Selective Insurance Group, Inc. · NASDAQ:SIGI

Selective Insurance — 2019 Bank of America Merrill Lynch Insurance Conference

29 slides from Selective Insurance's conference presentation, Feb 14, 2019

  1. Slide 1: Selective Insurance Group, Inc.

    PAGE 1 SELECTIVE INSURANCE GROUP, INC. 2019 CREDIT BANK SUISSE OF AMERICA MERRILL LYNCH 2019 INSURANCE FINANCIAL CONFERENCE SERVICES FORUM FEBRUARY 14, 2019

  2. Slide 2: Safe Harbor Statement

    PAGE 22 PAGE SAFE HARBOR STATEMENT In this presentation, we make certain statements and reference other information that are “forward-looking statements” as defined in the Private Securities Litigation Reform Act of 1995 (“PSLRA”). The PSLRA provides a safe harbor under the Securities Act of 1933, a

  3. Slide 3: Overview

    OVERVIEW PAGE 3 PAGE 3

  4. Slide 4: A Track Record of Superior Execution

    A TRACK RECORD OF SUPERIOR EXECUTION PAGE 4 NON-GAAP OPERATING ROES* IN RECENT YEARS HAVE BEEN IN LINE WITH LONG-TERM TARGETS th largest property and casualty insurance 35 company based on 2017 NPW 27 $3.8B 90+ $2.5B 95.0% $160M State Footprint Market Cap Years of Financial 2018 NPW 2018 GAAP 2018 A

  5. Slide 5: Our Sustainable Competitive Advantages

    OUR SUSTAINABLE COMPETITIVE ADVANTAGES PAGE 5 True franchise value with Unique field model enabled Superior customer “ivy league” distribution by sophisticated tools and experience delivered by partners technology best-in-class employees  Enables effective management  Locally-based underwriting, 

  6. Slide 6: Super Regional Company with National Capabilities

    SUPER REGIONAL COMPANY WITH NATIONAL CAPABILITIES PAGE 6 Standard Commercial Standard Personal E&S (79% of 2018 NPW) (12% of 2018 NPW) (9% of 2018 NPW) 27 States and D.C. 15 States All 50 States Over 1,320 distribution partners Over 720 distribution partners 90 wholesale distribution partners

  7. Slide 7: Excellent Operating Performance

    EXCELLENT OPERATING  Achieving pure renewal written price increases in PAGE 7 PERFORMANCE line with expected claim inflation  Underwriting and claims improvement PAGE 7 Historical GAAP Combined Ratios  Focus on managing expenses 110% Underlying Combined Ratio  3.0% after-tax book yield on fixed

  8. Slide 8: Summary of Our Operations

    SUMMARY OF OUR OPERATIONS PAGE 8 Commercial Lines Personal Lines Excess & Surplus (79% of NPW): A Profit Engine (12% of NPW) (9% of NPW)  A focus on disciplined growth  Targeting a 90% homeowners  Focus on target combined combined ratio in a normal ratio; top-line will depend on  Strong calendar

  9. Slide 9: Our Strategic Initiatives

    PAGE 9 OUR STRATEGIC INITIATIVES PAGE 9

  10. Slide 10: 2019 Strategic Initiatives

    2019 STRATEGIC INITIATIVES PAGE 10 CONTINUED PROFITABLE GROWTH PAGE 10 Execute on strategy of growing market share PRICE INCREASES ≥ EXPECTED CLAIM INFLATION Standard commercial lines renewal pure price increases that match or exceed STRONG expected claim inflation trends CUSTOMER SERVICE Continue t

  11. Slide 11: Price Increases Have Consistently Outperformed Industry

    PRICE INCREASES HAVE CONSISTENTLY OUTPERFORMED INDUSTRY PAGE 11 SIGI Pricing CLIPS Pricing SIGI Retention  Commercial lines renewal pure price PAGE 11 88% increases have exceeded CLIPS index 7.6% since 2009, and are tracking in line with Renewal Pure Price (%) 5.9% expected claim inflation trends R

  12. Slide 12: A Portfolio Approach to Underwriting

    A PORTFOLIO APPROACH TO UNDERWRITING PAGE 12 Commercial Lines Pricing By Retention Group  Portfolio management approach yields higher retention and rate CLAS Pure Rate % Premium Renewed Point of Renewal Retention 12% 95%  Granular and account-specific pricing including: Renewal Pure Price 9% o Pre

  13. Slide 13: Targeting Growth Through Market Share and Geo-Expansion

    TARGETING GROWTH THROUGH MARKET SHARE AND GEO-EXPANSION PAGE 13 PAGE 13 Historical Net Premiums Written COMMERCIAL LINES GROWTH DRIVERS: $2.5B Managed Premium Volume  Target of growing share of wallet to 12% with LOWER existing distribution partners RISK During Soft Market  Target of appointments

  14. Slide 14: Deliver a Superior Omni-Channel Customer Experience

    DELIVER A SUPERIOR OMNI-CHANNEL CUSTOMER EXPERIENCE PAGE 14 Customer-centricity is core to who we are as a company VALUE-ADDED SERVICES SUCH AS SELECTIVE® DRIVE “360-DEGREE” VIEW  Changing expectations from customers, and OF CUSTOMER potential disruptive threats from traditional and non-traditional

  15. Slide 15: Geo-Expansion Enhances Growth Opportunities

    GEO-EXPANSION ENHANCES GROWTH OPPORTUNITIES PAGE 15  Diversification and spread of risk o Targeting ~30 fully operational states PAGE 15 o Remainder to support multi-state accounts  Leverage existing Selective leaders and hire local underwriters who know the market and agencies  Established new S

  16. Slide 16: Financial Overview

    PAGE 16 FINANCIAL OVERVIEW PAGE 16

  17. Slide 17: Lower Risk Profile and Strong Financial Strength

    LOWER RISK PROFILE AND STRONG FINANCIAL STRENGTH PAGE 17 A Lower Risk Profile PAGE 17  Strong balance sheet underpinned by a conservative approach to: o Managing the investment portfolio o Purchasing reinsurance protection Low to o Reserving Medium Hazard  Conservative business and balance sheet p

  18. Slide 18: Conservative Investment Portfolio

    CONSERVATIVE INVESTMENT PORTFOLIO PAGE 18 Investment Portfolio Breakdown  Fixed income and short-term investments comprise 94% of the investment portfolio: $6.0B of Investments Fixed Income 89% (2% High yield) o “AA-” average credit quality o Effective duration of 3.6 years Short-Term 5% o Includes

  19. Slide 19: Active Portfolio Management Drives Investment Results

    ACTIVE PORTFOLIO MANAGEMENT DRIVES INVESTMENT RESULTS PAGE 19 Historical After-Tax Net Portfolio Yields  Strong investment performance driven by: PAGE 19 o Higher interest rates 4.0% Impact of higher interest rates, strategic repositioning and lower Federal income tax rates o Active portfolio manag

  20. Slide 20: Catastrophe Loss Impact Has Been Below Industry Average

    CATASTROPHE LOSS IMPACT HAS BEEN BELOW INDUSTRY AVERAGE PAGE 20  Catastrophe loss impact over the past 16 years Impact of Catastrophe Losses on Combined Ratio has averaged: 12 P&C Industry o 5.1 percentage points for the P&C industry Catastrophe loss impact on combined ratio (pts.) o 2.9 percentage

  21. Slide 21: Prudent Reinsurance Program

    PRUDENT REINSURANCE PROGRAM PAGE 21  2019 property catastrophe treaty structure: o Coverage of $735M in excess of $40M Net Single-Event Hurricane Loss* as a % of Equity retention PAGE 21 o $242M in collateralized limit, primarily in the top layer of the program 24% 22% o Additional earnings volatil

  22. Slide 22: A Strong Reserving Track Record

    A STRONG RESERVING TRACK RECORD PAGE 22 Impact of Reserve Development on our Combined Ratio  Disciplined reserving practices: 4.0% o Quarterly actuarial reserve reviews o Semi-annual independent review o Independent year-end opinion 2.0%  Favorable reserve development in Workers 0.0% Compensation

  23. Slide 23: 2019 Combined Ratio Plan – Underlying Margin Improvement

    2019 COMBINED RATIO PLAN – UNDERLYING MARGIN IMPROVEMENT PAGE 23 Reconciliation of 2019 GAAP Combined Ratio Guidance PAGE 23 2.4% 0.2%  Targeting price increases to keep up with expected claim inflation 93.1% 92.0%  Assumes no prior-year casualty reserve (2.7)% development (1.0)%  Business mix im

  24. Slide 24: Strong Capital and Liquidity Position, Focus on Expenses

    STRONG CAPITAL AND LIQUIDITY POSITION, FOCUS ON EXPENSES PAGE 24 CAPITAL AND LIQUIDITY PLAN EXPENSE MANAGEMENT $  Strong capital position with 19.7%  Cost management and greater leverage from debt-to-capital ratio NPW growth helps reduce expense ratio  Target NPW/surplus ratio of ~1.4x  Restruct

  25. Slide 25: A Focus on ROE and Growth in Book Value per Share

    A FOCUS ON ROE AND GROWTH IN BOOK VALUE PER SHARE PAGE 25 Historical Book Value per Share and Stockholders’ Equity Growth Generating non-GAAP operating ROE* in line $32 $30.40 $2,000 with our long-term target $1,500 $24 ($ in millions) $15.81 $1,000 $16 $500 Superior growth in book value per share $

  26. Slide 26: Strong ROE Outperformance Relative to Peers

    STRONG ROE OUTPERFORMANCE RELATIVE TO PEERS PAGE 26 Historical Non-GAAP Operating ROEs*  Solid underwriting and investment contributions 15%  Superior 12.5% non-GAAP operating ROE in 2018 12.5% 10.3% o Underwriting ROE contribution of 5.5% 10% 9.2% o Investment ROE contribution of 9.2% 8.6%  2019

  27. Slide 27: Total Shareholder Return Has Outperformed Benchmarks

    TOTAL SHAREHOLDER RETURN HAS OUTPERFORMED BENCHMARKS PAGE 27 Total Shareholder Return SIGI S&P 500 S&P Prop/Cas  Significant outperformance in total shareholder 30% return relative to S&P P&C insurance index and 20% 20% S&P 500 index over the past 1- and 5-year 13% 13% 13% 9% 11% periods 10% 5% 0%

  28. Slide 28: Our Value Proposition

    PAGE 28  Leveraging our competitive strengths to generate sustained financial outperformance o Strong franchise value with “ivy league” distribution partners o Unique field model enabled by sophisticated technology o Strong customer experience  Excellent growth opportunities within footprint and g

  29. Slide 29: Selective Insurance Group, Inc.

    PAGE 29 SELECTIVE INSURANCE GROUP, INC. 2019 CREDIT BANK SUISSE OF AMERICA MERRILL LYNCH 2019 INSURANCE FINANCIAL CONFERENCE SERVICES FORUM FEBRUARY 2019

Selective Insurance Group — 2019 Bank of America Merrill Lynch Insurance Conference on 6ix