Selective Insurance Group, Inc. · NASDAQ:SIGI
Selective Insurance — Q4 2022 Earnings Presentation
30 slides from Selective Insurance's earnings presentation, Feb 13, 2023
Slide 1: Investor Presentation Quarter and Year Ended December 31, 2022
INVESTOR PRESE N T A TION QUARTER AND YEAR ENDED DECEMBER 31, 2022
Slide 2: Safe Harbor Statement
We make certain statements and reference other information in this presentation 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 Securities Exchange Act of 1
Slide 3: Overview
Overview 3
Slide 4: A Track Record of Superior Execution
4 A Track Record of Superior Execution Nine Consecutive Years of Double - Digit Non - GAAP Operating ROEs* and Above Average Industry Growth 30 State Footprint ** $6.1B Market Cap (as of 2/7/2023) 95+ Years of Financial Strength and Superior Execution $3.6B 2022 NPW (up 12% Y/Y) 95.1% 2022 GAAP Comb
Slide 5: Our Sustainable Competitive Advantages
Our Sustainable Competitive Advantages Competitive Position Enhanced by Working Towards the Benefit of all our Stakeholders Distribution model emphasizes franchise value with high - quality partners • Appointment of high - quality independent agent distribution partners with whom we have close relat
Slide 6: Super Regional with National Capabilities
Super Regional with National Capabilities Standard Commercial (81% of NPW) Standard Personal (9% of NPW) Excess & Surplus (10% of NPW) 30 States & D.C. Focus on maintaining growth and profitability targets in a more uncertain loss trend environment 15 States Shifted focus to “mass - affluent” market
Slide 7: Well-positioned for Continued Outperformance
Well - positioned for Continued Outperformance Topline/ Underwriting • Ongoing successful execution of 3% market share strategies and geo - expansion • Strong NPW growth from rising prices, increased exposure, solid retention rates, and new business volumes • Combined ratio guidance of 96.5% for 202
Slide 8: Our Key Accomplishments in 2022
Our Key Accompli s hm e n t s In 2022 Underwriting Discipline Continuing our decade - long track record of effectively managing commercial lines pricing and retention rates in a dynamic loss trend environment Strong Top - Line Growth Leveraging our unique field underwriting model and sophisticated t
Slide 9: Strong ROE Outperformance Relative to Peers
Strong ROE Outperformance Relative to Peers 9 • 12.4% non - GAAP operating ROE* in 2022 driven by: − Solid underwriting profitability − Manageable CAT losses − Strong investment contribution • Track record of generating ROEs well in excess of our cost of capital and peer group averages 10.3% 8.6% 12
Slide 10: Historical GAAP Combined Ratios
Historical GAAP Combined Ratios Excellent Historical Operating Results • 2022 Highlights − GAAP combined ratio of 95.1% − NPW growth of 12% − After - tax net investment income of $232 million • 2023 Guidance − GAAP combined ratio of 96.5% includes net catastrophe losses of 4.5 points and assumes no
Slide 11: Our Strategic Initiatives
Our Strategic Initiatives 11
Slide 12: Our Major Strategic Initiatives
Our Major Strategic Initiatives Continued Profitable Growth Expanding “share of wallet” and new agent appointments; geo - expansion Deploy sophisticated underwriting and pricing tools to improve risk selection and achieve price increases ≥ loss trends Leverage Sophisticated Tools to Achieve Adequate
Slide 13: 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 industry average from 2009 - 2018 • An attractively priced book with strong embedded profitability • Ability to obtain appropriate price enabled by: − Strong distribution partner r
Slide 14: Portfolio Approach To Pricing and Underwriting
Portfolio Approach To Pricing and Underwriting Helps Drive Business Mix Improvements Commercial Lines Pricing by Retention Group • Portfolio management approach yields higher retention and rate • Account - specific pricing, including: − Predictive modeling − Relative loss frequency and severity − Pr
Slide 15: Targeting Profitable Growth Over Time
2000 2002 2004 2006 2008 2010 2012 2014 2016 2018 2020 2022 Managed Premium Volume During Soft Market $ 3.6B Targeting Profitable Growth Over Time Delivered an 8% NPW compounded annual growth rate over the last nine years Commercial Lines Pricing by Retention Group Commercial Lines Growth Drivers Lo
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 Recent Timeline of our Disciplined Approach to Geo - Expansion 2017 - 2018 − Established new Southwest regional hub by entering AZ, CO, NM, and UT for Commercial
Slide 17: A Focus On Customer Experience To Drive Retention
A Focus On Customer Experience To Drive Retention Customer - centricity is core to who we are as a company Advancing Value - Added Services Acti o na b le Insights Maximizing Digital Utilization Delivering services that help our insureds mitigate risk differentiates us in the market Developing a “36
Slide 18: Developing Leadership in Sustainability and Corporate Social Responsibility
Developing Leadership in Sustainability and Corporate Social Responsibility 18 Understanding and Attempting to Mitigate Climate Change Risk Diverse, engaged Board with strong oversight of key risk areas Publication of our inaugural TCFD report Providing Customers with Responsive Claims Services and
Slide 19: Financial Overview
Financial O v e r vi e w 19
Slide 20: Lower Risk Profile and Strong Financial Strength Ratings
Lower Risk Profile and Strong Financial Strength R A TI N GS AM Best: A+ S&P: A Moody’s: A2 Fitch: A+ Conservative business and balance sheet profile allows higher operating leverage A LOWER RISK PROFILE Low to Medium Hazard Writer Conse r v a ti v e Investment Portfolio Prude n t R eins u r ance P
Slide 21: 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 maintaining a smaller limit profile • Low account sizes (premium per policyholder) averaging: − $15.3K for Standard Commercial − $2.6K for Standard Personal − $3.8K for E&S • Low rei
Slide 22: Conservative Investment Portfolio
Investment Portfolio at 12/31/22 Conservative Investment Portfolio • Core fixed income and short - term investments comprised 92% of the investment portfolio at 12/31/22 − “AA - ” average credit quality − Effective duration of 4.1 years • Risk asset allocation (high yield, public equity, and alterna
Slide 23: Historical After-Tax Fixed Income Portfolio Yields
Historical After - Tax Fixed Income Portfolio Yields Active Portfolio Management Drives Investment Results • Rising interest rates helping new money reinvestment rates − $2.7B of new money invested in 2022 − Pre - tax book yield on fixed income portfolio up ~115 basis points in 2022 − Every 100 basi
Slide 24: Impact of Catastrophe Losses on Combined Ratio
Impact of Catastrophe Losses on Combined Ratio Historical Catastrophe Loss Impact Below Industry Average • Catastrophe loss impact over the past 20 years has averaged − 5.5 percentage points for the P&C industry − 3.5 percentage points for Selective • Catastrophe loss mitigation initiatives include:
Slide 25: Conservative Reinsurance Program
Net Single - Event Hurricane Loss* as a % of Equity Conservative Reinsurance Program 25 • 2023 property catastrophe treaty structure ̶ Coverage of $915M in excess of $60M retention, with net purchased limits totaling $810M ̶ $216M in collateralized limit, primarily in the top layer of the program •
Slide 26: Strong Reserving Track Record
Impact of Casualty Reserve Development on our Combined Ratio Strong Reserving Track Record 26 • Disciplined reserving practices ̶ Quarterly actuarial reserve reviews ̶ Semi - annual independent review ̶ Independent year - end opinion • Favorable reserve development in Workers Compensation, General L
Slide 27: Strong Capital And Liquidity Position, Greater Expense Focus
Strong Capital And Liquidity Position, Greater Expense Focus Capital and Liquidity Plan • Debt - to - capital ratio of 16.6% • NPW to surplus ratio of ~1.44x is in the middle of our target range of 1.35x – 1.55x • Parent company cash and investments totaling ~$484M is in excess of our target of 2x a
Slide 28: Strong Track Record of Book Value per Share Growth
Strong Track Record of Book Value per Share Growth and Shareholder Value Creation Over Time A Focus On ROE and Growth In Book Value Per Share 28 Refer to “Safe Harbor Statement” on page 2 of this presentation for further detail regarding certain non - GAAP financial measures Note: Book value per sha
Slide 29: Total Shareholder Returns Have Outperformed Benchmarks Over Longer Term
9 . 2 % 9.7% 1 8 .4% 1 6 .7% 1 7 .2% 10.1% 10.2% 7.6% 9.4% 13.8% 12.6% - 18.1% 4Q22 1 YEAR 5 YEARS 10 YEARS 2 5 % 2 0 % 1 5 % 1 0 % 5% 0% - 5 % - 1 0% - 1 5% - 2 0% S IGI S&P Prop/Cas S&P 500 Total Shareholder Returns Have Outperformed Benchmarks Over Longer Term • Solid long - term outperformance i
Slide 30: Our Value Proposition
Our Value P r opo s ition 30 *For further information on non - GAAP financial measures, please see “Safe Harbor Statement” on Page 2. Leveraging our competitive strengths to generate sustained financial outperformance A distribution model that emphasizes franchise value: We appoint and having meanin
Selective Insurance Group — Q4 2022 Earnings Presentation on 6ix