Selective Insurance Group, Inc. · NASDAQ:SIGI

Selective Insurance — Bank of America Merrill Lynch Insurance Conference 2017

31 slides from Selective Insurance's conference presentation, February 2017

  1. Slide 1: Selective Insurance Group, Inc. February 2017

    Selective Insurance Group, Inc. FEBRUARY 2017 € SELECTIVE

  2. Slide 2: Safe Harbor Statement

    PAGE 2 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 and the

  3. Slide 3: Strategic Overview

    STRATEGIC OVERVIEW GREG MURPHY Chairman and Chief Executive Officer

  4. Slide 4: Best Super Regional Company

    BEST SUPER REGIONAL COMPANY PAGE 4  Super-regional P&C company with capabilities SUSTAINABLE COMPETITIVE ADVANTAGES: of a national carrier  True franchise value with “ivy league”  Long history of financial strength, superior distribution partners execution, and disciplined growth  Unique field m

  5. Slide 5: True Franchise Value with Distribution Partners

    TRUE FRANCHISE VALUE WITH DISTRIBUTION PARTNERS PAGE 5  High franchise value: o Standard Commercial: 1,180 agents o Standard Personal: 710 agents o Excess & Surplus: 80 wholesale general agents  Franchise model helps obtain above industry average pricing while balancing retention and growth target

  6. Slide 6: Unique Field Model

    UNIQUE FIELD MODEL PAGE 6  Responsive, field-based model: o ~105 Agency Management Specialists o ~15 Personal Lines Marketing Specialists o ~115 Claims Management Specialists o ~80 Safety Management Specialists  Focused on delivering best-in-class customer service  Armed with sophisticated underw

  7. Slide 7: Superior Customer Experience

    SUPERIOR CUSTOMER EXPERIENCE PAGE 7  A personalized and customer-centric focus has been the centerpiece of our strategy since our founding  Investing in omni-channel experience, a potential game changer in an industry that has been slow to adopt change  Focus on driving increased customer loyalty

  8. Slide 8: 2016: Selective's Most Profitable Year

    2016: SELECTIVE’S MOST PROFITABLE YEAR PAGE 8 Statutory Combined Ratio (ex-CAT)  Underlying statutory combined ratio of 92.2% in 2016 98.4% 97.3%  Pursuing price increases in each of our segments 94.8%  Claims and underwriting improvements 92.5% 89.4% 89.0%  Focus on lowering expense ratio 2011

  9. Slide 9: Long History of Disciplined & Profitable Top Line Growth

    LONG HISTORY OF DISCIPLINED & PROFITABLE TOP LINE GROWTH PAGE 9 GROWTH DRIVERS: Net Premiums Written  Unique field model $2.5B  True franchise value with “ivy league” distribution Managed Premium partners Volume During Soft Market  Growing share of wallet  New agent appointments  Expansion in E

  10. Slide 10: Standard Commercial Lines: A Profit Engine

    STANDARD COMMERCIAL LINES: A PROFIT ENGINE PAGE 10 ($ in billions)  GROWTH DRIVERS: NPW Combined Ratio $2.0B 110.0% $1.7 o AMS territory additions o Small business teams $1.2 o New business capacity per AMS  PROFITABILITY DRIVERS: o Underwriting improvements o Enhanced claims processes o Price inc

  11. Slide 11: Price Increases Have Significantly Outperformed Industry Averages

    PRICE INCREASES HAVE SIGNIFICANTLY OUTPERFORMED INDUSTRY AVERAGES PAGE 11  Commercial Lines price increases have 10% 86% cumulatively outperformed the CLIPS index by 1,700 points since 2009 Renewal Pure Price (%) 84% 6%  Ability to get price is reflective of our: Retention (%) o Dynamic Portfolio

  12. Slide 12: Sophisticated Pricing Tools

    SOPHISTICATED PRICING TOOLS PAGE 12 Commercial Lines Pricing By Retention Group  Commercial Lines Dynamic Portfolio Manager Renewal Pure Price Point of Renewal (DPM) tool considers: Point of Renewal Retention Retention 9% 95% o Average diamond score Renewal Pure Price o Relative loss frequency and

  13. Slide 13: Personal Lines: A Profitable Year but Greater Focus on Auto Margins

    PERSONAL LINES: A PROFITABLE YEAR BUT GREATER FOCUS ON AUTO MARGINS PAGE 13 HOMEOWNERS ($ in millions) NPW Combined Ratio $400M 117.3% 120%  Profitability close to long term target of 90% combined ratio (in normal CAT year) after years of price increases and underwriting changes $273 $282  Sixth l

  14. Slide 14: Excess & Surplus: Targeting Margin Improvement

    EXCESS & SURPLUS: TARGETING MARGIN IMPROVEMENT PAGE 14 ($ in millions)  Entered E&S through two transactions in 2011 and NPW Combined Ratio 2012 $250M 118.8% 120% $210  Our E&S business has a low-limit profile; average policy size below $3K 102.1%  Significant targeted price increases in challeng

  15. Slide 15: Financial Strength & Risk Profile

    FINANCIAL STRENGTH & RISK PROFILE MARK WILCOX EVP, Chief Financial Officer

  16. Slide 16: Long-Term Shareholder Value Creation Through Book Value Growth

    LONG-TERM SHAREHOLDER VALUE CREATION THROUGH BOOK VALUE GROWTH PAGE 16  Long-term financial target – operating ROE* of 300 Selective’s Track Record of Book Value per basis points above our weighted average cost of capital Share Growth over Time  Strong balance sheet underpinned by a conservative $

  17. Slide 17: Conservative Investment Portfolio

    CONSERVATIVE INVESTMENT PORTFOLIO PAGE 17  “AA-” average credit quality As of 12/31/2016  3.6 year effective duration (including short-term) Fixed Income: 92%  Fixed income portfolio comprised of 97% investment grade bonds and 3% high yield securities Short-term: 4%  2016 operating cash flow - 1

  18. Slide 18: Conservative Reinsurance Coverage

    CONSERVATIVE REINSURANCE COVERAGE PAGE 18  2017 property catastrophe treaty structure: Net Hurricane Loss as a % of Equity o Coverage of $685M in excess of $40M retention 18% 16% o Reinsurance exhausts at approximately 1-in- 265 year event level o $201M limit is collateralized 12% o Additional earn

  19. Slide 19: A Strong Reserving Track Record

    A STRONG RESERVING TRACK RECORD PAGE 19  Disciplined reserving practices with quarterly A Long Track Record of Favorable Development actuarial reserve reviews ($ in millions)  Independent actuarial review performed semi- $80 annually $66  Independent year-end opinion $40  Favorable reserve devel

  20. Slide 20: 2017 Combined Ratio Plan – Underlying Margin Improvement

    2017 COMBINED RATIO PLAN – UNDERLYING MARGIN IMPROVEMENT PAGE 20 2017 Statutory Combined Ratio (x-CAT)  Earned rate increases in 2017 should offset Forecast of 90.5% projected loss cost inflation 1.9%  Expense reductions to lower statutory combined ratio by 0.6 points, and 92.2% claims/underwritin

  21. Slide 21: Investment Proposition

    PAGE 21 INVESTMENT PROPOSITION  Long track record of financial strength, superior execution and disciplined profitable growth  Strong balance sheet with conservative investment portfolio allows us to take on more operating leverage  Projected investment operating ROE* of 6.8% in 2017  Each point

  22. Slide 22: Selective Insurance Group, Inc. February 2017

    Selective Insurance Group, Inc. FEBRUARY 2017 € SELECTIVE

  23. Slide 23: Additional Information

    <> SELECTIVE” ADDITIONAL INFORMATION

  24. Slide 24: Financial Highlights 2012 - 2016

    FINANCIAL HIGHLIGHTS 2012 - 2016 PAGE 24 2012 2013 2014 2015 2016 Statutory NPW Growth 12.2% 8.7% 4.1% 9.8% 8.1% Net Income per Share $0.68 $1.87 $2.47 $2.85 $2.70 Operating EPS* $0.58 $1.65 $2.17 $2.70 $2.75 Dividend per Share $0.52 $0.52 $0.53 $0.57 $0.61 Book Value per Share $19.77 $20.63 $22.54

  25. Slide 25: Net Operating Cash Flow

    NET OPERATING CASH FLOW PAGE 25 ($ in millions) 440 Cash Flow as % of NPW $382 $336 $302 $227 $233 19% 18% 13% 12% 14% 40 2012 2013 2014 2015 2016

  26. Slide 26: Investment Income – After Tax

    INVESTMENT INCOME – AFTER TAX PAGE 26 ($ in millions) 110 $104 $100 $101 $98 $94 50 2012 2013 2014 2015 2016

  27. Slide 27: Insurance Operations Productivity

    INSURANCE OPERATIONS PRODUCTIVITY PAGE 27 ($ in 000s) 1,100 NPW per Employee Statutory Expense Ratio 35 $1,028 $979 $908 $908 $842 500 30 2012 2013 2014* 2015 2016 *Expense ratio excludes 0.4 point benefit from self-insured group sale

  28. Slide 28: Standard Commercial Lines Profitability

    STANDARD COMMERCIAL LINES PROFITABILITY PAGE 28 Statutory Combined Ratios Impact of Catastrophe Losses Combined Ratio excluding CATS 105 103.0 4.6 97.1 98.4 95.5 Combined 1.7 Ratio(%) 95.3 2.7 92.8 89.2 89.9 2.1 2.2 87.8 87.0 80 2012* 2013 2014 2015 2016 *Includes impact of reinstatement premium on

  29. Slide 29: Standard Commercial Lines Premium Breakdown

    STANDARD COMMERCIAL LINES PREMIUM BREAKDOWN PAGE 29 Strategic Business Unit Diversification 1% 2008 2016 Contractors 22% 26% Community & Public 35% Services 43% Manufacturing and Wholesale 16% Mercantile and Services Bonds 18% 19% 20%

  30. Slide 30: Standard Commercial Lines Premium Breakdown

    STANDARD COMMERCIAL LINES PREMIUM BREAKDOWN PAGE 30 2016 Net Premium Written Workers Compensation 18% General Liability 32% Commercial Property 18% Other 1% Bonds BOP Auto 1% 6% 24%

  31. Slide 31: ©2017 Selective Insurance Group, Inc., Branchville, NJ. Products vary by jurisdiction, terms, and conditions

    ©2017 Selective Insurance Group, Inc., Branchville, NJ. Products vary by jurisdiction, terms, and conditions and are provided by Selective Insurance Company of America and its insurer affiliates. Details at selective.com/who-we-are/selectives-affiliated-insurers.

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