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

Attached files

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8-K - FORM 8-K - SELECTIVE INSURANCE GROUP INC	f8k_073113.htm
EX-99.1 - EXHIBIT 99.1 - SELECTIVE INSURANCE GROUP INC	exh_991.htm

EXHIBIT 99.2

Supplemental Investor Package

___________________________________________________

Second Quarter 2013

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)

	June 30,							June 30,							December 31,
	2013							2012							2012
						Unrecognized/							Unrecognized/							Unrecognized/
	Balance			Market		Unrealized		Balance			Market		Unrealized		Balance			Market		Unrealized
	Sheet			Value		Gain/(Loss)		Sheet			Value		Gain/(Loss)		Sheet			Value		Gain/(Loss)
Invested Assets:
Corporate bonds 1	$	2,365,465			2,372,903		38,028	$	2,127,036			2,138,982		94,602	$	2,239,284			2,250,536		110,822
Government and Municipal bonds		1,533,853			1,554,533		48,520		1,639,471			1,672,005		103,711		1,610,798			1,640,138		99,026
Total bonds		3,899,318			3,927,436		86,548		3,766,507			3,810,987		198,313		3,850,082			3,890,674		209,848
Equities		172,064			172,064		29,630		148,117			148,117		17,860		151,382			151,382		18,941
Short-term investments		186,499			186,499		-		135,823			135,823		-		214,479			214,479		-
Other investments		109,077			109,077		-		125,540			125,540		-		114,076			114,076		-
Total invested assets		4,366,958			4,395,076		116,178		4,175,987			4,220,467		216,173		4,330,019			4,370,611		228,789


Invested assets per $ of stockholders' equity		3.97							3.85							3.97

Total assets		6,112,627							5,687,408							6,794,216

Liabilities:
Reserve for loss and loss expenses		3,270,114							3,044,363							4,068,941
Unearned premium reserve		1,048,011							970,806							974,706

Total liabilities		5,013,582							4,602,362							5,703,624

Stockholders' equity		1,099,045							1,085,046							1,090,592

Total debt to capitalization ratio		26.3	%						22.1	%						22.0	%
Adjusted total debt to capitalization ratio 2		26.3	%						15.6	%						15.6	%

Book value per share		19.72							19.75							19.77

Book value per share excluding
unrealized gain or loss on bond portfolio		19.04							17.93							17.78

NPW per insurance segment employee 3		886							N/M							842

Statutory premiums to surplus ratio		1.5	x						1.5	x						1.6	x

Statutory surplus		1,170,612							1,067,881							1,050,107

1 Includes mortgage-backed and asset-backed securities.

2 For June 30 and December 31 of 2012, 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. These notes were redeemed in March of 2013, eliminating their effect on equity.

3 Prior year amounts have been restated to include the impact of E&S.

Selective Insurance Group, Inc.
Selected Income Statement Data (unaudited)
June 2013		THREE MONTHS ENDED June 30,												SIX MONTHS ENDED June 30,
($ in thousands, except per share amounts)		2013						2012						2013						2012
					Per diluted share						Per diluted share						Per diluted share						Per diluted share
Consolidated
Revenue		$	468,945					$	428,907						928,894					$	848,255
Operating income			23,773			0.42			172			0.01			43,897			0.78			15,432			0.28
Net realized gains, after tax			3,349			0.06			116			-			5,530			0.10			2,949			0.05
Income from continuing operations			27,122			0.48			288			0.01			49,427			0.88			18,381			0.33
Loss on discontinued operations, after tax			-			-			-			-			(997	)		(0.02	)		-			-
Net income			27,122			0.48			288			0.01			48,430			0.86			18,381			0.33
Operating return on equity			8.5	%					0.1	%					8.0	%					2.9	%

Total Insurance Operations
Gross premiums written			555,568						512,267						1,092,866						1,010,222
Net premiums written			462,177						425,563						912,301						845,735
Net premiums earned			426,252						392,212						847,192						771,041
Underwriting gain (loss)	- before tax		4,483						(26,962	)					16,644						(28,325	)
	- after tax		2,914			0.05			(17,525	)		(0.31	)		10,819			0.19			(18,411	)		(0.33	)
GAAP combined ratio			98.9	%					106.9	%					98.0	%					103.7	%

Total Standard lines
Net premiums earned			396,205						376,245						787,086						745,351
GAAP combined ratio			98.3	%					105.8	%					97.6	%					102.5	%
Standard Commercial lines
Net premiums earned			322,657						306,289						640,502						606,786
GAAP combined ratio			97.0	%					104.7	%					97.5	%					102.3	%
Standard Personal lines
Net premiums earned			73,548						69,956						146,584						138,565
GAAP combined ratio			104.0	%					110.6	%					98.0	%					103.1	%
Excess and Surplus lines
Net premiums earned			30,047						15,967						60,106						25,690
GAAP combined ratio			107.6	%					131.9	%					103.7	%					138.9	%

Investments
Net investment income	- before tax		34,003						34,006						66,873						66,634
	- after tax		25,700			0.45			25,710			0.46			50,539			0.89			50,485			0.91
Effective tax rate			24.4	%					24.4	%					24.4	%					24.2	%
Annual after-tax yield on investment portfolio															2.3	%					2.4	%
Annual after-tax, after-interest expense yield															2.0	%					2.1	%
Invested assets per $ of stockholders' equity															3.97						3.85

Other expenses (net of other income)
Interest expense	- before tax		(5,570	)					(4,723	)					(11,401	)					(9,423	)
	- after tax		(3,621	)		(0.06	)		(3,070	)		(0.06	)		(7,411	)		(0.13	)		(6,125	)		(0.11	)

Other Expense - after tax		$	(1,220	)		(0.02	)	$	(4,944	)		(0.08	)		(10,050	)		(0.17	)	$	(10,517	)		(0.19	)

Diluted weighted avg shares outstanding			56,616						55,681						56,530						55,642

Selective Insurance Group, Inc. and Consolidated Subsidiaries

GAAP Investment Income

(unaudited)

($ in thousands)

	For the three months ended						%			Year to Date						%
	June			June			Increase			June			June			Increase
	2013			2012			(Decrease)			2013			2012			(Decrease)
Investment Income:
Interest:
Fixed Maturity Securities	$	30,298			31,759			(4.6	)		60,387			63,109			(4.3	)
Short-term		29			29			0.0			81			67			20.9
Other Investments:
Alternative Investments		3,869			3,166			22.2			8,109			5,461			48.5
Other		-			(203	)		100.0			(638	)		(498	)		(28.1	)
Dividends		1,874			1,280			46.4			3,081			2,517			22.4
Miscellaneous		-			25			(100.0	)		-			64			(100.0	)
		36,070			36,056			0.0			71,020			70,720			0.4

Investment Expense		2,067			2,050			0.8			4,147			4,086			1.5

Net Investment Income Before Tax		34,003			34,006			(0.0	)		66,873			66,634			0.4

Tax		8,303			8,296			0.1			16,334			16,149			1.1

Net Investment Income After Tax	$	25,700			25,710			(0.0	)	$	50,539			50,485			0.1

Net Investment Income per Share	$	0.45			0.46			(2.2	)	$	0.89			0.91			(2.2	)


Effective Tax Rate		24.4	%		24.4	%					24.4	%		24.2	%

Average Yields :

Fixed Maturity Securities:
Pre Tax											3.12	%		3.42	%
After Tax											2.36	%		2.59	%

Portfolio:
Pre Tax											3.08	%		3.22	%
After Tax											2.32	%		2.44	%



	For the three months ended									Year to date:
	June			June						June			June
Net Realized Gains(Losses)		2013			2012						2013			2012
Fixed Maturities		911			177						1,562			361
Equity Securities		4,367			-						9,654			4,176
Short Term		-			-						-			(2	)
Other Investments		(124	)		1						(2,707	)		1

Total		5,154			178						8,509			4,536
Net of Tax		3,349			116						5,530			2,949

As of June 30, 2013 year-to-date new money rates for fixed maturity securities were 1.71% on a pre-tax basis and 1.25% on an after tax-basis.

Selective Insurance Group, Inc.

2013 Statutory Results by Line of Business

2nd Qtr 2013 (unaudited)

($ in thousands)

	Net					Net											Underwriting			Dividends to			Combined			Combined			Underwriting
	Premiums		Percent			Premiums		Percent			Loss			LAE			Expense			Policyholders			Ratio			Ratio			Gain/
	Written		Change			Earned		Change			Ratio			Ratio			Ratio			Ratio			2013			2012			(Loss)
Standard Personal Lines:

Homeowners	$	35,068		6.4	%	$	31,703		10.0	%		66.0	%		10.4	%		31.6	%		0.0	%		108.0	%		119.7	%	$	(3,588	)
Auto		40,191		0.1	%		38,525		1.7	%		70.9	%		12.1	%		29.7	%		0.0	%		112.7	%		110.5	%		(5,385	)
Other (including flood)		3,601		(2.0	)%		3,320		2.1	%		54.3	%		(21.1	)%		(92.3	)%		0.0	%		(59.1	)%		4.4	%		5,541
Total	$	78,860		2.7	%	$	73,548		5.1	%		68.0	%		9.9	%		25.0	%		0.0	%		102.9	%		109.2	%	$	(3,432	)

Standard Commercial Lines:

Commercial property	$	59,194		11.3	%	$	54,937		9.1	%		38.3	%		5.8	%		36.7	%		0.1	%		80.9	%		116.3	%	$	8,928
Workers compensation		68,590		2.7	%		64,854		(2.7	)%		74.3	%		15.8	%		26.9	%		1.3	%		118.3	%		112.7	%		(12,871	)
General liability		110,232		11.1	%		99,766		7.7	%		46.6	%		15.3	%		32.9	%		0.1	%		94.9	%		102.3	%		1,604
Auto		84,253		12.5	%		76,706		7.2	%		56.0	%		8.0	%		31.2	%		0.1	%		95.3	%		96.0	%		1,280
Business owners policies		19,943		11.1	%		18,625		7.9	%		28.4	%		9.0	%		38.6	%		0.0	%		76.0	%		103.3	%		3,963
Bonds		5,410		(2.2	)%		4,775		1.6	%		13.7	%		5.0	%		60.7	%		0.0	%		79.4	%		84.3	%		598
Other		3,029		6.7	%		2,994		(3.8	)%		0.0	%		0.5	%		48.5	%		0.0	%		49.0	%		46.8	%		1,510
Total	$	350,652		9.4	%	$	322,658		5.3	%		51.0	%		11.4	%		32.9	%		0.3	%		95.6	%		104.7	%	$	5,013

Total Standard Operations	$	429,511		8.1	%	$	396,206		5.3	%		54.2	%		11.1	%		31.5	%		0.2	%		97.0	%		105.5	%	$	1,581

E&S		32,666		15.3	%		30,046		88.2	%		55.9	%		14.4	%		36.5	%		0.0	%		106.8	%		116.1	%		(3,015	)

Total Insurance Operations	$	462,177		8.6	%	$	426,252		8.7	%		54.3	%		11.3	%		31.9	%		0.2	%		97.7	%		106.2	%	$	(1,434	)

Note: Some amounts may not foot due to rounding.


				2013			2012
	Losses Paid		$	207,023		$	232,122
	LAE Paid			43,620			41,031
	Total Paid		$	250,643		$	273,153

Selective Insurance Group, Inc.

2013 Statutory Results by Line of Business

June 2013 YTD (unaudited)

($ in thousands)

	Net					Net											Underwriting			Dividends to			Combined			Combined			Underwriting
	Premiums		Percent			Premiums		Percent			Loss			LAE			Expense			Policyholders			Ratio			Ratio			Gain/
	Written		Change			Earned		Change			Ratio			Ratio			Ratio			Ratio			2013			2012			(Loss)
Standard Personal Lines:

Homeowners	$	62,902		8.1	%	$	62,837		10.7	%		55.4	%		9.9	%		32.5	%		0.0	%		97.8	%		105.8	%	$	1,345
Auto		77,876		0.6	%		76,919		2.1	%		66.9	%		12.4	%		29.9	%		0.0	%		109.2	%		110.1	%		(7,349	)
Other (including flood)		6,637		(1.5	)%		6,828		5.9	%		64.5	%		(20.6	)%		(83.5	)%		0.0	%		(39.6	)%		5.8	%		9,373
Total	$	147,415		3.6	%	$	146,584		5.8	%		61.8	%		9.8	%		26.0	%		0.0	%		97.6	%		103.4	%	$	3,369

Standard Commercial Lines:

Commercial property	$	116,953		10.1	%	$	108,352		8.6	%		40.1	%		5.7	%		37.8	%		0.1	%		83.7	%		100.3	%	$	14,398
Workers compensation		143,994		2.9	%		130,939		(1.2	)%		74.9	%		15.8	%		26.4	%		1.5	%		118.6	%		111.8	%		(27,722	)
General liability		219,637		9.9	%		197,469		8.0	%		45.7	%		16.2	%		33.5	%		0.0	%		95.4	%		101.3	%		1,631
Auto		166,126		10.2	%		151,053		6.4	%		56.9	%		8.4	%		31.3	%		0.0	%		96.6	%		96.3	%		400
Business owners policies		40,303		11.4	%		37,165		8.9	%		23.7	%		12.2	%		40.6	%		0.0	%		76.5	%		101.4	%		7,459
Bonds		10,364		1.9	%		9,539		1.9	%		13.7	%		4.2	%		60.8	%		0.0	%		78.7	%		85.9	%		1,533
Other		6,463		5.7	%		5,985		(4.7	)%		(0.4	)%		0.7	%		43.2	%		0.0	%		43.5	%		41.5	%		3,175
Total	$	703,840		8.4	%	$	640,502		5.6	%		51.2	%		11.9	%		33.2	%		0.3	%		96.6	%		101.4	%	$	874

Total Standard Operations	$	851,255		7.5	%	$	787,086		5.6	%		53.2	%		11.5	%		31.9	%		0.3	%		96.9	%		101.8	%	$	4,243

E&S		61,046		12.8	%		60,106		134.0	%		51.9	%		15.0	%		35.7	%		0.0	%		102.6	%		118.0	%		(1,881	)

Total Insurance Operations	$	912,301		7.9	%	$	847,192		9.9	%		53.1	%		11.8	%		32.2	%		0.2	%		97.3	%		102.7	%	$	2,363

Note: Some amounts may not foot due to rounding.


				2013			2012
	Losses Paid		$	394,308		$	439,015
	LAE Paid			88,609			84,567
	Total Paid		$	482,917		$	523,582

SELECTIVE INSURANCE GROUP, INC. CONSOLIDATED BALANCE SHEETS	Unaudited
($ in thousands, except share amounts)	June 30, 2013			December 31, 2012
ASSETS
Investments:
Fixed maturity securities, held-to-maturity – at carrying value (fair value: $507,625 – 2013; $594,661 – 2012)	$	479,507			554,069
Fixed maturity securities, available-for-sale – at fair value (amortized cost: $3,363,994 – 2013; $3,130,683 – 2012)		3,419,811			3,296,013
Equity securities, available-for-sale – at fair value (cost: $142,434 – 2013; $132,441 – 2012)		172,064			151,382
Short-term investments (at cost which approximates fair value)		186,499			214,479
Other investments		109,077			114,076
Total investments		4,366,958			4,330,019
Cash		154			210
Interest and dividends due or accrued		36,376			35,984
Premiums receivable, net of allowance for uncollectible accounts of: $4,478 – 2013; $3,906 – 2012		568,523			484,388
Reinsurance recoverables, net		552,488			1,421,109
Prepaid reinsurance premiums		140,833			132,637
Current federal income tax		1,904			2,569
Deferred federal income tax		135,886			119,136
Property and equipment – at cost, net of accumulated depreciation and amortization of: $174,226 – 2013; $169,428 – 2012		48,841			47,131
Deferred policy acquisition costs		165,078			155,523
Goodwill		7,849			7,849
Other assets		87,737			57,661
Total assets	$	6,112,627			6,794,216

LIABILITIES AND STOCKHOLDERS’ EQUITY
Liabilities:
Reserve for loss and loss expenses	$	3,270,114			4,068,941
Unearned premiums		1,048,011			974,706
Notes payable		392,400			307,387
Accrued salaries and benefits		102,223			152,396
Other liabilities		200,834			200,194
Total liabilities	$	5,013,582			5,703,624

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: 98,910,399 – 2013; 98,194,224 – 2012		197,821			196,388
Additional paid-in capital		282,014			270,654
Retained earnings		1,158,861			1,125,154
Accumulated other comprehensive income		19,278			54,040
Treasury stock – at cost (shares: 43,181,889 – 2013; 43,030,776 – 2012)		(558,929	)		(555,644	)
Total stockholders’ equity		1,099,045			1,090,592
Commitments and contingencies
Total liabilities and stockholders’ equity	$	6,112,627			6,794,216

SELECTIVE INSURANCE GROUP, INC. UNAUDITED CONSOLIDATED STATEMENTS OF INCOME	Quarter ended June 30,						Six Months ended June 30,
($ in thousands, except per share amounts)	2013			2012			2013			2012
Revenues:
Net premiums earned	$	426,252			392,212			847,192			771,041
Net investment income earned		34,003			34,006			66,873			66,634
Net realized gains:
Net realized investment gains		5,709			272			11,013			5,051
Other-than-temporary impairments		(508	)		(40	)		(2,427	)		(297	)
Other-than-temporary impairments on fixed maturity securities recognized in other comprehensive income		(47	)		(54	)		(77	)		(218	)
Total net realized gains		5,154			178			8,509			4,536
Other income		3,536			2,511			6,320			6,044
Total revenues		468,945			428,907			928,894			848,255

Expenses:
Loss and loss expense incurred		279,594			287,903			549,443			540,809
Policy acquisition costs		143,728			131,219			283,256			259,177
Interest expense		5,570			4,723			11,401			9,423
Other expenses		3,852			5,754			19,725			16,347
Total expenses		432,744			429,599			863,825			825,756

Income (loss) from continuing operations, before federal income tax		36,201			(692	)		65,069			22,499

Federal income tax expense (benefit):
Current		6,221			(500	)		13,674			6,678
Deferred		2,858			(480	)		1,968			(2,560	)
Total federal income tax expense (benefit)		9,079			(980	)		15,642			4,118

Net income from continuing operations		27,122			288			49,427			18,381

Loss on disposal of discontinued operations, net of tax of $(538)		—			—			(997	)		—

Net income	$	27,122			288			48,430			18,381

Earnings per share:
Basic net income from continuing operations	$	0.49			0.01			0.89			0.34
Basic net loss from discontinued operations		—			—			(0.02	)		—
Basic net income	$	0.49			0.01			0.87			0.34

Diluted net income from continuing operations	$	0.48			0.01			0.88			0.33
Diluted net loss from discontinued operations		—			—			(0.02	)		—
Diluted net income	$	0.48			0.01			0.86			0.33

Dividends to stockholders	$	0.13			0.13			0.26			0.26

SELECTIVE INSURANCE GROUP, INC. UNAUDITED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME	Quarter ended June 30,						Six Months ended June 30,
($ in thousands)	2013			2012			2013			2012
Net income	$	27,122			288			48,430			18,381

Other comprehensive income, net of tax:
Unrealized (losses) gains on investment securities:
Unrealized holding (losses) gains arising during period		(59,353	)		5,101			(56,959	)		17,974
Non-credit portion of other-than-temporary impairments recognized in other comprehensive income		31			35			50			142
Amount reclassified into net income:
Held-to-maturity securities		(399	)		(456	)		(865	)		(1,017	)
Non-credit other-than-temporary impairment		3			39			8			171
Realized gains on available for sale securities		(3,438	)		(128	)		(7,322	)		(2,917	)
Total unrealized (losses) gains on investment securities		(63,156	)		4,591			(65,088	)		14,353

Defined benefit pension and post-retirement plans:
Net actuarial gain		—			—			28,600			—
Amounts reclassified into net income:
Net actuarial loss		513			905			1,709			1,808
Prior service cost		—			24			6			49
Curtailment expense		—			—			11			—
Total defined benefit pension and post-retirement plans		513			929			30,326			1,857
Other comprehensive (loss) income		(62,643	)		5,520			(34,762	)		16,210
Comprehensive (loss) income	$	(35,521	)		5,808			13,668			34,591

SELECTIVE INSURANCE GROUP, INC. UNAUDITED CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY	Six Months ended June 30,
($ in thousands)	2013			2012
Common stock:
Beginning of year	$	196,388			194,494
Dividend reinvestment plan (shares: 33,514 – 2013; 46,603 – 2012)		67			93
Stock purchase and compensation plans (shares: 682,661 – 2013; 667,500 – 2012)		1,366			1,334
End of period		197,821			195,921

Additional paid-in capital:
Beginning of year		270,654			257,370
Dividend reinvestment plan		703			712
Stock purchase and compensation plans		10,657			7,647
End of period		282,014			265,729

Retained earnings:
Beginning of year		1,125,154			1,116,319
Net income		48,430			18,381
Dividends to stockholders ($0.26 per share – 2013 and 2012)		(14,723	)		(14,557	)
End of period		1,158,861			1,120,143

Accumulated other comprehensive income:
Beginning of year		54,040			42,294
Other comprehensive (loss) income		(34,762	)		16,210
End of period		19,278			58,504

Treasury stock:
Beginning of year		(555,644	)		(552,149	)
Acquisition of treasury stock (shares: 151,113 – 2013; 173,620– 2012)		(3,285	)		(3,102	)
End of period		(558,929	)		(555,251	)
Total stockholders’ equity	$	1,099,045			1,085,046

SELECTIVE INSURANCE GROUP, INC. UNAUDITED CONSOLIDATED STATEMENTS OF CASH FLOW	Six Months ended June 30,
($ in thousands)	2013			2012
Operating Activities
Net income	$	48,430			18,381

Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation and amortization		23,103			19,550
Loss on disposal of discontinued operations		997			—
Stock-based compensation expense		6,189			5,160
Undistributed losses of equity method investments		419			496
Net realized gains		(8,509	)		(4,536	)
Retirement income plan curtailment expense		16			—

Changes in assets and liabilities:
Increase in reserve for losses and loss expenses, net of reinsurance recoverables		69,790			19,802
Increase in unearned premiums, net of prepaid reinsurance and advance premiums		65,225			75,172
Increase (decrease) in net federal income taxes		3,171			(3,058	)
Increase in premiums receivable		(84,135	)		(57,294	)
Increase in deferred policy acquisition costs		(9,555	)		(16,638	)
Increase in interest and dividends due or accrued		(1,066	)		(500	)
Decrease in accrued salaries and benefits		(6,173	)		(5,699	)
Decrease in accrued insurance expenses		(5,478	)		(4,500	)
Other-net		(4,526	)		5,823
Net adjustments		49,468			33,778
Net cash provided by operating activities		97,898			52,159

Investing Activities
Purchase of fixed maturity securities, available-for-sale		(530,402	)		(426,346	)
Purchase of equity securities, available-for-sale		(42,546	)		(40,430	)
Purchase of other investments		(4,393	)		(6,355	)
Purchase of short-term investments		(1,116,873	)		(795,707	)
Purchase of subsidiary		—			255
Sale of subsidiary		1,225			445
Sale of fixed maturity securities, available-for-sale		6,851			37,699
Sale of short-term investments		1,144,853			876,928
Redemption and maturities of fixed maturity securities, held-to-maturity		48,186			57,152
Redemption and maturities of fixed maturity securities, available-for-sale		286,905			197,199
Sale of equity securities, available-for-sale		42,206			58,176
Distributions from other investments		6,077			8,443
Purchase of property and equipment		(6,761	)		(6,793	)
Net cash used in investing activities		(164,672	)		(39,334	)

Financing Activities
Dividends to stockholders		(13,668	)		(13,442	)
Acquisition of treasury stock		(3,285	)		(3,102	)
Net proceeds from stock purchase and compensation plans		3,769			2,225
Proceeds from issuance of notes payable, net of debt issuance costs		178,435			—
Repayment of notes payable		(100,000	)		—
Excess tax benefits from share-based payment arrangements		1,467			873
Net cash provided by (used in) financing activities		66,718			(13,446	)
Net decrease in cash		(56	)		(621	)
Cash, beginning of year		210			762
Cash, end of period	$	154			141

Selective Insurance Group, Inc.

Combined Insurance Company Subsidiaries

Unaudited Statutory Balance Sheets

($ in thousands)

	Jun-30			Jun-30			Dec-31
	2013			2012			2012

ASSETS
Bonds	$	3,794,994			3,569,892			3,617,371
Common stocks		172,064			148,117			151,382
Affiliated mortgage loan		37,086			37,791			37,443
Other investments		175,080			191,608			180,110
Short-term investments		147,071			113,584			208,845
Total investments		4,326,295			4,060,992			4,195,151

Cash on hand and in banks		(34,417	)		(29,939	)		(76,957	)
Interest and dividends due and accrued		36,361			36,069			35,979
Premiums receivable		567,218			521,684			482,227
Reinsurance recoverable on paid losses and expenses		8,087			9,852			11,354
Deferred tax recoverable		157,856			148,848			147,495
EDP equipment		1,017			1,527			1,372
Equities and deposits in pools and associations		6,800			6,168			12,734
Receivable for sold securities		18,730			1,154			257
Other assets		24,017			27,065			28,541
Total assets	$	5,111,964			4,783,420			4,838,153

LIABILITIES
Reserve for losses	$	2,282,379			2,177,438			2,226,858
Reinsurance payable on paid loss and loss expense		2,247			1,282			2,298
Reserve for loss expenses		438,734			431,272			427,560
Unearned premiums		907,178			833,998			842,068
Reserve for commissions payable		47,100			43,046			52,304
Ceded balances payable		31,243			17,516			271
Federal income tax payable		21,415			6,563			5,346
Premium and other taxes payable		24,330			20,531			24,604
Borrowed money		58,042			58,042			58,044
Reserve for dividends to policyholders		2,334			3,670			2,665
Reserves for unauthorized reinsurance		7,498			1,785			7,498
Payable for securities		9,596			17,171			7,682
Funds withheld on account of others		8,080			7,136			11,231
Accrued salaries and benefits		44,601			76,876			102,070
Other liabilities		56,575			19,213			17,547
Total liabilities		3,941,352			3,715,539			3,788,046


POLICYHOLDERS' SURPLUS
Capital		42,725			34,225			42,725
Paid in surplus		492,869			305,122			435,744
Unassigned surplus		635,018			728,534			571,638
Total policyholders' surplus		1,170,612			1,067,881			1,050,107
Total liabilities and policyholders' surplus	$	5,111,964			4,783,420			4,838,153

Selective Insurance Group, Inc.

Combined Insurance Company Subsidiaries

Unaudited Statutory Statements Of Income

($ in thousands)

	Three Months Ended June										Six Months Ended June
UNDERWRITING	2013					2012					2013					2012

Net premiums written	$	462,177					425,563					912,301					845,735

Net premiums earned		426,252					392,212					847,192					771,041

Net losses paid		207,023					232,122					394,308					439,015
Change in reserve for losses		24,363					6,841					55,521					4,411
Net losses incurred		231,386		54.3	%		238,963		60.9	%		449,829		53.1	%		443,426		57.5	%
Net loss expenses paid		43,620					41,031					88,609					84,567
Change in reserve for loss expenses		4,689					7,942					11,173					12,730
Net loss expenses incurred		48,309		11.3	%		48,973		12.5	%		99,782		11.8	%		97,297		12.6	%
Net underwriting expenses incurred		150,140		32.6	%		139,245		32.8	%		298,480		32.8	%		275,764		32.6	%
Total deductions		429,835					427,181					848,091					816,487
Statutory underwriting (loss)		(3,583	)				(34,969	)				(899	)				(45,446	)

Net loss from premium balances charged off		(616	)				(864	)				(1,350	)				(2,105	)
Finance charges and other income		3,746					1,934					6,678					4,895
Total other income		3,130		-0.7	%		1,070		-0.3	%		5,328		-0.6	%		2,790		-0.3	%
Policyholders' dividends incurred		(981	)	0.2	%		(1,230	)	0.3	%		(2,067	)	0.2	%		(2,144	)	0.3	%
Total underwriting (loss) gain		(1,434	)	97.7	%		(35,129	)	106.2	%		2,362		97.3	%		(44,800	)	102.7	%

INVESTMENT
Net investment income earned		34,012					33,793					67,342					67,272
Net realized gain		5,150					175					6,362					4,533
Total income before income tax		37,728					(1,161	)				76,066					27,005
Federal income tax expense		16,752					1,529					32,687					11,122

Net income (loss)	$	20,976					(2,690	)				43,379					15,883

Policyholders' Surplus
Surplus, beginning of period	$	1,151,959					1,083,174					1,050,107					1,062,707

Net income		20,976					(2,690	)				43,379					15,883
Change in deferred taxes		7,815					5,578					8,069					7,664
Change in unrealized gains		(884	)				(2,917	)				8,552					2,041
Dividends to stockholders		(6,662	)				(12,709	)				(18,782	)				(28,474	)
Change in cum. effect of acctg principle		-					-					-					44,296
Capital - transferred from surplus		-					1,900					-					1,900
Paid in surplus		-					-					57,125					-
Surplus - transferred to capital		-					(1,900	)				-					(1,900	)
Change in non-admitted assets		(3,290	)				(2,524	)				13,429					8,035
Change in additional admitted deferred taxes		-					-					-					(44,296	)
Change in Overfunded Contra Asset		(1,184	)				-					(9,907	)				-
Qual Pen Trans Liab		1,846					-					(33,879	)				-
Excess Plan Trans Liab		17					-					(578	)				-
PRL Plan Trans Liab		19					-					(1,199	)				-
Change in minimum pension liability		-					-					54,755					-
Surplus adjustments		-					(31	)				(459	)				25

Net change in surplus for period		18,653					(15,293	)				120,505					5,174

Surplus, end of period	$	1,170,612					1,067,881					1,170,612					1,067,881

Statutory underwriting (loss) gain	$	(1,434	)				(35,129	)				2,362					(44,800	)

Adjustments under GAAP:
Deferred policy acquisition costs		6,593					8,068					9,555					16,638
Pension costs		(101	)				70					5,824					140
Other, net		(575	)				29					(1,097	)				(303	)
GAAP underwriting (loss) / gain	$	4,483					(26,962	)				16,644					(28,325	)

Note: Some amounts or ratios may not foot due to rounding

Selective Insurance Group, Inc. and Consolidated Subsidiaries
Alternative Investments
as of June 30, 2013
(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		2,287,839		9,389,803		545,279			0.53		0.98
Silverpeak RE III	2008		15,000,000		8,002,236		2,758,571		(148,047	)		0.03		0.43
Total - Real Estate			35,000,000		10,290,075		12,148,374		397,232			0.40		0.84
Mezzanine Financing
Neovara Euro Mezz	2004		9,000,000		-		579,578		118,830			0.98		1.02
GS Mezz V	2007		25,000,000		13,143,207		9,015,318		612,283			0.72		1.29
New Canaan V	2012		7,000,000		4,491,872		2,433,308		112,071			0.03		1.00
Centerfield Capital	2012		3,000,000		2,077,118		839,551		26,882			0.05		0.96
Total - Mezz. Financing			44,000,000		19,712,197		12,867,755		870,067			0.75		1.15
Distressed Debt
Varde VIII	2006		10,000,000		-		4,523,135		848,664			0.81		1.26
Distressed Managers III	2007		15,000,000		2,928,796		7,583,171		767,040			0.53		1.09
Total - Distressed Debt			25,000,000		2,928,796		12,106,306		1,615,704			0.65		1.17
Private Equity
Prospector	1997		5,000,000		-		410,216		-			2.79		2.88
Trilantic Capital Partners III	2004		10,000,000		1,443,707		1,769,562		204,935			1.61		1.80
NB Co-Invest	2006		15,000,000		1,606,799		7,384,651		222,183			0.82		1.34
Trilantic Capital Partners IV	2007		11,098,351		1,491,469		8,244,581		1,114,446			0.78		1.55
Trilantic Capital Partners V	2012		7,000,000		7,000,000		-		-			-		-
Total - Private Equity			48,098,351		11,541,975		17,809,009		1,541,564			1.25		1.70
Private Equity, Secondary Market
NB SOF	2005		12,000,000		899,494		5,422,461		229,272			0.82		1.31
Vintage IV	2007		20,000,000		4,093,675		12,914,366		829,363			0.62		1.29
NB SOF II	2008		12,000,000		2,533,186		8,151,999		899,622			0.68		1.43
Total - Pvt. Eq. Sec. Mkt.			44,000,000		7,526,356		26,488,825		1,958,257			0.69		1.33
Energy/Power Generation
ArcLight I	2002		15,000,000		-		87,363		(11,740	)		1.80		1.81
ArcLight II	2003		15,000,000		2,295,492		1,375,930		(313,279	)		1.38		1.46
ArcLight III	2006		15,000,000		2,037,794		7,536,242		1,077,373			0.81		1.29
Quintana Energy	2006		10,000,000		1,204,351		6,366,560		368,485			0.56		1.28
ArcLight IV	2007		10,000,000		2,287,578		3,051,214		180,578			0.98		1.28
Total - Energy/Power Generation			65,000,000		7,825,215		18,417,309		1,301,417			1.19		1.45
Venture Capital
Venture V	2001		9,600,000		400,000		7,378,010		425,349			0.44		1.24
Total - Venture Capital			9,600,000		400,000		7,378,010		425,349			0.44		1.24
TOTAL - ALTERNATIVE INVESTMENTS		$	270,698,351		60,224,613		107,215,588		8,109,589			0.89		1.33
(1) Distributed to paid in ratio
(2) Total value to paid in ratio
Exhibit may not foot due to rounding

Selective Insurance Group, Inc. and Consolidated Subsidiaries

Municipal Bond Portfolio

State and Repayment Source Composition

June 30, 2013

($ in thousands)

(unaudited)

Exposure = 33% Held-to-Maturity; 67% 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		42,024		48	%		44,833		51	%		1,082		1	%		-		0	%		87,939		7	%
TX-PSF		-		0	%		-		0	%		-		0	%		23,482		100	%		23,482		2	%
WA		51,786		55	%		35,146		38	%		6,722		7	%		-		0	%		93,654		7	%
NY		68,739		88	%		9,773		12	%		-		0	%		-		0	%		78,512		6	%
FL		51,464		77	%		-		0	%		15,177		23	%		-		0	%		66,641		5	%
AZ		55,042		87	%		7,944		13	%		-		0	%		-		0	%		62,986		5	%
CO		21,084		40	%		31,978		60	%		-		0	%		-		0	%		53,062		4	%
CA		44,511		93	%		3,313		7	%		-		0	%		-		0	%		47,824		3	%
NC		23,351		55	%		13,121		31	%		5,904		14	%		-		0	%		42,376		3	%
MO		19,212		46	%		16,413		39	%		6,542		15	%		-		0	%		42,167		3	%
AK		22,108		64	%		12,484		36	%		-		0	%		-		0	%		34,592		2	%
Pre-refunded		57,532		49	%		46,150		39	%		7,718		7	%		5,328		5	%		116,728		9	%
Other		314,956		53	%		136,219		23	%		140,073		24	%		-		0	%		591,248		44	%
Grand Total		771,809		57	%		357,374		27	%		183,218		14	%		28,810		2	%		1,341,211		100	%

Selective Insurance Group, Inc. and Consolidated Subsidiaries

Credit Quality of Available-for-Sale Fixed Maturity Securities

June 30, 2013

($ in millions)

(Unaudited)

	Fair Value		Unrealized Gain (Loss)			Weighted Average Credit Quality
AFS Fixed Maturity Portfolio:
U.S. government obligations	$	178.0		12.1		AA+
Foreign government obligations		29.7		0.9		AA-
State and municipal obligations		894.3		9.7		AA
Corporate securities		1,524.0		32.1		A
Mortgage-backed securities (“MBS”)		638.4		0.9		AA
Asset-backed securities (“ABS”)		155.4		0.1		AAA
Total AFS fixed maturity portfolio	$	3,419.8		55.8		AA-
State and Municipal Obligations:
General obligations	$	416.2		4.9		AA+
Special revenue obligations		478.1		4.8		AA
Total state and municipal obligations	$	894.3		9.7		AA
Corporate Securities:
Financial	$	440.7		11.2		A
Industrials		121.1		4.5		A-
Utilities		135.5		1.4		A-
Consumer discretionary		163.4		3.4		A-
Consumer staples		158.7		3.8		A
Healthcare		176.7		4.4		A+
Materials		86.6		1.0		BBB+
Energy		79.2		1.3		A-
Information technology		99.8		—		A+
Telecommunications services		54.7		0.5		BBB+
Other		7.6		0.6		AA+
Total corporate securities	$	1,524.0		32.1		A
MBS:
Government guaranteed agency commercial MBS ("CMBS")	$	39.9		1.0		AA+
Other agency CMBS		9.2		(0.3	)	AA+
Non-agency CMBS		86.5		(2.2	)	AA
Government guaranteed agency residential MBS ("RMBS")		72.2		1.9		AA+
Non-agency RMBS		43.3		0.5		A-
Other agency RMBS		381.7		(0.1	)	AA+
Alternative-A (“Alt-A”) RMBS		5.6		0.1		A+
Total MBS	$	638.4		0.9		AA
ABS:
ABS	$	154.9		—		AAA
Sub-prime ABS1, 2		0.5		0.1		D
Total ABS	$	155.4		0.1		AAA

1We define sub-prime exposure as exposure to direct and indirect investments in non-agency residential mortgages with average FICO® scores below 650.

2Subprime ABS consists of one security whose issuer 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

June 30, 2013

($ in millions)

(Unaudited)

	Fair Value		Carry Value		Unrecognized Holding Gain		Unrealized Gain (Loss) in Accumulated Other Comprehensive Income			Total Unrealized/ Unrecognized Gain		Weighted Average Credit Quality
HTM Fixed Maturity Portfolio:
Foreign government obligations	$	5.6		5.5		0.1		0.2			0.3	AA+
State and municipal obligations		446.9		426.4		20.5		4.9			25.4	AA
Corporate securities		38.9		35.3		3.6		(0.7	)		2.9	A
MBS		9.6		6.6		3.0		(1.0	)		2.0	AA
ABS		6.6		5.7		0.9		(0.8	)		0.1	A+
Total HTM fixed maturity portfolio	$	507.6		479.5		28.1		2.6			30.7	AA
State and Municipal Obligations:
General obligations	$	144.3		138.2		6.1		2.7			8.8	AA
Special revenue obligations		302.6		288.2		14.4		2.2			16.6	AA
Total state and municipal obligations	$	446.9		426.4		20.5		4.9			25.4	AA
Corporate Securities:
Financial	$	9.4		8.6		0.8		(0.4	)		0.4	BBB+
Industrials		11.6		10.3		1.3		(0.2	)		1.1	A+
Utilities		14.8		13.4		1.4		(0.1	)		1.3	A+
Consumer discretionary		3.1		3.0		0.1		—			0.1	AA
Total corporate securities	$	38.9		35.3		3.6		(0.7	)		2.9	A
MBS:
Non-agency CMBS	$	9.6		6.6		3.0		(1.0	)		2.0	AA
Total MBS	$	9.6		6.6		3.0		(1.0	)		2.0	AA
ABS:
ABS	$	4.1		3.9		0.2		(0.1	)		0.1	BBB+
Alt-A ABS		2.5		1.8		0.7		(0.7	)		—	AAA
Total ABS	$	6.6		5.7		0.9		(0.8	)		0.1	A+

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SELECTIVE INSURANCE GROUP INC Reports