Good day everyone. Welcome to Selective Insurance Group's First Quarter 2020 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 everyone and welcome. We're simulcasting this call on our website selective.com and the replay will be available until June 8, 2020. Our supplemental investor package, which provides GAAP reconciliations of any non-GAAP financial measures referenced today, also is available on the Investors page of our website.Today, we will discuss our results and business operations using GAAP financial measures that also are included in our filings with the annual, quarterly and current reports filed with the U.S. Securities and Exchange Commission. Non-GAAP operating income, which we use to analyze trends in operations and believe it makes it easier for investors to evaluate our insurance business. Non-GAAP operating income is net income, excluding the after-tax impact of net realized gains or losses on investments, unrealized gains or losses on equity security and debt retirement costs related to our early redemption of debt securities in the first quarter of 2019, and statements and projections about our future performance.These forward-looking statements under the Private Securities Litigation Reform Act of 1995 are not guarantees of future performance and are subject to risks and uncertainties. For a detailed discussion of these risks and uncertainties, please refer to our annual and quarterly reports filed with the U.S. Securities and Exchange Commission, which includes supplemental disclosures related to the COVID-19 pandemic. You should be aware that Selective undertakes no obligation to update or revise any forward-looking statements.On today's call are the following members of Selective's executive management team: John Marchioni, President and Chief Executive Officer; and Mark Wilcox, Chief Financial Officer.And now I'll turn the call over to John.

Thank you, Rohan, and good morning. I'll make some introductory remarks and then focus on some high-level industry themes and the impact of the current environment on our performance and positioning. Mark will then discuss our financial results, and I'll return to highlight how we remain positioned for continued superior performance.I'll begin with some thoughts on the COVID-19 pandemic, the impact it has had on our business and our ability to serve our policyholders and distribution partners. These are clearly unprecedented times with the outbreak of COVID-19 impacting lives of countless people across the world, resulting in displacement of the nation's workforce, and significant volatility in the financial markets. We owe a wealth of gratitude to the first responders, medical professionals and other essential employees who have worked tirelessly so that we can all be safer and get back on the road to recovery.Selective entered this volatile environment in the strongest financial position in our 94-year history, and we remain well positioned to navigate through these turbulent times. I could not be more proud of how our company and in particular our employees responded to this crisis, continuing to serve our policyholders and distribution partners with the exceptional level of service they have come to expect from us.We have utilized a field-based model for over 25 years, including employees in underwriting, agency management, claims and safety management enabling us to continue to effectively provide our distribution partners with highly responsive personalized service and support, as they are dealing with disruption to their own operations. Our entire company has been responding proactively to service our policyholders and agents, recognizing the challenges they face.Steps we have taken to ease the financial burden on our policyholders, include helping our customers maintain coverage by offering individualized payment flexibility and suspending policy cancellations, late payment…

Thank you, John and good morning. I will start with some more detail on the COVID-19-related items, go through our results, and finish with an overview of our updated outlook for 2020. For the quarter, we reported $0.84 of non-GAAP operating earnings per share and we generated a non-GAAP annualized return on equity of 9.4%.The three COVID-19 underwriting-related items reduced operating income by $19.3 million or $0.32 per share and reduced our annualized operating return on equity by 3.6 percentage points. In addition, these items reduced our net premiums written by 11% and increased our underlying combined ratio by 3.5 points.Overall, despite our operating ROE being below our target it reflects a solid result, particularly in light of the proactive steps, we took in the quarter to robustly model quantify and reflect the negative financial impact of COVID-19.The $75 million return audit and midterm endorsement premium accrual that John highlighted reduced our first quarter net premiums written by $75 million resulting in a 4% decline to net premiums written for the quarter. As to this accrual, underlying premium growth was solid at 7%.The accrual represents our estimate of the full impact of the economic shutdown and the gradual reopening of the economy for in-force worker's compensation and general liability commercial lines policies.Actual audit and midterm endorsement premium adjustments will be reported to us over the coming quarters and these will be taken against this accrual. In addition, we will adjust this accrual up or down during the course of the year as the depth and duration of the economic slowdown and its impact on exposures become fully known.The pretax impact of this accrual after considering premium earnings and reduced losses and underwriting expenses was $4 million. This increased our combined ratio by 0.5 percentage points and reduced earnings by $0.05…

Thanks, Mark. While we continue to navigate a generational economic event, along with our policyholders and distribution partners, we are extremely confident in the strength and positioning of the company. We have consistently maintained a disciplined underwriting appetite and have effectively managed renewal pure price increases, in line with expected loss trend for a decade.Our field-based model, superior distribution relationships and customer experience focus, a strength in any environment, are only enhanced in the current one. Our core competitive advantages have positioned us as a market of choice for our agency partners and our ability to continue to deliver for them and our mutual customers throughout this crisis have further solidified that position.We are cognizant of the economic and health-related hardships that so many people in our country are dealing with and we solute all the essential employees who selflessly go to work each day, so that we can all be safer and still have the basic necessities of life. That said, we will not let the pandemic, market volatility or challenging economic conditions deter us from pursuing our objective of being an industry leader, one that is viewed as best-in-class in terms of product offerings and customer service, while also generating superior returns for our shareholders over time.With that, we will open the call up for questions. Operator?

Thank you. We will now begin the question-and-answer session. [Operator Instructions] We have our first question from Mike Zaremski of Credit Suisse. Mike, your line is open.

Good morning, Mike.

Hi, guys. This is actually Charlie on for Mike. Good morning.

Good morning, Charles.

Good morning.

Good morning. My first question is, how are you thinking about workers' comp profitability being impacted due to the virus, other than top line pressure?

Yes. So, clearly, we've seen a reduction in newly reported claims, with the shelter-in-place orders and a lot of nonessential businesses being closed, that has holistically reduced claim frequency. But as we've talked about in the prepared commentary, we would expect to see some compensable claims and predominantly from first responders and from medical professionals that are working routinely in connection or in contact with COVID-19-positive patients.So that has not materialized as of yet in our portfolio. In our portfolio, remember from a workers' comp perspective, we do have a heavy contractor portfolio. So about 40% of our overall premium and actually just under half of our workers' comp premium is in the contractor segment, which you wouldn't expect to see a lot of COVID-19 claims frequency from that group. But, overall, we would expect to see some loss activity coming through.Comp is a line that, if you looked at us over the last couple of years, you've seen a flat-to-slightly declining top line because of the pricing pressures that have been coming through that line. We've, obviously, benefited in terms of significant improvement in underlying loss ratios and that's continued. But with that pricing pressure and the reduction in exposures that are coming through and that is a big driver of the audit premium adjustment that we made in the first quarter, that will have an impact on profitability going forward.

Got it. Thanks. And then, my second question is, for the instances where you guys are having to deny business interruption claims, is it reasonable for us to kind of expect legal defense reserves to come out of that? And then, if business interruption losses aren't as widespread for the industry as some may have initially thought and we're seeing contractions in business activity, can commercial P&C pricing really continue to accelerate? Thanks.

Thank you. Very good questions. Clearly, and you're already starting to see there is some litigation relative to business interruption coverage. Our sense is, much of that litigation is focused on policies that do not contain the virus exclusion. And as we've mentioned in prepared comments and I'll reinforce again, 95% of our policies across both Standard Commercial and E&S do include a virus exclusion.And I think that's even less subject to litigation challenge than the physical damage, the property requirement, which in our view is also a solid policy form. But I would expect you will see some increased litigation and that will impact loss adjustment expenses. But, again, you want to remember that this is all in the context of the economic downturn impacting frequencies down pretty holistically. So I think that's point number one.Relative to the pricing environment and we did give you, in the prepared commentary, our April pricing, which had 4% and very strong retention in the month of April, I think, suggests that pricing at a reasonable level. And, again, we've really made this point over the last several years with the embedded profitability in our book and our ability over 10 years now, to continue to manage a reasonable level of pricing relative to expected loss trends that we've been able to maintain very strong retentions.And we think that's still reasonable going forward. In April, which was the first real full month of the economic strain that, we've seen, for pricing to remain at that level. We think that's a positive. Also overall profitability, before this crisis, started for the industry, still needed to improve. And as we said earlier, with the continued low for longer investment return environment it's only going to put more pressure on underwriting results.So the underwriting results for the industry needed to improve. We're in a beneficial position, because our core profitability is so strong. But we can't lose sight of the loss trends the normal loss trends which have in fact picked up of late and in our estimation would continue to run around three -- between 3% and 4% in a more normal environment. And I think that needs to be kept track of, as we move throughout this crisis. So we would expect pricing to remain on the trajectory that it's been on for the last several quarters.

Got it. Thank you, that’s helpful. Be well guys.

Thank you, Charles.

[Operator Instructions] Speakers, we have our next question from Sean Reitenbach of KBW. Sean, your line is open sir.

Hi. Good morning. I had a follow-up on the workers' comp issue. We've seen I think more people who are opposed to the -- rightfully so the virus -- legislation on virus exclusion as such. But the reaction to presumption of compensability to more frontline essential workers, beyond health care has been more mixed. Can you guys give your thoughts on that?

Yeah, sure, so I think, as you said, we would certainly not be in opposition to legislation that would expand presumptions to first responders. And to health care professionals that are in close contact with COVID-19 patients. Quite honestly, whether, we're out of presumption those are going to oftentimes be viewed as compensable injuries. And we also need to remember that, for the most part, the frequency of these will be low in terms of the incidence rate amongst working populations.And the average severity on both the medical and the indemnity side will also be low. So I think it's important to keep that in mind. I do think, and again our philosophy in comp and overall is that the unique facts and circumstances presented in every individual claim are going to guide the outcome of that claim.And if you have an employee who was told when everybody else was told to shelter at home that they need to come to work, in order to provide an essential service and that essential service requires them to interact with the public on a regular basis. And that individual tests positive for COVID-19 those facts are more than likely going to result, in a decision that that's a compensable injury and that applies with or without a legislative presumption.Now we do think, it's dangerous for these presumptions to just open up to all essential employees. Because I think, the fact that the individual whether it's a grocery store worker or an individual working at an assisted living facility, I think it's important that the essential employee also had to interact with the public, in order to create that exposure, whereas all essential employees many of which were actually working from home, shouldn't gain the benefit of that presumption.And I think those handful of states that have pursued a very broad presumption would create a much more of a problematic situation for the industry, holistically. But narrow presumptions, we think are reasonable expectations for essential employees who interact with the public.

Thank you. And then, could you guys just compare and contrast what you've seen in your Commercial Auto versus your personal auto book, for frequency and severity trends?

So severity trends are just way too early to talk about. I mean we've got, several weeks of data and that's a line, where your actual severity trends are going to develop over a much longer period. But I think from a frequency perspective, we have seen reductions in both personal and Commercial Auto.I would say and we used this reference in our prepared commentary, it was slightly less of a reduction for Commercial than it was for personal which would make sense, because you still have a lot of contractors. And a lot of other business vehicles on the road. Miles driven might not be the way to look at Commercial, Auto, frequency indicators, because miles driven might be relatively flat for certain business owners.But the amount of traffic and congestion on the road is likely to impact frequency on a favorable basis. So, I'm not going to get overly specific about the reduction in actual claim frequencies. But let's just say Commercial Auto was down. But down a little bit less than what we saw in personal auto.

Okay. Thank you very much.

Thank you. And speakers we're showing no questions in queue, at this time.

Yeah, why don't we just give it another minute to make sure, nobody else wanted to queue up?

Thank you. [Operator Instructions] Thank you. We show no questions, sir.

Okay. Well. Thank you all very much for joining. And if you have any follow-up questions, please feel free to reach out to, Rohan. Thank you very much.

Great. Thank you. Good morning.

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