Selective Insurance Group, Inc. · NASDAQ:SIGI
Selective Insurance — 2021 Bank of America Securities Insurance Conference
33 slides from Selective Insurance's conference presentation, February 2021
Slide 1: Investor Presentation
INVESTOR PRESENTATION February 2021 1
Slide 2: Safe Harbor Statement
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 o
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 Consistent Double-Digit non-GAAP Operating ROEs 2020 Non-GAAP Operating ROE OF 10.5%* 27 $4.0B 94 $2.8B 94.9% State Footprint** Market Cap Years of Financial 2020 NPW 2020 GAAP (as of 2/9/2021) Strength and (up 3% Y/Y)*** Combined Sup
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 growth Competitive market conditions Focus on achieving target hurting personal auto growth combined ratio; top-line will Strong calendar year profitability; depend
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) 7
Slide 8: Strong ROE Outperformance Relative to Peers
STRONG ROE OUTPERFORMANCE RELATIVE TO PEERS Historical Non-GAAP Operating ROEs* 15% 13.3% Elevated CAT • Superior 10.5% non-GAAP operating ROE* in losses 2020 driven by solid underwriting and 10.3% investment contributions 10% 10.5% • SIGI non-GAAP operating ROE* for 2020 includes elevated CAT losse
Slide 9: Excellent Historical Operating Results
EXCELLENT HISTORICAL OPERATING RESULTS FULL YEAR 2020 HIGHLIGHTS: Historical GAAP Combined Ratios 100% • Consolidated combined ratio of 94.9% COVID-19 impacts and elevated CAT losses • After-tax net investment income up 2% over prior year 95.8% 95.0% • Non-GAAP operating ROE* of 10.5% 95% 95.2% 2021
Slide 10: Our Strategic Initiatives
OUR STRATEGIC INITIATIVES 10
Slide 11: Our Major Strategic Initiatives
OUR MAJOR STRATEGIC INITIATIVES LEVERAGE SOPHISTICATED CULTURE FOCUSED ON CONTINUED PROFITABLE EXCELLENT TOOLS TO ACHIEVE INNOVATION AND GROWTH CUSTOMER SERVICE ADEQUATE PRICING SUSTAINABILITY Deploy sophisticated underwriting Expanding “share of wallet” Continue to deliver A culture of innovation a
Slide 12: Consistently Achieving Price Increases in Alignment with Loss Trend
CONSISTENTLY ACHIEVING PRICE INCREASES IN ALIGNMENT WITH LOSS TREND SIGI Pricing CLIPS Pricing SIGI Retention • Selective’s renewal pure price increases 88% exceeded industry average from 2009-2018 • An attractively-priced book with strong Renewal Pure Price (%) embedded profitability; industry pric
Slide 13: A Granular Approach to Pricing and Underwriting
A GRANULAR APPROACH TO PRICING AND UNDERWRITING Commercial Lines Pricing by Retention • Portfolio management approach yields 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 PAGE 14 Historical Net Premiums Written LOWER COMMERCIAL LINES GROWTH DRIVERS: RISK $3.0B • Target of growing “share of wallet” to 12% Managed Premium Volume During Soft Market with existing distribution partners • Target of appointments to represent 25% share i
Slide 15: Initiatives Focused on Profitable Growth
INITIATIVES FOCUSED ON PROFITABLE GROWTH New small business agency MarketMax® provides our distribution interface enhances opportunities partners with insights into their portfolio by significantly streamlining and positions them to expand their quoting and issuance process relationship with us 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 CO for personal lines • Initial growth and prof
Slide 17: Deliver a Superior Omni-Channel Experience
DELIVER A SUPERIOR OMNI-CHANNEL EXPERIENCE • Changing expectations from customers, and potential disruptive threats from traditional VALUE-ADDED and non-traditional competitors SERVICES SUCH AS “360-DEGREE” • Partnering with agents to provide a seamless SELECTIVE® DRIVE VIEW OF customer experience C
Slide 18: Strong Focus on Innovation and Sustainability
STRONG FOCUS ON INNOVATION AND SUSTAINABILITY A focus on attracting, developing, and retaining the best talent: • Established an Innovation function, including a lab at our Branchville, NJ campus • Leadership and development programs • Initiatives to increase diversity and inclusion • A focus on sus
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 Employee hiring, Increased Board Building a leadership retention, evaluation, diversity with recent culture centered and promo
Slide 20: Financial Overview
SELECTIVE BE UNIQUELY INSURED® 20
Slide 21: Lower Risk Profile and Strong Financial Strength
LOWER RISK PROFILE AND STRONG FINANCIAL STRENGTH • Strong balance sheet underpinned by a A LOWER RISK PROFILE conservative approach to: • Managing the investment portfolio • Purchasing reinsurance protection • Loss reserving Low to • Conservative business and balance sheet Medium profile allows for
Slide 22: A Writer of Predominantly Low- to Medium-Hazard Risks
A WRITER OF PREDOMINANTLY LOW- TO MEDIUM- HAZARD RISKS • Manage volatility of underwriting results, in part through maintaining a smaller limit profile Percent of Policies with TIV* or Limits of $1M or Less Property Casualty • Low account sizes (premium per policyholder) averaging: Standard Commerci
Slide 23: Conservative Investment Portfolio
CONSERVATIVE INVESTMENT PORTFOLIO Investment Portfolio at 12/31/20 • Core fixed income and short-term investments comprise 92% of the $7.5B of Investments investment portfolio: • “AA-” average credit quality • Effective duration of 3.8 years Fixed Income 87% • Risk asset allocation (high yield, publ
Slide 24: Active Portfolio Management Drives Investment Results
ACTIVE PORTFOLIO MANAGEMENT DRIVES INVESTMENT RESULTS Historical After-Tax Fixed Income • Current fixed income and short-term portfolio Portfolio Yields duration of 3.8 years 3.0% 2.8% 2.9% • AA- average credit rating 2.6% • Guidance of after-tax net investment income of $182M in 2021: 2.2% 2.1% • $
Slide 25: Historical Catastrophe Loss Impact Below Industry Average
HISTORICAL CATASTROPHE LOSS IMPACT BELOW INDUSTRY AVERAGE Impact of Catastrophe Losses on Combined Ratio • Catastrophe loss impact over the past 17 years has averaged: 12 pts Elevated • 5.3 percentage points for the P&C P&C Industry frequency of CAT losses industry • 3.2 percentage points for Select
Slide 26: Conservative Reinsurance Program
CONSERVATIVE REINSURANCE PROGRAM Net Single-Event Hurricane Loss* as a % of Equity • 2021 property catastrophe treaty structure: • Coverage of $785M in excess of $40M retention 18% 15% • $281M in collateralized limit, primarily in the top layer of the program 12% • Additional earnings volatility pro
Slide 27: Strong Reserving Track Record
STRONG RESERVING TRACK RECORD • Disciplined reserving practices: Impact of Casualty Reserve Development on our Combined Ratio • Quarterly actuarial reserve reviews 4.0% • Semi-annual independent review • Independent year-end opinion • Favorable reserve development in Workers Compensation and General
Slide 28: Rollforward of Underlying Combined Ratio
ROLLFORWARD OF UNDERLYING COMBINED RATIO * • 2021 guidance assumes: * • No prior year casualty reserve development • Catastrophe losses of 4.0 points on the combined ratio 2020 Net COVID-19 2020 Adjusted Higher Loss Trend Renewal UW Mix & Expense Other 2021 Forecasted Underlying & Related Underlying
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 16.7% • 2020 expense ratio of 33.8% includes 1.1 points of specific COVID-19-related items • NPW to surplus ratio of ~1.3x is at the low end of our target range o
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 Generating non-GAAP operating ROE* in and Shareholder Value Creation Over Time 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 • Solid long-term outperformance in TSR relative to S&P P&C SIGI S&P 500 S&P Prop/Cas 40% insurance and S&P 500 indices over the past 5- and 10-year periods 30% • Share price performance has reflected ou
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 footp
Slide 33: Investor Presentation
INVESTOR PRESENTATION February 2021 33
Selective Insurance Group — 2021 Bank of America Securities Insurance Conference on 6ix