Selective Insurance Group, Inc. · NASDAQ:SIGI
Selective Insurance — Q2 2019 Earnings Presentation
29 slides from Selective Insurance's earnings presentation, Aug 14, 2019
Slide 1: Second Quarter 2019 Presentation
Second Quarter 2019 Presentation
Slide 2: Safe Harbor Statement
In this presentation, we make certain statements and reference other information that are “forward - looking statements” as define d in the Private Securities Litigation Reform Act of 1995 (“PSLRA”). The PSLRA provides a safe harbor under the Securities Act of 1933, as am end ed, and the Securities
Slide 3: Selective Insurance
SELECTIVE INSURANCE™ ER
Slide 4: A Track Record of Superior Execution
41 st largest property and casualty insurance company based on 2018 NPW State Footprint 2018 NPW (up 6% Y/Y) Years of Financial Strength and Superior Execution Market Cap (as of 8/9/2019) 2018 GAAP Combined Ratio 27 $ 4.7B 90+ $2.5B 95.0% A TRACK RECORD OF SUPERIOR EXECUTION NON - GAAP OPERATING ROE
Slide 5: Our Sustainable Competitive Advantages
OUR SUSTAINABLE COMPETITIVE ADVANTAGES ▪ Enables effective management of pricing and retention ▪ Presents significant opportunity for profitable growth ▪ Agent overall satisfaction rating of 8.7/10 ▪ Locally - based underwriting, claims, and safety management specialists ▪ Agile capability and excel
Slide 6: Super Regional Company with National Capabilities
SUPER REGIONAL COMPANY WITH NATIONAL CAPABILITIES ~1,330 distribution partners ~720 distribution partners 27 States and D.C. 15 States All 50 States Standard Commercial (80% of NPW ) Standard Personal ( 11% of NPW ) E&S (9% of NPW ) ~90 wholesale distribution partners Note: NPW breakdown as of 1H 20
Slide 7: Excellent Operating Performance
EXCELLENT OPERATING PERFORMANCE FULL YEAR 2018 HIGHLIGHTS: ▪ Consolidated combined ratio of 95.0% ▪ After - tax net investment income up 35 % ▪ Non - GAAP operating ROE* of 12.5% 95.8% 94.5% 85% 90% 95% 100% 2014 2015 2016 2017 2018 2019E Underlying Combined Ratio Reported Combined Ratio * YTD (6/30
Slide 8: Summary of Our Operations
SUMMARY OF OUR OPERATIONS Commercial Lines ( 80 % of NPW): A Profit Engine ▪ A focus on disciplined growth ▪ Strong calendar year profitability in workers compensation and general liability; commercial auto remains an area of focus ▪ Drivers of profitability include pricing in - line with expected c
Slide 9: Our Strategic Initiatives
SELECTIVE INSURANCE™ re 2 OUR STRATEGIC INITIATIVES
Slide 10: 2019 Strategic Initiatives
Standard commercial lines renewal pure price increases that match or exceed expected claim trends Execute on strategy of growing market share Continue to enhance our customer experience strategy New hub established in the Southwest CONTINUED PROFITABLE GROWTH GEO - EXPANSION PRICE ALIGNMENT WITH EXP
Slide 11: Price Increases Have Consistently Outperformed Industry
▪ Commercial lines renewal pure price increases have exceeded CLIPS index since 2009, and are tracking in line with expected claim trends ▪ Ability to get appropriate price enabled by: o Strong distribution partner relationships o Sophisticated tools and actionable data o Culture of underwriting dis
Slide 12: A Portfolio Approach to Underwriting
A PORTFOLIO APPROACH TO UNDERWRITING Commercial Lines Pricing By Retention Group 65% 75% 85% 95% 0% 3% 6% 9% Above Average Average Below Average Low Very Low Renewal Pure Price CLAS Pure Rate % Premium Renewed Point of Renewal Retention % of Premium 49% 25% 15% 8% 3% As of June 30, 2019 ▪ Portfolio
Slide 13: Targeting Growth Through Market Share and Geo-Expansion
TARGETING GROWTH THROUGH MARKET SHARE AND GEO - EXPANSION PAGE 13 Historical Net Premiums Written COMMERCIAL LINES GROWTH DRIVERS: ▪ Target of growing share of wallet to 12% with existing distribution partners ▪ Target of appointments to represent 25% share in existing markets ▪ Geo - expansion (5 n
Slide 14: Deliver a Superior Omni-Channel Experience
DELIVER A SUPERIOR OMNI - CHANNEL EXPERIENCE ▪ Changing expectations from customers, and potential disruptive threats from traditional and non - traditional competitors ▪ Partnering with agents to provide a seamless customer experience ▪ Identifying value - added services to increase new business hi
Slide 15: Geo-Expansion Enhances Growth Opportunities
GEO - EXPANSION ENHANCES GROWTH OPPORTUNITIES ▪ Diversification and spread of risk o Targeting ~30 fully operational states o Remainder to support multi - state accounts ▪ Leverage existing Selective leaders and hire local underwriters who know the market and agencies ▪ Established new Southwest reg
Slide 16: Financial Overview
SELECTIVE INSURANCE™ ER * FINANCIAL OVERVIE“!
Slide 17: Lower Risk Profile and Strong Financial Strength
LOWER RISK PROFILE AND STRONG FINANCIAL STRENGTH A Lower Risk Profile ▪ Strong balance sheet underpinned by a conservative approach to: o Managing the investment portfolio o Purchasing reinsurance protection o Loss Reserving ▪ Conservative business and balance sheet profile allows for higher operati
Slide 18: Conservative Investment Portfolio
CONSERVATIVE INVESTMENT PORTFOLIO Fixed Income 90% Short-Term 5% Equities 2% Alternatives 3% Investment portfolio breakdown is as of 6 /30/19 Investment Portfolio Breakdown $ 6.4B of Investments ( 3 % High yield) ▪ Core fixed income and short - term investments comprise 92% (excluding high yield) of
Slide 19: Active Portfolio Management Drives Investment Results
ACTIVE PORTFOLIO MANAGEMENT DRIVES INVESTMENT RESULTS Historical After - Tax Net Portfolio Yields ▪ Strong investment performance driven by: o Lower Federal income tax rate o Modestly higher interest rates o Active portfolio management o Excellent operating cash flow (18% of NPW in 2018) o Strong al
Slide 20: Catastrophe Loss Impact Below Industry Average
CATASTROPHE LOSS IMPACT BELOW INDUSTRY AVERAGE Impact of Catastrophe Losses on Combined Ratio Note: Catastrophe impact for P&C industry based on A.M. Best estimates; 2019 estimate based on Review/Preview Report from February, 2019 0 6 12 2003 2005 2007 2009 2011 2013 2015 2017 2019B SIGI Avg. P&C In
Slide 21: Conservative Reinsurance Program
CONSERVATIVE REINSURANCE PROGRAM 2% 2% 2% 2% 3% 5% 20% 0% 6% 12% 18% 24% 25 50 100 150 200 250 500 (Return Period in Years) Net Single - Event Hurricane Loss* as a % of Equity * Single event hurricane losses are net of reinsurance, after tax, and reinstatement premiums as of 1/1/19. GAAP equity as o
Slide 22: Strong Reserving Track Record
STRONG RESERVING TRACK RECORD ▪ Disciplined reserving practices: o Quarterly actuarial reserve reviews o Semi - annual independent review o Independent year - end opinion ▪ Favorable reserve development in Workers Compensation and General Liability was partially offset by strengthening in Commercial
Slide 23: Margin Improvement Expected in 2019
MARGIN IMPROVEMENT EXPECTED IN 2019 Reconciliation of 2019 GAAP Combined Ratio Guidance 2018 Underlying Combined Ratio 93.1% 2.4% Loss Trend (2.1)% Earned Rate (1.0)% Claims/ UW Improvement 2019 Combined Ratio Guidance (Ex - CAT) 91.0 % Expenses (includes PH Dividends) 0.2% Normalization of non - CA
Slide 24: Strong Capital and Liquidity Position, Focus on Expenses
STRONG CAPITAL AND LIQUIDITY POSITION, FOCUS ON EXPENSES ▪ Cost management and greater leverage from NPW growth helps manage expense ratio ▪ Restructured long - term stock compensation program should reduce corporate expenses over time ▪ Will continue to make significant investments for the future $
Slide 25: 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 $15.81 $34.71 -$300 $200 $700 $1,200 $1,700 $2,200 $8 $16 $24 $32 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 1H2019 ($ in millions) GAAP Stockholders' Equit
Slide 26: Strong ROE Outperformance Relative to Peers
STRONG ROE OUTPERFORMANCE RELATIVE TO PEERS Historical Non - GAAP Operating ROEs* Peer index includes TRV, HIG, CNA, CINF, THG, UFCS, MCY, HMN, and KMPR * Refer to “Safe Harbor Statement” on page 2 of this presentation for further detail regarding certain non - GAAP financial measures. 10.3% 12.8% 8
Slide 27: Total Shareholder Returns Have Outperformed Benchmarks
TOTAL SHAREHOLDER RETURNS HAVE OUTPERFORMED BENCHMARKS 24% 38% 27% 22% 19% 11% 11% 15% 25% 26% 16% 17% 0% 10% 20% 30% 40% SIGI S&P 500 S&P Prop/Cas 1 Year 5 Years 10 Years Total Shareholder Return Note: Total shareholder return calculations as of June 30, 2019 Year - to - date ▪ Significant outperfo
Slide 28: Our Value Proposition
▪ Leveraging our competitive strengths to generate sustained financial outperformance o Strong franchise value with “ivy league” distribution partners o Unique field model enabled by sophisticated technology o Strong customer experience ▪ Excellent growth opportunities within footprint and geo - exp
Slide 29: Second Quarter 2019 Presentation
Second Quarter 2019 Presentation
Selective Insurance Group — Q2 2019 Earnings Presentation on 6ix