SELECTIVE INSURANCE GROUP, INC. February 14, 2018 2018 Bank f America Merrill Lynch Insurance Cnference
PAGE 2 CLICK TO EDIT MASTER TITLE STYLE SAFE HARBOR STATEMENT In this presentatin, we make certain statements and reference ther infrmatin that are frward-lking statements as defined in the Private Securities Litigatin Refrm Act f 1995 ( PSLRA ). The PSLRA prvides a safe harbr under the Securities Act f 1933 and the Securities Exchange Act f 1934 fr frward-lking statements that relate t ur intentins, beliefs, prjectins, estimatins, r frecasts f future events r ur future financial perfrmance. Frward-lking statements invlve knwn and unknwn risks, uncertainties, and ther factrs that may result in materially differing actual results. We can give n assurance that ur expectatins expressed in frward-lking statements will prve t be crrect. Factrs that culd cause ur actual results t differ materially frm thse prjected, frecasted, r estimated by us in frward-lking statements are discussed in further detail in Selective s public filings with the United States Securities and Exchange Cmmissin. We undertake n bligatin t publicly update r revise any frward-lking statements whether as a result f new infrmatin, future events r therwise ther than as the federal securities laws may require. This presentatin als includes certain nn-gaap financial measures within the meaning f Regulatin G, including nn-gaap perating earnings per share, nn-gaap perating incme, and nn-gaap perating return n equity. Definitins f these nn-gaap measures and a recnciliatin t the mst cmparable GAAP figures pursuant t Regulatin G are available in ur Annual Reprt n Frm 10-K and ur Supplemental Investr Package, which can be fund n ur website <www.selective.cm> under Investrs/Reprts, Earnings and Presentatins. We believe investrs and ther interested persns find these measurements beneficial and useful. We have cnsistently prvided these financial measurements in previus investr cmmunicatins s they have a cnsistent basis fr cmparing ur results between quarters and with ur industry cmpetitrs. These nn-gaap measures, hwever, may nt be cmparable t similarly titled measures used utside f the insurance industry. Investrs are cautined nt t place undue reliance n these nn-gaap measures in assessing ur verall financial perfrmance.
PAGE 3 CLICK TO EDIT MASTER TITLE STYLE STRATEGIC OVERVIEW Greg Murphy Chairman and Chief Executive Officer
PAGE 4 CLICK A SUPER-REGIONAL TO EDIT MASTER COMPANY TITLE STYLE WITH NATIONAL CAPABILITIES 25 state ftprint 90+ significant expansin plans years f financial strength and superir executin $3.4B Market Cap (as f 2/12/17) 93.3% GAAP Cmbined Rati $2.4B NPW (up 6% Y/Y) $119M A/T investment incme (up 20% Y/Y) 2017 nn-gaap perating ROE f 11.4% in line with lng-term target f 300 bps ver WACC
PAGE 5 CLICK OUR SUSTAINABLE TO EDIT MASTER COMPETITIVE TITLE STYLE ADVANTAGES Enables effective management f pricing and retentin True franchise Edit Master value text with styles ivy league distributin Secnd level partners Increase share f wallet and new agent appintments Agent verall satisfactin rating f 8.8/10 Unique field mdel enabled by Fifth level Lcally-based underwriting, claims, and safety management specialists sphisticated tls and technlgy Agile capability and excellent data analytics Superir custmer experience delivered by best-in-class emplyees Custmer-centricity has been the centerpiece f ur strategy Develping hlistic slutin fr 24-hur mni-channel shared experience Abve-average perating leverage enhances ROEs Each full pint n CR = 110 basis pints f nn-gaap perating ROE* Investments t stckhlders equity rati f 3.32 suggests ~800 basis pints f nn-gaap perating ROE* * Refer t Safe Harbr Statement n page 2 f this presentatin fr further detail regarding certain nn-gaap financial measures.
PAGE 6 CLICK TRUE FRANCHISE TO EDIT MASTER VALUE TITLE WITH STYLE DISTRIBUTION PARTNERS Standard Cmmercial (78% f 2017 NPW) Standard Persnal (13% f 2017 NPW) E&S (9% f 2017 NPW) 25 States 13 States All 50 States 1,250 distributin partners 700 distributin partners 85 whlesale distributin partners
PAGE 7 UNIQUE UNDERWRITING FIELD MODEL ENABLED BY SOPHISTICATED CLICK TO EDIT MASTER TITLE STYLE TOOLS AND TECHNOLOGY Field Claims Adjusters Small Business Team Agency Management Specialist Safety Management Specialist Empwered field underwriting mdel Lcal decisin making supprted by centralized expertise Armed with sphisticated underwriting and claims tls Fcused n delivering best-in-class custmer service Reginal Underwriting Team The crnerstne f ur High-tech, High-tuch business strategy
PAGE 8 CLICK DELIVER TO A EDIT SUPERIOR MASTER OMNI-CHANNEL TITLE STYLE CUSTOMER EXPERIENCE Changing expectatins frm custmers, and ptential disruptive threats frm traditinal and nn-traditinal cmpetitrs Partnering with agents t invest in jint strategies t prvide a seamless custmer experience Eliminating custmer frictin pints, and build-ut f custmized, practive messaging Identifying value-added services t increase switching csts Custmer-centricity is cre t wh we are as a cmpany
PAGE 9 CLICK 2017: EXCELLENT TO EDIT MASTER OPERATING TITLE STYLE PERFORMANCE 110% 105% 100% 100.9% GAAP Cmbined Ratis 107.2% Underlying Cmbined Rati Reprted Cmbined Rati 2017 pure written price increases by segment: Cmmercial Lines 2.9% Persnal Lines 3.0% E&S 5.0% Expected claim inflatin f ~3.0% Underwriting and claim imprvement 95% 90% 85% 93.3% 92.5% 2011 2012 2013 2014 2015 2016 2017 Fcus n lwering expense rati Underlying* GAAP Cmbined Ratis 2016 93.3% 2017 92.5% Imprvement 0.8 pts *Underlying GAAP cmbined rati excludes catastrphe lsses and prir year casualty reserve develpment 2018 frecast f a 91.0% underlying GAAP cmbined rati
1999 2001 2003 2005 2007 2009 2011 2013 2015 2017 PAGE 10 CLICK LONG HISTORY EDIT MASTER OF DISCIPLINED TITLE STYLE & PROFITABLE GROWTH Histrical Net Premiums Written Managed Premium Vlume During Sft Furth Market level $2.5B $0B COMMERCIAL LINES GROWTH DRIVERS: Grwing share f wallet t 12% with existing distributin partners New appintments t represent 25% share in existing markets Ge-expansin (3 new states) New prducts and M&A Cmbined pprtunity at 3% market share implies ptential cmpany prfile in excess f $4B f NPW Lwer Risk Higher Risk Successful track recrd f cycle management and prfitable grwth
PAGE 11 COMMERCIAL LINES GEO-EXPANSION ENHANCES GROWTH OPPORTUNITIES CLICK TO EDIT MASTER TITLE STYLE Diversificatin and spread f risk Targeting 30 fully peratinal states Remainder t supprt multi-state accunts Leverage existing Selective leaders and hire lcal underwriters wh knw the market and agencies Successful start in AZ and NH in 2017; CO in January 2018 Current States Expansin States Fill-in States UT and NM n target fr later this year A well-thught ut and disciplined apprach t ge-expansin
PAGE 12 CLICK STANDARD TO EDIT COMMERCIAL MASTER TITLE (78% STYLE OF BUSINESS): A PROFIT ENGINE ($ in billins) NPW $2.2B GAAP Cmbined Rati 7% CAGR f NPW frm 2011-2017 110% 100% 90% Fcused n disciplined and prfitable grwth Drivers f prfitability are: Price increases expected claim inflatin Underwriting mix imprvement Enhanced claims utcmes Expense management $0B 2011 2012 2013 2014 2015 2016 2017 80% Selective has the right tls, technlgy, and team in place t cntinue driving prfitable grwth in Standard Cmmercial Lines
Renewal Pure Price PAGE 13 A CLICK PORTFOLIO TO EDIT APPROACH MASTER TITLE TO UNDERWRITING STYLE Cmmercial Lines Pricing By Retentin Grup CLAS Pure Rate 9% 6% 3% 0% Abve Average Average Belw Average % Premium Renewed Lw Very Lw 95% 85% 75% 65% Pint f Renewal Retentin Prtfli management apprach yields higher retentin and rate Granular and accunt-specific pricing including: Predictive mdeling Relative lss frequency and severity Pricing deviatin Hazard and segment cnsideratin % f Premium 49% 26% 15% 7% 3% *May nt ft due t runding Strng fcus n develping tls and technlgies that enable mre efficient decisin making
Renewal Pure Price (%) PAGE 14 CLICK SOPHISTICATED TO EDIT MASTER TOOLS AND TITLE ACTIONABLE STYLE DATA 6.0% 2.0% SIGI Pricing CLIPS Pricing SIGI Retentin 0.9% 79% 0.3% 3.1% 2.8% 80% 1.9% 6.2% 7.6% 5.9% 5.9% 5.6% 82% 3.0% 3.0% 1.2% 2.6% 2.9% 83% 0.6% 0.6% 84% 80% Retentin (%) -0.8% -2.0% 2009 2010 2011 2012 2013 2014 2015 2016 2017 CLIPS: Willis Twers Watsn Cmmercial Lines Insurance Pricing Survey 76% Price change fr 2017 is as f first nine mnths fr CLIPS and full year 2017 fr Selective January 2018 Cmmercial Lines renewal pure price increase averaged 2.8%
PAGE 15 CLICK STANDARD TO EDIT PERSONAL MASTER LINES TITLE (13% STYLE OF BUSINESS) NPW ($ in millins) GAAP Cmbined Rati $400M 120% 100% HOMEOWNERS (88.2% cmbined rati in 2017) Target f 90% cmbined rati in nrmal CAT year (14 pints) Cntinue t diversify writings acrss ftprint PERSONAL AUTO (112.8% cmbined rati in 2017) Firmer pricing, althugh claim trends remain elevated 80% Expense imprvements t cntinue FLOOD $0 2011 2012 2013 2014 2015 2016 2017 60% Fifth largest Write Yur Own fld participant; a partial hedge fr catastrphe lsses Firmer aut insurance pricing envirnment is resulting in mre grwth pprtunities
PAGE 16 CLICK EXCESS TO & EDIT SURPLUS MASTER (9% TITLE OF BUSINESS) STYLE ($ in millins) GAAP Cmbined Rati $250M 140% Edit Master NPW text styles 100% Fcus n target cmbined rati tp-line changes will be based n market cnditins Targeted price increases being implemented t drive prfitability Claims utcme imprvements Our E&S business has a lwer-risk prfile: Average plicy size belw $3K 98% f plicies within $1M limit $0 2012 2013 2014 2015 2016 2017 80% Lng-term gal is fr cnsistent target margins
PAGE 17 CLICK TO EDIT MASTER TITLE STYLE FINANCIAL OVERVIEW Mark Wilcx EVP, Chief Financial Officer
PAGE 18 A FOCUS ON NON-GAAP OPERATING ROE* AND GROWTH IN BOOK CLICK TO EDIT MASTER TITLE STYLE VALUE PER SHARE $32 $24 Histrical Bk Value per Share Grwth $29.28 Meeting lng-term financial target fr a nn-gaap perating ROE* f 300 basis pints abve ur WACC Superir grwth in bk value per share $16 $15.81 $8 Higher ttal sharehlder returns ver time 2017 2016 2015 2014 2013 2012 2011 2010 2009 2008 * Refer t Safe Harbr Statement n page 2 f this presentatin fr further detail regarding certain nn-gaap financial measures. Strng track recrd f bk value per share grwth and sharehlder value creatin
PAGE 19 CLICK LOWER TO RISK EDIT PROFILE MASTER AND TITLE STRONG STYLEFINANCIAL STRENGTH A Lwer Risk Prfile Lw t Medium Hazard Writer Fcused n lw- t medium-hazard business Strng balance sheet underpinned by a cnservative apprach t: Managing the investment prtfli Purchasing reinsurance prtectin Reserving Our cnservative apprach enables greater perating leverage with a NPW/surplus rati f 1.4x Each full pint n the cmbined rati = ~110 basis pints f ROE Each full pint f P/T bk yield = ~275 basis pints f ROE Strng financial strength ratings A.M. Best A S&P A Mdy s A2 Fitch A+
PAGE 20 CLICK CONSERVATIVE TO EDIT MASTER INVESTMENT TITLE PORTFOLIO STYLE Investment Prtfli Breakdwn as f 12/31/17 Fixed Incme 92% Shrt-Term 3% Equities 3% (3% High yield) $5.7B f Investments Fixed incme and shrt-term investments cmprise 95% f the investment prtfli: AA- average credit quality Effective duratin f 3.7 years Includes 3% allcatin t high yield securities Current risk asset allcatin (high yield, public equity and alternatives) at 8% f invested assets, cmpared with lng-term target f 10% Alternatives 2% Onging wrk t further diversify ur alternative investments prtfli A cnservative investment management philsphy, with a fcus n highly-rated fixed incme securities
PAGE 21 CLICK CATASTROPHE TO EDIT MASTER LOSS IMPACT TITLE HAS STYLE BEEN BELOW INDUSTRY AVERAGE Impact f Catastrphe Lsses n Cmbined Rati Catastrphe lss impact n cmbined rati (pts.) P&C Industry P&C Industry 15-Yr. Avg. Catastrphe lss impact ver the past 15 years has averaged: 5.0 percentage pints fr the P&C industry 2.8 percentage pints fr Selective Catastrphe lss mitigatin initiatives include: SIGI SIGI 15-Yr. Avg. Strict guidelines arund castal prperties Fcus n gegraphic diversificatin and grwth that minimizes peak CAT aggregatins Nte: Catastrphe impact fr P&C industry based n A.M. Best estimates; 2017 results based n A.M. Best s US Prperty/Casualty: 2018 Review & Preview frm Feb 6, 2018 Relatively lw histrical vlatility frm catastrphe lsses n the cmbined rati
PAGE 22 CLICK PRUDENT TO EDIT REINSURANCE MASTER TITLE PROGRAM STYLE Net Single-Event Hurricane Lss* as a % f Equity 24% 18% 12% 6% 0% 2% 2% 3% 3% 4% 5% 22% 25 50 100 150 200 250 500 (Return Perid in Years) 2018 prperty catastrphe treaty structure: Cverage f $735M in excess f $40M retentin (up t 1-in-250 year event level) $224M f limit at tp f prgram is cllateralized Additinal earnings vlatility prtectin frm ur nn-ftprint $35M in excess f $5M layer Prperty XOL treaty cvers lsses up t $58M in excess f $2M retentin Casualty XOL treaty cvers lsses up t $88M in excess f $2M retentin * Single event hurricane lsses are net f reinsurance, after tax, and reinstatement premiums as f 7/1/17. Equity as f 12/31/17. Balance sheet prtectin thrugh cnservative prgram and strng panel f reinsurance partners
2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 PAGE 23 CLICK A STRONG TO EDIT RESERVING MASTER TRACK TITLE STYLE RECORD Impact f Reserve Develpment n ur Cmbined Rati 4.0% 2.0% Disciplined reserving practices: Quarterly actuarial reserve reviews Semi-annual independent review Independent year-end pinin 0.0% Favrable reserve develpment in Wrkers Cmpensatin and General Liability lines was partially ffset by strengthening in Cmmercial Aut and E&S lines during 2016 and 2017 Eleven cnsecutive years f net favrable reserve develpment
PAGE 24 STRONG NON-GAAP OPERATING ROE* IN 2017 AND WELL POSITIONED CLICK FOR THE TO FUTURE EDIT MASTER TITLE STYLE 14% 7% 6.2% Fifth level 7.3% (2.1)% 11.4% 8.5% 0% Underwriting Investments Other* Nn-GAAP Operating ROE* Other includes Interest expense + ther expenses Estimated WACC fr SIGI * Refer t Safe Harbr Statement n page 2 f this presentatin fr further detail regarding certain nn-gaap financial measures. 2017 Nn-GAAP Operating ROE* in Line With Lng-Term Target
PAGE 25 CLICK 2018 COMBINED TO EDIT MASTER RATIO PLAN TITLE STYLE UNDERLYING MARGIN IMPROVEMENT Recnciliatin f 2018 GAAP Cmbined Rati Guidance 92.5% 2.1% (1.9)% (0.9)% (0.8)% 91.0% Targeting price increases t keep up with lss inflatin Assumes n prir-year casualty reserve develpment Business mix imprvement thrugh risk segmentatin Claims and underwriting imprvements 2017 Underlying Cmbined Rati Lss Trend Earned Rate Claims/ UW Imprvement Expenses 2018 Underlying Cmbined Rati Guidance Fcus n lwering expense rati CAT budget f 3.5 pints Targeting underlying margin imprvement f 150 basis pints in 2018
PAGE 26 CLICK STRONG TO CAPITAL EDIT MASTER AND LIQUIDITY TITLE STYLE POSITION, FOCUS ON EXPENSES CAPITAL AND LIQUIDITY PLAN Strng capital psitin with 20.4% debt-t-capital rati Target NPW/surplus rati f ~1.4x (lwer end f histrical range) Grwing the business currently prvides the mst attractive capital deplyment pprtunity Sustainable grwth rate f apprximately 9% Increased sharehlder dividend by 13% in 2018 EXPENSE MANAGEMENT Targeting a 33% statutry expense rati r lwer ver time Cst management and greater leverage frm NPW grwth helping reduce expense rati Restructured lng-term stck cmpensatin prgram shuld reduce crprate expenses ver time Crprate effective tax rate expected t be 10 percentage pints lwer in 2018 Will cntinue t make significant investments fr the future
PAGE 27 CLICK TO EDIT MASTER TITLE STYLE OUR INVESTMENT PROPOSITION Leveraging ur cmpetitive strengths t generate sustained financial utperfrmance Strng franchise value with ivy league distributin partners Unique field mdel enabled by sphisticated technlgy Superir custmer experience delivered by best-in-class emplyees Excellent grwth pprtunities within ftprint and ge-expansin Slid underwriting margins, and well psitined fr firming market Targeting nn-gaap perating ROE* 300 basis pints ver WACC Cnservative apprach t risk selectin and balance sheet management * Refer t Safe Harbr Statement n page 2 f this presentatin fr further detail regarding certain nn-gaap financial measures Selective delivers High-tech, High-tuch insurance slutins while leveraging a unique distributin mdel t generate lng-term value fr sharehlders
SELECTIVE INSURANCE GROUP, INC. February 14, 2018 2018 Bank f America Merrill Lynch Insurance Cnference