Selective Insurance Group, Inc. · NASDAQ:SIGI

Selective Insurance — Investor Day (November 2017)

59 slides from Selective Insurance's investor day presentation, November 2017

  1. Slide 1: Investor Day Presentation: Setting the Stage for Sustained Outperformance

    INVESTOR DAY PRESENTATION SETTING THE STAGE FOR SUSTAINED OUTPERFORMANCE

  2. Slide 2: Safe Harbor Statement

    PAGE 2 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 and the

  3. Slide 3: Setting the Stage for Sustained Outperformance

    SETTING THE STAGE FOR SUSTAINED OUTPERFORMANCE Greg Murphy - Chairman and Chief Executive Officer

  4. Slide 4: Selective: Super-Regional Company

    SELECTIVE: CLICK TO EDITAMASTER SUPER-REGIONAL COMPANY TITLE STYLE PAGE 4 CAPABILITIES OF A NATIONAL  Edit Master text styles & o Second level RELATIONSHIPS OF A REGIONAL  Third level  Fourth level  Fifth level 24 state footprint significant expansion plans $3.4B Market Cap (as of 11/6/17) years

  5. Slide 5: Three Segments Fuel Diversification for Growth and Profitability

    THREE SEGMENTS FUEL DIVERSIFICATION FOR CLICK GROWTHTO AND EDITPROFITABILITY MASTER TITLE STYLE PAGE 5 Standard Commercial Standard Personal E&S and Flood  Edit Master text styles o Second level  Third level  Fourth level  Fifth level 24 States 13 States All 50 States 1,250 distribution partners

  6. Slide 6: Underwriting Diversification Improves Performance

    CLICK TO EDIT MASTER UNDERWRITING DIVERSIFICATION TITLE STYLE IMPROVES PERFORMANCE PAGE 6 COMMERCIAL LINES Edit Master text styles PERSONAL LINES EXCESS & SURPLUS o Second level  Third level  Fourth level  Fifth level  Unique model – drives new  Complements standard CL business  Extension of

  7. Slide 7: Sustainable Competitive Advantages Set Us Apart

    CLICK TO EDIT COMPETITIVE SUSTAINABLE MASTER TITLEADVANTAGES STYLE SET US APART PAGE 7 INDUSTRY SELECTIVE  Edit Master text styles o Second level  38,500 agents in industry  1,250 distribution partners True franchise value with “ivy  Third league” distribution level partners  Split business mod

  8. Slide 8: Industry Facing Turbulence: Headwinds and Tailwinds

    INDUSTRY CLICK FACING TO EDIT TURBULENCE MASTER TITLE STYLE PAGE 8  HEADWINDS Edit Master text styles TAILWINDS o Second level  Third level  Record low interest rateslevel  Fourth and macro uncertainty  2017 ROE forecast of “0%” around inflation, growth, GDP and taxes  Fifth level  Underwriti

  9. Slide 9: Financial and Operating Overview

    FINANCIAL AND OPERATING OVERVIEW SETTING THE STAGE FOR SUSTAINED OUTPERFORMANCE Mark Wilcox – EVP, Chief Financial Officer

  10. Slide 10: Strong Capital Position and Operating Performance

    STRONG CLICK TOCAPITAL POSITION EDIT MASTER AND TITLE OPERATING PERFORMANCE STYLE PAGE 10  Edit Master text styles OVERVIEW o Second level  Business model  Third level  Fourth level  Operating segments  Fifth level  Reinsurance, reserves, and catastrophe losses  Underwriting margins and guid

  11. Slide 11: Lower Risk Profile and Strong Financial Strength

    LOWERTO CLICK RISK PROFILE EDIT MASTERAND STRONG TITLE STYLEFINANCIAL STRENGTH PAGE 11 A Lower Risk Profile Strong Financial Strength Ratings  Edit Master text styles o Second level  Third level A.M. Best A  Fourth level  Fifth level Low to Fitch A+ Medium Hazard Writer Moody’s A2 S&P Global A L

  12. Slide 12: Higher Underwriting and Investment Leverage Has Helped ROE

    CLICK HIGHERTO EDIT MASTER AND UNDERWRITING TITLEINVESTMENT STYLE LEVERAGE HAS HELPED ROE PAGE 12 1.0 point of operating ROE* equates to ~:  Edit Master text styles 1.0 point of underwriting margin SIGI 1.4x o Second level NPW/Surplus  Third level 0.7x 2.0 points of underwriting margin Industry 

  13. Slide 13: Strong Operating ROE in 2017 and Well Positioned for Future

    STRONG OPERATING ROE** IN 2017 AND WELL POSITIONED CLICK TOFUTURE FOR THE EDIT MASTER TITLE STYLE PAGE 13 7.2%  Edit Master text styles 14% o Second level 11.0%  Third level (2.2)%  Fourth level 8.5%  Fifth level 6.0% 7% 0% Underwriting Investments Other* Operating Estimated ROE** WACC for SIGI

  14. Slide 14: Focus on Book Value per Share Growth and Operating ROE

    ACLICK FOCUSTOON BOOK EDIT VALUE MASTER PERSTYLE TITLE SHARE GROWTH AND OPERATING ROE* PAGE 14 Historical Book Value per Share Growth  Edit Master text styles Meeting long-term financial target for an operating $30 o Second level $29.10 ROE* of 300 basis points above our WACC  Third level  Fourth

  15. Slide 15: Standard Commercial: A Profit Engine

    STANDARD CLICK COMMERCIAL TO EDIT (79%STYLE MASTER TITLE OF BUSINESS): A PROFIT ENGINE PAGE 15 ($ in billions)  Edit Master text styles  Focused on disciplined and profitable growth NPW GAAP Combined Ratio 110% $2.2B o Second level  Third level 7% CAGR of NPW  Drivers of profitability are: from

  16. Slide 16: Writer of Small- and Mid-Market Commercial Accounts

    WRITER CLICK TOOF SMALL- EDIT ANDTITLE MASTER MID-MARKET STYLE COMMERCIAL ACCOUNTS PAGE 16  Premium Breakdown Edit Master text styles by Account Size (YTD 9/30/17)  Small account size and low- to medium-hazard o Second level 100% business mix in Commercial Lines:  Third level o Average account si

  17. Slide 17: A Casualty-Focused Book of Business

    CLICK TO EDIT MASTER BOOK A CASUALTY-FOCUSED TITLE STYLE OF BUSINESS PAGE 17   Account underwriter, with each line underwritten and Breakdown of Net Edit Master text Written Premium by Line styles priced separately o Second level  Third level  Centralized line of business and strategic business

  18. Slide 18: Standard Personal Lines: Greater Focus on Auto

    STANDARD PERSONAL LINES (12% OF BUSINESS): CLICK TO EDIT MASTER TITLE STYLE GREATER FOCUS ON AUTO PAGE 18 HOMEOWNERS  ($ in millions) Edit Master text styles NPW GAAP Combined Ratio  Profitability at target 90% combined ratio in normal o Second level $400M 120% CAT year (14 points on the combined

  19. Slide 19: Excess & Surplus: Targeting Improved Margins

    CLICK EXCESSTO& EDIT MASTER SURPLUS (9% TITLE STYLE TARGETING IMPROVED MARGINS OF BUSINESS): PAGE 19  Top-line being managed opportunistically, and will float ($ in millions)  Edit Master text NPW styles GAAP Combined Ratio up or down based on market conditions $250M 140% o Second level  Signific

  20. Slide 20: Conservative Investment Portfolio

    CONSERVATIVE CLICK INVESTMENT TO EDIT MASTER TITLEPORTFOLIO STYLE PAGE 20  Investment Edit Master text styles Portfolio Breakdown (as of 9/30/17)  Fixed income and short-term investments comprise o Second level 95% of the investment portfolio: $5.7B of Investments  Third level o “AA-” average cre

  21. Slide 21: Generating Yield in a Low Interest Rate Environment

    GENERATING YIELD CLICK TO EDIT IN A TITLE MASTER LOW INTEREST STYLE RATE ENVIRONMENT PAGE 21 Fixed Income Portfolio After-tax Yields  Edit Master text styles  Shift to more active management of investment o Second level portfolio in late 2016: Implementation 2.6%  Third level of more active o Thr

  22. Slide 22: Conservative Reinsurance Program

    CONSERVATIVE CLICK REINSURANCE TO EDIT MASTER PROGRAM TITLE STYLE PAGE 22  2017 property catastrophe treaty structure: Net Single-Event Edit Master textHurricane styles Loss* as a % of Equity o Second level o Coverage of $685M in excess of $40M retention 18% (up to 1-in-260 year event level)  Thi

  23. Slide 23: Catastrophe Loss Impact Below Industry Average

    CATASTROPHE CLICK LOSS IMPACT TO EDIT MASTER TITLEHAS BEEN BELOW INDUSTRY AVERAGE STYLE PAGE 23 Impact of Catastrophe Losses on Combined Ratio  Catastrophe loss impact over the past 15 years  Edit Master text styles has averaged: 12 o Second level  Third level o 4.9 percentage points for the P&C

  24. Slide 24: A Strong Reserving Track Record

    A STRONG CLICK RESERVING TO EDIT MASTERTRACK RECORD TITLE STYLE PAGE 24 Impact of Reserve Development on our Combined Ratio  Disciplined reserving practices:  Edit Master text styles 4.0% o Second level o Quarterly actuarial reserve reviews  Third level o Semi-annual independent review  Fourth l

  25. Slide 25: 2017 Combined Ratio Plan: Underlying Margin Improvement

    2017 COMBINED CLICK TO EDIT MASTER TITLE–STYLE RATIO PLAN UNDERLYING MARGIN IMPROVEMENT PAGE 25  Targeting price increases to keep up  Reconciliation Edit Master textofstyles 2017 Statutory Combined Ratio Guidance with, or exceed, loss inflation o Second 1.9% level  Third level  Business mix imp

  26. Slide 26: Strong Growth and Improved Margins

    STRONG CLICK TOGROWTH AND IMPROVED EDIT MASTER MARGINS TITLE STYLE PAGE 26 $2,600 110% 8% CAGR of NPW 2017 GUIDANCE  Edit Master textfrom styles 2011-2017 o Second level 100%  Full-year 2017 ex-CAT statutory combined ratio Combined Ratio  Third level guidance improved 1.0 points to 89.5% (assumes

  27. Slide 27: Strong Capital and Liquidity Position, Focus on Expenses

    CLICK TOCAPITAL STRONG EDIT MASTER AND LIQUIDITY TITLE STYLE POSITION, FOCUS ON EXPENSES PAGE 27  Strong capital position with 20.5% debt-to-capital ratio  Edit Master text styles o Second level  Target NPW/surplus ratio of ~1.4x (lower end of historical range) CAPITAL AND   Third level Growing

  28. Slide 28: Strong Execution Has Enabled Shareholder Value Creation

    STRONG CLICK TOEXECUTION HAS EDIT MASTER ENABLED TITLE STYLESHAREHOLDER VALUE CREATION PAGE 28  Edit Master text styles SIGI S&P 500 S&P Prop/Cas o Second level 50%  Third level 39%  Fourth level  Fifth level 30% 29% 25% 20% 18% 19% 18% 15% 13% 13% 10% 8% 0% Year-to-Date 2 Years 5 Years 10 Years

  29. Slide 29: Strategic Overview

    STRATEGIC OVERVIEW SETTING THE STAGE FOR SUSTAINED OUTPERFORMANCE Greg Murphy - Chairman and Chief Executive Officer

  30. Slide 30: Long History of Disciplined and Profitable Top Line Growth

    LONG HISTORY CLICK OF DISCIPLINED TO EDIT MASTER & PROFITABLE TOP LINE GROWTH TITLE STYLE PAGE 30  EditHistorical Master textNet Premiums Written styles GROWTH DRIVERS: Lower o Second level Risk $2.5B  Third levelManaged Premium Volume During Soft  Growing share of wallet with Combined  Fourth M

  31. Slide 31: Corporate Structure Facilitates Granular Insights

    CORPORATE CLICK STRUCTURE TO EDIT FACILITATES MASTER TITLE STYLE GRANULAR INSIGHTS PAGE 31  Edit Master text styles  Vertical and agile integration into underwriting o Second level  Third level  Renewal inventory management by account, cohort  Fourth level and distribution partner  Fifth level

  32. Slide 32: Well-Positioned for 2018 and Beyond

    FOR 2018 CLICK TO EDIT MASTER WELL-POSITIONED TITLEAND BEYOND….. STYLE PAGE 32  Earned pure renewal price greater than or equal to expected loss inflation  Edit Master text styles o Underwriting Second level  Catastrophe losses of 3.5 points  Third level Margins  No loss reserve development  F

  33. Slide 33: Break

    BREAK

  34. Slide 34: Our Strategic Imperatives Position Us for the Future

    OUR STRATEGIC IMPERATIVES POSITION US FOR THE FUTURE SETTING THE STAGE FOR SUSTAINED OUTPERFORMANCE John Marchioni – President and Chief Operating Officer

  35. Slide 35: The Case for Change

    CLICK THE TO EDIT CASE FOR MASTER CHANGETITLE STYLE PAGE 35  Edit Master text styles o Second level  Evolving consumer expectations  Third level  Fast pace of tech advancement  Fourth level  Fifth level  Changing demographics  New competitors in the marketplace  Increased pressure on margin

  36. Slide 36: Our Strategic Imperatives

    CLICK OUR TO EDIT MASTER STRATEGIC TITLE STYLE IMPERATIVES PAGE 36  Edit Master text styles Deliver a Leverage data & Optimize Align resources Createo a highly Second level superior treat info as a operational for profitable engaged team  Third level omni-channel valued corporate effectiveness & g

  37. Slide 37: Leverage Data and Treat Info as a Valued Corporate Asset

    LEVERAGE DATA AND TREAT INFO AS A VALUED CORPORATE ASSET SETTING THE STAGE FOR SUSTAINED OUTPERFORMANCE John Marchioni – President and Chief Operating Officer Brenda Hall – SVP, Chief Strategic Operations Officer Brian Sarisky – SVP, Commercial Lines Underwriting

  38. Slide 38: Leverage Data and Treat Info as a Valued Corporate Asset

    LEVERAGE CLICK DATA TO EDIT AND TREAT MASTER TITLEINFO AS A VALUED CORPORATE ASSET STYLE PAGE 38  Edit Master text styles o Second level  Strong track record of building and  Third level deploying pricing and claims models  Fourth level  Fifth level  Supports our field-based underwriting and c

  39. Slide 39: Sophisticated Tools and Actionable Data Enable Outperformance

    SOPHISTICATED TOOLS AND ACTIONABLE DATA ENABLE CLICK TO EDIT MASTER TITLE STYLE OUTPERFORMANCE PAGE 39 SIGI Pricing CLIPS Pricing SIGI Retention  Edit Master text styles o Second level 84% 84%  Third level Renewal Pure Price (%) 7.6% 82%  Fourth level 5.9% 5.9% 6.0%  Fifth level Retention (%) 6.

  40. Slide 40: A Portfolio Approach to Underwriting

    A PORTFOLIO CLICK TO EDITAPPROACH TO UNDERWRITING MASTER TITLE STYLE PAGE 40 Commercial Lines Pricing By Retention Group  Portfolio management yields higher retention  Edit Master text styles and rate Renewal Pure Price Point of Renewal Retention o Second level  Aligned with underwriter and regio

  41. Slide 41: Insights Drive Better Decisions

    INSIGHTS CLICK DRIVE TO EDIT BETTERTITLE MASTER DECISIONS STYLE PAGE 41 • Sophisticated underwriting desk tool  Edit Master text styles for new business opportunities o Second level  Third level • Better correlating new business  Fourth level premium and quality of risk  Fifth level • Increased

  42. Slide 42: Underwriting Insights Targets New Business Selection

    UNDERWRITING CLICK INSIGHTS TO EDIT MASTER TARGETS TITLE STYLENEW BUSINESS SELECTION PAGE 42  Deployed Q2 2017  Edit Master text styles PA o Second level  Compares prospective accounts  Third level with similar existing risks  Fourth level  Empowers underwriters at the  Fifth level decision p

  43. Slide 43: Leveraging Advanced Analytics

    CLICK TO EDITADVANCED LEVERAGING MASTER TITLE ANALYTICS STYLE PAGE 43  Edit Master text styles Traditional Insurance Models MVR o Second level Operations Underwriting Ordering  Third level Building New Models Tactical Examples  Fourth level  Fifth level Customer Claims Segmentation Marketing Saf

  44. Slide 44: Decision Management Is a Competitive Advantage

    DECISION CLICK MANAGEMENT TO EDIT IS A COMPETITIVE MASTER TITLE STYLE ADVANTAGE PAGE 44  Better decisions, faster  Edit Master text styles o Second level  Reduces/eliminates administrative tasks  Third level  Fourth level  Allows underwriters to focus on decision making  Fifth level  Simulta

  45. Slide 45: Align Resources for Profitable Growth

    ALIGN RESOURCES FOR PROFITABLE GROWTH SETTING THE STAGE FOR SUSTAINED OUTPERFORMANCE John Marchioni – President and Chief Operating Officer James McLain – SVP, Chief Field Operations Officer Shadi Albert – SVP, Southwest Regional Manager

  46. Slide 46: Align Resources for Profitable Growth

    ALIGN TO CLICK RESOURCES FORTITLE EDIT MASTER PROFITABLE STYLE GROWTH PAGE 46  Edit Master text styles  Field underwriting model is key to our agent o Second level value proposition and underwriting quality  Third level  Data-driven approach to underwriting, pricing  Fourth level and agency man

  47. Slide 47: Unique Underwriting Field Model

    UNIQUE CLICK UNDERWRITING TO FIELDSTYLE EDIT MASTER TITLE MODEL PAGE 47  Edit Master text styles  Empowered field underwriting model Small o Second level Business  Local decision making supported by Team  Third level centralized expertise  Fourth level  Fifth level Agency  Armed with sophisti

  48. Slide 48: Agency Relationship Management: A Key Area of Focus

    CLICK AGENCYTORELATIONSHIP EDIT MASTER TITLE STYLE MANAGEMENT: A KEY AREA OF FOCUS PAGE 48  Edit Master text styles  Deep understanding of business dynamics within each of our agencies o Second level  Third level  Close monitoring of production/profit  Fourth level metrics relative to targets 

  49. Slide 49: Targeting a 3% Commercial Lines Market Share in Footprint

    CLICK TO EDIT TARGETING MASTER A 3% TITLE STYLE COMMERCIAL LINES MARKET SHARE IN FOOTPRINT PAGE 49  Edit Master text styles  Franchise value with “ivy league” agents o Second level  Third level  Long-term goal of 3% CL market share:  Fourth level o Agency partners that control 25% of  Fifth le

  50. Slide 50: Geo-Expansion Growth Enhances Diversification

    CLICK TO EDIT MASTER GEO-EXPANSION TITLEGROWTH ENHANCES STYLE PAGE 50  Diversification and spread of risk  Edit Master text styles o Second level o 30 fully operational states  Third level o Remainder to support multi-state CL accounts  Fourth level  Leverage existing Selective leaders and hire

  51. Slide 51: Deliver a Superior Omni-Channel Experience

    DELIVER A SUPERIOR OMNI-CHANNEL EXPERIENCE SETTING THE STAGE FOR SUSTAINED OUTPERFORMANCE John Marchioni – President and Chief Operating Officer Gordon Gaudet – EVP, Chief Information Officer Rohit Mull – SVP, Chief Marketing Officer

  52. Slide 52: Delivering a Superior Omni-Channel Experience

    CLICK TO EDIT DELIVERING A SUPERIOR MASTER TITLE OMNI-CHANNEL STYLE EXPERIENCE PAGE 52  Edit Master text styles o Second level  Customer expectations are changing  Third level  Facing potential disruption from traditional and  Fourth level non-traditional competitors  Fifth level  Customer-ce

  53. Slide 53: Mastering Customer Information

    CLICK TO EDIT MASTERING CUSTOMER MASTER TITLE INFORMATION STYLE PAGE 53  Edit Master text styles  Significant o Second investments level in Customer Experience (CX) Third capabilities level  Fourth level  360o customer view through technology  Fifth level  24x7 customer self-service digital p

  54. Slide 54: The View of the Customer

    CLICK THE VIEW TO EDIT OF THE MASTER CUSTOMER TITLE STYLE PAGE 54  Edit Master text styles o Second level  Third level  Fourth level  Fifth level

  55. Slide 55: Providing a Shared Customer Experience

    CLICK TO EDIT PROVIDING A SHARED MASTERCUSTOMER TITLE STYLE EXPERIENCE PAGE 55  Partnering Edit Master textagents with styles to invest in joint CX strategies o Second level  Integrating efforts across customer, agents and employees  Third level increases complexity of delivering a seamless expe

  56. Slide 56: Technology Initiatives Increase Switching Cost

    CLICK TO EDIT INITIATIVES TECHNOLOGY MASTER TITLE INCREASE STYLE SWITCHING COST PAGE 56  Edit Master text styles  Insurtech efforts align with our strategic o Second level imperatives  Third level  Fourth level  Looking for solutions to help our customers better manage their business  Fifth le

  57. Slide 57: Conclusion

    CONCLUSION SETTING THE STAGE FOR SUSTAINED OUTPERFORMANCE Greg Murphy - Chairman and Chief Executive Officer

  58. Slide 58: Our Investment Proposition

    CLICK OUR INVESTMENT TO EDIT MASTER PROPOSITION TITLE STYLE PAGE 58 Leveraging our  Strong franchise value with “ivy league” independent distribution partners  Edit Master text styles core competitive  Unique field model enabled by sophisticated tools and processes o Second level strengths  Supe

  59. Slide 59: Investor Day Presentation: Setting the Stage for Sustained Outperformance

    INVESTOR DAY PRESENTATION SETTING THE STAGE FOR SUSTAINED OUTPERFORMANCE

Selective Insurance Group — Investor Day (November 2017) on 6ix