Selective Insurance Group, Inc. · NASDAQ:SIGI
Selective Insurance — Investor Presentation (September 2021)
33 slides from Selective Insurance's investor presentation, September 2021
Slide 1: Investor Presentation September 2021
INVESTOR SEPTEMBER 2021 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 A Seven-Year Track Record of Double-Digit Non-GAAP Operating ROEs* and Above Average Industry Growth 2020 Non-GAAP Operating ROE of 10.5%* 27 $4.9B 90+ $2.8B 94.9% State Footprint** Market Cap Years of Financial 2020 NPW 2020 GAAP (as of 9/7/2021) Strength and (u
Slide 5: Our Sustainable Competitive Advantages
OUR SUSTAINABLE COMPETITIVE ADVANTAGES Competitive Position Enhanced by Working Towards the Benefit of all our Stakeholders Franchise value Unique field model Superior omni-channel distribution model with enabled by sophisticated customer experience high-quality partners tools and technology deliver
Slide 6: Summary of Our Operations
SUMMARY OF OUR OPERATIONS Commercial Lines Personal Lines Excess & Surplus (80% of NPW) (11% of NPW) (9% 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 (80% of NPW) (11% of NPW) (9% of NPW) 27 15 50 States & D.C. States States & D.C. ~1,400 ~850 ~90 wholesale distribution partners distribution partners distribution partners (~6,000 for WYO flood) Note: Premi
Slide 8: Strong ROE Outperformance Relative to Peers
STRONG ROE OUTPERFORMANCE RELATIVE TO PEERS Historical Non-GAAP Operating ROEs* • Superior 16.4% non-GAAP operating 16.4% ROE* in 1H21 driven by: 15% Elevated CAT ̶ Solid underwriting profitability losses ̶ Manageable CAT losses 10.3% ̶ Strong investment contribution 10% 9.1% • 2020 results include
Slide 9: Excellent Historical Operating Results
EXCELLENT HISTORICAL OPERATING RESULTS FIRST HALF 2021 HIGHLIGHTS • Consolidated combined ratio of 89.5% Historical GAAP Combined Ratios • NPW growth of 19% (reported) and 11% (underlying) 100% • After-tax net investment income up 136% over prior year COVID-19 impacts and elevated CAT • Annualized n
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 Commercial Lines Pricing and Retention • Selective’s renewal pure price increases exceeded SIGI Pricing CLIPS Pricing SIGI Retention industry average from 2009-2018 10.0% 88% • An attractively priced book with strong embedded profit
Slide 13: A Granular Approach to Pricing and Underwriting
A GRANULAR APPROACH TO PRICING AND UNDERWRITING • 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 ̶ Pricing deviation ̶ Hazard and segment co
Slide 14: Targeting Profitable Growth Over Time
TARGETING PROFITABLE GROWTH OVER TIME Commercial Lines Growth Drivers Historical Net Premiums Written • Target of growing “share of wallet” to 12% LOWER RISK $3.0B with existing distribution partners Managed Premium Volume During Soft Market • Target of appointments to represent 25% 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 • AZ and UT for personal lines • Initial growth and profit
Slide 17: Deliver a Superior Omni-Channel Experience
DELIVER A SUPERIOR OMNI-CHANNEL EXPERIENCE • Changing expectations from customers, and potential disruptive threats from traditional and VALUE-ADDED SERVICES non-traditional competitors SUCH AS SELECTIVE® DRIVE “360-DEGREE” VIEW • Partnering with agents to provide a seamless OF CUSTOMER customer exp
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 results, in part through maintaining a Limits of $1M or Less Property Casualty smaller limit profile Standard Commercial Lines 78% 87%** • Low account sizes (premium per policy
Slide 23: Conservative Investment Portfolio
CONSERVATIVE INVESTMENT PORTFOLIO • Core fixed income and short-term Investment Portfolio at 6/30/21 investments comprise 92% of the investment portfolio: Fixed Income 87% ̶ “A+” average credit quality ̶ Effective duration of 3.9 years Short-Term 5% $7.8B of • Risk asset allocation (high yield, publ
Slide 24: Active Portfolio Management Drives Investment Results
ACTIVE PORTFOLIO MANAGEMENT DRIVES INVESTMENT RESULTS • Revised guidance of after-tax net investment Historical After-Tax Fixed Income Portfolio Yields income of $220M in 2021: ̶ $55M of after-tax net investment income 3.0% 2.8% 2.9% from our alternative investments 2.6% 2.6% ̶ Continued pressure on
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: ̶ 5.3 percentage points for the P&C industry 12 pts Elevated frequency of CAT ̶ 2.9 percentage points for Selective losses P&C Indus
Slide 26: Conservative Reinsurance Program
CONSERVATIVE REINSURANCE PROGRAM • 2021 property catastrophe treaty structure: Net Single-Event Hurricane Loss* as a % of Equity ̶ Coverage of $785M in excess of $40M retention 18% ̶ $281M 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: Rollforward of Underlying Combined Ratio
ROLLFORWARD OF UNDERLYING COMBINED RATIO (1) (2) (2) (1)(2) (2) (2) (2) (3) 2020 Net 2020 Higher Loss Trend Renewal UW Mix & Expense Other 2021 Calendar Year 2021 Underlying COVID-19 Adjusted Reinsurance Earned Rate Claims (includes PH Forecasted Reserve Forecasted Combined & Related Underlying Cost
Slide 29: 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 16.0% • 2020 expense ratio of 33.8% includes 1.1 points of specific COVID-19-related items • NPW to surplus ratio of ~1.3x is slightly below target range of 1.35x
Slide 30: 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 31: Total Shareholder Returns Have Outperformed Benchmarks Over Longer Term
TOTAL SHAREHOLDER RETURNS HAVE OUTPERFORMED BENCHMARKS OVER LONGER TERM Total Shareholder Return SIGI S&P 500 S&P Prop/Cas • Solid long-term 60% 56.2% outperformance in TSR relative to S&P 50% P&C insurance and 40.8% S&P 500 indices 40% 31.6% • Share price 30% performance has 22.0% reflected our abi
Slide 32: Our Value Proposition
OUR VALUE PROPOSITION Leveraging our competitive strengths to generate sustained financial outperformance Franchise value distribution model with best-in-class partners Unique field model enabled by sophisticated technology Strong customer experience Excellent growth opportunities within footprint a
Slide 33: Investor Presentation September 2021
INVESTOR SEPTEMBER 2021 PRESENTATION 33
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