Welcome back everyone to the Bank of America U.S. Insurance Conference, the last virtual U.S. Insurance Conference I hope to have. We have something a little bit different here. Traditionally, we love to talk to Hanover and Selective separately. They both have very interesting stories, and hopefully you'll get to hear those stories in breakout sessions. Given that both of these companies are trying to find the best strategy for engaging middle-market customers through a regional going national strategy, we felt they have a lot in common, a lot different, and we thought it would just make for an interesting opportunity to get them in a room together. Both Hanover and Selective are covered by my colleague, Grace Carter. I want to turn the mic over to Grace for a second, to introduce our esteemed colleagues here who are going to give us all the good answers. Then we'll have questions. Grace, why don't you introduce our speakers? Sure. We have John Marchioni, the CEO of Selective, and Jack Roche, the CEO of The Hanover, with us today. I guess we'll go ahead and get started. The first question for y'all is on differentiation, how you differentiate yourself versus peers for your agency partners and for your customers, and just if you want to say anything about your unique value proposition. I'm happy to start, Jack, if that's okay with you. Go for it. Sure. First of all, thank you for hosting this. It's a great opportunity. I look forward to a great conversation with Jack, always appreciate this conference. It's always a great lineup for us, so thank you for that. Just in terms of how we try to differentiate ourselves in the market, clearly, I think we're in a business being a highly fragmented and pretty mature industry, that it could be difficult to differentiate yourself. From our perspective, we would cite a handful of competitive advantages that collectively make us unique. I think any one of these is probably replicated by one or more of our competitors, but the collection of them is what we think sets us apart. The first one is we do have a unique operating model, our philosophy is to put our underwriting resources in close proximity to our agents and our customers. We think that provides value for agents in that they have somebody in their office who can actually get business written, we think it benefits us from an underwriting perspective through local knowledge of the producer, and they're up front underwriting. That would be the first point. Second point, I'm sure we'll talk about this later, is our ability to not only develop but also integrate into our workflows and processes, sophisticated tools and technologies to really help in risk selection and pricing and claims adjudication. The third advantage that we would cite is a franchise distribution model, what that means from our perspective is deep relationships and material relationships in terms of where we sit in an agent's list of companies with a small group of high-caliber partners. The fourth we would cite is just a constant focus on delivering a superior omnichannel customer experience and claimant experience. What we mean by that is giving customers multiple options to engage with us, making sure that level of experience across all of those engagement channels is consistent, and they can seamlessly navigate across those channels. The fifth, and I think this is probably underappreciated by some, which is our belief that having a very highly engaged and aligned team of top-notch employees to really execute on our strategy and engage our customers and engage our distribution partners is a big point of differentiation. Let me just close. I mean, with that as the context of how we think we separate ourselves, I think we need to recognize that this is a business where if you're going to succeed long term, you've got to get the fundamentals right. You've got to execute the fundamentals day in and day out. Those fundamentals are exposure analysis, pricing for the risk presented, and the controls around those exposures, getting claims adjudicated quickly and a good claimant experience, and making sure your employees are supported and have the tools necessary to do their job. Let me pause there and turn it over to Jack. Yeah. Thanks, John, and special thanks to Grace and Josh for having us today. I think this is a unique opportunity to present it a slightly different way. We have a lot of respect for Selective, having the opportunity to have an interchange and answer some questions with John is certainly a pleasure. I would say that for Hanover, as we articulated in our recent investor day, we believe we have a very unique agency partnering approach that combines some real relationship management and point-of-sale connectivity with advanced analytics around the marketplace, around how business is placed, how that placement is changing over time, and providing very substantial benchmarks to agents, whether they're acquisitive or whether they're trying to go it alone and survive and thrive as an independent agent. That partnering approach, working with a select number of agents around the country and giving them real consultative value based on the ability we have to work with the best agents in the industry, I think is at the tip of our spear. We combine that with a set of distinctive and diverse products and capabilities that I think are quite robust and equal to many of the national companies that we work with. Now, I'll admit, we tend to play in the small to mid-size space value, but across personal lines, small commercial, small specialty the lower end of middle market, we have, I think, one of the broadest sets of products and capabilities, and on the commercial line side, a national footprint today. We are truly, I think, an emerging national with robust capabilities that, combined with that agency approach, make us very unique and attract a lot of the best talent in the industry to our franchise. I think as you heard Bryan Salvatore in particular talk at our investor day, from a specialty standpoint, we've built out over $1.3 billion in dedicated specialty businesses that nicely complement our core commercial businesses that in and of themselves are very unique. That combination of capabilities and ability to generate profitable returns in a broad-based way, I think, are really starting to show evidence of a very solid strategy. Last but not least, as John articulated, this game is all about talent. I'm very proud of the fact that we have attracted some of the best talent in the industry to this firm, and we've generated what I think is a very unique culture that continues to develop and continues to build. Particularly in this competitive environment for employees, we're very proud of the fact that people that work here today are embracing that culture, but folks continue to want to come to work for this company because of our progressive culture. John, you were named CEO in February 2020. Now, you had obviously had several years as COO prior, and arguably your first job was to deal with COVID in the new role. What did you learn about management? What did you learn about how the businesses should operate? I mean, certainly, Jack, you went piping hot on COVID, too, but given the suddenness of everything with John, you might have some interesting executive opinions on leadership and whatnot. Needless to say, it wasn't how I drew up my first two years in the role. We all need to flex and learn, and clearly, the pandemic environment presented an opportunity to get about 10 years of experience in two years. From that perspective, I think it ultimately winds up rewarding in many ways. From my perspective, I think the big learning here, and I think this happens regardless of the environment you're in, but clearly, when you're in an environment of uncertainty and concern, visibility and communication is important. From my perspective, and I think our entire leadership team perspective, we felt like that was an important way for us to put our employees at ease and equally so to put our agents at ease, that we were going to be here, we were going to support them through this challenging and uncertain time. I think that communication continues to be a big part of the culture, that transparency. We've always strived on having an accessible and a visible leadership team in the organization, and we've worked hard to maintain that through the pandemic environment. Now, I think Jack might be in a similar situation to us. We were in a good spot because about a third of our employees were remote pre-pandemic. As a result of that, we had a lot of the collaboration tools in place. We had a lot of the skills in place in terms of how to manage and lead diverse teams remote in terms of geographic location. I think we've only accelerated the utilization and the capabilities of those collaboration tools. The other learning is, I think many of us weren't prepared with a lot of virtual tools and digital capabilities for customers and agents. I think the adoption of those tools was naturally increasing, but I think they clearly accelerated everybody's comfort level with using a lot of those platforms, which I think will be a positive, lasting effect that'll help from an efficiency perspective. I think clearly the challenge coming out of the pandemic is everybody recognizes that we're moving into a different work environment, whether more remote or hybrid. I think we need to recognize that how you maintain a winning culture in an environment where everybody is not together as much as they used to be takes effort. You've got to be fairly particular about how you maintain that level of engagement with employees. That's something we spend a lot of time on. I think the other consideration, clearly, is this has been a highly uncertain frequency and severity environment from a loss experience perspective. I think it's a fair assumption that some of that change in frequency and severity patterns might be more permanent. I think the hybrid working environment is clearly one that will impact driving patterns on a more permanent basis. There are a host of others, such as the dramatic increase in online shopping, which may change how retail operations appear from a loss experience perspective. I think there's some positives coming out of this that we learned. Certainly from an employee engagement perspective or from a leadership perspective, I think we've all needed to flex our style and really maintain a really high level of engagement with employees. Grace, you want to try and give us something different to Jack? Sure. We've seen a lot of companies increase their investments in tech and data analytics over the last few years to enhance their underwriting activities as well as just operating efficiencies. Would you like to speak a little bit about y'all's investments and just if you think that maybe having smaller scale than some national peers makes a difference? Yeah. Thanks, Grace. Listen, this is truly an exciting time from a technology, data, and analytics and really transformation more broadly. I think the better companies and the folks that truly have a great culture should be advantaged in that folks need to come up with new ways of doing business and purposeful ways of using technology and data analytics and new tools in order to advance the business. As John said earlier, this is a very fractured business, both from a distribution standpoint and from a customer placement standpoint. This is complicated. This is not something where somebody could come in just because they have scale and redefine how work is done, because no one carrier has enough throw weight to change the way agents operate or the ways customers will experience insurance. We've seen that to some degree with some of the early innings of some of the Insurtech influence. At the end of the day, I think to the heart of your question, Grace, I actually feel, and this sounds maybe a little bit naive, but I believe it to be true, that companies that are mid-size, that have enough capital and investment capability and talent to think about what it is that can change, that will increase operating efficiencies, potentially lower loss ratios, and mitigate losses, and help agents redefine the way the customer experiences insurance, can be greatly advantaged. Frankly, companies six, seven, eight times our size are more challenged in order to be agile, to think about how they're going to redefine that. I'll just speak for our company. We get the pleasure of working with the best agents in the country and having a bit of an open book test in terms of how they're placing their business and how we can help them advance their strategies, not just advance ours. I think that intimacy, combined with agility and the ability to invest a lot of money, and you saw at our investor day, we have not been shy in investing ahead towards the future. I feel like we're anything but disadvantaged against some of our larger competitors as the business transforms. Grace, if I could just add a couple of points, because I think Jack made some excellent points, and I agree with every one of them. I actually think we're both in a situation that's beneficial. The way I would describe it is we operate like regional companies being relationship-focused and people-focused, but we support that with the tools and capabilities of our national peers. I think the ability to combine those two dynamics does in fact give us great advantage in the marketplace. We are not at a meaningful information scale disadvantage to our larger competitors. I tried to accentuate the point earlier. It's not just about your ability to build tools, it's about your ability to integrate them into the workflow. We have to remember that while there are certain portions of the business that we participate in that are entirely automated, the decision-making process, a lot of what we do is not. These tools are really designed to give better information to our decision makers, our knowledge workers in underwriting claims and safety. I think as Jack pointed to, we're a lot more nimble in our ability to actually take those tools and integrate them without creating a lot of friction for employees, or friction for agents, or friction for customers. I do think that gives us a distinct advantage. Can we talk a little about distribution? I guess I'll have John start. Look, there seems to be consolidation in the distribution markets. It's kind of hard to track given different definitions about what is middle market, what is small market, what is large market. What advantage do you have to be the winner as a market consolidates? Do you see that? Are we correct identifying, yes, things are consolidating? Yes, they are consolidating and consolidating meaningfully. I think it's important to understand the dynamic of how this consolidation actually operates in the market. I think the vast majority, if not all of the consolidators, and we refer to them as consolidators, but there are many variations of how they're funded and how they operate and how they integrate acquired agencies into their platforms. In terms of what we see in the marketplace, decision-making, especially on the upper end of small and middle market, is still done office by office. The producers are still the ones that control the business. Your ability to provide those producers a consistent outlet, I think continues to be a success point. I think the benefits of this consolidation, however, is it gives us an opportunity to plan corporately with the leadership of these consolidators, but you still have to execute locally. I think that's something that we certainly are positioned to excel at. I know Jack emphasized this point earlier, whether it's a consolidator or a traditional independent agency, I think we're positioned on both fronts extremely well. Now, I'll say, at least in our instance, because we're in the process of expanding geographically and we continue to appoint strategically in our existing footprint, having a reputation with some of these consolidators has actually given us a leg up in some of our new states because you're not just coming in there as a new entity without a lot of experience or reputation. I think from that perspective, it certainly helped. There's nothing to indicate that this pace of acquisition is going to slow down. I think ultimately, though, the winners amongst the consolidators are going to be those that figure out how to leverage the scale that they've built to create customer value. I think one of the ways that they're trying to do that, and I think it's a good alignment with how we're set up, is they're trying to leverage the expertise they have in different industry verticals, and our ability to align with those industry verticals, I think also creates opportunity for us. Yeah, Josh, I would just build on the fact that there's no doubt that the consolidation that's happening on the agency side of the business is turning into consolidation of the business itself. We have a lot of data and evidence that we share regularly with agents about personal lines, small commercial, lower end of specialty. It is clearly moving to fewer and fewer markets that not only models to help agents become more efficient and better serve their customers. Over the last decade and a half, what is clearly obvious is that Customer service has actually eroded through that consolidation. Agents have been more focused on M&A and getting integration within their operations, and we see clear evidence that one of the implications of that is there's less touch with the smaller customer. A deliberate part of our strategy is to help them acknowledge that and to start taking meaningful steps towards using these new tools and capabilities in our operating models to get back to the business of serving customers. I see that accelerating. One thing's for sure, as agents consolidate, they get more strategic with their flow businesses and more operationally savvy over time. It takes a while, but they are clearly getting more operational, and that lends itself to our business strategy. Thanks. Grace. The next question, we'll start with Jack. We've seen some large players take some enhanced interest in small commercial here lately. I was wondering if you could talk about, just the evolution of the small commercial marketplace over time and where you see it going forward and what you see as your competitive advantages to defend and grow share in this environment. Yeah, listen, I couldn't be more bullish on small commercial and our ability to continue to win and succeed. I think that comes from, it's an attractive sector as people know that if you do it well, you can make good margins. If you look at it analytically, a lot of folks have come and gone in small commercial and not found that they can get the secret sauce. The secret sauce to me is knowing how to underwrite efficiently, knowing what information actually is leverageable to enhance loss ratios so that you can be as efficient as possible. You've seen markets try to be super efficient, but underestimate the value in some of that underwriting information and how to triangulate data. You've seen others who are trying to play in the old game of relationship and local business accumulation and lack the sophistication that's required to play in small commercial. I think what makes us unique is that the larger companies tend to be BOP account writers in their point of sale systems and write very little of the kind of non-point of sale CPP accounts. The regionals tend to be the opposite. They tend to write a lot of the non-point of sale business that they can get to, a little bit larger in size, but doesn't require them to be as invested in all the new technology and data and analytics. We present, I think, a broad-based offering across all of that and small specialty with nine businesses into the specialty. What I think is causing us to get increased share and certainly, strategic time with the biggest and best agents in the country is the breadth of that offering and the ability to generate really good returns, so we don't have to be as volatile with our pricing that some of our larger competitors have been. I'll just add a couple of additional points because once again, I think Jack, I would echo his sentiment here. The power of incumbency in small commercial is pretty meaningful. We're all focused on making sure our systems continue to improve and we streamline the process as much as possible. Having a high degree of knowledge around working with us that's developed over years with those individuals who place the business, is something that has some real staying power. I think Jack hit on another important point. We tend to talk about small business as though it's this large homogeneous group of accounts, less than a certain premium volume. It's a lot more specific than that. There's certainly micro business, minimum premium accounts. You can write professional offices with contents only and put those all through underwriting templates and pricing templates without a lot of human intervention with really good technology. I think we all do that. Now you talk about some of these accounts that might have a low premium, but have a lot more complexity. It's not the premium that we think about, it's the limit we're exposed to. If you're going to write small contractors, you need to make sure that you can evaluate that exposure in terms of how they manage their contracts, as an example. Are they assuming risk? If you're writing small restaurants, what's the exposure? How is that exposure controlled? I think Jack's point about small business, there are subsegments of it, some which are in fact maybe more likely to be disrupted if you're talking home-based businesses or the true micro accounts. There's a lot more underwriting necessary in a lot of what makes up that small business market. I think our ability to thrive across the different iterations within small is something that's an important competitive advantage. John, I just want to say thank you for the change of format here. You've always used our conference as an opportunity, or Select has always used as an opportunity to talk about your head guidance and what to expect. I also want to give you that opportunity to talk about how you think about the assumptions behind your guidance, and what do you think the risk factors are for upside and downside? Yeah, sure. Thank you. We provided our guidance for the 2022 year and talked through sort of a reconciliation like we typically do from the underlying 2021 results to the 2022 guidance. What you see there is when you strip out all the moving pieces and normalize the 2021 year is you see a relatively stable underlying combined ratio. I think as we highlighted on the call, and I know this generated an awful lot of interest, was we did increase our forward loss trend expectation from 4% to 5%. Without getting too deep into a discussion around loss trend, which would probably take us a full couple of hours between Jack and I to cover the topic. This is not about us thinking differently relative to actual historical loss trends or real actual changes in frequency and severity. This is us saying we all recognize that economic inflation has increased, and that impacts part of our business more than other parts of our business. That is embedded in our stance that we've taken to increase our forward loss trend from four to five. We also pointed to two other factors that are somewhat uncertain. We all recognize in our own loss trend, historical loss trends, a little bit of a shift relative to social inflation trends that I think we're all waiting to see how those reemerge once the pandemic fully lifts. We also have to recognize that we're not just looking at the most recent prior accident year, we're looking at the last several accident years, as we always do. The last two have presented a very different frequency and severity pattern driven by the pandemic. The question becomes the frequency benefit, which at least from our perspective, and I think many others have acknowledged the same. While frequencies have bounced back from the low points of 2020, in many lines, they're still a little bit below where they were pre-pandemic, and in part that's being offset by some higher severities for those same accident years. I think the question becomes, do frequency patterns ultimately revert back to what they looked like pre-pandemic? If so, do the severity patterns also reset? In other words, were the claims that dropped out of the system in the drop in frequency, were they a lot less severe claims? As frequencies come back, do severities normalize? I think those are the uncertainties we've pointed to. I think the upside potential here is if economic inflation doesn't persist through the balance of this year and into next year, maybe there's some upside potential there. If social inflation trends don't revert back to the trend that we saw pre-pandemic, there's some potential upside there. We might, as I mentioned earlier in my commentary, some of the pandemic frequencies that we saw might remain. We might see some frequency benefits persist even as the economy is fully reopened. I think those are the upside opportunities. Obviously the reverse or the inverse of those would be some potential downside risk. I say we've all seen in our careers patterns or times of uncertainty. This one happens to be driven by the pandemic and inflation. This is what we do. This is a big part of the planning discipline we all have. We'll see how this plays out. Ultimately, in our 2022 guidance is assumed 1 point increase in our forward loss trend. Yeah. Maybe I'll just take one minute to build on that and say that we too are very excited about 2022. We're focused on continuing on our strong track record of consistent top quartile type returns and growing our business as the environment makes that conducive. We feel particularly good about the guidance that we provided on the fourth quarter call around our combined ratio range, x CAT, and how that's a slight improvement over the 2021 guidance. To John's point, this is a business. I've been doing this for 36 years, and I think folks understand now that the predictability of loss trends, trying to forecast where pricing is going to be is a bit of a fool's errand. What you need to have is a healthy portfolio and clarity about how those trends are emerging in a team that is both cautious about things that are uncertain but opportunistic when they build confidence around certain profit pools or certain trends. I think our personal lines strategy is the perfect example of how we resisted the temptation to get into a price war, continued to generate substantially good returns. Our team is poised to capitalize on what we see as a firming market throughout the remainder of this year. That takes skill, it takes integrated thinking, and that's representative of, frankly, how we work across our entire enterprise. Whatever trends we think they are going to be, they're going to be different. We can forecast until we're blue in the face. What we need to be is on our toes and healthy and able to capitalize on those opportunities. That's really, I think, what both companies, frankly, do well. Great. Grace, why don't you go ahead? We'll start with Jack on a question on growth. With pricing rising in most lines of business, where do you think are the most attractive growth opportunities right now? If you could just walk us through how you think about organic growth opportunities versus where inorganic opportunities might be preferable. Yeah, I guess building off my last comment, we're particularly proud of the fact that we have some pretty good profitability across all major sectors of our business, and so that positions us well. I also look geographically, and we're in the best position we've ever been to grow thoughtfully in most of the geographies that we are located in or doing business in. I think those that have followed us know that we rebuilt this company on a good blend of inorganic and organic growth. Organic growth, including building out specialty businesses with talent-led strategies, but real thoughtfulness about how you build those in a way where you build the right operating models, you get the right claims expertise. With all of that, we're particularly bullish on the environment around specialty commercial because of the hard work we've done and the profitability we've created, and the distribution trends that I think are making it even more accessible to us direct to retail. We'll complement that with some wholesale relationships, but those relationships have to be partner-like. We're not getting in line. We're not an opportunistic company. We're a thoughtful, strategic company that goes after desirable profit pools and does what it takes to win that business with the best agents in the country. I'm hopeful, Grace, that we will get back to some of that inorganic, small base value capability type acquisitions. The inventory is a little bit thinner than a decade ago, and we're disciplined. We're not going to grow inorganically just for the sake of getting a little bit bigger. We have strict criteria that we use on our M&A work, we'll continue to embrace that. My guess is the environment starts to be a little bit more frothy for some targeted M&A going forward, I promise you, we won't be asleep at the wheel if those opportunities present themselves. I guess that's a good transition, M&A into capital deployment. I think that there's a general view that financials are cheap. Some people think insurance is particularly cheap. I'm sure that you think that your stocks are a good deal for shareholders at this point in time, That totally makes sense. The question comes, how much internal capital are you generating, Is the best use of that capital right now growing your underwriting footprint or, as you said, maybe there's opportunity for a strategic bolt-on at this point in time? I guess I'll let John answer first, I certainly want to hear from you both on that matter. Sure. I know we're running tight on time, I'll try to be brief to leave a few minutes for Jack on the topic. We obviously continue to view investing in our core business as the best opportunity to deploy capital. We generated north of a 14% ROE in 2021, we've, over the last eight years, delivered double-digit ROEs that average across that eight-year timeframe just under 12%. That's a really strong performance. From our perspective, we have great runway to continue to generate the kind of growth we've been generating. That'll be our primary area of focus. We really talk about it in terms of sustainable growth rate, that's the growth rate when you look at our current returns and assume our 25% target payout, dividend payout ratio, that we can continue to grow without impacting our operating leverage. Our operating leverage right now at just over one three is a little bit on the low end. That would put a sustainable growth rate at about 8%-9%. We've got a lot of opportunities to support additional growth. We do have an active share repurchase program that we have approved at $700 million. There's a little over $96 million left on that, We're deploying that in a very deliberate way where we think it generates the right returns at the right price points. Yeah. Listen, I think a similar story in that when you generate good, steady returns and you're growing your business, you're going to generate capital. It's a high-class problem on whether you use it to continue to grow in a thoughtful way. First and foremost, our capital is available to grow the business. Right now we see, as we articulated in our 5-year forecast, we see opportunities for good, steady growth over the next several years, and we plan to use a good portion of our capital that we're generating to do that. We hope, like I said, there'll be some small inorganic opportunities to complement the organic growth that we've kind of laid out. I also think we have a pretty strong track record. Our investors trust us with their money. They understand that we are ambitious, but not so much so that we do anything that's radical. When we have capital that we can't deploy in a reasonable amount of time, we return it, and we return it in a thoughtful way. I think as we go forward in this year, we'll see how that growth continues to develop, and we'll be selective. We have a repurchase plan outstanding, and we're planning on balancing that act and hoping that the growth is the lead use of our capital. Well, I'm going to call it short here. Not short. We're running a little long. There's a lot of interest, given the amount of people who are on this call right now. I know that you guys have a lot of meetings today. Grace, you want to say something to take us out? Sure. Thank you all for joining us today. We really appreciate it. It's been a really interesting chat, and just thank you. It's been fun. Thank you both. Appreciate it. John, always a pleasure, John. Everfi coming up next, everybody. Thank you. Take care.