UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, DC 20549

FORM 10-Q

(Mark One)

☒ QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended: ~~June 30, 2021~~March 31, 2022

☐ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from_____________________________to_____________________________

Commission File Number: 001-33067

SELECTIVE INSURANCE GROUP, INC.

(Exact Name of Registrant as Specified in Its Charter)


New Jersey						22-2168890
(State or Other Jurisdiction of Incorporation or Organization)						(I.R.S. Employer Identification No.)

40 Wantage Avenue

Branchville, New Jersey 07890

(Address of Principal Executive Offices) (Zip Code)


973			948-3000
(Registrant’s Telephone Number, Including Area Code)

(Former Name, Former Address and Former Fiscal Year, if Changed Since Last Report)

Securities registered pursuant to Section 12(b) of the Act:

Title of each class

Trading Symbol (s)

Name of each exchange on which registered

Common Stock, par value $2 per share

SIGI

The Nasdaq Stock Market LLC

Depositary Shares, each representing a 1/1,000th interest in a share of 4.60% Non-Cumulative Preferred Stock, Series B, without par value

SIGIP

The Nasdaq Stock Market LLC

Indicate by check mark whether the registrant: (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes ☒ No ☐

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes ☒ No ☐

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.


Large accelerated filer	☒	Accelerated filer ☐
Non-accelerated filer ☐		Smaller reporting company	☐
		Emerging growth company	☐

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act.

☐

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).

Yes ☐ No ☒

As of ~~July 16, 2021,~~April 30, 2022, there were ~~60,107,525~~60,353,399 shares of common stock, par value $2.00 per share, outstanding.

Table of Contents


	SELECTIVE INSURANCE GROUP, INC.
	Table of Contents
		Page No.
PART I. FINANCIAL INFORMATION

Item 1.	Financial Statements

	Consolidated Balance Sheets as of ~~June 30, 2021~~March 31, 2022 (Unaudited) and December 31, ~~2020~~2021	1

	Unaudited Consolidated Statements of Income for the Quarter Ended March 31, 2022 and ~~Six Months Ended June 30,~~ 2021 ~~and 2020~~	2

	Unaudited Consolidated Statements of Comprehensive Income for the Quarter Ended March 31, 2022 and ~~Six Months Ended June 30,~~ 2021 ~~and 2020~~	3

	Unaudited Consolidated Statements of Stockholders' Equity for the Quarter Ended March 31, 2022 and ~~Six Months Ended June 30,~~ 2021 ~~and 2020~~	4

	Unaudited Consolidated Statements of Cash Flows for the ~~Six Months~~Quarter Ended ~~June 30,~~March 31, 2022 and 2021 ~~and 2020~~	5

	Notes to Unaudited Interim Consolidated Financial Statements	6

Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations

	Forward-Looking Statements	2421

	Introduction	2421

	Critical Accounting Policies and Estimates	2522

	Financial Highlights of Results for ~~Second~~First Quarter 2022 and ~~Six Months~~ 2021 ~~and 2020~~	2622

	Results of Operations and Related Information by Segment	2825

	Federal Income Taxes	3833

	~~Financial Condition,~~ Liquidity and Capital Resources	3933

	Ratings	41

	~~Off-Balance Sheet Arrangements~~	42

	~~Contractual Obligations, Contingent Liabilities, and Commitments~~	4236

Item 3.	Quantitative and Qualitative Disclosures About Market Risk	4236

Item 4.	Controls and Procedures	4236

PART II. OTHER INFORMATION

Item 1.	Legal Proceedings	4337

Item 1A.	Risk Factors	4337

Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	4337

Item 3.	Defaults Upon Senior Securities	37

I tem 4.	Mine Safety Disclosures	38

Item 5.	Other Information	38

Item 6.	Exhibits	4438

Signatures		4439

Table of Contents


PART I. FINANCIAL INFORMATION


ITEM 1. FINANCIAL STATEMENTS.


SELECTIVE INSURANCE GROUP, INC. CONSOLIDATED BALANCE SHEETS	SELECTIVE INSURANCE GROUP, INC. CONSOLIDATED BALANCE SHEETS	Unaudited			SELECTIVE INSURANCE GROUP, INC. CONSOLIDATED BALANCE SHEETS	Unaudited
($ in thousands, except share amounts)	($ in thousands, except share amounts)	June 30, 2021		December 31, 2020	($ in thousands, except share amounts)	March 31, 2022		December 31, 2021
ASSETS	ASSETS				ASSETS
Investments:	Investments:				Investments:
Fixed income securities, held-to-maturity – at carrying value (fair value: $27,882 – 2021; $18,001 – 2020)		$	27,035	16,846
Fixed income securities, held-to-maturity – at carrying value (fair value: $32,625 – 2022; $29,460 – 2021)					Fixed income securities, held-to-maturity – at carrying value (fair value: $32,625 – 2022; $29,460 – 2021)	$	33,085	28,850
Less: allowance for credit losses	Less: allowance for credit losses	(79)		(22)	Less: allowance for credit losses	(50)		(65)
Fixed income securities, held-to-maturity, net of allowance for credit losses	Fixed income securities, held-to-maturity, net of allowance for credit losses	26,956		16,824	Fixed income securities, held-to-maturity, net of allowance for credit losses	33,035		28,785

Fixed income securities, available-for-sale – at fair value (allowance for credit losses: $6,011 – 2021 and $3,969 – 2020; amortized cost: $6,311,749 – 2021 and $6,073,517 – 2020)		6,626,400		6,455,928
Fixed income securities, available-for-sale – at fair value (allowance for credit losses: $37,599 – 2022 and $9,724 – 2021; amortized cost: $6,717,907 – 2022 and $6,490,753 – 2021)					Fixed income securities, available-for-sale – at fair value (allowance for credit losses: $37,599 – 2022 and $9,724 – 2021; amortized cost: $6,717,907 – 2022 and $6,490,753 – 2021)	6,598,822		6,709,976

Commercial mortgage loans – at carrying value (fair value: $73,559 – 2021 and $47,289 – 2020)		72,034		46,306
Commercial mortgage loans – at carrying value (fair value: $113,106 – 2022 and $97,598 – 2021)					Commercial mortgage loans – at carrying value (fair value: $113,106 – 2022 and $97,598 – 2021)	115,893		95,795
Less: allowance for credit losses	Less: allowance for credit losses	0		0	Less: allowance for credit losses	—		—
Commercial mortgage loans, net of allowance for credit losses	Commercial mortgage loans, net of allowance for credit losses	72,034		46,306	Commercial mortgage loans, net of allowance for credit losses	115,893		95,795

Equity securities – at fair value (cost: $320,586 – 2021; $301,551 – 2020)		348,342		310,367
Equity securities – at fair value (cost: $320,040 – 2022; $308,840 – 2021)					Equity securities – at fair value (cost: $320,040 – 2022; $308,840 – 2021)	344,583		335,537
Short-term investments	Short-term investments	351,230		409,852	Short-term investments	256,712		447,863
Other investments	Other investments	330,479		266,322	Other investments	425,666		409,032
Total investments (Note 4 and 5)	Total investments (Note 4 and 5)	7,755,441		7,505,599	Total investments (Note 4 and 5)	$	7,774,711	8,026,988
Cash	Cash	450		394	Cash	410		455
Restricted cash	Restricted cash	8,803		14,837	Restricted cash	17,474		44,608
Interest and dividends due or accrued		46,069		45,004
Accrued investment income					Accrued investment income	48,427		48,247

Premiums receivable	Premiums receivable	1,006,250		857,014	Premiums receivable	1,025,833		958,787
Less: allowance for credit losses (Note 6)	Less: allowance for credit losses (Note 6)	(18,300)		(21,000)	Less: allowance for credit losses (Note 6)	(14,300)		(13,600)
Premiums receivable, net of allowance for credit losses	Premiums receivable, net of allowance for credit losses	987,950		836,014	Premiums receivable, net of allowance for credit losses	1,011,533		945,187

Reinsurance recoverable	Reinsurance recoverable	598,658		589,269	Reinsurance recoverable	578,959		601,668
Less: allowance for credit losses (Note 7)	Less: allowance for credit losses (Note 7)	(1,777)		(1,777)	Less: allowance for credit losses (Note 7)	(1,600)		(1,600)
Reinsurance recoverable, net of allowance for credit losses	Reinsurance recoverable, net of allowance for credit losses	596,881		587,492	Reinsurance recoverable, net of allowance for credit losses	577,359		600,068

Prepaid reinsurance premiums	Prepaid reinsurance premiums	177,663		170,531	Prepaid reinsurance premiums	174,951		183,007

Property and equipment – at cost, net of accumulated depreciation and amortization of: $251,533 – 2021; $240,150 – 2020		75,142		77,696
Current federal income tax					Current federal income tax	—		772
Deferred federal income tax					Deferred federal income tax	55,274		—
Property and equipment – at cost, net of accumulated depreciation and amortization of: $259,522 – 2022; $253,427 – 2021					Property and equipment – at cost, net of accumulated depreciation and amortization of: $259,522 – 2022; $253,427 – 2021	83,180		82,053
Deferred policy acquisition costs	Deferred policy acquisition costs	323,155		288,578	Deferred policy acquisition costs	341,689		326,915
Goodwill	Goodwill	7,849		7,849	Goodwill	7,849		7,849
Other assets	Other assets	188,468		153,919	Other assets	217,690		195,240
Total assets	Total assets	$	10,167,871	9,687,913	Total assets	$	10,310,547	10,461,389

LIABILITIES AND STOCKHOLDERS’ EQUITY	LIABILITIES AND STOCKHOLDERS’ EQUITY				LIABILITIES AND STOCKHOLDERS’ EQUITY
Liabilities:	Liabilities:				Liabilities:
Reserve for loss and loss expense (Note 8)	Reserve for loss and loss expense (Note 8)	$	4,437,253	4,260,355	Reserve for loss and loss expense (Note 8)	$	4,644,391	4,580,903
Unearned premiums	Unearned premiums	1,791,308		1,618,271	Unearned premiums	1,872,666		1,803,207

Long-term debt	Long-term debt	550,881		550,743	Long-term debt	505,566		506,050
Current federal income tax	Current federal income tax	7,451		14,021	Current federal income tax	16,473		—
Deferred federal income tax	Deferred federal income tax	10,881		27,096	Deferred federal income tax	—		13,413
Accrued salaries and benefits	Accrued salaries and benefits	103,383		114,868	Accrued salaries and benefits	90,584		121,057
Other liabilities	Other liabilities	375,347		363,670	Other liabilities	402,626		453,874
Total liabilities	Total liabilities	$	7,276,504	6,949,024	Total liabilities	$	7,532,306	7,478,504

Stockholders’ Equity:	Stockholders’ Equity:				Stockholders’ Equity:
Preferred stock of $0 par value per share:	Preferred stock of $0 par value per share:	$	200,000	200,000	Preferred stock of $0 par value per share:	$	200,000	200,000
Authorized shares 5,000,000; Issued shares: 8,000 with $25,000 liquidation preference per share - 2021 and 2020
Authorized shares 5,000,000; Issued shares: 8,000 with $25,000 liquidation preference per share - 2022 and 2021					Authorized shares 5,000,000; Issued shares: 8,000 with $25,000 liquidation preference per share - 2022 and 2021
Common stock of $2 par value per share:	Common stock of $2 par value per share:				Common stock of $2 par value per share:
Authorized shares 360,000,000	Authorized shares 360,000,000				Authorized shares 360,000,000
Issued: 104,371,083 – 2021; 104,032,912 – 2020		208,742		208,066
Issued: 104,674,999 – 2022; 104,450,916 – 2021					Issued: 104,674,999 – 2022; 104,450,916 – 2021	209,336		208,902
Additional paid-in capital	Additional paid-in capital	454,459		438,985	Additional paid-in capital	472,790		464,347
Retained earnings	Retained earnings	2,467,596		2,271,537	Retained earnings	2,640,437		2,603,472
Accumulated other comprehensive income (Note 11)		169,371		220,186
Treasury stock – at cost (shares: 44,264,847 – 2021; 44,127,109 – 2020) (Note 12)		(608,801)		(599,885)
Accumulated other comprehensive (loss) income (Note 11)					Accumulated other comprehensive (loss) income (Note 11)	(129,795)		115,099
Treasury stock – at cost (shares: 44,339,527 – 2022; 44,266,534 – 2021)					Treasury stock – at cost (shares: 44,339,527 – 2022; 44,266,534 – 2021)	(614,527)		(608,935)
Total stockholders’ equity	Total stockholders’ equity	$	2,891,367	2,738,889	Total stockholders’ equity	$	2,778,241	2,982,885
Commitments and contingencies	Commitments and contingencies	0		0	Commitments and contingencies	0		0
Total liabilities and stockholders’ equity	Total liabilities and stockholders’ equity	$	10,167,871	9,687,913	Total liabilities and stockholders’ equity	$	10,310,547	10,461,389

The accompanying notes are an integral part of these unaudited interim consolidated financial statements.

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SELECTIVE INSURANCE GROUP, INC. UNAUDITED CONSOLIDATED STATEMENTS OF INCOME	SELECTIVE INSURANCE GROUP, INC. UNAUDITED CONSOLIDATED STATEMENTS OF INCOME	Quarter ended June 30,			Six Months ended June 30,			SELECTIVE INSURANCE GROUP, INC. UNAUDITED CONSOLIDATED STATEMENTS OF INCOME	Quarter ended March 31,
($ in thousands, except per share amounts)	($ in thousands, except per share amounts)	2021		2020	2021		2020	($ in thousands, except per share amounts)	2022		2021
Revenues:	Revenues:							Revenues:
Net premiums earned	Net premiums earned	$	740,518	630,671	$	1,465,478	1,282,374	Net premiums earned	$	812,283	724,960
Net investment income earned	Net investment income earned	83,731		34,444	153,447		90,411	Net investment income earned	72,602		69,716

Net realized and unrealized investment gains (losses)		10,057		12,649	15,176		(32,017)
Net realized and unrealized investment (losses) gains								Net realized and unrealized investment (losses) gains	(40,352)		5,119
Other income	Other income	6,212		4,683	10,324		6,508	Other income	1,529		4,112
Total revenues	Total revenues	840,518		682,447	1,644,425		1,347,276	Total revenues	846,062		803,907

Expenses:	Expenses:							Expenses:
Loss and loss expense incurred	Loss and loss expense incurred	421,623		403,949	835,024		804,273	Loss and loss expense incurred	494,236		413,401
Amortization of deferred policy acquisition costs	Amortization of deferred policy acquisition costs	154,357		136,931	303,408		273,432	Amortization of deferred policy acquisition costs	169,757		149,051
Other insurance expenses	Other insurance expenses	94,862		84,601	183,772		179,947	Other insurance expenses	93,990		88,910
Interest expense	Interest expense	7,366		7,928	14,725		15,529	Interest expense	7,168		7,359
Corporate expenses	Corporate expenses	9,112		6,345	18,666		15,405	Corporate expenses	11,021		9,554
Total expenses	Total expenses	687,320		639,754	1,355,595		1,288,586	Total expenses	776,172		668,275

Income before federal income tax	Income before federal income tax	153,198		42,693	288,830		58,690	Income before federal income tax	69,890		135,632

Federal income tax expense:	Federal income tax expense:							Federal income tax expense:
Current	Current	32,017		(1,350)	60,441		8,536	Current	17,178		28,424
Deferred	Deferred	(702)		9,860	(2,764)		735	Deferred	(3,618)		(2,062)
Total federal income tax expense	Total federal income tax expense	31,315		8,510	57,677		9,271	Total federal income tax expense	13,560		26,362

Net income	Net income	$	121,883	34,183	$	231,153	49,419	Net income	$	56,330	109,270

Preferred stock dividends	Preferred stock dividends	2,300		0	4,753		0	Preferred stock dividends	2,300		2,453

Net income available to common stockholders	Net income available to common stockholders	$	119,583	34,183	$	226,400	49,419	Net income available to common stockholders	$	54,030	106,817

Earnings per common share:	Earnings per common share:							Earnings per common share:
Net income available to common stockholders - Basic	Net income available to common stockholders - Basic	$	1.99	0.57	$	3.77	0.83	Net income available to common stockholders - Basic	$	0.89	1.78

Net income available to common stockholders - Diluted	Net income available to common stockholders - Diluted	$	1.98	0.57	$	3.74	0.82	Net income available to common stockholders - Diluted	$	0.89	1.77

The accompanying notes are an integral part of these unaudited interim consolidated financial statements.

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SELECTIVE INSURANCE GROUP, INC. UNAUDITED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME	SELECTIVE INSURANCE GROUP, INC. UNAUDITED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME	Quarter ended June 30,			Six Months ended June 30,			SELECTIVE INSURANCE GROUP, INC. UNAUDITED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME	Quarter ended March 31,
($ in thousands)	($ in thousands)	2021		2020	2021		2020	($ in thousands)	2022		2021
Net income	Net income	$	121,883	34,183	$	231,153	49,419	Net income	$	56,330	109,270

Other comprehensive income (loss) ("OCI"), net of tax:
Unrealized gains (losses) on investment securities:
Unrealized holding gains (losses) arising during period		28,086		149,127	(53,527)		74,882
Unrealized gains (losses) on securities with credit loss recognized in earnings		7,888		29,608	(1,055)		(22,050)
Other comprehensive loss ("OCI"), net of tax:								Other comprehensive loss ("OCI"), net of tax:
Unrealized losses on investment securities:								Unrealized losses on investment securities:
Unrealized holding losses arising during period								Unrealized holding losses arising during period	(206,848)		(81,613)
Unrealized losses on securities with credit loss recognized in earnings								Unrealized losses on securities with credit loss recognized in earnings	(68,430)		(8,943)

Amounts reclassified into net income:	Amounts reclassified into net income:							Amounts reclassified into net income:
Held-to-maturity ("HTM") securities	Held-to-maturity ("HTM") securities	(2)		(25)	(4)		(5)	Held-to-maturity ("HTM") securities	1		(2)
Net realized losses (gains) on disposals and intent-to-sell available-for-sale ("AFS") securities		46		(1,332)	523		7,616
Credit loss (benefit) expense		(1,795)		(3,890)	2,153		8,582
Net realized losses on disposals and intent-to-sell available-for-sale ("AFS") securities								Net realized losses on disposals and intent-to-sell available-for-sale ("AFS") securities	12,633		477
Credit loss expense								Credit loss expense	17,421		3,948

Total unrealized gains (losses) on investment securities		34,223		173,488	(51,910)		69,025
Total unrealized losses on investment securities								Total unrealized losses on investment securities	(245,223)		(86,133)

Defined benefit pension and post-retirement plans:	Defined benefit pension and post-retirement plans:							Defined benefit pension and post-retirement plans:
Amounts reclassified into net income:	Amounts reclassified into net income:							Amounts reclassified into net income:
Net actuarial loss	Net actuarial loss	548		595	1,095		1,191	Net actuarial loss	329		547
Total defined benefit pension and post-retirement plans	Total defined benefit pension and post-retirement plans	548		595	1,095		1,191	Total defined benefit pension and post-retirement plans	329		547
Other comprehensive income (loss)		34,771		174,083	(50,815)		70,216
Comprehensive income		$	156,654	208,266	$	180,338	119,635
Other comprehensive loss								Other comprehensive loss	(244,894)		(85,586)
Comprehensive (loss) income								Comprehensive (loss) income	$	(188,564)	23,684

The accompanying notes are an integral part of these unaudited interim consolidated financial statements.

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SELECTIVE INSURANCE GROUP, INC. UNAUDITED CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY	SELECTIVE INSURANCE GROUP, INC. UNAUDITED CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY	Quarter ended June 30,			Six Months ended June 30,			SELECTIVE INSURANCE GROUP, INC. UNAUDITED CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY	Quarter ended March 31,
($ in thousands, except share and per share amounts)	($ in thousands, except share and per share amounts)	2021		2020	2021		2020	($ in thousands, except share and per share amounts)	2022		2021
Preferred stock:	Preferred stock:							Preferred stock:
Beginning of period	Beginning of period	$	200,000	0	$	200,000	0	Beginning of period	$	200,000	200,000
Issuance of preferred stock	Issuance of preferred stock	0		0	0		0	Issuance of preferred stock	—		—
End of period	End of period	200,000		0	200,000		0	End of period	200,000		200,000

Common stock:	Common stock:							Common stock:
Beginning of period	Beginning of period	208,576		207,665	208,066		206,968	Beginning of period	208,902		208,066
Dividend reinvestment plan	Dividend reinvestment plan	11		16	24		30	Dividend reinvestment plan	11		13
Stock purchase and compensation plans	Stock purchase and compensation plans	155		194	652		877	Stock purchase and compensation plans	423		497
End of period	End of period	208,742		207,875	208,742		207,875	End of period	209,336		208,576

Additional paid-in capital:	Additional paid-in capital:							Additional paid-in capital:
Beginning of period	Beginning of period	446,410		427,328	438,985		418,521	Beginning of period	464,347		438,985
Dividend reinvestment plan	Dividend reinvestment plan	416		407	845		815	Dividend reinvestment plan	443		429

Stock purchase and compensation plans	Stock purchase and compensation plans	7,633		7,284	14,629		15,683	Stock purchase and compensation plans	8,000		6,996
End of period	End of period	454,459		435,019	454,459		435,019	End of period	472,790		446,410

Retained earnings:	Retained earnings:							Retained earnings:
Beginning of period, as previously reported		2,363,189		2,083,340	2,271,537		2,080,529
Beginning of period								Beginning of period	2,603,472		2,271,537

Cumulative effect adjustment due to adoption of guidance on allowance for credit losses, net of tax		0		0	0		1,435
Balance at beginning of period, as adjusted		2,363,189		2,083,340	2,271,537		2,081,964

Net income	Net income	121,883		34,183	231,153		49,419	Net income	56,330		109,270
Dividends to preferred stockholders	Dividends to preferred stockholders	(2,300)		0	(4,753)		0	Dividends to preferred stockholders	(2,300)		(2,453)
Dividends to common stockholders	Dividends to common stockholders	(15,176)		(13,894)	(30,341)		(27,754)	Dividends to common stockholders	(17,065)		(15,165)
End of period	End of period	2,467,596		2,103,629	2,467,596		2,103,629	End of period	2,640,437		2,363,189

Accumulated other comprehensive income (loss) ("AOCI"):
Accumulated other comprehensive (loss) income ("AOCI"):								Accumulated other comprehensive (loss) income ("AOCI"):
Beginning of period	Beginning of period	134,600		(22,117)	220,186		81,750	Beginning of period	115,099		220,186

Other comprehensive income (loss)		34,771		174,083	(50,815)		70,216
Other comprehensive loss								Other comprehensive loss	(244,894)		(85,586)
End of period	End of period	169,371		151,966	169,371		151,966	End of period	(129,795)		134,600

Treasury stock:	Treasury stock:							Treasury stock:
Beginning of period	Beginning of period	(608,730)		(599,760)	(599,885)		(592,832)	Beginning of period	(608,935)		(599,885)
Acquisition of treasury stock - share repurchase authorization	Acquisition of treasury stock - share repurchase authorization	0		0	(3,404)		0	Acquisition of treasury stock - share repurchase authorization	(76)		(3,404)
Acquisition of treasury stock - shares acquired related to employee-share based compensation plans		(71)		(54)	(5,512)		(6,982)
Acquisition of treasury stock - shares acquired related to employee share-based compensation plans								Acquisition of treasury stock - shares acquired related to employee share-based compensation plans	(5,516)		(5,441)
End of period	End of period	(608,801)		(599,814)	(608,801)		(599,814)	End of period	(614,527)		(608,730)

Total stockholders’ equity	Total stockholders’ equity	$	2,891,367	2,298,675	$	2,891,367	2,298,675	Total stockholders’ equity	$	2,778,241	2,744,045

Dividends declared per preferred share	Dividends declared per preferred share	$	287.50	0	$	594.17	0	Dividends declared per preferred share	$	287.50	306.67
Dividends declared per common share	Dividends declared per common share	$	0.25	0.23	$	0.50	0.46	Dividends declared per common share	$	0.28	0.25

Preferred stock, shares outstanding:	Preferred stock, shares outstanding:							Preferred stock, shares outstanding:
Beginning of period	Beginning of period	8,000		0	8,000		0	Beginning of period	8,000		8,000
Issuance of preferred stock	Issuance of preferred stock	0		0	0		0	Issuance of preferred stock	—		—
End of period	End of period	8,000		0	8,000		0	End of period	8,000		8,000

Common stock, shares outstanding:	Common stock, shares outstanding:							Common stock, shares outstanding:
Beginning of period	Beginning of period	60,023,883		59,707,545	59,905,803		59,461,153	Beginning of period	60,184,382		59,905,803
Dividend reinvestment plan	Dividend reinvestment plan	5,636		7,899	12,056		14,874	Dividend reinvestment plan	5,641		6,420
Stock purchase and compensation plan	Stock purchase and compensation plan	77,656		97,365	326,115		438,601	Stock purchase and compensation plan	218,442		248,459
Acquisition of treasury stock - share repurchase authorization	Acquisition of treasury stock - share repurchase authorization	0		0	(52,781)		0	Acquisition of treasury stock - share repurchase authorization	(1,000)		(52,781)
Acquisition of treasury stock - shares acquired related to employee share-based compensation plans	Acquisition of treasury stock - shares acquired related to employee share-based compensation plans	(939)		(1,067)	(84,957)		(102,886)	Acquisition of treasury stock - shares acquired related to employee share-based compensation plans	(71,993)		(84,018)
End of period	End of period	60,106,236		59,811,742	60,106,236		59,811,742	End of period	60,335,472		60,023,883

The accompanying notes are an integral part of these unaudited interim consolidated financial statements.

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SELECTIVE INSURANCE GROUP, INC. UNAUDITED CONSOLIDATED STATEMENTS OF CASH FLOWS	SELECTIVE INSURANCE GROUP, INC. UNAUDITED CONSOLIDATED STATEMENTS OF CASH FLOWS	Six Months ended June 30,			SELECTIVE INSURANCE GROUP, INC. UNAUDITED CONSOLIDATED STATEMENTS OF CASH FLOWS	Quarter ended March 31,
($ in thousands)	($ in thousands)	2021		2020	($ in thousands)	2022		2021
Operating Activities	Operating Activities				Operating Activities
Net income	Net income	$	231,153	49,419	Net income	$	56,330	109,270

Adjustments to reconcile net income to net cash provided by (used in) operating activities:	Adjustments to reconcile net income to net cash provided by (used in) operating activities:				Adjustments to reconcile net income to net cash provided by (used in) operating activities:
Depreciation and amortization	Depreciation and amortization	27,451		29,634	Depreciation and amortization	12,807		13,703

Stock-based compensation expense	Stock-based compensation expense	10,927		11,198	Stock-based compensation expense	7,031		6,493
Undistributed (gains) losses of equity method investments		(34,841)		7,319
Undistributed gains of equity method investments					Undistributed gains of equity method investments	(9,406)		(13,905)
Distributions in excess of current year income of equity method investments	Distributions in excess of current year income of equity method investments	1,817		8,488	Distributions in excess of current year income of equity method investments	11,626		2,309
Net realized and unrealized (gains) losses		(15,176)		32,017
Net realized and unrealized losses (gains)					Net realized and unrealized losses (gains)	40,352		(5,119)
Loss on disposal of fixed assets	Loss on disposal of fixed assets	10		17	Loss on disposal of fixed assets	2		3

Changes in assets and liabilities:	Changes in assets and liabilities:				Changes in assets and liabilities:
Increase in reserve for loss and loss expense, net of reinsurance recoverable	Increase in reserve for loss and loss expense, net of reinsurance recoverable	167,509		101,151	Increase in reserve for loss and loss expense, net of reinsurance recoverable	86,197		106,468
Increase in unearned premiums, net of prepaid reinsurance	Increase in unearned premiums, net of prepaid reinsurance	165,905		89,705	Increase in unearned premiums, net of prepaid reinsurance	77,515		73,218
(Decrease) increase in net federal income taxes		(9,278)		8,340
Increase in net federal income taxes					Increase in net federal income taxes	13,656		25,927
Increase in premiums receivable	Increase in premiums receivable	(151,936)		(44,095)	Increase in premiums receivable	(66,346)		(59,182)
Increase in deferred policy acquisition costs	Increase in deferred policy acquisition costs	(34,577)		(14,269)	Increase in deferred policy acquisition costs	(14,774)		(14,074)
Increase in interest and dividends due or accrued		(1,124)		(934)
Increase in accrued investment income					Increase in accrued investment income	(185)		(1,101)
Decrease in accrued salaries and benefits	Decrease in accrued salaries and benefits	(11,485)		(44,082)	Decrease in accrued salaries and benefits	(30,473)		(31,216)
Increase in other assets	Increase in other assets	(21,991)		(2,753)	Increase in other assets	(10,789)		(14,302)
Decrease in other liabilities	Decrease in other liabilities	(31,912)		(33,770)	Decrease in other liabilities	(80,864)		(68,236)
Net cash provided by operating activities	Net cash provided by operating activities	292,452		197,385	Net cash provided by operating activities	92,679		130,256

Investing Activities	Investing Activities				Investing Activities
Purchase of fixed income securities, held-to-maturity		(11,250)		0
Purchase of fixed income securities, available-for-sale		(1,158,017)		(961,803)
Purchase of fixed income securities, HTM					Purchase of fixed income securities, HTM	(5,000)		(9,000)
Purchase of fixed income securities, AFS					Purchase of fixed income securities, AFS	(874,665)		(671,909)
Purchase of commercial mortgage loans	Purchase of commercial mortgage loans	(25,945)		(17,934)	Purchase of commercial mortgage loans	(20,399)		(14,860)
Purchase of equity securities	Purchase of equity securities	(76,793)		(73,879)	Purchase of equity securities	(13,952)		(48,910)
Purchase of other investments	Purchase of other investments	(40,286)		(39,400)	Purchase of other investments	(15,555)		(18,589)
Purchase of short-term investments	Purchase of short-term investments	(2,596,863)		(3,368,828)	Purchase of short-term investments	(910,191)		(1,723,212)
Sale of fixed income securities, available-for-sale		307,057		302,342
Sale of fixed income securities, AFS					Sale of fixed income securities, AFS	425,234		212,891
Proceeds from commercial mortgage loans	Proceeds from commercial mortgage loans	217		54	Proceeds from commercial mortgage loans	301		99
Sale of short-term investments	Sale of short-term investments	2,655,450		3,278,106	Sale of short-term investments	1,101,725		1,795,239
Redemption and maturities of fixed income securities, held-to-maturity		1,032		1,200
Redemption and maturities of fixed income securities, available-for-sale		629,512		461,527
Redemption and maturities of fixed income securities, HTM					Redemption and maturities of fixed income securities, HTM	756		1,461
Redemption and maturities of fixed income securities, AFS					Redemption and maturities of fixed income securities, AFS	216,024		319,469
Sale of equity securities	Sale of equity securities	57,316		1,320	Sale of equity securities	2,626		42,782
Sale of other investments	Sale of other investments	3,128		53	Sale of other investments	525		3,004
Distributions from other investments	Distributions from other investments	6,245		7,349	Distributions from other investments	4,342		5,162
Purchase of property and equipment	Purchase of property and equipment	(9,491)		(12,634)	Purchase of property and equipment	(7,677)		(4,561)

Net cash used in investing activities	Net cash used in investing activities	(258,688)		(422,527)	Net cash used in investing activities	(95,906)		(110,934)

Financing Activities	Financing Activities				Financing Activities
Dividends to preferred stockholders	Dividends to preferred stockholders	(4,753)		0	Dividends to preferred stockholders	(2,300)		(2,453)
Dividends to common stockholders	Dividends to common stockholders	(29,155)		(26,631)	Dividends to common stockholders	(16,447)		(14,569)
Acquisition of treasury stock	Acquisition of treasury stock	(8,916)		(6,982)	Acquisition of treasury stock	(5,592)		(8,845)
Net proceeds from stock purchase and compensation plans	Net proceeds from stock purchase and compensation plans	3,790		4,731	Net proceeds from stock purchase and compensation plans	999		824
Preferred stock issued, net of issuance costs	Preferred stock issued, net of issuance costs	(479)		0	Preferred stock issued, net of issuance costs	—		(479)
Proceeds from borrowings		0		387,000
Repayments of borrowings		0		(135,000)

Repayments of finance lease obligations	Repayments of finance lease obligations	(229)		(314)	Repayments of finance lease obligations	(612)		(115)
Net cash (used in) provided by financing activities		(39,742)		222,804
Net cash used in financing activities					Net cash used in financing activities	(23,952)		(25,637)
Net decrease in cash and restricted cash	Net decrease in cash and restricted cash	(5,978)		(2,338)	Net decrease in cash and restricted cash	(27,179)		(6,315)
Cash and restricted cash, beginning of year	Cash and restricted cash, beginning of year	15,231		7,975	Cash and restricted cash, beginning of year	45,063		15,231
Cash and restricted cash, end of period	Cash and restricted cash, end of period	$	9,253	5,637	Cash and restricted cash, end of period	$	17,884	8,916

The accompanying notes are an integral part of these unaudited interim consolidated financial statements.

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NOTES TO UNAUDITED INTERIM CONSOLIDATED FINANCIAL STATEMENTS

NOTE 1. Basis of Presentation

The words "Company,” “we,” “us,” or “our” refer to Selective Insurance Group, Inc. (the "Parent") and its subsidiaries, except as expressly indicated or the context requires otherwise. We have prepared our interim unaudited consolidated financial statements (“Financial Statements”) in conformity with (i) United States ("U.S.") generally accepted accounting principles (“GAAP”), and (ii) the rules and regulations of the U.S. Securities and Exchange Commission (“SEC”) regarding interim financial reporting. These require usmanagement to make estimates and assumptions that affect the reported financial statement balances, ~~and~~as well as the disclosure of contingent assets and liabilities. Actual results could differ from those estimates. All significant intercompany accounts and transactions ~~between the Parent and its subsidiaries~~ are eliminated in consolidation.

Our Financial Statements reflect all adjustments that, in our opinion, are normal, recurring, and necessary for a fair presentation of our results of operations and financial condition. Our Financial Statements cover the ~~second~~first quarters ended ~~June 30,~~March 31, 2022 (“First Quarter 2022”) and March 31, 2021 (“~~Second~~First Quarter 2021”~~) and June 30, 2020 (“Second Quarter 2020”) and the six-month periods ended June 30, 2021 (“Six Months 2021”) and June 30, 2020 (“Six Months 2020”~~). Our Financial Statements do not include all information and disclosures required by GAAP and the SEC for audited annual financial statements. Because results of operations for any interim period are not necessarily indicative of results for a full year, our Financial Statements should be read in conjunction with the consolidated financial statements contained in our Annual Report on Form 10-K for the year ended December 31, ~~2020~~2021 (“~~2020~~2021 Annual Report”) filed with the SEC.

NOTE 2. Adoption of Accounting Pronouncements

~~In December 2019, the Financial Accounting Standards Board ("FASB") issued Accounting Standards Update ("ASU") 2019-12,~~ ~~Income Taxes - Simplifying the Accounting for Income Taxes~~ ~~(“ASU 2019-12”). Among other items, ASU 2019-12 simplifies the~~There was no adoption of accounting ~~treatment of tax law changes and year-to-date losses~~pronouncements in interim periods. An entity generally recognizes the effects of a change in tax law in the period of enactment; however, there is an exception for tax laws with delayed effective dates. Under current guidance, an entity may not adjust its annual effective tax rate for a tax law change until the period in which the law is effective. ASU 2019-12 provides that all effects of a tax law change, including adjustment of the estimated annual effective tax rate, are recognized in the period of enactment.

For year-to-date losses in interim periods, an entity is required currently to estimate its annual effective tax rate for the full fiscal year at the end of each interim period and use that rate to calculate its income taxes on a year-to-date basis. When an interim period loss exceeds the anticipated loss for the year, the income tax benefit is limited to the amount that would be recognized if the year-to-date loss were the anticipated loss for the full year. ASU 2019-12 removes this limitation and an entity would compute its income tax benefit at each interim period based on its estimated annual effective tax rate.

~~We adopted this guidance on January 1, 2021, and it did not have a material impact to our financial condition, cash flows, or results of operations.~~First Quarter 2022.

Pronouncements to be effective in the future

In March 2020, the ~~FASB~~Financial Accounting Standards Board ("FASB") issued ~~ASU~~Accounting Standards Update ("ASU") 2020-04, Reference Rate Reform (Topic 848) - Facilitation of the Effects of Reference Rate Reform on Financial Reporting (“ASU 2020-04”). ASU 2020-04 provides optional expedients and exceptions to the guidance in GAAP on contract modifications and hedge accounting to ease the financial reporting burdens related to the expected market transition away from the London Interbank Offered Rate ("LIBOR") and other interbank offered rates to alternative reference rates. Companies can elect to adopt ASU 2020-04 as of the beginning of the interim period that includes March 2020, or any date thereafter through December 31, 2022. We are currently evaluating the impact of this guidance on our financial condition and results of operations.

~~Table of Contents~~

NOTE 3. Statements of Cash Flows

Supplemental cash flow information was as follows:


		Six Months ended June 30,				Quarter ended March 31,
($ in thousands)	($ in thousands)	2021		2020	($ in thousands)	2022		2021
Cash paid during the period for:
Cash paid (received) during the period for:					Cash paid (received) during the period for:
Interest	Interest	$	14,547	14,920	Interest	$	8,523	8,722
Federal income tax	Federal income tax	66,000		0	Federal income tax	(800)		—

Cash paid for amounts included in the measurement of lease liabilities:	Cash paid for amounts included in the measurement of lease liabilities:				Cash paid for amounts included in the measurement of lease liabilities:
Operating cash flows from operating leases	Operating cash flows from operating leases	4,348		4,443	Operating cash flows from operating leases	2,058		2,226
Operating cash flows from financing leases	Operating cash flows from financing leases	4		10	Operating cash flows from financing leases	11		2
Financing cash flows from finance leases	Financing cash flows from finance leases	229		314	Financing cash flows from finance leases	612		115

Non-cash items:	Non-cash items:				Non-cash items:

Corporate actions related to fixed income securities, AFS1	Corporate actions related to fixed income securities, AFS1	45,392		18,224	Corporate actions related to fixed income securities, AFS1	1,244		26,085
Corporate actions related to fixed income securities, HTM1		0		2,596
Corporate actions related to equity securities1		527		890

Assets acquired under finance lease arrangements	Assets acquired under finance lease arrangements	183		119	Assets acquired under finance lease arrangements	38		183
Assets acquired under operating lease arrangements	Assets acquired under operating lease arrangements	16		4,358	Assets acquired under operating lease arrangements	5,760		16

Non-cash purchase of property and equipment	Non-cash purchase of property and equipment	35		60	Non-cash purchase of property and equipment	—		3

1Examples of corporate actions include like-kind exchanges, non-cash acquisitions, and stock splits.

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The following table ~~reconciles~~provides a reconciliation of cash and restricted cash reported inwithin the Consolidated Balance Sheets ~~with what is~~that equate to the amount reported in the Consolidated Statements of Cash Flows:

($ in thousands) June 30, 2021 December 31, 2020
Cash $ 450 394
Restricted cash 8,803 14,837
Total cash and restricted cash shown in the Statements of Cash Flows $ 9,253 15,231


($ in thousands)	March 31, 2022		December 31, 2021
Cash	$	410	455
Restricted cash	17,474		44,608
Total cash and restricted cash shown in the Consolidated Statements of Cash Flows	$	17,884	45,063

Amounts included in restricted cash represent cash received from the National Flood Insurance Program ("NFIP"), which is restricted to pay flood claims under the Write Your Own program.

NOTE 4. Investments

(a) Information ~~about~~regarding our AFS securities as of ~~June 30, 2021,~~March 31, 2022 and December 31, ~~2020, is~~2021 were as follows:

June 30, 2021
($ in thousands) Cost/
Amortized
Cost Allowance for Credit Losses Unrealized
Gains Unrealized
Losses Fair
Value
AFS fixed income securities:
U.S. government and government agencies $ 132,506 0 4,319 (631) 136,194
Foreign government 14,578 (49) 819 (73) 15,275
Obligations of states and political subdivisions 1,119,039 (38) 81,003 (103) 1,199,901
Corporate securities 2,325,858 (3,477) 146,061 (1,555) 2,466,887
Collateralized loan obligations ("CLO") and other asset-backed securities ("ABS") 1,266,236 (1,399) 20,110 (2,724) 1,282,223
Residential mortgage-backed securities ("RMBS") 820,650 (1,034) 35,655 (774) 854,497
Commercial mortgage-backed securities ("CMBS") 632,882 (14) 39,420 (865) 671,423
Total AFS fixed income securities $ 6,311,749 (6,011) 327,387 (6,725) 6,626,400


March 31, 2022
($ in thousands)	Cost/ Amortized Cost		Allowance for Credit Losses	Unrealized Gains	Unrealized Losses	Fair Value
AFS fixed income securities:
U.S. government and government agencies	$	131,986	—	490	(5,383)	127,093
Foreign government	17,160		(150)	145	(452)	16,703
Obligations of states and political subdivisions	1,122,132		(1,991)	15,329	(10,039)	1,125,431
Corporate securities	2,445,468		(23,066)	25,658	(60,320)	2,387,740
Collateralized loan obligations ("CLO") and other asset-backed securities ("ABS")	1,444,224		(2,283)	7,974	(32,701)	1,417,214
Residential mortgage-backed securities ("RMBS")	903,800		(10,029)	6,779	(22,591)	877,959
Commercial mortgage-backed securities ("CMBS")	653,137		(80)	5,618	(11,993)	646,682
Total AFS fixed income securities	$	6,717,907	(37,599)	61,993	(143,479)	6,598,822

~~Table of Contents~~


December 31, 2020
December 31, 2021								December 31, 2021
($ in thousands)	($ in thousands)	Cost/ Amortized Cost		Allowance for Credit Losses	Unrealized Gains	Unrealized Losses	Fair Value	($ in thousands)	Cost/ Amortized Cost		Allowance for Credit Losses	Unrealized Gains	Unrealized Losses	Fair Value
AFS fixed income securities:	AFS fixed income securities:							AFS fixed income securities:
U.S. government and government agencies	U.S. government and government agencies	$	110,038	0	6,239	(137)	116,140	U.S. government and government agencies	$	127,974	—	3,629	(1,145)	130,458
Foreign government	Foreign government	16,801		(1)	1,569	(3)	18,366	Foreign government	15,420		(46)	609	(123)	15,860
Obligations of states and political subdivisions	Obligations of states and political subdivisions	1,159,588		(4)	87,564	(11)	1,247,137	Obligations of states and political subdivisions	1,121,422		(137)	68,258	(235)	1,189,308
Corporate securities	Corporate securities	2,152,203		(2,782)	180,971	(2,340)	2,328,052	Corporate securities	2,478,348		(6,682)	106,890	(4,953)	2,573,603
CLO and other ABS	CLO and other ABS	1,014,820		(592)	20,166	(7,843)	1,026,551	CLO and other ABS	1,343,687		(939)	14,350	(6,284)	1,350,814
RMBS	RMBS	999,485		(561)	53,065	(201)	1,051,788	RMBS	756,280		(1,909)	24,813	(2,932)	776,252
CMBS	CMBS	620,582		(29)	48,348	(1,007)	667,894	CMBS	647,622		(11)	27,752	(1,682)	673,681
Total AFS fixed income securities	Total AFS fixed income securities	$	6,073,517	(3,969)	397,922	(11,542)	6,455,928	Total AFS fixed income securities	$	6,490,753	(9,724)	246,301	(17,354)	6,709,976

The following tables provide a roll forward of the allowance for credit losses on our AFS fixed income securities for the periods indicated:

Quarter ended June 30, 2021
($ in thousands) Beginning Balance Current Provision for Securities without Prior Allowance Increase (Decrease) on Securities with Prior Allowance, excluding intent (or Requirement) to Sell Securities Reductions for Securities Sold Reductions for Securities Identified as Intent (or Requirement) to Sell during the Period Ending Balance
Foreign government $ 56 0 (7) 0 0 49
Obligations of states and political subdivisions 201 0 (163) 0 0 38
Corporate securities 6,166 148 (2,403) (373) (61) 3,477
CLO and other ABS 1,470 0 (70) (1) 0 1,399
RMBS 864 3 230 (63) 0 1,034
CMBS 24 4 (14) 0 0 14
Total AFS fixed income securities $ 8,781 155 (2,427) (437) (61) 6,011

Quarter ended June 30, 2020
($ in thousands) Beginning Balance Current Provision for Securities without Prior Allowance Increase (Decrease) on Securities with Prior Allowance, excluding intent (or Requirement) to Sell Securities Reductions for Securities Sold Reductions for Securities Identified as Intent (or Requirement) to Sell during the Period Ending Balance
Foreign government $ 21 0 7 0 0 28
Obligations of states and political subdivisions 29 15 (27) 0 0 17
Corporate securities 13,412 813 (5,686) (395) (67) 8,077
CLO and other ABS 1,565 27 (145) (58) 0 1,389
RMBS 722 0 124 (15) 0 831
CMBS 38 8 7 0 0 53
Total AFS fixed income securities $ 15,787 863 (5,720) (468) (67) 10,395

Six Months ended June 30, 2021
($ in thousands) Beginning Balance Current Provision for Securities without Prior Allowance Increase (Decrease) on Securities with Prior Allowance, excluding intent (or Requirement) to Sell Securities Reductions for Securities Sold Reductions for Securities Identified as Intent (or Requirement) to Sell during the Period Ending Balance
Foreign government $ 1 49 (1) 0 0 49
Obligations of states and political subdivisions 4 25 9 0 0 38
Corporate securities 2,782 2,185 (909) (520) (61) 3,477
CLO and other ABS 592 941 (116) (18) 0 1,399
RMBS 561 618 (68) (77) 0 1,034
CMBS 29 2 (17) 0 0 14
Total AFS fixed income securities $ 3,969 3,820 (1,102) (615) (61) 6,011


Quarter ended March 31, 2022
($ in thousands)	Beginning Balance		Current Provision for Securities without Prior Allowance	Initial Allowance for Purchased Credit Deteriorated Assets with Credit Deterioration	Increase (Decrease) on Securities with Prior Allowance, excluding intent (or Requirement) to Sell Securities	Reductions for Securities Sold	Reductions for Securities Identified as Intent (or Requirement) to Sell during the Period	Ending Balance
Foreign government	$	46	103	—	1	—	—	150
Obligations of states and political subdivisions	137		1,732	—	132	(10)	—	1,991
Corporate securities	6,682		15,393	—	3,337	(1,247)	(1,099)	23,066
CLO and other ABS	939		1,288	—	59	(3)	—	2,283
RMBS	1,909		—	8,318	(63)	(135)	—	10,029
CMBS	11		72	—	(3)	—	—	80
Total AFS fixed income securities	$	9,724	18,588	8,318	3,463	(1,395)	(1,099)	37,599

Table of Contents


Six Months ended June 30, 2020
Quarter ended March 31, 2021									Quarter ended March 31, 2021
($ in thousands)	($ in thousands)	Beginning Balance		Current Provision for Securities without Prior Allowance	Increase (Decrease) on Securities with Prior Allowance, excluding intent (or Requirement) to Sell Securities	Reductions for Securities Sold	Reductions for Securities Identified as Intent (or Requirement) to Sell during the Period	Ending Balance	($ in thousands)	Beginning Balance		Current Provision for Securities without Prior Allowance	Increase (Decrease) on Securities with Prior Allowance, excluding intent (or Requirement) to Sell Securities	Reductions for Securities Sold	Reductions for Securities Identified as Intent (or Requirement) to Sell during the Period	Ending Balance
Foreign government	Foreign government	$	0	28	0	0	0	28	Foreign government	$	1	56	(1)	—	—	56
Obligations of states and political subdivisions	Obligations of states and political subdivisions	0		17	0	0	0	17	Obligations of states and political subdivisions	4		186	11	—	—	201
Corporate securities	Corporate securities	0		8,539	0	(395)	(67)	8,077	Corporate securities	2,782		4,058	(527)	(147)	—	6,166
CLO and other ABS	CLO and other ABS	0		1,447	0	(58)	0	1,389	CLO and other ABS	592		1,001	(106)	(17)	—	1,470
RMBS	RMBS	0		846	0	(15)	0	831	RMBS	561		356	(39)	(14)	—	864
CMBS	CMBS	0		53	0	0	0	53	CMBS	29		10	(15)	—	—	24
Total AFS fixed income securities	Total AFS fixed income securities	$	0	10,930	0	(468)	(67)	10,395	Total AFS fixed income securities	$	3,969	5,667	(677)	(178)	—	8,781

During First Quarter 2022 and First Quarter 2021, we did not have any write-offs or recoveries of our AFS fixed income securities, so these items are not included in the tables above.

For information on our methodology and significant inputs used to measure expected credit losses, our accounting policy for recognizing write-offs of uncollectible amounts, and our treatment of accrued interest, refer to Note 2. "Summary of Significant Accounting Policies" in Item 8. "Financial Statements and Supplementary Data." of our ~~2020~~2021 Annual Report. Accrued interest on AFS securities was ~~$44.9~~$46.8 million as of ~~June 30, 2021,~~March 31, 2022, and ~~$43.8~~$46.3 million as of December 31, ~~2020.~~2021. We did not record any material write-offs of accrued interest during ~~2021 or 2020.~~2022 and 2021.

(b) Quantitative information about unrealized losses on our AFS portfolio is provided below.


June 30, 2021		Less than 12 months			12 months or longer		Total
March 31, 2022									March 31, 2022	Less than 12 months			12 months or longer		Total
($ in thousands)	($ in thousands)	Fair Value		Unrealized Losses	Fair Value	Unrealized Losses	Fair Value	Unrealized Losses	($ in thousands)	Fair Value		Unrealized Losses	Fair Value	Unrealized Losses	Fair Value	Unrealized Losses
AFS fixed income securities:	AFS fixed income securities:								AFS fixed income securities:
U.S. government and government agencies	U.S. government and government agencies	$	17,582	(631)	0	0	17,582	(631)	U.S. government and government agencies	$	89,044	(4,410)	5,252	(973)	94,296	(5,383)
Foreign government	Foreign government	3,122		(73)	0	0	3,122	(73)	Foreign government	5,394		(268)	1,996	(184)	7,390	(452)
Obligations of states and political subdivisions	Obligations of states and political subdivisions	7,222		(103)	0	0	7,222	(103)	Obligations of states and political subdivisions	223,497		(9,846)	2,834	(193)	226,331	(10,039)
Corporate securities	Corporate securities	84,676		(880)	6,163	(675)	90,839	(1,555)	Corporate securities	1,002,980		(59,605)	6,823	(715)	1,009,803	(60,320)
CLO and other ABS	CLO and other ABS	415,284		(1,699)	71,126	(1,025)	486,410	(2,724)	CLO and other ABS	937,362		(28,658)	101,722	(4,043)	1,039,084	(32,701)
RMBS	RMBS	84,141		(774)	0	0	84,141	(774)	RMBS	545,934		(21,444)	13,731	(1,147)	559,665	(22,591)
CMBS	CMBS	54,258		(704)	14,511	(161)	68,769	(865)	CMBS	337,995		(9,807)	23,123	(2,186)	361,118	(11,993)
Total AFS fixed income securities	Total AFS fixed income securities	$	666,285	(4,864)	91,800	(1,861)	758,085	(6,725)	Total AFS fixed income securities	$	3,142,206	(134,038)	155,481	(9,441)	3,297,687	(143,479)


December 31, 2020		Less than 12 months			12 months or longer		Total
December 31, 2021									December 31, 2021	Less than 12 months			12 months or longer		Total
($ in thousands)	($ in thousands)	Fair Value		Unrealized Losses	Fair Value	Unrealized Losses	Fair Value	Unrealized Losses	($ in thousands)	Fair Value		Unrealized Losses	Fair Value	Unrealized Losses	Fair Value	Unrealized Losses
AFS fixed income securities:	AFS fixed income securities:								AFS fixed income securities:
U.S. government and government agencies	U.S. government and government agencies	$	11,519	(137)	0	0	11,519	(137)	U.S. government and government agencies	$	34,857	(746)	7,827	(399)	42,684	(1,145)
Foreign government	Foreign government	1,122		(3)	0	0	1,122	(3)	Foreign government	2,000		(84)	1,061	(39)	3,061	(123)
Obligations of states and political subdivisions	Obligations of states and political subdivisions	2,223		(11)	0	0	2,223	(11)	Obligations of states and political subdivisions	25,837		(235)	—	—	25,837	(235)
Corporate securities	Corporate securities	65,187		(2,152)	2,400	(188)	67,587	(2,340)	Corporate securities	300,549		(4,903)	2,520	(50)	303,069	(4,953)
CLO and other ABS	CLO and other ABS	261,746		(2,995)	165,661	(4,848)	427,407	(7,843)	CLO and other ABS	663,976		(4,934)	53,368	(1,350)	717,344	(6,284)
RMBS	RMBS	18,227		(194)	1,181	(7)	19,408	(201)	RMBS	236,010		(2,931)	20	(1)	236,030	(2,932)
CMBS	CMBS	55,482		(616)	16,093	(391)	71,575	(1,007)	CMBS	112,899		(1,016)	20,326	(666)	133,225	(1,682)
Total AFS fixed income securities	Total AFS fixed income securities	$	415,506	(6,108)	185,335	(5,434)	600,841	(11,542)	Total AFS fixed income securities	$	1,376,128	(14,849)	85,122	(2,505)	1,461,250	(17,354)

We do not currently intend to sell any of the securities in the tables above, nor will we be required to sell any of these securities. The ~~decrease~~increase in gross unrealized losses ~~during Six Months~~at March 31, 2022 compared to December 31, 2021 was driven by an increase in ~~longer-dated~~ benchmark ~~United States~~U.S. Treasury rates ~~partially offset by the tightening~~and a widening of credit spreads. Considering these factors and our review of these securities under our credit loss policy as described in Note 2. "Summary of Significant Accounting Policies" in Item 8. "Financial Statements and Supplementary Data." of our ~~2020~~2021 Annual Report, we have concluded that no allowance for credit loss is required on these balances. This conclusion reflects our current judgment ~~as to~~about the financial position and future prospects of the entity that issued the investment security and underlying collateral.

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(c) Fixed income securities at ~~June 30, 2021 are summarized below~~March 31, 2022 by contractual ~~maturity.~~maturity are shown below. Mortgage-backed securities are included in the maturity tables using the estimated average life of each security. Expected maturities may differ from

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contractual maturities because issuers may have the right to call or prepay obligations with or without call or prepayment penalties.

AFS HTM
($ in thousands) Fair Value Carrying Value Fair Value
Due in one year or less $ 537,130 1,032 1,033
Due after one year through five years 3,365,039 14,971 15,808
Due after five years through 10 years 2,109,060 10,953 11,041
Due after 10 years 615,171 0 0
Total fixed income securities $ 6,626,400 26,956 27,882

Listed below are the contractual maturities of fixed income securities at March 31, 2022:


	AFS		HTM
($ in thousands)	Fair Value		Carrying Value	Fair Value
Due in one year or less	$	396,074	6,727	6,899
Due after one year through five years	2,915,421		5,977	6,012
Due after five years through 10 years	2,425,811		20,331	19,714
Due after 10 years	861,516		—	—
Total fixed income securities	$	6,598,822	33,035	32,625

(d) The following table summarizes our other investment portfolio by strategy:

Other Investments June 30, 2021 December 31, 2020
($ in thousands) Carrying Value Remaining Commitment
Maximum Exposure to Loss1
Carrying Value Remaining Commitment
Maximum Exposure to Loss1
Alternative Investments
   Private equity $ 218,385 110,998 329,383 157,276 100,905 258,181
   Private credit 58,674 96,132 154,806 54,017 98,330 152,347
   Real assets 19,970 15,773 35,743 19,659 16,493 36,152
Total alternative investments 297,029 222,903 519,932 230,952 215,728 446,680
Other securities 33,450 0 33,450 35,370 0 35,370
Total other investments $ 330,479 222,903 553,382 266,322 215,728 482,050


Other Investments	March 31, 2022				December 31, 2021
($ in thousands)	Carrying Value		Remaining Commitment	Maximum Exposure to Loss1	Carrying Value	Remaining Commitment	Maximum Exposure to Loss1
Alternative Investments
Private equity	$	281,352	124,761	406,113	273,070	99,734	372,804
Private credit	60,476		92,279	152,755	63,138	92,674	155,812
Real assets	26,159		20,914	47,073	23,524	22,579	46,103
Total alternative investments	367,987		237,954	605,941	359,732	214,987	574,719
Other securities	57,679		—	57,679	49,300	—	49,300
Total other investments	$	425,666	237,954	663,620	409,032	214,987	624,019

1~~The maximum exposure to loss includes both the carry value of these investments and the related remaining commitments.~~ In addition ~~tax credits that have been~~to the amounts in this table, previously recognized ~~in Other securities~~tax credits are subject to the risk of ~~recapture, which we~~recapture. We do not consider ~~significant.~~the risk of recapture to be significant and therefore do not include in this table.

We are contractually committed to make additional investments up to the remaining commitments stated ~~above, but we do~~above. We did not ~~have a material future obligation to fund losses or debts on behalf of these investments. We have not provided~~provide any non-contractual financial support at any time during ~~2021~~2022 or ~~2020.~~2021.

The following table shows gross summarized financial information for our other investments portfolio, including the portion we do not own. ~~The~~As the majority of these investments are carried under the equity method of accounting and report results to us on a one-quarter ~~lag. The following table provides (i)~~lag, the ~~gross~~ summarized financial statement information ~~for these investments~~is for the ~~three and six-months~~three-month period ended, ~~March 31, and (ii) the portion of these results that are included in our Second Quarter and Six Months results:~~December 31:

Income Statement Information Quarter ended June 30, Six Months ended June 30,
($ in millions) 2021 2020 2021 2020
Net investment income $ 8.4 (3.1) $ 490.0 9.6
Realized gains 1,392.5 179.0 2,168.6 343.8
Net change in unrealized appreciation 4,948.9 (2,862.9) 9,579.7 (1,658.9)
Net income $ 6,349.8 (2,687.0) $ 12,238.3 (1,305.5)
Insurance Subsidiaries’ alternative investments income $ 29.9 (16.0) $ 50.1 (9.7)


Income Statement Information	Quarter ended March 31,
($ in millions)	2022		2021
Net investment income	$	135.5	481.6
Realized gains	2,748.0		776.0
Net change in unrealized appreciation	5,178.2		4,630.8
Net income	$	8,061.7	5,888.4
Alternative investment income included in "Net investment income earned" on our Consolidated Statements of Income	$	19.1	20.2

(e) ~~Certain Insurance Subsidiaries,~~We have pledged certain AFS fixed income securities as ~~members of~~collateral related to our borrowing relationships with the Federal Home Loan Bank of Indianapolis ("FHLBI") and the Federal Home Loan Bank of New York ("FHLBNY")~~, have pledged~~. In addition, certain ~~AFS fixed income~~ securities ~~as collateral. Additionally, to comply with insurance laws, certain Insurance Subsidiaries have deposited certain securities~~were on deposit with various state and regulatory agencies at ~~June 30, 2021.~~March 31, 2022 to comply with insurance laws. We retain all rights regarding all securities pledged as collateral.

The following table summarizes the market value of these securities at ~~June 30, 2021:~~

($ in millions) FHLBI Collateral FHLBNY Collateral State and
Regulatory Deposits Total
U.S. government and government agencies $ 0 0 21.6 21.6
Obligations of states and political subdivisions 0 0 5.0 5.0
RMBS 78.5 48.9 0 127.4
CMBS 6.7 15.6 0 22.3
Total pledged as collateral $ 85.2 64.5 26.6 176.3
March 31, 2022:


($ in millions)	FHLBI Collateral		FHLBNY Collateral	State and Regulatory Deposits	Total
U.S. government and government agencies	$	—	—	20.3	20.3
Obligations of states and political subdivisions	—		—	3.8	3.8



RMBS	63.1		35.9	—	99.0
CMBS	5.8		12.8	—	18.6


Total pledged as collateral	$	68.9	48.7	24.1	141.7

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(f) We did not have exposure to any credit concentration risk of a single issuer greater than 10% of our stockholders' equity, other than certain U.S. ~~government-backed investments,~~government agencies, as of ~~June 30, 2021,~~March 31, 2022, or December 31, ~~2020.~~2021.

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(g) The components of pre-tax net investment income earned were as follows:

Quarter ended June 30, Six Months ended June 30,
($ in thousands) 2021 2020 2021 2020
Fixed income securities $ 52,608 51,079 $ 105,431 101,332
Commercial mortgage loans ("CMLs") 695 156 1,209 218
Equity securities 2,982 2,023 5,470 3,575
Short-term investments 55 420 140 1,586
Other investments 32,860 (15,846) 50,293 (9,504)
Investment expenses (5,469) (3,388) (9,096) (6,796)
Net investment income earned $ 83,731 34,444 $ 153,447 90,411

The increase in net investment income earned in Second Quarter 2021 and Six Months 2021 compared to the prior year periods were driven by the alternative investments in our other investments portfolio. The results reflect the improvement in the equity markets in the three and six-month periods ending March 31, 2021, as our results on these holdings are recorded on a one-quarter lag.


	Quarter ended March 31,
($ in thousands)	2022		2021
Fixed income securities	$	53,925	52,823
Commercial mortgage loans ("CMLs")	970		514
Equity securities	2,418		2,488
Short-term investments	101		85
Other investments	19,305		17,433
Investment expenses	(4,117)		(3,627)
Net investment income earned	$	72,602	69,716

(h) The following table summarizes net realized and unrealized gains and losses for the periods indicated:

Quarter ended June 30, Six Months ended June 30,
($ in thousands) 2021 2020 2021 2020
Gross gains on sales $ 2,079 6,478 $ 5,755 12,151
Gross losses on sales (1,811) (3,863) (6,282) (5,436)
Net realized gains (losses) on disposals 268 2,615 (527) 6,715
Net unrealized gains (losses) on equity securities 7,661 5,701 18,941 (11,436)
Net credit loss benefit (expense) on fixed income securities, AFS 2,272 4,923 (2,725) (10,864)
Net credit loss (expense) benefit on fixed income securities, HTM (53) 1 (60) 1
Net credit loss benefit (expense) on CMLs 0 22 0 (218)
Losses on securities for which we have the intent to sell (91) (613) (453) (16,215)
Net realized and unrealized gains (losses) $ 10,057 12,649 $ 15,176 (32,017)


	Quarter ended March 31,
($ in thousands)	2022		2021
Gross gains on sales	$	2,197	3,676
Gross losses on sales	(13,560)		(4,471)
Net realized losses on disposals	(11,363)		(795)
Net unrealized (losses) gains on equity securities	(2,154)		11,280
Net credit loss expense on fixed income securities, AFS	(22,052)		(4,997)
Net credit loss benefit (expense) on fixed income securities, HTM	14		(7)

Losses on securities for which we have the intent to sell	(4,797)		(362)
Net realized and unrealized (losses) gains	$	(40,352)	5,119

~~Unrealized~~Net realized and unrealized investment gains ~~(losses)~~decreased $45.5 million in First Quarter 2022 compared to First Quarter 2021 primarily driven by (i) active trading of our fixed income securities in an effort to opportunistically increase yield given the rising interest rate environment, and (ii) higher credit loss expense on our AFS fixed income securities portfolio.

Net unrealized losses and gains recognized in income on equity securities, as reflected in the table above, ~~include~~included the following:

Quarter ended June 30, Six Months ended June 30,
($ in thousands) 2021 2020 2021 2020
Unrealized gains (losses) recognized in income on equity securities:
On securities remaining in our portfolio at period end $ 7,458 5,701 $ 16,942 (11,439)
On securities sold during period 203 0 1,999 3
Total unrealized gains (losses) recognized in income on equity securities $ 7,661 5,701 $ 18,941 (11,436)

The improvement in net realized and unrealized gains in Six Months 2021 as compared to Six Months 2020 was primarily driven by (i) unrealized gains on our equity securities compared to unrealized losses last year, which were driven by COVID-19-related market disruption, and (ii) lower intent-to-sell losses as we provided our investment managers significant trading flexibility last year given market conditions.


	Quarter ended March 31,
($ in thousands)	2022		2021
Unrealized (losses) gains recognized in income on equity securities:
On securities remaining in our portfolio at end of period	$	(2,220)	10,097
On securities sold in period	66		1,183
Total unrealized (losses) gains recognized in income on equity securities	$	(2,154)	11,280

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NOTE 5. Fair Value Measurements

The financial assets in our investment portfolio are primarily measured at fair value as disclosed on the Consolidated Balance Sheets. The following table presents the carrying amounts and estimated fair values of our financial liabilities as of ~~June 30, 2021~~March 31, 2022, and December 31, ~~2020:~~

June 30, 2021 December 31, 2020
($ in thousands) Carrying Amount Fair Value Carrying Amount Fair Value
Financial Liabilities
Long-term debt:
7.25% Senior Notes $ 49,915 64,485 49,914 66,148
6.70% Senior Notes 99,509 124,997 99,499 127,886
5.375% Senior Notes 294,285 372,432 294,241 383,669
1.61% borrowings from FHLBNY 25,000 25,026 25,000 25,182
1.56% borrowings from FHLBNY 25,000 25,050 25,000 25,198
3.03% borrowings from FHLBI 60,000 65,549 60,000 67,513
Subtotal long-term debt 553,709 677,539 553,654 695,596
Unamortized debt issuance costs (3,291) (3,419)
Finance lease obligations 463 508
Total long-term debt $ 550,881 550,743
2021:


	March 31, 2022			December 31, 2021
($ in thousands)	Carrying Amount		Fair Value	Carrying Amount	Fair Value
Financial Liabilities







Long-term debt:
7.25% Senior Notes	$	49,919	59,828	49,917	63,719
6.70% Senior Notes	99,525		116,980	99,520	127,574

5.375% Senior Notes	294,353		332,644	294,330	395,652
3.03% borrowings from FHLBI	60,000		60,747	60,000	64,126
Subtotal long-term debt	503,797		570,199	503,767	651,071
Unamortized debt issuance costs	(3,106)			(3,167)
Finance lease obligations	4,875			5,450
Total long-term debt	$	505,566		506,050

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For a discussion ofregarding the fair value ~~hierarchy and~~ techniques ~~used to value~~of our financial ~~assets and liabilities,~~instruments, refer to Note 2. "Summary of Significant Accounting Policies" in Item 8. "Financial Statements and Supplementary Data." of our ~~2020~~2021 Annual Report.

The following tables provide quantitative disclosures of our financial assets that were measured and recorded at fair value at ~~June 30, 2021,~~March 31, 2022, and December 31, ~~2020:~~

June 30, 2021 Fair Value Measurements Using
($ in thousands) Assets
Measured at
Fair Value Quoted Prices in
Active Markets for
Identical Assets/
Liabilities (Level 1) Significant Other
Observable
Inputs
(Level 2) Significant Unobservable
Inputs
(Level 3)
Description
Measured on a recurring basis:
AFS fixed income securities:
U.S. government and government agencies $ 136,194 59,569 76,625 0
Foreign government 15,275 0 15,275 0
Obligations of states and political subdivisions 1,199,901 0 1,191,919 7,982
Corporate securities 2,466,887 0 2,376,482 90,405
CLO and other ABS 1,282,223 0 1,211,486 70,737
RMBS 854,497 0 854,497 0
CMBS 671,423 0 671,423 0
Total AFS fixed income securities 6,626,400 59,569 6,397,707 169,124
Equity securities:
Common stock1
346,232 260,971 0 0
Preferred stock 2,110 2,110 0 0
Total equity securities 348,342 263,081 0 0
Short-term investments 351,230 351,133 97 0
Total assets measured at fair value $ 7,325,972 673,783 6,397,804 169,124
2021:


March 31, 2022			Fair Value Measurements Using
($ in thousands)	Assets Measured at Fair Value		Quoted Prices in Active Markets for Identical Assets/ Liabilities (Level 1)	Significant Other Observable Inputs (Level 2)	Significant Unobservable Inputs (Level 3)
Description
Measured on a recurring basis:
AFS fixed income securities:
U.S. government and government agencies	$	127,093	31,671	95,422	—
Foreign government	16,703		—	16,703	—
Obligations of states and political subdivisions	1,125,431		—	1,118,186	7,245
Corporate securities	2,387,740		—	2,264,938	122,802
CLO and other ABS	1,417,214		—	1,286,296	130,918
RMBS	877,959		—	877,959	—
CMBS	646,682		—	646,243	439
Total AFS fixed income securities	6,598,822		31,671	6,305,747	261,404
Equity securities:
Common stock1	342,572		246,178	—	—
Preferred stock	2,011		2,011	—	—
Total equity securities	344,583		248,189	—	—
Short-term investments	256,712		250,938	5,774	—
Total assets measured at fair value	$	7,200,117	530,798	6,311,521	261,404

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December 31, 2020				Fair Value Measurements Using
December 31, 2021							December 31, 2021			Fair Value Measurements Using
($ in thousands)	($ in thousands)	Assets Measured at Fair Value		Quoted Prices in Active Markets for Identical Assets/Liabilities (Level 1)	Significant Other Observable Inputs (Level 2)	Significant Unobservable Inputs (Level 3)	($ in thousands)	Assets Measured at Fair Value		Quoted Prices in Active Markets for Identical Assets/Liabilities (Level 1)	Significant Other Observable Inputs (Level 2)	Significant Unobservable Inputs (Level 3)
Description	Description						Description
Measured on a recurring basis:	Measured on a recurring basis:						Measured on a recurring basis:
AFS fixed income securities:	AFS fixed income securities:						AFS fixed income securities:
U.S. government and government agencies	U.S. government and government agencies	$	116,140	40,960	75,180	0	U.S. government and government agencies	$	130,458	60,615	69,843	—
Foreign government	Foreign government	18,366		0	18,366	0	Foreign government	15,860		—	15,860	—
Obligations of states and political subdivisions	Obligations of states and political subdivisions	1,247,137		0	1,244,243	2,894	Obligations of states and political subdivisions	1,189,308		—	1,181,563	7,745
Corporate securities	Corporate securities	2,328,052		0	2,257,352	70,700	Corporate securities	2,573,603		—	2,459,476	114,127
CLO and other ABS	CLO and other ABS	1,026,551		0	970,176	56,375	CLO and other ABS	1,350,814		—	1,225,905	124,909
RMBS	RMBS	1,051,788		0	1,051,788	0	RMBS	776,252		—	776,007	245
CMBS	CMBS	667,894		0	667,894	0	CMBS	673,681		—	669,425	4,256
Total AFS fixed income securities	Total AFS fixed income securities	6,455,928		40,960	6,284,999	129,969	Total AFS fixed income securities	6,709,976		60,615	6,398,079	251,282
Equity securities:	Equity securities:						Equity securities:
Common stock1	Common stock1	308,632		261,846	0	0	Common stock1	333,449		249,846	—	—
Preferred stock	Preferred stock	1,735		1,735	0	0	Preferred stock	2,088		2,088	—	—
Total equity securities	Total equity securities	310,367		263,581	0	0	Total equity securities	335,537		251,934	—	—
Short-term investments	Short-term investments	409,852		405,400	4,452	0	Short-term investments	447,863		442,723	5,140	—
Total assets measured at fair value	Total assets measured at fair value	$	7,176,147	709,941	6,289,451	129,969	Total assets measured at fair value	$	7,493,376	755,272	6,403,219	251,282

1Investments amounting to ~~$85.3~~$96.4 million at ~~June 30, 2021,~~March 31, 2022, and ~~$46.8~~$83.6 million at December 31, ~~2020,~~2021, were measured at fair value using the net asset value per share (or its practical expedient) and ~~are~~have not been classified in the fair value hierarchy. These investments are not redeemable and the timing of liquidations of the underlying assets is unknown at each reporting period. The fair value amounts in this table ~~enables~~are intended to permit reconciliation of the fair value hierarchy to total assets measured at fair value.

~~The following table provides a summary of Level 3 changes in Six Months 2021 and Six Months 2020:~~

June 30, 2021
($ in thousands) Obligations of States and Political Subdivisions Corporate Securities CLO and Other ABS Total
Fair value, December 31, 2020 $ 2,894 70,700 56,375 129,969
Total net (losses) gains for the period included in:
OCI (13) 1,899 396 2,282
Net realized and unrealized (losses) gains 0 11 (82) (71)
Net investment income earned 0 13 6 19
Purchases 0 25,403 17,639 43,042
Sales 0 0 0 0
Issuances 0 0 0 0
Settlements 0 (167) (1,429) (1,596)
Transfers into Level 3 5,101 0 3,226 8,327
Transfers out of Level 3 0 (7,454) (5,394) (12,848)
Fair value, June 30, 2021 $ 7,982 90,405 70,737 169,124
Change in unrealized (losses) gains for the period included in earnings for assets held at period end 0 11 (82) (71)
Change in unrealized gains (losses) for the period included in OCI for assets held at period end (13) 1,899 396 2,282

1311

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June 30, 2020
($ in thousands) Obligation of state and Political Subdivisions Corporate Securities CLO and Other ABS Total
Fair value, December 31, 2019 $ 0 17,051 17,034 34,085
Total net (losses) gains for the period included in:
OCI (111) (1,770) (367) (2,248)
Net realized and unrealized (losses) gains 0 (384) (349) (733)
Net investment income earned 0 0 1 1
Purchases 0 3,002 9,690 12,692
Sales 0 0 0 0
Issuances 0 0 0 0
Settlements 0 (138) (1,032) (1,170)
Transfers into Level 3 2,890 4,592 20,107 27,589
Transfers out of Level 3 0 0 (9,924) (9,924)
Fair value, June 30, 2020 $ 2,779 22,353 35,160 60,292
Change in unrealized gains (losses) for the period included in earnings for assets held at period end 0 (384) (349) (733)
Change in unrealized gains (losses) for the period included in OCI for assets held at period end (111) (1,770) (367) (2,248)
The following tables provide a summary of the changes in the fair value of securities measured using Level 3 inputs and related quantitative information for the periods indicated:


Quarter ended March 31, 2022
($ in thousands)	Obligations of States and Political Subdivisions		Corporate Securities	CLO and Other ABS	RMBS	CMBS	Total
Fair value, December 31, 2021	$	7,745	114,127	124,909	245	4,256	251,282
Total net (losses) gains for the period included in:
OCI	(343)		(6,529)	(4,335)	(17)	(415)	(11,639)
Net realized and unrealized (losses) gains	(157)		(1,809)	(472)	—	(7)	(2,445)
Net investment income earned	—		4	15	—	47	66
Purchases	—		2,964	27,033	—	—	29,997
Sales	—		—	—	—	—	—
Issuances	—		—	—	—	—	—
Settlements	—		(69)	(136)	(11)	(11)	(227)
Transfers into Level 3	—		17,055	—	—	—	17,055
Transfers out of Level 3	—		(2,941)	(16,096)	(217)	(3,431)	(22,685)
Fair value, March 31, 2022	$	7,245	122,802	130,918	—	439	261,404

Change in unrealized losses for the period included in earnings for assets held at period end	(157)		(1,809)	(472)	—	(7)	(2,445)
Change in unrealized gains for the period included in OCI for assets held at period end	(343)		(6,529)	(4,335)	(17)	(415)	(11,639)


Quarter ended March 31, 2021
($ in thousands)	Obligation of state and Political Subdivisions		Corporate Securities	CLO and Other ABS	Total
Fair value, December 31, 2020	$	2,894	70,700	56,375	129,969
Total net (losses) gains for the period included in:
OCI	(99)		(2,388)	(1,116)	(3,603)
Net realized and unrealized (losses) gains	—		(91)	(143)	(234)
Net investment income earned	—		1	3	4
Purchases	—		21,100	10,672	31,772
Sales	—		—	—	—
Issuances	—		—	—	—
Settlements	—		—	(412)	(412)
Transfers into Level 3	5,101		—	—	5,101
Transfers out of Level 3	—		—	(490)	(490)
Fair value, March 31, 2021	$	7,896	89,322	64,889	162,107

Change in unrealized (losses) gains for the period included in earnings for assets held at period end	—		(91)	(143)	(234)
Change in unrealized gains (losses) for the period included in OCI for assets held at period end	(99)		(2,388)	(1,116)	(3,603)

The following tables present quantitative information about the significant unobservable inputs utilized in the fair value measurements of Level 3 assets at March 31, 2022 and December 31, 2021:

March 31, 2022

($ in thousands)

Assets Measured at Fair Value

Valuation Techniques

Unobservable Inputs

Range
(Weighted Average)

Internal valuations:

Corporate securities

56,510

Discounted Cash Flow

Illiquidity Spread

(4.4)% - 5.3% (1.1)%

CLO and other ABS

46,816

Discounted Cash Flow

Illiquidity Spread

0.01% - 8.0% (1.9)%

Total internal valuations

103,326

Other1

158,078

Total Level 3 securities

261,404

Table of Contents

December 31, 2021

($ in thousands)

Assets Measured at Fair Value

Valuation Techniques

Unobservable Inputs

Range
(Weighted Average)

Internal valuations:

Corporate securities

54,135

Discounted Cash Flow

Illiquidity Spread

0.3% - 3.0% (1.2)%

CLO and other ABS

34,903

Discounted Cash Flow

Illiquidity Spread

0.7% - 8.0% (2.1)%

Total internal valuations

89,038

Other1

162,244

Total Level 3 securities

251,282

1Other is comprised of broker quotes or other third-party pricing for which there is a lack of transparency as to the inputs used to develop the valuations. The quantitative details of these unobservable inputs is neither provided to us, nor reasonably available to us, and therefore are not included in the tables above.

For the securities in the tables above valued using a discounted cash flow analysis, we apply an illiquidity spread in our determination of fair value. An increase in this assumption would result in a lower fair value measurement.

The following tables provide quantitative information regarding our financial assets and liabilities that were not measured, but were disclosed at fair value at ~~June 30, 2021,~~March 31, 2022, and December 31, ~~2020:~~2021:

June 30, 2021 Fair Value Measurements Using
($ in thousands) Assets/
Liabilities
Disclosed at
Fair Value Quoted Prices in
Active Markets for
Identical Assets/
Liabilities
(Level 1) Significant Other
Observable Inputs
(Level 2) Significant
Unobservable
Inputs
(Level 3)
Financial Assets
HTM:
Obligations of states and political subdivisions $ 4,665 0 4,665 0
Corporate securities 23,217 0 23,217 0
Total HTM fixed income securities $ 27,882 0 27,882 0
CMLs $ 73,559 0 0 73,559
Financial Liabilities
Long-term debt:
7.25% Senior Notes $ 64,485 0 64,485 0
6.70% Senior Notes 124,997 0 124,997 0
5.375% Senior Notes 372,432 0 372,432 0
1.61% borrowings from FHLBNY 25,026 0 25,026 0
1.56% borrowings from FHLBNY 25,050 0 25,050 0
3.03% borrowings from FHLBI 65,549 0 65,549 0
Total long-term debt $ 677,539 0 677,539 0


March 31, 2022			Fair Value Measurements Using
($ in thousands)	Assets/ Liabilities Disclosed at Fair Value		Quoted Prices in Active Markets for Identical Assets/ Liabilities (Level 1)	Significant Other Observable Inputs (Level 2)	Significant Unobservable Inputs (Level 3)
Financial Assets
HTM:

Obligations of states and political subdivisions	$	3,502	—	3,502	—
Corporate securities	29,123		—	29,123	—


Total HTM fixed income securities	$	32,625	—	32,625	—

CMLs	$	113,106	—	—	113,106

Financial Liabilities











Long-term debt:
7.25% Senior Notes	$	59,828	—	59,828	—
6.70% Senior Notes	116,980		—	116,980	—
5.375% Senior Notes	332,644		—	332,644	—



3.03% borrowings from FHLBI	60,747		—	60,747	—
Total long-term debt	$	570,199	—	570,199	—


December 31, 2021			Fair Value Measurements Using
($ in thousands)	Assets/ Liabilities Disclosed at Fair Value		Quoted Prices in Active Markets for Identical Assets/ Liabilities (Level 1)	Significant Other Observable Inputs (Level 2)	Significant Unobservable Inputs (Level 3)
Financial Assets
HTM:

Obligations of states and political subdivisions	$	3,576	—	3,576	—
Corporate securities	25,884		—	25,884	—


Total HTM fixed income securities	$	29,460	—	29,460	—

CMLs	$	97,598	—	—	97,598

Financial Liabilities





Long-term debt:
7.25% Senior Notes	$	63,719	—	63,719	—
6.70% Senior Notes	127,574		—	127,574	—
5.375% Senior Notes	395,652		—	395,652	—
3.03% borrowings from FHLBI	64,126		—	64,126	—
Total long-term debt	$	651,071	—	651,071	—

1413

Table of Contents

December 31, 2020 Fair Value Measurements Using
($ in thousands) Assets/
Liabilities
Disclosed at
Fair Value Quoted Prices in
Active Markets for
Identical Assets/
Liabilities
(Level 1) Significant Other
Observable Inputs
(Level 2) Significant
Unobservable
Inputs
(Level 3)
Financial Assets
HTM:
Obligations of states and political subdivisions $ 4,795 0 4,795 0
Corporate securities 13,206 0 13,206 0
Total HTM fixed income securities $ 18,001 0 18,001 0
CMLs $ 47,289 0 0 47,289
Financial Liabilities
Long-term debt:
7.25% Senior Notes $ 66,148 0 66,148 0
6.70% Senior Notes 127,886 0 127,886 0
5.375% Senior Notes 383,669 0 383,669 0
1.61% borrowings from FHLBNY 25,182 0 25,182 0
1.56% borrowings from FHLBNY 25,198 0 25,198 0
3.03% borrowings from FHLBI 67,513 0 67,513 0
Total long-term debt $ 695,596 0 695,596 0

NOTE 6. Allowance for Credit Losses on Premiums Receivable

The following table provides a roll forward of the allowance for credit losses on our premiums receivable balance for the periods indicated:

Quarter ended June 30, Six Months ended June 30,
($ in thousands) 2021 2020 2021 2020
Balance at beginning of period $ 21,000 $ 18,000 $ 21,000 $ 6,400
Cumulative effect adjustment1
0 0 0 1,058
Balance at beginning of period, as adjusted $ 21,000 $ 18,000 $ 21,000 $ 7,458
Current period provision for expected credit losses 733 4,597 1,541 15,792
Write-offs charged against the allowance for credit losses (3,526) (1,597) (4,400) (2,250)
Recoveries 93 0 159 0
Allowance for credit losses, end of period $ 18,300 $ 21,000 $ 18,300 $ 21,000

1~~Represents the impact of our adoption of ASU 2016-13,~~ ~~Financial Instruments - Credit Losses~~.


	Quarter ended March 31,
($ in thousands)	2022		2021
Balance at beginning of period	$	13,600	$	21,000


Current period change for expected credit losses	916		808

Write-offs charged against the allowance for credit losses	(520)		(874)
Recoveries	304		66
Allowance for credit losses, end of period	$	14,300	$	21,000

In ~~Six Months 2020,~~First Quarter 2022, we recognized an additional allowance for credit losses of ~~$13.5~~$0.7 million, net of write-offs and recoveries. WeIncluded in this was a reserve of $2.3 million on 2022 policies based ~~this increase~~ on ~~an evaluation of~~our historical write-off percentages and assumptions, partially offset by a $1.1 million allowance reduction on older policies, primarily impacted by the ~~recoverability of our premiums receivable in light of (i)~~COVID-19 pandemic, for which the billing accommodations we announced during the first quarter of 2020 and (ii) the impact of certain state regulations that provided for deferral of payments without cancellation for a period up to 90 days and increased earned but uncollected premiums. The billing accommodations included individualized payment flexibility and suspending the effect of policy cancellations, late payment notices, and late or reinstatement fees. credit loss did not fully materialize.

The heightened credit risk experienced in 2020 ~~led us to increase~~as a result of COVID-19 resulted in the allowance for credit losses being increased to $21.0 million, ~~in Second Quarter 2020.~~where it remained as of March 31, 2021. During ~~Second~~First Quarter 2021, we ~~realized a portion~~recognized expected credit losses, net of ~~the anticipated write-offs, which reduced~~recoveries, of $2.1 million on 2021 policies based on our ~~allowance. The reduction was~~historical write-off percentages and assumptions, partially offset by ~~the additional provision established~~a $1.2 million allowance reduction on ~~current-year premiums, which resulted in the ending allowance of $18.3 million.~~older policies.

For a discussion of the methodology used to evaluate our estimate of expected credit losses, refer to Note 2. "Summary of Significant Accounting Policies" in Item 8. "Financial Statements and Supplementary Data." of our 2021 Annual Report.

~~Table of Contents~~

NOTE 7. Reinsurance

We evaluate and monitor the financial condition of our reinsurers under voluntary reinsurance arrangements to minimize our exposure to significant losses from reinsurer insolvencies. The following tables provide (i) a disaggregation of our reinsurance recoverable balance by financial strength rating and (ii) an aging analysis of our past due reinsurance recoverable balances as of ~~June 30, 2021,~~March 31, 2022, and December 31, ~~2020:~~

June 30, 2021
($ in thousands) Current Past Due Total Reinsurance Recoverables
Financial strength rating of rated reinsurers
A++ $ 40,382 $ 14 $ 40,396
A+ 357,328 2,554 359,882
A 105,600 87 105,687
A- 2,054 0 2,054
B++ 135 244 379
B+ 0 0 0
Total rated reinsurers $ 505,499 $ 2,899 $ 508,398
Non-rated reinsurers
Federal and state pools $ 86,512 $ 0 $ 86,512
Other than federal and state pools 3,474 274 3,748
Total non-rated reinsurers $ 89,986 $ 274 $ 90,260
Total reinsurance recoverable, gross $ 595,485 $ 3,173 $ 598,658
Less: allowance for credit losses1
(1,777)
Total reinsurance recoverable, net $ 596,881
2021:


		December 31, 2020							March 31, 2022
($ in thousands)	($ in thousands)	Current		Past Due		Total Reinsurance Recoverables		($ in thousands)	Current		Past Due		Total Reinsurance Recoverables
Financial strength rating of rated reinsurers	Financial strength rating of rated reinsurers							Financial strength rating of rated reinsurers
A++	A++	$	37,464	$	102	$	37,566	A++	$	42,025	$	(3)	$	42,022
A+	A+	354,846		2,452		357,298		A+	349,963		735		350,698
A	A	105,652		415		106,067		A	97,115		926		98,041
A-	A-	2,139		0		2,139		A-	3,230		79		3,309
B++	B++	56		324		380		B++	—		—		—
B+	B+	0		0		0		B+	—		—		—
Total rated reinsurers	Total rated reinsurers	$	500,157	$	3,293	$	503,450	Total rated reinsurers	$	492,333	$	1,737	$	494,070

Non-rated reinsurers	Non-rated reinsurers							Non-rated reinsurers
Federal and state pools	Federal and state pools	$	82,575	$	0	$	82,575	Federal and state pools	$	79,980	$	—	$	79,980
Other than federal and state pools	Other than federal and state pools	2,676		568		3,244		Other than federal and state pools	4,744		165		4,909
Total non-rated reinsurers	Total non-rated reinsurers	$	85,251	$	568	$	85,819	Total non-rated reinsurers	$	84,724	$	165	$	84,889

Total reinsurance recoverable, gross	Total reinsurance recoverable, gross	$	585,408	$	3,861	$	589,269	Total reinsurance recoverable, gross	$	577,057	$	1,902	$	578,959
Less: allowance for credit losses1						(1,777)
Less: allowance for credit losses								Less: allowance for credit losses					(1,600)
Total reinsurance recoverable, net	Total reinsurance recoverable, net					$	587,492	Total reinsurance recoverable, net					$	577,359

~~Represents our current expectation~~Table of Contents


	December 31, 2021
($ in thousands)	Current		Past Due		Total Reinsurance Recoverables
Financial strength rating of rated reinsurers
A++	$	38,601	$	9	$	38,610
A+	339,857		1,520		341,377
A	95,675		1,227		96,902
A-	3,209		145		3,354
B++	—		—		—
B+	—		—		—
Total rated reinsurers	$	477,342	$	2,901	$	480,243

Non-rated reinsurers
Federal and state pools	$	116,378	$	—	$	116,378
Other than federal and state pools	4,597		450		5,047
Total non-rated reinsurers	$	120,975	$	450	$	121,425

Total reinsurance recoverable, gross	$	598,317	$	3,351	$	601,668
Less: allowance for credit losses					(1,600)
Total reinsurance recoverable, net					$	600,068

The following table provides a rollforward of the allowance for credit losses on ~~total current and past due~~our reinsurance ~~recoverables, and is not identifiable by reinsurer.~~recoverable balance for the periods indicated:


($ in thousands)	Quarter ended March 31,
	2022		2021
Balance at beginning of period	$	1,600	1,777


Current period change for expected credit losses	—		63

Write-offs charged against the allowance for credit losses	—		—
Recoveries	—		—
Allowance for credit losses, end of period	$	1,600	1,840

~~Table of Contents~~

~~The following table provides a rollforward of the allowance for credit losses on our reinsurance recoverable balance for the periods indicated:~~

($ in thousands) Quarter ended June 30, Six Months ended June 30,
2021 2020 2021 2020
Balance at beginning of period $ 1,840 1,502 $ 1,777 4,400
Cumulative effect adjustment1
0 0 0 (2,903)
Balance at beginning of period, as adjusted $ 1,840 1,502 $ 1,777 1,497
Current period provision for expected credit losses (63) 894 0 899
Write-offs charged against the allowance for credit losses 0 0 0 0
Recoveries 0 0 0 0
Allowance for credit losses, end of period $ 1,777 2,396 $ 1,777 2,396

1~~Represents the impact of our adoption of ASU 2016-13,~~ ~~Financial Instruments - Credit Losses~~.

The following table contains a listing of direct, assumed, and ceded reinsurance amounts for premiums written, premiums earned, and loss and loss expenses incurred for the periods indicated. For more information about reinsurance, refer to Note 9. “Reinsurance” in Item 8. “Financial Statements and Supplementary Data.” of our ~~2020~~2021 Annual Report.

Quarter ended June 30, Six Months ended June 30,
($ in thousands) 2021 2020 2021 2020
Premiums written:
Direct $ 954,770 834,643 $ 1,863,544 1,581,074
Assumed 4,872 6,410 10,405 12,453
Ceded (126,437) (116,301) (242,566) (221,448)
Net $ 833,205 724,752 $ 1,631,383 1,372,079
Premiums earned:
Direct $ 853,456 733,647 $ 1,690,825 1,488,538
Assumed 4,411 6,055 10,087 12,228
Ceded (117,349) (109,031) (235,434) (218,392)
Net $ 740,518 630,671 $ 1,465,478 1,282,374
Loss and loss expenses incurred:
Direct $ 460,073 451,013 $ 901,580 876,808
Assumed 3,217 4,300 6,664 9,198
Ceded (41,667) (51,364) (73,220) (81,733)
Net $ 421,623 403,949 $ 835,024 804,273

Direct premiums written ("DPW") increased $120.1 million, or 14%, in Second Quarter 2021 compared to Second Quarter 2020. The increase included 3 percentage points from the COVID-19-related $19.7 million premium credit to our personal and commercial automobile policyholders in Second Quarter 2020. This premium credit to customers with in-force polices was equivalent to 15% of their April and May 2020 premiums.


	Quarter ended March 31,
($ in thousands)	2022		2021
Premiums written:
Direct	$	1,001,049	908,774
Assumed	5,314		5,533
Ceded	(116,565)		(116,129)
Net	$	889,798	798,178
Premiums earned:
Direct	$	931,376	837,369
Assumed	5,528		5,676
Ceded	(124,621)		(118,085)
Net	$	812,283	724,960
Loss and loss expenses incurred:
Direct	$	528,588	441,507
Assumed	4,278		3,447
Ceded	(38,630)		(31,553)
Net	$	494,236	413,401

Additionally, DPW increased $282.5 million, or 18%, in Six Months 2021 compared to Six Months 2020 resulted from (i) overall renewal pure price increases, (ii) new business growth, and (iii) strong retention. This increase also included 7 percentage points from the $75.0 million return audit and endorsement premium accrual that was recorded in the first quarter

Table of 2020 and the premium credit mentioned above. This accrual reflected lower exposure levels, which determine the premium we charge, attributable to the economic impacts of the COVID-19 pandemic and the anticipated decline in sales and payroll exposures on the general liability and workers compensation lines of business.Contents

Ceded premiums written, ceded premiums earned, and ceded loss and loss expenses incurred related to our participation in the NFIP, to which we cede 100% of our NFIP flood premiums, losses, and loss expenses, were as follows:

Ceded to NFIP Quarter ended June 30, Six Months ended June 30,
($ in thousands) 2021 2020 2021 2020
Ceded premiums written $ (75,081) (74,187) $ (140,823) (136,274)
Ceded premiums earned (66,833) (67,369) (134,352) (134,230)
Ceded loss and loss expenses incurred (18,941) (12,991) (21,148) (18,087)


Ceded to NFIP	Quarter ended March 31,
($ in thousands)	2022		2021
Ceded premiums written	$	(60,889)	(65,742)
Ceded premiums earned	(69,268)		(67,519)
Ceded loss and loss expenses incurred	(2,417)		(2,207)

~~Table of Contents~~

NOTE 8. Reserve for Loss and Loss Expense

The table below provides a roll forward of reserve for loss and loss expense for beginning and ending reserve balances:

Six Months ended June 30,
($ in thousands) 2021 2020
Gross reserve for loss and loss expense, at beginning of year $ 4,260,355 4,067,163
Less: reinsurance recoverable on unpaid loss and loss expense, at beginning of year1
554,269 547,066
Net reserve for loss and loss expense, at beginning of year 3,706,086 3,520,097
Incurred loss and loss expense for claims occurring in the:
Current year 886,801 825,201
Prior years (51,777) (20,928)
Total incurred loss and loss expense 835,024 804,273
Paid loss and loss expense for claims occurring in the:
Current year 227,505 221,422
Prior years 455,919 479,736
Total paid loss and loss expense 683,424 701,158
Net reserve for loss and loss expense, at end of period 3,857,686 3,623,212
Add: Reinsurance recoverable on unpaid loss and loss expense, at end of period 579,567 553,694
Gross reserve for loss and loss expense at end of period $ 4,437,253 4,176,906

1 ~~Six Months 2020 includes an adjustment of $2.9 million related to our adoption of ASU 2016-13,~~ ~~Financial Instruments - Credit Losses~~.


	Quarter ended March 31,
($ in thousands)	2022		2021
Gross reserve for loss and loss expense, at beginning of period	$	4,580,903	4,260,355
Less: reinsurance recoverable on unpaid loss and loss expense, at beginning of period	578,641		554,269
Net reserve for loss and loss expense, at beginning of period	4,002,262		3,706,086
Incurred loss and loss expense for claims occurring in the:
Current year	508,299		447,170
Prior years	(14,063)		(33,769)
Total incurred loss and loss expense	494,236		413,401
Paid loss and loss expense for claims occurring in the:
Current year	91,292		80,158
Prior years	312,926		243,687
Total paid loss and loss expense	404,218		323,845
Net reserve for loss and loss expense, at end of period	4,092,280		3,795,642
Add: Reinsurance recoverable on unpaid loss and loss expense, at end of period	552,111		564,546
Gross reserve for loss and loss expense at end of period	$	4,644,391	4,360,188

Prior year reserve development in ~~Six Months 2021~~First Quarter 2022 was favorable by ~~$51.8~~$14.1 million, ~~which included $52.0~~consisting of $20.0 million of ~~casualty reserve development. The~~ favorable casualty reserve development included $25.0 million in our general liability line of business, $20.0 million in our workers compensation line of business, and $7.0 million in our Excess and Surplus ("E&S") casualty lines of business.

~~Prior year reserve development in Six Months 2020 was favorable by $20.9 million, which included $25.0 million of~~ casualty reserve development, partially offset by ~~$4.1~~$5.9 million of unfavorable property reserve development. The favorable casualty reserve development included ~~$25~~$10.0 million in our workers compensation line of business, ~~and $10~~$5.0 million in our general liability line of business, ~~partially offset by $10.0~~and $5.0 million ~~of unfavorable reserve development~~ in our ~~commercial automobile~~bonds line of business.

Prior year reserve development in First Quarter 2021 was favorable by $33.8 million, consisting of $35.0 million of favorable casualty reserve development, partially offset by $1.2 million of unfavorable property reserve development. The favorable casualty reserve development included $15.0 million in our workers compensation line of business, $15.0 million in our general liability line of business, and $5.0 million in our Excess and Surplus (E&S") casualty lines of business.

NOTE 9. Segment Information

We evaluate the results of our 4 reportable segments as follows:

•Our Standard Commercial Lines, Standard Personal Lines, and E&S Lines are evaluated based on before and after-tax underwriting results (net premiums earned, incurred loss and loss expense, policyholder dividends, policy acquisition costs, and other underwriting expenses), return on equity ("ROE") contribution, and combined ratios.

•Our Investments segment is primarily evaluated on after-tax net investment income and its ROE contribution. After-tax net realized and unrealized gains and losses, which are not included in non-GAAP operating income, are also included in our ~~Investment~~Investments segment results.

In computing each segment's results, we do not make adjustments for interest expense or corporate ~~expenses, nor do we allocate~~expenses. No segment has a separate investment portfolio or allocated assets.

1816

Table of Contents

The following summaries present revenues (net investment income and net realized and unrealized gains and losses on investments ~~for~~in the case of the Investments segment) and pre-tax income for the individual segments:

Revenue by Segment Quarter ended June 30, Six Months ended June 30,
($ in thousands) 2021 2020 2021 2020
Standard Commercial Lines:
Net premiums earned:
Commercial property $ 106,113 95,413 $ 208,923 189,282
Workers compensation 74,337 61,906 152,527 128,612
General liability 197,293 163,273 390,813 327,853
Commercial automobile 178,028 138,535 349,909 288,225
Businessowners' policies 29,311 27,516 57,938 54,552
Bonds 8,993 9,210 17,586 18,849
Other 5,679 5,151 11,199 10,211
Miscellaneous income 5,795 4,195 9,502 5,586
Total Standard Commercial Lines revenue 605,549 505,199 1,198,397 1,023,170
Standard Personal Lines:
Net premiums earned:
Personal automobile 41,009 38,189 82,402 80,676
Homeowners 30,570 31,652 61,168 63,142
Other 1,714 1,792 3,544 3,943
Miscellaneous income 417 488 822 922
Total Standard Personal Lines revenue 73,710 72,121 147,936 148,683
E&S Lines:
Net premiums earned:
Casualty lines 47,642 42,722 91,475 86,794
Property lines 19,829 15,312 37,994 30,235
Total E&S Lines revenue 67,471 58,034 129,469 117,029
Investments:
Net investment income 83,731 34,444 153,447 90,411
Net realized and unrealized investment gains (losses) 10,057 12,649 15,176 (32,017)
Total Investments revenue 93,788 47,093 168,623 58,394
Total revenues $ 840,518 682,447 $ 1,644,425 1,347,276


Revenue by Segment	Quarter ended March 31,
($ in thousands)	2022		2021
Standard Commercial Lines:
Net premiums earned:
General liability	$	216,325	193,520
Commercial automobile	193,830		171,881
Commercial property	120,062		102,810
Workers compensation	84,680		78,190
Businessowners' policies	30,044		28,627
Bonds	10,360		8,593
Other	6,168		5,520
Miscellaneous income	1,101		3,707
Total Standard Commercial Lines revenue	662,570		592,848
Standard Personal Lines:
Net premiums earned:
Personal automobile	39,716		41,393
Homeowners	31,187		30,598
Other	1,739		1,830
Miscellaneous income	428		405
Total Standard Personal Lines revenue	73,070		74,226
E&S Lines:
Net premiums earned:
Casualty lines	54,624		43,833
Property lines	23,548		18,165

Total E&S Lines revenue	78,172		61,998
Investments:
Net investment income	72,602		69,716
Net realized and unrealized investment (losses) gains	(40,352)		5,119
Total Investments revenue	32,250		74,835


Total revenues	$	846,062	803,907

Income Before and After Federal Income Tax Quarter ended June 30, Six Months ended June 30,
($ in thousands) 2021 2020 2021 2020
Standard Commercial Lines:
Underwriting gain, before federal income tax $ 67,938 16,730 $ 137,437 33,856
Underwriting gain, after federal income tax 53,671 13,217 108,575 26,747
Combined ratio 88.7 % 96.7 88.4 96.7
ROE contribution 8.2 2.4 8.3 2.4
Standard Personal Lines:
Underwriting gain (loss), before federal income tax $ 5,644 (6,325) $ 13,339 (5,938)
Underwriting gain (loss), after federal income tax 4,459 (4,997) 10,538 (4,691)
Combined ratio 92.3 % 108.8 90.9 104.0
ROE contribution 0.7 (0.9) 0.8 (0.4)
E&S Lines:
Underwriting gain (loss), before federal income tax $ 2,306 (532) $ 2,822 3,312
Underwriting gain (loss), after federal income tax 1,822 (420) 2,229 2,616
Combined ratio 96.6 % 100.9 97.8 97.2
ROE contribution 0.3 (0.1) 0.2 0.2
Investments:
Net investment income $ 83,731 34,444 $ 153,447 90,411
Net realized and unrealized investment gains (losses) 10,057 12,649 15,176 (32,017)
Total investment segment income, before federal income tax 93,788 47,093 168,623 58,394
Tax on investment segment income 18,402 8,558 32,850 9,662
Total investment segment income, after federal income tax $ 75,386 38,535 $ 135,773 48,732
ROE contribution of after-tax net investment income 10.3 5.2 9.5 6.6


Income Before and After Federal Income Tax	Quarter ended March 31,
($ in thousands)	2022			2021
Standard Commercial Lines:
Underwriting income, before federal income tax	$	42,384		69,499
Underwriting income, after federal income tax	33,483			54,904
Combined ratio	93.6		%	88.2
ROE contribution	5.0			8.6

Standard Personal Lines:
Underwriting income, before federal income tax	$	6,520		7,695
Underwriting income, after federal income tax	5,151			6,079
Combined ratio	91.0		%	89.6
ROE contribution	0.8			1.0

E&S Lines:
Underwriting income, before federal income tax	$	6,925		516
Underwriting income, after federal income tax	5,471			408
Combined ratio	91.1		%	99.2
ROE contribution	0.8			0.1

Investments:
Net investment income	$	72,602		69,716
Net realized and unrealized investment (losses) gains	(40,352)			5,119
Total investments segment income, before federal income tax	32,250			74,835
Tax on investments segment income	5,613			14,448
Total investments segment income, after federal income tax	$	26,637		60,387
ROE contribution of after-tax net investment income earned	8.7			8.9

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Reconciliation of Segment Results to Income Before Federal Income Tax	Reconciliation of Segment Results to Income Before Federal Income Tax	Quarter ended June 30,			Six Months ended June 30,			Reconciliation of Segment Results to Income Before Federal Income Tax	Quarter ended March 31,
($ in thousands)	($ in thousands)	2021		2020	2021		2020	($ in thousands)	2022		2021
Underwriting gain
Underwriting income								Underwriting income
Standard Commercial Lines	Standard Commercial Lines	$	67,938	16,730	$	137,437	33,856	Standard Commercial Lines	$	42,384	69,499
Standard Personal Lines	Standard Personal Lines	5,644		(6,325)	13,339		(5,938)	Standard Personal Lines	6,520		7,695
E&S Lines	E&S Lines	2,306		(532)	2,822		3,312	E&S Lines	6,925		516
Investment income	Investment income	93,788		47,093	168,623		58,394	Investment income	32,250		74,835
Total all segments	Total all segments	169,676		56,966	322,221		89,624	Total all segments	88,079		152,545
Interest expense	Interest expense	(7,366)		(7,928)	(14,725)		(15,529)	Interest expense	(7,168)		(7,359)
Corporate expenses	Corporate expenses	(9,112)		(6,345)	(18,666)		(15,405)	Corporate expenses	(11,021)		(9,554)
Income, before federal income tax	Income, before federal income tax	$	153,198	42,693	$	288,830	58,690	Income, before federal income tax	$	69,890	135,632
Preferred stock dividends	Preferred stock dividends	(2,300)		0	(4,753)		0	Preferred stock dividends	(2,300)		(2,453)
Income available to common stockholders, before federal income tax	Income available to common stockholders, before federal income tax	$	150,898	42,693	$	284,077	58,690	Income available to common stockholders, before federal income tax	$	67,590	133,179

NOTE 10. Retirement Plans

The primary pension plan for our employees is the Retirement Income Plan for Selective Insurance Company of America (the “Pension Plan”). Selective Insurance Company of America ~~("SICA"~~(“SICA”) also sponsors the Supplemental Excess Retirement Plan (the “Excess Plan”) and a life insurance benefit plan. All plans are closed to new entrants, and benefits ceased accruing under the Pension Plan and the Excess Plan after March 31, 2016. For more information about SICA's retirement plans, see Note 15. “Retirement Plans” in Item 8. “Financial Statements and Supplementary Data.” of our ~~2020~~2021 Annual Report.

The following tables provide information about the Pension Plan:

Pension Plan Pension Plan
Quarter ended June 30, Six Months ended June 30,
($ in thousands) 2021 2020 2021 2020
Net Periodic Pension Cost (Benefit):
Interest cost $ 2,149 2,828 $ 4,297 5,656
Expected return on plan assets (5,744) (5,476) (11,488) (10,953)
Amortization of unrecognized net actuarial loss 625 704 1,250 1,408
Total net periodic pension cost (benefit)1
$ (2,970) (1,944) $ (5,941) (3,889)


	Pension Plan
	Quarter ended March 31,
($ in thousands)	2022		2021


Net Periodic Pension Cost (Benefit):

Interest cost	$	2,486	2,148
Expected return on plan assets	(5,537)		(5,744)

Amortization of unrecognized net actuarial loss	366		625

Total net periodic pension cost (benefit)1	$	(2,685)	(2,971)

1 The components of net periodic pension cost (benefit) are included within "Loss and loss expense incurred" and "Other insurance expenses" on the Consolidated Statements of Income.


		Pension Plan					Pension Plan
		Six Months ended June 30,					Quarter ended March 31,
		2021		2020			2022		2021
Weighted-Average Expense Assumptions:	Weighted-Average Expense Assumptions:					Weighted-Average Expense Assumptions:
Discount rate	Discount rate	2.68	%	3.33	%	Discount rate	2.98	%	2.68	%

Effective interest rate for calculation of interest cost	Effective interest rate for calculation of interest cost	2.06		2.95		Effective interest rate for calculation of interest cost	2.48		2.06
Expected return on plan assets	Expected return on plan assets	5.40		5.80		Expected return on plan assets	5.00		5.40

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NOTE 11. Comprehensive Income

The ~~following are the~~ components of comprehensive income, both gross and net of tax, for ~~Second~~First Quarter 2022 and ~~Six Months~~First Quarter 2021 ~~and 2020:~~

Second Quarter 2021
($ in thousands) Gross Tax Net
Net income $ 153,198 31,315 121,883
Components of OCI:
Unrealized gains on investment securities:

Unrealized holding gains during the period 35,553 7,467 28,086
Unrealized gains on securities with credit loss recognized in earnings 9,985 2,097 7,888
Amounts reclassified into net income:
HTM securities (3) (1) (2)
Net realized losses on disposals and losses on intent-to-sell AFS securities 58 12 46
Credit loss benefit (2,272) (477) (1,795)
    Total unrealized gains on investment securities 43,321 9,098 34,223
Defined benefit pension and post-retirement plans:
Amounts reclassified into net income:
Net actuarial loss 693 145 548
    Total defined benefit pension and post-retirement plans 693 145 548
Other comprehensive income 44,014 9,243 34,771
Comprehensive income $ 197,212 40,558 156,654
Second Quarter 2020
($ in thousands) Gross Tax Net
Net income $ 42,693 8,510 34,183
Components of OCI:
Unrealized gains on investment securities:

Unrealized holding gains during the period 188,768 39,641 149,127
Unrealized gains on securities with credit loss recognized in earnings 37,479 7,871 29,608
Amounts reclassified into net income:
HTM securities (31) (6) (25)
Net realized gains on disposals and losses on intent-to-sell AFS securities (1,686) (354) (1,332)
Credit loss benefit (4,924) (1,034) (3,890)
    Total unrealized gains on investment securities 219,606 46,118 173,488
Defined benefit pension and post-retirement plans:
Amounts reclassified into net income:
Net actuarial loss 753 158 595
    Total defined benefit pension and post-retirement plans 753 158 595
Other comprehensive income 220,359 46,276 174,083
Comprehensive income $ 263,052 54,786 208,266
were as follows:

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First Quarter 2022
($ in thousands)	Gross		Tax	Net
Net income	$	69,890	13,560	56,330
Components of OCI:
Unrealized losses on investment securities:
Unrealized holding losses during the period	(261,832)		(54,984)	(206,848)
Unrealized losses on securities with credit loss recognized in earnings	(86,621)		(18,191)	(68,430)

Amounts reclassified into net income:
HTM securities	1		—	1
Net realized losses on disposals and intent-to-sell AFS securities	15,991		3,358	12,633
Credit loss expense	22,052		4,631	17,421

Total unrealized losses on investment securities	(310,409)		(65,186)	(245,223)
Defined benefit pension and post-retirement plans:

Amounts reclassified into net income:
Net actuarial loss	417		88	329

Total defined benefit pension and post-retirement plans	417		88	329
Other comprehensive loss	(309,992)		(65,098)	(244,894)
Comprehensive loss	$	(240,102)	(51,538)	(188,564)


First Quarter 2021
($ in thousands)	Gross		Tax	Net
Net income	$	135,632	26,362	109,270
Components of OCI:
Unrealized losses on investment securities:
Unrealized holding losses during the period	(103,308)		(21,695)	(81,613)
Unrealized losses on securities with credit loss recognized in earnings	(11,320)		(2,377)	(8,943)
Amounts reclassified into net income:
HTM securities	(2)		—	(2)
Net realized losses on disposals and intent-to-sell AFS securities	604		127	477
Credit loss expense	4,997		1,049	3,948
Total unrealized losses on investment securities	(109,029)		(22,896)	(86,133)
Defined benefit pension and post-retirement plans:

Amounts reclassified into net income:
Net actuarial loss	693		146	547

Total defined benefit pension and post-retirement plans	693		146	547
Other comprehensive loss	(108,336)		(22,750)	(85,586)
Comprehensive income	$	27,296	3,612	23,684

Six Months 2021
($ in thousands) Gross Tax Net
Net income $ 288,830 57,677 231,153
Components of OCI:
Unrealized losses on investment securities:

Unrealized holding losses during the period (67,755) (14,228) (53,527)
Unrealized losses on securities with credit loss recognized in earnings (1,335) (280) (1,055)
Amounts reclassified into net income:
HTM securities (5) (1) (4)
Net realized losses on disposals and losses on intent-to-sell AFS securities 662 139 523
Credit loss expense 2,725 572 2,153
    Total unrealized losses on investment securities (65,708) (13,798) (51,910)
Defined benefit pension and post-retirement plans:
Amounts reclassified into net income:
Net actuarial loss 1,386 291 1,095
    Total defined benefit pension and post-retirement plans 1,386 291 1,095
Other comprehensive loss (64,322) (13,507) (50,815)
Comprehensive income $ 224,508 44,170 180,338
Six Months 2020
($ in thousands) Gross Tax Net
Net income $ 58,690 9,271 49,419
Components of OCI:
Unrealized gains on investment securities:

Unrealized holding gains during the period 94,787 19,905 74,882
Unrealized losses on securities with credit loss recognized in earnings (27,911) (5,861) (22,050)
Amounts reclassified into net income:
HTM securities (6) (1) (5)
Net realized losses on disposals and losses on intent-to-sell AFS securities 9,641 2,025 7,616
Credit loss expense 10,863 2,281 8,582
    Total unrealized gains on investment securities 87,374 18,349 69,025
Defined benefit pension and post-retirement plans:
Amounts reclassified into net income:
Net actuarial loss 1,507 316 1,191
    Total defined benefit pension and post-retirement plans 1,507 316 1,191
Other comprehensive income 88,881 18,665 70,216
Comprehensive income $ 147,571 27,936 119,635

The ~~following are the~~ balances of, and changes in, each component of AOCI (net of taxes) as of ~~June 30, 2021:~~March 31, 2022 were as follows:

June 30, 2021 Defined Benefit
Pension and Post-Retirement Plans
Net Unrealized (Losses) Gains on Investment Securities Total AOCI
($ in thousands)
Credit Loss Related1
HTM
Related All
Other Investments
Subtotal
Balance, December 31, 2020 $ (2,546) 6 307,790 305,250 (85,064) 220,186
OCI before reclassifications (1,055) 0 (53,527) (54,582) 0 (54,582)
Amounts reclassified from AOCI 2,153 (4) 523 2,672 1,095 3,767
Net current period OCI 1,098 (4) (53,004) (51,910) 1,095 (50,815)
Balance, June 30, 2021 $ (1,448) 2 254,786 253,340 (83,969) 169,371


	Net Unrealized (Losses) Gains on Investment Securities					Defined Benefit Pension and Post-Retirement Plans	Total AOCI
($ in thousands)	Credit Loss Related1		HTM Related	All Other	Investments Subtotal
Balance, December 31, 2021	$	(4,287)	(3)	185,170	180,880	(65,781)	115,099


OCI before reclassifications	(68,430)		—	(206,848)	(275,278)	—	(275,278)
Amounts reclassified from AOCI	17,421		1	12,633	30,055	329	30,384
Net current period OCI	(51,009)		1	(194,215)	(245,223)	329	(244,894)
Balance, March 31, 2022	$	(55,296)	(2)	(9,045)	(64,343)	(65,452)	(129,795)

1Represents change in unrealized loss on securities with credit loss recognized in earnings.

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The reclassifications out of AOCI were as follows:

Quarter ended June 30, Six Months ended June 30, Affected Line Item in the Unaudited Consolidated Statements of Income
($ in thousands) 2021 2020 2021 2020
HTM related
Unrealized losses on HTM disposals $ 0 0 $ 0 1 Net realized and unrealized investment gains (losses)
Amortization of net unrealized gains on HTM securities (3) (31) (5) (7) Net investment income earned
(3) (31) (5) (6) Income before federal income tax
1 6 1 1 Total federal income tax expense
(2) (25) (4) (5) Net income
Net realized losses (gains) on disposals and intent-to-sell AFS securities
Net realized losses (gains) on disposals and intent-to-sell AFS securities 58 (1,686) 662 9,641 Net realized and unrealized investment gains (losses)
58 (1,686) 662 9,641 Income before federal income tax
(12) 354 (139) (2,025) Total federal income tax expense
46 (1,332) 523 7,616 Net income
Credit loss related
Credit loss (benefit) expense (2,272) (4,924) 2,725 10,863 Net realized and unrealized investment gains (losses)
(2,272) (4,924) 2,725 10,863 Income before federal income tax
477 1,034 (572) (2,281) Total federal income tax expense
(1,795) (3,890) 2,153 8,582 Net income
Defined benefit pension and post-retirement life plans
Net actuarial loss 160 162 319 324 Loss and loss expense incurred
533 591 1,067 1,183 Other insurance expenses
Total defined benefit pension and post-retirement life 693 753 1,386 1,507 Income before federal income tax
(145) (158) (291) (316) Total federal income tax expense
548 595 1,095 1,191 Net income
Total reclassifications for the period $ (1,203) (4,652) $ 3,767 17,384 Net income


	Quarter ended March 31,			Affected Line Item in the Unaudited Consolidated Statements of Income
($ in thousands)	2022		2021






HTM related
Unrealized (gains) losses on HTM disposals	$	—	—		Net realized and unrealized investment (losses) gains
Amortization of net unrealized losses (gains) on HTM securities	1		(2)		Net investment income earned
	1		(2)		Income before federal income tax
	—		—		Total federal income tax expense
	1		(2)		Net income
Net realized losses on disposals and intent-to-sell AFS securities
Net realized losses on disposals and intent-to-sell AFS securities	15,991		604		Net realized and unrealized investment (losses) gains
	15,991		604		Income before federal income tax
	(3,358)		(127)		Total federal income tax expense
	12,633		477		Net income
Credit loss related
Credit loss expense	22,052		4,997		Net realized and unrealized investment (losses) gains
	22,052		4,997		Income before federal income tax
	(4,631)		(1,049)		Total federal income tax expense
	17,421		3,948		Net income

Defined benefit pension and post-retirement life plans
Net actuarial loss	96		159		Loss and loss expense incurred
	321		534		Other insurance expenses
Total defined benefit pension and post-retirement life	417		693		Income before federal income tax






	(88)		(146)		Total federal income tax expense
	329		547		Net income

Total reclassifications for the period	$	30,384	4,970		Net income

NOTE 12. ~~Equity~~

On December 2, 2020, we announced that our Board of Directors authorized a $100 million share repurchase program, which has no set expiration or termination date. Our repurchase program does not obligate us to acquire any particular amount of our common stock, and the repurchase program may be suspended or discounted at any time at our discretion. The timing and amount of any share repurchases under the authorization will be determined by management at its discretion based on market conditions and other considerations. As of June 30, 2021, 52,781 shares were repurchased under the share repurchase program at a total cost of $3.4 million. These repurchases were all completed in the first quarter of 2021, and we did not repurchase any shares under our share repurchase program in Second Quarter 2021. We have $96.6 million of remaining capacity under our share repurchase program.

~~NOTE 13.~~ Litigation

As of ~~June 30, 2021,~~March 31, 2022, we do not believe we are involved in any legal action that could have a material adverse effect on our consolidated financial condition, results of operations, or cash flows.

In the ordinary course of conducting business, we are parties in various legal actions. Most are claims litigation involving our Insurance Subsidiaries as (i) liability insurers defending or providing indemnity for third-party claims brought against our customers, (ii) insurers defending first-party coverage claims brought against them, or (iii) liability insurers seeking declaratory judgment on our insurance coverage obligations. We account for such activity ~~through the establishment of~~by establishing unpaid loss and loss expense reserves. ~~In ordinary course claims litigation,~~Considering potential losses and defense costs reserves, we expect that any potential ultimate liability ~~after consideration of provisions made~~ for ~~potential losses and costs of defense,~~ordinary course claims litigation will not be material to our consolidated financial condition, results of operations, or cash flows.

All of our commercial property and businessowners' policies require direct physical loss of or damage to property by a covered cause of loss. ~~It also is~~All our ~~practice to include in, or attach to, all~~ standard lines commercial property and businessowners' policies also include or attach an exclusion that states that all loss or property damage caused by or resulting from any virus, bacterium, or other microorganism that induces or is capable of inducing physical distress, illness, or disease is not a covered cause of loss ("Virus Exclusion"). Whether COVID-19-related contamination, the existence of the COVID-19 pandemic, and the resulting

~~Table of Contents~~

COVID-19-related government shutdown orders cause physical loss of or damage to property is the subject of much public debate and first-party coverage litigation against some insurers, including us. The Virus Exclusion also is the subject of first-party coverage litigation against some insurers, including us. We cannot predict the outcome of litigation over these two coverage issues, including the interpretation of provisions similar or identical to those in our insurance policies.

From time to time, our Insurance Subsidiaries also are named as defendants in other legal actions, some ~~of which assert~~asserting claims for substantial amounts. Plaintiffs may style these actions putatively as ~~putative~~ class actions and seek judicial certification of a state or national class for allegations involving our business practices, such as improper ~~reimbursement of~~ medical ~~providers paid~~provider reimbursement under workers compensation and personal and commercial automobile insurance policies or improper reimbursement for automobile parts. Similarly, our Insurance Subsidiaries can be ~~named~~defendants in individual actions seeking extra-contractual damages, punitive damages, or penalties, often alleging bad faith ~~in the handling of insurance claims.~~claims handling. We believe that we have valid defenses to these allegations, and we account for such activity ~~through the establishment of~~by establishing unpaid loss and loss expense reserves. ~~In these other legal actions,~~Considering estimated losses and defense costs reserves, we expect that any potential ultimate liability ~~after consideration of provisions made~~ for ~~estimated losses,~~these other legal actions will not be material to our consolidated financial condition. ~~Nonetheless,~~As litigation outcomes are inherently unpredictable and ~~because~~ the amounts sought in certain of these

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actions are large or indeterminate, it is possible that ~~any~~ adverse outcomes could have a material adverse effect on our consolidated results of operations or cash flows in particular quarterly or annual periods.

NOTE ~~14.~~13. Subsequent Events

On ~~July 21, 2021, we repaid our $25~~April 1, 2022, SICA borrowed $35 million ~~1.61% borrowing~~ from the ~~FHLBNY.~~FHLBNY at an interest rate of 0.70%. This borrowing was refinanced upon its maturity on May 2, 2022, at an interest rate of 1.10%. This borrowing matures on June 27, 2022. These funds were used for general corporate purposes.

ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS.

Forward-Looking Statements

The terms "Company," "we," "us," and "our" refer to Selective Insurance Group, Inc. (the "Parent"), and its subsidiaries, except as expressly indicated or the context otherwise requires. InCertain statements in this Quarterly Report on Form 10-Q, ~~we discuss and make statements about our intentions, beliefs, current expectations, and projections for our future operations and performance. Such statements~~including information incorporated by reference, are “forward-looking statements” ~~under~~as defined by the Private Securities Litigation Reform Act of ~~1995.~~1995 (“PSLRA”). The PSLRA provides a safe harbor under the Securities Act of 1933 and the Securities Exchange Act of 1934 for forward-looking statements. These statements relate to our intentions, beliefs, projections, estimations, or forecasts of future events and financial performance. They involve known and unknown risks, uncertainties, and other factors that may cause our or industry actual results, activity levels, or performance to materially differ from those expressed or implied by the forward-looking statements. In some cases, you can identify forward-looking statements ~~often are identified~~ by words such as ~~“anticipates,” “believes,” “expects,~~“may,” “will,” “could,” “would,” “should,” ~~and “intends” and their negatives. We caution prospective investors that~~“expect,” “plan,” “anticipate,” “target,” “project,” “intend,” “believe,” “estimate,” “predict,” “potential,” “pro forma,” “seek,” “likely,” “continue,” or comparable terms. Our forward-looking statements are ~~not guarantees of future performance. Risks~~only predictions, and ~~uncertainties are inherent in our future performance.~~ we can give no assurance that such expectations will prove correct. We undertake no obligation, other than as federal securities laws may require, to publicly update or revise any forward-looking statements for any reason.

Factors that could cause our actual results to differ materially from ~~those indicated~~what we project, forecast, or estimate in forward-looking statements ~~include, without limitation, those~~are discussed in further detail in Item 1A. “Risk Factors.” in Part II. “Other Information” of this Form 10-Q. ~~Our stated~~These risk factors may not be exhaustive. We operate in a ~~continually~~constantly changing business environment, and new risk factors may emerge ~~from time to~~at any time. We can neither predict ~~such~~these new risk factors nor ~~can we~~ assess ~~the~~their impact, if any, ~~such new risk factors may have~~ on our businesses or the extent ~~to which~~ any factor or combination of factors may cause actual results to differ materially from ~~those expressed or implied in~~ any forward-looking ~~statement. In light of~~statements. Given these risks, uncertainties, and assumptions, the forward-looking events ~~discussed~~we discuss in this report might not occur. We make forward-looking statements based on currently available information and assume no obligation, other than as may be required under the federal securities laws, to publicly update or revise any forward-looking statements for any reason.

Introduction

We classify our business into four reportable segments:

•Standard Commercial Lines;

•Standard Personal Lines;

•Excess and Surplus Lines ("E&S ~~Lines;~~Lines"); and

•Investments.

For more details about these segments, refer to Note 9. "Segment Information" in Item 1. "Financial Statements." of this Form 10-Q and Note 12. "Segment Information" in Item 8. "Financial Statements and Supplementary Data." of our Annual Report on Form 10-K for the year ended December 31, ~~2020~~2021 ("~~2020~~2021 Annual Report").

We write our Standard Commercial and Standard Personal Lines products and services through nine of our insurance subsidiaries, some of which participate in the federal government's National Flood Insurance Program's ("NFIP") Write Your Own ~~Program ("WYO").~~Program. We write our E&S products through another subsidiary, Mesa Underwriters Specialty Insurance Company, ~~which provides us with~~ a nationally-authorized non-admitted platform for customers who generally cannot obtain coverage in the standard marketplace. Collectively, we refer to our ten insurance subsidiaries as the "Insurance Subsidiaries."

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The following is Management’s Discussion and Analysis (“MD&A”) of the consolidated results of operations and financial condition, as well as known trends and uncertainties, that may have a material impact in future periods. Investors should read the MD&A in conjunction with Item 1. "Financial Statements." of this Form 10-Q and the consolidated financial statements in our ~~2020~~2021 Annual Report filed with the United States ("U.S.") Securities and Exchange Commission.

In the MD&A, we will discuss and analyze the following:

•Critical Accounting Policies and Estimates;

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•Financial Highlights of Results for the ~~second~~first quarters ended ~~June 30,~~March 31, 2022 (“First Quarter 2022”) and March 31, 2021 (“~~Second~~First Quarter 2021”~~) and June 30, 2020 (“Second Quarter 2020”) and the six-month periods ended June 30, 2021 (“Six Months 2021”) and June 30, 2020 (“Six Months 2020”~~);

•Results of Operations and Related Information by Segment;

•Federal Income Taxes;

•~~Financial Condition,~~ Liquidity and Capital Resources;

•~~Ratings;~~

•~~Off-Balance Sheet Arrangements;~~ and

•~~Contractual Obligations, Contingent Liabilities, and Commitments.~~Ratings.

Critical Accounting Policies and Estimates

Our unaudited interim consolidated financial statements include amounts for which we have made informed estimates and judgments for transactions not yet completed. Such estimates and judgments affect the reported amounts in the consolidated financial statements. As outlined in our ~~2020~~2021 Annual Report, those estimates and judgments most critical to the preparation of the consolidated financial statements involved the following: (i) reserves for loss and loss expense; (ii) investment valuation and the allowance for credit losses on available-for-sale ("AFS") fixed income securities; and (iii) ~~reinsurance; (iv) allowance for credit losses on premiums receivable, and (v) the accrual for auditable premium.~~reinsurance. These estimates and judgments require the use of assumptions about matters that are highly uncertain, and therefore are subject to change as facts and circumstances develop. If different estimates and judgments had been applied, materially different amounts might have been reported in the financial statements. For additional information regarding our critical accounting policies and estimates, refer to pages 35 through 43 of our 2021 Annual Report.

We have made no material changes in the critical accounting policies disclosed on pages 37 through 46 of our 2020 Annual Report. There were no material changes to the following estimates in Second Quarter 2021: (i) reinsurance; and (ii) the allowance for credit losses on premiums receivable.

~~The following estimates materially changed in Second Quarter 2021:~~

•Investment valuation and the allowance for credit losses on AFS fixed income securities - See Note 4. "Investments" and Note 5. "Fair Value Measurements" in Item 1. "Financial Statements." of this Form 10-Q;

•~~Reserve for loss and loss expense - See Note 8. "Reserve for Loss and Loss Expense" in Item 1. "Financial Statements." of this Form 10-Q; and~~

•Accrual for auditable premium - In the first quarter of 2020, we recorded a $75 million return audit and mid-term endorsement premium accrual in response to the COVID-19 pandemic and the anticipated decline in payroll and sales exposures on the workers compensation and general liability lines of business. The remaining accrual was $24.8 million as of December 31, 2020. During Six Months 2021, we applied premium adjustments for audits, fully exhausting this accrual as of June 30, 2021. Since April 2020, through active engagement among our underwriters, insureds, and distribution partners, we have established exposure levels to reflect our best estimate of how the current environment may impact our policies. As a result, we do not have material accruals for additional or return premium as of June 30, 2021.

~~Table of Contents~~

Financial Highlights of Results for ~~Second~~First Quarter 2022 and ~~Six Months~~First Quarter 2021 ~~and Second Quarter and Six Months 2020~~1


($ and shares in thousands, except per share amounts)	($ and shares in thousands, except per share amounts)	Quarter ended June 30,				Change % or Points		Six Months ended June 30,					Change % or Points		($ and shares in thousands, except per share amounts)			Quarter ended March 31,						Change % or Points
		2021			2020			2021				2020				2022				2021
Financial Data:	Financial Data:														Financial Data:
Revenues	Revenues	$	840,518		682,447	23	%	$	1,644,425			1,347,276		22	%		Revenues			$	846,062		803,907		5	%
After-tax net investment income	After-tax net investment income	67,441			28,542	136		123,784				74,025	67		After-tax net investment income			58,515				56,343		4
After-tax underwriting income	After-tax underwriting income	59,952			7,800	669		121,342				24,672	392		After-tax underwriting income			44,105				61,391		(28)
Net income before federal income tax	Net income before federal income tax	153,198			42,693	259		288,830				58,690	392		Net income before federal income tax			69,890				135,632		(48)
Net income	Net income	121,883			34,183	257		231,153				49,419	368		Net income			56,330				109,270		(48)
Net income available to common stockholders	Net income available to common stockholders	119,583			34,183	250		226,400				49,419	358		Net income available to common stockholders			54,030				106,817		(49)

Key Metrics:	Key Metrics:														Key Metrics:
Combined ratio	Combined ratio	89.8		%	98.4	(8.6)	pts	89.5		%		97.6	(8.1)	pts	Combined ratio			93.1		%		89.3		3.8	pts
Invested assets per dollar of common stockholders' equity	Invested assets per dollar of common stockholders' equity	$	2.88		3.10	(7)	%	$	2.88			3.10	(7)	%	Invested assets per dollar of common stockholders' equity			$	3.02			2.97		2	%
Annualized return on common equity ("ROE")	Annualized return on common equity ("ROE")	18.3			6.2	12.1	pts	17.3				4.4	12.9	pts	Annualized return on common equity ("ROE")			8.1				16.8		(8.7)	pts
Statutory premiums to surplus ratio		1.33		x	1.39	(0.06)		1.33			x	1.39	(0.06)
Net premiums written to statutory surplus ratio															Net premiums written to statutory surplus ratio			1.36		x		1.33		0.03

Per Common Share Amounts:	Per Common Share Amounts:														Per Common Share Amounts:
Diluted net income per share	Diluted net income per share	$	1.98		0.57	247	%	$	3.74			0.82	356	%	Diluted net income per share			$	0.89			1.77		(50)	%
Book value per share	Book value per share	44.78			38.43	17		44.78				38.43	17		Book value per share			42.73				42.38		1
Dividends declared per share to common stockholders	Dividends declared per share to common stockholders	0.25			0.23	9		0.50				0.46	9		Dividends declared per share to common stockholders			0.28				0.25		12

Non-GAAP Information:	Non-GAAP Information:														Non-GAAP Information:
Non-GAAP operating income2	Non-GAAP operating income2	$	111,638		24,190	362	%	$	214,411			74,712	187	%	Non-GAAP operating income2			$	85,908			102,773		(16)	%
Diluted non-GAAP operating income per common share2	Diluted non-GAAP operating income per common share2	1.85			0.40	363		3.54				1.24	185		Diluted non-GAAP operating income per common share2			1.41				1.70		(17)
Annualized non-GAAP operating ROE2	Annualized non-GAAP operating ROE2	17.1		%	4.4	12.7	pts	16.4		%		6.7	9.7	pts	Annualized non-GAAP operating ROE2			12.8		%		16.2		(3.4)	pts
Adjusted book value per common share2															Adjusted book value per common share2			$	43.80			38.73		13	%

1Refer to the Glossary of Terms attached to our ~~2020~~2021 Annual Report as Exhibit 99.1 for definitions of terms used of this Form 10-Q.

2 Non-GAAP operating income, ~~is a measure~~non-GAAP operating income per diluted common share, and non-GAAP operating ROE are measures comparable to net income available to common stockholders, net income available to common stockholders per diluted common share, and ROE, respectively, but ~~excludes after-tax~~exclude after- tax net realized and unrealized gains and losses on ~~investments. Non-GAAP operating income~~investments included in net income. Adjusted book value per common share is a measure comparable to book value per common share, but excludes total after-tax unrealized gains and losses on investments included in accumulated other comprehensive (loss) income. They are used as an important financial ~~measure~~measures by us, analysts, and investors because the timing of realized and unrealized investment gains and losses on ~~sales of~~ securities in any given period is largely discretionary. In addition, net realized and unrealized investment gains and losses on investments ~~that are charged to earnings~~ could distort the analysis of trends.

Table of Contents

Reconciliations of net income available to common stockholders, net income available to common stockholders per diluted common share, ~~and~~ annualized ROE, and book value per common share to non-GAAP operating income, non-GAAP operating income per diluted common share, ~~and~~ annualized non-GAAP operating ROE, and adjusted book value per common share, respectively, are provided in the tables below:

Reconciliation of net income available to common stockholders to non-GAAP operating income Quarter ended June 30, Six Months ended June 30,
($ in thousands) 2021 2020 2021 2020
Net income available to common stockholders $ 119,583 34,183 $ 226,400 49,419
Net realized and unrealized (gains) losses, before tax (10,057) (12,649) (15,176) 32,017
Tax on reconciling items 2,112 2,656 3,187 (6,724)
Non-GAAP operating income $ 111,638 24,190 $ 214,411 74,712


Reconciliation of net income available to common stockholders to non-GAAP operating income	Quarter ended March 31,
($ in thousands)	2022		2021
Net income available to common stockholders	$	54,030	106,817


Net realized and unrealized investment losses (gains) included in net income, before tax	40,352		(5,119)

Tax on reconciling items	(8,474)		1,075
Non-GAAP operating income	$	85,908	102,773


Reconciliation of net income available to common stockholders per diluted common share to non-GAAP operating income per diluted common share	Reconciliation of net income available to common stockholders per diluted common share to non-GAAP operating income per diluted common share	Quarter ended June 30,			Six Months ended June 30,			Reconciliation of net income available to common stockholders per diluted common share to non-GAAP operating income per diluted common share	Quarter ended March 31,
		2021		2020	2021		2020		2022		2021
Net income available to common stockholders per diluted common share	Net income available to common stockholders per diluted common share	$	1.98	0.57	$	3.74	0.82	Net income available to common stockholders per diluted common share	$	0.89	1.77

Net realized and unrealized (gains) losses, before tax		(0.17)		(0.21)	(0.25)		0.53
Net realized and unrealized investment losses (gains) included in net income, before tax								Net realized and unrealized investment losses (gains) included in net income, before tax	0.66		(0.08)

Tax on reconciling items	Tax on reconciling items	0.04		0.04	0.05		(0.11)	Tax on reconciling items	(0.14)		0.01
Non-GAAP operating income per diluted common share	Non-GAAP operating income per diluted common share	$	1.85	0.40	$	3.54	1.24	Non-GAAP operating income per diluted common share	$	1.41	1.70


Reconciliation of annualized ROE to annualized non-GAAP operating ROE	Reconciliation of annualized ROE to annualized non-GAAP operating ROE	Quarter ended June 30,			Six Months ended June 30,			Reconciliation of annualized ROE to annualized non-GAAP operating ROE	Quarter ended March 31,
		2021		2020	2021		2020		2022		2021
Annualized ROE	Annualized ROE	18.3	%	6.2	17.3	%	4.4	Annualized ROE	8.1	%	16.8

Net realized and unrealized (gains) losses, before tax		(1.5)		(2.3)	(1.1)		2.9
Net realized and unrealized investment losses (gains) included in net income, before tax								Net realized and unrealized investment losses (gains) included in net income, before tax	6.0		(0.8)

Tax on reconciling items	Tax on reconciling items	0.3		0.5	0.2		(0.6)	Tax on reconciling items	(1.3)		0.2
Annualized non-GAAP operating ROE	Annualized non-GAAP operating ROE	17.1	%	4.4	16.4	%	6.7	Annualized non-GAAP operating ROE	12.8	%	16.2


Reconciliation of book value per common share to adjusted book value per common share	Quarter ended March 31,
	2022		2021
Book value per common share	$	42.73	42.38
Total unrealized investment losses (gains) included in accumulated other comprehensive (loss) income, before tax	1.35		(4.62)
Tax on reconciling items	(0.28)		0.97
Adjusted book value per common share	$	43.80	38.73

The components of our annualized ROE and non-GAAP operating ROE are as follows:


Annualized ROE and non-GAAP operating ROE Components	Quarter ended March 31,			Change Points
	2022		2021
Standard Commercial Lines Segment	5.0	%	8.6	(3.6)
Standard Personal Lines Segment	0.8		1.0	(0.2)
E&S Lines Segment	0.8		0.1	0.7
Total insurance operations	6.6		9.7	(3.1)

Investment income	8.7		8.9	(0.2)
Net realized and unrealized investment (losses) gains	(4.7)		0.6	(5.3)
Total investments segment	4.0		9.5	(5.5)

Other	(2.5)		(2.4)	(0.1)

Annualized ROE	8.1	%	16.8	(8.7)
Net realized and unrealized investment losses (gains), after tax	4.7		(0.6)	5.3
Annualized Non-GAAP Operating ROE	12.8	%	16.2	(3.4)

Our First Quarter 2022 annualized non-GAAP operating ROE of 12.8% was above our full-year 2022 targeted non-GAAP operating ROE of 11%, but below our First Quarter 2021 annualized non-GAAP operating ROE of 16.2%. The decrease compared to First Quarter 2021 was primarily driven by a $17.3 million, or 3.1-point, reduction in after-tax underwriting income, resulting from (i) an increase in non-catastrophe property loss and loss expenses in First Quarter 2022, and (ii) lower favorable prior year casualty reserve development in First Quarter 2022; partially offset by a decrease in net catastrophe losses in First Quarter 2022.

Table of Contents

~~The components~~Our First Quarter 2022 results included $245 million of after-tax net unrealized investment losses recorded in stockholders' equity. These investment losses reduced our March 31, 2022 stockholders' equity position, which resulted in an approximate 50 basis point benefit to our First Quarter 2022 annualized ROE ~~are as follows:~~

Annualized ROE Components Quarter ended June 30, Change Points Six Months ended June 30, Change Points
2021 2020 2021 2020
Standard Commercial Lines Segment 8.2 % 2.4 5.8 8.3 % 2.4 5.9
Standard Personal Lines Segment 0.7 (0.9) 1.6 0.8 (0.4) 1.2
E&S Lines Segment 0.3 (0.1) 0.4 0.2 0.2 —
Total insurance operations 9.2 1.4 7.8 9.3 2.2 7.1
Investment income 10.3 5.2 5.1 9.5 6.6 2.9
Net realized and unrealized investment gains (losses) 1.2 1.8 (0.6) 0.9 (2.3) 3.2
Total investments segment 11.5 7.0 4.5 10.4 4.3 6.1
Other (2.4) (2.2) (0.2) (2.4) (2.1) (0.3)
Annualized ROE 18.3 % 6.2 12.1 17.3 % 4.4 12.9
and non-GAAP operating ROE.

~~Our Six Months 2021~~In addition to the above drivers of the year-over-year change in our annualized non-GAAP operating ROE, the 8.7-point reduction in the annualized ROE was due to a decrease of ~~16.4% is above our full-year 2021 target of 11%,~~5.3 points in net realized and ~~our Six Months 2020 annualized non-GAAP operating ROE of 6.7%. Non-GAAP operating income per diluted common share increased (i) $1.45~~unrealized investment gains in ~~Second~~First Quarter ~~2021~~2022 compared to ~~Second~~First Quarter ~~2020, and (ii) $2.30 in Six Months 2021 compared to Six Months 2020.~~

2021. The ~~increase in non-GAAP operating income per diluted common share in Second Quarter and Six Months 2021 compared to Second Quarter and Six Months 2020~~decrease was primarily driven ~~by:~~

•~~Catastrophe losses (lower~~ by ~~$0.98~~(i) active trading of our fixed income securities to opportunistically increase yield in ~~Second Quarter 2021~~the rising interest rate environment, and ~~$1.05 in Six Months 2021) driven by industry-wide U.S. catastrophe~~(ii) higher credit loss ~~activity in 2020 that significantly exceeded the 10-year historical median;~~

•~~Investment~~expense on our AFS fixed income ~~(higher by $0.64 in Second Quarter 2021 and $0.82 in Six Months 2021) driven by our other investments portfolio, which principally includes alternative investments; and~~

•~~Favorable prior year casualty reserve development (higher by $0.31 in Six Months 2021) attributable to accident years 2018 and prior.~~securities portfolio.

Outlook

We entered ~~2021~~2022 in the strongest financial position in our ~~Company's long~~95-year history, with a record level of GAAP equity, statutory capital and surplus, and holding company cash and investments. We were well positioned to continue ~~generating disciplined~~executing on our strategic objectives and ~~profitable growth. During~~delivering growth and profitability. Although First Quarter 2022 financial results were not as favorable as First Quarter 2021, our overall First Quarter 2022 financial results were strong with 11% growth in NPW and a 12.8% annualized non-GAAP operating ROE, which was above our full-year target of 11%.

While we ~~continued~~recorded strong financial results in First Quarter 2022, this quarter included elevated economic inflation, which resulted in a significant increase in interest rates, a widening of credit spreads, lower public equity valuations, and significant financial market volatility. The higher interest rates and widening of credit spreads reduced the value of our fixed income securities, which lowered our stockholders' equity by 8% during First Quarter 2022. The higher economic inflation impacted our non-catastrophe property loss and loss expenses with increased severities in our property lines, particularly commercial and personal automobile physical damage results. Should these trends continue in the near-term, it could negatively impact our profitability. We will continue to focus on achieving written renewal pure price increases, along with underwriting improvements, that meet or exceed expected loss trend. We achieved Standard Commercial Lines renewal pure price increases of 4.8% in First Quarter 2022. Renewal pure price increased throughout the quarter, with both February and March rate at 5.1%. This trend continued into April 2022 with renewal pure rate increases of 5.2%.

In addition, the higher interest rates and the widening of credit spreads provide an opportunity to invest our cash flows in new fixed income securities with higher yields, which over time will likely increase the overall book yield on our fixed income securities investment portfolio.

We continue to focus on several other foundational areas to position us for ongoing success:

•Delivering on our strategy for continued disciplined and profitable growth ~~by (i) continuing~~by:

◦Continuing to expand our Standard Commercial Lines market share by (i) increasing our share towards our 12% target of ~~wallet with existing agents and~~our agents' premiums, (ii) strategically appointing new agents, ~~(ii) investing~~and (iii) maximizing new business growth in the small business market through utilization of our enhanced small business platform;

◦Expanding our geographic ~~expansion,~~footprint, with a plan to ~~add~~commence writing Standard Commercial Lines business in the states of Vermont, Alabama, and Idaho ~~subject to regulatory approval,~~ in the near-term, and other states over ~~time, (iii) increasing~~time;

◦Increasing customer retention by delivering a superior omnichannel experience and offering value-added technologies and ~~services, and (iv) shifting~~services;

◦Shifting our focus towards targeting new and renewal customers in the mass affluent market within our Standard Personal Lines segment, ~~which is a customer base that derives greater value from~~where we believe we can be more competitive with the strong coverage and ~~service.~~servicing capabilities that we offer; and

•◦~~Continuing to achieve written renewal pure price increases~~Deploying our new underwriting platform in our E&S segment that ~~meet or exceed expected loss trend, while delivering on our strategy for continued disciplined growth. We achieved overall renewal pure price increases~~will improve agents' ease of ~~5.1% in Second Quarter 2021 and 5.2% in Six Months 2021, which we believe is above our expected loss trend.~~interactions with us.

•Continuing to build on a culture centered on the values of diversity, equity, and inclusion that fosters innovation, ~~and~~ idea generation, and developing a group of specially trained leaders who can guide us successfully into the future.

For more details about our major areas of strategic focus, refer to the "Outlook" section in "Financial Highlights of Results for Years Ended December 31, 2020, 2019, and 2018" within Item 7. "Management's Discussion and Analysis of Financial Condition and Results of Operations." of our 2020 Annual Report.

~~For 2021, we revised our~~Our full-year ~~guidance~~expectations are as follows:

•A GAAP combined ratio, excluding net catastrophe losses, of ~~89% (prior guidance 90%) that~~91.0%. Our combined ratio estimate assumes no additional prior-year casualty reserve development;

•~~Catastrophe~~Net catastrophe losses of 4.0 points on the combined ratio;

•After-tax net investment income of ~~$220~~$205 million (prior guidance ~~$195~~$200 million) that includes ~~$55~~$15 million (prior guidance ~~$31~~$20 million) in after-tax net investment income from our alternative investments;

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•An overall effective tax rate of approximately 20.5%, that ~~includes~~assumes an effective tax rate of ~~19.0%~~19.5% for net investment income and ~~21%~~21.0% for all other items; and

•Weighted average shares of ~~60.5~~61 million on a fully diluted basis.

Results of Operations and Related Information by Segment

Insurance Operations

The following table provides quantitative information for analyzing the combined ratio:

All Lines Quarter ended June 30, Change % or Points Six Months ended June 30, Change % or Points
($ in thousands) 2021 2020 2021 2020
Insurance Operations Results:
Net premiums written ("NPW") $ 833,205 724,752 15 % $ 1,631,383 1,372,079 19 %
Net premiums earned (“NPE”) 740,518 630,671 17 1,465,478 1,282,374 14
Less:
Loss and loss expense incurred 421,623 403,949 4 835,024 804,273 4
Net underwriting expenses incurred 241,825 216,191 12 474,451 445,428 7
Dividends to policyholders 1,182 658 80 2,405 1,443 67
Underwriting income $ 75,888 9,873 669 % $ 153,598 31,230 392 %
Combined Ratios:
Loss and loss expense ratio 56.9 % 64.0 (7.1) pts 56.9 % 62.8 (5.9) pts
Underwriting expense ratio 32.7 34.3 (1.6) 32.4 34.7 (2.3)
Dividends to policyholders ratio 0.2 0.1 0.1 0.2 0.1 0.1
Combined ratio 89.8 98.4 (8.6) 89.5 97.6 (8.1)


All Lines	Quarter ended March 31,				Change % or Points
($ in thousands)	2022			2021
Insurance Operations Results:
Net premiums written ("NPW")	$	889,798		798,178	11	%
Net premiums earned (“NPE”)	812,283			724,960	12
Less:
Loss and loss expense incurred	494,236			413,401	20
Net underwriting expenses incurred	260,639			232,626	12
Dividends to policyholders	1,579			1,223	29
Underwriting income	$	55,829		77,710	(28)	%
Combined Ratios:
Loss and loss expense ratio	60.8		%	57.0	3.8	pts
Underwriting expense ratio	32.1			32.1	—
Dividends to policyholders ratio	0.2			0.2	—
Combined ratio	93.1			89.3	3.8

The 11% NPW growth in ~~Second~~First Quarter ~~and Six Months 2021~~2022 compared to the prior year periods reflects our strong relationships with best-in-class distribution partners, sophisticated underwriting and pricing tools, and excellent customer servicing capabilities. This solid growth includedFirst Quarter 2021 reflected (i) overall renewal pure price increases, and (ii) higher direct new business, ~~growth,~~ as shown in the following table:

Quarter ended June 30, Change
% or
Points Six Months ended June 30, Change
% or
Points
($ in millions) 2021 2020 2021 2020
Direct new business $ 173.3 150.1 16 % $ 329.0 302.9 9 %
Renewal pure price increases 5.1 3.9 1.2 5.2 4.0 1.2


	Quarter ended March 31,
($ in millions)	2022			2021
Direct new business premiums	$	177.2		155.6
Renewal pure price increases on NPW	4.6		%	5.2

In ~~Second Quarter 2021, NPW growth was impacted by three points from the COVID-19-related premium credits to~~addition, our ~~personal and commercial automobile customers, which reduced NPW by $19.7 million in the prior-year period. The~~ NPW growth in ~~Six Months~~First Quarter 2022 benefited from strong retention and exposure growth driven by increased economic activity in the U.S., which resulted in our customers increasing their sales, payrolls, and exposure units, all of which favorably impacted our NPW.

The increase in NPE in First Quarter 2022 compared to First Quarter 2021 ~~was further impacted by~~resulted from the ~~COVID-19-related $75 million estimate of return audit~~same impacts to the NPW increase described above.

Loss and ~~mid-term endorsement premium that reduced Six Months 2020 NPW, resulting in a total impact from COVID-19-related adjustments to NPW of approximately eight~~Loss Expenses

The loss and loss expense ratio increased 3.8 points in ~~Six Months 2021.~~First Quarter 2022 compared to First Quarter 2021, primarily due to the following:


	First Quarter 2022				First Quarter 2021
($ in millions)	Loss and Loss Expense Incurred		Impact on Loss and Loss Expense Ratio		Loss and Loss Expense Incurred		Impact on Loss and Loss Expense Ratio		Change in Ratio
Net catastrophe losses	$	20.6	2.5	pts	$	29.9	4.1	pts	(1.6)	pts
(Favorable) prior year casualty reserve development	(20.0)		(2.5)		(35.0)		(4.8)		2.3
Non-catastrophe property loss and loss expenses	150.4		18.5		115.6		15.9		2.6
Total	$	151.0	18.5		$	110.5	15.2		3.3

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~~Loss and Loss Expenses~~

The decrease in the loss and loss expense ratio of 7.1% in Second Quarter and 5.9% in Six Months 2021 compared to Second Quarter and Six Months 2020, respectively, was primarily the result of the following:

Second Quarter 2021 Second Quarter 2020
($ in millions) Loss and Loss Expense Incurred Impact on
Loss and Loss Expense Ratio Loss and Loss
Expense
Incurred Impact on
Loss and Loss Expense Ratio Change in Ratio
Catastrophe losses $ 22.6 3.1 pts $ 83.2 13.2 pts (10.1) pts
(Favorable) prior year casualty reserve development (17.0) (2.3) (15.0) (2.4) 0.1
Non-catastrophe property loss and loss expenses 107.3 14.5 81.8 13.0 1.5
Total $ 112.9 15.3 $ 150.0 23.8 (8.5)
Six Months 2021 Six Months 2020
($ in millions) Loss and Loss Expense Incurred Impact on
Loss and Loss Expense Ratio Loss and Loss
Expense
Incurred Impact on
Loss and Loss Expense Ratio Change in Ratio
Catastrophe losses $ 52.6 3.6 pts $ 116.4 9.1 pts (5.5) pts
(Favorable) prior year casualty reserve development (52.0) (3.5) (25.0) (1.9) (1.6)
Non-catastrophe property loss and loss expenses 222.9 15.2 189.9 14.8 0.4
Total $ 223.5 15.3 $ 281.3 22.0 (6.7)

Details of the prior year casualty reserve development were as follows:

(Favorable)/Unfavorable Prior Year Casualty Reserve Development Quarter ended June 30, Six Months ended June 30,
($ in millions) 2021 2020 2021 2020
General liability $ (10.0) (10.0) $ (25.0) (10.0)
Commercial automobile — 10.0 — 10.0
Workers compensation (5.0) (15.0) (20.0) (25.0)
Total Standard Commercial Lines (15.0) (15.0) (45.0) (25.0)
E&S (2.0) — (7.0) —
Total (favorable) prior year casualty reserve development $ (17.0) (15.0) $ (52.0) (25.0)
(Favorable) impact on loss ratio (2.3) pts (2.4) (3.5) (1.9)


(Favorable)/Unfavorable Prior Year Casualty Reserve Development	Quarter ended March 31,
($ in millions)	2022			2021
General liability	$	(5.0)		(15.0)

Workers compensation	(10.0)			(15.0)

Bonds	(5.0)			—
Total Standard Commercial Lines	(20.0)			(30.0)

Homeowners	—			—
Personal automobile	—			—
Total Standard Personal Lines	—			—

E&S	—			(5.0)

Total (favorable) prior year casualty reserve development	$	(20.0)		(35.0)

(Favorable) impact on loss ratio	(2.5)		pts	(4.8)

For additional qualitative discussion on reserve development ~~discussion, please~~and non-catastrophe property loss and loss expenses, refer to the insurance segment sections below in "Results of Operations and Related Information by Segment."

~~Underwriting Expenses~~

The underwriting expense ratio decreased 1.6 points in Second Quarter 2021 compared to Second Quarter 2020 and 2.3 points in Six Months 2021 compared to Six Months 2020. The underwriting expense ratios in Second Quarter and Six Months 2020 were elevated by 2.2 points and 2.1 points, respectively, for COVID-19-related items. The decrease in the underwriting expense ratios in Second Quarter and Six Months 2021 reflect the absence of these COVID-19-related impacts, partially offset by an increase in profit-based compensation to our distribution partners and employees, which was 0.5 points higher in Second Quarter 2021 compared to Second Quarter 2020 and 0.3 points higher in Six Months 2021 compared to Six Months 2020.

The COVID-19-related items included in 2020 results were as follows: (i) lower net earned premiums from the estimate of return audit and mid-term endorsement premium recorded in the first quarter and premium credits given to our personal and commercial automobile customer during the second quarter; and (ii) increases of $3.0 million in the second quarter and $13.5 million in the first six months of last year to our allowance for credit losses on premiums receivable.

~~Table of Contents~~

Standard Commercial Lines Segment


		Quarter ended June 30,				Change % or Points		Six Months ended June 30,				Change % or Points					Quarter ended March 31,					Change % or Points
($ in thousands)	($ in thousands)	2021			2020			2021			2020		($ in thousands)		2022			2021
Insurance Segments Results:	Insurance Segments Results:													Insurance Segments Results:
NPW	NPW	$	677,128		583,342	16	%	$	1,342,694		1,101,774		22	%		NPW		$	737,639		665,565		11	%
NPE	NPE	599,754			501,004	20		1,188,895			1,017,584	17		NPE			661,469			589,141		12
Less:	Less:													Less:
Loss and loss expense incurred	Loss and loss expense incurred	329,817			307,037	7		654,667			619,195	6		Loss and loss expense incurred			399,474			324,850		23
Net underwriting expenses incurred	Net underwriting expenses incurred	200,817			176,579	14		394,386			363,090	9		Net underwriting expenses incurred			218,032			193,569		13
Dividends to policyholders	Dividends to policyholders	1,182			658	80		2,405			1,443	67		Dividends to policyholders			1,579			1,223		29
Underwriting income	Underwriting income	$	67,938		16,730	306	%	$	137,437		33,856	306	%	Underwriting income			42,384			69,499		(39)
Combined Ratios:	Combined Ratios:													Combined Ratios:
Loss and loss expense ratio	Loss and loss expense ratio	55.0		%	61.4	(6.4)	pts	55.0		%	60.9	(5.9)	pts	Loss and loss expense ratio			60.4	%		55.1		5.3	pts
Underwriting expense ratio	Underwriting expense ratio	33.5			35.2	(1.7)		33.2			35.7	(2.5)		Underwriting expense ratio			33.0			32.9		0.1
Dividends to policyholders ratio	Dividends to policyholders ratio	0.2			0.1	0.1		0.2			0.1	0.1		Dividends to policyholders ratio			0.2			0.2		—
Combined ratio	Combined ratio	88.7			96.7	(8.0)		88.4			96.7	(8.3)		Combined ratio			93.6			88.2		5.4

NPW growth ~~was up 16%~~of 11% in ~~Second~~First Quarter 2022 compared to First Quarter 2021 ~~and 22% in Six Months 2021 compared to the same prior-year periods, reflecting~~reflected (i) ~~direct new business increases, (ii)~~ renewal pure price increases, (ii) higher direct new business, and (iii) ~~strong~~stronger retention as shown in the ~~following table:~~

Quarter ended June 30, Change
% or
Points Six Months ended June 30, Change
% or
Points
($ in millions) 2021 2020 2021 2020
Direct new business $ 128.7 109.9 17 % $ 243.2 225.3 8 %
Retention 85 % 86 (1) pts 85 % 85 — pts
Renewal pure price increases 5.5 3.9 1.6 5.5 4.0 1.5
table below. In addition, NPW growth in First Quarter 2022 benefited from exposure growth.

Additionally, Second Quarter 2021 NPW growth was impacted by three points from the COVID-19-related premium credits to our commercial automobile customers, which reduced NPW by $15.4 million in the prior-year period. The NPW growth in Six Months 2021 was further impacted by the COVID-19-related $75 million estimate of return audit and mid-term endorsement premium that reduced Six Months 2020 NPW, resulting in a total impact from COVID-19-related adjustments to NPW of approximately nine points in Six Months 2021.


	Quarter ended March 31,
($ in millions)	2022			2021
Direct new business premiums	$	128.4		114.5
Retention	87		%	86
Renewal pure price increases on NPW	4.8			5.5

The ~~loss and loss expense ratio decreased 6.4 points~~increase in ~~Second~~NPE in First Quarter 2022 compared to First Quarter 2021 ~~and 5.9 points in Six Months 2021 compared~~resulted from the same impacts to the ~~same prior-year periods, driven by the following:~~

Second Quarter 2021 Second Quarter 2020
($ in millions) Loss and Loss Expense Incurred Impact on
Loss and Loss Expense Ratio Loss and Loss
Expense
Incurred Impact on
Loss and Loss Expense Ratio Change in Ratio
Catastrophe losses $ 11.3 1.9 pts $ 50.7 10.1 pts (8.2) pts
Non-catastrophe property loss and loss expenses 74.6 12.4 60.9 12.2 0.2
(Favorable) prior year casualty reserve development (15.0) (2.5) (15.0) (3.0) 0.5
Total 70.9 11.8 96.6 19.3 (7.5)
Six Months 2021 Six Months 2020
($ in millions) Loss and Loss Expense Incurred Impact on
Loss and Loss Expense Ratio Loss and Loss
Expense
Incurred Impact on
Loss and Loss Expense Ratio Change in Ratio
Catastrophe losses $ 27.3 2.3 pts $ 71.4 7.0 pts (4.7) pts
Non-catastrophe property loss and loss expenses 158.3 13.3 140.5 13.8 (0.5)
(Favorable) prior year casualty reserve development (45.0) (3.8) (25.0) (2.5) (1.3)
Total 140.6 11.8 186.9 18.3 (6.5)
NPW increase described above.

Catastrophe losses in Second Quarter and Six Months 2021 were lower than our 10-year Standard Commercial Lines average of 2.9 points, whereas Second Quarter and Six Months 2020 were significantly higher than this average, in part due to numerous events designated by the Insurance Services Office's Property Claims Services unit that impacted us, including two April 2020 storms ($43 million) and claims related to civil unrest ($20 million).

In addition, the current year loss and loss expense ratio was higher by 1.2 points in Second Quarter 2021 and 0.8 points in Six Months 2021 compared to the same prior-year periods, primarily driven by increases in frequencies in 2021, as last year experienced lower frequencies reflecting reductions in miles driven due to the COVID-19-related governmental directives

3026

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~~impacting our commercial automobile lines of business in 2020. This, in conjunction with lower non-catastrophe property losses~~The 5.3-point increase in the ~~prior year period, provided an offset~~loss and loss expense ratio in First Quarter 2022 compared to First Quarter 2021 was primarily driven by the ~~$15.4 million premium credit to customers in 2020.~~following:


	First Quarter 2022				First Quarter 2021
($ in millions)	Loss and Loss Expense Incurred		Impact on Loss and Loss Expense Ratio		Loss and Loss Expense Incurred		Impact on Loss and Loss Expense Ratio	Change in Ratio
Net catastrophe losses	$	14.9	2.3	pts	$	16.1	2.7	(0.4)	pts
Non-catastrophe property loss and loss expenses	115.7		17.5		83.6		14.2	3.3
(Favorable) prior year casualty reserve development	(20.0)		(3.0)		(30.0)		(5.1)	2.1

Total	110.6		16.8		69.7		11.8	5.0

For quantitative information on the favorable ~~prior year~~prior-year casualty reserve development by line of business, see the "Insurance Operations" section above, and for qualitative information about the significant drivers of this development, see the line of business discussions below.

The underwriting expense ratio decreased 1.7 points in Second Quarter 2021 compared to Second Quarter 2020 and 2.5 points in Six Months 2021 compared to Six Months 2020. The underwriting expense ratios in Second Quarter and Six Months 2020 were elevated by 2.5 points and 2.3 points, respectively, for COVID-19-related items, as further discussed in "Insurance Operations" above. The decrease in the underwriting expense ratios in Second Quarter and Six Months 2021 reflect the absence of these COVID-19-related impacts, partially offset by an increase in profit-based compensation to our distribution partners and employees, which was 0.5 points higher in both Second Quarter 2021 and Six Months 2021.

~~The~~ following is a discussion of our most significant Standard Commercial Lines of business:

General Liability
Quarter ended June 30, Change
% or
Points Six Months ended June 30, Change
% or
Points
($ in thousands) 2021 2020 2021 2020
NPW $ 225,503 200,917 12 % $ 447,565 351,711 27 %
  Direct new business 37,174 31,468 18 71,428 67,354 6
  Retention 85 % 87 (2) pts 85 % 86 (1) pts
  Renewal pure price increases 4.6 3.8 0.8 4.6 3.8 0.8
NPE $ 197,293 163,273 21 % $ 390,813 327,853 19 %
Underwriting income 31,045 25,108 24 67,618 38,182 77
Combined ratio 84.3 % 84.6 (0.3) pts 82.7 % 88.4 % (5.7) pts
% of total Standard Commercial Lines NPW 33 34 33 32


General Liability
	Quarter ended March 31,				Change % or Points1
($ in thousands)	2022			2021
NPW	$	244,118		222,062	10	%
Direct new business	37,883			34,253	n/a
Retention	87		%	86	n/a
Renewal pure price increases	4.0			4.4	n/a
NPE	$	216,325		193,520	12	%
Underwriting income	28,817			36,573	(21)
Combined ratio	86.7		%	81.1	5.6	pts
% of total Standard Commercial Lines NPW	33			33

1n/a: not applicable.

NPW ~~grew 12%~~growth of 10% in ~~Second~~First Quarter 2022 compared to First Quarter 2021 ~~and 27% in Six Months 2021 compared to the same prior year periods due to new business growth,~~benefited from renewal pure price increases, exposure growth, and strong retention. NPW in Six Months 2021 was also impacted by 15 points from the COVID-19-related $46 million estimate of return audit and mid-term endorsement premium recorded on this line in the first quarter of 2020.higher direct new business.

The ~~fluctuations~~5.6-point increase in the combined ~~ratios illustrated~~ratio in First Quarter 2022 compared to First Quarter 2021 was primarily driven by less favorable prior year casualty reserve development, as follows:

First Quarter 2022

First Quarter 2021

($ in millions)

Loss and Loss Expense Incurred

Impact on
Combined Ratio

Loss and Loss Expense Incurred

Impact on
Combined Ratio

Change in Ratio

(Favorable) prior year casualty reserve development

(5.0)

(2.3)

pts

(15.0)

(7.8)

5.5

pts

The prior year favorable casualty reserve development in First Quarter 2022 was primarily attributable to lower loss severities in accident years 2019 and prior. The First Quarter 2021 prior year favorable casualty reserve development was primarily attributable to improved loss severities in accident years 2018 and prior.


Commercial Automobile
	Quarter ended March 31,				Change % or Points1
($ in thousands)	2022			2021
NPW	$	212,595		190,646	12	%
Direct new business	31,413			28,746	n/a
Retention	87		%	87	n/a
Renewal pure price increases	7.4			9.0	n/a
NPE	$	193,830		171,881	13	%
Underwriting (loss) income	(10,918)			2,792	(491)
Combined ratio	105.6		%	98.4	7.2	pts
% of total Standard Commercial Lines NPW	29			29

1n/a: not applicable.

Table of Contents

NPW growth of 12% in First Quarter 2022 compared to First Quarter 2021 benefited from renewal pure price increases, higher direct new business, and exposure growth that reflects 7% growth of in-force vehicle counts as of March 31, 2022 compared to March 31, 2021.

The 7.2-point increase in the combined ratio in First Quarter 2022 compared to First Quarter 2021 was primarily driven by the following:


	First Quarter 2022				First Quarter 2021
($ in millions)	Loss and Loss Expense Incurred		Impact on Combined Ratio		Loss and Loss Expense Incurred		Impact on Combined Ratio	Change in Ratio
Net catastrophe losses	$	0.3	0.2	pts	$	0.2	0.1	0.1	pts
Non-catastrophe property loss and loss expenses	43.0		22.2		29.4		17.1	5.1

Total	$	43.3	22.4		$	29.6	17.2	5.2

First Quarter 2022 experienced elevated non-catastrophe property loss and loss expenses, due primarily to higher severities from recent inflationary and supply chain impacts that have caused increases to labor and the cost of materials.

In addition, the combined ratio was impacted by a 1.6-point increase in current year casualty loss costs in First Quarter 2022 compared to First Quarter 2021, primarily due to an expected increase in claim frequencies resulting from a more normalized amount of miles driven as the COVID-19-related restrictions continue to lessen.


Commercial Property
	Quarter ended March 31,				Change % or Points1
($ in thousands)	2022			2021
NPW	$	130,905		113,382	15	%
Direct new business	27,817			24,270	n/a
Retention	86		%	85	n/a
Renewal pure price increases	6.2			6.0	n/a
NPE	$	120,062		102,810	17	%
Underwriting income	176			6,766	97
Combined ratio	99.9		%	93.4	6.5	pts
% of total Standard Commercial Lines NPW	18			17

1n/a: not applicable.

NPW growth of 15% in First Quarter 2022 compared to First Quarter 2021 benefited from renewal pure price increases, exposure growth, stronger retention, and higher direct new business.

The 6.5-point increase in the combined ratio in First Quarter 2022 compared to First Quarter 2021 was primarily driven by the items in the table ~~above included~~shown below.


	First Quarter 2022				First Quarter 2021
($ in millions)	Loss and Loss Expense Incurred		Impact on Combined Ratio		Loss and Loss Expense Incurred	Impact on Combined Ratio	Change in Ratio
Net catastrophe losses	$	12.9	10.8	pts	13.7	13.3	(2.5)	pts
Non-catastrophe property loss and loss expenses	63.1		52.5		44.6	43.4	9.1
Total	$	76.0	63.3		58.3	56.7	6.6

First Quarter 2022 experienced elevated non-catastrophe property loss and loss expenses, primarily due to increased severity compared to First Quarter 2021 that reflects the ~~following:~~volatility from period to period that is normally associated with our commercial property line of business.

Second Quarter 2021 Second Quarter 2020
($ in millions) Loss and Loss Expense Incurred Impact on
Combined Ratio Loss and Loss Expense Incurred Impact on
Combined Ratio Change in Ratio
(Favorable) prior year casualty reserve development $ (10.0) (5.1) pts $ (10.0) (6.1) pts 1.0 pts
Six Months 2021 Six Months 2020
($ in millions) Loss and Loss Expense Incurred Impact on
Combined Ratio Loss and Loss Expense Incurred Impact on
Combined Ratio Change in Ratio
(Favorable) prior year casualty reserve development $ (25.0) (6.4) pts $ (10.0) (3.1) pts (3.3) pts

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Workers Compensation
	Quarter ended March 31,				Change % or Points1
($ in thousands)	2022			2021
NPW	$	97,459		92,291	6	%
Direct new business	16,946			15,946	n/a
Retention	87		%	86	n/a
Renewal pure price increases	(1.1)			0.2	n/a
NPE	$	84,680		78,190	8	%
Underwriting income	15,905			20,418	(22)
Combined ratio	81.2		%	73.9	7.3	pts
% of total Standard Commercial Lines NPW	13			14

1n/a: not applicable.

NPW growth of 6% in First Quarter 2022 compared to First Quarter 2021 benefited from higher direct new business, exposure growth, and stronger retention.

The 7.3-point increase in the combined ratio in First Quarter 2022 compared to First Quarter 2021 was the result of less favorable prior year casualty reserve development, as follows:

First Quarter 2022

First Quarter 2021

($ in millions)

Loss and Loss Expense Incurred

Impact on
Combined Ratio

Loss and Loss Expense Incurred

Impact on
Combined Ratio

Change in Ratio

(Favorable) prior year casualty reserve development

(10.0)

(11.8)

pts

(15.0)

(19.2)

7.4

pts

The favorable prior year casualty reserve development in ~~Second~~First Quarter 2022 was primarily due to improved loss severities in accident years 2019 and ~~Six Months~~prior. The favorable prior year casualty reserve development in First Quarter 2021 was primarily ~~attributable~~due to ~~lower~~improved loss severities in accident years 2018 and prior. ~~The Second Quarter and Six Months 2020 reserve development was primarily attributable to favorable reserve development on loss severities in accident years 2016 and prior.~~

Standard Personal Lines Segment


	Quarter ended March 31,				Change % or Points
($ in thousands)	2022			2021
Insurance Segments Results:
NPW	$	65,057		65,077	—	%
NPE	72,642			73,821	(2)
Less:
Loss and loss expense incurred	48,547			47,166	3
Net underwriting expenses incurred	17,575			18,960	(7)
Underwriting income	6,520			7,695	(15)
Combined Ratios:
Loss and loss expense ratio	66.8		%	63.9	2.9	pts
Underwriting expense ratio	24.2			25.7	(1.5)
Combined ratio	91.0			89.6	1.4

NPW was flat in First Quarter 2022 compared to First Quarter 2021, continuing to be impacted by the challenging personal automobile competitive environment. In ~~addition~~the third quarter of 2021, we transitioned our personal lines strategy to targeting customers in the mass affluent market where we believe our strong coverage and servicing capabilities can be more competitive.


	Quarter ended March 31,
($ in millions)	2022			2021
Direct new business premiums1	$	9.6		9.8
Retention	84		%	83
Renewal pure price increases on NPW	0.6			0.8

1Excludes our Flood direct premiums written, which is 100% ceded to the ~~items above, the combined ratios were impacted by a decrease in the underwriting expense ratio of 1.4 points in Second Quarter 2021 compared to Second Quarter 2020~~NFIP and ~~2.3 points in Six Months 2021 compared to Six Months 2020, the drivers of which are consistent with the items discussed in the Standard Commercial Lines Segment above.~~therefore, has no impact on our NPW.

~~Table of Contents~~

Commercial Automobile
Quarter ended June 30, Change
% or
Points Six Months ended June 30, Change
% or
Points
($ in thousands) 2021 2020 2021 2020
NPW $ 205,906 160,697 28 % $ 396,552 329,007 21 %
  Direct new business 33,406 32,143 4 62,152 61,000 2
  Retention 86 % 86 — pts 86 % 86 — pts
  Renewal pure price increases 9.0 7.6 1.4 9.0 7.6 1.4
NPE $ 178,028 138,535 29 % $ 349,909 288,225 21 %
Underwriting income (loss) 4,241 (7,706) 155 7,033 (8,480) 183
Combined ratio 97.6 % 105.6 (8.0) pts 98.0 % 102.9 (4.9) pts
% of total Standard Commercial Lines NPW 30 28 30 30

NPW growth benefited from renewal pure price increases and growth in direct new business, as shown in the table above. This growth also includes an in-force vehicle count increase of 7% as of June 30, 2021 compared to June 30, 2020. Additionally, NPW growth includes 11 points in Second Quarter 2021 and 5 points in Six Months 2021 due to the $15.4 million premium credit given to our commercial automobile customers as a result of the COVID-19 pandemic in Second Quarter 2020, as discussed in the Standard Commercial Lines discussion above.

~~The combined ratio improvements outlined above were driven by the following:~~

Six Months 2021 Six Months 2020
($ in millions) Loss and Loss Expense Incurred Impact on
Combined Ratio Loss and Loss Expense Incurred Impact on
Combined Ratio Change in Ratio
Catastrophe losses $ 0.7 0.2 pts $ 1.4 0.5 pts (0.3) pts
Non-catastrophe property loss and loss expenses 55.6 15.9 40.1 13.9 2.0
Unfavorable prior year casualty reserve development — — 10.0 3.5 (3.5)
Total $ 56.3 16.1 $ 51.5 17.9 (1.8)

In addition, the current year loss and loss expense ratio was higher by 1.6 points in Second Quarter 2021 and 0.6 points in Six Months 2021 compared to the same prior-year periods, primarily driven by increases in frequencies in 2021, as last year experienced lower frequencies reflecting reductions in miles driven due to the COVID-19-related governmental directives impacting this line of business in 2020. This, in conjunction with lower non-catastrophe property losses in the prior year period, provided an offset to the $15.4 million premium credit to customers in 2020.

The Second Quarter and Six Months 2020 prior year casualty reserve development was primarily attributable to unfavorable reserve development on loss severities in accident years 2016 through 2019, and higher than expected frequencies in accident year 2019.

In addition to the items above, the combined ratios were impacted by a decrease in the underwriting expense ratio of 4.3 points in Second Quarter 2021 compared to Second Quarter 2020 and 3.9 points in Six Months 2021 compared to Six Months 2020, the drivers of which are consistent with the items further discussed in the Standard Commercial Lines Segment above.

~~Table of Contents~~

Workers Compensation
Quarter ended June 30, Change
% or
Points Six Months ended June 30, Change
% or
Points
($ in thousands) 2021 2020 2021 2020
NPW $ 80,491 74,984 7 % $ 172,782 126,180 37 %
Direct new business 16,002 12,612 27 31,947 27,969 14
Retention 86 % 85 1 pts 86 % 84 2 pts
Renewal pure price (decreases) increases (0.1) (2.9) 2.8 0.1 (2.7) 2.8
NPE $ 74,337 61,906 20 % $ 152,527 128,612 19 %
Underwriting income 8,686 15,720 (45) 29,104 26,755 9
Combined ratio 88.3 % 74.6 13.7 pts 80.9 % 79.2 1.7 pts
% of total Standard Commercial Lines NPW 12 13 13 11

NPW increased 7% in Second Quarter 2021 and 37% in Six Months 2021 compared to the respective prior year periods due to increased direct new business and higher retention. Additionally, NPW growth in Six Months 2021 was impacted by 25 points due to the COVID-19-related $29 million estimate of return audit and mid-term endorsement premium recorded on this line in the first quarter of 2020.

~~The increase in the combined ratio in Second Quarter 2021 and Six Months 2021 compared to the same prior-year periods was driven by favorable prior year casualty reserve development, as follows:~~

Second Quarter 2021 Second Quarter 2020
($ in millions) Loss and Loss Expense Incurred Impact on
Combined Ratio Loss and Loss Expense Incurred Impact on
Combined Ratio Change in Ratio
(Favorable) prior year casualty reserve development $ (5.0) (6.7) pts $ (15.0) (24.2) pts 17.5 pts
Six Months 2021 Six Months 2020
($ in millions) Loss and Loss Expense Incurred Impact on
Combined Ratio Loss and Loss Expense Incurred Impact on
Combined Ratio Change in Ratio
(Favorable) prior year casualty reserve development $ (20.0) (13.1) pts $ (25.0) (19.4) pts 6.3 pts

The favorable prior year casualty reserve development in Second Quarter and Six Months 2021 was primarily due to lower severities in accident years 2018 and prior, and the development in Second Quarter and Six Months 2020 was primarily due to lower severities in accident years 2017 and prior.

In addition, the combined ratios were impacted by a decrease in the underwriting expense ratio of 2.5 points in Second Quarter 2021 compared to Second Quarter 2020 and 3.1 points in Six Months 2021 compared to Six Months 2020, the drivers of which are consistent with the items further discussed in the Standard Commercial Lines Segment above.

Commercial Property
Quarter ended June 30, Change
% or
Points Six Months ended June 30, Change
% or
Points
($ in thousands) 2021 2020 2021 2020
NPW $ 119,140 104,060 14 % $ 232,524 207,186 12 %
Direct new business 29,943 23,858 26 54,212 48,444 12
Retention 84 % 84 — pts 84 % 84 — pts
Renewal pure price increases 5.6 3.9 1.7 5.8 4.0 1.8
NPE $ 106,113 95,413 11 % $ 208,923 189,282 10 %
Underwriting income (loss) 16,820 (14,339) 217 23,586 (22,891) 203
Combined ratio 84.1 % 115.0 (30.9) pts 88.7 % 112.1 (23.4) pts
% of total Standard Commercial Lines NPW 18 18 17 19

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Table of Contents

The ~~decrease~~2.9-point increase in the ~~combined~~loss and loss expense ratio in ~~Second~~First Quarter ~~2021 and Six Months 2021~~2022 compared to ~~the same prior-year periods~~First Quarter 2021 was driven by the following:

Second Quarter 2021 Second Quarter 2020
($ in millions) Loss and Loss Expense Incurred Impact on
Combined Ratio Loss and Loss Expense Incurred Impact on
Combined Ratio Change in Ratio
Catastrophe losses $ 9.2 8.6 pts 35.3 37.0 pts (28.4) pts
Non-catastrophe property loss and loss expenses 40.3 38.0 38.3 40.1 (2.1)
Total $ 49.5 46.6 73.6 77.1 (30.5)
Six Months 2021 Six Months 2020
($ in millions) Loss and Loss Expense Incurred Impact on
Combined Ratio Loss and Loss Expense Incurred Impact on
Combined Ratio Change in Ratio
Catastrophe losses $ 22.9 10.9 pts 55.0 29.0 pts (18.1) pts
Non-catastrophe property loss and loss expenses 84.9 40.6 83.9 44.3 (3.7)
Total $ 107.8 51.5 138.9 73.3 (21.8)


	First Quarter 2022				First Quarter 2021
($ in millions)	Loss and Loss Expense Incurred		Impact on Loss and Loss Expense Ratio		Loss and Loss Expense Incurred	Impact on Loss and Loss Expense Ratio	Change in Ratio

Net catastrophe losses	$	4.3	6.0	pts	5.6	7.6	(1.6)	pts
Non-catastrophe property loss and loss expenses	25.6		35.2		23.1	31.3	3.9


Total	$	29.9	41.2		28.7	38.9	2.3

~~Lower catastrophe~~First Quarter 2022 experienced elevated non-catastrophe property loss and loss expenses associated with physical damage losses on our personal automobile line of business due to higher frequencies and severities from recent inflationary and supply chain impacts that have caused increases to labor and the cost of materials. The likely continuation of this trend, coupled with renewal pure price increases below trend, may put pressure on this segment's profitability in ~~Second~~the near-term.

In addition, the loss and loss expense ratio was impacted by a 0.7-point increase in current year casualty loss costs in First Quarter ~~and Six Months 2021~~2022 compared to ~~Second~~First Quarter ~~and Six Months 2020 were~~2021, primarily due to an expected increase in claim frequencies resulting from a more normalized amount of miles driven as the COVID-19-related restrictions continue to lessen.

The 1.5-point decrease in the underwriting expense ratio in First Quarter 2022 compared to First Quarter 2021 was primarily driven by ~~the events mentioned~~(i) a 0.8-point reduction in commissions, and (ii) a 0.5-point decrease in employee-related expenses.

E&S Lines Segment


	Quarter ended March 31,				Change % or Points
($ in thousands)	2022			2021
Insurance Segments Results:
NPW	$	87,102		67,536	29	%
NPE	78,172			61,998	26
Less:
Loss and loss expense incurred	46,215			41,385	12
Net underwriting expenses incurred	25,032			20,097	25
Underwriting income (loss)	6,925			516	1,242
Combined Ratios:
Loss and loss expense ratio	59.1		%	66.8	(7.7)	pts
Underwriting expense ratio	32.0			32.4	(0.4)
Combined ratio	91.1			99.2	(8.1)

The strong NPW growth of 29% in First Quarter 2022 compared to First Quarter 2021 reflected renewal pure price increases and higher direct new business as shown in the ~~"Standard Commercial Lines" discussion~~table below. In addition, NPW growth in First Quarter 2022 benefited from exposure growth driven by favorable economic conditions in E&S lines in the U.S.


	Quarter ended March 31,
($ in millions)	2022		2021
Direct new business premiums	$	39.2	31.3

Overall renewal price increases on NPW	7.7		7.3

The increase in NPE in First Quarter 2022 compared to First Quarter 2021 resulted from the same impacts to the NPW increase described above.

~~Standard Personal Lines Segment~~

Quarter ended June 30, Change
% or
Points Six Months ended June 30, Change
% or
Points
($ in thousands) 2021 2020 2021 2020
Insurance Segments Results:
NPW $ 78,559 78,173 — % $ 143,636 145,813 (1) %
NPE 73,293 71,633 2 147,114 147,761 —
Less:
Loss and loss expense incurred 47,984 58,151 (17) 95,150 112,483 (15)
Net underwriting expenses incurred 19,665 19,807 (1) 38,625 41,216 (6)
Underwriting income (loss) $ 5,644 (6,325) 189 % $ 13,339 (5,938) 325 %
Combined Ratios:
Loss and loss expense ratio 65.5 % 81.1 (15.6) pts 64.6 % 76.1 (11.5) pts
Underwriting expense ratio 26.8 27.7 (0.9) 26.3 27.9 (1.6)
Combined ratio 92.3 108.8 (16.5) 90.9 104.0 (13.1)

NPW was flat in Second Quarter 2021 compared to Second Quarter 2020 and decreased 1% in Six Months 2021 compared to Six Months 2020, primarily driven by new business that was not sufficient to compensate for the policies lost at renewal due to the challenging competitive environment in the personal auto line of business. Offsetting this decrease was the impact of the COVID-19-related premium credits to our personal automobile customers, which reduced NPW by $4.3 million in the prior-year period, and added five points of growth in Second Quarter 2021 compared to Second Quarter 2020 and three points of growth in Six Months 2021 compared to Six Months 2020.

Quarter ended June 30, Change
% or
Points Six Months ended June 30, Change
% or
Points
($ in millions) 2021 2020 2021 2020
Direct new business $ 10.9 11.8 (8) % $ 20.8 21.8 (5) %
Retention 84 % 84 — pts 83 % 83 — pts
Renewal pure price increases 1.1 3.1 (2.0) 0.9 3.4 (2.5)

3430

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The 7.7-point decrease in the loss and loss expense ratio ~~decreased 15.6 points~~ in ~~Second~~First Quarter 2022 compared to First Quarter 2021 ~~compared to Second Quarter 2020 and 11.5 points in Six Months 2021 compared to Six Months 2020 driven by the following:~~

Second Quarter 2021 Second Quarter 2020
($ in millions) Loss and Loss Expense Incurred Impact on
Loss and Loss Expense Ratio Loss and Loss
Expense
Incurred Impact on
Loss and Loss Expense Ratio Change in Ratio
Catastrophe losses $ 5.0 6.8 pts 26.0 36.2 pts (29.4) pts
Non-catastrophe property loss and loss expenses 24.9 34.0 15.3 21.4 12.6
Total $ 29.9 40.8 41.3 57.6 (16.8)
Six Months 2021 Six Months 2020
($ in millions) Loss and Loss Expense Incurred Impact on
Loss and Loss Expense Ratio Loss and Loss
Expense
Incurred Impact on
Loss and Loss Expense Ratio Change in Ratio
Catastrophe losses $ 10.6 7.2 pts 37.9 25.7 pts (18.5) pts
Non-catastrophe property loss and loss expenses 48.0 32.6 38.1 25.8 6.8
Total $ 58.6 39.8 76.0 51.5 (11.7)

Ten events were designated as catastrophes that impacted Second Quarter 2021, with a severe thunderstorm, including wind and hail, in late June 2021 in our footprint states having the most significant impact on results. Six Months 2021 results were also impacted by a severe thunderstorm, accompanied by wind and hail, in March 2021, which affected our footprint states. Thirteen events impacted Second Quarter 2020, which included two severe storms occurring in April 2020, that impacted parts of the Mid-West and East Coast regions of the United States with damaging winds and tornadoes. Additionally, Six Months 2020 was ~~affected by a tornado that impacted Tennessee in March 2020.~~

In addition, the current year loss and loss expense ratio was higher by 1.2 points in Second Quarter 2021 and 0.3 points in Six Months 2021 compared to the same prior-year periods, primarily driven by increases in frequencies in 2021, as last year experienced lower frequencies reflecting reductions in miles driven due to the COVID-19-related governmental directives impacting our personal automobile line of business in 2020. This, in conjunction with lower non-catastrophe property losses in the prior year period, provided an offset to the $4.3 million premium credit to customers in 2020.

The underwriting expense ratio decreased 0.9 points in Second Quarter 2021 compared to Second Quarter 2020 and 1.6 points in Six Months 2021 compared to Six Months 2020. The underwriting expense ratios in Second Quarter and Six Months 2020 were elevated by 2.1 points and 2.2 points, respectively, for COVID-19-related items, as further discussed in "Insurance Operations" above. The decrease in the underwriting expense ratios in Second Quarter and Six Months 2021 reflect the absence of these COVID-19-related impacts, partially offset by an increase in profit-based compensation to our employees, which was 0.8 points in Second Quarter 2021 and 0.6 points in Six Months 2021.

~~E&S Lines Segment~~

Quarter ended June 30, Change
% or
Points Six Months ended June 30, Change
% or
Points
($ in thousands) 2021 2020 2021 2020
Insurance Segments Results:
NPW $ 77,518 63,237 23 % $ 145,053 124,492 17 %
NPE 67,471 58,034 16 129,469 117,029 11
Less:
Loss and loss expense incurred 43,822 38,761 13 85,207 72,595 17
Net underwriting expenses incurred 21,343 19,805 8 41,440 41,122 1
Underwriting income (loss) $ 2,306 (532) 533 % $ 2,822 3,312 (15) %
Combined Ratios:
Loss and loss expense ratio 65.0 % 66.8 (1.8) pts 65.8 % 62.1 3.7 pts
Underwriting expense ratio 31.6 34.1 (2.5) 32.0 35.1 (3.1)
Combined ratio 96.6 100.9 (4.3) 97.8 97.2 0.6

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NPW grew 23% in Second Quarter 2021 and 17% in Six Months 2021 compared to the same prior-year periods due to strong new business growth and renewal pure price increases. Quantitative information on the premium in this segment is as follows:

Quarter ended June 30, Change
% or
Points Six Months ended June 30, Change
% or
Points
($ in millions) 2021 2020 2021 2020
Direct new business $ 33.7 28.3 19 % $ 65.0 55.8 16 %
Renewal pure price increases 6.9 5.5 1.4 7.1 4.8 2.3

~~The loss and loss expense ratio decreased 1.8 points in Second Quarter 2021 while increasing 3.7 points in Six Months 2021 compared to the same prior year periods,~~ primarily driven by the items ~~outlined~~ in the table ~~below:~~shown below.

Second Quarter 2021 Second Quarter 2020
($ in millions) Loss and Loss Expense Incurred Impact on
Loss and Loss Expense Ratio Loss and Loss
Expense
Incurred Impact on
Loss and Loss Expense Ratio Change in Ratio
Catastrophe losses $ 6.4 9.5 pts $ 6.5 11.3 pts (1.8) pts
Non-catastrophe property loss and loss expenses 7.8 11.5 5.6 9.6 1.9
(Favorable) prior year casualty reserve development (2.0) (3.0) — — (3.0)
Total $ 12.2 18.0 $ 12.1 20.9 (2.9)
Six Months 2021 Six Months 2020
($ in millions) Loss and Loss Expense Incurred Impact on
Loss and Loss Expense Ratio Loss and Loss
Expense
Incurred Impact on
Loss and Loss Expense Ratio Change in Ratio
Catastrophe losses $ 14.7 11.3 pts $ 7.0 6.0 pts 5.3 pts
Non-catastrophe property loss and loss expenses 16.6 12.9 11.3 9.7 3.2
(Favorable) prior year casualty reserve development (7.0) (5.4) — — (5.4)
Total $ 24.3 18.8 $ 18.3 15.7 3.1


	First Quarter 2022				First Quarter 2021
($ in millions)	Loss and Loss Expense Incurred		Impact on Loss and Loss Expense Ratio		Loss and Loss Expense Incurred		Impact on Loss and Loss Expense Ratio	Change in Ratio
Net catastrophe losses	$	1.3	1.7	pts	$	8.3	13.3	(11.6)	pts
Non-catastrophe property loss and loss expenses	9.1		11.6		8.9		14.3	(2.7)
(Favorable) prior year casualty reserve development	—		—		(5.0)		(8.1)	8.1
Total	$	10.4	13.3		$	12.2	19.5	(6.2)

The ~~increase~~decrease in net catastrophe losses in ~~Six Months 2021~~First Quarter 2022 compared to ~~Six Months 2020~~First Quarter 2021 was primarily due to a series of large storms in First Quarter 2021 that significantly impacted Texas and other ~~southern~~Southern and ~~central states. Non-catastrophe property loss and loss expenses were also elevated~~Midwestern states, that did not reoccur in ~~both periods due to an increase in severity of a few commercial property losses from fires.~~First Quarter 2022.

~~The favorable prior year casualty reserve development in Second Quarter and Six Months 2021 was primarily attributable to lower loss severities in accident years 2016 through 2018.~~ There was no prior year casualty reserve development in ~~Second~~First Quarter ~~and Six Months 2020.~~2022. The favorable prior year casualty reserve development in First Quarter 2021 was primarily due to improved loss severities in accident years 2016 through 2018.

The underwriting expense ratio decreased 2.5 points in Second Quarter 2021 and 3.1 points in Six Months 2021 compared to the respective prior year periods, primarily due to a decrease in labor and travel expenses of 1.6 points in Second Quarter 2021 and 1.7 points in Six Months 2021 compared to the same prior-year periods. In addition, the ~~underwriting~~loss and loss expense ~~ratios~~ratio was impacted by a 1.4-point decrease in ~~Second~~current year casualty loss costs in First Quarter and Six Months 2020 were elevated by 0.4 points and 1.0 point, respectively, for COVID-19-related increases in our allowance for credit losses on premiums receivable as further discussed in "Insurance Operations" above.

~~Reinsurance~~

~~We successfully completed negotiations of our July 1, 2021 excess of loss treaties, which provide coverage for our Standard Commercial Lines, Standard Personal Lines, and~~2022 compared to First Quarter 2021. Our E&S ~~Lines. The Casualty Excess~~casualty lines results have improved over recent years, following a number of ~~Loss (“Casualty Treaty”) was renewed with the same structure as the expiring treaty. The treaty year ceded deposit premium increased $9.5 million, or 16%, reflecting a slight~~underwriting and claims initiatives, strong rate ~~increase coupled with an increase in projected subject earned premium.~~

The Property Excess of Loss (“Property Treaty”) was renewed with an increase in the retention on the first layer from $2.0 million to $3.0 million, thereby decreasing the coverage in excess of retention to $7.0 million from $8.0 million. The subsequent layers remained the same. The treaty year deposit premium increased $0.5 million, or 1%, reflecting a risk-adjusted rate increase along with an increase in projected subject premium offset with the premium reduction benefit of the aforementioned first layer retention increase.

~~Table of Contents~~

~~The following table summarizes the details of the Property Treaty~~increases, and the ~~Casualty Treaty arrangements covering our Insurance Subsidiaries:~~

~~Treaty Name~~

~~Reinsurance Coverage~~

~~Terrorism Coverage~~

~~Property Excess of Loss (covers all insurance operations)~~

~~$57 million above $3 million retention covering 100% in three layers. Losses other than TRIPRA certified losses are subject to the following reinstatements and annual aggregate limits:~~

~~- $7 million in excess of $3 million layer provides unlimited~~

~~reinstatements;~~

~~- $30 million in excess of $10 million layer provides three~~

~~reinstatements, $120 million in aggregate limits; and~~

~~- $20 million in excess of $40 million layer provides three~~

~~reinstatements, $80 million in aggregate limits.~~

All NBCR losses are excluded regardless of whether or not they are certified under TRIPRA. For non-NBCR losses, the treaty distinguishes between acts committed on behalf of foreign persons or foreign interests ("Foreign Terrorism") and those that are not. The treaty provides annual aggregate limits for Foreign Terrorism (other than NBCR) acts of $21 million for the first layer, $60 million for the second layer, and $40 million for the third layer. Non-foreign terrorism losses (other than NBCR) are covered to the same extent as non-terrorism losses.

~~Casualty Excess of Loss (covers all insurance operations)~~

~~There are six layers covering 100% of $88 million in excess of $2 million. Losses other than terrorism losses are subject to the following:~~

~~- $3 million in excess of $2 million layer provides 33~~

~~reinstatements, $102 million annual aggregate limit;~~

~~- $7 million in excess of $5 million layer provides six~~

~~reinstatements, $49 million annual aggregate limit;~~

~~- $9 million in excess of $12 million layer provides three~~

~~reinstatements, $36 million annual aggregate limit;~~

~~- $9 million in excess of $21 million layer provides one~~

~~reinstatement, $18 million annual aggregate limit;~~

~~- $20 million in excess of $30 million layer provides one~~

~~reinstatement, $40 million annual aggregate limit; and~~

~~- $40 million in excess of $50 million layer provides one~~

~~reinstatement, $80 million annual aggregate limit.~~

~~All NBCR losses are excluded. All other losses stemming from the acts of terrorism are subject to the following:~~

~~- $3 million in excess of $2 million layer with $15 million net~~

~~annual terrorism aggregate limit;~~

~~- $7 million in excess of $5 million layer with $28 million net~~

~~annual terrorism aggregate limit;~~

~~- $9 million in excess of $12 million layer with $27 million net~~

~~annual terrorism aggregate limit;~~

~~- $9 million in excess of $21 million layer with $18 million net~~

~~annual terrorism aggregate limit;~~

~~- $20 million in excess of $30 million layer with $40 million~~

~~net annual terrorism aggregate limit; and~~

~~- $40 million in excess of $50 million layer with $80 million~~

~~net annual terrorism aggregate limit.~~

decrease in current year casualty loss costs reflects the impacts of these actions.

Investments

The primary ~~objective~~objectives of the investment portfolio isare to maximize after-tax net investment income and ~~its~~generate long-term growth in book value by maximizing the overall total return ~~while maintaining~~of the portfolio. Each objective is balanced against prevailing market conditions, capital preservation considerations, and our enterprise risk-taking appetite. We maintain (i) a well-diversified portfolio across issuers, sectors, and asset classes, and (ii) a high credit quality core fixed income securities portfolio with a duration and ~~managing our duration~~maturity profile at an acceptable risk ~~profile.~~ level that provides ample liquidity. The effective duration of ~~our~~the fixed income ~~and~~securities portfolio, including short-term investments, was ~~3.9~~4.1 years as of ~~June 30, 2021,~~March 31, 2022, compared to the Insurance Subsidiaries' ~~liability~~net loss and loss expense reserves duration of ~~3.7~~3.5 years at December 31, 2020. The effective duration is monitored and managed to maximize yield while managing interest rate risk at an acceptable level. We maintain a well-diversified portfolio across sectors, with credit quality and maturities that provide ample liquidity. Purchases and sales are intended to maximize investment returns in the current market environment while balancing capital preservation.2021.

Our fixed income and short-term investments represented ~~91%~~90% of our invested assets at ~~June 30, 2021,~~March 31, 2022, and ~~92%~~91% at December 31, ~~2020. At June 30, 2021, these~~2021. Additionally, as of both dates, our fixed income securities and short-term investments portfolio had a weighted average credit rating of "A+" ~~compared to “AA-” as of December 31, 2020,~~ with ~~a 96% allocation to~~ investment grade holdings ~~at both periods. The decline in~~representing 96% of the weighted average credit rating reflects a meaningful reduction in our sector allocation to agency residential mortgage-backed securities over the past year as lower interest rates accelerated prepayments as we had expected. Given the very low reinvestment rates for this asset class, we have reallocated these non-sale disposal cash flows into other high-quality fixed income sectors, including corporate securities and other asset-backed security classes that do not carry a "AAA" rating, but in our view currently offer a better risk and reward trade-off.

Total Invested Assets
($ in thousands) June 30, 2021 December 31, 2020 Change
Total invested assets $ 7,755,441 7,505,599 3 %
Invested assets per dollar of common stockholders' equity 2.88 2.96 (3)
Unrealized gain – before tax1
348,440 395,207 (12)
Unrealized gain – after tax1
275,268 312,214 (12)

1~~Includes unrealized gains on fixed income and equity securities.~~

Invested assets increased as of June 30, 2021, compared to December 31, 2020, reflecting operating cash flows during Six Months 2021 of $292.5 million, that were 18% of NPW, partially offset by a decrease in pre-tax unrealized gains of $46.8 million. The decrease in gross unrealized gains during Six Months 2021 was driven by an increase in longer-dated benchmark United States Treasury rates, partially offset by tightening credit spreads.total portfolio.

For further details on the composition, credit quality, and the various risks to which our portfolio is subject, see Item 7A. “Quantitative and Qualitative Disclosures About Market Risk.” of our ~~2020~~2021 Annual Report.


Total Invested Assets
($ in thousands)	March 31, 2022		December 31, 2021	Change
Total invested assets	$	7,774,711	8,026,988	(3)	%
Invested assets per dollar of common stockholders' equity	3.02		2.88	5
Unrealized (loss) gain – before tax1	(56,904)		255,658	(122)
Unrealized (loss) gain – after tax1	(44,954)		201,970	(122)

1Includes unrealized losses on fixed income securities of $81.5 million and unrealized gains on equity securities of $24.5 million at March 31, 2022.

Invested assets decreased $252.3 million at March 31, 2022, compared to December 31, 2021, reflecting an increase in pre-tax unrealized losses of $312.6 million, due to an increase in benchmark U.S. Treasury rates and the widening of credit spreads, partially offset by operating cash flows during First Quarter 2022 that were 10% of NPW.

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Net Investment Income

The components of net investment income earned were as follows:

Quarter ended June 30, Change
% or Points Six Months ended June 30, Change
% or Points
($ in thousands) 2021 2020 2021 2020
Fixed income securities $ 52,608 51,079 3 % $ 105,431 101,332 4 %
Commercial mortgage loans ("CMLs") 695 156 346 1,209 218 455
Equity securities 2,982 2,023 47 5,470 3,575 53
Short-term investments 55 420 (87) 140 1,586 (91)
Other investments 32,860 (15,846) (307) 50,293 (9,504) (629)
Investment expenses (5,469) (3,388) 61 (9,096) (6,796) 34
Net investment income earned – before tax 83,731 34,444 143 153,447 90,411 70
Net investment income tax expense (16,290) (5,902) 176 (29,663) (16,386) 81
Net investment income earned – after tax $ 67,441 28,542 136 $ 123,784 74,025 67
Effective tax rate 19.5 % 17.1 2.4 pts 19.3 % 18.1 1.2 pts
Annualized after-tax yield on fixed income investments 2.6 2.7 (0.1) 2.6 2.6 —
Annualized after-tax yield on investment portfolio 3.5 1.6 1.9 3.2 2.1 1.1


	Quarter ended March 31,				Change % or Points
($ in thousands)	2022			2021
Fixed income securities	$	53,925		52,823	2	%
Commercial mortgage loans ("CMLs")	970			514	89
Equity securities	2,418			2,488	(3)
Short-term investments	101			85	19
Other investments	19,305			17,433	11
Investment expenses	(4,117)			(3,627)	14
Net investment income earned – before tax	72,602			69,716	4
Net investment income tax expense	(14,087)			(13,373)	5
Net investment income earned – after tax	$	58,515		56,343	4
Effective tax rate	19.4		%	19.2	0.2		pts
Annualized after-tax yield on fixed income investments	2.6			2.6	—
Annualized after-tax yield on investment portfolio	3.0			3.0	—

Net investment income earned increased 4% in First Quarter 2022 compared to First Quarter 2021, driven by income earned on fixed income securities and other investments. During First Quarter 2022, we actively traded our fixed income securities portfolio to opportunistically increase yield in the rising interest rate environment. The ~~increase~~average after-tax new purchase yield on fixed income security purchases in ~~after-tax~~First Quarter 2022 was 2.6%, which was up sequentially from 2.1% in the fourth quarter of 2021 and 1.7% in First Quarter 2021. In addition, as of March 31, 2022, 14% of our fixed income securities portfolio was invested in floating rate securities, which reset principally to 90-day U.S. dollar-denominated London Interbank Offered Rate.

As the returns on our alternative investments generally follow capital market performance, which was down during First Quarter 2022, we expect losses on these investments in the second quarter of 2022, which will impact net investment income. Over the remainder of 2022, we expect higher reinvestment yields within our fixed income securities portfolio, which will likely result in higher net investment income in Second Quarter and Six Months 2021 compared to Second Quarter and Six Months 2020 was driven by higher returns on alternative investments in our other investment portfolio of $29.9 million in Second Quarter 2021 and $50.1 million in Six Months 2021, compared to losses of $16.0 million and $9.7 million in the same prior-year periods, respectively. These returns are recorded on a one-quarter lag, and reflect the strong capital market performance in the three and six-month periods ending March 31, 2021.from these securities.

Realized and Unrealized Gains and Losses

~~Our~~When evaluating securities for sale, our general ~~investment~~ philosophy ~~for sales of securities~~ is to ~~(i)~~ reduce our exposure to securities and sectors based on economic evaluations of whether the fundamentals for that ~~we have evaluated and determined~~security or sector have deteriorated ~~economic fundamentals,~~ or ~~(ii) determine~~the timing is appropriate ~~timing for an opportunistic~~to opportunistically trade for other securities ~~or sectors~~ with better economic-return characteristics.

Net realized and unrealized gains and losses for the indicated periods were as follows:

Quarter ended June 30, Change % Six Months ended June 30, Change %
($ in thousands) 2021 2020 2021 2020
Net realized gains (losses) on disposals $ 268 2,615 (90) % $ (527) 6,715 (108) %
Net unrealized gains (losses) equity securities 7,661 5,701 34 18,941 (11,436) (266)
Net credit loss benefit (expense) on fixed income securities, AFS 2,272 4,923 (54) (2,725) (10,864) (75)
Net credit loss (expense) benefit on fixed income securities, HTM (53) 1 N/M (60) 1 N/M
Net credit loss benefit (expense) on CMLs — 22 (100) — (218) (100)
Losses on securities for which we have the intent to sell (91) (613) (85) (453) (16,215) (97)
Total net realized and unrealized gains (losses) $ 10,057 12,649 (20) $ 15,176 (32,017) (147)


	Quarter ended March 31,			Change %
($ in thousands)	2022		2021
Net realized losses on disposals	$	(11,363)	(795)	1,329	%
Net unrealized (losses) gains on equity securities	(2,154)		11,280	(119)
Net credit loss expense on fixed income securities, AFS	(22,052)		(4,997)	341
Net credit loss expense on fixed income securities, held-to-maturity	14		(7)	(300)

Losses on securities for which we have the intent to sell	(4,797)		(362)	1,225
Total net realized and unrealized investment (losses) gains	$	(40,352)	5,119	(888)

~~The improvement in net~~Net realized and unrealized investment gains decreased $45.5 million in ~~Six Months 2021~~First Quarter 2022 compared to ~~Six Months 2020 was~~First Quarter 2021, primarily driven by (i) ~~unrealized gains~~active trading of our fixed income securities in First Quarter 2022 to opportunistically increase yield in the rising interest rate environment, and (ii) higher credit loss expense on our ~~equity~~AFS fixed income securities this year compared to unrealized losses last year, which were driven by COVID-19-related market disruption last year, and (ii) lower intent-to-sell losses this year as we provided our investment managers significant trading flexibility last year given market conditions.portfolio.

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Federal Income Taxes

The following table provides information ~~about~~regarding federal income taxes and reconciles federal income tax at the corporate rate to the effective tax rate:

Quarter ended June 30, Six Months ended June 30,
($ in thousands) 2021 2020 2021 2020
Tax at statutory rate $ 32,172 8,965 $ 60,655 12,325
Tax-advantaged interest (1,139) (1,171) (2,317) (2,385)
Dividends received deduction (167) (165) (276) (220)
Executive compensation 763 365 970 716
Stock-based compensation (160) 51 (623) (1,830)
Other (154) 465 (732) 665
Federal income tax expense $ 31,315 8,510 $ 57,677 9,271
Income before federal income tax, less preferred stock dividends $ 150,898 42,693 $ 284,077 58,690
Effective tax rate 20.8 % 19.9 20.3 15.8

~~Table of Contents~~

We had increased levels of income before federal income tax in Six Months 2021 subject to the statutory tax rate of 21% that increased our effective tax rate in Six Months 2021 compared to Six Months 2020 by 450 basis points.


	Quarter ended March 31,
($ in thousands)	2022			2021
Tax at statutory rate	$	14,677		28,483
Tax-advantaged interest	(1,074)			(1,178)
Dividends received deduction	(106)			(109)
Executive compensation	258			207
Stock-based compensation	(731)			(464)
Other	536			(577)
Federal income tax expense	13,560			26,362
Income before federal income tax, less preferred stock dividends	67,590			133,179
Effective tax rate	20.1		%	19.8

~~Financial Condition,~~ Liquidity and Capital Resources

Capital resources and liquidity reflect our ability to generate cash flows from business operations, borrow funds at competitive rates, and raise new capital to meet our operating and growth needs.

Liquidity

We manage liquidity by focusing on generating sufficient cash flows to meet the short-term and long-term cash requirements of our business operations. We also adjust our liquidity in light of economic or market conditions, as discussed further below.

Sources of Liquidity

Sources of cash for the Parent historically have consisted of dividends from the Insurance Subsidiaries, the investment portfolio held byat the Parent, borrowings under third-party lines of credit, loan agreements with certain Insurance Subsidiaries, and the issuance of equity (common or preferred) and debt securities. We continue to monitor these sources, ~~giving consideration to~~considering both our short-term and long-term liquidity and capital preservation strategies.

The Parent's investment portfolio ~~provides liquidity through~~includes (i) short-term investments that are generally maintained in “AAA” rated money market funds approved by the National Association of Insurance Commissioners, (ii) high-quality, highly liquid government and corporate fixed income securities; (iii) equity ~~securities,~~securities; (iv) other investments, and ~~(iv)~~(v) a cash balance. In the aggregate, Parent cash and total investments amounted to ~~$505~~$518 million at ~~June 30, 2021~~March 31, 2022, and ~~$490~~$527 million at December 31, ~~2020.~~2021.

The composition of the Parent's ~~liquidity~~investment portfolio may ~~fluctuate~~change over time based on various factors, including the amount and availability of dividends from our Insurance Subsidiaries, investment income, expenses, other Parent cash needs, such as dividends payable to ~~shareholders,~~stockholders, asset allocation investment decisions, inorganic growth opportunities, debt retirement, and share repurchases. Our target is for the Parent is to maintain ~~liquidity matching~~highly liquid investments of at least twice its expected annual net cash outflow needs, ~~which is currently estimated at~~or $180 million.

Insurance Subsidiary Dividends

The Insurance Subsidiaries generate liquidity through insurance float, which is created by collecting premiums and earning investment income before ~~claims are paid.~~paying claims. The period of float can extend over many years. Our investment portfolio consists of maturity dates that continually provide a source of cash flow for claims payments in the ordinary course of business. ~~As protection for the~~To protect our Insurance Subsidiaries' capital, ~~resources at the Insurance Subsidiaries,~~ we purchase reinsurance coverage for ~~any~~ significantly large claims or catastrophes that may occur.

The Insurance Subsidiaries paid ~~$70~~$40 million in total dividends to the Parent during ~~Six Months 2021.~~First Quarter 2022. As of December 31, ~~2020,~~2021, our allowable ordinary maximum dividend ~~was $241~~is $322 million for ~~2021.~~2022. All Insurance Subsidiary dividends to the Parent are (i) subject to the approval and/or review of its domiciliary state insurance regulator, and (ii) generally payable only from earned statutory surplus reported in its ~~statutory~~ annual statements as of the preceding December 31. Although domiciliary state insurance regulators historically have approved dividends, there is no assurance they will approve future Insurance Subsidiary dividends.

New Jersey corporate law also limits the maximum amount of dividends the Parent can pay our ~~shareholders~~stockholders if either (i) the Parent would be unable to pay its debts as they became due in the usual course of business, or (ii) the Parent’s total assets would be less than its total liabilities. The Parent’s ability to pay dividends to ~~shareholders~~stockholders is also impacted by (i) covenants in its credit agreement ~~(discussed below under "Line of Credit")~~ that obligate it, among other things, to maintain a minimum consolidated net worth and a maximum ratio of consolidated debt to total capitalization, and (ii) the terms of our preferred stock that prohibit dividends to be declared or paid

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on our common stock if dividends are not declared and paid, or made payable, on all outstanding preferred stock for the latest completed dividend period.

For additional information regarding dividend restrictions and financial covenants, where applicable, see Note 11. "Indebtedness", Note 17. ~~"Preferred Stock"~~"Equity", and Note 22. “Statutory Financial Information, Capital Requirements, and Restrictions on Dividends and Transfers of Funds” in Item 8. “Financial Statements and Supplementary Data.” of our ~~2020~~2021 Annual Report.

Line of Credit

On December 20, 2019, the Parent entered into a Credit Agreement with the lenders named therein (the “Lenders”) and the Bank of Montreal, Chicago Branch, as Administrative Agent ("Line of Credit"). Under the Line of Credit, the Lenders have agreed to provide the Parent with a $50 million revolving credit facility that can be increased to $125 million with the Lenders'

~~Table~~ consent. No borrowings were made under the Line of ~~Contents~~

~~consent.~~Credit in First Quarter 2022. The Line of Credit will mature on December 20, 2022, and has a variable interest rate based on, among other factors, the Parent’s debt ratings.

For additional information regarding the Line of Credit and corresponding representations, warranties, and covenants, refer to Note 11. "Indebtedness" in Item 8. "Financial Statements and Supplementary Data." of our ~~2020~~2021 Annual Report. We met all covenants under our Line of Credit as of ~~June 30, 2021.~~March 31, 2022.

~~Several~~Four of the Insurance Subsidiaries are members of Federal Home Loan Bank ("FHLB") branches, as shown in the following table. Membership requires the ownership of branch stock and includes the right to ~~borrow and gain~~ access to liquidity. All ~~FHLBI~~Federal Home Loan Bank of Indianapolis ("FHLBI") and ~~FHLBNY~~Federal Home Loan Bank of New York ("FHLBNY") borrowings are required to be secured by investments pledged as collateral. For additional information regarding collateral outstanding, refer to Note 4. "Investments" in Item 1. "Financial Statements." of this Form 10-Q:


Branch			Insurance Subsidiary Member
FHLBI			Selective Insurance Company of South Carolina ("SICSC")1 Selective Insurance Company of the Southeast ("SICSE")1
FHLBNY			Selective Insurance Company of America ("SICA") Selective Insurance Company of New York ("SICNY")

1These subsidiaries are jointly referred to as the "Indiana Subsidiaries" as they are domiciled in Indiana.

The Line of Credit permits aggregate borrowings from the FHLBI and the FHLBNY up to 10% of the respective member company’s admitted assets for the previous year. ~~Additionally, as~~As SICNY is domiciled in New York, its FHLBNY borrowings are limited by New York insurance regulations to the lower of 5% of admitted assets for the most recently completed fiscal quarter, or 10% of admitted assets for the previous year-end. As of ~~June 30, 2021,~~March 31, 2022, we had remaining capacity of ~~$339~~$435.2 million for ~~Federal Home Loan Bank~~FHLB borrowings, with a ~~$12.2~~$17.1 million additional stock purchase requirement to allow the member companies to borrow their ~~full~~ remaining capacity amounts.

Short-term Borrowings

We did not make any short-term borrowings from FHLB branches during ~~Six Months 2021.~~First Quarter 2022. However, on April 1, 2022, SICA borrowed $35 million from the FHLBNY at an interest rate of 0.70% with repayment due on May 2, 2022. This borrowing was refinanced upon its maturity on May 2, 2022, at an interest rate of 1.10%. This borrowing now matures on June 27, 2022. These funds were used for general corporate purposes.

Intercompany Loan Agreements

The Parent has lending agreements with the Indiana Subsidiaries approved by the Indiana Department of Insurance that provide it additional liquidity. Similar to the Line of Credit, these lending agreements limit the Parent's borrowings from the Indiana Subsidiaries to 10% of the admitted assets of the respective Indiana Subsidiary. The outstanding balance on these intercompany loans was $40.0 million as of both ~~June 30, 2021~~March 31, 2022, and December 31, ~~2020.~~2021. The remaining capacity under these intercompany loan agreements was ~~$97.1~~$109.9 million as of both ~~June 30, 2021,~~March 31, 2022, and December 31, ~~2020.~~2021.

Capital Market Activities

The Parent had no private or public issuances of stock during ~~Six Months 2021.~~First Quarter 2022. In the fourth quarter of 2020, we enhanced our capital structure flexibility at the Parent by issuing $200 million of 4.60% non-cumulative perpetual preferred stock. Net proceeds after issuance costs were ~~approximately~~ $195 million. The Parent is using these proceeds for general corporate purposes, which may include the repurchase of common stock under a $100 million share repurchase program authorized by our Board of Directors (the "Board") in conjunction with the preferred stock offering. During ~~Six Months 2021,~~First Quarter 2022, we repurchased ~~52,781~~1,000 shares of our common stock under this authorization at a cost of ~~approximately $3.4 million,~~$75,488, with a ~~$64.49~~$75.49 average price per share, ~~with all share repurchases made in the first quarter of 2021.~~excluding commission costs paid. We have ~~$96.6~~$96.5 million of remaining capacity under our share repurchase program. For additional information on the

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preferred stock transaction and share repurchase program, refer to Note 17. “Equity” in Item 8. "Financial Statements and Supplementary Data." of our 2021 Annual Report.

Uses of Liquidity

The Parent's liquidity generated from the sources discussed above is used, among other things, to pay dividends to our ~~shareholders.~~stockholders. Dividends on shares of the Parent's common and preferred stock are declared and paid at the discretion of the Board ~~of Directors~~ based on our operating results, financial condition, capital requirements, contractual restrictions, and other relevant factors. On ~~July 28, 2021,~~May 4, 2022, our Board ~~of Directors~~ declared:

•A quarterly cash dividend on common stock of ~~$0.25~~$0.28 per common share, that is payable ~~September~~June 1, ~~2021~~2022, to holders of record ~~as of August 13, 2021;~~on May 16, 2022; and

•A cash dividend of $287.50 per share on our 4.60% Non-Cumulative Preferred Stock, Series B (equivalent to $0.28750 per depository share) ~~that is~~ payable on ~~September~~June 15, ~~2021~~2022, to holders of record as of ~~August~~May 31, ~~2021.~~2022.

Our ability to meet our interest and principal repayment obligations on our debt, as well as our ability to continue to pay dividends to our stockholders, is dependent on (i) liquidity at the Parent, (ii) the ability of the Insurance Subsidiaries to pay

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dividends, if necessary, and/or (iii) the availability of other sources of liquidity to the Parent. ~~On July 21, 2021, we repaid one of~~Excluding the short-term borrowing described above, our ~~$25 million borrowings from the FHLBNY. This~~next FHLB borrowing principal repayment increased our remaining capacity to $364 million, from $339 million, for Federal Home Loan Bank borrowings, as well as the related additional stock purchase requirement to $13.3 million, from $12.2 million, for the member companies to borrow their full remaining capacity amounts. The following summarizes our upcoming principal payments due:

•~~$25 million to FHLBNY on August 16, 2021; and~~

•~~$60~~is $60 million to FHLBI due on December 16, 2026.

Restrictions on the ability of the Insurance Subsidiaries to declare and pay dividends, without alternative liquidity options, could materially affect our ability to service debt and pay dividends on common and preferred stock. ~~We currently expect to repay the $25 million FHLBNY borrowing in full on August 16, 2021 from available Insurance Subsidiaries liquid assets.~~

Capital Resources

Capital resources ensure we can pay policyholder claims, furnish the financial strength to support the business of underwriting insurance risks, and facilitate continued business growth. At ~~June 30, 2021,~~March 31, 2022, we had GAAP stockholders' equity of ~~$2.9~~$2.8 billion and statutory surplus of ~~$2.3~~$2.4 billion. With total debt of ~~$550.9~~$505.6 million at ~~June 30, 2021,~~March 31, 2022, our debt-to-capital ratio was ~~16%~~15.4%. For additional information on our statutory surplus, see Note 22. "Statutory Financial Information, Capital Requirements, and Restrictions on Dividends and Transfers of Funds" in Item 8. "Financial Statements and Supplementary Data." of our ~~2020~~2021 Annual Report.

The following table summarizes certain contractual obligations we had at March 31, 2022 that may require us to invest additional amounts into our investment portfolio, which we would fund primarily with operating cash flows.



($ in millions)	Amount of Obligation		Year of Expiration of Obligation
Alternative and other investments	$	238.0	2036
Non-publicly traded collateralized loan obligations in our fixed income securities portfolio	60.0		2037
Non-publicly traded common stock within our equity portfolio	16.4		2027
CMLs	6.3		2024
Privately-placed corporate securities	65.1		2026
Total	$	385.8

There is no certainty that any such additional investment will be required. We expect to have the capacity to repay and/or refinance these obligations as they come due.

Our current and long-term material cash requirements associated with (i) loss and loss expense reserves, (ii) contractual obligations pursuant to operating and financing leases for office space and equipment, and (iii) notes payable, funded primarily with operating cash flows, have not materially changed since December 31, 2021.

Our other cash requirements include, without limitation, ~~principal and interest payments on various notes payable,~~ dividends to stockholders, ~~payment of claims, payment of commitments under limited partnership agreements,~~ capital expenditures, and other operating expenses, including commissions to our distribution partners, labor costs, premium taxes, general and administrative expenses, and income taxes. ~~For further details regarding~~

As of March 31, 2022 and December 31, 2021, we had no (i) material guarantees on behalf of others and trading activities involving non-exchange traded contracts accounted for at fair value, (ii) material transactions with related parties other than those disclosed in Note 18. “Related Party Transactions” in Item 8. “Financial Statements and Supplementary Data.” of our ~~cash requirements, refer~~2021 Annual Report, and (iii) material relationships with unconsolidated entities or financial partnerships, such as structured finance or special purpose entities, established to ~~the section below entitled, “Contractual Obligations, Contingent Liabilities, and Commitments.”~~facilitate off-balance sheet arrangements or other contractually narrow or

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limited purposes. Consequently, we are not exposed to any material financing, liquidity, market, or credit risk related to off-balance sheet arrangements.

We continually monitor our cash requirements and the amount of capital resources we maintain at the holding company and operating subsidiary levels. As part of our long-term capital strategy, we strive to maintain capital metrics that support our targeted financial strength relative to the macroeconomic environment. Based on our analysis and market conditions, we may take a variety of actions, including, without limitation, contributing capital to the Insurance Subsidiaries, issuing additional debt and/or equity securities, repurchasing existing debt, repurchasing shares of the Parent’s common stock, and increasing common stockholders’ dividends.

Our capital management strategy is intended to protect the interests of the policyholders of the Insurance Subsidiaries and our stockholders, while enhancing our financial strength and underwriting capacity. We have ~~an attractive~~a profitable book of business and solid capital base, positioning us well to take advantage of market opportunities that may arise.

Book value per common share ~~increased~~decreased 8% to ~~$44.78~~$42.73 as of ~~June 30, 2021,~~March 31, 2022, from ~~$42.38~~$46.24 as of December 31, ~~2020,~~2021, driven by ~~$3.74~~a $4.07 change in net ~~income per share, and partially offset by $0.86 of lower~~ unrealized ~~gains~~losses on our fixed income securities portfolio and ~~$0.50~~$0.28 in dividends to our common ~~shareholders.~~stockholders, partially offset by $0.89 in net income per diluted common share. The increase in net unrealized losses on our fixed income securities was primarily driven by an increase in benchmark U.S. Treasury rates and the widening of credit spreads. Our adjusted book value per share, which is book value per share excluding total after-tax unrealized gains or losses on investments included in accumulated other comprehensive (loss) income, increased slightly to $43.80 as of March 31, 2022, from $43.23 as of December 31, 2021.

Cash Flows

Net cash provided by operating activities was $93 million in First Quarter 2022 compared to $130 million in First Quarter 2021. Cash flows from operations decreased in First Quarter 2022 primarily driven by reduced underwriting results in our insurance operations. For more information on our underwriting results, refer to "Insurance Operations" above in this MD&A.

Net cash used in investing activities was $96 million in First Quarter 2022 compared to $111 million in First Quarter 2021. Investing activity was less in First Quarter 2022 as a result of reduced cash flows from our insurance operations.

Net cash used in financing activities remained relatively flat with $24 million in First Quarter 2022 compared to $26 million in First Quarter 2021.

Ratings

Our ratings remain the same as reported in our "Overview" section of Item 1. "Business." of our ~~2020~~2021 Annual Report and are as follows:

NRSRO

Financial Strength Rating

Outlook

AM Best Company

AA+

~~Positive~~Stable

Moody's Investors Services ~~("Moody's")~~

Stable

Fitch Ratings ("Fitch")

A+

Stable

Standard & Poor's Global Ratings

Stable

On ~~April 2, 2021,~~March 24, 2022, Fitch reaffirmed our "A+" rating with a "stable" outlook. In taking this rating action, Fitch cited our (i) business profile as a regional commercial lines writer with strong independent agency relationships, (ii) strong capitalization, and (iii) strong financial performance with stable underwriting results and return metrics that have remained favorable compared to peers.

On May 6, 2021, Moody’s reaffirmed our "A2" rating with a "stable" outlook. In taking this action, Moody’s cited our (i) strong underwriting profitability, financial leverage and coverage metrics, (ii) conservative investment portfolio, and (iii) strong regional franchise presence and established independent agency support.

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~~Off-Balance Sheet Arrangements~~

At June 30, 2021, and December 31, 2020, we had no material relationships with unconsolidated entities or financial partnerships, such as structured finance or special purpose entities, established to facilitate off-balance sheet arrangements or other contractually narrow or limited purposes. Consequently, we are not exposed to any material financing, liquidity, market, or credit risk related to off-balance sheet arrangements.

~~Contractual Obligations, Contingent Liabilities, and Commitments~~

Our future cash payments associated with (i) loss and loss expense reserves, (ii) contractual obligations pursuant to operating and financing leases for office space and equipment, and (iii) notes payable have not materially changed since December 31, 2020. At June 30, 2021, we had certain contractual obligations that may require us to invest additional amounts in our investment portfolio as follows:

($ in millions) Amount of Obligation Year of Expiration of Obligation
Alternative and other investments $ 222.9 2036
Non-publicly traded collateralized loan obligations in our fixed income securities portfolio 39.9 2030
Non-publicly traded common stock within our equity portfolio 9.4 2027
CMLs 5.4 2023
Privately-placed corporate securities 16.0 Less than a year
Total $ 293.6

~~There is no certainty that any such additional investment will be required. We expect to have the capacity to repay and/or refinance these obligations as they come due.~~

We have issued no material guarantees on behalf of others and have no trading activities involving non-exchange traded contracts accounted for at fair value. For additional details on transactions with related parties, see Note 18. "Related Party Transactions" in Item 8. "Financial Statements and Supplementary Data." of our 2020 Annual Report.

ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK.

There have been no material changes in the information about market risk set forth in our ~~2020~~2021 Annual Report. While not reflective of a material shift in the overall risk/return characteristics of our fixed income and short-term investments, the aggregate weighted average credit rating of these portfolios decreased to "A+" as of June 30, 2021, from “AA-” as of December 31, 2020. The decline in the weighted average credit rating reflects a meaningful reduction in our sector allocation to agency residential mortgage-backed securities over the past year as lower interest rates accelerated prepayments, as we had expected. Given the very low reinvestment rates for this asset class, we have reallocated these non-sale disposal cash flows into other high-quality fixed income sectors, including corporate securities and other asset-backed security classes that do not carry a "AAA" rating, but in our view currently offer a better risk and reward trade-off.

ITEM 4. CONTROLS AND PROCEDURES.

Our management, with the participation of our Chief Executive Officer and Chief Financial Officer, has evaluated the effectiveness of our disclosure controls and procedures (as such term is defined in Rules 13a-15(e) and 15d-15(e) under the Securities Exchange Act of 1934, as amended (the “Exchange Act”)), as of the end of the period covered by this report. In performing this evaluation, management used the criteria set forth by the Committee of Sponsoring Organizations of the Treadway Commission in Internal Control – Integrated Framework ("COSO Framework") in 2013. Based on this evaluation,

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our Chief Executive Officer and Chief Financial Officer have concluded that our disclosure controls and procedures as of the end of such period are (i) effective in recording, processing, summarizing, and reporting information on a timely basis that we are required to disclose in the reports that we file or submit under the Exchange Act, and (ii) effective in ensuring that information that we are required to disclose in the reports that we file or submit under the Exchange Act is appropriately accumulated and communicated to our management, including our Chief Executive Officer and Chief Financial Officer, to allow timely decisions about required disclosure. No changes in our internal control over financial reporting (as such term is defined in Rule 13a-15(f) of the Exchange Act) occurred during ~~Second~~First Quarter ~~2021~~2022 that materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

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PART II. OTHER INFORMATION

ITEM 1. LEGAL PROCEEDINGS.

Incidental to our insurance operations, we are routinely engaged in ~~ordinary routine~~ legal proceedings ~~that, because litigation~~with inherently unpredictable outcomes ~~are inherently unpredictable,~~that could have a material adverse effect on our consolidated results of operations or cash flows in particular quarterly or annual periods. For additional information regarding our legal risks, refer to Note ~~13.~~12. "Litigation" in Item 1. "Financial Statements." of this Form 10-Q and Item 1A. “Risk Factors.” below in Part II. “Other Information.” As of ~~June 30, 2021,~~March 31, 2022, we have no material pending legal proceedings that could have a material adverse effect on our consolidated financial condition, results of operations, or cash flows.

ITEM 1A. RISK FACTORS.

Certain risk factors can significantly impact our business, liquidity, capital resources, results of operations, financial condition, and debt ratings. These risk factors might affect, alter, or change actions we might take executing our long-term capital strategy. Examples include, without limitation, contributing capital to any or all of the Insurance Subsidiaries, issuing additional debt and/or equity securities, repurchasing our existing debt and/or equity securities, or increasing or decreasing common stockholders' dividends. We operate in a continually changing business environment, and new risk factors ~~emerge from time to time.~~that we cannot predict or assess may emerge. Consequently, we can neither predict such new risk factors nor assess the potential future impact, if any, they might have on our business. Except as discussed below,there have been no material changes from the risk factors disclosed in Item 1A. “Risk Factors.” in our ~~2020~~2021 Annual Report.

~~During Second Quarter 2021,~~We write business domestically in the ~~risk of broad~~United States and we do not have direct exposure within our insurance operations to businesses or individuals in Russia or the Ukraine. We do not have material exposure to investments subject to embargos or Russian reinsurance counterparties. However, the ongoing Russian war against Ukraine is impacting global economic, banking, commodity, and financial markets, exacerbating ongoing economic challenges, including inflation has emerged as a heightened risk relative to the risk factor discussed in our 2020 Annual Report. Inflation levels accelerated in Second Quarter 2021 with the overall consumer price index ("CPI"), the Core CPI, and the Producer Price Index all showing elevated levels compared to last year. As discussed in more detail in our 2020 Annual Report, inflation has significant potential impacts to our claims severity across multiple lines of businesssupply chain disruption, which influences insurance loss costs, premiums and could also cause higher levels of reserve development. Additionally, if heightened levels of economic inflation are tied to higher interest rate yields on fixed income securities, it could increase unrealized losses on our fixed income securities and lower total returns from our other invested assets.investment valuation.

ITEM 2. UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS.

The following table provides information ~~about~~regarding our purchases of our common stock in ~~Second~~First Quarter ~~2021:~~2022:

Period
Total Number of
Shares Purchased1
Average Price
Paid per Share Total Number of
Shares Purchased
as Part of Publicly
Announced Programs
Approximate Dollar Value of
Shares that May Yet
Be Purchased Under the Announced Programs
(in millions)2
April 1 – 30, 2021 166 $ 73.33 — $ 96.6
May 1 – 31, 2021 398 77.43 — 96.6
June 1 – 30, 2021 375 76.26 — 96.6
Total 939 $ 76.24 — $ 96.6


Period	Total Number of Shares Purchased1	Average Price Paid per Share		Total Number of Shares Purchased as Part of Publicly Announced Programs2	Approximate Dollar Value of Shares that May Yet Be Purchased Under the Announced Programs (in millions)2
January 1 – 31, 2022	846	$	80.04	—	$	96.6
February 1 – 28, 2022	70,816	76.56		1,000	96.5
March 1 – 31, 2022	331	83.26		—	96.5
Total	71,993	$	76.63	1,000	$	96.5

1We purchased these shares from employees to satisfy tax withholding obligations associated with the vesting of their restricted stock units.

2On December 2, 2020, we announced ~~that~~ our Board of Directors authorized a $100 million share repurchase program ~~which has~~with no set expiration or termination date. Our repurchase program does not obligate us to acquire any particular amount of our common ~~stock, and~~stock. Management will determine the ~~repurchase program may be suspended or discontinued at any time at our discretion. The~~ timing and amount of any share repurchases under the authorization ~~will be determined by management~~ at its discretion ~~and~~ based on market conditions and other considerations.

ITEM 3. DEFAULTS UPON SENIOR SECURITIES.

None.

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ITEM 4. MINE SAFETY DISCLOSURES.

Not applicable.

ITEM 5. OTHER INFORMATION.

None.

ITEM 6. EXHIBITS.


Exhibit No.

*11						Statement Re: Computation of Per Share ~~Earnings.~~Earnings
*31.1						Certification of Chief Executive Officer in accordance with Section 302 of the Sarbanes-Oxley Act of 2002.
*31.2						Certification of Chief Financial Officer in accordance with Section 302 of the Sarbanes-Oxley Act of 2002.
**32.1						Certification of Chief Executive Officer in accordance with Section 906 of the Sarbanes-Oxley Act of 2002.
**32.2						Certification of Chief Financial Officer in accordance with Section 906 of the Sarbanes-Oxley Act of 2002.
**101						The following financial statements from the Company's Quarterly Report on Form 10-Q for the quarter ended ~~June 30, 2021,~~March 31, 2022, formatted in Inline Extensible Business Reporting Language (iXBRL): (i) Consolidated Balance Sheets, (ii) Consolidated Statements of Income, (iii) Consolidated Statements of Comprehensive Income, (iv) Consolidated Statements of Stockholders' Equity, (v) Consolidated Statements of Cash Flows and (vi) Notes to Consolidated Financial Statements.
**104						The cover page from the Company's Quarterly Report on Form 10-Q for the quarter ended ~~June 30, 2021,~~March 31, 2022, formatted in iXBRL.

* Filed herewith.

** Furnished and not filed herewith.

~~+ Management compensation plan or arrangement.~~

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SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this Report to be signed on its behalf by the undersigned thereunto duly authorized.

SELECTIVE INSURANCE GROUP, INC.

Registrant


Date:	~~July 29, 2021~~May 5, 2022	By: /s/ John J. Marchioni
		John J. Marchioni
		Chairperson of the Board, President and Chief Executive Officer
		(principal executive officer)

Date:	~~July 29, 2021~~May 5, 2022	By: /s/ Mark A. Wilcox
		Mark A. Wilcox
		Executive Vice President and Chief Financial Officer
		(principal financial officer)

4439


Quarter ended June 30, 2021
($ in thousands)	Beginning Balance		Current Provision for Securities without Prior Allowance	Increase (Decrease) on Securities with Prior Allowance, excluding intent (or Requirement) to Sell Securities	Reductions for Securities Sold	Reductions for Securities Identified as Intent (or Requirement) to Sell during the Period	Ending Balance
Foreign government	$	56	0	(7)	0	0	49
Obligations of states and political subdivisions	201		0	(163)	0	0	38
Corporate securities	6,166		148	(2,403)	(373)	(61)	3,477
CLO and other ABS	1,470		0	(70)	(1)	0	1,399
RMBS	864		3	230	(63)	0	1,034
CMBS	24		4	(14)	0	0	14
Total AFS fixed income securities	$	8,781	155	(2,427)	(437)	(61)	6,011


Quarter ended June 30, 2020
($ in thousands)	Beginning Balance		Current Provision for Securities without Prior Allowance	Increase (Decrease) on Securities with Prior Allowance, excluding intent (or Requirement) to Sell Securities	Reductions for Securities Sold	Reductions for Securities Identified as Intent (or Requirement) to Sell during the Period	Ending Balance
Foreign government	$	21	0	7	0	0	28
Obligations of states and political subdivisions	29		15	(27)	0	0	17
Corporate securities	13,412		813	(5,686)	(395)	(67)	8,077
CLO and other ABS	1,565		27	(145)	(58)	0	1,389
RMBS	722		0	124	(15)	0	831
CMBS	38		8	7	0	0	53
Total AFS fixed income securities	$	15,787	863	(5,720)	(468)	(67)	10,395


Six Months ended June 30, 2021
($ in thousands)	Beginning Balance		Current Provision for Securities without Prior Allowance	Increase (Decrease) on Securities with Prior Allowance, excluding intent (or Requirement) to Sell Securities	Reductions for Securities Sold	Reductions for Securities Identified as Intent (or Requirement) to Sell during the Period	Ending Balance
Foreign government	$	1	49	(1)	0	0	49
Obligations of states and political subdivisions	4		25	9	0	0	38
Corporate securities	2,782		2,185	(909)	(520)	(61)	3,477
CLO and other ABS	592		941	(116)	(18)	0	1,399
RMBS	561		618	(68)	(77)	0	1,034
CMBS	29		2	(17)	0	0	14
Total AFS fixed income securities	$	3,969	3,820	(1,102)	(615)	(61)	6,011


June 30, 2020
($ in thousands)	Obligation of state and Political Subdivisions		Corporate Securities	CLO and Other ABS	Total
Fair value, December 31, 2019	$	0	17,051	17,034	34,085
Total net (losses) gains for the period included in:
OCI	(111)		(1,770)	(367)	(2,248)
Net realized and unrealized (losses) gains	0		(384)	(349)	(733)
Net investment income earned	0		0	1	1
Purchases	0		3,002	9,690	12,692
Sales	0		0	0	0
Issuances	0		0	0	0
Settlements	0		(138)	(1,032)	(1,170)
Transfers into Level 3	2,890		4,592	20,107	27,589
Transfers out of Level 3	0		0	(9,924)	(9,924)
Fair value, June 30, 2020	$	2,779	22,353	35,160	60,292

Change in unrealized gains (losses) for the period included in earnings for assets held at period end	0		(384)	(349)	(733)
Change in unrealized gains (losses) for the period included in OCI for assets held at period end	(111)		(1,770)	(367)	(2,248)


Second Quarter 2021
($ in thousands)	Gross		Tax	Net
Net income	$	153,198	31,315	121,883
Components of OCI:
Unrealized gains on investment securities:
Unrealized holding gains during the period	35,553		7,467	28,086
Unrealized gains on securities with credit loss recognized in earnings	9,985		2,097	7,888

Amounts reclassified into net income:
HTM securities	(3)		(1)	(2)
Net realized losses on disposals and losses on intent-to-sell AFS securities	58		12	46
Credit loss benefit	(2,272)		(477)	(1,795)

Total unrealized gains on investment securities	43,321		9,098	34,223
Defined benefit pension and post-retirement plans:

Amounts reclassified into net income:
Net actuarial loss	693		145	548

Total defined benefit pension and post-retirement plans	693		145	548
Other comprehensive income	44,014		9,243	34,771
Comprehensive income	$	197,212	40,558	156,654


Second Quarter 2020
($ in thousands)	Gross		Tax	Net
Net income	$	42,693	8,510	34,183
Components of OCI:
Unrealized gains on investment securities:
Unrealized holding gains during the period	188,768		39,641	149,127
Unrealized gains on securities with credit loss recognized in earnings	37,479		7,871	29,608
Amounts reclassified into net income:
HTM securities	(31)		(6)	(25)
Net realized gains on disposals and losses on intent-to-sell AFS securities	(1,686)		(354)	(1,332)
Credit loss benefit	(4,924)		(1,034)	(3,890)
Total unrealized gains on investment securities	219,606		46,118	173,488
Defined benefit pension and post-retirement plans:

Amounts reclassified into net income:
Net actuarial loss	753		158	595

Total defined benefit pension and post-retirement plans	753		158	595
Other comprehensive income	220,359		46,276	174,083
Comprehensive income	$	263,052	54,786	208,266


Six Months 2021
($ in thousands)	Gross		Tax	Net
Net income	$	288,830	57,677	231,153
Components of OCI:
Unrealized losses on investment securities:
Unrealized holding losses during the period	(67,755)		(14,228)	(53,527)
Unrealized losses on securities with credit loss recognized in earnings	(1,335)		(280)	(1,055)

Amounts reclassified into net income:
HTM securities	(5)		(1)	(4)
Net realized losses on disposals and losses on intent-to-sell AFS securities	662		139	523
Credit loss expense	2,725		572	2,153

Total unrealized losses on investment securities	(65,708)		(13,798)	(51,910)
Defined benefit pension and post-retirement plans:

Amounts reclassified into net income:
Net actuarial loss	1,386		291	1,095

Total defined benefit pension and post-retirement plans	1,386		291	1,095
Other comprehensive loss	(64,322)		(13,507)	(50,815)
Comprehensive income	$	224,508	44,170	180,338


Six Months 2020
($ in thousands)	Gross		Tax	Net
Net income	$	58,690	9,271	49,419
Components of OCI:
Unrealized gains on investment securities:
Unrealized holding gains during the period	94,787		19,905	74,882
Unrealized losses on securities with credit loss recognized in earnings	(27,911)		(5,861)	(22,050)
Amounts reclassified into net income:
HTM securities	(6)		(1)	(5)
Net realized losses on disposals and losses on intent-to-sell AFS securities	9,641		2,025	7,616
Credit loss expense	10,863		2,281	8,582
Total unrealized gains on investment securities	87,374		18,349	69,025
Defined benefit pension and post-retirement plans:

Amounts reclassified into net income:
Net actuarial loss	1,507		316	1,191

Total defined benefit pension and post-retirement plans	1,507		316	1,191
Other comprehensive income	88,881		18,665	70,216
Comprehensive income	$	147,571	27,936	119,635


Annualized ROE Components	Quarter ended June 30,			Change Points	Six Months ended June 30,			Change Points
	2021		2020		2021		2020
Standard Commercial Lines Segment	8.2	%	2.4	5.8	8.3	%	2.4	5.9
Standard Personal Lines Segment	0.7		(0.9)	1.6	0.8		(0.4)	1.2
E&S Lines Segment	0.3		(0.1)	0.4	0.2		0.2	—
Total insurance operations	9.2		1.4	7.8	9.3		2.2	7.1

Investment income	10.3		5.2	5.1	9.5		6.6	2.9
Net realized and unrealized investment gains (losses)	1.2		1.8	(0.6)	0.9		(2.3)	3.2
Total investments segment	11.5		7.0	4.5	10.4		4.3	6.1

Other	(2.4)		(2.2)	(0.2)	(2.4)		(2.1)	(0.3)

Annualized ROE	18.3	%	6.2	12.1	17.3	%	4.4	12.9