Selective Insurance Group, Inc. · NASDAQ:SIGI
Selective Insurance — FY2022 Earnings Presentation
31 slides from Selective Insurance's earnings presentation, 2022
Slide 1: Investor Presentation: Quarter and Year Ended December 31, 2022
INVESTOR PRESENTATION QUARTER AND YEAR ENDED DECEMBER 31, 2022
Slide 2: Safe Harbor Statement
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 Securiti
Slide 3: Overview
Overview SELECTIVE INSURANCE .
Slide 4: A Track Record of Superior Execution
A Track Record of Superior Execution Nine Consecutive Years of Double-Digit Non-GAAP Operating ROEs* and Above Average Industry Growth 30 State Footprint** 2022 $6.1B Market Cap (as of 2/7/2023) Non-GAAP Operating ROE of 12.4%* 95+ Years of Financial Strength and Superior Execution $3.6B 2022 NPW (u
Slide 5: Our Sustainable Competitive Advantages
Our Sustainable Competitive Advantages Competitive Position Enhanced by Working Towards the Benefit of all our Stakeholders Distribution model Sophisticated tools for risk Superior omni-channel emphasizes franchise value Unique locally-based selection, pricing, and customer experience delivered with
Slide 6: Super Regional with National Capabilities
Super Regional with National Capabilities Standard Commercial Standard Personal Excess & Surplus (81% of NPW) (9% of NPW) (10% of NPW) 30 States & D.C. 15 States 50 States & D.C. Focus on maintaining Shifted focus to “mass- Strong growth and growth and profitability affluent” market; price profitabi
Slide 7: Well-positioned for Continued Outperformance
Well-positioned for Continued Outperformance Topline/ Pricing/ Balance Sheet/ Underwriting Loss Trends Investments Risk Management • Ongoing successful • Decade-long track record • Prudently managed the • Strong financial position – execution of 3% market of pursuing price investment portfolio to so
Slide 8: Our Key Accomplishments 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 Our Key Strong Top-Line Growth Accomplishments Leveraging our unique field underwriting model and sophisticated tools and technolog
Slide 9: Strong ROE Outperformance Relative to Peers
Strong ROE Outperformance Relative to Peers Historical Non-GAAP Operating ROEs* • 12.4% non-GAAP operating ROE* in 2022 driven by: 15% Elevated CAT losses ̶ Solid underwriting profitability 12.4% ̶ Manageable CAT losses 10.3% ̶ Strong investment contribution 10% • Track record of generating ROEs wel
Slide 10: Excellent Historical Operating Results
Excellent Historical Operating Results Historical GAAP Combined Ratios • 2022 Highlights 100% COVID-19 ̶ GAAP combined ratio of 95.1% and elevated catastrophes ̶ NPW growth of 12% 96.5% 95.8% ̶ After-tax net investment income of 95.1% 95% $232 million 95.2% • 2023 Guidance 93.3% ̶ GAAP combined rati
Slide 11: Our Strategic Initiatives
Our Strategic Initiatives 11
Slide 12: Our Major Strategic Initiatives
Leverage Sophisticated Tools to Achieve Adequate Pricing Deploy sophisticated underwriting and pricing tools to improve risk selection and achieve price increases ≥ loss trends Continued Profitable Growth Expanding “share of wallet” and new agent Our Major appointments; geo-expansion Strategic Initi
Slide 13: Consistently Achieving Price Increases In Alignment with Loss Trend
Consistently Achieving Price Increases In Alignment with Loss Trend Commercial Lines Pricing and Retention • Selective’s renewal pure price increases SIGI Pricing CLIPS Pricing SIGI Retention exceeded industry average from 2009-2018 10.0% 88% • An attractively priced book with strong embedded profit
Slide 14: Portfolio Approach To Pricing and Underwriting Helps Drive Business Mix Improvements
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 ̶ Pric
Slide 15: Targeting Profitable Growth Over Time
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 $ 3.6B Lower Risk Target of growing “share of wallet” to 12% with existing Managed Premium Volume distribution
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 Lines
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 Actionable Maximizing Digital Value-Added Services Insights Utilization Delivering services that help Developing a “360-degree” view of Providing an omni-channel customer our insureds m
Slide 18: Developing Leadership in Sustainability
Understanding and Attempting to Mitigate Climate Change Risk Diverse, engaged Board with strong oversight of key risk areas Publication of our inaugural TCFD report A Culture of Strong Governance and Transparency Sustainability Committee overseen by senior management Diverse, engaged Board with stro
Slide 19: Financial Overview
Financial Overview SELECTIVE INSURANCE®
Slide 20: Lower Risk Profile and Strong Financial Strength
Lower Risk Profile and Strong Financial Strength Conservative business and balance sheet profile allows higher operating leverage A LOWER RISK PROFILE RATINGS Low to Medium Hazard Writer AM Best: A+ Conservative Investment Fitch: A+ Portfolio Prudent Reinsurance Program S&P: A Disciplined Reserving
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 Percent of Policies with TIV¹ or Property Casualty part through maintaining a smaller limit profile Limits of $1M or Less • Low account sizes (premium per policyholder) Standard Commercial Lines 76%
Slide 22: Conservative Investment Portfolio
Conservative Investment Portfolio Investment Portfolio at 12/31/22 • 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 Fixed Income 87% • Risk asset allocation (high yield, public equity
Slide 23: Active Portfolio Management Drives Investment Results
Active Portfolio Management Drives Investment Results Historical After-Tax Fixed Income Portfolio Yields • Rising interest rates helping new money 3.1% reinvestment rates 3.0% 2.9% ̶ $2.7B of new money invested in 2022 2.8% 2.6% 2.6% ̶ Pre-tax book yield on fixed income portfolio up ~115 basis point
Slide 24: Historical Catastrophe Loss Impact Below Industry Average
Historical Catastrophe Loss Impact Below Industry Average Impact of Catastrophe Losses on Combined Ratio • Catastrophe loss impact over the past 20 years Elevated has averaged 12 frequency of ̶ 5.5 percentage points for the P&C CAT losses industry ̶ 3.5 percentage points for Selective P&C • Catastro
Slide 25: Conservative Reinsurance Program
Conservative Reinsurance Program Net Single-Event Hurricane Loss* as a % of Equity • 2023 property catastrophe treaty structure 40% ̶ Coverage of $915M in excess of $60M retention, with net purchased limits totaling $810M 30% ̶ $216M in collateralized limit, primarily 21% in the top layer of the pro
Slide 26: Strong Reserving Track Record
Strong Reserving Track Record Impact of Casualty Reserve Development on our Combined Ratio • Disciplined reserving practices 0.0% ̶ Quarterly actuarial reserve reviews ̶ Semi-annual independent review ̶ Independent year-end opinion -2.0% • Favorable reserve development in Workers Compensation, Gener
Slide 27: Strong Capital and Liquidity Position, Greater Expense Focus
Strong Capital and Liquidity Position, Greater Expense Focus Capital and Liquidity Plan Expense Management • Debt-to-capital ratio of 16.6% • Expecting expense ratio pressure in 2023 due • NPW to surplus ratio of ~1.44x is in the to higher reinsurance costs; targeting middle of our target range of 1
Slide 28: 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 Shareholder Value Creation Over Time line with our long-term target $50 $3,000 $40 $2,500 $2,000 ($ in millions) $30 $1,500 $20 Superior growth in book value
Slide 29: Total Shareholder Returns Have Outperformed Benchmarks Over Longer Term
Total Shareholder Returns Have Outperformed Benchmarks Over Longer Term Total Shareholder Return • Solid long-term outperformance in TSR SIGI S&P Prop/Cas S&P 500 relative to S&P P&C 25% insurance and S&P 20% 16.7% 17.2% 18.4% 500 indices 15% 10.1% 10.2% 13.8%12.6% 10% 9.2% 7.6% 9.7% 9.4% • Share pr
Slide 30: Our Value Proposition
Leveraging our competitive strengths to generate sustained financial outperformance A distribution model that emphasizes franchise value: We appoint and having meaningful, close business relationships with high-quality, independent distribution partners, who value us and our business model, and prov
Slide 31: Investor Presentation: Quarter and Year Ended December 31, 2022
INVESTOR PRESENTATION QUARTER AND YEAR ENDED DECEMBER 31, 2022
Selective Insurance Group — FY2022 Earnings Presentation on 6ix