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Operator
Good day, everyone. Welcome to the Selective Insurance Group's third quarter 2013 earnings release conference 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.
Jennifer DiBerardino - SVP, IR, Treasurer
Thank you. Good morning, and welcome to Selective Insurance Group's third quarter 2013 conference call. This call is being simulcast on our website and the replay will be available through December 2, 2013. 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 today on the call are the following members of Selective's executive management team -- Greg Murphy, CEO; Dale Thatcher, CFO; John Marchioni, President and Chief Operating Officer; and Ron Zaleski, Chief Actuary.
Now, I'll turn the call over to Dale to review third quarter results.
Dale Thatcher - EVP, CFO
Thanks, Jennifer. Good morning. We're very pleased with our third quarter results, as commercial and personal lines pricing remained strong and we continued to execute on our underwriting and claims initiatives.
For the quarter, operating income of $0.42 per diluted share was up from $0.34 per diluted share in the third quarter of 2012, with the improvement largely driven by better underwriting results.
The third quarter statutory combined ratio improved by 2.1 points from a year ago to 96.3%.
Catastrophe losses were $11.9 million pretax or 2.7 points, up slightly from $9.6 million pretax or 2.4 points a year ago. The driver for catastrophe losses this quarter was a series of Midwest thunderstorms, with the largest one, CAT-24, accounting for $7.5 million.
We also had favorable prior-year casualty development in the quarter of $3.5 million or 0.8 points compared to $7 million or 1.7 points a year ago.
Overall, statutory net premiums written were up 9% in the quarter, driven by standard commercial lines, which were up 10% and excess and surplus lines, which increased 20%.
Standard commercial lines renewal pure price was up 7.9% and retention held steady at 83% in the quarter. The commercial lines statutory combined ratio in the quarter was 95.6% including 0.7 points of catastrophe losses. Commercial property generated a 67% statutory combined ratio in the quarter, 14.3 points lower than a year ago, due to fewer large losses.
General liability, our largest line of business, produced a 96.2% combined ratio. This is more than a 4 point improvement from the third quarter of 2012, with 3 points of the improvement coming from favorable prior-year reserve development.
Workers' compensation produced a 118.2% statutory combined ratio in the quarter, which included $3.5 million of unfavorable prior-year development driven by older accident years. We have carefully managed growth in workers' comp and year-to-date through September, net premiums written are up only 4%, which includes renewal pure price of 7.8% as compared to 9% growth and 7.6% pure price in our standard commercial lines book.
Our workers' comp business is written as part of an overall account and not on a monoline basis. Also, I'd like to point out that we don't write workers' compensation in our contract binding authority E&S business.
While our workers' compensation results need to improve, we have a number of initiatives in place to address this line's profitability, including rate increase, that in general, have outpaced our overall loss cost trends.
More importantly, given the contracts of certain industry events of late, it's reasonable to question the quality of any company's workers' comp reserve position. We do a ground-up reserve analysis of every major line of business every quarter. This allows us to quickly react to any reserve issues we identify. As you've seen, we've taken steps as we recognize developing trends in the workers' comp line of business and book adverse development as we felt it was appropriate.
Although we strive to get reserves right by line of business, we also recognize the impossibility of complete knowledge. And therefore, we maintain an overall conservative reserve position. Over the last 17 years, the variability in our reserve development has had a standard deviation of only 1.1%, while the industry has had a standard deviation of over twice that.
Personal lines net premiums written grew 2% in the quarter to $81 million and the statutory combined ratio was 97.6%. Results included 11.7 points of catastrophe losses, which were almost exclusively in the homeowners' line and largely the result of one event that impacted states in the Midwest.
Personal lines pricing exceeded our expectations in the quarter with renewal rate of 7.5% and we continue to see the benefits of our pricing success in underlying results. In the quarter, our personal lines ex-catastrophe combined ratio was 85.9% and year-to-date, we are at 89.9%. Both improved slightly from the comparable 2012 periods.
Retention and personal lines continues to be strong at 86%.
Net premiums written for our E&S operations grew to $36 million in the third quarter, up 20% from a year ago. The statutory combined ratio of 105% included 3.1 points of catastrophe losses. We are pleased with the improvement in our newest segment and are on track for E&S operations to perform in line with our overall goal of approximately a 95% combined ratio in 2014.
Turning to investments, third quarter after-tax investment income was $25 million, up 4% from a year ago. Alternative investments primarily drove the increase, with pretax income of $2.6 million compared to $900,000 in the third quarter of 2012.
Invested assets increased 4% from a year ago to $4.5 billion, driven primarily by increased operating cash flows and the net proceeds from our senior note offering in February.
Operating cash flows as a percent of net premiums written were 17% year-to-date, which compares to 14% in 2012 and 8% in 2011. Partially offsetting these increases was the mark-to-market impact of $122 million on the fixed income portfolio, primarily driven by higher interest rates.
After-tax new money rates of 1.5% in the quarter were lower than our current portfolio yield, which continued to impact our investment income. As a result, the after-tax yields on our fixed income portfolio were down 13 basis points from a year ago to 2.3%. In spite of the decline in fixed income yield, the overall portfolio yield was in line with the third quarter of last year.
Given the pressure on investment income from low interest rates, our 95% combined ratio goal for 2014 will now approximate closer to an 11% ROE than 12%.
In the quarter, we realized almost $9 million after tax of capital gains in the investment portfolio related to a rebalancing of our domestic equity portfolio. Compared to September 30, 2012, the overall portfolio unrealized gain position declined from $211 million to $84 million pretax at September 30, largely due to rising interest rates.
Also of note is the quarter-end unrecognized gain position in the fixed income held to maturity portfolio of $27 million pretax or $0.31 per share after tax. Our overall fixed income portfolio maintains a high credit quality of AA-minus and duration of 3.5 years, including short-term investments.
Surplus and stockholders' equity ended the quarter at $1.2 billion and $1.1 billion respectively. Book value per share at September 30 was $20.16, up 2% from year-end as the negative impact of rising interest rates on the portfolio's unrealized gains has been more than offset by positive net income. Our premium to surplus ratio was 1.5 to 1 at September 30.
In the quarter, we achieved operating ROE of 8.6% and total ROE of 11.7% compared to our current weighted average cost of capital of 8.8%.
Now I'll turn the call over to John Marchioni to review the insurance operations.
John Marchioni - President, COO
Thanks, Dale. Good morning. Third quarter results reflect the success of our underwriting and claims strategies and the exceptional employees and agents we have executing on those strategies. This marks our 18th consecutive quarter for commercial lines pure price increases.
We are successfully deploying our underwriting and pricing tools that provide underwriters with specific policy-level guidance on an agency portfolio basis. Which allows underwriters to target the highest rate increases on the worst-performing accounts while protecting retention on our best accounts.
Year-to-date for standard commercial lines, we obtained 16% pure rates on our lowest-quality accounts with a point of renewal retention of 71%. This represents 3% of our commercial lines premium. We obtained a 6% pure rate increase on our highest-quality accounts while maintaining a solid 89% point of renewal retention, representing 54% of our commercial lines' premium.
As previously mentioned, we achieved 7.9% standard commercial renewal pure pricing in the quarter. And year-to-date is up to 7.6%, right in line with our projection of 7.6% for the full year. Retention also remained strong at 82% year-to-date.
In addition to rate, we separately measure the impact of underwriting improvements to our combined ratio. Currently, underwriting improvements are well ahead of our expectations in our three-year plan.
Our commercial lines growth is largely a result of the success we've had in pricing and a 2% increase in exposure. Standard commercial lines new business improved substantially in the third quarter to $75 million, up 33% from depressed levels a year ago. On a year-to-date basis, new business is up 18% to $217 million.
Our new business opportunities are coming from the long-term partnerships we have with our superior agency force. Much of this business is controlled by our agents, meaning they have a very good familiarity with the accounts they are presenting. We run these agent-controlled opportunities through our new business models, which makes us very comfortable with the quality and pricing of our new business.
While pricing and risk selection on new business remained strong, we have seen an uptick in hit ratios across all three segments -- small, middle market and large accounts. Our strategy to refocus our field underwriters, or AMSs, on middle-market accounts, while pushing small accounts to a more efficient small business team model, is currently paying dividends. Our diversification across industry segments is very strong. And we've reduced our worker's comp writings to 19% of new business in the quarter, slightly below the makeup of our standard commercial lines' in-force book, which is 20% worker's comp.
Year-to-date, our excess and surplus lines, contract binding authority business combined ratio was at 101.9%. Results are tracking in line with our expectations to achieve between a 100% and 102% combined ratio for 2013.
New E&S business is up 23% over the third quarter of 2012 as we are continuing to see business migrate back to this market. Having largely completed the integration efforts of our E&S operations, we are well positioned to capitalize on the growth opportunities in this segment. Though still early, we are seeing increased momentum in driving business from our retail agency partners to our wholesale agency partners. And we expect that to accelerate going forward.
E&S renewal pure price year-to-date is up 6.1% for this predominantly casualty book of business. The same factors influencing the standard market pricing environment are present in the E&S market. And we expect this trend to continue. Improved pricing, combined with our aggressive underwriting actions on targeted segments, have us well positioned to produce consistent profitability in the E&S segment going forward.
Underlying personal lines results in the quarter continue to demonstrate improvement and we are making good progress on our targeted profitability initiatives for both homeowners and auto.
In the quarter, we achieved an overall 7.5% renewal pure price increase for personal lines, while retention remained strong at 86%. Net premiums written were up 2% in the quarter due to rate increases and total policies in force that were up slightly when compared to September of last year.
This increase was partially offset by a shift in business away from Jew Jersey, which is our state with the highest average premium. At the same time, new policy counts are down, as we have generally seen declining close rates while we carefully push rate and work to improve our mix of business.
The statutory combined ratio year-to-date in personal lines remained a profitable 97.6% compared to 98.4% in the comparable period of 2012. While on an ex-catastrophe basis, the combined ratio was 89.9%, an improvement of 90.6%.
We continue to drive profitability in the homeowners' line as we increase rate across the book and make underwriting changes, including raising deductibles to increase cost sharing. Additionally in 2013, we have tightened our underwriting appetite for monoline homeowners. For the nine months, our homeowners line achieved a statutory combined ratio of 98.4%, including 16.1 points of catastrophes and renewal price increase of 10.4%.
For personal auto, we have consistently been getting price increases above loss cost trend, achieving 5.9% year-to-date. We are increasing the geographic diversification of our auto book and have made progress on increasing the age of the book. Operationally, we are very confident in the progress we're making toward our 2014 goals.
Now I'll turn the call over to Greg.
Greg Murphy - Chairman, President, CEO
Thank you, John. Before I give you my perspective on the quarter and marketplace, I'd like to take this opportunity to congratulate John on his new responsibilities as President and Chief Operating Officer. The Board of Directors elevated John to this role as a result of his excellent relationships with our agency force and his efforts to drive our superior underwriting and claims initiatives towards our 2014 underwriting goal.
Our third-quarter results for underwriting combined ratio, renewal price increases, new business growth and retention clearly demonstrate the improvements to our underwriting operations, and are moving us toward successful achievement of our goal for a 92 ex-cat statutory combined ratio in 2014. Renewal pure price increases are at the high end of our previously announced range. And retention has remained strong, an important indicator of market stability.
As we just completed our 18th consecutive quarter of renewal pure price increases, we read the commentary about the lack of sustainability for commercial lines renewal price increase. But we don't agree. While it's clearly not a hard market, like the ones in the past, commercial lines prices are still firm and ahead of loss cost trends.
In addition to loss trend, higher pricing levels must offset the following industry-wide trends. Single-A, corporate bonds for the industry that are yielding about 350 basis points below where they were five years ago. And report calendar year results that are about 4.5 points better than the 2013 accident year results due to ongoing favorable reserve development.
Another benchmark is overall commercial lines growth versus GDP. For the first six months of 2013, industry-wide commercial lines net premium written grew 4.6%, while GDP was up about 2%. The net growth, 2.6%, is clearly not high enough to offset the loss trends, lower investment yields and declining favorable developments.
With an overall industry ROE from investments projected at 6.3% for 2013, the industry must gain more underwriting discipline in order to achieve the returns on equity, or surplus, that Wall Street or rating agencies expect.
Renewal pure price increases are the lynchpins lowering our combined ratio. The three-year plan has included overall renewal price of increased expectation of between 5% and 8%. Standard renewal pure price increased 6.3% in 2012 and 7.7% year-to-date 2013. While standard lines retention remained steady at 84%. We expect overall 2014 renewal pure price increases in the 6% to 7.5% range. We remain encouraged by our growth opportunities as market conditions continue to modestly improve.
In addition to the benefit of pure price increases, we are gaining traction in our E&S business, expanding our agency force and implementing new products. At the same time, our field employees and small business teams are working together to grow our book. At year-end 2012, in 18 of our 22 standard line states, we had market shares below 1%. We have ample opportunity to increase our penetration in a targeted manner, as we utilize our sophisticated underwriting tools to write business with the best agents.
Reflecting on the improved results, we are updating our full year 2013 guidance as follows. An ex-catastrophe statutory combined ratio of approximately 95.5, excluding 2.5 points of catastrophe losses, which is a net improvement of 1 point from our previous guidance. No prior year casualty development in the fourth quarter. After-tax investment income of between $95 million and $100 million. Weighted average shares of approximately 57 million.
Now, I'll turn the call over to the operator for your questions.
Operator
(Operator Instructions) We have a question from Vincent DeAugustino with KBW.
Vincent DeAugustino - Analyst
Greg and John, you've had this 92% core combined ratio target for 2014. And when it was first issued, that looked out pretty far. And that's actually been really helpful in framing where you're driving the business. But in some ways, more importantly, how you plan on getting there.
So now that 2014 is a bit closer and the 92% ex-cat core combined ratio target is within sight, I'm curious if you're planning on rolling that goal forward another year? And also, continuing to use that figure, which has been pretty helpful.
Greg Murphy - Chairman, President, CEO
I'd say that of all the carriers out there, I think we've been probably the most transparent in terms of our three-year plan and the elements of the profit improvement. And we are currently assessing that right now and figuring out how we will update that, in what fashion we will roll that out. So I don't have anything for you right now. But we are working on that.
Vincent DeAugustino - Analyst
Okay, good, very much look forward to that. And John, one of the things you had mentioned was the strategy between small commercial and mid-market and how there's benefits of leveraging a straight-through processing model on small commercial. Just so we can benchmark the ease of use for agents, do you have any thoughts on how long it might take a CSR to enter in the data for a quote on a vanilla BOP account? I'm just trying to bounce that off of what your commentary has been this quarter.
John Marchioni - President, COO
So clearly, you're hitting on a very important point relative to how companies are perceived in terms of ease of doing business and the ability to go straight through relative to small accounts. That's something we benchmark. We bring together our commercial lines customer service reps and producers from our agents' office to come in, evaluate our system and give us feedback on others.
I don't want to sit here and quote actual transaction time. But I'd tell you the bigger issue, I'd say, that we're focused on is the percentage of those accounts that they enter into the system that they actually have the ability to bind on the spot. As opposed to the percentage of those accounts that actually headed out of the system due to an underwriting or a price candidate and require manual intervention by an underwriter at Selective.
I think that's -- if you were to ask a small commercial producer, or a personal lines producer, for that matter, and agents' office, that's the bigger issue. I think for the most part, companies that are focused on small commercial are pretty tightly grouped in terms of the amount of time it would take. It varies obviously if you're talking about a straight BOP or if you're talking about a BOP that's going to have an auto attached to it or umbrellas attached to it or a comp account attached to it. That'll determine the amount of time it takes.
But it's really more of a focus on what percentage of the business they can actually issue at the end of the process, as opposed to waiting to hear back from one of our underwriters to finalize the issuance.
Vincent DeAugustino - Analyst
Okay, good. That color is helpful. Dale, you had mentioned Selective's conservative reserving philosophy and determined the track record and our analysis, completely agree with that. And just on a go-forward basis, I'm curious if my understanding of the new (inaudible) draft is correct in the sense that, at least on a GAAP basis, you won't be able to take that same conservative deterministic approach that you've been doing.
And then really the question gets to how should we think about reconciling that methodology versus the actuary results. If your current methodology prevailed within that, or in this framework, would they actually -- would you not have a divergence in methodologies at all? I'm just trying to get a sense of how both could look if this actually goes through.
Dale Thatcher - EVP, CFO
You're trying to get a sense of it, and quite frankly, so are we and so is every other accountant in the world. It's still early; it's still difficult to tell how does that ultimately get put into play on a practical way. Obviously, it's clear in the guidance that the old concept of management's best estimate is going by the wayside.
The problem that I think that they don't fully recognize is that there's still a lot of art to the actuarial science in terms of understanding trends and recognizing trends that aren't always completely and purely decipherable into a mathematical formula. So it's going to be an evolutionary process as we see how that actually hits the road.
All I can tell you is that Selective has always, and will remain, committed to a strong balance sheet. And that's the only thing we can put out there. I don't think anybody in the accounting world would ever be against that. So we will implement it to the spirit and the letter of the law. But we're also very committed to a strong balance sheet.
Vincent DeAugustino - Analyst
Okay, great. Thanks for the color and talk to you soon.
Operator
(Operator Instructions) We have a question from Mark Dwelle with RBC Capital Markets.
Mark Dwelle - Analyst
A couple of questions -- first, related to your flood insurance servicing business, were you impacted at all by the government shutdown at the beginning of the month on that business ?
Greg Murphy - Chairman, President, CEO
No, no, we were not.
Mark Dwelle - Analyst
Okay. Second question is to the extent that they delay the implementation of the rate increases in the flood insurance business, will that have any impact on you? Or are you really paid based on a fee per account? It doesn't really matter what the premiums are?
John Marchioni - President, COO
This is John. I'd say the only way that impacts us is when we think about our premium forecasts for that line of business, or that segment of business, going forward. Because clearly, we anticipate the rate level coming through as passed by the act. But we understand the political pressures that are on there to roll some of that back. So we do get paid a servicing fee relative to premium. And that will be impacted. But again, that's more about our planning going forward in terms of how we factor that in.
Greg Murphy - Chairman, President, CEO
It's a straight commission rate that we get paid from the federal government. So right now, there would be no real change in the operation, other than John mentioned in terms of what happens with our expectation in terms of premium growth.
Dale Thatcher - EVP, CFO
But it is a percentage of premium.
Greg Murphy - Chairman, President, CEO
Right.
Dale Thatcher - EVP, CFO
But it's also that percentage is revisited annually. So it's uncertain what the federal government may or may not do. if the rate increases actually did go through, they would have the option of lowering that percentage. But if they did nothing with the percentage, clearly then our revenues would go up. But so would the commissions they would pay and the agents.
Mark Dwelle - Analyst
It would seem like paraphrasing those various comments, the status quo would be the status quo if they don't implement the rate increase. If they do implement the increase, possibly there's some upside. But that would remain to be seen?
Dale Thatcher - EVP, CFO
That's a correct characterization, Mark.
Mark Dwelle - Analyst
Okay. Second question -- I hear your comments, Greg, in terms of what the industry needs as far as rate increases and why that would be the right thing for us to do, or for the industry to do. But just to play devil's advocate a bit, we've seen time and again that not everybody is as disciplined as Selective as far as continuing to go after the rate that they actually need. When you have your conversations -- this is a question maybe for both John and Greg.
When you're in conversations with your customers and you're asking them for 10%, 7.9%, whatever the answer is, inevitably, they're starting to hear from other carriers who are dangling more attractive improvements. How does that conversation go at this stage? We're starting to see some inflection where there is a little bit more -- call it rate aggressiveness -- starting to emerge in certain areas and certain companies.
John Marchioni - President, COO
This is John. I'll start and then Greg can certainly follow on. There's no question, the longer our rate level continues at this pace, the more difficult some of those conversations become. I will say the way we've approached it from the start, dating back to early 2009, and continue to approach it, and will always it that way going forward, is to make sure we're very targeted.
The conversation with the customer, there's some underlying review relative to where that account is priced, and what the quality of that account is, what the loss experience of that account is. Our rate variation between those buckets is fairly significant. So what that assumes is if certain accounts go to market, they're going to realize that, in fact, the pricing we're putting out there is still fair relative to the exposure presented. That, I think, has protected us in a lot of ways from losing our better accounts because, as we said earlier, that's where we're at the lower end of our overall rate levels in terms of what we're achieving.
But I'd say the other thing is the way we've administered our rate changes and our relationship with our agents allows us to have a very good conversation relative to the overall portfolio and what we're trying to achieve. But agents are also very open with us about where they really have competition out in the (inaudible) and where they have less competition. So it allows us to flex based on that. But it is clearly an account-by-account negotiation.
And our view has been for that worst 10% or so of our business, we are going to put rate recommendations out there that we're going to stick to. And if push comes to shove, we're going to lose that account. On the other side of it, we're going to put rate indications out for our best business. And if push comes to shove, we'll make a decision in certain cases to back off a little bit. But again, within the context of our overall rate targets.
Greg Murphy - Chairman, President, CEO
And if I could, Mark, there's a little fatigue out there from the consumer standpoint too in terms of all the ongoing shopping. There is a number out there that we constantly hear that trips a wire where people are going to go to market. But I think it gets down to the point that John made in terms of, hey, where we're pushing that hard at that high a level, we've got conviction to stand behind the account. We've got conviction to stand behind our inside underwriters relative to that.
Conversely, you heard our conversation and our comments, earlier that our target rate level for 2014 is between 6% and 7.5%. We're going to be doing that very granularly. So it will be differently applied to probably how it's going to be applied to 80% of our business than the remaining 20%.
Then if I could come back to your overarching comment, that a 6.3% ROE from the investment portfolio, there's not a lot of places to hide. So the industry has to underwrite under a sub (inaudible) combined ratio to have any shot of hitting any kind of reasonable ROE in the 8%, 9% range. So the industry benefit that we garner is that given our premium leverage of 1.5 to 1, for every 1 point of combined ratio, we're generating almost 1 full point of ROE. The industry is just around half of that.
So not only do they have the pressure to improve their results, but they've got to drive their combined ratios much lower than we do to generate the equal amounts of return. So there is a little bit of advantage to us in this marketplace. And to be frank with you, I don't see anything that's going to change that dynamic for several years.
I just don't see -- there is a lot more pressure on price increases. You, as analysts, are putting a lot more heat on companies in terms of where is their renewal pure price? Why aren't you quoting that to me? Where is it? What's your expectation of 2014? What's your loss trend look like? What's the medical part of the loss trend feel like?
And then overall -- I don't need to tell you -- there has been a fair amount of favorable development that still continues. And at some point, that well is going to run dry. And when it does, that's going to be a big turnaround in industry performance.
Mark Dwelle - Analyst
It's very helpful color. I have probably one other question just kind of in that same vein. In broad terms, what percentage of your customers would you say actively shop their book of business in any given year? And does that vary between kind of large, medium and small?
John Marchioni - President, COO
Yes, it's a great question. It's one that we talk with our agents about. It's going to vary agency-by-agency. So we tend to have -- and as you well know, we have a smaller group of agents. Our view is higher premium volume per agency. Our agents tend to be those that are less sensitive to pricing from a sales perspective. They tend to lead with coverage. They tend to lead with exposure analysis. They tend to lead with service. So our expectation is they generally shop their renewals less than most other agents do.
But the other part of your question is more about the consumer's end of that and how much are they asking to be shopped? I would say it generally happens less on the small commercial side because agents aren't inclined to spend a lot of time and energy requoting that business every year. It's just not cost effective for them; whereas you move up the scale on your more sophisticated buyers in the middle-market margin and large-account side to a better understanding of their insurance program. It may be more likely to come to their agent and say I'd like you to shop me. So it really does vary agency-by-agency.
Greg Murphy - Chairman, President, CEO
And Mark, I would say that one of the things that we do measure internally to get a little bit at that, and that's why we measure retention at point of renewal, is an entirely different measurement because that measures every account that our inside underwriters had the opportunity to touch at renewal. That point of renewal retention runs approximately 8 points higher than our regular retention.
We quote you retention levels of 82%, 83%. Point of renewals are more in the 90%, low -- high 80's, low 90's. And that's telling you that we renewed close to 90% of the business that we had the opportunity to renew, which means 10% would leave for various reasons -- obviously, A, if we put out too high of a rate relative to that, they might have found another market or they may be actively shopping.
So it kind of cuts to a little bit of that's why we measure that as -- and then we look at renewals. When we lose those renewals, when we don't write that business, we're actively looking at that to find out why we didn't write those accounts. So I want you to make sure we understand that's something we closely stay on top of.
Mark Dwelle - Analyst
Thanks very much for a very thorough answer.
Operator
Our next question comes from Robert Paun with Sidoti & Company.
Robert Paun - Analyst
I wanted to just follow up on that pricing discussion. In terms of the workers' comp business, can you talk about the pricing in that business? How do renewal rates today compare to, say, what you were seeing about six months ago or a year ago?
John Marchioni - President, COO
So for the quarter, workers' comp pricing is pretty much right on target with our overall commercial lines pricing level and on a year-to-date basis, slightly higher. I would say generally speaking, what you are seeing in terms of file rate levels from the various bureaus, NCCI and the various rate bureaus, is probably down slightly year-on-year from what we saw last year in terms of what they are filing for and in certain cases what they are getting.
Now, that does vary by jurisdiction. You are seeing some states whose individual rate bureaus or NCCI are now getting higher rate levels filed. But I would say generally speaking, 2012 was a higher filed rate level by the bureaus than 2013. And I think you'll continue to see a little bit more pressure on that on a go-forward basis in terms of file rates. That's only one component of the rate increase you're getting.
You also are able to move around individual schedule [mods] on an account-by-account basis to get rate level. But again, that varies state-to-state. There are some states where you've got a fairly high level of schedule credits on your book, and other states where you have fairly little to move around. But I would say year-on-year, the bureau file rate levels are down overall slightly, but still relatively high relative to trend.
Greg Murphy - Chairman, President, CEO
And Robert, I would just say that when you look at the calendar year versus the accident year results, our comp is trading slightly over [110], in the [110, 111] range. And as John mentioned, we're getting right around 7.8%, 7.9% rate increases. So that's not enough to do what we need to. This is the line that's got the highest degree of focus on our claim side for efficiencies and other improvements that are dedicated to really driving better results, better outcomes in that line.
And so we know that we're not going to be able to do this all-through rate. There is some that have to have different underwriting initiatives, claims initiatives. But also remember that we write this as a part of an account that we're an account basis underwriter, as Dale and John had in their comments. So that's where our focuses are on comp. We're very careful with it. But we also are trying to drive as much rate in underwriting and claims improvement as we possibly can through that line.
Robert Paun - Analyst
Okay, thanks. And also just a second question -- can you talk a little bit more about the E&S business? What drove the top line growth in the quarter? And maybe you can talk about what drove the combined ratio improvement in that business as well.
John Marchioni - President, COO
So this is John -- two distinct questions here. I'd say on the top line growth side, the predominant driver is we're now completely through our integration efforts of those operations. And clearly, when you got through a significant integration, it is a distraction for the operation. That's done; it's behind us. We've started to better execute in terms of appointing new wholesales agents in places where we had gaps in our agency plan.
And I think we're starting to have more success within the Selective footprint of driving business from our retail agency partners to our wholesalers. So new business generally has been a positive in terms of the lift in the overall top line growth in our E&S operations.
In terms of the bottom line improvement, there were a couple of segments in a couple of specific geographies that were really driving the performance in that book of business in a negative way, that we aggressively addressed through price, and in certain cases, underwriting actions, and in other cases, specifically targeted actions with a couple of wholesale partnerships.
And because of the nature of that business and your ability to take fairly aggressive actions over the short term in terms of pricing and underwriting, we were able to drive that loss ratio down fairly quickly relative to what we were able to do in our standard book of business. And then the final piece is you're getting the benefit of expense improvement year-over-year as well now that we're through the integration costs as well as the premium coming through.
Robert Paun - Analyst
Right, thank you for the answers.
Operator
(Operator Instructions) We have no further questions at this time.
Greg Murphy - Chairman, President, CEO
All right. Well, thank you. If you have any follow-up comments, please contact Dale and Jennifer. Thank you very much for participating in the call this morning.
Operator
That does conclude today's conference. Thank you for participating. You may disconnect at this time.