Selective Insurance Group, Inc. · NASDAQ:SIGI
Selective Insurance — Investor Presentation (November 2013)
36 slides from Selective Insurance's investor presentation, November 2013
Slide 1: Investor Presentation
Investor Presentation November 2013
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: Foundation for Success
Foundation for Success
Slide 4: Who We Are
Who We Are • $1.7B 2012 NPW • Super-regional carrier • Unique field model • Standard lines distributed through independent agents • Excess & Surplus (E&S) lines distributed through wholesale agents • History of financial strength
Slide 5: Business Diversification
Business Diversification Standard Commercial Lines • 22 state footprint 2012 • 1,100 independent agency relationships Net Premiums Written % • Average account size of $9,000 7% Personal Lines • 13 state footprint • 620 independent agents 17% • Agents want joint C/L & P/L markets • Flood 2012 net inc
Slide 6: Financial Strength is our Foundation for Success
Financial Strength is our Foundation for Success • Access to capital markets – February 2013 issued $185 million 5.875% senior notes due 2043 – Use of proceeds: • Called $100 million 7.5% junior subordinated notes due 2066 • Balance to fund growth • Underwriting stability • Disciplined reserving • C
Slide 7: Underwriting Stability
Underwriting Stability Statutory Combined Ratio – SIGI vs. Peers 115 % 110 105 100 Standard 95 Deviation SIGI 3.7 90 Peer Average 7.7 85 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 6/30/13 Source: SNL Financial YTD Peers include CINF, THG, STFC, UFCS, CNA, HIG, TRV, WRB Deviation calculated by
Slide 8: Impact of CATs on Combined Ratio
Impact of CATs on Combined Ratio 12 pts SIGI Avg = 2.8 pts 10 Ind. Avg. = 5.0 pts 8 6 4 2 0 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 6/30/13 YTD Source: AM Best
Slide 9: Conservative Reinsurance Program
Conservative Reinsurance Program % of Equity at Risk 12% Blended Model Results (RMS v11 & AIR v13) 10% 11% 8% 6% 4% 2% 3% 0% 1% Probability 0.4% Probability CAT Cover: $585M in excess of $40M Percentages are after tax and include applicable reinstatement premium. Data as of 7/12; Equity data as of D
Slide 10: Calendar Year Development
Calendar Year Development 5% 4% SIGI Industry (Favorable)/Adverse Points 3% 2% 1% 0% -1% -2% -3% -4% -5% -6% 2003 2004 2005 2006 2007 2008 2009 2010* 2011 2012 6/30/13 YTD *2010 Industry development includes $4B charge from AIG Source: AM Best and Insurance Information Institute Note: Industry exclu
Slide 11: Conservative Investment Portfolio
Conservative Investment Portfolio • Well diversified, laddered $4.5B Invested Assets portfolio September 30, 2013 • Only 1.3% of bond portfolio Bonds 90% rated “BB” & below “AA-” Avg Rating • 3.7 year average duration, excluding short-term • Investment leverage of 4.0 x 2.3% yield = ~9% ROE Equities
Slide 12: Selective's Use of Underwriting Leverage
Selective’s Use of Underwriting Leverage SIGI Industry 1.9 1.8 Premium to Surplus Ratio 1.7 1.7 1.7 1.6 1.6 1.5 1.5 1.5 1.5 1.5 1.4 1.3 1.3 1.2 1.1 1.1 1.0 0.9 0.9 0.9 0.9 0.8 0.8 0.8 0.8 0.7 0.7 0.5 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 6/30/13 Sources: ISO, AM Best and Insurance Inform
Slide 13: Impact of Leverage
Impact of Leverage Combined Ratio Required for ~12% ROE 100 % ~95% SIGI 90 Investment Leverage 4.0x U/W Leverage 1.6x ~87% Industry Investment Leverage 2.3x 80 U/W Leverage 0.8x 70 Industry Source: AM Best 2012
Slide 14: Combined Ratio Improvement Plan – On Track to Achieve Goal
Combined Ratio Improvement Plan – On Track to Achieve Goal 115 % 110 6.5 105 100.9 100 ` 95 1.0 ~92.0 (12.5) (1.5) 90 (2.0) 85 Company expectation for 3 points of CAT losses and overall renewal pure price increases of 6 - 7.5% in 2014 *Excluding CATS and reserve development
Slide 15: Strategic Overview
Strategic Overview
Slide 16: What Makes Us Unique
What Makes Us Unique • Empowered decision makers • Superior agency relationships • Sophisticated tools • Focus on customer experience • Excellent risk management Culture of Continuous Improvement
Slide 17: Relationships with the Highest Caliber Agents
Relationships with the Highest Caliber Agents • $1.4M NPW per agency in 2012 • 8.6/10 on 2013 agency survey • Franchise value • Greater share of wallet • Strong feedback loop
Slide 18: A Regional with National Capabilities
A Regional with National Capabilities Capabilities of a National Nimbleness of a Regional • Sophisticated pricing • Relationships • Fraud and recovery models • Local decision making • Advanced data and technology Selective: A Unique Super-Regional
Slide 19: Standard Commercial Lines New Business
Standard Commercial Lines New Business $350 New Direct Premiums Written $300 $250 ($ in Millions) $200 $150 $100 $50 $- 2006 2007 2008 2009 2010 2011 2012 9/30/12 9/30/13 YTD YTD
Slide 20: Pricing Sophistication – Dynamic Portfolio Manager
Pricing Sophistication – Dynamic Portfolio Manager • ~20 factors driven through DPM generate individual policy guidance and portfolio level impact – Line of business and segment strategy – CAT modeling – Predictive modeling – Agency profitability – Risk characteristics – “What-if” profitability anal
Slide 21: Pricing by Retention Group
Pricing Sophistication – Dynamic Portfolio Manager Sept 2013 YTD Pricing by Retention Group Standard Commercial Lines 18% 90% 16% Commercial Lines Price 14% 12% 80% Retention 10% 8% 6% 70% 4% 2% 0% 60% Above Average Below Low Very Low Average Average Sept 2013 YTD Price = 7.6%
Slide 22: Relationships Drive Pricing Through the Cycle
Relationships Drive Pricing Through the Cycle 8% 90% Standard Commercial Lines Price 7% 85% 6% Quarterly Retention 80% 5% 4% 75% 3% 70% 2% 65% 1% 0% 60% Commercial lines pricing target of 7.6% for 2013
Slide 23: Personal Lines Sophistication
Personal Lines Sophistication Homeowners • Increasing rate • By-peril rating • Encourage whole account customers Auto • Increasing rate • Continued mix improvements • Underwriting restrictions • Claims initiatives • Age of book Anticipate personal lines pricing of approximately 7.5% in 2013
Slide 24: Homeowners Pricing
Homeowners Pricing 12% 95% 10% Renewal Pure Price 8% 85% Retention 6% 4% 75% 2% 0% 65% 2008 2009 2010 2011 2012 9/30/13 YTD Anticipate pricing of approximately 9.5% in 2013
Slide 25: Personal Auto Pricing
Personal Auto Pricing 7% 95% 6% Renewal Pure Price 5% 85% Retention 4% 3% 75% 2% 1% 0% 65% 2008 2009 2010 2011 2012 9/30/13 YTD Anticipate pricing of approximately 5.5% in 2013
Slide 26: Achieving Better Outcomes in Claims
Achieving Better Outcomes in Claims • Medical cost containment Projected • Complex claims unit 3 Point • Fraud detection model Loss & • Recovery model Expense • Litigation management Savings • Comprehensive data management tools
Slide 27: Why Invest in Selective?
Why Invest in Selective? • Proven ability to manage the market cycle • Growth at the right time — Grew faster and longer in last hard market • Strong balance sheet limits downside
Slide 28: Financial Highlights 2009 – Q3 2013
Financial Highlights 2009 – Q3 2013 2009 2010 2011 2012 1Q13 2Q13 3Q13 Statutory NPW Growth (4.7)% (2.3)% 6.8% 12.2% 7.1% 8.6% 9.4% Operating EPS* $1.39 $1.38 $0.38 $0.58 $0.36 $0.42 $0.42 Net Income per Share* $0.68 $1.23 $0.40 $0.68 $0.38 $0.48 $0.57 Dividend per Share $0.52 $0.52 $0.52 $0.52 $0.1
Slide 29: Net Operating Cash Flow
Net Operating Cash Flow ($ in millions) 290 Cash Flow as % of NPW 240 241 238 228 227 190 17% 16% 16% 14% 140 159 123 90 11% 8% 40 2008 2009 2010 2011 2012 9/30/13 YTD
Slide 30: Investment Income – After-tax
Investment Income – After-tax ($ in millions) 120 110 111 111 100 105 100 90 96 80 70 60 50 40 2008 2009 2010 2011 2012 YTD September 2013: $75M
Slide 31: Focus on Expense Management
Focus on Expense Management 36 35 34 33 GAAP Expense Ratio 32 31 30 29 28 27 26 2007 2008 2009 2010 2011 2012 9/30/2013 YTD SIGI Peer Median Source: SNL Financial Note: Expense Ratio including Dividends Peers include CINF, CNA, HIG, STFC , THG, TRV, UFCS, and WRB
Slide 32: Insurance Operations Productivity
Insurance Operations Productivity % ($ in 000s) NPW per Employee Statutory Expense Ratio 900 33.0 895 32.5 842 797 766 791 32.0 700 761 31.5 31.0 30.5 500 30.0 29.5 300 29.0 2008 2009 2010 2011* 2012 9/30/13 *Excludes Excess & Surplus Lines
Slide 33: Standard Commercial Lines Profitability
Standard Commercial Lines Profitability Statutory Combined Ratios 115 % 110 105 103.9 103.0 100.9 99.8 100.8 0.5 6.4 5.0 100 2.4 98.5 3.3 95.9 99.3 98.5 95.0 2.1 96.2 95.4 0.9 98.0 93.6 1.2 97.5 97.5 1.2 95 1.5 0.3 96.4 95.0 95.0 93.9 93.3 93.8 90 85 Impact of Catastrophe Losses Combined Ratio exclu
Slide 34: Premium by Strategic Business Unit
Premium by Strategic Business Unit 2012 Standard Commercial Lines Direct Premium Written Bonds Community and 1% Public Services Contractors 23% 34% Manufacturing & Mercantile 42%
Slide 35: Premium by Line of Business
Premium by Line of Business 2012 Standard Commercial Lines Net Premium Written Workers Compensation General Liability 21% 31% Commercial Property Other 17% Auto 1% Bonds BOP 1% 6% 23%
Slide 36: Long-Term Shareholder Value Creation
Long-Term Shareholder Value Creation $25 0.52 0.52 * 0.52 $20 0.44 0.49 0.52 0.52 19.77 20.16 0.40 18.82 18.97 19.45 17.87 0.52 17.80 0.35 Per Share $15 0.31 16.44 15.81 14.96 12.96 $10 $5 $0 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 Sep-13 Book Value Dividend *Annualized indicated dividend
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