Selective (SIGI) Q1 2025 Earnings Call

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DATE

Wednesday, May 7, 2025

CALL PARTICIPANTS

John Marchioni: Chairman of the Board, President, and Chief Executive Officer

Patrick Brennan: Executive Vice President and Chief Financial Officer

Brad Wilson: Senior Vice President, Investor Relations and Treasurer

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Combined Ratio: 96.1%, including 3.7 points of catastrophe losses and 0.4 points of unfavorable prior year casualty reserve development in personal auto for Q1 2025.

Net Premiums Written Growth: driven by excess and surplus lines and standard commercial lines

Return on Equity: 14.4% for both GAAP and operating ROE during Q1 2025

Overall Renewal Pure Pricing: 10.3%, up 2.2 points year-over-year during Q1 2025 and approximately 3 points above loss trend assumptions

Standard Commercial Lines Renewal Pure Price: 9.1%, with general liability at 12% and commercial property and auto both exceeding 10%

Personal Lines Renewal Pure Price: 24.1%, with net premiums written decreased during Q1 2025 due to deliberate profit improvement actions

After-tax Net Investment Income: $96 million, up 12% year-over-year during Q1 2025

Book Value Per Share: Increased 5% in the quarter

SUMMARY

Selective Insurance reported solid Q1 2025 results amid a challenging macroeconomic environment, maintaining its full-year GAAP guidance of a 96%-97% combined ratio. The company's focus on pricing discipline and portfolio optimization led to a 10.3% overall renewal pure pricing increase. particularly in personal lines and general liability.

Management expects rate changes to remain above loss trends but moderate compared to 2024 increases, with full-year guidance for 2025 implies a mid-teens non-GAAP operating ROE

The company added 30 new agency locations during Q1 2025 and expanded into 13 new states since 2017, contributing $350 million in premiums written for standard commercial lines during 2024

Workers' compensation pricing remains negative, with Q1 2025 rates at approximately -3%, while the company assumes flat frequencies and mid-single-digit medical severity inflation during CY2025

"We are absolutely focused on restoring our profile as a company that delivers consistent underwriting margins and operating ROEs."

INDUSTRY GLOSSARY

Renewal Pure Price: The change in premium on policies that renew, excluding the impact of exposure changes

E&S Lines: Excess and Surplus lines, referring to specialized insurance for risks that are difficult to place in the standard market

Social Inflation: The trend of rising insurance costs due to increased litigation, larger jury awards, and broader definitions of liability

Full Conference Call Transcript

Operator: Good day, and welcome to the Selective Insurance Group First Quarter 2025 Earnings Conference Call. At this time, all participants are in a listen-only mode. After the speakers' presentation, there will be a question and answer session. Instructions will be given at that time. As a reminder, this call may be recorded. I would now like to turn the call over to Brad Wilson, Senior Vice President, Investor Relations and Treasurer. Please go ahead. Good morning. Thank you for joining Selective's First Quarter 2025 Earnings Conference Call.

Brad Wilson: Yesterday, we posted our earnings press release, financial supplement, and investor presentation on selective.com's Investors section. A replay of the webcast will be available there shortly after this call. John Marchioni, our Chairman of the Board, President, and Chief Executive Officer, and Patrick Brennan, Executive Vice President and Chief Financial Officer, will discuss first quarter results and take your questions. John and Patrick will reference non-GAAP measures, that we and the investment community use to make it easier to evaluate our insurance business. These non-GAAP measures include operating income, operating return on common equity, and adjusted book value per common share. The financial supplements on our website include GAAP reconciliations to any referenced non-GAAP financial measures. We will also make statements and projections about our future performance. These are forward-looking statements under the Private Securities Litigation Reform Act of 1995. Not guarantees of future performance. These statements are subject to risks and uncertainties that we disclose in our annual, quarterly, and current reports filed with the SEC. We undertake no obligation to update or revise any forward-looking statements. Now I'll turn the call over to John. Thanks, Brad, and good morning.

John Marchioni: We delivered a solid start to the year with an overall combined ratio of 96.1% and after-tax net investment income of $96 million. Return on equity and operating return on equity were 14.4%. Net premiums written grew 7%, driven by excess and surplus lines, and standard commercial lines. Personal lines premium decreased by 12% as we improved that portfolio's profitability. Patrick will provide more detail on these results in our 2025 guidance, which still points to a full-year combined ratio between 96% and 97% and an underlying combined ratio of 90% to 91%. While our full-year guidance implies a mid-teens operating ROE, we remain focused on improving our underwriting margin. Have been pressuratively due to the widespread impacts of social inflation on average casualty severities. We are absolutely focused on restoring our profile as a company that delivers consistent underwriting margins and operating ROEs. Over the past decade, our average combined ratio was 95% and our average operating ROE was 12%. We are confident that our approach to addressing the elevated loss trend environment through our reserving planning, underwriting, and pricing actions will quickly restore that profile. We continue to price new and renewal business contemplating our latest view of loss trends and profitability relative to our 95% combined ratio target. In the first quarter, overall renewal pure pricing across our three insurance segments was 10.3%, up 2.2 points from a year ago. Overall renewal pure pricing is approximately three points above our loss trend assumption. Assuming this trend continues, it implies future margin expansion. Turning to segment performance. Standard Commercial Lines reported a 96.4% combined ratio. Renewal pure price increased to 9.1%, driven by general liability at 12%. Retention was stable at 85%. Market dynamics and pricing rationality vary by line. And we continue to deliver elevated renewal pure price increases in commercial property and commercial auto, both of which exceeded 10%. Renewal pure price, excluding workers' compensation, was 10.5%. Excess and surplus lines, driven by average renewal pure pricing increases of 8.7% and strong policy count growth at 20% net premiums written growth in the quarter. With a 92.5% combined ratio and 81 underlying combined ratio, we see continued growth opportunities for this segment. However, that market remains competitive and we will continue to prioritize our profitability objectives as we pursue growth. Personal Lines delivered a combined ratio of 98%, approximately seven points better than a year ago. As our rating and non-rating actions to reposition the book advanced profitability improvement. Renewal pure price was 24.1% in the quarter. While target business grew 11% in the quarter, total personal lines net premiums written decreased due to deliberate profit improvement actions. Notably, new business decreased by 58% as we focused on profitable growth in states where our rate levels are adequate, we expect rate changes will remain above loss trends but moderate compared to our rate increases in 2024. We do not have filed rates that support our necessary path to profitability in certain states. Including New Jersey, our largest state. And we significantly curtailed production in those states. I'll close with a few comments on our corporate strategy, risks, and opportunities as we navigate this highly dynamic macroeconomic environment. As an insurer, we create value by assuming risk for our customers, allowing them to operate their businesses and live their lives with the knowledge that their assets are protected. The contingent capital we provide is an essential social utility and our independent agents and wholesale brokers value us as a stable partner. Over time, we reward shareholders through strategic execution, prudent enterprise risk management, and profitable growth. We often highlight how our differentiated operating model and empowered decision-makers deliver our products and value-added services through our distribution partners to our customers. Every year, several of our executives and regional management teams host six regional agency council meetings with a cross-section of our distribution partners. This year, their feedback reinforced that our differentiated approach continues to resonate with our business partners and customers. Our open and dynamic discussions about customer expectations, the insurance market, talent, technology, and artificial intelligence confirm that. Despite the risk in the external environment. Significant market opportunities exist for Selective and our partners. The insurance industry faces significant macroeconomic uncertainty including financial market performance, international trade, and a possible recession. We may be impacted by whatever changes ultimately occur in these areas. Nonetheless, we will be able to face these challenges by focusing on our long-term value proposition and by focus strategic execution in the areas we control. As always, we will carefully navigate the uncertainty in the environment. Responding prudently as new information emerges. Our significant investments in recent years to support scalable and profitable growth provide us with many opportunities to increase our market share while meeting or exceeding our profitability targets. We remain disciplined underwriters, unwilling to trade that profitability for growth. New business moderated in recent quarters, including this one, as we push pricing higher resulting in reduced hit ratios. However, policy retention has remained strong as we execute our pricing strategy in a granular fashion. As we position ourselves for the future, we have several strategies to grow market share profitably. In our existing footprint, we are focused on growing with existing partners, and strategically appointing new agency locations. In the first quarter, we added 30, In 2024, we had a net increase of 200. Careful and deliberate geographic expansion continues to provide lift. Since 2017, we've added 13 states to our standard commercialized with five last year. In 2024, these 13 states accounted for two points of growth adding $350 million of premiums written for approximately 10% of standard commercial lines production. Profitability in these expansion states is meeting our expectations. Technology investments are critical to ensure efficiency and scale. We are actively developing and executing artificial intelligence use cases focused on underwriting scalability and improving claims outcomes. We've also made considerable progress modernizing our excess and surplus lines, commercial lines, and claim systems. For example, in E and S, system and process enhancements have improved operational efficiency with the segment's premium production up significantly with limited headcount growth. Our actions in 2024 and the continued execution of our strategy in 2025 leave us well-positioned despite the uncertainty in the external environment. Now I will turn it over to Patrick who will provide more details about our financial results.

Patrick Brennan: Thanks, John, and good morning, everyone. Net income available to common stockholders increased 34% in the quarter. Fully diluted EPS and non-GAAP operating EPS were both $1.76 and as a result, our return on equity and operating return on equity were both 14.4%. The GAAP combined ratio for the quarter was 96.1% included 3.7 points of catastrophe losses, and 0.4 points of unfavorable prior year casualty reserve development isolated to personal auto. Our underlying combined ratio was 92, 150 basis points above the midpoint of our full-year guidance. However, we believe our full-year underwriting combined ratio will meet our original 90% to 91% expectation as the first quarter underlying combined ratio tends to be higher than other quarters due to normal seasonality. Turning to capital. Our capital position remains strong, with $3.3 billion of GAAP equity and $3.2 billion of statutory surplus, at March 31. Book value per share increased 5% in the quarter driven by our profitability and a $1.06 per share reduction in after-tax net unrealized fixed income security losses. Debt to capital increased to 21.7% at quarter-end due to February's successful $400 million senior notes issuance. The transaction received strong investor support, and we are using the proceeds for general corporate purposes, including supporting disciplined and profitable growth which we consider the most prudent way to create long-term value. For our investors. We return capital to shareholders through regular quarterly dividends and, from time to time, we also engage in opportunistic share repurchases. During the first quarter, we repurchased $19.4 million of common stock at an average price of $82.87 per share. As of 03/31/2025, $56 million remained under our repurchase authorization. First quarter after-tax net investment income was $96 million, up 12% from a year ago. This generated 12.8 points of return on equity, up 50 basis points from 12.3% in the first quarter of 2024. Our strong operating cash flow and the senior notes proceeds resulted in a very active first quarter allowing us to invest over $900 million of new money. The average new purchase yield was an attractive 6% pretax. Consequently, the quarter-end average pretax book yield increased to 5%. We expect our fixed income portfolio's embedded book yield will provide durable investment income. However, the volatile external environment presents downside risk to our net investment income guidance, particularly related to alternative investments. Over our investment horizon, we expect alternative investments will produce at least a 10% return. However, the asset class has inherent economic variability due to its higher risk and return profile and higher accounting variability because market value changes flow through the income statement. Overall, our investment portfolio remains conservatively positioned. Total fixed income and short-term investments represented 92% of the portfolio at quarter-end, with an average credit quality of A plus and a duration of 4.1 years. Our overall investment strategy is to maximize the economic value of our portfolio by achieving stable, risk-adjusted after-tax net investment income and contributing to long-term growth in book value per share. We do not expect to change our investment strategy or allocations meaningfully, but our portfolio's positioning enables us to evaluate and act upon opportunities that market dislocations or volatility may present. Pulling together what we've discussed, we are reaffirming our original 2025 guidance, which is as follows. We expect our 2025 GAAP combined ratio will be between 96-97%, including six points of catastrophe losses. As a reminder, our longstanding practice is to not assume any additional prior accident year reserve development in our forward guidance. At this time, we are not revising our after-tax net investment income guidance of $405 million. A higher asset base from our senior notes issuance proceeds should benefit net investment income. However, alternative investments could face valuation headwinds in the coming months. Depending on the ultimate outcome and timing of tariffs, economic uncertainty and financial market volatility, is heightened risk that alternative investment income could come under pressure when we report second quarter earnings. As a reminder, we report alternative investment income on a one-quarter lag. We remain comfortable with the long-term performance expectations of the asset class and our 4% allocation. Our guidance includes an overall effective tax rate of approximately 21.5% and an estimated 61.5 million fully diluted weighted average shares, including those repurchased in the first quarter, and assumes no additional repurchases under our existing share repurchase authorization. Operator, please start our question and answer session.

Operator: Please press 11 again. Our first question comes from Michael Phillips with Oppenheimer. Your line is open.

Michael Phillips: Thanks. Good morning. John, in your opening comments, you talked about overall price in the 10.3% and how that was probably about 3% or points above loss trends overall. Could you drill down to, I guess, the casualty side and what you're seeing? Any updates there on your loss trend assumptions and how that might compare to pricing was up in GL, which is good, but maybe just comments on what you're seeing for GL loss trends? Thank you.

John Marchioni: Yeah. Thanks, Mike. So our view of loss trend is unchanged from the beginning of the year. When we put together guidance, as you recall, we had all-in casualty loss trends at about 8.5%. And, again, that's all in. So, you know, GL and workers comp and commercial auto liability are all in that number. And we've talked about GL in the 9% kind of range, all driven by severity. That continues to be our view. I think it's important to remember that our 25 guidance and what we're applying that loss trend to is includes the 2024 year where we acted pretty quickly to increase our expected loss ratio in the GL line by over seven, almost 7.5 points. So that trend is now reflective of what we have observed in actual severity changes over the last few years. And as a result of that, we continue to stay with that as our trend expectation.

Michael Phillips: Okay. Thank you. If I could drill down to one line in commercial auto, if I could. You've talked about there how pricing has been up higher for longer. And that's been kind of helping to ward off any potential reserve charges. So far, good there. I guess I was surprised to see maybe maybe surprised to start a word, but your your your loss pick in the quarter came down at about three points? Maybe just if you can drill down to kind of what's behind

John Marchioni: You're talking specifically on commercial auto?

Michael Phillips: Yes. Yes. I am, John.

John Marchioni: Yeah. So I think, again, I remember, this is this is a a multiyear pricing change. And I think I might have gone through this last quarter. If you if you focus on commercial auto BI our average change over the last four years is a little over 10%. And then you saw that 10% remain in the quarter. So just roughly speaking, assuming that longer-term trend that we've pointed to in the eight percentage kind of range, you've had a number of years now where your earn rate level has been running slightly above that elevated loss trend. And that's gonna be the the probably the larger driver. But also remember, auto physical damage is in that that line in total. And we've continued to generate strong rate on auto physical damage. And that loss trend tracks closer with our property trend which has been in the, call it, three and a half kind of range. So you definitely have more improvement on the auto physical damage side than you might see necessarily on the auto BI side that might be a little bit more flattish. And those are those are how the pieces come together.

Michael Phillips: Okay. No. Thank you. I'll circle back if I if I need to. Thanks, John. Thank you, Mike.

Operator: Thank you. Our next question comes from Mike Zaremski with BMO. Your line is open.

Michael Zaremski: Hey, morning, gentlemen. The first question I have is on the seasonality comments. If I look at kind of the historical seasonality, you know, we can see it. And I'm doing the math quickly, but it seems like this year seasonality is more pronounced. Maybe more than two times the historical level. Any thoughts on what's causing the greater seasonality this year than in the past?

John Marchioni: No. I think that's the seasonality we're anticipating is largely driven by noncap property. And when you look back historically, that's held up pretty well. Now there's expense ratio movement that also could impact what you see on a historical basis. And that might vary from year to year. But on the on the non-cat property side, this is pretty much what we've seen on a on a historical basis.

Michael Zaremski: Okay. Got it. Some okay. Seem it seems like it was a 50, 40 basis points by the midpoint this year of of your guide, and it certainly has been more like 60 basis points above in 1Q. So just to make sure you're saying that you you you didn't you're not you're just seeing kind of typical normal seasonality for for you all. This this quarter. So I just wanna clarify?

John Marchioni: Correct. And if you if you if you break down the the difference in terms of 2024's underlying combined ratio and the guidance, there's about or the I'm sorry. The q one result, there's about a two and a five point difference. About a point of that is seasonality.

Michael Zaremski: Okay. Okay. Got it. Workers tab, I know you've you know, we can see that you're booking above a hundred now. Know you've called out workers' comp is becoming less favorable in, you know, in quarters last year. But seems like a pretty conservative pick. Any color on what's you're seeing there?

John Marchioni: Yeah. I I think a couple of points I'll highlight there. Know, if you look back to last year, on an accident year basis for us, we were in that 97 to 98 range when you when you back out the impact of of favorable development from prior years. Honestly, when you look at it on an industry basis, I think you'll see 24 accident year on industry basis is in that neighborhood of a hundred. Now granted, the the older accident years continued to emerge favorably, albeit maybe a little bit more lightly favorable. I think that's also been an industry-wide trend. So let's just assume that high high nineties for us, industry kinda hundred starting on an accident year basis. Our written rate last year was around negative three. Our first quarter rate is around negative three. So let's just assume you've got an earn rate impact of about 3% negative. As we've done, we and we pointed to this last year, we've started to see a flattening of frequency trends. So on a roll forward basis, '24 into '25, we're assuming flat frequencies. And then you've got the impact of severity inflation largely driven by medical. And that you know, let's put it somewhere in the mid single digit range in terms of where we anticipate medical severities on a go forward basis. You combine that with flat frequencies and a negative three earned rate and that's how you roll it forward. And I think that applies on an industry basis as well. Now to the extent the prior years continue to emerge favorably, and in particular, to the extent 'twenty three and 'twenty four ultimately, emerge favorably, which we we haven't recognized anything there at this point, but they're immature. But to the extent that continues, that might prove a conservative assumption. But we think based on where we are today, that's the appropriate way for us to establish the the ELR, the expected loss ratio for 2025.

Michael Zaremski: Okay. Yeah. I appreciate the candidness. I I guess we we haven't heard, other peers, but maybe they just haven't been asked about, seeing the the flattening frequency. I know you guys have called that out. So we're, you know, I guess, in our seats, we're trying to figure out if it's a if it's a mixed thing that's specific to SIGI. A selective salary or or or it's a in industry wide phenomenon. I I think you're saying it's more more industry wide. So dig into that more Okay. You know, lastly, just trying to, you know, I know this is also an industry issue impact, on tariffs. On the commercial property side, Do you have any views on kind of how many points that that could cause the industry to need to to push price if, you know, if the current tariff regime sticks and and comes into play? Any thoughts there? I I feel like most most management teams so far have been willing to say, you know, it'll have an impact, but but no no really quantification.

John Marchioni: Yeah. So I first of all, I'm I'm not sure I'm gonna give you anything other than what you haven't already heard, which I think there's been some some accurate commentary out there for some of our peers. First of all, it's early. And and understanding where where tariffs ultimately settle is very much an open question at this point. But I would say and I'll talk about it overall, and then I'll certainly hit your question on commercial property specifically. But I would say overall, when you factor in the various mitigants the it is a manageable impact from a loss cost perspective. So the primary impacts, obviously, are auto physical damage lines, both personal and commercial. And then property at home. I think when you look at the various mitigants, the first one would be what are the loss cost of labor versus materials. And if you look at it on an auto basis, historically, the the lost costs are about 60% labor. And on the property side, both commercial and personal blended labors in the neighborhood of 55 or so percent of the cost. So that's that's an impact that sort of mitigates the impact of tariffs. And then you've got the consideration relative to materials that are coming from imports versus those that are produced and sourced domestically. And if you look at auto parts, it's as much as 40% of those are produced and sourced domestically. So there's there's a balancing there. And then on lumber, which is a big input on both commercial and personal property, a significant more than more than half of that is is produced and sourced domestically. So that lowers the impact. And then on with the property line in particular, you've got the the inflation sensitive exposure basis for both commercial property and home, which allows you to respond with regard to insurance to value or or total insured values in addition to price. And that's a relatively quick triggering item that as we see that those lost costs start to come through you can respond relatively quickly from an exposure basis perspective. So I think if you put all those pieces together, don't think there's any question personal auto physical damage is probably the biggest impact on a line basis. That's obviously a smaller impact for us. And then it works down from there, and you're probably looking at something in the low single digits on an overall basis.

Michael Zaremski: Okay. Yeah. That that that's excellent color. And I'm hopefully, you're okay if me asking one quick follow-up to the work comp, discussion earlier. Because looking at the live transcript. So you you said negative three earned rate. In comp. Does that include wage inflation? I think it does. I thought, you know, wage inflation has been really helping, the earned rate in that line for the industry. Given it looks like wage inflation is still you know, you know, pretty at at pretty healthy levels.

John Marchioni: Yeah. That that is like, that's a pure rate number I'm giving you. We haven't we haven't put exposure change numbers out there for for workers' comp. That's pure rate. So there's no question there's no question. Wages wages are an offsetting impact to that.

Michael Zaremski: Thank you.

Operator: Thank you. Our next question comes from Paul Newsome with Research. Your line is open. Good morning.

Paul Newsome: Was hoping you could talk a little bit more about the competitive environment. And pricing which is become a little bit of an issue this quarter. Just concerns that certain areas are softening and certain not. And maybe you could put that into the context. My my sense is that selective is, at this point, you know, raising rates more than the vast majority of the competitors but maybe I'm wrong about that. And just any thoughts you have about sort of how you see yourself relative to others in the market environment. Yeah. I think from a GL perspective, I think your your depiction of where we are is an accurate one. And I think, you know, our our view was that when we reacted to the twenty two and twenty three accident years, in in the middle part of twenty twenty four we thought it prudent to also move '24 higher which then reset our pricing targets. Order to to offset that that increase in expected loss ratios and our forward trend assumptions. I think there's no question that as a result of that, our pricing targets are probably above where the broader market is. And and you do see that impact on our our conversion rates and, therefore, our new business, which in commercial lines was flat on a year over year basis. Now remember, we we continue to open up additional distribution points, whether it's through new states or new agents. So that, if you think about it on a same store basis, that's probably a little bit more negative in terms of where the growth is as we've said, we we've got conviction around where we're pricing from a GL perspective. And we think that's appropriate based on our incorporation of those higher run rate severity trends into our forward view. And our our objective here is to stay ahead of the curve from a severity perspective, and we're not we while we recognize that there will be an inflection point, where social inflation starts to to normalize, not assuming that happens in 2025, and we're pricing according to that. That makes sense. It always seems to be the right decision to be ahead of price on pricing. Related to that question is one of retention. And you know, obviously, there's been an a pretty quick new business impact. But do you expect or should should be prudent for us to be thinking that retention will be impacted in coming quarters as well from that competitive environment and then sort of things stabilize after that. I I I think, you know, retention has held up well for a few quarters now. And the pricing change we're talking about was, you know, our our run rate in the in the early part of or mid part of last year was in the high single digits. And now we're we're in the in the 12% kinda range. You really wanna think about it in terms of overall pricing change. And we've been in that 8% all in because that's we remember, we we write on a package basis for the most part. So this is one line and you've got other lines that are impacting the overall rate change. We were at 8.3% for all of last year. In in standard commercial lines and now we're at nine one. So you've got different lines moving in different directions but overall higher. So it's not such a dramatic move that it it's dramatically impacted retentions. But again, I we're at a point in the market where we think it's appropriate to focus on achieving your price target. And if that has a slight impact on retention over time, we're willing to make that trade. But I also wanna highlight, and I I made reference to this in my prepared remarks, we continue to to execute our pricing strategy on a granular and targeted basis. Which should also mitigate the overall impact from a retention perspective.

Paul Newsome: Thank you. You're thoughts are much appreciated. We appreciate the help.

John Marchioni: Thank you, Paul.

Operator: Thank you. As a reminder, if you'd like to ask. And our next question comes from Meyer Shields with KBW. Your line is open.

Meyer Shields: Great. Thanks. Good morning and thank you so much for the enhanced disclosure with cash and reserve results by law, which makes things a lot easier to follow. Two quick line of business questions. First, in the ISO data, I guess, fast track data, we're seeing maybe surprising decreases in claim frequency for physical damage coverages. And I'm wondering whether that translates into personalized books that selective rights.

John Marchioni: Yeah. So I I we are we are seeing this same thing on on both commercial auto physical damage and personal auto physical damage. And I'm sorry. Mayor. I just wanna make sure that the your question related I didn't hear the full question related to the affluent market. I think it's across the board, and we're we're seeing it in in our target market as well.

Meyer Shields: Okay. Yeah. No. That's perfect. That's really what I wanted to know. I had a question. I was hoping you could take us through the specifics of your bond book with regard to, I guess, both potential claim costs inflation on construction materials and overall sensitivity to the economy.

John Marchioni: So you're you're asking specifically about the the the bond or surety book, or you're asking about the construction book?

Meyer Shields: I I was asking about the surety book, but welcome comment. As broadly if you wanna make.

John Marchioni: Yeah. I mean, the surety book for us is is a relatively small portfolio. It's in the it's it's in the range of of, $40 million. It's around 11% of our over overall premium. We've been in that business a long time. The results have continued to be very strong. And obviously, to the extent we anticipate impacts from an economic perspective, we would we would adjust our pricing accordingly.

Meyer Shields: Okay. Do do you your your book as subjects to sort of economic macroeconomic pressures?

John Marchioni: I we're not no. We're not we're not writing large contract surety. You know, we're a we're a small market you know, lower end of the mid market player in that space. So you wanna think about us in those terms.

Meyer Shields: Okay. Thank you very much. Thank you.

Operator: Our next question is a follow-up from Mike with BMO.

Michael Zaremski: Hey, thanks. Just a quick follow-up in commercial lines. Any puts and takes worth calling out on on reserve development in any of the lines?

Patrick Brennan: No.

John Marchioni: No. Nothing. You know, the only the only reserve change we we called out was the personal auto liability driven by New Jersey. Severities in the twenty four year, but nothing on the commercial line side.

Operator: Thank you. Thank you. Our next question is a follow-up from Michael Phillips with Oppenheimer. Your line is open.

Michael Phillips: Just one more, kind of a softer question, John. I guess given the macro environment and kind of everybody's concerns and what's happening in the world of The U. S, Have you seen any more pushback recently than normal? From from insurers or agents that say, hey. You might wanna ease up on pricing given our clients are under pressure too. Has that changed at all in the past couple in past month or so?

John Marchioni: It it hasn't. Now it's not this not to suggest it won't. And I think, you know, we we continue to see strong exposure change in our commercial lines portfolio. And again, being a predominantly small and middle market player, not that there's not an impact there, but in terms of anticipating an impact, I would say that hasn't really changed any of the pressure points. And that's not to suggest that there's not some ongoing concern relative to continued increases across the market. I think this was the case certainly in personal lines over the last couple of years, and I think it exists. There's where there's some rate fatigue, on the part of distribution partners and customers. But I think that's why the focus really needs to be on addressing the underlying causes of the increase in loss costs, are driving pricing. And that's why this focus around litigation abuse is of particular importance and connecting that dot for customers so they understand what that does to the cost of insurance.

Michael Phillips: Okay. Thank you. Makes sense. Appreciate it.

Operator: Thank you. I'm showing no further questions at this time. I'd turn the call back over to John for closing remarks.

John Marchioni: Well, thank you all for joining us. As always, we appreciate appreciate the questions and the participation, and please follow-up with Brad if you have any anything additional. Thank you.

Operator: Thank you for your participation. This does conclude the program, and you may now disconnect. Everyone, have a great day.

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