Selective Insurance Group, Inc. · NASDAQ:SIGI
Selective Insurance — Q3 2023 Earnings Presentation
31 slides from Selective Insurance's earnings presentation, Nov 2, 2023
Slide 1: Investor Presentation, Quarter Ended September 30, 2023
INVESTOR PRESENTATION QUARTER ENDED SEPTEMBER 30, 2023
Slide 2: Safe Harbor Statement
Safe Harbor Statement We make certain statements and reference other information in this presentation that are “forward-looking statements” as defined in the Private Securities Litigation Reform Act of 1995 (“PSLRA”). The PSLRA provides a forward-looking statement safe harbor under the Securities Ac
Slide 3: Overview
Overview SELECTIVE INSURANCE .
Slide 4: A Track Record of Superior Execution
A Track Record of Superior Execution Nine Consecutive Years of Double-Digit Non-GAAP Operating ROEs* and Above Average Industry Growth $6.5B Market Cap (as of 11/1/2023) 2022 Non-GAAP 95+ Years of Financial Strength and Superior Execution Operating ROE of 12.4%* $3.6B 2022 NPW (up 12% Y/Y) 95.1% 202
Slide 5: Our Sustainable Competitive Advantages
Our Sustainable Competitive Advantages Competitive Position Enhanced by Working Towards the Benefit of all our Stakeholders Franchise value distribution Sophisticated tools for risk Superior omni-channel model with high-quality Unique locally based selection, pricing, and customer experience deliver
Slide 6: Super Regional with National Capabilities
Super Regional with National Capabilities Standard Commercial Standard Personal Excess & Surplus (80% of NPW*) (10% of NPW*) (10% of NPW*) 30 States & D.C. 15 States 50 States & D.C. Focus on profitable growth Shifted focus to “mass- Strong growth and in a more uncertain loss affluent” market; price
Slide 7: Well-positioned for Continued Outperformance
Well-positioned for Continued Outperformance Topline/ Pricing/ Financial Strength/ Underwriting Loss Trends Investments Risk Management • Ongoing successful • Long, consistent track • Prudently managed • Strong balance sheet and execution of 3% market record of renewal pure investment portfolio to h
Slide 8: 2022 Key Accomplishments
Underwriting Discipline Continuing our decade-long track record of effectively managing commercial lines pricing and retention rates in a dynamic loss trend environment 2022 Key Strong Top-Line Growth Leveraging our unique field underwriting model Accomplishments and sophisticated tools and technolo
Slide 9: Strong ROE Outperformance Relative to Peers
Strong ROE Outperformance Relative to Peers Historical Non-GAAP Operating ROEs* • 12.4% non-GAAP operating ROE* in 2022 and 13.2% in 9M23 driven by: 15% ̶ Strong investment contribution 13.2% ̶ Underwriting profitability with strong 10.3% underlying performance, partially offset by elevated catastro
Slide 10: Excellent Historical Operating Results
Excellent Historical Operating Results • Nine Months 2023 Highlights Historical GAAP Combined Ratios ̶ GAAP combined ratio of 97.5% and underlying GAAP combined ratio of 100% 90.3% ̶ NPW growth of 15% 96.5% ̶ After-tax net investment income of 95.8% 95.1% $231 million 95% 95.2% • 2023 Guidance¹ ̶ GA
Slide 11: Our Strategic Initiatives
Our Strategic Initiatives 11
Slide 12: Our Major Strategic Initiatives
Leverage Sophisticated Tools to Achieve Adequate Pricing Deploy sophisticated underwriting and pricing tools to improve risk selection and achieve price increases ≥ loss trends Continued Profitable Growth Expanding “share of wallet” and new agent Our Major appointments; geo-expansion Strategic Initi
Slide 13: Achieving Price Increases in Alignment with Projected Loss Trend
Achieving Price Increases in Alignment with Projected Loss Trend Commercial Lines Pricing and Retention • Granular pricing and consistent underwriting SIGI Pricing CLIPS Pricing SIGI Retention make us a compelling market for agents and insureds 10.0% 88% • Attractively priced book with strong embedd
Slide 14: Portfolio Approach to Pricing and Underwriting Helps Drive Business Mix Improvements
Portfolio Approach to Pricing and Underwriting Helps Drive Business Mix Improvements Commercial Lines Pricing by Retention Group • Portfolio management approach yields higher retention and rate • Account-specific pricing, including: ̶ Predictive modeling ̶ Relative loss frequency and severity ̶ Pric
Slide 15: Targeting Profitable Growth Over Time
Targeting Profitable Growth Over Time Delivered an 8% NPW compounded annual growth rate over the last nine years Historical Net Premiums Written Commercial Lines Growth Drivers $ 3.6B Lower Risk Target of growing “share of Managed Premium Volume wallet” to 12% with existing During Soft Market distri
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 Recent Timeline of our Disciplined Approach to Geo-Expansion 2017-2018 ̶ Established new Southwest regional hub by entering AZ, CO, NM, and UT for Commercial Lines
Slide 17: Focus on Customer Experience to Drive Retention
Focus on Customer Experience to Drive Retention Customer-centricity is core to who we are as a company Advancing Actionable Maximizing Digital Value-Added Services Insights Utilization Delivering services that help Developing a “360-degree” view of Providing an omni-channel customer our insureds mit
Slide 18: Developing Leadership in Sustainability
Understanding and Managing Climate Risks Publication of our 2nd TCFD report and 3rd Sustainability Report Preparing for a transition to a clean energy future A Culture of Strong Governance and Transparency Sustainability Committee overseen by senior management and Board of Directors Enhancing Custom
Slide 19: Financial Overview
Financial Overview SELECTIVE INSURANCE®
Slide 20: Lower Risk Profile and Strong Financial Strength
Lower Risk Profile and Strong Financial Strength Conservative business and balance sheet profile allows higher operating leverage FINANCIAL STRENGTH Predominantly RATINGS Low-to-Medium Hazard Writer Conservative AM Best: A+ Investment Portfolio Prudent Fitch: A+ Reinsurance Program Disciplined Reser
Slide 21: Predominantly Write Low- To Medium-Hazard Risks
Predominantly Write Low- To Medium-Hazard Risks • Manage volatility of underwriting results, in part through maintaining a smaller limit profile • Low account sizes (premium per policyholder) averaging: $15.3K for Standard Commercial $2.6K for Standard Personal $3.8K for E&S • Low reinsurance attach
Slide 22: Conservative Investment Portfolio
Conservative Investment Portfolio Investment Portfolio at 9/30/23 • Fixed income and short-term investments comprised 92% of investment portfolio at 9/30/23 ̶ “A+” average credit quality Fixed Income 88% ̶ Effective duration of 4.1 years • Risk asset allocation (high yield, public equity, Short-Term
Slide 23: Active Portfolio Management Drives Investment Results
Active Portfolio Management Drives Investment Results Historical After-Tax Fixed Income Portfolio Yields • Higher interest rates benefited new money 4.0% 4.0% reinvestment rates ̶ $2.7B of new money invested in 2022 and $2.0B in 9M23 3.1% ̶ Pre-tax book yield on fixed income 3.0% 2.9% portfolio up ~
Slide 24: 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 20 years averaged: 12 ̶ 5.4 percentage points for the P&C industry ̶ 3.5 percentage points for Selective P&C • Catastrophe loss mitigation initiatives incl
Slide 25: Conservative Reinsurance Program
Conservative Reinsurance Program Net Single-Event Hurricane Loss* as a % of Equity • 2023 property catastrophe treaty structure 40% ̶ Coverage of $915M in excess of $60M retention, with net purchased limits totaling $810M 30% ̶ $216M in collateralized limit, primarily 21% in the top layer of the pro
Slide 26: Strong Reserving Track Record
Strong Reserving Track Record Impact of Casualty Reserve Development on our Combined Ratio • Disciplined reserving practices 0.0% ̶ Quarterly actuarial reserve reviews ̶ Semi-annual independent review ̶ Independent year-end opinion -2.0% • Favorable reserve development in Workers Compensation and E&
Slide 27: Strong Capital and Liquidity Position, Greater Expense Focus
Strong Capital and Liquidity Position, Greater Expense Focus Capital and Liquidity Plan Expense Management • Debt-to-capital ratio of 16.0% • Expense ratio improvement in 9M23 benefited from strong premium growth and continued • NPW-to-surplus ratio of ~1.53x compared to target range of 1.35x – 1.55
Slide 28: Focus on ROE and Growth in Book Value Per Share
Focus on ROE and Growth in Book Value Per Share* Strong Track Record of Book Value per Share Growth and Generating non-GAAP operating ROE** in Shareholder Value Creation Over Time line with our long-term target $50 $3,000 $40 $2,500 $2,000 ($ in millions) $30 $1,500 $20 Superior growth in book value
Slide 29: Total Shareholder Returns Have Outperformed Benchmarks Over Longer Term
Total Shareholder Returns Have Outperformed Benchmarks Over Longer Term Total Shareholder Return • Solid long-term SIGI S&P Prop/Cas S&P 500 outperformance in TSR 28.3% relative to S&P P&C 30% insurance and S&P 25% 500 indices 21.6% 20% 17.5% 17.2% • Common stock price 15% 13.1% 14.4% performance ha
Slide 30: Our Value Proposition
Leveraging our competitive strengths to generate sustained financial outperformance Emphasis on franchise value in distribution: meaningful, close business relationships with high-quality, independent distribution partners, who value us and our business model, and provide us opportunities to grow pr
Slide 31: Investor Presentation, Quarter Ended September 30, 2023
INVESTOR PRESENTATION QUARTER ENDED SEPTEMBER 30, 2023
Selective Insurance Group — Q3 2023 Earnings Presentation on 6ix