Selective Insurance Group, Inc. · NASDAQ:SIGI
Selective Insurance — Keefe, Bruyette & Woods 2011 Insurance Conference
31 slides from Selective Insurance's conference presentation, Sep 7, 2011
Slide 1: Keefe, Bruyette & Woods 2011 Insurance Conference
– SELECTIVE INSURANCE GROUP, INC. – KEEFE, BRUYETTE & WOODS 2011 INSURANCE CONFERENCE SEPTEMBER 7, 2011 Financial Prepared for Growth Path to ROE Long-Term Strength Tomorrow Opportunity Improvement Value Creation
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: Financial Strength
– SELECTIVE INSURANCE GROUP, INC. – FINANCIAL STRENGTH Financial Prepared for Growth Path to ROE Long-Term Strength Tomorrow Opportunity Improvement Value Creation
Slide 4: 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 – 990 independent SC agents GA • Sophisticated underwriting tools • Rated A+ by
Slide 5: Focus on Enterprise Risk Management
Focus on Enterprise Risk Management • Business model generates more earnings stability • Sophisticated underwriting and granular pricing • Strong reserving practices • Conservative reinsurance program • Historically strong capital position • Deep investment management talent Financial Financial Prep
Slide 6: More Earnings Stability
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 Prepared for Growth Path to ROE Long-Term Strength Strength Tomorrow
Slide 7: More Earnings Stability
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 Pre
Slide 8: More Earnings Stability
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 9: Catastrophe Losses
Catastrophe Losses Points on Combined Ratio 25% 20% 15% 10% 5% 0% 2010 1Q:11 2Q:11 Peer Average SIGI Source: SNL Financial, Company Reports Note: Peers include CB, CINF, CNA, HIG, HGIC, STFC, THG, TRV, WRB and UFCS Financial Financial Prepared for Growth Path to ROE Long-Term Strength Strength Tomor
Slide 10: Strong Natural Catastrophe Reinsurance Program
Strong Natural Catastrophe Reinsurance Program % of Equity at Risk (Near-term basis) 30% Blended RMS v11.0 and AIR RMS v11.0 25% 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 11: Adverse/(Favorable) Points of Calendar Year Development
Adverse/ (Favorable) Points of Calendar Year Development 8% 6% 4% AIG takes $4B charge 2% 0% -2% -4% 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 U.S. P&C Industry SIGI Source: AM Best, 2010 Estimate Financial Financial Prepared for Growth Path to ROE Long-Term Strength Strength Tomorrow Opport
Slide 12: 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 13: Focus on Expense Management
Focus on Expense Management % 36 35 34 33 32 31 30 29 28 27 26 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 Source: SNL Financial SIGI Median Note: GAAP Expense Ratio including Dividends for regional peers (CINF, THG, HGIC, STFC and UFCS) Financial Financial Prepared for Growth Path to ROE
Slide 14: High Quality Investment Portfolio
High Quality Investment Portfolio • Average “AA” bond quality $4.0B Invested Assets • Approximately 3.3 year June 30, 2011 average duration, including Bonds short-term & cash 89.7% • Laddered maturity schedule – 38% matures within 3 years – 72% matures within 5 years • Outsourcing provides access Eq
Slide 15: Prepared for Tomorrow
– SELECTIVE INSURANCE GROUP, INC. – PREPARED FOR TOMORROW •Growth opportunity •Path to ROE improvement •Long-term shareholder value creation Financial Prepared for Growth Path to ROE Long-Term Strength Tomorrow Opportunity Improvement Value Creation
Slide 16: A Growth Company When the Time is Right
A Growth Company When the Time is Right $ in millions 1,600 1,400 Net Premiums Written 1,200 1,000 800 600 400 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 Financial Prepared for Growth Path to ROE Long-Term Strength Tomorrow Opportunity Improvement Value Creation
Slide 17: Selective's Growth Opportunity
Selective’s Growth Opportunity • Growth within current agency plant – Current share of wallet at 6.6% – 12.5% share of wallet would achieve $3B in premium • Commercial Lines product expansion – 33 products over past 2 ½ years • Small Business and Personal Lines strategy – New Field Marketing Special
Slide 18: Field Model Supports Agents
Field Model Supports Agents • Local knowledge of insureds Agency Management • Full claims/underwriting Claims Specialists Management authority Specialists • Supported by sophisticated underwriting tools • Safety management services lower frequency and increase retention • Field Market Specialists Sa
Slide 19: Agency Focus
Agency Focus • 990 Agents • 2,000 Storefronts • Ease of doing business • Online agency marketing portal Number of Agents 1,000 950 900 850 800 750 700 650 600 2006 2007 2008 2009 2010 2011 Financial Prepared for Growth Path to ROE Long-Term Strength Tomorrow Opportunity Improvement Value Creation
Slide 20: Middle Market Dynamics
Middle Market Dynamics • Agency relationships are key • Agents act as risk manager for insureds • Field underwriting and claims model • Predictive modeling used as a tool Financial Prepared for Growth Path to ROE Long-Term Strength Tomorrow Opportunity Improvement Value Creation
Slide 21: 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 • Improved touch points strengthen Selective bra
Slide 22: Middle Market Product Expansion
Middle Market Product Expansion • Added 20 new and enhanced products in 2009 • Introduced another 13 in past 18 months • New products • Aging Services, Identity Theft, Cyber Security, Technology • Enhanced products • Resort Endorsement, Contractors GL, Property Coverage for Municipalities Financial
Slide 23: Small Business and Personal Lines Opportunity
Small Business and Personal Lines Opportunity • Build scale through expanded capabilities and strategic additions to our agency plant • Predictive modeling is rule based • Small business teams and Field Marketing Specialists improve ease of doing business • Results in greater revenue diversification
Slide 24: Small Business Growth
Small Business Growth $ thousands Average DPW/Day 300 250 200 150 100 2006 2007 2008 2009 2010 Financial Prepared for Growth Path to ROE Long-Term Strength Tomorrow Opportunity Improvement Value Creation
Slide 25: 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 26: E&S Contract Binding Authority Product Expansion
E&S Contract Binding Authority Product Expansion • Renewal rights transaction effective August 1st with Alterra • Hired E&S underwriting team • 2010 gross written premiums of $77 million • Average account size of $2,500 • 75% casualty lines and 25% property • Primarily general liability, no workers
Slide 27: Path to ROE Improvement
Path to ROE Improvement • Commercial Lines – Improving renewal mix of business – Improving new business quality and pricing – Reduced hurricane AAL while growing exposures over the last 3 years – 9 consecutive quarters of positive price • Personal Lines – Reduced hurricane AAL while significantly gr
Slide 28: 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% 2.6% 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 2Q:11 9 consecutive quarters of positive price Financial Prepar
Slide 29: Personal Lines Rate Success
Personal Lines Rate Success Blended In-force Rate 8% 7.1% 7% 6.3% 6.7% 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 Prepared for Growth Path to ROE Long-Term Strength Tomorrow Opportunity Improvement Value Creation
Slide 30: 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 – Proactive medical management – Staff counsel expansion – Streamlined management of claims files – Fraud analytics – Subrogation process redesign Anticipate $8M savings from 2
Slide 31: Long-Term Shareholder Value Creation
Long-Term Shareholder Value Creation $0.52 $0.52 * Book Value Dividends $0.49 $20 $0.44 $0.52 $20.33 $0.40 $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 Jun-11 Current Dividend Yield: 3.6% *Ann
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