Selective Insurance Group, Inc. · NASDAQ:SIGI
Selective Insurance — KBW Insurance Conference 2015
33 slides from Selective Insurance's conference presentation, Sep 10, 2015
Slide 1: Selective Insurance Group, Inc. KBW Insurance Conference
Selective Insurance Group, Inc. KBW Insurance Conference September 10, 2015
Slide 2: Forward Looking Statements
Forward Looking Statements 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 3: Strategic Overview
Strategic Overview Gregory Murphy Chairman and Chief Executive Officer
Slide 4: Selective's Value-Added Approach
Selective’s Value-Added Approach Super-regional P&C Carrier with long history of financial strength, superior execution and disciplined growth - Rated “A” or higher by A.M. Best for 85 consecutive years - Successful execution of 3-year profitability improvement plan in 2014 Unique “High-tech, High-t
Slide 5: High-Tech
High-Tech Easy-to-use agency technology Investing in omni-channel customer experience Leader in modeling and business intelligence 5
Slide 6: High-Touch Field Model
High-Touch Agency Management Specialists Corporate Underwriters Small Business Team Responsive, field-based model Personal Lines Field Claims Management Supported by regional & Model Marketing Reps Specialists corporate expertise Focus on customer experience Technology/ Regional Systems Support Unde
Slide 7: Continuous Improvement
Continuous Improvement Claims Initiatives Centralized handling of Workers’ Compensation claims Strategic case management and escalation model Enhanced property oversight and management Fraud detection and recovery model Implementation of Claims Outcome Advisor (COA) Underwriting Initiatives Workers’
Slide 8: Continuous Improvement: Strategic Business Unit Diversification
Continuous Improvement: Strategic Business Unit Diversification Improved mix of business 22% Contractors 24% 34% 2008 43% Community & Public 2014 Services 16% Manufacturing Mercantile Service 18% 19% 23% Percentages based on Direct Premiums Written 8
Slide 9: Continuous Improvement: Workers Compensation Improvement
Continuous Improvement: Workers Compensation Improvement Statutory Combined Ratio 110% (5)% (3)% 2% 97% (5)% (2)% 2014 Calendar Year Earned Rate Underwriting / Expense Loss Trend 2015 Reserve Claims Guidance* Development *Guidance for full-year results (provided as of September 9, 2015) 9
Slide 10: Successfully Execute Profitability Plan
Successfully Execute Profitability Plan 98.4% 97.3% 94.8% 92.5% 90.0% 2011 2012 2013 2014 2015 Guidance* Overall Statutory Combined Ratio excluding Catastrophe Losses *Guidance for full-year results (provided as of September 9, 2015) 10
Slide 11: Pricing Strategy: Balancing Rate and Retention
Pricing Strategy: Balancing Rate and Retention Standard Commercial Lines 8% 100% 7% 95% 90% 6% Renewal Pure Price 85% 5% Retention 80% 4% 75% 3% 70% 65% 2% 60% 1% 55% 0% 50% 2Q 4Q 2Q 4Q 2Q 4Q 2Q 4Q 2Q 4Q 2Q 4Q 2Q 2009 2010 2011 2012 2013 2014 2015 11
Slide 12: Pricing Strategy: Highly Granular Pricing Capability
Pricing Strategy: Highly Granular Pricing Capability Standard Commercial Lines 18% June 2015 YTD 95% 16% 90% Point of Renewal Retention 14% Renewal Pure Price 12% 85% 10% 80% 8% 6% 75% 4% 70% 2% 0% 65% Above Average Below Low Very Low Average Average Retention Group % of Premium 54.8% 25.6% 10.4% 6.
Slide 13: Growth Opportunity: Standard Commercial Lines
Growth Opportunity: Standard Commercial Lines 1. Middle Market: Addition of agency management specialists throughout the footprint 2. Small Business: Expanded underwriting authority for regional small business teams; straight-through processing 3. Increasing share of wallet within agency plant with
Slide 14: Growth Opportunity: Excess and Surplus Lines
Growth Opportunity: Excess and Surplus Lines Increase wholesale agent share of wallet New online quoting capability New business incentives to retail partners NPW Growth Rate 25% 23% 20% 16% 16% 15% 10% 5% 0% 2013 2014 June 2015 YTD 14
Slide 15: Standard Personal Lines
Standard Personal Lines Focus on profitability improvement through rate and targeted underwriting actions The Selective EdgeSM product - Targets consultative buyers across the wealth spectrum who shop on overall value and service - Combined auto and home policies - July 1 enhancement rollout Dimin
Slide 16: Selective's Differentiators
Selective’s Differentiators ♦ Long track record of financial strength, superior execution and disciplined growth ♦ Unique “High-tech, High-touch” operating model with strong agency relationships ♦ Investing in profitable growth through agency expansion, strategic underwriting initiatives, expansion
Slide 17: Financial Strength
Financial Strength Dale Thatcher EVP, Chief Financial Officer
Slide 18: History of Financial Strength
History of Financial Strength Long-Term Shareholder Value Creation ♦ AM Best financial strength rating of $0.56* “A” superior $25 $22.95 $20 ♦ Robust risk and return strategy $15 ♦ Disciplined reserving practices $10 ♦ Focus on shareholder value creation $5 $0 2005 2006 2007 2008 2009 2010 2011 2012
Slide 19: Robust Risk and Return Strategy
Robust Risk and Return Strategy Conservative Reinsurance Program Conservative Investment Portfolio Low to Medium Superior Management Information Hazard & Analytical Capabilities Writer Higher than Average Operational Leverage 1.5x NPW to Surplus 3.8x Invested Assets to Equity As of June 30, 2015 19
Slide 20: Conservative CAT Reinsurance
Conservative CAT Reinsurance % of Equity at Risk Renewed January 1, 2015 1 in 250 Year Event $685M in excess of $40M retention 28% Reduced gross PML Exhausts at through CAT approximately 1-in-273 management actions year event 2015 Property Catastrophe Treaty 6% 5% 4% 2% Average reinsurer rating $196
Slide 21: Conservative Investment Portfolio
Conservative Investment Portfolio After-Tax Net Investment Income Alternatives Short-term 125 ($ in Millions) 2% 3% 115 Equities 5% 105 95 GUIDANCE* 85 75 2011 2012 2013 2014 2015 “AA-” average credit quality 3.7 year duration (incl. short-term) Investment Leverage of 3.8x Fixed Income 90% As of Jun
Slide 22: Reserve Strength
Reserve Strength Disciplined reserving practices Quarterly actuarial reserve reviews 9 consecutive years of favorable development 2 evaluations per year by independent actuary Standard Deviation (2005 – 2014) of Reserve Development Points on the Combined Ratio Peer Average* 3.6% Selective 1.4% *Sour
Slide 23: Total Return: SIGI vs. Benchmarks
Total Return: SIGI vs. Benchmarks SIGI S&P 500 S&P Prop/Cas 30 29.0% 25 21.1% Total Return % 20 17.2% 15 10 5 0 -5 1 Year 3 Years 5 Years As of September 4, 2015 23
Slide 24: 2015 Guidance
2015 Guidance 4 points of catastrophe losses $95 to $100 million of after-tax investment income 3% - 3.5% overall renewal pure price 58 million weighted average shares outstanding 2015 Overall Ex-Cat Statutory Combined Ratio Plan 95.3% (2.1)% 0.8% 0.2% 90% (2.5)% (1.7)% 2014 Accident Calendar Year E
Slide 25: Selective's Differentiators
Selective’s Differentiators Long track record of financial strength, superior execution and disciplined growth Unique “High-tech, High-touch” operating model with strong agency relationships Investing in profitable growth through agency expansion, strategic underwriting initiatives, expansion of sma
Slide 26: Financial Highlights 2011–Q2 2015
Financial Highlights 2011– Q2 2015 2011 2012 2013 2014 Q1 2015 Q2 2015 Statutory NPW Growth 7.0% 12.2% 8.7% 4.1% 8.7% 10.9% Operating EPS* $0.38 $0.58 $1.65 $2.17 $0.48 $0.62 Net Income per Share* $0.40 $0.68 $1.87 $2.47 $0.69 $0.58 Dividend per Share $0.52 $0.52 $0.52 $0.53 $0.14 $0.14 Book Value p
Slide 27: Net Operating Cash Flow
Net Operating Cash Flow ($ in millions) Cash Flow as % of NPW 336 340 19% 290 240 227 233 14% 12% 190 159 140 123 11% 90 8% 40 2010 2011 2012 2013 2014 YTD June 2015: $166M
Slide 28: Investment Income – After-tax
Investment Income – After-tax ($ in millions) 120 111 111 110 104 100 101 100 90 80 70 60 50 40 2010 2011 2012 2013 2014 YTD June 2015: $46M
Slide 29: Insurance Operations Productivity
Insurance Operations Productivity ($ in 000s) NPW per Employee Statutory Expense Ratio 950 35 945 908 908 % 34 842 791 750 761 33 32 550 31 30 350 29 2010 2011* 2012 2013 2014** 6/30/15 YTD *Excludes Excess & Surplus Lines **Expense ratio excludes 0.4 point benefit from self-insured group sale
Slide 30: Standard Commercial Lines Pricing
Standard Commercial Lines Pricing Selective CLIPS 7.5% 6.5% Renewal Pure Price 5.5% 4.5% 3.5% 2.5% 1.5% 0.5% -0.5% -1.5% Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 2009 2010 2011 2012 2013 2014 2015 Industry Source: Towers Watson Commercial Lines Insurance Pricing Sur
Slide 31: Standard Commercial Lines Profitability
Standard Commercial Lines Profitability Statutory Combined Ratios % 105 103.9 103.0 99.8 100.8 6.4 5.0 100 0.5 98.5 3.3 99.3 97.1 2.1 95.9 97.5 97.5 98.0 95.5 95.0 1.7 95 93.6 0.9 96.4 0.3 1.2 95.0 95.3 2.7 93.3 93.8 92.8 89.9 90 4.3 85 85.6 80 Impact of Catastrophe Losses Combined Ratio excluding C
Slide 32: Premium by Line of Business
Premium by Line of Business 2014 Standard Commercial Lines Net Premium Written Workers Compensation General Liability 19% 31% Commercial Property 18% Other 1% Bonds BOP Auto 1% 6% 24%
Slide 33: Long-Term Shareholder Value Creation
Long-Term Shareholder Value Creation $25 0.53 0.56* 0.52 22.54 22.95 0.52 0.52 $20 0.49 0.52 20.63 0.44 0.52 19.77 18.97 19.45 0.40 18.82 17.87 0.52 17.80 $15 16.44 15.81 Per Share $10 $5 $0 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 Jun-15 Book Value Dividend *Annualized indicated dividend N
Selective Insurance Group — KBW Insurance Conference 2015 on 6ix