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_073014.htm
EX-99.1 - EXHIBIT 99.1 - SELECTIVE INSURANCE GROUP INC	exh_991.htm

EXHIBIT 99.2

Supplemental Investor Package

Second Quarter 2014

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)

	June 30,							June 30,							December 31,
($ in thousands, except per share data)	2014							2013							2013
	Balance Sheet			Market Value		Unrecognized/ Unrealized Gain		Balance Sheet			Market Value		Unrecognized/ Unrealized Gain		Balance Sheet			Market Value		Unrecognized/ Unrealized Gain
Invested Assets:
Corporate bonds 1	$	2,625,026			2,629,567		63,986	$	2,365,465			2,372,903		38,028	$	2,595,256			2,601,556		27,812
Government and Municipal bonds		1,630,112			1,646,135		56,322		1,533,853			1,554,533		48,520		1,513,159			1,530,961		38,106
Total fixed income securities		4,255,138			4,275,702		120,308		3,899,318			3,927,436		86,548		4,108,415			4,132,517		65,918
Equities		211,348			211,348		45,134		172,064			172,064		29,630		192,771			192,771		37,420
Short-term investments		166,488			166,488		-		186,499			186,499		-		174,251			174,251		-
Other investments		106,125			106,125		-		109,077			109,077		-		107,875			107,875		-
Total invested assets	$	4,739,099			4,759,663		165,442	$	4,366,958			4,395,076		116,178	$	4,583,312			4,607,414		103,338


Invested assets per $ of stockholders' equity		3.83							3.97							3.97

Total assets		6,490,585							6,112,627							6,270,170

Liabilities:
Reserve for loss and loss expenses		3,451,306							3,270,114							3,349,770
Unearned premium reserve		1,100,864							1,048,011							1,059,155

Total liabilities		5,252,510							5,013,582							5,116,242

Stockholders' equity		1,238,075							1,099,045							1,153,928

Total debt to capitalization ratio		24.1	%						26.3	%						25.4	%

Book value per share		21.96							19.72							20.63

Book value per share excluding unrealized gain or loss on bond portfolio		20.81							19.04							20.15

NPW per insurance segment employee		927							886							908

Statutory premiums to surplus ratio		1.4	x						1.5	x						1.4	x

Statutory surplus		1,292,961							1,170,612							1,256,431

1 Includes mortgage-backed and asset-backed securities.

Selective Insurance Group, Inc. & Consolidated Subsidiaries

Selected Income Statement Data

(unaudited)

		Quarter Ended June 30,												Six Months Ended June 30,
($ in thousands, except per share amounts)		2014						2013						2014						2013
					Per diluted share						Per diluted share						Per diluted share						Per diluted share
Consolidated
Revenue		$	506,849					$	468,945					$	1,015,920					$	928,894
Operating income			26,390			0.46			23,773			0.42			39,673			0.70			43,897			0.78
Net realized gains, after tax			2,951			0.05			3,349			0.06			7,642			0.13			5,530			0.10
Income from continuing operations			29,341			0.51			27,122			0.48			47,315			0.83			49,427			0.88
Loss on discontinued operations, after tax			-			-			-			-			-			-			(997	)		(0.02	)
Net income			29,341			0.51			27,122			0.48			47,315			0.83			48,430			0.86
Operating return on equity			8.7	%					8.5	%					6.6	%					8.0	%

Total Insurance Operations
Gross premiums written			578,151						555,568						1,143,892						1,092,866
Net premiums written			479,823						462,177						956,573						912,301
Net premiums earned			463,625						426,252						920,120						847,192
Underwriting gain	- before tax		10,084						4,483						5,069						16,644
	- after tax		6,555			0.11			2,914			0.05			3,295			0.06			10,819			0.19
GAAP combined ratio			97.8	%					98.9	%					99.4	%					98.0	%

Total Standard lines
Net premiums earned			429,051						396,205						853,310						787,086
GAAP combined ratio			97.6	%					98.3	%					99.5	%					97.6	%
Standard Commercial lines
Net premiums earned			354,507						322,657						703,948						640,502
GAAP combined ratio			95.6	%					97.0	%					98.3	%					97.5	%
Standard Personal lines
Net premiums earned			74,544						73,548						149,362						146,584
GAAP combined ratio			107.5	%					104.0	%					105.3	%					98.0	%
Excess and Surplus lines
Net premiums earned			34,574						30,047						66,810						60,106
GAAP combined ratio			100.1	%					107.6	%					98.6	%					103.7	%

Investments
Net investment income	- before tax		36,774						34,003						72,308						66,873
	- after tax		27,421			0.48			25,700			0.45			53,907			0.94			50,539			0.89
Effective tax rate			25.4	%					24.4	%					25.4	%					24.4	%
Annualized after-tax yield on investment portfolio															2.3	%					2.3	%
Annualized after-tax, after-interest expense yield															2.0	%					2.0	%
Invested assets per $ of stockholders' equity															3.83						3.97

Other expenses (net of other income)
Interest expense	- before tax		(5,425	)					(5,570	)					(10,986	)					(11,401	)
	- after tax		(3,526	)		(0.06	)		(3,621	)		(0.06	)		(7,141	)		(0.12	)		(7,411	)		(0.13	)

Other Expense - after tax		$	(4,060	)		(0.07	)	$	(1,220	)		(0.02	)	$	(10,388	)		(0.18	)	$	(10,050	)		(0.17	)

Diluted weighted avg shares outstanding			57,260						56,616						57,215						56,530

Selective Insurance Group, Inc. & Consolidated Subsidiaries

GAAP Insurance Operations Results

(Unaudited)

Second Quarter
($ in thousands)	Quarter Ended June 30, 2014															Quarter Ended June 30, 2013

	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		363,860			78,181			442,041			37,782			479,823			350,651			78,860			429,511			32,666			462,177
Net Premiums Earned		354,507			74,544			429,051			34,574			463,625			322,657			73,548			396,205			30,047			426,252
Loss and Loss Expense Incurred		216,532			58,863			275,395			22,400			297,795			201,316			57,204			258,520			21,074			279,594
Net Underwriting Expenses Incurred		120,723			21,263			141,986			12,211			154,197			110,617			19,319			129,936			11,258			141,194
Dividends to Policyholders		1,549			-			1,549			-			1,549			981			-			981			-			981
GAAP Underwriting Gain (Loss)		15,703			(5,582	)		10,121			(37	)		10,084			9,743			(2,975	)		6,768			(2,285	)		4,483

GAAP Ratios
Loss and Loss Expense Ratio		61.1	%		79.0	%		64.2	%		64.8	%		64.2	%		62.4	%		77.8	%		65.2	%		70.1	%		65.6	%
Underwriting Expense Ratio		34.1	%		28.5	%		33.0	%		35.3	%		33.3	%		34.3	%		26.2	%		32.9	%		37.5	%		33.1	%
Dividends to Policyholders Ratio		0.4	%		0.0	%		0.4	%		0.0	%		0.3	%		0.3	%		0.0	%		0.2	%		0.0	%		0.2	%
Combined Ratio		95.6	%		107.5	%		97.6	%		100.1	%		97.8	%		97.0	%		104.0	%		98.3	%		107.6	%		98.9	%





Year to Date
($ in thousands)	Year to Date June 30, 2014															Year to Date June 30, 2013

	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		743,210			145,519			888,729			67,844			956,573			703,840			147,415			851,255			61,046			912,301
Net Premiums Earned		703,948			149,362			853,310			66,810			920,120			640,502			146,584			787,086			60,106			847,192
Loss and Loss Expense Incurred		459,171			116,890			576,061			42,280			618,341			404,455			104,796			509,251			40,192			549,443
Net Underwriting Expenses Incurred		229,917			40,414			270,331			23,592			293,923			218,135			38,790			256,925			22,113			279,038
Dividends to Policyholders		2,787			-			2,787			-			2,787			2,067			-			2,067			-			2,067
GAAP Underwriting Gain (Loss)		12,073			(7,942	)		4,131			938			5,069			15,845			2,998			18,843			(2,199	)		16,644

GAAP Ratios
Loss and Loss Expense Ratio		65.2	%		78.3	%		67.5	%		63.3	%		67.2	%		63.1	%		71.5	%		64.7	%		66.9	%		64.9	%
Underwriting Expense Ratio		32.7	%		27.0	%		31.7	%		35.3	%		31.9	%		34.1	%		26.5	%		32.6	%		36.8	%		32.9	%
Dividends to Policyholders Ratio		0.4	%		0.0	%		0.3	%		0.0	%		0.3	%		0.3	%		0.0	%		0.3	%		0.0	%		0.2	%
Combined Ratio		98.3	%		105.3	%		99.5	%		98.6	%		99.4	%		97.5	%		98.0	%		97.6	%		103.7	%		98.0	%

Selective Insurance Group, Inc. and Consolidated Subsidiaries

GAAP Investment Income

June 2014 (unaudited)

	Quarter Ended						%			Year to Date						%
($ in thousands, except per share data)	June 2014			June 2013			Increase (Decrease)			June 2014			June 2013			Increase (Decrease)
Investment Income:
Interest:
Fixed Income Securities	$	33,781			30,298			11		$	64,809			60,387			7
Short-term		14			29			(52	)		33			81			(59	)
Other Investments:
Alternative Investments		3,553			3,869			(8	)		8,771			8,109			8
Other		-			-			-			-			(638	)		100
Dividends		1,736			1,874			(7	)		3,185			3,081			3
		39,084			36,070			8			76,798			71,020			8

Investment Expense		2,310			2,067			12			4,490			4,147			8

Net Investment Income Before Tax		36,774			34,003			8			72,308			66,873			8

Tax		9,353			8,303			13			18,401			16,334			13

Net Investment Income After Tax	$	27,421			25,700			7		$	53,907			50,539			7

Net Investment Income per Share	$	0.48			0.45			7		$	0.94			0.89			6


Effective Tax Rate		25.4	%		24.4	%					25.4	%		24.4	%

Average Yields :

Fixed Income Securities:
Pre Tax											3.10	%		3.12	%
After Tax											2.31	%		2.36	%

Portfolio:
Pre Tax											3.10	%		3.08	%
After Tax											2.31	%		2.32	%



	Quarter Ended									Year to date
	June			June						June			June
Net Realized Gains (Losses)	2014			2013						2014			2013
Fixed Income Securities		749			911						784			1,562
Equity Securities		3,790			4,367						10,973			9,654
Other Investments		-			(124	)					-			(2,707	)

Total		4,539			5,154						11,757			8,509
Net of Tax		2,951			3,349						7,642			5,530

As of June 30, 2014 year-to-date new money rates for fixed income securities were 2.6% on a pre-tax basis and 2.1% on an after tax-basis.

Selective Insurance Group, Inc.

Combined Insurance Company Subsidiaries

2014 Statutory Results by Line of Business

Quarter Ended June 2014 (unaudited)

	Net					Net											Underwriting			Dividends to			Combined			Combined
	Premiums		Percent			Premiums		Percent			Loss			LAE			Expense			Policyholders			Ratio			Ratio			Underwriting
($ in thousands)	Written		Change			Earned		Change			Ratio			Ratio			Ratio			Ratio			2014			2013			Gain/(Loss)
Standard Personal Lines:

Homeowners	$	36,936		5.3	%	$	33,575		5.9	%		83.9	%		8.6	%		32.0	%		0.0	%		124.5	%		108.0	%	$	(9,301	)
Auto		39,152		(2.6	)%		38,021		(1.3	)%		61.0	%		8.2	%		31.0	%		0.0	%		100.2	%		112.7	%		(426	)
Other (including flood)		2,093		(41.9	)%		2,948		(11.2	)%		57.1	%		13.3	%		(153.0	)%		0.0	%		(82.6	)%		(59.1	)%		4,224
Total	$	78,181		(0.9	)%	$	74,544		1.4	%		71.1	%		7.9	%		27.1	%		0.0	%		106.1	%		102.9	%	$	(5,503	)

Standard Commercial Lines:

Commerical property	$	62,630		5.8	%	$	61,226		11.4	%		59.2	%		4.9	%		37.5	%		0.1	%		101.7	%		80.9	%	$	(1,537	)
Workers compensation		65,210		(4.9	)%		68,993		6.4	%		64.8	%		15.7	%		29.8	%		2.0	%		112.1	%		118.3	%		(7,255	)
General liability		118,176		7.2	%		111,591		11.9	%		30.3	%		16.6	%		33.7	%		0.1	%		80.7	%		94.9	%		19,316
Auto		87,412		3.7	%		83,472		8.8	%		53.8	%		7.6	%		32.0	%		0.1	%		93.5	%		95.3	%		4,193
Business owners policies		21,964		10.1	%		21,279		14.2	%		70.4	%		10.2	%		37.2	%		0.0	%		117.7	%		76.0	%		(4,027	)
Bonds		5,313		(1.8	)%		4,734		(0.9	)%		16.5	%		3.6	%		64.0	%		0.0	%		84.1	%		79.4	%		382
Other		3,154		4.1	%		3,213		7.3	%		(1.1	)%		0.3	%		51.8	%		0.0	%		51.0	%		49.0	%		1,606
Total	$	363,860		3.8	%	$	354,507		9.9	%		49.5	%		11.6	%		34.0	%		0.4	%		95.5	%		95.6	%	$	12,677

Total Standard Operations	$	442,041		2.9	%	$	429,051		8.3	%		53.3	%		10.9	%		32.7	%		0.4	%		97.3	%		97.0	%	$	7,174

E&S	$	37,782		15.7	%	$	34,574		15.1	%		51.0	%		14.0	%		34.9	%		0.0	%		99.9	%		106.8	%	$	-

Total Insurance Operations	$	479,823		3.8	%	$	463,625		8.8	%		53.1	%		11.1	%		33.0	%		0.3	%		97.5	%		97.7	%	$	6,101

Note: Some amounts may not foot due to rounding.

				2014			2013
	Losses Paid		$	221,989		$	207,023
	LAE Paid			44,075			43,620
	Total Paid		$	266,064		$	250,643

Selective Insurance Group, Inc.

Combined Insurance Company Subsidiaries

2014 Statutory Results by Line of Business

Year-to-date June 2014 (unaudited)

	Net					Net											Underwriting			Dividends to			Combined			Combined
	Premiums		Percent			Premiums		Percent			Loss			LAE			Expense			Policyholders			Ratio			Ratio			Underwriting
($ in thousands)	Written		Change			Earned		Change			Ratio			Ratio			Ratio			Ratio			2014			2013			Gain/(Loss)
Standard Personal Lines:

Homeowners	$	65,636		4.3	%	$	66,874		6.4	%		81.9	%		8.3	%		32.8	%		0.0	%		123.0	%		97.8	%	$	(14,969	)
Auto		75,969		(2.4	)%		76,248		(0.9	)%		60.4	%		9.6	%		30.6	%		0.0	%		100.6	%		109.2	%		(365	)
Other (including flood)		3,914		(41.0	)%		6,238		(8.6	)%		53.8	%		8.8	%		(150.4	)%		0.0	%		(87.8	)%		(39.6	)%		8,487
Total	$	145,519		(1.3	)%	$	149,362		1.9	%		69.8	%		8.5	%		27.0	%		0.0	%		105.3	%		97.6	%	$	(6,847	)

Standard Commercial Lines:

Commerical property	$	126,726		8.4	%	$	121,412		12.1	%		75.4	%		5.0	%		35.9	%		0.1	%		116.4	%		83.7	%	$	(21,757	)
Workers compensation		141,181		(2.0	)%		138,405		5.7	%		64.7	%		15.6	%		26.7	%		1.8	%		108.8	%		118.6	%		(12,941	)
General liability		237,680		8.2	%		220,409		11.6	%		31.6	%		16.6	%		32.4	%		0.1	%		80.7	%		95.4	%		37,029
Auto		176,535		6.3	%		165,688		9.7	%		55.9	%		7.6	%		30.6	%		0.1	%		94.2	%		96.6	%		6,346
Business owners policies		44,088		9.4	%		42,148		13.4	%		76.9	%		10.3	%		36.5	%		0.0	%		123.7	%		76.5	%		(10,693	)
Bonds		10,180		(1.8	)%		9,490		(0.5	)%		16.4	%		6.1	%		58.4	%		0.0	%		80.8	%		78.7	%		1,421
Other		6,819		5.5	%		6,396		6.9	%		(0.8	)%		0.2	%		47.0	%		0.0	%		46.5	%		43.5	%		3,223
Total	$	743,210		5.6	%	$	703,948		9.9	%		53.6	%		11.6	%		32.2	%		0.4	%		97.8	%		96.6	%	$	2,628

Total Standard Operations	$	888,729		4.4	%	$	853,310		8.4	%		56.4	%		11.1	%		31.4	%		0.3	%		99.2	%		96.9	%	$	(4,220	)

E&S	$	67,844		11.1	%	$	66,810		11.2	%		49.0	%		14.4	%		35.4	%		0.0	%		98.8	%		102.6	%	$	406

Total Insurance Operations	$	956,573		4.9	%	$	920,120		8.6	%		55.9	%		11.3	%		31.7	%		0.3	%		99.2	%		97.3	%	$	(3,813	)

Note: Some amounts may not foot due to rounding.

				2014			2013
	Losses Paid		$	435,286		$	394,308
	LAE Paid			88,839			88,609
	Total Paid		$	524,125		$	482,917

Selective Insurance Group, Inc.

Combined Insurance Company Subsidiaries

2014 Net Catastrophe Losses and Prior Year Casualty Reserve Development

Statutory Results by Line of Business

(unaudited)

	Quarter Ended												Six Months Ended
Net Catastrophe Losses Incurred	June 30, 2014						June 30, 2013						June 30, 2014						June 30, 2013
($ in thousands)	Loss and Loss Expense Incurred			Impact on Loss and Loss Expense Ratio			Loss and Loss Expense Incurred			Impact on Loss and Loss Expense Ratio			Loss and Loss Expense Incurred			Impact on Loss and Loss Expense Ratio			Loss and Loss Expense Incurred			Impact on Loss and Loss Expense Ratio

Standard Personal Lines	$	12,733			17.1	%	$	7,868			10.7	%	$	21,013			14.1	%	$	8,403			5.7	%

Standard Commercial Lines	$	12,781			3.6	%	$	9,195			2.8	%	$	38,687			5.5	%	$	9,933			1.6	%

Total Standard Operations	$	25,514			5.9	%	$	17,063			4.3	%	$	59,700			7.0	%	$	18,336			2.3	%

E&S	$	1,688			4.9	%	$	2,557			8.5	%	$	1,874			2.8	%	$	2,860			4.8	%

Total Insurance Operations	$	27,202			5.9	%	$	19,620			4.6	%	$	61,574			6.7	%	$	21,196			2.5	%






Prior Year Casualty Reserve Development	Quarter Ended												Six Months Ended
(Favorable) / Unfavorable	June 30, 2014						June 30, 2013						June 30, 2014						June 30, 2013
($ in thousands)	Loss and Loss Expense Incurred			Impact on Loss and Loss Expense Ratio			Loss and Loss Expense Incurred			Impact on Loss and Loss Expense Ratio			Loss and Loss Expense Incurred			Impact on Loss and Loss Expense Ratio			Loss and Loss Expense Incurred			Impact on Loss and Loss Expense Ratio

Standard Personal Lines	$	(2,000	)		(2.7	)%	$	1,000			1.4	%	$	(4,000	)		(2.7	)%	$	(1,500	)		(1.0	)%

Standard Commercial Lines	$	(15,500	)		(4.4	)%	$	(5,000	)		(1.5	)%	$	(27,500	)		(3.9	)%	$	(4,500	)		(0.7	)%

Total Standard Operations	$	(17,500	)		(4.1	)%	$	(4,000	)		(0.9	)%	$	(31,500	)		(3.7	)%	$	(6,000	)		(0.7	)%

E&S	$	-			0.0	%	$	2,000			6.7	%	$	-			0.0	%	$	2,500			4.2	%

Total Insurance Operations	$	(17,500	)		(3.8	)%	$	(2,000	)		(0.4	)%	$	(31,500	)		(3.4	)%	$	(3,500	)		(0.4	)%


Note: Some amounts may not foot due to rounding.

Selective Insurance Group, Inc. & Consolidated Subsidiaries Consolidated Balance Sheets
($ in thousands)	(Unaudited) June 30, 2014			December 31, 2013
ASSETS
Investments:
Fixed income securities, held-to-maturity – at carrying value (fair value: $385,502 – 2014; $416,981 – 2013)	$	364,938			392,879
Fixed income securities, available-for-sale – at fair value (amortized cost: $3,792,036 – 2014; $3,675,977 – 2013)		3,890,200			3,715,536
Equity securities, available-for-sale – at fair value (cost: $166,214 – 2014; $155,350 – 2013)		211,348			192,771
Short-term investments (at cost which approximates fair value)		166,488			174,251
Other investments		106,125			107,875
Total investments		4,739,099			4,583,312
Cash		1,547			193
Interest and dividends due or accrued		37,747			37,382
Premiums receivable, net of allowance for uncollectible accounts of: $3,733 – 2014; $4,442 – 2013		589,617			524,870
Reinsurance recoverable, net		558,758			550,897
Prepaid reinsurance premiums		148,256			143,000
Current federal income tax		—			512
Deferred federal income tax		97,401			122,613
Property and equipment – at cost, net of accumulated depreciation and amortization of: $184,748 – 2014; $179,192 – 2013		53,836			50,834
Deferred policy acquisition costs		182,087			172,981
Goodwill		7,849			7,849
Other assets		74,388			75,727
Total assets	$	6,490,585			6,270,170

LIABILITIES AND STOCKHOLDERS’ EQUITY
Liabilities:
Reserve for loss and loss expenses	$	3,451,306			3,349,770
Unearned premiums		1,100,864			1,059,155
Notes payable		392,290			392,414
Current federal income tax		10,150			—
Accrued salaries and benefits		84,870			111,427
Other liabilities		213,030			203,476
Total liabilities	$	5,252,510			5,116,242

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: 99,697,374 – 2014; 99,120,235 – 2013		199,395			198,240
Additional paid-in capital		298,352			288,182
Retained earnings		1,234,462			1,202,015
Accumulated other comprehensive income		68,012			24,851
Treasury stock – at cost (shares: 43,323,441– 2014; 43,198,622 – 2013)		(562,146	)		(559,360	)
Total stockholders’ equity		1,238,075			1,153,928
Commitments and contingencies
Total liabilities and stockholders’ equity	$	6,490,585			6,270,170

Selective Insurance Group, Inc. & Consolidated Subsidiaries

Unaudited Consolidated Statements of Income


	Quarter Ended June 30,						Six Months Ended June 30,
($ in thousands, except per share amounts)	2014			2013			2014			2013
Revenues:
Net premiums earned	$	463,625			426,252			920,120			847,192
Net investment income earned		36,774			34,003			72,308			66,873
Net realized gains:
Net realized investment gains		4,958			5,709			13,139			11,013
Other-than-temporary impairments		(419	)		(508	)		(1,382	)		(2,427	)
Other-than-temporary impairments on fixed income securities recognized in other comprehensive income		—			(47	)		—			(77	)
Total net realized gains		4,539			5,154			11,757			8,509
Other income		1,911			3,536			11,735			6,320
Total revenues		506,849			468,945			1,015,920			928,894

Expenses:
Loss and loss expenses incurred		297,795			279,594			618,341			549,443
Policy acquisition costs		155,173			143,728			304,439			283,256
Interest expense		5,425			5,570			10,986			11,401
Other expenses		8,935			3,852			17,549			19,725
Total expenses		467,328			432,744			951,315			863,825

Income from continuing operations, before federal income tax		39,521			36,201			64,605			65,069

Federal income tax expense:
Current		8,781			6,221			15,319			13,674
Deferred		1,399			2,858			1,971			1,968
Total federal income tax expense		10,180			9,079			17,290			15,642

Net income from continuing operations		29,341			27,122			47,315			49,427

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

Net income	$	29,341			27,122			47,315			48,430

Earnings per share:
Basic net income from continuing operations	$	0.52			0.49			0.84			0.89
Basic net loss from discontinued operations		—			—			—			(0.02	)
Basic net income	$	0.52			0.49			0.84			0.87

Diluted net income from continuing operations	$	0.51			0.48			0.83			0.88
Diluted net loss from discontinued operations		—			—			—			(0.02	)
Diluted net income	$	0.51			0.48			0.83			0.86

Dividends to stockholders	$	0.13			0.13			0.26			0.26

Selective Insurance Group, Inc. & Consolidated Subsidiaries Unaudited Consolidated Statements of Comprehensive Income	Quarter Ended June 30,						Six Months Ended June 30,

($ in thousands)	2014			2013			2014			2013
Net income	$	29,341			27,122			47,315			48,430

Other comprehensive income (loss), net of tax:
Unrealized gains (losses) on investment securities:
Unrealized holding gains (losses) arising during period		29,329			(59,353	)		50,755			(56,959	)
Non-credit portion of other-than-temporary impairments recognized in other comprehensive income		—			31			—			50
Amount reclassified into net income:
Held-to-maturity securities		(144	)		(399	)		(440	)		(865	)
Non-credit other-than-temporary impairments		305			3			305			8
Realized gains on available for sale securities		(3,255	)		(3,438	)		(7,954	)		(7,322	)
Total unrealized gains (losses) on investment securities		26,235			(63,156	)		42,666			(65,088	)

Defined benefit pension and post-retirement plans:
Net actuarial gain		—			—			—			28,600
Amounts reclassified into net income:
Net actuarial loss		248			513			495			1,709
Prior service cost		—			—			—			6
Curtailment expense		—			—			—			11
Total defined benefit pension and post-retirement plans		248			513			495			30,326
Other comprehensive income (loss)		26,483			(62,643	)		43,161			(34,762	)
Comprehensive income (loss)	$	55,824			(35,521	)		90,476			13,668

Selective Insurance Group, Inc. & Consolidated Subsidiaries Unaudited Consolidated Statements of Stockholders’ Equity	Six Months Ended June 30,

($ in thousands)	2014			2013
Common stock:
Beginning of year	$	198,240			196,388
Dividend reinvestment plan (shares: 29,949 – 2014; 33,514 – 2013)		60			67
Stock purchase and compensation plans (shares: 547,190 – 2014; 682,661 – 2013)		1,095			1,366
End of period		199,395			197,821

Additional paid-in capital:
Beginning of year		288,182			270,654
Dividend reinvestment plan		642			703
Stock purchase and compensation plans		9,528			10,657
End of period		298,352			282,014

Retained earnings:
Beginning of year		1,202,015			1,125,154
Net income		47,315			48,430
Dividends to stockholders ($0.26 per share – 2014 and 2013)		(14,868	)		(14,723	)
End of period		1,234,462			1,158,861

Accumulated other comprehensive income:
Beginning of year		24,851			54,040
Other comprehensive income (loss)		43,161			(34,762	)
End of period		68,012			19,278

Treasury stock:
Beginning of year		(559,360	)		(555,644	)
Acquisition of treasury stock (shares: 124,819 – 2014; 151,113 – 2013)		(2,786	)		(3,285	)
End of period		(562,146	)		(558,929	)
Total stockholders’ equity	$	1,238,075			1,099,045

Selective Insurance Group, Inc. & Consolidated Subsidiaries Unaudited Consolidated Statements of Cash Flow	Six Months Ended June 30,

($ in thousands)	2014			2013
Operating Activities:
Net Income	$	47,315			48,430

Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation and amortization		18,912			23,103
Sale of renewal rights		(8,000	)		—
Loss on disposal of discontinued operations		—			997
Stock-based compensation expense		6,102			6,189
Undistributed (gains) losses of equity method investments		(138	)		419
Net realized gains		(11,757	)		(8,509	)
Retirement income plan curtailment expense		—			16

Changes in assets and liabilities:
Increase in reserve for loss and loss expenses, net of reinsurance recoverables		93,675			69,790
Increase in unearned premiums, net of prepaid reinsurance and advance premiums		36,997			65,225
Decrease in net federal income taxes		12,634			3,171
Increase in premiums receivable		(64,747	)		(84,135	)
Increase in deferred policy acquisition costs		(9,106	)		(9,555	)
Decrease in interest and dividends due or accrued		(361	)		(1,066	)
Decrease in accrued salaries and benefits		(26,557	)		(6,173	)
Decrease in accrued insurance expenses		(16,872	)		(5,478	)
Other-net		(5,425	)		(4,526	)
Net adjustments		25,357			49,468
Net cash provided by operating activities		72,672			97,898

Investing Activities:
Purchase of fixed income securities, available-for-sale		(339,362	)		(530,402	)
Purchase of equity securities, available-for-sale		(111,886	)		(42,546	)
Purchase of other investments		(6,039	)		(4,393	)
Purchase of short-term investments		(764,692	)		(1,116,873	)
Sale of subsidiary		—			1,225
Sale of fixed income securities, available-for-sale		19,557			6,851
Sale of short-term investments		772,455			1,144,853
Redemption and maturities of fixed income securities, held-to-maturity		28,595			48,186
Redemption and maturities of fixed income securities, available-for-sale		222,568			286,905
Sale of equity securities, available-for-sale		111,996			42,206
Distributions from other investments		7,726			6,077
Purchase of property and equipment		(6,628	)		(6,761	)
Sale of renewal rights		8,000			—
Net cash used in investing activities		(57,710	)		(164,672	)

Financing Activities:
Dividends to stockholders		(13,914	)		(13,668	)
Acquisition of treasury stock		(2,786	)		(3,285	)
Net proceeds from stock purchase and compensation plans		3,091			3,769
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		955			1,467
Repayment of capital lease obligations		(954	)		—
Net cash (used in) provided by financing activities		(13,608	)		66,718
Net increase (decrease) in cash		1,354			(56	)
Cash, beginning of year		193			210
Cash, end of period	$	1,547			154

Selective Insurance Group, Inc.

Combined Insurance Company Subsidiaries

Statutory Balance Sheets

(unaudited)

($ in thousands)	June 30, 2014			June 30, 2013			December 31, 2013

ASSETS
Bonds	$	4,094,993			3,794,994			4,010,464
Common stocks		211,348			172,064			192,771
Affiliated mortgage loan		36,346			37,086			36,721
Other investments		172,089			175,080			173,856
Short-term investments		137,181			147,071			158,827
Total investments		4,651,957			4,326,295			4,572,639

Cash on hand and in banks		(18,072	)		(34,417	)		(31,186	)
Interest and dividends due and accrued		37,642			36,361			37,267
Premiums receivable		586,586			567,218			522,907
Reinsurance recoverable on paid losses and expenses		9,995			8,087			10,059
Deferred tax recoverable		149,770			157,856			154,320
EDP equipment		667			1,017			913
Equities and deposits in pools and associations		9,595			6,800			9,555
Receivable for sold securities		7			18,730			7
Other assets		26,544			24,017			30,671
Total assets	$	5,454,691			5,111,964			5,307,152

LIABILITIES
Reserve for losses	$	2,420,474			2,282,379			2,341,476
Reinsurance payable on paid loss and loss expense		2,853			2,247			2,557
Reserve for loss expenses		471,202			438,734			455,983
Unearned premiums		952,608			907,178			916,155
Reserve for commissions payable		54,191			47,100			63,482
Ceded balances payable		34,379			31,243			33,721
Federal income tax payable		10,953			21,415			27,749
Premium and other taxes payable		20,289			24,330			27,870
Borrowed money		58,042			58,042			58,044
Reserve for dividends to policyholders		2,443			2,334			2,070
Reserves for unauthorized reinsurance		2,735			7,498			2,735
Payable for securities		30,125			9,596			-
Funds withheld on account of others		7,560			8,080			6,623
Accrued salaries and benefits		46,806			44,601			65,053
Other liabilities		47,070			56,575			47,203
Total liabilities		4,161,730			3,941,352			4,050,721


POLICYHOLDERS' SURPLUS
Capital		42,725			42,725			42,725
Paid in surplus		492,869			492,869			492,869
Unassigned surplus		757,367			635,018			720,837
Total policyholders' surplus		1,292,961			1,170,612			1,256,431
Total liabilities and policyholders' surplus	$	5,454,691			5,111,964			5,307,152

Selective Insurance Group, Inc.

Combined Insurance Company Subsidiaries

Statutory Statements Of Income

(unaudited)

	Quarter Ended June										Six Months Ended June
($ in thousands)	2014					2013					2014					2013
UNDERWRITING
Net premiums written	$	479,823					462,177					956,573					912,301

Net premiums earned		463,625					426,252					920,120					847,192

Net losses paid		221,989					207,023					435,286					394,308
Change in reserve for losses		24,057					24,363					78,998					55,521
Net losses incurred		246,046		53.1	%		231,386		54.3	%		514,284		55.9	%		449,829		53.1	%

Net loss expenses paid		44,075					43,620					88,839					88,609
Change in reserve for loss expenses		7,675					4,689					15,219					11,173
Net loss expenses incurred		51,750		11.1	%		48,309		11.3	%		104,058		11.3	%		99,782		11.8	%

Net underwriting expenses incurred		159,413		33.2	%		150,140		32.6	%		313,203		32.8	%		298,480		32.8	%

Total deductions		457,209					429,835					931,545					848,091
Statutory underwriting gain / (loss)		6,416					(3,583	)				(11,425	)				(899	)

Net loss from premium balances charged off		(895	)				(616	)				(1,769	)				(1,350	)
Finance charges and other income		2,129					3,746					12,168					6,678
Total other income		1,234		-0.2	%		3,130		-0.7	%		10,399		-1.1	%		5,328		-0.6	%
Policyholders' dividends incurred		(1,549	)	0.3	%		(981	)	0.2	%		(2,787	)	0.3	%		(2,067	)	0.2	%
Total underwriting gain / (loss)		6,101		97.5	%		(1,434	)	97.7	%		(3,813	)	99.2	%		2,362		97.3	%

INVESTMENT
Net investment income earned		36,652					34,012					72,147					67,342
Net realized gain		4,537					5,150					11,752					6,362
Total income before income tax		47,290					37,728					80,086					76,066

Federal income tax expense		7,108					16,752					12,953					32,687

Net income	$	40,182					20,976					67,133					43,379

Policyholders' Surplus
Surplus, beginning of period	$	1,263,795					1,151,959					1,256,431					1,050,107

Net income		40,182					20,976					67,133					43,379
Change in deferred taxes		(5,403	)				7,815					(6,685	)				8,069
Change in unrealized gains		6,451					(884	)				5,139					8,552
Dividends to stockholders		(14,378	)				(6,662	)				(28,754	)				(18,782	)
Paid in surplus		-					-					-					57,125
Change in non-admitted assets		2,033					(3,290	)				(867	)				13,429
Change in Overfunded Contra Asset		(1,546	)				(1,184	)				(3,093	)				(9,907	)
Qual Pen Transitional Liability		1,815					1,846					3,631					(33,879	)
Excess Plan Transitional Liability		7					17					15					(578	)
PRL Plan Transitional Liability		5					19					11					(1,199	)
Change in minimum pension liability		-					-					-					54,755
Surplus adjustments		-					-					-					(459	)

Net change in surplus for period		29,166					18,653					36,530					120,505

Surplus, end of period	$	1,292,961					1,170,612					1,292,961					1,170,612

Statutory underwriting gain / (loss)	$	6,101					(1,434	)				(3,813	)				2,362

Adjustments under GAAP:
Deferred policy acquisition costs		4,409					6,593					9,105					9,555
Pension costs		(98	)				(101	)				(195	)				5,824
Other, net		(328	)				(575	)				(28	)				(1,097	)
GAAP underwriting gain	$	10,084					4,483					5,069					16,644

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

Selective Insurance Group, Inc. and Consolidated Subsidiaries

Alternative Investments

as of June 30, 2014

(unaudited)

Fund	Inception Year	Original Commitment		Remaining Commitment		Current Market Value		YTD Income			DPI(1) Ratio		TVPI(2) Ratio
Real Estate
Silverpeak RE II	2005		20,000,000		2,185,689		8,195,022		1,091,960			0.67		1.06
Silverpeak RE III	2008		15,000,000		7,945,108		2,843,778		57,659			0.04		0.44
Total - Real Estate			35,000,000		10,130,797		11,038,800		1,149,619			0.51		0.90

Mezzanine Financing
Neovara Euro Mezz	2004		9,000,000		-		579,578		-			0.98		1.02
GS Mezz V	2007		25,000,000		10,223,976		7,612,396		414,269			0.88		1.29
New Canaan V	2012		7,000,000		2,169,158		4,232,020		212,689			0.20		1.07
Centerfield Capital	2012		3,000,000		2,077,118		818,831		34,680			0.08		0.97
Total - Mezz. Financing			44,000,000		14,470,253		13,242,825		661,638			0.81		1.16

Distressed Debt
Varde VIII	2006		10,000,000		-		3,042,718		247,442			1.02		1.32
Distressed Managers III	2007		15,000,000		2,971,463		6,904,059		529,466			0.70		1.22
Total - Distressed Debt			25,000,000		2,971,463		9,946,777		776,908			0.84		1.26

Private Equity
Prospector	1997		5,000,000		-		413,381		2,973			2.79		2.88
Trilantic Capital Partners III	2004		10,000,000		1,455,947		2,586,420		352,522			1.63		1.90
NB Co-Invest	2006		15,000,000		1,509,555		7,319,772		964,307			0.92		1.42
Trilantic Capital Partners IV	2007		11,098,351		1,339,289		9,875,400		1,195,341			0.89		1.79
Trilantic Capital Partners V	2012		7,000,000		5,612,282		1,193,300		42,513			-		0.86
Total - Private Equity			48,098,351		9,917,073		21,388,273		2,557,655			1.27		1.79

Private Equity, Secondary Market
NB SOF	2005		12,000,000		899,494		3,568,214		189,191			1.02		1.34
Vintage IV	2007		20,000,000		4,118,809		12,373,512		381,639			0.70		1.33
NB SOF II	2008		12,000,000		2,211,904		7,633,707		655,447			0.85		1.48
Total - Pvt. Eq. Sec. Mkt.			44,000,000		7,230,207		23,575,433		1,226,277			0.82		1.38

Energy/Power Generation
ArcLight I	2002		15,000,000		-		93,896		(36,918	)		1.80		1.81
ArcLight II	2003		15,000,000		2,295,492		500,980		(507,577	)		1.38		1.41
ArcLight III	2006		15,000,000		2,037,794		6,214,676		461,324			1.00		1.39
Quintana Energy	2006		10,000,000		362,821		8,306,003		1,038,465			0.55		1.40
ArcLight IV	2007		10,000,000		2,287,578		2,686,610		847,626			1.09		1.35
Total - Energy/Power Generation			65,000,000		6,983,685		17,802,165		1,802,920			1.24		1.49

Venture Capital
Venture V	2001		9,600,000		350,000		7,089,121		596,206			0.60		1.36
Total - Venture Capital			9,600,000		350,000		7,089,121		596,206			0.60		1.36

TOTAL - ALTERNATIVE INVESTMENTS		$	270,698,351		52,053,477		104,083,394		8,771,224			0.97		1.38

(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 Income Securities

June 30, 2014

(unaudited)

($ in millions)	Fair Value		Unrealized Gain (Loss)			Average Credit Quality
AFS Fixed Income Portfolio:
U.S. government obligations	$	158.8		9.3		AA+
Foreign government obligations		28.0		1.0		AA-
State and municipal obligations		1,107.1		27.0		AA+
Corporate securities		1,782.6		52.4		A-
Asset-backed securities (“ABS”)		132.2		0.7		AAA
Mortgage-backed securities (“MBS”)		681.5		7.8		AA+
Total AFS fixed income portfolio	$	3,890.2		98.2		AA-
State and Municipal Obligations:
General obligations	$	528.0		12.4		AA+
Special revenue obligations		579.1		14.6		AA
Total state and municipal obligations	$	1,107.1		27.0		AA+
Corporate Securities:
Financial	$	550.7		16.1		A
Industrials		140.6		5.3		A-
Utilities		156.4		3.8		BBB+
Consumer discretionary		204.9		7.0		A-
Consumer staples		171.5		4.8		A
Healthcare		167.8		5.4		A
Materials		109.3		3.5		BBB+
Energy		108.1		2.8		A-
Information technology		116.0		1.8		A+
Telecommunications services		50.4		1.5		BBB+
Other		6.9		0.4		AA+
Total corporate securities	$	1,782.6		52.4		A-
ABS:
ABS	$	131.8		0.7		AAA
Sub-prime ABS1		0.4		—		D
Total ABS	$	132.2		0.7		AAA
MBS:
Government guaranteed agency commercial MBS (“CMBS”)	$	23.7		0.6		AA+
Other agency CMBS		10.8		(0.1	)	AA+
Non-agency CMBS		138.0		1.6		AA+
Government guaranteed agency residential MBS (“RMBS”)		41.8		1.2		AA+
Other agency RMBS		422.9		3.6		AA+
Non-agency RMBS		40.1		0.8		A-
Alternative-A (“Alt-A”) RMBS		4.2		0.1		A
Total MBS	$	681.5		7.8		AA+

1Subprime ABS consists of one security whose issuer is currently expected by rating agencies to default on its obligations. We define sub-prime exposure as exposure to direct and indirect investments in non-agency residential mortgages with average FICO® scores below 650.

Selective Insurance Group, Inc. and Consolidated Subsidiaries

Credit Quality of Held-to-Maturity Fixed Income Securities

June 30, 2014

(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 Income Portfolio:
Foreign government obligations	$	5.5		5.4		0.1		0.1			0.2	AA+
State and municipal obligations		346.7		330.8		15.9		2.9			18.8	AA
Corporate securities		24.5		21.5		3.0		(0.3	)		2.7	A+
ABS		3.3		2.7		0.6		(0.6	)		—	AAA
MBS		5.5		4.5		1.0		(0.5	)		0.5	AAA
Total HTM fixed income portfolio	$	385.5		364.9		20.6		1.6			22.2	AA

State and Municipal Obligations:
General obligations	$	110.6		105.9		4.7		1.5			6.2	AA
Special revenue obligations		236.1		224.9		11.2		1.4			12.6	AA
Total state and municipal obligations	$	346.7		330.8		15.9		2.9			18.8	AA

Corporate Securities:
Financial	$	2.3		1.9		0.4		(0.1	)		0.3	A-
Industrials		7.0		5.9		1.1		(0.1	)		1.0	A+
Utilities		13.7		12.2		1.5		(0.1	)		1.4	A+
Consumer discretionary		1.5		1.5		—		—			—	AA
Total corporate securities	$	24.5		21.5		3.0		(0.3	)		2.7	A+

ABS:
ABS	$	0.8		0.8		—		—			—	AA
Alt-A ABS		2.5		1.9		0.6		(0.6	)		—	AAA
Total ABS	$	3.3		2.7		0.6		(0.6	)		—	AAA

MBS:
Non-agency CMBS	$	5.5		4.5		1.0		(0.5	)		0.5	AAA
Total MBS	$	5.5		4.5		1.0		(0.5	)		0.5	AAA

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SELECTIVE INSURANCE GROUP INC Reports