Selective Insurance Group, Inc. · NASDAQ:SIGI
Selective Insurance — Keefe, Bruyette & Woods 2016 Insurance Conference
32 slides from Selective Insurance's conference presentation, 2016
Slide 1: Selective Insurance Group, Inc. Investor Presentation Third Quarter 2016
Selective Insurance Group, Inc. Investor Presentation Third Quarter 2016 Selective Insurance Selective Insurance Group, Group,Inc. Inc.
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 Selective Insurance Group, Inc. 3
Slide 4: Best Super-Regional Company
Best Super-Regional Company ► Super-regional P&C carrier with long history of financial strength, superior execution and disciplined growth in these lines of business: Standard Commercial Standard Personal Excess & Surplus ► Sustainable Competitive Advantages: True franchise value with “ivy
Slide 5: True Franchise Value with “ivy league” Distribution Partners
True Franchise Value with “ivy league” Distribution Partners ► High franchise value: Standard Commercial: 1,100 agents in 22 states Standard Personal: 700 agents in 13 states Excess & Surplus: 80 wholesale brokers in 50 states ► Standard lines NPW per agent of $1.7 million ► Agent relationship
Slide 6: Field Model: Competitive Advantage
Field Model: Competitive Advantage ► Responsive, field-based model: Agency Management ~100 Agency Management Specialists Specialists Corporate Underwriters ~15 Personal Lines Marketing Small Business Team Specialists ~100 Claims Management Field Personal Claims Specialists Lines Management Mod
Slide 7: Commercial Lines Renewal Premium
Commercial Lines Renewal Premium $1.5 85% ► Vertical integration allows for nimble execution Direct Renewal Premium (in billions) $1.4 84% $1.3 83% ► Inside underwriters receive $1.2 82% Overall Retention credit for non-renewal of lower $1.1 81% performing accounts $1.0 80% $0.9 79% ► 27 consecutive
Slide 8: Sophisticated Pricing Tools
Sophisticated Pricing Tools Commercial Lines Pricing by Retention Group Point of Renewal Retention 9% YTD June 30, 2016 95% Renewal Pure Price 8% 7% 6% 85% 5% 4% 3% 75% 2% 1% 0% 65% Above Average Below Low Very Low Average Average % of Premium 49.7% 24.7% 15.4% 7.6% 2.6% Third generation models allo
Slide 9: Profitable Growth
Profitable Growth Growth drivers: 500 450 ► Unique field model Direct New Business ($in millions) 400 ► True franchise value 350 ► Increased capacity through: 300 250 Small Business Teams 200 Agency Management 150 Specialists 100 Additional agents 50 ► The Selective Edge® for Personal 0 2011*
Slide 10: 2015: Selective’s Most Profitable Year
2015: Selective’s Most Profitable Year Statutory Combined Ratio (Ex-CAT) ► Generated 89.4% combined ratio, 98.4% excluding catastrophes 97.3% ► Operating ROE of 11.8% beat target of 94.8% 300 bps over WACC 92.5% ► In 2016, expect to meet or exceed claim inflation through the following actions: 89.4%
Slide 11: Commercial Lines
Commercial Lines ($ in billions) NPW Combined Ratio $2.0 110% ► Combined ratio improvement driven by: Renewal pure price increases $1.6 105% Underwriting and claims efforts $1.5 $1.4 $1.4 ► Executing on our small business strategy $1.3 100% $1.2 through redefined Small Business Teams rolled out
Slide 12: Claims Management: Significant Improvements in Workers Compensation
Claims Management: Significant Improvements in Workers Compensation ► Centralized handling of workers Focus on Lower Hazard Mix compensation claims Improvement ► Strategic case management and escalation model 45.5% 39.4% 40.5% 46.6% ► Fraud detection and recovery model 15.1% 12.9% 2013 2015 Low Haza
Slide 13: Opportunity for Profitable Growth
Opportunity for Profitable Growth Personal Lines Excess & Surplus Lines ► Goal to produce a Homeowners 90% ► Net premium written growth of 23% in combined ratio in a normal CAT year the first six months of 2016 ► The Selective Edge® product targets ► Achieved overall 4.1% price increase the consulta
Slide 14: 2016 Guidance
2016 Guidance 2016 Ex-CAT Statutory Combined Ratio Plan* 92.8% 1.2% 89.5% (1.3)% 0.0% (1.8)% (1.5)% 2015 Accident Calendar Year Earned Rate Underwriting / Expense Loss Trend 2016 Ex-CAT Year Ex-CAT Reserve Claims Guidance Development** *Assumes no additional prior year casualty reserve development G
Slide 15: Investing in Omni-Channel Experience
Investing in Omni-Channel Experience ► Game changer in an industry that has been slow to adopt change ► Providing customers with 24-by-7 access to transactional capabilities and information ► Drive increased customer loyalty and retention ► Our ability to drive agency adoption is based on the franch
Slide 16: Investment Proposition
Investment Proposition ► Long track record of financial strength, superior execution and disciplined growth ► Unique operating model combining local underwriting authority with true franchise value with “ivy league” distribution partners ► Investing in technology to deliver best-in-class omni- chann
Slide 17: Risk Profile and Financial Strength
Risk Profile and Financial Strength Selective Insurance Group, Inc. 17
Slide 18: Robust Risk and Return Strategy
Robust Risk and Return Strategy Low to Medium Hazard Writer Selective Insurance Group, Inc. 18
Slide 19: Conservative Investment Portfolio
Conservative Investment Portfolio Alternatives 1% Short-term ► “AA-” average credit quality Equities 4% 3% ► Investment ROE of 6.2% (approximated by yield of 1.8% x leverage of 3.4x) ► 3.7 year duration (incl. short- term) As of 6/30/2016 ► 2016 expected after-tax net investment income of approximat
Slide 20: Conservative Reinsurance Program
Conservative Reinsurance Program Renewed January 1, 2016 % of Equity at Risk $685M in excess of $40M retention 1 in 250 Year Event 26% Reduced gross PML Exhausts at through CAT approximately 1-in- management actions 274 year event 2016 Property Catastrophe Treaty 8% 5% Average reinsurer $201 million
Slide 21: Reserve Strength
Reserve Strength Standard Deviation (2006 – 2015) of ► Disciplined reserving practices Reserve Development Points on the Combined Ratio ► Quarterly actuarial reserve reviews ► 10 consecutive years of favorable Peer Average* 3.1% reserve development ► 2 reviews per year by independent Selective 1.2%
Slide 22: Generating Long-Term Shareholder Value
Generating Long-Term Shareholder Value $0.60* $28 $0.57 $26.86 $0.53 $0.52 $24.37 $0.52 $0.52 $21 $0.49 $0.52 $22.54 $0.44 $0.52 $20.63 $0.52 $19.45 $19.77 $18.82 $18.97 $17.87 $17.80 $14 $15.81 $7 $0 Book Value Per Share Dividend Per Share *Annualized indicated dividend Selective has a long track-r
Slide 23: Total Shareholder Returns
Total Shareholder Returns Total Return as of June 30, 2016 SIGI S&P 500 S&P Prop/Cas 40% 38.5% 30% 20.7% 21.4% 20% 14.8% 10% 5.8% 0% Year-to-Date 1 Year 3 Years 5 Years 10 Years Selective’s continued success in 2016 reflects its ability to drive sustainable and profitable growth while delivering sha
Slide 24: Sustainable Competitive Advantages
Sustainable Competitive Advantages ► True franchise value with “ivy league” distribution partners ► Our unique field model coupled with sophisticated underwriting and claims capabilities ► Superior customer experience delivered by best- in-class employees 16% Driving long-term success 8% Selective I
Slide 25: Selective Insurance Group, Inc. Third Quarter 2016
Selective Insurance Group, Inc. Investor Presentation Third Quarter 2016 Selective Insurance Selective Insurance Group, Group,Inc. Inc.
Slide 26: Financial Highlights 2012 – Q2 2016
Financial Highlights 2012 – Q2 2016 2012 2013 2014 2015 Q1 2016 Q2 2016 Statutory NPW Growth 12.2% 8.7% 4.1% 9.8% 9.1% 8.6% Operating EPS $0.58 $1.65 $2.17 $2.70 $0.66 $0.72 Net Income per Share $0.68 $1.87 $2.47 $2.85 $0.63 $0.74 Dividend per Share $0.52 $0.52 $0.53 $0.57 $0.15 $0.15 Book Value per
Slide 27: Net Operating Cash Flow
Net Operating Cash Flow ($ in millions) 440 Cash Flow as % of NPW 390 $382 $336 18% 340 19% 290 240 $227 $233 14% 12% 190 140 $123 90 8% 40 2011 2012 2013 2014 2015 YTD June 2016: $59M Selective Insurance Group, Inc.
Slide 28: Investment Income – After-tax
Investment Income – After-tax ($ in millions) 120 $111 110 $104 $100 $101 100 $94 90 80 70 60 50 40 2011 2012 2013 2014 2015 YTD June 2016: $47M Selective Insurance Group, Inc.
Slide 29: Standard Commercial Lines Pricing
Standard Commercial Lines Pricing Selective CLIPS 7.5% 6.5% 5.5% Renewal Pure Price 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 Q3 Q4 Q1 Q2 2009 2010 2011 2012 2013 2014 2015 2016 Industry Source: Towers Watson Commercial Lines Insu
Slide 30: Standard Commercial Lines Profitability
Standard Commercial Lines Profitability % Statutory Combined Ratios 105 103.9 103.0 99.8 100.8 0.5 6.4 5.0 100 98.5 3.3 99.3 97.1 95.9 2.1 99.3 97.5 98.0 1.7 95.5 95.0 95 0.9 96.4 1.2 95.0 95.3 2.7 93.8 92.8 90 89.2 89.1 2.2 1.9 87.0 87.2 85 80 Impact of Catastrophe Losses Combined Ratio excluding C
Slide 31: Standard Commercial Lines Premiums
Standard Commercial Lines Premiums Strategic Business Unit Diversification 2008 2015 22% Contractors 27% 35% 43% Community & Public Services 16% Manufacturing 18% Mercantile Service 19% 20% Includes Bonds Premium Selective Insurance Group, Inc.
Slide 32: Premium by Line of Business
Premium by Line of Business 2015 Standard Commercial Lines Net Premium Written Workers Compensation 19% General Liability 32% Commercial Property 18% Other 1% Bonds Auto 1% BOP 23% 6% Selective Insurance Group, Inc.
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