Selective Insurance Group, Inc. · NASDAQ:SIGI
Selective Insurance — NYSSA 1574 Annual Insurance Industry Conference (February 2011)
40 slides from Selective Insurance's conference presentation, Feb 7, 2011
Slide 1: NYSSA 1574 Annual Insurance Industry Conference
- SELECTIVE INSURANCE GROUP, INC. - NYSSA 1574 ANNUAL INSURANCE INDUSTRY CONFERENCE SELECTIVE INSURANCE GROUP, INC. FEBRUARY 8, 2011
Slide 2: Financial Strength
- SELECTIVE INSURANCE GROUP, INC. -— FINANCIAL STRENGTH DALE THATCHER CHIEF FINANCIAL OFFICER
Slide 3: Forward Looking Statement
Forward Looking Statement forma, "continue" or other comparable terminology. predictions, and we can give no assurance that such expectations will p publicly update of fevisé any forward-looking statements, whether as a result of new informatio, ul Factors, that could cause our actual results to dif
Slide 4: Who We Are
Who We Are e 22-state super-regional e 2010: $1.4B NPW ¢ 82% commercial lines e¢ 18% personal lines e High tech, high touch business model e Partner of choice - 980 independent agents e Focus on enterprise risk management e Rated A+ by A.M. Best for 49 years Pricing Commercial Personal Prepared for
Slide 5: Focus on Enterprise Risk Management
Focus on Enterprise Risk Management * Historically strong capital position + Business model generates more earnings stability * Sophisticated underwriting and granular pricing + Strong reserving practices + Conservative reinsurance + Deep investment management talent Pricing Commercial Personal Prep
Slide 6: More Earnings Stability
More Earnings Stability Combined Ratio — SIGI vs. Industry =-@-SIGI (STD. DEV 4.4) =m Industry (STD. DEY 6.7) Source: A.M. Best, Ill Pricing Commercial Personal Prepared for Success Lines Lines Tomorrow
Slide 7: More Earnings Stability: SIGI vs. National Peers
More Earnings Stability os Combined Ratio — SIGI vs. National Peers 120 115 110 105 100 95 90 -*-SIGI(STD. DEV 4.4} =@National Peers (STD. DEV 3.7) > ia 2 ‘td <i £ £ a s a s a ¥ s Source: SNL Financial Note: National Peers include CNA, CB, HIG, TRV and WRB Pricing Commercial Personal Prepared for Su
Slide 8: More Earnings Stability: SIGI vs. Regional Peers
More Earnings Stability 495 Combined Ratio — SIGI vs. Regional Peers 120 - 115 110 105 100 - 95 90 =®-SIGI(STD. DEV 4.4) m-Regional Peers (STD. DEV 5.1) > b & 2 } 2 £ s s ¢ s s £ £ Source: SNL Financial Note: Regional Peers include CINF, THG, HGIC, STFC and UFCS Pricing Commercial Personal Prepared
Slide 9: Adverse/(Favorable) Points of Development
Adverse/ (Favorable) Points of Calendar Year Development 8.0% 6.0% 4.0% 2.0% 0.0% 2.0% 4.0% 6.0% 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010+ SoieaNAN Best U.S. P&C Industry @SIGI *SIGI and Industry data as of 9/30/10 P; Prepared for Success Tomorrow
Slide 10: Premium-to-Surplus
1.9X 4 1.7X 1.5X 4 1.3X 1.1X 0.9X 0.7X 0.5X Premium-to-Surplus BSIG] BP&C MUL 2000 2001 +2002 «2003-2004 ©2005-2006 |«-2007 «2008 += 20092010" 1 point of Combined Rati 1 point of ROE Note= Industry data as of 9/30/10 Pri Prepared for Success Tomorrow
Slide 11: High Quality Investment Portfolio
High Quality Investment Portfolio $3.9B Invested Assets * Outsourcing provides access December 31, 2010 to broader market expertise + Reallocation of risk for better risk adjusted returns * Average “AA” bond quality + Approximately 3.5 year average duration, including short-term & cash + Equities an
Slide 12: Diversified Municipal Portfolio
Diversified Municipal Portfolio $1.4 billion portfolio AA rated 33% of portfolio matures within 3 years Diversified among 293 issuers NY, CA, NJ, IL represent $34M or 2.3% of portfolio Personal Lines Repayment Source December 31, 2010 Prepared for Tomorrow
Slide 13: Interest Rate Impact
Interest Rate Impact Laddered maturity schedule Differential between roll off rates and new money rates © 2011: (1.4)% © 2012: (0.9)% Impact to net investment income © 2011: ($2.3M) * 2012: ($6.3M) Fixed Inco! Maturity Sch Commercial Personal Lines Lines Prepared for Tomorrow
Slide 14: Long-Term Shareholder Value Creation
Long-Term Shareholder Value Creation Wi Book Value i Dividends $20 eo $16 rs n @& $12 $8 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 Dividend Yield: 2.9% Pri Prepared for Success Tomorrow
Slide 15: Prepared for Tomorrow
- SELECTIVE INSURANCE GROUP, INC. - PREPARED FOR TOMORROW GREG MURPHY CHAIRMAN, PRESIDENT & CEO
Slide 16: Selective's Commercial Lines Pricing Success
Selective’s Commercial Lines Pricing Success 4.0% 34% aia 2.0% 0.0% 5 -2.0% 4.0% 6.0% + 8.0% | Selective CLIPS Advisen ADVX HCIAB = MarketScout 10.0% 1Q:09 20:09 30:09 4Q:09 10:10 20:10 39:10 4Q:10 Jan: 11 7 consecutive quarters of positive price nancial Personal Prepared for Strength Tomorrow W
Slide 17: Why Are We Successful?
Why Are We Successful? + Agency relationships + Field model + Sophisticated underwriting tools and granular pricing — Aggregate quality score by account — Targeted pricing — Agency profitability -— Segment performance — Hazard grade — System calculated pure price change + The courage to walk away Fi
Slide 18: Mix of Business
Mix of Business $1.46 Direct Premium Written Middle Market $820M (57%) ancial Pricing Prepared for Strength Success Tomorrow
Slide 19: Middle Market
Middle Market Middle Market $820M (57%) Agency relationships are key Agents act as risk manager for insureds Field underwriting and claims model Safety Management ny Commercial a re r Ra eens oe isi SELECTIVE’
Slide 20: Field Model
Field Model * Local knowledge of insureds cums — + Full claims/underwriting eenest ‘Spenaises authority + Supported by sophisticated underwriting tools + Safety management services lowers frequency and increases retention Safety. Field Tach. Hanegement ‘alists ‘Specialste a Over 300 Field Personnel
Slide 21: Agency Focus
Agency Focus « 980 Agents e 2,000 Storefronts e Number 1, 2 or 3 in 60% of agencies appointed for 5 or more years Number of Agents ¢ Ease of doing business wa e Online agency marketing 900 portal 850 800 750 700 650 600 lll 2006 2007 2008 2009 2010 Financial Pricing “0 J Personal Prepared for Streng
Slide 22: Middle Market Product Expansion
Middle Market Product Expansion « Added 20 new and enhanced products in 2009 * Introduced another 11 in 2010 * New products « Aging Services, Identity Theft, Cyber Security, Technology * Enhanced products « Resort Endorsement, Contractors GL, Property Coverage for Municipalities Financial Pricing Co
Slide 23: Small Business
Less price sensitive Better profitability Stronger retention Straight through processing Small Business
Slide 24: Small Business Growth
Small Business Growth $ thousands Average DPW/Day 300 250 200 150 100 + 2005 2006 2007 2008 2009 2010 Financial Pricing 0 Personal Prepared for Strength Success Tomorrow
Slide 25: Small Business Product Expansion
Small Business Product Expansion 2010 Auto Serv WC, Summit Contractors, BR Exp Mfg WC, Contractors WC Exp 3uilders Risk Expanded Special Contractors & Merchants PRO BOP Lines i Tomorrow > SELECTIVE
Slide 26: Personal Lines
Personal Lines + Smoothes performance over the long-term * Significant source of agent revenue + Improving mix of business and ability to get rate Personal Lines $260M (18%)
Slide 27: Personal Lines Rate Success
Personal Lines Rate Success In-force Rate and Premium (gin Blended Potential Premium millions) In-force Based on In-force Rate Book Personal Lines profitable in 2011 Financial Pricing Commercial Pe Prepared for h SELECTIVE Strength Success Lines Tomorrow
Slide 28: Driving Down Cost of Goods Sold
Driving Down Cost of Goods Sold Litigation management Vendor optimization More integrated outcomes in resolution of claims Claims strengthens Selective brand 3 point reduction in loss costs over 3 years Financial Pricing Commercial Personal Strength Success Lines Lines
Slide 29: Customer Focus to Improve Retention
Customer Focus to Improve Retention * Continue to build relationships with end customers * 24/7 online access for customer service needs *« Improving customer experience through high frequency touch points * Online interactive safety training resources * Safety management strengthens Selective brand
Slide 30: 2011 Guidance
2011 Guidance * Statutory and GAAP combined ratio of 101-102% * 2 points of catastrophe losses « 55 million weighted average shares outstanding Expect to continue to drive positive personal and ] commercial rate in 2011 Financial Pricing Commercial Personal Strength Success Lines Lines
Slide 31: Financial Highlights 2006 - 2010
Financial Highlights 2006 - 2010 2010 2009 + 2008 + 2007 «=-2006 NPW Growth (2.3% | (4.7)% | (4.5)% | 1.4% | 5.3% Operating EPS $1.35] $1.39] $1.43] $216| $2.23 Net income per share $1.20] soes| $0.82| $259| $2.65 Dividend per Share $0.52] $052| $0.52| $0.49| $0.44 Book Value $19.95] $18.83 | $16.84
Slide 32: Net Operating Cash Flow
Net Operating Cash Flow ($ in millions) 440 390 340 290 240 190 140 | 40 7 2006 2007 2008 2009 2010
Slide 33: Investment Income - After-tax
Investment Income - After-tax ($ in millions) 140 130 120 no 134 121 | 2006 2007 2008 2009 2010
Slide 34: Commercial Lines Profitability
Commercial Lines Profitability Statutory Combined Ratios 110 a a a a a HI Impact of Catastrophe Hl combined Ratio Excluding Cats
Slide 35: Granular Pricing Capabilities
12.0% 10.0% 8.0% 6.0% 4.0% 2.0% 0.0% 2.0% 4.0% Granular Pricing Capabilities Selective Pricing by Diamond 10.3% 10.3% ™3Q:09 §2Q:10 40:09 30:10 ™1Q:10 §4Q:10 1&2 Diamond 3 Diamond 4&5 Diamond
Slide 36: Commercial Lines New Business Quality Improvement
Percent of Total DPW Commercial Lines New Business Quality Improvement Percent of Total New Premium Diamond Distribution WC, BOP, CPP, CA 70% 62% 60% 50% 40% 30% 20% 10% 0% MPre-Modeling m1 2010 December YTD 5 & 4 Diamond 3 Diamond 2&1 Diamond > SELECTIVE™
Slide 37: Retaining our Best Commercial Business
Retaining our Best Commercial Business 90% 88% | 89% 86% 4 87% 84% + 82% 4 80% + 78% 76% 74% T T 1&2 Diamond 3 Diamond 4&5 Diamond 80% Retention at point of renewal as of December 31, 2010 @ stucriver
Slide 38: Insurance Operations Productivity
($ in 000s) Insurance Operations Productivity 700 % IEENWP per employee Expense ratio 35 276 2006 2007 2008 2009 2010
Slide 39: Commercial Lines Premium by Line of Business
Commercial Lines Premium by Line of Business 2010 Statutory Net Premium Written Commercial BOP Bonds / Other Property Auto bit 1% 25% Workers Compensation 21% General Liability 28% & scuccriver
Slide 40: Premium by Strategic Business Unit
Premium by Strategic Business Unit 2010 Direct Premium Written Spec Programs 22% Contractors 35% Mig/ Dist Serv 18% Merc/Serv 25%
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