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_013014.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 2013

Investor Contact:

Jennifer DiBerardino

Senior Vice President, Investor Relations and Treasurer

Tel: 973-948-1364

jennifer.diberardino@selective.com

Selective Insurance Group, Inc. & Consolidated Subsidiaries

Selected Balance Sheet Data

(unaudited)

	December 31,							December 31,
($ in thousands, except per share data)	2013							2012
						Unrecognized/							Unrecognized/
	Balance			Market		Unrealized		Balance			Market		Unrealized
	Sheet			Value		Gain/(Loss)		Sheet			Value		Gain/(Loss)
Invested Assets:
Corporate bonds 1	$	2,595,256			2,601,556		27,812	$	2,239,284			2,250,536		110,822
Government and Municipal bonds		1,513,159			1,530,961		38,106		1,610,798			1,640,138		99,026
Total bonds		4,108,415			4,132,517		65,918		3,850,082			3,890,674		209,848
Equities		192,771			192,771		37,420		151,382			151,382		18,941
Short-term investments		174,251			174,251		-		214,479			214,479		-
Other investments		107,875			107,875		-		114,076			114,076		-
Total invested assets		4,583,312			4,607,414		103,338		4,330,019			4,370,611		228,789


Invested assets per $ of stockholders' equity		3.97							3.97

Total assets		6,270,170							6,794,216

Liabilities:
Reserve for losses and loss expenses		3,349,770							4,068,941
Unearned premium reserve		1,059,155							974,706

Total liabilities		5,116,242							5,703,624

Stockholders' equity		1,153,928							1,090,592

Total debt to capitalization ratio		25.4	%						22.0	%
Adjusted total debt to capitalization ratio 2		25.4	%						15.6	%

Book value per share		20.63							19.77

Book value per share excluding
unrealized gain or loss on bond portfolio		20.15							17.78

NPW per insurance segment employee 3		908							842

Statutory premiums to surplus ratio		1.4	x						1.6	x

Statutory surplus		1,256,431							1,050,107

1 Includes mortgage-backed and asset-backed securities.

2 For December 31, 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. This debt was paid off in March of 2013, eliminating its effect on equity.

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

Selective Insurance Group, Inc. & Consolidated Subsidiaries

Selected Income Statement Data

(unaudited)

		THREE MONTHS ENDED December 31,												TWELVE MONTHS ENDED December 31,
($ in thousands, except per share amounts)		2013						2012						2013						2012
					Per diluted share						Per diluted share						Per diluted share						Per diluted share
Consolidated
Revenue		$	488,034					$	448,975						1,903,741					$	1,734,102
Operating income (loss)			26,120			0.45			(2,293	)		(0.04	)		93,939			1.65			32,121			0.58
Net realized (losses) gains, after tax			(785	)		(0.01	)		3,601			0.06			13,476			0.24			5,842			0.10
Income from continuing operations			25,335			0.44			1,308			0.02			107,415			1.89			37,963			0.68
Loss on discontinued operations, after tax			-			-			-			-			(997	)		(0.02	)		-			-
Net income			25,335			0.44			1,308			0.02			106,418			1.87			37,963			0.68
Operating return on equity			9.2	%					-0.8	%					8.4	%					3.0	%

Total Insurance Operations
Gross premiums written			491,675						457,464						2,177,443						2,006,605
Net premiums written			405,110						370,630						1,810,159						1,666,883
Net premiums earned			451,312						406,853						1,736,072						1,584,119
Underwriting gain (loss)	- before tax		11,971						(36,543	)					38,766						(64,007	)
	- after tax		7,781			0.14			(23,753	)		(0.42	)		25,198			0.44			(41,605	)		(0.74	)
GAAP combined ratio			97.3	%					109.0	%					97.8	%					104.0	%

Total Standard lines
Net premiums earned			418,189						378,041						1,610,951						1,504,890
GAAP combined ratio			96.8	%					108.6	%					97.4	%					103.0	%
Standard Commercial lines
Net premiums earned			345,155						308,856						1,316,619						1,225,335
GAAP combined ratio			97.3	%					108.5	%					97.4	%					103.3	%
Standard Personal lines
Net premiums earned			73,034						69,185						294,332						279,555
GAAP combined ratio			94.1	%					109.3	%					97.1	%					101.3	%
Excess and Surplus lines
Net premiums earned			33,123						28,812						125,121						79,229
GAAP combined ratio			104.7	%					113.4	%					103.0	%					124.7	%

Investments
Net investment income	- before tax		35,313						34,593						134,643						131,877
	- after tax		26,361			0.46			26,286			0.47			101,410			1.79			100,265			1.79
Effective tax rate			25.4	%					24.0	%					24.7	%					24.0	%
Annual after-tax yield on investment portfolio															2.3	%					2.4	%
Annual after-tax, after-interest expense yield															1.9	%					2.1	%
Invested assets per $ of stockholders' equity															3.97						3.97

Other expenses (net of other income)
Interest expense	- before tax		(5,567	)					(4,724	)					(22,538	)					(18,872	)
	- after tax		(3,619	)		(0.06	)		(3,071	)		(0.05	)		(14,650	)		(0.26	)		(12,267	)		(0.22	)

Other Expense - after tax		$	(4,403	)		(0.09	)	$	(1,755	)		(0.04	)		(18,019	)		(0.32	)	$	(14,272	)		(0.25	)

Diluted weighted avg shares outstanding			57,065						56,128						56,810						55,933

Selective Insurance Group, Inc. & Consolidated Subsidiaries

GAAP Insurance Operations Results

Fourth Quarter
($ in thousands)	Quarter Ended December 31, 2013															Quarter Ended December 31, 2012

	Standard Commercial Lines			Standard Personal Lines			Total Standard Lines			Excess & Surplus Lines			Grand Total			Standard Commercial Lines			Standard Personal Lines			Total Standard Lines			Excess & Surplus Lines			Grand Total
Net Premiums Written		300,527			69,542			370,069			35,041			405,110			273,170			68,061			341,231			29,399			370,630
Net Premiums Earned		345,155			73,034			418,189			33,123			451,312			308,856			69,185			378,041			28,812			406,853
Loss and Loss Expenses Incurred		217,035			48,728			265,763			23,215			288,978			231,041			54,316			285,357			22,573			307,930
Net Underwriting Expenses Incurred		118,004			20,021			138,025			11,457			149,482			103,465			21,286			124,751			10,096			134,847
Dividends to Policyholders		881			-			881			-			881			619			-			619			-			619
GAAP Underwriting Gain (Loss)		9,235			4,285			13,520			(1,549	)		11,971			(26,269	)		(6,417	)		(32,686	)		(3,857	)		(36,543	)

GAAP Ratios
Loss and Loss Expense Ratio		62.9	%		66.7	%		63.6	%		70.1	%		64.0	%		74.8	%		78.5	%		75.5	%		78.3	%		75.7	%
Underwriting Expense Ratio		34.1	%		27.4	%		33.0	%		34.6	%		33.1	%		33.5	%		30.8	%		32.9	%		35.1	%		33.1	%
Dividends to Policyholders Ratio		0.3	%		0.0	%		0.2	%		0.0	%		0.2	%		0.2	%		0.0	%		0.2	%		0.0	%		0.2	%
Combined Ratio		97.3	%		94.1	%		96.8	%		104.7	%		97.3	%		108.5	%		109.3	%		108.6	%		113.4	%		109.0	%





Year to Date
($ in thousands)	Year to Date December 31, 2013															Year to Date December 31, 2012

	Standard Commercial Lines			Standard Personal Lines			Total Standard Lines			Excess & Surplus Lines			Grand Total			Standard Commercial Lines			Standard Personal Lines			Total Standard Lines			Excess & Surplus Lines			Grand Total
Net Premiums Written		1,380,740			297,757			1,678,497			131,662			1,810,159			1,263,738			289,848			1,553,586			113,297			1,666,883
Net Premiums Earned		1,316,619			294,332			1,610,951			125,121			1,736,072			1,225,335			279,555			1,504,890			79,229			1,584,119
Loss and Loss Expenses Incurred		831,261			206,450			1,037,711			84,027			1,121,738			853,143			204,644			1,057,787			63,203			1,120,990
Net Underwriting Expenses Incurred		447,228			79,237			526,465			44,829			571,294			409,679			78,425			488,104			35,584			523,688
Dividends to Policyholders		4,274			-			4,274			-			4,274			3,448			-			3,448			-			3,448
GAAP Underwriting Gain (Loss)		33,856			8,645			42,501			(3,735	)		38,766			(40,935	)		(3,514	)		(44,449	)		(19,558	)		(64,007	)

GAAP Ratios
Loss and Loss Expense Ratio		63.1	%		70.1	%		64.4	%		67.2	%		64.6	%		69.6	%		73.2	%		70.3	%		79.8	%		70.8	%
Underwriting Expense Ratio		34.0	%		27.0	%		32.7	%		35.8	%		33.0	%		33.4	%		28.1	%		32.5	%		44.9	%		33.0	%
Dividends to Policyholders Ratio		0.3	%		0.0	%		0.3	%		0.0	%		0.2	%		0.3	%		0.0	%		0.2	%		0.0	%		0.2	%
Combined Ratio		97.4	%		97.1	%		97.4	%		103.0	%		97.8	%		103.3	%		101.3	%		103.0	%		124.7	%		104.0	%

Selective Insurance Group, Inc. and Consolidated Subsidiaries

GAAP Investment Income

December 2013 (unaudited)

	For the three months ended						%			Year to Date						%
	December			December			Increase			December			December			Increase
($ in thousands, except per share data)	2013			2012			(Decrease)			2013			2012			(Decrease)
Investment Income:
Interest:
Fixed Maturity Securities		30,626			30,739			(0.4	)		121,582			124,687			(2.5	)
Short-term		15			48			(68.8	)		117			151			(22.5	)
Other Investments:
Alternative Investments		5,098			3,995			27.6			15,846			10,391			52.5
Other		-			(459	)		100.0			(638	)		(1,395	)		54.3
Dividends		1,718			2,430			(29.3	)		6,140			6,215			(1.2	)
Miscellaneous		-			(105	)		100.0			-			-			-
		37,457			36,648			2.2			143,047			140,049			2.1

Investment Expense		2,144			2,055			4.3			8,404			8,172			2.8

Net Investment Income Before Tax		35,313			34,593			2.1			134,643			131,877			2.1

Tax		8,952			8,307			7.8			33,233			31,612			5.1

Net Investment Income After Tax	$	26,361			26,286			0.3		$	101,410			100,265			1.1

Net Investment Income per Share	$	0.46			0.47			(2.1	)	$	1.79			1.79			0.0


Effective Tax Rate		25.4	%		24.0	%					24.7	%		24.0	%

Average Yields :

Fixed Maturity Securities:
Pre Tax											3.06	%		3.34	%
After Tax											2.31	%		2.53	%

Portfolio:
Pre Tax											3.02	%		3.12	%
After Tax											2.28	%		2.38	%



	For the three months ended:									Year to date:
	December			December						December			December
Net Realized Gains (Losses)	2013			2012						2013			2012
Fixed Maturities		831			1,204						3,019			2,867
Equity Securities		(1,919	)		4,736						20,620			6,522
Short Term		-			-						-			(2	)
Other Investments		(120	)		(400	)					(2,907	)		(399	)

Total		(1,208	)		5,540						20,732			8,988
Net of Tax		(785	)		3,601						13,476			5,842

As of December 31, 2013 year-to-date new money rates for fixed maturity securities were 1.98% on a pre-tax basis and 1.43% on an after tax-basis.

Selective Insurance Group, Inc.

Combined Insurance Company Subsidiaries

2013 Statutory Results by Line of Business

Fourth Quarter 2013 (unaudited)

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

Homeowners	$	32,071		15.6	%	$	32,781		20.7	%		41.4	%		9.9	%		33.8	%		0.0	%		85.1	%		159.8	%	$	5,139
Auto		35,121		(4.2	)%		37,937		(1.4	)%		71.4	%		9.6	%		34.2	%		0.0	%		115.1	%		118.9	%		(4,750	)
Other (including flood)		3,714		1.2	%		3,681		4.4	%		38.8	%		8.5	%		(66.8	)%		0.0	%		(19.5	)%		(413.5	)%		4,416
Total	$	70,907		4.2	%	$	74,399		7.5	%		56.5	%		9.0	%		29.4	%		0.0	%		94.9	%		107.7	%	$	4,806

Standard Commercial Lines:

Commercial property	$	51,025		13.8	%	$	59,056		17.2	%		36.7	%		5.0	%		41.1	%		0.0	%		82.7	%		116.4	%	$	13,516
Workers compensation		62,680		9.0	%		70,163		9.6	%		76.6	%		19.5	%		30.2	%		1.1	%		127.3	%		119.2	%		(16,878	)
General liability		90,741		10.6	%		106,928		10.4	%		39.6	%		21.0	%		37.9	%		0.0	%		98.5	%		108.3	%		7,693
Auto		68,055		6.0	%		80,804		10.3	%		51.6	%		8.3	%		36.6	%		0.0	%		96.4	%		100.2	%		7,576
Business owners policies		21,544		18.9	%		20,303		22.4	%		48.3	%		4.0	%		37.7	%		0.0	%		90.0	%		145.2	%		1,560
Bonds		3,623		(5.6	)%		4,756		(1.2	)%		13.7	%		10.0	%		76.7	%		0.0	%		100.4	%		64.1	%		851
Other		2,858		6.6	%		3,144		6.9	%		(1.0	)%		0.3	%		55.3	%		0.0	%		54.6	%		48.8	%		1,585
Total	$	300,527		10.0	%	$	345,153		11.8	%		49.2	%		13.6	%		37.1	%		0.3	%		100.2	%		110.7	%	$	15,902

Total Standard Operations	$	371,433		8.9	%	$	419,553		11.0	%		50.5	%		12.8	%		35.7	%		0.2	%		99.2	%		110.0	%	$	20,708

E&S		35,042		20.2	%		33,124		16.0	%		52.8	%		17.4	%		35.4	%		0.0	%		105.6	%		114.8	%		(2,550	)

Total Insurance Operations	$	406,475		9.7	%	$	452,677		11.3	%		50.7	%		13.1	%		35.6	%		0.2	%		99.6	%		110.4	%	$	18,157

Note: Some amounts may not foot due to rounding.

				2013			2012
	Losses Paid		$	204,847		$	248,663
	LAE Paid			51,322			29,828
	Total Paid		$	256,169		$	278,491

Selective Insurance Group, Inc.

Combined Insurance Company Subsidiaries

2013 Statutory Results by Line of Business

December 2013 YTD (unaudited)

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

Homeowners	$	132,197		8.8	%	$	127,991		12.4	%		52.5	%		9.7	%		32.8	%		0.0	%		95.0	%		109.3	%	$	5,061
Auto		152,661		(0.8	)%		153,370		0.8	%		67.5	%		11.5	%		31.1	%		0.0	%		110.1	%		113.0	%		(15,301	)
Other (including flood)		14,263		(1.1	)%		14,336		5.7	%		52.4	%		8.7	%		(91.0	)%		0.0	%		(29.9	)%		(108.6	)%		18,575
Total	$	299,122		3.2	%	$	295,697		5.8	%		60.3	%		9.6	%		27.0	%		0.0	%		96.9	%		100.7	%	$	8,334

Standard Commercial Lines:

Commerical property	$	237,556		11.4	%	$	224,412		10.9	%		36.0	%		5.5	%		37.4	%		0.0	%		78.9	%		99.1	%	$	42,479
Workers compensation		277,135		5.1	%		267,612		2.1	%		75.0	%		16.7	%		27.3	%		1.6	%		120.6	%		114.5	%		(57,778	)
General liability		426,244		9.9	%		405,322		8.6	%		43.8	%		18.2	%		34.1	%		0.0	%		96.2	%		102.7	%		8,347
Auto		325,895		10.2	%		310,994		8.0	%		56.1	%		8.3	%		32.1	%		0.0	%		96.4	%		97.1	%		6,513
Business owners policies		82,167		13.3	%		77,097		12.6	%		39.0	%		8.5	%		39.1	%		0.0	%		86.6	%		112.0	%		8,339
Bonds		19,186		2.9	%		19,000		0.6	%		13.7	%		6.1	%		63.8	%		0.0	%		83.5	%		80.5	%		3,019
Other		12,556		5.0	%		12,181		0.3	%		(0.4	)%		0.4	%		48.5	%		0.0	%		48.5	%		46.1	%		6,092
Total	$	1,380,740		9.3	%	$	1,316,618		7.4	%		50.6	%		12.5	%		33.7	%		0.3	%		97.1	%		103.0	%	$	17,011

Total Standard Operations	$	1,679,862		8.1	%	$	1,612,315		7.1	%		52.3	%		12.0	%		32.5	%		0.3	%		97.1	%		102.5	%	$	25,345

E&S		131,662		16.5	%		125,122		58.4	%		50.9	%		16.3	%		35.7	%		0.0	%		102.9	%		118.8	%	$	(5,905	)

Total Insurance Operations	$	1,811,524		8.7	%	$	1,737,437		9.7	%		52.2	%		12.3	%		32.8	%		0.2	%		97.5	%		103.5	%	$	19,439

Note: Some amounts may not foot due to rounding.

				2013			2012
	Losses Paid		$	793,495		$	899,619
	LAE Paid			184,870			157,717
	Total Paid		$	978,365		$	1,057,336

Selective Insurance Group, Inc.

Combined Insurance Company Subsidiaries

2013 Net Catastrophe Losses and Prior Year Casualty Reserve Development

Statutory Results by Line of Business

(unaudited)

	Quarter ended												Year Ended
Net Catastrophe Losses Incurred	December 31, 2013						December 31, 2012						December 31, 2013						December 31, 2012
($ in thousands)	Loss and Loss Expense Incurred			Impact on Loss Ratio			Loss and Loss Expense Incurred			Impact on Loss Ratio			Loss and Loss Expense Incurred			Impact on Loss Ratio			Loss and Loss Expense Incurred			Impact on Loss Ratio

Standard Personal Lines	$	2,668			3.6	%	$	24,078			34.8	%	$	19,807			6.7	%	$	40,490			14.5	%

Standard Commercial Lines	$	10,882			3.2	%	$	27,313			8.8	%	$	23,010			1.7	%	$	56,419			4.6	%

Total Standard Operations	$	13,550			3.2	%	$	51,391			13.6	%	$	42,817			2.7	%	$	96,909			6.4	%

E&S	$	755			2.3	%	$	555			1.9	%	$	4,598			3.7	%	$	1,698			2.1	%

Total Insurance Operations	$	14,305			3.2	%	$	51,946			12.8	%	$	47,415			2.7	%	$	98,607			6.2	%






Prior Year Casualty Reserve Development	Quarter ended												Year Ended
(Favorable) / Unfavorable	December 31, 2013						December 31, 2012						December 31, 2013						December 31, 2012
($ in thousands)	Loss and Loss Expense Incurred			Impact on Loss Ratio			Loss and Loss Expense Incurred			Impact on Loss Ratio			Loss and Loss Expense Incurred			Impact on Loss Ratio			Loss and Loss Expense Incurred			Impact on Loss Ratio

Standard Personal Lines	$	(2,000	)		(2.7	)%	$	(2,000	)		(2.9	)%	$	(5,500	)		(1.9	)%	$	(6,500	)		(2.3	)%

Standard Commercial Lines	$	(5,500	)		(1.6	)%	$	-			0.0	%	$	(11,500	)		(0.9	)%	$	(10,500	)		(0.9	)%

Total Standard Operations	$	(7,500	)		(1.8	)%	$	(2,000	)		(0.5	)%	$	(17,000	)		(1.0	)%	$	(17,000	)		(1.1	)%

E&S	$	-			0.0	%	$	-			0.0	%	$	2,500			2.0	%	$	-			0.0	%

Total Insurance Operations	$	(7,500	)		(1.7	)%	$	(2,000	)		(0.5	)%	$	(14,500	)		(0.8	)%	$	(17,000	)		(1.1	)%

Note: Some amounts may not foot due to rounding.

Selective Insurance Group, Inc. & Consolidated Subsidiaries
Consolidated Balance Sheets
December 31,	Unaudited
($ in thousands)	2013			2012
ASSETS
Investments:
Fixed maturity securities, held-to-maturity – at carrying value (fair value: $416,981 – 2013; $594,661 – 2012)	$	392,879			554,069
Fixed maturity securities, available-for-sale – at fair value (amortized cost: $3,675,977 – 2013; $3,130,683 – 2012)		3,715,536			3,296,013
Equity securities, available-for-sale – at fair value (cost of: $155,350– 2013; $132,441 – 2012)		192,771			151,382
Short-term investments (at cost which approximates fair value)		174,251			214,479
Other investments		107,875			114,076
Total investments		4,583,312			4,330,019
Cash		193			210
Interest and dividends due or accrued		37,382			35,984
Premiums receivable, net of allowance for uncollectible accounts of: $4,442– 2013; $3,906– 2012		524,870			484,388
Reinsurance recoverable, net		550,897			1,421,109
Prepaid reinsurance premiums		143,000			132,637
Current federal income tax		512			2,569
Deferred federal income tax		122,613			119,136
Property and equipment – at cost, net of accumulated depreciation and amortization of: $179,192 – 2013; $169,428 – 2012		50,834			47,131
Deferred policy acquisition costs		172,981			155,523
Goodwill		7,849			7,849
Other assets		75,727			57,661
Total assets	$	6,270,170			6,794,216

LIABILITIES AND STOCKHOLDERS’ EQUITY
Liabilities:
Reserve for losses and loss expenses	$	3,349,770			4,068,941
Unearned premiums		1,059,155			974,706
Notes payable		392,414			307,387
Accrued salaries and benefits		111,427			152,396
Other liabilities		203,476			200,194
Total liabilities	$	5,116,242			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: 99,120,235 – 2013; 98,194,224 – 2012		198,240			196,388
Additional paid-in capital		288,182			270,654
Retained earnings		1,202,015			1,125,154
Accumulated other comprehensive income		24,851			54,040
Treasury stock – at cost (shares: 43,198,622 – 2013; 43,030,776 – 2012)		(559,360	)		(555,644	)
Total stockholders’ equity		1,153,928			1,090,592
Commitments and contingencies
Total liabilities and stockholders’ equity	$	6,270,170			6,794,216

Selective Insurance Group, Inc. & Consolidated Subsidiaries
Consolidated Statements of Income
	Unaudited Quarter ended						Year ended
	December 31,						December 31,
($ in thousands, except per share amounts)	2013			2012			Unaudited 2013			2012
Revenues:
Net premiums earned	$	451,312			406,853			1,736,072			1,584,119
Net investment income earned		35,313			34,593			134,643			131,877
Net realized gains:
Net realized investment gains		1,251			6,345			26,375			13,252
Other-than-temporary impairments		(2,459	)		(493	)		(5,566	)		(1,711	)
Other-than-temporary impairments on fixed maturity securities recognized in other comprehensive income		-			(312	)		(77	)		(2,553	)
Total net realized (losses) gains		(1,208	)		5,540			20,732			8,988
Other income		2,617			1,989			12,294			9,118
Total revenues		488,034			448,975			1,903,741			1,734,102

Expenses:
Losses and loss expenses incurred		288,978			307,930			1,121,738			1,120,990
Policy acquisition costs		151,407			135,117			579,977			526,143
Interest expense		5,567			4,724			22,538			18,872
Other expenses		7,834			6,382			35,686			30,462
Total expenses		453,786			454,153			1,759,939			1,696,467

Income (loss) from continuing operations, before federal income tax		34,248			(5,178	)		143,802			37,635

Federal income tax expense (benefit):
Current		4,106			4,057			24,147			5,647
Deferred		4,807			(10,543	)		12,240			(5,975	)
Total federal income tax expense (benefit)		8,913			(6,486	)		36,387			(328	)

Net income from continuing operations		25,335			1,308			107,415			37,963

Loss on disposal of discontinued operations, net of tax of
$(538) - 2013		-			-			(997	)		-

Net income	$	25,335			1,308			106,418			37,963

Earnings per share:
Basic net income from continuing operations	$	0.45			0.02			1.93			0.69
Basic net loss from discontinued operations		-			-			(0.02	)		-
Basic net income	$	0.45			0.02			1.91			0.69

Diluted net income from continuing operations	$	0.44			0.02			1.89			0.68
Diluted net loss from discontinued operations		-			-			(0.02	)		-
Diluted net income	$	0.44			0.02			1.87			0.68

Dividends to stockholders	$	0.13			0.13			0.52			0.52

Selective Insurance Group, Inc. & Consolidated Subsidiaries
Consolidated Statements of Comprehensive Income
December 31,	Unaudited
($ in thousands)	2013			2012			2011
Net income	$	106,418			37,963			22,033

Other comprehensive income, net of tax:
Unrealized (losses) gains on investment securities:
Unrealized holding (losses) gains arising during period		(54,557	)		30,937			45,592
Non-credit portion of other-than-temporary impairments recognized in other comprehensive income		50			1,660			772
Amount reclassified into net income:
Held-to-maturity securities		(1,025	)		(1,581	)		(1,484	)
Non-credit other-than-temporary impairment		9			182			321
Realized gains on available for sale securities		(15,301	)		(6,118	)		(1,821	)
Total unrealized (losses) gains on investment securities		(70,824	)		25,080			43,380

Defined benefit pension and post-retirement plans:
Net actuarial gain (loss)		38,775			(17,268	)		(10,919	)
Amounts reclassified into net income:
Net actuarial loss		2,843			3,837			2,712
Prior service cost		6			97			97
Curtailment expense		11			—			—
Total defined benefit pension and post-retirement plans		41,635			(13,334	)		(8,110	)
Other comprehensive (loss) income		(29,189	)		11,746			35,270
Comprehensive income	$	77,229			49,709			57,303

Selective Insurance Group, Inc. & Consolidated Subsidiaries
Consolidated Statements of Stockholders’ Equity
December 31,	Unaudited
($ in thousands)	2013			2012			2011
Common stock:
Beginning of year	$	196,388			194,494			192,725
Dividend reinvestment plan (shares: 63,349 – 2013; 90,110 – 2012; 100,383 – 2011)		127			180			201
Stock purchase and compensation plans (shares: 862,662 – 2013; 857,403 – 2012; 783,661 – 2011)		1,725			1,714			1,568
End of year		198,240			196,388			194,494

Additional paid-in capital:
Beginning of year		270,654			257,370			244,613
Dividend reinvestment plan		1,396			1,419			1,417
Stock purchase and compensation plans		16,132			11,865			11,340
End of year		288,182			270,654			257,370

Retained earnings:
Beginning of year		1,125,154			1,116,319			1,123,087
Net income		106,418			37,963			22,033
Dividends to stockholders ($0.52 per share – 2013, 2012, and 2011)		(29,557	)		(29,128	)		(28,801	)
End of year		1,202,015			1,125,154			1,116,319

Accumulated other comprehensive income:
Beginning of year		54,040			42,294			7,024
Other comprehensive (loss) income		(29,189	)		11,746			35,270
End of year		24,851			54,040			42,294

Treasury stock:
Beginning of year		(555,644	)		(552,149	)		(549,408	)
Acquisition of treasury stock (shares: 167,846 – 2013; 194,575 – 2012; 149,997 – 2011)		(3,716	)		(3,495	)		(2,741	)
End of year		(559,360	)		(555,644	)		(552,149	)
Total stockholders’ equity	$	1,153,928			1,090,592			1,058,328

Selective Insurance Group, Inc. & Consolidated Subsidiaries
Consolidated Statements of Cash Flow
December 31,	Unaudited
($ in thousands)	2013			2012			2011
Operating Activities:
Net Income	$	106,418			37,963			22,033

Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation and amortization		43,461			38,693			34,645
Loss on disposal of discontinued operations		997			—			650
Stock-based compensation expense		8,630			6,939			7,422
Undistributed (income) losses of equity method investments		202			1,651			(323	)
Net realized (gains) losses		(20,732	)		(8,988	)		(2,240	)
Retirement income plan curtailment expense		16			—			—

Changes in assets and liabilities:
Increase in reserves for losses and loss expenses, net of reinsurance recoverables		151,037			64,763			56,905
Increase in unearned premiums, net of prepaid reinsurance and advance premiums		75,246			82,777			46,334
Decrease (increase) in net federal income taxes		14,834			(7,812	)		372
Increase in premiums receivable		(40,482	)		(18,094	)		(45,116	)
Increase in deferred policy acquisition costs		(17,458	)		(19,762	)		(7,777	)
(Increase) decrease in interest and dividends due or accrued		(1,372	)		468			633
Increase in accrued salaries and benefits		18,685			6,533			1,521
Increase (decrease) in accrued insurance expenses		14,444			8,831			(636	)
Other-net		(17,802	)		32,737			8,534
Net adjustments		229,706			188,736			100,924
Net cash provided by operating activities		336,124			226,699			122,957

Investing Activities:
Purchase of fixed maturity securities, available-for-sale		(1,069,387	)		(884,911	)		(487,813	)
Purchase of equity securities, available-for-sale		(118,072	)		(83,833	)		(150,551	)
Purchase of other investments		(9,332	)		(12,990	)		(16,033	)
Purchase of short-term investments		(2,056,576	)		(1,735,691	)		(1,448,782	)
Purchase of subsidiary, net of cash acquired		—			255			(51,728	)
Sale of subsidiary		1,225			751			1,152
Sale of fixed maturity securities, available-for-sale		20,126			103,572			146,435
Sale of short-term investments		2,096,805			1,738,255			1,433,441
Redemption and maturities of fixed maturity securities, held-to-maturity		116,584			118,260			177,350
Redemption and maturities of fixed maturity securities, available-for-sale		513,804			439,957			162,796
Sale of equity securities, available-for-sale		115,782			101,740			60,071
Distributions from other investments		12,039			24,801			25,622
Sale of other investments		—			1			16,357
Purchase of property, equipment, and other assets		(14,023	)		(12,879	)		(11,824	)
Net cash used in investing activities		(391,025	)		(202,712	)		(143,507	)

Financing Activities:
Dividends to stockholders		(27,416	)		(26,944	)		(26,513	)
Acquisition of treasury stock		(3,716	)		(3,495	)		(2,741	)
Net proceeds from stock purchase and compensation plans		7,119			4,840			5,011
Proceeds from issuance of notes payable, net of debt issuance costs		178,435			—			—
Proceeds from borrowings		—			—			45,000
Repayment of notes payable		(100,000	)		—			—
Excess tax benefits (expense) from share-based payment arrangements		1,545			1,060			(90	)
Repayment of capital lease obligations		(1,083	)		—			—
Net cash provided by (used in) financing activities		54,884			(24,539	)		20,667
Net (decrease) increase in cash		(17	)		(552	)		117
Cash, beginning of year		210			762			645
Cash, end of year	$	193			210			762

Selective Insurance Group, Inc.

Combined Insurance Company Subsidiaries

Statutory Balance Sheets

(unaudited)

	December 31,			December 31,
($ in thousands)	2013			2012

ASSETS
Bonds	$	4,010,464			3,617,371
Common stocks		192,771			151,382
Affiliated mortgage loan		36,721			37,443
Other investments		173,856			180,110
Short-term investments		158,827			208,845
Total investments		4,572,639			4,195,151

Cash on hand and in banks		(31,186	)		(76,957	)
Interest and dividends due and accrued		37,267			35,979
Premiums receivable		522,907			482,227
Reinsurance recoverable on paid losses and expenses		10,059			11,354
Deferred tax recoverable		154,320			147,495
EDP equipment		913			1,372
Equities and deposits in pools and associations		9,555			12,734
Receivable for sold securities		7			257
Other assets		30,671			28,541
Total assets	$	5,307,152			4,838,153

LIABILITIES
Reserve for losses	$	2,341,476			2,226,858
Reinsurance payable on paid loss and loss expense		2,557			2,298
Reserve for loss expenses		455,983			427,560
Unearned premiums		916,155			842,068
Reserve for commissions payable		63,482			52,304
Ceded balances payable		33,721			271
Federal income tax payable		27,749			5,346
Premium and other taxes payable		27,870			24,604
Borrowed money		58,044			58,044
Reserve for dividends to policyholders		2,070			2,665
Reserves for unauthorized reinsurance		2,735			7,498
Payable for securities		-			7,682
Funds withheld on account of others		6,623			11,231
Accrued salaries and benefits		65,053			102,070
Other liabilities		47,203			17,547
Total liabilities		4,050,721			3,788,046


POLICYHOLDERS' SURPLUS
Capital		42,725			42,725
Paid in surplus		492,869			435,744
Unassigned surplus		720,837			571,638
Total policyholders' surplus		1,256,431			1,050,107
Total liabilities and policyholders' surplus	$	5,307,152			4,838,153

Selective Insurance Group, Inc.

Combined Insurance Company Subsidiaries

Statutory Statements Of Income

(unaudited)

	Three Months Ended December										Twelve Months Ended December
($ in thousands)	2013					2012					2013					2012
UNDERWRITING
Net premiums written	$	406,475					370,380					1,811,524					1,666,633

Net premiums earned		452,677					406,603					1,737,437					1,583,869

Net losses paid		204,847					248,663					793,495					899,619
Change in reserve for losses		24,515					35,020					114,618					53,830
Net losses incurred		229,362		50.7	%		283,683		69.8	%		908,113		52.2	%		953,449		60.2	%

Net loss expenses paid		51,322					29,828					184,870					157,717
Change in reserve for loss expenses		8,145					(5,941	)				28,423					9,019
Net loss expenses incurred		59,467		13.1	%		23,887		5.8	%		213,293		12.3	%		166,736		10.5	%

Net underwriting expenses incurred		146,967		36.1	%		129,545		35.0	%		602,698		33.3	%		548,631		32.9	%

Total deductions		435,796					437,115					1,724,104					1,668,816
Statutory underwriting gain / (loss)		16,881					(30,512	)				13,333					(84,947	)

Net loss from premium balances charged off		(676	)				(727	)				(2,697	)				(3,398	)
Finance charges and other income		2,834					2,141					13,078					9,694
Total other income		2,158		-0.5	%		1,414		-0.4	%		10,381		-0.5	%		6,296		-0.3	%
Policyholders' dividends incurred		(882	)	0.2	%		(620	)	0.2	%		(4,275	)	0.2	%		(3,449	)	0.2	%
Total underwriting gain / (loss)		18,157		99.6	%		(29,718	)	110.4	%		19,439		97.5	%		(82,100	)	103.5	%

INVESTMENT
Net investment income earned		35,246					35,202					134,866					133,756
Net realized (loss) / gain		(5,200	)				5,457					14,593					8,766
Total income before income tax		48,203					10,941					168,898					60,422

Federal income tax expense / (benefit)		3,773					(3,204	)				46,710					10,026

Net income	$	44,430					14,145					122,188					50,396

Policyholders' Surplus
Surplus, beginning of period	$	1,194,797					1,088,494					1,050,107					1,062,707

Net income		44,430					14,145					122,188					50,396
Change in deferred taxes		(11,861	)				3,008					(5,657	)				7,732
Change in unrealized gains		12,759					(6,020	)				16,434					2,599
Dividends to stockholders		(6,685	)				(16,378	)				(32,129	)				(196,091	)
Change in cumulative effect of acctg principle		-					-					-					44,296
Paid in common stock		-					100					-					10,400
Paid in surplus		-					-					57,125					130,722
Surplus - transferred to capital		-					(100	)				-					(2,000	)
Change in reserve for unauthorized		4,764					(5,713	)				4,764					(5,713	)
Change in non-admitted assets		11,399					(9,593	)				27,099					7,165
Change in additional admitted deferred taxes		-					-					-					(44,296	)
Change in Overfunded Contra Asset		(503	)				-					(11,594	)				-
Qual Pen Transitional Liability		8,427					-					(23,605	)				-
Excess Plan Transitional Liability		(432	)				-					(994	)				-
PRL Plan Transitional Liability		242					-					(947	)				-
Change in minimum pension liability		-					(17,836	)				54,755					(17,836	)
Surplus adjustments		(906	)				-					(1,115	)				26

Net change in surplus for period		61,634					(38,387	)				206,324					(12,600	)

Surplus, end of period	$	1,256,431					1,050,107					1,256,431					1,050,107

Statutory underwriting gain / (loss)	$	18,157					(29,718	)				19,439					(82,100	)

Adjustments under GAAP:
Deferred policy acquisition costs		(4,229	)				(5,982	)				17,458					19,762
Pension costs		(116	)				49					5,606					259
Other, net		(1,841	)				(892	)				(3,737	)				(1,928	)
GAAP underwriting gain / (loss)	$	11,971					(36,543	)				38,766					(64,007	)

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

Selective Insurance Group, Inc. and Consolidated Subsidiaries

Alternative Investments

as of December 31, 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		2,230,449		8,911,704		1,098,706			0.58		1.01
Silverpeak RE III	2008		15,000,000		7,973,056		2,786,119		(120,499	)		0.04		0.43
Total - Real Estate			35,000,000		10,203,505		11,697,823		978,207			0.44		0.86

Mezzanine Financing
Neovara Euro Mezz	2004		9,000,000		-		579,578		118,830			0.98		1.02
GS Mezz V	2007		25,000,000		12,373,976		8,896,239		1,008,613			0.76		1.30
New Canaan V	2012		7,000,000		3,797,454		2,478,190		243,498			0.27		1.04
Centerfield Capital	2012		3,000,000		2,077,118		784,151		5,692			0.08		0.93
Total - Mezz. Financing			44,000,000		18,248,548		12,738,158		1,376,634			0.78		1.16

Distressed Debt
Varde VIII	2006		10,000,000		-		3,678,662		1,197,914			0.93		1.30
Distressed Managers III	2007		15,000,000		2,964,514		7,900,459		1,906,039			0.59		1.18
Total - Distressed Debt			25,000,000		2,964,514		11,579,121		3,103,953			0.73		1.23

Private Equity
Prospector	1997		5,000,000		-		410,408		192			2.79		2.88
Trilantic Capital Partners III	2004		10,000,000		1,443,707		2,440,164		875,538			1.61		1.87
NB Co-Invest	2006		15,000,000		1,513,183		6,987,856		499,976			0.87		1.35
Trilantic Capital Partners IV	2007		11,098,351		1,315,089		9,314,410		2,703,562			0.83		1.69
Trilantic Capital Partners V	2012		7,000,000		5,726,392		1,039,393		(230,481	)		0.00		0.82
Total - Private Equity			48,098,351		9,998,371		20,192,231		3,848,787			1.24		1.73

Private Equity, Secondary Market
NB SOF	2005		12,000,000		899,494		4,892,545		446,742			0.88		1.32
Vintage IV	2007		20,000,000		4,102,023		12,706,701		1,399,563			0.66		1.31
NB SOF II	2008		12,000,000		2,737,779		8,019,043		1,349,141			0.73		1.48
Total - Pvt. Eq. Sec. Mkt.			44,000,000		7,739,296		25,618,288		3,195,446			0.74		1.36

Energy/Power Generation
ArcLight I	2002		15,000,000		-		130,814		31,711			1.80		1.81
ArcLight II	2003		15,000,000		2,295,492		1,008,557		(680,652	)		1.38		1.44
ArcLight III	2006		15,000,000		2,037,794		6,737,668		2,243,412			0.94		1.36
Quintana Energy	2006		10,000,000		362,821		7,267,538		759,503			0.55		1.30
ArcLight IV	2007		10,000,000		2,287,578		2,216,493		22,456			1.05		1.27
Total - Energy/Power Generation			65,000,000		6,983,685		17,361,070		2,376,430			1.22		1.46

Venture Capital
Venture V	2001		9,600,000		400,000		7,024,636		966,711			0.54		1.30
Total - Venture Capital			9,600,000		400,000		7,024,636		966,711			0.54		1.30

TOTAL - ALTERNATIVE INVESTMENTS		$	270,698,351		56,537,918		106,211,328		15,846,168			0.92		1.35

(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

Credit Quality of Available-for-Sale Fixed Maturity Securities

December 31, 2013

(unaudited)


($ in millions)	Fair Value		Unrealized Gain (Loss)			Average Credit Quality
AFS Fixed Maturity Portfolio:
U.S. government obligations	$	173.4		10.1		AA+
Foreign government obligations		30.6		0.8		AA-
State and municipal obligations		951.6		5.2		AA
Corporate securities		1,734.9		27.0		A
Asset-backed securities (“ABS”)		140.9		0.5		AAA
Mortgage-backed securities (“MBS”)		684.1		(4.0	)	AA+
Total AFS fixed maturity portfolio	$	3,715.5		39.6		AA-
State and Municipal Obligations:
General obligations	$	472.0		2.6		AA+
Special revenue obligations		479.6		2.6		AA
Total state and municipal obligations	$	951.6		5.2		AA
Corporate Securities:
Financial	$	534.1		11.7		A
Industrials		135.1		3.7		A-
Utilities		146.5		(0.3	)	A-
Consumer discretionary		190.6		2.7		A-
Consumer staples		171.9		3.0		A
Healthcare		168.5		3.1		A
Materials		101.2		1.4		A-
Energy		93.7		0.9		A-
Information technology		121.2		(0.6	)	A+
Telecommunications services		64.7		1.0		BBB+
Other		7.4		0.4		AA+
Total corporate securities	$	1,734.9		27.0		A
ABS:
ABS	$	140.4		0.4		AAA
Sub-prime ABS1, 2		0.5		0.1		D
Total ABS	$	140.9		0.5		AAA
MBS:
Government guaranteed agency commercial MBS (“CMBS”)	$	30.0		0.9		AA+
Other agency CMBS		9.1		(0.3	)	AA+
Non-agency CMBS		132.2		(1.5	)	AA+
Government guaranteed agency residential MBS (“RMBS”)		55.2		1.4		AA+
Other agency RMBS		411.5		(5.1	)	AA+
Non-agency RMBS		41.4		0.6		A-
Alternative-A (“Alt-A”) RMBS		4.7		—		A
Total MBS	$	684.1		(4.0	)	AA+

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 Fixed Maturity Securities

December 31, 2013

(unaudited)

($ in millions)	Fair Value		Carry Value		Unrecognized Holding Gain		Unrealized Gain (Loss) in Accumulated Other Comprehensive Income			Total Unrealized/ Unrecognized Gain		Average Credit Quality
HTM Fixed Maturity Portfolio:
Foreign government obligations	$	5.6		5.4		0.2		0.1			0.3	AA+
State and municipal obligations		369.8		352.2		17.6		4.0			21.6	AA
Corporate securities		30.3		27.8		2.5		(0.3	)		2.2	A
ABS		3.4		2.8		0.6		(0.6	)		—	AA+
MBS		7.9		4.7		3.2		(0.9	)		2.3	AA-
Total HTM portfolio	$	417.0		392.9		24.1		2.3			26.4	AA

State and Municipal Obligations:
General obligations	$	118.5		113.1		5.4		2.0			7.4	AA
Special revenue obligations		251.3		239.1		12.2		2.0			14.2	AA
Total state and municipal obligations	$	369.8		352.2		17.6		4.0			21.6	AA

Corporate Securities:
Financial	$	7.3		6.8		0.5		(0.1	)		0.4	BBB+
Industrials		7.8		6.8		1.0		(0.2	)		0.8	A+
Utilities		13.2		12.2		1.0		—			1.0	A+
Consumer discretionary		2.0		2.0		—		—			—	AA
Total corporate securities	$	30.3		27.8		2.5		(0.3	)		2.2	A

ABS:
ABS	$	0.9		0.9		—		—			—	A
Alt-A ABS		2.5		1.9		0.6		(0.6	)		—	AAA
Total ABS	$	3.4		2.8		0.6		(0.6	)		—	AA+

MBS:
Non-agency CMBS	$	7.9		4.7		3.2		(0.9	)		2.3	AA-
Total MBS	$	7.9		4.7		3.2		(0.9	)		2.3	AA-

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SELECTIVE INSURANCE GROUP INC Reports