Selective Insurance Group, Inc. · NASDAQ:SIGI
Selective Insurance — Investor Presentation (June 2016)
32 slides from Selective Insurance's investor presentation, June 2016
Slide 1: Selective Insurance Group, Inc. Investor Presentation
Selective Insurance Group, Inc. Investor Presentation June 2016 Selective Insurance Selective Insurance Group, Group,Inc. Inc.
Slide 2: Forward Looking Statements
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
Slide 3: Strategic Overview
Strategic Overview Selective Insurance Group, Inc. 3
Slide 4: Best Super-Regional Company
Best Super-Regional Company ► Super-regional P&C carrier with long history of financial strength, superior execution and disciplined growth in these lines of business: Standard Commercial Standard Personal Excess & Surplus ► Sustainable Competitive Advantages: True franchise value with “ivy
Slide 5: True Franchise Value with "ivy league" Distribution Partners
True Franchise Value with “ivy league” Distribution Partners ► High franchise value: Standard Commercial: 1,100 agents in 22 states Standard Personal: 700 agents in 13 states Excess & Surplus: 80 wholesale brokers in 50 states ► Standard lines NPW per agent of $1.7 million ► Agent relationship
Slide 6: Field Model: Competitive Advantage
Field Model: Competitive Advantage ► Responsive, field-based model: Agency Management ~100 Agency Management Specialists Specialists Corporate Underwriters ~15 Personal Lines Marketing Small Business Team Specialists ~100 Claims Management Field Personal Claims Specialists Lines Management Mod
Slide 7: Commercial Lines Renewal Premium
Commercial Lines Renewal Premium $1.5 85% Vertical integration allows for Direct Renewal Premium (in billions) $1.4 84% ► $1.3 83% nimble execution $1.2 82% Overall Retention ► Inside underwriters receive $1.1 81% credit for non-renewal of lower $1.0 80% performing accounts $0.9 79% $0.8 78% ► 3rd g
Slide 8: Sophisticated Pricing Tools
Sophisticated Pricing Tools Commercial Lines Pricing by Retention Group Point of Renewal Retention 12% First Quarter 2016 95% Renewal Pure Price 10% 8% 85% 6% 4% 75% 2% 0% 65% Above Average Below Low Very Low Average Average % of Premium 49.4% 24.7% 15.6% 7.6% 2.7% Selective’s pricing tools allow th
Slide 9: Profitable Growth
Profitable Growth Growth drivers: 500 450 ► Unique field model Direct New Business ($in millions) 400 ► True franchise value 350 ► Increased capacity through: 300 250 Small Business Teams 200 Agency Management 150 Specialists 100 Additional agents 50 ► The Selective Edge® for Personal 0 2011*
Slide 10: 2015: Selective's Most Profitable Year
2015: Selective’s Most Profitable Year Statutory Combined Ratio (Ex-CAT) 98.4% ► Generated 89.4% combined ratio, 97.3% excluding catastrophes 94.8% ► Achieved operating ROE goal of 300 bps above WACC at 11.8% 92.5% ► In 2016, expect to outpace claim inflation through the following actions: 89.4% R
Slide 11: Commercial Lines
Commercial Lines ($ in billions) ► Commercial lines price increases met or NPW Combined Ratio $2.0 110% exceeded claims inflation for 26 consecutive quarters $1.6 105% ► Executing on our small business strategy $1.5 $1.4 through redefined Small Business Teams rolled $1.4 $1.3 100% out in 2015 $1.2 ►
Slide 12: Claims Management: Significant Improvements in Workers Compensation
Claims Management: Significant Improvements in Workers Compensation ► Centralized handling of workers Focus on Lower Hazard Mix compensation claims Improvement ► Strategic case management and escalation model 45.5% 39.4% 40.5% 46.6% ► Fraud detection and recovery model 15.1% 12.9% 2013 2015 Low Haza
Slide 13: Opportunity for Profitable Growth
Opportunity for Profitable Growth Personal Lines Excess & Surplus Lines ► Goal to produce a Homeowners 90% ► Net premium written growth of 28% in combined ratio in a normal CAT year the first quarter of 2016 ► The Selective Edge® product targets ► Achieved overall 3.3% price increase the consultativ
Slide 14: Investing in Omni-Channel Experience
Investing in Omni-Channel Experience ► Game changer in an industry that has been slow to adopt change ► Providing customers with 24-by-7 access to transactional capabilities and information ► Drive increased customer loyalty and retention ► Our ability to drive agency adoption is based on the franch
Slide 15: Investment Proposition
Investment Proposition ► Long track record of financial strength, superior execution and disciplined growth ► Unique operating model combining local underwriting authority with true franchise value with “ivy league” distribution partners ► Investing in technology to deliver best-in-class omni- chann
Slide 16: Risk Profile and Financial Strength
Risk Profile and Financial Strength Selective Insurance Group, Inc. 16
Slide 17: Robust Risk and Return Strategy
Robust Risk and Return Strategy Low to Medium Hazard Writer Selective Insurance Group, Inc. 17
Slide 18: Conservative Investment Portfolio
Conservative Investment Portfolio Alternatives 2% Short-term ► “AA-” average credit quality Equities 2% 4% ► Investment ROE of 6.6% (approximated by yield of 1.84% x leverage of 3.5) ► 3.8 year duration (incl. short- term) As of 3/31/2016 ► 2016 expected after-tax new money rate of 1.78% ► 2016 expe
Slide 19: Conservative Reinsurance Program
Conservative Reinsurance Program % of Equity at Risk Renewed January 1, 2016 1 in 250 Year Event $685M in excess of $40M retention 26% Reduced gross PML Exhausts at through CAT approximately 1-in- management actions 274 year event 2016 Property Catastrophe 8% Treaty 5% 4% Average reinsurer $201 mill
Slide 20: Reserve Strength
Reserve Strength Standard Deviation (2006 – 2015) of ► Disciplined reserving practices Reserve Development Points on the Combined Ratio ► Quarterly actuarial reserve reviews ► 10 consecutive years of favorable Peer Average* 3.1% reserve development ► 2 reviews per year by independent Selective 1.2%
Slide 21: Generating Long-Term Shareholder Value
Generating Long-Term Shareholder Value $28 $0.60* $0.57 $0.53 $25.61 $0.52 $24.37 $0.52 $0.52 $21 $0.49 $0.52 $22.54 $0.44 $0.52 $20.63 $0.52 $19.45 $19.77 $18.82 $18.97 $17.87 $17.80 $14 $15.81 $7 $0 Book Value Per Share Dividend Per Share *Annualized indicated dividend Selective has a long track-r
Slide 22: Total Shareholder Returns
Total Shareholder Returns Total Return as of March 31, 2016 SIGI S&P 500 S&P Prop/Cas 30% 28.3% 25% 20% 19.0% 17.4% 15% 9.5% 10% 5.9% 5% 0% -5% 1 Year 3 Years 5 Years 10 Years Selective’s continued success in 2016 reflects its ability to drive sustainable and profitable growth while delivering share
Slide 23: Sustainable Competitive Advantages
Sustainable Competitive Advantages ► True franchise value with “ivy league” distribution partners ► Our unique field model coupled with sophisticated underwriting and claims capabilities ► Superior customer experience delivered by best- in-class employees 16% Driving long-term success 8% Selective I
Slide 24: Selective Insurance Group, Inc.
Selective Insurance Group, Inc. Investor Presentation June 2016 Selective Insurance Selective Insurance Group, Group,Inc. Inc.
Slide 25: Financial Highlights 2012 – Q1 2016
Financial Highlights 2012 – Q1 2016 2012 2013 2014 2015 Q1 2016 Statutory NPW Growth 12.2% 8.7% 4.1% 9.8% 9.1% Operating EPS $0.58 $1.65 $2.17 $2.70 $0.66 Net Income per Share $0.68 $1.87 $2.47 $2.85 $0.63 Dividend per Share $0.52 $0.52 $0.53 $0.57 $0.15 Book Value per Share $19.77 $20.63 $22.54 $24
Slide 26: Net Operating Cash Flow
Net Operating Cash Flow ($ in millions) 440 Cash Flow as % of NPW 390 $382 $336 18% 340 19% 290 240 $227 $233 14% 12% 190 140 $123 90 8% 40 2011 2012 2013 2014 2015 YTD March 2016: $14M Selective Insurance Group, Inc.
Slide 27: Investment Income – After-tax
Investment Income – After-tax ($ in millions) 120 $111 110 $104 $100 $101 100 $94 90 80 70 60 50 40 2011 2012 2013 2014 2015 YTD March 2016: $24M Selective Insurance Group, Inc.
Slide 28: Standard Commercial Lines Pricing
Standard Commercial Lines Pricing Selective CLIPS 7.5% 6.5% 5.5% Renewal Pure Price 4.5% 3.5% 2.5% 1.5% 0.5% -0.5% -1.5% Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 2009 2010 2011 2012 2013 2014 2015 2016 Industry Source: Towers Watson Commercial Lines Insuran
Slide 29: Standard Commercial Lines Profitability
Standard Commercial Lines Profitability % Statutory Combined Ratios 105 103.9 103.0 99.8 100.8 0.5 6.4 5.0 100 98.5 3.3 99.3 97.1 95.9 2.1 99.3 97.5 98.0 1.7 95.5 95.0 95 0.9 96.4 1.2 95.0 95.3 2.7 93.8 92.8 89.7 90 89.2 2.2 2.9 87.0 86.8 85 80 Impact of Catastrophe Losses Combined Ratio excluding C
Slide 30: Standard Commercial Lines Premiums
Standard Commercial Lines Premiums Strategic Business Unit Diversification 2008 2015 22% Contractors 27% 35% 43% Community & Public Services 16% Manufacturing 18% Mercantile Service 19% 20% Includes Bonds Premium Selective Insurance Group, Inc.
Slide 31: Premium by Line of Business
Premium by Line of Business 2015 Standard Commercial Lines Net Premium Written Workers Compensation 19% General Liability 32% Commercial Property 18% Other 1% Bonds Auto 1% BOP 23% 6% Selective Insurance Group, Inc.
Slide 32: Long-Term Shareholder Value Creation
Long-Term Shareholder Value Creation $30 $0.60* $0.57 $25 $25.61 $0.53 $24.37 $0.52 $22.54 $0.52 $0.52 $20 $0.44 $0.49 $0.52 $20.63 $0.52 $19.77 $18.97 $19.45 $0.40 $18.82 $17.87 $0.52 $17.80 $15 $16.44 $15.81 $10 $5 $0 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 Q1 2016 Book Value Divide
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