UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC 20549

SCHEDULE 14A
(Rule 14a-101)

INFORMATION REQUIRED IN PROXY STATEMENT

SCHEDULE 14A INFORMATION

Proxy Statement Pursuant to Section 14(a) of the Securities
Exchange Act of 1934

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☒ Definitive Proxy Statement

☐ Definitive Additional Materials

☐ Soliciting Material Pursuant to §240.14a-12

SELECTIVE INSURANCE GROUP, INC.
(Name of Registrant as Specified In Its Charter)

(Name of Person(s) Filing Proxy Statement, if other than the Registrant)

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March 24, 201726, 2018

NOTICE OF 20172018 ANNUAL MEETING OF STOCKHOLDERS
AND PROXY STATEMENT

Wednesday, April 26, 2017May 2, 2018

The 20172018 Annual Meeting of Stockholders of Selective Insurance Group, Inc. (“Selective”) will be held on Wednesday, April 26, 2017,May 2, 2018, at 3:9:00 PMAM Eastern Time in the auditorium at Selective’s principal offices located at, and having the mailing address of, 40 Wantage Avenue, Branchville, New Jersey 07890.

At the meeting, we will ask stockholders to:

We plan a brief business meeting focused on these items, and we will attend to any other business properly brought before the meeting and at any adjournments or postponements of the meeting. After the meeting, we will make a brief presentation on our operations and will offer time for your comments and questions. ForEnclosed for your review in anticipation of the meeting is Selective’s 20162017 Annual Report to Stockholders is enclosed.Stockholders.

The Board of Directors recommends that you vote: (i) “FOR” all of the nominees to the Board of Directors in Proposal 1; and (ii) “FOR” Proposals 2, 3, and 4; and (iii) “EVERY YEAR” in Proposal 3 for the timing of the stockholders’ advisory vote to be held on the compensation of our named executive officers.4.These proposals are further described in the Proxy Statement.

Selective stockholders of record at the close of business on Monday,Wednesday, March 6, 20177, 2018, are entitled to notice of, and the right to vote at, the meeting and any adjournment or postponement of it. A quorum is a majority of outstanding shares in attendance or represented by proxy.YOUR VOTE IS IMPORTANT. VOTE YOUR SHARES BY: (I) CALLING THE TOLL-FREE TELEPHONE NUMBER LISTED ON THE PROXY CARD; (II) ACCESSING THE INTERNET WEBSITE LISTED ON THE PROXY CARD; OR (III) COMPLETING, DATING, AND SIGNING THE PROXY CARD AND RETURNING IT IN THE ENCLOSED ENVELOPE. YOU MAY REVOKE YOUR PROXY AT ANY TIME PRIOR TOBEFORE THE TIME IT IS VOTED AT THE 20172018 ANNUAL MEETING THROUGH THE PROCESSES DESCRIBED IN THE PROXY STATEMENT. IF YOU HOLD SHARES THROUGH A BROKER OR OTHER CUSTODIAN, PLEASE SEE THE VOTING INSTRUCTIONS PROVIDED TO YOU BY THAT BROKER OR CUSTODIAN.

Very truly yours,

Gregory E. Murphy
Chairman of the Board and Chief Executive Officer

By Order of the Board of Directors:

Robyn P. Turner
Corporate Secretary

Table of Contents

Page

PROXY STATEMENT

FOR THE 20172018 ANNUAL MEETING OF STOCKHOLDERS
TO BE HELD WEDNESDAY, APRIL 26, 2017MAY 2, 2018

GENERAL INFORMATION ABOUT SELECTIVE’S ANNUAL MEETING

WHEN AND WHERE IS THE ANNUAL MEETING?

The 20172018 Annual Meeting of Stockholders (the “Annual Meeting”) of Selective Insurance Group, Inc. (“Selective” or “we”) will be held on Wednesday, April 26, 2017,May 2, 2018, at 3:9:00 PMAM Eastern Time in the auditorium at Selective’s principal offices at 40 Wantage Avenue, Branchville, New Jersey 07890. Directions are on the back of this Proxy Statement. Our telephone number is (973) 948-3000.

WHEN IS THISPROXY STATEMENT BEING MAILED?

This Proxy Statement and proxy card are being mailed to Selective stockholders on or about March 24, 2017.26, 2018.

WHO IS ENTITLED TOVOTE AT THE ANNUAL MEETING?

Anyone who owned Selective common stock as of the close of business on March 6, 20177, 2018, is entitled to one vote per share owned. There were 58,246,98358,744,815 shares outstanding at the close of business on that date.

WHO IS SOLICITING MYPROXY TO VOTE MY SHARES AND WHEN?

Selective’s Board of Directors (“Board of Directors” or the “Board”) is soliciting your proxy, meaning your authorization for our named proxies, J. Brian ThebaultPaul D. Bauer and Robert Kelly Doherty,Cynthia S. Nicholson, to vote your shares.

Unless revoked by you, your proxy will be effective for the Annual Meeting and for any adjournments or postponements of that meeting.

WHAT IS THE COST OFSOLICITING PROXIES AND WHO IS PAYING FOR THE COST?

Selective is bearing the entire cost of soliciting proxies. Proxies will be solicited principally through the mail, but they also may be solicited personally or in writing, by telephone, e-mail, facsimile, or otherwise by Selective directors or officers, or employees of a Selective subsidiary, who will receive no additional compensation. Selective has engaged Georgeson LLC,Innisfree M&A Incorporated, a proxy solicitation firm, to assist in the solicitation of proxies and the distribution of proxy materials. Georgeson LLCInnisfree M&A Incorporated will provide such services for an estimated fee of approximately $8,000,$15,000, plus expenses. Selective will reimburse banks, brokerage firms, and other custodians, nominees, and fiduciaries for reasonable expenses incurred by them in sending proxy materials to their customers or principals who are the beneficial owners of shares of Selective common stock.

WHAT ARE THEREQUIREMENTS FOR BUSINESS TO BE CONDUCTED AT THE ANNUAL MEETING?

For business to be conducted at the Annual Meeting, owners of 29,123,49329,372,409 shares of Selective common stock (a majority of the issued and outstanding shares entitled to vote), constituting a quorum, must be in attendance or represented by proxy. Our common stock is our only class of voting securities.

PROPOSALS FORSTOCKHOLDER VOTE AND APPROVAL REQUIREMENTS

Management is presenting four proposals for a stockholder vote.

THE BOARD IS SUBJECT TO ANNUAL ELECTION BY THE STOCKHOLDERS. THE BOARD RECOMMENDS THAT YOU VOTE “FOR” THE FOLLOWING 1213 NOMINATED DIRECTORS FOR A TERM OF ONE YEAR:

You can find information about these nominees, Selective’s Board of Directors, its committees, and other related matters in the section entitled, “Information about Proposal 1” of this Proxy Statement.

New Jersey law and Selective’s By-Laws govern the vote on Proposal 1, on which you may:

Under our By-Laws and assuming a quorum is present, a director nominee in an uncontested election must be elected by a majority of votes cast. A majority exists when the number of votes cast “for” a director nominee exceeds the number of votes cast “against” the director nominee. A director nominee who fails to receive a majority of votes cast in an uncontested election is required to tender his or her resignation from the Board of Directors within five days following the certification of the election results. In that event: (i) the Corporate Governance and Nominating Committee must recommend to the Board of Directors whether it should accept the resignation; and (ii) the Board of Directors must decide whether to accept the resignation and disclose its decision-making process.

Stockholders may not cumulate their votes. Abstentions and broker non-votes (shares held by a broker, bank, or other nominee that does not have authority, either express or discretionary, to vote on a particular matter) will not be taken into account in determining the outcome of the vote consistent with New Jersey law and the proxy rules of the United States Securities and Exchange Commission (“SEC”).

THE BOARD RECOMMENDS THAT YOU VOTE “FOR” THE APPROVAL, ON AN ADVISORY BASIS, OF THE COMPENSATION OF OUR NAMED EXECUTIVE OFFICERS DISCLOSED IN THIS PROXY STATEMENT.

You can find information about the compensation of our named executive officers in the section entitled, “Executive Compensation” and about Proposal 2 in the section entitled, “Information about Proposal 2” of this Proxy Statement.

New Jersey law and Selective’s By-Laws govern the vote on Proposal 2, on which you may:

Assuming a quorum is present, Proposal 2 will pass if approved by an affirmative vote of a majority of the votes cast at the Annual Meeting. Abstentions and broker non-votes will not be taken into account in determining whether the proposal has received the requisite number of affirmative votes consistent with New Jersey law and the SEC’s proxy rules.

THE BOARD RECOMMENDS THAT YOU VOTE “FOR” A STOCKHOLDERS’ ADVISORY VOTE ON THE COMPENSATIONAPPROVAL OF OUR NAMED EXECUTIVE OFFICERS TO BE HELDTHE AMENDMENT AND RESTATEMENT OF THE SELECTIVE INSURANCE GROUP, INC. 2014 OMNIBUS STOCK PLAN.

You can find information about the Selective Insurance Group, Inc. 2014 Omnibus Stock Plan (the “Omnibus Stock Plan”) in the section entitled, “Information about Proposal 3” of this Proxy StatementEVERY YEAR..

New Jersey law and Selective’s By-Laws govern the vote on Proposal 3, on which you may:

Assuming a quorum is present, the Proposal 3 selection that receives the mostwill pass if approved by an affirmative vote of a majority of votes cast will be deemedat the stockholders’ selection.Annual Meeting. Abstentions and broker non-votes will not be taken into account in determining whether the outcomeproposal has received the requisite number of the voteaffirmative votes consistent with New Jersey law and the SEC’s proxy rules.

THE BOARD RECOMMENDS THAT YOU VOTE “FOR” THE RATIFICATION OF THE APPOINTMENT OF KPMG LLP AS OUR INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM FOR THE FISCAL YEAR ENDING DECEMBER 31, 2017.2018.

You can find information about Selective’s relationship with KPMG LLP in the section entitled, “Information about Proposal 4” of this Proxy Statement.

New Jersey law and Selective’s By-Laws govern the vote on Proposal 4, on which you may:

Assuming a quorum is present, Proposal 4 will pass if it receives an affirmative vote of a majority of the votes cast at the Annual Meeting. Abstentions will not be counted as votes cast and will not be taken into account in determining whether the proposal has received the requisite number of affirmative votes consistent with New Jersey law and the SEC’s proxy rules.

OTHER MATTERS TO COME BEFORE THE ANNUAL MEETING

The Board of Directors is unaware of any other business to be presented for a vote at the Annual Meeting. If any other matters are properly presented for a vote, the individuals named as proxies will have discretionary authority to vote on such matters according to their best judgment to the extent permitted by applicable law and NASDAQ Stock Market (“NASDAQ”) and SEC rules and regulations.

The Chairman of the Annual Meeting may refuse to allow the presentation of a proposal or nominee for the Board of Directors if the proposal or nominee is not properly submitted. The requirements for submitting proposals and nominations for this year’s Annual Meeting are set forthdetailed in Selective’s By-Laws.

CAUTIONARY STATEMENTS REGARDING FORWARD-LOOKING INFORMATION

This Proxy Statement contains forward-looking statements within the meaning of federal securities laws. Forward-looking statements may be identified by words like “anticipate,” “expect,” “project,” “believe,” “plan,” “may,” “estimate,” “intend,” and other similar words. These forward-looking statements are based on our beliefs, assumptions, and estimates using information available to us at the time and are not intended to be guarantees of future events or performance. Factors that may cause actual results to differ materially from those contemplated by the statements in this Proxy Statement can be found in our most recent Annual Report on Form 10-K filed with the SEC and in the Quarterly Reports on Form 10-Q we have filed or will file with the SEC hereafter under the headings “Risk Factors” and “Forward-Looking Statements.”

You are cautioned not to place undue reliance on any of our forward-looking statements. We disclaim any intention or obligation to publicly update or revise any forward-looking statements, except as required by law. This cautionary statement applies to all forward-looking statements contained in this document.

VOTING AND PROXY PROCEDURE

HOW DO I VOTE?

You can vote four ways:

Timing is important, so please mail your proxy card promptly. We must receive it before the beginning of the Annual Meeting. If you do not give voting instructions on your signed and mailed proxy card, the named proxies will vote your shares FOR each of the director nominees, and FOR Proposals, 2, 3, and 4, and FOR the Board’s recommendation on Proposal 3.4. If any other matters requiring a vote arise during the meeting, the named

proxies will exercise their discretion in accordance withusing their best judgment to the extent permitted by applicable law and NASDAQ and SEC rules and regulations.

HOW DO I REVOKE MY PROXY OR CHANGE MY VOTING INSTRUCTIONS?

You may revoke your proxy at any time before the proxy is exercised at the Annual Meeting:Meeting by:

HOW WILL PROXIES BE VOTED IF I GIVE MY AUTHORIZATION?

If you: (i) properly execute your proxy card and return it to Selective; or (ii) submit your proxy by telephone or via the Internet, and do not subsequently revoke your proxy, your shares of common stock will be voted at the Annual Meeting in accordance withaccording to your instructions.

In the absence of voting instructions, the named proxies will vote your shares FOR each of the director nominees and FOR Proposals, 2, 3, and 4, and FOR the Board’s recommendation on Proposal 3.4. If other matters properly come before the Annual Meeting, the named proxies will vote on such matters in accordance withusing their best judgment to the extent permitted by applicable law and NASDAQ and SEC rules and regulations.

WHAT IF MY SHARES ARE NOT REGISTERED IN MY NAME?

If you are a beneficial owner of our stock, meaning that the Selective stock you own is held in the name of a bank, broker, or other nominee (commonly referred to as holding shares in “street name”), you should have received access to these proxy materials from your bank, broker, or other nominee by mail or e-mail with information on how to submit your voting instructions. Unless you provide voting instructions to your bank, broker, or other nominee, your shares will not be voted on the election of directors (Proposal 1); the advisory (non-binding) vote on the compensation of Selective’s named executive officers (Proposal 2); and the advisory (non-binding) vote onapproval of the frequencyamendment and

restatement of an advisory vote on the compensation of Selective’s named executive officersOmnibus Stock Plan (Proposal 3). In contrast, we believe brokers are permitted to vote uninstructed shares on the ratification of the appointment of our

independent registered public accounting firm (Proposal 4) and may choose to do so at their own discretion. Broker non-votes count toward a quorum, but otherwise do not affect the outcome of any proposal.

HOW WILL VOTES BE COUNTED?

The inspectors of election appointed for the Annual Meeting by the Board of Directors will separately tabulate affirmative and negative votes, abstentions, and broker non-votes. Shares represented by proxies that reflect abstentions and broker non-votes are counted for determining whether there is a quorum. We believe brokers may exercise their discretionary voting power for Proposal 4.

For Proposal 1, abstentions and broker non-votes will not be considered in determining whether director nominees have received more “for” votes than “against” votes. Approval of Proposal 2 and Proposal 3 requires the affirmative vote of a majority of votes cast at the Annual Meeting. Abstentions and broker non-votes have no effect ondo not affect Proposal 2. The selection in Proposal 3 that receives the most votes cast at the Annual Meeting will be deemed the stockholders’ selection. Abstentions2 and broker non-votes have no effect on Proposal 3. Approval of Proposal 4 requires the affirmative vote of a majority of votes cast at the Annual Meeting. Abstentions have no effect ondo not affect Proposal 4.

IMPORTANT NOTICE REGARDING AVAILABILITY OF PROXY MATERIALS FOR THE ANNUAL MEETING OF STOCKHOLDERS TO BE HELD ON WEDNESDAY, APRIL 26, 2017MAY 2, 2018

This Proxy Statement and our 20162017 Annual Report to Stockholders are available on
Selective’s Internet website atwww.Selective.com.

INFORMATION ABOUT PROPOSAL 1

Election of Directors

Under our By-Laws, directors in uncontested elections must be elected by a majority of votes cast. A majority exists when the number of votes cast “for” a director nominee exceeds the number of votes cast “against” that nominee. For more information on our majority voting policy, please see the section entitled, “Corporate Governance – Majority Voting for Directors in Uncontested Elections” of this Proxy Statement.

All directors stand for election for a one-year term. In all cases, each director will hold office until a successor has been elected and qualified, or until the director’s earlier resignation or removal.

Selective’s Board of Directors currently has 1213 members. Pursuant toUnder Selective’s Amended and Restated Certificate of Incorporation and By-Laws, Selective may have a minimum of seven and a maximum of 20 directors. By majority vote, the Board of Directors may set the number of directors within this range at any time.

Process for Review and Nomination of Director Candidates

The Corporate Governance and Nominating Committee is responsible for the review and nomination of candidates to the Board of Directors. The Corporate Governance and Nominating Committee reviews all director candidates for possible nomination and election to the Board and seeks such candidates from any source, including:

Any stockholder proposing one or more Board candidates must submit in writing all information required to be disclosed pursuant to Regulation 14A under the Securities Exchange Act of 1934, as amended (the “Exchange Act”) requires in a solicitation of proxies for the election of a director to the Chairperson of the Corporate Governance and Nominating Committee, c/o Corporate Secretary, Selective Insurance Group, Inc., 40 Wantage Avenue, Branchville, New Jersey 07890.

Regardless of source, the Corporate Governance and Nominating Committee evaluates all candidates based on, among other things, the following standards:

Although Selective has no formal diversity policy, our Corporate Governance Guidelines provide that the composition of the Board should encompass a broad range of skills, expertise, industry knowledge, and diversity of opinion. Accordingly, diversity of thought, experience, gender, race, and ethnic background are greatly considered in the director evaluation process.

Director Nominees

No family relationships exist between any of Selective’s current directors, executive officers, and persons nominated by Selective to become a director.

The Board has ratified the Corporate Governance and Nominating Committee’s nomination of the 1213 directors listed below to stand for election at the 20172018 Annual Meeting for terms expiring at the 20182019 Annual Meeting or until a successor has been duly elected and qualified. A. David Brown will be retiring at the 2018 Annual Meeting and the Board will be reduced to 13 members.

All 1213 nominees have consented to beingbe named in this Proxy Statement and to servingserve if elected. The Board does not know of any reason why any of these nomineesnominee would decline or be unable to serve if elected. If a nominee becomes unavailable or unable to serve before the Annual Meeting, the Board can either reduce its size or designate a substitute nominee. If the Board designates a substitute nominee, proxies that would have been cast for the original nominee will be cast for the substitute nominee unless contrary instructions are given to the contrary.given.

Board Recommendation

THE BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS THAT STOCKHOLDERS VOTE “FOR” THE NOMINEES TO THE BOARD OF DIRECTORS.

SECURITY OWNERSHIP OF MANAGEMENT AND CERTAIN BENEFICIAL OWNERS

Security Ownership of Management

The following table shows as of February 21, 2017:19, 2018:

* Less than 1% of the common stock outstanding.

⁽¹⁾ No directors or executive officers hold Selective common stock in margin accounts or have Selective common stock pledged for a loan or stock purchase.

⁽²⁾ Ms. Mitchell was appointed to Selective’s Board effective as of March 9, 2018.

⁽³⁾Includes: (i) 42,80343,361 shares held by Chas. E. Rue & Son, Inc. t/a Rue Insurance (“Rue Insurance”), an independent insurance agency of which Mr. Rue is Chairman and owner of more than a 10% equity interest (see the section entitled, “Transactions with Related Persons” of this Proxy Statement for more information); and (ii) 5,226 shares held by Mr. Rue’s wife.

⁽³⁾⁽⁴⁾ Includes 117118 shares held in custody for, and 103104 shares held by, a daughter of Mr. Thebault.

Security Ownership of Certain Beneficial Owners

The following table lists the only persons or groups known to Selective knows to be the beneficial owners of more than 5% of any class of Selective’s voting securities as of December 31, 2016,2017, based on Schedules 13G/A filed by the beneficial owners on January 27, 2017, February 13, 2017,19, 2018, February 9, 2017,2018, and February 14, 2017,9, 2018, respectively, with the SEC.

EXECUTIVE OFFICERS

The names of our executive officers and their ages, positions, and biographies are set forth below. Our executive officers are appointed by and serve at the discretion of our board of directors.

TRANSACTIONS WITH RELATED PERSONS

Director William M. Rue is Chairman, and owns more than 10%, of the equity of Rue Insurance, an independent insurance agency that has been appointed to do business on behalf of Selective’s insurance subsidiaries since 1928. Mr. Rue has two children who are employed by Rue Insurance: a daughter; and a son, who also serves as president of the agency. The appointment of Rue Insurance as an independent agent was made on similar terms and conditions as other agents of Selective’s insurance subsidiaries and includes the right to: (i) receive commissions for policies placed; and (ii) participate in the Amended and Restated Selective Insurance Group, Inc. Stock Purchase Plan for Independent Insurance Agencies (2010), Amended and Restated as of February 1, 2017.

In 2016,2017, Rue Insurance placed insurance policies for its customers and itself with Selective’s insurance subsidiaries and earned $2.8$2.2 million of commissions on direct premiums written of $10.4$11.1 million. Selective expects the relationship with Rue Insurance will continue in 2017.2018. For additional information regarding Mr. Rue, see the section entitled, “Information about Proposal 1 – Director Nominees” of this Proxy Statement.

Review, Approval, or Ratification of Transactions with Related Persons

Selective has a written Related Person Transactions Policy and Procedures (the “Related Person Policy”).

The Related Person Policy defines “Related Person Transactions” as any transaction, arrangement, or relationship in which Selective or any of its subsidiaries was, is, or will be a participant and the amount involved exceeds $20,000, and in which any “Related Person” had, has, or will have a direct or indirect interest. A “Related Person” under the Related Person Policy is generally: (i) any director, executive officer, or nominee to become director of Selective or an immediate family member of such person; (ii) a beneficial owner of more than 5% of Selective’s common stock or an immediate family member of such beneficial owner; and (iii) any firm, corporation, or other entity in which any person included in (i) or (ii) is employed or is a general partner or principal or in a similar position or in which such person has a 5% or greater beneficial ownership interest in Selective’s common stock.

Under the Related Person Policy, the Audit Committee (or Chairperson of the Audit Committee if between meetings) must approve Related Person Transactions. In its review, the Audit Committee considers all available relevant facts and circumstances of the proposed transaction, including: (i) the benefits to Selective; (ii) the impact on a director’s independence; (iii) the availability of other sources for comparable products and services; (iv) the terms of the transaction; and (v) the terms available to unrelated third parties or to employees generally. No Audit Committee member may participate in any review, consideration, or approval of any Related Person Transaction in which such

director or any of his or her immediate family members is the Related Person. The Audit Committee only approves those Related Person Transactions that it considers are in, or not inconsistent with, the best interests of Selective and its stockholders.

Director Independence

The Board of Directors has determined that all directors are independent under NASDAQ and SEC rules and regulations – except Messrs. Murphy and Rue.¹ In making its determination, the Board considered disclosures made by the directors related to various transactions, relationships, or arrangements that relate toinvolving Selective. Disclosures by the directors. For a description of the transactions, relationships, or arrangements related to Mr. Rue, see the section entitled, “Transactions with Related Persons.”following two directors required analysis:

When the Board determined the independence of Ronald L. O’Kelley it: In determining that Mr. O’Kelley is an independent director, the Board considered that two of his daughters and a son-in-law are employed with companies with which we do business.² As: (i) Mr. O’Kelley, his daughters, and son-in-law have no involvement in such transactions; (ii) the relationships with such companies pre-date the employment of his daughters with these companies and his daughter’s marriage to the son-in-law; and (iii) the amount of revenue involved in such arrangements is immaterial to the business of such entities, the Board determined that these arrangements do not affect Mr. O’Kelley’s independence under applicable NASDAQ and SEC rules and regulations.

A daughter of Mr. O’Kelley is Vice President for Quality Improvement & Compliance with Liberty Mutual Insurance Company (“Liberty Mutual”). One of our insurance subsidiaries has had an agreement since 2011 with a Liberty Mutual subsidiary that provides long-term disability insurance and long-term, short-term and related disability and leave management services to Selective and its employees. The aggregate annual premium Selective pays for these services is approximately $653,000, including approximately $257,000 of contributions by Selective’s employees for supplemental disability insurance coverage. Liberty Mutual’s aggregate revenues for 2016 were approximately $38.3 billion. Mr. O’Kelley’s daughter has no involvement with Selective’s insurance program with Liberty Mutual. In 2014, another daughter of Mr. O’Kelley became Managing Director of State Street Global Markets, LLC, a subsidiary of State Street Corporation (“State Street”). Selective paid State Street Bank and Trust Company, a subsidiary of State Street, approximately $185,000 in 2016 for security custodial and banking services, and approximately $305,000 to State Street Global Exchange U.S. LLC, another subsidiary of State Street, for use of a software system. State Street’s aggregate revenues for 2016 were approximately $10.2 billion. Mr. O’Kelley’s daughter has no involvement with these transactions. This same daughter is married to the Vice President, Executive Relationship Manager – US / Canada of American International Group, Inc. (“AIG”). AIG is a capital contributor to Lloyd’s Syndicate 1414, which participated on certain layers of our 2016 casualty reinsurance treaty. In addition to Syndicate 1414, we also ceded premium to American International Reinsurance Company (“AIRCO”), an AIG subsidiary. AIRCO is a participant on several layers of our property catastrophe reinsurance program. The total ceded premium for 2016 associated with Syndicate 1414 and AIRCO was $121,306. In addition, National Union Fire Insurance Company of Pittsburgh (“National Union”), a subsidiary of AIG, participated in our 2008 national workers compensation reinsurance pool quota share treaty. In 2016, we received approximately $23,000 in recovered net losses under that treaty from National Union. Neither Mr. O’Kelley’s daughter, nor his son-in-law, has any involvement with these payments under these treaties.

When the Board determined the independence of John S. Scheid it: In determining that Mr. Scheid is an independent director, the Board considered that we currently provide insurance coverage to the Messmer Catholic Schools (“Messmer”), a charitable organization that supports Wisconsin independent schools of which Mr. Scheid has been a director since 2013 and chairman since 2016. We provide the insurance coverage to Messmer on terms no more favorable than to other third parties. AsAs: (i) Mr. Scheid has no involvement in the securing of such insurance policy coverage, andcoverage; (ii) his relationship with Messmer pre-dates his membership on our Board; and (iii) our business relationship with Messmer pre-dates Mr. Scheid’s appointment to Selective’s Board, the Board determined that this arrangement does not affect Mr. Scheid’s independence under applicable NASDAQ and SEC rules and regulations.

SECTION 16(a) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE

Section 16(a) of the Exchange Act requires Selective’s directors and executive officers, and persons who beneficially own more than 10% of a registered class of Selective’s equity securities, to file with the SEC initial reports of beneficial ownership and reports of changes in beneficial ownership of Selective’s equity securities. Directors, executive officers, and greater than 10% stockholders are required by SEC regulations to furnish Selective with copies of all Section 16(a) Exchange Act reports they file. Based solely on Selective’s review of the provided copies of Forms 3, 4, and 5, or written representations from certain reporting persons that Forms 5 were not required, Selective believes that all directors, executive officers, and greater than 10% beneficial owners timely met all reporting requirements under Section 16(a) for the fiscal year ended December 31, 2016.2017.

____________________________

¹For a description of the transactions, relationships, or arrangements related to Mr. Rue, see the section entitled, “Transactions with Related Persons.”

²A daughter of Mr. O’Kelley is Vice President for Quality Improvement & Compliance with Liberty Mutual Insurance Company (“Liberty Mutual”). One of our insurance subsidiaries has had an agreement since 2011 with a Liberty Mutual subsidiary that provides long-term disability insurance and long-term, short-term and related disability and leave management services to Selective and its employees. The aggregate annual premium Selective pays for these services is approximately $688,000, including approximately $280,000 of contributions by Selective’s employees for supplemental disability insurance coverage. Liberty Mutual’s aggregate revenues for 2017 were approximately $39.4 billion. In 2014, another daughter of Mr. O’Kelley became Managing Director of State Street Global Markets, LLC, a subsidiary of State Street Corporation (“State Street”). Selective paid State Street Bank and Trust Company, a subsidiary of State Street, approximately $306,000 in 2017 for security custodial and banking services. State Street’s aggregate revenues for 2017 were approximately $11.2 billion. Mr. O’Kelley’s daughter has no involvement with these transactions. This same daughter is married to the Vice President, Executive Relationship Manager – US / Canada of American International Group, Inc. (“AIG”). In 2017, we ceded approximately $155,000 of premium to American International Reinsurance Company (“AIRCO”), an AIG subsidiary. AIRCO is a participant on several layers of our property catastrophe reinsurance program. In addition, National Union Fire Insurance Company of Pittsburgh (“National Union”), a subsidiary of AIG, participated in our 2008 national workers compensation reinsurance pool quota share treaty. In 2017, we received approximately $26,000 in recovered net losses under that treaty from National Union.

CORPORATE GOVERNANCE

Corporate Governance Guidelines

Selective has established Corporate Governance Guidelines that are available for review in the Corporate Governance subsection of the Investors section of Selective’s website,www.Selective.com. These guidelines provide for the election of a Lead Independent Director, who supervises meetings of Selective’s independent directors that occur at least semi-annually. Paul D. BauerJ. Brian Thebault is presently the Lead Independent Director. In 2016,2017, Selective’s independent directors met four times outside the presence of management.

All members of the Audit Committee, the Corporate Governance and Nominating Committee, and the Salary and Employee Benefits Committee are independent directors under NASDAQ and SEC rules and regulations.

Majority Voting for Directors in Uncontested Elections

Selective’s Board of Directors has adopted a majority voting policy for uncontested elections of incumbent directors. To be re-elected to the Board, an incumbent director must receive a majority vote by stockholders, unless the Corporate Secretary determines that the number of nominees exceeds the number of directors to be elected. If any incumbent director nominee receives less than a majority of votes cast, the following process must be followed:

Stock Ownership and Retention Requirements and Hedging

Selective believes that stock ownership by directors and management encourages the enhancement of stockholder value. Selective’s stock ownership guidelines, which are based on prevailing corporate governance practices, are included in our Corporate Governance Guidelines, which are available in the Corporate Governance subsection of the Investors section ofwww.Selective.com.

The following table shows the common stock ownership guidelines for our directors and certain officers. Each director must meet the guidelines within five years of his or her first election to the Board and each officer must meet the guidelines on the later of March 31, 2015, or within six years of attaining the specified position:

In calculating ownership under the guidelines:

Officers are required to retain direct ownership of at least 75% of the shares acquired under an equity award granted under any companySelective equity compensation plan or other written compensatory arrangements that pays out after July 27, 2011, net of taxes and transaction costs, unless the officer has met his or her applicable stock ownership requirement as set forth above. Our directors and officers have met, or are on track to meet, the required ownership guidelines.

Selective officers, directors, and employees are prohibited from entering into hedging or monetization transactions, such as zero-cost collars and forward sale contracts, involving Selective common stock. These transactions would allow an officer, director, or employee to hold Selective securities without the full risks and rewards of ownership. When that occurs, the officer, director, or employee may no longer have the same objectives as Selective’s other stockholders. For this reason, such hedging or monetization transactions are prohibited.

BOARD MEETINGS AND COMMITTEES

The Board of Directors held sixfive meetings in 2016.2017. All directors attended 75% or more of the aggregate of the meetings of the Board of Directors and their respective committees for the period during which they were directors in 2016.2017. Selective expects all directors to attend the Annual Meeting, and all directors serving on the Board on May 4, 2016April 26, 2017, attended the 20162017 Annual Meeting.

The Board has five standing committees:

The following tables provide information on each of the five committees:

RISK MANAGEMENT

Board Leadership Structure

Our two principal Board leadership positions are: (i) Chairman of the Board; and (ii) Lead Independent Director. The Lead Independent Director position is defined in our Corporate Governance Guidelines and is very similar to the role of an independent non-executive Chairman. We believe that our current Board leadership structure provides effective oversight of management and strong leadership of the independent directors. The Corporate Governance and Nominating Committee also conducts annual self-assessments and evaluates their effectiveness of the Board and its various committees and evaluates their effectiveness.committees.

The Lead Independent Director is responsible for coordinating the activities of the independent directors and performing various other duties. The Lead Independent Director’s general authority and responsibilities are as follows:

Our Lead Independent Director is Paul D. Bauer,J. Brian Thebault, who was appointed in 20132017 and has served on our Board since 1998.1996. Our Chairman of the Board since 2000 is Gregory E. Murphy, our Chief Executive Officer. At this time, we believe there is a benefit to having Mr. Murphy serve as both Chairman of the Board and Chief Executive Officer. As the executive with primary responsibility for managing our day-to-day operations, he is best positioned to chair regular Board meetings and to ensure that key business issues and risks are brought to the attention of our Board or its appropriate committee.

Enterprise Risk Management

Our Board overseesAs a property and casualty holding company, our overall enterprise risk management process, which follows, among other things,insurance subsidiaries are in the 2004Enterprise Risk Management – Integrated Frameworkbusiness of the Treadway Commission of the Committee of Sponsoring Organizations.assuming risk. We begancategorize our formal enterprise risk management process over 16 years ago. Its key components include identification and measurement, reporting, and monitoring of major risks andinto the development of appropriate responses.

In addition to the Board’s oversight of overall risk and the enterprise risk management process, various committees of the Board oversee risks specific to their areas of supervision and report their activities and findings to the Board:following five broad categories:

Our internal control framework operates with the three lines of defense model. The Chief Executive Officer, whofirst line of defense consists of individual functions that deliberately assume risks and own and manage our risk on a day-to-day and business operational basis. The second line of defense is the executive ultimately responsible for risk oversight and also supports the first line to understand and manage risk. A dedicated risk team led by the Chief Risk Officer is responsible for this second line and reports to the Chief Financial Officer. The third line of defense is our Internal Audit team, which provides independent, objective assurance as to the assessment of the adequacy and effectiveness of our internal control environment. It also coordinates risk-based audits and compliance reviews and other specific initiatives to evaluate and address risk within targeted areas of our business.

We use Enterprise Risk Management (“ERM”) as part of our governance and control process to take an entity-wide view of our major risks and their impact. Our ERM framework is designed to identify, measure, report, and monitor our major risks and develop appropriate responses to support successful execution of our business strategy.

Our Board oversees our ERM process and sets our overall risk appetite, while the Executive Risk Committee areis responsible for the holistic evaluation and supervision of our aggregated risk profile and determination of future risk management actions in support of our overall risk appetite. In addition to the Board’s oversight of our overall risk and the ERM process, various committees of the Board oversee risks specific to their areas of supervision and report their activities and findings to the full Board. The Executive Risk Committee uses various management committees for detailed analysis and management of specific major risks. The Executive Risk Committee primarily consists of the Chief Executive Officer, his direct reports and key operational leaders, each of whom is responsible for management of risk in his or her respective area, and athe Chief Risk Officer, who reportsOfficer. 

In addition to the Chief Financial Officer.various committees and the governance process over ERM, we believe that high-quality and effective ERM is best achieved when it is a shared cultural value throughout the organization. We consider ERM to be a key process that is the responsibility of every employee. We have developed and use tools and processes that we believe support a culture of risk management and create a robust framework of ERM within our organization. In addition, our compensation policies and practices as well as our governance framework, including our Board’s leadership structure, are designed to support our overall risk appetite and strategy. We believe that our ERM processes and practices help us to identify potential events that may affect us, quantify, evaluate and manage the risks to which we are exposed, and provide reasonable assurance regarding the achievement of our objectives.

We rely on quantitative and qualitative tools to identify, prioritize, and manage our major risks including proprietary and third-party computer modeling as well as various other analyses. The Executive Risk Committee meets at least quarterly and reviews and discusses various aspects and the interrelation of Selective’s major risks, including, but not limited to, capital modeling results, capital adequacy, risk metrics, emerging risks, and sensitivity analysis. The Chief Risk Officer reports on the Executive Risk CommitteeCommittee’s activities, analyses, and findings to the Board or the appropriate Board committee, and provides a structured forum for consideration of risks that either may preclude us from achieving our strategic goals or may provide potential opportunities to be pursued.quarterly update on certain risk metrics. Consistent with the requirements of state insurance regulators, our insurance subsidiaries annually file their Own Risk and Solvency Assessment report, which is an internal assessment of our insurance subsidiaries’ solvency. The Chief Risk Officer develops the report in coordination with members of the Executive Risk Committee, and the report is provided to the Board. The Chief Risk Officer reports on the Executive Risk Committee’s activities, analyses, and findings to the Board or the appropriate Board committee, and provides a quarterly update on certain risk metrics.

In overseeing the analysis and management of risk, the Board regularly receives, analyzes, and makes due inquiry regarding reports from its various committees and management. We believe our Board’s leadership structure and the Lead Independent Director position supports the Board’s ability to evaluate and manage risk effectively.

Compensation Risk Assessment

We do not believe that risks arising from our compensation policies and practices are reasonably likely to have a material adverse effect on our operations or results. To make this determination, we conducted an internal risk assessment of our compensation policies and programs. In performing the risk assessment, we considered that we operate in an industry based almost entirely on managing risk, and we believe that our risk management function is robust. We also analyzed the issues set forthdetailed in the proxy disclosure rules and gave close consideration to the following points:

We also considered our overall compensation program, including:

We also considered that, from time-to-time, we adjust our compensation programs from time-to-time as risks in our industry and reportable segments change to help ensure that compensation and risk remain appropriately aligned.

Finally, we reviewed our various risk mitigation strategies in the compensation context, including:

STOCKHOLDER COMMUNICATIONS

Stockholders may send communications to the Board of Directors or individual directors in writing c/o Corporate Secretary, Selective Insurance Group, Inc., 40 Wantage Avenue, Branchville, New Jersey 07890 or by e-mail to corporate.governance@Selective.com. The Board has instructed the Corporate Secretary to use discretion in forwarding unsolicited advertisements, invitations to conferences, or other promotional material.

CODE OF CONDUCT

Selective has adopted a Code of Conduct that sets outprovides guiding business ethics principles for all Selective personnel, including executive officers. The Code of Conduct can be foundis located in the Corporate Governance subsection of the Investors section of Selective’s website,www.Selective.com. Any amendment to or waiver from the provisions of the Code of Conduct that applies to Selective’s senior executive officers will be posted to Selective’s website.

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³Our statutory combined ratio is similar to our GAAP combined ratio, except that costs related to the successful acquisition of insurance contracts are deferred and amortized over the life of the insurance policies under GAAP, while these costs are expensed under statutory accounting principles, and the expense ratio for GAAP is calculated in relation to net premiums earned, compared to net premiums written under statutory accounting principles. Our combined ratio was 0.9% lower under statutory accounting principles in 2017 than under GAAP.

EXECUTIVE COMPENSATION

COMPENSATION DISCUSSION AND ANALYSIS

EXECUTIVE SUMMARY

Purpose of Compensation Discussion and Analysis

This Compensation Discussion and Analysis provides our stockholders information about our 20162017 compensation program for the following named executive officers (“NEOs”):

• Gregory E. Murphy, Chairman and Chief Executive Officer;
  
  
• Dale A. Thatcher, former Executive Vice President, Chief Financial Officer and Treasurer;
  
  
• John J. Marchioni, President and Chief Operating Officer; and
  
  
• Michael H. Lanza, Executive Vice President, General Counsel and Chief Compliance Officer.

In 2014 in connection with succession planning and Mr. Marchioni’s appointment as President and Chief Operating Officer, certain reporting relationships were reorganized and Messrs. Thatcher, Marchioni, and Lanza became Mr. Murphy’s only direct reports.

Effective December 31, 2014, our Board of Directors designated the CEO and his three direct reports as Selective’s only “executive officers” under Section 16 of the Exchange Act. AfterSince January 1, 2017, following Mr. Thatcher’s retirement on September 1, 2016, Mark A. Wilcox was electedWilcox’s election as Executive Vice President and Chief Financial Officer, effective January 1, 2017.Messrs. Wilcox, Marchioni, and Lanza were Mr. Murphy’s only direct reports.

Consideration of 20162017 Say-on-Pay Advisory Vote Results

As they have done each year sinceSince our initial say-on-pay proposal in 2011, our stockholders have overwhelmingly supported our compensation decisions. At our 20162017 Annual Meeting of Stockholders, our stockholders once again voted on an advisory basis to approve the compensation of our NEOs, with over 96% of votes cast voting in favor of the proposal. We considered these results and, in light of our stockholders’ indicated support for our compensation decisions, did not make any material changes in our 20162017 compensation decisions and policies. We have continued to maintain our emphasis on providing a combination of both short-short-term and long-term incentive compensation, which we believe rewards our executives for delivering stockholder value.

20162017 Corporate Performance Highlights

In 2016,During 2017, we deliveredmade excellent progress executing our Strategic Business Plan Framework that focuses on our five strategic imperatives:

To that end, in 2017, we followed through on an aggressive business plan that significantly outperformed the expected industry statutory combined ratio¹⁴ by approximately nineover 12 points. We generated a non-generally accepted accounting principles (“GAAP”) operating return on equity²⁵ (“OROE”) of 11.0%11.4%, which was: (i) 1.1 points above our budgeted projection for the year, and (ii) above the A.M. Best Company expected 20162017 industry after-tax return on surplus of 6.0%3.6%. For the second year in a row, weWe also produced a new company record low statutoryan impressive GAAP combined ratio of 91.8% (89.0%93.3% (90.4% excluding catastrophe losses), or 92.4% on a statutory basis, which was better than our target, and which compares very favorably to A.M. Best Company’s expected 20162017 industry statutory combined ratio of 100.7%105.1% with 4.98.8 points of catastrophe losses.⁶

STATUTORYGAAP COMBINED RATIO

In addition to the significantour strong combined ratio improvements,results, other key accomplishments for 20162017 included the following:

• Our stock price ended 2016 at $43.05, an increase of 28% from year-end 2015;
  
  
• Our total shareholder return (“TSR”), which is calculated using the change in the value of Selective’s common stock price and reinvested dividends, was 30.4%, compared to the Standard & Poor’s 500 Index total return of 12.0%;
  
  
• Compared to 2015, we increased overall NPW by 8%, which was three times the A.M. Best Company projected industry growth rate of 3%;
  
  
• Compared to 2015, commercial lines NPW increased 9%, which was nine times the A.M. Best Company projected industry commercial growth rate of 1%;
  
  
• We achieved 2.9% in overall standard lines renewal pure price increases, with 2.6% in standard commercial lines and 4.8% in standard personal lines. We have successfully achieved 28 consecutive

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¹⁴The statutory combined ratio is the property and casualty insurance industry standard measure of underwriting profitability. A statutory combined ratio under 100% generally indicates that an insurance company is generating an underwriting profit and a statutory combined ratio over 100% generally indicates that an insurance company is generating an underwriting loss.

²⁵Operating return on equity is a non-GAAP (generally accepted accounting principles) financial measure and is calculated as follows: operating income from the performance period / (stockholders’ equity at the beginning of the performance period + stockholders’ equity at the end of the year) / 2. Operating income differs from net income by the exclusion of realized gains or losses on investments, the deferred tax write-off recognized in 2017 related to the enactment of federal tax reform, and the results of discontinued operations. It is used as an important financial measure by management, analysts, and investors, because the realization of investment gains and losses on sales in any given period is largely discretionary as to timing. In addition, theseThese investment gains and losses, as well as other-than-temporary investment impairments that are charged to earnings, the deferred tax write-off, and the results of discontinued operations, could distort the analysis of trends. Operating income is not intended as a substitute for net income prepared in accordance with generally accepted accounting principles.GAAP.

quarters of positive standard commercial lines renewal pure price increases that outperformed the Willis Towers Watson Commercial Lines Insurance Pricing Survey by approximately 1,700 basis points, while maintaining high retention rates. Our excess and surplus lines achieved 4.9% in price increases;

 

• Strong retention rates of 83% for standard commercial lines and 82% for standard personal lines;
  
  

• ⁶We achieved significant progress inoften refer to our workers compensation line of business, improving the 2016 accident year statutory combined ratio by nearly five points, through changes in underwriting mix and claims handling improvements;
  
  

• We receivedother statutory measures as they relate to our performance versus the industry as a score of 8.76 out of 10 on an independently administered agency satisfaction survey;
  
  
• We completedwhole, as industry statutory financial metrics are readily available whereas the assessment of our omni-channel customer service and communication capabilities and created an implementation plan, and improved our mobile applications;
  
  
• We successfully renewed our 2016 property reinsurance program, including the renewal of the collateralized catastrophe layer for a two-year term;
  
  
• We executed our expense reduction initiative resulting in maintaining overall controllable expenses below budgeted target;
  
  
• We successfully implemented initial phases of our plan to expand our standard commercial lines into Arizona and New Hampshire; and
  
  
• Compared to 2015, we increased after-tax investment income by 5%, which is 2% below our original 2016 guidance. We hired and on-boarded new core fixed income managers and a high-yield money manager, and remained focused on diversifying our portfolio and building out our alternative risk investment strategy.

In the third quarter of 2016,2017, A.M. Best Company reaffirmed our “A (Excellent)” (with a “stable” outlook) financial strength rating, citing our excellent level of risk-adjusted capitalization, targeted regional markets with strong distribution partner relationships,operating performance, and consistently profitable operating performance.high policy retention rates across our standard lines of business. During the fourth quarter of 2016,2017, S&P Global Ratings (“S&P”) upgradedreaffirmed our financial strength rating toof “A” from “A-” with(with a stable outlook.“stable” outlook). This rating changereaffirmation reflects S&P’s view of our strong business risk profile and strong financial risk profile, built on our strong competitive position and very strong capital and earnings. In addition, ourOur stable outlook also reflects S&P’s expectation that we will sustain our strong competitive position and operating performance. Fitch Ratings reaffirmed our “A+” rating (with a “stable” outlook) in the thirdsecond quarter of 20162017 citing our strong financial performance and capitalization with growth in stockholders’ equity, as well as a strong competitive position and diversified underwriting. Moody’s Investors Service’s reaffirmed of our “A2” rating (with a “stable” outlook) in the second quarter of 2015.2017, referencing our solid regional franchise, established independent agency support, solid risk-adjusted capitalization, strong invested asset quality, and good underwriting profitability.

CEO Pay for Performance

The following table sets forthpresents Mr. Murphy’s compensation over the past five years, its dollar and percentage change from the prior year, and Selective’s TSR for the one-, three-, and five-year periods. We believe the table demonstrates the correlation between changes in Selective’s TSR and Mr. Murphy’s compensation, which is consistent with, and reflects our philosophy of, aligning compensation with the interests of stockholders and long-term performance.

*For 2017, also includes discretionary bonus.

* Note: The value of “Indexed Total Shareholder Return (TSR)” at the end of each yearyear-end shown above is based on the then-current value of an assumed $100 investment in Selective stock on December 31, 2011,2012, and reflects changes in stock price and assumes that dividends paid to stockholders are reinvested in Selective stock.

Role and Function of the Salary and Employee Benefits Committee

The Salary and Employee Benefits Committee of the Board of Directors (“SEBC”) oversees executive compensation. The SEBC retains an independent executive compensation consultant, Exequity LLP (“Compensation Consultant”), to advise it on executive and director compensation issues. Representatives of the Compensation Consultant:Consultant representatives: (i) review senior executive compensation; (ii) prepare comprehensive competitive compensation analyses for our NEOs; (iii) provide counsel to the SEBC regarding award metrics, components of compensation, amounts allocated to those components, and the total compensation opportunities for the CEO and the other NEOs; and (iv) attend SEBC meetings, as requested by the SEBC.

The Compensation Consultant has advised the SEBC since 2007. The Compensation Consultant’s only business with Selective is to advise the SEBC on executive and director compensation matters. In light of the factors set forthcontained in SEC and NASDAQ rules, the SEBC has determined that the Compensation Consultant’s services do not raise a conflict of interest.

The SEBC has full autonomy in determining executive compensation and makes all final determinations regardingabout CEO and other NEO compensation, incorporating information provided by the Compensation Consultant. The CEO also makes compensation recommendations to the SEBC regardingon the NEOs based on the CEO’s assessment of each individual’sNEO’s annual performance, contributions to Selective, and potential for advancement. In making its compensation decisions, the SEBC also considers pre-established guidelines regarding award amounts and pay levels at companies with which we compete for business and executive talent (discussed below), Selective’s performance, executive retention issues, internal compensation parity, and advancement in abilities, experience, and responsibilities. The Executive Vice President, and Chief Human Resources Officer and certain other human resources officers, as part of

their usual duties and responsibilities, provide the SEBC with information regarding the overall design of the executive compensation program and its individual components.

DESIGN CONSIDERATIONS OF SELECTIVE’S EXECUTIVE COMPENSATION PROGRAM

Selective’s Executive Compensation Program Objective and Philosophy

The objective of our executive compensation program is to attract, retain, and motivate executive talent who will drive the organization’s success by creating stockholder value through profitable growth and effective risk management.

Our compensation program is designed to: (i) reward the achievement of our business objectives; (ii) recognize our executives for their individual achievements by motivating them to execute their duties and responsibilities in a manner not reasonably likely to have a material adverse effect on our operations or results; and (iii) promote long-term relationships with our executives. We aim to provide these highly talented and qualified executives with compensation that is competitive, both in value and mix of short-term and long-term cash and stock-based components, with the total compensation paid by other property and casualty insurance companies and other companies with which we compete for executive talent.

Consistent with our pay-for-performance philosophy, we link our annual incentive awards to pre-determined financial and strategic business objectives and individual contributions, and we align our long-term compensation to the achievement of pre-determined specific performance measures that impact the generation of long-term stockholder value.

Compensation Elements

Our executive compensation program generally consists of the following key elements selected to: (i) address the market-based realities of attracting and retaining quality executives; and (ii) align the executives’ compensation with our stockholders’ interests:

• Base salary;
  
  
• Annual cash incentive program (“ACIP”) payments; and
  
  
• Long-term incentive program (“LTIP”) awards in the form of performance-based restricted stock units and performance-based cash incentive units.

Compensation Best Practices

Selective primarily uses the following compensation structures and practices:

• Fixed and variable compensation components;
  
  
• Issuances of performance-based equity and performance-based annual cash bonus awards to NEOs;
  
  
• Stock ownership and retention requirements;
  
  
• Limited perquisites; and
  
  
• Double triggers for cash and equity award payments upon a change in control under employment agreements.

Benchmarking

When making compensation decisions, the SEBC believes it is important to be informed of compensation practices at multiple comparator groups of publicly-traded companies and property and casualty insurance holding companies. The SEBC believes that:

• Benchmarking provides the SEBC with relevant information to make appropriate compensation decisions that will help attract, retain, and motivate the key talent required to drive company performance and long-term stockholder value;
  
  
• Measuring our compensation against practices from these two benchmark sources helps ensure that the SEBC has an ample and robust assessment of our competitive compensation posture; and

• Considering multiple market references offsets inaccuracies inherent in a single market data point and enhances the SEBC’s decisions by allowing it to rely on a more comprehensive set of market-competitive pay boundaries than just a single benchmark.

Accordingly, the SEBC receives from, and reviews with, the Compensation Consultant the following benchmarking information:

• Benchmarking analyses of base salaries, annual cash incentives, total cash compensation, long-term incentives, and total compensation we pay our NEOs compared to a proxy peer group; and
  
  
• Benchmark data provided by a third-party vendor for our NEOs against a group of 54 property and casualty insurance organizations, excluding Selective.

As one reference point in setting 20162017 target total compensation for the NEOs, in late 2015,2016, the Compensation Consultant furnished the SEBC with the most recent NEO compensation information available as of that time from two market reference sources as follows:

For purposes of re-evaluating its earlier 20162017 NEO compensation decisions and in establishing compensation parameters for 2017, in late 2016 and early 2017,2018, the SEBC reviewed the most recent NEO compensation information available as of that time from these two market reference sources.sources in late 2017 and early 2018.

Information for the Proxy Peers in the above table (collectively, the “Proxy Peer Group”) was obtained from proxy statements and other materials filed with the SEC. This information includes data on compensation components and analysis of the overall financial performance of the organizations in the group. We analyze our performance in relationcompared to them. The Proxy Peer Group is composed of organizations that provide similar products, have a similar geographic market scope, and compete with us for executive talent. The Property and Casualty Insurance Compensation Survey provides supplemental data from organizations of various sizes. This information is divided into segments that most accurately reflect the size of our organization. Because we strive to engage the best talent whichand may require ushave to recruit from organizations larger than us,organizations, we look at data from throughout the overall property and casualty insurance industry, asindustry. In late 2017 and early 2018, the SEBC reviewed information reported in the Property and Casualty Insurance Compensation Survey. The Property and Casualty Insurance Compensation Survey, data reviewed by the SEBC in late 2016 and early 2017 reflectedwhich reflects data from 5556 organizations, including Selective, havingthat have an annual median direct written premium of $2.4$2.7 billion and annual median revenues of $2.2$2.3 billion.

When the SEBC evaluates the compensation we pay to our NEOs, it seeks to benchmark against positions with comparable job responsibilities whenever possible. Mr. Marchioni’s position, which has broad succession plan-mandated responsibilities, does not have a direct comparator in our multiple market reference groups. The lack of a true benchmark position for Mr. Marchioni impacts the compensation comparison of our NEOs as a group. With this in mind, the SEBC deemed the positioning of aggregate 2017 total compensation, as reported in the Summary Compensation Table, for our NEOs, (excluding Mr. Thatcher, whose cash compensation reflected his retirement date of September 1, 2016, and is therefore not relevant for the purposes of this comparison)which was 39%38% above the total average median of the reference market sources.  The SEBC deemed the positioning to marketsources, to be appropriate based ongiven Selective’s 2016 performance. The components comprising total compensation differed from market to varying degrees. Specifically, base salary was above the total average median by 13%14% and annual cash incentive awards and discretionary bonus were 108%125% above the total average median, resulting in annual total cash compensation that was above the total average median by 57%73%. The grant date fair value of our 20162017 long-term incentive awards was 25%7% above the total average median. TheConsidering each individual’s accomplishments and contributions, the degree to which we achieved our 2017 goals and outperformed A.M. Best Company’s expected industry performance, the SEBC felt that each NEO’s compensation was appropriately positioned relative to market considering their individual accomplishments and contributions, the degree to which we achieved our 2016 goals, and related outperformance to the expected industry performance by A.M. Best Company.market.

20162017 ELEMENTS OF COMPENSATION AND ALLOCATION BETWEEN CURRENT AND LONG-TERM COMPENSATION

The table below shows the percentage of total variable and total fixed compensation for the CEO and the other NEOs that is short-term incentive compensation (ACIP)(ACIP and discretionary bonus for Messrs. Murphy and Marchioni) versus long-term incentive compensation (LTIP), and fixed (base salary) versus variable (ACIP, discretionary bonus for Messrs. Murphy and Marchioni, and LTIP). When evaluating 20162017 compensation for our CEO and other NEOs, the SEBC considered: (i) our overall results compared to budget and projected industry results; (ii) our ability to obtain renewal pure price increases on our insurance business that allowed us to achieve our statutory combined ratio targets; (iii) our ability to profitably grow NPW to meet or exceed budgeted targets; (iv) our investment income performance compared to both budget and benchmark targets; (v) significant claims improvement initiatives; and (vi) retention of top talent. These factors were viewed in light of the relative competitive positioning of the compensation of our CEO and the other NEOs.

As the table indicates, the 20162017 compensation allocation aligns closely with our compensation philosophy, which is designed to motivate executives to achieve short-term and long-term corporate objectives consistent with our stockholders’ economic interests. We strive to achieve a balance between pay incentive vehicles and performance time horizons, generally placing the most weight on achievement of long-term success that increases long-term stockholder value.horizons.

The charts below reflect the allocation of 20162017 compensation to LTIP, ACIP, discretionary bonus, and base salary for the CEO and an average for all other NEOs:

Base Salary

Our base salary compensation is intended to provide stable, competitive compensation while taking into account each executive’s scope of responsibility, relevant background, training, and experience. In setting base salaries, the SEBC considers both competitive market data for positions with comparable job content and overall market demand for each position. The SEBC generally believes that base salaries should be aligned with market trends for executives with similar responsibilities at comparable companies. When establishing the base salaries of NEOs, the SEBC also considers:

• The functional role of the executive’s position;
  
  
• The executive’s level of responsibility;
  
  
• The executive’s growth in the position, including skills and competencies;

• The executive’s contribution and performance; and
  
  
• The organization’s ability to replace the executive.

Based on these considerations, and on their respective accomplishments and contributions as described below in the section entitled, “2016 Compensation Actions for the CEO and Other NEOs,” the SEBC increased the base salariesposition of the CEOeach NEO’s salary to competitive data, and the other NEOsdesire to contain fixed costs in early 2016 during our regularsupport of expense ratio initiatives, Messrs. Murphy, Marchioni, and Lanza did not receive a base salary review process, as follows:increase in 2017. Mr. Murphy, 2%; Mr. Thatcher, 4%; Mr. Marchioni, 5%; and Mr. Lanza, 4%.Wilcox, who was hired on January 1, 2017, was not eligible for a salary increase.

Annual Cash Incentive Program (ACIP)

Our ACIP is intended to link a meaningful portion of annual cash compensation to one or more pre-established near-term strategic and/or financial organizational performance goals. For 2016,2017, all of the NEOs were eligible to participate in the ACIP. ACIP awards are granted under the Selective Insurance Group, Inc. Cash Incentive Plan, As Amended and Restated as of May 1, 2014 (the “Cash Incentive Plan”). ACIP awards made to our NEOs arein 2017 and prior years were intended to qualify as performance-based compensation under Section 162(m) of the Internal Revenue Code of 1986, as amended (the “Code”). For more information regarding the application of Section 162(m) to the executive compensation program for our NEOs, see the section below entitled, “Tax Treatment and Accounting.”

20162017 ACIP Measures for NEOs

In order for the 20162017 ACIP awards to theour NEOs (whowho are covered“covered employees” under Code Section 162(m)) to qualify as performance-based compensation, the SEBC determined in February 20162017 that the 2016 ACIP awards for covered employees would fund at each individual’sNEO’s maximum based on our achievement in 20162017 of a single performance measure; namely positive GAAP net income as defined under generally accepted accounting principles.income. The maximum award opportunity established by the SEBC for each of our NEOs under the ACIP is shown below under the section entitled, “2016“2017 ACIP Payment Opportunities and Awards for NEOs.” If we did not achieve positive GAAP net income in 2016,2017, the maximum ACIP awards for executive officers would have been determined based entirely on the degree of achievement of the general corporate financial and strategic performance goals used in determining the funding of ACIP awards for employees other than covered employees (the “Corporate ACIP Measures”).

By achieving positive GAAP net income of $158.5$168.8 million in 2016,2017, we met the performance requirements under Code Section 162(m) and the SEBC could have paid up to the individual maximum amounts for the 20162017 ACIP awards or exercised negative discretion. Based on our strong performance and the CEO’s outstanding leadership in 2016, the SEBC awarded the CEO the maximum ACIP award. ACIP payments were awarded to the other NEOs within the range but, except for Mr. Marchioni, not to the maximum award established for such individuals based on their individual performance and the degree of achievement of the Corporate ACIP Measures.

20162017 Corporate ACIP Measures

Our Corporate ACIP Measures are established to encourage our employees to remain focused on particular financial and strategic objectives, even in the face of especially challenging circumstances in a performance year. For 2016,2017, the SEBC determined that the Corporate ACIP funding opportunity would be between 0% and 139%126.7% of target, based on attainment of the Corporate ACIP Measures. Zero percent (0%) to 89%76.7% of this target percentage was attributable to a financial performance goal of achieving a statutory combined ratio of between 88.5% and 100%, and 0% to 50% of this target percentage was attributable to the achievement of 1613 measures related to theour five strategic initiatives.imperatives (with an additional potential 5% from the pure rate profitability improvement goal). The table below reflects total potential Corporate ACIP percentages at various statutory combined ratio percentages if all 1613 measures were fully met and all potential premium points were achieved:met:

20162017 Corporate ACIP Measure Results

The 20162017 Corporate ACIP Measure results are as follows:

Strategic Initiatives Results

As reflected in the above table, we fully achieved 12,10 and partially achieved three,one of the 1613 measures under the ACIP’s 2017 four focus areas relating to our five 2016 strategic initiatives, which equatesinitiatives. These accomplishments equate to the strategic performance goal component under the Corporate ACIP Measures generating funding at 47.2%48.5%.

Financial Performance Results

For 2016,2017, our overall statutory combined ratio was 91.8%92.4%, which included 2.82.9 points of catastrophe losses. Accordingly, the financial performance component of the Corporate ACIP Measures generated funding at 63.1%50.7%.

20162017 Corporate ACIP Measure Results

For 2016,2017, our Corporate ACIP Measures, both strategic initiatives and financial performance, resulted in total funding opportunity of 110.3%99.2%.

20162017 ACIP Payment Opportunities and Awards for NEOs

The ACIP payment opportunities for the NEOs earned in 20162017 and paid in 20172018 were based on competitive market levels and set as a percentage of annual base salary. For Mr. Thatcher, his earned ACIP payment reflects his contributions through his retirement on September 1, 2016. The following table sets forthlists for each NEO the 20162017 minimum and maximum ACIP opportunities, the SEBC’s actual 20162017 award as a percentage of base salary, and the percentage increase or decreasechange in ACIP from 20152016 to 2016:2017 (except for Mr. Wilcox, who was hired effective as of January 1, 2017):

ELEMENTS OF LONG-TERM COMPENSATION

Design Elements

Our long-term incentive opportunities are intended to reward our leaders and encourage their long-term retention. By aligning financial rewards with the economic interests of our stockholders, leaders are motivated to achieve our long-term strategic objectives and increase stockholder value. We use both cash and non-cash vehicles under our LTIP to deliver long-term compensation, which is consistent with the market practices of the companies included in our Proxy Peer Group. We establish a dollar denominateddollar-denominated target for each employee eligible to participate in the LTIP, including the NEOs. All individual target award amounts are aggregated to determine the total LTIP award pool.

LTIP awards are granted in overlapping three-year cycles and are allocated among performance-based restricted stock units and performance-based cash incentive units. By granting performance-based restricted stock units and performance-based cash incentive units with three-year performance periods, our goal is to encourage executive officers to continue their tenure with us and align their economic interests with those of our stockholders.

Long-Term Incentive Program Award Grants

Performance goals for the long-term incentive awards granted in 20142015 through 20162017 are as follows:

⁽¹⁾ Statutory operating return on policyholder surplus is a measurement of profitability that reflects the amount of operating income generated by dividing operating income by the average policyholder surplus during the period.

In determining the amount of LTIP awards granted to the NEOs in 2016,2017, the SEBC considered several factors, including: (i) each NEOsNEO’s ability to drive and impact our performance over the three-year performance period; (ii) each NEOsNEO’s performance during the previous year, including the achievement of departmental goals and other projects and endeavors accomplished throughout the year, as outlined below; (iii) each NEOsNEO’s total compensation in comparison to our Proxy Peer Group and Property and Casualty Insurance Compensation Survey data; and (iv) our desire for long-term retention of high-performing executives.

In 2017, the SEBC changed the elements allocation of the total grant date fair value of LTIP awards to executives, including the NEOs, to 75% performance-based restricted stock units and 25% performance-based cash incentive units, from 60% performance-based restricted stock units and 40% performance-based cash incentive units for 2016 LTIP awards. The SEBC increased the allocation to performance-based restricted stock units, and lowered and narrowed the performance grid for performance-based cash incentive units, to mitigate the potential volatility of stock compensation expense.

Performance-Based Restricted Stock Units

SixtySeventy-five percent (60%(75%) of the total grant date fair value of each NEO’s LTIP award made in 20162017 consisted of performance-based restricted stock units granted under the Selective Insurance Group, Inc. 2014 Omnibus Stock Plan (the “2014 Omnibus Stock Plan”).Plan. The 20162017 performance-based grants arelink directly linked to the interests of stockholders based on, and subject to, the following conditions:

• Three-year vesting period; and
  
  
• Achievement at the end of any calendar year during the three-year period beginning on January 1, 2016 and ending on December 31, 2018 of either: (i) a cumulative OROE of at least 12% (computed by excluding from the determination of average equity any unrealized gain or loss occurring after December 31, 2015); or (ii) a cumulative 5% growth in policy count or statutory NPW.

Dividend equivalent units (“DEUs”) are credited on performance-based restricted stock units at the same time and at the same dividend rate paid to all Selective stockholders. Payment of DEUs, which are payable in shares of Selective common stock, remains subject to the same vesting conditions and performance measures applicable toas the underlying restricted stock units. DEUs are not paid out unless and until the related restricted stock units vest. This use of performance-based restricted stock units aligns this component of our NEOs’ compensation with overall corporate performance and stockholder interests.

Performance-Based Cash Incentive Units

The remaining fortytwenty-five percent (40%(25%) of the grant date fair value of the NEO’s LTIP award granted in 20162017 consisted of performance-based cash incentive units granted under the Cash Incentive Plan. Performance-based cash incentive units granted in 2016 are2017 link directly linked to the interests of stockholders based on, and subject to, the following terms:

• Three-year performance period;
  
  
• The value of each cash incentive unit, initially awarded at $100 per unit, increases or decreases to reflect the TSR of Selective common stock over the three-year performance period for the award; and
  
  
• The number of cash incentive units ultimately earned increases or decreases based on the performance criteria in the following table:

In establishing the peer group (the “Cash Incentive Unit Peer Group”) for 2016 for comparing2017 to compare performance and determiningdetermine the ultimate number of performance-based cash incentive units earned, the SEBC strived to include companies that have a similar mix of products, operate in the same geographic regions, have similar premium volume, and distribute their products through independent agents. The Cash Incentive Unit Peer Group differs from the Proxy Peer Group, as the Proxy Peer Group also includes companies with which we compete for executive talent. The Cash Incentive Unit Peer Group consists of the following companies:

Timing of LTIP Awards

Restricted stock unit and cash incentive unit awards are generally granted each year following the release of Selective’s year-end earnings results.

20132014 Long-Term Incentive Program Award Grant Results

The following table summarizes the achievement of the performance metrics for the 20132014 LTIP award grants and the corresponding payout in 2016:2017:

⁽¹⁾ Cash incentive unit awards are denominated in units with an initial value of $100. Appreciation or depreciation is based on TSR, which is determined using the change in Selective’s common stock price and reinvested dividends over the three-year performance period for the award. The number of units ultimately earned increases or decreases based on: (i) cumulative three-year statutory NPW growth relative to the Cash Incentive Unit Peer Group index; and (ii) cumulative three-year statutory combined ratiooperating return on policyholder surplus relative to this peer group index.

20162017 COMPENSATION ACTIONS FOR THE CEO AND OTHER NEOS

In making its 20162017 base salary, ACIP (and discretionary bonus for Messrs. Murphy and Marchioni), and LTIP compensation decisions for our CEO and the other NEOs, with respect to base salary, ACIP awards, and LTIP awards, the SEBC considered theeach NEO’s overall and individual accomplishments and contributionscontributions. The required achievement of each NEO. Thepre-determined financial and strategic goals limits the ACIP and LTIP components of our compensation program are limited by the required achievement of pre-determined financial and strategic goals.program. We structure our reward programs to retain and motivate our best-performing employees and those in critical positions. In balancing our strategic results achieved with ongoing price competition, the SEBC made the following compensation decisions in 2016:2017:

• 	§	For the CEO, Mr. Murphy’s:

  	○	Base salary was not changed;

  	○	ACIP payment for 2017, together with a discretionary bonus, was 16% higher than his 2016 ACIP payment (Mr. Murphy did not receive a discretionary bonus for 2016);

  	○	LTIP award granted in February 2017 was 14% lower than his award granted in the previous year; and

  ○

  Total compensation based on salary, ACIP payment, LTIP, and a discretionary bonus was 0.3% higher for 2017 compared to 2016.

  As CEO, Mr. Murphy’s:
  
  

• Base salary increased by 2%;
  
  
• ACIP payment for 2016 was 2% higher than his 2015 ACIP payment;
  
  
• LTIP award granted in February 2016 was 24% higher than his grant in the previous year; and
  
  
• Total compensation based on salary, ACIP payment, and LTIP was 10% higher for 2016 compared to 2015.

Mr. Murphy as CEO, has ultimate responsibility for the achievement of all financial, strategic, and investment goals. Accordingly, inIn making its compensation decisions for Mr. Murphy, the SEBC considered our overall corporate performance, as previously detailed in this Compensation Discussion and Analysis under the section entitled “2016“2017 Corporate Performance Highlights,” and a comprehensive written performance appraisal completed by non-employee members of Selective’s Board of Directors.

Based on the achievement of positive net income, the degree of achievement of the Corporate ACIP Measures,measures and the factors noted above in the 20162017 Corporate Performance Highlights, and guidance provided by the Compensation Consultant regarding CEO pay trends, the SEBC determined that Mr. Murphy’s 20162017 ACIP would be setmaintained at 200% of base salary. This compares to his initial ACIP opportunity range of 0-200% of base salary. As the ACIP component ofThe SEBC also considered Mr. Murphy’s compensation is tied to our annuallong-standing superior leadership in achieving exceptional and sustained financial and strategic goals, including net income,operating performance, and the 2016 ACIP payment reflectshistorical positioning of his compensation relative to peers, which has ranged from below the exceptional results achieved by our Insurance Operations. peer median, to at the peer median, even during periods of outstanding performance. Accordingly, the SEBC believes that an incremental discretionary bonus for Mr. Murphy in the amount of $300,000, and for Mr. Marchioni in the amount of $110,000 as discussed below, are warranted for 2017, given their collective stewardship over Selective’s sustained financial and operational success, as evidenced by:

The SEBC determined that Mr. Murphy’s ACIP payment wasand his additional discretionary bonus were appropriate and consistent with Selective’s pay-for-performance philosophy.philosophy and that they reinforce our long history of linking pay and performance.

Our other NEOs were also critical in executing Selective’s 20162017 strategic goals and key accomplishments. In light of these accomplishments, the SEBC made the following compensation decisions for the other NEOs:NEOs⁷:

• Base salaries for Messrs. Marchioni, Lanza, and Thatcher increased in 2016 by 5%, 4%, and 4%, respectively;
  
  
• LTIP awards granted in February 2016 for Messrs. Thatcher, Marchioni, and Lanza, increased by 9%, 21%, and 7%, respectively, compared to LTIP payments for 2015;
  
  
• ACIP payment for Mr. Thatcher decreased by 31% reflecting his retirement in September 2016, and payments for Messrs. Marchioni and Lanza for 2016 increased by 8% and 10%, respectively; and
  
  
• Total compensation based on base salary, ACIP payment, and LTIP awards for Messrs. Marchioni and Lanza increased for 2016 compared to 2015 by approximately 11% and 7%, respectively, and for Mr. Thatcher, decreased by approximately 8%, reflecting his retirement in September 2016.

In making compensation decisions regarding base salary and LTIP for the other NEOs, the SEBC considered the following for each NEO:

Mr. ThatcherWilcox – In addition to his general management responsibility as a member of the executive management team, Mr. Thatcher,Wilcox, as Executive Vice President and Chief Financial Officer, and Treasurer, had, prior to his retirement,has primary responsibility for all financial matters, including financial accounting, investor relations, tax, capital and capital management planning, treasury, investment operations, enterprise risk management, internal audit, reinsurance, and contracts and procurement, and corporate communications.procurement. Mr. Thatcher’sWilcox’s major contributions through his retirement in September 2016,2017 included:

• Overseeing a management committee to develop a plan to reduce the organization’s expense ratio;
  
  

• 	§	Completing a strategic review to increase integration, efficiency, and effectiveness of treasury and vendor management;

  	§	Assessing and entering into numerous state premium and federal income tax credit purchase transactions;

  	§	Executing on an agreed audit plan for designated operational areas;

  	§	Remodeling risk assessment processes to provide for enhanced coordination with our independent auditors;

  	§	Successfully renewing our 2017 property catastrophe reinsurance program, including the renewal of the collateralized catastrophe layer for a two-year term, and a placement of a new partially collateralized $50 million in excess of $725 million layer;

  	§	Completing a strategic plan for the finance group by assessing operational functions within the group in relation to the group’s mission, vision, and objectives;

  	§	Coordinating with business units to determine optimal company mix associated with Selective’s ongoing geographic expansion initiative;

  	§	Enhancing risk metrics, reporting, and modeling processes;

  	§	Continuing the on-boarding process of new fixed income and alternative investment managers;

  	§	Continuing to refine and actively manage our investment process to appropriately balance the maximization of after-tax net investment income with the associated risks;

  §

  Executing on our specified strategy for risk assets;

  ____________________________

  ⁷ As Mr. Wilcox joined Selective as of January 1, 2017, no comparative information between 2016 and entering into numerous state premium and federal income tax credit purchase transactions;
  
  

• Successfully renewing our 2016 property reinsurance, including the renewal of the collateralized catastrophe layer2017 is provided for a two-year term;
  
  
• Successfully establishing and continuing to address development opportunities for key individuals in Selective’s financial operations;
  
  
• Coordinating efforts for the completion of financial projections and tax implications associated with Selective’s geographic expansion project;
  
  
• Engaging in significant enterprise risk management activities, including active participation in industry discussions on capital standards and models;
  
  
• Coordinating the hiring and on-boarding of a new high-yield money manager and the development of our alternative risk investment strategy;
  
  
• Implementing a new investment software performance tool that improved the portfolio validation process and reduced related costs;
  
  
• Providing leadership on communication and application of strategic framework initiatives to assign resources for profitable growth, optimize operational efficiency and effectiveness, and create a highly engaged team;
  
  
• Executing our expense reduction initiative resulting in maintaining overall controllable expenses below budgeted target;

him.

• Supporting property aggregation decisions through utilization of various catastrophe-related tools; and
  
  
• Providing evaluations of existing and proposed tax legislation, working with trade association and industry government affairs representatives to advance interests of Selective and the property and casualty insurance industry.

Based on the achievement of positive net income, the degree of achievement of the Corporate ACIP Measures, and the factors noted above, the SEBC approved the CEO’s recommendation that Mr. Thatcher’s 2016Wilcox’s 2017 ACIP payment would be set at 94%153% of his base salary. This compares to his initial ACIP payment opportunity range of 0-150%0-165% of base salary. Mr. Thatcher’s 2016 ACIP payment was 31% lower than his 2015 ACIP payment reflecting his retirement in September 2016.

Mr. Marchioni – As President and Chief Operating Officer, Mr. Marchioni is responsible for our Insurance Operations, Strategy, Actuarial, Human Resources, and Information Technology areas. Mr. Marchioni plays a key role in developing strategies that enhance profitability, growth, and competitive strength, including managing agency relations, claims, underwriting, customer service, and all regional operations. Mr. Marchioni also serves as a member of our key management committees.

Mr. Marchioni has primary responsibilities for the achievement of the 20162017 Corporate ACIP strategic measures and many of his accomplishments are closely tied to these measures. Under Mr. Marchioni’s leadership, our Insurance Operations continue to focus on granular pricing and sophisticated underwriting, as well as significant improvement in claims outcomes, that we believe give us a competitive advantage. Mr. Marchioni’s major contributions in 20162017 included:

• Producing a company record low statutory combined ratio of 91.8% in 2016, including catastrophe losses, and 89.0% excluding catastrophe losses, compared to an A.M. Best Company expected 2016 industry statutory combined ratio of 100.7%, which includes a catastrophe loss assumption of 4.9 points;
  
  
• Increasing overall NPW in 2016 by 8% compared to 2015, and commercial lines NPW by 5% compared to 2015;
  
  
• Achieving 2.9% in overall standard lines renewal pure price increases, with 2.6% in standard commercial lines and 4.8% in standard personal lines. We have successfully achieved 28 consecutive quarters of positive standard commercial lines renewal pure price increases that outperformed the Willis Towers Watson Commercial Lines Insurance Pricing Survey by approximately 1,700 basis points, while maintaining high retention rates. Our excess and surplus lines achieved 4.9% in price increases;
  
  
• Strong retention rates of 83% for standard commercial lines and 82% for standard personal lines;
  
  
• Improving underwriting profitability on designated standard commercial and personal lines, particularly homeowners, through rate changes, loss improvement efforts, and retention actions;
  
  
• Achieving significant progress in our workers compensation line of business, improving the 2016 accident year statutory combined ratio by nearly five points, through changes in underwriting mix and claims handling improvements;
  
  
• Executing an expense reduction initiative resulting in maintaining the overall controllable expenses below budgeted target;
  
  
• Implementing excess and surplus lines claims initiatives to improve claims outcomes, including refinements in litigation management, increased use of staff counsel, and consolidation of panel counsel firms;
  
  
• Commencing implementation of a new policy issuance system for excess and surplus lines operations;

• Achieving key omni-channel milestones, including implementing new specified phases of master data management and customer self-service systems, and digital technology initiatives;
  
  
• Implementing initial phases of geographic expansion into Arizona and New Hampshire;
  
  
• Implementing specified phases of a project to improve underwriting processes;
  
  
• Expanding participation in agency customer service development programs;
  
  
• Receiving a score of 8.76 out of 10 on an independently administered agency satisfaction survey;
  
  
• Developing a three-year strategy and approach to diversity and inclusion, and implementing an underwriter onboarding program; and
  
  
• Overseeing communication and training to embed strategic framework initiatives and specified corporate values and leadership competencies throughout the organization.

Based on the achievement of positive net income, the degree of achievement of the Corporate ACIP Measures, and the factors noted above, the SEBC approved the CEO’s recommendation that Mr. Marchioni’s 20162017 ACIP would be set at 175%180% of base salary. This compares to his initial ACIP opportunity range of 0-175%0-180% of base salary.

As more fully described above in the section on the CEO’s compensation, the SEBC believes that an incremental discretionary bonus for Mr. Marchioni of $110,000 is warranted given his stewardship, together with that of Mr. Murphy, resulting in Selective’s sustained financial and operational success.

Mr. Marchioni’s ACIP payment for 2017, together with his discretionary bonus, was 11% higher than his 2016 ACIP payment was 8% higher than his 2015 ACIP payment.alone. Mr. Marchioni did not receive a discretionary bonus last year. We believe this award alignsthese awards align with our pay-for-performance philosophy that is intended to reward and retain key performers in critical positions.

Mr. Lanza – In addition to his general management responsibility as a member of the executive management team, Mr. Lanza, as Executive Vice President, General Counsel and Chief Compliance Officer, has primary responsibility for all legal, corporate governance, government affairs, state filings, regulatory, and compliance matters. Mr. Lanza’s major 20162017 contributions were:

• Overseeing and providing legal advice on the filing of commercial and personal lines standard rate and product filings, including approvals for ElitePac product in timely fashion;
  
  
• Providing ongoing advice on various records retention and records management matters;
  
  
• Providing significant counsel on finance, investment, tax, securities, and corporate transaction matters;
  
  
• Providing significant counsel on corporate management, compliance, and disclosure matters;
  
  
• Implementing inter-departmental consolidation and related expense control plans;
  
  
• Assisting in the development of communications to embed strategic framework initiatives and specified corporate values and leadership competencies throughout the organization;
  
  
• Supporting the geographic expansion initiative by securing licensure approval in Arizona and New Hampshire and providing related counsel on government affairs and product compliance in these new markets;
  
  
• Providing advice on various marketing incentive and cross-selling initiatives;
  
  
• Coordinating with the Information Technology Department on initiating an updated data loss prevention project, including data classification;
  
  
• Continuing legal support for omni-channel customer experience initiatives;
  
  
• Providing timely and appropriate legal advice on the expansion of standard commercial, standard personal, and excess and surplus lines products;

• Supervising and coordinating various government affairs and trade association activities on rate and form filings and complex claims issues, including those relating to the National Flood Insurance Program, capital standards, and the Terrorism Risk Insurance Program Reauthorization Act; and
  
  
• Providing counsel to the claims operations on large loss, complex claims and extra-contractual matters, utilization of staff counsel and panel counsel, alternative fee arrangements, operational metrics, and claims organizational changes.

Based on the achievement of positive net income, the degree of achievement of the Corporate ACIP Measures, and the factors noted above, the SEBC approved the CEO’s recommendation that Mr. Lanza’s 20162017 ACIP would be set at 102%111% of base salary. This compares to his initial ACIP payment opportunity range of 0-150% of base salary. Mr. Lanza’s 20162017 ACIP payment was 10%9% higher than his 20152016 ACIP payment. This award aligns with our pay-for-performance philosophy that is intended to reward and retain key performers in critical positions.

PERQUISITES

NEO perquisites are limited to tax preparation services, which is a prevailing industry practice. Messrs.practice, and in certain circumstances, moving expenses and taxes payable on those expenses. Mr. Murphy used tax preparation services in 2017 and Lanza used this perquisite in 2016 and werewas reimbursed $3,000, and $2,850, respectively.Mr. Wilcox received reimbursement for $62,115 for moving expenses and $57,329 for taxes associated with these moving expenses.

RETIREMENT AND DEFERRED COMPENSATION PLANS

Selective Insurance Company of America (“SICA”), a wholly-owned subsidiary of Selective, employs all of our personnel, including all of the NEOs. We strive to provide a competitive retirement benefit program that allows us to attract and retain talent for the organization. This includes a defined contribution program, including a nonqualified defined contribution deferred compensation plan (“Deferred Compensation Plan”) for certain of our officers and highly compensated officers,employees, including the NEOs, and depending on date of hire, a defined benefit pension program, including a nonqualified supplemental pension plan for certain of our officers and highly compensated employees, in which all of the NEOs participate.participate, other than Mr. Wilcox. These plans are consistent with benefits provided by many of the companies with which we compete for executive talent.

SICA offers a tax-qualified defined contribution plan named the Selective Insurance Retirement Savings Plan (the “Retirement Savings Plan”) tofor employees, including the NEOs, who meet eligibility requirements. Participants other than highly compensated employees, as defined by the Internal Revenue Service, could contribute up to 50% of their definedeligible compensation to the Retirement Savings Plan, up to $18,000 in 2016.2017. Under the Retirement Savings Plan, participant contributions are matched at 100% toof the firstemployee’s salary

deferrals up to 3% of the employee’s definedeligible compensation, and at 50% up to the next 3% of the employee’s defined compensation.salary deferrals above 3%, up to 6% of the employee’s eligible compensation, subject to limitations under the Code.

Participants over the age of 50, including certain of the NEOs, were eligible in 20162017 to make an additional catch-up salary deferral contribution to the Retirement Savings Plan pursuant tounder the Code. As of April 5, 2013, in conjunction with the amendment of theThe Retirement Income Plan for Selective Insurance Company of America (the “Retirement Income Plan”) and the related supplemental employee retirementpension plan, discussed further below, were amended to curtail thecease accrual of additional benefits under these plans aftereffective as of March 31, 2016,2016. In connection with the curtailment of the Retirement Income Plan, all eligible participants in the Retirement Savings Plan, including the NEOs (other than Mr. Wilcox who did not satisfy the one-year service requirement in 2017), began receiving a non-elective contribution of 4% of base salary.salary to their accounts under the Retirement Savings Plan.

Under the Deferred Compensation Plan, certain executives and employees, including the NEOs may, subject to certain limitations, defer: (i) up to 50% of their base salary; (ii) up to 100% of their annual bonus (subject to certain limitations to provide for required tax withholding); and/or (iii) all or a percentage of such other compensation as otherwise designated by the administrator of the Deferred Compensation Plan. To compensate for the extent not matched inCode’s limitations on SICA’s matching contributions for the NEOs under the Retirement Savings Plan, due to the limitations under the Code and the provisions of the Retirement Savings Plan,SICA matched our NEOs’ contributions to the Deferred Compensation Plan by participantsin 2017 as follows: 100% of each NEO’s salary deferrals to the Retirement Savings Plan and the Deferred Compensation Plan up to 3% of the employee’s base salary, and 50% of the NEO’s salary deferrals to the Retirement Savings Plan and the Deferred Compensation Plan above 3%, up to 6% of the NEO’s base salary, were matched by SICA as follows: 100% of the first 3% of the NEOs’ defined compensation and 50% upless any matching contributions to the next 3% of the NEOs’ defined compensation.Retirement Savings Plan. Additionally, to the extent that non-elective contributions to the Retirement Savings Plan are limited due to the provisions of the Code and the Retirement Savings Plan, non-elective contributions of 4% of base salary are made by SICA to participants’ Deferred Compensation Plan accounts. Additional information regarding the Deferred Compensation Plan is included in the section entitled, “Nonqualified Deferred Compensation” of this Proxy Statement.

SICA also has maintained a non-contributory defined benefit pension program consisting of a tax-qualified defined benefit pension plan, the Retirement Income Plan, and a nonqualified supplemental employee retirementpension plan for certain executives and employees. The accrual of additional benefits under the pension program ceased as of March 31, 2016. The pension program is more fully described in the section entitled, “Pension Benefits” of this Proxy Statement.

In addition, SICA maintains health and welfare benefit plans in which eligible employees, including the NEOs, participate.

EMPLOYMENT AGREEMENTS

SICA has entered into employment agreements with its key executive officers, including the NEOs, which provide for severance in the event of termination: (i) due to death or disability; (ii) without “Cause”³⁸; (iii) due to resignation for “Good Reason”⁴⁹ by (A) the CEO at any time, or (B) other executives within two years following a change in control; (iv) due to resignation of the NEO within two years of the company first imposing a requirement, without the consent of the NEO, that relocates the NEO’s business location more than 50 miles; and (v) within two years following a change in control. The SEBC believes that these agreements are important for recruitment and retention

____________________________

⁸“Cause” is defined in the employment agreements, but generally means the executive: (i) was convicted of or pled guilty to a felony; (ii) breached a material provision of the executive’s employment agreement; or (iii) engaged in misconduct which constitutes fraud in the performance of the executive’s duties and obligations to the company.

⁹“Good Reason” is defined in the employment agreements, but generally means: (i) a material reduction in salary; (ii) a material negative change in the executive’s benefits; (iii) a material reduction of the executive’s position, duties, responsibilities, and status with the company or material negative change in title or office; (iv) requiring the executive to be based at a location in excess of 50 miles from the location of the executive’s office prior to a change in control; (v) failure of a counterparty to a transaction resulting in a change in control to assume the employment agreement; or (vi) a breach of the employment agreement by SICA within two years after a change in control.

of key executives and was advised by its Compensation Consultant that the terms of these agreements were market competitive within our peer group when they were executed. In the event of a change in control, uncertainty may arise among our key executives as to their continued employment after or in connection with such event, which may result in the departure or distraction of our key executives. The purpose of the employment agreements is to retain our key executives, and reinforce and encourage their continued attention and dedication during such a potentially critical time, even if they fear that their position will be terminated after or in connection with the change in control.

With respect to severance payments, outstanding awards under our stock and cash plans, and continued insurance coverages or reimbursement for such coverage, the change in control provisions of the employment agreements are triggered if the executive’s employment is terminated within two years following a change in control. This double trigger ensures such a payout does not automatically occur upon a change in control only. The employment agreements are described in the section entitled, “Employment Agreements and Potential Payments upon Termination or Change in Control” of this Proxy Statement. This section includes information on multipliers used in calculating the severance payment and duration of benefit coverage provided to individual executives upon termination. We believe these multipliers are consistent with the level and value of the position to the organization.

________________________

³“Cause” is defined in the employment agreements, but generally means the executive: (i) was convicted of or pled guilty to a felony; (ii) breached a material provision of the executive’s employment agreement; or (iii) engaged in misconduct which constitutes fraud in the performance of the executive’s duties and obligations to the company.

⁴“Good Reason” is defined in the employment agreements, but generally means: (i) a material reduction in salary; (ii) a material negative change in the executive’s benefits; (iii) a material reduction of the executive’s position, duties, responsibilities, and status with the company or material negative change in title or office; (iv) requiring the executive to be based at a location in excess of 50 miles from the location of the executive’s office prior to a change in control; (v) failure of a counterparty to a transaction resulting in a change in control to assume the employment agreement; or (vi) a breach of the employment agreement by SICA within two years after a change in control.

TAX TREATMENT AND ACCOUNTING

The SEBC generally seeks to preserve deductibility under the Code for performance-based compensation paid to its executive officers as practicable. Code Section 162(m) prohibits publicly-ownedpublicly-held companies from deducting compensation paid to certain of its executive officers as expensefor federal tax purposes to the extent that the officer’s taxable year compensation exceeds $1 million. While the SEBC generally has sought to preserve deductibility under Code Section 162(m), the SEBC may make decisions it believes to be in excessthe best interests of $1 millionSelective in which it is possible that certain compensation would not performance-based and is notbe deductible under Code Section 162(m).

For taxable years commencing before January 1, 2018, compensation paid pursuant to a stockholder approved plan.stockholder-approved plan that otherwise qualified as “performance-based compensation” under Section 162(m) was exempt from the annual $1 million deduction limitation. The Tax Cuts and Jobs Act (“Tax Reform”) eliminated the performance-based compensation exception for taxable years commencing after December 31, 2017. Under Tax Reform transition relief, compensation provided under a written binding contract in effect on November 2, 2017 that is not materially modified after that date continues to be subject to the performance-based compensation exception of Section 162(m), as previously in effect. The performance-based compensation exception, however, generally will not be available for new awards of compensation granted after November 2, 2017.

Awards to NEOs for 20162017 were granted under two performance-based stockholder approved plans: (i) the 2014 Omnibus Stock Plan; and (ii) the Cash Incentive Plan. While the SEBC generally seeks to preserve deductibility under Code Section 162(m), there may be situations where the SEBC makes compensation decisions it believes to be in the best interests of the company in which certain compensation would not be deemed deductible under Code Section 162(m). In February 2016,2017, the SEBC approved a single performance measure under our Cash Incentive Plan to allow annual cash awards to our executives in 2017, including our NEOs, to qualify as performance-based compensation under Code Section 162(m). The single performance measure is positive net income determined in accordance with generally accepted accounting principles.GAAP. In determining actual annual cash awards to our executive officers under the Cash Incentive Plan, the SEBC may adjust the maximum possible payout downwards, based upon the respective accomplishments and contributions of the executives and the Corporate ACIP Measures, as described more fully in the sections above entitled, “2016“2017 ACIP Payment Opportunities and Awards for NEOs” and “2016“2017 Compensation Actions for the CEO and Other NEOs.” This arrangement does not result in any duplication of payouts.

Generally accepted accounting principles requireGAAP requires compensation expense to be measured on the income statement for all share-based payments at grant date fair value for equity instruments (including employee stock options and restricted stock unit awards) and at market value on the daydate of vesting for liability instruments (including cash incentive unit awards). The SEBC has considered the impact of generally accepted accounting principlesGAAP on our use of stock-based compensation as a retention tool. The SEBC has determined that the current estimated costs of continuing to use stock-based compensation relative to the benefits they provide are appropriate and do not warrant any change to our current incentive framework.

We have designed our compensation programs and awards to executive officers to comply with the provisions of Section 409A of the Code, where applicable. For example, payments that are subject to Section 409A of the Code and made to our executive officers under our nonqualified deferred compensation plans on account of the executives’ separation from service are not payable before the first day of the seventh month following the date of separation from service.

service if the executives are “specified employees” under Section 409A of the Code.

SUMMARY COMPENSATION TABLE

The following Summary Compensation Table reflects the compensation earned by or paid to the NEOs during 2017, 2016, 2015, and 2014.2015.