Selective Insurance Group, Inc. · NASDAQ:SIGI
Selective Insurance — Sidoti & Company 15th Annual Emerging Growth Institutional Investor Forum 2011
31 slides from Selective Insurance's conference presentation, Mar 22, 2011
Slide 1: Sidoti & Company 15th Annual Emerging Growth Institutional Investor Forum
– SELECTIVE INSURANCE GROUP, INC. – SIDOTI & COMPANY, LLC 15TH ANNUAL EMERGING GROWTH INSTITUTIONAL INVESTOR FORUM SELECTIVE INSURANCE GROUP, INC. MARCH 22, 2011 Financial Pricing Commercial Personal Prepared for Strength Success Lines Lines Tomorrow
Slide 2: Financial Strength
– SELECTIVE INSURANCE GROUP, INC. – FINANCIAL STRENGTH DALE THATCHER CHIEF FINANCIAL OFFICER Financial Pricing Commercial Personal Prepared for Strength Success Lines Lines Tomorrow
Slide 3: Forward Looking Statement
Forward Looking Statement Certain statements in this report, including information incorporated by reference, are “forward- looking statements” as that term is defined in the Private Securities Litigation Reform Act of 1995 (“PSLRA”). The PSLRA provides a safe harbor under the Securities Act of 1933
Slide 4: Who We Are
Who We Are • 22-state super-regional MN MI • 2010: $1.4B NPW WI MI NY MA CT RI • 82% commercial lines IA PA NJ OH MD DE IL IN • 18% personal lines MO VA KY • High tech, high touch business model NC TN • Partner of choice – 980 independent SC agents GA • Focus on enterprise risk management • Rated A+
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 Financial Financial Pricing Comm
Slide 6: More Earnings Stability: SIGI vs. Industry
More Earnings Stability Combined Ratio – SIGI vs. Industry 125 SIGI (STD. DEV 4.3) 120 Industry (STD. DEV 6.7) 115 110 105 100 95 90 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 Source: A.M. Best, III Financial Financial Pricing Commercial Personal Prepared for Strength Strength Success Li
Slide 7: More Earnings Stability: SIGI vs. National Peers
More Earnings Stability Combined Ratio – SIGI vs. National Peers 125 SIGI (STD. DEV 4.3) 120 National Peers (STD. DEV 9.8) 115 110 105 100 95 90 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 Source: SNL Financial Note: National Peers include CNA, CB, HIG, TRV and WRB Financial Financial Pri
Slide 8: More Earnings Stability: SIGI vs. Regional Peers
More Earnings Stability Combined Ratio – SIGI vs. Regional Peers 125 SIGI (STD. DEV 4.3) 120 Regional Peers (STD. DEV 5.1) 115 110 105 100 95 90 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 Source: SNL Financial Note: Regional Peers include CINF, THG, HGIC, STFC and UFCS Financial Financia
Slide 9: Adverse/(Favorable) Points of Calendar Year 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* Source: AM Best U.S. P&C Industry SIGI *SIGI and Industry data as of 9/30/10 Financial Financial Pricing Commercial Personal Prepared for Strength St
Slide 10: Premium-to-Surplus
Premium-to-Surplus 1.9 SIGI P&C 1.9X 1.8 1.8 1.7 1.7 1.7 1.7X 1.6 1.5 1.5 1.5 1.5X 1.3 1.3 1.3X 1.2 1.1 1.1 1.1X 1.0 1.0 1.0 0.9 0.9X 0.9 0.8 0.8 0.7X 0.5X 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010* 1 point of Combined Ratio = 1 point of ROE Note: Industry data as of 9/30/10 Financial F
Slide 11: High Quality Investment Portfolio
High Quality Investment Portfolio $3.9B Invested Assets • Outsourcing provides access December 31, 2010 to broader market expertise Bonds 90.6% • Reallocation of risk for better risk adjusted returns • Average “AA” bond quality • Approximately 3.5 year average duration, including Equities short-term
Slide 12: Diversified Municipal Portfolio
Diversified Municipal Portfolio Repayment Source December 31, 2010 • $1.4 billion portfolio • AA rated GO-State 9% TX-PSF 3% • 33% of portfolio matures GO-Local within 3 years 25% • Diversified among 293 issuers • NY, CA, NJ, IL represent $34M or 2.3% of portfolio Revenue 63% Financial Financial Pri
Slide 13: Interest Rate Impact
Interest Rate Impact • Laddered maturity schedule Fixed Income Maturity Schedule • Differential between roll off rates 20% and new money rates 15% • 2011: (1.4)% 10% • 2012: (0.9)% 5% • Impact to net investment income • 2011: ($2.3M) 0% • 2012: ($6.3M) 30 bps of Yield = 1 point of ROE Financial Fina
Slide 14: Long-Term Shareholder Value Creation
Long-Term Shareholder Value Creation Book Value Dividends $0.49 $0.52 $20 $0.44 $0.52 $0.40 $19.81 $19.95 $18.81 $0.52 $18.83 $0.35 $16 $17.34 $16.84 Per Share $0.31 $15.79 $0.30 $0.30 $13.74 $12 $12.26 $11.58 $8 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 Current Dividend Yield: 3.1% Financia
Slide 15: Prepared for Tomorrow
– SELECTIVE INSURANCE GROUP, INC. – PREPARED FOR TOMORROW GREG MURPHY CHAIRMAN, PRESIDENT & CEO Financial Pricing Commercial Personal Prepared for Strength Success Lines Lines Tomorrow
Slide 16: Selective's Commercial Lines Renewal Pricing Success
Selective’s Commercial Lines Renewal Pricing Success 3.3% 4.0% 3.4% 2.7% 2.8% 2.8% 2.7% 2.8% 2.0% 1.5% 0.6% 0.0% -0.8% -2.0% -4.0% -6.0% -8.0% Selective CLIPS Advisen ADVx CIAB MarketScout -10.0% 1Q:09 2Q:09 3Q:09 4Q:09 1Q:10 2Q:10 3Q:10 4Q:10 Jan: 11 Feb: 11 7 consecutive quarters of positive price
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 Fin
Slide 18: Mix of Business
Mix of Business $1.4B Direct Premium Written Middle Market $820M (57%) Personal Lines Small Business $260M (18%) $360M (25%) Financial Pricing Commercial Commercial Personal Prepared for Strength Success Lines Lines Lines Tomorrow
Slide 19: Middle Market
Middle Market Middle Market $820M (57%) • Agency relationships are key • Agents act as risk manager for insureds • Field underwriting and claims model • Safety Management Financial Pricing Commercial Commercial Personal Prepared for Strength Success Lines Lines Lines Tomorrow
Slide 20: Field Model
Field Model • Local knowledge of insureds Agency Management • Full claims/underwriting Claims Specialists Management authority Specialists • Supported by sophisticated underwriting tools • Safety management services lowers frequency and increases retention Safety Field Sales Management Specialists S
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 • Ease of doing business 1,000 950 • Online agency marketing 900 portal 850 800 750 700 650 600 2006 2007 2008 2009 2010 Financial Pricing Commercial Commercial Personal
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 Co
Slide 23: Small Business
Small Business • Less price sensitive • Better profitability • Stronger retention • Straight through processing Small Business $360M (25%) Financial Pricing Commercial Commercial Personal Prepared for Strength Success Lines Lines Lines Tomorrow
Slide 24: Small Business Growth
Small Business Growth $ thousands Average DPW/Day 300 250 200 150 100 2005 2006 2007 2008 2009 2010 Financial Pricing Commercial Commercial Personal Prepared for Strength Success Lines Lines Lines Tomorrow
Slide 25: Small Business Product Expansion
Small Business Product Expansion 2010 Auto Serv WC, Summit Contractors, BR Exp Mfg WC, Contractors WC Exp Auto Serv CPP Golf CPP and Summit LRO Manufacturing CPP Expanded Manufacturing CPP Light Manufacturing Civic Organizations Builders Risk Expanded Special Contractors & Merchants PRO BOP Special
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%) Financial Pricing Commercial Personal Personal Prepared for Strength Success Lines Lines Lines Tomorrow
Slide 27: Personal Lines Rate Success
Personal Lines Rate Success Potential Premium Blended In-force Rate 16 8% 14 7% 7.1% 12 6% $ in Millions 6.3% 10 5.8% 5% Rate 8 4% 6 3% 3.1% 4 2.4% 2% 2 1% 0 0% 2007 2008 2009 2010 2011E New Business $39 $43 $55 $62 DPW Financial Pricing Commercial Personal Personal Prepared for Strength Success Lin
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 Financial Pricing Commercial Personal Prepared Preparedfor for Strength Success Lines Lin
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 *As of February 3, 2011 Financial Pricing Commercial Personal Preparedfor Prepare
Slide 31: Selective Insurance Group, Inc.
– SELECTIVE INSURANCE GROUP, INC. – SIDOTI & COMPANY, LLC 15TH ANNUAL EMERGING GROWTH INSTITUTIONAL INVESTOR FORUM SELECTIVE INSURANCE GROUP, INC. MARCH 22, 2011 Financial Pricing Commercial Personal Prepared for Strength Success Lines Lines Tomorrow