Selective Insurance Group, Inc. · NASDAQ:SIGI
Selective Insurance — Investor Presentation (May 2011)
27 slides from Selective Insurance's investor presentation, May 2011
Slide 1: Investor Presentation May 2011
– SELECTIVE INSURANCE GROUP, INC. – INVESTOR PRESENTATION MAY 2011 FINANCIAL STRENGTH Financial Pricing Commercial Personal Prepared for Strength Success Lines Lines Tomorrow
Slide 2: Forward Looking Statement
Forward Looking Statement Certain statements in this report, including information incorporated by reference, are “forward- looking statements” as that term is defined in the Private Securities Litigation Reform Act of 1995 (“PSLRA”). The PSLRA provides a safe harbor under the Securities Act of 1933
Slide 3: Who We Are
Who We Are • 22-state super-regional MN MI • 2010: $1.4B NPW WI MI NY MA CT RI • 82% commercial lines IA PA NJ OH MD DE IL IN • 18% personal lines MO VA KY • High tech, high touch business model NC TN • Partner of choice – 980 independent SC agents GA • Focus on enterprise risk management • Rated A+
Slide 4: Focus on Enterprise Risk Management
Focus on Enterprise Risk Management • Historically strong capital position • Business model generates more earnings stability • Sophisticated underwriting and granular pricing • Strong reserving practices • Conservative reinsurance program • Deep investment management talent Financial Financial Pric
Slide 5: More Earnings Stability: SIGI vs. Industry
More Earnings Stability Combined Ratio – SIGI vs. Industry 125 SIGI (STD. DEV 4.3) 120 Industry (STD. DEV 6.7) 115 110 105 100 95 90 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 Source: A.M. Best, III Financial Financial Pricing Commercial Personal Prepared for Strength Strength Success Li
Slide 6: More Earnings Stability: SIGI vs. National Peers
More Earnings Stability Combined Ratio – SIGI vs. National Peers 125 SIGI (STD. DEV 4.3) 120 National Peers (STD. DEV 9.8) 115 110 105 100 95 90 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 Source: SNL Financial Note: National Peers include CNA, CB, HIG, TRV and WRB Financial Financial Pri
Slide 7: More Earnings Stability: SIGI vs. Regional Peers
More Earnings Stability Combined Ratio – SIGI vs. Regional Peers 125 SIGI (STD. DEV 4.3) 120 Regional Peers (STD. DEV 5.1) 115 110 105 100 95 90 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 Source: SNL Financial Note: Regional Peers include CINF, THG, HGIC, STFC and UFCS Financial Financia
Slide 8: Adverse/(Favorable) Points of Calendar Year Development
Adverse/ (Favorable) Points of Calendar Year Development 8.0% 6.0% 4.0% AIG takes $4B charge 2.0% 0.0% -2.0% -4.0% 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 U.S. P&C Industry SIGI Source: AM Best, 2010 Estimate Financial Financial Pricing Commercial Personal Prepared for Strength Strength Su
Slide 9: Premium-to-Surplus
Premium-to-Surplus 1.9 SIGI P&C 1.9X 1.8 1.8 1.7 1.7 1.7 1.7X 1.6 1.5 1.5 1.5 1.5X 1.3 1.3 1.3X 1.2 1.1 1.1 1.1X 1.0 1.0 1.0 0.9 0.9X 0.9 0.8 0.7 0.7X 0.5X 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 1 point of Combined Ratio = 1 point of ROE Sources: ISO, AM Best, III; 2010 AM Best Estim
Slide 10: High Quality Investment Portfolio
High Quality Investment Portfolio • Average “AA” bond quality $4.0B Invested Assets • Approximately 3.4 year March 31, 2011 average duration, including Bonds short-term & cash 90.7% • Laddered maturity schedule – 34% matures within 3 years – 68% matures within 5 years • Outsourcing provides access E
Slide 11: Strong Natural Catastrophe Reinsurance Program
Strong Natural Catastrophe Reinsurance Program % of Equity at Risk (Near-term basis) 30% Blended RMS v11.0 and AIR 25% RMS v11.0 1% Probability = 5% 0.4% Probability = 18% 24% 20% 15% AIR v12 10% 12% RMS v11.0 RMS v9.0 5% RMS v9.0 AIR v12 5% 6% 4% 4% 0% 1% Probability 0.4% Probability CAT cover: $43
Slide 12: Prepared for Tomorrow
– SELECTIVE INSURANCE GROUP, INC. – PREPARED FOR TOMORROW Financial Pricing Commercial Personal Prepared for Strength Success Lines Lines Tomorrow
Slide 13: Selective's Commercial Lines Renewal Pricing Success
Selective’s Commercial Lines Renewal Pricing Success 4.0% 3.4% 3.3% 2.7% 2.8% 2.8% 2.8% 2.0% 1.5% 0.6% 0.0% -0.8% -2.0% -4.0% -6.0% -8.0% Selective CLIPS CIAB MarketScout -10.0% 1Q:09 2Q:09 3Q:09 4Q:09 1Q:10 2Q:10 3Q:10 4Q:10 1Q:11 8 consecutive quarters of positive price Financial Pricing Pricing C
Slide 14: Why Are We Successful?
Why Are We Successful? • Agency relationships • Field model • Sophisticated underwriting tools and granular pricing – Aggregate quality score by account – Targeted pricing – Agency profitability – Segment performance – Hazard grade – System calculated pure price change • The courage to walk away Fin
Slide 15: Mix of Business
Mix of Business Middle Market Personal Lines Small Business $1.4B Net Premium Written in 2010 Financial Pricing Commercial Commercial Personal Prepared for Strength Success Lines Lines Lines Tomorrow
Slide 16: Middle Market
Middle Market • Agency relationships are key • Agents act as risk manager for insureds • Safety Management • Field underwriting and claims model Financial Pricing Commercial Commercial Personal Prepared for Strength Success Lines Lines Lines Tomorrow
Slide 17: Field Model
Field Model • Local knowledge of insureds Agency Management • Full claims/underwriting Claims Specialists Management authority Specialists • Supported by sophisticated underwriting tools • Safety management services lowers frequency and increases retention Field Safety Marketing Management Specialis
Slide 18: Agency Focus
Agency Focus • 980 Agents • 2,000 Storefronts • Number 1, 2 or 3 in 60% of agencies appointed for 5 or more years Number of Agents • Ease of doing business 1,000 950 • Online agency marketing 900 portal 850 800 750 700 650 600 2006 2007 2008 2009 2010 Financial Pricing Commercial Commercial Personal
Slide 19: Middle Market Product Expansion
Middle Market Product Expansion • Added 20 new and enhanced products in 2009 • Introduced another 11 in 2010 • New products • Aging Services, Identity Theft, Cyber Security, Technology • Enhanced products • Resort Endorsement, Contractors GL, Property Coverage for Municipalities Financial Pricing Co
Slide 20: Small Business
Small Business • Less price sensitive • Better profitability • Stronger retention • Straight through processing Financial Pricing Commercial Commercial Personal Prepared for Strength Success Lines Lines Lines Tomorrow
Slide 21: Small Business Growth
Small Business Growth $ thousands Average DPW/Day 300 250 200 150 100 2006 2007 2008 2009 2010 Financial Pricing Commercial Commercial Personal Prepared for Strength Success Lines Lines Lines Tomorrow
Slide 22: Small Business Product Expansion
Small Business Product Expansion 2010 Auto Serv WC, Summit Contractors, BR Exp Mfg WC, Contractors WC Exp Auto Serv CPP Golf CPP and Summit LRO Manufacturing CPP Expanded Manufacturing CPP Light Manufacturing Civic Organizations Builders Risk Expanded Special Contractors & Merchants PRO BOP Special
Slide 23: Personal Lines
Personal Lines • Smoothes performance over the long-term • Significant source of agent revenue • Improving mix of business and ability to get rate Financial Pricing Commercial Personal Personal Prepared for Strength Success Lines Lines Lines Tomorrow
Slide 24: Personal Lines Rate Success
Personal Lines Rate Success Blended In-force Rate 8% 7.1% 7% 6.3% 5.8% 6% 5% Rate 4% 3.1% 3% 2.4% 2% 1% 0% 2007 2008 2009 2010 2011E New Business DPW $39 $43 $55 $62 Financial Pricing Commercial Personal Personal Prepared for Strength Success Lines Lines Lines Tomorrow
Slide 25: Driving Down Cost of Goods Sold
Driving Down Cost of Goods Sold • 3 point reduction in loss costs expected over 3 years – Specialized claims handling model – Improved workers compensation medical management – Staff counsel expansion – Vendor management – Fraud analytics – Recovery and subrogation Anticipate $6M savings from 2011 i
Slide 26: Customer Focus to Improve Retention
Customer Focus to Improve Retention • Continue to build relationships with end customers • 24/7 online access for customer service needs • Improving customer experience through high frequency touch points • Online interactive safety training resources • Safety management strengthens Selective brand
Slide 27: Long-Term Shareholder Value Creation
Long-Term Shareholder Value Creation $0.52 $0.52 * Book Value Dividends $0.49 $20 $0.44 $0.52 $0.40 $20.06 $19.81 $0.52 $19.95 $0.35 $18.83 $18.81 $16 $16.84 Per Share $17.34 $0.31 $15.79 $0.30 $13.74 $12 $12.26 $8 2002 2003 2004 2005 2006 2007 2008 2009 2010 Mar-11 Current Dividend Yield: 3.0% *Ann
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