SELECTIVE INSURANCE GROUP INC - FORM 8-K - EX-99.2 - EXHIBIT 99.2

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8-K - FORM 8-K - SELECTIVE INSURANCE GROUP INC	f8k_020212.htm
EX-99.1 - EXHIBIT 99.1 - SELECTIVE INSURANCE GROUP INC	exh_991.htm

EXHIBIT 99.2

Supplemental Investor Package

_______________________________________________

Fourth Quarter and

Full Year 2011

Investor Contact:

Jennifer DiBerardino

Senior Vice President, Investor Relations and Treasurer

Tel: 973-948-1364

jennifer.diberardino@selective.com

Selective Insurance Group, Inc.

Selected Balance Sheet Data (unaudited)

($ in thousands, except per share amounts)

	December 31,								December 31,
	2011								2010
						Unrecognized/								Unrecognized/
	Balance			Market		Unrealized			Balance			Market		Unrealized
	Sheet			Value		Gain/(Loss)			Sheet			Value		Gain/(Loss)
Invested Assets:
Corporate bonds1	$	1,967,498			1,981,909		73,085			1,683,336			1,704,600		35,334
Gov't\ Municipal bonds		1,642,223			1,673,508		108,694			1,873,730			1,894,436		77,913
Total bonds		3,609,721			3,655,417		181,779			3,557,066			3,599,036		113,247
Equities		157,355			157,355		13,529			69,636			69,636		11,597
Short-term investments		217,044			217,044		-			161,155			161,155		-
Other investments		128,301			128,301		(4,520	)		137,865			137,865		(4,982	)
Total invested assets		4,112,421			4,158,117		190,788			3,925,722			3,967,692		119,862


Invested assets per $ of stockholders' equity		3.71								3.67

Total assets		5,736,369								5,231,772

Liabilities:
Reserve for losses and loss expenses		3,144,924								2,830,058
Unearned premium reserve		906,991								823,596

Total liabilities		4,627,141								4,160,663

Stockholders' equity		1,109,228								1,071,109

Total debt to capitalization ratio		21.7	%							19.7	%
Adjusted total debt to capitalization ratio 2		15.3	%							12.9	%

Book value per share		20.39								19.95

Book value per share excluding unrealized gain or loss on bond portfolio		18.76								19.09

NPW per insurance segment employee (excludes E&S)		791								761

Statutory premiums to surplus ratio		1.4	x							1.3	x

Statutory surplus3		1,062,707								1,073,025

1 Includes mortgage-backed and asset-backed securities.

2 The adjusted debt to capitalization ratio reflects an estimated equity treatment of 90% applied to our $100 million Junior Subordinated Notes issued September 25, 2006 as applied by A.M. Best.

3 Statutory surplus for 2011 includes the December 31, 2011 acquisition of Montpelier U.S. Insurance Company.

Selective Insurance Group, Inc.
Selected Income Statement Data (unaudited)
December 2011		THREE MONTHS ENDED December 31,												TWELVE MONTHS ENDED December 31,
($ in thousands, except per share amounts)		2011						2010						2011						2010
					Per diluted share						Per diluted share						Per diluted share						Per diluted share
Consolidated
Revenue		$	400,380					$	394,089					$	1,597,475					$	1,564,621
Operating income			18,487			0.33			26,284			0.48			19,059			0.34			73,925			1.35
Net realized (losses) gains, after tax			(2,354	)		(0.04	)		(2,478	)		(0.05	)		1,456			0.03			(4,604	)		(0.08	)
Income from continuing operations			16,133			0.29			23,806			0.43			20,515			0.37			69,321			1.27
Loss on discontinued operations, after tax			-			-			(31	)		-			(650	)		(0.01	)		(3,780	)		(0.07	)
Net income			16,133			0.29			23,775			0.43			19,865			0.36			65,541			1.20
Operating return on equity			6.7	%					9.7	%					1.7	%					7.1	%

Insurance Operations
Gross premiums written			422,438						364,047						1,776,908						1,659,669
Net premiums written			352,179						301,812						1,485,349						1,390,541
Net premiums earned			373,427						353,497						1,439,313						1,416,598
Underwriting income (loss)	- before tax		4,971						(468	)					(106,919	)					(22,167	)
	- after tax		3,231			0.06			(305	)		(0.01	)		(69,497	)		(1.26	)		(14,409	)		(0.26	)
GAAP combined ratio			98.7	%					100.1	%					107.4	%					101.6	%

Commercial lines
Net premiums earned			305,440						290,148						1,174,861						1,174,282
GAAP combined ratio			97.7	%					97.9	%					105.1	%					100.1	%
Personal lines
Net premiums earned			67,987						63,349						264,452						242,316
GAAP combined ratio			103.1	%					110.2	%					118.0	%					108.5	%

Investments
Net investment income	- before tax		28,839						41,471						147,443						145,708
	- after tax		22,567			0.41			31,001			0.56			111,088			2.01			111,059			2.04
Effective tax rate			21.7	%					25.2	%					24.7	%					23.8	%
Annual after-tax yield on investment portfolio															2.8	%					2.9	%
Annual after-tax, after-interest expense yield															2.5	%					2.6	%
Invested assets per $ of stockholders' equity															3.71						3.67

Other expenses (net of other income)
Interest expense	- before tax		(4,584	)					(4,560	)					(18,259	)					(18,616	)
	- after tax		(2,980	)		(0.05	)		(2,964	)		(0.05	)		(11,868	)		(0.21	)		(12,100	)		(0.22	)

Other Expense - after tax		$	(4,331	)		(0.09	)	$	(1,448	)		(0.02	)	$	(10,664	)		(0.20	)	$	(10,625	)		(0.21	)

Diluted weighted avg shares outstanding			55,437						54,894						55,221						54,504

Selective Insurance Group, Inc.
Estimated Impact of Change in Deferred Policy Acquisition Costs and Restatements
December 31, 2011 (unaudited)
($ in thousands, except per share data)


	2011						2010						2009						2008
	Reported			Restated			Reported			Restated			Reported			Restated			Reported			Restated

Balance Sheet Data:
Deferred policy acquisition costs		214,069			135,761			209,627			127,984			218,601			134,765			212,319			128,756
Total assets		5,736,369			5,685,469			5,231,772			5,178,704			5,114,827			5,060,333			4,945,556			4,891,240
Stockholders' equity		1,109,228			1,058,328			1,071,109			1,018,041			1,002,375			947,881			890,493			836,177
Book value per share		20.39			19.45			19.95			18.97			18.83			17.80			16.84			15.81


Income Statement Data:
Net income		19,865			22,033			65,541			66,966			36,398			36,220			43,758			43,658
Underwriting (loss) profit		(106,919	)		(103,584	)		(22,167	)		(19,974	)		2,385			2,111			132			(21	)
Combined ratio		107.4	%		107.2	%		101.6	%		101.4	%		99.8	%		99.9	%		100.0	%		100.0	%

Net income per share:
Basic		0.37			0.41			1.23			1.26			0.69			0.69			0.84			0.84
Diluted		0.36			0.40			1.20			1.23			0.68			0.68			0.82			0.82

Non-GAAP Measures*:
Operating income		19,059			21,227			73,925			75,350			74,538			74,360			76,245			76,145
Operating income per diluted share		0.34			0.38			1.35			1.38			1.39			1.39			1.43			1.43


Reconciliation of Non-GAAP Measures to GAAP Measures:
Operating income		19,059			21,227			73,925			75,350			74,538			74,360			76,245			76,145
Capital gains (losses), net of tax		1,456			1,456			(4,604	)		(4,604	)		(29,880	)		(29,880	)		(32,144	)		(32,144	)
Discontinued operations, net of tax		(650	)		(650	)		(3,780	)		(3,780	)		(8,260	)		(8,260	)		(343	)		(343	)
Net income		19,865			22,033			65,541			66,966			36,398			36,220			43,758			43,658

* Operating income is a non-GAAP measure that is comparable to net income with the exclusion of capital gains and losses and the results of discontinued operations. Operating income is used as an important financial measure by us, 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, these realized investment gains and losses, as well as other-than-temporary impairment charges that are included in earnings, and the results of discontinued operations, could distort the analysis of trends.

Selective Insurance Group, Inc. and Consolidated Subsidiaries
GAAP Investment Income
(unaudited)
($ in thousands)


		For the three months ended						%			Year to Date						%
		December			December			Increase			December			December			Increase
		2011			2010			(Decrease)			2011			2010			(Decrease)
Investment Income:
	Interest:
	Fixed Maturity Securities	$	31,875			33,076			(4	)	$	129,710			130,990			(1	)
	Short-term		37			70			(47	)		160			437			(63	)
	Other Investments:
	Alternative Investments		(3,316	)		9,191			(136	)		20,678			20,313			2
	Other		(139	)		-			N/A			(139	)		-			N/A
	Dividends		2,236			959			133			4,535			2,238			103
	Miscellaneous		45			45			-			133			139			(4	)
			30,738			43,341			(29	)		155,077			154,117			1

Investment Expense			1,899			1,870			2			7,634			8,409			(9	)

Net Investment Income Before Tax			28,839			41,471			(30	)		147,443			145,708			1

Tax			6,272			10,470			(40	)		36,355			34,649			5

Net Investment Income After Tax		$	22,567			31,001			(27	)	$	111,088			111,059			-

Net Investment Income per Share		$	0.41			0.56			(27	)	$	2.01			2.04			(1	)


Effective Tax Rate			21.7	%		25.2	%					24.7	%		23.8	%

Average Yields :

Fixed Maturity Securities:
	Pre Tax											3.62	%		3.80	%
	After Tax											2.75	%		2.93	%

Portfolio:
	Pre Tax											3.67	%		3.78	%
	After Tax											2.76	%		2.88	%



		For the three months ended									Year to date
		December			December						December			December
Net Realized Gains(Losses)		2011			2010						2011			2010
	Fixed Maturities		5,436			(92	)					6,933			(14,898	)
	Equity Securities		(9,057	)		1,464						(4,693	)		12,999
	Other Investments		-			(5,184	)					-			(5,184	)

	Total		(3,621	)		(3,812	)					2,240			(7,083	)
	Net of Tax		(2,354	)		(2,478	)					1,456			(4,604	)

As of December 31, 2011 new money rates for taxable fixed maturity securities were 2.68% on a pre-tax basis and 1.74% on an after-tax basis.

Selective Insurance Group, Inc.
2011 Statutory Results by Line of Business
4th Qtr 2011 (unaudited)
($ in thousands)

	Net					Net											Underwriting			Dividends to			Combined			Combined
	Premiums		Percent			Premiums		Percent			Loss			LAE			Expense			Policyholders			Ratio			Ratio			Underwriting
	Written		Change			Earned		Change			Ratio			Ratio			Ratio			Ratio			2011			2010			Gain/(Loss)
Personal Lines:

Homeowners	$	28,040		11.6	%	$	27,226		14.9	%		55.2	%		10.4	%		29.8	%		0.0	%		95.4	%		104.6	%	$	1,007
Auto		35,744		1.5	%		37,302		2.3	%		73.6	%		11.0	%		30.9	%		0.0	%		115.5	%		117.4	%		(5,291	)
Other (including flood)		3,593		6.4	%		3,459		8.8	%		61.7	%		(9.1	)%		(49.2	)%		0.0	%		3.4	%		29.7	%		3,409
Total	$	67,376		5.7	%	$	67,987		7.3	%		65.6	%		9.7	%		26.2	%		0.0	%		101.5	%		108.1	%	$	(876	)

Commercial Lines:

Commerical property	$	42,821		4.5	%	$	48,869		(0.4	)%		29.8	%		6.0	%		39.1	%		0.1	%		75.0	%		86.3	%	$	14,572
Workers compensation		62,605		25.5	%		69,476		11.0	%		69.9	%		15.6	%		24.6	%		1.8	%		111.9	%		123.8	%		(6,582	)
General liability		77,139		16.7	%		88,965		5.9	%		51.2	%		17.4	%		35.4	%		0.1	%		104.1	%		101.0	%		557
Auto		62,325		8.0	%		70,568		0.0	%		55.2	%		8.3	%		32.7	%		0.1	%		96.3	%		99.2	%		5,318
Business owners policies		17,922		4.3	%		16,670		1.5	%		29.8	%		13.4	%		37.5	%		0.0	%		80.7	%		99.5	%		2,753
Bonds		3,998		(0.2	)%		4,691		(4.8	)%		19.2	%		7.7	%		66.9	%		0.0	%		93.8	%		74.0	%		753
Other		17,991		694.8	%		6,201		141.6	%		36.5	%		6.4	%		46.3	%		0.0	%		89.2	%		45.5	%		(4,772	)
Total	$	284,802		19.6	%	$	305,440		5.3	%		51.0	%		12.5	%		34.2	%		0.5	%		98.2	%		101.9	%	$	12,599

Grand Total	$	352,179		16.7	%	$	373,427		5.6	%		53.7	%		12.0	%		32.6	%		0.4	%		98.7	%		102.8	%	$	11,723

Note: Some amounts may not foot due to rounding.

				2011			2010
	Losses Paid		$	245,778		$	195,666
	LAE Paid			39,804			39,958
	Total Paid		$	285,582		$	235,624

Selective Insurance Group, Inc.
2011 Statutory Results by Line of Business
December 2011 YTD (unaudited)
($ in thousands)

	Net					Net											Underwriting			Dividends to			Combined			Combined
	Premiums		Percent			Premiums		Percent			Loss			LAE			Expense			Policyholders			Ratio			Ratio			Underwriting
	Written		Change			Earned		Change			Ratio			Ratio			Ratio			Ratio			2011			2010			Gain/(Loss)
Personal Lines:

Homeowners	$	110,002		13.6	%	$	102,764		17.0	%		95.3	%		9.2	%		30.7	%		0.0	%		135.2	%		108.6	%	$	(38,356	)
Auto		149,767		1.5	%		148,824		4.8	%		74.8	%		10.9	%		30.7	%		0.0	%		116.4	%		113.6	%		(24,730	)
Other (including flood)		13,442		8.6	%		12,864		3.0	%		81.0	%		(46.8	)%		(47.6	)%		0.0	%		(13.4	)%		5.2	%		14,865
Total	$	273,211		6.4	%	$	264,452		9.1	%		83.1	%		7.4	%		26.8	%		0.0	%		117.3	%		106.4	%	$	(48,221	)

Commercial Lines:

Commerical property	$	195,927		0.8	%	$	192,989		(3.1	)%		67.0	%		5.8	%		37.0	%		0.1	%		109.9	%		93.7	%	$	(20,112	)
Workers compensation		261,348		10.1	%		259,354		3.6	%		73.3	%		15.9	%		25.2	%		1.8	%		116.2	%		124.2	%		(42,473	)
General liability		351,561		8.7	%		344,682		2.4	%		49.7	%		17.7	%		33.3	%		0.0	%		100.7	%		96.4	%		(4,726	)
Auto		282,825		0.5	%		279,610		(4.1	)%		55.7	%		7.3	%		31.1	%		0.1	%		94.2	%		90.2	%		15,330
Business owners policies		67,580		2.3	%		66,225		1.5	%		57.9	%		13.3	%		38.6	%		0.0	%		109.8	%		116.0	%		(6,984	)
Bonds		18,653		(2.6	)%		18,910		(1.7	)%		16.0	%		8.0	%		61.7	%		0.0	%		85.7	%		79.1	%		2,864
Other		34,245		234.6	%		13,091		29.4	%		20.4	%		4.4	%		49.2	%		0.0	%		74.0	%		46.6	%		(6,987	)
Total	$	1,212,137		7.1	%	$	1,174,861		0.2	%		58.8	%		12.3	%		32.8	%		0.4	%		104.3	%		100.8	%	$	(63,088	)

Grand Total	$	1,485,349		7.0	%	$	1,439,313		1.7	%		63.2	%		11.4	%		31.7	%		0.4	%		106.7	%		101.6	%	$	(111,309	)

Note: Some amounts may not foot due to rounding.

				2011			2010
	Losses Paid		$	857,844		$	784,641
	LAE Paid			152,955			154,661
	Total Paid		$	1,010,799		$	939,302

Consolidated Balance Sheets
December 31,	Unaudited
($ in thousands, except share amounts)	2011			2010
ASSETS
Investments:
Fixed maturity securities, held-to-maturity – at carrying value
(fair value: $758,043 – 2011; $1,256,294 – 2010)	$	712,348			1,214,324
Fixed maturity securities, available-for-sale – at fair value
(amortized cost: $2,766,856 – 2011; $2,285,988 – 2010)		2,897,373			2,342,742
Equity securities, available-for-sale – at fair value
(cost of: $143,826 – 2011; $58,039 – 2010)		157,355			69,636
Short-term investments (at cost which approximates fair value)		217,044			161,155
Other investments		128,301			137,865
Total investments		4,112,421			3,925,722
Cash		762			645
Interest and dividends due or accrued		35,842			37,007
Premiums receivable, net of allowance for uncollectible
accounts of: $3,768 – 2011; $4,691 – 2010		466,294			414,105
Reinsurance recoverable, net		561,855			318,752
Prepaid reinsurance premiums		147,686			110,327
Current federal income tax		731			11,200
Deferred federal income tax		92,686			93,234
Property and equipment – at cost, net of accumulated
depreciation and amortization of: $160,294 – 2011; $151,704 – 2010		43,947			41,775
Deferred policy acquisition costs		214,069			209,627
Goodwill		7,849			7,849
Other assets		52,227			61,529
Total assets	$	5,736,369			5,231,772

LIABILITIES AND STOCKHOLDERS’ EQUITY
Liabilities:
Reserve for losses and loss expenses	$	3,144,924			2,830,058
Unearned premiums		906,991			823,596
Notes payable		307,360			262,333
Accrued salaries and benefits		119,297			100,933
Other liabilities		148,569			143,743
Total liabilities	$	4,627,141			4,160,663

Stockholders’ Equity:
Preferred stock of $0 par value per share:
Authorized shares 5,000,000; no shares issued or outstanding	$	-			-
Common stock of $2 par value per share
Authorized shares: 360,000,000
Issued: 97,246,711 – 2011; 96,362,667 – 2010		194,494			192,725
Additional paid-in capital		257,370			244,613
Retained earnings		1,167,219			1,176,155
Accumulated other comprehensive income		42,294			7,024
Treasury stock – at cost (shares: 42,836,201 – 2011; 42,686,204 – 2010)		(552,149	)		(549,408	)
Total stockholders’ equity		1,109,228			1,071,109
Commitments and contingencies
Total liabilities and stockholders’ equity	$	5,736,369			5,231,772

SELECTIVE INSURANCE GROUP, INC.	Unaudited
CONSOLIDATED STATEMENTS OF INCOME	Quarter ended						Year ended
	December 31,						December 31,
							Unaudited
($ in thousands, except per share amounts)	2011			2010			2011			2010
Revenues:
Net premiums earned	$	373,427			353,497			1,439,313			1,416,598
Net investment income earned		28,839			41,471			147,443			145,708
Net realized gains (losses):
Net realized investment gains (losses)		6,223			(3,385	)		15,426			10,575
Other-than-temporary impairments		(8,936	)		101			(11,998	)		(16,225	)
Other-than-temporary impairments on fixed maturity securities recognized in
other comprehensive income		(908	)		(528	)		(1,188	)		(1,433	)
Total net realized (losses) gains		(3,621	)		(3,812	)		2,240			(7,083	)
Other income		1,735			2,933			8,479			9,398
Total revenues		400,380			394,089			1,597,475			1,564,621

Expenses:
Losses and loss expenses incurred		245,268			242,976			1,074,987			982,118
Policy acquisition costs		123,010			111,902			469,739			458,045
Interest expense		4,584			4,560			18,259			18,616
Other expenses		7,618			5,250			26,425			23,886
Total expenses		380,480			364,688			1,589,410			1,482,665

Income from continuing operations, before federal income tax		19,900			29,401			8,065			81,956

Federal income tax expense (benefit):
Current		12,386			(3,152	)		(228	)		5,323
Deferred		(8,619	)		8,747			(12,222	)		7,312
Total federal income tax expense (benefit)		3,767			5,595			(12,450	)		12,635

Net income from continuing operations		16,133			23,806			20,515			69,321

Loss on disposal of discontinued operations, net of tax of $(16) for Fourth
Quarter 2010 and $(350) and $(2,035) for Twelve Months 2011 and 2010		-			(31	)		(650	)		(3,780	)

Net income	$	16,133			23,775			19,865			65,541

Earnings per share:
Basic net income from continuing operations	$	0.30			0.44			0.38			1.30
Basic net loss from discontinued operations		-			-			(0.01	)		(0.07	)
Basic net income		0.30			0.44			0.37			1.23

Diluted net income from continuing operations		0.29			0.43			0.37			1.27
Diluted net loss from discontinued operations		-			-			(0.01	)		(0.07	)
Diluted net income	$	0.29			0.43			0.36			1.20

Dividends to stockholders	$	0.13			0.13			0.52			0.52

Consolidated Statements of Stockholders’ Equity
December 31,	Unaudited
($ in thousands, except share amounts)	2011					2010					2009
Common stock:
Beginning of year	$	192,725					191,646					190,527
Dividend reinvestment plan
(shares: 100,383 – 2011; 106,437 – 2010; 123,880 – 2009)		201					213					248
Stock purchase and compensation plans
(shares: 783,661 – 2011; 433,271 – 2010; 435,571 – 2009)		1,568					866					871
End of year		194,494					192,725					191,646

Additional paid-in capital:
Beginning of year		244,613					231,933					217,195
Dividend reinvestment plan		1,417					1,465					1,514
Stock purchase and compensation plans		11,340					11,215					13,224
End of year		257,370					244,613					231,933

Retained earnings:
Beginning of year		1,176,155					1,138,978					1,128,149
Cumulative-effect adjustment due to adoption of other-
than-temporary impairment guidance under ASC 320,
net of deferred income tax		-					-					2,380
Net income		19,865		19,865			65,541		65,541			36,398		36,398
Cash dividends to stockholders ($0.52 per share – 2011,
2010, and 2009)		(28,801	)				(28,364	)				(27,949	)
End of year		1,167,219					1,176,155					1,138,978

Accumulated other comprehensive income (loss):
Beginning of year		7,024					(12,460	)				(100,666	)
Cumulative-effect adjustment due to adoption of other-
than-temporary impairment guidance under ASC 320,
net of deferred income tax		-					-					(2,380	)
Other comprehensive income (loss), increase (decrease) in:
Unrealized gains (losses) on investment securities:
Non-credit portion of other-than-temporary
impairment losses recognized in other
comprehensive income, net of deferred income tax		1,093					3,416					(5,629	)
Other net unrealized gains on investment
securities, net of deferred income tax		42,287					21,113					92,183
Total unrealized gains on investment securities		43,380		43,380			24,529		24,529			86,554		86,554
Defined benefit pension plans, net of deferred income tax		(8,110	)	(8,110	)		(5,045	)	(5,045	)		4,032		4,032
End of year		42,294					7,024					(12,460	)
Comprehensive income				55,135					85,025					126,984

Treasury stock:
Beginning of year		(549,408	)				(547,722	)				(544,712	)
Acquisition of treasury stock
(shares: 149,997 – 2011; 107,425 – 2010; 191,858 – 2009)		(2,741	)				(1,686	)				(3,010	)
End of year		(552,149	)				(549,408	)				(547,722	)
Total stockholders’ equity	$	1,109,228					1,071,109					1,002,375

Consolidated Statements of Cash Flows
December 31,	Unaudited
($ in thousands, except share amounts)	2011			2010			2009
Operating Activities
Net Income	$	19,865			65,541			36,398

Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation and amortization		34,645			31,770			28,593
Loss on disposal of discontinued operations		650			3,780			1,174
Stock-based compensation expense		7,422			8,017			11,256
Undistributed (income) loss of equity method investments		(323	)		(8,712	)		21,726
Net realized (gains) losses		(2,240	)		7,083			45,970
Postretirement life curtailment benefit		-			-			(4,217	)
Unrealized gain on trading securities		-			-			(262	)
Goodwill impairment on discontinued operations		-			-			12,214

Changes in assets and liabilities:
Increase in reserves for losses and loss expenses, net of reinsurance recoverables		56,905			41,526			60,619
Increase (decrease) in unearned premiums, net of prepaid reinsurance and advance
premiums		46,334			(26,661	)		(8,028	)
(Increase) decrease in net federal income taxes		(1,403	)		15,809			(3,718	)
(Increase) decrease in premiums receivable		(45,116	)		32,472			34,317
(Increase) decrease in deferred policy acquisition costs		(4,442	)		8,974			(6,282	)
Decrease (increase) in interest and dividends due or accrued		633			(2,361	)		1,918
Increase (decrease) in accrued salaries and benefits		1,521			(14,913	)		(15,240	)
(Decrease) increase in accrued insurance expenses		(636	)		(4,470	)		2,240
Sale of trading securities		-			-			2,831
Other-net		9,142			1,330			6,050
Net adjustments		103,092			93,644			191,161
Net cash provided by operating activities		122,957			159,185			227,559

Investing Activities
Purchase of fixed maturity securities, held-to-maturity		-			-			(158,827	)
Purchase of fixed maturity securities, available-for-sale		(487,813	)		(1,007,679	)		(1,041,277	)
Purchase of equity securities, available-for-sale		(150,551	)		(71,192	)		(79,455	)
Purchase of other investments		(16,033	)		(20,673	)		(16,298	)
Purchase of short-term investments		(1,448,782	)		(1,741,738	)		(1,956,164	)
Purchase of subsidiary, net of cash acquired		(51,728	)		-			-
Sale of subsidiary		1,152			978			(12,538	)
Sale of fixed maturity securities, held-to-maturity		-			-			5,820
Sale of fixed maturity securities, available-for-sale		146,435			190,438			538,769
Sale of short-term investments		1,433,441			1,794,434			1,940,427
Redemption and maturities of fixed maturity securities, held-to-maturity		177,350			319,835			282,310
Redemption and maturities of fixed maturity securities, available-for-sale		162,796			298,171			122,403
Sale of equity securities, available-for-sale		60,071			98,015			137,244
Distributions from other investments		25,622			22,406			25,596
Sale of other investments		16,357			-			-
Purchase of property, equipment, and other assets		(11,824	)		(6,522	)		(8,207	)
Net cash used in investing activities		(143,507	)		(123,527	)		(220,197	)

Financing Activities
Dividends to stockholders		(26,513	)		(26,056	)		(26,296	)
Acquisition of treasury stock		(2,741	)		(1,686	)		(3,010	)
Principal payment of notes payable		-			(12,300	)		(12,300	)
Proceeds from borrowings		45,000			-			13,000
Net proceeds from stock purchase and compensation plans		5,011			4,962			4,612
Excess tax benefits from share-based payment arrangements		(90	)		(744	)		(1,200	)
Net cash provided by (used in) financing activities		20,667			(35,824	)		(25,194	)
Net increase (decrease) in cash and cash equivalents		117			(166	)		(17,832	)
Net decrease in cash and cash equivalents from discontinued operations		-			-			(15,037	)
Net increase (decrease) in cash from continuing operations		117			(166	)		(2,795	)
Cash from continuing operations, beginning of year		645			811			3,606
Cash from continuing operations, end of year	$	762			645			811

Selective Insurance Group, Inc.
Combined Insurance Company Subsidiaries
Unaudited Statutory Balance Sheets
($ in thousands)


	Dec-31 *			Dec-31
	2011			2010

ASSETS
Bonds	$	3,452,204			3,482,204
Common stocks		157,355			69,636
Affiliated mortgage loan		38,131			38,785
Other investments		197,409			174,067
Short-term investments		183,070			111,021
Total investments		4,028,169			3,875,713

Cash on hand and in banks		(20,701	)		(30,343	)
Interest and dividends due and accrued		35,880			37,172
Premiums receivable		461,482			410,809
Reinsurance recoverable on paid losses and expenses		12,365			5,013
Deferred tax recoverable		137,659			133,100
EDP equipment		1,804			1,409
Equities and deposits in pools and associations		4,837			6,681
Receivable for sold securities		644			16,738
Other assets		27,964			30,164
Total assets	$	4,690,103			4,486,456

LIABILITIES
Reserve for losses	$	2,173,028			2,111,557
Reinsurance payable on paid loss and loss expense		1,285			1,030
Reserve for loss expenses		418,542			401,508
Unearned premiums		759,304			713,268
Reserve for commissions payable		44,488			43,590
Ceded balances payable		21,871			12,835
Federal income tax payable		12,176			1,645
Premium and other taxes payable		23,588			23,466
Borrowed money		58,043			13,018
Reserve for dividends to policyholders		3,470			2,390
Reserves for unauthorized reinsurance		1,785			1,811
Payable for securities		-			5,028
Funds withheld on account of others		6,523			7,015
Accrued salaries and benefits		80,601			61,353
Other liabilities		22,692			13,917
Total liabilities		3,627,396			3,413,431


POLICYHOLDERS' SURPLUS
Capital		32,325			28,325
Aggregate write-ins for special surplus funds		44,296			40,521
Paid in surplus		307,022			255,792
Unassigned surplus		679,064			748,387
Total policyholders' surplus		1,062,707			1,073,025
Total liabilities and policyholders' surplus	$	4,690,103			4,486,456

* Includes the December 31, 2011 acquisition of Montpelier U.S. Insurance Company. Combined statutory filings for 2011 will not reflect the acquisition as this Company will not be included in our intercompany pooling until January 1, 2012

Selective Insurance Group, Inc.
Combined Insurance Company Subsidiaries
Unaudited Statutory Statements Of Income
($ in thousands)


	Three Months Ended										Twelve Months Ended
	December										December

UNDERWRITING	2011					2010					2011					2010


Net premiums written	$	352,179					301,812					1,485,349					1,388,556

Net premiums earned		373,427					353,497					1,439,313					1,414,612


Net losses paid		245,778					195,666					857,844					784,641
Change in reserve for losses		(45,368	)				10,910					52,252					39,181
Net losses incurred		200,410		53.7	%		206,576		58.4	%		910,096		63.2	%		823,822		58.2	%
Net loss expenses paid		39,804					39,958					152,955					154,661
Change in reserve for loss expenses		4,879					(3,230	)				11,395					2,051
Net loss expenses incurred		44,683		12.0	%		36,728		10.4	%		164,350		11.4	%		156,712		11.1	%
Net underwriting expenses incurred		115,692		32.8	%		103,578		34.3	%		474,139		31.9	%		449,620		32.3	%
Total deductions		360,785					346,882					1,548,585					1,430,154
Statutory underwriting (loss) / gain		12,642					6,615					(109,272	)				(15,542	)



Net loss from premium balances charged off		(1,210	)				(1,057	)				(5,213	)				(5,142	)
Finance charges and other income		1,772					2,907					8,460					9,590
Total other income		562		-0.2	%		1,850		-0.6	%		3,247		-0.2	%		4,448		-0.3	%
Policyholders' dividends incurred		(1,481	)	0.4	%		(1,011	)	0.3	%		(5,284	)	0.4	%		(3,878	)	0.3	%
Total underwriting (loss) / gain		11,723		98.7	%		7,454		102.8	%		(111,309	)	106.7	%		(14,972	)	101.6	%


INVESTMENT
Net investment income earned		30,459					39,362					148,005					138,021
Net realized gain / (loss)		(3,621	)				(15,909	)				2,195					(19,282	)
Total income before income tax		38,561					30,907					38,891					103,767
Federal income tax expense / (income)		14,674					(456	)				12,433					16,848


Net income	$	23,887					31,363					26,458					86,919


Policyholders' Surplus
Surplus, beginning of period	$	1,010,144					1,034,321					1,073,025					981,955


Net income		23,887					31,363					26,458					86,919
Change in deferred taxes		11,749					2,941					17,220					2,169
Change in unrealized gains		15,801					12,506					2,355					26,198
Dividends to stockholders		(17,007	)				(12,002	)				(63,025	)				(48,010	)
Paid in surplus *		51,230					-					51,230					-
Paid in common stock *		4,000					-					4,000					-
Change in reserve for unauthorized		26					(798	)				26					(798	)
Change in non-admitted assets		(12,666	)				(4,263	)				(21,378	)				14,851
Change in additional admitted deferred taxes		5,241					5,550					3,775					6,570
Change in minimum pension liability		(15,090	)				3,407					(15,090	)				3,407
Surplus adjustments *		(14,608	)				-					(15,889	)				(236	)


Net change in surplus for period		52,563					38,704					(10,318	)				91,070


Surplus, end of period	$	1,062,707					1,073,025					1,062,707					1,073,025


Statutory underwriting (loss) / gain	$	11,723					7,454					(111,309	)				(14,972	)

Adjustments under GAAP:
Deferred policy acquisition costs		(5,975	)				(8,963	)				4,442					(8,974	)
Pension costs		(1,618	)				755					250					2,045
Other, net		841					286					(302	)				(266	)
GAAP underwriting (loss) / gain	$	4,971					(468	)				(106,919	)				(22,167	)

Selective Insurance Group, Inc. and Consolidated Subsidiaries
Alternative Investments
as of December 31, 2011
(unaudited)

	Inception	Original		Remaining		Current		YTD			DPI(1)		TVPI(2)
Fund	Year	Commitment		Commitment		Market Value		Income			Ratio		Ratio
Real Estate
Silverpeak RE II	2005		20,000,000		2,473,976		10,390,153		1,276,202			0.45		0.96
Silverpeak RE III	2008		15,000,000		8,095,585		3,377,382		(56,701	)		0.02		0.51
Total - Real Estate			35,000,000		10,569,561		13,767,535		1,219,501			0.34		0.84
Mezzanine Financing
Neovara Euro Mezz	2004		9,000,000		-		1,072,293		(836,617	)		0.95		1.03
GS Mezz V	2007		25,000,000		15,255,707		7,744,362		728,712			0.60		1.17
Total - Mezz. Financing			34,000,000		15,255,707		8,816,655		(107,905	)		0.77		1.10
Distressed Debt
Varde VIII	2006		10,000,000		-		7,372,134		(322,617	)		0.38		1.12
GS Distressed Opp III	2007		15,000,000		3,135,660		9,580,421		934,885			0.24		0.99
Total - Distressed Debt			25,000,000		3,135,660		16,952,555		612,268			0.30		1.05
Private Equity
Prospector	1997		5,000,000		-		411,121		(323	)		2.79		2.88
Trilantic Capital Partners III	2004		10,000,000		1,219,343		4,022,140		1,446,577			1.27		1.70
NB Co-Invest	2006		15,000,000		1,847,495		9,730,334		1,729,882			0.53		1.22
Trilantic Capital Partners IV	2007		11,098,351		2,301,528		7,572,404		1,651,122			0.41		1.24
Total - Private Equity			41,098,351		5,368,366		21,735,999		4,827,258			0.99		1.56
Private Equity, Secondary Market
NB SOF	2005		12,000,000		899,494		6,601,877		1,059,842			0.64		1.24
GS Vintage IV	2007		20,000,000		5,280,941		15,101,646		3,464,691			0.37		1.21
NB SOF II	2008		12,000,000		3,326,196		8,410,797		1,605,660			0.36		1.31
Total - Pvt. Eq. Sec. Mkt.			44,000,000		9,506,631		30,114,320		6,130,193			0.45		1.24
Energy/Power Generation
ArcLight I	2002		15,000,000		1,655,505		234,045		1,061,616			1.80		1.81
ArcLight II	2003		15,000,000		2,295,492		2,972,783		1,721,227			1.23		1.39
ArcLight III	2006		15,000,000		2,037,794		10,235,790		1,709,439			0.60		1.25
Quintana Energy	2006		10,000,000		1,902,067		8,006,160		713,808			0.09		1.07
ArcLight IV	2007		10,000,000		2,717,373		4,464,089		1,751,975			0.86		1.31
Total - Energy/Power Generation			65,000,000		10,608,231		25,912,867		6,958,065			1.03		1.41
Venture Capital
Venture V	2001		10,000,000		900,000		7,248,497		1,038,166			0.30		1.10
Total - Venture Capital			10,000,000		900,000		7,248,497		1,038,166			0.30		1.10
TOTAL - ALTERNATIVE INVESTMENTS		$	254,098,351		55,344,156		124,548,428		20,677,546			0.72		1.25
(1) Distributed to paid in ratio
(2) Total value to paid in ratio
Note: Some amounts may not foot due to rounding

Selective Insurance Group, Inc. and Consolidated Subsidiaries

Municipal Bond Portfolio

State and Repayment Source Composition

December 31, 2011

($ in thousands)

(unaudited)

Exposure = 51% Held-to-Maturity; 49% Available-for-Sale

Repayment Source Composition by State
Market Values
State	Revenue	% of State	General Obligation (GO)-Local	% of State	General Obligation (GO)-State	% of State	TX - Permanent School Fund (PSF)	% of State	Total	% of Total
TX	55,930	55%	44,289	44%	1,101	1%	-	0%	101,320	8%
TX-PSF	-	0%	-	0%	-	0%	41,190	100%	41,190	3%
WA	38,133	45%	46,238	55%	-	0%	-	0%	84,371	7%
AZ	60,795	90%	7,083	10%	-	0%	-	0%	67,878	5%
NY	66,291	100%	-	0%	-	0%	-	0%	66,291	5%
FL	53,587	100%	-	0%	-	0%	-	0%	53,587	4%
OH	30,408	59%	13,611	27%	7,255	14%	-	0%	51,274	4%
IL	28,386	58%	20,356	42%	-	0%	-	0%	48,742	4%
CO	17,241	36%	29,319	60%	1,812	4%	-	0%	48,372	4%
MN	6,390	13%	5,038	11%	36,926	76%	-	0%	48,354	4%
NC	24,169	58%	14,032	33%	3,775	9%	-	0%	41,976	3%
Pre-refunded	41,319	50%	25,517	31%	12,405	15%	3,658	4%	82,899	7%
Other	360,074	66%	115,455	21%	68,261	13%	-	0%	543,790	42%
Grand Total	782,723	61%	320,938	25%	131,535	10%	44,848	4%	1,280,044	100%

Selective Insurance Group, Inc. and Consolidated Subsidiaries
Credit Quality of Available-for-Sale Fixed Maturity Securities
December 31, 2011
($ in millions)
(unaudited)


	Fair Value		Unrealized Gain (Loss)			Average Credit Quality
AFS Fixed Maturity Portfolio:
U.S. government obligations1	$	353.8		20.3		AA+
Foreign government obligations		34.2		0.5		AA
State and municipal obligations		622.7		44.4		AA
Corporate securities		1,213.3		44.9		A
Mortgage-backed securities ("MBS")		594.5		19.2		AA
Asset-backed securities ("ABS")		78.9		1.2		AAA
Total AFS fixed maturity portfolio	$	2,897.4		130.5		AA-

State and Municipal Obligations:
Government obligations	$	282.6		22.1		AA+
Special revenue obligations		340.1		22.3		AA
Total state and municipal obligations	$	622.7		44.4		AA

Corporate Securities:
Financial	$	379.0		3.7		A
Industrials		86.9		6.1		A-
Utilities		75.6		3.5		BBB+
Consumer discretion		104.3		4.9		BBB+
Consumer staples		137.3		6.9		A
Healthcare		145.0		8.3		AA-
Materials		66.5		2.5		A-
Energy		77.9		3.3		A-
Information technology		74.3		2.6		A
Telecommunications services		50.9		1.5		BBB+
Other		15.6		1.6		AA+
Total corporate securities	$	1,213.3		44.9		A

MBS:
Government Guaranteed Agency commercial mortgage-backed securities ("CMBS")	$	72.9		5.0		AA+
Non-agency CMBS		39.7		(0.3	)	A-
Government Guaranteed Agency residential mortgage-backed securities ("RMBS")		98.2		4.7		AA+
Other Agency RMBS		339.1		10.8		AA+
Non-agency RMBS		37.1		(1.0	)	BBB
Alternative-A ("Alt-A") RMBS		7.5		-		AA+
Total MBS	$	594.5		19.2		AA

ABS:
ABS	$	77.5		1.3		AAA
Alt-A ABS3		0.7		-		D
Sub-prime ABS2,3		0.7		(0.1	)	D
Total ABS	$	78.9		1.2		AAA

1 U.S. Government includes coporate securities fully guaranteed by the FDIC.
2 We define sub-prime exposure as exposure to direct and indirect investments in non-agency residential mortgages with average FICO® scores below 650.
3 Alt-A ABS and sub-prime ABS each consist of one security that is currently expected by rating agencies to default on its obligations.

Selective Insurance Group, Inc. and Consolidated Subsidiaries
Credit Quality of Held-to-Maturity Securities
December 31, 2011
($ in millions)
(unaudited)

	Fair Value		Carry Value		Unrecognized Holding Gain (Loss)			Unrealized Gain (Loss) in Accumulated Other Comprehensive Income			Total Unrealized Unrecognized Gain (Loss)			Average Credit Quality
HTM Fixed Maturity Portfolio:
Foreign government obligations	$	5.5		5.6		(0.1	)		0.3			0.2		AA+
State and municipal obligations		657.4		626.0		31.4			11.9			43.3		AA
Corporate securities		69.5		62.6		6.9			(2.2	)		4.7		A
Mortgage-backed securities		17.7		11.5		6.2			(3.0	)		3.2		AA-
Asset-backed securities		7.9		6.6		1.3			(1.4	)		(0.1	)	A
Total HTM fixed maturity portfolio	$	758.0		712.3		45.7			5.6			51.3		AA

State and Municipal Obligations:
Government obligations	$	214.8		205.3		9.5			6.3			15.8		AA
Special revenue obligations		442.6		420.7		21.9			5.6			27.5		AA
Total state and municipal obligations	$	657.4		626.0		31.4			11.9			43.3		AA

Corporate Securities:
Financial	$	20.7		18.5		2.2			(1.5	)		0.7		A-
Industrials		20.3		17.8		2.5			(0.7	)		1.8		A
Utilities		15.4		13.7		1.7			(0.1	)		1.6		A+
Consumer discretion		5.9		5.6		0.3			0.1			0.4		AA-
Consumer staples		5.1		5.0		0.1			-			0.1		A
Materials		2.1		2.0		0.1			-			0.1		BBB
Total corporate securities	$	69.5		62.6		6.9			(2.2	)		4.7		A

MBS:
Non-agency CMBS		17.7		11.5		6.2			(3.0	)		3.2		AA-
Total MBS	$	17.7		11.5		6.2			(3.0	)		3.2		AA-

ABS:
ABS	$	5.6		5.0		0.6			(0.5	)		0.1		BBB+
Alt-A ABS		2.3		1.6		0.7			(0.9	)		(0.2	)	AAA
Total ABS	$	7.9		6.6		1.3			(1.4	)		(0.1	)	A

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SELECTIVE INSURANCE GROUP INC Reports