really is still at 90.5%. It's just a matter of kind of using round numbers or should we think of it as--?

I think you should view it as round numbers. Take 2.5 points of favorable development through six months divided by two, you get 1.25. We're splitting quarters of a point right now. So, yes. Yes.

Okay. And then within the current quarter, I think on a GAAP basis, if I back out an 80 basis point uptick of non-cat weather, the core loss ratio went up about 40 basis points. And I just wanted to see is that something that's kind of secluded or isolated to the Auto lines of business or just wanted to get a better sense of what drove that?

Arash, its Mark here. Good question. So, I think what you're referring to is on a GAAP basis on a comparative backing out catalog, backing out favorable development and non-cat property losses. The underlying loss ratio is up about 30, 40 basis points on a comparative quarter. And what you're seeing there is really two things. One is with the rate increases in auto, auto as a percentage of the premium is a slightly big line within the overall loan premium mix and that's booked to a higher loss ratio than the rest of the book. And we outlook in the 2017 loss ratio in Commercial Auto a little bit higher than we were a year ago. So, that is the driver of that uptick and underlying loss ratio.

Thanks. And I know you provided the renewal pricing numbers. I just wanted to know how does how does new pricing compare to renewal pricing.

So, -- this is John. So, we don't disclose the new business pricing number because it's not nearly as accurate as the renewal pricing number because you don't have the same basket of policies to compare. You're writing a very different mix of business from one year to the next, so it's very difficult to compare. When we refer to our sophisticated underwriting pricing tools, our underwriters and regional management teams do have a lot of information on an account-by-account basis in terms of how they're pricing a piece of new business relative to how that same class and quality of account is prized in the renewal portfolio and how that renewal portfolio as its price is producing from the margin perspective. So, transnationally, our folks understand what's happening from a new business pricing perspective. But you can't rule that up in a way that we would be comfortable disclosing a new business pricing number. But we've said over and over again, we very much manage that, we see how that performance is coming in relative to expected loss ratios on new business and we're comfortable with the quality and the pricing.

So, this is Greg again. Take it even from John's little [Indiscernible], we're looking at by class of power unit, what the renewal rate per unit is, what the new rate per unit is? And so we're looking at that by geography, by -- and those are the things that we're kind of anchoring to which is -- which new business and new business pricing is a little bit more difficult to get your arms around, but I have to you that we're doing everything that we can to better understand the price level that we write into a piece of business.

Thank you. That makes sense. My other question on your wallet share and market share initiatives, I think you know $2.8 billion is the opportunity that you've mentioned before. What about -- and that excludes the new states, correct?

That does. That's a number that we put out there based on the 25 and 12 share of wallet in our existing things.

Okay. And how would you define I guess you have a similar number or provide for the new states or how we should think about that?

I would think about it in the same terms. So, as we mentioned in the prepared comments in both our new states, Arizona and New Hampshire, we actually started out with a set of agency partnerships that about right 25% of the market. And again, these numbers are never precise to the decimal point, so you want to think of them as directional targets. But we would expect over several years to be marching towards a 12% share of wallet in those same states. I think -- way you really want to focus on in terms of creating opportunity that was getting something that 3% market share. Look state-by-state at the available premium in each of our footprint states and then looking at 3% share. For us, the 25 and 12 are the managing levers that we push in order to drive to that overall market share. That's really where the opportunity number is coming from and we said in the prepared comments in excess of $2 billion of opportunity, because again, those numbers lag a little bit in terms of getting reported premiums, but we continue to focus on those two management levers that I mentioned.

Thanks. And obviously on the wallet share piece to increase that, you need to take the business I guess from someone else. So, I guess can you maybe just talk a bit about how you are able to take that business from others and is this mostly from small regional carriers, do you think you're winning the business from -- or where do you think that opportunity is coming from?

So, you mean how we're weighing it other than better products, better underwriting, better people, better claim service? That's our value proposition and it has been for a long time. And our agents and the approach we've had and the partnerships we've had, we generally have a group of approximately 1,200 agents that want to grow their business with us because they know the product is better, they know we're going to have a very consistent underwriting pricing philosophy, and they know that from a claim service and other servicing perspective, we're going to outperform everybody else that they have lineup of company. So, there's no question. If you look at our share wallet growth expectations, there is a fair amount of that that will come from other companies, controlled accounts that they are going to move us or give us an opportunity to quote on renewal. But at the same time, we also are working with our agency partners to ensure that they are growing new, new opportunities, new to the agency which is also going to give us an ability by writing a higher percentage of their new business to the agency and other carriers are writing is also how we expect to grow share of wallet over time.

And then this is Greg. So, the two things I would kind of add to that, John touched on it in his opening comments. One is the omnichannel customer experience 24/7. That is something that we've talking to our agents for now multiple years and driving them into that kind of environment. I don't know how many of your -- how far other competitors talk to you about what they are doing on their agency plan? But for us to be able to execute that strategy with a franchise value is a heck of a lot easier than doing it with an agency plan that has thousands and thousands of agents. Actually, that's the point that you always want to stay focus on and I think then relative to the -- we're clean in terms of a lot of the things that we do with our agents, in terms of our line of sight, our supplemental commission programs, and then the fact that there isn’t really channel conflict with Selective that you may start to see evidence of it and maybe more evidence of as we march into the future. So, again, we're trying to position our agents to be best-in-class for small business, for medium business, and for large business. And I think that's the way you need to think of us. And our share of wallet at 12, let's say that as we continue to expand our state capability and other things that we would expect that that share will increase over time. It's not going to go up usually, but as we can continue to handle accounts in multi-state areas, our share of wallet should go higher. So, that 12 share of wallet is based on our underwriting appetite [ph] today and I think of states that we got in the inventory.

Thanks. And one other thing I wanted to ask. You mentioned that you've been shifting to the lower hazard. Is this on the E&S side which should help on the margin? I just wanted to ask why does that help on the margins because I would assume that the lower hazard business has lower premiums. So, what is it about that that that drives it? Because I've also heard some other carriers mentioned in certain lines that if they go for higher hazard business and they manage the severity there they can potentially even get a bit more margin because the rates there are higher. So, can you just talk?

I'm sorry, just clarify, you broke up when you were saying what segment you're talking about. You're talking about order or E&S, I'm not sure?

I'm sorry. I'm talking about E&S.

Okay. So, yes -- from an E&S perspective, we haven't really shifted our hazard mix. We've always been pretty low -- let's call it low hazard within the E&S space, low limits profile, generally a $1 million limits and lower, our average premium size about $3,000. And it's generally contractors, restaurants, bars, and taverns, small habitation. So, the risk profile for us has not really changed in terms of hazard mix that we talk about.

Okay, that makes sense. Thank you.

Thank you. Our next question is from Scott Heleniak from RBC Capital Markets. Your line is open.

Hi, good morning.

Good morning Scott.

I was wondering if you could just follow-up on the comment. John you made the comment about intense competition and certainly we've heard others kind of talk about that along those the lines. So, does it -- can I take that to mean has that really ticked up a whole lot in the last couple quarters? And are you seeing some more aggressive behavior than maybe you were a year ago?

I would say that's -- that isn't that what we're seeing. And, again, it's going to vary geographically, it's going to vary a little bit depending on the class and the line of business we're talking about. But I would say sequentially over the last several quarters you have seen competition for new business intensify. Now, interestingly, we've been able to do an excellent job of managing the renewal inventory with continuing solid retentions and still achieve -- and actually slightly outperform expectations with regard to pricing. But new business, hit ratios are under pressure and we've seen that really get dialed up. I think the one line in particular that maybe worthy of note would be workers' comp, which is surprisingly amongst the most competitive. And I say surprisingly because we've certainly seen significant performance improvement over the last few years as has the rest of the industry, but overall margins on an accident year basis are right around target for us and for the rest of the industry, but you are seeing a much heavier discounting of that line, you're seeing much more focus on increasing commission levels, especially in low and medium hazard smaller comp segment. So, I would say that would be one area in particular, we're seeing competition dialed up the most.

And interesting too Scott, when you see some problems at certain carriers in the marketplace, they have a tendency to go counter and get more aggressive on pricing for new business to try to keep the engine going. So, it's a little bit of a mix growth, but we want to make sure that our underwriters end of deal are maintaining discipline and we're closely kind of monitoring their overall performance.

Yes, I guess some people are chasing the performance there in the worker's comp which is in a very good line over the past few years for most people.

It is your highest inflation line that you write in the business.

Absolutely. Speaking of that, have you seen any real kind of loss cost inflation uptick at all in any lines, obviously didn't sound in workers' comp, but anywhere else or any uptick in legal cost or anything?

I would say to you that overall it's been very tame [ph] but the line that has seen loss cost inflation the most is Commercial Auto and that's why we're not generating as much improvement in that line as we would normally expect. I mean remember so our six month rate increase year-to-date in the liability aspect of the policy is 7.5%, on the physical damage side, its 4.7, so when you add the two together, they are at 6.7% rate level. That is enormous amount of rate in line, for that rate is being mostly offset by higher trend. And so I would say that that is the line that we’ve seen a little bit more pressure relative to what's happened on the trend and trends been mostly on the frequency side although some severity, but it's mostly been frequency-focused relative to what's happened there. And then maybe a little in Personal Auto, you can attribute that to distracted driving and where you see some states start to adopt EUI now right, driving -- electronics under influence and other aspects of that and that in my mind is a positive because you just see it all over the place. So, whether it's gas prices, whether it's poor road conditions, whether it's just traffic congestion, but miles driven are up and we're seeing a little bit higher frequency, but as you guys know, auto is a smaller part of our overall -- in terms of what we said we were going to do relative to profit improvements. I don't want anybody to be off at that we said we were going to lay into that over time. As John mentioned, we're going to push a little bit higher on rates at 6 and 6th level and that's because we're seeing market conditions change fairly quickly in that segment -- in that line I should say.

Is that 6% -- I mean that's obviously an average, but is there areas where it's significantly higher than the 6% that you feel like it's kind of -- we've definitely seeing companies with upper single-digit rate increases there. I don't know if there's any states where they are kind of stuck out as well?

So, just clarify one point, the 6% we quoted in our prepared comments refers to the full annualized impact of the rate filings we're making in the calendar year. So, those are staggered over the course of the years and will earn their way in 2018. You do see some variation from state-to-state around that 6% based on our own individually developed rate level indications, but overall, I think the trends that Greg just took you through are fairly universal and it's a matter of what your profitability is in your book as a starting point, but they are all moving directionally at about the same pace.

Okay. And just a few more on Personal Lines, you saw a bit of growth again which you did also in the first quarter. Some of that is obviously rate, but are you guys feeling a lot better about this business where you feel like you can get some sustainable growth? That's the first. And then second on that is how many of the new agencies you're appointing excluding the new states underwriting Personal Lines, just not exact number, but just generally how is that trending?

Yes, great questions. Let me take the first one. You ask relative to sustainability of growth. So, you've not seen another quarter of growth in that 3% to 4% kind of range driven predominantly by growth in the Personal Auto Line. Homeowners' growth has been relatively flat over the last few quarters and we see that being an opportunity for us to continue to drive our growth going forward as we start to pick up increased new business opportunities on a package basis with our home line driving profitability. We like the -- kind of the run rate we're on right now and that 3% to 4% kind of on a range and feel good based on where the pricing environment is market wise and we're already know it was -- feel very good about our positioning in those markets. With regard to new agency appointments, our general philosophy in the states in which we have both Personal Lines and Commercial, which is 13 Personal Line state of our now 24 Commercial Line states. Our general philosophy is to appoint agents that write both Personal and Commercial. We don't go out there and make a lot of Commercial Lines-only appointments. What I will say is based on market opportunity; we're, in fact, starting to make more Personal Lines predominant appointments. In other words, there are gaps in our agency plan from a Personal Lines production perspective because we've got very strong Commercial Lines predominant agents that are in place. We are making more Personal Lines predominant, but there are also multi line appointments and now will continue to be our general philosophy being that we're going to be a better partner to agency if we give them a better product on both Commercial and Personal Lines. I'm not sure I addressed the entire question there.

Yes. No, that's perfect. That's a good answer. Thanks for the new supplement format here. There's definitely some good details in there. So, that's all I had. Thanks.

Thanks Scott. Mark did a great job on that. So, thank you for that comment. Operator, Bob, next question.

Thank you. [Operator Instructions] Our next question is from Alison Jacobowitz from Bank of America. Your line is open.

Thanks. Most of questions have been answered. I'm just wondering can you do me a favor [Indiscernible] for I understood it right. Could you just repeat again the prior period catastrophe effect in the quarter, what it was in total?

Yes. Sure, Alison, this is Mark here. I'll walk you through those numbers. So, in the t he quarter you told we had $29 million of total catastrophe losses which is 5.2 point from the combined ratio of Q2 2017. Of that $17 million related to events that took place in the second quarter, which represented 3.1 point, $12 million relates to development on events that took place in prior period, of which $9 million related to Q1. There were three events that happened late in the first quarter that resulted in $9 million of the current accident year development. And then there was -- there's also a little bit of development from some lines reported losses in 2016 and that was about $3 million. So, net-net of the 5.2 point cat losses in the quarter, 3.1 in the quarter from current quarter event and 2.1 from prior period to that.

Thank you very much.

Bob, are there any more questions on the line.

At this time, we have no further questions.

Well, thank you very much for participating. Remember that our Investor Day in November. Rohan is looking for you to be there. Some very good things he's got planned for that meeting. So, thank you very much. And if you have any follow-up items, please contact the Investor Relations team and Mark. So, thank you very much for participating in the call today.

That concludes today's conference. Thank you for participating. You may now disconnect