Selective Insurance Group, Inc. · NASDAQ:SIGI
Selective Insurance — NYSSA 18th Annual Insurance Industry Conference (March 2014)
24 slides from Selective Insurance's conference presentation, Mar 17, 2014
Slide 1: Selective Insurance Group, Inc. First Quarter Investor Presentation
Selective Insurance Group, Inc. First Quarter Investor Presentation Current as of March 17, 2014
Slide 2: Forward Looking Statements
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 and the Securities Exchang
Slide 3: Financial Overview
A, SELECTIVE ® Financial Overview
Slide 4: History of Success as a Super-Regional
Small commercial, 44th largest History of Field-based E&S and U.S. P&C financial operating personal carrier* strength model lines business *Source: A.M. Best, based on 2012 Net Premiums Written History of Success as a Super-Regional
Slide 5: Standard Commercial Lines
2013 Standard Commercial Lines % Net Premiums Written • “Main street” account underwriter • Average account size $10,000 • ~1,100 agents • Field underwriters supported by regional and corporate expertise 76% 2013 Statutory Combined Ratio = 97.1% Standard Commercial Lines
Slide 6: Personal Lines
2013 Personal Lines % Net Premiums Written • Focus on account customers • ~690 agents in 13 states • By-peril rating capabilities 17% 2013 Statutory Combined Ratio = 96.9% Personal Lines
Slide 7: Excess and Surplus Lines
Excess & Surplus Lines 2013 • Controlled binding authority, no % Net Premiums Written claims authority • ~90 wholesale general agencies • Average policy size of $2,700 • ~70% general liability • 98% $1M or lower limits 7% 2013 Statutory Combined Ratio = 102.9% Excess and Surplus Lines
Slide 8: Key Takeaways
Strong balance sheet provides a foundation for success Lower volatility allows for greater operational leverage Effective cycle management Path to a 92% ex-catastrophes combined ratio in 2014 Key Takeaways
Slide 9: Conservative Investment Portfolio
Net Operating Cash Flows 20% as % of NPW 19% December 31, 2013 16% $4.6B in Invested Assets 15% 14% Alternatives 2% Short-Term 11% 4% Equities 4% 10% 8% 5% 0% 2009 2010 2011 2012 2013 Bonds SIGI Industry* 90% • “AA-” average credit quality • 3.6 year duration, excluding short-term • Investment lever
Slide 10: Conservative Catastrophe Reinsurance
% of Equity at Risk – 1 in 250 Event Blended Model Results (RMS & AIR) 2014 Property Catastrophe Treaty 11% • $685M in excess of $40M retention • Increased top layer by $100M • Flat premium despite additional limit • Exhausts at approximately 1-in- 250 year event 4% • Average reinsurer rating “A+” 2
Slide 11: Impact of CATs on Combined Ratio
10 pts SIGI Avg = 2.8 pts 9 Ind. Avg. = 5.0 pts 8 7 6 5 4 3 2 1 0 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 Industry Source: A.M. Best Impact of CATs on Combined Ratio
Slide 12: Lower Volatility of Results
Standard Deviation (2003-2012) Reserve Development Combined Ratio (Points on Combined Ratio) 8.0 5.9 3.9 1.4 SIGI Peer Average* SIGI Peer Average* “Ground-up” quarterly reserve review and focus on “main street” accounts *Source: SNL Financial, Statutory Data Peers include CINF, THG, STFC, UFCS, CNA,
Slide 13: Combined Ratio Improvement Plan
2014 Ex-CAT Statutory Combined Ratio Plan 2.0% 96.5% (4.5)% 0.2% 92% (2.0)% 2013 Loss Trend Earned Rate Underwriting / Expense 2014 Actual* Claims Projected* *Excluding CATS and reserve development May not foot due to rounding Expectation for 4 points of CAT losses in 2014 Combined Ratio Improvement
Slide 14: Impact of Leverage
Investment Leverage Underwriting Leverage ROE Generated at a 96% (Invested Assets/ (Premiums-to-Surplus) Combined Ratio Stockholders’ Equity) 10.5% 1.4x 4.0x 8.0% 2.3x 0.7x SIGI Industry SIGI Industry SIGI Industry Industry Source: A.M. Best 2013E Impact of Leverage
Slide 15: Strategic Overview
A, SELECTIVE ® Strategic Overview
Slide 16: Competitive Advantages
Field Model Superior Based On Sophisticated Agency Empowered Underwriting/ Relationships Decision Claims Tools Makers Focus On Broad Appetite Effective Customer and Strong Manager of Experience Product Leverage Portfolio Capabilities of a National…Relationships of a Regional Competitive Advantages
Slide 17: Net Premiums Written ($ in millions)
2,000 Net Premiums Written ($ in millions) 1,800 Managed Growth Through Cycle 1,600 1,400 1,200 1,000 800 600 400 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 Effective Cycle Management
Slide 18: Growth Opportunities
Increase Market Addition of Share Within Expansion Agents and Existing New E&S of Product Storefronts Footprint Operations Offerings Growth Opportunities
Slide 19: Standard Commercial Lines Pricing
8% 90% QTD through Feb. 28, 2014 +6.3% 7% 85% 6% Renewal Pure Price 80% 5% Retention 4% 75% 3% 70% 2% 65% 1% 0% 60% 2Q:09 4Q:09 2Q:10 4Q:10 2Q:11 4Q:11 2Q:12 4Q:12 2Q:13 4Q:13 • 19 consecutive quarters of renewal pure price increases • In 2014, anticipate renewal pure price increases of 6–7% Standar
Slide 20: Point of Renewal Retention
2013 Pricing by Retention Group 89.6% Standard Commercial Lines 18% 90% Point of Renewal Retention 16% 85% 14% Renewal Pure Price 12% 80% 10% 75% 8% 70.8% 6% 70% 4% 65% 2% 0% 60% Above Average Average Below Average Low Very Low Dynamic Portfolio Manager allows underwriters to drive mix improvement U
Slide 21: Statutory Combined Ratio
2013 Statutory Combined Ratio by Line of Business 130% 120% Statutory Combined Ratio 110% 100% 90% 80% 70% General Commercial Workers Comp Property BOP Liability Auto NPW $426M $326M $277M $238M $82M Standard Commercial Lines Profitability
Slide 22: Workers Compensation Plan
Balance Renewal Pure Price Underwriting of 7.5% in 2013 Initiatives with Claims Initiatives Compared to 4% Overall Account Loss Trend Profitability Workers Compensation Plan
Slide 23: Claims Initiatives
Strategic Case Unit (WC) Escalation Model Medical Cost Management Fraud Detection and Recovery Models Complex Claims Unit Litigation Management Claims Initiatives
Slide 24: Why Invest in Selective?
Strong balance sheet provides a foundation for success Lower volatility allows for greater operational leverage Effective cycle management Path to a 92% ex-catastrophes combined ratio in 2014 Why Invest in Selective?
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