Selective Insurance Group, Inc. · NASDAQ:SIGI
Selective Insurance — Sidoti & Company 15th Annual Emerging Growth Institutional Investor Forum (March 2011)
31 slides from Selective Insurance's conference presentation, Mar 17, 2011
Slide 1: Sidoti 15th Annual Emerging Growth Institutional Investor Forum
- SELECTIVE INSURANCE GROUP, INC, - SIDOTI & COMPANY, LLC 15™ ANNUAL EMERGING GROWTH INSTITUTIONAL INVESTOR FORUM SELECTIVE INSURANCE GROUP, INC. MARCH 22, 2011
Slide 2: Financial Strength
- SELECTIVE INSURANCE GROUP, INC, - FINANCIAL STRENGTH DALE THATCHER CHIEF FINANCIAL OFFICER
Slide 3: Forward Looking Statement
Forward Looking Statement Certain statements in this report, including information incorporated by reference, are “forward- looking statements” as that predictions, and we can give no assurance that such expectations vl prov undertake no obligation, other than as may be required under the federal se
Slide 4: 22-state super-regional
e 22-state super-regional e 2010: $1.4B NPW © 82% commercial lines e 18% personal lines e High tech, high touch business model e Partner of choice - 980 independent agents e Focus on enterprise risk management e Rated A+ by A.M. Best for 49 years cg SELECTIVE Success Tomorrow
Slide 5: Focus on Enterprise Risk Management
Focus on Enterprise Risk Management ¢ Historically strong capital position - Business model generates more earnings stability ¢ Sophisticated underwriting and granular pricing * Strong reserving practices + Conservative reinsurance ¢ Deep investment management talent
Slide 6: More Earnings Stability: SIGI vs. Industry
More Earnings Stability Combined Ratio — SIGI vs. Industry 125 120 115 110 105 100 95 90 =@SIGI (STD. DEV 4.3) -m@ Industry (STD. DEV 6.7) 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 Source: A.M. Best, Ill Pricing Commercial Success Lines
Slide 7: More Earnings Stability: SIGI vs. National Peers
More Earnings Stability ips Combined Ratio - SIGI vs. National Peers 120 115 110 105 100 95 90 <eSIGI(STD. DEV 4.3) -@ National Peers (STD. DEV 9.8) 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 Source: SNL Financial Note: National Peers include CNA, CB, HIG, TRV and WRB Pricing Success
Slide 8: More Earnings Stability: SIGI vs. Regional Peers
More Earnings Stability 105 Combined Ratio — SIGI vs. Regional Peers 120 - 115 - 110 - 105 - 100 95 + 90 T T T T T T T r r r 1 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 <®SIGI (STD. DEV 4.3) Regional Peers (STD. DEV 5.1) Source: SNL Financial Note: Regional Peers include CINF, THG, HGIC
Slide 9: Adverse/(Favorable) Points of Development
Adverse/ (Favorable) Points of Calendar Year Development 8.0% 6.0% 4.0% 2.0% + 0.0% -2.0% -4.0% -6.0% 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010* Sourée: AM Best U.S. P&C Industry m@SIGI *SIGI and Industry data as of 9/30/10 Pricing Commercial Success Lines
Slide 10: Premium-to-Surplus
Premium-to-Surplus 19 aSiGl = P&C 18 18 uW uW WwW 16 1.9X 4 1.7% 4 15x 6 15 15 13 1.3X 4 1.1K : oD 0.9X 5 os 0.7X 4 0.5X 2000-2001 2002 2003 2004) 2005) 2006.) 2007, 200s 0s 20 1 point of Combined Ratio = 1 point of ROE Note: Industry data as of 9/30/10 Pricing Success
Slide 11: High Quality Investment Portfolio
High Quality Investment Portfolio $3.9B Invested Assets Outsourcing provides access December 31, 2010 to broader market expertise suis on6%. Reallocation of risk for better risk adjusted returns Average “AA” bond quality Approximately 3.5 year average duration, including short-term & cash Equities a
Slide 12: Diversified Municipal Portfolio
Diversified Municipal Portfolio Repayment Source December 31, 2010 * $1.4 billion portfolio e AArated are ‘se © 33% of portfolio matures GO-Local within 3 years aie * Diversified among 293 issuers e NY, CA, NJ, IL represent $34M or 2.3% of portfolio Revenue 63% icing Success
Slide 13: Interest Rate Impact
Interest Rate Impact Laddered maturity schedule Differential between roll off rates and new money rates * 2011: (1.4)% * 2012: (0.9)% Impact to net investment income * 2011: ($2.3M) * 2012: ($6.3M) Fixed Income Maturity Schedule 30 bps of Yield = 1 point of ROE icing Success Tomorrow
Slide 14: Long-Term Shareholder Value Creation
Long-Term Shareholder Value Creation @ Book Value DB Dividends $20 $0.44 $16 Per Share $12 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 | Current Dividend Yield: 3.1% Pr Success
Slide 15: Prepared for Tomorrow
- SELECTIVE INSURANCE GROUP, INC, - PREPARED FOR TOMORROW GREG MURPHY CHAIRMAN, PRESIDENT & CEO
Slide 16: Selective's Commercial Lines Renewal Pricing Success
Selective’s Commercial Lines Renewal Pricing Success 4.0% aay 3% Selective CLIPS AdvisenADVx SCIAB @MarketScout 1Q:09 2Q:09 3Q:09 4Q:09 10:10 2Q:10 30:10 4Q:10 Jan: 11 Feb: 11 Personal Prepared for Tomorrow
Slide 17: Why Are We Successful?
Why Are We Successful? Agency relationships Field model Sophisticated underwriting tools and granular pricing — Aggregate quality score by account — Targeted pricing — Agency profitability — Segment performance — Hazard grade — System calculated pure price change The courage to walk away Financial P
Slide 18: Mix of Business
Mix of Business Financial Strength $1.4B Direct Premium Written Middle Market $820M (57%) Personal Lines $260M (18%) Pricing Prepared for Success Tomorrow
Slide 19: Middle Market
Middle Market =a Middle Market $820M (57%) Agency relationships are key Agents act as risk manager for insureds Field underwriting and claims model Safety Management 7 Financial Pricing Commercial Personal Prepared for F Strength Success Lines Lines Tomorrow > SELECTIVE
Slide 20: Field Model
Field Model Local knowledge of insureds Full claims/underwriting authority Supported by sophisticated underwriting tools Safety management services lowers frequency and increases retention ng Claims Management Specialists Agency Management Specialists Safety Field Sales Management. Specialists Speci
Slide 21: Agency Focus
Agency Focus * 980 Agents « 2,000 Storefronts « Number 1, 2 or 3 in 60% of agencies appointed for 5 or more years Number of Agents e Ease of doing business 1,000 * Online agency marketing 900 portal 850 800 750 700 650 600 2006 2007 2008 2009 2010 ng Success Tomorrow
Slide 22: Middle Market Product Expansion
Middle Market Product Expansion « Added 20 new and enhanced products in 2009 * Introduced another 11 in 2010 « New products « Aging Services, Identity Theft, Cyber Security, Technology « Enhanced products « Resort Endorsement, Contractors GL, Property Coverage for Municipalities Financial Pricing Pe
Slide 23: Small Business
Small Business Less price sensitive Better profitability Stronger retention Straight throu processing ng Success
Slide 24: Small Business Growth
Small Business Growth $ thousands Average DPW/Day 300 5 250 L 200 150 100 2005 2006 2007 2008 2009 2010 I ng Personal ength Success Lines
Slide 25: Small Business Product Expansion
Small Business Product Expansion ee 2010 Auto Serv WC, Summit Contractors, BR Exp Mfg WC, Contractors WC Exp Auto Serv CPP Golf CPP and. Summit LRO ‘Manufacturing Expanded Special Contractors & Merchants PRO BOP. =P Special Contractors W/— erchants PRO BOP 2000 Financial Pricing Commercial Personal
Slide 26: Personal Lines
Personal Lines « Smoothes performance over the long-term * Significant source of agent revenue + Improving mix of business and ability to get rate Personal Lines $260M (18%) Prepared fi Tomorrow
Slide 27: Personal Lines Rate Success
Personal Lines Rate Success =Potential Premium Blended In-force Rate 16 8% 14 7% 2 12 7.1% Le 6% 2 10 i 5.8% 5% x = 8 4% & @ 6 3% 4 2.4% i 2% 2 1% 0 0% 2007 2008 2009 2010 2011E New Pusu $39 $43 $55 $62 Strength Success
Slide 28: Driving Down Cost of Goods Sold
Driving Down Cost of Goods Sold Litigation management Vendor optimization More integrated outcomes in resolution of claims Claims strengthens Selective brand 3 point reduction in loss costs over 3 years Pricing Commercial Personal Success Lines Lines
Slide 29: Customer Focus to Improve Retention
Customer Focus to Improve Retention * Continue to build relationships with end customers « 24/7 online access for customer service needs * Improving customer experience through high frequency touch points * Online interactive safety training resources * Safety management strengthens Selective brand
Slide 30: 2011 Guidance
2011 Guidance ¢ Statutory and GAAP combined ratio of 101-102% * 2 points of catastrophe losses ¢ 55 million weighted average shares outstanding Expect to continue to drive positive personal and commercial rate in 2011 Pricing Commercial Personal Success Lines Lines
Slide 31: Sidoti 15th Annual Emerging Growth Institutional Investor Forum
- SELECTIVE INSURANCE GROUP, INC, - SIDOTI & COMPANY, LLC 15™ ANNUAL EMERGING GROWTH INSTITUTIONAL INVESTOR FORUM SELECTIVE INSURANCE GROUP, INC. MARCH 22, 2011