Selective opened 2026 with a solid first quarter, generating a 12% operating ROE (its seventh straight quarter of double-digit operating returns) on fully diluted EPS of $1.58 and non-GAAP operating EPS of $1.69, with after-tax net investment income of $113 million, up 18% year-over-year. The GAAP combined ratio was 98.3, including a seasonally elevated 6.2 points of catastrophe losses, but importantly there was no prior-year casualty reserve development at any segment or line, and the 92.1 underlying combined ratio remained within the full-year 90.5%-91.5% target. Management prioritized underwriting margin over growth, so net premiums written declined (Standard Commercial down 1%, Personal Lines down 6%) even as it pushed renewal pure price increases near 12% in commercial auto and around 10% in general liability, deliberately shedding underperforming cohorts while retaining its best accounts. Selective reaffirmed full-year 2026 guidance of a 96.5%-97.5% combined ratio and $465 million of net investment income, and highlighted early, measurable results from AI tools in claims and underwriting.
Good morning. Thank you for joining Selective's first quarter 2026 earnings conference call. Yesterday, we posted our earnings press release, financial supplement, and investor presentation on the Investors section of selective.com. A replay of today's webcast will be available there shortly after this call. Joining me are John Marchioni, our Chairman, President, and Chief Executive Officer, and Patrick Brennan, Executive Vice President and Chief Financial Officer. They will discuss results and take your questions.
During the call, we will reference non-GAAP measures used by insurance and investment professionals to evaluate financial and operating performance, including operating income, operating return on common equity, and adjusted book value per common share. Reconciliations to the most comparable GAAP measures are available in our financial supplements on our investor relations page. We will also make forward-looking statements under the Private Securities Litigation Reform Act of 1995.
These statements and projections about future performance are subject to risks and uncertainties that we disclose in our SEC filings. 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. We delivered a solid start to the year, demonstrating the strength and consistency of our operating model in an increasingly competitive market. Our reserves remain stable across all insurance segments and lines of business, and our underlying profitability reinforces our confidence in achieving our full-year guidance. As the industry continues to wrestle with elevated commercial casualty loss trends, we believe our efforts over the past two years have us well-positioned moving forward.
We generated an Operating ROE of 12%, consistent with our long-term target. This was our seventh consecutive quarter of double-digit operating returns, which reflects disciplined execution across all our operations. As we've emphasized in prior quarters, we continue to prioritize underwriting margins over top-line growth. Our pricing posture on commercial casualty in both Standard Commercial Lines and Excess and Surplus Lines fully reflects our view on current loss trends.
Despite ongoing industry-wide reserve pressure in this segment, market pricing, particularly in other liability occurrence, has not adjusted upward. As a result, our premiums declined 1% year-over-year, with E&S up 1% and Standard Commercial Lines down 1%. In Standard Personal Lines, premiums declined 6%, while our target mass affluent market business grew by 1%. We believe heightened discipline is essential in today's environment. Across the industry, social inflation continues to pressure recent accident years, particularly in General Liability, Commercial Auto liability, and umbrella.
Based on historical patterns, this could imply further deterioration in run rate industry profitability. In contrast, we believe our planning and reserving processes have been responsive to these trends, and we have taken meaningful action to ensure our assumptions remain aligned with emerging data. Our view of loss trends is integrated into our pricing strategies and underwriting decisions.
This allows us to have conviction about where we write business and where we step back. In General Liability, for example, we have delivered renewal pure price increases in the 10% range over the past seven quarters, even as industry surveys show mid-single-digit rate increases. In Commercial Auto liability this quarter, we delivered renewal pure price increases approaching 12%. This discipline is impacting our competitive positioning on certain casualty-oriented accounts, but we do not believe pursuing inadequate casualty returns will create long-term value.
While taking these deliberate, disciplined actions amid increased competition, we are fully committed to the long-term opportunity to meaningfully expand our market share. We continue to execute on expanding our standard lines geographic footprint, and we remain focused on growing with existing agency partners and strategically appointing new agency locations within our existing footprint. We are also seeing positive shifts in our portfolio mix.
Our relative exposure to contractors has declined within our new business mix, reflecting our efforts to diversify and improve margin durability. Contractors remain an important industry vertical for us, and we maintain differentiated expertise in serving them. However, a more diversified portfolio positions us better for long-term performance. On renewals, we have the tools and operating model to continuously improve portfolio quality, taking appropriate and granular rate actions.
This results in lower retention on underperforming cohorts and stronger retention on well-performing accounts. The expected loss ratio benefit of these mix improvement actions accelerated over the course of the quarter as we leveraged this capability more meaningfully. We believe these actions, combined with the continued earning of strong renewal pricing, are appropriate given our market context and will drive improved underlying margins over time. We continue to invest in capabilities that support scale, diversification, and profitable growth.
Artificial intelligence strategically enables these efforts. Early AI achievements in claims, underwriting, and risk management are delivering measurable outcomes in accuracy, speed, and productivity, positioning us to responsibly scale AI across the organization. A significant portion of our strategic technology investments in 2026 is focused on improving risk selection, pricing accuracy, and productivity. While we have deployed many AI tools and are evaluating more, I would like to highlight two that are having a meaningful impact in driving better, more consistent outcomes, while also improving productivity. Our AI claims ingestion tool has processed more than 500,000 documents, letting our adjusters focus on higher value work. We also have deployed automation to support evaluation of contractual risk transfer adequacy, a key element of the underwriting process for contractors. With over 90% of results returned by the tool within two minutes.
These tools are supported by a governance program with a cross-disciplinary AI and model governance committee and a focus on human-in-the-loop engagement for AI outputs. These safeguards help us drive accuracy, quality, and trust as we scale AI responsibly across the enterprise. We are excited about the opportunities ahead and confident in our ability to execute with discipline. Now I'll turn the call over to Patrick.
Thanks, John, and good morning. For the quarter, we reported fully diluted EPS of $1.58 and non-GAAP operating EPS of $1.69, resulting in an 11.2% ROE and a 12% operating ROE. Our GAAP combined ratio was 98.3, including 6.2 points of catastrophe losses. Importantly, we had no prior year casualty reserve development at the segment or line of business level. We're pleased with the stability and will continue to evaluate emerging data with rigor and discipline. Our underlying combined ratio was 92.1. As a reminder, the first quarter typically runs a higher combined due to normal seasonality, and we expect our full-year underlying combined ratio to fall within our original 90.5%-91.5% range. Standard Commercial Lines net premiums written declined 1% as lower policy counts offset 7.1% renewal pure price increases and stronger new business pricing.
We remain disciplined, focusing on growth in areas that meet or exceed our risk-adjusted hurdles and support our business mix diversification goals. Our first quarter General Liability underlying combined ratio was 2.3 points higher than full year 2025, as we continue to embed elevated severity growth into our assumed loss trend for the line. In Commercial Auto, the underlying combined ratio for the quarter was 98.0%, 1.1 points better than full year 2025, driven by lower non-catastrophe property losses.
Commercial Auto liability picks remain consistent with full year 2025 as earned renewal pure price continues to offset severity pressures. Excluding Workers' Compensation, renewal pure price increased 8%. General Liability pricing increased by 9.8%, and Commercial Auto pricing increased 9.1%, up 50 basis points from the fourth quarter. Auto liability price increases approached 12%. Property renewal premium increased 10%, including 3.7 points of exposure growth.
Retention was 82%, stable with recent periods, but down 3 points from a year ago due to pricing and underwriting actions to improve profitability. We are intentionally driving higher point of renewal retention on our best-performing accounts and meaningfully lower retention on underperforming businesses. These actions accelerated through the quarter and should contribute to improved underwriting margins in Standard Commercial Lines going forward. Excess and Surplus Lines premiums written grew at 1% in the quarter, with average renewal pure price increases of 4.1%. We continue to push higher rate levels in E&S casualty based on our view of General Liability loss trends. Property pricing was slightly negative, reflecting heightened competition and strong margins. The E&S combined ratio was a profitable 89.5%, 3 points better than a year ago.
In Personal Lines, the combined ratio improved to 92.8% for the quarter from 98.0% first quarter 2025 and 100.6% for full year 2025. Results are even stronger outside of New Jersey. Personal Lines net premiums written declined 6% year-over-year, with target business up 1%. Nearly all new business came from our target mass affluent market. Renewal pure price was 10.6%. Turning to capital management, we continue to prioritize profitable growth and aim to return 20%-25% of earnings to shareholders through dividends. We also consider repurchasing shares when our capital position and stock price make it attractive to do so. During the quarter, we repurchased $30 million of common stock, building on the $86 million we repurchased in the full year 2025. At quarter end, $140 million remained on our authorization.
We will continue to balance opportunistic repurchases with maintaining capital to support profitable underwriting and investment opportunities.
After-tax net investment income was $113 million, up 18% from a year ago, generating 13.3 points of return on equity. Our portfolio is conservatively positioned with an average credit quality of A+. We modestly extended the duration of our fixed income portfolio to 4.3 years to support the durability of our book yield. Turning to guidance, we are reaffirming the guidance we communicated in January. For 2026, we expect to see a GAAP combined ratio between 96.5% and 97.5%, assuming six points of catastrophe losses. As a reminder, our forward guidance assumes no future reserve development as we book our best estimate each quarter. We continue to expect after-tax net investment income of $465 million.
Our guidance assumes an effective tax rate of approximately 21.5% and a fully diluted weighted average share count of approximately 60.5 million, which reflects first quarter share repurchase activity but does not make assumptions about future activity. With that, operator, please start our question and answer session.