Selective Insurance Group, Inc. · NASDAQ:SIGI
Selective Insurance — 2022 Bank of America Securities Insurance Conference
32 slides from Selective Insurance's conference presentation, February 2022
Slide 1: Investor Presentation February 2022
INVESTOR February 2022 PRESENTATION 1
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 BE UNIQUELY INSURED®
Slide 4: A Track Record of Superior Execution
A TRACK RECORD OF SUPERIOR EXECUTION An Eight-Year Track Record of Double-Digit Non-GAAP Operating ROEs* and Above Average Industry Growth 2021 Non-GAAP Operating ROE of 14.3%* 27 $4.7B 95+ $3.2B 92.8% State Footprint** Market Cap Years of Financial 2021 NPW 2021 GAAP (as of 2/11/2022) Strength and
Slide 5: Our Sustainable Competitive Advantages
OUR SUSTAINABLE COMPETITIVE ADVANTAGES Competitive Position Enhanced by Working Towards the Benefit of all our Stakeholders Distribution model Unique field model Superior omni-channel emphasizing franchise enabled by sophisticated customer experience value with high-quality tools and technology deli
Slide 6: Summary of Our Operations
SUMMARY OF OUR OPERATIONS Commercial Lines Personal Lines Excess & Surplus (81% of NPW) (9% of NPW) (10% of NPW) • Focused on disciplined • Competitive dynamics • Focus on achieving target growth hurting personal auto combined ratio; top-line growth, but market will depend on market • Strong calenda
Slide 7: Super Regional Company with National Capabilities
SUPER REGIONAL COMPANY WITH NATIONAL CAPABILITIES Standard Commercial Standard Personal E&S (81% of NPW) (9% of NPW) (10% of NPW) 27 15 50 States & D.C. States States & D.C. 7
Slide 8: Strong ROE Outperformance Relative to Peers
STRONG ROE OUTPERFORMANCE RELATIVE TO PEERS Historical Non-GAAP Operating ROEs* • Superior 14.3% non-GAAP operating ROE* in 2021 driven by: 15% 14.3% Elevated CAT ̶ Solid underwriting profitability losses ̶ Manageable CAT losses 10.3% ̶ Strong investment contribution 10% 8.8% • Track record of gener
Slide 9: Excellent Historical Operating Results
EXCELLENT HISTORICAL OPERATING RESULTS 2021 HIGHLIGHTS Historical GAAP Combined Ratios • Consolidated combined ratio of 92.8% 100% • NPW growth of 15% (11% excluding specific 2020 COVID-19 impacts and elevated CAT COVID-19-related impacts) losses • After-tax net investment income up 42% over prior y
Slide 10: Our Strategic Initiatives
OUR STRATEGIC INITIATIVES 10
Slide 11: Our Major Strategic Initiatives
OUR MAJOR STRATEGIC INITIATIVES LEVERAGE SOPHISTICATED CONTINUED EXCELLENT CULTURE FOCUSED ON TOOLS TO ACHIEVE PROFITABLE GROWTH CUSTOMER SERVICE INNOVATION AND ADEQUATE PRICING SUSTAINABILITY Deploy sophisticated underwriting Expanding “share of wallet” and Continue to deliver superior A culture of
Slide 12: Consistently Achieving Price Increases in Alignment with Loss Trend
CONSISTENTLY ACHIEVING PRICE INCREASES IN ALIGNMENT WITH LOSS TREND • Selective’s renewal pure price increases exceeded Commercial Lines Pricing and Retention industry average from 2009-2018 and have steadily increased in 2019-2021 SIGI Pricing CLIPS Pricing SIGI Retention • An attractively priced b
Slide 13: Portfolio Approach to Pricing and Underwriting Helps Drive Business Mix Improvements
PORTFOLIO APPROACH TO PRICING AND UNDERWRITING HELPS DRIVE BUSINESS MIX IMPROVEMENTS • Portfolio management approach yields Commercial Lines Pricing by Retention Group higher retention and rate • Account-specific pricing, including: ̶ Predictive modeling ̶ Relative loss frequency and severity ̶ Pric
Slide 14: Targeting Profitable Growth Over Time
TARGETING PROFITABLE GROWTH OVER TIME Commercial Lines Growth Drivers Historical Net Premiums Written LOWER • Target of growing “share of wallet” to 12% RISK $3.5B with existing distribution partners • Target of appointments to represent 25% Managed Premium Volume During Soft Market share in existin
Slide 15: Initiatives Focused on Profitable Growth
INITIATIVES FOCUSED ON PROFITABLE GROWTH MarketMax® provides New small business our distribution partners agency interface with insights into their enhances opportunities portfolio and positions by significantly them to expand their streamlining quoting relationship with us and issuance process Shif
Slide 16: Greenfield Geo-Expansion Enhances Growth Opportunities
GREENFIELD GEO-EXPANSION ENHANCES GROWTH OPPORTUNITIES Diversification and spread of risk, with a target of having national capabilities 2017 – 2018 • Established new Southwest regional hub by entering AZ, CO, NM, and UT for commercial lines • NH for commercial lines • AZ and UT for personal lines •
Slide 17: Deliver a Superior Omni-Channel Experience
DELIVER A SUPERIOR OMNI-CHANNEL EXPERIENCE • Changing expectations from customers, and VALUE-ADDED SERVICES potential disruptive threats from traditional and SUCH AS non-traditional competitors SELECTIVE® DRIVE • Partnering with agents to provide a seamless “360-DEGREE” VIEW customer experience OF C
Slide 18: Developing Leadership in Environmental, Social, and Governance Disclosures
DEVELOPING LEADERSHIP IN ENVIRONMENTAL, SOCIAL, AND GOVERNANCE DISCLOSURES Risk oversight and mitigation Capital allocation away from specific environmentally hazardous classes Understanding and Reducing our carbon footprint Attempting to Mitigate Climate Change Risk Sustainability Committee Respons
Slide 19: DE&I Initiatives to Drive Employee Engagement
DE&I INITIATIVES TO DRIVE EMPLOYEE ENGAGEMENT Promoting diversity, equity, and inclusion is a key facet of driving employee engagement and enhancing innovation and creativity Senior leadership business Increased Board diversity Building a leadership culture objectives tied to supporting and with rec
Slide 20: Financial Overview
SELECTIV BE UNIQUELY INSURED® FINANCIAL OVERVIEW
Slide 21: Lower Risk Profile and Strong Financial Strength
LOWER RISK PROFILE AND STRONG FINANCIAL STRENGTH A LOWER RISK PROFILE AM Best • Strong balance sheet underpinned by a A+ conservative approach to: ̶ Managing the investment portfolio S&P ̶ Purchasing reinsurance protection A ̶ Loss reserving Low to • Conservative business and balance sheet Medium pr
Slide 22: A Writer of Predominantly Low- to Medium-Hazard Risks
A WRITER OF PREDOMINANTLY LOW- TO MEDIUM- HAZARD RISKS • Manage volatility of underwriting Percent of Policies with TIV* or Property Casualty results, in part through maintaining a Limits of $1M or Less smaller limit profile Standard Commercial Lines 77% 86%** • Low account sizes (premium per policy
Slide 23: Conservative Investment Portfolio
CONSERVATIVE INVESTMENT PORTFOLIO • Core fixed income and short-term investments comprise 91% of the investment portfolio: Investment Portfolio at 12/31/21 ̶ “A+” average credit quality ̶ Effective duration of 3.9 years Fixed Income 85% • Risk asset allocation (high yield, public equity, Short-Term
Slide 24: Active Portfolio Management Drives Investment Results
ACTIVE PORTFOLIO MANAGEMENT DRIVES INVESTMENT RESULTS • Guidance of after-tax net investment income Historical After-Tax Fixed Income Portfolio Yields of $200M in 2022: ̶ $20M of after-tax net investment income 3.0% 2.8% 2.9% from our alternative investments 2.6% 2.6% ̶ Continued pressure on new mon
Slide 25: Historical Catastrophe Loss Impact Below Industry Average
HISTORICAL CATASTROPHE LOSS IMPACT BELOW INDUSTRY AVERAGE • Catastrophe loss impact over the past 20 years has Impact of Catastrophe Losses on Combined Ratio averaged: 12 Elevated ̶ 5.2 percentage points for the P&C industry pts frequency of CAT ̶ 3.4 percentage points for Selective losses P&C Indus
Slide 26: Conservative Reinsurance Program
CONSERVATIVE REINSURANCE PROGRAM • 2022 property catastrophe treaty structure: Net Single-Event Hurricane Loss* as a % of Equity ̶ Coverage of $835M in excess of $40M retention 18% ̶ $259M in collateralized limit, primarily in the 15% top layer of the program 12% ̶ Additional earnings volatility pro
Slide 27: Strong Reserving Track Record
STRONG RESERVING TRACK RECORD Impact of Casualty Reserve Development on our Combined Ratio • Disciplined reserving practices: ̶ Quarterly actuarial reserve reviews ̶ Semi-annual independent review 4.0% ̶ Independent year-end opinion • Favorable reserve development in Workers Compensation and General
Slide 28: Strong Capital and Liquidity Position, Greater Focus on Expenses
STRONG CAPITAL AND LIQUIDITY POSITION, GREATER FOCUS ON EXPENSES CAPITAL AND LIQUIDITY PLAN EXPENSE MANAGEMENT • Debt-to-capital ratio of 14.5% • Expecting expense ratio improvement in 2022 and over the next few years • NPW to surplus ratio of ~1.33x is slightly below our target range of 1.35x – 1.5
Slide 29: 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 Shareholder Value Creation Over Time Generating non-GAAP operating ROE* in line with our long-term target $50 $3,000 $2,500 $40 $2,000 ($ in millions) Superior growth in book value per share $30
Slide 30: Total Shareholder Returns Have Outperformed Benchmarks Over Longer Term
TOTAL SHAREHOLDER RETURNS HAVE OUTPERFORMED BENCHMARKS OVER LONGER TERM Total Shareholder Return SIGI S&P Prop/Cas S&P 500 • Solid long-term 50% outperformance in TSR relative to S&P 40% P&C insurance and S&P 500 indices 30% 28.7% • Share price 24.0% performance has 20% 18.5% 18.6% reflected our abi
Slide 31: Our Value Proposition
OUR VALUE PROPOSITION Leveraging our competitive strengths to generate sustained financial outperformance A distribution model that emphasizes franchise value, meaning we focus on appointing high-quality independent distribution partners, with whom we have meaningful and close business relationships
Slide 32: Investor Presentation February 2022
INVESTOR February 2022 PRESENTATION 32
Selective Insurance Group — 2022 Bank of America Securities Insurance Conference on 6ix