Good day everyone. Welcome to the Selective Insurance Group’s Fourth Quarter 2014 Earnings Call. At this time for opening remarks and introductions, I would like to turn the call over to Senior Vice President, Investor Relations and Treasurer, Ms. Jennifer DiBerardino. You many begin.

Thank you very much. Good morning, and welcome to Selective Insurance Group's fourth quarter 2014 conference call. This call is being simulcast on our website and a replay will be available through March 2, 2015. 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. Selective uses operating income, a non-GAAP measure, to analyze trends and operations. Operating income is net income excluding the after-tax impact of net realized investment gains or losses, as well as the after-tax results of 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 that will be made during this call are forward-looking statements, as defined by the Private Securities Litigation Reform Act of 1995. Forward-looking statements are not guarantees of future performance and are subject to risks and uncertainties. We refer you to Selective's Annual Report on Form 10-K and any subsequent Form 10-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 statements. Joining me on the call today are the following members of Selective's Executive Management Team; Greg Murphy, CEO; John Marchioni, President and Chief Operating Officer; Dale Thatcher, CFO; and Ron Zaleski, Chief Actuary. Now, I'll turn the call over to Dale to review fourth quarter and 2014 results.

Thanks, Jen and good morning. The fourth quarter marked the conclusion of an excellent year for Selective as we delivered on our very aggressive three-year plan that we established in 2012. We entered the year with 92.5% statutory combined ratio, excluding catastrophe losses, in line with our 92% expectation. Catastrophe losses add 3.2 points to the combined ratio, compared to our original budget of four points. After-tax net investment income finished the year at $104 million, 4% above our original guidance. For the quarter, operating income per diluted share was $0.72, up 60% from $0.45 per share a year ago. There were few items in the quarter that impacted results in both directions as follows. Catastrophe losses in the quarter were actually negative as they included an unexpected $8 million reinsurance recoverable from over 10 years ago, which resulted in a net benefit from catastrophes. When compared to the fourth quarter of 2013, were favorable by $0.24 per diluted share. Non-CAT property losses were elevated when compared to the fourth quarter of 2013, resulting in an unfavorable impact of $0.10 per diluted share. The remaining favorable variance of the fourth quarter of last year was largely driven by our insurance operations, where we continue to benefit from earned rate in excess of expected claims inflation and the success of our underwriting and claims initiatives. These operational improvements were partially offset by $5.5 million in current year cash casualty reserve pick increases. The net impact of both is a favorable 1.3 points on the combined ratio or $0.07 per diluted share. The fourth quarter statutory combined ratio was 93.2% compared to 99.6% a year ago and our underlying combined ratio excluding catastrophes and prior year casualty development improved by 1.5 points to 96.6%. The catastrophe loss benefit in the quarter was…

Thanks Dale. We accomplished a great deal on operations over the past three years and with all three insurance segments generated combined ratios under a 100% in 2014, which set the stage for continued improvement in 2015. In 2014, standard commercial lines represented 76% of our net premium generated a 95.5% statutory combined ratio. Personal lines at 16% of our net premium performed at 94.5% statutory combined ratio. Excess and surplus lines, which represents 8% of our net premiums generated a 99.2% statutory combined ratio for the year. These results reflect our efforts to balance rate and retention; implement claims and underwriting improvements across the organization and maintain strong relationships with our distribution partners. For over 20 years, our power field model and deep relationship with our agency partners have been important points of differentiation for Selective in the marketplace. Over time we've made adjustments in our structure, to best position our organization for growth, profitability and efficiency. Our agency management specialist or AMS's continue to be a central focus of the field model with responsibility for managing the growth and profitability of their territory and underwriting new commercial accounts. In an effort to increase the capacity of our current AMS's and improve our responsiveness to agents, we will be broadening the scope of our small business teams to include more accounts that fall outside of our automated underwriting platform. We expect to expand its scope that the small business teams will improve our underwriting efficiency while allowing AMS's to increase their focus on middle market opportunities and boarder agency management and strategic items. With the addition of more than a dozen AMS territories and the change to the small business team, we expect AMS productivity to improve significantly and translate to increased share of wallet with our agency partners.…

Thank you, John. The hard working employees of Selective are very proud to have delivered on profitability goals we established three years ago, very aggressive renewal pure pricy goals as well as claims and underwriting initiatives were successfully executed and ultimately produced 92.5 combined ratio excluding catastrophes for 2014 compared to our 92 target. Three years ago the linchpin of our decline was overall renewal pure price increases of between 5% and 8% for each year. We successfully renewed pure prices growth of 6.3% in 2012, 7.6% in 2013 and 5.6% in 2014 for compounded growth rate of 21%. The competitive market environment is expected to continue. However, the hard work accomplished by our organization establishes a strong foundation of further improvement in underlying profitability in 2015 through one overall renewal pure prices increases of 4%, two, earning pure price increases about 160 basis points higher than expected claim inflation, three, ongoing recognition from the benefits from our claims initiatives that will be reflected in the results and four, continued mix of business underwriting improvements. We have reported some profitable growth. In 2014 our overall growth rate was 4%. However, excluding the strategic sale of our Self-Insured Group business in the first quarter our growth rate would have been up 6% for the year. In 2015 our new business growth opportunities will come from a number of areas. As John described our small business teams have been restructured and will add more than a dozen agency managers and specialists throughout our footprint to focus on middle market account opportunities. Our plan is to also increase the number of agents in each state of operation over the next several years so that the agency plan represents approximately 25% of the commercial on state market share. We believe these action will significantly…

Thank you. [Operator Instructions] Our first question today comes from Vincent DeAugustino from KBW. Your line is open.

Hi good morning everyone.

Good morning Vincent.

I guess the first thing in order is just congrats on making a long dated call on the 92 and getting there. So, the non-CAT weather headwinds certainly didn’t make it any easier, so good to see the guidance moving in the right direction beyond that. So I guess, on that topic to start with John if I heard the numbers right, on the assumed 5 point improvement on Worker's Comp. if I think about that as far as moving the aggregate combined ratio, it should be about 70 basis points and then comparing that to the 92 guide for 14 and then some summarization of that higher elevated non-CAT weather that kind of leaves about 30 basis points left for just rate and other non-rate underwriting actions otherwise. So just thinking about those two buckets it just seems like the one point guide to guide ex-CAT margin kind of movement there might seem to be some level of conservatism into that. So I just want to see if my math is right and then just any color you guys may have on thoughts there.

Your math is right, but there are a lot more moving parts than just those that you have articulated. So, obviously as you pointed out in your initial lead-in, we did have some higher non-CAT property losses this year. You have to make some allowance for expectations around that. So basically, it is just an overall view of what we believe to be a realistic estimate of what we are going to be able to achieve. We may be a little bit better. We may be a little bit worse at the end of the day.

And then, this is Greg and the other thing I just wanted to, you know there in 2013 there is also an elevated, there is a little bit of higher expense ratio. We got along very big initiatives as an organization, you know the company very well. You know everything that we do in terms of modeling and there isn’t a lot that the larger organizations do that we aren’t doing as a company and we are making some infrastructure investments in our IT area that I have added a little bit more to our expense ratio that are planned that will start to round out all of our major systems as you know we are doing in the billing system this year. And I might say this year that started 2014 there is a lot of rearchitecture that happened both our commercial lines underwriting system and the first one is underwriting system and so there is a lot that we have that just started to impact. The other side on expense ratio is, we will be hitting at full strive some of our profitability product gets to our profit base compensation has gone up and then the other squirrely thing even though we have truncated our pension plan and not adding anymore years of service or age effective in April 2016, based on the very low interest rate environment there is a much larger pension charge in the 2015 number versus 2014. So I dare mention there's a lot of what we, I just wanted to show you the comps street. So you mentioned our constant running at about 10 and like John said there are 500 basis points attached with one part, but overall we expect comp to be at or below box rate. So it's 7 full points down and like you say, you got the math right. It represents approximately 20% of our premium. So you do have that right.

Okay good color there, thank you. And then just one quick follow up, on the reinsurance renewal, any notable changes on terms and conditions, I mean anything either from a CAT window standpoint or included, excluded coverages or anything of that side? Secondly on the sort of new CAT coverage, I guess in the last few years how often would you have tapped of that coverage if it had existed prior?

Well on the new CAT we would not have tapped to that at all and in fact in the history of the enterprises that we purchase it wouldn’t have tapped that. But I will say that the attachment point of $5 million for the CAT or for the E&S business attaches at the same probability point as our $40 million attachment point for our standard lines program. So it's roughly a similar style of event for the E&S and it is as we said for those events that hit outside of our 22 states footprint. As far as the CAT renewal, it came in as we said similar to what you're seeing in the marketplace where rates were down a little bit and we were able to extend our average cost from 96 to 120 hours.

Okay, thanks very much guys.

Thank you. [Operator Instructions] Our next question comes from Scott Heleniak from RBC. Your line is open.

Hi. Good morning.

Good morning, Scott.

Just a couple of questions here, first you touched on your comments about adding new agencies over the next few years and I was wondering if you could kind of expand on that a little bit and is there any specific geographies that you're targeting as you're going through that. And I would assume it would be agencies that carry commercial and personal lines, but anything you can share on the new agency plans?

Yes sure, Scott. This is John. So I think Greg had laid out the key drivers that we think about in terms of maximizing our market share in each of our 22 primary operating states, the two levers being the share of the overall market controlled by our agents and then our share of wallet of that agency premium. So we look at those two metrics and where we currently stand, we do have some of our states and they tend to be the states who have been in for a longer time, where our agents already control close to that market share and our real focus is just on driving share of wallet higher. But in a lot of our other states, we do in fact have agency groups that control a lot less than that number. So for us, this is a reaffirmation of our franchise value model. So that maintained -- remains the core of our philosophy, but we think with that, there is a lot of headroom to add agents to get them to that sort of -- to get our overall agency plan to that 25 kind of target over the next several years. This is not the sort of thing that happens in a year or two. You build into this and make sure you got the staffing in place to support it and then at the same time, you drive the share of wallet higher, but we think this is opportunity we're well positioned for. It doesn’t take a lot of additional investment and it allows us to really better capitalize on the capacity and the new business production capacity we think we already have, but there are, I would say few states excluded from the opportunity when we think about what we're -- how we're currently positioned.

Okay. And then I was just curious -- I know on the Brown & Brown call, they were pretty upbeat about their kind of core small middle market customer recovering -- just seeing better trends benefitting from the economy. Just wondering if you guys are seeing the same sort of positive trends, what are you hearing from customers and do you feel like creating a bigger benefit from the economy, the past few quarters compared to what it was maybe a year or two ago.

So I think, Scott, this is John again, one of the key measures to look at what's happening with the economy with our customers, is what's happening with order premium and we've seen a pretty consistent trend of positive order premium, which is a big change from just a couple of years ago. So I think that's the best indication of what's happening in the economy and how we would expect to see that impact our premium on a go-forward basis.

Okay. Do you have that by chance for the quarter? If not, I can get it later.

We saw order premium total for the quarter was $5 million.

$5 million, okay.

And [over] [ph] it was zero in the fourth quarter of 2013. And then Scott, just to add to that, the other item to look at and we certainly measure very closely is endorsement premium as well. So both the personal and the commercial line side you see endorsement activity where our vehicles and properties are being added for schedules and I think that's also been a nice favorable trend for us over the last couple of years.

Okay. And then anything you can share on some of the early claim accounts that you're seeing from the winter storm, so we can know -- New England and some of your states in New York and New Jersey, but if there was any detail you had on that early on?

No detail on this line, obviously it's pretty early in the process.

The one thing I would point out on that was having at least in New Jersey and New York and states of emergency that were declared, certainly maintained or roads were clear, so in terms of auto accidents and other things, there weren’t a lot of people out on the road. So that was a major benefit in terms of reducing our auto frequency.

Yes, well -- but also the storm could have been a lot worse in a lot of places too, but -- and then the other thing I just…

Remember, don't write personal lines in Massachusetts.

Right. Yes, okay. And then just last question on Personal Lines, I think you guys talked about just how the over the past few years, the fine and monoline homeowners you've kind of been reducing that -- that's been reduced a little bit just because of the -- you're certainly not renewing those. Just wondering how -- I guess it sounds like you're pretty much done with that and then if you could touch on that and then just the Selective Edge product, what kind of -- when exactly was that launch and what kind of early reception you're seeing there?

Scott, this is John again. So on the targeted non-renewals, strategic non-renewal arising from the dwelling fire line that is largely complete at this point. So don't anticipate a significant impact, which -- New Jersey is the one state that will continue a little bit into 2015. But we see a much more normalized retention because the impact there will continue to be diminished and I would say the same thing applies to some of the targeted monoline home non-renewals in particular that really could happen in 2014, but we don't anticipate a significant impact going forward. So that's the retention side of your question. With regard to the Selective Edge, that wasn’t that launch on January 1 in 10 of our states and the remaining three states have been improved and they're finishing up the programming and they'll launch in the first quarter. That's really designed to provide some coverage enhancements and additional charge, but coverage enhancements for the consumer that's going to package up and buy both the auto and home from us, we've gotten very positive feedback on it. I think the only reaction has been very good by our agency partners and we think that's going to really help us target the customer that we really believe is a great fit for us from a value proposition perspective and the customer who doesn’t necessarily view the personalized product as a commodity. And we think those opportunities are up and down the wealth scale. This is not just a high net income target. We think there are folks in that consultative buyer category up and down the wealth spectrum.

All right. Appreciate the answers, thanks.

Thank you. And at this time, I am showing no further questions. [Operator Instructions] I am showing no further questions.

Okay. All right. Just want to make sure no one punched in later. All right. So thank you very much for your participation and if you have any follow-up questions, please contact Dale or Jennifer. Thank you very much.

Thank you. That does conclude today's conference. You may all disconnect at this time.