Good day and welcome to The Hanover Insurance First Quarter 2021 Earnings Conference Call. All participants will be in a listen-only mode. [Operator Instructions] Please note this event is being recorded. I would now like to turn the conference over to Oksana Lukasheva. Please go ahead.

Thank you, operator. Good morning and thank you for joining us for our quarterly conference call. We will begin today's call with prepared remarks from Jack Roche, our President and Chief Executive Officer; and Jeff Farber, our Chief Financial Officer. Available to answer your questions after our prepared remarks are Bryan Salvatore, President of Specialty Lines; and Dick Lavey, President of Agency Markets. Before I turn the call over to Jack, let me note that our earnings press release, financial supplement and a complete slide presentation for today's call are available in the Investors section of our website at www.hanover.com. After the presentation, we will answer questions in the Q&A session. Our prepared remarks and responses to your questions today, other than statements of historical fact, include forward-looking statements as defined under the Private Securities Litigation Reform Act of 1995 regarding, among other things, our outlook for 2021, the ongoing impact of the COVID-19 pandemic, economic conditions and other risks and uncertainties that could affect the Company performance and/or cause actual results to differ materially from those anticipated. We caution you with respect to reliance on forward-looking statements and in this respect, refer you to the forward-looking statements section in our press release, the presentation deck and our filings with the SEC, which includes supplemental risk factors related to severe weather and catastrophes, among others. Today's discussion will also reference certain non-GAAP financial measures such as operating income and accident year loss and combined ratios, excluding catastrophes, among others. A reconciliation of these non-GAAP financial measures to the closest GAAP measure on a historical basis can be found in the press release, the slide presentation or the financial supplement, which are posted on our website, as I mentioned earlier. With those comments, I will turn the call over to Jack.

Thank you, Oksana. Good morning, everyone, and thank you for joining us this morning. I will begin by discussing our first quarter financial highlights in the context of the current business and economic environment. I'll then provide a strategic review of each of our segments and our accomplishments during the quarter. Jeff will review our financial results in more detail and provide some thoughts on the quarters ahead, and then we'll be happy to take your questions. Overall, we are very pleased with our strong financial performance in the quarter, especially in light of the unprecedented catastrophe and activity. We posted net written premium growth of 5.2% and a combined ratio excluding catastrophes that exceeded our original expectations, underscoring our ability to capitalize on market opportunities while prudently managing the complexities of an uncertain environment. In particular, I want to call your attention to three highlights for the first quarter. First, we are very excited about the increasing growth momentum in our businesses. Premium production exceeded our original expectations for the quarter, elevating back to pre-COVID levels, reflecting our strong market position and the effectiveness of our strategy. Our balanced approach to Personal Lines pricing has proven to be effective. And the overall business environment, including rate, remains strong in commercial lines, fueling our robust premium momentum. Importantly, we are well positioned to continue driving profitable growth in all major segments of our business, and we expect to achieve mid-single-digit growth or higher for the remainder of the year. Second, consistent with our pre-announcement, we sustained elevated catastrophe losses of $133 million or 11.5% of net earned premiums, primarily as a result of Winter Storms Uri and Viola in mid-February. These losses were substantially concentrated in Texas across all industry classes due to damage from the record-low temperatures, power outages…

Thank you, Jack. Good morning, everyone. For the first quarter, we reported net income of $92.7 million or $2.51 per diluted share compared with a net loss of $40 million or $1.04 per basic share in the prior year first quarter. After-tax operating income was $61.4 million or $1.66 per diluted share compared with $86.8 million or $2.23 per diluted share in the first quarter of 2020. The difference between net and operating income in the first quarter of each year primarily reflects the increase in the fair value of equity securities in 2021 and the decline in the first quarter of 2020. Our combined ratio was 98.8% compared with 95.2% in the prior year quarter, reflecting the impact of elevated catastrophe losses. In the quarter, we incurred catastrophe losses of 11.5% of net earned premium, driven by large losses from the severe winter freeze events in the South. Texas was impacted particularly hard by the freezing temperatures, power outages and winter conditions, accounting for about 2/3 of the total cat losses in the quarter, mostly in the commercial multi-peril line, of which we hold about 2.9% market share in the state. We have worked tirelessly over the last decade on our property aggregation. And for most events over the last four to five years, we have been pleased with our losses relative to the specific industry concentration and position, and first quarter's events were not an exception. Prior year reserve development was favorable in the quarter by $8.2 million, primarily reflecting lower-than-expected losses in Personal Auto and continued favorability in workers' comp. These results and our prudent reserving actions reinforced our focus on building a strong balance sheet and highlight our successful efforts over the years. This being said, we continue to exercise prudence and thoughtfulness in making our…

[Operator Instructions] And ladies and gentlemen, our first question today comes from Meyer Shields with KBW.

Great. So I want to start with a question for Jack, if I can. You talked about taking, I think, a very rational, more competitive posture in Small Commercial. Can you talk about what you're seeing from your competitors? In other words, does this improve your competitive position or hold it steady?

I think -- Meyer, first of all, thanks for the question. I think there are a number of factors that are allowing us to build on the momentum that we've worked so hard on in Small Commercial. Not only is the profitability of our current portfolio and all the hard work we do with our agents to position our products to be broad-based and to be a little bit more comprehensive than many of the competitors that we compete against. But I think probably one of the biggest factors that's causing us to feel even better than ever about our Small Commercial opportunity is that more and more agents are getting strategic around their flow businesses and in particular, are starting to work on their operating models and how they can concentrate their business with fewer and more strategic carriers, which we believe plays right into our business strategy and our capability set. So if you add all of that up, being profitably positioned, investing in our capabilities, including our new platform, that couldn't be coming at a better time. Frankly, it gives us a lot of reason to be optimistic about how we can further build on our Small Commercial momentum.

Okay. Understood. Maybe a related question, And I think the growth opportunity seems fantastic. But I'm curious as to -- when you have new business coming from new agents, is that booked more conservatively than, I don't know, new business from existing agents?

Well, I think one of the things we've shared in the past is that, even with new appointments, we have a real transparent approach to envisioning what our future partnership would look like, what our underwriting appetite is and how that matches their current book of business, leveraging our Agent Insight tool. And then as we start the process of building momentum, we hold them to the same high standard that we hold all of our agents in terms of the quality of the mix, the pricing that we look at vis-à-vis our own renewal book and some of the statistics that we gather from our Agency Insight tool. So we're quite confident that new business from high-quality new agents is at least as disciplined, if you will, as the new business that we write with our existing agency plan.

[Operator Instructions] Ladies and gentlemen, this concludes the question-and-answer session. I'd like to turn the conference back over to the management team for any final remarks.

Thank you, everybody, for your participation today, and we're looking forward to talking to you next quarter.

Thank you.

Thanks, everybody.

Thank you. This concludes today's conference call. We thank you all for attending today's presentation. You may now disconnect your lines, and have a wonderful day.