UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC 20549
SCHEDULE 14A
(Rule 14a-101)
INFORMATION REQUIRED IN PROXY STATEMENT
SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(a) of
the Securities
Exchange Act of 1934
Filed by the Registrant ☒
Filed by a Party other than the Registrant ☐
Check the appropriate box:
| ☐ | Preliminary proxy statement |
| ☐ | Confidential, for use of the Commission Only (as permitted
by Rule 14a-6(e)(2)) |
| ☒ | Definitive Proxy Statement |
| ☐ | Definitive Additional Materials |
| ☐ | Soliciting Material Pursuant to §240.14a-12 |
SELECTIVE INSURANCE GROUP, INC.
(Name of Registrant as Specified In Its Charter)
(Name of Person(s) Filing Proxy Statement,
if other than the Registrant)
Payment of Filing Fee (Check the appropriate box):
| ☐ | Fee paid previously with preliminary materials. |
| ☐ | Fee computed on table in exhibit required by Item 25(b) per
Exchange Act Rules 14a-6(i)(1) and 0-11. |
40 Wantage Avenue
Branchville, New Jersey 07890
March 29, 2023
NOTICE
OF 2023 ANNUAL MEETING OF STOCKHOLDERS
AND PROXY STATEMENT
Wednesday, May 3, 2023
9:00 AM Eastern Time
|
Attending the Annual Meeting
The
2023 Annual Meeting of Stockholders (the “Annual Meeting”) of Selective Insurance Group, Inc. (“Selective”
and “we”) will be held on Wednesday, May 3, 2023, at 9:00 AM Eastern Time. The Annual Meeting will be a virtual
meeting held exclusively via live audiocast.
To
attend, vote, and submit questions during the Annual Meeting, please visit http://www.virtualshareholdermeeting.com/SIGI2023
and enter the 16-digit control number included on your Notice of Internet Availability or proxy card.
If you requested printed copies of the proxy materials, we encourage
you to vote your shares by phone, by mail, or online in advance to ensure your vote will be represented at the Annual Meeting. Even if
you plan to attend the Annual Meeting virtually, we encourage you to vote your shares in advance.
|
At the Annual Meeting, we will ask stockholders to:
| 1. | Elect 13 directors named in the accompanying Proxy Statement
for a one-year term expiring in 2024; |
| 2. | Approve, on an advisory basis, the 2022 compensation of Selective’s
named executive officers; |
| 3. | Vote, on an advisory basis, on the frequency of an advisory vote on the compensation of Selective’s named executive officers;
and |
| 4. | Ratify the appointment of KPMG LLP as Selective’s independent registered public accounting firm for the fiscal year ending December 31,
2023. |
We plan a brief business meeting focused on these items and will attend
to any other business properly brought before the Annual Meeting and its adjournments, postponements, or continuations, if any. After
the Annual Meeting, we will offer time for your questions. Enclosed for your review in anticipation of the Annual Meeting is Selective’s
2022 Annual Report to Stockholders.
The Board of Directors recommends that you vote: (i) “FOR”
each of the director nominees in Proposal 1; (ii) “FOR” Proposal 2; (iii) “ONE YEAR” for Proposal 3;
and (iv) “FOR” Proposal 4. These proposals are further described in the Proxy Statement.
Selective
stockholders of record as of the close of business on Tuesday, March 7, 2023, are entitled to notice of, and the right to
vote at, the Annual Meeting and any adjournment, postponement, or continuation thereof.
YOUR
VOTE IS IMPORTANT. VOTE YOUR SHARES BY (I) CALLING THE TOLL-FREE TELEPHONE NUMBER LISTED ON THE PROXY CARD, (II) ACCESSING
THE INTERNET WEBSITE LISTED ON THE PROXY CARD, OR (III) COMPLETING, DATING, AND SIGNING THE PROXY CARD AND RETURNING IT IN THE ENCLOSED
ENVELOPE. YOU MAY REVOKE YOUR PROXY AT ANY TIME BEFORE IT IS VOTED AT THE ANNUAL MEETING THROUGH THE PROCESSES DESCRIBED IN THE PROXY
STATEMENT. IF YOU HOLD SHARES THROUGH A BROKER OR OTHER CUSTODIAN, PLEASE SEE THE VOTING INSTRUCTIONS PROVIDED TO YOU BY THAT BROKER OR
CUSTODIAN.
Very truly yours,
John J. Marchioni
Chairman of the Board, President and Chief Executive
Officer
By Order of the Board of Directors:
Robyn
P. Turner
Corporate Secretary
TABLE OF CONTENTS
CAUTIONARY STATEMENTS REGARDING
FORWARD-LOOKING INFORMATION
This Proxy Statement contains forward-looking statements within the
meaning of federal securities laws. Forward-looking statements may be identified by words like “anticipate,” “expect,”
“project,” “believe,” “plan,” “may,” “estimate,” “intend,” and
other similar words. We base these forward-looking statements on our beliefs, assumptions, and estimates using information available to
us at the time. They are not intended to be guarantees of future events or performance. Factors that may cause actual results to differ
materially from forward-looking statements in this Proxy Statement can be found in our most recent Annual Report on Form 10-K filed
with the SEC and in our subsequent filings with the SEC, including under the headings “Risk Factors” and “Forward-Looking
Statements.”
We caution you not to unduly rely on any of our forward-looking statements.
We disclaim any intention or obligation to publicly update or revise any forward-looking statements, except as required by law. This cautionary
statement applies to all forward-looking statements contained in this document.
WEBSITES
Website addresses referenced in this Proxy Statement are provided for
convenience only, and the content on the referenced websites does not constitute a part of, and is specifically not incorporated by reference
into, this Proxy Statement.
PROXY STATEMENT
FOR
THE 2023 ANNUAL MEETING OF STOCKHOLDERS
TO BE HELD WEDNESDAY, MAY 3, 2023
GENERAL INFORMATION ABOUT
SELECTIVE’S ANNUAL MEETING
WHEN AND WHERE IS THE ANNUAL MEETING?
The
2023 Annual Meeting of Stockholders (the “Annual Meeting”) of Selective Insurance Group, Inc. (“Selective,”
“we,” “us,” and “our”) will be held virtually on Wednesday, May 3, 2023, at 9:00 AM Eastern
Time exclusively via live audiocast. The Annual Meeting will not have a physical location, and you will not be able to attend the meeting
in person. You can participate, vote, and submit your questions online during the Annual Meeting by visiting http://www.virtualshareholdermeeting.com/SIGI2023
and entering the 16-digit control number on your proxy card. See below for additional information regarding the virtual meeting format.
WHEN IS THIS PROXY STATEMENT BEING MAILED?
This Proxy Statement and proxy card are first being mailed or given
to Selective stockholders on or about March 29, 2023.
WHO IS ENTITLED TO VOTE AT THE ANNUAL MEETING?
Anyone
who owned Selective common stock as of the close of business on March 7, 2023 (the “Record Date”) is entitled
to one vote per share owned. There were 60,491,997 shares of Selective common stock outstanding at the close of business on the Record
Date.
WHO IS SOLICITING MY PROXY TO VOTE MY SHARES AND WHEN?
Selective’s Board of Directors (the “Board of Directors”
or the “Board”) is soliciting your proxy, meaning your authorization for our named proxies, Cynthia S. Nicholson and J. Brian
Thebault, to vote your shares. Unless revoked by you, your proxy will be effective for the Annual Meeting and its adjournments, postponements,
or continuations, if any.
WHAT IS THE COST OF SOLICITING PROXIES AND WHO IS PAYING FOR THE
COST?
Selective is bearing the entire cost of soliciting proxies. Proxies
will be solicited principally through the mail and by email. They also may be solicited in person, in writing, by telephone, text message,
email, or facsimile, or otherwise by directors or employees, including officers of Selective or a Selective subsidiary, who will receive
no additional compensation for these efforts. Selective has engaged Innisfree M&A Incorporated, a proxy solicitation firm (“Innisfree”),
to assist in soliciting proxies and distributing proxy materials. Innisfree will provide such services for an estimated fee of approximately
$16,500, plus expenses. Selective will reimburse banks, brokerage firms, and other custodians, nominees, and fiduciaries for reasonable
expenses they incur in sending proxy materials to their customers or principals who are the beneficial owners of shares of Selective common
stock.
WHAT ARE THE REQUIREMENTS FOR BUSINESS TO BE CONDUCTED AT THE ANNUAL
MEETING?
For business to be conducted at the Annual Meeting, owners of 30,246,000
shares of Selective common stock (a majority of the issued and outstanding shares entitled to vote), constituting a quorum, must be in
attendance by virtual participation or represented by proxy. Our common stock is our only class of voting securities.
HOW DO STOCKHOLDERS ATTEND THE VIRTUAL ANNUAL MEETING?
The Annual Meeting will be held exclusively via live audiocast, allowing
meeting attendance from any location in the world. We are pleased to use virtual stockholder meeting technology to provide ready access
and cost savings for Selective and its stockholders.
To
be admitted to the Annual Meeting at http://www.virtualshareholdermeeting.com/SIGI2023, you must enter the 16-digit
control number on the proxy card you previously received. You can vote online, submit your questions, and examine Selective’s
stockholder list by following the instructions provided on the meeting website during the Annual Meeting.
The
meeting will begin promptly at 9:00 AM Eastern Time on May 3, 2023. Online access will start at 8:45 AM Eastern Time. We encourage
you to access the meeting website before the start time to ensure sufficient time to complete the check-in procedures. If you are not
a stockholder, you may still access the meeting website as a guest, but you will not be able to vote, ask questions, or view the stockholder
list.
The
virtual meeting platform is fully supported across internet browsers (Microsoft Edge, Mozilla Firefox, Google Chrome, and Safari) and
devices (desktops, laptops, tablets, and cell phones) running the most updated version of applicable software and plugins. You will be
able to test the system before the Annual Meeting starts. If you encounter any technical difficulties logging onto http://www.virtualshareholdermeeting.com/SIGI2023
or during the Annual Meeting, a toll-free number and international number will be available on the meeting website to help
you. Technicians will be ready to assist you with any technical difficulties, beginning at 8:45 AM Eastern Time through the conclusion
of the Annual Meeting.
HOW DO STOCKHOLDERS ASK QUESTIONS AT THE ANNUAL MEETING?
The
Annual Meeting will include a question and answer session. We will answer questions relevant to Selective and meeting matters submitted
in accordance with the meeting rules posted on the meeting website (http://www.virtualshareholdermeeting.com/SIGI2023).
Stockholders can submit written questions via the Internet at any time during the Annual Meeting by following the instructions that will
be available on the meeting website. Stockholders must have their control number to ask a question. In order to answer questions from
as many stockholders as possible, each stockholder is limited to two questions. Substantially similar questions will be grouped and answered
once to avoid repetition and allow more time for other questions. To ensure the meeting is conducted fairly for all stockholders, the
Chairperson of the Annual Meeting may exercise broad discretion in recognizing stockholders wishing to participate, the order that questions
are addressed, and the amount of time devoted to any one question. By virtually attending the Annual Meeting, stockholders agree to abide
by the agenda and procedures for the Annual Meeting.
PROPOSALS FOR STOCKHOLDER
VOTE AND APPROVAL REQUIREMENTS
Management is presenting four proposals for a stockholder vote.
| PROPOSAL 1. | ELECTION
OF DIRECTORS |
DIRECTORS ARE SUBJECT TO ANNUAL ELECTION BY THE STOCKHOLDERS. THE BOARD
RECOMMENDS THAT YOU VOTE “FOR” EACH OF THE FOLLOWING 13 DIRECTOR NOMINEES FOR A TERM OF ONE YEAR:
| AINAR D. AIJALA, JR. |
STEPHEN C. MILLS |
| LISA ROJAS BACUS |
H. ELIZABETH MITCHELL |
| TERRENCE W. CAVANAUGH |
CYNTHIA S. NICHOLSON |
| WOLE C. COAXUM |
JOHN S. SCHEID |
| ROBERT KELLY DOHERTY |
J. BRIAN THEBAULT |
| JOHN J. MARCHIONI |
PHILIP H. URBAN |
| THOMAS A. MCCARTHY |
|
You can find information about the director nominees, Selective’s
Board of Directors, its committees, and other related matters in the section entitled, “Information about Proposal 1” of this
Proxy Statement.
New Jersey law and Selective’s By-Laws govern the vote on Proposal
1, on which you may:
| ◾ | Vote “FOR” all of the director nominees; |
| ◾ | Vote “AGAINST” all of the director nominees; |
| ◾ | Vote “FOR” or “AGAINST”
specific director nominees; or |
| ◾ | Abstain from voting for all or specific director nominees. |
Under our By-Laws and assuming a quorum is present, a director nominee
in an uncontested election must be elected by a majority of votes cast. A majority exists when the number of votes cast “For”
a director nominee exceeds the number of votes cast “Against” the director nominee. A director nominee who fails to receive
a majority of votes cast in an uncontested election is required to tender their resignation from the Board of Directors within five days
following the certification of the election results. In that event, (i) the Corporate Governance and Nominating Committee must recommend
to the Board of Directors whether it should accept the resignation, and (ii) the Board of Directors must decide whether to accept
the resignation and disclose its decision-making process.
Stockholders may not cumulate their votes. Abstentions and broker non-votes
will not be taken into account in determining the outcome of the vote.
| PROPOSAL 2. | APPROVAL,
ON AN ADVISORY BASIS, OF THE 2022 COMPENSATION OF OUR NAMED EXECUTIVE OFFICERS |
THE BOARD RECOMMENDS THAT YOU VOTE “FOR” THE APPROVAL,
ON AN ADVISORY BASIS, OF THE 2022 COMPENSATION OF OUR NAMED EXECUTIVE OFFICERS DISCLOSED IN THIS PROXY STATEMENT.
You can find information about the compensation of our named executive
officers in the section entitled, “Executive Compensation” and about Proposal 2 in the section entitled, “Information
about Proposal 2” of this Proxy Statement.
New Jersey law and Selective’s By-Laws govern the vote on Proposal
2, on which you may:
| ◾ | Vote “AGAINST” Proposal 2; or |
| ◾ | Abstain from voting on Proposal 2. |
Assuming a quorum is present, Proposal 2 will pass if approved by an
affirmative vote of a majority of the votes cast at the Annual Meeting. Abstentions and broker non-votes will not be taken into account
in determining the outcome of the vote.
| PROPOSAL 3. | ADVISORY
VOTE ON THE FREQUENCY OF FUTURE ADVISORY VOTES ON THE COMPENSATION OF OUR NAMED EXECUTIVE OFFICERS |
THE BOARD RECOMMENDS THAT YOU VOTE FOR “ONE YEAR”
AS THE FREQUENCY OF FUTURE ADVISORY VOTES ON THE COMPENSATION OF OUR NAMED EXECUTIVE OFFICERS.
You can find information about Proposal 3 in the section entitled,
“Information about Proposal 3” of this Proxy Statement.
New Jersey law and Selective’s By-Laws govern the vote on Proposal
3, on which you may:
| ◾ | Vote “ONE YEAR” in favor of an advisory vote on executive compensation being held every year; |
| ◾ | Vote “TWO YEARS” in favor of an advisory vote on executive compensation being held every two years; |
| ◾ | Vote “THREE YEARS” in favor of an advisory vote on executive compensation being held every three years; or |
Assuming a quorum is present, the Proposal 3 selection that receives
the most votes cast will be deemed the stockholders’ selection. Abstentions and broker non-votes will not be taken into account
in determining the outcome of the vote.
| PROPOSAL 4. | RATIFICATION
OF APPOINTMENT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM |
THE BOARD RECOMMENDS THAT YOU VOTE “FOR” THE RATIFICATION
OF THE APPOINTMENT OF KPMG LLP AS OUR INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM FOR THE FISCAL YEAR ENDING DECEMBER 31, 2023.
You can find information about Selective’s relationship with
KPMG LLP in the section entitled, “Information about Proposal 4” of this Proxy Statement. New Jersey law and Selective’s
By-Laws govern the vote on Proposal 4, on which you may:
| ◾ | Vote “AGAINST” Proposal 4; or |
| ◾ | Abstain from voting on Proposal 4. |
Assuming a quorum is present, Proposal 4 will pass if it receives an
affirmative vote of a majority of the votes cast at the Annual Meeting. Abstentions will not be taken into account in determining the
outcome of the vote. Proposal 4 is considered a “routine” matter on which brokers may cast a vote.
OTHER MATTERS TO COME BEFORE
THE ANNUAL MEETING
The Board of Directors is unaware of any other business to be presented
for a vote at the Annual Meeting. If any other matters are properly presented for a vote, the individuals named as proxies will have discretionary
authority to vote on such matters according to their best judgment to the extent permitted by applicable law and rules and regulations
of Nasdaq Stock Market (“Nasdaq”) and the U.S. Securities and Exchange Commission (the “SEC”).
The Chairperson of the Annual Meeting may refuse to allow the presentation
of a proposal or nominee for the Board of Directors if the proposal or nominee is not properly submitted. The requirements for submitting
proposals and director nominations for the Annual Meeting are detailed in Selective’s By-Laws.
VOTING AND PROXY PROCEDURE
HOW DO I VOTE?
If you are the record holder of your shares, you can vote in four ways:
| 1. | BY MAIL (PROXY CARD MUST BE RECEIVED BEFORE THE ANNUAL
MEETING): |
| ◾ | Mark your voting instructions on your proxy card; |
| ◾ | Sign your name exactly as it appears on your proxy card; |
| ◾ | Date your proxy card; and |
| ◾ | Mail your proxy card to us in the provided postage-paid envelope. |
Timing is important, so please mail your proxy card promptly.
We must receive it before the beginning of the Annual Meeting. If you do not give voting instructions on your signed and mailed proxy
card, the named proxies will vote your shares: (i) “FOR” each of the director nominees in Proposal 1; (ii) “FOR”
Proposal 2; (iii) “ONE YEAR” for Proposal 3; and (iv) “FOR” Proposal 4.
| 2. | BY TELEPHONE (MAY BE DONE AT ANY TIME UNTIL
TUESDAY, MAY 2, 2023, AT 11:59 PM EASTERN TIME): |
| ◾ | Call the toll-free number on your proxy card; and |
| ◾ | Follow the instructions on your proxy card and the voice prompts. |
IF YOU VOTE BY TELEPHONE, YOU DO NOT
NEED TO RETURN YOUR PROXY CARD.
| 3. | BY INTERNET (MAY BE DONE AT ANY TIME UNTIL TUESDAY,
MAY 2, 2023, AT 11:59 PM EASTERN TIME): |
| ◾ | Go to the website listed on your proxy card; and |
| ◾ | Follow the instructions on your proxy card and the website. |
IF YOU VOTE BY INTERNET, YOU DO NOT
NEED TO RETURN YOUR PROXY CARD.
| 4. | BY VIRTUAL PARTICIPATION (MAY ONLY BE DONE ON
WEDNESDAY, MAY 3, 2023, DURING THE ANNUAL MEETING): |
| ◾ | Virtually attend the Annual Meeting and vote online during the
audiocast. |
As
of the date of this proxy statement, we do not know of any other matters that may be presented for action at the Annual Meeting.
However, should other matters properly come before the meeting, the persons named as proxies will vote in a manner as they may, in their
discretion and to the extent permitted by applicable laws, rules, and regulations, determine.
If your shares are held in our 401(k) plan or employee stock purchase
plan, you can vote in any of the above four ways; provided, however, if you choose to vote by telephone (option 2) or by internet (option
3), you must do so before 11:59 PM Eastern Time on FRIday, April 28, 2023.
HOW DO I REVOKE MY PROXY OR CHANGE MY VOTING INSTRUCTIONS?
You may revoke your proxy at any time before the proxy is exercised
at the Annual Meeting by:
| ◾ | Submitting a new vote by telephone, via the Internet, or by returning a properly executed new proxy card bearing a later date. Any
subsequent timely and valid vote by any method will change your prior vote. For example, if you voted by telephone, a subsequent Internet
vote will change your vote. The vote counted will be the last vote received before 11:59 PM Eastern Time on Tuesday, May 2, 2023
(if you are the record holder of your shares) or 11:59 PM Eastern Time on Friday, April 28, 2023 (if your shares are held in our
401(k) plan or employee stock purchase plan) – unless you change your vote by virtually attending the Annual Meeting and voting
online during the Annual Meeting; |
| ◾ | Writing to Selective’s Corporate Secretary, Robyn P. Turner, at 40 Wantage Avenue, Branchville, New Jersey 07890 (such revocation
must be received before the commencement of the Annual Meeting); and |
| ◾ | Virtually attending the Annual Meeting and voting online during the audiocast. |
HOW WILL PROXIES BE VOTED IF I GIVE MY AUTHORIZATION?
If you (i) properly execute your proxy card and return it to Selective,
or (ii) submit your proxy by telephone or via the Internet and do not subsequently revoke your proxy, your shares of common stock
will be voted at the Annual Meeting according to your instructions. In the absence of voting instructions, the named proxies will vote
your shares: (i) “FOR” each of the director nominees in Proposal 1; (ii) “FOR” Proposal 2; (iii) “ONE
YEAR” for Proposal 3; and (iv) “FOR” Proposal 4. If other matters properly come before the Annual Meeting, the
named proxies will vote on such matters using their best judgment to the extent permitted by applicable laws, rules, and regulations.
WHAT IF MY SHARES ARE NOT REGISTERED IN MY NAME?
If the Selective stock you own is held in the name of a bank,
broker, or other nominee (commonly referred to as holding shares in “street name”), your bank, broker, or other nominee
should have provided you access to these proxy materials by mail or e-mail with information on how to submit your voting
instructions. If you do not provide voting instructions, the broker, bank, or other holder of record cannot vote your shares with
respect to “non-routine” matters, but can vote the shares with respect to “routine” matters. “Broker
non-votes” occur when a beneficial owner of shares held in street name fails to provide instructions to the broker, bank, or
other nominee as to how to vote on matters deemed “non-routine.” We believe the election of directors (Proposal 1), the
advisory (non-binding) vote on the 2022 compensation of Selective’s named executive officers (Proposal 2), and the advisory
(non-binding) vote on the frequency of an advisory vote on the compensation of Selective’s named executive officers (Proposal
3) are “non-routine” matters, and brokers, banks, or other nominees cannot vote your shares on such proposals if you
have not given
voting instructions. In these cases, the broker, bank, or other nominee can register your shares as being present at the Annual Meeting for purposes of determining the presence of a quorum, but will not be able to vote on those matters for which specific authorization is required under the New York Stock Exchange (“NYSE”) rules.
HOW WILL VOTES, ABSTENTIONS, AND BROKER NON-VOTES BE COUNTED?
The inspectors of election appointed for the Annual Meeting by the
Board of Directors will separately tabulate affirmative and negative votes, abstentions, and broker non-votes. Shares represented by proxies
that reflect abstentions and broker non-votes are counted to determine whether there is a quorum.
The below chart summarizes the required voting standard for each proposal
and the impacts of abstentions and broker non-votes.
| Proposal |
Voting Approval Standard |
Effect of
Abstention(1) |
Effect of Broker
Non-Vote(2) |
| Election of Directors |
Affirmative vote of a majority of
votes cast |
No effect |
No effect |
Approval, on an Advisory Basis, of the
2022 Compensation of our Named
Executive Officers |
Affirmative vote of a majority of
votes cast |
No effect |
No effect |
Vote, on an Advisory Basis, on the
Frequency of the Advisory Executive
Compensation Vote |
Selection that receives the most
votes cast will be deemed the
stockholders’ selection |
No effect |
No effect |
Ratification of the Appointment of
Independent Registered Public
Accounting Firm |
Affirmative vote of a majority of
votes cast |
No effect |
Not applicable |
(1) For
purposes of determining the number of votes cast concerning a particular matter, only those cast “For” or “Against”
are included.
(2) Under
NYSE rules that apply to brokers, Proposal 4 is considered a “routine” proposal on which brokers are permitted to vote
in their discretion even if the beneficial owners do not provide voting instructions. However, Proposals 1, 2, and 3 are not considered
to be routine matters and brokers will not be entitled to vote thereon unless beneficial owners provide voting instructions. Accordingly,
broker non-votes will not be counted toward the tabulation of votes on Proposals 1, 2, and 3.
IMPORTANT
NOTICE REGARDING AVAILABILITY OF PROXY MATERIALS FOR THE ANNUAL
MEETING OF STOCKHOLDERS TO BE HELD ON WEDNESDAY, MAY 3,
2023
This
Proxy Statement and our 2022 Annual Report to Stockholders are available on Selective’s Internet website at www.Selective.com.
INFORMATION ABOUT PROPOSAL
1
Election of Directors
Under
our By-Laws, directors in uncontested elections must be elected by a majority of votes cast. A majority exists when the number of votes
cast “for” a director nominee exceeds the number of votes cast “against” that director nominee. For more information
on our majority voting policy, please see the section entitled, “Corporate Governance – Majority Voting for Directors
in Uncontested Elections” of this Proxy Statement.
All directors stand for election for a one-year term. In all cases,
each director will hold office until a successor has been elected and qualified, or until the director’s earlier resignation or
removal.
The Board of Directors currently has 16 members, 13 of whom are standing
for reelection at the Annual Meeting. Messrs. Burville, Morrissey, and Rue have reached the mandatory director retirement age specified
in our By-Laws and are not standing for reelection at the Annual Meeting. We acknowledge and thank Messrs. Burville, Morrissey, and
Rue for their service on the Board. Following the Annual Meeting, the size of the Board of Directors will be reduced from 16 members to
13 members. Under Selective’s Amended and Restated Certificate of Incorporation and By-Laws, Selective may have a minimum of seven
and a maximum of 20 directors. By majority vote, the Board of Directors may set the number of directors within this range at any time.
Process for Review and Nomination of Director Candidates
We believe the Board’s composition should encompass a broad range
of skills, expertise, industry knowledge, and diversity of opinion. Directors should possess the highest personal and professional ethics,
integrity, and values, and must be committed to representing the long-term interests of Selective and its stockholders.
The Corporate Governance and Nominating Committee is responsible for
reviewing and nominating candidates to the Board of Directors. The Corporate Governance and Nominating Committee reviews all director
candidates for possible nomination and election to the Board and seeks such candidates from any source, including:
| ◾ | Directors and management; |
| ◾ | Third-party search firms that the Corporate Governance and Nominating Committee may engage from time to time for a fee to identify
and assess candidates; and |
Any stockholder proposing one or more director candidates must submit
in writing all applicable information required under the Securities Exchange Act of 1934, as amended (the “Exchange Act”),
and Selective’s By-Laws to the Chairperson of the Corporate Governance and Nominating Committee, c/o Corporate Secretary, Selective
Insurance Group, Inc., 40 Wantage Avenue, Branchville, New Jersey 07890.
The Corporate Governance and Nominating Committee evaluates all candidates,
including any recommended by stockholders, using the same criteria, including, among other things:
| ◾ | Personal and professional ethics, integrity, character, and values; |
| ◾ | Professional and personal experience; |
| ◾ | Independence and avoidance or limitation of potential or actual conflicts of interest; |
| ◾ | Dedication and commitment to representing the long-term interests of Selective and its stockholders; |
| ◾ | Willingness to dedicate and devote sufficient time to Board duties and activities; |
| ◾ | Other appropriate and relevant factors, including the qualifications and skills of the current members of the Board; and |
| ◾ | Diversity, including gender, race, and culture, along with personal expertise in areas expected to contribute to the Board’s
effectiveness, such as general operations, technology, finance, investment, marketing, financial reporting, legal and regulatory, risk
management, cybersecurity, human capital management, and diversity, equity, and inclusion (“DE&I”), among others. |
The table below summarizes some of the attributes, expertise, and skills
we find relevant to our business that our director nominees bring to the Board. The table does not include every attribute, expertise,
or skill that each director nominee offers. The fact that a particular attribute, expertise, or skill is not listed does not mean that
a director nominee does not possess it. All our director nominees exhibit high integrity, an appreciation for diversity of background,
experience, and thought, innovative thinking, proven records of success, and knowledge of corporate governance requirements and best practices.
ATTRIBUTES,
EXPERTISE
&
SKILLS |
AINAR
D. AIJALA, JR. |
LISA
ROJAS BACUS |
TERRENCE
W. CAVANAUGH |
WOLE
C. COAXUM |
ROBERT
KELLY DOHERTY |
JOHN
J. MARCHIONI |
THOMAS
A. MCCARTHY |
STEPHEN
C. MILLS |
H.
ELIZABETH MITCHELL |
CYNTHIA
S. NICHOLSON |
JOHN
S. SCHEID |
J.
BRIAN THEBAULT |
PHILIP
H. URBAN |
| INSURANCE
INDUSTRY EXPERIENCE |
|
⌧ |
⌧ |
⌧ |
|
⌧ |
⌧ |
|
⌧ |
|
⌧ |
|
⌧ |
FINANCIAL
STATEMENT/
AUDIT/PUBLIC DISCLOSURE |
⌧ |
|
⌧ |
⌧ |
⌧ |
⌧ |
⌧ |
⌧ |
⌧ |
|
⌧ |
⌧ |
⌧ |
FINANCE/CAPITAL
MANAGEMENT EXPERTISE/
M&A |
|
|
⌧ |
⌧ |
⌧ |
⌧ |
⌧ |
|
⌧ |
|
⌧ |
⌧ |
⌧ |
| INVESTMENT |
|
|
⌧ |
⌧ |
⌧ |
⌧ |
⌧ |
⌧ |
|
|
⌧ |
|
⌧ |
PUBLIC
COMPANY
EXECUTIVE EXPERIENCE |
|
⌧ |
⌧ |
⌧ |
⌧ |
⌧ |
⌧ |
⌧ |
⌧ |
|
|
|
|
| ACTUARIAL |
⌧ |
|
|
|
|
⌧ |
⌧ |
|
⌧ |
|
⌧ |
|
⌧ |
HUMAN
CAPITAL
MANAGEMENT EXPERIENCE, INCLUDING DE&I |
⌧ |
⌧ |
⌧ |
⌧ |
⌧ |
⌧ |
⌧ |
⌧ |
⌧ |
⌧ |
⌧ |
⌧ |
⌧ |
RISK
MANAGEMENT
EXPERTISE, INCLUDING ESG
AND SUSTAINABILITY |
⌧ |
⌧ |
⌧ |
⌧ |
⌧ |
⌧ |
⌧ |
⌧ |
⌧ |
⌧ |
⌧ |
⌧ |
⌧ |
TECHNOLOGY/
CYBERSECURITY |
⌧ |
|
⌧ |
⌧ |
⌧ |
⌧ |
|
|
⌧ |
|
⌧ |
⌧ |
⌧ |
| LEGAL
OR REGULATORY EXPERIENCE |
⌧ |
⌧ |
⌧ |
⌧ |
⌧ |
⌧ |
⌧ |
|
⌧ |
|
⌧ |
|
⌧ |
MARKETING/
BRANDING |
|
⌧ |
⌧ |
⌧ |
|
⌧ |
|
⌧ |
|
⌧ |
|
⌧ |
⌧ |
| AGENCY
DISTRIBUTION |
|
⌧ |
⌧ |
⌧ |
|
⌧ |
⌧ |
|
|
|
|
|
⌧ |
Diversity
In
addition to these attributes, expertise, and skills, the Corporate Governance and Nominating Committee, when evaluating the suitability
of individual director nominees, considers diversity, as described above. Under our Corporate Governance Guidelines, the Corporate
Governance and Nominating Committee is required to ensure that all pools of interviewed director candidates include individuals of diverse
gender, race, and culture.
The following graphs depict the racial/ethnic, gender, and LGBTQ+ diversity of Selective’s current directors and
director nominees, based on the self-identification information that the current directors and director nominees provided and to which
each individual consented to its public disclosure:
The
following graphs depict the tenure (in years) of Selective’s current directors and director nominees:
The following graphs depict the age of Selective’s
current directors and director nominees:
As shown in the table below, five of our 16 current
directors self-identify as diverse. Three directors self-identify as female; three directors self-identify as underrepresented minorities
(meaning individuals who self-identify as Black or African American, Hispanic or Latin, Asian, Native American or Alaska Native, Native
Hawaiian or Pacific Islander, or two or more races or ethnicities); and one director self-identifies as LGBTQ+.
Board Diversity Matrix
As of January 29, 2023 |
| Total Number of Current Directors |
16* |
| |
Female |
Male |
Non-Binary |
Did Not
Disclose
Gender |
| Part I: Gender Identity |
| Directors |
3 |
13 |
0 |
0 |
| Part II: Demographic Background |
| African American or Black |
0 |
2 |
0 |
0 |
| Alaskan Native or Native American |
0 |
0 |
0 |
0 |
| Asian |
0 |
0 |
0 |
0 |
| Hispanic or Latin |
1 |
0 |
0 |
0 |
| Native Hawaiian or Pacific Islander |
0 |
0 |
0 |
0 |
| White |
2 |
11 |
0 |
0 |
| Two or More Races or Ethnicities |
0 |
0 |
0 |
0 |
| LGBTQ+ |
1 |
| Did Not Disclose Demographic Background |
0 |
* John C. Burville, Michael J. Morrissey, and William M. Rue are included
in this table but are not standing for reelection at the Annual Meeting.
Board Diversity Matrix
As of January 18, 2022 |
| Total Number of Directors |
17* |
| |
Female |
Male |
Non-Binary |
Did Not
Disclose
Gender |
| Part I: Gender Identity |
| Directors |
3 |
14 |
0 |
0 |
| Part II: Demographic Background |
| African American or Black |
0 |
2 |
0 |
0 |
| Alaskan Native or Native American |
0 |
0 |
0 |
0 |
| Asian |
0 |
0 |
0 |
0 |
| Hispanic or Latin |
1 |
0 |
0 |
0 |
| Native Hawaiian or Pacific Islander |
0 |
0 |
0 |
0 |
| White |
2 |
12 |
0 |
0 |
| Two or More Races or Ethnicities |
0 |
0 |
0 |
0 |
| LGBTQ+ |
1 |
| Did Not Disclose Demographic Background |
0 |
* Gregory E. Murphy is included in this table but did not stand for
reelection at the 2022 Annual Meeting of Stockholders.
Director Nominees
No family relationships exist among Selective’s current directors,
director nominees, and executive officers.
The Board ratified the Corporate Governance and Nominating Committee’s
nomination of the 13 director nominees listed below to stand for election at the Annual Meeting for terms expiring at the 2024 Annual
Meeting or until their respective successors have been duly elected and qualified.
All 13 director nominees have consented to be named in this Proxy Statement
and to serve if elected. The Board does not know of any reason a director nominee would decline or be unable to serve if elected. If a
director nominee becomes unavailable or unable to serve before the Annual Meeting, the Board can reduce its size or designate a substitute
director nominee. If the Board designates a substitute director nominee, proxies that would have been cast for the original director nominee
will be cast for the substitute director nominee unless contrary instructions are given.
| NOMINEES OF THE BOARD OF DIRECTORS |
| Ainar
D. Aijala, Jr. |
|
Age: 66
Director since: 2020
Independent Director
Board Committees:
Audit, Finance
|
Background Information
◾
Senior Advisor to the Global CEO and other senior-level positions, including Chief Global Corporate Development Officer and Global
Managing Partner of Consulting and Human Capital, Deloitte & Touche LLP (“Deloitte”), 1982 to 2020.
◾
Senior Manager, Coopers & Lybrand Consulting, 1977 to 1982.
◾
Board of Managers, DLED, Inc., since 2021.
◾
Enrolled Actuary pursuant to the Employee Retirement Income Security Act of 1974, since 1982.
◾
Emeritus Governor, Board of Governors, Junior Achievement Worldwide, since 2021; Member, Junior Achievement Worldwide, 2003 to
2021, and Junior Achievement USA, 2015 to 2021; Member of the Executive Compensation Committee, 2003 to 2021, and past Chairman of Junior
Achievement Worldwide, 2006 to 2009.
◾
University of Michigan at Ann Arbor (B.S.).
Discussion of individual experience, qualifications,
attributes, and skills.
Mr. Aijala has significant experience as an actuary
and as a corporate development and human capital executive. As a senior global advisor and managing partner at Deloitte for 38 years,
he advised public companies on various strategic issues relevant to Selective, particularly with respect to human capital and benefit
plan issues. Deloitte grew rapidly during his tenure as Global Managing Partner, and he was responsible for attracting, developing, and
retaining top human capital. Mr. Aijala also has devoted considerable time to educating primary and secondary school students about entrepreneurship,
work readiness, and financial literacy through Junior Achievement Worldwide. His broad knowledge of human relations matters, notably recruiting,
developing, and retaining human capital, benefits Selective in developing its talent strategies. For the foregoing reasons, the Board
believes Mr. Aijala is qualified to serve as a director.
|
| NOMINEES OF THE BOARD OF DIRECTORS |
| Lisa
Rojas Bacus |
|
Age: 59
Director since: 2020
Independent Director
Board Committees:
Corporate Governance & Nominating, Salary &
Employee Benefits
|
Background Information
◾
Executive Vice President, Global Chief Marketing Officer, Cigna Corporation (“Cigna”), 2013 to 2019.
◾
Executive Vice President and Chief Marketer, American Family Insurance Group, 2008 to 2013.
◾
Executive Director, Global Marketing Strategy and other senior positions, Ford Motor Company, 1986 to 2008.
◾
Board Member, Culver’s Franchising System, Inc., since 2010.
◾
Board Member, PetSmart Charities Inc., since 2019.
◾
Member, Latino Corporate Directors Association.
◾
Member, Prospanica.
◾
Northern Arizona University (B.S.) and Duke University (M.B.A.).
◾
Diligent Institute ESG Leadership Certification.
Other Public Company Board Service
◾
Board Member, Teradata Corporation (NYSE: TDC), since 2015.
◾
Board Member, Douglas Dynamics, Inc. (NYSE: PLOW), since 2020.
Discussion of individual experience, qualifications,
attributes, and skills.
Ms. Bacus has over 30 years of marketing and senior
leadership experience in Fortune 100 global companies in the insurance and automotive industries. She has extensive property and casualty
marketing experience, including developing relationships with independent agents. She is a strategic thinker and highly regarded customer
experience expert. Ms. Bacus is an advocate for environmental, social, and governance (“ESG”) issues, and gender and ethnic
diversity matters. Her marketing, digital, and analytics experience contribute significantly to Selective’s strategies. For the
foregoing reasons, the Board believes Ms. Bacus is qualified to serve as a director. |
| Terrence
W. Cavanaugh |
|
Age: 69
Director since: 2018
Independent Director
Board Committees:
Audit, Salary & Employee Benefits
|
Background Information
◾
Founding partner, Accretive Consulting LLC, since 2017.
◾
President and Chief Executive Officer, Erie Indemnity Company, 2008 to 2016.
◾
Chief Operating Officer of Chubb Surety & Trade Credit, Chubb Group of Insurance Companies (“Chubb Group”), 2002
to 2007; Chief Marketing Officer, Chubb Group, 1998 to 2001; various underwriting and field management roles, 1975 to 1997.
◾
Director, Highmark Health, since 2013.
◾
Board of Commissioners, Naples Airport Authority, since 2022.
◾
Director, Property Casualty Insurance Association, 2008 to 2017; Chairman, 2014 to 2015.
◾
Trustee, The Institutes, 2010 to 2016.
◾
Director, Insurance Information Institute, 2011 to 2016; Chairman, 2015 to 2016.
◾
University of Notre Dame (B.B.A.).
◾
Harvard Business School (Program for Management Development).
Discussion of individual experience, qualifications,
attributes, and skills.
Mr. Cavanaugh has more than 40 years of insurance
expertise, including serving for eight years as the chief executive officer of a Fortune 500® insurer. He has extensive
experience growing property and casualty direct premiums written and increasing policyholder surplus, delivering profitability, and developing
relationships with independent agents. Mr. Cavanaugh has significant customer experience and talent development knowledge and expertise.
For the foregoing reasons, the Board believes Mr. Cavanaugh is qualified to serve as a director.
|
| NOMINEES OF THE BOARD OF DIRECTORS |
| Wole
C. Coaxum |
|
Age: 52
Director since: 2020
Independent Director
Board Committees:
Corporate Governance & Nominating, Finance
|
Background Information
◾
Founder and Chief Executive Officer, Mobility Capital Finance, Inc. (MoCaFi), since 2016.
◾
Managing Director and other senior management positions, JPMorgan Chase & Company, 2007 to 2015.
◾
President and Chief Executive Officer, Willis Canada Inc., 2005 to 2007; Chief Operating Officer and Chief Finance Officer, Willis
North America, 2002 to 2005.
◾
Vice President, Corporate and Investment Bank, and other various positions, Citigroup Inc., 1992 to 2002.
◾
Trustee, Phillips Exeter Academy, since 2012.
◾
Director, Roosevelt Institute, since 2016; Board Treasurer, since 2019.
◾
Williams College (B.A.).
◾
New York University’s Stern School of Business (M.B.A.).
Discussion of individual experience, qualifications,
attributes, and skills.
Mr. Coaxum is the president and chief executive officer
of a digital banking platform that he founded to support underserved communities. His experience in FinTech is relevant to Selective’s
InsurTech strategies. His senior management, financial services, and insurance experience at JPMorgan Chase & Company, Willis Group,
and Citigroup Inc. influence our overall strategies. Mr. Coaxum’s experience providing underserved communities with financial services
helps Selective evaluate its geographic expansion and DE&I strategies. Mr. Coaxum is an executive with large public company and FinTech
experience with keen insights into underserved communities and DE&I issues. For the foregoing reasons, the Board believes Mr. Coaxum
is qualified to serve as a director.
|
| Robert
Kelly Doherty |
|
Age: 64
Director since: 2015
Independent Director
Lead Independent Director since: May 2022
Board Committees:
Audit, Finance, Executive
|
Background Information
◾
Managing Partner and Founder, Caymen Partners, since 1999, and Caymen Advisors, 1999 to 2020.
◾
Vice Chairman, Bankers Trust Company and Bankers Trust New York Corporation, 1997 to 1998; various positions in global trading
and investment operations, 1982 to 1997.
◾
Director, Harding Loevner Funds, Inc., since 2004; Lead Director, since 2014.
◾
Director, Cyota, Inc., 2000 to 2005; Non-Executive Chairman, 2002 to 2005.
◾
Princeton University (B.A.).
Discussion of individual experience, qualifications,
attributes, and skills.
Mr. Doherty has significant investment experience
in both public and private companies. He plays a key advisory role in contributing to Selective’s investment strategies, particularly
in the private equity sector, and has substantial knowledge about investment products. Mr. Doherty also has significant senior management
experience with a large financial services company and is familiar with the issues that Selective’s senior management faces, including
business strategy development and execution. For the foregoing reasons, the Board believes Mr. Doherty is qualified to serve as a director.
|
| NOMINEES OF THE BOARD OF DIRECTORS |
| John
J. Marchioni |
|
Age: 53
Director since: 2019
Chairman of the Board since: May 2022
Board Committees:
Executive
|
Background Information
◾
President and Chief Executive Officer (“CEO”), Selective, since 2020.
◾
President and Chief Operating Officer, Selective, 2013 to 2020.
◾
Executive Vice President, Insurance Operations, Selective, 2010 to 2013.
◾
Executive Vice President, Chief Underwriting and Field Operations Officer, Selective, 2008 to 2010.
◾
Executive Vice President, Chief Field Operations Officer, Selective, 2007 to 2008.
◾
Senior Vice President, Director of Personal Lines, Selective, 2005 to 2007.
◾
Various insurance operations and government affairs positions, Selective, 1998 to 2005.
◾
Board of Trustees, The Institutes, since 2022.
◾
Director, The American Property Casualty Insurance Association, since 2020.
◾
Director, Commerce and Industry Association of New Jersey, since 2015.
◾
Member of the Board of Overseers at St. John’s University School of Risk Management, Insurance and Actuarial Science, since
2021.
◾
Chartered Property Casualty Underwriter (CPCU).
◾
Princeton University (B.A.).
◾
Harvard University (Advanced Management Program).
Discussion of individual experience, qualifications,
attributes, and skills.
Mr. Marchioni became Chairman of the Board in 2022,
after becoming President and CEO of Selective in 2020, having served as our President and Chief Operating Officer since 2013. As Selective’s
President and CEO, he oversees all aspects of the company, where he has been employed for over 25 years. Mr. Marchioni has exhibited strong
leadership, guiding Selective’s management team in executing our strategic initiatives. He has extensive knowledge of the property
and casualty industry and its regulation, having begun his Selective career in government affairs. He serves on several significant industry-related
boards, including the American Property Casualty Insurance Association, The Institutes, and the St. John’s University School of
Risk Management. His demonstrated talents and abilities will continue to help position Selective for its next phase of growth. For the
foregoing reasons, the Board believes Mr. Marchioni is qualified to serve as a director.
|
| NOMINEES OF THE BOARD OF DIRECTORS |
| Thomas
A. McCarthy |
|
Age: 66
Director since: 2018
Independent Director
Board Committees:
Audit, Finance, Executive
|
Background Information
◾
Executive Vice President and Chief Financial Officer, Cigna, 2013 to 2017; Vice President, Finance, 2011 to 2013; Acting Chief
Financial Officer, 2010 to 2011; Vice President and Treasurer, 2008 to 2010; and Vice President, Strategy and Corporate Development, 2003
to 2008.
◾
Director, Avenue of the Arts, since 2022.
◾
Trustee, American University of Rome, since 2018.
◾
Director, Habitat for Humanity of Montgomery & Delaware Counties, since 2017.
◾
Wharton School of the University of Pennsylvania (B.S.).
◾
Carnegie Mellon University (M.B.A.).
◾
NACD Directorship Certified®.
Other Public Company Board Service
◾
Director, Privia Health Group, Inc. (Nasdaq: PRVA), since 2021.
Discussion of individual experience, qualifications,
attributes, and skills.
Mr. McCarthy retired in 2017 after more than 30 years
with Cigna, where his responsibilities included strategy and corporate development, including mergers and acquisitions, corporate risk
management, corporate finance, capital management, and treasury operations. Mr. McCarthy’s significant operational experience as
the chief financial officer of a Fortune 100 company and his knowledge of investments, finance, public company operations, controls, and
disclosures are invaluable assets to Selective as it develops and implements its investment and growth strategies. For the foregoing reasons,
the Board believes Mr. McCarthy is qualified to serve as a director.
|
| Stephen
C. Mills |
|
Age: 63
Director since: 2020
Independent Director
Board Committees:
Finance, Salary and Employee Benefits
|
Background Information
◾
President and General Manager, New York Knicks, 2013 to 2020.
◾
Founding Partner and Chief Executive Officer, Athletes & Entertainers Wealth Management, LLC, 2010 to 2013.
◾
President and Chief Operating Officer, MSG Sports, and previously Executive Vice President, Franchise Operations, New York Knicks,
Madison Square Garden, 2000 to 2009.
◾
Member, Board of Trustees and Audit Committee, Ariel Investments, since 2015.
◾
Director, Madison Square Garden Networks, 2020 to 2021.
◾
Director, Ladies Professional Golf Association, since January 2023.
◾
Director, Harlem Junior Tennis, 2017 to 2022.
◾
Member, Board of Advisors, Hospital for Special Surgery, since 2011.
◾
Director, Princeton University Varsity Club, since 2010.
◾
Princeton University (B.A.).
Other Public Company Board Service
◾
Director, Madison Square Garden Sports Corp. (NYSE: MSGS), since 2020.
Discussion of individual experience, qualifications,
attributes, and skills.
Mr. Mills has extensive general management, marketing,
brand communication, and human capital experience after three decades in senior positions with Madison Square Garden Sports, the New York
Knicks, the National Basketball Association, and his own sports agency. As an investment fiduciary on the Mutual Fund Board of Trustees
of Ariel Investments, he can contribute insights to our investment strategies. Mr. Mills has been active with several prominent charities,
and these experiences and his knowledge of media-intensive public companies furthers our marketing and ESG strategies. He is very knowledgeable
on ESG and DE&I issues. For the foregoing reasons, the Board believes Mr. Mills is qualified to serve as a director.
|
| NOMINEES OF THE BOARD OF DIRECTORS |
| H.
Elizabeth Mitchell |
|
Age: 61
Director since: 2018
Independent Director
Board Committees:
Audit, Corporate
Governance and
Nominating, Executive
|
Background Information
◾ President,
CEO and Director, Renaissance Reinsurance U.S. Inc., 2015 to 2016.
◾ President,
Platinum Underwriters Reinsurance, Inc., 2005 to 2015; Chief Executive Officer, 2007 to 2015; Chief Operating Officer and Executive
Vice President, 2004 to 2005; Executive Vice President, 2002 to 2004; Director, 2002 to 2015.
◾ Executive
Vice President, St. Paul Reinsurance, Inc., 1998 to 2002; Senior Vice President, 1998; Vice President, 1993 to 1998.
◾ Advisor,
Hudson Structured Capital Management Ltd., since 2018.
◾ Director,
StanCorp Financial Group, Inc., 2017 to 2022.
◾ Chairperson,
Weston Insurance Holdings, 2020 to 2022.
◾ Board
of Overseers, St. John’s University School of Risk Management, Insurance and Actuarial Science, 2007 to 2016.
◾ Trustee,
The Institutes, 2010 to 2016.
◾ Board
Member, Reinsurance Association of America, 2002 to 2007;
2014 to 2016.
◾ Board
Member, Broker and Reinsurance Market Association, 2002 to 2016; Chair of the Board, 2007 to 2008; Vice Chair, 2006 to 2007; Executive
Committee, 2006 to 2010.
◾ Fellow
of the Casualty Actuarial Society.
◾ Member,
American Academy of Actuaries.
◾ Member,
Association of Professional Insurance Women.
◾ College
of the Holy Cross (B.A.).
◾ NACD
Directorship Certified®.
◾ CERT
Certificate in Cybersecurity Oversight.
Other Public Company Board Service
◾ Director,
Principal Financial Group (Nasdaq: PFG), since 2022.
Discussion of individual experience, qualifications,
attributes, and skills.
Ms. Mitchell is an experienced insurance industry executive
with a proven record of accomplishment leading an organization with sustained profitability. In addition to her extensive senior management
experience in the property and casualty insurance and reinsurance industries, Ms. Mitchell is an actuary and very knowledgeable
about risk, actuarial science, insurance operations, mergers and acquisitions, and operational reorganization matters. For the foregoing
reasons, the Board believes Ms. Mitchell is qualified to serve as a director.
|
| NOMINEES OF THE BOARD OF DIRECTORS |
| Cynthia
S. Nicholson |
|
Age: 59
Director since: 2009
Independent Director
Board Committees:
Corporate
Governance and Nominating,
Executive, Salary and
Employee
Benefits
|
Background Information
◾ Band
of Sisters, LLC, Managing Member, since 2021.
◾ Advisor,
Yext, Inc., since 2019.
◾ Advisor,
Tangelo (formerly known as Tangerine/Feed Each Other/Forkcast), since 2018; Chief Marketing Officer, 2017 to 2018; Chief Operating Officer,
2015 to 2017.
◾ Chief
Marketing Officer, Softcard®, 2013 to 2015.
◾ Executive
Vice President and Chief Marketing Officer, Equinox Holdings, Inc., 2010 to 2012.
◾ Advisor,
GamesThatGive, Inc., 2010 to 2011; Principal Strategist and Director, 2009 to 2010.
◾ Senior
Vice President and Chief Marketing Officer, Pepsi-Cola North America, a division of PepsiCo, Inc., 2005 to 2008.
◾ Member
of Advisory Board, Lavit, LLC, since 2017.
◾ Director,
Heartland Consumer Products Investments Holdings, LLC, 2016 to 2018.
◾ Director,
Association of National Advertisers, 2006 to 2008.
◾ University
of Illinois (B.S.).
◾ Kelley
School of Business, Indiana University (M.B.A.).
Discussion of individual experience, qualifications,
attributes, and skills.
Ms. Nicholson is a marketing expert with over 30 years of experience
in several consumer-focused industries. She was chief marketing officer at Equinox Holdings, Inc. and Pepsi-Cola North America. Ms. Nicholson
has extensive experience with building brands, developing advertising messaging, buying media, and developing and implementing strategies
for promotions, innovation, digital and social media, and direct marketing. Her strong consumer marketing and branding experience benefits
our efforts to expand our brand with distribution partners, businesses, and consumers in property and casualty insurance markets. Ms. Nicholson’s
marketing experience includes developing messaging related to diversity and culture building. She is a Managing Member of Band of Sisters,
LLC, which assists corporate leaders in leveraging diversity to build inclusive cultures. This experience and knowledge will help inform
Selective’s DE&I initiatives. For the foregoing reasons, the Board believes Ms. Nicholson is qualified to serve as a director.
|
| NOMINEES OF THE BOARD OF DIRECTORS |
| John
S. Scheid |
|
Age: 67
Director since: 2014
Independent Director
Board Committees:
Audit, Executive, Finance
|
Background Information
◾ Owner
and sole member, Scheid Investment Group, LLC, since 2013.
◾ PricewaterhouseCoopers
LLP, Senior Partner, 2009 to 2013; Global Insurance Assurance Practice Leader, 2001 to 2009; Chairman, Americas Insurance Practice, 2001
to 2010; U.S. Insurance Practice Leader, 1995 to 2001; Midwest Region Financial Services Leader, 1991 to 1995; Partner, 1988 to 1991;
other positions, 1977 to 1988.
◾ Director,
Extraordinary Re Holdings LTD and Extraordinary Reinsurance Bermuda, 2018 to 2022.
◾ Director,
Groupware Technologies Holdings, Inc., since 2021.
◾ Director,
Catholic Relief Services, since 2021; Audit and Risk Committee Chair since 2020.
◾ Director,
Sprecher Brewing Company, since 2022.
◾ Director,
Dynamis Software Corporation, 2014 to 2018.
◾ Director,
Messmer Catholic Schools, 2013 to 2021; Chairman, 2016 to 2021.
◾ Member,
Finance Council for the Archdiocese of Milwaukee, since 2016; Chairman since January 2023.
◾ Chairman,
Accounting Examining Board, State of Wisconsin, 2013 to 2019.
◾ Member,
Golden Angels Investment Group, since 2013.
◾ Director,
University of Wisconsin-Milwaukee Foundation, 2002 to 2011; Emeritus Director, since 2011.
◾ Investment
Committee Member, Marquette University High School, since 2011.
◾ Member,
Board of Governors, Junior Achievement Worldwide, 2004 to 2019; Audit Committee Chair, 2004 to 2019.
◾ Certified
Public Accountant (Wisconsin).
◾ University
of Notre Dame (B.B.A.).
◾ NACD
Directorship Certified®.
Discussion of individual experience, qualifications,
attributes, and skills.
Mr. Scheid retired after 36 years at PricewaterhouseCoopers LLP,
most recently serving as a senior partner, primarily in the insurance and asset management industries. He has extensive experience in
finance and insurance, financial management, public company governance and disclosure, corporate transactions, strategic leadership, succession
planning, and cybersecurity. For the foregoing reasons, the Board believes Mr. Scheid is qualified to serve as a director.
|
| NOMINEES OF THE BOARD OF DIRECTORS |
| J.
Brian Thebault |
|
Age: 71
Director since: 1996
Independent Director
Lead Independent Director: 2017 – May 2022
Board Committees:
Corporate Governance and Nominating, Salary and Employee Benefits
|
Background Information
◾ Partner,
Thebault Associates, since 1987.
◾ Chairman,
Earth-Thebault, 2007 to 2009.
◾ Chairman
and Chief Executive Officer, L.P. Thebault Company, 1998 to 2007; President and Chief Executive Officer, 1984 to 1998.
◾ Director,
Curex Group Holdings LLC, since 2010.
◾ Trustee,
The Peck School, 1994 to 2010.
◾ Trustee,
The Delbarton School, 1990 to 2007.
◾ University
of Southern California (B.S.).
Discussion of individual experience, qualifications,
attributes, and skills.
Mr. Thebault grew L.P. Thebault Company into one of the largest
privately-held graphic arts companies in the country by focusing on quality, customer service, and advanced technology for its Fortune
500® clients across the United States. Many of our commercial customers are private, closely-held companies, and Mr. Thebault’s
understanding of this important economic sector’s decision-making processes helps inform Selective’s strategies. From his
experience in the printing and graphic arts industry, Mr. Thebault has a strong understanding of sales, marketing, branding, customer
service, technology, finance, and business strategy. For the foregoing reasons, the Board believes Mr. Thebault is qualified to serve
as a director. |
| Philip
H. Urban |
|
Age: 70
Director since: 2014
Independent Director
Board Committees:
Audit, Corporate
Governance and
Nominating, Salary and Employee Benefits
|
Background Information
◾ President
and Chief Executive Officer, Grange Insurance, 1999 to 2010.
◾ President,
Personal Lines, Guaranty National Insurance Company, 1996 to 1999.
◾ Senior
Vice President, Great American Insurance Company, 1990 to 1996.
◾ Chairman, Integrity
Insurance, 2002 to 2010.
◾ Chairman,
The Grange Bank, 1999 to 2007.
◾ Director,
The Jeffrey Company, since 2005; Member, Audit and Risk Committee, 2005 to 2021; Member, Compensation Committee, since 2021.
◾ Miami
University of Ohio (B.A.).
◾ Ohio
State University (M.B.A.).
Discussion of individual experience, qualifications,
attributes, and skills.
Mr. Urban has a wealth of property and casualty insurance experience,
both as a senior executive and board member. He has first-hand knowledge of the independent agent distribution channel, geographic market
expansion, insurance products, and technology, which he uses to contribute to Selective’s strategic direction. For the foregoing
reasons, the Board believes Mr. Urban is qualified to serve as a director. |
Board Recommendation
THE BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS THAT STOCKHOLDERS VOTE
“FOR” EACH OF THE DIRECTOR NOMINEES.
SECURITY OWNERSHIP OF MANAGEMENT
AND CERTAIN BENEFICIAL OWNERS
Security Ownership of Management and the Board of Directors
The following table shows, as of February 22, 2023:
| ◾ | The number of shares of Selective common stock beneficially owned by each director, director nominee, and the named executive officers;
and |
| ◾ | The number of shares of Selective common stock beneficially owned by our directors and executive officers as a group. |
None
of the directors, director nominees, or named executive officers held any stock options exercisable or any restricted stock units that
vest within 60 days of February 22, 2023. Except as indicated by footnote, the persons named below have sole voting and investment
power with respect to all shares shown as beneficially owned by them, subject to community property laws where applicable. Unless otherwise
indicated, the business address of each individual is Selective Insurance Group, Inc., 40 Wantage Avenue, Branchville, New
Jersey 07890.
| Name of Beneficial Owner |
Total Shares of Common
Stock Beneficially Owned(1) |
Percent of Class |
| Aijala, Ainar D., Jr. |
3,366 |
* |
| Bacus, Lisa Rojas |
2,249 |
* |
| Burville, John C. |
46,304 |
* |
| Cavanaugh, Terrence W. |
13,417 |
* |
| Coaxum, Wole C. |
2,249 |
* |
| Doherty, Robert Kelly |
23,336 |
* |
| Hall, Brenda M. |
18,056(2) |
* |
| Lanza, Michael H. |
30,705 |
* |
| Marchioni, John J. |
170,543 |
* |
| McCarthy, Thomas A. |
13,156 |
* |
| Mills, Stephen C. |
2,249 |
* |
| Mitchell, H. Elizabeth |
10,613 |
* |
| Morrissey, Michael J. |
12,579 |
* |
| Nicholson, Cynthia S. |
19,893 |
* |
| Rue, William M. |
371,940(3) |
1% |
| Scheid, John S. |
25,850 |
* |
| Senia, Vincent M. |
12,984 |
* |
| Thebault, J. Brian |
51,504 |
* |
| Urban, Philip H. |
24,771 |
* |
| Wilcox, Mark A. |
41,676 |
* |
| All directors and executive officers, as a group (21 persons) |
904,946 |
1.5% |
* Less
than 1% of the common stock outstanding.
(1) No
directors or executive officers hold Selective common stock in margin accounts or have Selective common stock pledged for a loan or stock
purchase.
(2) Includes
546 shares held in a 401(k) account for the benefit of Ms. Hall.
(3) Includes:
(i) 44,772 shares held by Rue Investment Company, LLC (see the section entitled, “Transactions with Related Persons”
of this Proxy Statement for more information); and (ii) 5,226 shares held by Mr. Rue’s wife.
Security Ownership of Certain Beneficial
Owners
The following table lists the only persons or groups known to Selective
to be the beneficial owners of more than 5% of any class of Selective’s voting securities based on Schedules 13G and amendments
thereto filed by the beneficial owners with the SEC.
| Title of Class |
Name and Address of Beneficial
Owner |
Amount and Nature of
Beneficial Ownership |
Percent of Class |
| Common Stock |
BlackRock, Inc.
55 East 52nd Street
New York, NY 10055 |
7,094,794 shares of common stock(1) |
11.8% |
| Common Stock |
The Vanguard Group, Inc.
100 Vanguard Blvd. Malvern, PA 19355 |
6,044,820 shares of common stock(2) |
10.03% |
(1) BlackRock, Inc.
(“BlackRock”) filed an amendment to Schedule 13G with the SEC on January 23, 2023, reporting that it is deemed to be
the beneficial owner of an excess of 5% of the outstanding shares of Selective common stock. BlackRock reported that, as of December 31,
2022, it had sole voting power with respect to 6,955,565 shares, shared voting power with respect to 0 shares, sole dispositive power
with respect to 7,094,794 shares, and shared dispositive power with respect to 0 shares.
(2) Vanguard
Group, Inc. (“Vanguard”) filed an amendment to Schedule 13G with the SEC on February 10, 2023, reporting that it
is deemed to be the beneficial owner of an excess of 5% of the outstanding shares of Selective common stock. Vanguard reported that,
as of January 31, 2023, it had sole voting power with respect to 0 shares, shared voting power with respect to 42,568 shares, sole
dispositive power with respect to 5,942,611 shares, and shared dispositive power with respect to 102,209 shares.
EXECUTIVE OFFICERS
The names of our executive officers and their ages, positions, and
biographies are set forth below. Our executive officers are appointed by and serve at the discretion of our Board of Directors.
| EXECUTIVE
OFFICERS |
| John
J. Marchioni |
| President and Chief Executive Officer |
Background Information
◾ For
information regarding Mr. Marchioni, please see the section entitled, “Information about Proposal 1 – Director Nominees”
of this Proxy Statement.
|
| Mark
A. Wilcox |
|
Age: 55
Executive Vice President,
Chief Financial Officer
|
Background Information
◾ Present
position since 2017.
◾ Senior
Vice President, Corporate Controller and Chief Accounting Officer of RenaissanceRe Holdings Ltd., 2005 to 2016.
◾ Vice
President and Internal Auditor, RenaissanceRe Holdings Ltd., 2003 to 2005.
◾ Senior
Manager, Audit and Business Advisory Services – Insurance Practice, PricewaterhouseCoopers LLP, 2001 to 2003; various positions,
1997 to 2001.
◾ Certified
Public Accountant (Washington, D.C.).
◾ Chartered
Financial Analyst.
◾ University
of South Florida (B.S.).
◾ Georgetown
University (M.B.A.).
◾ Oxford
University, Graduate Summer Program in International Management. |
| Brenda
M. Hall |
|
Age: 52
Executive Vice President, Chief Operating Officer, Standard Lines
|
Background Information
◾ Present
position since 2022.
◾ Executive
Vice President, Commercial Lines Chief Operating Officer, 2019 to 2022.
◾ Senior
Vice President, Chief Strategic Operations Officer, Selective, 2015 to 2019.
◾ Vice
President, Director of Field Underwriting, Selective, 2008 to 2015.
◾ Certified
Insurance Counselor.
◾ Certified
Risk Manager.
◾ University
of Mount Union (B.A.).
◾ Webster
University (M.A.). |
| Michael
H. Lanza |
|
Age: 61
Executive Vice President, General Counsel, and
Chief Compliance Officer
|
Background Information
◾ Present
position since 2007.
◾ Senior
Vice President and General Counsel, Selective, 2004 to 2007.
◾ Director,
National Center for State Courts, since 2021.
◾ Trustee,
Newton Medical Center Foundation, since 2014.
◾ Member,
Warren E. Burger Society of the National Center for State Courts.
◾ Member,
Society of Corporate Secretaries and Corporate Governance Professionals.
◾ Member,
National Investor Relations Institute.
◾ University
of Connecticut (B.A.).
◾ University
of Connecticut School of Law (J.D.). |
| Vincent
M. Senia |
|
Age: 59
Executive Vice President, Chief Actuary
|
Background Information
◾ Present
position since 2017.
◾ Senior
Vice President, Actuarial Reserving, Selective, 2010 to 2017.
◾ Vice
President and Chief Reserving Actuary, Munich Re America, 2003 to 2010; various actuarial management positions, 2001 to 2003.
◾ Fellow
of the Casualty Actuarial Society.
◾ Member,
American Academy of Actuaries.
◾ New
Jersey Institute of Technology (B.S.). |
| Paul
Kush |
|
Age: 62
Executive Vice President, Chief Claims Officer
|
Background Information
◾ Present
position since 2019.
◾ Chief
Claims Officer, ProSight Specialty Insurance, 2010 to 2019.
◾ Senior
Vice President, Claims, and other management roles, Crum and Forster, 1982 to 2009.
◾ Duquesne
University (B.S.).
◾ Wharton
School of the University of Pennsylvania’s American Institute of CPCU Advanced Executive Education Program. |
TRANSACTIONS WITH RELATED
PERSONS
Review, Approval, or Ratification of Transactions with Related
Persons
Selective has a written Related Person Transactions Policy and Procedures
(the “Related Person Policy”). The Related Person Policy defines “Related Person Transactions” as any transaction,
arrangement, or relationship in which Selective or any of its subsidiaries was, is, or will be a participant and the amount involved exceeds
$20,000, and in which any “Related Person” had, has, or will have a direct or indirect interest. A “Related Person”
under the Related Person Policy is generally: (i) any director, executive officer, or nominee to become director of Selective or
an immediate family member of any such person; (ii) a beneficial owner of more than 5% of Selective’s common stock or an immediate
family member of any such beneficial owner; and (iii) any firm, corporation, or other entity in which any person included in (i) or
(ii) is employed or is a general partner or principal or in a similar position or in which such person is a 5% or greater beneficial
owner.
Under the Related Person Policy, the Audit Committee (or Chairperson
of the Audit Committee if between meetings) must approve Related Person Transactions. In its review, the Audit Committee considers all
available relevant facts and circumstances of the proposed transaction, including (i) the benefits to Selective, (ii) the impact
on a director’s independence, (iii) the availability of other sources for comparable products and services, (iv) the terms
of the transaction, and (v) the terms available to unrelated third parties or employees generally. No Audit Committee member may
participate in any review, consideration, or approval of any Related Person Transaction in which such director or any of their immediate
family members is the Related Person. The Audit Committee only approves Related Person Transactions that it considers are in, or not inconsistent
with, the best interests of Selective and its stockholders.
William M. Rue
Director William M. Rue is Chairman, and owns more than 10% of the
equity, of Rue Holding Company, which owns 100% of Chas. E. Rue & Son, Inc., t/a Rue Insurance, a general independent retail
insurance agency (“Rue Insurance”). Rue Insurance has been appointed as a distribution partner of Selective’s insurance
subsidiaries since 1928, on terms and conditions similar to those of the other distribution partners of Selective’s insurance subsidiaries,
and includes the right to: (i) receive commissions for policies placed; and (ii) participate in the Amended and Restated Selective
Insurance Group, Inc. Stock Purchase Plan for Independent Insurance Agencies (2010), Amended and Restated as of February 1,
2017. Mr. Rue has two children who are employed by Rue Insurance: a daughter, who owns less than 10% of the equity of Rue Holding
Company; and a son, who serves as president of Rue Insurance and owns more than 10% of the equity of Rue Holding Company.
In
2022, Rue Insurance placed insurance policies for its customers and itself with Selective’s insurance subsidiaries and was paid
standard market commissions, including supplemental commissions, of $2.7 million on direct premiums written of $14.3 million. All
contracts and transactions with Rue Insurance were consummated in the ordinary course of business on an arm’s-length basis. For
additional information regarding Mr. Rue, see the section entitled, “Information about Proposal 1 – Director Nominees”
of this Proxy Statement.
The Selective Insurance Group Foundation
In 2005, we established a private foundation, now named The Selective
Insurance Group Foundation (the “Foundation”), under Section 501(c)(3) of the Internal Revenue Code of 1986, as
amended (the “Code”). The board of directors of the Foundation is comprised of some of the officers of Selective and its insurance
subsidiaries. We made $0.3 million in charitable contributions to the Foundation in 2022.
BlackRock
BlackRock,
a leading publicly traded investment management firm, has purchased our common shares in the ordinary course of its investment business
and has previously filed Schedules 13G/A with the SEC. On January 23, 2023, BlackRock filed a Schedule 13G/A reporting beneficial
ownership, as of December 31, 2022, of 11.8% of our outstanding common stock. In connection with purchasing our common shares,
BlackRock filed the necessary filings with insurance regulatory authorities. On the basis of those filings, BlackRock is deemed not to
be a controlling person for the purposes of applicable insurance law.
We are required to disclose related-party information for our transactions
with BlackRock. BlackRock is highly regulated, serves its clients as a fiduciary, and has a diverse platform of active (alpha) and index
(beta) investment strategies across asset classes that enables it to tailor investment outcomes and asset allocation solutions for clients.
BlackRock also offers the BlackRock Solutions® investment and risk management technology platform, Aladdin®,
risk analytics, advisory, and technology services and solutions to a broad base of institutional and wealth management investors. We incurred
expenses related to BlackRock for services rendered of $1.8 million in 2022. Amounts payable for such services, at December 31, 2022,
were $0.8 million.
As
part of our overall investment diversification, we invest in various BlackRock funds from time to time. These funds accounted for less
than 1% of our invested assets, at December 31, 2022. During 2022, with regard to BlackRock funds, we (i) purchased $18.5 million
in securities, (ii) sold $32.3 million in securities, (iii) recognized net realized and unrealized losses of $6.9 million,
and (iv) recorded $1.8 million in income. There were no amounts payable on the settlement of these investment transactions at December 31,
2022.
Our pension plan’s investment portfolio contained investments
in BlackRock funds of $120.1 million, at December 31, 2022. During 2022, with regard to BlackRock funds, our pension plan (i) purchased
$56.4 million in securities, (ii) sold $65.7 million in securities, and (iii) recorded net investment losses of $80.5 million.
In addition, our employee deferred compensation plan and defined contribution plan may offer our employees the option to invest in various
BlackRock funds. All contracts and transactions with BlackRock were consummated in the ordinary course of business on an arm’s-length
basis.
Vanguard
Vanguard, one of the world’s largest investment management companies,
has purchased our common shares in the ordinary course of its investment business and has previously filed Schedules 13G/A with the SEC.
Vanguard offers low-cost mutual funds and exchange-traded funds, as well as other investment-related services. On February 10, 2023,
Vanguard filed a Schedule 13G/A reporting beneficial ownership of 10.03% of our common stock as of January 31, 2023. In connection
with purchasing our common shares, Vanguard filed the necessary filings with insurance regulatory authorities. On the basis of those filings,
we do not expect Vanguard to be deemed a controlling person for the purposes of applicable insurance law.
As part of our overall investment diversification, we may invest in
various Vanguard funds from time to time. These funds accounted for less than 1% of our invested assets, at December 31, 2022. During
2022, with regard to Vanguard funds, we (i) purchased $3.5 million in securities, (ii) sold $125.2 million, (iii) recognized
net realized and unrealized losses of $10.4 million, and (iv) recorded $4.7 million in income. There were no amounts payable on
the settlement of these investment transactions, at December 31, 2022. Our deferred compensation plan offers our employees investment
options based on the notional value of various Vanguard funds. Our defined contribution
plan offers our employees the option to invest in a Vanguard fund. All transactions with Vanguard are consummated in the ordinary course of business on an arm’s-length basis.
Director Independence
Our
securities are listed on Nasdaq, and we use the standards of “independence” prescribed by rules set forth by Nasdaq.
Under Nasdaq rules, a majority of a listed company’s board of directors must be comprised of independent directors. Under Nasdaq
rules, a director will only qualify as an “independent director” if, in the opinion of that company’s board of directors,
that person does not have a relationship that would interfere with the exercise of independent judgment in carrying out a director’s
responsibilities. Our Board of Directors has determined that all current directors and director nominees1 are independent
under applicable Nasdaq and SEC rules and regulations – except our CEO, Mr. Marchioni, and Mr. Rue.2
In making its determination, the Board considered disclosures each director made related to various transactions, relationships, or arrangements
involving Selective. Disclosures by the following four directors required analysis:
John
C. Burville: In determining that Mr. Burville is an independent director, the Board considered that, during 2022, Mr. Burville’s
daughter was an analyst for AXA XL Bermuda (“AXA”), which, with its subsidiaries, has a long-standing commercial relationship
with our insurance subsidiaries. The Board determined that the commercial relationship is not material principally because (i) our
payments to AXA were approximately 0.002% of its 2022 consolidated gross revenues, and (ii) neither Mr. Burville nor his daughter
has any involvement with these transactions. Accordingly, the Board determined that this arrangement does not affect Mr. Burville’s
independence.
Terrence
W. Cavanaugh: In determining that Mr. Cavanaugh is an independent director, the Board considered that Mr. Cavanaugh’s
son is employed as Director, Corporate Risk and Broking of Willis Towers Watson (“WTW”), which has commercial relationships
with our insurance subsidiaries and employee benefit plans. The Board has determined that these commercial relationships are not material
because (i) the payments made were approximately 0.046% of WTW’s 2022 consolidated gross revenues, (ii) Mr. Cavanaugh’s
son had no involvement with the transactions with WTW, and (iii) the amount of revenue generated for WTW through these arrangements
is not material to WTW. Accordingly, the Board determined these arrangements do not affect Mr. Cavanaugh’s independence.
H.
Elizabeth Mitchell: In determining that Ms. Mitchell is an independent director, the Board considered that she serves
as an advisor on the reinsurance strategy of Hudson Structured Capital Management Ltd. (“HSCM”). In connection with a previously
disclosed $5 million commitment to HSCM Ventures Fund 2 LP (the “HSCM Fund”), in 2022, Selective contributed approximately
$1.27 million. HSCM manages the HSCM Fund through its InsurTech strategy. The Board has determined that this commercial relationship is
not material, principally because (i) Ms. Mitchell is not actively involved with the HSCM Fund or its InsurTech strategy and
receives no material direct or indirect compensation from the HSCM Fund, and (ii) the relative insignificance of these transactions
for HSCM and us.
In May 2022, Ms. Mitchell was appointed to the board of directors
of the Principal Financial Group (“Principal”). In connection with Principal’s recent acquisition of Wells Fargo’s
trust business, bank accounts for our deferred compensation plan and certain state deposit bonds were transferred to the Principal. Ms. Mitchell
had no involvement with the establishment of the bank accounts or the procurement of the state deposit bonds. In 2022, the total fees
associated with these arrangements were $13,750. Accordingly, the Board determined that Ms. Mitchell’s relationship with the
Principal does not affect her independence.
The Board also considered that Ms. Mitchell’s brother is
Senior Director, Global Services & Customer Operations for Servicenow, Inc. (“Servicenow”). At the recommendation
of, and through, one of our information technology vendors, we purchased software licenses and related software support services of Servicenow.
The total amounts paid to the recommending vendor for Servicenow-related products and services in 2022 was approximately $504,000, which
is less than 0.01% of Servicenow’s 2022 total revenues. As neither Ms. Mitchell nor her brother
1 The Board determined that each of the following current
directors are independent: Mses. Bacus, Mitchell, and Nicholson and Messrs. Aijala, Burville, Cavanaugh, Coaxum, Doherty, McCarthy, Mills,
Morrissey, Scheid, Thebault, and Urban. The Board determined that each of the following director nominees are independent: Mses. Bacus,
Mitchell, and Nicholson and Messrs. Aijala, Cavanaugh, Coaxum, Doherty, McCarthy, Mills, Scheid, Thebault, and Urban.
2 For a description of the transactions, relationships,
or arrangements related to Mr. Rue, see the section entitled, “Transactions with Related Persons.”
had any involvement with these transactions, and they are
immaterial, the Board determined that these transactions do not affect Ms. Mitchell’s independence.
Cynthia
Nicholson: In determining that Cynthia Nicholson is an independent director, the Board considered that she is a managing member
of Band of Sisters, LLC. Ms. Nicholson presented at two Selective events for no compensation; however, we purchased copies of a
book published by Band of Sisters, LLC and distributed them to attendees at both events. The aggregate amount paid for the books was
approximately $2,200. Ms. Nicholson receives a percentage of this amount. Given these transactions’ nature and immateriality,
the Board determined that these transactions do not affect Ms. Nicholson’s independence.
All members of the Audit Committee, the Corporate Governance and Nominating
Committee, and the Salary and Employee Benefits Committee are independent directors under applicable Nasdaq and SEC rules and regulations.
CORPORATE GOVERNANCE
Corporate Governance Guidelines
Selective has established Corporate Governance Guidelines that are
available for review on Selective’s website at www.selective.com/investors/corporate-governance.
Majority Voting for Directors in Uncontested Elections
Selective’s Board of Directors has adopted a majority voting
policy for uncontested elections of incumbent directors. To be reelected to the Board, an incumbent director must receive a majority
vote by stockholders, unless the Corporate Secretary determines that the number of director nominees exceeds the number of directors
to be elected. If any incumbent director nominee receives less than a majority of votes cast, the following process must be followed:
| ◾ | The
incumbent director must tender their resignation to the Chairperson of the Board within five
days following the certification of the election results. |
| ◾ | Within
45 days after the stockholders’ meeting, the Corporate Governance and Nominating Committee
will make a recommendation to the Board regarding whether to accept the director’s
resignation. In determining and making its recommendation to the Board, the Corporate Governance
and Nominating Committee may consider any factors it deems relevant and a range of possible
alternatives concerning the director’s tendered resignation. |
| ◾ | Within
90 days after the stockholders’ meeting, the Board of Directors shall formally act
on the Corporate Governance and Nominating Committee’s recommendation and, within four
business days of doing so, shall file with the SEC a Current Report on Form 8-K, disclosing
its decision, the rationale for its decision, and the process it followed in reaching the
decision to accept or reject the director’s tendered resignation. |
| ◾ | Any
incumbent director who fails to receive a majority of votes cast and tenders a resignation
may not participate or vote in the deliberations of the Corporate Governance and Nominating
Committee or the Board related to their resignation. If every member of the Corporate Governance
and Nominating Committee fails to receive a majority vote at the same stockholders’
meeting, then the independent directors who received a majority vote and any independent
directors who did not stand for reelection must appoint from themselves an ad hoc Board
committee to consider the tendered resignations and make a recommendation to the Board whether
it should accept them. If fewer than three directors would constitute an ad hoc committee,
the entire Board (other than the individual director whose resignation is being considered)
will make the determination to accept or reject the director’s resignation. |
Board Refreshment
While the Board recognizes the importance of Board refreshment,
it does not believe it should limit the number of terms for which an individual may serve as a director. Directors who have served on
the Board for an extended period of time have institutional knowledge and are able to provide valuable insight into the operations and
future of Selective based on their experience with and understanding of Selective’s history, policies, and objectives. The Board
believes that, as an alternative to term limits, it can ensure that the Board continues to evolve and adopt new viewpoints through the
evaluation and nomination process. As an additional means to support Board refreshment,
we have recently lowered our mandatory retirement age from 75
to 72. Accordingly, our Corporate Governance Guidelines and By-Laws now provide that no person who has attained their 72nd
birthday is eligible for election as a director.
Overboarding: Limits on Outside Board
Memberships
The Board recognizes that a director’s ability to fulfill their
responsibilities as a member of the Board can be impaired if the director serves on numerous other boards or board committees. Accordingly,
our Corporate Governance Guidelines limit the number of public company directorships that a director may hold. Pursuant to our Corporate
Governance Guidelines, directors are not permitted to serve on the boards of more than four public companies (including Selective’s
Board); provided that any director employed as a chief executive officer of a public company is not permitted to serve on the boards
of more than two public companies (including Selective’s Board). Additionally, a director must advise the Lead Independent Director,
the Chairperson of the Board, or the Chairperson of the Corporate Governance and Nominating Committee before accepting an invitation
to serve on another public or private company board, so that the Board can confirm that no actual or potential conflicts exist and that
the proposed board service does not interfere with their duties and obligations as a director of Selective. Service on boards and board
committees of other companies must be consistent with our conflict of interest and related person transactions policies.
Board Meetings and Committees
The
Board of Directors held six meetings in 2022, and the independent directors met four times outside the presence of management.
All directors attended at least 75% of the aggregate number of Board and their respective committee meetings during 2022, with average
attendance over 95%. While we do not have a formal policy on director attendance at annual meetings, Selective expects all directors
to attend annual meetings of stockholders. All then-serving directors virtually attended the 2022 Annual Meeting of Stockholders.
The Board has five standing committees:
| ◾ | Corporate
Governance and Nominating Committee; |
| ◾ | Salary
and Employee Benefits Committee; |
| ◾ | Executive
Committee; and |
The Corporate Governance and Nominating Committee is responsible for
evaluating and making recommendations to the Board concerning the appointment of directors to the five committees and the selection of
committee chairpersons. The Board generally favors the periodic rotation of committee chairperson positions, but also recognizes that,
at times, it may not be in the best interest of Selective to change a Board committee chairperson position, such as when a director has
special knowledge or experience. It is anticipated that Board committee chairpersons will serve up to approximately five consecutive
years, on average, to facilitate rotation of committee chairpersons while preserving experienced leadership.
The following tables provide information on each of the five standing
committees:
| Audit Committee |
| Written
Charter is available on Selective’s website at www.selective.com/investors/corporate-governance |
2022
Meetings: 5 |
Responsibilities:
The Audit Committee assists the Board
in monitoring: (i) the integrity of the financial statements of Selective; (ii) the compliance by Selective with legal and regulatory
requirements and adopted ethical standards; (iii) the independence and qualifications of Selective’s independent auditors; and
(iv) the performance of the internal auditors and independent auditors. Specifically, the Audit Committee:
◾ Oversees
our annual audits and quarterly reviews of the financial statements.
◾ Monitors
the adequacy and effectiveness of our financial reporting process and systems of internal controls regarding finance, accounting,
and legal compliance.
◾ Reviews
and discusses with Selective’s management, Chief Audit Executive, and independent auditors Selective’s financial statements,
reports, and other information provided to the public and filed with the SEC, as well as critical accounting policies and practices
and critical audit matters.
◾ Prior
to its inclusion in any audited statutory financial statements, reviews the report prepared by management, assessing the effectiveness
of internal control over financial reporting and stating management's responsibility for establishing and maintaining adequate internal
control over financial reporting.
◾ Monitors
the activities of the Internal Audit Department and reviews and approves the Internal Audit Department’s budget, resources,
audit plan, and charter.
◾ Reviews
and concurs in the appointment, evaluation, replacement, reassignment, or dismissal of the Chief Audit Executive and the Chief Audit
Executive’s performance review and compensation awards.
◾ Discusses
significant financial risk exposures, including Selective’s loss and loss expense reserves, and the steps management has taken
to monitor, control, and report such exposures.
◾ Assists
the Board in overseeing our enterprise risk management function and discusses with management Selective’s major financial,
operational (including, without limitation, risks related to cybersecurity, information security, technology, and privacy and data
protection), or other risk exposures and steps management has taken to monitor and manage such exposures related to enterprise risk
management.
◾ Reviews,
at least annually, Selective’s information technology security program and reviews and discusses the controls around cybersecurity,
including plans to enhance the program’s effectiveness and Selective’s business continuity and disaster recovery plans
related to enterprise risk management.
◾ Oversees
and monitors climate change-related risks.
◾ Appoints
Selective’s independent registered public accounting firm and supervises the relationship between Selective and its independent
auditors, including reviewing their performance, making decisions about their compensation, retention, and removal, reviewing and
approving in advance their audit services and permitted non-audit services, and confirming the independence of the independent auditors.
◾ Oversees
Selective’s Related Person Transactions Policy and Procedures and reviews and approves proposed transactions.
◾ Oversees
procedures for the (a) receipt, retention, and treatment of complaints received by Selective regarding accounting, internal accounting
controls, or auditing matters, and (b) confidential, anonymous submissions by employees of Selective of concerns regarding questionable
accounting or auditing matters. |
| Director
Members: |
Independent |
| H.
Elizabeth Mitchell, Chairperson |
Yes |
| Ainar
D. Aijala, Jr. |
Yes |
| John
C. Burville |
Yes |
| Terrence
W. Cavanaugh |
Yes |
| Robert
Kelly Doherty |
Yes |
| Thomas
A. McCarthy |
Yes |
| John
S. Scheid, Designated Audit Committee financial expert |
Yes |
| Philip
H. Urban |
Yes |
| Corporate
Governance and Nominating Committee |
| Written
Charter is available on Selective’s website at www.selective.com/investors/corporate-governance |
2022
Meetings: 4 |
| Responsibilities: |
| The
Governance and Nominating Committee’s purposes are to: (i) establish criteria for the selection of directors and to identify
and recommend to the Board the nominees for director in connection with Selective’s annual meeting of stockholders; (ii) advise
the Board with respect to the Board composition, procedures, and committees; (iii) identify and recommend to the Board the members
of the Board to serve on the Board’s committees; (iv) oversee the evaluation of the Board; (v) oversee Selective’s
corporate governance policies and procedures; and (vi) oversee management’s activities to address ESG issues and trends.
Specifically, the Governance and Nominating Committee: |
| |
| ◾ |
Reviews
and assesses the adequacy of Selective’s Corporate Governance Guidelines and recommends changes to the Board. |
| ◾ |
Recommends
to the Board the directors to serve as members of the Board committees, chairpersons of the committees, and Lead Independent Director. |
| ◾ |
Advises
the Board regarding Board composition, succession, procedures, and committees. |
| ◾ |
Reviews
and updates Selective’s Code of Conduct and reviews conflicts of interest or other issues that may arise under the Code of
Conduct involving Selective’s officers or directors. |
| ◾ |
Oversees
the self-evaluations of the Board and its committees. |
| ◾ |
Oversees
management’s activities to advance corporate sustainability and corporate social responsibility, and addresses ESG-categorized
matters and trends, including, among others: |
| |
◾ |
Reviewing
and discussing with management significant corporate sustainability, corporate social responsibility, and ESG-categorized matters,
trends, opportunities, and risks; |
| |
◾ |
Reviewing and
discussing with management Selective’s sustainability, social responsibility, and ESG-categorized strategies and activities; |
| |
◾ |
Overseeing the
development and use of tailored sustainability, social responsibility, and ESG-categorized measurement and tracking metrics; |
| |
◾ |
Reviewing Selective’s
sustainability, social responsibility, and ESG-categorized disclosures prior to public dissemination; |
| |
◾ |
Overseeing Selective’s
philanthropic strategies; and |
| |
◾ |
Reporting key
sustainability, corporate social responsibility, and ESG-categorized activities and trends to the Board on a regular basis. |
| ◾ |
Makes
a recommendation to the Board on whether to accept an incumbent director’s tendered resignation if the director fails to receive
a majority vote in an uncontested election of directors. |
| ◾ |
Reviews
all proposals submitted by stockholders for inclusion in Selective’s proxy statement for its annual meeting of stockholders
and results of stockholder advisory votes and recommends to the Board how to respond to such proposals and advisory votes. |
| Director
Members: |
Independent |
| Cynthia
S. Nicholson, Chairperson |
Yes |
| Lisa
Rojas Bacus |
Yes |
| Wole
C. Coaxum |
Yes |
| H.
Elizabeth Mitchell |
Yes |
| Michael
J. Morrissey |
Yes |
| J.
Brian Thebault |
Yes |
| Philip
H. Urban |
Yes |
| Salary
and Employee Benefits Committee |
| Written
Charter is available on Selective’s website at www.selective.com/investors/corporate-governance |
2022
Meetings: 7 |
| Responsibilities: |
| The
Salary and Employee Benefits Committee’s purposes are to: (i) oversee and review Selective’s compensation and employee
benefit plans and practices, including its executive officer and employee compensation, incentive compensation, and equity-based
plans; (ii) review the performance and development of Selective’s management in achieving corporate goals and objectives;
(iii) assure that Selective’s executive officers are compensated effectively in a manner consistent with Selective’s
financial performance, strategy, competitive practices, and regulatory requirements; (iv) review and discuss with management
Selective’s Compensation Discussion and Analysis to be included in Selective's annual proxy statement or Annual Report on Form 10-K
filed with the SEC; and (v) prepare the Compensation Committee Report consistent with SEC rules. Specifically, the Salary and
Employee Benefits Committee: |
| |
| |
◾ |
Reviews
periodic updates from management on initiatives and progress in the area of human capital management, including a review of the diversity
of the company’s workforce and DE&I initiatives, programs, and progress. |
| |
◾ |
Reviews
annually and approves corporate goals and objectives relevant to executive officer compensation and evaluates the performance of
the CEO and the other executive officers in light of those goals. |
| |
◾ |
Reviews
annually and approves Selective’s compensation strategy for employees. |
| |
◾ |
Reviews
annually and determines the individual elements of total compensation for the CEO and other executive officers. |
| |
◾ |
Reviews
matters related to the CEO and executive officers’ performance, compensation, succession planning, and professional development. |
| |
◾ |
Reviews
and monitors management development plans and activities, including periodically reviewing with the CEO the plans for succession
for Selective’s CEO, other executive officers, and other key employees, including plans for succession in the event of an emergency,
and making recommendations to the Board with respect to the selection of appropriate individuals to succeed to these positions. |
| |
◾ |
Reviews
and approves compensation for non-employee directors. |
| |
◾ |
Reviews
the independence and engagement of the independent executive compensation consultant. |
| |
◾ |
Considers
and approves any executive officer compensation plan objectives related to ESG, including with respect to human capital management
and DE&I. |
| |
◾ |
Reviews
and considers the results of any advisory vote on executive officer compensation (“say-on-pay” vote) and the results
of any advisory vote on the frequency of say-on-pay votes (“say-on-frequency” votes). |
| |
◾ |
Provides
recommendations to the Board on compensation-related proposals to be considered at Selective’s annual meeting, including the
say-on-pay vote and the say-on-frequency vote. |
| |
◾ |
Assists
the Board in the Board’s oversight of Selective’s hedging and pledging policies applicable to Selective’s executive
officers and directors. |
| |
| The
Salary and Employee Benefits Committee may form subcommittees for any purpose that it deems appropriate and may delegate to such
subcommittees such power and authority as the Salary and Employee Benefits Committee deems appropriate; provided, however, that (i) no
subcommittee shall have fewer than two members and (ii) the Salary and Employee Benefits Committee shall not delegate to a subcommittee
any power or authority required by any law, regulation, or listing standard to be exercised by the Salary and Employee Benefits Committee
as a whole. To the extent permitted by applicable laws, rules, and regulations and Selective’s incentive compensation plans
and equity-based compensation plans, the Salary and Employee Benefits Committee may delegate to management the administration of
such incentive compensation plans and equity-based compensation plans for persons not subject to the reporting requirements of Section 16
of the Exchange Act. Delegation shall not limit or restrict the Salary and Employee Benefits Committee on any delegated matter, and
any related committee action shall not limit or restrict the Salary and Employee Benefits Committee’s future actions. |
| |
| Salary
and Employee Benefits Committee |
| Director
Members: |
Independent |
| Michael
J. Morrissey, Chairperson |
Yes |
| Lisa
Rojas Bacus |
Yes |
| John
C. Burville |
Yes |
| Terrence
W. Cavanaugh |
Yes |
| Stephen
C. Mills |
Yes |
| Cynthia
S. Nicholson |
Yes |
| J.
Brian Thebault |
Yes |
| Philip
H. Urban |
Yes |
| Executive
Committee |
| No
written charter. Responsibilities defined in By-Laws. |
2022
Meetings: 2 |
Responsibilities:
◾ Authorized
by Selective’s By-Laws to exercise the Board’s powers and authority in the management of Selective’s business and
affairs between meetings of the Board.
◾ Has
the right and authority to exercise all the powers of the Board on all matters brought before it, except concerning Selective’s
investments or as prohibited by law.
|
| Director
Members: |
Independent |
| John
J. Marchioni, Chairperson |
No |
| Robert
Kelly Doherty |
Yes |
| Thomas
A. McCarthy |
Yes |
| H.
Elizabeth Mitchell |
Yes |
| Michael
J. Morrissey |
Yes |
| Cynthia
S. Nicholson |
Yes |
| John
S. Scheid |
Yes
|
| Finance
Committee |
| Written
Charter is available on Selective’s website at www.selective.com/investors/corporate-governance |
2022
Meetings: 4 |
| Responsibilities: |
| The
Finance Committee reviews and makes recommendations to the Board concerning certain of Selective’s financial affairs and policies,
including, without limitation, investments and investment policies and guidelines, financial planning, capital structure and management,
dividend policy and dividends, share repurchases, and strategic plans and transactions. Specifically, the Finance Committee: |
| |
| |
◾ |
Reviews
and approves changes to Selective’s investment policies, strategies, and programs. |
| |
◾ |
Reviews
investment transactions made on behalf of Selective and reviews the performance of Selective’s investment portfolio and external
investment managers. |
| |
◾ |
Discusses
Selective’s major investment risk exposures with management, including the steps management has taken to monitor and manage
such exposures. |
| |
◾ |
Reviews
Selective’s capital structure and reviews and makes recommendations to the Board about Selective’s financial policies
and corporate finance matters, including (i) financial planning, cash flow management, fiscal and treasury policies, and financial
risk assessment and management, (ii) the issuance, retirement, or repurchase of debt, equity, and other securities, and (iii) other
transactions or financial issues that management desires the Finance Committee to review. |
| |
◾ |
Reviews
matters relating to the investment portfolios of the benefit plans of Selective and its subsidiaries, including the administration
and performance of such portfolios. |
| |
◾ |
Reviews
Selective’s reinsurance program, including structure, pricing, and financial strength of participating reinsurers of the program. |
| |
◾ |
Appoints
members of Selective’s Management Investment Committee. |
| |
◾ |
Reviews
and makes recommendations to the Board regarding the payment of dividends. |
| |
◾ |
Oversees
management’s incorporation of ESG considerations into their due diligence and investment decision-making process, as appropriate. |
| |
|
|
| Director Members: |
Independent |
| Thomas A. McCarthy, Chairperson |
Yes |
| Ainar D. Aijala, Jr. |
Yes |
| Wole C. Coaxum |
Yes |
| Robert Kelly Doherty |
Yes |
| Stephen C. Mills |
Yes |
| Michael J. Morrissey |
Yes |
| William M. Rue |
No |
| John S. Scheid |
Yes |
Board Leadership Structure
Our two principal Board leadership positions are: (i) Board Chairperson;
and (ii) Lead Independent Director.
As
set forth in our Corporate Governance Guidelines, the Board does not require the separation of the offices of the Board Chairperson
and the CEO. Instead, the Board regularly evaluates and decides whether the same person should hold the offices of Board Chairperson
and CEO. Our Board has determined that it is appropriate and in the best interests of Selective and its stockholders for Mr. Marchioni
to serve as both CEO and Board Chairperson given his institutional and industry knowledge. Our Board believes that our current leadership
structure fosters responsive and strong leadership for Selective.
As discussed in greater detail below, our current governance structure
establishes a dynamic leadership role for the Lead Independent Director, which, together with independent committee leadership, provides
a meaningful counterbalance to the CEO Chairperson and maintains independent and effective oversight of management.
CEO and Board Chairperson Responsibilities
When the CEO serves as the Board Chairperson, as is the current structure,
they are responsible for oversight and guidance of Selective’s management and overall corporate performance. The CEO Chairperson
leads the Board and facilitates intra-Board communication in setting Selective’s strategies, vision, mission, and long-term and
short-term goals and fosters ethical and responsible corporate culture and decision-making throughout Selective. Specific duties of a
Board Chairperson include:
| ◾ | Consistent
with the Corporate Governance Guidelines, coordinating with the other directors, the Lead
Independent Director, and management in preparation of Board and Board committee agendas
and meeting materials; |
| ◾ | Presiding
over all Board and stockholder meetings; |
| ◾ | Recommending
actions to improve the effectiveness and performance of the Board; |
| ◾ | In
conjunction with the Lead Independent Director, serving as a spokesperson for the Board and
meeting with stockholders as required; and |
| ◾ | Assisting
the Lead Independent Director and Chairperson of the Corporate Governance and Nominating
Committee in recruiting potential candidates to the Board and in recommending appointments
to various Board committees. |
Lead Independent Director Responsibilities
Our
Corporate Governance Guidelines provide that when the Board does not have an independent Chairperson, the Board will appoint an independent
director to be the Lead Independent Director. Robert Kelly Doherty is presently our Lead Independent Director and has served in
that role since May 2022. The Lead Independent Director is responsible for coordinating the activities of the independent directors
and performing various other duties, including:
| ◾ | Presiding
at all meetings of independent directors, as appropriate, and providing prompt feedback to
the Chairperson and/or CEO; |
| ◾ | Serving
as a point of contact for Board members to raise issues that they may not be able to readily
address with the Chairperson and/or CEO; |
| ◾ | Ensuring
that matters of importance to the directors are placed on the Board’s meeting agendas; |
| ◾ | Assuring
that the Chairperson and/or CEO understand the Board’s views on all critical matters; |
| ◾ | Assuring
that the Board understands the Chairperson’s and/or CEO’s views on all critical
matters; and |
| ◾ | Calling
executive sessions of the independent directors and serving as chairperson of such meetings. |
It is anticipated that the Lead Independent Director will serve up
to approximately five consecutive years to facilitate the rotation of the Lead Independent Director position while maintaining experienced
leadership; however, the Board may extend such tenure in accordance with good governance practices, including to accommodate the transition
of a new CEO or new directors or to provide continuity to further strategic objectives or address external factors affecting Selective.
Board
and Committee Multi-Step Evaluation Process
The Corporate Governance and Nominating Committee conducts annual
self-assessments and evaluates its effectiveness and the effectiveness of the full Board and its other committees. The current process
is outlined below:
| |
1
Committee Self-Evaluations |
|
|
| |
|
|
|
| |
● The Corporate Governance and Nominating Committee conducts an annual self-evaluation of the Board
and its committees to assess and enhance their effectiveness. A questionnaire is posted on a secure website for all directors and is
used as a reference tool for self-evaluation discussions conducted by the Lead Independent Director and the Corporate Governance and
Nominating Committee Chairperson. |
| |
|
|
|
| |
2
One-on-One Discussions with Lead Independent Director and Corporate Governance and Nominating Committee Chairperson |
|
| |
|
|
| |
● The Lead Independent Director and Corporate Governance and Nominating Committee Chairperson conduct
separate, one-on-one interviews with each Director to discuss feedback regarding key areas such as: |
| |
|
|
|
| |
● Director
and Board Oversight
● Strategic and Operational Matters
● Board/Committee Composition and Structure
● Board Knowledge and Understanding |
● Board Engagement/Communication
● Meeting
Conduct and Board Materials
● Governance
|
| |
|
|
|
| |
3
Board Closed Session |
|
| |
|
|
| |
● The results of the self-evaluations are discussed with the Corporate Governance and Nominating
Committee and full Board in their executive sessions. Appropriate actions are taken to address results. |
Continuing Education for Directors
Selective
provides continuing education opportunities for directors, including a mix of in-house and third-party presentations and programs. We
will provide reimbursement for reasonable expenses incurred by a director in connection with continuing education courses or programs
related to Board service.
SUSTAINABILITY, ESG,
AND HUMAN CAPITAL
Selective’s
Sustainability and ESG Oversight and Management
The
Board delegated oversight of ESG to the Corporate Governance and Nominating Committee. Risks related to ESG
are allocated among the Board’s committees consistent with their charters, as outlined above. Management’s
Sustainability Committee (discussed below) provides quarterly updates to the Corporate Governance and Nominating
Committee on ESG-related strategic initiatives. Corporate Governance and Nominating Committee members offer
valuable insights based on their ESG-related knowledge and experience. The Corporate Governance and Nominating
Committee regularly reports to the full Board on ESG matters.
The executive
management team oversees the organization’s ESG efforts. The Sustainability Committee provides detailed quarterly reports on ESG-related
initiatives to the executive management team, which provides feedback and oversight on those initiatives.
The Sustainability
Committee is a chartered management committee, comprised of leaders and employees from the Underwriting, Claims, Legal, Finance, Risk,
Internal Audit, and Human Resources Departments. An ESG Manager coordinates its activities. The Sustainability Committee is responsible
for developing plans and objectives for ESG-related initiatives and making quarterly progress reports to executive leadership and the
Corporate Governance and Nominating Committee. The Sustainability Committee’s primary purpose is to assist management in developing
strategies and goals to integrate sustainability into the business objectives of the organization.
|
 |
Sustainability, Corporate Social Responsibility, and ESG Overview
We strive to maintain a high level of ethics and integrity in our
business practices. We are committed to understanding and mitigating risk, serving our customers responsibly, enabling our employees’
professional success and work/life balance, and helping the communities in which we live, work, and serve, while being environmentally
responsible. In 2022, we continued to drive ESG initiatives, overseen by management’s Sustainability Committee, and published our
inaugural Task Force on Climate-related Financial Disclosures (TCFD) report. We believe these initiatives support our goal of rewarding
our stockholders with above-market operating performance.
Helping Our Customers:
We provide customers and distribution partners with services that
help mitigate risks, offering a wide range of tools and technologies. Our Claims team reacts promptly to help customers recover after
experiencing loss. As part of our commitment to delivering a superior omni-channel customer experience, we electronically disseminate
proactive messages to our customers, helping them prepare for weather events. Our customer satisfaction scores have been consistently
strong, with an overall satisfaction score of 8.34 on a 10-point scale for 2022.
Developing Our Employees:
A core strategic priority is to ensure we have a highly engaged and
aligned team of high-caliber employees. We continue to invest significantly in employee training programs and prioritize development
plans to position our talent for future opportunities and leadership. See below under the section entitled, “Human Capital”
for further information about efforts to drive this initiative.
Advancing Diversity, Equality, and Inclusion (DE&I):
We believe in the importance of increasing employee diversity at all
levels in our organization. While we believe that women and racial and ethnic minorities constitute a meaningful part of our overall
workforce, we strive to increase representation in senior organizational levels. See below under the section entitled, “Human Capital”
for further information about efforts to drive this initiative.
Supporting Our Communities:
Through the Foundation we donate to non-profit organizations that
promote civic responsibility, support home, auto, and business safety, and provide health and human services. The Foundation’s
mission is to empower safe, sustainable, just, and diverse communities where we live, work, and serve:
| ◾ | Safe
– organizations that support disaster relief and help protect the public; |
| ◾ | Sustainable
– organizations that support the environment, education, and people in need; |
| ◾ | Just
– organizations that support social welfare and human services; and |
| ◾ | Diverse
– organizations that support social justice, equity, and inclusion. |
In 2022, the Foundation donated approximately $950,000 to local and
nationwide charities.
Selective invests in indirect state and federal incentives to finance
programs with social benefits or objectives. For example, Selective has invested in low-income housing tax credits, historic property
credits, rural investment programs, economic redevelopment credits, renewable energy credits, and scholarship tax credit programs. Selective
has been participating in and making significant investments in these types of programs since 2008.
Managing Climate Risk:
As a property and casualty insurance company, we understand that climate
change creates greater unpredictability of weather-related loss frequency and severity. This poses a long-term risk to the lives and
livelihoods of our customers and our business. Our efforts to help address climate change and its associated impacts are centered on
(i) prudent oversight and management of catastrophe risk exposure, (ii) helping our customers through responsive claims handling,
safety management, and proactive weather alerts, (iii) allocating capital away from specific environmentally-hazardous classes through
underwriting and investment initiatives, and (iv) reducing our carbon footprint. Understanding and helping mitigate climate change
perils for our business and customers is core to our operations and strategy. We believe these efforts (i) contribute to our corporate
responsibility to help mitigate climate change, and (ii) will reward our stockholders with sustained superior financial and operating
performance over the long term.
In addition to mitigating insurance operations
and investment risk, we:
| ◾ | Have
robust plans to ensure operational continuity if we suffer unforeseen or catastrophic events.
We have business continuity plans for our key data processing facility (i.e., the Disaster
Recovery Plan), the leadership team (i.e., the Executive Crisis Management Plan), and significant
operational areas. We review and update these plans at least annually, and conduct other
testing, including “tabletop” exercises and planned hands-on tests; |
| ◾ | Track
our Scope 1 and Scope 2 carbon emissions; however, as an insurance holding company, we are
not a meaningful greenhouse gas emitter relative to entities in many other industries. Our
Scope 1 emissions include consumption of natural gas, diesel, refrigerant, and fuel usage
under our fleet program, and our Scope 2 emissions comprise our electricity usage; |
| ◾ | Built
ground-mount and garage-canopy solar photovoltaic facilities at our corporate headquarters.
The facilities are expected to generate approximately five million kWh of electricity annually,
and we sell the solar renewable energy credits to others. Since we sell these credits, our
interests in renewable energy production do not reduce our greenhouse gas emissions; however,
they do contribute to the production of cleaner energy. |
| ◾ | We continue to reduce our carbon emissions over the long term and are implementing several initiatives at our corporate headquarters
to lower our environmental impact, including by: |
| ◾ | Upgrading our corporate headquarters building management system, which should reduce heating and cooling natural gas consumption; |
| ◾ | Transitioning our fleet from gasoline to hybrid vehicles over the next three to five years; |
| ◾ | Installing electric vehicle charging stations for employee use; and |
| ◾ | Migrating our information technology systems from our corporate headquarters' data center to the cloud. |
The table below outlines strategically important ESG categories and
our related actions and areas of focus:
| ENVIRONMENTAL, SOCIAL, AND GOVERNANCE |
| ESG Category |
Highlights and Areas of Focus |
 |
Human Capital |
✓
Employment practices
✓
Professional training & development programs
✓
DE&I
initiatives
✓
Employee physical, financial, and emotional well-being |
 |
Community Engagement |
✓
Volunteerism and charitable giving
✓
Annual
donations through the Foundation
✓
Alignment
with philanthropic programs to help communities |
 |
Environment & Energy |
✓
Robust Enterprise Risk Management framework
✓
Do
not underwrite specific environmentally-hazardous risks related to production from coal mines, thermal coal plants, or oil sands extraction
because they are outside our underwriting appetite
✓
Reduction of energy and water consumption
✓
Recycling programs |
 |
Ethics & Compliance |
✓
Independent Board oversight
✓
Code of Conduct setting legal and ethical standards
✓
Whistleblower and compliance hotline
✓
Supplier Code of Conduct |
 |
Products & Services |
✓
Paying claims promptly
✓
Provide customers with risk mitigation solutions
✓
Coverage from flood perils
✓
Reducing environmental impact |
 |
Customer Privacy & Data Security |
✓
Data privacy and governance
✓
Robust cybersecurity programs
✓
Technology to safeguard information and systems
✓
Governance and controls |
 |
Responsible Investing |
✓
Consider ESG risk factors in management and oversight
✓
Beginning to incorporate ESG considerations into investment process |
| |
|
|
Human Capital
We recognize that developing and protecting
our human capital, and providing a mutually beneficial employee experience, complements and contributes to superior longer-term financial
performance. We are committed to maintaining a safe and inclusive workplace that promotes diversity and provides attractive benefits to
our approximately 2,520 employees. In 2022, we were:
| ◾ | Designated as a Great Place to Work CertifiedTM organization for the third year in a row; |
| ◾ | Recognized by DiversityJobs as one of its Top Diversity Employers showing continual dedication and commitment to establishing a diverse
workforce and culture; and |
| ◾ | Recognized by Forbes as one of “America's Best Mid-Size Employers.” |
We discuss our approach to (i) physical,
social, and financial well-being of our employees; (ii) talent development and employee retention; and (iii) DE&I more fully
below.
| ◾ | Physical, Social, and Financial Well-Being of our Employees: We invest significantly in our employees’ physical, social,
and financial well-being, which is essential to attracting and retaining the best talent. We are committed to fair pay and regularly analyze
and adjust compensation to ensure internal equity and external market alignment. We offer competitive financial benefit programs to support
the financial well-being of our employees and their families. Among the offerings are a 401(k) plan with non-elective and employer
matching contributions, an employee stock purchase plan allowing discounted stock purchases, and tuition reimbursement and student loan
repayment. Most employees are eligible to participate in our annual cash incentive program, funded and paid based on the achievement of
our financial and strategic objectives. Employees above certain levels are eligible to participate in our long-term, stock-based incentive
compensation program. We also offer a wide range of competitive and convenient health and wellness programs. To support our employees’
social well-being, we encourage connections with their colleagues and communities through various programs, such as paid time off for
volunteer work and matching charitable donations. |
| ◾ | Talent Development and Employee Retention: We invest significant time and resources in (i) training and development to
assist our employees in fulfilling their professional potential and having rewarding careers, and (ii) efforts to retain our best
talent and foster a positive work-life balance. We are committed to ongoing employee learning, personal growth, and continuous improvement.
Our employees have access to various live instructor-led training courses and over 26,000 online skills training courses and resources.
We also have leadership and talent development programs and initiatives at all levels of the organization. Examples include our (i) Next
Generation of Leaders program, which identifies early- and mid-career management for focused development opportunities that prepare them
for future senior leadership, (ii) RISE (Retain Include Support Engage) program, which is an accelerated professional development
program for diverse individual contributors interested in first-level management positions, and (iii) our Ignite College Internship
and Momentum Trainee programs, which provide collaboration and cross-functional events and experiences for interns and early career employees. |
Of
our 2,520 employees at December 31, 2022, 980 are normally home-based; 840 are in our regional offices; and the remainder are in
our corporate office. Our Flexible Work Location Policy permits most office-based employees to work remotely 60% of the time. Our
employee turnover rate in 2022 was approximately 15%. Employees with over 20 years of service represented approximately 16% of our workforce.
| ◾ | Diversity, Equity, and Inclusion (DE&I): We recognize that collaboration by employees with diverse backgrounds, ideas,
and experiences can foster innovation, improving operational performance, product and service development, customer experience, market
opportunities, and revenue. We have initiatives to increase representation and cultivate greater inclusion of people with different ethnicity,
race, age, sexual orientation, gender identities and expressions, and socio-economic backgrounds. Recent initiatives include: |
| ◾ | Increasing gender and racial diversity through our Next Generation of Leaders program; |
| ◾ | Sponsoring various employee resource groups for women, Black, LGBTQ+, and military and veteran employees; |
| ◾ | Introducing a professional development program focused on under-represented groups; |
| ◾ | Implementing business objectives tied to supporting and participating in DE&I initiatives; |
| ◾ | Enhanced hiring, retention, and promotion practices intended to increase diversity at all organizational levels, including expanding
university recruiting efforts to include historically Black colleges and universities; |
| ◾ | Partnering with the National African American Insurance Association for services and employee programming for our employee’s
use; and |
| ◾ | Adding new directors with diverse backgrounds, skills, experience, ethnicity, and race to our Board. |
As of December 31, 2022, women represented 58% of our
non-officer workforce and 33% of our officer workforce, as compared to 58% and 32% as of December 31, 2021, respectively. Increasing
the representation of women in first-level, middle, and senior management roles is a prioritized goal. Our ethnic diversity for officers
and non-officers is consistent with the national average for financial services, but our objective is to increase this representation
over time. Approximately 78% of our workforce was White as of December 31, 2022, compared to 80% as of December 31, 2021, and
22% of our workforce was Black, Latin, Asian, and/or other ethnically diverse, compared to 20% as of December, 31, 2021. We have a diverse
Board, with five of our director nominees self-identifying as part of one or more underrepresented groups.
RISK MANAGEMENT
Enterprise Risk Management
A high-functioning, effective Enterprise Risk Management (“ERM”)
program is best achieved when risk management is treated as an organizational cultural value that is the shared responsibility of every
employee. We have developed processes and tools that we believe support a risk management culture and create a robust organizational ERM
framework. We have also designed our compensation policies and practices, governance framework, and Board leadership structure to support
our overall risk appetite and strategy.
We use ERM as part of our governance and control process to take an
entity-wide view of our major risks and their potential impact. We designed our ERM framework to identify, measure, report, and monitor
our major risks and develop appropriate responses to support the successful execution of our business strategies.
Our
Board oversees our ERM process, and all Board committees oversee risks specific to their areas of supervision and report their activities
and findings to the entire Board. Management has formed an Executive Risk Committee (“ERC”) that is responsible for the holistic
monitoring and supervision of our risk profile and determining future risk management actions supporting our overall risk profile.
The ERC provides management oversight of our ERM function. The ERC relies on several management committees to analyze and manage specific
major risks, including the Emerging Risk Committee and the Underwriting Committee. At least quarterly, the ERC meets to review and discuss
various topics and the interrelation of our significant risks, including, without limitation, capital modeling results, capital adequacy,
risk metrics, emerging risks, and sensitivity analysis. The Chief Risk Officer reports to the Board or the appropriate Board committee
on the ERC’s activities, analyses, and findings, providing quarterly updates on specific risk metrics.
In addition, the Board receives regular updates on the strength of
our cyber risk control environment, emerging cyber threat issues, and the results of external assessments by outside security consultants.
Two of the Board's directors have earned cybersecurity oversight certifications from a corporate directors organization.
For more information about how the Board oversees ESG and sustainability-related
risks, please refer to the “ESG, Sustainability, and Human Capital” section of this Proxy Statement.
For more information about our ERM function, see the “Corporate
Governance, Sustainability and Social Responsibility” section under “Item 1. Business.” of our Annual Report on Form 10-K
for the year ended December 31, 2022.
Compensation Risk Assessment
We do not believe that risks arising from our compensation policies
and practices are reasonably likely to have a material adverse effect on our operations or results. Accordingly, no material adjustments
were made to our compensation policies and practices as a result of our risk profile.
To make this determination, we assessed the risks of our compensation
policies and programs. In assessing these risks, we considered that we operate in an industry based almost entirely on managing risk,
and our risk management function is robust. We considered the following:
| ◾ | The compensation policies and practices for employees of our reportable segments are similar. Our insurance operations, which sell
property and casualty insurance products, are subject to, among other things, risks related to significant competition, extensive losses
from catastrophic events, and emerging risks. Our investment segment, which invests premiums collected by the insurance operations and
proceeds from capital transactions, is subject to, among other things, global economic risks, such as adverse impacts from governmental
monetary policies, and risks inherent in the equity and debt markets; |
| ◾ | Our compensation policies are consistent with our overall risk structure, and we award a significant portion of our senior officers’
compensation on the accomplishment of financial performance goals that are measured over a three-year period; and |
| ◾ | In addition to designing our compensation policies and practices to motivate our employees to take appropriate levels of risk, we
have developed a set of controls and governance processes to manage our risk profile. These include escalation processes based on various
levels of individual authorities, a comprehensive set of management and Board committees that focus on analysis, management, and reporting
of specific major risks, and robust internal audit processes. These controls and governance processes, along with our risk management
process, are designed to help us understand and react to changes in our risk profile and effectively manage our risk profile consistent
with our risk appetite. |
We also considered our overall compensation program, including:
| ◾ | The features of our compensation program and whether they align with our compensation philosophy; |
| ◾ | The compensation program’s multiple financial and strategic measures that balance profitability and growth. We base our financial
goals on the U.S. generally accepted accounting principles (“GAAP”) combined ratio,3
which is an accepted insurance industry standard of profitability, return on common equity (“ROE”), statutory net premiums
written (“NPW”) growth, and statutory operating return on policyholder surplus. We base our strategic goals on measures intended
to generate profitable growth, such as pricing, retention, customer experience, and operational efficiency; |
| ◾ | The maximum potential payments under our compensation plans; |
| ◾ | The mix of fixed versus variable compensation; |
| ◾ | The balance between cash and equity compensation; |
| ◾ | The ratio of compensation based on long-term versus short-term performance metrics; and |
| ◾ | The timing of equity award grants and vesting. |
We also considered that we adjust our compensation programs from time-to-time
as risks in our industry and reportable segments change to help ensure that compensation and risk remain appropriately aligned.
3
The combined ratio is the property and casualty insurance industry standard measure of underwriting profitability. A combined ratio under
100% indicates that an insurance company is generating an underwriting profit and a combined ratio over 100% indicates that an insurance
company is generating an underwriting loss.
Finally, we reviewed our various risk mitigation strategies in the
compensation context, including:
| ◾ | The stock ownership and retention requirements for management outlined in the section entitled, “Executive Stock Ownership and
Retention Requirements” of this Proxy Statement; |
| ◾ | The independent oversight of compensation programs by the Salary and Employee Benefits Committee (“SEBC”), including oversight
of goals and performance measures; and |
| ◾ | The Board’s role in risk oversight, which includes receiving, analyzing, and making due inquiry about reports from its committees,
including the SEBC, and management’s ERC. |
We will continue to assess the risks of our compensation policies and
programs going forward.
STOCKHOLDER COMMUNICATIONS
Stockholders
and other interested parties may send communications to the Board, a committee of the Board, or individual directors in writing
to c/o Corporate Secretary, Selective Insurance Group, Inc., 40 Wantage Avenue, Branchville, New Jersey 07890 or by e-mail to corporate.governance@Selective.com.
The Corporate Secretary will review each communication received solely to determine if appropriate. The Board has determined that
the following types of communication are not related to the Board’s duties and responsibilities and are not appropriate: spam and
similar junk mail and mass mailings, unsolicited advertisements or invitations to conferences or promotional material, product complaints,
resumes or other job inquiries, and surveys.
CODE OF CONDUCT
Selective
has adopted a Code of Conduct that establishes business ethics principles that apply to all Selective personnel, including executive
officers. The Code of Conduct is located on Selective’s website at www.selective.com/investors/corporate-governance. Any material
amendment to or waiver from the provisions of the Code of Conduct that applies to Selective’s executive officers will be posted
to Selective’s website.
EXECUTIVE COMPENSATION
COMPENSATION DISCUSSION
AND ANALYSIS
EXECUTIVE SUMMARY
This Compensation Discussion and Analysis provides
our stockholders information about our 2022 compensation program for the following named executive officers (“NEOs”):
| ◾ | John J. Marchioni, Chairman, President and CEO; |
| ◾ | Mark A. Wilcox, Executive Vice President, Chief Financial Officer; |
| ◾ | Brenda M. Hall, Executive Vice President, Chief Operating Officer, Standard Lines; |
| ◾ | Michael H. Lanza, Executive Vice President, General Counsel and Chief Compliance Officer; and |
| ◾ | Vincent M. Senia, Executive Vice President, Chief Actuary. |
Consideration of 2022 Say-on-Pay Advisory Vote Results
Since our initial say-on-pay proposal in 2011, our stockholders have
overwhelmingly supported our compensation decisions. Our NEOs’ compensation was approved at the 2022 Annual Meeting of Stockholders
by over 99% of votes cast. In determining our NEOs’ 2022 compensation, the SEBC considered these results. Consequently, we did not
materially change our 2022 compensation program and policies. We have continued to emphasize a well-calibrated and balanced combination
of short-term and long-term incentive compensation, which we believe rewards our NEOs for delivering stockholder value. We value our stockholders’
feedback and will continue to review and consider the results of our say-on-pay proposals.
2022 Corporate Performance Highlights
For 2022, we generated a GAAP ROE of 8.8%, well above Conning, Inc.’s
expected 2022 U.S. property and casualty insurance industry GAAP ROE4 of 1.6%. We also generated a non-GAAP operating ROE5
of 12.4%, above our 11% target. In 2022, we delivered our ninth consecutive year of double-digit non-GAAP operating ROE, averaging approximately
12% over that timeframe. Our 2022 combined ratio of 95.1% was an excellent result, over 12 points below Conning, Inc.’s expected
2022 U.S. property and casualty insurance industry statutory combined ratio of 107.4%.4
GAAP COMBINED RATIO
Our after-tax net investment income was $232.2 million in 2022, a decrease
of 12% as compared to 2021, driven by lower returns from our alternative investments, reflecting lower valuations. Partially offsetting
this decrease was an increase in income earned on fixed income securities. Investments contributed 9.4 points of GAAP ROE in 2022. As
of year-end 2022, 92% of our portfolio was invested in fixed income securities and short-term investments with an average credit rating
of “AA-” and an effective duration of 4.1 years, offering a high degree of liquidity. Risk assets, including our high
yield allocation within fixed income, public equities, and limited partnership investments in private equity, private credit, and real
asset strategies, represented 9.8% of our investment portfolio at year-end 2022.
In addition to our strong non-GAAP operating ROE of 12.4%, other key
accomplishments for 2022 included the following:
| ◾ | Our annualized total shareholder return (“TSR”) was 9.7%, calculated by comparing the change in value of Selective's common
stock price and reinvested dividends. The table below shows our TSR as compared to |
4 Source:
©2023 Conning, Inc. Used with permission.
5 Non-GAAP
operating ROE is a non-GAAP financial measure and is calculated as follows:
| Non-GAAP Operating ROE: |
| Non-GAAP Operating Income from the Performance Period |
| ÷ |
| Average Common Stockholders’ Equity over the Performance Period |
Non-GAAP operating income differs from net income
available to common stockholders by the exclusion of after-tax net realized and unrealized gains and losses on investments and after-tax
debt retirement costs. It is used as an important financial measure by management, analysts, and investors because the realization of
investment gains and losses on sales in any given period is largely discretionary as to timing. In addition, net realized and unrealized
investment gains and losses on investments that are charged to earnings and the debt retirement costs could distort the analysis of trends.
Non-GAAP operating ROE is not intended as a substitute for ROE that is based on net income available to common stockholders prepared in
accordance with GAAP. Please refer to Selective’s Annual Report on Form 10-K for the year ended December 31, 2022 for a reconciliation
of Non-GAAP operating ROE to its most directly comparable financial measure calculated and presented in accordance with GAAP.
Standard & Poor’s (“S&P”) P&C Index annualized TSR and S&P’s 500 Index annualized TSR for the
last one-, three-, five-, and ten-year periods:
| Time Period |
Selective
Annualized TSR |
S&P’s P&C Index
Annualized TSR |
S&P’s 500 Index
Annualized TSR |
| One-Year Period |
9.7% |
17.2% |
-18.1% |
| Three-Year Period |
12.4% |
12.3% |
7.7% |
| Five-Year Period |
10.1% |
10.2% |
9.4% |
| Ten-Year Period |
18.4% |
13.8% |
12.6% |
| ◾ | Compared to 2021, overall NPW increased by 12%, driven by 12% growth in commercial lines, 16% in excess and surplus lines, and 9%
in personal lines. Overall new business increased 13%, with commercial lines up 9%, personal lines up 54%, and excess and surplus lines
up 14%. |
| ◾ | We achieved 5.1% in overall renewal pure price increases, including an increase of 5.4% in standard commercial lines and 7.3% in excess
and surplus lines. |
| ◾ | We achieved a standard commercial lines (81% of our 2022 total NPW) retention rate of 85% through the efforts of underwriters, who
use our sophisticated pricing and underwriting tools, and coordinate their efforts with our independent distribution partners. |
On
November 8, 2022, AM Best Company reaffirmed our “A+ (Superior)” financial strength rating, the second highest of
their 13 financial strength ratings, and our “stable” outlook. In taking this rating action, AM Best Company cited our balance
sheet strength, strong operating performance, favorable business profile, and appropriate enterprise risk management. On October 13,
2022, S&P Global Ratings reaffirmed our “A” rating with a “stable” outlook. In taking this action, S&P
cited our strong financial and business risk profiles, driven by strong capital adequacy and operating performance.
On March 24, 2022, Fitch Ratings reaffirmed our “A+”
rating with a “stable” outlook. In taking this rating action, Fitch Ratings cited our business profile as a regional commercial
lines writer with strong independent agency relationships, strong capitalization, and strong financial performance with stable underwriting
results and return metrics that have remained favorable compared to peers. Moody’s Investors Service last reaffirmed our “A2”
rating (with a “stable” outlook) in the second quarter of 2021, when it cited our strong underwriting profitability, financial
leverage, and coverage metrics, conservative investment portfolio, and strong regional franchise presence and established independent
agency support.
2022
Progress on our Strategic Business Plan Framework
In 2022, we continued making strong progress on our Strategic Business
Plan Framework and our five strategic imperatives. We designed our strategy to leverage these strategic imperatives to maximize growth
and profitability and reward our stockholders with strong and consistent value creation. We believe the following imperatives enhance
our competitive position and help us maintain our outperformance relative to our peers and the broader insurance marketplace:
Create a Highly Engaged Team
In 2022 we amended our Flexible Work Location Policy to allow most
office-based employees to work remotely 60% of the time. We enhanced our automation tools to allow for collaboration in a hybrid/remote
work environment. We continued our DE&I efforts by (i) supporting our six affinity groups and employee resource groups, (ii) offering
opportunities to participate in various DE&I programs, and (iii) developing metrics for quarterly reporting to management and
establishing and delivering a multi-module DE&I employee training program as part of our 2022 annual cash incentive plan (“ACIP”)
strategic goals. All senior leaders had DE&I-related business objectives in 2022, and all employees had mandatory DE&I training.
To support and advance underrepresented employees, we initiated a specifically designed professional development program and increased
diversity representation in our NextGen leadership development program.
In 2022, we were:
| ◾ | Designated as a Great Place to Work CertifiedTM organization for the third year in a row; |
| ◾ | Recognized by DiversityJobs as one of its Top Diversity Employers showing continual dedication and commitment to establishing a diverse
workforce and culture; and |
| ◾ | Recognized by Forbes as one of “America's Best Mid-Size Employers.” |
See the section entitled, “Human Capital” for further information
about efforts to drive this imperative.
Also as part of our 2022 ACIP strategic goals, we worked to advance
ESG initiatives by establishing greenhouse gas emissions metrics and reporting and issuing a Task Force on Climate-related Financial Disclosures
(TCFD) report.
Align Resources for Profitable Growth
To support our profitable growth, we continued to expand our geographic
footprint in 2022. We began writing standard commercial lines business in Vermont in June and began writing standard commercial lines
business in Alabama and Idaho in October.
We also continued to expand capabilities in our new standard commercial
lines agency interface platform designed to streamline new small business policy quoting and issuance. We continued to execute a multi-year
strategy to (i) improve small business writing ease and speed for our distribution partners and (ii) offer a best-in-class small
business customer experience. We enhanced our rating platform's user experience by reducing the information required to be inputted before
quote generation.
In 2022, we continued to reposition our standard personal lines business
to serve the mass affluent market, where we believe our strong coverage and servicing capabilities will be more competitive. We also deployed
a new excess and surplus lines underwriting platform to improve agents’ ease of interactions with us.
Deliver a Superior Omni-Channel Customer Experience
In 2022, we drove more personalized and consistent customer experiences,
with an omni-channel delivery focus, reinforcing our brand building to maximize customer retention. We improved digital offerings, encouraging
customers to use these convenience tools. In 2022, 70% of customer payments were self-service processed. We also (i) exceeded our
goals for customer use of our MySelective functionality, increasing Report a Claim, Make a Payment, and Certificate of Insurance transactions;
(ii) updated our Integrated Voice Response system; (iii) teamed up with a nationwide home security company to provide complimentary
home security systems to eligible customers; and (iv) expanded the reach of our safety management program.
Leverage Data and Treat Information as a Valued Corporate Asset
In
2022, we blended underwriting and statistical inputs into our front-line models, providing additional guidance to improve underwriting
and pricing decisions, and implementing designated modeling enhancements and delivering analytics reports. We also rebuilt our
homeowners pricing models, which should enhance our competitive position in the personal lines mass affluent market. We developed formalized
data and modeling governance processes, to ensure our use of data and models meets internal and external standards of practice.
Optimize Operational Effectiveness and Efficiency
Our imperative to optimize operational effectiveness and efficiency
aims to drive down our expense ratio and improve the overall employee experience. In 2022, we focused on robotic process automation solutions
and enhancing workflow automation. We also continued to work to mitigate our technology risk, completing a multi-year maturity plan and
executing another external maturity assessment.
CEO Pay for Performance
The following tables present (i) CEO compensation over the past
five years (“CEO Total Compensation”), (ii) the dollar and percentage change from the prior year, and (iii) Selective’s
cumulative TSR for the corresponding one-, three-, and five-year periods. As Mr. Marchioni was appointed CEO effective February 1,
2020, the table reflects our former CEO’s compensation for 2017 through 2019, and Mr. Marchioni’s compensation for 2020
through 2022. The tables demonstrate the correlation between changes in Selective's cumulative TSR and our CEO compensation,
which reflects and is consistent with our philosophy of aligning compensation with the interests of stockholders and long-term performance.
* The
value of “Indexed Total Shareholder Return (TSR)” shown is based on the then-current value of an assumed $100 investment in
Selective common stock on December 31, 2017, reflecting stock price changes and assuming all dividends paid are reinvested in Selective
common stock.
| |
2018 |
2019 |
2020 |
2021 |
2022 |
CEO Total Compensation(1)
(Base Salary Rate + Annual Cash Incentive Plan Payments + Total Long-Term Compensation) |
$5,100,019 |
$6,792,401 |
$4,800,608 |
$5,349,100 |
$5,716,622 |
| $ Change from Prior Year |
+$200,011 |
+$1,692,382(1) |
-$1,991,793(2) |
+$548,492 |
+$367,522 |
| % Change from Prior Year |
+4.1% |
+33.2% |
-29.3% |
+11.4% |
+6.9% |
| One-Year TSR |
+5.1% |
+8.2% |
+4.5% |
+24.0% |
+9.7% |
| Cumulative Three-Year TSR |
+89.3% |
+57.2% |
+18.9% |
+40.2% |
+42.0% |
| Cumulative Five-Year TSR |
+144.8% |
+158.1% |
+114.1% |
+103.6% |
+61.6% |
(1) Increase
primarily related to the transition of our former CEO, Gregory E. Murphy, to Executive Chairman.
(2) Decrease
primarily related to Mr. Marchioni’s transition to the CEO role.
Role and Function of the Salary and Employee Benefits Committee,
the Compensation Consultant, and Management
The SEBC oversees executive compensation and retains an independent
executive compensation consultant, Exequity LLP (the “Compensation Consultant”), to advise it on executive and director compensation
matters. The Compensation Consultant (i) reviews our NEO compensation structure and amounts, (ii) prepares comprehensive competitive
compensation analyses for our NEOs, (iii) provides counsel to the SEBC about award metrics, compensation components, amounts allocated
to those components, and the total compensation opportunities for the CEO and the other NEOs, and (iv) attends SEBC meetings, as
invited.
The Compensation Consultant has advised the SEBC since 2007. The Compensation
Consultant advises the SEBC on executive and director compensation matters and does not provide any additional services to Selective.
The SEBC
determined that the Compensation Consultant has no conflicts of interest with Selective based on applicable SEC and Nasdaq rules.
The SEBC has full autonomy to make compensation decisions about the
NEOs, incorporating information and advice from the Compensation Consultant. In 2022, Mr. Marchioni made recommendations to the SEBC
regarding the other NEOs’ compensation, based on his assessment of their annual performance, contributions to Selective, and potential
for advancement. Mr. Marchioni did not participate in the deliberations on his compensation.
In making its compensation decisions, the SEBC also considers (i) pre-established
guidelines regarding award amounts, (ii) pay levels at companies with which we compete for business and executive talent (discussed
below), (iii) Selective's performance, (iv) executive retention issues, (v) internal compensation parity, and (vi) advancement
in abilities, experience, and responsibilities. As part of their usual duties and responsibilities, the Executive Vice President, Chief
Human Resources Officer, and certain other human resources officers provide the SEBC with information about the overall design of the
executive compensation program and its components.
DESIGN CONSIDERATIONS OF SELECTIVE’S EXECUTIVE COMPENSATION
PROGRAM
Selective’s Executive Compensation Program Objective
and Philosophy
Our executive compensation program aims to attract, retain, and motivate
executive talent to drive Selective's success by creating stockholder value through profitable growth and effective risk management.
Our compensation program is designed to: (i) promote and align
both the short- and long-term interests of our NEOs with those of our stockholders; (ii) reward the achievement of our business objectives
through the execution of our Strategic Business Plan Framework and its five strategic imperatives; (iii) recognize each NEO’s
achievements, motivating execution of duties and responsibilities in a manner not reasonably likely to have a material adverse effect
on our operations or results; and (iv) promote ESG and DE&I in the execution of our insurance and investment operations with
related executive performance objectives and goals. We aim to provide our highly talented and qualified NEOs with competitive total compensation,
based on total value and a mix of short- and long-term cash and stock-based components, compared to the compensation paid by other property
and casualty insurance companies and other companies with which we compete for executive talent.
When evaluating compensation for our CEO and other NEOs, the SEBC considers:
(i) our overall results compared to budget and projected industry results; (ii) performance relative to our ROE target; (iii) Selective’s
underwriting profitability as measured by our combined ratios; (iv) our ability to profitably grow NPW; (v) our investment income
performance compared to both budget and benchmark targets; (vi) progress on ESG and DE&I initiatives; and (vii) retention
of top talent.
Consistent with our pay-for-performance philosophy, we link our annual
incentive awards to pre-determined financial and strategic business objectives and individual contributions. We align our long-term compensation
to the achievement of pre-determined specific performance measures that we believe impact the generation of long-term stockholder value.
Compensation Elements
Our executive compensation program generally consists of the following
key elements selected to: (i) address the market-based realities of attracting and retaining quality NEOs; and (ii) align the
NEOs’ compensation with our stockholders’ interests:
| ◾ | Long-term incentive program (“LTIP”) awards in the form of performance-based restricted stock units and performance-based
cash incentive units. |
Compensation Best Practices
Our compensation program and practices feature
the following best practices:
| WHAT WE DO |
WHAT WE DO NOT DO |
| We use fixed and variable compensation components. |
We do not include excise tax gross-up provisions in employment agreements. |
| We align pay with performance, with compensation weighted toward performance-based equity and performance-based cash bonus awards to NEOs. |
We do not re-price stock options. |
| We have stock ownership and retention requirements for our senior executives. |
We do not grant stock options at less than fair market value. |
| We have double triggers for cash and equity award payments upon a change in control under employment agreements. |
We do not pay dividends on unvested stock-based awards. |
| We have a recoupment policy that provides for the clawback of certain incentive-based compensation (see section entitled, “Recoupment of Awards” of this Proxy Statement for more information). |
We have not included incentive compensation in pension calculations (accrual of additional pension benefits ceased in 2016). |
| We offer very limited perquisites to executive officers. |
We do not permit hedging of Selective stock by directors, officers, or employees (see section entitled, “Policy on Hedging” of this Proxy Statement for more information). |
| The SEBC engages an independent compensation consultant. |
We do not guarantee annual salary increases. |
Benchmarking
When making compensation decisions, the SEBC believes it is important
to have information from multiple sources about compensation practices at an array of publicly traded companies and property and casualty
insurance holding companies. The SEBC believes that:
| ◾ | Benchmarking provides the SEBC with relevant context to make appropriate compensation decisions that will help attract, retain, and
motivate the key talent required to drive company performance and long-term stockholder value; |
| ◾ | Measuring our compensation against practices from two benchmark sources (see below for more details) helps ensure that the SEBC has
an ample and robust assessment of our competitive compensation posture; and |
| ◾ | Considering multiple market references alleviates potential volatility inherent in a single-market data point and enhances the SEBC’s
decisions by allowing it to rely on a more comprehensive set of market-competitive pay boundaries. |
The SEBC reviewed with the Compensation Consultant the following benchmarking
information in July 2021 for purposes of establishing 2022 compensation:
| ◾ | Analyses of both the individual compensation elements and total compensation that we pay our NEOs compared to a peer group that consisted
of companies with which we compete in the sale of products and services and for talent (“Proxy Peer Group”); and |
| ◾ | Data provided by a third-party vendor (2021 Property and Casualty Insurance Compensation Survey) for our NEOs against a group consisting
of 55 property and casualty insurance organizations, including Selective, with annual median direct written premiums of $3.6 billion and
annual median revenues of $3.6 billion. |
As part of the 2022 compensation process, in late 2021, the Compensation
Consultant furnished the SEBC with the most recent NEO compensation information available from the following:
| Proxy Peer Group* |
Third-Party
Vendor Survey |
| Arch Capital Group, Ltd. |
RLI Corporation |
Property and
Casualty Insurance
Compensation
Survey |
| Argo Group International Holdings, Ltd. |
State Auto Financial Corporation |
| Cincinnati Financial Corporation |
The Hanover Insurance Group, Inc. |
| CNA Financial Corporation |
The Hartford Financial Services Group, Inc. |
| Erie Indemnity Company |
United Fire Group, Inc. |
| Everest Re Group, Ltd. |
W. R. Berkley Corporation |
| Kemper Corporation |
|
* There were no changes with respect to the companies comprising the
Proxy Peer Group. As such, the Proxy Peer Group used in making 2022 compensation decisions was the same as the Proxy Peer Group used in
2021.
Information for the Proxy Peer Group companies was obtained from proxy
statements and other SEC filings. This information includes data on compensation components and comparative analyses of the overall financial
performance of the Proxy Peer Group. The Proxy Peer Group is comprised of companies that provide similar products, have a similar geographic
market scope, and compete with us for executive talent. The Property and Casualty Insurance Compensation Survey provides supplemental
data from organizations of various sizes. We analyze data from across the property and casualty insurance industry because we strive to
engage the best talent and recruit from organizations that are both smaller and larger than Selective.
In
late 2022 and early 2023, to evaluate 2022 pay decisions, including the ACIP payouts for 2022, the SEBC reviewed information (i) from
an updated Proxy Peer Group (which was identical to the 2022 Proxy Peer Group other than the removal of State Auto Financial Corporation
due to its acquisition and the addition of AXIS Capital Holdings Limited), and (ii) reported in the 2022 Property and Casualty
Insurance Compensation Survey, reflecting data from 55 organizations (including Selective) with annual median direct written premiums
of $4.1 billion and annual median revenues of $4.2 billion.
The SEBC reviewed compensation information from these two market reference
sources in setting the NEOs’ total compensation (consisting of aggregate base salaries, ACIP payments, and LTIP awards) 10.1% below
the combined benchmark median and 37.7% below the combined benchmark 75th percentile.
The components comprising NEO total compensation for 2022 differed
from market to varying degrees. Specifically, base salary was below the combined benchmark median by 4.6% and below the 75th
percentile by 14.7% to balance fixed NEO compensation with overall company performance and TSR. Driven by the solid 2022 performance relative
to annual financial, operational, and strategic objectives detailed below and financial and operational performance versus peers, ACIP
awards were 6.5% above the combined benchmark median but 35.7% below the combined benchmark 75th percentile. The combined relative
positioning of base salary and ACIP awards resulted in annual total cash compensation that was 2.7% above the combined benchmark median
and 27.9% below the combined benchmark 75th percentile. The grant date fair value of our 2022 LTIP awards was 22.7% below the
combined benchmark median and 47.8% below the combined benchmark 75th percentile to balance NEO compensation with our expense
management initiatives and TSR. The SEBC felt that each NEO’s compensation was appropriate considering their accomplishments and
contributions, the extent to which we achieved our 2022 goals, performance compared to projected industry performance, and our expense
management. The SEBC deemed these compensation levels appropriate because of (i) overall company performance, (ii) our combined
ratio and the impact of catastrophe and non-catastrophe property losses on underwriting results, (iii) the impact of higher interest
rates on our investment results, (iv) our expenses, including our expense ratio, and (v) individual performance of our NEOs.
2022 ELEMENTS OF COMPENSATION AND ALLOCATION BETWEEN CURRENT
AND LONG-TERM COMPENSATION
The table below shows the percentages of compensation for 2022 for
the CEO and the other NEOs that are fixed compensation (i.e., base salary) versus variable compensation (i.e., ACIP and LTIP), and short-term
incentive compensation (i.e., ACIP) versus long-term incentive compensation (i.e., LTIP).
As indicated in the table below, the 2022 compensation allocation aligns
closely with our compensation philosophy, which is designed to motivate our NEOs to achieve short- and long-term corporate objectives
consistent with our stockholders’ economic interests. We strive to balance pay incentive elements and performance time horizons.
| |
Fixed Compensation |
Variable Compensation |
| NEOs |
2022 Base Salary |
2022 Short-Term
(ACIP) |
2022 Long-Term
(LTIP) |
2022 Total Variable
(ACIP + LTIP) |
| John J. Marchioni |
17% |
37% |
46% |
83% |
| Mark A. Wilcox |
24% |
37% |
39% |
76% |
| Brenda M. Hall |
29% |
36% |
35% |
71% |
| Michael H. Lanza |
35% |
33% |
32% |
65% |
| Vincent M. Senia |
31% |
38% |
31% |
69% |
The chart below reflects the allocation of 2022 compensation among
LTIP, ACIP, and base salary for the CEO and for all other NEOs on average:
Base Salary
Our base salary compensation is intended to provide stable, competitive
compensation while considering each NEO’s scope of responsibility, relevant background, training, and experience. In setting base
salaries, the SEBC considers competitive market data for positions with comparable job content and overall market demand for each position.
The SEBC generally believes base salaries should align with market trends for NEOs with similar responsibilities at comparable companies.
When establishing the base salaries of our NEOs, the SEBC also considers:
| ◾ | The functional role of the NEO’s position; |
| ◾ | The NEO’s level of responsibility; |
| ◾ | The NEO’s growth in the position, including skills and competencies; |
| ◾ | The NEO’s contribution and performance; and |
| ◾ | Selective’s ability to replace the NEO. |
Based on these considerations and their individual accomplishments
and contributions as described below in the section entitled, “2022 Compensation Actions for the CEO and other NEOs,” the
SEBC increased the base salary rates of the following NEOs in early 2022 during our regular salary review process: Mr. Marchioni
8.1%; Mr. Wilcox, 7.7%; Ms. Hall 13.6%; Mr. Lanza, 1.8%; and Mr. Senia, 2.4%. Ms. Hall’s salary rate was
increased to better reflect the importance and impact of her expanded leadership role and to better align her compensation competitively
to market position. The other NEOs’ base salary rate increases were based on each NEO’s performance and ongoing competitiveness
with relevant peer benchmarks.
Annual Cash Incentive Program
Our ACIP is intended to link a meaningful portion of annual cash compensation
to one or more pre-established annual short-term strategic and financial organizational performance goals. For 2022, all NEOs were eligible
to participate in the ACIP. ACIP awards are granted under the Selective Insurance Group, Inc. Cash Incentive Plan, As Amended and
Restated as of May 1, 2014 (the “Cash Incentive Plan”).
2022 Corporate ACIP Measures
Our Corporate ACIP Measures (defined below) are established to encourage
our NEOs to remain focused on particular financial and strategic objectives, even in the face of especially challenging circumstances
in the performance year. The SEBC considers the level of achievement of the Corporate ACIP Measures when determining the ACIP payments
to our NEOs. The SEBC has authority to adjust payouts as it deems appropriate in its discretion.
The ACIP plan has two components, financial and strategic (together,
the “Corporate ACIP Measures”). The financial component is tied to Selective’s GAAP combined ratio for the performance
year. The 50% target was set to a combined ratio that we estimated would generate our target ROE of 11%. For 2022, that target combined
ratio was 93.5%. The financial component pays 0% at a combined ratio of 100% or greater, and is capped at an 82.1% payout for a combined
ratio of 89% or less. The strategic component opportunity ranges between 0% and 50.0% is based on the achievement of the target of 14
specific measures tied to our strategic business framework, with a potential for an additional 5% of upside for exceeding certain targets.
The table below shows total potential Corporate ACIP payouts for NEOs
at various combined ratio percentages, assuming all 14 strategic measures were fully met:
| GAAP Combined Ratio (%) |
Corporate ACIP Measures(1) |
| Financial Measure (%) |
Strategic Measures (%) |
Total Opportunity (%)(2) |
| 100.0 |
0.0 |
50 |
50 |
| 99.0 |
7.5 |
50 |
57.5 |
| 98.0 |
14.9 |
50 |
64.9 |
| 97.0 |
22.4 |
50 |
72.4 |
| 96.0 |
29.9 |
50 |
79.9 |
| 95.0 |
37.3 |
50 |
87.3 |
| 94.0 |
44.8 |
50 |
94.8 |
| 93.5 |
50.0 |
50 |
100.0 |
| 93.0 |
52.2 |
50 |
102.2 |
| 92.0 |
59.7 |
50 |
109.7 |
| 91.0 |
67.2 |
50 |
117.2 |
| 90.0 |
74.6 |
50 |
124.6 |
| 89.0 |
82.1 |
50 |
132.1 |
(1) Straight
line interpolation applies to performance between designated goals.
(2) Reflects
total opportunity based on degree of achievement of performance objectives not including the additional 3% potential upside for exceeding
the commercial lines pure rate target on standard renewal business and 2% potential upside for exceeding the direct new standard commercial
lines premium target.
2022 Corporate ACIP Measure Results
The 2022 Corporate ACIP Measure results were based
on our achievement of the financial metric of overall GAAP combined ratio and the strategic measures, as described in greater detail below.
Financial Performance Results
For 2022, our overall GAAP combined ratio was
95.1%. Accordingly, the financial performance component of the Corporate ACIP Measures generated funding at 36.6%.
Strategic Measures Performance Results
The table below reflects that we fully achieved all 14 of the 2022
ACIP strategic measures and exceeded two of the strategic measures. Consequently, the strategic measures performance component of the
Corporate ACIP Measures funded at 51.5%.
Strategic
Imperative |
Measure |
Point
Value |
Results |
Align
Resources for Profitable
Growth
&
Leverage Data
and Treat
Information as
a Valued
Corporate Asset |
GROWTH |
| Achieve designated target for direct new standard commercial lines premiums (excluding bonds). |
4 pts
(plus 2 pts premium) |
Achieved
4.3 pts |
| Achieve excess and surplus lines strategic project goals for the automated issuance of new designated coverages. |
2 pts |
Achieved 2 pts |
| Achieve designated net renewal direct premium written budget for commercial lines (excluding bonds). |
4 pts |
Achieved 4 pts |
| Achieve designated key milestones of small business strategy to improve ease of doing business. |
4 pts |
Achieved 4 pts |
| Achieve designated strategic milestones for geographic expansion for Vermont, Maine, West Virginia, Alabama, and Idaho. |
4 pts |
Achieved 4 pts |
| PROFITABILITY IMPROVEMENT |
| Achieve designated commercial lines (excluding bonds and management liability insurance) pure rate target on standard renewal business. |
6 pts
(plus 3 pts premium) |
Achieved
7.2 pts |
| Achieve designated pricing differential for specified business retention categories. |
4 pts |
Achieved 4 pts |
Optimize
Operational
Effectiveness
and Efficiency |
EXPENSE MANAGEMENT |
| Achieve designated labor and non-labor expense targets for specified business units. |
4 pts |
Achieved 4 pts |
| Achieve designated company-wide expense target. |
4 pts |
Achieved 4 pts |
Create a Highly
Engaged Team |
Advance DE&I initiatives by developing metrics for quarterly reporting to management and establishing and delivering a multi-module DE&I employee training program. |
2 pts |
Achieved 2 pts |
| Advance ESG initiatives by establishing greenhouse gas emissions metrics and reporting and issuing a Task Force on Climate-related Financial Disclosures (TCFD) report. |
2 pts |
Achieved
2 pts |
Deliver a
Superior
Omni-Channel
Experience
&
Leverage Data
and Treat
Information as a
Valued
Corporate Asset |
CUSTOMER EXPERIENCE |
| Achieve designated customer self-service levels. |
3 pts |
Achieved 3 pts |
|
Implement designated value-added commercial lines, personal lines, and digital safety management products and services. |
3 pts |
Achieved
3 pts |
Achieved designated staff counsel optimization and integration of workers compensation claims reporting.
|
4 pts |
Achieved
4 pts |
2022 Corporate ACIP Measure Results
For 2022, our combined Corporate ACIP Measures resulted in a total
funding opportunity for the NEOs of 88.1% (36.6 points from the financial measure and 51.5 points from strategic measures).
2022 ACIP Payment Opportunities Awards for NEOs
The 2022 ACIP payment opportunities for the NEOs were based on competitive
market levels and set as a percentage of each NEO’s annual base salary. The following table lists each NEO’s: (i) 2022
minimum and maximum ACIP opportunities as a percentage of base salary rate, (ii) actual 2022 award as a percentage of base salary
rate, (iii) actual 2022 award amount, and (iv) the percentage change in ACIP amount awarded from 2021 to 2022:
| NEO |
Minimum 2022
ACIP Opportunity
(as % of Base
Salary Rate) |
Maximum 2022
ACIP Opportunity(1)
(as % of Base
Salary Rate) |
Actual 2022
ACIP Payment
(as % of Base
Salary) |
Actual 2022
ACIP
Payment |
Change in ACIP
Payment from
2021 to 2022 |
| John J. Marchioni |
0% |
350% |
212.5% |
$2,100,000 |
-8.7% |
| Mark A. Wilcox |
0% |
250% |
158.9% |
$1,100,000 |
-8.3% |
| Brenda M. Hall |
0% |
150% |
124.3% |
$610,000 |
0% |
| Michael H. Lanza |
0% |
150% |
91.6% |
$530,000 |
-8.6% |
| Vincent M. Senia |
0% |
150% |
120.5% |
$520,000 |
-8.0% |
(1) The
NEOs’ ACIP opportunity ranges (as percentage of base salary rate) were established by the SEBC in February 2022 and did not
change from 2021. This equates to maximum potential payment amounts of $3,500,000 for Mr. Marchioni; $1,750,000 for Mr. Wilcox;
$750,000 for Ms. Hall; $870,000 for Mr. Lanza; and $649,500 for Mr. Senia.
ELEMENTS OF LONG-TERM COMPENSATION
Design Elements
Our long-term incentive opportunities are intended to reward our NEOs
and encourage their long-term retention. By aligning financial rewards with our stockholders’ economic interests, our NEOs are motivated
to achieve our long-term strategic objectives and increase stockholder value. We use both cash and non-cash elements under our LTIP to
deliver long-term compensation, consistent with the market practices of the companies included in our Proxy Peer Group.
LTIP awards are typically granted in overlapping three-year cycles
and are allocated between performance-based restricted stock units and performance-based cash incentive units. By granting performance-based
restricted stock units and performance-based cash incentive units with three-year performance periods, our goal is to encourage our NEOs
to continue their tenure with us and align their economic interests with those of our stockholders.
LTIP Award Grants
Performance
Period |
Restricted Stock Unit Performance Measures |
Cash Incentive Unit Performance
Measures |
| 01/01/20 – 12/31/22 |
Generate a cumulative non-GAAP operating ROE of at least 12% (computed by excluding from the determination of average equity any unrealized gain occurring after December 31, 2019), or achieve a 5% cumulative growth in policy count or statutory NPW at any calendar year end during the performance period. |
Cumulative TSR over the three-year performance period, and cumulative three-year statutory NPW growth and statutory operating return on policyholder surplus(1) relative to peer index. |
| 01/01/21 – 12/31/23 |
Generate a cumulative non-GAAP operating ROE of at least 12% (computed by excluding from the determination of average equity any unrealized gain occurring after December 31, 2020), or achieve a 5% cumulative growth in policy count or statutory NPW at any calendar year end during the performance period. |
Cumulative TSR over the three-year performance period, and cumulative three-year statutory NPW growth and statutory operating return on policyholder surplus relative to peer index. |
| 01/01/22 – 12/31/24 |
Generate a cumulative non-GAAP operating ROE of at least 12% (computed by excluding from the determination of average equity any unrealized gain occurring after December 31, 2021), or achieve a 5% cumulative growth in policy count or statutory NPW at the end of the three-year performance period. |
Cumulative TSR over the three-year performance period, and cumulative three-year statutory NPW growth and statutory operating return on policyholder surplus relative to peer index. |
(1) Statutory
operating return on policyholder surplus is a profitability measurement calculated by dividing statutory operating income by the average
policyholder surplus during the period.
In determining the amount of LTIP awards granted to the NEOs in 2022,
the SEBC considered several factors, including: (i) each NEO’s performance during the previous year, including the achievement
of departmental goals and other projects and endeavors accomplished throughout the year; (ii) each NEO’s total compensation
in comparison to our Proxy Peer Group and 2021 Property and Casualty Insurance Compensation Survey data; and (iii) our desire for
long-term retention of high-performing executives.
Performance-Based Restricted Stock Units
Approximately 75% of the total grant date fair value of each NEO’s
LTIP award made in 2022 consisted of performance-based restricted stock units granted under the Selective Insurance Group, Inc. 2014
Omnibus Stock Plan (the “Omnibus Stock Plan”), subject to the following conditions:
| ◾ | Three-year vesting period; and |
| ◾ | Achievement at the end of the three-year period beginning on January 1, 2022 and ending on December 31, 2024, of either
(i) a cumulative non-GAAP operating ROE of at least 12% (computed by excluding from the determination of average equity any unrealized
gain or loss occurring after December 31, 2021), or (ii) a cumulative 5% growth in policy count or statutory NPW. |
Dividend equivalent units (“DEUs”) are credited on performance-based
restricted stock units at the same time and same dividend rate paid to all Selective stockholders. Payments of DEUs, which are payable
in shares of Selective common stock, remain subject to the same vesting conditions and performance measures as the underlying restricted
stock units. DEUs are not paid unless and until the related restricted stock units vest. This use of performance-based restricted stock
units aligns this component of our NEOs’ compensation with overall corporate performance and stockholder interests.
Performance-Based Cash Incentive Units
The remaining approximate 25% of the total grant date fair value of
each NEO’s LTIP award granted in 2022 consisted of performance-based cash incentive units granted under the Cash Incentive Plan,
subject to, the following terms:
| ◾ | Three-year performance period; |
| ◾ | The value of each cash incentive unit, initially awarded at $100 per unit, increases or decreases to reflect the TSR of Selective
common stock over the three-year performance period for the award beginning on January 1, 2022 and ending on December 31, 2024;
and |
| ◾ | The number of cash incentive units ultimately earned increases or decreases based on the performance criteria in the following table: |
Matrix of Potential Performance-Based Cash Incentive Unit Payouts
(as a % of Initial Award Value) |
Cumulative 3-Year
Statutory Net
Premium Growth
Relative to Peer
Index |
>=80% |
100% |
108% |
117% |
125% |
133% |
142% |
150% |
| 70% |
86% |
100% |
108% |
117% |
125% |
133% |
142% |
| 60% |
72% |
86% |
100% |
108% |
117% |
125% |
133% |
| 50% |
58% |
72% |
86% |
100% |
108% |
117% |
125% |
| 40% |
44% |
58% |
72% |
86% |
100% |
108% |
117% |
| 30% |
30% |
44% |
58% |
72% |
86% |
100% |
108% |
| <=20% |
0% |
30% |
44% |
58% |
72% |
86% |
100% |
| |
<=20% |
30% |
40% |
50% |
60% |
70% |
>=80% |
Cumulative 3-Year Statutory Operating Return on Policyholder Surplus
Relative to Peer Index |
In establishing the 2022 peer group to compare performance and determine
the ultimate number of performance-based cash incentive units earned (the “Cash Incentive Unit Peer Group”), the SEBC strived
to include companies with similar premium volume, product mixes, and geographic operations, and independent insurance agents product distribution.
The Cash Incentive Unit Peer Group used for 2022 was consistent with that used in 2021, except the SEBC approved the removal of State
Auto Financial Corporation as a peer company due to its acquisition. The Cash Incentive Unit Peer Group differs from the Proxy Peer Group,
as the Proxy Peer Group also includes companies with which we compete for executive talent. The Cash Incentive Unit Peer Group consists
of the following companies:
| Auto-Owners Insurance Group |
Liberty Mutual Group Inc. |
| Cincinnati Financial Corporation |
The Hanover Insurance Group, Inc. |
| CNA Financial Corporation |
United Fire Group, Inc. |
| Donegal Insurance Group |
Utica National Insurance Group |
| Erie Indemnity Company |
Westfield Group |
Timing of LTIP Awards
LTIP awards are generally granted each year after Selective releases
year-end results.
2019 LTIP Award Grant Results
The following table summarizes the achievement of the performance metrics
for the 2019 LTIP award grants and the corresponding payout in 2022:
| Performance Metrics |
Actual Performance Versus
Performance Metrics |
Percentage
Achieved |
| 2019 Grant Results |
|
|
| Restricted Stock Units |
Achieved 5% cumulative growth of NPW |
100%(1) |
| Generate
a cumulative non-GAAP operating ROE of at least 12% (computed by excluding from the determination of average equity any unrealized
gain occurring after December 31, 2018), or achieve a 5% cumulative growth in policy count or statutory NPW at any calendar
year-end during the performance period. |
| Cash Incentive Units(2) |
Achieved a TSR of 140.20%,
a statutory operating return on policyholder surplus of 42%, and NPW growth of 27%(3) |
150% of units at $140.20 |
| Cumulative TSR over the three-year performance period, and cumulative three-year statutory NPW growth and statutory operating return on policyholder surplus relative to peer index for the period of January 1, 2019 to December 31, 2021. |
(1) The
5% cumulative growth in statutory NPW was achieved for the performance period, resulting in a 100% payout of the restricted stock units.
(2) Cash
incentive unit awards are denominated in units and granted at a target amount, with an initial value of $100. The number and final value
of the cash incentive units ultimately earned by the NEOs are variable, depending on the level of achievement of the underlying performance
metrics. For the 2019 awards, the final dollar value of the cash incentive units ($140.20) appreciation or depreciation was based on TSR,
determined using the change in Selective’s common stock price and reinvested dividends over the award’s three-year performance
period. The number of 2019 cash incentive units ultimately earned (150%) was based on: (i) cumulative three-year statutory NPW growth
relative to the Cash Incentive Unit Peer Group index; and (ii) cumulative three-year operating return on policyholder surplus relative
to this peer group index.
(3) Selective’s
cumulative three-year statutory operating return on policyholder surplus of 42% positioned us in the 100th percentile of the
Cash Incentive Unit Peer Group. The cumulative three-year statutory NPW growth of 27% placed us in the 91st percentile of the
Cash Incentive Unit Peer Group, resulting in the earning of 150% of the cash incentive units initially granted. Please refer to the Matrix
of Potential Performance-Based Cash Incentive Unit Payouts above.
2022 COMPENSATION ACTIONS FOR THE CEO AND OTHER NEOS
In making its 2022 base salary, ACIP, and LTIP compensation decisions
for Mr. Marchioni and the other NEOs, the SEBC considered each NEO’s overall and individual accomplishments and contributions.
The required achievement of pre-determined financial and strategic goals limits our compensation program’s ACIP and LTIP components.
We structure our reward programs to retain and motivate our best-performing employees and those in critical positions. In balancing our
strategic results achieved with ongoing price competition, the SEBC made the following compensation decisions for 2022:
| ◾ | Base salary rate increased 8.1% from 2021; |
| ◾ | ACIP payment for 2022 was 8.7% lower than his 2021 ACIP payment; |
| ◾ | LTIP award granted in 2022 was 23.7% higher than his award granted in 2021, to increase the CEO’s allocation to long-term compensation
and more closely align compensation with benchmark median; and |
| ◾ | Total compensation, including salary paid, ACIP payment, and LTIP award was 6.9% higher in 2022 than 2021. |
As CEO, Mr. Marchioni was responsible for achieving all financial,
strategic, and investment goals. In making its 2022 compensation decisions for Mr. Marchioni, the SEBC considered our overall corporate
performance, as previously detailed in this Compensation Discussion and Analysis under the section entitled “2022 Corporate Performance
Highlights,” and a comprehensive written performance appraisal of the CEO completed by all members of Selective’s Board of
Directors (other than Mr. Marchioni).
Based on the degree of achievement of the Corporate ACIP Measures
and the factors noted above in the 2022 Corporate Performance Highlights, the SEBC determined that Mr. Marchioni’s 2022 ACIP
payment would be 212.5% of base salary. This compares to his initial ACIP opportunity range of 0%-350% of base salary.
The SEBC determined that Mr. Marchioni’s ACIP payment was
appropriate and consistent with Selective’s pay-for-performance philosophy and reinforced our long-standing history of linking
pay and performance.
Our other NEOs were also critical in executing Selective’s 2022
strategic goals and delivering key accomplishments. In light of these accomplishments, the SEBC made the following compensation decisions
for the other NEOs:
| ◾ | Base
salary rates increased 7.7% for Mr. Wilcox, 13.6% for Ms. Hall, 1.8% for Mr. Lanza,
and 2.4% for Mr. Senia, based on each NEO’s performance and ongoing competitiveness
with relevant peer benchmarks; |
| ◾ | The
ACIP payments for 2022, compared to the ACIP payments for 2021, decreased 8.3% for Mr. Wilcox,
8.6% for Mr. Lanza, and 8.0% for Mr. Senia, with no change for Ms. Hall; |
| ◾ | LTIP
awards granted in February 2022, compared to LTIP awards granted in February 2021,
increased 17.8% for Mr. Wilcox, 20.3% for Ms. Hall, 5.0% for Mr. Lanza, and
12.0% for Mr. Senia to increase the NEOs’ allocation to long-term compensation;
and |
| ◾ | Total
compensation, including salary paid, ACIP payments, and LTIP awards, compared to 2021 increased
4.1% for Mr. Wilcox, increased 9.9% for Ms. Hall, decreased 0.9% for Mr. Lanza,
and increased 0.7% for Mr. Senia. |
LTIP award increases, and consequently total compensation, were made
to increase the allocation to long-term compensation and align competitively with external compensation benchmark sources. Compensation
decisions for Ms. Hall reflect the importance and impact of her expanded leadership role and responsibilities in early 2022, and
her assumption of oversight of our personal lines, small business, and distribution strategies in October 2022.
In making 2022 compensation decisions for Messrs. Wilcox, Lanza,
and Senia, and Ms. Hall, the SEBC considered the following for each NEO:
Mr. Wilcox
– As Executive Vice President, Chief Financial Officer, Mr. Wilcox has (i) primary responsibility for all
financial matters, including financial accounting, SEC and statutory financial reporting, internal audit, investor relations, tax, capital
and capital management planning, treasury, billing, investments, enterprise risk management, reinsurance, financial planning, and contracts
and procurement, and (ii) general management responsibility as an executive management team member, including sustainability and
corporate social responsibility. Mr. Wilcox’s major contributions in 2022 included:
| ◾ | Achieving
net investment income, after-tax, of $232.2 million, which contributed 9.4 points of ROE; |
| ◾ | Generating
core investment income well above budget, while improving investment liquidity and investment
credit quality, and managing our allocation to risk assets; |
| ◾ | Updating
the investment portfolio strategic asset allocation analysis and performance benchmarks; |
| ◾ | Enhancing
our ESG-related disclosures by issuing our inaugural Task Force on Climate-related Financial
Disclosures (TCFD) report, which included baseline scope 1 and 2 greenhouse emissions; |
| ◾ | Successfully
executing our reinsurance renewal strategy and related placements in a particularly challenging
environment, analyzing catastrophe risk retention and reinsurance alternatives, and implementing
a facultative adequacy tool; |
| ◾ | Implementing
new supplier lifecycle management and onboarding; |
| ◾ | Continuing
to identify and execute tax-related strategies, including use of tax credit investments; |
| ◾ | Increasing
the use of data analytics, improving the effectiveness and efficiency of the internal auditing
processes; |
| ◾ | Monitoring
and managing the annual expense budgeting and forecasting processes and implementing expense
reduction initiatives to achieve our expense ratio target; |
| ◾ | Developing
and implementing a strategy to increase investor and analyst engagement to attract long-term
stockholders; and |
| ◾ | Completing
the expansion of the corporate headquarters solar project that sells powers to others, on
budget in the face of challenging supply chain and tariff issues, the installation of electronic
vehicle (“EV”) charging stations at the corporate headquarters, and the addition
of hybrid vehicles to the corporate vehicle fleet. |
Based on the degree of achievement of the Corporate ACIP Measures
and the factors noted above, the SEBC approved Mr. Marchioni’s recommendation that Mr. Wilcox’s 2022 ACIP payment
be set at 158.9% of his base salary. This compares to his initial ACIP payment opportunity range of 0%-250% of base salary.
Mr. Wilcox’s ACIP payment for 2022 was 8.3% lower than
his 2021 ACIP. We believe his 2022 ACIP award aligns with our pay-for-performance philosophy intended to reward and retain key performers
in critical positions.
Ms. Hall
– As Executive Vice President, Chief Operating Officer, Standard Lines, Ms. Hall
has (i) primary responsibility for the overall results of our standard commercial and personal lines segments, and (ii) general
management responsibility as an executive management team member, including sustainability and corporate social responsibility. In 2022,
Ms. Hall’s responsibilities expanded to include oversight of our personal lines, small business, and distribution strategies.
Ms. Hall’s significant 2022 contributions were:
| ◾ | Achieving
a standard commercial lines net combined ratio of 94.8%; |
| ◾ | Achieving
standard commercial lines NPW growth of 12% and new business growth of 9.0% as compared to
the prior year, average renewal pure price increases of 5.4%, and strong retention of 85%; |
| ◾ | Exceeding
commercial lines new business pricing target; |
| ◾ | Expanding
our standard commercial lines geographic footprint in Vermont, Alabama, and Idaho; |
| ◾ | Supporting
new small business growth through enhancements to our standard commercial lines agency interface
platform designed to streamline new small business policy quoting and issuance; |
| ◾ | Achieving
standard personal lines NPW growth of 9% compared to the prior year, primarily due to (i) higher
direct new business, (ii) stronger retention, (iii) higher homeowner coverage amounts
due to inflation adjustments, and (iv) higher average policy sizes from our new mass
affluent market strategy, where we believe our strong coverage and servicing capabilities
will be more competitive; |
| ◾ | Driving
key milestones to improve omni-channel customer and agency experience and improve retention; |
| ◾ | Providing
leadership for robotic process automation efforts to build capacity and increase operational
efficiency; |
| ◾ | Providing
leadership and guidance in leveraging data to drive strategic imperatives throughout commercial
lines and personal lines operations; |
| ◾ | The
strategic appointment of new distribution partners, while increasing share of business with
existing distribution partners; and |
| ◾ | Supporting
the organization’s DE&I efforts, including serving as a member of the Women at
Work Steering Committee, and engaging and mentoring diverse Insurance Operations managers. |
Based on the degree of achievement of the
Corporate ACIP Measures and the factors noted above, the SEBC approved Mr. Marchioni’s recommendation that Ms. Hall’s
2022 ACIP payment be set at 124.3% of base salary. This compares to her initial ACIP payment opportunity range of 0%-150% of base salary.
Ms. Hall’s 2022 ACIP payment was
the same as her 2021 ACIP payment. This award aligns with our pay-for-performance philosophy intended to reward and retain key performers
in critical positions.
Mr. Lanza
– As Executive Vice President, General Counsel and Chief Compliance Officer, Mr. Lanza has had (i) primary
responsibility for all legal, corporate governance, government affairs, state filings, regulatory, compliance matters, and, beginning
in late 2022, responsibility for corporate communications and (ii) general management responsibility as an executive management
team member, including sustainability and corporate social responsibility. Mr. Lanza’s significant 2022 contributions were:
| ◾ | Advising
the Board and management on corporate governance, regulatory compliance, data and information
governance, and public disclosure matters, including providing counsel and significant engagement
with Board leadership in the review of Board membership size, tenure, retirement, and diversity; |
| ◾ | Providing
significant counsel and leadership on government affairs and public policy matters and legislative
and regulatory matters of significance to the company and the industry, including effective
participation in trade associations and advocacy groups, litigation reform, COVID-19-related
litigation and insurance operations matters, flood insurance, and cybersecurity and privacy
issues, and facilitating engagement with regulators, particularly in our upcoming expansion
states; |
| ◾ | Providing
timely and appropriate legal advice and leadership on all ESG-related matters, including
ESG metrics, revisions and updates to internal and external ESG disclosures, certifications,
and reporting, and advising management’s Sustainability Committee; |
| ◾ | Providing
legal counsel and executive leadership on regulatory compliance initiatives, including reorganization
and realignment of responsibilities; |
| ◾ | Providing
continued legal support on COVID-19-related matters leading to the full reopening of our
offices in the first quarter of 2022, including advising on related employee health and safety
issues and Executive Management Team and Human Resources Department communications; |
| ◾ | Providing
legal advice and counsel on corporate transaction strategies and policy development, including
documentation, due diligence, communication, and employee onboarding related to an excess
and surplus lines renewal rights transaction; |
| ◾ | Providing
executive leadership and legal advice for high-exposure litigation matters, assuming responsibility
for and continued improvement of overall quality, appropriateness, and timeliness of legal
advice for claims coverage and litigation matters; |
| ◾ | Providing
legal counsel and executive leadership on various DE&I matters, including active engagement
with our DE&I Council, employee resource groups, and an accelerated professional development
program for diverse individual contributors interested in first-level management positions;
and |
| ◾ | Providing
continued legal support of real estate operations, including the opening of the corporate
headquarters hotel and conference center, and expansion of the corporate headquarters solar
facility that sells power to others. |
Based on the degree of achievement of the Corporate ACIP Measures
and the factors noted above, the SEBC approved Mr. Marchioni’s recommendation that Mr. Lanza’s 2022 ACIP payment
be set at 91.6% of base salary. This compares to his initial ACIP payment opportunity range of 0%-150% of base salary.
Mr. Lanza’s 2022 ACIP payment was 8.6% lower than his 2021
ACIP payment. This award aligns with our pay-for-performance philosophy intended to reward and retain key performers in critical positions.
Mr. Senia –
As Executive Vice President and Chief Actuary, Mr. Senia has (i) primary responsibility for directing our actuarial
operations, including pricing, reserving, and other actuarial analytics, and (ii) general management responsibility as an
executive management team member, including sustainability and corporate social responsibility. He also plays a key role in
Selective’s strategic and financial planning. Mr. Senia’s key 2022 contributions were:
| ◾ | Providing
sound loss and loss expense estimates by ensuring consistent and reasonable assumptions and
selections throughout the planning, pricing, and reserving processes, and performing ongoing
monitoring of internal and external trends and adjusting assumptions accordingly; |
| ◾ | Executing
comprehensive quarterly reserve reviews, including monthly actual versus expected claims
metrics, incorporating frequency and severity trends; |
| ◾ | Supporting
commercial lines growth and profitability by producing detailed insights into portfolio profitability
and ongoing price monitoring; |
| ◾ | Blending
underwriting and statistical inputs into our front-line models, providing additional guidance
to improve underwriting and pricing decisions, and implementing designated modeling enhancements
and delivering analytics reports; |
| ◾ | Rebuilding
our homeowners pricing models, which should enhance our competitive position in the personal
lines mass affluent market; |
| ◾ | Supporting
the development of formalized data and modeling governance processes to ensure our use of
data and models meets internal and external standards of practice; |
| ◾ | Supporting
our commercial lines geographic expansion initiative through development of rate and class
plan filings; |
| ◾ | Refining
excess and surplus lines profitability reviews through increased segmentation and expansion
of price monitoring; and |
| ◾ | Identifying
and implementing new pricing and reserving approaches while increasing automation and simplification
of pricing and reserving processes. |
Based on the degree of achievement of the
Corporate ACIP Measures and the factors noted above, the SEBC approved Mr. Marchioni’s recommendation that Mr. Senia’s
2022 ACIP payment be set at 120.5% of base salary. This compares to his initial ACIP payment opportunity range of 0%-150% of base salary.
Mr. Senia’s 2022 ACIP payment
was 8.0% lower than his 2021 ACIP payment. This award aligns with our pay-for-performance philosophy intended to reward and retain key
performers in critical positions.
PERQUISITES
NEO perquisites in 2022 were limited to tax
preparation services and executive physicals, which is consistent with prevailing industry practice. The following NEOs received the
following perquisites in 2022:
| NEO |
Perquisite |
Amount* |
| Mr. Marchioni |
Tax
preparation services |
$3,700 |
| Executive
physical examination service |
$5,000 |
| Mr. Wilcox |
Executive
physical examination service |
$5,000 |
| Ms. Hall |
Executive
physical examination service |
$5,200 |
| Mr. Lanza |
Tax
preparation services |
$3,000 |
| Executive
physical examination service |
$5,000 |
| Mr. Senia |
Executive
physical examination service |
$11,000 |
* Variance in amounts for executive
physical examination services reflect geographic cost differential and initial scheduled services.
EXECUTIVE STOCK OWNERSHIP AND RETENTION REQUIREMENTS
Selective believes that stock ownership by management encourages the
enhancement of stockholder value. Selective’s stock ownership guidelines are based on prevailing corporate governance practices
and detailed in the Corporate Governance Guidelines.
The following table shows the common stock ownership guidelines for
certain officers. Each officer must meet (and subsequently maintain) the current stock ownership guidelines within the later of (i) five
years from attainment of the respective officer status, and (ii) three years from any change to these requirements (“Requirement
Date”). Base salary increases during the five-year period will require the ultimate ownership requirements to increase when shares
are valued on November 1 following such increase.
If, at the November 1 valuation date, an officer fails to meet
their current stock ownership requirement as of their Requirement Date, the officer has until March 15 of the following year to
cure the non-compliance. If an officer does not cure the non-compliance by March 15, the SEBC may determine to pay all or a portion
of such officer’s next annual cash incentive plan award in shares of Selective common stock.
| Position |
Requirement |
| CEO
or President |
6
x base salary |
| CFO |
4
x base salary |
| Executive
Vice Presidents |
3
x base salary |
| Senior
Vice Presidents or equivalent job grade |
1.5
x base salary |
In calculating ownership under the guidelines:
| ◾ | Shares
of Selective common stock of which the officer is deemed to be the “beneficial owner”
(as such term is defined under Section 16 of the Exchange Act), seventy-five percent
(75%) of the awards of restricted stock or restricted stock units (including related dividend
equivalent units) not yet vested, and shares of Selective common stock held in benefit plan
investments (i.e., 401(k) plan) are counted; and |
| ◾ | Unexercised
stock options are not counted. |
In addition, officers are required to retain direct ownership of at
least 75% of the shares acquired under an equity award granted under any Selective equity compensation plan or other written compensatory
arrangements, net of taxes and transaction costs, unless the officer has met their applicable stock ownership requirement. Taxes and
transaction costs include: (i) shares retained by Selective to satisfy tax withholding requirements attributable to awards; and
(ii) shares the officer tenders to pay all or any portion of the exercise price of option grants. All of our officers have met,
or are on track to meet by their requirement date, the required ownership guidelines.
POLICY ON HEDGING
Selective seeks to fully align the long-term financial interests of
its officers, directors, and employees with the interests of Selective’s other stockholders. For this reason, Selective officers,
directors, and employees are prohibited from purchasing financial instruments (including prepaid variable forward contracts, equity swaps,
collars, and exchange funds), or otherwise engaging in transactions that hedge, offset, or are designed to hedge or offset, any decrease
in the market value or the full ownership risks and rewards of their direct or indirect Selective stock holdings.
RECOUPMENT OF AWARDS
Selective has an incentive-based compensation recoupment policy, under
which the Board, upon the SEBC’s recommendation, may require, in certain circumstances, the return, repayment, or forfeiture of
any cash or equity-based incentive compensation payment or award made to any current or former “Senior Officer” (as defined
in such policy) during the three completed fiscal years immediately preceding the date of: (i) a required restatement of Selective’s
financial statements due to material noncompliance with any financial reporting requirement under the federal securities laws, regardless
of the Senior Officer’s culpability in such restatement; or (ii) required restatement of a performance measure – a financial
or operating metric used formulaically or considered by the SEBC in determining performance-based compensation – in which the fraud
or willful misconduct of the Senior Officer was a significant contributing factor in causing the restatement.
In October 2022, the SEC adopted new Rule 10D-1 under the
Exchange Act, which requires national securities exchanges, including Nasdaq, to establish listing standards relating to executive officer
incentive compensation clawback and disclosure rules. We intend to monitor the development of Nasdaq’s final listing standards
and plans to amend its existing compensation recoupment policy, as appropriate, in accordance with requirements of Nasdaq’s final
listing standards.
RETIREMENT AND DEFERRED COMPENSATION PLANS
Selective Insurance Company of America (“SICA”), a wholly
owned subsidiary of Selective, employs all our personnel, including the NEOs. We strive to provide a competitive retirement benefit program
that allows us to attract and retain talent for the organization. We offer a defined contribution program, including a nonqualified defined
contribution deferred compensation plan (the “Deferred Compensation Plan”) for certain officers and highly-compensated employees,
including the NEOs. This program is consistent with benefits provided by many of the companies with which we compete for executive talent.
SICA also has maintained a non-contributory defined benefit pension
program consisting of a tax-qualified defined benefit pension plan, the Retirement Income Plan, and a nonqualified supplemental pension
plan for certain executives and employees. The accrual of additional benefits under the pension program ceased as of March 31, 2016.
The “Pension Benefits” of this Proxy Statement describes the pension program more fully. Because of their earlier hire dates,
Mr. Marchioni, Ms. Hall, and Mr. Lanza participate in the pension program. Because of their later hire dates, Mr. Wilcox
(employed on January 1, 2017) and Mr. Senia (employed on October 4, 2010) are not eligible to participate in the pension
program.
SICA offers a tax-qualified defined contribution plan named the Selective
Insurance Retirement Savings Plan (the “Retirement Savings Plan”) for employees, including the NEOs, who meet eligibility
requirements. Participants can contribute up to 50% of their eligible compensation to the Retirement Savings Plan, which was up to $20,500
in 2022. Under the Retirement Savings Plan, participant contributions are matched at 100% of the employee’s salary deferrals up
to 3% of the employee’s eligible compensation, and at 50% of the employee’s salary deferrals above 3%, up to 6% of the employee’s
eligible compensation, subject to limitations under the Code. Participants turning age 50 or over during the year, including all the
NEOs, were eligible in 2022 to make additional catch-up salary deferral contributions of up to $6,500 to the Retirement Savings Plan
under the Code.
In connection with the curtailment of the Retirement Income Plan,
all eligible participants in the Retirement Savings Plan, including the NEOs, began receiving a non-elective contribution of 4% of base
salary to their accounts under the Retirement Savings Plan, subject to limitations under the Code.
Under the Deferred Compensation Plan, certain executives and employees,
including the NEOs, may, subject to certain limitations, defer: (i) up to 50% of their base salary; (ii) up to 100% of their
annual bonus (subject to certain limitations to provide for required tax withholding); and/or (iii) all or a percentage of such
other compensation as otherwise designated by the administrator of the Deferred Compensation Plan. To compensate for the Code’s
limitations on SICA’s matching contributions for the NEOs under the Retirement Savings Plan, SICA matched our NEOs’ contributions
to the Deferred Compensation Plan in 2022 as follows: 100% of each NEO’s salary deferrals to the Retirement Savings Plan and the
Deferred Compensation Plan up to 3% of the employee’s base salary, and 50% of the NEO’s salary deferrals to the Retirement
Savings Plan and the Deferred Compensation Plan above 3%, up to 6% of the NEO’s base salary, less any matching contributions to
the Retirement Savings Plan. To the extent provisions of the Code and the Retirement Savings Plan limit non-elective contributions to
the Retirement Savings Plan, SICA makes non-elective contributions of 4% of base salary to participants’ Deferred Compensation
Plan accounts. The “Nonqualified Deferred Compensation” section of this Proxy Statement includes additional information about
the Deferred Compensation Plan.
SICA also maintains broad-based health and welfare benefit plans in
which eligible employees, including the NEOs, participate.
EMPLOYMENT AGREEMENTS
SICA has entered into employment agreements with its key executive
officers, including the NEOs. Each employment agreement provides for severance in the event of termination: (i) due to death or
Disability; (ii) without “Cause”; (iii) due to resignation for “Good Reason” within two years following
a “Change in Control” (as each capitalized term is defined in the applicable employment agreement); (iv) due to resignation
of the NEO within two years of the company first imposing a requirement, without the consent of the NEO, that relocates the NEO’s
business location more than 50 miles; and (v) for the CEO, a resignation at any time for Good Reason. The SEBC believes these agreements
are important for the recruitment and retention of key executives, and its Compensation Consultant advised that the employment agreements’
terms were market competitive within our peer group when executed. Furthermore, after or in connection with a change in control, uncertainty
may arise among our key executives about their continued employment, possibly leading to their distraction or departure. The purpose
of the employment agreements is to retain our key executives and reinforce and encourage their continued attention and dedication during
the potentially critical period of a change in control.
The change in control provisions of the NEOs’ employment agreements
concerning severance payments, outstanding awards under our stock and cash plans, and continued insurance coverages or coverage reimbursement,
are triggered following the NEO’s employment termination without Cause or the resignation of the NEO for Good Reason within two
years following a change in control. This double trigger ensures such a payout does not automatically occur upon a change in control
only.
The employment agreements are described in the section entitled, “Employment
Agreements and Potential Payments upon Termination or Change in Control” section of this Proxy Statement. This section includes
information on multipliers used in calculating the severance payment and duration of reimbursement for the cost of certain benefit coverages
provided to individual executives upon termination. We believe these multipliers are consistent with each NEO’s level and value
of position to the organization. SICA’s current employment agreements do not contain excise tax gross-up provisions.
TAX TREATMENT AND ACCOUNTING
Code Section 162(m) generally disallows a federal income
tax deduction to public companies for annual compensation over $1 million (per individual) paid to their chief executive officer, chief
financial officer, and certain other NEOs. In considering the goals of our executive compensation program in making its compensation
decisions, the SEBC retains the flexibility to award compensation it believes to be in Selective’s best long-term interests, even
if the awards may not be fully deductible under Code Section 162(m).
GAAP requires compensation expense to be measured on the income statement
for all stock-based payments at grant date fair value for equity instruments (including restricted stock unit awards) and at market value
on the date of vesting for liability instruments (including cash incentive unit awards). The SEBC has considered the impact of GAAP on
our use of stock-based compensation as a retention tool. The SEBC has determined that the current estimated costs of using stock-based
compensation relative to the benefits they provide are appropriate and do not warrant any change to our current incentive framework.
We have designed our compensation programs and awards to executive
officers to be exempt from or, where applicable, comply with the provisions of Section 409A of the Code. For example, if the executives
are “specified employees” under Section 409A of the Code, any payments of deferred compensation under our nonqualified
deferred compensation plans that are triggered by the executive officer’s separation from service are not payable before the first
day of the seventh month after the executive’s date of separation from service.
COMPENSATION COMMITTEE
REPORT
The Salary and Employee Benefits Committee establishes general executive
compensation policies and establishes the salaries and bonuses of Selective’s named executive officers, including the Chief Executive
Officer. The Salary and Employee Benefits Committee (i) has reviewed and discussed the Compensation Discussion and Analysis with
management, and (ii) based on this review and discussion, recommended to the Board of Directors, and the Board of Directors approved,
the inclusion of the Compensation Discussion and Analysis in this Proxy Statement.
Submitted by the Salary and Employee Benefits
Committee of Selective’s Board of Directors,
| Michael J.
Morrissey, Chairperson |
Stephen C.
Mills |
| Lisa Rojas Bacus |
Cynthia S. Nicholson |
| John C. Burville |
J. Brian Thebault |
| Terrence W. Cavanaugh |
Philip H. Urban |
The Compensation Committee Report does not constitute soliciting material,
and it shall not be deemed to be filed or incorporated by reference into any other Selective filing under the Securities Act of 1933,
as amended (“Securities Act”), or the Exchange Act, except to the extent that Selective specifically incorporates the Compensation
Committee Report by reference therein.
SUMMARY COMPENSATION
TABLE
The following Summary Compensation Table reflects the compensation
earned by or paid to the NEOs during 2022, 2021, and 2020.
Name
and Principal
Position |
Year |
Salary
($)(1) |
Stock
Awards
($)(2) |
Non-Equity
Incentive
Plan
Compensation
($)(3) |
Change
in
Pension Value
and Nonqualified
Deferred
Compensation
Earnings ($)(4) |
All Other
Compensation
($)(5) |
Total
($) |
John J. Marchioni
President and CEO |
2022
2021
2020 |
988,462
925,000
951,923 |
2,628,160
2,124,100
1,648,685 |
2,100,000
2,300,000
2,200,000 |
–
–
239,169 |
93,565
86,525
90,629 |
5,810,187
5,435,625
5,130,406 |
Mark A. Wilcox
EVP, Chief Financial Officer |
2022
2021
2020 |
692,308
648,464
661,733 |
1,137,671
965,506
775,882 |
1,100,000
1,200,000
1,100,000 |
–
–
– |
63,912
65,119
75,824 |
2,993,891
2,879,089
2,613,439 |
Brenda M. Hall
EVP, Chief Operating Officer, Standard Lines |
2022
2021 |
490,769
437,692 |
580,954
482,753 |
610,000
610,000 |
–
– |
46,915
37,488 |
1,728,638
1,567,933 |
Michael H. Lanza
EVP, General Counsel and Chief Compliance Officer |
2022
2021
2020 |
578,462
568,462
579,615 |
525,097
500,014
500,033 |
530,000
580,000
550,000 |
–
–
101,198 |
57,169
66,019
48,221 |
1,690,728
1,714,495
1,779,067 |
Vincent M. Senia
EVP, Chief Actuary |
2022
2021 |
431,462
421,769 |
420,053
375,077 |
520,000
565,000 |
–
– |
47,674
35,850 |
1,419,189
1,397,696 |
(1) The
year 2020 included an extra pay period (27 vs. 26). This pay-period timing occurs approximately once every decade. Consequently, the
NEOs, and every employee in the organization who was employed for the full year, were paid an additional pay period in 2020. This did
not result in an ongoing increase to the NEOs’ or any employee’s annual base pay rate.
(2) This
column reflects the aggregate grant date fair value of the 2022, 2021, and 2020 grants of performance-based restricted stock unit awards
and 2022, 2021, and 2020 grants of performance-based cash incentive unit awards. The grants of performance-based restricted stock units
generally vest three years from the date of grant, conditioned upon the attainment of certain predetermined performance goals. Grants
of performance-based cash incentive unit awards generally vest at the payment date, which is as soon as practicable in the calendar year
following the end of the calendar year coincident with the end of the three-year performance period. The value of each cash incentive
unit initially awarded increases or decreases to reflect TSR on Selective common stock over the three-year performance period for the
award. For the 2022, 2021, and 2020 performance-based cash incentive unit awards, the number of cash incentive units ultimately earned
increases or decreases based on (i) cumulative three-year statutory NPW growth relative to the Cash Incentive Unit Peer Group, and
(ii) cumulative three-year statutory operating return on policyholder surplus relative to the Cash Incentive Unit Peer Group. Restricted
stock unit and cash incentive unit awards are generally subject to forfeiture should the grantee resign or be terminated for cause prior
to vesting. However, restricted stock unit and cash incentive unit awards granted to Messrs. Lanza and Senia will vest upon attainment
of the performance condition only, as they have achieved early retirement eligibility.
The grant date fair values for the performance-based
restricted stock unit and performance-based cash incentive unit awards granted to the NEOs are as follows:
| Name |
Year |
Performance-Based
Restricted
Stock Units ($) |
Performance-Based
Cash
Incentive Units ($) |
| John
J. Marchioni |
2022
2021
2020 |
1,953,160
1,574,100
1,223,685 |
|
675,000
550,000
425,000 |
| Mark
A. Wilcox |
2022
2021
2020 |
843,871
715,506
575,882 |
|
293,800
250,000
200,000 |
| Brenda
M. Hall |
2022
2021 |
430,954
357,753 |
|
150,000
125,000 |
| Michael
H. Lanza |
2022
2021
2020 |
393,797
375,014
375,033 |
|
131,300
125,000
125,000 |
| Vincent
M. Senia |
2022
2021 |
315,053
281,277 |
|
105,000
93,800 |
The aggregate grant date fair value reported in this column assumes
the following: (i) the predetermined performance goals for the restricted stock unit grants are probable of being attained; (ii) initial
per unit values for the cash incentive unit awards of $100; and (iii) a 100% peer group unit multiplier for cash incentive unit
awards. For further discussion of the fair value calculation of the awards in this column, please refer to Note 16 to the consolidated
financial statements in Selective’s Annual Report on Form 10-K for the year ended December 31, 2022. The maximum value
assuming the highest level of performance conditions for the performance-based restricted stock units are consistent with the amounts
above. Although the maximum number of performance-based cash incentive units potentially issuable is 150% of the original grant for the
2020, 2021, and 2022 grants, the ultimate maximum value of the 2020, 2021, and 2022 grants cannot be determined at this time because
the initial value of each unit is adjusted based on the TSR of Selective common stock over the grant’s three-year performance period.
(3) Amounts
in this column are annual cash incentive plan awards to the NEOs earned in 2022 and paid in 2023, earned in 2021 and paid in 2022, and
earned in 2020 and paid in 2021. These awards were granted under the Cash Incentive Plan.
(4) Amounts
in this column reflect the actuarial increase in the present value of each NEO’s pension benefits under all defined benefit pension
plans of SICA, determined using the same interest rate and mortality assumptions as those used for financial statement reporting purposes.
There were no changes to the benefit formulas under the defined pension benefit plans in 2022, as the plans were amended to cease further
accruals effective as of March 31, 2016. The changes in pension values reported in this column are primarily attributable to an
increase in the discount rate used to calculate present value and the use of the most-recently released mortality tables. There were
no above-market or preferential earnings on deferred compensation under SICA’s nonqualified deferred compensation program. For
2022, Mr. Marchioni’s, Ms. Hall’s, and Mr. Lanza’s Change in Pension Value and Nonqualified Deferred
Compensation was $(487,396), $(157,936), and $(187,677), respectively. These negative amounts have been excluded from the Summary Compensation
Table in accordance with SEC rules. Based on Messrs. Wilcox and Senia’s hire dates, they are not eligible to participate in
SICA’s defined benefit pension plans.
(5) For
2022, amounts in this column for each NEO reflect the following (amounts in this footnote may not exactly match the figures in the Summary
Compensation Table due to rounding):
| ◾ | Mr. Marchioni:
$30,756 of company matching contributions and $27,338 of non-elective contributions to his
Deferred Compensation Plan account, $13,725 of company matching contributions and $12,200
of non-elective contributions to his 401(k) plan account, $3,700 for tax preparation
services, $5,000 for the executive physical examination service, and $846 related to a service
award that all employees are eligible to receive based on their achievement of certain tenure
milestones. |
| ◾ | Mr. Wilcox:
$17,429 of company matching contributions and $15,492 of non-elective contributions to his
Deferred Compensation Plan account, $13,725 of company matching contributions and $12,200
of non-elective contributions to his 401(k) plan account, $5,000 for the executive physical
examination service, and $66 related to a service award that all employees are eligible to
receive based on their achievement of certain tenure milestones. |
| ◾ | Ms. Hall:
$8,360 of company matching contributions and $7,431 of non-elective contributions to her
Deferred Compensation Plan account, $13,725 of company matching contributions and $12,200
of non-elective contributions to her 401(k) plan account, and $5,200 for the executive
physical examination service. |
| ◾ | Mr. Lanza:
$12,306 of company matching contributions and $10,938 of non-elective contributions to his
Deferred Compensation Plan account, $13,725 of company matching contributions and $12,200
of non-elective contributions to his 401(k) plan account, $3,000 for tax preparation
services, and $5,000 for the executive physical examination service. |
| ◾ | Mr. Senia:
$5,691 of company matching contributions and $5,058 of non-elective contributions to his
Deferred Compensation Plan account, $13,725 of company matching contributions and $12,200
of non-elective contributions to his 401(k) plan account, and $11,000 for the executive
physical examination service. |
GRANTS OF PLAN-BASED
AWARDS
The following table shows the grants of plan-based
awards to our NEOs in 2022:
| Name |
Grant
Date |
Estimated
Future
Payouts under Non-
Equity Incentive Plan
Awards(1) |
Estimated
Future Payouts under
Equity Incentive Plan Awards(2) |
Grant
Date Fair
Value of Cash
Incentive Unit and
Restricted Stock
Units Awards ($)(4) |
Cash
Incentive Unit
Awards(3) |
Restricted
Stock
Unit
Awards
(#) |
Threshold
($) |
Maximum
($) |
Threshold
(#) |
Target
(#) |
Maximum
(#) |
Maximum
(#) |
| John
J. Marchioni |
2/7/2022 |
|
|
|
|
|
26,231 |
1,953,160 |
| 2/7/2022 |
|
|
2,970 |
6,750 |
10,125 |
|
675,000 |
| |
0 |
3,500,000 |
|
|
|
|
|
| Mark.
A. Wilcox |
2/7/2022 |
|
|
|
|
|
11,416 |
843,871 |
| 2/7/2022 |
|
|
1,293 |
2,938 |
4,407 |
|
293,800 |
| |
0 |
1,750,000 |
|
|
|
|
|
| Brenda
M. Hall |
2/7/2022 |
|
|
|
|
|
5,830 |
430,954 |
| 2/7/2022 |
|
|
660 |
1,500 |
2,250 |
|
150,000 |
| |
0 |
750,000 |
|
|
|
|
|
| Michael
H. Lanza |
2/7/2022 |
|
|
|
|
|
5,101 |
393,797 |
| 2/7/2022 |
|
|
578 |
1,313 |
1,970 |
|
131,300 |
| |
|
870,000 |
|
|
|
|
|
| Vincent
M. Senia |
2/7/2022 |
|
|
|
|
|
4,081 |
315,053 |
| 2/7/2022 |
|
|
462 |
1,050 |
1,575 |
|
105,000 |
| |
0 |
649,500 |
|
|
|
|
|
(1) Amounts
represent minimum and maximum potential ACIP awards under the Cash Incentive Plan for 2022 based on 2022 base salary rates. Maximum awards
reflect the maximum ACIP award established by the SEBC. Actual payouts of the above-referenced awards are included in the Non-Equity
Incentive Plan Compensation column of the Summary Compensation Table. For information regarding the ACIP, see the section of the Compensation
Discussion and Analysis entitled, “Annual Cash Incentive Program.”
(2) Performance-based
cash incentive unit awards were granted under the Cash Incentive Plan, and performance-based restricted stock unit awards were granted
under the Omnibus Stock Plan. For a description of the material terms of such awards, see the section of the Compensation Discussion
and Analysis entitled, “Elements of Long-Term Compensation.”
(3) The
number of performance-based cash incentive units paid can range from 0%-150%, and therefore, the amount payable could be $0. The threshold
selected represents performance compared to the 30th percentile of the Cash Incentive Unit Peer Group, the target represents
performance compared to the 50th percentile of the Cash Incentive Unit Peer Group, and the maximum represents performance
greater than or equal to the 80th percentile of the Cash Incentive Unit Peer Group.
(4) The
grant date fair value reported in this column assumes the following: (i) the predetermined performance goals for the restricted
stock unit grants are probable of being attained; (ii) initial per unit values for the cash incentive unit awards of $100; and (iii) a
100% peer group unit multiplier for cash incentive unit awards. For further discussion of the fair value calculation of the awards in
this column, please refer to Note 16 to the consolidated financial statements in Selective’s Annual Report on Form 10-K for
the year ended December 31, 2022.
OUTSTANDING EQUITY AWARDS
AT FISCAL YEAR END
The following table shows the unvested stock awards of our NEOs as
of December 31, 2022:
| |
Stock
Awards |
| Name |
No. of
Shares or
Units of Stock That
Have Not Vested
(#)(1) |
Market
Value of
Shares or Units of
Stock That Have
Not Vested ($) |
Equity
Incentive
Plan Awards: No. of
Unearned Shares,
Units or Other
Rights That Have
Not Vested (#) |
Equity
Incentive
Plan Awards: Market
or Payout Value of
Unearned Shares,
Units or Other
Rights That Have
Not Vested ($)(8) |
| John
J. Marchioni |
24,109(2)
26,101(3) |
2,665,169(4)
2,312,783 |
5,500(5)
6,750(6)
26,593(7) |
1,121,695
1,110,337
2,356,415 |
| Mark
A. Wilcox |
11,346(2)
11,864(3) |
1,254,241(4)
1,051,273 |
2,500(5)
2,938(6)
11,574(7) |
509,861
483,284
1,025,536 |
| Brenda
M. Hall |
4,610(2)
5,932(3) |
509,665(4)
525,637 |
1,250(5)
1,500(6)
5,910(7) |
254,931
246,742
523,728 |
| Michael
H. Lanza |
7,091(2)
5,932(3) |
783,901(4)
525,637 |
1,250(5)
1,313(6)
5,171(7) |
254,931
215,981
458,239 |
| Vincent
M. Senia |
5,319(2)
4,449(3) |
588,009(4)
394,250 |
938(5)
1,050(6)
4,137(7) |
191,300
172,719
366,609 |
(1) In
the event of a termination of employment on or after an individual attains Early Retirement Age, as defined under the 2020, 2021, and
2022 restricted stock unit award agreements (the “Award Early Retirement Age”), holders of performance-based restricted stock
unit awards granted in 2020, 2021, and 2022 are vested in such awards subject only to the attainment of applicable performance measures.
The respective dates upon which each NEO attained, or is anticipated to attain, their Award Early Retirement Age are as follows: Mr. Marchioni,
May 28, 2024; Mr. Wilcox, January 2, 2027; Ms. Hall, May 28, 2025; Mr. Lanza, December 16, 2016; and
Mr. Senia, October 4, 2020.
(2) Reflects
number of performance-based restricted stock units initially granted on February 3, 2020, and the related accrued DEUs, which were
vested and paid on February 3, 2023. Also reflects number of performance-based cash incentive units initially granted on February 3,
2020 to the NEOs for the three-year performance period ended December 31, 2022, which vested on February 3, 2023. In the event
of a termination of employment on or after an individual’s Award Early Retirement Age, holders of such awards are vested in such
awards, with the initial number of units and the value of each unit subject to adjustment, based on the attainment of specified performance
measures. Award Early Retirement Age dates for the NEOs are set forth in footnote 1. Settlement of the 2020 cash incentive unit awards
will be made as soon as practicable in the 2023 calendar year, following the determination of the attainment of the applicable performance
measures. The amounts reflected in this column are attributable to the number of performance-based restricted stock units and related
accrued DEUs as follows: Mr. Marchioni, 19,859; Mr. Wilcox, 9,346; Ms. Hall, 3,797; Mr. Lanza, 5,841; and Mr. Senia,
4,381. The amounts reflected in this column are attributable to the number of performance-based cash incentive units as follows: Mr. Marchioni,
4,250; Mr. Wilcox, 2,000; Ms. Hall, 813; Mr. Lanza, 1,250; and Mr. Senia, 938.
(3) Reflects
number of performance-based restricted stock units initially granted on February 1, 2021 and the related accrued DEUs for which
the applicable performance measures were achieved as of December 31, 2022, which generally will vest and be payable on February 1,
2024.
(4) Reflects
an $88.61 per unit value and a $142.0306 per unit value for the restricted stock units and cash incentive units, respectively, granted
on February 3, 2020. With respect to the cash incentive units, the amounts assume maximum performance level.
(5) Reflects
number of performance-based cash incentive units initially granted on February 1, 2021, to the NEOs for the three-year performance
period ending December 31, 2023, which generally will vest on February 1, 2024, following the determination of the attainment
of the applicable performance measures. In the event of a termination of employment on or after an individual’s Award Early Retirement
Age, holders of such awards are vested in such awards, with the initial number of units and the value of each unit subject to adjustment,
based on the attainment of specified performance measures. Award Early Retirement Age dates for the NEOs are set forth in footnote 1.
Settlement of the 2021 cash incentive unit awards will be made as soon as practicable in the 2024 calendar year, following the determination
of the attainment of the applicable performance measures.
(6) Reflects
number of performance-based cash incentive units initially granted on February 7, 2022, to the NEOs for the three-year performance
period ending December 31, 2024, which generally will vest on February 7, 2025, following the determination of the attainment
of the applicable performance measures. In the event of a termination of employment on or after an individual’s Award Early Retirement
Age, holders of such awards are vested in such awards, with the initial number of units and the value of each unit subject to adjustment,
based on the attainment of specified performance measures. Award Early Retirement Age dates for the NEOs are set forth in footnote 1.
Settlement of the 2022 cash incentive unit awards will be made as soon as practicable in the 2025 calendar year, following the determination
of the attainment of the applicable performance measures.
(7) Reflects
number of performance-based restricted stock units initially granted on February 7, 2022, and the related accrued DEUs: (i) for
which the attainment of the applicable performance measures will be calculated at the end of the performance period on December 31,
2024; and (ii) that generally will vest and be payable on February 7, 2025, subject to the attainment of the applicable performance
measures.
(8) The
amounts in this column reflect: (i) a $135.9630 per unit value for the February 1, 2021 cash incentive unit grant, and a $109.6629
per unit value for the February 7, 2022 cash incentive unit grant based on the TSR of Selective common stock at December 31,
2022; and (ii) an $88.61 per unit value for the February 7, 2022 restricted stock unit grant. With respect to the cash incentive
units, the amounts assume maximum performance.
OPTION EXERCISES AND
STOCK VESTED
The following table shows the stock vesting of awards by our NEOs
in 2022:
| |
Stock
Awards |
| Name |
Number of Shares
Acquired
on Vesting (#)(1) |
Value Realized on
Vesting
($)(2) |
| John
J. Marchioni |
20,976 |
1,916,168 |
| Mark
A. Wilcox |
12,908 |
1,179,186 |
| Brenda
M. Hall |
3,066 |
280,106 |
| Michael
H. Lanza |
8,068 |
736,981 |
| Vincent
M. Senia |
6,052 |
552,901 |
(1) Amounts
in this column include the number of performance-based restricted stock units and the related accrued DEUs that vested in 2022 and performance-based
cash incentive units paid in 2022. The amounts reflected in this column are attributable to the number of performance-based restricted
stock units and related accrued DEUs as follows: Mr. Marchioni, 16,101; Mr. Wilcox, 9,908; Ms. Hall, 2,354; Mr. Lanza,
6,193; and Mr. Senia, 4,645. The amounts reflected in this column are attributable to the number of performance-based cash incentive
units as follows: Mr. Marchioni, 4,875; Mr. Wilcox, 3,000; Ms. Hall, 713; Mr. Lanza, 1,875; and Mr. Senia, 1,407.
(2) Amounts
in this column include the value of performance-based restricted stock units and the related accrued DEUs that vested in 2022 and the
amount paid for performance-based cash incentive units in 2022. The amounts reflected in this column are attributable to the number of
performance-based restricted stock units and related accrued DEUs as follows: Mr. Marchioni, $1,232,693; Mr. Wilcox, $758,586;
Ms. Hall, $180,213; Mr. Lanza, $474,106; and Mr. Senia, $355,640. The amounts reflected in the table attributable to performance-based
cash incentive units are as follows: Mr. Marchioni, $683,475; Mr. Wilcox, $420,600; Ms. Hall, $99,893; Mr. Lanza,
$262,875; and Mr. Senia, $197,261.
PENSION BENEFITS
SICA maintains a tax-qualified, non-contributory defined benefit pension
plan, the Retirement Income Plan. Many SICA employees, including Mr. Marchioni, Ms. Hall, and Mr. Lanza, and certain former
employees whose employment commenced on or before December 31, 2005, are eligible to receive benefits under the Retirement Income
Plan. SICA also maintains the unfunded Selective Insurance Supplemental Pension Plan (“SERP”) to provide supplemental benefits
to certain executives and other participants in the Retirement Income Plan equal to the difference between: (i) the benefits payable
to these participants under the Retirement Income Plan, calculated without regard to Code limitations on annual amounts payable under
the Retirement Income Plan; and (ii) the actual benefits payable to these participants under the Retirement Income Plan.
Benefits under the Retirement Income Plan and SERP were curtailed
in the first quarter of 2013, when both plans were amended to cease accrual of additional benefits for all participants as of March 31,
2016. Participants as of March 31, 2016, remain entitled to the benefits already earned but have not earned additional benefits
since that date.
The Retirement Income Plan was amended as of July 1, 2002, to
provide for different calculations based on age and company service as of that date. Monthly benefits payable at normal retirement age
under the Retirement Income Plan and the SERP for the NEOs are computed as follows. Defined terms used in this section, but not defined
in this Proxy Statement, have the meanings given to them in the Retirement Income Plan.
| 1. | If a participant: (i) completed at least five years of Vesting Service
on or before July 1, 2002; and (ii) the sum of a participant’s age and Vesting
Service is 55 or more on or before July 1, 2002, a participant’s benefit is equal
to the sum of: (a) 2% of Average Monthly Compensation (base salary), less 1 3/7% of
Primary Social Security benefit multiplied by the number of years of Benefit Service through
June 30, 2002 (up to 35 years) reduced by the monthly amount, if any, of retirement
annuity payable under the group annuity contract issued by AXA Equitable Life Insurance Company
that was purchased under a prior terminated defined benefit pension plan, based on Benefit
Service as of June 30, 2002, but including compensation earned after such date; and
(b) 1.2% of Average Monthly Compensation multiplied by the number of years of Benefit
Service after June 30, 2002. |
| 2. | If a participant first became eligible for the plan before July 1,
2002, but did not qualify for 1 above, the participant’s benefit is equal to the greater
of: (i) the benefit accrued as of June 30, 2002 equal to 2% of Average Monthly
Compensation less 1 3/7% of Primary Social Security Benefit multiplied by years of Benefit
Service reduced by the monthly amount, if any, of retirement annuity payable under the group
annuity contract issued by AXA Equitable Life Insurance Company that was purchased under
a prior terminated defined benefit pension plan, based on Benefit Service as of June 30,
2002, but including compensation earned after such date for purposes of determining the participant’s
Average Monthly compensation; and (ii) 1.2% of Average Monthly Compensation multiplied
by years of Benefit Service. |
| 3. | If a participant first became a participant in the plan after July 1,
2002, the benefit is equal to 1.2% of Average Monthly Compensation multiplied by years of
Benefit Service. |
The earliest retirement age is 55 with 10 years of service or the
attainment of 70 points (age plus years of service). If a participant chooses to begin receiving benefits before their 65th birthday,
the amount of the monthly benefit will be reduced as follows:
| ◾ | By
1/180th for each complete calendar month for the first 60 months by which the first early
retirement benefit payment precedes the attainment of Normal Retirement Age (age 65); |
| ◾ | By
1/360th for each complete calendar month for the next 60 months by which the first early
retirement benefit payments precede Normal Retirement Age; and |
| ◾ | By
40% plus 1/600th per month for each month before age 55. |
At retirement, participants receive monthly pension payments. There
are four optional forms of payments that can be chosen as alternatives to the normal form of payment, which for a married participant
is an automatic 50% joint and surviving spouse annuity, and for an unmarried participant is a single life annuity.
The following table shows information regarding the pension benefits
of our NEOs. Based on Mr. Wilcox’s hire date of January 1, 2017 and Mr. Senia’s hire date of October 4,
2010, they are not eligible to participate in the Retirement Income Plan or the SERP:
| Name(1) |
Plan
Name |
Number
of
Years Credited
Service (#)(2) |
Present
Value
of Accumulated
Benefit ($)(3) |
Payments
During
Last Fiscal Year
($) |
| John
J. Marchioni |
Retirement
Income Plan |
17.25 |
355,316 |
– |
| |
SERP |
17.25 |
575,534 |
– |
| Brenda
M. Hall |
Retirement
Income Plan |
13.42 |
262,507 |
– |
| |
SERP |
13.42 |
11,299 |
– |
| Michael
H. Lanza |
Retirement
Income Plan |
10.67 |
320,217 |
– |
| |
SERP |
10.67 |
305,855 |
– |
(1) Mr. Marchioni,
Ms. Hall, and Mr. Lanza are each early retirement eligible.
(2) The
Retirement Income Plan imposes a one-year waiting period for plan participation, which year is not included in years of credited service.
(3) Present
value as of December 31, 2022, is calculated based on Normal Retirement Age of 65 using a 5.21% discount rate. For further discussion,
see Note 15. “Retirement Plans” in Item 8. “Financial Statements and Supplementary Data.” of Selective’s
Annual Report on Form 10-K for the year ended December 31, 2022.
NONQUALIFIED DEFERRED
COMPENSATION
The Deferred Compensation Plan allows participants to defer receipt
of up to 50% of base salary and up to 100% of their annual bonus (subject to certain limitations to provide for required tax withholding).
Participant accounts are credited with a notional rate of return (positive or negative) based on the performance of investment options
selected by the participants from a menu of notional investment options. Participants can elect to schedule in-service withdrawals or
withdrawals upon separation from service.
SICA makes matching contributions to a participant’s Deferred
Compensation Plan account to supplement matching contributions under the Retirement Savings Plan. For 2022, such matching contributions
consisted of 100% of the first 3% of base salary and 50% of the next 3% of base salary deferred to the Retirement Savings Plan and the
Deferred Compensation Plan together, minus any matching contribution made to a participant’s Retirement Savings Plan account. Effective
January 1, 2010, the Deferred Compensation Plan was amended for participants ineligible to participate in the Retirement Income
Plan to provide a non-elective contribution to the extent not made to a participant’s Retirement Savings Plan account due to the
limitations under the Code and the Retirement Savings Plan. The non-elective contribution to the Deferred Compensation Plan is equal
to 4% of a participant’s base salary, minus any non-elective contribution made to the Retirement Savings Plan. In conjunction with
the amendment of the Retirement Income Plan and the SERP to cease accrual of further benefits under those plans effective as of March 31,
2016, all participants affected by the curtailment, including the NEOs, became eligible for the non-elective contribution effected on
April 5, 2013.
The following table shows information regarding
nonqualified deferred compensation of our NEOs:
| Name |
Executive
Contributions
in 2022 ($)(1) |
Company
Contributions
in 2022 ($)(2) |
Aggregate
Earnings
in 2022 ($)(3) |
Aggregate
Withdrawals/
Distributions ($) |
Aggregate
Balance
at December 31,
2022 ($)(4) |
| John
J. Marchioni |
39,538 |
53,975 |
(238,615) |
– |
1,267,746 |
| Mark
A. Wilcox |
1,114,615 |
30,469 |
(453,201) |
– |
2,511,713 |
| Brenda
M. Hall |
40,315 |
12,554 |
(114,780) |
– |
531,576 |
| Michael
H. Lanza |
34,708 |
23,669 |
(168,986) |
– |
842,986 |
| Vincent
M. Senia |
30,202 |
11,200 |
(31,172) |
– |
242,684 |
(1) Amounts
in this column are attributable to (i) 2022 salaries deferred by Messrs. Marchioni, Wilcox, Lanza, and Senia and Ms. Hall,
which are included in the Salary column of the Summary Compensation Table; and (ii) 2022 ACIP awards deferred by Mr. Wilcox
and Ms. Hall, which are included in the Non-Equity Incentive Plan Compensation column of the Summary Compensation Table.
(2) Amounts
in this column are included in the All Other Compensation column of the Summary Compensation Table as follows: Mr. Marchioni 93,565;
Mr. Wilcox 63,912; Ms. Hall 46,915; Mr. Lanza 57,169; and Mr. Senia 47,674.
(3) Amounts
in this column are not included in the Summary Compensation Table because such earnings or losses were not above-market or preferential.
Values are negative reflecting 2022 performance of the NEOs’ selected notional investment options.
(4) Amounts
in this column include the following aggregate contributions of the NEOs and SICA to the Deferred Compensation Plan in 2022, which amounts
are included in the Summary Compensation Table:
| ◾ | For
2020: Mr. Marchioni, $90,581; Mr. Wilcox, $290,451; and Mr. Lanza, $47,181. |
| ◾ | For
2021: Mr. Marchioni, $63,677; Mr. Wilcox, $1,031,008; Ms. Hall, $34,385; Mr. Lanza,
$34,523; and Mr. Senia, $35,250. |
| ◾ | For
2022: Mr. Marchioni, $93,513; Mr. Wilcox, $1,145,085; Ms. Hall, $52,869; Mr. Lanza,
$58,377; and Mr. Senia, $41,403. |
EMPLOYMENT AGREEMENTS
AND POTENTIAL PAYMENTS UPON
TERMINATION OR CHANGE IN CONTROL
SICA entered into employment agreements or amended employment agreements,
as applicable, with: (i) Mr. Marchioni, commencing as of February 1, 2020, in connection with his appointment as President
and Chief Executive Officer; (ii) Mr. Wilcox, commencing as of January 1, 2017, in connection with his commencement of
employment; (iii) Ms. Hall, commencing as of September 30, 2019, in connection with her promotion to EVP; (iv) Mr. Lanza,
commencing as of March 2, 2020, to conform his agreement to SICA’s current terms; and (v) Mr. Senia, commencing
as of June 6, 2017, in connection with his promotion to EVP (collectively, the “Employment Agreements”). The following
tables summarize the principal provisions of the Employment Agreements.
| Term |
Initial
three-year term, automatically renewed for additional one-year periods unless terminated by either party with written notice.(1) |
| Compensation |
Base
salary.(2) |
| Benefits |
Eligible
to participate in incentive compensation plan, stock plan, 401(k) plan, and any other stock option, stock appreciation right,
stock bonus, pension (based on date of hire), group insurance, retirement, profit sharing, medical, disability, accident, life insurance,
relocation plan or policy, or any other plan, program, policy or arrangement of Selective or SICA intended to benefit SICA’s
employees generally. |
| Vacation
and Reimbursements |
Vacation
time and reimbursements for ordinary travel and entertainment expenses per SICA’s policies. |
| Perquisites |
Suitable
offices, secretarial and other services, and other perquisites to which other SICA executives are generally entitled. |
| Severance
and Benefits on Termination without Change in Control |
◾ For
Cause or Resignation by NEO other than for Good Reason: Salary and benefits accrued through termination date.
◾ Death
or Disability: Multiple(3) of: (i) NEO’s salary; plus (ii) average of three most recent annual
cash incentive payments; provided that any such severance payments be reduced by life or disability insurance payments under policies
with respect to which SICA paid premiums, paid in 12 equal installments.
◾ Without
Cause by SICA, Relocation of Office over 50 Miles (without NEO’s consent), Resignation for Good Reason by CEO:
◾ Multiple(3) of:
(i) NEOs salary; plus (ii) average of three most recent annual cash incentive payments paid in 12 equal installments.
|
| |
◾ Medical,
dental, vision, disability, and life insurance coverage in effect for NEO and dependents until the earlier of specified period of months(4) following
termination or commencement of equivalent benefits from a new employer.
◾ Stock
Awards: Except for termination for Cause or resignation by the NEO other than for Good Reason, immediate vesting and possible
extended exercise period, as applicable, for any previously granted stock options, stock appreciation rights, cash incentive units, restricted
stock, restricted stock units, and stock bonuses.
|
| Severance
and Benefits on Termination after Change in Control |
For termination without Cause or resignation for Good
Reason for: (i) CEO at any time; or (ii) other NEO within two years following a Change in Control (as defined in the Employment
Agreement), NEO is entitled to:
◾ Severance
payment equal to multiple(5) of the greater of: (i) NEO’s salary plus target annual cash incentive payment;
or (ii) NEO’s salary plus the average of NEO’s annual cash incentive payments for the three calendar years prior
to the calendar year in which the termination occurs, paid in lump sum.
◾ Medical,
dental, vision, disability, and life insurance coverage in effect for NEO and dependents until the earlier of a period of months(6) following
termination or commencement of equivalent benefits from a new employer.
◾ Stock
awards, same as above, except that the initial number of cash incentive units is multiplied by 150%. |
| Release;
Confidentiality and Non-Solicitation |
◾ Receipt
of severance payments and benefits conditioned upon:
◾ Entry
into release of claims; and
◾ No
disclosure of confidential or proprietary information, or solicitation of employees to leave Selective or its subsidiaries for a
period of two years following the termination of the Employment Agreement, and assignment of intellectual property rights. |
(1) The
initial three-year term ended or will end as follows:
| NEO |
Date |
| Mr. Marchioni |
January 31,
2023 |
| Mr. Wilcox |
January 1,
2020 |
| Ms. Hall |
September 30,
2022 |
| Mr. Lanza |
March 2,
2023 |
| Mr. Senia |
June 12,
2020 |
(2) The
annual base salaries for the NEOs, as of March 11, 2022, were as follows: Mr. Marchioni, $1,000,000; Mr. Wilcox, $700,000;
Ms. Hall, $500,000; Mr. Lanza, $580,000; and Mr. Senia, $433,000.
(3) For
Mr. Marchioni, the multiple is two, and for Messrs. Wilcox, Lanza, and Senia and Ms. Hall the multiple is 1.5.
(4) For
Mr. Marchioni, the period is 24 months, and for Messrs. Wilcox, Lanza, and Senia and Ms. Hall, the period is 18 months.
(5) For
Mr. Marchioni, the multiple is 2.99. For Messrs. Wilcox, Lanza, and Senia and Ms. Hall, the calculation for the severance
payment is 1.5 times the sum of the NEO’s salary and the average of the NEO’s annual cash incentive payments for the three
calendar years prior to the calendar year in which the termination occurs.
(6) For
Mr. Marchioni, the period is 36 months, and for Messrs. Wilcox, Lanza, and Senia and Ms. Hall, the period is 18 months.
The following table shows information regarding
payments and benefits to which our NEOs would be entitled under the terms of their respective Employment Agreements and the scenarios
shown as of December 31, 2022:
| Name |
Resignation(1)
or Termination
For Cause ($) |
Retirement
($)(2) |
Death
or
Disability ($)(3) |
Termination
without Cause
or Resignation
with Good
Reason ($)(4) |
Termination
Following
Change in
Control ($)(5) |
| John
J. Marchioni |
– |
8,520,574 |
14,787,240 |
14,830,784 |
20,096,716 |
| Mark
A. Wilcox |
– |
3,851,117 |
6,651,117 |
6,683,750 |
7,019,329 |
| Brenda
M. Hall |
– |
1,835,742 |
3,340,742 |
3,373,375 |
3,480,835 |
| Michael
H. Lanza |
– |
1,992,948 |
3,840,448 |
3,873,082 |
4,116,321 |
| Vincent
M. Senia |
– |
1,524,935 |
2,956,935 |
2,990,445 |
3,108,397 |
(1) Other
than a resignation for Good Reason.
(2) This
column includes the value of earned and unearned performance-based restricted stock units granted under the Omnibus Stock Plan and any
related accrued DEUs. These performance-based awards would normally vest upon: (i) achievement of early or normal retirement eligibility
or continuation in service through the end of the applicable performance period; and (ii) the achievement of the specified performance
goals applicable to each such award and be payable following the end of the applicable three-year performance period. As each of Messrs. Lanza
and Senia have attained early retirement eligibility, their respective restricted stock unit awards have vested, but their ultimate payment
value will only be determined upon achievement of each award’s applicable performance condition. Also included in this column is
the value of performance-based cash incentive units awarded under the Cash Incentive Plan to the NEOs. The value of such awards is calculated
using: (i) the target 100% unit multiplier for the number of cash incentive units granted; and (ii) the per unit value at December 31,
2022. Under the Cash Incentive Plan, the NEOs’ awards would fully vest upon achievement of early or normal retirement eligibility
or continuation in service through the end of the payment date and be payable following the end of the applicable three-year performance
period. As each of Messrs. Lanza and Senia have attained early retirement eligibility, their respective cash incentive unit awards
have vested, but their ultimate payment value will only be determined upon achievement of each award’s applicable performance conditions.
(3) This
column includes the value of unvested performance-based restricted stock units granted under the Omnibus Stock Plan and any related accrued
DEUs. In the event of total disability, these performance-based awards would normally vest for all the NEOs upon the achievement of the
specified performance goals applicable to each such award and be payable following the end of the applicable three-year performance period.
In the event of death, these performance-based awards are immediately vested and payable for all the NEOs. Also included in this column
is the value of performance-based cash incentive units awarded under the Cash Incentive Plan to the NEOs. The value of such awards is
calculated using: (i) the target 100% unit multiplier for the number of cash incentive units granted; and (ii) the per unit
value at December 31, 2022. Under the Cash Incentive Plan, in the event of death or total disability, the NEOs’ awards would
fully vest and be payable following the end of the applicable three-year performance period. This column also includes the cash severance
payment provided for in each NEO’s Employment Agreement.
(4) This
column includes the value of unvested performance-based restricted stock units granted under the Omnibus Stock Plan and any related accrued
DEUs. These performance-based awards would normally vest upon: (i) a termination without Cause or resignation for Good Reason; and
(ii) the achievement of the specified performance goals applicable to each such award and be payable following the end of the applicable
three-year performance period. Also included in this column is the value of performance-based cash incentive units awarded under the
Cash Incentive Plan to the NEOs. The value is calculated using: (i) the target 100% unit multiplier for the number of cash incentive
units granted; and (ii) the per unit value at December 31, 2022. The cash incentive unit awards would fully vest and be payable
following the end of the applicable three-year performance period. Also included in this column are the cash severance payment and the
value of applicable medical, dental, and vision coverages, as provided for in each respective NEO’s Employment Agreement.
(5) This
column includes the value of unvested performance-based restricted stock units granted under the Omnibus Stock Plan, and any related
accrued DEUs, which would immediately vest and be payable upon a termination of employment within two years following a change in control.
This column also includes the value of performance-based cash incentive units awarded under the Cash Incentive Plan to the NEOs, all
of which would vest upon a termination of employment within two years following a change in control. The value of such awards is calculated
using: (i) a 150% per unit multiplier; and (ii) the per unit
value at December 31, 2022. Also included in this column are the cash severance payment and the value of applicable medical, dental,
and vision coverages, as provided for in each NEO’s Employment Agreement.
CEO PAY RATIO
As required by Section 953(b) of the Dodd-Frank Wall Street
Reform and Consumer Protection Act of 2010 (the “Dodd-Frank Act”) and Item 402(u) of Regulation S-K, we are providing
the ratio of the annual total compensation of our CEO, Mr. Marchioni, to that of our median employee. In making this pay ratio disclosure,
other companies may use assumptions, estimates, and methodologies different than ours; as a result, the following information may not
be directly comparable to the information provided by other companies in our peer group or otherwise. The pay ratio included in this
information is a reasonable estimate calculated in a manner consistent with Item 402(u) of Regulation S-K.
We identified the median employee in 2022 by tabulating 2022 W-2 Medicare
Wages on December 31, 2022. We included all employees, whether employed full-time, part-time, or seasonally. We did not make
any adjustments or annualize compensation for employees who we did not employ for all of 2022. We believe the use of W-2 Medicare Wages
is a simple and consistent methodology that we can easily replicate in future years.
Mr. Marchioni’s 2022 total compensation was $5,810,187
(reflected in the Summary Compensation Table, which excludes the negative change in pension value and non-qualified deferred compensation),
and our median employee’s 2022 total compensation was $105,838. Mr. Marchioni’s 2022 total compensation was approximately
55 times that of our median employee.
PAY VERSUS PERFORMANCE
The
table below discloses “Compensation Actually Paid” (“CAP”), calculated under SEC rules, for (i) Selective’s
principal executive officer (“PEO”) and (ii) Selective’s NEOs other than the PEO, on an average basis, as well
as certain financial performance measures for Selective for the past three fiscal years. Mr. Marchioni served as PEO during 2022
and 2021. During 2020, Gregory E. Murphy served as PEO until January 31, 2020, after which time Mr. Marchioni was appointed
as PEO.
Consistent
with SEC rules, Selective has identified GAAP Combined Ratio as its “Company-Selected Measure,” an accepted insurance industry
standard of profitability. Selective believes that this measure represents the most important financial performance measure used to link
CAP to company performance. GAAP Combined Ratio is a key component of Selective’s compensation program, as described in
our Compensation Discussion and Analysis section above.
Pay Versus Performance Table
| | | | | | | | Value of Initial Fixed
$100 Investment Based
On: | | |
Fiscal
Year
(a) | Summary
Compensation
Table
(“SCT”)
Total for
PEO ($)(1)
(b1) | SCT
Table
Total for
PEO
($)(1) (b2) | CAP to
PEO
($)(1)(2)(3)(c1) | CAP
to
PEO
($)(1)(2)(4)(c2) | Average
SCT Total
for Non-
PEO
NEOs
($)(5) (d) | Average
CAP to
Non-PEO
NEOs
($)(2)(5)(6)
(e) | Total
Share-
Holder
Return
($)(7) (f) | Peer
Group
Total
Share-
holder
Return
($)(7)(g) | Net
Income
($) (h) | GAAP
Combined
Ratio
(%) (i) |
| 2022 | 5,810,187 | – | 7,100,961 | – | 1,958,112 | 2,282,919 | 142.03 | 108.70 | 224,886 | 95.1 |
| 2021 | 5,435,625 | – | 7,471,943 | – | 1,889,803 | 2,490,130 | 129.52 | 101.26 | 403,837 | 92.8 |
| 2020 | 5,130,406 | 5,370,502 | 5,319,126 | 5,606,083 | 2,196,253 | 2,287,992 | 104.46 | 90.45 | 246,355 | 94.9 |
(1) Mr. Marchioni
served as PEO during 2022 and 2021. During 2020, Gregory E. Murphy served as PEO until January 31, 2020, after which time Mr. Marchioni
was appointed as PEO. Mr. Murphy served as our Executive Chairman from February 1, 2020 through December 31, 2020. Consistent
with SEC rules, we have included Mr. Murphy’s total 2020 compensation, including his compensation for service as Executive
Chairman from February 1, 2020 through December 31, 2020, as reflected in Mr. Murphy’s total compensation amount
set forth in columns (b2)
and (c2). No relationship can be drawn between PEO (c2) and performance measures because Mr. Murphy was only a PEO for one month of
the reported disclosure period.
(2) Consistent
with SEC rules, we made the following adjustments to the SCT totals for NEOs to calculate CAP amounts:
| ◾ | Excluded
the actuarial increase in the present value of each applicable NEO’s pension benefits
under SICA’s defined benefit pension plans, which represented changes in pension values
primarily attributable to an increase in the discount rate used to calculate present value
and the use of the most-recently released mortality tables. See tables below for quantitative
detail for the PEOs and non-PEO NEOs. |
| ◾ | Added
changes in pension values attributable to current years’ service and any change in
pension value attributable to plan amendments made during each fiscal year. Our pension plan
is closed to new entrants and existing participants ceased accruing benefits after March 31,
2016. There were no amendments to the pension plan in each fiscal year that changed that
pension value. |
| ◾ | Excluded
the grant date fair values for the performance-based restricted stock unit and performance-based
cash incentive unit awards granted to the NEOs. See tables below for quantitative detail
for the PEOs and non-PEO NEOs. |
| ◾ | Added
the fair values of performance-based restricted stock units (and related accrued dividend
equivalent units) and performance-based cash incentive unit awards granted to the NEOs in
each year, valued as of each fiscal year end. See tables below for quantitative detail for
the PEO and non-PEO NEOs. |
| ◾ | Added
the year-over-year change in fair value of the prior years' unvested performance-based restricted
stock units (and related accrued dividend equivalent units) and performance-based cash incentive
unit awards, and the awards that vested during each fiscal year. See tables below for quantitative
detail for the PEO and non-PEO NEOs. |
Additionally, assumptions made in the valuation of the
2022, 2021, and 2020 grants of performance-based restricted stock unit awards, and the 2022, 2021, and 2020 grants of performance-based
cash incentive unit awards that differ materially from those disclosed as of the grant date of such awards include adjustment of:
| ◾ | Selective's
common stock price per share and reinvested dividends to reflect the measurement date value
(instead of the common stock price per share and reinvested dividends at grant date). Measurement
date represents each fiscal year end or the date of vesting for those awards that vested
in each fiscal year. |
| ◾ | Per
unit values for the performance-based cash incentive unit awards for the TSR value at the
measurement date (instead of using the initial per unit value of $100). |
| ◾ | The
peer group multiplier for cash incentive unit awards to reflect the Monte Carlo valuation
received at the measurement date, recorded on a one-quarter lag (instead of using the initial
peer group multiplier of 100%). |
(3) The
following table reconciles SCT Total for PEO (b1) to Total CAP to PEO (c1):
| PEO (c1): |
Fiscal
Year | SCT Total
($) (A) | Deducted from
SCT: Pension
Value and
Nonqualified
Deferred
Compensation
Earnings
($) (B) | Added to CAP:
Pension Value
Attributable to
Fiscal Years'
Service and Plan
Amendments
($) (C) | Deducted
from SCT:
Grant Date
Fair Value of
Awards
($) (D) | Added to
CAP: Fair
Value of
Awards
Granted in
Fiscal
Year ($)(1)
(E) | Added to
CAP:
Change in
Fair Value
of Prior
Years'
Unvested
Awards
($)(1) (F) | Added to
CAP:
Change in
Fair Value of
Prior Years'
Awards that
Vested in
Fiscal Year
($)(1) (G) | Total CAP
(A - B + C -
D + E + F
+ G) |
| 2022 | 5,810,187 | -- | – | 2,628,160 | 3,420,746 | 584,812 | (86,623) | 7,100,961 |
| 2021 | 5,435,625 | – | – | 2,124,100 | 3,075,273 | 1,093,366 | (8,221) | 7,471,943 |
| 2020 | 5,130,406 | 239,169 | – | 1,648,685 | 1,810,867 | 244,246 | 21,461 | 5,319,126 |
(1) The
table below shows information on performance-based restricted stock unit awards (“RSUs”) and performance-based cash incentive
unit awards (“CIUs”) previously granted to PEO (c1).
| PEO (c1): |
| Fiscal Year | Fair Value of Equity
Awards Granted in Fiscal
Year at Fiscal Year End
($) | Change in Fair Value
of Prior Years'
Awards Unvested ($) | Change in Fair Value
of Prior Years' Awards
that Vested in Fiscal
Year ($) | Equity Fair Value
Included in
Compensation
Actually Paid ($) |
| 2022 | | | | |
| RSUs | 2,310,409 | 406,192 | (86,623) | 2,629,977 |
| CIUs | 1,110,337 | 178,620 | - | 1,288,957 |
| Total | 3,420,746 | 584,812 | (86,623) | 3,918,934 |
| 2021 | | | | |
| RSUs | 2,052,416 | 598,684 | (36,748) | 2,614,352 |
| CIUs | 1,022,857 | 494,682 | 28,527 | 1,546,066 |
| Total | 3,075,273 | 1,093,366 | (8,221) | 4,160,419 |
| 2020 | | | | |
| RSUs | 1,255,857 | 117,570 | 54,475 | 1,427,902 |
| CIUs | 555,010 | 126,676 | (33,014) | 648,673 |
| Total | 1,810,867 | 244,246 | 21,461 | 2,076,575 |
(4) The
following table reconciles SCT Total for PEO (b2) to Total CAP to PEO (c2):
| PEO (c2): |
Fiscal
Year | SCT Total
($) (A) | Deducted from
SCT: Pension
Value and
Nonqualified
Deferred
Compensation
Earnings ($)
(B) | Added to CAP:
Pension Value
Attributable to
Fiscal Years'
Service and
Plan
Amendments
($) (C) | Deducted
from SCT:
Grant Date
Fair Value
of Awards
($) (D) | Added to
CAP: Fair
Value of
Awards
Granted in
Fiscal Year
($)(1) (E) | Added to
CAP:
Change in
Fair Value
of Prior
Years'
Unvested
Awards
($)(1) (F) | Added to
CAP:
Change in
Fair Value
of Prior
Years'
Awards
that
Vested in
Fiscal Year
($)(1) (G) | Total CAP
(A - B + C
- D + E + F
+ G) |
| 2022 | n/a | n/a | n/a | n/a | n/a | n/a | n/a | n/a |
| 2021 | n/a | n/a | n/a | n/a | n/a | n/a | n/a | n/a |
| 2020 | 5,370,502 | 380,329 | – | 2,100,004 | 2,284,638 | 395,669 | 35,607 | 5,606,083 |
(1) The
table below shows information on performance-based RSUs and performance-based CIUs previously granted to PEO (c2).
| PEO (c2): |
| Fiscal Year | Fair Value of Equity
Awards Granted in Fiscal
Year at Fiscal Year End ($) | Change in Fair
Value of Prior
Years’ Awards
Unvested ($) | Change in Fair Value
of Prior Years’
Awards that Vested
in Fiscal Year ($) | Equity Fair Value
Included in
Compensation
Actually Paid ($) |
| 2022 | | | | |
| RSUs | n/a | n/a | n/a | n/a |
| CIUs | n/a | n/a | n/a | n/a |
| Total | n/a | n/a | n/a | n/a |
| 2021 | | | | |
| RSUs | n/a | n/a | n/a | n/a |
| CIUs | n/a | n/a | n/a | n/a |
| Total | n/a | n/a | n/a | n/a |
| 2020 | | | | |
| RSUs | 1,599,049 | 190,096 | 90,788 | 1,879,933 |
| CIUs | 685,589 | 205,573 | (55,181) | 835,981 |
| Total | 2,284,638 | 395,669 | 35,607 | 2,715,914 |
(5) For
2022 and 2021, the Non-PEO NEOs were Messrs. Wilcox, Lanza, and Senia, and Ms. Hall. For 2020, the Non-PEO NEOs were Messrs. Wilcox
and Lanza.
(6) The following table reconciles Average SCT Total for Non-PEO NEOs (d) to Average CAP to Non-PEO NEOs (e):
| Average for Non-PEO NEOs: |
Fiscal
Year | SCT Total
($) (A) | Deducted from
SCT: Pension
Value and
Nonqualified
Deferred
Compensation
Earnings
($) (B) | Added to CAP:
Pension Value
Attributable to
Fiscal Years'
Service and
Plan
Amendments
($) (C) | Deducted
from
SCT:
Grant
Date Fair
Value of
Awards
($) (D) | Added to
CAP: Fair
Value of
Awards
Granted in
Fiscal Year
($)(1) (E) | Added to
CAP:
Change in
Fair Value
of Prior
Years'
Unvested
Awards
($)(1) (F) | Added to
CAP: Change
in Fair Value
of Prior
Years'
Awards that
Vested in
Fiscal Year
($)(1) (G) | Total
CAP
(A - B + C -
D + E +
F + G) |
| 2022 | 1,958,112 | – | – | 665,944 | 863,214 | 158,607 | (31,070) | 2,282,919 |
| 2021 | 1,889,803 | – | – | 580,838 | 835,690 | 348,738 | (3,263) | 2,490,130 |
| 2020 | 2,196,253 | 101,198 | – | 637,958 | 698,107 | 120,014 | 12,774 | 2,287,992 |
(1) The
table below shows information on performance-based RSUs and performance-based CIUs previously granted to the Non-PEO NEOs.
| Average for Non-PEO NEOs: |
Fiscal
Year | Fair Value of Equity Awards
Granted in Fiscal Year at
Fiscal Year End ($) | Change in Fair Value
of Prior Years’
Awards Unvested ($) | Change in Fair Value of
Prior Years’ Awards that
Vested in Fiscal Year ($) | Equity Fair
Value Included
in
Compensation
Actually Paid
($) |
| 2022 | | | | |
| RSUs | 583,518 | 108,458 | (31,070) | 660,907 |
| CIUs | 279,695 | 50,149 | – | 329,844 |
| Total | 863,214 | 158,607 | (31,070) | 990,751 |
| 2021 | | | | |
| RSUs | 559,612 | 188,746 | (14,317) | 734,040 |
| CIUs | 276,078 | 159,992 | 11,054 | 447,124 |
| Total | 835,690 | 348,738 | (3,263) | 1,181,165 |
| 2020 | | | | |
| RSUs | 485,891 | 55,881 | 32,425 | 574,197 |
| CIUs | 212,216 | 64,133 | (19,651) | 256,698 |
| Total | 698,107 | 120,014 | 12,774 | 830,894 |
(7) We
used our peer group for purposes of Item 201(e) of Regulation S-K to calculate peer group total shareholder return. The peer group
is a select group of peer companies comprised of Nasdaq-listed companies in SIC Code 6330-6339, Fire, Marine, and Casualty Insurance.
Narrative
Discussion of Relationship between CAP and Performance Measures
We
believe that the Pay Versus Performance Table reflects an alignment of CAP with Selective’s performance of key financial performance
measures. The information in the below charts further demonstrates that generally there is correlation among the CAP amounts set forth
in columns (c1), (c2), and (e) and Selective’s TSR, net income, and GAAP combined ratio. As noted above, the amount set forth
in column (c2) includes Mr. Murphy’s compensation for service as Executive Chairman from February 1, 2020 through
December 31, 2020, in connection with Selective’s PEO leadership transition.
In addition to reviewing this discussion and the Pay Versus Performance
Table above, we encourage you to read the Compensation Discussion and Analysis section of this Proxy Statement, which explains our executive
compensation philosophy and programs and compensation decisions relating to 2022 compensation for our NEOs.
CAP versus Selective TSR
In each of 2022, 2021, and 2020, Selective markedly outperformed the
Peer Group TSR. The relationship between CAP to PEO (c1) and Average CAP to Non-PEO NEOs to Selective’s TSR was moderately correlated,
as both CAP to CEO (c1) and Average CAP to Non-PEO NEOs increased from 2020 to 2021, as Selective’s TSR increased. However, CAP
to CEO (c1) and Average CAP to Non-PEO NEOs decreased from 2021 to 2022, while Selective’s TSR increased.
CAP versus Selective Net Income
Across 2022, 2021, and 2020, Selective generated strong net income.
From 2020 to 2021, there were strong correlations between Selective’s net income and each of PEO CAP (c1) and Average CAP to Non-PEO
NEOs. Specifically, both CAP to PEO (c1) and Average CAP to Non-PEO NEOs increased from 2020 to 2021, as Selective’s net income
increased. In 2022, both CAP to PEO (c1) and Average CAP to Non-PEO NEOs decreased, as compared to 2021, as Selective’s net income
decreased.
CAP versus Selective GAAP Combined Ratio
For each of 2022, 2021, and 2020, Selective generated strong GAAP combined
ratio results. There is a correlation between Selective’s GAAP combined ratio and each of CAP to PEO (c1) and Average CAP to Non-PEO
NEOs. Specifically, both CAP to PEO (c1) and Average CAP to Non-PEO NEOs increased from 2020 to 2021, as Selective’s combined ratio
decreased (improved). Both CAP to PEO (c1) and Average CAP to Non-PEO NEOs decreased for 2022, as compared to 2021, as Selective’s
combined ratio increased (weakened).
Important Financial Performance Measures
The following unranked tabular list sets forth the most important performance
measures used by Selective to link CAP for all NEOs to company performance for 2022:
| GAAP Combined Ratio |
| Cumulative non-GAAP operating ROE* / cumulative statutory operating return on policyholders’ surplus |
| Cumulative policy count growth |
| Cumulative statutory net premiums written growth |
| Profitability improvement |
| Expense management and operational efficiency |
| Customer experience |
* See the Compensation Discussion and Analysis section of this Proxy
Statement for a discussion of non-GAAP operating ROE, which is a non-GAAP performance measure.
DIRECTOR COMPENSATION
We compensate non-employee directors for their Board service with a
combination of cash and equity in amounts commensurate with their role and involvement, and consistent with peer company practices. In
setting director compensation, we consider the significant amount of time and effort our directors expend in fulfilling their duties,
and the skill level required of members of our Board. We intend to compensate our non-employee directors in a competitive way that attracts
and retains high-caliber directors and aligns their interests with those of our stockholders. Mr. Marchioni, our CEO, did not receive
additional compensation for his service as a director in 2022.
The SEBC, which is comprised solely of independent directors, has the
primary responsibility for reviewing and approving compensation for non-employee directors, including the following elements: retainer;
meeting fees; committee member fees; committee chairperson fees; lead independent director fee; non-executive chairperson fee; and equity
compensation. In October 2021, the SEBC reviewed the form and amount of compensation paid to our non-employee directors for their
Board service. The SEBC considered the results of an independent analysis completed by the Compensation Consultant, who reviewed non-employee
director compensation trends and data from companies comprising the Proxy Peer Group used by the SEBC in its review of executive compensation.
After consultation with the Compensation Consultant, and in light of peer data and the amount of responsibility of the positions, the
SEBC approved the following changes to Selective’s non-employee director compensation program to align compensation with the Proxy
Peer Group median:
| ◾ | Increased the Annual Retainer Fee from $85,000 to $90,000; |
| ◾ | Increased the Grant Date Fair Value of Annual Equity Award from $80,000 to $95,000; |
| ◾ | Increased Annual Committee Member Retainer Fees from $7,500 to $8,000 for the SEBC, Finance, and Audit Committees, with the Corporate
Governance and Nominating Committee Member Retainer Fee remaining at $5,000; |
| ◾ | Increased the Annual Committee Chairperson Fees for the Audit Committee and Finance Committee from $30,000 to $32,500, and for the
SEBC and the Corporate Governance and Nominating Committee from $20,000 to $22,500; and |
| ◾ | Established an Annual Non-Executive Chairperson Fee of $150,000. |
The following table summarizes the types and amounts of compensation
paid to our non-employee directors in 2022:
| Type of Compensation |
Amount ($) |
| Annual Retainer Fee |
90,000 |
| Grant Date Fair Value of Annual Equity Award |
95,000 |
| Board Meeting Attendance |
– |
| Annual Committee Member Retainer Fees |
|
| Audit Committee |
8,000 |
| Corporate Governance and Nominating Committee |
5,000 |
| Finance Committee |
8,000 |
| SEBC |
8,000 |
| Annual Committee Chairperson Fees |
|
| Audit Committee |
32,500 |
| Corporate Governance and Nominating Committee |
22,500 |
| Finance Committee |
32,500 |
| SEBC |
22,500 |
| Non-Executive Chairperson Fee |
150,000 |
| Lead Independent Director Fee |
40,000 |
| Expenses |
Reasonable |
As the tables above show, in 2022, the non-employee directors received
compensation in the forms of restricted stock units and cash for their director service. The SEBC annually reviews and approves the compensation
for non-employee directors, including the Annual Retainer Fee. For 2022, non-employee directors had the election to receive up to 100%
of their Annual Retainer Fee in shares of Selective common stock. Any remaining balance of the Annual Retainer Fee was paid in cash. Non-employee
directors made this election before December 31, 2021. The Annual Retainer Fee was paid in one installment on the second business
day following Selective’s 2022 Annual Meeting of Stockholders.
For 2022, the annual equity grant under Selective’s non-employee
director compensation program was made entirely in restricted stock units granted under the Omnibus Stock Plan. Shares of Selective common
stock paid to directors as a portion of their Annual Retainer Fee were issued under the Omnibus Stock Plan. Annual Committee Member Fees,
Annual Committee Chairperson Fees, the Non-Executive Chairperson Fee, and the Lead Independent Director Fee were paid in cash as reflected
in the table above.
The following table shows compensation earned by or paid to our non-employee
directors during 2022 for 2022 service:
| Name |
Fees Earned or Paid in
Cash ($)(1) |
Stock Awards ($)(2) |
Total ($) |
| Ainar D. Aijala, Jr. |
106,000 |
95,061 |
201,061 |
| Lisa Rojas Bacus |
103,000 |
95,061 |
198,061 |
| John C. Burville |
106,032 |
95,061 |
201,093 |
| Terrence W. Cavanaugh |
106,032 |
95,061 |
201,093 |
| Wole C. Coaxum |
103,000 |
95,061 |
198,061 |
| Robert Kelly Doherty |
132,630 |
95,061 |
227,691 |
| Thomas A. McCarthy |
130,532 |
95,061 |
225,593 |
| Stephen C. Mills |
106,000 |
95,061 |
201,061 |
| H. Elizabeth Mitchell |
127,500 |
95,061 |
222,561 |
| Michael J. Morrissey |
125,516 |
95,061 |
220,577 |
| Cynthia S. Nicholson |
120,532 |
95,061 |
215,593 |
| William M. Rue |
98,000 |
95,061 |
193,061 |
| John S. Scheid |
106,032 |
95,061 |
201,093 |
| J. Brian Thebault |
116,479 |
95,061 |
211,540 |
| Philip H. Urban |
111,032 |
95,061 |
206,093 |
(1) Information
on the election by directors to receive shares of Selective common stock instead of cash for their 2022 annual retainer is set forth below
under the heading “Annual Retainer Stock Election.”
(2) This
column reflects the aggregate grant date fair value for the 2022 grants of restricted stock units to directors, based on a grant date
fair value of $81.11 per share, calculated in accordance with ASC Topic 718. Information on unvested restricted stock units held by each
director as of December 31, 2022, is set forth below under the heading “Unvested Restricted Stock Units.”
Annual Retainer Stock Election
Directors elected to receive shares of Selective
common stock for all or a portion of their 2022 Annual Retainer Fee as follows:
| Name |
Number of Shares |
Payment Date Value of Stock ($) |
| Ainar D. Aijala, Jr. |
– |
– |
| Lisa Rojas Bacus |
– |
– |
| John C. Burville |
1,110 |
90,032 |
| Terrence W. Cavanaugh |
1,110 |
90,032 |
| Wole C. Coaxum |
– |
– |
| Robert Kelly Doherty |
– |
– |
| Thomas A. McCarthy |
1,110 |
90,032 |
| Stephen C. Mills |
– |
– |
| H. Elizabeth Mitchell |
– |
– |
| Michael J. Morrissey |
555 |
45,016 |
| Cynthia S. Nicholson |
1,110 |
90,032 |
| William M. Rue |
– |
– |
| John S. Scheid |
1,110 |
90,032 |
| J. Brian Thebault |
– |
– |
| Philip H. Urban |
1,110 |
90,032 |
Unvested
Restricted Stock Units*
The aggregate number of unvested restricted stock units held by each
director as of December 31, 2022, was as follows:
| Name |
Unvested Restricted Stock Units (#) |
| Ainar D. Aijala, Jr. |
1,172 |
| Lisa Rojas Bacus |
1,172 |
| John C. Burville |
1,172 |
| Terrence W. Cavanaugh |
1,172 |
| Wole C. Coaxum |
1,172 |
| Robert Kelly Doherty |
1,172 |
| Thomas A. McCarthy |
1,172 |
| Stephen C. Mills |
1,172 |
| H. Elizabeth Mitchell |
1,172 |
| Michael J. Morrissey |
1,172 |
| Cynthia S. Nicholson |
1,172 |
| William M. Rue |
1,172 |
| John S. Scheid |
1,172 |
| J. Brian Thebault |
1,172 |
| Philip H. Urban |
1,172 |
* No
directors held any outstanding stock options as of December 31, 2022.
Director Stock Ownership and Retention Requirements
Selective believes that stock ownership by directors encourages the
enhancement of stockholder value. Selective’s stock ownership guidelines are based on prevailing corporate governance practices
and are detailed in the Corporate Governance Guidelines.
Each
non-employee director must own five times the amount of their annual retainer within five years of their first election to the Board.
The following count toward satisfying the guidelines: (i) shares of Selective common stock of which the director is deemed to be
the “beneficial owner” (as such term is defined under Section 16 of the Exchange Act); (ii) awards of restricted
stock and restricted stock units (including related dividend equivalent units) not yet vested; (iii) shares of Selective common stock
held in benefit plan investments (i.e., 401(k) Plan); and (iv) deferred shares of Selective common stock held in accounts of
directors. Unexercised stock options are not counted. All of our directors have met, or are on track to meet, the required ownership
guidelines.
INFORMATION ABOUT PROPOSAL
2
As required under the Dodd-Frank Act, our Board of Directors provides
Selective’s stockholders the opportunity to vote annually to approve, on an advisory (non-binding) basis, the compensation of our
named executive officers disclosed pursuant to the compensation disclosure rules of the SEC (also referred to as say-on-pay). Although
the vote is non-binding, the Board and the SEBC value our stockholders’ opinions and will consider the outcome of this vote when
making future compensation decisions for named executive officers. In 2022, our stockholders overwhelmingly supported our compensation
decisions, with over 99% of votes cast voting in favor of our say-on-pay proposal.
We urge stockholders to read the Compensation Discussion and Analysis
section of this Proxy Statement, which discusses our compensation philosophy, policies, and procedures. The following resolution is being
submitted to stockholders for approval at the Annual Meeting pursuant to Section 14A of the Exchange Act:
“RESOLVED, that the stockholders of Selective Insurance Group, Inc.
(“Selective”) approve, on an advisory basis, the 2022 compensation of Selective’s named executive officers as such compensation
is disclosed in this Proxy Statement pursuant to Item 402 of Regulation S-K or any successor thereto.”
If a majority of stockholders vote against this proposal, neither the
Board nor the SEBC will be required to take any specific action because this vote is non-binding and advisory. Nonetheless, consistent
with our record of stockholder responsiveness, the SEBC will consider our stockholders’ concerns and take them into account in future
determinations concerning our executive compensation programs. The Board recommends you indicate your support for the compensation of
our named executive officers as outlined in the above resolution.
We have included in this Proxy Statement a proposal regarding the frequency
of the say-on-pay advisory vote (“say-on-frequency” vote) and the Board has recommended that the stockholders vote “one
year” to approve an annual say-on-pay vote. Unless the Board modifies its policy on the frequency of holding say-on-pay votes, the
next say-on-pay advisory vote will be held at our 2024 Annual Meeting of Stockholders, and the next say-on-frequency vote is expected
to occur at the 2029 Annual Meeting of Stockholders.
Board Recommendation
THE BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS THAT STOCKHOLDERS VOTE
“FOR” THE ADVISORY RESOLUTION APPROVING THE 2022 COMPENSATION OF OUR NAMED EXECUTIVE OFFICERS AS DISCLOSED IN THIS
PROXY STATEMENT.
INFORMATION ABOUT PROPOSAL
3
The Dodd–Frank Wall Street Reform and Consumer Protection Act
requires that at least once every six years, companies ask their stockholders how often they would like to be presented with the “say-on-pay”
advisory vote on named executive officer compensation: every year, every two years, or every three years. This non-binding, advisory vote
is commonly referred to as a “say-on-frequency” vote.
Our current policy provides for an annual say-on-pay vote. The Board
believes an annual frequency (i.e., every year) is the optimal frequency for the say-on-pay vote. An annual vote provides stockholders
the opportunity to evaluate our compensation policies and procedures on a regular and more frequent basis. Specifically, because the SEBC
makes its compensation decisions on an annual basis, we believe our stockholders should have an annual opportunity to provide advisory
approval of these decisions. We also believe that an annual frequency vote provides the highest level of accountability and direct communication
with our stockholders.
Stockholders are not voting to approve or disapprove the Board’s
recommendation. Instead, you may cast your vote on your preferred voting frequency by choosing any of the following four options with
respect to this proposal:
For the reasons discussed above, the Board recommends you vote for
a frequency of “one year” as set forth in the following resolution:
“RESOLVED, that the advisory vote relating to compensation
paid to Selective’s named executive officers, as disclosed pursuant to Item 402 of Regulation S-K, including the Compensation Discussion
and Analysis, compensation tables, and narrative discussion, shall be conducted every ONE YEAR.”
The
Board and the SEBC value the opinions expressed by stockholders and will take into account the outcome of the vote when considering
the frequency of future votes on Selective’s executive compensation; however, as the say-on-frequency vote is advisory, it will
not be binding on the Board or the SEBC and will not overrule any decision by the Board or SEBC.
In accordance with Section 14A of the Exchange Act, the next say-on-frequency
vote is expected to occur at our 2029 Annual Meeting of Stockholders.
Board Recommendation
The Board recommends THAT YOU
vote for “ONE YEAR” AS the frequency of FUTURE advisory voteS ON THE compensation OF OUR NAMED EXECUTIVE OFFICERS,
as stated in the above resolution.
INFORMATION ABOUT PROPOSAL
4
Ratification of Appointment of
Independent Registered Public Accounting Firm
The Audit Committee has appointed KPMG LLP to act as Selective’s
independent registered public accounting firm for the fiscal year ending December 31, 2023. The Audit Committee monitors the independence
of the independent registered public accounting firm and compliance with auditor partner rotation requirements. Upon the recommendation
of the Audit Committee, the Board of Directors has approved the appointment and has directed that the appointment be submitted to Selective’s
stockholders for ratification at the Annual Meeting.
Stockholder ratification of the appointment of KPMG LLP as Selective’s
independent registered public accounting firm is not required. The Board of Directors, however, is submitting the appointment to our stockholders
for ratification as a matter of good corporate practice. If our stockholders do not ratify the appointment, the Audit Committee and the
Board of Directors will reconsider whether to retain KPMG LLP or another firm, but are under no obligation to engage a different auditing
firm. Even if our stockholders ratify the appointment, the Audit Committee and the Board of Directors may direct the appointment of a
different auditing firm at any time during the 2023 fiscal year if the Audit Committee and the Board determine that such a change would
be in the best interests of Selective and our stockholders.
A representative of KPMG LLP will attend virtually and participate
in the Annual Meeting. The representative will have an opportunity to make a statement and be available to respond to appropriate questions.
Board Recommendation
THE BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS THAT STOCKHOLDERS VOTE
“FOR” THE RATIFICATION OF THE APPOINTMENT OF KPMG LLP AS OUR INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM FOR THE
FISCAL YEAR ENDING DECEMBER 31, 2023.
FEES OF INDEPENDENT REGISTERED
PUBLIC ACCOUNTING FIRM
KPMG LLP, Selective’s independent registered public accounting
firm, provided services in the following categories and amounts in 2022 and 2021:
| Category |
2022 |
2021 |
| Audit Fees(1) |
$1,836,500 |
$1,807,000 |
| Audit-Related Fees |
– |
– |
| Tax Fees(2) |
$6,337 |
$4,074 |
| All Other Fees(3) |
$110,500 |
$114,000 |
| TOTAL |
$1,953,337 |
$1,925,074 |
(1) Audit
Fees include fees associated with the issuance of consent procedures in 2021.
(2) Tax
Fees for 2022 and 2021 were for tax consulting services.
(3) All
Other Fees for 2022 and 2021 consisted of amounts associated with independent actuarial reviews, reserve opinions, and consulting services.
The Audit Committee has a pre-approval policy that requires pre-approval
of audit, audit-related, and permitted non-audit services on an annual basis and authorizes the Audit Committee to delegate, to one or
more of its members, pre-approval authority for permitted services. The Audit Committee delegated the authority to pre-approve audit,
audit-related, and permitted non-audit services by KPMG LLP to the Audit Committee Chairperson, who is required to report any pre-approvals
to the Audit Committee for ratification at its next meeting. In 2022, the Audit Committee pre-approved 100% of audit, audit-related, and
permitted non-audit services, and concluded that KPMG LLP’s provision of such services was compatible with the maintenance of KPMG
LLP’s independence in the conduct of its auditing functions.
AUDIT COMMITTEE REPORT
The Audit Committee oversees Selective’s financial reporting
processes on behalf of the Board of Directors. Management has the primary responsibility for overseeing the preparation of the financial
statements and the overall reporting processes, including the systems of internal controls. In fulfilling its oversight responsibilities,
the Audit Committee has:
| ◾ | Periodically met with and held discussions with management regarding the quality, not just the acceptability, of the accounting principles,
the reasonableness of significant judgments, and the clarity of disclosures in Selective’s financial statements. |
| ◾ | Reviewed and discussed the audited financial statements for the year ended December 31, 2022, included in the Annual Report on
Form 10-K and any amendments thereto, with management, which represented to the Audit Committee that: (i) the financial statements
were prepared in accordance with U.S. generally accepted accounting principles; and (ii) management had reviewed Selective’s
disclosure controls and procedures and believes those controls are effective. |
| ◾ | Reviewed and discussed with KPMG LLP, Selective’s independent registered public accounting firm, which is responsible for expressing
an opinion on the conformity of those audited financial statements in accordance with U.S. generally accepted accounting principles, their
judgments as to the quality, not just the acceptability, of Selective’s accounting principles and such other matters as are required
to be discussed with the Audit Committee under the requirements of the Public Company Accounting Oversight Board, including the Statement
on Auditing Standards No. 1301, “Communications with Audit Committees” as adopted by the Public Company Accounting Oversight
Board, as may be modified or supplemented. |
| ◾ | Received the written disclosures and the letter from KPMG LLP required by the applicable requirements of the Public Company Accounting
Oversight Board regarding the independent registered public accounting firm’s communications with the Audit Committee concerning
independence and discussed with KPMG LLP its independence from Selective and its management. |
In reliance on the reviews and discussions referred to above, the Audit
Committee recommended to the Board of Directors, and the Board of Directors approved, the inclusion of the audited financial statements
in Selective’s Annual Report on Form 10-K and any amendments thereto for the year ended December 31, 2022.
Submitted by the Audit Committee of Selective’s
Board of Directors,
| H. Elizabeth Mitchell, Chairperson |
Robert Kelly Doherty |
| Ainar D. Aijala, Jr. |
Thomas A. McCarthy |
| John C. Burville |
John S. Scheid |
| Terrence W. Cavanaugh |
Philip H. Urban |
The Audit Committee Report does not constitute soliciting material,
and shall not be deemed to be filed or incorporated by reference into any other Selective filing under the Securities Act or the Exchange
Act, except to the extent that Selective specifically incorporates the Audit Committee Report by reference therein.
STOCKHOLDER PROPOSALS AND
NOMINATIONS
Proposals for Inclusion in 2024 Proxy
From time to time, stockholders present proposals that may be proper
subjects for inclusion in the proxy statement and consideration at an annual meeting. Under SEC rules, in order to be included in the
proxy statement for the 2024 Annual Meeting of Stockholders, stockholder proposals submitted under Exchange Act Rule 14a-8 must be
received no later than November 30, 2023 by Selective’s Corporate Secretary at 40 Wantage Avenue, Branchville, New Jersey 07890.
Other Proposals and Nominations
Selective’s By-Laws require that a stockholder who otherwise
intends to: (i) present a proposal outside of Rule 14a-8 under the Exchange Act; or (ii) nominate a director, must deliver
notice to the Corporate Secretary, in proper written form and in accordance with the requirements of the By-Laws, not less than 120 days
nor more than 150 days prior to the first anniversary of the preceding year’s annual meeting. Accordingly, a notice of a stockholder
proposal for the 2024 Annual Meeting of Stockholders, submitted outside of Rule 14a-8 under the Exchange Act, will be untimely if
received by the Corporate Secretary before December 5, 2023 or after January 4, 2024. In addition, stockholders who intend to
solicit proxies in support of director nominees other than Selective’s nominees must comply with the additional requirements of
Rule 14a-19(b).
Householding
As permitted by the rules of the SEC, certain brokers have adopted
the procedure of “householding” whereby they deliver a single set of proxy materials to one address shared by two or more
of our stockholders. This procedure can result in significant cost savings. As such, certain brokers may have delivered only one set of
proxy materials to multiple stockholders who share an address, unless such brokers received contrary instructions from the impacted stockholders
prior to the mailing date. If you hold shares through a broker and are currently sharing an address with another of our stockholders and
wish to receive a separate copy of the proxy materials, have your future proxy materials householded, or your materials are currently
householded and you would prefer to receive separate materials in the future, please contact your broker to make a request to change your
householding status.
* * * * * * * *
It is important that your shares be represented at the Annual Meeting,
regardless of the number of shares that you hold. ACCORDINGLY, YOU ARE URGED TO PROMPTLY VOTE YOUR SHARES BY: (1) COMPLETING, DATING,
AND SIGNING THE ENCLOSED PROXY CARD AND RETURNING IT IN THE ENCLOSED ENVELOPE; (2) CALLING THE TOLL-FREE TELEPHONE NUMBER LISTED
ON THE PROXY CARD; OR (3) ACCESSING THE INTERNET WEB SITE LISTED ON THE PROXY CARD.
By Order of the Board of Directors:
Robyn P. Turner
Corporate Secretary
March 29, 2023
Branchville, New Jersey
SELECTIVE
INSURANCE GROUP, INC. ATTN: ROBYN P. TURNER 40 WANTAGE AVENUE BRANCHVILLE, NJ 07890 SCAN TO VIEW MATERIALS & VOTE VOTE BY INTERNET
Before The Annual Meeting - Go to www.proxyvote.com or scan the QR Barcode above Use the Internet to transmit your voting instructions
and for electronic delivery of information. Vote by 11:59 p.m. Eastern Time on May 2, 2023 for shares held directly and by 11:59 p.m.
Eastern Time on April 28, 2023 for shares held in a Plan. Have your proxy card in hand when you access the website and follow the instructions
to obtain your records and to create an electronic voting instruction form. During The Annual Meeting - Go to www.virtualshareholdermeeting.com/SIGI2023
You may attend the Annual Meeting via the Internet and vote during the Annual Meeting. Have the information that is printed in the box
marked by the arrow available and follow the instructions. VOTE BY PHONE - 1-800-690-6903 Use any touch- tone telephone to transmit your
voting instructions. Vote by 11:59 p.m. Eastern Time on May 2, 2023 for shares held directly and by 11:59 p.m. Eastern Time on April
28, 2023 for shares held in a Plan. Have your proxy card in hand when you call and then follow the instructions. VOTE BY MAIL Mark, sign
and date your proxy card and return it in the postage-paid envelope we have provided or return it to Vote Processing, c/o Broadridge,
51 Mercedes Way, Edgewood, NY 11717. TO VOTE, MARK BLOCKS BELOW IN BLUE OR BLACK INK AS FOLLOWS: D95310-P82943 KEEP THIS PORTION FOR
YOUR RECORDS THIS PROXY CARD IS VALID ONLY WHEN SIGNED AND DATED. DETACH AND RETURN THIS PORTION ONLY SELECTIVE INSURANCE GROUP, INC.
1. ELECTION OF DIRECTORS THE BOARD IS SUBJECT TO ANNUAL ELECTION BY THE STOCKHOLDERS. THE BOARD RECOMMENDS THAT YOU VOTE " FOR "
EACH OF THE FOLLOWING 13 NOMINATED DIRECTORS FOR A TERM OF ONE YEAR: Nominees: 1a. AINAR D. AIJALA, JR. 1b. LISA ROJAS BACUS 1c. TERRENCE
W. CAVANAUGH 1d. WOLE C. COAXUM 1e. ROBERT KELLY DOHERTY 1f. JOHN J. MARCHIONI For Against Abstain ! ! ! ! ! ! ! ! ! ! ! ! ! ! ! ! !
! For Against Abstain 2. APPROVAL, ON AN ADVISORY BASIS, OF THE 2022 COMPENSATION ! ! ! OF OUR NAMED EXECUTIVE OFFICERS THE BOARD RECOMMENDS
THAT YOU VOTE ;FOR THE APPROVAL, ON AN ADVISORY BASIS, OF THE 2022 COMPENSATION OF OUR NAMED EXECUTIVE OFFICERS DISCLOSED
IN THE PROXY STATEMENT. 1 Year 2 Years 3 Years Abstain 3. ADVISORY VOTE ON THE FREQUENCY OF FUTURE ! ! ! ! ADVISORY VOTES ON THE COMPENSATION
OF OUR NAMED EXECUTIVE OFFICERS 1g. THOMAS A. MCCARTHY 1h. STEPHEN C. MILLS 1i. H. ELIZABETH MITCHELL 1j. CYNTHIA S. NICHOLSON 1k. JOHN
S. SCHEID 1l. J. BRIAN THEBAULT 1m. PHILIP H. URBAN ! ! ! ! ! ! ! ! ! ! ! ! ! ! ! ! ! ! ! ! ! THE BOARD RECOMMENDS THAT YOU VOTE FOR
"1 YEAR" AS THE FREQUENCY OF FUTURE ADVISORY VOTES ON THE COMPENSATION OF OUR NAMED EXECUTIVE OFFICERS 4. RATIFICATION OF APPOINTMENT
OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM THE BOARD RECOMMENDS THAT YOU VOTE FOR THE RATIFICATION O F T H E A P
P O I N T M E N T O F K P M G L L P A S O U R I N D E P E N D E N T REGISTERED PUBLIC ACCOUNTING FIRM FOR THE FISCAL YEAR ENDING DECEMBER
31, 2023. THIS PROXY WHEN PROPERLY EXECUTED WILL BE VOTED AS DIRECTED OR, IF NO DIRECTION IS GIVEN, WILL BE VOTED AS THE BOARD RECOMMENDS.
For Against Abstain ! ! ! Please sign exactly as your name(s) appear(s) on the Proxy. If held in joint tenancy, all persons should sign.
Trustees, administrators, etc., should include title and authority. Corporations should provide full name of corporation and title of
authorized officer signing the Proxy. Signature [PLEASE SIGN WITHIN BOX] Date Signature (Joint Owners) Date
SELECTIVE
INSURANCE GROUP, INC. ANNUAL MEETING OF STOCKHOLDERS Wednesday, May 3, 2023 9:00 AM Eastern Time Live via webcast at www.virtualshareholdermeeting.com/SIGI2023
Important Notice Regarding the Availability of Proxy Materials for the Annual Meeting: The Notice and Proxy Statement and Annual Report
are available at www.proxyvote.com. D95311-P82943 Selective Insurance Group, Inc. proxy This proxy is solicited by the Board of Directors
for use at the Annual Meeting on May 3, 2023. The shares of stock you hold in your account will be voted as you specify on the reverse
side. If no choice is specified, the proxy will be voted "FOR" each of the director nominees listed in Item 1, "FOR"
Item 2, "1 YEAR" for Item 3, and "FOR" Item 4. By signing the proxy, you revoke all prior proxies and appoint Cynthia
S. Nicholson and J. Brian Thebault, and each of them with full power of substitution and to act alone, to vote your shares on the matters
shown on the reverse side and any other matters which may come before the Annual Meeting and any adjournments, postponements, or continuations
thereof. TO VOTE BY INTERNET OR TELEPHONE, SEE REVERSE SIDE OF THIS PROXY CARD.
DEF 14A
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xbrli:pure
Selective Insurance (NASDAQ:SIGI)
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Selective Insurance (NASDAQ:SIGI)
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