Selective Insurance Group, Inc. · NASDAQ:SIGI
Selective Insurance — Investor Presentation (2020)
30 slides from Selective Insurance's investor presentation, 2020
Slide 1: 2020 Investor Presentation
SELECTIVE BE UNIQUELY INSURED“ 2020 Investor Presentation
Slide 2: Safe Harbor Statement
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, as amended, an
Slide 3: Overview
SELECTIVE INSURANCE” SS
Slide 4: A Track Record of Superior Execution
A TRACK RECORD OF SUPERIOR EXECUTION STRONG UNDERWRITING PERFORMANCE WITH SIX CONSECUTIVE YEARS OF DOUBLE-DIGIT ROES 2019 Non-GAAP Operating ROE OF 13.3%* 27 $4.2B 90+ $2.7B 93.7% State Footprint Market Cap Years of Financial 2019 NPW 2019 GAAP (as of 2/11/2020) Strength and (up 7% Y/Y) Combined Rat
Slide 5: Our Sustainable Competitive Advantages
OUR SUSTAINABLE COMPETITIVE ADVANTAGES Franchise value Unique field model Superior customer distribution model with enabled by sophisticated experience delivered by best-in-class partners tools and technology best-in-class employees • Enables effective • Locally-based • Total attention to customer m
Slide 6: Super Regional Company with National Capabilities
SUPER REGIONAL COMPANY WITH NATIONAL CAPABILITIES Standard Commercial Standard Personal E&S (80% of NPW) (11% of NPW) (9% of NPW) 27 15 50 States & D.C. States States & D.C. ~1,350 ~770 ~90 wholesale distribution partners distribution partners distribution partners Note: NPW breakdown as of full-yea
Slide 7: Excellent Operating Performance
EXCELLENT OPERATING PERFORMANCE Historical GAAP Combined Ratios FULL YEAR 2019 HIGHLIGHTS: 100% • Consolidated combined ratio of 93.7% Underlying Combined Ratio • After-tax net investment income up 13% 95.8% Reported Combined Ratio • Non-GAAP operating ROE* of 13.3% 95.0% 95% 93.7% 2020 FORECAST: •
Slide 8: Summary of Our Operations
SUMMARY OF OUR OPERATIONS Commercial Lines Personal Lines Excess & Surplus (80% of NPW) (11% of NPW) (9% of NPW) • Focused on disciplined growth • Targeting a 90% • Focus on achieving target homeowners combined ratio combined ratio; top-line will • Strong calendar year in a normal CAT year (~14 depe
Slide 9: Our Strategic Initiatives
SELECTIVE INSURANCE” EE ° OUR STRATEGIC INITIATIVES
Slide 10: Our Major Strategic Initiatives
OUR MAJOR STRATEGIC INITIATIVES PRICE ALIGNMENT WITH LEVERAGE SOPHISTICATED CONTINUED PROFITABLE EXCELLENT EXPECTED LOSS TREND TOOLS AND TECHNOLOGY GROWTH CUSTOMER SERVICE Seek to achieve price Leverage sophisticated Expanding “share of Continue to deliver superior increases in line with or underwri
Slide 11: Consistently Achieving Price Increases in Alignment with Loss Trend
CONSISTENTLY ACHIEVING PRICE INCREASES IN ALIGNMENT WITH LOSS TREND SIGI Pricing CLIPS Pricing SIGI Retention • Commercial Lines renewal pure price 88% increases have met or exceeded CLIPS index since 2009, and are tracking in line with expected loss trends 6.0% Renewal Pure Price (%) 84% • For the
Slide 12: A Granular Approach to Pricing and Underwriting
A GRANULAR APPROACH TO PRICING AND UNDERWRITING • Portfolio management approach yields Commercial Lines Pricing by Retention Group higher retention and rate Pure Rate % Premium Renewed • Account-specific pricing, including: Point of Renewal Retention 12% 95% Renewal Pure Price • Predictive modeling
Slide 13: Targeting Profitable Growth Over Time
TARGETING PROFITABLE GROWTH OVER TIME PAGE 13 Historical Net Premiums Written COMMERCIAL LINES GROWTH DRIVERS: LOWER RISK • Target of growing “share of wallet” to $2.8B Managed Premium Volume 12% with existing distribution partners During Soft Market • Target of appointments to represent 25% share i
Slide 14: Greenfield Geo-Expansion Enhances Growth Opportunities
GREENFIELD GEO-EXPANSION ENHANCES GROWTH OPPORTUNITIES • Diversification and spread of risk • Targeting ~30 fully operational states • Remainder to support multi-state accounts • Established new Southwest regional hub by entering AZ, CO, NM, and UT for commercial lines in 2017 and 2018 and AZ and UT
Slide 15: Deliver a Superior Omni-Channel Experience
DELIVER A SUPERIOR OMNI-CHANNEL EXPERIENCE • Changing expectations from customers, and VALUE-ADDED potential disruptive threats from traditional and SERVICES SUCH AS SELECTIVE® DRIVE “360-DEGREE” VIEW non-traditional competitors OF CUSTOMER • Partnering with agents to provide a seamless customer exp
Slide 16: Financial Overview
SELECTIVE INSURANCE” (eS ° FINANCIAL OVERVIEW
Slide 17: Lower Risk Profile and Strong Financial Strength
LOWER RISK PROFILE AND STRONG FINANCIAL STRENGTH A LOWER RISK PROFILE • Strong balance sheet underpinned by a conservative approach to: • Managing the investment portfolio • Purchasing reinsurance protection • Loss reserving Low to • Conservative business and balance sheet Medium profile allows for
Slide 18: A Writer of Predominantly Low- to Medium-Hazard Risks
A WRITER OF PREDOMINANTLY LOW- TO MEDIUM- HAZARD RISKS • Manage volatility of underwriting results, in part through Percent of Policies with TIV or maintaining a smaller limit profile Limits of $1M or Less Property Casualty • Low account sizes (premium per Standard Commercial Lines 79% 87%* policyho
Slide 19: Conservative Investment Portfolio
CONSERVATIVE INVESTMENT PORTFOLIO Investment Portfolio at 12/31/19 • Core fixed income and short-term investments $6.7B of Investments comprise 95% of the investment portfolio: • “AA-” average credit quality Fixed Income 91% (4% High Yield) • Effective duration of 3.6 years Short-Term 4% • Risk asse
Slide 20: Active Portfolio Management Drives Investment Results
ACTIVE PORTFOLIO MANAGEMENT DRIVES INVESTMENT RESULTS Historical After-Tax Fixed Income Portfolio Yields • Strong investment performance in 2019 driven by: 3.0% 2.9% • Active portfolio management 2.8% • Excellent operating cash flow (18% of NPW in 2019) 2.2% • Strong alternative asset returns 2.1% 2
Slide 21: Catastrophe Loss Impact Below Industry Average
CATASTROPHE LOSS IMPACT BELOW INDUSTRY AVERAGE • Catastrophe loss impact over the past 17 Impact of Catastrophe Losses on Combined Ratio years has averaged: 12 pts • 5.1 percentage points for the P&C P&C Industry industry • 2.9 percentage points for Selective 6 • Catastrophe loss mitigation initiati
Slide 22: Conservative Reinsurance Program
CONSERVATIVE REINSURANCE PROGRAM Net Single-Event Hurricane Loss* as a % of Equity • 2020 property catastrophe treaty structure: • Coverage of $735M in excess of $40M retention 24% • $242M in collateralized limit, primarily in the top 18% layer of the program 18% • Additional earnings volatility pro
Slide 23: Strong Reserving Track Record
STRONG RESERVING TRACK RECORD Impact of Casualty Reserve Development on our Combined Ratio • Disciplined reserving practices: 4.0% • Quarterly actuarial reserve reviews • Semi-annual independent review 2.0% • Independent year-end opinion • Favorable reserve development in Workers Compensation was pa
Slide 24: Margin Improvement Expected in 2020
MARGIN IMPROVEMENT EXPECTED IN 2020 • Targeting price increases in line with or in Reconciliation of 2019 Underlying GAAP Combined Ratio to 2020 excess of expected loss trend • Assumes no prior year casualty reserve 2.2%(1) development 92.9% • Business mix improvement through risk segmentation (2.3)
Slide 25: Strong Capital and Liquidity Position, Greater Focus on Expenses
STRONG CAPITAL AND LIQUIDITY POSITION, GREATER FOCUS ON EXPENSES CAPITAL AND LIQUIDITY PLAN EXPENSE MANAGEMENT • Strong position with 20.1% debt-to-capital ratio • Cost management and greater leverage from NPW growth helps drive expense ratio down • NPW to surplus ratio of ~1.4x is at the low end of
Slide 26: A Focus on ROE and Growth in Book Value per Share
A FOCUS ON ROE AND GROWTH IN BOOK VALUE PER SHARE Strong Track Record of Book Value per Share Growth and Generating non-GAAP operating ROE* in line Shareholder Value Creation with our long-term target $50 $2,500 $40 $2,000 ($ in millions) Superior growth in book value per share $30 $1,500 $20 $1,000
Slide 27: Strong ROE Outperformance Relative to Peers
STRONG ROE OUTPERFORMANCE RELATIVE TO PEERS Historical Non-GAAP Operating ROEs* • Strong underwriting and investment 15% 13.3% contributions 10.3% • Superior 13.3% non-GAAP operating ROE* in 10% 2019 10.9% 8.2% • Underwriting ROE contribution of 6.5% 5% SIGI Operating ROE • Investment ROE contributi
Slide 28: Total Shareholder Returns Have Outperformed Benchmarks
TOTAL SHAREHOLDER RETURNS HAVE OUTPERFORMED BENCHMARKS Total Shareholder Return SIGI S&P 500 S&P Prop/Cas • Solid outperformance in total 40% shareholder return relative to S&P 31.5% P&C insurance index and S&P 500 30% index over the past 5- and 10-year 25.9% periods 20.9% 20% 17.2% 13.2% 13.6% 14.5
Slide 29: Our Value Proposition
• Leveraging our competitive strengths to generate sustained financial outperformance • Franchise value distribution model with best-in-class partners • Unique field model enabled by sophisticated technology • Strong customer experience • Excellent growth opportunities within footprint and geo-expan
Slide 30: 2020 Investor Presentation
SELECTIVE BE UNIQUELY INSURED“ 2020 Investor Presentation
Selective Insurance Group — Investor Presentation (2020) on 6ix