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_102914.htm
EX-99.1 - EXHIBIT 99.1 - SELECTIVE INSURANCE GROUP INC	exh_991.htm

Exhibit 99.2


Supplemental Investor Package

Third 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)

	September 30,							September 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	$	2,585,882			2,590,023		44,665	$	2,533,612			2,540,760		41,013	$	2,595,256			2,601,556		27,812
Government and Municipal bonds		1,717,838			1,731,805		58,036		1,521,782			1,541,201		47,265		1,513,159			1,530,961		38,106
Total fixed income securities		4,303,720			4,321,828		102,701		4,055,394			4,081,961		88,278		4,108,415			4,132,517		65,918
Equities		211,266			211,266		30,847		180,506			180,506		22,183		192,771			192,771		37,420
Short-term investments		181,593			181,593		-		172,087			172,087		-		174,251			174,251		-
Other investments		106,548			106,548		-		108,073			108,073		-		107,875			107,875		-
Total invested assets	$	4,803,127			4,821,235		133,548	$	4,516,060			4,542,627		110,461	$	4,583,312			4,607,414		103,338


Invested assets per $ of stockholders' equity		3.79							4.02							3.97

Total assets		6,577,419							6,266,345							6,270,170

Liabilities:
Reserve for loss and loss expenses		3,445,706							3,316,291							3,349,770
Unearned premium reserve		1,143,979							1,111,539							1,059,155

Total liabilities		5,310,494							5,142,136							5,116,242

Stockholders' equity		1,266,925							1,124,209							1,153,928

Total debt to capitalization ratio		23.6	%						25.9	%						25.4	%

Book value per share		22.45							20.16							20.63

Book value per share excluding unrealized gain or loss on bond portfolio		21.48							19.44							20.15

NPW per insurance segment employee		896							895							908

Statutory premiums to surplus ratio		1.4	x						1.5	x						1.4	x

Statutory surplus		1,323,097							1,194,797							1,256,431

1 Includes mortgage-backed and asset-backed securities.

Selective Insurance Group, Inc. & Consolidated Subsidiaries

Selected Income Statement Data

(unaudited)

		Quarter Ended September 30,												Nine Months Ended September 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		$	515,358					$	486,813					$	1,531,278					$	1,415,707
Operating income			43,262			0.76			23,922			0.42			82,935			1.44			67,819			1.20
Net realized gains, after tax			9,900			0.17			8,731			0.15			17,542			0.31			14,261			0.25
Income from continuing operations			53,162			0.93			32,653			0.57			100,477			1.75			82,080			1.45
Loss on discontinued operations, after tax			-			-			-			-			-			-			(997	)		(0.02	)
Net income			53,162			0.93			32,653			0.57			100,477			1.75			81,083			1.43
Operating return on equity			13.8	%					8.6	%					9.1	%					8.2	%

Total Insurance Operations
Gross premiums written			598,638						592,902						1,742,530						1,685,768
Net premiums written			495,121						492,748						1,451,694						1,405,049
Net premiums earned			462,639						437,568						1,382,759						1,284,760
Underwriting gain	- before tax		34,437						10,151						39,506						26,795
	- after tax		22,384			0.39			6,598			0.12			25,679			0.45			17,417			0.31
GAAP combined ratio			92.6	%					97.7	%					97.1	%					97.9	%

Total Standard lines
Net premiums earned			426,520						405,676						1,279,830						1,192,762
GAAP combined ratio			91.6	%					97.5	%					96.9	%					97.6	%
Standard Commercial lines
Net premiums earned			352,143						330,962						1,056,091						971,464
GAAP combined ratio			92.1	%					97.3	%					96.2	%					97.5	%
Standard Personal lines
Net premiums earned			74,377						74,714						223,739						221,298
GAAP combined ratio			89.2	%					98.2	%					100.0	%					98.0	%
Excess and Surplus lines
Net premiums earned			36,119						31,892						102,929						91,998
GAAP combined ratio			103.8	%					100.0	%					100.4	%					102.4	%

Investments
Net investment income	- before tax		34,292						32,457						106,600						99,330
	- after tax		25,765			0.45			24,510			0.43			79,672			1.39			75,049			1.32
Effective tax rate			24.9	%					24.5	%					25.3	%					24.4	%
Annualized after-tax yield on investment portfolio															2.3	%					2.3	%
Annualized after-tax, after-interest expense yield															2.0	%					1.9	%
Invested assets per $ of stockholders' equity															3.79						4.02

Other expenses (net of other income)
Interest expense	- before tax		(5,558	)					(5,570	)					(16,544	)					(16,971	)
	- after tax		(3,613	)		(0.06	)		(3,620	)		(0.06	)		(10,754	)		(0.19	)		(11,031	)		(0.19	)

Other Expense - after tax		$	(1,274	)		(0.02	)	$	(3,566	)		(0.07	)	$	(11,662	)		(0.21	)	$	(13,616	)		(0.24	)

Diluted weighted avg shares outstanding			57,406						56,900						57,286						56,719

Selective Insurance Group, Inc. & Consolidated Subsidiaries

GAAP Insurance Operations Results

(Unaudited)

Third Quarter
($ in thousands)	Quarter Ended September 30, 2014															Quarter Ended September 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		376,438			79,048			455,486			39,635			495,121			376,373			80,800			457,173			35,575			492,748
Net Premiums Earned		352,143			74,377			426,520			36,119			462,639			330,962			74,714			405,676			31,892			437,568
Loss and Loss Expense Incurred		201,352			45,137			246,489			24,443			270,932			209,771			52,926			262,697			20,620			283,317
Net Underwriting Expenses Incurred		121,864			21,203			143,067			13,047			156,114			111,089			20,426			131,515			11,259			142,774
Dividends to Policyholders		1,156			-			1,156			-			1,156			1,326			-			1,326			-			1,326
GAAP Underwriting Gain (Loss)		27,771			8,037			35,808			(1,371	)		34,437			8,776			1,362			10,138			13			10,151

GAAP Ratios
Loss and Loss Expense Ratio		57.2	%		60.7	%		57.8	%		67.7	%		58.6	%		63.4	%		70.8	%		64.8	%		64.7	%		64.7	%
Underwriting Expense Ratio		34.6	%		28.5	%		33.5	%		36.1	%		33.8	%		33.5	%		27.4	%		32.4	%		35.3	%		32.7	%
Dividends to Policyholders Ratio		0.3	%		0.0	%		0.3	%		0.0	%		0.2	%		0.4	%		0.0	%		0.3	%		0.0	%		0.3	%
Combined Ratio		92.1	%		89.2	%		91.6	%		103.8	%		92.6	%		97.3	%		98.2	%		97.5	%		100.0	%		97.7	%

Year to Date
($ in thousands)	Year to Date September 30, 2014															Year to Date September 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		1,119,648			224,567			1,344,215			107,479			1,451,694			1,080,213			228,215			1,308,428			96,621			1,405,049
Net Premiums Earned		1,056,091			223,739			1,279,830			102,929			1,382,759			971,464			221,298			1,192,762			91,998			1,284,760
Loss and Loss Expense Incurred		660,523			162,027			822,550			66,723			889,273			614,226			157,722			771,948			60,812			832,760
Net Underwriting Expenses Incurred		351,781			61,617			413,398			36,639			450,037			329,224			59,216			388,440			33,372			421,812
Dividends to Policyholders		3,943			-			3,943			-			3,943			3,393			-			3,393			-			3,393
GAAP Underwriting Gain (Loss)		39,844			95			39,939			(433	)		39,506			24,621			4,360			28,981			(2,186	)		26,795

GAAP Ratios
Loss and Loss Expense Ratio		62.5	%		72.4	%		64.3	%		64.8	%		64.3	%		63.2	%		71.3	%		64.7	%		66.1	%		64.8	%
Underwriting Expense Ratio		33.3	%		27.6	%		32.3	%		35.6	%		32.5	%		34.0	%		26.7	%		32.6	%		36.3	%		32.8	%
Dividends to Policyholders Ratio		0.4	%		0.0	%		0.3	%		0.0	%		0.3	%		0.3	%		0.0	%		0.3	%		0.0	%		0.3	%
Combined Ratio		96.2	%		100.0	%		96.9	%		100.4	%		97.1	%		97.5	%		98.0	%		97.6	%		102.4	%		97.9	%

Selective Insurance Group, Inc. and Consolidated Subsidiaries

GAAP Investment Income

September 2014 (unaudited)

	Quarter Ended						%			Year to Date						%
($ in thousands, except per share data)	September 2014			September 2013			Increase (Decrease)			September 2014			September 2013			Increase (Decrease)
Investment Income:
Interest:
Fixed Income Securities	$	30,706			30,569			0		$	95,515			90,956			5
Short-term		15			21			(29	)		48			102			(53	)
Other Investments:
Alternative Investments		3,906			2,639			48			12,677			10,748			18
Other		-			-			N/M			-			(638	)		N/M
Dividends		1,909			1,341			42			5,094			4,422			15
		36,536			34,570			6			113,334			105,590			7

Investment Expense		2,244			2,113			6			6,734			6,260			8

Net Investment Income Before Tax		34,292			32,457			6			106,600			99,330			7

Tax		8,527			7,947			7			26,928			24,281			11

Net Investment Income After Tax	$	25,765			24,510			5		$	79,672			75,049			6

Net Investment Income per Share	$	0.45			0.43			5		$	1.39			1.32			5


Effective Tax Rate		24.9	%		24.5	%					25.3	%		24.4	%

Average Yields :

Fixed Income Securities:
Pre Tax											3.03	%		3.07	%
After Tax											2.27	%		2.32	%

Portfolio:
Pre Tax											3.03	%		2.99	%
After Tax											2.26	%		2.26	%



	Quarter Ended:									Year to date:
Net Realized Gains (Losses)	September 2014			September 2013						September 2014			September 2013
Fixed Income Securities		662			626						1,446			2,188
Equity Securities		14,568			12,885						25,541			22,539
Other Investments		1			(80	)					1			(2,787	)

Total		15,231			13,431						26,988			21,940
Net of Tax		9,900			8,731						17,542			14,261

As of September 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 September 2014 (unaudited)

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

Homeowners	$	38,402		3.2	%	$	33,957		4.9	%		46.3	%		7.1	%		33.4	%		0.0	%		86.8	%		99.6	%	$	3,018
Auto		38,926		(1.9	)%		37,695		(2.1	)%		58.6	%		8.8	%		32.9	%		0.0	%		100.3	%		107.4	%		(537	)
Other (including flood)		1,719		(56.1	)%		2,725		(28.8	)%		61.3	%		(2.8	)%		(193.8	)%		0.0	%		(135.3	)%		(23.6	)%		4,463
Total	$	79,048		(2.2	)%	$	74,377		(0.5	)%		53.1	%		7.6	%		28.2	%		0.0	%		88.9	%		97.6	%	$	6,944

Standard Commercial Lines:

Commerical property	$	71,463		2.7	%	$	61,304		7.5	%		38.4	%		6.2	%		35.4	%		(0.1	)%		79.9	%		67.0	%	$	8,762
Workers compensation		65,740		(6.7	)%		66,732		0.3	%		65.0	%		16.1	%		28.3	%		1.8	%		111.2	%		118.2	%		(7,186	)
General liability		117,731		1.6	%		110,894		9.9	%		32.2	%		17.8	%		34.2	%		0.0	%		84.2	%		96.2	%		15,204
Auto		90,600		(1.2	)%		83,536		5.6	%		53.0	%		8.1	%		31.7	%		0.0	%		92.8	%		97.1	%		3,765
Business owners policies		21,916		7.9	%		21,649		10.3	%		42.1	%		10.6	%		37.6	%		0.0	%		90.3	%		102.1	%		1,994
Bonds		5,362		3.1	%		4,791		1.8	%		16.2	%		6.4	%		63.7	%		0.0	%		86.3	%		80.1	%		291
Other		3,628		12.2	%		3,237		6.0	%		0.7	%		0.5	%		54.6	%		0.0	%		55.8	%		53.2	%		1,218
Total	$	376,438		0.0	%	$	352,143		6.4	%		44.5	%		12.4	%		33.7	%		0.3	%		90.9	%		95.6	%	$	24,049

Total Standard Operations	$	455,486		(0.4	)%	$	426,520		5.1	%		46.0	%		11.6	%		32.6	%		0.3	%		90.5	%		96.0	%	$	30,992

E&S	$	39,635		11.4	%	$	36,119		13.3	%		51.7	%		15.9	%		35.3	%		0.0	%		102.9	%		100.5	%	$	(2,304	)

Total Insurance Operations	$	495,121		0.5	%	$	462,639		5.7	%		46.5	%		11.9	%		32.9	%		0.2	%		91.5	%		96.3	%	$	28,688

Note: Some amounts may not foot due to rounding.

			2014			2013
	Losses Paid		$	227,149		$	194,340
	LAE Paid			50,339			44,939
	Total Paid		$	277,488		$	239,279

Selective Insurance Group, Inc.

Combined Insurance Company Subsidiaries

2014 Statutory Results by Line of Business

Year-to-date September 2014 (unaudited)

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

Homeowners	$	104,038		3.9	%	$	100,831		5.9	%		69.9	%		7.9	%		33.0	%		0.0	%		110.8	%		98.4	%	$	(11,952	)
Auto		114,895		(2.3	)%		113,943		(1.3	)%		59.8	%		9.4	%		31.3	%		0.0	%		100.5	%		108.6	%		(902	)
Other (including flood)		5,634		(46.6	)%		8,965		(15.9	)%		56.1	%		(2.7	)%		(155.6	)%		0.0	%		(102.2	)%		(33.6	)%		12,950
Total	$	224,567		(1.6	)%	$	223,739		1.1	%		64.2	%		8.2	%		27.5	%		0.0	%		99.9	%		97.6	%	$	96

Standard Commercial Lines:

Commerical property	$	198,189		6.2	%	$	182,716		10.5	%		63.0	%		5.4	%		35.6	%		0.1	%		104.1	%		77.8	%	$	(12,995	)
Workers compensation		206,921		(3.5	)%		205,137		3.9	%		64.8	%		15.7	%		27.3	%		1.8	%		109.6	%		118.4	%		(20,126	)
General liability		355,411		5.9	%		331,303		11.0	%		31.8	%		17.0	%		33.0	%		0.0	%		81.8	%		95.7	%		52,233
Auto		267,134		3.6	%		249,224		8.3	%		55.0	%		7.8	%		30.9	%		0.0	%		93.7	%		96.8	%		10,111
Business owners policies		66,004		8.9	%		63,797		12.3	%		65.1	%		10.4	%		36.9	%		0.0	%		112.4	%		85.4	%		(8,700	)
Bonds		15,541		(0.1	)%		14,281		0.3	%		16.3	%		6.2	%		60.2	%		0.0	%		82.7	%		79.2	%		1,712
Other		10,448		7.7	%		9,633		6.6	%		(0.3	)%		0.3	%		49.7	%		0.0	%		49.7	%		46.7	%		4,441
Total	$	1,119,648		3.7	%	$	1,056,091		8.7	%		50.6	%		11.9	%		32.6	%		0.4	%		95.5	%		96.2	%	$	26,676

Total Standard Operations	$	1,344,215		2.7	%	$	1,279,830		7.3	%		53.0	%		11.2	%		31.8	%		0.3	%		96.3	%		96.6	%	$	26,773

E&S	$	107,479		11.2	%	$	102,929		11.9	%		50.0	%		14.9	%		35.4	%		0.0	%		100.3	%		101.9	%	$	(1,898	)

Total Insurance Operations	$	1,451,694		3.3	%	$	1,382,759		7.6	%		52.7	%		11.5	%		32.1	%		0.3	%		96.6	%		96.9	%	$	24,875

Note: Some amounts may not foot due to rounding.

			2014			2013
	Losses Paid		$	662,435		$	588,648
	LAE Paid			139,178			133,548
	Total Paid		$	801,613		$	722,196

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												Nine Months Ended
Net Catastrophe Losses Incurred	September 30, 2014						September 30, 2013						September 30, 2014						September 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	$	1,605			2.2	%	$	8,735			11.7	%	$	22,618			10.1	%	$	17,138			7.7	%

Standard Commercial Lines	$	3,259			0.9	%	$	2,196			0.7	%	$	41,946			4.0	%	$	12,129			1.2	%

Total Standard Operations	$	4,864			1.1	%	$	10,932			2.7	%	$	64,564			5.0	%	$	29,267			2.5	%

E&S	$	511			1.4	%	$	983			3.1	%	$	2,386			2.3	%	$	3,843			4.2	%

Total Insurance Operations	$	5,375			1.2	%	$	11,914			2.7	%	$	66,949			4.8	%	$	33,110			2.6	%






Prior Year Casualty Reserve Development	Quarter Ended												Nine Months Ended
(Favorable) / Unfavorable	September 30, 2014						September 30, 2013						September 30, 2014						September 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	)%	$	(2,000	)		(2.7	)%	$	(6,000	)		(2.7	)%	$	(3,500	)		(1.6	)%

Standard Commercial Lines	$	(10,000	)		(2.8	)%	$	(1,500	)		(0.5	)%	$	(37,500	)		(3.6	)%	$	(6,000	)		(0.6	)%

Total Standard Operations	$	(12,000	)		(2.8	)%	$	(3,500	)		(0.9	)%	$	(43,500	)		(3.4	)%	$	(9,500	)		(0.8	)%

E&S	$	4,000			11.1	%	$	-			0.0	%	$	4,000			3.9	%	$	2,500			2.7	%

Total Insurance Operations	$	(8,000	)		(1.7	)%	$	(3,500	)		(0.8	)%	$	(39,500	)		(2.9	)%	$	(7,000	)		(0.5	)%

Note: Some amounts may not foot due to rounding.

Selective Insurance Group, Inc. & Consolidated Subsidiaries

Consolidated Balance Sheets

	(unaudited) September 30,			December 31,
($ in thousands, except share amounts)	2014			2013
ASSETS
Investments:
Fixed income securities, held-to-maturity – at carrying value (fair value: $354,190 – 2014; $416,981 – 2013)	$	336,082			392,879
Fixed income securities, available-for-sale – at fair value (amortized cost: $3,884,252 – 2014; $3,675,977 – 2013)		3,967,638			3,715,536
Equity securities, available-for-sale – at fair value (cost: $180,419 – 2014; $155,350 – 2013)		211,266			192,771
Short-term investments (at cost which approximates fair value)		181,593			174,251
Other investments		106,548			107,875
Total investments		4,803,127			4,583,312
Cash		2,501			193
Interest and dividends due or accrued		37,563			37,382
Premiums receivable, net of allowance for uncollectible accounts of: $3,860 – 2014; $4,442 – 2013		591,686			524,870
Reinsurance recoverable, net		559,946			550,897
Prepaid reinsurance premiums		158,889			143,000
Current federal income tax		—			512
Deferred federal income tax		92,780			122,613
Property and equipment – at cost, net of accumulated depreciation and amortization of: $188,175 – 2014; $179,192 – 2013		55,532			50,834
Deferred policy acquisition costs		189,681			172,981
Goodwill		7,849			7,849
Other assets		77,865			75,727
Total assets	$	6,577,419			6,270,170

LIABILITIES AND STOCKHOLDERS’ EQUITY
Liabilities:
Reserve for loss and loss expenses	$	3,445,706			3,349,770
Unearned premiums		1,143,979			1,059,155
Notes payable		392,294			392,414
Current federal income tax		16,322			—
Accrued salaries and benefits		97,469			111,427
Other liabilities		214,724			203,476
Total liabilities	$	5,310,494			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: 99,753,415 – 2014; 99,120,235 – 2013		199,507			198,240
Additional paid-in capital		300,425			288,182
Retained earnings		1,280,148			1,202,015
Accumulated other comprehensive income		49,125			24,851
Treasury stock – at cost (shares: 43,329,195– 2014; 43,198,622 – 2013)		(562,280	)		(559,360	)
Total stockholders’ equity		1,266,925			1,153,928
Commitments and contingencies
Total liabilities and stockholders’ equity	$	6,577,419			6,270,170

Selective Insurance Group, Inc. & Consolidated Subsidiaries

Unaudited Consolidated Statements of Income

	Quarter ended September 30,					Nine Months ended September 30,
($ in thousands, except per share amounts)	2014		2013			2014			2013
Revenues:
Net premiums earned	$	462,639		437,568			1,382,759			1,284,760
Net investment income earned		34,292		32,457			106,600			99,330
Net realized gains:
Net realized investment gains		15,231		14,111			28,370			25,124
Other-than-temporary impairments		—		(680	)		(1,382	)		(3,107	)
Other-than-temporary impairments on fixed income securities recognized in other comprehensive income		—		—			—			(77	)
Total net realized gains		15,231		13,431			26,988			21,940
Other income		3,196		3,357			14,931			9,677
Total revenues		515,358		486,813			1,531,278			1,415,707

Expenses:
Loss and loss expenses incurred		270,932		283,317			889,273			832,760
Policy acquisition costs		158,101		145,314			462,540			428,570
Interest expense		5,558		5,570			16,544			16,971
Other expenses		5,441		8,127			22,990			27,852
Total expenses		440,032		442,328			1,391,347			1,306,153

Income from continuing operations, before federal income tax		75,326		44,485			139,931			109,554

Federal income tax expense:
Current		7,373		6,367			22,692			20,041
Deferred		14,791		5,465			16,762			7,433
Total federal income tax expense		22,164		11,832			39,454			27,474

Net income from continuing operations		53,162		32,653			100,477			82,080

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

Net income	$	53,162		32,653			100,477			81,083

Earnings per share:
Basic net income from continuing operations	$	0.94		0.59			1.79			1.48
Basic net loss from discontinued operations		—		—			—			(0.02	)
Basic net income	$	0.94		0.59			1.79			1.46

Diluted net income from continuing operations	$	0.93		0.57			1.75			1.45
Diluted net loss from discontinued operations		—		—			—			(0.02	)
Diluted net income	$	0.93		0.57			1.75			1.43

Dividends to stockholders	$	0.13		0.13			0.39			0.39

Selective Insurance Group, Inc. & Consolidated Subsidiaries

Unaudited Consolidated Statements of Comprehensive Income

	Quarter ended September 30,						Nine Months ended September 30,
($ in thousands)	2014			2013			2014			2013
Net income	$	53,162			32,653			100,477			81,083

Other comprehensive income (loss), net of tax:
Unrealized (losses) gains on investment securities:
Unrealized holding (losses) gains arising during period		(8,988	)		6,383			41,767			(50,576	)
Non-credit portion of other-than-temporary impairments recognized in other comprehensive income		—			—			—			50
Amount reclassified into net income:
Held-to-maturity securities		(243	)		(307	)		(683	)		(1,172	)
Non-credit other-than-temporary impairments		780			1			1,085			9
Realized gains on available for sale securities		(10,683	)		(8,785	)		(18,637	)		(16,107	)
Total unrealized (losses) gains on investment securities		(19,134	)		(2,708	)		23,532			(67,796	)

Defined benefit pension and post-retirement plans:
Net actuarial gain		—			—			—			28,600
Amounts reclassified into net income:
Net actuarial loss		247			513			742			2,222
Prior service cost		—			—			—			6
Curtailment expense		—			—			—			11
Total defined benefit pension and post-retirement plans		247			513			742			30,839
Other comprehensive (loss) income		(18,887	)		(2,195	)		24,274			(36,957	)
Comprehensive income	$	34,275			30,458			124,751			44,126

Selective Insurance Group, Inc. & Consolidated Subsidiaries

Unaudited Consolidated Statements of Stockholders' Equity

	Nine Months ended September 30,
($ in thousands)	2014			2013
Common stock:
Beginning of year	$	198,240			196,388
Dividend reinvestment plan (shares: 44,322 – 2014; 49,964 – 2013)		89			100
Stock purchase and compensation plans (shares: 588,858 – 2014; 712,994 – 2013)		1,178			1,426
End of period		199,507			197,914

Additional paid-in capital:
Beginning of year		288,182			270,654
Dividend reinvestment plan		957			1,052
Stock purchase and compensation plans		11,286			12,361
End of period		300,425			284,067

Retained earnings:
Beginning of year		1,202,015			1,125,154
Net income		100,477			81,083
Dividends to stockholders ($0.39 per share – 2014 and 2013)		(22,344	)		(22,153	)
End of period		1,280,148			1,184,084

Accumulated other comprehensive income:
Beginning of year		24,851			54,040
Other comprehensive income (loss)		24,274			(36,957	)
End of period		49,125			17,083

Treasury stock:
Beginning of year		(559,360	)		(555,644	)
Acquisition of treasury stock (shares: 130,573 – 2014; 151,555 – 2013)		(2,920	)		(3,295	)
End of period		(562,280	)		(558,939	)
Total stockholders’ equity	$	1,266,925			1,124,209

Selective Insurance Group, Inc. & Consolidated Subsidiaries

Unaudited Consolidated Statements of Cash Flow

	Nine Months ended September 30,
($ in thousands)	2014			2013
Operating Activities:
Net Income	$	100,477			81,083

Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation and amortization		31,059			32,861
Sale of renewal rights		(8,000	)		—
Loss on disposal of discontinued operations		—			997
Stock-based compensation expense		7,421			7,428
Undistributed (gains) losses of equity method investments		(131	)		248
Net realized gains		(26,988	)		(21,940	)
Retirement income plan curtailment expense		—			16

Changes in assets and liabilities:
Increase in reserve for loss and loss expenses, net of reinsurance recoverables		86,887			112,876
Increase in unearned premiums, net of prepaid reinsurance		68,935			120,288
Decrease in net federal income taxes		33,596			8,990
Increase in premiums receivable		(66,816	)		(84,826	)
Increase in deferred policy acquisition costs		(16,700	)		(21,688	)
Increase in interest and dividends due or accrued		(82	)		(45	)
(Decrease) increase in accrued salaries and benefits		(13,958	)		8,286
(Decrease) increase in accrued insurance expenses		(12,545	)		6,895
Other-net		(25,036	)		(13,480	)
Net adjustments		57,642			156,906
Net cash provided by operating activities		158,119			237,989

Investing Activities:
Purchase of fixed income securities, available-for-sale		(560,493	)		(838,634	)
Purchase of equity securities, available-for-sale		(185,529	)		(112,742	)
Purchase of other investments		(8,498	)		(7,864	)
Purchase of short-term investments		(1,082,192	)		(1,619,948	)
Sale of subsidiary		—			1,225
Sale of fixed income securities, available-for-sale		35,499			6,851
Sale of short-term investments		1,074,850			1,662,340
Redemption and maturities of fixed income securities, held-to-maturity		56,375			87,952
Redemption and maturities of fixed income securities, available-for-sale		336,939			413,722
Sale of equity securities, available-for-sale		186,001			109,399
Distributions from other investments		13,514			10,546
Purchase of property and equipment		(9,178	)		(10,493	)
Sale of renewal rights		8,000			—
Net cash used in investing activities		(134,712	)		(297,646	)

Financing Activities:
Dividends to stockholders		(20,899	)		(20,532	)
Acquisition of treasury stock		(2,920	)		(3,295	)
Net proceeds from stock purchase and compensation plans		3,554			4,305
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		1,024			1,479
Repayment of capital lease obligations		(1,858	)		(768	)
Net cash (used in) provided by financing activities		(21,099	)		59,624
Net increase (decrease) in cash		2,308			(33	)
Cash, beginning of year		193			210
Cash, end of period	$	2,501			177

Selective Insurance Group, Inc.

Combined Insurance Company Subsidiaries

Statutory Balance Sheets

(unaudited)

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

ASSETS
Bonds	$	4,166,759		3,936,304			4,010,464
Common stocks		211,265		180,506			192,771
Affiliated mortgage loan		36,155		36,905			36,721
Other investments		172,505		174,064			173,856
Short-term investments		139,193		149,227			158,827
Total investments		4,725,877		4,477,006			4,572,639

Cash on hand and in banks		232		(32,507	)		(31,186	)
Interest and dividends due and accrued		37,460		35,915			37,267
Premiums receivable		588,789		567,753			522,907
Reinsurance recoverable on paid losses and expenses		10,558		9,036			10,059
Deferred tax recoverable		153,305		161,229			154,320
EDP equipment		567		890			913
Equities and deposits in pools and associations		9,966		9,623			9,555
Receivable for sold securities		723		441			7
Other assets		27,008		31,821			30,671
Total assets	$	5,554,485		5,261,207			5,307,152

LIABILITIES
Reserve for losses	$	2,408,287		2,316,960			2,341,476
Reinsurance payable on paid loss and loss expense		2,680		2,067			2,557
Reserve for loss expenses		475,933		447,838			455,983
Unearned premiums		985,089		962,357			916,155
Reserve for commissions payable		60,739		55,601			63,482
Ceded balances payable		30,036		33,087			33,721
Federal income tax payable		26,750		26,976			27,749
Premium and other taxes payable		18,068		28,201			27,870
Borrowed money		58,042		58,042			58,044
Reserve for dividends to policyholders		2,606		2,242			2,070
Reserves for unauthorized reinsurance		2,735		7,498			2,735
Payable for securities		44,712		9,429			-
Funds withheld on account of others		7,933		7,261			6,623
Accrued salaries and benefits		61,074		57,388			65,053
Other liabilities		46,704		51,463			47,203
Total liabilities		4,231,388		4,066,410			4,050,721


POLICYHOLDERS' SURPLUS
Capital		42,725		42,725			42,725
Paid in surplus		492,869		492,869			492,869
Unassigned surplus		787,503		659,203			720,837
Total policyholders' surplus		1,323,097		1,194,797			1,256,431
Total liabilities and policyholders' surplus	$	5,554,485		5,261,207			5,307,152

Selective Insurance Group, Inc.

Combined Insurance Company Subsidiaries

Statutory Statements Of Income

(unaudited)

	Quarter Ended September								Nine Months Ended September
($ in thousands)	2014				2013				2014				2013
UNDERWRITING
Net premiums written	$	495,121				492,748				1,451,694				1,405,049

Net premiums earned		462,639				437,568				1,382,759				1,284,760

Net losses paid		227,149				194,340				662,435				588,648
Change in reserve for losses		(12,187	)			34,582				66,811				90,103
Net losses incurred		214,962		46.5%		228,922		52.3%		729,246		52.7%		678,751		52.8%

Net loss expenses paid		50,339				44,939				139,178				133,548
Change in reserve for loss expenses		4,730				9,105				19,949				20,278
Net loss expenses incurred		55,069		11.9%		54,044		12.4%		159,127		11.5%		153,826		12.0%

Net underwriting expenses incurred		165,184		33.4%		157,251		31.9%		478,387		33.0%		455,731		32.4%

Total deductions		435,215				440,217				1,366,760				1,288,308
Statutory underwriting gain / (loss)		27,424				(2,649	)			15,999				(3,548	)

Net loss from premium balances charged off		(999	)			(671	)			(2,768	)			(2,021	)
Finance charges and other income		3,419				3,566				15,587				10,244
Total other income		2,420		-0.5%		2,895		-0.6%		12,819		-0.9%		8,223		-0.6%
Policyholders' dividends incurred		(1,156	)	0.2%		(1,326	)	0.3%		(3,943	)	0.3%		(3,393	)	0.3%
Total underwriting gain / (loss)		28,688		91.5%		(1,080	)	96.3%		24,875		96.6%		1,282		96.9%

INVESTMENT
Net investment income earned		33,778				32,278				105,925				99,620
Net realized gain		15,231				13,431				26,983				19,793
Total income before income tax		77,697				44,629				157,783				120,695

Federal income tax expense		19,099				10,250				32,052				42,937

Net income	$	58,598				34,379				125,731				77,758

Policyholders' Surplus
Surplus, beginning of period	$	1,292,961				1,170,612				1,256,431				1,050,107

Net income		58,598				34,379				125,731				77,758
Change in deferred taxes		(3,477	)			(1,865	)			(10,162	)			6,204
Change in net unrealized capital gains / (losses)		(9,553	)			(4,877	)			(4,414	)			3,675
Dividends to stockholders		(14,379	)			(6,662	)			(43,133	)			(25,444	)
Paid in surplus		-				-				-				57,125
Change in non-admitted assets		(1,336	)			2,271				(2,203	)			15,700
Change in Overfunded Contra Asset		(1,547	)			(1,184	)			(4,640	)			(11,091	)
Qual Pen Trans Liab		1,815				1,847				5,446				(32,032	)
Excess Plan Trans Liab		8				16				23				(562	)
PRL Plan Trans Liab		7				10				18				(1,189	)
Change in minimum pension liability		-				-				-				54,755
Surplus adjustments		-				250				-				(209	)

Net change in surplus for period		30,136				24,185				66,666				144,690

Surplus, end of period	$	1,323,097				1,194,797				1,323,097				1,194,797

Statutory underwriting gain / (loss)	$	28,688				(1,080	)			24,875				1,282

Adjustments under GAAP:
Deferred policy acquisition costs		7,595				12,132				16,700				21,687
Pension costs		(98	)			(101	)			(293	)			5,723
Other, net		(1,748	)			(800	)			(1,776	)			(1,897	)
GAAP underwriting gain	$	34,437				10,151				39,506				26,795

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

Selective Insurance Group, Inc. and Consolidated Subsidiaries

Alternative Investments

as of September 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		2,142,141		8,559,952		1,456,890			0.67		1.08
Silverpeak RE III	2008		15,000,000		7,919,066		2,652,115		42,619			0.07		0.44
Total - Real Estate			35,000,000		10,061,207		11,212,067		1,499,509			0.51		0.91

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		6,348,783		644,313			0.96		1.30
New Canaan V	2012		7,000,000		1,473,310		3,592,037		371,054			0.44		1.09
Centerfield Capital	2012		3,000,000		2,077,118		753,031		30,459			0.15		0.97
Total - Mezz. Financing			44,000,000		13,774,405		11,273,429		1,045,826			0.87		1.17

Distressed Debt
Varde VIII	2006		10,000,000		-		2,651,398		453,318			1.08		1.34
Distressed Managers III	2007		15,000,000		2,980,677		6,553,113		482,282			0.73		1.21
Total - Distressed Debt			25,000,000		2,980,677		9,204,511		935,600			0.88		1.27

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		2,685,586		451,688			1.63		1.91
NB Co-Invest	2006		15,000,000		1,476,418		7,231,016		1,046,329			0.93		1.43
Trilantic Capital Partners IV	2007		11,098,351		1,343,210		9,326,111		1,593,501			0.98		1.83
Trilantic Capital Partners V	2012		7,000,000		4,905,098		1,913,275		55,304			-		0.92
Total - Private Equity			48,098,351		9,180,673		21,569,369		3,149,794			1.27		1.79

Private Equity, Secondary Market
NB SOF	2005		12,000,000		899,494		3,568,070		189,047			1.02		1.34
Vintage IV	2007		20,000,000		4,120,521		12,285,725		647,761			0.72		1.35
NB SOF II	2008		12,000,000		1,957,874		7,210,638		947,791			0.91		1.49
Total - Pvt. Eq. Sec. Mkt.			44,000,000		6,977,889		23,064,433		1,784,600			0.85		1.39

Energy/Power Generation
ArcLight I	2002		15,000,000		-		14,357		(22,177	)		1.81		1.81
ArcLight II	2003		15,000,000		2,295,492		549,845		(458,712	)		1.38		1.41
ArcLight III	2006		15,000,000		2,037,794		5,069,447		794,945			1.09		1.41
Quintana Energy	2006		10,000,000		362,821		8,639,595		1,372,057			0.55		1.44
ArcLight IV	2007		10,000,000		2,287,578		2,385,608		1,689,951			1.20		1.43
Total - Energy/Power Generation			65,000,000		6,983,685		16,658,852		3,376,064			1.28		1.51

Venture Capital
Venture V	2001		9,600,000		350,000		7,114,700		884,943			0.63		1.39
Total - Venture Capital			9,600,000		350,000		7,114,700		884,943			0.63		1.39

TOTAL - ALTERNATIVE INVESTMENTS		$	270,698,351		50,308,535		100,097,361		12,676,336			1.00		1.39

(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

September 30, 2014

(unaudited)


($ in millions)	Fair Value		Unrealized Gain (Loss)			Weighted Average Credit Quality
AFS Fixed Income Portfolio:
U.S. government obligations	$	151.7		7.9		AA+
Foreign government obligations		27.9		0.8		AA-
State and municipal obligations		1,229.2		32.8		AA
Corporate securities		1,763.1		38.0		A-
Asset-backed securities (“ABS”)		147.0		0.4		AAA
Mortgage-backed securities (“MBS”)		648.7		3.5		AA+
Total AFS fixed income portfolio	$	3,967.6		83.4		AA-
State and Municipal Obligations:
General obligations	$	564.5		14.6		AA+
Special revenue obligations		664.7		18.2		AA
Total state and municipal obligations	$	1,229.2		32.8		AA
Corporate Securities:
Financial	$	541.7		11.5		A
Industrials		141.1		4.3		A-
Utilities		150.2		2.4		BBB+
Consumer discretionary		204.1		5.4		A-
Consumer staples		176.9		3.6		A-
Healthcare		169.5		4.3		A
Materials		109.8		2.4		BBB+
Energy		105.9		1.5		A-
Information technology		111.9		1.2		A+
Telecommunications services		49.2		1.1		BBB+
Other		2.8		0.3		AA
Total corporate securities	$	1,763.1		38.0		A-
ABS:
ABS	$	146.6		0.3		AAA
Sub-prime ABS1		0.4		0.1		D
Total ABS	$	147.0		0.4		AAA
MBS:
Government guaranteed agency commercial MBS (“CMBS”)	$	17.6		0.3		AA+
Other agency CMBS		10.6		(0.2	)	AA+
Non-agency CMBS		137.3		0.4		AA+
Government guaranteed agency residential MBS (“RMBS”)		35.9		1.0		AA+
Other agency RMBS		406.3		1.3		AA+
Non-agency RMBS		37.1		0.6		A-
Alternative-A (“Alt-A”) RMBS		3.9		0.1		A
Total MBS	$	648.7		3.5		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

September 30, 2014

(unaudited)


($ in millions)	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 Income Portfolio:
Foreign government obligations	$	5.4		5.4		—		0.1			0.1	AA+
State and municipal obligations		317.6		303.6		14.0		2.4			16.4	AA
Corporate securities		22.8		20.0		2.8		(0.3	)		2.5	A+
ABS		3.1		2.6		0.5		(0.5	)		—	AAA
MBS		5.3		4.5		0.8		(0.5	)		0.3	AAA
Total HTM fixed income portfolio	$	354.2		336.1		18.1		1.2			19.3	AA

State and Municipal Obligations:
General obligations	$	107.0		103.0		4.0		1.2			5.2	AA
Special revenue obligations		210.6		200.6		10.0		1.2			11.2	AA
Total state and municipal obligations	$	317.6		303.6		14.0		2.4			16.4	AA

Corporate Securities:
Financial	$	2.3		1.9		0.4		(0.1	)		0.3	A-
Industrials		6.7		5.7		1.0		(0.1	)		0.9	A+
Utilities		13.5		12.1		1.4		(0.1	)		1.3	A+
Consumer staples		0.3		0.3		—		—			—	AA
Total corporate securities	$	22.8		20.0		2.8		(0.3	)		2.5	A+

ABS:
ABS	$	0.7		0.7		—		—			—	AA
Alt-A ABS		2.4		1.9		0.5		(0.5	)		—	AAA
Total ABS	$	3.1		2.6		0.5		(0.5	)		—	AAA

MBS:
Non-agency CMBS	$	5.3		4.5		0.8		(0.5	)		0.3	AAA
Total MBS	$	5.3		4.5		0.8		(0.5	)		0.3	AAA

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SELECTIVE INSURANCE GROUP INC Reports