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_103013.htm
EX-99.1 - EXHIBIT 99.1 - SELECTIVE INSURANCE GROUP INC	exh_991.htm

Exhibit 99.2

Supplemental Investor Package

___________________________________________________

Third Quarter 2013

Investor Contact:

Jennifer DiBerardino

Senior Vice President, Investor Relations and Treasurer

Tel: 973-948-1364

jennifer.diberardino@selective.com

Selective Insurance Group, Inc.

Selected Balance Sheet Data (unaudited)

($ in thousands, except per share amounts)

	September 30,							September 30,							December 31,
	2013							2012							2012
						Unrecognized/							Unrecognized/							Unrecognized/
	Balance			Market		Unrealized		Balance			Market		Unrealized		Balance			Market		Unrealized
	Sheet			Value		Gain		Sheet			Value		Gain		Sheet			Value		Gain
Invested Assets:
Corporate bonds 1	$	2,533,612			2,540,760		41,013	$	2,223,077			2,234,897		119,877	$	2,239,284			2,250,536		110,822
Government and Municipal bonds		1,521,782			1,541,201		47,265		1,647,599			1,681,098		108,778		1,610,798			1,640,138		99,026
Total bonds		4,055,394			4,081,961		88,278		3,870,676			3,915,995		228,655		3,850,082			3,890,674		209,848
Equities		180,506			180,506		22,183		155,577			155,577		27,710		151,382			151,382		18,941
Short-term investments		172,087			172,087		-		184,878			184,878		-		214,479			214,479		-
Other investments		108,073			108,073		-		122,081			122,081		-		114,076			114,076		-
Total invested assets		4,516,060			4,542,627		110,461		4,333,212			4,378,531		256,365		4,330,019			4,370,611		228,789


Invested assets per $ of stockholders' equity		4.02							3.85							3.97

Total assets		6,266,345							5,879,941							6,794,216

Liabilities:
Reserve for losses and loss expenses		3,316,291							3,103,111							4,068,941
Unearned premium reserve		1,111,539							1,017,076							974,706

Total liabilities		5,142,136							4,755,563							5,703,624

Stockholders' equity		1,124,209							1,124,378							1,090,592

Total debt to capitalization ratio		25.9	%						21.5	%						22.0	%
Adjusted total debt to capitalization ratio 2		25.9	%						15.2	%						15.6	%

Book value per share		20.16							20.44							19.77

Book value per share excluding
unrealized gain or loss on bond portfolio		19.44							18.28							17.78

NPW per insurance segment employee 3		895							832							842

Statutory premiums to surplus ratio		1.5	x						1.5	x						1.6	x

Statutory surplus		1,194,797							1,088,494							1,050,107

1 Includes mortgage-backed and asset-backed securities.

2 For September 30 and December 31 of 2012, the adjusted debt to capitalization ratio reflects an estimated equity treatment of 90% applied to our $100 million Junior Subordinated Notes issued September 25, 2006 as applied by A.M. Best. These notes were redeemed in March of 2013, eliminating their effect on equity.

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

Selective Insurance Group, Inc.
Selected Income Statement Data (unaudited)
September 2013		THREE MONTHS ENDED September 30,												NINE MONTHS ENDED September 30,
($ in thousands, except per share amounts)		2013						2012						2013						2012
					Per diluted share						Per diluted share						Per diluted share						Per diluted share
Consolidated
Revenue		$	486,813					$	436,872						1,415,707					$	1,285,127
Operating income			23,922			0.42			18,982			0.34			67,819			1.20			34,414			0.62
Net realized gains (losses), after tax			8,731			0.15			(708	)		(0.01	)		14,261			0.25			2,241			0.04
Income from continuing operations			32,653			0.57			18,274			0.33			82,080			1.45			36,655			0.66
Loss on discontinued operations, after tax			-			-			-			-			(997	)		(0.02	)		-			-
Net income			32,653			0.57			18,274			0.33			81,083			1.43			36,655			0.66
Operating return on equity			8.6	%					6.9	%					8.2	%					4.2	%

Total Insurance Operations
Gross premiums written			592,902						538,919						1,685,768						1,549,141
Net premiums written			492,748						450,518						1,405,049						1,296,253
Net premiums earned			437,568						406,225						1,284,760						1,177,266
Underwriting gain (loss)	- before tax		10,151						861						26,795						(27,464	)
	- after tax		6,598			0.12			559			0.01			17,417			0.31			(17,852	)		(0.32	)
GAAP combined ratio			97.7	%					99.8	%					97.9	%					102.3	%

Total Standard lines
Net premiums earned			405,676						381,498						1,192,762						1,126,849
GAAP combined ratio			97.5	%					98.3	%					97.6	%					101.0	%
Standard Commercial lines
Net premiums earned			330,962						309,693						971,464						916,479
GAAP combined ratio			97.3	%					100.2	%					97.5	%					101.6	%
Standard Personal lines
Net premiums earned			74,714						71,805						221,298						210,370
GAAP combined ratio			98.2	%					89.9	%					98.0	%					98.6	%
Excess and Surplus lines
Net premiums earned			31,892						24,727						91,998						50,417
GAAP combined ratio			100.0	%					123.1	%					102.4	%					131.1	%

Investments
Net investment income	- before tax		32,457						30,650						99,330						97,284
	- after tax		24,510			0.43			23,494			0.42			75,049			1.32			73,979			1.33
Effective tax rate			24.5	%					23.3	%					24.4	%					24.0	%
Annual after-tax yield on investment portfolio															2.3	%					2.3	%
Annual after-tax, after-interest expense yield															1.9	%					2.0	%
Invested assets per $ of stockholders' equity															4.02						3.85

Other expenses (net of other income)
Interest expense	- before tax		(5,570	)					(4,725	)					(16,971	)					(14,148	)
	- after tax		(3,620	)		(0.06	)		(3,071	)		(0.05	)		(11,031	)		(0.19	)		(9,196	)		(0.17	)

Other Expense - after tax		$	(3,566	)		(0.07	)	$	(2,000	)		(0.04	)		(13,616	)		(0.24	)	$	(12,517	)		(0.22	)

Diluted weighted avg shares outstanding			56,900						55,862						56,719						55,717

Selective Insurance Group, Inc. and Consolidated Subsidiaries

GAAP Investment Income

(unaudited)

($ in thousands)

	For the three months ended						%			Year to Date						%
	September			September			Increase			September			September			Increase
	2013			2012			(Decrease)			2013			2012			(Decrease)
Investment Income:
Interest:
Fixed Maturity Securities		30,569			30,839			(0.9	)		90,956			93,948			(3.2	)
Short-term		21			36			(41.7	)		102			103			(1.0	)
Other Investments:
Alternative Investments		2,639			935			182.2			10,748			6,396			68.0
Other		-			(438	)		(100.0	)		(638	)		(936	)		31.8
Dividends		1,341			1,268			5.8			4,422			3,785			16.8
Miscellaneous		-			41			(100.0	)		-			105			(100.0	)
		34,570			32,681			5.8			105,590			103,401			2.1

Investment Expense		2,113			2,031			4.0			6,260			6,117			2.3

Net Investment Income Before Tax		32,457			30,650			5.9			99,330			97,284			2.1

Tax		7,947			7,156			11.1			24,281			23,305			4.2

Net Investment Income After Tax	$	24,510			23,494			4.3		$	75,049			73,979			1.4

Net Investment Income per Share	$	0.43			0.42			2.4		$	1.32			1.33			(0.8	)


Effective Tax Rate		24.5	%		23.3	%					24.4	%		24.0	%

Average Yields :

Fixed Maturity Securities:
Pre Tax											3.07	%		3.35	%
After Tax											2.32	%		2.53	%

Portfolio:
Pre Tax											2.99	%		3.07	%
After Tax											2.26	%		2.34	%



	For the three months ended:									Year to date:
	September			September						September			September
Net Realized Gains (Losses)		2013			2012						2013			2012
Total Fixed Maturities		626			1,302						2,188			1,663
Total Equity Securities		12,885			(2,390	)					22,539			1,786
Total Short Term		-			-						-			(2	)
Total Other Investments		(80	)		-						(2,787	)		1

Total		13,431			(1,088	)					21,940			3,448
Net of Tax		8,731			(708	)					14,261			2,241

As of September 30, 2013 year-to-date new money rates for fixed maturity securities were 1.87% on a pre-tax basis and 1.35% on an after tax-basis.

Selective Insurance Group, Inc.

2013 Statutory Results by Line of Business

3rd Quarter 2013 (unaudited)

($ in thousands)

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

Homeowners	$	37,224		4.7	%	$	32,373		8.2	%		58.1	%		9.3	%		32.2	%		0.0	%		99.6	%		70.5	%	$	(1,423	)
Auto		39,664		(0.5	)%		38,514		0.6	%		64.9	%		11.7	%		30.7	%		0.0	%		107.4	%		112.8	%		(3,203	)
Other (including flood)		3,912		(2.7	)%		3,827		6.6	%		43.9	%		9.8	%		(77.4	)%		0.0	%		(23.6	)%		(14.8	)%		4,785
Total	$	80,800		1.7	%	$	74,714		4.1	%		61.0	%		9.9	%		26.7	%		0.0	%		97.6	%		88.8	%	$	159

Standard Commercial Lines:

Commercial property	$	69,578		11.8	%	$	57,004		9.2	%		27.5	%		5.8	%		33.8	%		(0.1	)%		67.0	%		81.3	%	$	14,565
Workers compensation		70,461		6.2	%		66,510		1.4	%		73.4	%		15.3	%		27.1	%		2.3	%		118.2	%		115.9	%		(13,178	)
General liability		115,865		9.3	%		100,925		7.6	%		44.6	%		19.4	%		32.1	%		0.0	%		96.2	%		100.4	%		(977	)
Auto		91,715		13.6	%		79,137		8.8	%		59.0	%		8.1	%		30.1	%		(0.1	)%		97.1	%		95.7	%		(1,462	)
Business owners policies		20,320		11.7	%		19,629		10.6	%		58.4	%		6.1	%		37.6	%		0.0	%		102.1	%		101.2	%		(680	)
Bonds		5,198		12.4	%		4,705		(0.2	)%		13.6	%		5.9	%		60.6	%		0.0	%		80.1	%		88.0	%		636
Other		3,234		2.1	%		3,052		4.5	%		0.0	%		0.1	%		53.1	%		0.0	%		53.2	%		52.9	%		1,332
Total	$	376,373		10.3	%	$	330,962		6.9	%		50.9	%		12.4	%		31.9	%		0.4	%		95.6	%		98.8	%	$	235

Total Standard Operations	$	457,173		8.7	%	$	405,676		6.3	%		52.8	%		11.9	%		31.0	%		0.3	%		96.0	%		96.9	%	$	394

E&S		35,575		19.5	%		31,892		29.0	%		47.1	%		17.6	%		35.8	%		0.0	%		100.5	%		121.6	%		(1,475	)

Total Insurance Operations	$	492,748		9.4	%	$	437,568		7.7	%		52.3	%		12.4	%		31.3	%		0.3	%		96.3	%		98.4	%	$	(1,081	)

Note: Some amounts may not foot due to rounding.


				2013			2012
	Losses Paid		$	194,340		$	211,941
	LAE Paid			44,939			43,322
	Total Paid		$	239,279		$	255,263

Selective Insurance Group, Inc.

2013 Statutory Results by Line of Business

September 2013 YTD (unaudited)

($ in thousands)

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

Homeowners	$	100,126		6.8	%	$	95,211		9.8	%		56.3	%		9.7	%		32.4	%		0.0	%		98.4	%		93.6	%	$	(78	)
Auto		117,540		0.2	%		115,432		1.6	%		66.2	%		12.2	%		30.2	%		0.0	%		108.6	%		111.0	%		(10,552	)
Other (including flood)		10,549		(2.0	)%		10,655		6.1	%		57.1	%		8.7	%		(99.4	)%		0.0	%		(33.6	)%		(1.4	)%		14,158
Total	$	228,215		2.9	%	$	221,298		5.2	%		61.5	%		9.9	%		26.2	%		0.0	%		97.6	%		98.4	%	$	3,528

Standard Commercial Lines:

Commerical property	$	186,531		10.7	%	$	165,356		8.8	%		35.8	%		5.7	%		36.3	%		0.0	%		77.8	%		93.7	%	$	28,963
Workers compensation		214,455		4.0	%		197,449		(0.3	)%		74.4	%		15.7	%		26.5	%		1.8	%		118.4	%		113.1	%		(40,900	)
General liability		335,503		9.7	%		298,394		7.9	%		45.4	%		17.3	%		33.1	%		0.0	%		95.7	%		101.0	%		654
Auto		257,841		11.4	%		230,191		7.2	%		57.6	%		8.3	%		31.0	%		(0.1	)%		96.8	%		96.1	%		(1,062	)
Business owners policies		60,623		11.5	%		56,794		9.5	%		35.7	%		10.1	%		39.6	%		0.0	%		85.4	%		101.3	%		6,779
Bonds		15,563		5.1	%		14,244		1.2	%		13.6	%		4.7	%		60.8	%		0.0	%		79.2	%		86.6	%		2,168
Other		9,698		4.5	%		9,037		(1.8	)%		(0.2	)%		0.5	%		46.5	%		0.0	%		46.7	%		45.3	%		4,507
Total	$	1,080,213		9.0	%	$	971,464		6.0	%		51.1	%		12.1	%		32.7	%		0.3	%		96.2	%		100.5	%	$	1,109

Total Standard Operations	$	1,308,428		7.9	%	$	1,192,762		5.8	%		53.0	%		11.7	%		31.6	%		0.3	%		96.6	%		100.1	%	$	4,637

E&S		96,621		15.2	%		91,998		82.5	%		50.3	%		15.9	%		35.7	%		0.0	%		101.9	%		120.3	%	$	(3,356	)

Total Insurance Operations	$	1,405,049		8.4	%	$	1,284,760		9.1	%		52.8	%		12.0	%		31.8	%		0.3	%		96.9	%		101.2	%	$	1,282

Note: Some amounts may not foot due to rounding.


				2013			2012
	Losses Paid		$	588,648		$	650,956
	LAE Paid			133,548			127,889
	Total Paid		$	722,196		$	778,845

SELECTIVE INSURANCE GROUP, INC. CONSOLIDATED BALANCE SHEETS	Unaudited
($ in thousands, except share amounts)	September 30, 2013			December 31, 2012
ASSETS
Investments:
Fixed maturity securities, held-to-maturity – at carrying value (fair value: $448,529 – 2013; $594,661 – 2012)	$	421,962			554,069
Fixed maturity securities, available-for-sale – at fair value (amortized cost: $3,573,751 – 2013; $3,130,683 – 2012)		3,633,432			3,296,013
Equity securities, available-for-sale – at fair value (cost: $158,323 – 2013; $132,441 – 2012)		180,506			151,382
Short-term investments (at cost which approximates fair value)		172,087			214,479
Other investments		108,073			114,076
Total investments		4,516,060			4,330,019
Cash		177			210
Interest and dividends due or accrued		36,044			35,984
Premiums receivable, net of allowance for uncollectible accounts of: $4,513 – 2013; $3,906 – 2012		569,214			484,388
Reinsurance recoverables, net		555,579			1,421,109
Prepaid reinsurance premiums		149,182			132,637
Current federal income tax		1,551			2,569
Deferred federal income tax		131,603			119,136
Property and equipment – at cost, net of accumulated depreciation and amortization of: $176,718 – 2013; $169,428 – 2012		50,020			47,131
Deferred policy acquisition costs		177,211			155,523
Goodwill		7,849			7,849
Other assets		71,855			57,661
Total assets	$	6,266,345			6,794,216

LIABILITIES AND STOCKHOLDERS’ EQUITY
Liabilities:
Reserve for loss and loss expenses	$	3,316,291			4,068,941
Unearned premiums		1,111,539			974,706
Notes payable		392,407			307,387
Accrued salaries and benefits		116,682			152,396
Other liabilities		205,217			200,194
Total liabilities	$	5,142,136			5,703,624

Stockholders’ Equity:
Preferred stock of $0 par value per share:	$	—			—
Authorized shares 5,000,000; no shares issued or outstanding
Common stock of $2 par value per share:
Authorized shares 360,000,000
Issued: 98,957,182 – 2013; 98,194,224 – 2012		197,914			196,388
Additional paid-in capital		284,067			270,654
Retained earnings		1,184,084			1,125,154
Accumulated other comprehensive income		17,083			54,040
Treasury stock – at cost (shares: 43,182,331 – 2013; 43,030,776 – 2012)		(558,939	)		(555,644	)
Total stockholders’ equity		1,124,209			1,090,592
Commitments and contingencies
Total liabilities and stockholders’ equity	$	6,266,345			6,794,216

SELECTIVE INSURANCE GROUP, INC. UNAUDITED CONSOLIDATED STATEMENTS OF INCOME
	Quarter ended September 30,						Nine Months ended September 30,
($ in thousands, except per share amounts)	2013			2012			2013			2012
Revenues:
Net premiums earned	$	437,568			406,225			1,284,760			1,177,266
Net investment income earned		32,457			30,650			99,330			97,284
Net realized gains (losses):
Net realized investment gains		14,111			1,856			25,124			6,907
Other-than-temporary impairments		(680	)		(921	)		(3,107	)		(1,218	)
Other-than-temporary impairments on fixed maturity securities recognized in other comprehensive income		—			(2,023	)		(77	)		(2,241	)
Total net realized gains (losses)		13,431			(1,088	)		21,940			3,448
Other income		3,357			1,085			9,677			7,129
Total revenues		486,813			436,872			1,415,707			1,285,127

Expenses:
Loss and loss expense incurred		283,317			272,251			832,760			813,060
Policy acquisition costs		145,314			131,849			428,570			391,026
Interest expense		5,570			4,725			16,971			14,148
Other expenses		8,127			7,733			27,852			24,080
Total expenses		442,328			416,558			1,306,153			1,242,314

Income from continuing operations, before federal income tax		44,485			20,314			109,554			42,813

Federal income tax expense (benefit):
Current		6,367			(5,088	)		20,041			1,590
Deferred		5,465			7,128			7,433			4,568
Total federal income tax expense		11,832			2,040			27,474			6,158

Net income from continuing operations		32,653			18,274			82,080			36,655

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

Net income	$	32,653			18,274			81,083			36,655

Earnings per share:
Basic net income from continuing operations	$	0.59			0.33			1.48			0.67
Basic net loss from discontinued operations		—			—			(0.02	)		—
Basic net income	$	0.59			0.33			1.46			0.67

Diluted net income from continuing operations	$	0.57			0.33			1.45			0.66
Diluted net loss from discontinued operations		—			—			(0.02	)		—
Diluted net income	$	0.57			0.33			1.43			0.66

Dividends to stockholders	$	0.13			0.13			0.39			0.39

SELECTIVE INSURANCE GROUP, INC. UNAUDITED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME
	Quarter ended September 30,						Nine Months ended September 30,
($ in thousands)	2013			2012			2013			2012
Net income	$	32,653			18,274			81,083			36,655

Other comprehensive income, net of tax:
Unrealized gains (losses) on investment securities:
Unrealized holding gains (losses) arising during period		6,383			23,803			(50,576	)		41,777
Non-credit portion of other-than-temporary impairments recognized in other comprehensive income		—			1,315			50			1,457
Amount reclassified into net income:
Held-to-maturity securities		(307	)		(219	)		(1,172	)		(1,236	)
Non-credit other-than-temporary impairment		1			6			9			177
Realized (gains) losses on available for sale securities		(8,785	)		674			(16,107	)		(2,243	)
Total unrealized (losses) gains on investment securities		(2,708	)		25,579			(67,796	)		39,932

Defined benefit pension and post-retirement plans:
Net actuarial gain		—			—			28,600			—
Amounts reclassified into net income:
Net actuarial loss		513			904			2,222			2,712
Prior service cost		—			24			6			73
Curtailment expense		—			—			11			—
Total defined benefit pension and post-retirement plans		513			928			30,839			2,785
Other comprehensive (loss) income		(2,195	)		26,507			(36,957	)		42,717
Comprehensive income	$	30,458			44,781			44,126			79,372

SELECTIVE INSURANCE GROUP, INC. UNAUDITED CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY	Nine Months ended September 30,
($ in thousands)	2013			2012
Common stock:
Beginning of year	$	196,388			194,494
Dividend reinvestment plan (shares: 49,964 – 2013; 68,640 – 2012)		100			137
Stock purchase and compensation plans (shares: 712,994 – 2013; 698,723 – 2012)		1,426			1,397
End of period		197,914			196,028

Additional paid-in capital:
Beginning of year		270,654			257,370
Dividend reinvestment plan		1,052			1,064
Stock purchase and compensation plans		12,361			9,093
End of period		284,067			267,527

Retained earnings:
Beginning of year		1,125,154			1,116,319
Net income		81,083			36,655
Dividends to stockholders ($0.39 per share – 2013 and 2012)		(22,153	)		(21,859	)
End of period		1,184,084			1,131,115

Accumulated other comprehensive income:
Beginning of year		54,040			42,294
Other comprehensive (loss) income		(36,957	)		42,717
End of period		17,083			85,011

Treasury stock:
Beginning of year		(555,644	)		(552,149	)
Acquisition of treasury stock (shares: 151,555 – 2013; 176,513 – 2012)		(3,295	)		(3,154	)
End of period		(558,939	)		(555,303	)
Total stockholders’ equity	$	1,124,209			1,124,378

SELECTIVE INSURANCE GROUP, INC. UNAUDITED CONSOLIDATED STATEMENTS OF CASH FLOW	Nine Months ended September 30,
($ in thousands)	2013			2012
Operating Activities
Net income	$	81,083			36,655

Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation and amortization		32,861			29,386
Loss on disposal of discontinued operations		997			—
Stock-based compensation expense		7,428			6,263
Undistributed losses of equity method investments		248			1,090
Net realized gains		(21,940	)		(3,448	)
Retirement income plan curtailment expense		16			—

Changes in assets and liabilities:
Increase in reserve for losses and loss expenses, net of reinsurance recoverables		112,876			37,463
Increase in unearned premiums, net of prepaid reinsurance and advance premiums		120,667			119,269
Decrease (increase) in net federal income taxes		8,990			(1,050	)
Increase in premiums receivable		(84,826	)		(53,659	)
Increase in deferred policy acquisition costs		(21,688	)		(25,744	)
Decrease (increase) in interest and dividends due or accrued		(45	)		721
Increase in accrued salaries and benefits		8,286			5,365
Increase in accrued insurance expenses		6,895			299
Other-net		(13,859	)		15,144
Net adjustments		156,906			131,099
Net cash provided by operating activities		237,989			167,754

Investing Activities
Purchase of fixed maturity securities, available-for-sale		(838,634	)		(676,408	)
Purchase of equity securities, available-for-sale		(112,742	)		(41,004	)
Purchase of other investments		(7,864	)		(9,050	)
Purchase of short-term investments		(1,619,948	)		(1,231,519	)
Purchase of subsidiary		—			255
Sale of subsidiary		1,225			600
Sale of fixed maturity securities, available-for-sale		6,851			92,170
Sale of short-term investments		1,662,340			1,263,684
Redemption and maturities of fixed maturity securities, held-to-maturity		87,952			91,665
Redemption and maturities of fixed maturity securities, available-for-sale		413,722			297,980
Sale of equity securities, available-for-sale		109,399			58,749
Distributions from other investments		10,546			13,910
Sale of other investments		—			1
Purchase of property and equipment		(10,493	)		(9,382	)
Net cash used in investing activities		(297,646	)		(148,349	)

Financing Activities
Dividends to stockholders		(20,532	)		(20,188	)
Acquisition of treasury stock		(3,295	)		(3,154	)
Net proceeds from stock purchase and compensation plans		4,305			2,586
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		1,479			904
Repayments of capital lease obligations		(768	)		—
Net cash provided by (used in) financing activities		59,624			(19,852	)
Net decrease in cash		(33	)		(447	)
Cash, beginning of year		210			762
Cash, end of period	$	177			315

Selective Insurance Group, Inc.

Combined Insurance Company Subsidiaries

Unaudited Statutory Balance Sheets

($ in thousands)

	Sep-30			Sep-30			Dec-31
	2013			2012			2012

ASSETS
Bonds	$	3,936,304			3,606,161			3,617,371
Common stocks		180,506			155,577			151,382
Affiliated mortgage loan		36,905			37,618			37,443
Other investments		174,064			188,131			180,110
Short-term investments		149,227			198,334			208,845
Total investments		4,477,006			4,185,821			4,195,151

Cash on hand and in banks		(32,507	)		(42,644	)		(76,957	)
Interest and dividends due and accrued		35,915			35,496			35,979
Premiums receivable		567,753			518,142			482,227
Reinsurance recoverable on paid losses and expenses		9,036			9,200			11,354
Deferred tax recoverable		161,229			150,194			147,495
EDP equipment		890			1,332			1,372
Equities and deposits in pools and associations		9,623			7,491			12,734
Receivable for sold securities		441			337			257
Other assets		31,821			31,489			28,541
Total assets	$	5,261,207			4,896,858			4,838,153

LIABILITIES
Reserve for losses	$	2,316,960			2,191,838			2,226,858
Reinsurance payable on paid loss and loss expense		2,067			2,191			2,298
Reserve for loss expenses		447,838			433,502			427,560
Unearned premiums		962,357			878,291			842,068
Reserve for commissions payable		55,601			47,032			52,304
Ceded balances payable		33,087			17,711			271
Federal income tax payable		26,976			8,671			5,346
Premium and other taxes payable		28,201			21,344			24,604
Borrowed money		58,042			58,042			58,044
Reserve for dividends to policyholders		2,242			3,370			2,665
Reserves for unauthorized reinsurance		7,498			1,785			7,498
Payable for securities		9,429			36,944			7,682
Funds withheld on account of others		7,261			6,164			11,231
Accrued salaries and benefits		57,388			85,308			102,070
Other liabilities		51,463			16,171			17,547
Total liabilities		4,066,410			3,808,364			3,788,046


POLICYHOLDERS' SURPLUS
Capital		42,725			42,625			42,725
Paid in surplus		492,869			435,844			435,744
Unassigned surplus		659,203			610,025			571,638
Total policyholders' surplus		1,194,797			1,088,494			1,050,107
Total liabilities and policyholders' surplus	$	5,261,207			4,896,858			4,838,153

Selective Insurance Group, Inc.

Combined Insurance Company Subsidiaries

Unaudited Statutory Statements Of Income

($ in thousands)

	Three Months Ended										Nine Months Ended
	September										September

UNDERWRITING	2013					2012					2013					2012


Net premiums written		492,748					450,518					1,405,049					1,296,253

Net premiums earned		437,568					406,225					1,284,760					1,177,266


Net losses paid		194,340					211,941					588,648					650,956
Change in reserve for losses		34,582					14,399					90,103					18,810
Net losses incurred		228,922		52.3	%		226,340		55.7	%		678,751		52.8	%		669,766		56.9	%
Net loss expenses paid		44,939					43,322					133,548					127,889
Change in reserve for loss expenses		9,105					2,230					20,278					14,960
Net loss expenses incurred		54,044		12.4	%		45,552		11.2	%		153,826		12.0	%		142,849		12.1	%
Net underwriting expenses incurred		157,251		31.9	%		143,322		31.8	%		455,731		32.4	%		419,086		32.4	%
Total deductions		440,217					415,214					1,288,308					1,231,701
Statutory underwriting loss		(2,649	)				(8,989	)				(3,548	)				(54,435	)



Net loss from premium balances charged off		(671	)				(566	)				(2,021	)				(2,671	)
Finance charges and other income		3,566					2,658					10,244					7,553
Total other income		2,895		-0.6	%		2,092		-0.5	%		8,223		-0.6	%		4,882		-0.4	%
Policyholders' dividends incurred		(1,326	)	0.3	%		(685	)	0.2	%		(3,393	)	0.3	%		(2,829	)	0.2	%
Total underwriting (loss) gain		(1,080	)	96.3	%		(7,582	)	98.4	%		1,282		96.9	%		(52,382	)	101.2	%


INVESTMENT
Net investment income earned		32,278					31,282					99,620					98,554
Net realized gain (loss)		13,431					(1,224	)				19,793					3,309
Total income before federal income tax		44,629					22,476					120,695					49,481
Federal income tax expense		10,250					2,108					42,937					13,230


Net income		34,379					20,368					77,758					36,251


Policyholders' Surplus
Surplus, beginning of period		1,170,612					1,067,881					1,050,107					1,062,707


Net income		34,379					20,368					77,758					36,251
Change in deferred taxes		(1,865	)				(2,940	)				6,204					4,724
Change in unrealized gains		(4,877	)				6,578					3,675					8,619
Dividends to stockholders		(6,662	)				(151,239	)				(25,444	)				(179,713	)
Change in cumulative effect of acctg principle		-					-					-					44,296
Paid in common stock		-					8,400					-					10,300
Paid in surplus		-					130,722					57,125					130,722
Surplus - transferred to capital		-					-					-					(1,900	)
Change in non-admitted assets		2,271					8,723					15,700					16,758
Change in additional admitted deferred taxes		-					-					-					(44,296	)
Change in Overfunded Contra Asset		(1,184	)				-					(11,091	)				-
Qualified Pension Transitional Liability		1,847					-					(32,032	)				-
Excess Plan Transitional Liability		16					-					(562	)				-
PRL Plan Transitional Liability		10					-					(1,189	)				-
Change in minimum pension liability		-					-					54,755					-
Surplus adjustments		250					1					(209	)				26


Net change in surplus for period		24,185					20,613					144,690					25,787


Surplus, end of period		1,194,797					1,088,494					1,194,797					1,088,494


Statutory underwriting (loss) gain		(1,080	)				(7,582	)				1,282					(52,382	)

Adjustments under GAAP:
Deferred policy acquisition costs		12,132					9,106					21,687					25,744
Pension costs		(101	)				70					5,723					210
Other, net		(800	)				(733	)				(1,897	)				(1,036	)
GAAP underwriting gain (loss)		10,151					861					26,795					(27,464	)

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

Selective Insurance Group, Inc. and Consolidated Subsidiaries

Alternative Investments

as of September 30, 2013

(unaudited)

	Inception	Original		Remaining		Current		YTD			DPI(1)		TVPI(2)
Fund	Year	Commitment		Commitment		Market Value		Income			Ratio		Ratio
Real Estate
Silverpeak RE II	2005		20,000,000		2,230,449		9,604,139		759,615			0.53		0.99
Silverpeak RE III	2008		15,000,000		7,974,598		2,780,185		(126,433	)		0.04		0.43
Total - Real Estate			35,000,000		10,205,047		12,384,324		633,182			0.40		0.85
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		8,998,702		861,076			0.75		1.29
New Canaan V	2012		7,000,000		4,344,571		2,589,099		154,038			0.04		1.02
Centerfield Capital	2012		3,000,000		2,077,118		753,836		(38,307	)		0.07		0.89
Total - Mezz. Financing			44,000,000		18,795,665		12,921,215		1,095,638			0.76		1.15
Distressed Debt
Varde VIII	2006		10,000,000		-		4,135,663		908,815			0.85		1.27
Distressed Managers III	2007		15,000,000		2,964,514		7,775,048		1,360,633			0.56		1.14
Total - Distressed Debt			25,000,000		2,964,514		11,910,711		2,269,448			0.68		1.19
Private Equity
Prospector	1997		5,000,000		-		410,216		-			2.79		2.88
Trilantic Capital Partners III	2004		10,000,000		1,443,707		1,773,098		208,472			1.61		1.80
NB Co-Invest	2006		15,000,000		1,606,799		7,483,266		320,798			0.82		1.34
Trilantic Capital Partners IV	2007		11,098,351		1,353,709		8,381,980		1,251,845			0.78		1.56
Trilantic Capital Partners V	2012		7,000,000		6,097,572		902,428		-			-		1.00
Total - Private Equity			48,098,351		10,501,787		18,950,988		1,781,115			1.22		1.69
Private Equity, Secondary Market
NB SOF	2005		12,000,000		899,494		5,393,868		339,030			0.83		1.31
Vintage IV	2007		20,000,000		4,098,660		12,754,258		1,038,197			0.64		1.30
NB SOF II	2008		12,000,000		2,704,427		7,806,012		943,576			0.71		1.44
Total - Pvt. Eq. Sec. Mkt.			44,000,000		7,702,582		25,954,139		2,320,803			0.71		1.34
Energy/Power Generation
ArcLight I	2002		15,000,000		-		86,393		(12,710	)		1.80		1.81
ArcLight II	2003		15,000,000		2,295,492		1,263,967		(425,242	)		1.38		1.45
ArcLight III	2006		15,000,000		2,037,794		6,231,613		1,738,423			0.94		1.33
Quintana Energy	2006		10,000,000		455,080		7,014,622		446,703			0.54		1.27
ArcLight IV	2007		10,000,000		2,287,578		2,452,690		258,653			1.05		1.29
Total - Energy/Power Generation			65,000,000		7,075,944		17,049,285		2,005,827			1.22		1.46
Venture Capital
Venture V	2001		9,600,000		400,000		7,018,382		641,897			0.50		1.27
Total - Venture Capital			9,600,000		400,000		7,018,382		641,897			0.50		1.27
TOTAL - ALTERNATIVE INVESTMENTS		$	270,698,351		57,645,538		106,189,044		10,747,910			0.90		1.33

(1) Distributed to paid in ratio

(2) Total value to paid in ratio

Exhibit may not foot due to rounding

Selective Insurance Group, Inc. and Consolidated Subsidiaries

Municipal Bond Portfolio

State and Repayment Source Composition

September 30, 2013

($ in thousands)

(unaudited)

Exposure = 30% Held-to-Maturity; 70% Available-for-Sale

Repayment Source Composition by State

Market Values

State	Revenue		% of State			General Obligation (GO)-Local		% of State			General Obligation (GO)-State		% of State			TX - Permanent School Fund (PSF)		% of State			Total		% of Total
TX		41,701		47	%		45,993		52	%		1,079		1	%		-		0	%		88,773		7	%
TX-PSF		-		0	%		-		0	%		-		0	%		23,308		100	%		23,308		2	%
WA		51,569		56	%		34,877		37	%		6,717		7	%		-		0	%		93,163		7	%
NY		68,579		88	%		9,735		12	%		-		0	%		-		0	%		78,314		6	%
FL		52,909		78	%		-		0	%		15,139		22	%		-		0	%		68,048		5	%
AZ		53,279		87	%		7,923		13	%		-		0	%		-		0	%		61,202		5	%
CO		16,741		34	%		31,824		66	%		-		0	%		-		0	%		48,565		4	%
MO		18,846		42	%		16,349		36	%		10,065		22	%		-		0	%		45,260		3	%
CA		41,168		93	%		3,299		7	%		-		0	%		-		0	%		44,467		3	%
NC		23,328		55	%		13,133		31	%		5,924		14	%		-		0	%		42,385		3	%
OH		19,831		51	%		9,436		25	%		9,440		24	%		-		0	%		38,707		3	%
Pre-refunded		51,397		48	%		45,893		43	%		4,250		4	%		5,314		5	%		106,854		8	%
Other		308,656		53	%		153,772		26	%		123,668		21	%		-		0	%		586,096		44	%
Grand Total		748,004		57	%		372,234		28	%		176,282		13	%		28,622		2	%		1,325,142		100	%

Selective Insurance Group, Inc. and Consolidated Subsidiaries

Credit Quality of Available-for-Sale Fixed Maturity Securities

September 30, 2013

($ in millions)

(Unaudited)

	Fair Value		Unrealized Gain (Loss)			Weighted Average Credit Quality
AFS Fixed Maturity Portfolio:
U.S. government obligations	$	180.8		11.6		AA+
Foreign government obligations		29.7		0.9		AA-
State and municipal obligations		929.5		11.1		AA
Corporate securities		1,663.1		33.5		A
Mortgage-backed securities (“MBS”)		679.5		2.0		AA+
Asset-backed securities (“ABS”)		150.8		0.6		AAA
Total AFS fixed maturity portfolio	$	3,633.4		59.7		AA-
State and Municipal Obligations:
General obligations	$	438.6		5.8		AA+
Special revenue obligations		490.9		5.3		AA
Total state and municipal obligations	$	929.5		11.1		AA
Corporate Securities:
Financial	$	522.7		13.0		A
Industrials		112.2		4.1		A-
Utilities		143.5		1.0		A-
Consumer discretionary		189.4		3.6		A-
Consumer staples		164.2		4.3		A
Healthcare		170.8		4.0		A
Materials		94.9		1.4		BBB+
Energy		88.0		1.2		A-
Information technology		105.6		(0.2	)	A+
Telecommunications services		64.3		0.6		BBB+
Other		7.5		0.5		AA+
Total corporate securities	$	1,663.1		33.5		A
MBS:
Government guaranteed agency commercial mortgage-backed securities ("CMBS")	$	35.5		1.0		AA+
Other agency CMBS		9.1		(0.3	)	AA+
Non-agency CMBS		107.4		(1.2	)	AA
Government guaranteed agency residential MBS ("RMBS")		61.4		1.8		AA+
Other agency RMBS		418.9		0.1		AA+
Non-agency RMBS		42.0		0.5		A-
Alternative-A (“Alt-A”) RMBS		5.2		0.1		A+
Total MBS	$	679.5		2.0		AA+
ABS:
ABS	$	150.0		0.5		AAA
Sub-prime ABS1, 2		0.8		0.1		CCC
Total ABS	$	150.8		0.6		AAA

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

2Subprime ABS consists of one security whose issuer is currently expected by rating agencies to default on its obligations.

Selective Insurance Group, Inc. and Consolidated Subsidiaries

Credit Quality of Held-to-Maturity Securities

September 30, 2013

($ in millions)

(Unaudited)


	Fair Value		Carry Value		Unrecognized Holding Gain		Unrealized Gain (Loss) in Accumulated Other Comprehensive Income			Total Unrealized/ Unrecognized Gain		Weighted Average Credit Quality
HTM Fixed Maturity Portfolio:
Foreign government obligations	$	5.6		5.5		0.1		0.2			0.3	AA+
State and municipal obligations		395.6		376.3		19.3		4.1			23.4	AA
Corporate securities		31.8		28.8		3.0		(0.5	)		2.5	A
MBS		9.6		6.3		3.3		(1.0	)		2.3	AA
ABS		5.9		5.1		0.8		(0.8	)		—	A+
Total HTM portfolio	$	448.5		422.0		26.5		2.0			28.5	AA
State and Municipal Obligations:
General obligations	$	124.2		118.7		5.5		2.3			7.8	AA
Special revenue obligations		271.4		257.6		13.8		1.8			15.6	AA
Total state and municipal obligations	$	395.6		376.3		19.3		4.1			23.4	AA
Corporate Securities:
Financial	$	7.4		6.8		0.6		(0.2	)		0.4	BBB+
Industrials		7.9		6.8		1.1		(0.2	)		0.9	A
Utilities		14.6		13.3		1.3		(0.1	)		1.2	A+
Consumer discretionary		1.9		1.9		—		—			—	AA
Total corporate securities	$	31.8		28.8		3.0		(0.5	)		2.5	A
MBS:
Non-agency CMBS	$	9.6		6.3		3.3		(1.0	)		2.3	AA
Total MBS	$	9.6		6.3		3.3		(1.0	)		2.3	AA
ABS:
ABS	$	3.4		3.3		0.1		(0.1	)		—	BBB+
Alt-A ABS		2.5		1.8		0.7		(0.7	)		—	AAA
Total ABS	$	5.9		5.1		0.8		(0.8	)		—	A+

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SELECTIVE INSURANCE GROUP INC Reports