Good day, everyone. Welcome to Selective Insurance Group’s Third 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.

Good morning and welcome to Selective Insurance Group’s earnings 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 November 26, 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 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 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. First I'll make some introductory comments and then focus on some high level themes for the quarter. Mark will then focus on our financial results, and John will review our insurance operations in more detail, providing additional color on key underwriting initiatives. The big story in the quarter was the industry's record level of insured catastrophe losses. With some estimates for the three hurricanes, Harvey, Irma, and Marie exceeding $100 billion. Selective's third quarter results remained solid despite the higher catastrophe losses, benefiting from our discipline underwriting, product risk appetite, and geographic concentration. We continue to execute on our strategy of maintaining underwriting discipline while finding opportunities to drive topline growth. Our statutory consolidated combined ratio for the first nine months of the year was an excellent 92.2, an impressive result in the context of a projected underwriting loss for the industry in 2017. Following the third quarter catastrophe losses, on underlying basis or after adjusting for catastrophe losses and reserve development, our year-to-date combined ratio was an extremely strong 90.7. The standard commercial lines and personal lines segments produced excellent overall results. The E&S generated a loss for the third quarter and we remained focused on addressing loss development and improving underlying profitability. Our annualize operating return on equity was 11% for the first nine months of the year in line with our long-term goal of achieving 300 basis points above our weighted average cost of capital. On a rolling one-year basis, our weighted average cost of capital is approximately 8.5%. The combined ratio for the first nine months demonstrates our strong commitment to maintaining underwriting discipline in a market that is very competitive. Our ability to effectively balance the objectives around profitability and growth reflect; one, strong franchise model with Ivy League…

Thank you, Greg. 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. For the quarter, we reported $0.79 of fully diluted earnings per share and $0.72 cents of operating earnings per share which is up 16% from 2016 and we generated an annualized operating ROE of 10.1%. Through the first nine months of 2017, we've generated operating income of 133.7 million, which is up 14% from 2016 and an operating ROE of 11%. This is an excellent result thus far, here characterized by significant catastrophe loss activity continue to lower interest rates and a competitive pricing environment. For the third quarter GAAP underwriting income totaled $21 million after-tax and generated 5 points of operating ROE. In addition the investment portfolio generated after-tax that investment income of 30 million which coupled with our ratio of invested assets through equity at 3.4 times generated 7.1 percentage points of operating ROE. Consolidated net premiums written were up 4% for the third quarter and were up 5% for the year-to-date period. The consolidated combined ratio was 94.3% in the third quarter on a GAAP basis and 93.7% on a statutory basis. On an underlying basis, prior to catastrophe losses and prior year reserve development, our statutory combined ratio was 91.3% for the quarter and 90.7% year-to-date. During the third quarter we increased our launch total for the commercial order line of business for the 2017 accident year. Which increased our third quarter underlying combined ratio by 1.1 percentage points and our year-to-date combined ratio by about 40 basis points resulting in some modest deterioration in our underlying statutory combined ratio from last quarter. That said our underlying combined ratio is still well ahead from 2016 for the…

Thanks, Mark and good morning. Our focus remains on finding opportunities for profitable top line growth by leveraging our franchise agency relationships, unique build underwriting remodels to sophisticated underwriting tools which allow us to segment and price risks on a granular basis. We've often talked about our long-term growth strategy within our footprint stage for commercial lines. We see to appoint new agents in our current markets to represent 25% of available commercialized premium and growing to 12% share wallet with our appointed agents. Together, this target represents an approximately 3% commercial lines market share and an additional premium opportunity of more than $2.5 billion in our 24 state footprint. So far this year, we've appointed 73 new agents in our footprint excluding of our new states of Arizona and New Hampshire that will continue to drive our market share higher. Effective July 1st, we open two new states on our geographic expansion program with the launches of our product in Arizona and New Hampshire. We opened Arizona with 16 agencies of points and New Hampshire with 10. In each case, these agencies control about 25% of the available commercial lines premium. We're pleased with the receptivity and performance of these two new markets and expect to write approximately $9 million of net premium by end of the year. Our regional office in Arizona will serve as the underwriting hub for our Southwest expansion which also includes Colorado in early 2018 and New Mexico and Utah by the end of next year. We continue to invest in tools and technologies that strengthen our underwriting capabilities and allow us to obtain the right price for a given risk. Our new Underwriting Insights tool which we deployed to our new business underwriter's earlier this year provides real-time insights into how each prospective…

Thank you. [Operator Instructions] Our first question is from Arash Soleimani with KBW. Please go ahead with your question.

Thanks. I just got the question on the E&S development. Can you just provide a bit more detail around what exactly drove that I know you said it was severity and accidents year 2015 and prior, but it was a pretty large amount just want to get more color in terms of what that amount of consisted of?

Arash, thank you for the question. This is John starting and certainly Greg or Mark could jump in as well. There's not a lot more to tell you other than what you just read back from our prepared comments which it was in fact 2015 actually year prior and it was very driven and I think from our perspective, frequencies have held pretty steady with what our expectation would have been for that accident year. And the severity is what's driving the movement in the quarter. But I will also reiterate, we've said this in the past relative to our reserve a philosophy overall, which is we do have and knowingly have a tendency to react more quickly to what may be negative news in the in the reserve portfolio and that philosophy continues to acquire E&S as well. But beyond that let me just make a couple of other comments relative to how we think about this business and how we think about our profitability in the current year and how we think about it going forward. A couple of points just to reinforce what we’ve talked about in the past and again time is back to the fact is the development came from 2015 and prior. Starting in January 2016 is the point at which we made all the changes in our claims handling process to merge this operation under the management of our overall claims organization. And that's an important point because at that point in January 2016 to the current accident year is when our claims organization has had their hands on file since day one as opposed to 2015 and prior which were transition files and not that you can improve the outcomes from both the loss and an expense perspective on transfer file, but…

I don't really have anything to add to that, other than the fact that what John touched on it and it's really about this is part of that transition. The transition is like the fact that we want to make sure we address the reserve position for the prior years, nothing's ever final, but we wanted to make sure that as we move into the fourth quarter and into next year, we really felt solid about the positioning of the overall book above average. Hope we got from John's comments, we do feel positive about the overall book of business.

Thanks. That's very helpful. And I kind of just extend the question a little bit when I look at the 3Q 2017 quarter, loss ratio for E&S, so backing out the reserves and the cap and also adjusting for I think you guys had 840 basis points decline in non-cap property losses in E&S. So when I backed that out of 3Q 2016 it implies a still look at about 230 basis points of core loss to ratio improvement in E&S segment. So my question there is that improvement just the function of what you said in terms of January 2016 and forward the changes you've made. I guess what I'm trying to ask is you're not seeing any signs that would imply that loss ticks should be higher in the E&S going forward it seems like this was really just all the legacy stuff that doesn't really have any bearing on trends you're seeing on business you're writing today, does that make sense?

So clearly what you're seeing you pointed out to us big part of that is improving relative to non-cap property, but the other point that's driving kind of refers back Greg overall comments in the beginning which is when you think about performance you need to think about on level relative to loss trend and we have been earning rate in this book of business and that will have a positive impact year-over-year on the underlying loss ratios.

Another focus when you start to look at underlying performance I would have to turn this focus more on the year-to-date number. I mean you're going to get lumpiness quarter-to-quarter relative to property activity both favorably, unfavorably and I don't view that necessarily as an indication of either a positive move or negative move. So again, when you look at this book the underlying combined ratio is about 91 in the overall book and I will tell you that's what I would have a little bit more focus on going forward rather than just the core.

Okay. I guess to ask you differently the stuff that caused you to record the adverse development that doesn't imply any trends that would make you think that initial loss ticks should be higher than you may thought if your money

We would have adjusted you would have seen changes in the 2016, 2017 year. This was as John mentioned 2015 and prior.

Yeah. Just to add to that Arash, it will be good for your math, you're right in and back out if you look at an accident year versus excluding cap and non-cap property in the quarter the sort of the underlying so to speak loss ratio is about 230 basis points better than the year ago period and about 170 basis points on a year-to-date basis and that is John mentioned and Greg as well really reflect the earn rate coming through the book of business. It doesn't and which would reflect in improved profitability on the underlying book of business. The reality is the combined ratio in the quarter with 120 which is not something that we're happy with, but from an underlying trend perspective the earn rate is coming three to four and that combined with the focus on the underwriting mix improvement and the claims handling outcomes should help to drive our profitability during the course -- in the future period. And unlike commercial order where we increase the current accident year, the development provided E&S was 2015 and prior didn’t impact 2016 or 2017.

And then the only point I will add Arash, this is John. We've talked about this in the past. Mark made our reference mix improvement just remember this is a business where it is you can drive mix improvement quickly because the typical retention in this segment is in the mid to high 50% range, so you have the opportunity to turn over your yield it’s very more quickly and that helps drive mix improvement. When you target certain classes of business either for hiding rate or in certain cases back in non-renewal.

Thanks that make sense. And what's a fair target combined ratio that you say to think about for this book? I don't know if you've put one out there but you know just….?

What we generally said as we look at this segment running a few points better than our overall commercial lines but that you know we pay a little bit of time to get there. We also told you that this is a business that we're going to manage more by ROE. And as John indicated in his comments the topline flex with market conditions. So you know favorable market conditions you see this unit grow more rapidly in a highly competitive market. You'll see a trend.

And in terms of the competitive conditions I know you also mentioned in the earnings release. But you know it is highly competitive right now. So does that imply the next few quarters that you know if that kind of trend persists in terms of the competition the book should continue to shrink near term?

I would say that looking at it we don't want to point out. I would say there is obviously sub-segments that we're reviewing today. But generally, I would say this market condition is pretty, pretty aggressive right now, pretty competitive when I say aggressive, pretty competitive right now.

And the primary pressure point for us on the topline in E&S has been new business. Year-over-year has been down significantly. And I it should be more to our unwillingness to flex on our pricing stance whereas the renewal of Victoria's as healthy -- steady in with some additional rate going it…

Thanks. And the comment you made about the book should run a few points better than the commercial book. What's the kind of rough timeline for that? Is that something that you expect?

I would say that you got to give us a little bit of time for our claim changes to manifest the sales and our picks -- you know these things that we're changing that fundamentally we think reduce pure premium costs going forward have time to really bring themselves. And so I think from an expense scale standpoint, we're pretty much there today where we bought the book needed to run. And I would say it's a combination of continuing to drive very well. He had a couple of segmentations in there that we want to make sure that we feel we can have our long-term targets. And then the overall part that will be just in terms of ongoing new business and the new business growth rates.

Okay. Thanks. That's helpful. And I just want to touch on the guidance real quick. I know on the combined ratio guidance to you know you kept that intact and last quarter on the call you know you talked about how you took it from you know a 90.5 to 89.5 to give credit for the one point a favorable development. And then if you back out you know point of favorable you've got to a 90.5 core. So should we still think of the core as a 90.5 or you know is there any update to that based on the development the favorable development you had in 3Q. So I just want to make sure I'm interpreting that guidance?

We haven't changed anything. Just remember what you will get always moving from nine months to 12 months there's always a spike of about 50 basis points and our expense ratio as a result of the how premium volume comes in the fourth quarter to our latest premium volume quarter probably represents a little under 23% of the premium that we would normally you know. So if we look at the quarter at 25% the premium volume in the fourth quarter is lower. We always get a little bit of a of an increase of about 50 basis points from nine months to 12 months in the statutory expense ratio. I think going forward and I know Mark and Bob to see us do this is just convert all of our guidance to GAAP and that's something that I know we will be looking at. But since the guidance was out in the form of the statutory we've left it that way for the year and that would avoid some of the confusion around the combined ratio movements.

Okay. I was going to ask the same thing. I was going to say going forward it would be actually very helpful, yes.

It wasn't here or you're just you're just totally up to that.

Thank you. Thank you very much for all the answers. Thank you.

Thank you.

Thank you. Our next question is from Mike Doyle with RBC Capital Markets. Please go ahead with your question.

Yeah. It's a last round of questions pretty much exhausted most of what I had.

Okay. Holloway -- Mike, why are you by the way?

Doing fine.

I love your pieces by the way I read them religiously.

Thank you very much. Thank you for that. So I guess since you covered a lot of ground in the last -- the last set of questions. I guess the one item that I feel like still remains out there is you commented correctly that you know a lot of the action that impacts the 18 numbers is kind of already been taken from you know a written standpoint. But how are you approaching you know the opportunity to try to seek you know broader rate improvements as selective positions such that there is more rate to get. Or is you kind of kept up a good rate increase clip right along the way. Maybe you don't have as much upside to grab as some of your less diligent competitors.

Yeah. Mike, this is John. I'll take a stab at that. I was -- as well. You know I would say that factors starting in 2009 not that we ignore the marketplace that we are operating but we've really focused on our target combined ratios and the pricing of the hour and the story in a very granular way and tried to manage in that way. And if you look at our performance we constantly highlight our performance relative to the clubs commercialized pricing survey has been very strong. And we kept retentions high throughout this period of time. Our philosophy is not going to change. We're going to continue to manage the business that way. We're going to continue to manage it to our target ratios and more aggressively manage that 10 or so percent of our renewal inventory that we think is really driving overall performance in a negative way. And at the same time make sure we're creating the oxygen in our pricing strategy to protect that 50% of the business every year that actually exceeds our margin targets. So that will be a philosophy. That said you know we highlighted a couple of things in the course of the prepared comments. Number one would be workers' company pricing continues to be very pressured and it's also a very competitive segment for new business. That's a little bit harder to control company-by-company because in many places you're dependent upon loss cost filings from either NCCI individual state bureaus. And it's harder to overcome what may be a decline in a loss costs filing. And you're seeing a lot of those come through. So I think that's going to be a negative for the entire market going forward. Pricing on the other hand we're seeing our property around where you've seen a lot more discussion following the catastrophe activity has been a line in you know more price for the industry. And what you may have seen in the third quarter as a wakeup call for that particular line to start to open more. And then finally on auto as we expressed in the prepared comments as well when we look at trends in that line, we're getting about 6.5, a little over 6.5 points of rate on that line. But we expect that those trends will support the need for market pricing to continue for the commercial auto line of business. So you know we put altogether our philosophy and our approach to managing pricing will continue to be the same.

Hey, Mike here Greg. I would say that there is no company you're going to seek with such tight vertical lens into pricing. And let me just -- on the ground level how really happens as we have our inside folks that work with our agency 60 to 90 days out. They got the inventory as John articulated. They got it by cohort. Their ability to dial up or dial down pricing is very agile and that agility comes through every single bump. We can see that we can see it by region, we can see it by agency, we can see it by inside underwriter. And I would just answer your question as what I hear is a lot more tailwind and headwind right out. And let's be realistic. I mean the ROE at zero this year for the industry that's nothing for anybody to be proud of and irrespective of the hurricane that was going to be much better than 500 or 600 basis points without this large activity which has nothing to be proud of either. So you know thinking about costs and capitals in the 850 range and other things, I mean the industry needs to get a certain amount of discipline. I think this whole tale then scared a lot of people as the mega event that could have come off the sign of Florida could have been extremely as dropping. This has people thinking of reinsurance programs where they protect themselves. I think people are thinking about counterparty differently retro programs differently but these are all things that they should have been thinking about way before any of this had happened. But my guess is that -- and I want to make this point if you don't get overall rate then I got no rate. I don't want to hear about commercial auto at 10 and getting it all back G.L. and comp. Overall rate, if you're not getting overall rate then you're getting no rate. And so when you think about claim inflation in this business, it's all predicated on medical, medical permeates everything that we do and medical trends, if anything, are edging higher, they are not edging lower. And we sit there and go property and everything else this should provide a lot more tailwinds for us. And you got to remember we're very dialed in on the amount of inventory we want -- we really are touching. So, again, if company's got an agile information, sophistication to do it, and a deployment into a highly franchise model, that's us.

Okay. Very much appreciate the comments. Thanks. That's all my questions.

Nice Mark.

Thank you. [Operator Instructions] Our next question is from Paul Newsome with Sandler O'Neill. Please proceed with your question.

Good morning Paul.

Good morning. I thought you might want to weigh in on -- a little bit more on the impact of these catastrophes that we've had kind of broadly. And so Mark my question really is this in your opinion has there been a lesson learned from these events. I mean I think back the hard market 9/11 taught us about clash risk. The hard market in the 1980s taught us about the potential for very, very large corporate lawsuit and labiality side. There seem to be sort of a specific lesson that they're told -- they told underwriters they need to do something different. And I wonder if there's a lesson here to be learned in your opinion from the industry's perspective and from an underwriters' perspective.

Yes, this is Mark here. Why don't I jump in and then Greg and John can follow-up as well on the topic. Greg talked a little bit about the cat loss activity this quarter and the needs to price further and get adequately compensated for the risk the company to take in. I think from our perspective when you look at our business model and the way the quarter shook out for us whether the events that took place happened exactly as it did which for us had two big E&S states, Texas and Florida. It was a good test case relatively new E&S segment for us, the reinsurance programs that we have in place and worked out well for us in terms of a relatively modest impact two and a half points on the combined ratio. If the storm track has been different, if Irma had that sort of really, really significant impact or in particular with Maria, [Indiscernible] high shipped these and Maria had hit east coast -- call it really, really significant cat event. I think again for Selective with the reinsurance protection that we buy, the way we think about catastrophe hubris management, I think it really showed the strength of the franchise and the business model that we have -- to have a sort of a lower of volatility underwriting result and good reinsurance program wise. From a lessons learned perspective, I think there's always lessons that are learned from each catastrophe. And I think time will tell what lessons will come out of this. I do say staring down that -- those forecasts there's the really bad Hurricane Irma forecast, really caused people to sit back and really think about the business model, really think about the value of reinsurance and how that is part of an overall primary operation and as Greg mentioned the counterparty credit risk. From a claims handling perspective, we'll see what happens. We saw off good stuff in Ike in 2008, a lot of sort of claims development as the [Indiscernible] Texas and litigation reopened claims. We got issue in Florida and I think that will be exacerbated with Hurricane Irma. But time will tell what lessons will be learned, but from our perspective, we feel pretty good about the business model the underwriting risk appetite that we have and again, the reinsurance we have that the balance sheet some significant event like this.

The only other point I would add, Paul this is John, is relative to flood exposure and aggregation of flood exposures. Prior to this quarter, there was a lot of talk about how the private market was going to really step in and provide capacities for flood either in an excess or raft or in certain cases a complete take out of business that's currently in the write your own program through the NFIP. And based on this experience, I think understanding the aggregation of flood exposure in addition to the wind exposure in some of these geographies that you saw impacted may have some companies rethinking your appetite for that business. Now, we're a significant player in the write your own program. We think that program can be shored up in certain ways, especially relative to pricing per unit of exposure-to-exposure. But I think you may see some companies reexamine their appetite relative to providing private flood insurance, especially in higher hazard zones.

And Paul, Greg, just -- again, you got a pretty good sense from everybody. To me, it's always been about collateral counter-party retro. I will tell you our folks have been dialed in on that for years; we've been pushing on disclosures, on trying to get into deeper into retro programs. And I would say our folks did very good at capturing collateral where the opportunities have been out there in the marketplace to better collateralize your reinsurance programs to the extent possible. So, I would tell you this many companies now that are sitting and looking at attachment points and return periods and questioning whether or not their return periods were adequate relative to an event set that large and it's not only a matter of the property side as reinsurers have become more diversified, you got to cross issues relative to that to the fall out into the [Indiscernible] programs as well. So, as companies stretch again diversifying their more liabilities as cat writer, that's also another long-term exposure that's not easily truncated.

Thank you very much.

Thank you. At this point, there are no further questions on queue.

Well, I thank you all for attending. I know Rohan is excited about the Investor Day that's coming up as I've indicated you many times, we are really looking for a great day and hopefully, everyone will be here in attendance. So, thank you very much. And any follow-up, please reach out to Rohan and his team, make sure that you get on the invite list. And thank you very much for participating in today's call.

That concludes Selective Insurance Group third quarter 2012 earnings call. Thank you for your participation. You may now disconnect.