UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
SCHEDULE 14A
INFORMATION REQUIRED IN PROXY STATEMENT
SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(a)
of the Securities Exchange Act of 1934
Filed by the Registrant [X]
Filed by a Party other than the Registrant [ ]
x
Filed by a Party other than the Registrant [ | ] |
Check the appropriate box:
[ ] Preliminary Proxy Statement [ ] Confidential, For Use of the Commission
[X]
[ | ] Preliminary Proxy Statement | |
[ | ] Confidential, For Use of the Commission Only (as permitted by Rule 14a-6(e)(2)) | |
x Definitive Proxy Statement Only (as permitted by Rule 14a-6(e)(2))
[ ] Definitive Additional Materials
[ ] Soliciting Material Pursuant to Rule 14a-12
----------
[ | ] Definitive Additional Materials | |
[ | ] Soliciting Material Pursuant to §240.14a-12 | |
SELECTIVE INSURANCE GROUP, INC.
(Name
(Name of Registrant as Specified in itsIn Its Charter)
----------
None
(Name of Person(s) Filing Proxy Statement, if other than the Registrant)
Payment of Filing Fee (Check the appropriate box):
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(1) Title of each class of securities to which transaction applies:
(2) Aggregate number of securities to which transaction applies:
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pursuant to Exchange Act Rule 0-11:
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[ ] Fee paid previously with preliminary materials.
[ | ] Fee computed on table below per Exchange Act Rules 14a-6(i)(1) and 0-11. |
(1) | Title of each class of securities to which transaction applies: |
(2) | Aggregate number of securities to which transactions applies: |
(3) | Per unit price or other underlying value of transaction computed pursuant to Exchange Act Rule 0-11 (set forth the amount on which the filing fee is calculated and state how it was determined): |
(4) | Proposed maximum aggregate value of transaction: |
(5) | Total fee paid: |
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[ ] Check box if any part of the fee is offset as provided by Exchange Act Rule 0-11(a)(2) and identify the filing for which the offsetting fee was paid previously. Identify the previous filing by registration statement number, or the formForm or scheduleSchedule and the date of its filing.
(1) Amount Previously Paid:
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[LOGO] SELECTIVE
(1) | Amount Previously Paid: | |||
(2) Form, Schedule or Registration Statement No.: | ||||
March 28, 2006
NOTICE OF 2006 ANNUAL MEETING OF STOCKHOLDERS
AND PROXY STATEMENT
April 26, 2006
Selective Insurance Group, Inc.
40 Wantage Avenue
Branchville, New Jersey 07890
973-948-3000
http://www.selective.com
Gregory E. Murphy
Chairman, President,
and Chief Executive Officer
April 3, 2003
Dear Stockholder of Selective Insurance Group, Inc.:
It is a pleasure to invite you to your Company's 2003’s (“Selective”) 2006 Annual Meeting of Stockholders to be held on Wednesday, May 7, 2003, at 11:00 a.m. in the
auditorium at the headquarters of the Company at 40 Wantage Avenue, Branchville,
New Jersey. The Annual Report, as well as formal Notice of the Annual Meeting,
together with the Proxy Statement and proxy, is enclosed with this letter.
Whether you own a few or many shares of stock and whether or not you plan to
attend the meeting in person, it is important that your shares be represented
and voted. Please complete and file your proxy either by mail, electronically or
by telephone as soon as possible.
Your continued support is appreciated. We look forward to seeing you at the
meeting.
Warmest regards,
/s/ Gregory E. Murphy
Gregory E. Murphy
[LOGO] SELECTIVE Selective Insurance Group, Inc.
40 Wantage Avenue
Branchville, New Jersey 07890
973-948-3000
http://www.selective.com
NOTICE OF ANNUAL MEETING TO BE HELD
May 7, 2003
TO OUR STOCKHOLDERS:
The Annual Meeting of Stockholders of Selective Insurance Group, Inc. (the
"Company") will be held on Wednesday, May 7, 2003, at 11:00 a.m.AM on Wednesday, April 26, 2006, in the auditoriumAuditorium at the headquarters of the CompanySelective’s principal offices at 40 Wantage Avenue, Branchville, New Jersey 07890.
At the meeting, we will ask stockholders to:
1. | Elect directors as follows: |
Four (4) Class II directors for the following purposes:
1. To elect fiveterms expiring in 2009;
Two (2) Class III directors for terms expiring in 2008;
One (1) Class I director for a term of three years each;
2. To considerexpiring in 2007;
2. | Approve the Selective Insurance Group, Inc. Stock Purchase Plan for Independent Insurance Agencies; and |
3. | Ratify the appointment of KPMG LLP as independent public accountants for the fiscal year ending December 31, 2006. |
We plan a brief business meeting focused on these items and act upon a shareholder proposal; and
3. To transact suchwe will attend to any other and further business if any, as may properly may be
broughtcome before the meeting and at any adjournments or postponements of the meeting. The Board of Directors has fixedrecommends that you vote in favor of Items 1, 2, and 3. These proposals are further described in the proxy statement.
Also enclosed is Selective’s 2006 Annual Report to Stockholders. At the meeting, we will also be making a brief presentation on operations and we will offer time for your comments and questions.
Selective stockholders of record at the close of business on March 17, 2003, as the
record date for the determination of stockholders10, 2006 are entitled to notice of and to vote at the Annual Meeting.
Once again, you may choose to vote your shares by usingmeeting and any adjournment of it. A quorum is a toll-free telephone
number ormajority of outstanding shares. YOUR VOTE IS IMPORTANT. WE URGE YOU TO VOTE YOUR SHARES BY (1) CALLING THE TOLL-FREE TELEPHONE NUMBER LISTED ON THE PROXY CARD; (2) ACCESSING THE INTERNET WEBSITE LISTED ON THE PROXY CARD; OR (3) COMPLETING, DATING, AND SIGNING THE ENCLOSED PROXY CARD AND RETURNING IT IN THE ENCLOSED ENVELOPE. YOUR PROXY MAY BE REVOKED AT ANY TIME PRIOR TO THE TIME IT IS VOTED AT THE 2006 ANNUAL MEETING.
Very truly yours,
Gregory E. Murphy
Chairman of the Internet, as described on the proxy card. You may also mark, sign,
date,Board, President and mail your proxy in the envelope provided, which requires no postage if
mailed in the United States. We encourage you to complete and file your proxy by
accessing the World Wide Web or by using a touch-tone telephone if these options
are available to you. The method by which you decide to vote will not limit your
right to revoke your proxy or to vote in person at the Annual Meeting should you
later decide to attend the Annual Meeting in person.
Chief Executive Officer
By orderOrder of the Board of Directors,
/s/ Michele Nieroda Schumacher
Michele Nieroda SchumacherDirectors:
Michael H. Lanza
Senior Vice President, Corporate SecretaryGeneral Counsel and Corporate Governance Officer
Dated: April 3, 2003
TABLE OF CONTENTS
Proxy Statement | 1 |
General Information about Selective’s Annual Meeting | 1 |
Proposals For Stockholder Vote and Approval Requirements | 2 |
Other Matters to Come before the Annual Meeting | 3 |
Voting and Proxy Procedure | 3 |
Security Ownership of Directors and Executive Officers and Certain Beneficial Owners and
Securities Authorized for Issuance under Equity Compensation Plans | 5 | |
Information about Proposal 1 – Election of Directors | 7 | |
Executive Officers | 11 | |
Certain Relationships and Related Transactions | 11 | |
Section 16(A) Beneficial Ownership Reporting Compliance | 12 | |
Code of Conduct | 12 | |
The Board of Directors and its Committees | 13 | |
Director Selection Process | 16 | |
Director Compensation | 17 | |
Executive Compensation | 18 | |
Compensation Committee Interlocks and Insider Participation in Compensation Decisions | 26 | |
Report of the Salary and Employee Benefits Committee | 27 | |
Information about Proposal 2 – Approval of The Selective Insurance Group, Inc. 40 Wantage Avenue
Branchville, New Jersey 07890
Stock Purchase
Plan for Independent Insurance Agencies | 30 | |
Information about Proposal 3 – Ratification of Appointment of Independent Public Accountants | 33 | |
Audit Committee Report | 33 | |
Stockholder Proposals and Nominations | 35 | |
Stockholder Communication with the Board | 36 | |
Documents Incorporated by Reference | 36 | |
Appendix A – Selective Insurance Group, Inc. Stock Purchase Plan for Independent Insurance Agencies | A-1 |
PROXY STATEMENT
General Matters
This Proxy Statement is furnished in connection with a solicitation of proxies
by the Board of Directors of Selective Insurance Group, Inc. (the "Company") for
use at the
FOR THE 2006 ANNUAL MEETING OF STOCKHOLDERS
TO BE HELD APRIL 26, 2006
GENERAL INFORMATION ABOUT SELECTIVE’S ANNUAL MEETING
WHEN AND WHERE IS THE ANNUAL MEETING?
The 2006 Annual Meeting of Stockholders to(the “Annual Meeting”) will be held on Wednesday, May 7, 2003,April 26, 2006, at 11:00 a.m.AM in the auditoriumAuditorium at the headquarters of the CompanySelective’s principal offices at 40 Wantage Avenue, Branchville, New Jersey 07890. Directions are on the back of the proxy statement.
WHO IS ENTITLED TO VOTE AT THE ANNUAL MEETING?
Anyone who owned Selective common stock as of the close of business on March 10, 2006, is entitled to one vote per share owned. There were 27,510,071 shares outstanding at the close of business on that date.
WHO IS SOLICITING MY PROXY TO VOTE MY SHARES AND WHEN?
Selective’s Board of Directors (“Board of Directors” or the “Board”) is soliciting your “proxy,” or your authorization for our named proxies, Paul D. Bauer and atJoan M. Lamm-Tennant, to vote your shares. Unless revoked by you, your proxy will be effective for the Annual Meeting and for any adjournment thereof.
The Companyadjournments or continuations of that meeting.
WHAT IS THE COST OF SOLICITING 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 may also be solicited personally or by telephone, telegraph, or special letter by directors, officers, and regular Selective employees for no additional compensation. Selective has retainedengaged Georgeson Shareholder Communications Inc. for(“Georgeson”), a fee of
$7,500, plus expenses,proxy solicitation firm, to aidassist in the solicitation of proxies by mail, telephone, and personal contact. In addition to solicitation by mailthe distribution of proxy materials, including reviewing Selective’s proxy materials, disseminating broker search cards, soliciting a proxy service company, brokers, banks, and by certain employeesinstitutional holders, and delivering executed proxies. Georgeson will provide such services for an estimated fee of the Company (without additional compensation), arrangements have been made
withapproximately $7,500 plus expenses. Selective will reimburse banks, brokerage housesfirms, and other custodians, nominees, and fiduciaries for reasonable expenses incurred by them in sending proxy materials to send
proxy material totheir customers or principals who are the beneficial owners. The costsowners of the solicitation willshares of Selective common stock.
WHAT ARE THE REQUIREMENTS FOR BUSINESS TO BE CONDUCTED AT THE ANNUAL MEETING?
For business to be borne by the Company.
On March 17, 2003, which is the record date for the determination of
stockholders entitled to notice of, and to voteconducted at the Annual Meeting, there
were outstanding and entitled to vote 26,891,464 sharesa quorum of common stock, $2.00
par value ("Common Stock"). The Common Stock is13,755,036 Selective stockholders (a majority of the Company's only issued and outstanding classshares entitled to vote) must be in attendance or represented by proxy.
Page 1
PROPOSALS FOR STOCKHOLDER VOTE AND APPROVAL REQUIREMENTS
Management is presenting three (3) proposals for a stockholder vote.
PROPOSAL 1. | ELECTION OF DIRECTORS |
THE BOARD RECOMMENDS THAT YOU VOTE FOR:
THE FOUR NOMINATED CLASS II DIRECTORS: A. DAVID BROWN; WILLIAM M. KEARNS, JR.; S. GRIFFIN MCCLELLAN III; AND J. BRIAN THEBAULT;
THE TWO NOMINATED CLASS III DIRECTORS: JOHN C. BURVILLE AND JOHN F. ROCKART; AND
THE ONE NOMINATED CLASS I DIRECTOR: W. MARSTON BECKER.
You can find information about these nominees, as well as information about Selective’s Board of voting stock. This Proxy StatementDirectors, its committees, compensation for directors, and the accompanying
proxy are being mailedother related matters beginning on or about April 3, 2003, to all stockholders
of record as of the record date. Under page 7.
New Jersey law and Selective’s By-laws govern the Company's By-Laws,
each sharevote on Proposal 1, on which you may:
Vote in favor of Common Stock outstandingall the nominees;
Withhold your votes as to all nominees; or
Withhold your votes as to specific nominees.
Assuming a quorum, to be elected, a candidate must receive a plurality of the record date is entitled to one
votevotes cast at the Annual Meeting. The presenceMeeting in person or by proxy of the holders of
a majority of the shares of Common Stock entitled to vote at the Annual Meeting
constitutes a quorum. Under New Jersey law, proxies submitted with votes
withheld for the election of directors, abstentionsStockholders may not cumulate their votes. Abstentions and broker non-votes are
included in determining whether a quorum is present. Directors are elected by a
plurality of votes cast, meaning that the five nominees receiving the greatest
number of votes will be elected. Votes withheld for the election of any or all
of the nominees have no impact on the election of directors except to reduce the
number of votes for the nominee(s) for which votes are withheld. Approval of the
shareholder proposal requires the affirmative vote of a majority of the votes
cast on the proposal. Abstentions are counted as shares present at the meeting
for purposes of determining a quorum. Similarly, shares which brokers do not
have the authority to vote in the absence of timely instructions from beneficial
owners ("broker nonvotes") are also counted at the meeting for purposes of
determining a quorum. Abstentions and broker nonvotes are not considered votes
cast and will not be counted either "for" or "against" the shareholder proposal
and, accordingly, will have no effect on the outcome of the vote.
PROPOSAL 2. | APPROVAL OF THE SELECTIVE INSURANCE GROUP, INC. STOCK PURCHASE PLAN FOR INDEPENDENT INSURANCE AGENCIES (the “Agencies Stock Purchase Plan”) |
THE BOARD RECOMMENDS THAT YOU VOTE FOR THE AGENCIES STOCK PURCHASE PLAN.
You can find information about the Agencies Stock Purchase Plan beginning on page 30.
New Jersey law and Selective’s By-laws govern the vote on Proposal 2, on which you may:
Vote in favor of Proposal 2;
Vote against Proposal 2; or
Abstain from voting.
Assuming a quorum, the proposal will pass if approved by a majority of the stockholders present in person or represented by proxy and entitled to vote at the Annual Meeting. Abstentions will have the same effect as votes against Proposal 2 and broker non-votes will have no effect on the outcome of the vote.
PROPOSAL 3. | RATIFICATION OF APPOINTMENT OF INDEPENDENT PUBLIC ACCOUNTANTS |
THE BOARD RECOMMENDS THAT YOU VOTE TO RATIFY THE APPOINTMENT OF KPMG LLP AS INDEPENDENT PUBLIC ACCOUNTANTS FOR THE FISCAL YEAR ENDING DECEMBER 31, 2006.
You can find information about Selective’s relationship with KPMG LLP beginning on page 33.
New Jersey law and Selective’s By-laws govern the vote on Proposal 3, on which you may:
Vote in favor of Proposal 3;
Vote against Proposal 3; or
Abstain from voting.
Assuming a quorum, Proposal 3 will pass if approved by a majority of the stockholders present in person or represented by proxy and entitled to vote at the Annual Meeting. Abstentions will have the same effect as votes against Proposal 3 and broker non-votes will have no effect on the outcome of the vote.
Page 2
OTHER MATTERS TO COME BEFORE THE ANNUAL MEETING
The only persons or groups that were known by the Company asBoard of March 17, 2003,Directors is not aware of any other business to be the beneficial owners of more than 5%presented for a vote of the Company's outstanding Commonstockholders at the Annual Meeting. If any other matters are properly presented for a vote, the people named as proxies will have discretionary authority, to the extent permitted by applicable law and NASDAQ Stock are listed below:
The Chairman of the date hereof,Annual Meeting may refuse to allow presentation of a proposal or nominee for the Board of Directors knows of no other business that
will be presentedif the proposal or nominee is not properly submitted. The requirements for consideration atsubmitting proposals and nominations for this year’s meeting were the meeting, except the matters set forth
in the Notice of Annual Meeting. If any such other business shall properly come
before the meeting, it is intended that votes will be cast, pursuant to proxies
solicited, in respect of any such other business in the discretion of the
persons acting under said proxies. Duly executed proxies that contain no
instructions to the contrary will be voted FOR the election of the five nominees
named hereinsame as directors of the Company, and AGAINST the shareholder proposal.
The Annual Report to Stockholdersthose described on page 35 for the fiscal year ending December 31, 2002,
is being provided to all stockholders of record as of the close of business on
March 17, 2003 together with this Proxy Statement.
next year’s meeting.
VOTING AND PROXY PROCEDURE
HOW TO VOTE
Stockholders of record (that is, stockholders who hold their shares in their own
name)DO I VOTE?
You can vote any one of threefour (4) ways:
1. By Mail: Sign, date and return
1. | BY MAIL. Mark your voting instructions on, then sign and date the proxy card. Then return the proxy card in the postage-paid envelope provided. If you mail your proxy card, we must receive it before the beginning of the meeting. |
If we receive your signed proxy card, in the enclosed
postage-paid envelope. Ifbut you sign and return your proxy card but do not give voting instructions, the named proxies will vote your shares represented byFOR Items 1, 2, and 3. If any other matters arise during the meeting that proxy will be
voted as recommended by the Board of Directors.
2. By Telephone: Call the toll-free number on your proxy card torequire a vote, by
phone. You will need to follow the instructions on your proxy card and
the voice prompts.
3. By Internet: Go to the web site listed on your proxy card to vote
through the Internet. You will need to follow the instructions on your
proxy card and the web site. If you vote through the Internet, you may
incur telephone and/or Internet access charges from your service
providers.
If you vote by telephone or the Internet, your electronic vote authorizes the named proxies will exercise their discretion, to vote on your behalf in the same manner as if you signed, datedextent permitted by applicable law and returned your proxy card.NASDAQ and SEC rules and regulations.
2. | BY TELEPHONE. Call the toll-free number on your proxy card to vote by phone. Follow the instructions on your proxy card and the voice prompts. IF YOU VOTE BY TELEPHONE, YOU DO NOT NEED TO RETURN YOUR PROXY CARD. |
3. | BY INTERNET. Go to the website listed on your proxy card to vote through the Internet. Follow the instructions on your proxy card and the website. If you vote through the Internet, you may incur telephone and/or Internet access charges from your service providers. IF YOU VOTE BY INTERNET, YOU DO NOT NEED TO RETURN YOUR PROXY CARD. |
4. | IN PERSON. Attend the Annual Meeting, or send a personal representative with an appropriate proxy, in order to vote. |
Page 3
HOW DO I REVOKE MY PROXY OR THE INTERNET, YOU DO
NOT NEED TO RETURN YOUR PROXY CARD.
If your shares are held in the name of a bank, broker or other holder of record
(that is, "street name"), you will receive instructions from the holder of
record that you must follow in order for your shares to be voted. Telephone and
Internet voting may be offered to stockholders whose shares are held by banks
and brokers.
CHANGING OR REVOKING YOUR VOTE
CHANGE MY VOTING INSTRUCTIONS?
You may revoke your proxy by giving proper written notice of revocationwriting to the Corporate Secretary, Michael H. Lanza, at the address in the meeting notice on the cover of the Company before yourthis proxy is exercised.statement. You may also change your vote at any time before the proxy is exercised.exercised by entering a new vote via the Internet, by telephone, or by returning a properly executed proxy bearing a later date. Any subsequent timely and valid vote by any means will change your prior vote. For example, if you voted by telephone, a subsequent Internet vote will change your vote. The last vote received before midnight easternnoon central time, May 6, 2003April 25, 2006 will be the onevote that is counted. You may also change your vote by voting in person at the annual
meeting.
Stockholders who holdAnnual Meeting.
HOW WILL PROXIES BE VOTED IF I GIVE MY AUTHORIZATION?
If you properly execute your proxy on the accompanying form, return it to Selective, and do not subsequently revoke your proxy, your shares of common stock will be voted at the Annual Meeting in accordance with your instructions. In the absence of instructions, the named proxies will vote your shares “FOR” the election of each director nominee, “FOR” the approval of the Agencies Stock Purchase Plan, and “FOR” the ratification of the appointment of KPMG LLP as Selective’s independent public accountants. If other matters should properly come before the meeting, the named proxies will vote on such matters, to the extent permitted by applicable law and NASDAQ and SEC rules and regulations, in accordance with their best judgment.
HOW WILL VOTES BE COUNTED?
The inspector of elections appointed by the Board of Directors for the Annual Meeting will separately tabulate affirmative and negative 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). Shares represented by proxies that reflect abstentions and broker non-votes are counted for determining whether there is a quorum. Abstentions and broker non-votes will not be considered in determining whether director nominees have received the requisite number of affirmative votes. For each of the remaining proposals, approval will require the affirmative votes of the holders of a majority of the total number of the votes of the stockholders present at the Annual Meeting or represented by proxy and entitled to vote on the proposal. For each of these remaining proposals, abstentions will have the effect of a vote “Against” such proposal, and broker non-votes, although counted for purposes of determining the presence of a quorum, will have the effect of a vote neither for nor against such proposal.
WHAT IF MY SHARES ARE NOT REGISTERED IN MY NAME?
If you own your shares in brokerage accounts, or "street name"
stockholders, who wish to change their“street name,” meaning that your broker is actually the record owner, you should contact your broker. When a broker does not have voting instructions and withholds its vote prior toon one of these matters, it is called a “broker non-vote.” Broker non-votes count toward a quorum, but otherwise do not affect the meeting, will need to
contact the institution that holds their shares. If you wish to change your vote
at the meeting, you will need to obtain a legal proxy from the institution that
holds your shares.
I. ELECTIONoutcome of any proposal.
Page 4
SECURITY OWNERSHIP OF DIRECTORS (ItemAND EXECUTIVE OFFICERS
AND CERTAIN BENEFICIAL OWNERS AND SECURITIES AUTHORIZED
FOR ISSUANCE UNDER EQUITY COMPENSATION PLANS
SECURITY OWNERSHIP OF MANAGEMENT
AS OF FEBRUARY 28, 2006
The following table shows:
How much Selective common stock each nominee for director, director, the Chairman of the Board, Chief Executive Officer and President (“CEO”), and the next four most highly compensated executive officers other than the CEO, own directly or beneficially.
How much Selective common stock the directors and executive officers of Selective own, directly or beneficially as a group.
|
| NUMBER OF |
|
| |
| NUMBER | SHARES | TOTAL |
| |
| OF SHARES | REGARDING | SHARES |
| |
| BENEFICIALLY | OPTIONS | BENEFICIALLY | PERCENT | |
NAME OF OWNER | OWNED | EXERCISABLE(1) | OWNED | OF CLASS | |
Bauer, Paul D. | 13,991 |
| 21,000 | 34,991 | * |
Becker, W. Marston | 103 |
| 0 | 103 | * |
Brown, A. David | 15,232 |
| 21,000 | 36,232 | * |
Burville, John C. | 119 |
| 0 | 119 | * |
Connell, Richard F. | 37,719 |
| 5,000 | 42,719 | * |
Kearns, William M., Jr. | 85,577 |
| 27,000 | 112,577 | * |
Lamm-Tennant, Joan M. | 15,611 |
| 27,000 | 42,611 | * |
McClellan, S. Griffin, III | 24,133 | (2) | 6,000 | 30,133 | * |
Murphy, Gregory E. | 137,016 |
| 34,825 | 171,841 | * |
Ochiltree, Jamie, III | 109,353 | (3) | 44,000 | 153,353 | * |
O’Kelley, Ronald L. | 1,969 |
| 3,000 | 4,969 | * |
Rockart, John F. | 3,530 |
| 9,000 | 12,530 | * |
Rue, William M. | 207,193 | (4) | 27,000 | 234,193 | * |
Thatcher, Dale A. | 38,038 |
| 5,000 | 43,038 | * |
Thebault, J. Brian | 19,755 | (5) | 27,000 | 46,755 | * |
Zaleski, Ronald J. | 40,734 |
| 16,996 | 57,730 | * |
All executive officers and directors as a group (20 persons) | 841,512 |
| 329,783 | 1,171,295 | 4.24 |
* | Less than 1% of the common stock outstanding. |
Page 5
HOLDERS OF 5% OR MORE OF SELECTIVE SECURITIES
The following table lists the only person or group known to Selective to be the beneficial owner of more than 5% of any class of Selective’s voting securities as of December 31, 2005, based on a Schedule 13G filed by the beneficial owner on February 6, 2006 with the SEC.
Title of Class | Name & Address of Beneficial Owner | Amount & Nature of Beneficial | Percentage of Class |
Common Stock | Dimensional Fund Advisors Inc. 1299 Ocean Avenue, 11th Floor Santa Monica, CA 90401 | 2,129,248 shares of common stock | 7.53% |
SECURITIES AUTHORIZED FOR ISSUANCE UNDER EQUITY COMPENSATION PLANS
The following table sets forth certain information as of December 31, 2005,with respect to compensation plans under which shares of Selective’s common stock may be issued.(1)
Plan Category | (a) |
| (b) |
| (c) | |
Equity Compensation plans | 789,523 |
| $26.96 |
| 1,971,194 | (2) |
|
|
|
|
|
|
|
Equity Compensation plans not | — |
| — |
| 561,502 | (3) |
|
|
|
|
|
|
|
Total | 789,523 |
| $26.96 |
| 2,532,696 |
|
(1) | Since December 31, 2005, Selective has issued 42,970 stock options and 136,985 restricted shares under the Selective Insurance Group, Inc. 2005 Omnibus Stock Plan (the “Omnibus Stock Plan”). |
(2) | Includes 223,903 shares available for issuance under Selective’s Employee Stock Purchase Plan; and 1,747,291 shares available for issuance under Selective’s Omnibus Stock Plan; which can be issued as stock options or in the form of restricted stock awards. |
(3) | This is the number of shares available for issuance under Selective’s current Stock Purchase Plan for Independent Insurance Agents. |
Page 6
Stock Purchase Plan for Independent Insurance Agents
History
Selective’s Board of Directors adopted the Selective Insurance Group Stock Purchase Plan for Independent Insurance Agents (the “Original Independent Agents Plan”) initially in May 1989 and most recently amended the Independent Agents Plan on July 24, 2000. At the Annual Meeting, the Board is seeking shareholder approval of a new Agencies Stock Purchase Plan, which, if approved, would replace the Original Independent Agents Plan. If the new Agencies Stock Purchase Plan is not approved by stockholders, the Original Independent Agents Plan will remain in effect. Please see Proposal 2 for information regarding the Agencies Stock Purchase Plan.
The Plan
Selective’s Board of Directors adopted the Original Independent Agents Plan to motivate persons performing independent insurance agency services for Selective by enabling them to participate in Selective’s long-term growth and success by purchasing shares of Selective’s common stock at a discounted price. The purchase price for shares offered under the Original Independent Agents Plan is the average of the high and low sale prices of Selective’s common stock quoted on NASDAQ on the date of purchase, less a discount of 10%.
Eligibility
Each independent insurance agency which is under contract with Selective’s insurance subsidiaries to promote and sell Selective insurance products is eligible to participate in the Original Independent Agents Plan and to purchase shares of Selective’s common stock under the plan. Also eligible to purchase shares under the Original Independent Agents Plan are: the principals of such agencies, general partners, officers and stockholders of eligible insurance agencies, key employees of eligible insurance agencies designated by the principals, general partners or officers of the agencies, their individual retirement plans, their Keogh plans, and employee benefit plans of eligible insurance agencies.
Restrictions on Shares Purchased under the Plan
Shares purchased under the Original Independent Agents Plan are restricted for a period of one year beginning on the date of the day after the purchase. During this one-year period, shares purchased under the Original Independent Agents Plan cannot be sold, transferred, pledged, assigned or disposed of in any way.
INFORMATION ABOUT PROPOSAL 1 on Proxy)
The Company's
Election of Directors
Selective’s Board of Directors currently has twelve (12) directors, divided into three (3) classes designated Class I, Class II, and Class III. Pursuant to Selective’s Restated Certificate of Incorporation, as amended, (the
"Certificate"), and its By-laws, Selective may have a minimum of seven (7) and a maximum of twenty (20) directors. By majority vote, the By-Laws provide thatBoard of Directors may set the number of directors within this range at any time.
Under Selective’s By-laws, directors are elected at the Annual Meeting for terms of the
Company shall not be less than seven nor more than twenty,three (3) years, unless a director is being elected to fill a vacant, unexpired term. No family relationships exist between any of Selective’s current directors, executive officers, and such number
within the minimum and maximum limitations shall be fixed from timepersons nominated by Selective to time bybecome a resolution approved by a majority of the whole Board of Directors. As provided
in the Certificate,director. At present, the Board of Directors is divided into three classes, equal
or nearly as equal as possible, so that directors serve staggered three-year
terms.
has authorized twelve (12) directors.
The Board nominated four (4) Class II directors to stand for election at the Annual Meeting for terms expiring at the 2009 Annual Meeting or when a successor has nominatedbeen duly elected and qualified: A. David Brown,Brown; William M. Kearns, Jr.,; S. Griffin McClellan III,III; and J. Brian ThebaultThebault.
The Board also nominated two (2) Class III directors to stand for reelection as directors for three-year
terms expiringelection at the Annual Meeting of Stockholders in 2006. All such persons
are currently directors and were previously elected by stockholders. John F.
Rockart, Ph.D., who is also nominated for election as director for a three-year term expiring at the 2008 Annual Meeting of Stockholders in 2006, was elected by the
Board asor when a director on July 1, 2002 and added to the Class of Directors whose
terms expire in 2003. Mr. Thomas D. Sayles, Jr., whosuccessor has been duly elected and qualified: John C. Burville and John F. Rockart. Dr. Burville was recommended by a director since
1988, retired fromthird party search firm and non-management directors of Selective and was appointed to the Board effective January 15, 2003. 1, 2006. Dr. Rockart is presently a Class II director whose term expires at the 2006 Annual Meeting.
Page 7
The Board reduced the
number of directors from twelvealso nominated one (1) Class I director to eleven effectivestand for election at the Annual Meeting for a term expiring at the 2007 Annual Meeting or when a successor has been duly elected and qualified: W. Marston Becker. Mr. Becker was recommended by a third party search firm and non-management directors of Selective and was appointed to the Board effective February 200313, 2006.
All seven (7) nominees have consented to being named in this proxy statement and to serve if elected and the Board Meeting.
In the eventdoes not know of any nominee shallreason why any of these nominees would decline or be unable to serve asif elected. If a director at the time ofnominee becomes unavailable or unable to serve before the Annual Meeting, of Stockholders, which the Board of Directors does not
presently expect,can either reduce its size or designate a substitute nominee. If the Board designates a substitute nominee, proxies in favor of such unavailablethat would have been cast for the original nominee will be votedcast for a consentingthe substitute nominee selected by the Board of Directors. None of the
nominees for directorunless instructions are related to any executive officer or director of the
Company or another nominee by blood, marriage or adoption.
Directors shall be elected by a plurality of the votes cast.
2
NOMINEES
The following information is set forth with respectgiven to the five nominees for
election as directors at the Annual Meeting of Stockholders to serve three-year
terms expiring at the Annual Meeting of Stockholders in 2006.
contrary.
NOMINEES OF THE BOARD OF DIRECTORS
CLASS II – DIRECTORS CONTINUING IN OFFICE UNTIL THE 2009 ANNUAL MEETING OF STOCKHOLDERS | |
Name, Age, Year Elected To Board of Directors | Occupation And Background |
A. David Brown,63 Independent Director, 1996 | • Managing Partner, Bridge Partners, LLC, an executive recruiting firm, since October 2003. • Partner, Whitehead Mann, executive • Director, Hanover Direct, since • Director, • Director, The Sports Authority, Inc., • Trustee, Drew • Trustee, Jackie Robinson Foundation. • Trustee, Morristown Memorial Hospital Foundation. • Graduate of Monmouth University (B.S.). |
William M. Kearns, Jr., 70 Independent Director, 1975 | • Chairman and Co-CEO and other executive positions of Keefe Managers, LLC, a money management firm, since 1998. • President, W.M. Kearns & Co., Inc., a private investment company, since • Advisory Director, • Trustee of EQ Advisors Trust (Equitable Life Assurance Society of the U.S.), AXA Financial, since • Trustee, AXA Enterprise Funds, since 2004. • Director, Transitor Devices, Inc., since 1991. • Advisory Director, Gridley and Company LLC, since • Director, U. S. Shipping Partners L.P., since • Advisory Director, Private Client Resources LLC, since • Member, Executive Advisory Committee, William E. Simon School of Business Administration, University of Rochester, since 1986. • Member, National Association of Securities Dealers. • Trustee, Morristown Memorial Hospital Foundation. • Honorary LLD, Gonzaga University. • Graduate of the University of Maine (B.A.). • Graduate of New York University (M.A.). |
S. Griffin McClellan III, 68 Independent Director, 1980 | •Retired • Self-employed Banking Consultant, 1994 to 2001. • Graduate of |
Page 8
J. Brian Thebault,54 Independent Director, 1996 | • Chairman and Chief Executive Officer, L.P. Thebault Company, a graphic • Trustee, The Delbarton School, since 1990. • Trustee, The Peck School, since 1994. • Graduate of University of Southern California (B.S.). |
CLASS III – DIRECTORS CONTINUING IN OFFICE UNTIL THE 2008 ANNUAL MEETING OF STOCKHOLDERS | |
Name, Age, Year Elected To Board of Directors | Occupation And Background |
John C. Burville, 58 Independent Director, 2006 | • Insurance Consultant to the Bermuda Government, since 2003. • Bermuda Insurance Advisory Committee, since 1985. • Chief Actuary and • Graduate of Leicester University in |
John F. Rockart, 74 Independent Director, 2002 | • Senior Lecturer Emeritus, Massachusetts Institute of • Director, • Director, Comshare, Inc., 1998 to • Director, Oasis Semiconductor, Inc., 2004 to 2005. • Member, Society Information Management, Association Information Systems. • Trustee of New England Medical Center, since 1980. • Graduate of Princeton University (A.B.). • Graduate of Harvard Business School (M.B.A.). • Graduate of Massachusetts Institute of Technology (Ph.D.). |
CLASS I – DIRECTOR CONTINUING IN OFFICE UNTIL THE 2007 ANNUAL MEETING OF STOCKHOLDERS | |
Name, Age, Year Elected To Board of Directors | Occupation And Background |
W. Marston Becker, 53 Independent Director, 2006 | • Chairman & • Chairman of • Director, • Director, West Virginia University, United Hospital System, since • Director, Trenwick Group, Ltd., 1997-2003. • Advisory Board Member, International Catastrophe Insurance Managers, LLC (ICAT), since 2005. • Advisory Board Member, Conning Funds, since 1997. • Advisory Board Member, American Securities Funds, since 1997. • Graduate of • Graduate of West Virginia University |
Page 9
CONTINUING DIRECTORS
CLASS I – DIRECTORS CONTINUING IN OFFICE UNTIL THE 2007 ANNUAL MEETING OF STOCKHOLDERS | |
Name, Age, Year Elected To Board of Directors | Occupation And Background |
Gregory E. Murphy,50 | • Chairman, President, and Chief Executive Officer of • President and Chief Executive Officer of • President and Chief Operating Officer of • Other senior executive, management, and operational positions at Selective, since 1980. • Director, Newton Memorial Hospital Foundation, Inc., since • Director, American Insurance Association (AIA), since 2002. • Trustee, the American Institute for CPCU (AICPCU) and the Insurance Institute of America • Graduate of Boston College (B.S.). • Harvard University (Advanced Management Program). |
William M. Rue, Non-Independent Director, 1977 | • President, • President, Rue Financial Services, Inc., since 2002. • Director, 1st Constitution Bank, since • Director, Robert Wood • Trustee, Rider University, • Director, Robert Wood Johnson University Hospital Foundation, since 1999. |
CLASS III – DIRECTORS CONTINUING IN OFFICE UNTIL THE 2008 ANNUAL MEETING OF STOCKHOLDERS | |
Name, Age, Year Elected To Board of Directors | Occupation And Background |
Paul D. Bauer, 62 Independent Director, 1998 | • Designated by the Board of • Retired Financial Executive. • Executive Vice President and Chief • Director, R.P. Adams Co., 1991 to 2004. • Director, Rosina Holdings Inc., since • Director, IMC, Inc., 1995 to • Director, Catholic Health System of Western New York, since 1998. • Trustee, D’Youville College, since 1995. • Graduate of Boston College (B.S. in Accounting). |
Page 10
Joan M. Lamm-Tennant, 53 Independent Director, 1993 | • Senior Vice President, General Reinsurance Corporation, since 1997. • Professor of Finance, Villanova University, 1988 to 2000. • Member, American Risk and Insurance Association. • Member, International Insurance Society. • Member, Association for Investment Management and Research. • Graduate of St. Mary’s University (B.B.A. and M.B.A.). • Graduate of the University of Texas (Ph.D.). |
Ronald L. O’Kelley, 61 | • Chairman and CEO, Atlantic Coast Venture Investments Inc., a private investment company, since • Executive Vice President, • Director, U. S. Shipping Partners L.P., since • Director, Refco Inc., 2005 – 2006. • Advisory Director, Donald H. Jones Center for Entrepreneurship, Tepper School of Business, Carnegie Mellon University, since • Graduate of Duke University (A.B.). • Graduate of Carnegie-Mellon University (M.B.A.). |
The Board of office areDirectors has determined that all directors, except for a one-year period.
*See additional information about Mr. Murphy and Mr. Rue, are independent as defined by the applicable NASDAQ and SEC rules and regulations. See the section entitled Certain Relationships and Related Transactions below for further information concerning Mr. Rue.
EXECUTIVE OFFICERS
Information regarding Executive Officers is incorporated by reference to Selective’s Annual Report on page 4.
5
STOCK OWNERSHIP OF DIRECTORS AND OFFICERS
The following table sets forth, as of February 18, 2003, certain information
with respect to shares of Common Stock beneficially owned by (i) each director;
(ii) eachForm 10-K in the item in Part I captioned “Executive Officers of the executive officers named in the Summary Compensation Table
below;Registrant.”
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
Transactions with Management and (iii) all of the Company's directors and executive officers asOthers/Certain Business Relationships
William M. Rue, a group:
Rue Insurance wrote insurance policies accounting for $10.2 million in direct written premiums with Selective’s insurance subsidiaries and Selective’s insurance subsidiaries paid Rue Insurance $1.9 million in commissions.
Rue Insurance wrote contracts accounting for $64,000 in fees with Selective HR Solutions and Selective HR Solutions paid Rue Insurance $15,000 in commissions.
Selective paid $0.2 million in reinsurance commissions to P.L. Services, LLC t/a Public Alliance Group Administrative Services, an insurance fund administrator of which Rue Insurance owns 20% and which places reinsurance through Selective Insurance Company of America (“SICA”), a Selective insurance subsidiary.
Selective paid $0.6 million in premiums for insurance coverages that Rue Insurance wrote with non-Selective insurance companies for Selective’s own operations, for which Rue Insurance was paid commission pursuant to its agreements with those carriers.
Page 11
The son of S. Griffin McClellan III, a Selective director, S. Griffin McClellan IV, is an Assistant Vice President of Selective’s subsidiary, SICA. In 2005, Mr. Rue disclaims beneficial
ownership.
(d) 27,124S. Griffin McClellan IV received $140,229 in cash compensation, primarily comprised of salary, bonus and tuition reimbursement, and a grant of 962 shares held by a trust for the benefit of son and daughter, of
whichrestricted Selective common stock. Mr. Rue is a co-trustee.
(7) Includes 100 shares held in custody for son.
6
COMPENSATION OF DIRECTORS
During 2002, nonemployee directors, consisting of all directors other than Mr.
Murphy, received Directors' fees, which are fixed annually,S. Griffin McClellan IV’s compensation was determined in accordance with the termsSICA’s standard employee compensation practices. Mr. S. Griffin McClellan III was a member of the Stock Compensation Plan for Nonemployee Directors (the "Stock
Plan"). Under the Stock Plan, the Director receives his or her annual fees for
services as a DirectorAudit Committee in (i) shares of Common Stock or (ii) in cash and shares
of Common Stock, at the election2005. As of the Director, provided2006 Annual Meeting, he will no longer serve on that no more than 50%committee.
Indebtedness of Management
Certain loans were previously made by Selective to executives that are grandfathered under the compensation is paid in cash. The annual fees are fixed annuallySarbanes-Oxley Act of 2002 and were authorized by the Board of Directors to encourage Selective stock ownership. On December 16, 1994, Selective made a loan to Jamie Ochiltree, III, now Selective’s Senior Executive Vice President, Insurance Operations, in the original principal amount of $197,000 at an annual interest rate of zero percent and area maturity date in 2005 to finance the exercise of non-qualified stock options to purchase Selective common stock granted on the same date. On August 7, 1998, Selective made a loan to Mr. Ochiltree in the original principal amount of $98,799 at an annual interest rate of 2.5% and a maturity date in 2009 to finance the purchase of Selective common stock in the open market. The largest aggregate amount of such indebtedness outstanding at any time during the fiscal year 2005 was $116,403. Mr. Ochiltree paid quarterly on January 1, April 1, July 1, and
October 1the 1994 loan in full as of each year. The numberFebruary 2005. As of shares of Common Stock to be issued to
each director on each payment date is determined by dividing one-fourthMarch 10, 2006, the outstanding principal amount under the 1998 loan was $43,471.
SECTION16(A) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
Section 16(a) of the amountSecurities Exchange Act of annual fees1934, as amended (the “Exchange Act”), requires Selective’s directors and executive officers, and persons who own more than 10% of a registered class of Selective’s equity securities, to be paidfile with the SEC initial reports of ownership and reports of changes in Common Stockownership of Selective’s equity securities. Such executive officers, directors, and greater than 10% stockholders are required by the fair market value (the
averageSEC regulation to furnish Selective with copies of all of the highSection 16(a) Exchange Act reports that they file. Based solely on its review of the copies of Forms 3, 4, and low sale price5 or written representations from certain reporting persons that no Forms 5 were required for those persons, Selective believes that all reporting requirements under Section 16(a) for the fiscal year ended December 31, 2005, were met in a timely manner by its directors, executive officers, and greater than 10% beneficial owners.
CODE OF CONDUCT
Selective has adopted a Code of a shareConduct which sets forth the guiding principles of Common Stock as reported on
the NASDAQ National Market)business ethics for all Selective personnel, including executive officers. The Code of a share of Common Stock on such payment date. For
2002, the annual fees were fixed at $38,000. At the November 2002 Board Meeting,
the Board fixed the annual fees for 2003 at $38,000. In addition to the annual
fees receivedConduct can be found under the Stock Plan, effective January 1, 2003,Corporate Governance section of Selective’s website, www.selective.com. Any amendment to or waiver from the Board
approved committee fees as follows: $1,500 for each in-person meeting attended,
and $1,000 for each telephonic meeting attended. These committee fees are paid
in cash.
On or before December 20provisions of each year, the directors must electCode of Conduct that applies to receive upSelective’s senior executive officers will be posted to 50% of their annual fees in cash. Messrs. Herder and McClellan elected to
receive 50% of their annual fees for the year 2002 in cash. In addition, each
nonemployee director may also elect on or before December 20 of each year to
defer the receipt of their annual fees under the Stock Plan, and any dividends
accrued with interest thereon, to a specified future year, the attainment of age
70 or termination of services as a director. Messrs. Bauer, Brown, Dolan,
Thebault and Ms. Lamm-Tennant elected to defer their 2002 annual fees under the
Stock Plan. Of the directors who did not defer their annual fees, Messrs. Kearns
and Rue each received 1,573 shares, Messrs. Herder and McClellan each received
787 shares and Mr. Rockart received 785 shares.
Selective’s website, www.selective.com.
Page 12
THE BOARD OF DIRECTORS AND ITS COMMITTEES
The Board of Directors terminated the Directors' Plan (the retirement plan for
directors) on December 31, 1997. In connection therewith, the present value of
the future benefits of each eligible nonemployee director was determined to be
fully vested as of December 31, 1997. held seven (7) meetings in 2005.
The Company converted those benefits into
units, with each such unit having a value equal to the fair market value of a
share of Common Stock on December 31, 1997. Each unit accrued an amount equal to
the dividends declaredBoard has five (5) standing committees: Audit, Corporate Governance and paid on a share of Common Stock. Dividends accrued on
units were reinvested in additional units in the same manner as dividends are
reinvested in shares of Common Stock under the Company's dividend reinvestment
plan for stockholders. On May 8, 2002, following approval by stockholders, the
Company converted the units into a fixed number of shares of Common Stock. Those
shares of Common Stock were credited to an account established for each
participant. Each participant has made an irrevocable election to defer receipt
of the shares until termination of service as a director or to receive the
shares in installments over not more than a five year period beginning as of the
January 1 following termination of service as a director. Cash dividends
declaredNominating, Executive, Finance, and paid on the shares of Common Stock are credited to the director's
account.Salary and Employee Benefits. The cash portion of the account is credited with interest at the end of
each year at the annual rate equal to the average two-year United States
Treasury Bill rate for that year. If distributions are made prior to the end of
any year, interest will be paid on the cash portion being distributed at an
annual rate equal to the average two-year United States Treasury Bill rate from
the beginning of that year to the date of distribution. The cash portion of the
account will be distributed to the director on the date(s) the shares are
distributed. In the event of a "Change in Control" of the Company which results
in the termination of a director's service as a director of the Company, the
shares of Common StockAudit, Corporate Governance and cash in the director's account will be distributed to
the director on the first day of the month following the termination of service
as a director. For purposes of that distribution, "Change of Control" means: (i)
an acquisition of a controlling interest in the Company's voting securities;
(ii) an election contest; (iii) a successful tender or exchange offer by a
person other than the Company or an affiliate of the Company; (iv) a merger; or
(v) a consolidation or other business combination, anyNominating, Finance, and Salary and Employee Benefits Committees have written charters, all of which result in
directors constituting a majority of the Board nominated by management of the
Company immediately prior to such event ceasing tocan be directors after the event.
The Company also has a Stock Option Plan for Directors (the "Option Plan"),
which applies only to nonemployee directors. Under the Option Plan, each
eligible director automatically receives an option to purchase 3,000 shares of
Common Stock on March 1 of each year. Subject to certain adjustments, the
maximum number of shares of Common Stock that may be issuedfound under options
granted pursuant to the Option Plan is 850,000, which may be authorized but
unissued shares or treasury shares. The exercise price for each share of Common
Stock subject to an option granted is the fair market value of a share of Common
Stock on the date such option is granted. The exercise price is payable in cash
or in Common Stock of the Company. Any option granted under the Plan becomes
exercisable on the first anniversary of the date it was granted. No option is
exercisable after the tenth anniversary of the grant. In the event of an
optionee's death or disability, an option may be exercised, in whole or in part,
by the optionee's executor, administrator, guardian or legal representative in
accordance with the terms of such option. On March 1, 2002, options to purchase
3,000 shares of Common Stock were granted to each eligible director at an
exercise price of $22.68 per share, the fair market value on that date.
7
COMMITTEES OF THE BOARD OF DIRECTORS
Corporate Salary &
Board Member Audit Governance (1) Benefits Finance Executive
- ------------ ----- -------------- -------- ------- ---------
Paul D. Bauer X X
- -----------------------------------------------------------------------------------------
A. David Brown X C X
- -----------------------------------------------------------------------------------------
William H. Dolan, II X X
- -----------------------------------------------------------------------------------------
C. Edward Herder, CPCU X X
- -----------------------------------------------------------------------------------------
William M. Kearns, Jr. C X X
- -----------------------------------------------------------------------------------------
Joan M. Lamm-Tennant, PhD. C X X
- -----------------------------------------------------------------------------------------
S. Griffin McClellan III X C X
- -----------------------------------------------------------------------------------------
Gregory E. Murphy * X C
- -----------------------------------------------------------------------------------------
John F. Rockart, Ph D. X X
- -----------------------------------------------------------------------------------------
William M. Rue, CPCU X
- -----------------------------------------------------------------------------------------
J. Brian Thebault X X
- -----------------------------------------------------------------------------------------
Total meetings held in 2002 5 2 6 4 0
Total number of Board meetings during 2002: 8
* Chairman of the Board C= Chairperson X=Member
(1) At the May 8, 2002 Organizational Meeting, the Committee on Directors and
the Conflict of Interest Committees were combined to form the Corporate Governance Committee. Prior to May 8, 2002,section of Selective’s website, www.selective.com.
All of the members of the Audit Committee, on Directors met
two timesthe Corporate Governance and Nominating Committee, and the Conflict of InterestSalary and Employee Benefits Committee met one time.
- --------------------------------------------------------------------------------
Audit Committee: The Audit Committee, consisting of allare independent directors overseesas defined by NASDAQ and SEC rules and regulations.
All directors attended 75% or more of the Company's financial reporting process and internal controls on
behalfmeetings of the Board of Directors. Directors and the committees of which they are members in 2005.
It is Selective’s policy that all directors are expected to attend the Annual Meeting. All directors attended the 2005 Annual Meeting.
Page 13
The Audit Committee also supervisesfollowing table lists for each of these committees, its membership, a summary of its responsibilities, and the relationship between the Company and its independent auditors, including making
decisions with respect to appointment, retention (or removal), reviewing the
scopenumber of audit services, approving significant non-audit services and confirming
independence.
Corporate Governance: meetings it held in 2005:
COMMITTEE NAME AND MEMBERSHIP | COMMITTEE RESPONSIBILITIES | 2005 MEETINGS |
Audit Paul D. Bauer, Chairperson(1) Joan M. Lamm-Tennant(2) S. Griffin McClellan III(3) John F. Rockart J. Brian Thebault (1) Designated by the Board of Directors as an audit committee financial expert in accordance with SEC rules and regulations. Became Chairperson on April 27, 2005. (2) Served as Chairperson until April 26, 2005. (3) As of the 2006 Annual Meeting, Mr. McClellan will no longer serve on this committee. | • Oversee the accounting and financial reporting processes and the audits of the financial statements. • Review and discuss with Selective’s management and independent auditors Selective’s financial reports and other financial information provided to the public and filed with the SEC. • Monitor the internal audit department and the appointment or replacement of the Director of Internal Audit. • Monitor Selective’s internal controls regarding finance, accounting and legal compliance. • Appoint Selective’s independent auditors and supervise the relationship between Selective and its independent auditors, including reviewing their performance, making decisions with respect to their compensation, retention and removal, reviewing and approving in advance their audit services and permitted non-audit services, and confirming the independence of the independent auditors. | 8 |
Corporate Governance and Nominating William M. Kearns, Jr., A. David Brown(1) Ronald L. O’Kelley John F. Rockart (1) The Board appointed Mr. Brown to the Corporate Governance and Nominating Committee effective April 27, 2005. | • Establish criteria for the selection of directors and identify and recommend to the Board the nominees for director. • Review and assess Selective’s Corporate Governance Guidelines and recommend any changes to the Board. • Recommend to the Board the Board members to serve on the various Board committees and as chairpersons. • Advise the Board with respect to Board composition, procedures and committees. • Review and approve compensation for non-employee directors. • Review and update Selective’s Code of Conduct and review conflicts of interest or other issues that may arise under the Code of Conduct involving Selective’s officers or directors. • Oversee the self-evaluations of the Board and each committee of the Board. | 5 |
Page 14
Executive Gregory E. Murphy, Chairperson Paul D. Bauer(1) A. David Brown William M. Kearns, Jr. William M. Rue (1) The Board appointed Mr. Bauer to the Executive Committee effective April 27, 2005. | • Authorized to exercise the Board of Directors’ powers and authority in the management of Selective’s business and affairs between Board meetings. • Has the right and authority to exercise all the powers of the Board of Directors on all matters brought before itexcept matters concerning Selective’s investments. | 1 |
Finance William M. Rue, Chairperson John C. Burville(1) William M. Kearns, Jr. Joan M. Lamm-Tennant S. Griffin McClellan III Gregory E. Murphy Ronald L. O’Kelley (1) The Board appointed Dr. Burville to the Finance Committee effective January 1, 2006. | • Review and approve changes to Selective’s investment policies, strategies, and programs. • Review investment transactions made on behalf of Selective and review the performance of Selective’s investment portfolio. • Appoint members of Selective’s Management Investment Committee. • Review and make recommendations to the Board regarding payment of dividends. • Review Selective’s capital structure and provide recommendations to the Board regarding financial policies and matters of corporate finance. | 4 |
Salary & Employee Benefits A. David Brown, Chairperson Paul D. Bauer John C. Burville(1) J. Brian Thebault (1) The Board appointed Dr. Burville to the Salary and Employee Benefits Committee effective January 1, 2006. | • Oversee, review, and administer all compensation, equity, and employee benefit plans and programs related to Selective’s and its subsidiaries’ employees and management. • Review annually and approve corporate goals and objectives relevant to executive compensation and evaluate performance in light of those goals. • Review annually and approve Selective’s compensation strategy for employees. • Review annually and determine the individual elements of total compensation of the CEO and other members of Senior Management. | 6 |
Page 15
DIRECTOR SELECTION PROCESS
The Corporate Governance and Nominating Committee consistingis responsible for reviewing candidates for election to Selective’s Board of all
independent directors, has responsibilityDirectors that are identified by Board members, management, and/or third party search firms and selecting nominees for approval by the developmentstockholders. In making selections, the Corporate Governance and adoptionNominating Committee reviews the attributes and criteria required in light of corporate governance guidelines, appointmentcurrent Board membership, including experience, skills, expertise, diversity, character, business judgment, time availability in light of Board committee members and
chairpersons, appointment of new Board directors and nomination of continuing
directors. The committee also develops and adopts guidelines for corporate
charitable contributions and oversees the Company's conflictother commitments, dedication, conflicts of interest policy.
This committeeand other relevant factors that the Corporate Governance and Nominating Committee consider appropriate. Candidates for election should be willing to devote sufficient time to carry out their duties and responsibilities effectively, and should possess the highest personal and professional ethics, integrity, and values. Candidates must be committed to representing the long-term interests of Selective and its stockholders. The Corporate Governance and Nominating Committee will consider nominees recommended by stockholders for election as directors at an Annual Meeting of Stockholders but does not solicit such recommendations. ShareholdersThe Corporate Governance and Nominating Committee applies the same standards in considering candidates submitted by stockholders as it does in evaluating candidates identified by other sources. Stockholders who wish to propose a nominee for electionconsideration by the Corporate Governance and Nominating Committee must do so in writing addressed to the Chairman of the Corporate Governance and Nominating Committee, c/o the Corporate Secretary of the Company,Selective, 40 Wantage Avenue, Branchville, NJ 07890. The proceduresnotification must contain all information relating to each person whom the stockholder proposes that the Corporate Governance and Nominating Committee consider for making such recommendations cannomination as a director as would be found in
"Shareholder Proposals" on page 22 of the Proxy Statement.
Salary and Employee Benefits Committee: The Salary and Employee Benefits
Committee, consisting of all independent directors, is responsible for setting
the executive compensation policies of the Company and evaluating the
performance and level of compensation of the executive officers of the Company
and its subsidiaries. The Committee continuously evaluates employee benefits and
makes recommendations to the Board in connection with these benefits. The
Committee also administers the Company's stock option plans and is the Trustee
of the Retirement Savings Plan and the Retirement Income Plan.
Finance Committee: The Finance Committee establishes overall investment policies
and guidelines of the Company and reviews and approves investments made by the
Company.
Executive Committee: The Executive Committee meets, as may be required, when the
Board of Directors is not in session and has the right and authority to exercise
all the powers of the Board of Directors on all matters brought before it,
except matters concerning the Company's investments.
ATTENDANCE OF BOARD MEMBERS AT MEETINGS
During 2002, all Board members attended 75% or more of the aggregate number of
meetings of the Board and of the meetings of Committees on which they served,
except for Ms. Lamm-Tennant who attended 71% of the aggregate number of meetings
of the Board and of the meetings of Committees on which she served.
SECTION 16(a) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
Based on the Company's review of Forms 3, 4, and 5 and written representations
submitted to the Company during and with respect to the fiscal year ended
December 31, 2002, the Company believes that all statements of transactions of
beneficial ownership required to be filed by directors and officersdisclosed in a solicitation of the
Company with the Securities and Exchange Commission were timely filed.
8
EXECUTIVE COMPENSATION AND OTHER INFORMATION
SUMMARY COMPENSATION TABLE
The following table shows,proxies for the fiscal years ended December 31, 2002, 2001election of such person as a director pursuant to Regulation 14A under the Exchange Act.
Page 16
DIRECTOR COMPENSATION
Compensation for non-employee directors in 2004 and 2000,2005 is shown on the table below. Employee directors do not receive compensation paid or accrued for those years, toserving on the Chairman,
President and Chief Executive Officer,Board.
COMPENSATION |
| 2005 |
|
| 2004 |
Annual Retainer Fee (1) |
| $43,000 |
|
| $43,000 |
Annual Option Grant (in shares) (2) |
| $3,000 |
|
| $3,000 |
Board Meeting Attendance |
| $0 |
|
| $0 |
Committee Attendance Fee (3) |
| $1,500 $1,000 |
|
| $1,500 $1,000 |
Annual Chairperson Fee(4) |
| $10,000 $10,000 |
|
| $10,000 $10,000 |
Lead Director Fee(5) |
| $10,000 |
|
| $0 |
Expenses |
| Reasonable |
|
| Reasonable |
(1) | The Annual Retainer Fee is set annually by the Corporate Governance and Nominating Committee. Pursuant to the Stock Compensation Plan for Nonemployee Directors (the “Directors Stock Plan”) prior to April 26, 2005 and the Omnibus Stock Plan thereafter, directors, by December 20 of the prior year, must elect to receive the Annual Retainer Fee either (i) entirely in shares of common stock or (ii) in a combination of shares of common stock and cash, which must be 50% or less of the Annual Retainer Fee. The Annual Retainer Fee is paid in equal quarterly installments on the first (1st) day of January, April, July, and October. The number of shares of common stock issued in each quarterly installment is determined by multiplying the amount of Annual Retainer Fee to be paid in stock by one-quarter (0.25) and dividing that product by the average of the high and low sale price of Selective’s common stock as quoted on NASDAQ on the payment date (“Fair Market Value”). By December 20 of the prior year, directors may also elect to defer the receipt of the Annual Retainer Fee and any dividends and accrued interest to a specified future year, the attainment of age 70, or termination of services as a director. On January 31, 2006, the Corporate Governance and Nominating Committee increased the Annual Retainer Fee for each non-employee Director to $50,000, with at least 50% still provided through Selective’s common stock. |
(2) | Under the Stock Option Plan for Directors (the “Directors Option Plan”) prior to April 26, 2005 and the Omnibus Stock Plan thereafter, each director automatically receives an option to purchase 3,000 shares of common stock on March 1 or the following business day if March 1 is on a weekend (“Automatic Director Option”). The exercise price for each option is the Fair Market Value and is payable in cash or in common stock. Each option vests on the first anniversary of its grant and has a term of ten (10) years. In the event of a director’s death or disability, an option may be exercised, in whole or in part, by the director’s executor, administrator, guardian or legal representative in accordance with the terms of such option. On January 31, 2006, the Corporate Governance and Nominating Committee decided to amend Selective’s non-employee director compensation program so that each non-employee director annually receives equity awards of $32,500 in restricted shares of Selective’s common stock and $32,500 in options under the Omnibus Stock Plan. Upon the Corporate Governance and Nominating Committee’s recommendation, effective February 28, 2006, the Board amended the Omnibus Stock Plan to eliminate Automatic Director Option grants and make other conforming changes. |
(3) | Committee Attendance Fees are paid in cash. Directors may also elect to defer the receipt of their Committee Attendance Fees and any interest thereon, to a specified future year, the attainment of age 70, or termination of services as a director. |
(4) | Annual Chairman Fees are paid quarterly in cash. Directors may also elect to defer the receipt of their Annual Chairman Fee and any interest thereon, to a specified future year, the attainment of age 70, or termination of service as a director. On January 31, 2006, the Corporate Governance and Nominating Committee increased the Annual Chairperson Fee for the Audit Committee and the Salary and Employee Benefits Committee to $12,500. Also at that time, the Corporate Governance and Nominating Committee adopted an Annual Chairperson Fee for each of the Corporate Governance and Nominating Committee and the Finance Committee of $7,500. |
(5) | The Corporate Governance and Nominating Committee set an annual fee of $10,000 to be paid quarterly in cash to the Lead Director, effective January 1, 2005 and, on January 31, 2006, increased the Lead Director Fee to $15,000. |
Page 17
EXECUTIVE COMPENSATION
The following Summary Compensation Table shows how much compensation Selective’s CEO and the next four most highly compensated executive officers other than the CEO earned over the past three (3) fiscal years (these executives are referred to as our “named executive officers”). Other tables that follow provide more detail about the specific types of the Company who served as executive officers
at the end of fiscal year 2002. (See footnote 1 below)
compensation.
Annual Compensation(1) | Long-Term | ||||||
Name and Principal Position | Year | Salary($) | Bonus ($)(2) | Other | Restricted | Securities | All Other ($) |
Gregory E. Murphy Chairman, President & | 2005 2004 2003 | 746,154 695,385 635,769 | 1,500,000 1,000,000 621,600 | 0 0 0 | 1,126,250 870,500 466,400 | 5,000 5,000 10,000 | 8,721 7,832 34,296 |
Jamie Ochiltree, III Senior Executive Vice President, | 2005 2004 2003 | 388,769 371,385 337,662 | 540,000 330,000 190,400 | 0 0 0 | 405,450 313,380 186,560 | 5,000 5,000 7,000 | 19,576 22,248 22,480 |
Richard F. Connell Senior Executive Vice President & | 2005 2004 2003 | 348,462 327,693 298,846 | 425,000 240,000 168,000 | 0 0 0 | 405,450 313,380 186,560 | 5,000 5,000 7,000 | 15,722 14,910 13,597 |
Dale A. Thatcher Executive Vice President, | 2005 2004 2003 | 298,616 278,385 233,846 | 400,000 200,000 131,600 | 0 0 0 | 405,450 313,380 186,560 | 5,000 5,000 7,000 | 13,256 13,339 11,188 |
Ronald J. Zaleski Executive Vice President | 2005 2004 2003 | 331,923 316,769 288,692 | 375,000 205,000 162,400 | 0 0 0 | 405,450 313,380 186,560 | 5,000 5,000 7,000 | 6,844 14,413 13,135 |
(1) | Annual Compensation is paid by SICA, which also sponsors the employee benefit plans in which such executive officers participate. |
(2) | Bonus payments in 2003 and 2004 were made pursuant to Selective’s Annual Cash Incentive Plan. Bonus payments for 2005 were made pursuant to the Selective Insurance Group, Inc. Cash Incentive Plan (“Cash Incentive Plan”), approved by Selective’s shareholders on April 26, 2005, as well as other awards granted by the Salary and Employee Benefits Committee to certain executive officers for personal achievement, which include $251,250 to Mr. Murphy, $36,500 to Mr. Connell, $107,100 to Mr. Ochiltree, $67,000 to Mr. Thatcher, and $5,370 to Mr. Zaleski. Under the Cash Incentive Plan, employees receive a percentage of salary as Annual Cash Incentive Payments if they achieved specified personal goals and Selective achieves stated corporate performance goals. The amounts contained in this column reflect the amounts earned for the applicable fiscal year. |
(3) | SEC rules do not require the reporting of perquisites and other personal benefits to the extent that the aggregate amount of such compensation is the lesser of either $50,000 or 10% of the total annual salary and bonus reported for each named executive officer. |
(4) | All amounts represent the dollar amount of the restricted stock on the date granted. Grants were made pursuant to the Selective Insurance Group, Inc. Stock Option Plan III (“Plan III”), under which such shares and their accumulated dividends cliff-vest four years from the date granted depending upon achievement of predetermined performance goals. The grants are subject to forfeiture should the named executive resign or be terminated for cause prior to vesting. The aggregate value of restricted stock awards at the end of 2005 was $4,248,000 for Mr. Murphy, $1,646,100 for Mr. Ochiltree, $1,646,100 for Mr. Connell, $1,646,100 for Mr. Thatcher, and $1,646,100 for Mr. Zaleski. The aggregate number of restricted shares held at the end of 2005 was 80,000 by Mr. Murphy, 31,000 by Mr. Ochiltree, 31,000 by Mr. Connell, 31,000 by Mr. Mr. Thatcher, and 31,000 by Mr. Zaleski. |
(5) | The amounts represent Selective’s annual matching contribution on behalf of the named executive to Selective’s Deferred Compensation Plan and to the Selective Insurance Company of America Retirement Savings Plan. The contributions to Selective’s Deferred Compensation Plan reflected in the table for 2005 are $17,035 for Mr. Ochiltree, $15,278 for Mr. Connell, $9,353 for Mr. Thatcher, and $6,485 for Mr. Zaleski. The contributions to the Selective Insurance Company of America Retirement Savings Plan reflected in the table for 2005 are $8,721 for Mr. Murphy, $505 for Mr. Ochiltree, $445 for Mr. Connell, $3,903 for Mr. Thatcher and $359 for Mr. Zaleski. In addition, the amounts for Mr. Ochiltree also include $2,037, which represents the difference between the market rate of interest and the actual rate of interest on indebtedness of such executive officer to Selective. |
Page 18
OPTION/SAR GRANTS IN LAST FISCAL YEAR
Individual Grants Grant Date Value
- ------------------------------------------------------------------------------------------ ----------------
Number of % of
Securities Total Options/
Underlying SARs Granted to Exercise or
Options/SARs Employees in Base Price Grant Date
Name Granted (1) (#) Fiscal Year ($/Sh) (2) Expiration Date Present Value ($) (3)
- ---- --------------- ----------- ---------- --------------- ---------------------
Gregory E. Murphy 10,000 6.59 20.75 02/05/12 54,850
Jamie Ochiltree III 5,000 3.29 20.75 02/05/12 27,425
Richard F. Connell 5,000 3.29 20.75 02/05/12 27,425
James W. Coleman, Jr. 5,000 3.29 20.75 02/05/12 27,425
Ronald J. Zaleski 5,000 3.29 20.75 02/05/12 27,425
(1) The stock options were granted under the Company's Stock Option Plan II and
Stock Option Plan III ("the Plans"). The Plans permit the granting of
options to all employees and permits the granting of SARs in tandem with
any or all stock options. If a SAR is exercised, the employee must
surrender the related stock option or portion thereof. Upon exercise of a
SAR, payment will be made by the Company in stock, cash, or some
combination thereof as a committee appointed by the Board of Directors
shall determine at the time of exercise. None of the options granted to the
named executive officers in 2002 has SARs attached. Under the terms of the
Plans, options or any related SARs, may be granted at no less than fair
market value as of the date of grant. They must be exercised within ten
years from the date of grant. In the event of any change in the number of
outstanding shares of the Common Stock of the Company as a result of a
stock dividend, stock split, or other readjustments, the committee
appointed by the Board of Directors shall make an appropriate adjustment in
the aggregate number of shares which may be subject to stock options
granted under the Plans and in the number of shares subject to and the
option price of each then outstanding option. The Company's Stock Option
Plan II expired on September 1, 2002 and was replaced by Stock Option Plan
III, which was approved at the Annual Meeting of Shareholders on May 8,
2002. All of the options granted to the named executives in 2002 were
granted under Stock Option Plan II.
(2) The options set forth in the table above were granted on February 5, 2002
at an exercise price equal to the fair market value of a share of Common
Stock at such date and were immediately exercisable.
(3) The Black-Scholes option pricing method has been used to calculate the
present value as of the date of grant and it is not intended to forecast
appreciation, if any, of the Company's stock price. The present value as of
the date of the grant, calculated using the Black-Scholes method, is based
on assumptions about future interest rates, expected life of the options,
dividend yield and stock price volatility. The risk free interest rate is
based on a zero coupon US Government Issue with the same terms and maturity
date as the specified option grant. The volatility is based on an estimate
of the future price variability of Selective Insurance Group, Inc. (SIGI)
stock for a term commensurate with the expected life of the option. There
is no assurance that these assumptions will prove to be true in the future.
Listed below are the various assumptions that were made with regard to the
grants:
-------------------------------------------
Exercise Price $20.75
-------------------------------------------
Risk Free Interest Rate 4.7%
-------------------------------------------
Expected Life of Option 7 Years
-------------------------------------------
Dividend Yield 2.4%
-------------------------------------------
Expected Volatility 24%
-------------------------------------------
10
OPTION AND SAR EXERCISES AND HOLDINGS
The following table sets forth information with respectconcerning stock option grants in 2005 to each of the named executive officers named in the Summary Compensation Table concerning the exercise of
options and/or SARs during the last fiscal year and unexercised options and SARs
held as of the end of the last fiscal year.
Table. No stock appreciation rights (“SARs”) were granted in 2005.
| Individual Grants |
|
| Potential Realizable Value | ||
Named Executive | Number of Securities Underlying | % of Total | Exercise | Expiration Date(4) | 5% ($) | 10% ($) |
Gregory E. Murphy | 5,000 | 4.62 | 44.05 | 2/1/2015 | 11,013 | 22,025 |
Jamie Ochiltree, III | 5,000 | 4.62 | 44.05 | 2/1/2015 | 11,013 | 22,025 |
Richard F. Connell | 5,000 | 4.62 | 44.05 | 2/1/2015 | 11,013 | 22,025 |
Dale A. Thatcher | 5,000 | 4.62 | 44.05 | 2/1/2015 | 11,013 | 22,025 |
Ronald J. Zaleski | 5,000 | 4.62 | 44.05 | 2/1/2015 | 11,013 | 22,025 |
(1) | There can be no assurance provided to any executive officer or any other holder of Selective’s securities that the actual stock price appreciation over the (ten) 10-year option term will be at the assumed 5% and 10% compounded annual rates or at any other defined level. Unless the market price of the common stock appreciates over the option term, no value will be realized from the option grants made to the named executive officers. |
(2) | The stock options were granted under Plan III. Plan III permits the granting of options to all employees and permits the granting of SARs in tandem with any or all stock options. If a SAR is exercised, the employee must surrender the related stock option or portion thereof. Upon exercise of a SAR, payment will be made by Selective in stock, cash, or some combination thereof as a committee appointed by the Board of Directors shall determine at the time of exercise. None of the options granted to the named executive officers in 2004 have SARs attached. Under the terms of Plan III, options or any related SARs, may be granted at no less than fair market value as of the date of grant. Options or any related SARs must be exercised within ten (10) years from the date of grant. In the event of any change in the number of outstanding shares of Selective’s common stock as a result of a stock dividend, stock split, or other readjustments, the committee appointed by the Board of Directors shall make an appropriate adjustment in the aggregate number of shares which may be subject to stock options granted under Plan III and in the number of shares subject to and the option price of each then outstanding option. |
(3) | The exercise price is equal to the fair market value of the common stock on the date of grant. |
(4) | The options may be exercised beginning on February 1, 2006. |
Page 19
AGGREGATED OPTION/SAROPTION EXERCISES IN LAST FISCAL YEAR
AND FISCAL YEAR-END OPTION/SAROPTION VALUES
The following table sets forth information concerning stock option exercises in 2005 to each of the named executive officers in the Summary Compensation Table. No SARs were exercised in 2005, and none of these named executive officers had any unexercised SARs outstanding as of December 31, 2005.
| Number of Securities | Value of Unexercised | ||||
Name | Shares on Exercise | Value | Exercisable | Unexercisable | Exercisable | Unexercisable |
Gregory E. Murphy | 13,200 | 349,032 | 29,825 | 5,000 | 882,369 | 45,250 |
Jamie Ochiltree, III | 7,932 | 207,453 | 39,000 | 5,000 | 1,179,258 | 45,250 |
Richard F. Connell | 5,000 | 112,975 | 0 | 5,000 | 0 | 45,250 |
Dale A. Thatcher | 24,000 | 570,150 | 0 | 5,000 | 0 | 45,250 |
Ronald J. Zaleski | 18,004 | 458,342 | 11,996 | 5,000 | 337,027 | 45,250 |
(1) | Calculated by multiplying the number of |
(2) | Calculated by multiplying the number of shares acquired on |
Page 20
DEFINED BENEFIT PENSION PROGRAM
Selective maintains a non-contributory retirement income plan (the “Pension Plan”) that benefits most employees whose employment with Selective commenced on or before December 31, 2005, including the market pricenamed executive officers. Selective also maintains an unfunded supplemental benefit plan, as permitted under the Employee Retirement Income Security Act of 1974, as amended (“ERISA”), to provide payments to Pension Plan participants equal to the difference between (i) the benefit payable to a participant under the Pension Plan calculated without regard to ERISA and Internal Revenue Code limitations on annual amounts payable under the Pension Plan, and (ii) the benefit payable to the participant pursuant to such limitations. The Pension Plan was amended as of July 1, 2002, to provide for different calculations based on service with Selective as of that date.
PENSION PLAN TABLE I
(EMPLOYEES WITH FIVE YEARS OF VESTING AS OF JULY 1, 2002
WHOSE AGE + YEARS OF VESTING SERVICE EQUALED OR EXCEEDED 55)
|
| Years of Service | ||||||||||||
Remuneration |
| 5 |
| 10 |
| 15 |
| 20 |
| 25 |
| 30 |
| 35 |
200,000 |
| 14,400 |
| 34,400 |
| 54,400 |
| 74,400 |
| 94,400 |
| 114,400 |
| 134,400 |
225,000 |
| 16,200 |
| 38,700 |
| 61,200 |
| 83,700 |
| 106,200 |
| 128,700 |
| 151,200 |
250,000 |
| 18,000 |
| 43,000 |
| 68,000 |
| 93,000 |
| 118,000 |
| 143,000 |
| 168,000 |
275,000 |
| 19,800 |
| 47,300 |
| 74,800 |
| 102,300 |
| 129,800 |
| 157,300 |
| 184,800 |
300,000 |
| 21,600 |
| 51,600 |
| 81,600 |
| 111,600 |
| 141,600 |
| 171,600 |
| 201,600 |
325,000 |
| 23,400 |
| 55,900 |
| 88,400 |
| 120,900 |
| 153,400 |
| 185,900 |
| 218,400 |
350,000 |
| 25,200 |
| 60,200 |
| 95,200 |
| 130,200 |
| 165,200 |
| 200,200 |
| 235,200 |
375,000 |
| 27,000 |
| 64,500 |
| 102,000 |
| 139,500 |
| 177,000 |
| 214,500 |
| 252,000 |
400,000 |
| 28,800 |
| 68,800 |
| 108,800 |
| 148,800 |
| 188,800 |
| 228,800 |
| 268,800 |
425,000 |
| 30,600 |
| 73,100 |
| 115,600 |
| 158,100 |
| 200,600 |
| 243,100 |
| 285,600 |
450,000 |
| 32,400 |
| 77,400 |
| 122,400 |
| 167,400 |
| 212,400 |
| 257,400 |
| 302,400 |
475,000 |
| 34,200 |
| 81,700 |
| 129,200 |
| 176,700 |
| 224,200 |
| 271,700 |
| 319,200 |
500,000 |
| 36,000 |
| 86,000 |
| 136,000 |
| 186,000 |
| 236,000 |
| 286,000 |
| 336,000 |
525,000 |
| 37,800 |
| 90,300 |
| 142,800 |
| 195,300 |
| 247,800 |
| 300,300 |
| 352,800 |
550,000 |
| 39,600 |
| 94,600 |
| 149,600 |
| 204,600 |
| 259,600 |
| 314,600 |
| 369,600 |
575,000 |
| 41,400 |
| 98,900 |
| 156,400 |
| 213,900 |
| 271,400 |
| 328,900 |
| 386,400 |
600,000 |
| 43,200 |
| 103,200 |
| 163,200 |
| 223,200 |
| 283,200 |
| 343,200 |
| 403,200 |
625,000 |
| 45,000 |
| 107,500 |
| 170,000 |
| 232,500 |
| 295,000 |
| 357,500 |
| 420,000 |
650,000 |
| 46,800 |
| 111,800 |
| 176,800 |
| 241,800 |
| 306,800 |
| 371,800 |
| 436,800 |
675,000 |
| 48,600 |
| 116,100 |
| 183,600 |
| 251,100 |
| 318,600 |
| 386,100 |
| 453,600 |
700,000 |
| 50,400 |
| 120,400 |
| 190,400 |
| 260,400 |
| 330,400 |
| 400,400 |
| 470,400 |
725,000 |
| 52,200 |
| 124,700 |
| 197,200 |
| 269,700 |
| 342,200 |
| 414,700 |
| 487,200 |
750,000 |
| 54,000 |
| 129,000 |
| 204,000 |
| 279,000 |
| 354,000 |
| 429,000 |
| 504,000 |
775,000 |
| 55,800 |
| 133,300 |
| 210,800 |
| 288,300 |
| 365,800 |
| 443,300 |
| 520,800 |
800,000 |
| 57,600 |
| 137,600 |
| 217,600 |
| 297,600 |
| 377,600 |
| 457,600 |
| 537,600 |
825,000 |
| 59,400 |
| 141,900 |
| 224,400 |
| 306,900 |
| 389,400 |
| 471,900 |
| 554,400 |
850,000 |
| 61,200 |
| 146,200 |
| 231,200 |
| 316,200 |
| 401,200 |
| 486,200 |
| 571,200 |
875,000 |
| 63,000 |
| 150,500 |
| 238,000 |
| 325,500 |
| 413,000 |
| 500,500 |
| 588,000 |
900,000 |
| 64,800 |
| 154,800 |
| 244,800 |
| 334,800 |
| 424,800 |
| 514,800 |
| 604,800 |
925,000 |
| 66,600 |
| 159,100 |
| 251,600 |
| 344,100 |
| 436,600 |
| 529,100 |
| 621,600 |
950,000 |
| 68,400 |
| 163,400 |
| 258,400 |
| 353,400 |
| 448,400 |
| 543,400 |
| 638,400 |
975,000 |
| 70,200 |
| 167,700 |
| 265,200 |
| 362,700 |
| 460,200 |
| 557,700 |
| 655,200 |
1,000,000 |
| 72,000 |
| 172,000 |
| 272,000 |
| 372,000 |
| 472,000 |
| 572,000 |
| 672,000 |
1,025,000 |
| 73,800 |
| 176,300 |
| 278,800 |
| 381,300 |
| 483,800 |
| 586,300 |
| 688,800 |
1,050,000 |
| 75,600 |
| 180,600 |
| 285,600 |
| 390,600 |
| 495,600 |
| 600,600 |
| 705,600 |
1,075,000 |
| 77,400 |
| 184,900 |
| 292,400 |
| 399,900 |
| 507,400 |
| 614,900 |
| 722,400 |
1,100,000 |
| 79,200 |
| 189,200 |
| 299,200 |
| 409,200 |
| 519,200 |
| 629,200 |
| 739,200 |
Page 21
Pension Plan Table I illustrates annual pension benefits, including supplemental benefits, at normal retirement (age 65) for various years of credited service in the form of a single life annuity and prior to any offset for Social Security benefits for participants. As shown on the dateSummary Compensation Table on page 18, Salary is the only compensation covered by the Pension Plan; Bonus and Other Annual Compensation is not covered by the Pension Program.
The following table lists the estimated credited years of exercise, lessservice for the option exercise price.
(2)named executive officers that qualify for the pension benefits depicted on Pension Plan Table I:
Named Executive Officer | Average Monthly | Years of Service as of |
Gregory E. Murphy | 53,432.69 | 24 |
Jamie Ochiltree, III | 28,255.77 | 10 |
Monthly Pension Program benefits at normal retirement age are computed by adding two calculations. The valuefirst is the former plan calculation which provides for 2% of unexercised in-the-money options is based“average monthly compensation” (based on the closing
market price per sharemonthly average of Common Stockthe member’s compensation for the 60 months out of the most recent 120 months of employment preceding the member’s termination of employment for which the employee’s compensation is the highest) less 1 3/7% of a Social Security benefit multiplied by the number of years of benefit service through June 30, 2002 (up to a maximum of 35 years). The second calculation provides for 1.2% of average monthly compensation (as defined herein) multiplied by the number of years of benefit service after June 30, 2002.
Page 22
PENSION PLAN TABLE II
(EMPLOYEES HIRED BEFORE JULY 1, 2001 WHO, AS OF JULY 1, 2002,
NEITHER (I) WERE AGE 50 AND HAD 5 YEARS OF VESTING SERVICE,
NOR (II) HAD 25 YEARS OF VESTING SERVICE)
|
| Years of Service | ||||||||||||
Remuneration |
| 5 |
| 10 |
| 15 |
| 20 |
| 25 |
| 30 |
| 35 |
200,000 |
| 12,000 |
| 26,000 |
| 46,000 |
| 66,000 |
| 86,000 |
| 106,000 |
| 126,000 |
225,000 |
| 13,500 |
| 29,250 |
| 51,750 |
| 74,250 |
| 96,750 |
| 119,250 |
| 141,750 |
250,000 |
| 15,000 |
| 32,500 |
| 57,500 |
| 82,500 |
| 107,500 |
| 132,500 |
| 157,500 |
275,000 |
| 16,500 |
| 35,750 |
| 63,250 |
| 90,750 |
| 118,250 |
| 145,750 |
| 173,250 |
300,000 |
| 18,000 |
| 39,000 |
| 69,000 |
| 99,000 |
| 129,000 |
| 159,000 |
| 189,000 |
325,000 |
| 19,500 |
| 42,250 |
| 74,750 |
| 107,250 |
| 139,750 |
| 172,250 |
| 204,750 |
350,000 |
| 21,000 |
| 45,500 |
| 80,500 |
| 115,500 |
| 150,500 |
| 185,500 |
| 220,500 |
375,000 |
| 22,500 |
| 48,750 |
| 86,250 |
| 123,750 |
| 161,250 |
| 198,750 |
| 236,250 |
400,000 |
| 24,000 |
| 52,000 |
| 92,000 |
| 132,000 |
| 172,000 |
| 212,000 |
| 252,000 |
425,000 |
| 25,500 |
| 55,250 |
| 97,750 |
| 140,250 |
| 182,750 |
| 225,250 |
| 267,750 |
450,000 |
| 27,000 |
| 58,500 |
| 103,500 |
| 148,500 |
| 193,500 |
| 238,500 |
| 283,500 |
475,000 |
| 28,500 |
| 61,750 |
| 109,250 |
| 156,750 |
| 204,250 |
| 251,750 |
| 299,250 |
500,000 |
| 30,000 |
| 65,000 |
| 115,000 |
| 165,000 |
| 215,000 |
| 265,000 |
| 315,000 |
525,000 |
| 31,500 |
| 68,250 |
| 120,750 |
| 173,250 |
| 225,750 |
| 278,250 |
| 330,750 |
550,000 |
| 33,000 |
| 71,500 |
| 126,500 |
| 181,500 |
| 236,500 |
| 291,500 |
| 346,500 |
575,000 |
| 34,500 |
| 74,750 |
| 132,250 |
| 189,750 |
| 247,250 |
| 304,750 |
| 362,250 |
600,000 |
| 36,000 |
| 78,000 |
| 138,000 |
| 198,000 |
| 258,000 |
| 318,000 |
| 378,000 |
625,000 |
| 37,500 |
| 81,250 |
| 143,750 |
| 206,250 |
| 268,750 |
| 331,250 |
| 393,750 |
650,000 |
| 39,000 |
| 84,500 |
| 149,500 |
| 214,500 |
| 279,500 |
| 344,500 |
| 409,500 |
675,000 |
| 40,500 |
| 87,750 |
| 155,250 |
| 222,750 |
| 290,250 |
| 357,750 |
| 425,250 |
700,000 |
| 42,000 |
| 91,000 |
| 161,000 |
| 231,000 |
| 301,000 |
| 371,000 |
| 441,000 |
725,000 |
| 43,500 |
| 94,250 |
| 166,750 |
| 239,250 |
| 311,750 |
| 384,250 |
| 456,750 |
750,000 |
| 45,000 |
| 97,500 |
| 172,500 |
| 247,500 |
| 322,500 |
| 397,500 |
| 472,500 |
775,000 |
| 46,500 |
| 100,750 |
| 178,250 |
| 255,750 |
| 333,250 |
| 410,750 |
| 488,250 |
800,000 |
| 48,000 |
| 104,000 |
| 184,000 |
| 264,000 |
| 344,000 |
| 424,000 |
| 504,000 |
825,000 |
| 49,500 |
| 107,250 |
| 189,750 |
| 272,250 |
| 354,750 |
| 437,250 |
| 519,750 |
850,000 |
| 51,000 |
| 110,500 |
| 195,500 |
| 280,500 |
| 365,500 |
| 450,500 |
| 535,500 |
875,000 |
| 52,500 |
| 113,750 |
| 201,250 |
| 288,750 |
| 376,250 |
| 463,750 |
| 551,250 |
900,000 |
| 54,000 |
| 117,000 |
| 207,000 |
| 297,000 |
| 387,000 |
| 477,000 |
| 567,000 |
925,000 |
| 55,500 |
| 120,250 |
| 212,750 |
| 305,250 |
| 397,750 |
| 490,250 |
| 582,750 |
950,000 |
| 57,000 |
| 123,500 |
| 218,500 |
| 313,500 |
| 408,500 |
| 503,500 |
| 598,500 |
975,000 |
| 58,500 |
| 126,750 |
| 224,250 |
| 321,750 |
| 419,250 |
| 516,750 |
| 614,250 |
1,000,000 |
| 60,000 |
| 130,000 |
| 230,000 |
| 330,000 |
| 430,000 |
| 530,000 |
| 630,000 |
1,025,000 |
| 61,500 |
| 133,250 |
| 235,750 |
| 338,250 |
| 440,750 |
| 543,250 |
| 645,750 |
1,050,000 |
| 63,000 |
| 136,500 |
| 241,500 |
| 346,500 |
| 451,500 |
| 556,500 |
| 661,500 |
1,075,000 |
| 64,500 |
| 139,750 |
| 247,250 |
| 354,750 |
| 462,250 |
| 569,750 |
| 677,250 |
1,100,000 |
| 66,000 |
| 143,000 |
| 253,000 |
| 363,000 |
| 473,000 |
| 583,000 |
| 693,000 |
Pension Plan Table II illustrates annual pension benefits, including supplemental benefits, at normal retirement (age 65) for various years of credited service in the form of a single life annuity and prior to any offset for Social Security benefits for participants. As shown on the Summary Compensation Table on page 18, Salary is the only compensation covered by the Pension Program; Bonus and Other Annual Compensation is not covered by the Pension Plan.
Page 23
The following table lists the estimated credited years of service for the named executive officers that qualify for the pension benefits depicted on Pension Plan Table II:
Named Executive Officer | Average Monthly | Years of Service as of |
Richard F. Connell | 25,387.82 | 4 |
Dale A. Thatcher | 20,579.81 | 4 |
Ronald J. Zaleski | 24,381.73 | 5 |
Monthly Pension Plan benefits at normal retirement age are computed by comparing two calculations and providing the benefit which is the greater of the two. The first is the former plan calculation which provides for 2% of “average monthly compensation” (based on the monthly average of the member’s compensation for the 60 months out of the most recent 120 months of employment preceding the member’s termination of employment for which the employee’s compensation is the highest) less 1 3/7% of a Social Security benefit multiplied by the number of years of benefit service through June 30, 2002 (up to a maximum of 35 years). The second calculation provides for 1.2% of average monthly compensation (as defined herein) multiplied by all years of benefit service.
Effective January 1, 2006, the Pension Plan closed to employees hired after December 31, 2002, of $25.18,
less the option exercise price per share.
11
Page 24
EMPLOYMENT CONTRACTS, TERMINATION OF EMPLOYMENT,
AND CHANGE-IN-CONTROL AGREEMENTS
EMPLOYMENT AGREEMENTS
Under an
Messrs. Murphy, Ochiltree, Connell, and Thatcher have employment agreements with SICA, which contain similar terms and conditions. The agreement with Selective Insurance Company of America
("SICA") effectiveentered into between Mr. Murphy and SICA on August 1, 1995 was most recently amended on May 1, 1998, May 2, 2000 and August
1, 2001 and in effect through August 1, 2004,2004. Pursuant to the terms of the agreement, Mr. Murphy receives an annual base
salary of not less than $550,000 through August$700,000. The agreement entered into between Mr. Ochiltree and SICA on October 21, 1995 was most recently amended on May 1, 2004. The Board has set Mr.
Murphy's annual base salary for 2003 at $640,000. Under an employmentPursuant to the terms of the agreement,
with SICA effective October 31, 1995, amended October 31, 1998, May 2, 2000 and
October 31, 2001, and in effect through October 31, 2004, Mr. Ochiltree receives an annual base salary of not less than $290,000 through October 31, 2004.$374,000. The Board has setagreement entered into between Mr. Ochiltree's annual base salary for 2003 at $340,000. Under an
employment agreement withConnell and SICA effectiveon August 8, 2000 andwas most recently amended on March 1, 2003,2003. Pursuant to the terms of the agreement, Mr. Connell receives an annual base salary of not less than $300,000
through$300,000. The agreement entered into between Mr. Thatcher and SICA on May 5, 2000, was most recently amended on March 1, 2006. The Board has set2003. Pursuant to the terms of the agreement, Mr. Connell's annual base salary for
2003 at $300,000. Under an employment agreement with SICA dated May 2, 1997,
amended May 2, 2000 and March 1, 2003, Mr. ColemanThatcher receives an annual base salary of not less than $294,000 through March 1, 2006. The Board has set Mr.
Coleman's annual base salary for 2003 at $294,000.$235,000. If any of these executive officers isare not reelectedre-elected to histheir current position, or if he isare terminated without cause, he will be entitled to receive severance pay equal to his salary and certain benefits in effect at the time of his termination of employment for a period of two (2) years after the date of such termination, payable in monthly installments. If heany of these executive officers is terminated for cause, he is entitled to receive that portion of his salary earned to the date of his termination and the benefits accrued to him under certain employee benefit plans to the date of such termination, to the extent that such benefits may be payable to him under the provisions of such plans in effect on the date of the termination of his employment. The CompanySelective has guaranteed SICA'sSICA’s performance of all its obligations under the employment agreements.
TERMINATION AGREEMENTS
Messrs. Murphy, Ochiltree, Connell, Coleman,Thatcher, and Zaleski have termination agreements with SICA pursuant to which payments will be made under certain circumstances following a Change in Control of the Company, as(as defined in the agreements. Mr. Murphy's agreementagreements) of Selective. Each of these agreements is automatically renewable for successive one-year terms, each August, unless prior written notice of non-renewal is given.
Mr. Ochiltree's agreement is automatically renewable for successive one-year
terms each October unless prior written notice of non-renewal is given. Mr.
Connell's agreement is effective August 8, 2000 through August 8, 2003, and is
thereafter automatically renewable for successive one-year terms each August
unless prior written notice of non-renewal is given. Mr. Coleman's agreement is
automatically renewable for successive one-year terms each May unless prior
written notice of non-renewal is given. The agreement for Mr. Zaleski is
automatically renewable for successive one-year terms each September unless prior written notice of non-renewal is given. Each agreement provides that, in the event of a Change in Control of the Company,Selective, SICA shallwill continue to employ the executive officer in the capacities in which he was serving immediately prior to the Change in Control for a period of three (3) years, commencing on the date on which the Change in Control shall have occurred, which term will be automatically renewed for successive one-year periods unless prior written notice is given. Each agreement provides that if the executive officer'sofficer’s employment is terminated (as definedas set forth in the agreement)agreement after a Change in Control occurs, other than (i) due to the executive officer'sofficer’s death or retirement, (ii) by SICA for Cause or Disability (as defined in the agreement), or (iii) by the executive officer other than for Good Reason (as such foregoing capitalized terms are defined in the agreement), the executive officer will be entitled to receive earned but unpaid base salary through the date of termination, as well as any incentive compensation benefits or awards that have been accrued, earned, or become payable but which have not been paid, and as severance pay in lieu of any further salary for periods subsequent to the date of termination, an amount in cash equal to his "annualized“annualized includible compensation for the base period"period” (as defined in Section 280G(d)(1) of the Internal Revenue Code, of 1986, as amended
(the "Code"), multiplied by a factor of 2.99, provided that if any of the payments or benefits provided for in the agreement, together with any other payments or benefits that the executive officer has the right to receive would constitute a "parachute payment"“parachute payment” (as defined in Section 280G(b) of the Internal Revenue Code), the Company shallSelective will pay to the executive officer on a net after-tax basis the greater of (1)(i) the payments and benefits due to the executive officer reduced in order of priority and amount as executive officer shall elect, to the largest amount as will result in no portion of such payments being subject to the excise tax imposed by Section 4999 of the Internal Revenue Code or (2)(ii) payments and benefits due to the executive officer, plus an amount in cash equal to (x) the amount of such "excess“excess parachute payments"payments” multiplied by (y) twenty (20%) percent. The CompanySelective has guaranteed SICA'sSICA’s performance of all its obligations under the termination agreements.
PENSION PLANS
The Company maintains a noncontributory Retirement Income Plan. This pension
plan covers substantially all employees, including officers. Compensation
covered under
Page 25
COMPENSATION COMMITTEE INTERLOCKS
AND INSIDER PARTICIPATION IN COMPENSATION DECISIONS
During 2005, the plan consists only of basic wages and salaries, not including
overtime and bonuses, i.e., only the "Salary" columnfollowing directors served as members of the Summary Compensation
Table. IfSalary and Employee Benefits Committee: A. David Brown, Paul D. Bauer, John C. Burville, C. Edward Herder, and J. Brian Thebault. Mr. Herder retired from the employee is married, the normal formBoard of benefit is a joint and
survivor annuity for the employee and spouse. If the employee elects against
such annuity with the spouse's consent, a single life annuity may be paid. The
Company has a nonqualified supplemental pension plan to provide benefits that
would have been paid by the qualified plan, but for the limitations imposed by
the Internal Revenue Code on the maximum benefits payable and the compensation
upon which qualified plan benefits may be calculated.
As ofSelective, effective December 31, 2002 the Chairman, President2005, and Chief Executive Officer and
the other executive officers named in the Summary Compensation Table had the
following credited years of service under the pension plans: Mr. Murphy, 21
years; Mr. Ochiltree, 7 years; Mr. Connell, 1 year; Mr. Coleman, 19 years; and
Mr. Zaleski, 2 years. The planJohn C. Burville was amended as of July 1, 2002 and provides for
different calculations based on service with the company as of the date of the
amendment. Two of the four calculations applyappointed to the executive officers namedSalary and Employee Benefits Committee, effective January 1, 2006.
None of these individuals was employed in the Summary Compensation Table.
12
Table 1 illustrates annual pension benefits, including supplemental benefits, at
normal retirement (age 65) for various years2005 as an officer or an employee of credited service in the formSelective or one of a single life annuity and prior toits subsidiaries or was formerly an officer of Selective or any offset for Social Security benefits for
participants that were deemed to be in the Transition Group. Employees whoof its subsidiaries. None of these individuals had at least five years of vestingany relationship with Selective other than service as of July 1, 2002, and whose age plus
years of vesting service equaleda director or exceeded 55 as of July 1, 2002 qualifiedreceived compensation from Selective other than for
this group.
Monthly plan benefits at normal retirement age are computed by adding two
calculations. The first is the former plan calculation which provides for 2% of
"average monthly compensation" (based on the monthly average of the member's
compensation for the 60 months out of the most recent 120 months of employment
preceding the member's termination of employment for which the employee's
compensation is the highest) less 1 3/7% of a social security benefit multiplied
by the number of years of benefit service through June 30, 2002 (up to a maximum
of 35 years). The second calculation provides for 1.2% of average monthly
compensation (as defined herein) multiplied by the number of years of benefit
service after June 30, 2002.
Calculations in this table apply to Mr. Murphy, Mr. Ochiltree and Mr. Coleman.
Table 1 Years of Service
------------------------------------------------------------------
Remuneration 5 10 15 20 25 30 35
- --------------------------------------------------------------------------------
200,000 19,200 39,200 59,200 79,200 99,200 119,200 139,200
225,000 21,600 44,100 66,600 89,100 111,600 134,100 156,600
250,000 24,000 49,000 74,000 99,000 124,000 149,000 174,000
275,000 26,400 53,900 81,400 108,900 136,400 163,900 191,400
300,000 28,800 58,800 88,800 118,800 148,800 178,800 208,800
325,000 31,200 63,700 96,200 128,700 161,200 193,700 226,200
350,000 33,600 68,600 103,600 138,600 173,600 208,600 243,600
375,000 36,000 73,500 111,000 148,500 186,000 223,500 261,000
400,000 38,400 78,400 118,400 158,400 198,400 238,400 278,400
425,000 40,800 83,300 125,800 168,300 210,800 253,300 295,800
450,000 43,200 88,200 133,200 178,200 223,200 268,200 313,200
475,000 45,600 93,100 140,600 188,100 235,600 283,100 330,600
500,000 48,000 98,000 148,000 198,000 248,000 298,000 348,000
525,000 50,400 102,900 155,400 207,900 260,400 312,900 365,400
550,000 52,800 107,800 162,800 217,800 272,800 327,800 382,800
575,000 55,200 112,700 170,200 227,700 285,200 342,700 400,200
600,000 57,600 117,600 177,600 237,600 297,600 357,600 417,600
625,000 60,000 122,500 185,000 247,500 310,000 372,500 435,000
650,000 62,400 127,400 192,400 257,400 322,400 387,400 452,400
675,000 64,800 132,300 199,800 267,300 334,800 402,300 469,800
700,000 67,200 137,200 207,200 277,200 347,200 417,200 487,200
725,000 69,600 142,100 214,600 287,100 359,600 432,100 504,600
750,000 72,000 147,000 222,000 297,000 372,000 447,000 522,000
775,000 74,400 151,900 229,400 306,900 384,400 461,900 539,400
800,000 76,800 156,800 236,800 316,800 396,800 476,800 556,800
13
Table 2 illustrates annual pension benefits, including supplemental benefits, at
normal retirement (age 65) for various years of benefit service in the form of a
single life annuity and prior to any offset for Social Security benefits for
participants that were deemed to be in the Other Group, which means that they
were hired by the Company before July 1, 2001 and as of July 1, 2002, had
neither (1) attained age 50 and completed 5 years of vesting service, nor (2)
completed 25 years of vesting service.
Monthly plan benefits at normal retirement age are computed by comparing two
calculations and providing the benefit which is the greater of the two. The
first is the former plan calculation which provides for 2% of "average monthly
compensation" (based on the monthly average of the member's compensation for the
60 months out of the most recent 120 months of employment preceding the member's
termination of employment for which the employee's compensation is the highest)
less 1 3/7% of a social security benefit multiplied by the number of years of
benefit service through June 30, 2002 (up to a maximum of 35 years). The second
calculation provides for 1.2% of average monthly compensation (as defined
herein) multiplied by all years of benefit service.
Calculations in this table apply to Mr. Connell and Mr. Zaleski.
Table 2 Years of Service
------------------------------------------------------------------
Remuneration 5 10 15 20 25 30 35
- --------------------------------------------------------------------------------
200,000 18,000 38,000 58,000 78,000 98,000 118,000 138,000
225,000 20,250 42,750 65,250 87,750 110,250 132,750 155,250
250,000 22,500 47,500 72,500 97,500 122,500 147,500 172,500
275,000 24,750 52,250 79,750 107,250 134,750 162,250 189,750
300,000 27,000 57,000 87,000 117,000 147,000 177,000 207,000
325,000 29,250 61,750 94,250 126,750 159,250 191,750 224,250
350,000 31,500 66,500 101,500 136,500 171,500 206,500 241,500
375,000 33,750 71,250 108,750 146,250 183,750 221,250 258,750
400,000 36,000 76,000 116,000 156,000 196,000 236,000 276,000
425,000 38,250 80,750 123,250 165,750 208,250 250,750 293,250
450,000 40,500 85,500 130,500 175,500 220,500 265,500 310,500
475,000 42,750 90,250 137,750 185,250 232,750 280,250 327,750
500,000 45,000 95,000 145,000 195,000 245,000 295,000 345,000
525,000 47,250 99,750 152,250 204,750 257,250 309,750 362,250
550,000 49,500 104,500 159,500 214,500 269,500 324,500 379,500
575,000 51,750 109,250 166,750 224,250 281,750 339,250 396,750
600,000 54,000 114,000 174,000 234,000 294,000 354,000 414,000
625,000 56,250 118,750 181,250 243,750 306,250 368,750 431,250
650,000 58,500 123,500 188,500 253,500 318,500 383,500 448,500
675,000 60,750 128,250 195,750 263,250 330,750 398,250 465,750
700,000 63,000 133,000 203,000 273,000 343,000 413,000 483,000
725,000 65,250 137,750 210,250 282,750 355,250 427,750 500,250
750,000 67,500 142,500 217,500 292,500 367,500 442,500 517,500
775,000 69,750 147,250 224,750 302,250 379,750 457,250 534,750
800,000 72,000 152,000 232,000 312,000 392,000 472,000 552,000
14
EQUITY COMPENSATION PLAN INFORMATION
The following table sets forth certain information as of December 31, 2002 with
respect to compensation plans under which shares of the Company's common stock
may be issued.
(c)
Number of securities
remaining available
(a) for future issuance
Number of securities to (b) under equity
be issued upon exercise of Weighted-average compensation plans
outstanding options, exercise price of outstanding (excluding securities
Plan Category warrants and rights options, warrants and rights reflected in column (a))
- ------------- -------------------------- ----------------------------- --------------------------
Equity Compensation plans 1,320,304 $19.31 2,811,297(1)
approved by security holders
Equity Compensation 0 N/A 801,283(2)
plans not approved by security
holders
Total 1,320,304 $19.31 3,612,580
(1) Includes 384,525 shares available for issuance under shares available for
issuance under Selective's Employee Stock Purchase Plan and 425,872 shares
available for issuance of Selective's Stock Compensation Plan for
Non-Employee Directors and 1,984,000 shares available under Stock Option
Plan III, which can be issued either as stock options or in the form of
restricted stock awards.
(2) This is the number of shares available for issuance under Selective's Stock
Purchase Plan for Independent Insurance Agents.
Stock Purchase Plan For Independent Insurance Agents
The Plan
The Company's Board of Directors adopted theservice in 2005.
No Selective Insurance Group Stock
Purchase Plan for Independent Insurance Agents (the "Plan") to motivate persons
performing independent insurance agency services for us by enabling them to
participate in our long-term growth and success by purchasing sharesexecutive officer served as a member of the Company's common stock atcompensation committee of another entity, or as a discounted price. The Plan was originally adopted in
May 1989 and was most recently amended on July 24, 2000. The purchase price for
shares offered under the Plan is the averagedirector of the high and low sale pricesanother entity, one of the Company's common stock quotedwhose executive officers served on the NASDAQ National Market on the dateSalary and Employee Benefits Committee or as a director of purchase, less a discount of 10%.
Eligibility
Each independent insurance agency which is under contract with us to promote and
sell our insurance products is eligible to participate in the Plan and to
purchase shares of our common stock under the Plan. Also eligible to purchase
shares under the Plan are: the principals, general partners, officers and
stockholders of eligible insurance agencies, key employees of eligible insurance
agencies designated by the principals, general partners or officers of the
agencies, their individual retirement plans, their Keogh plans, and employee
benefit plans of eligible insurance agencies.
Restrictions on Shares Purchased under the Plan
Shares purchased under the Plan on or after August 3, 1999, are restricted for a
period of one-year beginning on the date of the day after the purchase. During
this one-year period, shares purchased under this plan cannot be sold,
transferred, pledged, assigned or disposed of in any way.
Selective.
Page 26
REPORT OF THE SELECTIVE INSURANCE GROUP, INC. SALARY AND EMPLOYEE BENEFITS COMMITTEE
The
Selective’s Salary and Employee Benefits Committee (the "Committee"(“SEBC”) establishes general executive compensation policies and establishes the salaries and bonuses of Selective’s executive officers, including the Chief Executive Officer. The Board of Directors is responsible for settingdid not modify any action or recommendation made by the SEBC with respect to executive compensation in 2005.
The following table summarizes the key policies, offactors, and other compensation information that the Company and evaluating the level ofSEBC used in determining executive compensation of the executive officers of
the Company and its subsidiaries relative to the positions and performancesin 2005:
Policies | • Provide competitive compensation packages to attract and retain qualified executives. • Reflect Selective’s performance and the value created for Selective’s stockholders. • Tie personal performance and contribution to Selective’s operational and financial performance. • Support the short-term and long-term strategic goals and values of Selective and reward individual contribution to Selective’s success. |
Executive Compensation Elements | • Annual base salary, tied to the SEBC’s evaluation of personal executive performance, including managerial ability and development of personnel, the competitive marketplace for comparable executives, and internal alignment considerations. • Variable incentive awards tied to Selective’s achievement of corporate operational and financial performance targets established at the beginning of the fiscal year and personal executive objectives also established at the beginning of the year. • Long-term, equity-based incentive awards of stock options (with or without tandem stock appreciation rights) and stock grants, tied to aligning the interests of executive officers with those of stockholders and ensuring that officers have an equity-stake management view. • In 2005, the CEO and each of Selective’s executive officers met or exceeded all but one (growth in worksite lives for Selective HR Solutions) of the goals established for them at the beginning of the year. This achievement is reflected in the awards granted to them for 2005. |
CEO-Specific Compensation Elements | Detailed performance evaluation that considered: • The CEO’s qualifications. • Level of experience brought to the position and gained while in the position. • Selective’s performance implementing or completing critical projects or processes. • Selective’s underwriting performance as measured by the statutory combined ratio relative to the industry. • The importance of the CEO’s contribution to the achievement of Selective’s strategic initiatives and financial performance. Specifically, under Mr. Murphy’s leadership in 2005, Selective achieved the following: o Net premiums written growth of 7%; o Statutory combined ratio of 94.6% compares to 95.9% in 2004; o Operating earnings per share of $4.36 compared to $3.58 in 2004; o Return on average equity of 15.9%; o Total return to shareholders of 21.9%; o Named to Forbes Magazine “Platinum 400” list and also named one of America’s Best Managed Companies by Forbes – ranking in the “top 10” for insurance; o Named to “Ward’s 50 Benchmark Group” listing of top performing companies in the property-casualty insurance sector; o Named to the Forbes list of “The 100 Best Mid-Cap Stocks”; and o Ranked #897 on overall FORTUNE 1000 list of America’s largest corporations and #31 in insurance property and casualty stock company sector. • Specific accomplishments. • The importance of the CEO’s individual contributions to the achievement of Selective’s goals and objectives set for 2005. |
Page 27
2005 Factors | • Successful completion of Strategic Initiatives aimed at: o Growth in worksite lives for Selective HR Solutions; o Strategic market planning for the insurance business; o Overall expense reduction; o Increased efficiency in claims handling; o Implementation of various knowledge management initiatives; and o Various technology initiatives related to Selective’s agents. • Selective’s financial performance compared to its performance in the prior year, including its combined ratio (both overall and by lines of insurance), return on equity, results of operations, and overall financial condition. |
In 2005, the SEBC retained an independent compensation consultant to provide advice on executive compensation matters, including the base salary and incentive compensation levels for executive officers. The Committee's decisions onconsulting firm furnished the SEBC with compensation surveys and data for purposes of comparing Selective’s executive compensation are
subject tolevels with those at companies within and outside the approval ofindustry with which Selective competes for executive talent and is providing the Board of Directors, exceptSEBC with specific recommendations for grants under
certain ofmaintaining Selective’s executive compensation at a level competitive with the Company's employee benefit plans, which are made solely by the
Committee in order for such plans to satisfy the administration requirements of
Rule 16b-3 under the Securities Exchange Act of 1934, and marketplace.
Section 162(m) of the Internal Revenue Code. The Committee consists of Messrs. Brown (Chairman),
Bauer, Dolan, Herder, McClellan and Thebault, all of whom are nonemployee
directors, within the meaning of Rule 16b-3 and "outside directors" within the
meaning of Section 162(m). For purposes of this report, the term "Company" means
Selective Insurance Group, Inc. and its subsidiaries unless the context
otherwise requires.
15
The Committee's executive compensation policies are intendedCode disallows a tax deduction to enable the
Company to attract and retain qualified executives and compensate them in direct
relationship to their accomplishments and levels of responsibility by combining
a base salary component with annual bonus and long-term incentive components.
The levels of annual total compensationpublicly held companies for executive officers are generally
intended to be comparable to the levels of annual total compensation paid to executives with comparable responsibilities in a groupcertain of other companies in the
insurance industry, while providing for annual and long-term incentives which
are subject to the achievement of performance-related goals. The comparison
group of companies are identified by the Company as being similar in size and
scope to Selective using external surveys. This comparison group of companies in
the insurance industry is smaller and more diverse than the group comprising the
Company's peer group for purposes of the performance graph set forth on page 19
in this Proxy Statement.
After determining the levels of compensation for each executive officer as
compared with his or her counterparts in the identified industry group, the
Committee weighs the executive officer's performance and level of responsibility
and considers such executive officer's contributions to the achievement of
financial and other goals of the Company. These goals are established in advance
and may relate to the executive officer's performance, the Company's
performance, or both. Among the criteria used in determining base salaries are:
(i) the Company's financial performance compared to its performance in the prior
year, including the Company's combined ratio (both overall and by lines of
insurance), return on equity, results of operations and overall financial
condition; (ii) the managerial ability of such executive officer as evaluated by
the Committee, taking into account the evaluation of such person by the Chief
Executive Officer; and (iii) such officer's ability to develop personnel within
the areas of his or her responsibility for the future operation of the Company.
These criteria are the more significant factors used by the Committee in
reaching its decisions on executive compensation. As a result of the individual
evaluations, for any particular year the compensation level of each executive
officer may be higher or lower than that of comparable executives in the
comparison group and may vary each year depending upon the achievement of the
individual.
The Committee meets a minimum of four times a year. Changes in the base salary
component of executive compensation do not necessarily occur annually, but may
occur after a longer period of time.
In addition to the base salary component of executive officers' compensation,
cash payments under the Company's Annual Cash Incentive Plan (the "ACIP" Plan)
may be earned. Individual cash incentive awards under the ACIP Plan are subject
to two separate and distinct criteria related to the Company's performance as
established by the Committee at the beginning of the year. The criteria
established by the Committee for 2002 was as follows: (1) If the Company met
certain strategic initiatives which were aimed at commercial lines and personal
lines price increases, introduction of new technology for agents, the rollout of
the Claims Service Center, and the expansion of business opportunities through
the growth of the Company's Diversified Insurance Services businesses, then all
employees, including the executive officers, could earn a portion of his/her
target incentive percentage as specified in the ACIP Plan; and (2) If the
Company also achieved financial targets related to operating income and combined
ratio, then all employees, including the executive officers, could earn an
additional portion of his/her target incentive percentage as specified in the
ACIP Plan.
In February 2003, the Committee reviewed each executive officer's performance
evaluation by the Chief Executive Officer, the strategic initiatives and the
recommendations of the Chief Executive Officer as to the executive's achievement
and the Company's achievement of the strategic initiatives and financial targets
for 2002 using the criteria described above. Based upon the Company's
performance in 2002 and the ACIP Plan percentage guidelines, the Committee
determined that the Company achieved both the strategic initiatives, financial
targets and that annual cash incentives would be awarded for to the Company's
executive officers for the year ended December 31, 2002, in accordance with the
ACIP Plan.
The two forms of executive officers' long-term incentive compensation are stock
options (with or without tandem stock appreciation rights) and stock grants
under the Company's Stock Option Plan II (which is no longer issuing new
options) and the Company's Stock Option Plan III, which went into effect upon
stockholder approval in May 2002 (the "Plans"). The Committee believes that
stock ownership by management encourages management to enhance stockholder
value. Under the current Plan, stock options (with or without tandem stock
appreciation rights) granted to executive officers and other employees give
optionees the right to purchase shares of the Company's Common Stock over a
ten-year period at the fair market value per share on the date of grant.
Generally, the Committee grants options to executive officers based on their
assessment of individual merit, taking into account, among other things the
performance evaluations of such executive officers by the Chief Executive
Officer. The number of options granted at any given time is also determined, in
part, by the executive officer's level of responsibility (i.e., more options are
given to employees and executives in positions of greater responsibility), and
the date of the last option grant to such person. In recent years, the Company
has generally granted options on an annual basis, but options are not
necessarily granted annually to each executive officer. Grants of stock also
provide incentive to the executive officers, to enhance stockholder value. Under
the Plan, the Committee,extent that compensation exceeds $1 million per covered officer in its discretion, may make restricted or unrestricted
grants of Common Stock, or grant rights to receive Common Stock, to executive
officers and other employees, in addition to or in substitution for stock
options or stock appreciation rights. Grants made to executive officers are
subject to the attainment of one or more performance-related objectives and
other terms and conditions as may be determined by the Committee in its
discretion. In 2002, grants of restricted stock under the Plans were made to all
executive officers. All restricted stock grants to executive officers vest after
a period of four years and are subject to the attainment of various
predetermined corporate financial goals, such as return on equity or cumulative
earnings or premium growth during the vesting period.
16
On February 5, 2002, the Committee granted Mr. Murphy 10,000 restricted shares
of the Company's Common Stock under the Plan. The shares vest four years after
the grant and are subject to the achievement of predetermined corporate
performance goals, includingany fiscal year return on average equity during the
vesting period. On the same date, the Committee granted Mr. Murphyand is not under a non-qualified stock optionstockholder approved plan. The limitation applies only to purchase 5,181 shares of the Company's common
stock at an exercise price of grant of $20.75 per share, and an incentive stock
optioncompensation that is not considered to purchase 4,819 shares of the Company's common stock at an exercise
price at the fair market value on the date of grant of $20.75 per share.be performance-based. The CompanySEBC intends, to the extent practicable, to preserve deductibility under the Internal Revenue Code for compensation paid to its executive officers while maintaining compensation programs to attract and retain highly qualified executives in a competitive environment.
The Committee's basis for determining the compensation of the Chief Executive
Officer has been substantially the same as those referred to above with respect
to the Company's other executive officers. The Committee seeks to maintain the
base salary of the Chief Executive Officer at a level competitive with the
mid-range of the base salaries of the chief executive officers of other
insurance companies in the Company's identified comparison group. Mr. Murphy is
also eligible to participate in the same employee benefit plans available to the
other executive officers of the Company.
No Compensation Committee interlocks or insider participation in compensation
decisions occurred during the fiscal year ended December 31, 2002.
Submitted by the Salary and Employee Benefits Committee of the Company'sSelective’s Board of Directors: Directors
A. David Brown, (Chairman), Chairperson
Paul D. Bauer William A. Dolan, II,
John C. Edward Herder, S. Griffin McClellan III, and Burville
J. Brian Thebault.
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
During 2002,Thebault
Page 28
Performance Graph
The following chart, produced by the SalaryCenter for Research in Security Prices, depicts Selective’s performance for the period beginning January 1, 2000 and Employee Benefits Committee was composed of A. David
Brown, Paul D. Bauer, William A. Dolan, II, C. Edward Herder, S. Griffin
McClellan III, and J. Brian Thebault. None of these individuals were employedending December 31, 2005, as officers or employeesmeasured by total stockholder return on the common stock compared with the total return of the Company. No executive officerNASDAQ Stock Market (U.S.) Index and the NASDAQ Fire, Marine and Casualty Index (68 NASDAQ Company stocks in SIC Major Group 633 (SIC 6330-6339 U.S. fire, marine and casualty insurance). Upon request, Selective will furnish stockholders a list of the Company servedcomponent companies of such indices.
Notwithstanding anything to the contrary set forth in any of Selective’s previous filings under the Securities Act of 1933 or the Exchange Act that might incorporate future filings made by Selective under those statutes, the preceding Report of the Compensation Committee of the Board of Directors on Executive Compensation and Selective’s Stock Performance Graph will not be incorporated by reference into any of those prior filings, nor will such report or graph be incorporated by reference into any future filings made by Selective under those statutes.
Page 29
INFORMATION ABOUT PROPOSAL 2
Approval of the compensation committeeSelective Insurance Group, Inc. Stock Purchase Plan for
Independent Insurance Agencies
Selective’ stockholders are being asked to approve the Selective Insurance Group, Inc. Stock Purchase Plan for Independent Insurance Agencies (the “Agencies Stock Purchase Plan”). The purpose of another entity orthe Agencies Stock Purchase Plan is to motivate independent insurance agencies that sell products and services for the insurance company subsidiaries of Selective, by enabling them to participate in Selective’s long-term growth and success and to help align their success with those interests of Selective’s stockholders.
After approval and effective as of July 1, 2006, the Agencies Stock Purchase Plan will replace the
Selective Insurance Group Stock Purchase Plan for Independent Insurance Agents (the “Original Independent Agents Plan”) currently in effect and stock purchases will no longer be available under the Original Independent Agents Plan. If the Agencies Stock Purchase Plan is not approved by stockholders, the Original Independent Agents Plan will remain in effect.
The following table provides a directorsummary of another
entity, onethe Agencies Stock Purchase Plan, which is qualified in its entirety by the text of whose executive officers served on the Agencies Stock Purchase Plan, a copy of which is attached to this proxy statement as Appendix A.
Plan Administrator | •Salary and Employee Benefits Committee |
Authority of Plan Administrator | • Administer the Agencies Stock Purchase Plan and exercise all of the powers and authorities either specifically granted to it under the Agencies Stock Purchase Plan or necessary or advisable in the administration of the Agencies Stock Purchase Plan, including, without limitation, the authority to: o Construe and interpret the Agencies Stock Purchase Plan; o Make adjustments in response to changes in applicable laws, regulations, or accounting principles, or for any other reason, in accordance with the section of the Agencies Stock Purchase Plan entitled, Amendment or Termination of the Plan; o Prescribe, amend, or rescind rules and regulations relating to the Agencies Stock Purchase Plan and appoint such agents as it shall deem appropriate for the proper administration of the Agencies Stock Purchase Plan; and o Make all other determinations deemed necessary or advisable for the administration of the Agencies Stock Purchase Plan. |
Eligibility | • Each independent insurance agency that is under contract with any of the insurance subsidiaries of Selective to promote and sell Selective’s subsidiaries’ insurance products (approximately 750 agencies), other than such agencies that promote and sell only Selective’s subsidiaries’ flood insurance products (each, an “Eligible Agency”). • “Eligible Persons” designated by an Eligible Agency, including principals, general partners, officers, and stockholders of an Eligible Agency (“Principals”); key employees of an Eligible Agency (“Key Employees”); and individual retirement plans of Principals and Key Employees, Keogh plans of Principals and Key Employees, and employee benefit plans of an Eligible Agency. |
Page 30
Purchases | • The Agencies Stock Purchase Plan allows each Eligible Agency and those Eligible Persons designated by the Eligible Agency to purchase shares of the common stock of Selective, par value $2.00 per share (“Common Stock”), at a 10% discount from fair market value (closing selling price for the Common Stock reported on the NASDAQ on the applicable purchase date). • Under the Agencies Stock Purchase Plan, each Eligible Agency, together with its designated Eligible Persons, may invest up to the applicable Maximum Contribution Amount (as described below) per calendar quarter on certain purchase dates, based upon the amount of Written Premiums (as defined below) by such Eligible Agency during the previous calendar year with one or more of Selective’s insurance subsidiaries, as follows: | |
Written Premiums | Maximum Contribution Amounts | |
Less than $2,000,000 | $30,000 | |
$2,000,000 or more but | ||
less than $5,000,000 | $50,000 | |
$5,000,000 or more | $75,000 | |
• “Written Premiums” include all written premiums, less cancellations and returns, recorded by Selective and its insurance subsidiaries, but do not include: o Premiums for policies written through pools, associations, or syndicates; o Premiums for insurance written in any reinsurance facility, joint underwriting association, or other insurance program required by law; o Policyholder dividends, expense fees, surcharges, and other like charges; o Premiums from any accident and health, systems breakdown, and flood policies; o Premiums for alternative market business, including, but not limited to, retrospectively rated policies and assumed business; and o Premiums for policies, coverages, or plans that the Salary and Employee Benefits Committee may exclude from the Agencies Stock Purchase Plan. • There is a $100 minimum for purchases by a participant in the Agencies Stock Purchase Plan per calendar quarter. If a participant does not purchase $100 per a calendar quarter, any amounts below such minimum will be refunded to the participant. • An Eligible Agency or Eligible Person may elect to apply all or a portion of its earned cash commissions (as defined in the Agencies Stock Purchase Plan) and its distributions from Selective’s profit sharing commitment to the purchase of shares of Common Stock under the Agencies Stock Purchase Plan. • Participants pay no brokerage commissions or administrative or other charges for purchases of shares of Common Stock under the Agencies Stock Purchase Plan. | ||
Restrictions on Shares | • Shares of Common Stock purchased under the Agencies Stock Purchase Plan shall be restricted for a period of one year beginning on the purchase date and expiring upon the first anniversary of the purchase date. During this restricted period, the participant may not sell, transfer, pledge, assign, or dispose of his or her shares of Common Stock in any way. | |
Shares Reserved for Issuance | • The maximum number of shares of Common Stock reserved for issuance is 1,500,000 (one million five hundred thousand), with adjustments based on stock splits, dividends, recapitalizations or other changes or transactions. The shares may be authorized but unissued Common Stock or authorized and issued Common Stock held in Selective’s treasury. • Included in the 1,500,000shares (subject to adjustment) that may be delivered under the Agencies Stock Purchase Plan are 537,526 shares previously reserved under the Original Independent Agents Plan would be available for delivery under the Agencies Stock Purchase Plan. | |
Non-Transferability of Rights | • Rights under the Agencies Stock Purchase Plan are not transferable other than by will or the laws of descent and distribution and are exercisable during the Participant’s lifetime only by the Participant. | |
Page 31
Amendment or Termination | • The Board or the Salary and Employee Benefits Committee may amend, revise, suspend, or terminate the Agencies Stock Purchase Plan at any time and in any respect whatsoever; provided, however, that stockholder approval shall be required for any such amendment if and to the extent such approval is required in order to comply with applicable law or any stock exchange listing requirement. |
Federal Income Tax Consequences of the Agencies Stock Purchase Plan | • The following discussion summarizes certain United States federal income tax consequences of the purchase of stock under the Agencies Stock Purchase Plan. The summary does not purport to cover federal employment tax or other federal tax consequences, or state, local, or foreign tax consequences that may be associated with the Agencies Stock Purchase Plan. Further, the summary is based on the law as in effect on the date of this proxy statement. o A participant does not realize taxable income when such participant’s participation in the plan begins (i.e., the first day of the enrollment period in the plan). However, a participant will, at the time shares are purchased, recognize as ordinary income (determined without reduction for brokerage fees or other costs paid in connection with the disposition) an amount equal to the excess of the fair market value of the shares on the date of purchase over the purchase price. o When a participant disposes of shares acquired through the plan, he or she will recognize either a capital gain or loss, depending upon whether the shares or disposed of for more or less than the fair market value of the shares on the date of purchase. Special rules apply in the case of death. o Capital gain is short-term if the shares have been held one year or less, and long-term if held more than one year. The holding period for a share acquired under the plan begins on the purchase date. |
NEW PLAN BENEFITS
There have been no awards granted under the Agencies Stock Purchase Plan to date. Selective cannot determine at this time the benefits that will be received by the Eligible Agencies and Employee
Benefits Committee.
REPORT OF THE SELECTIVE INSURANCE GROUP, INC. AUDIT COMMITTEE
Eligible Persons if the Agencies Stock Purchase Plan is approved by stockholders because Selective cannot predict how many shares of Common Stock each Eligible Agency and Eligible Person will choose to purchase under the Agencies Stock Purchase Plan.
Page 32
INFORMATION ABOUT PROPOSAL 3
Ratification of Appointment of
Independent Public Accountants
The Audit Committee has appointed KPMG LLP to act as Selective’s independent public accountants for the fiscal year ending December 31, 2006. The Board of Directors has approved the appointment and has directed that such appointment be submitted to Selective’s stockholders for ratification at the Annual Meeting.
Stockholder ratification of the appointment of KPMG LLP as Selective’s independent public accountants is composednot required. The Board of five independent directorsDirectors, however, is submitting the appointment to the stockholders for ratification as a matter of good corporate practice. If the stockholders do not ratify the appointment, the Audit Committee and acts under a
written charter approved by the Board of Directors. The membersDirectors will reconsider whether or not to retain KPMG LLP or another firm. Even if the appointment is ratified, the Board of Directors, in its discretion, may direct the Audit
Committeeappointment of a different auditing firm at any time during the 2006 fiscal year if the Board determines that such a change would be in the best interests of Selective and its stockholders.
Representatives of KPMG LLP are Messrs. Bauer, Dolan, Rockartexpected to be present at the Annual Meeting, will have an opportunity to make a statement if they so desire and Thebault,will be available to respond to appropriate questions. In 2005, Selective paid KPMG LLP $1,212,800 for audit and Ms. Lamm-Tennant
(Chairperson), each of whom is independent as definedaudit-related services. No non-audit services were provided by the National
Association of Securities Dealers, Inc. listing standards.
KPMG LLP to Selective in 2005.
AUDIT COMMITTEE REPORT
The Audit Committee oversees the Company'sSelective’s financial reporting process and
internal controls on behalf of the Board of Directors. The Audit Committee
supervises the relationship between the Company and its independent auditors,
including making decisions with respect to their appointment, retention or
removal, reviewing the scope of their audit services, approving significant
non-audit services, and confirming the independence of the independent auditors.
Management has the primary responsibility for overseeing preparation of the Company's financial statements and the financialoverall reporting process, including the systemsystems of internal controls. The
independent auditors are responsible for performing an independent audit of the
Company's consolidated financial statements in accordance with auditing
standards generally accepted in the United States of America and issuing a
report thereon.
In fulfilling its oversight responsibilities, the Audit Committee has periodically met with and held discussions with management regarding the independent auditorsquality, not just the acceptability, of the accounting principles, the reasonableness of significant judgments and appropriate Companythe clarity of disclosures in Selective’s financial personnel.statements. The Audit Committee reviewed the Company's consolidatedaudited financial statements for the year ended December 31, 2002, and2005, included in the report of the
independent auditorsAnnual Report with respect to such financial statements and has discussed
them with management and the independent auditors.management. Management represented to the Audit Committee that (i) the financial statements were prepared in accordance with accounting principles generally accepted in the United States of America.
Management further represented to the Committee that they haveAmerica, and (ii) management had reviewed the
Company'sSelective’s disclosure controls and procedureprocedures and that management believes those controls are effective.
The Audit Committee discussedreviewed with KPMG LLP, Selective’s independent public accountants who are responsible for expressing an opinion on the independent auditorsconformity of those audited financial statements with accounting principles generally accepted in the United States of America, their judgments as to the quality, not just the acceptability, of Selective’s accounting principles and such other matters as are required to be discussed bywith the Audit Committee under generally accepted auditing standards, including the Statement on Auditing Standards No. 61, (Communication with
Audit Committees).as may be modified or supplemented. In addition, the Audit Committee has also received and reviewed the written
disclosures and the letter from the independent auditors required by
Independence Standards Board Standard No. 1 (Independence Discussions with Audit
Committees) and have discussed with the independent auditors their independence.
17
Basedthe auditors’ independence from management and Selective, including the matters in the written disclosures delivered to the Audit Committee and required by the Independence Standards Board in Standard No. 1 (Independence Discussion with Audit Committee), as may be modified or supplemented.
Page 33
In reliance on the review,reviews and discussions and representations referred to above, the Audit Committee recommended to the Board of Directors and(and the Board has approved,
thatapproved) the inclusion of the audited consolidated financial statements be included in the Company's Annual Report on Form 10-K for the year ended December 31, 2002, as filed2005, for filing with the SecuritiesSEC. The Committee and Exchange Commission.
the Board have also recommended, subject to stockholder approval, the selection of KPMG LLP as Selective’s independent public accountants.
Submitted by the Audit Committee of the Company'sSelective’s Board of Directors: Joan M.
Lamm-Tennant (Chairperson), Directors
Paul D. Bauer, William A. Dolan, II, Chairperson
Joan M. Lamm-Tennant
S. Griffin McClellan III
John F. Rockart and
J. Brian Thebault.
AUDIT FEES
Thebault
The following table showsAudit Committee Report does not constitute soliciting material, and shall not be deemed to be filed or incorporated by reference into any other Company filing under the aggregate fees billedSecurities Act of 1933, as amended, or the Exchange Act, except to the Company forextent that Selective specifically incorporates the year
ended December 31, 2002,Audit Committee Report by reference therein.
Fees of Independent Public Accountants
KPMG LLP, Selective’s independent public accountants, provided services in the Company's independent auditors, KPMG LLP:
Audit fees $440,000
Financial information systems
designfollowing categories and implementation fees none
All other fees:
Audit related fees $213,000(1)
Other non-audit fees none
-----------
Total all other fees $213,000
(1) Audit related fees consisted primarily of audits on the financial
statements of the Company's insurance subsidiariesamounts in 2005 and employee
benefit plans, and the auditors' issuance of their consent in
connection with the Company's Senior Convertible Note offering.
2004:
Category | 2005 |
| 2004 |
Audit Fees | $1,039,800 |
| $1,263,850 |
Audit-Related Fees(1) | $173,000 |
| $88,750 |
Tax Fees | $0 |
| $0 |
All Other Fees | $0 |
| $0 |
TOTAL | $1,212,800 |
| $1,352,600 |
(1) | Audit-Related Fees for 2004 and 2005 consisted primarily of the independent actuarial review and reserve opinion related to the Audit. The Audit-Related Fees for 2005 also include audits of the employee benefit plans for 2004 and 2005. |
The Audit Committee has considered whethera Pre-Approval Policy that requires pre-approval of audit and audit-related services on an annual basis and authorizes the Audit Committee to delegate to one or more of its members pre-approval authority with respect to permitted services. In 2005, the Audit Committee pre-approved all audit and audit-related services and concluded that KPMG LLP’s provision of thesesuch services iswas compatible with maintaining the principal auditors' independence.
18
COMPARISON OF FIVE-YEAR CUMULATIVE TOTAL RETURNS
The following graph demonstrates a five-year comparisonmaintenance of cumulative total
returnsKPMG LLP’s independence in the conduct of its auditing functions. KPMG LLP provided no tax services or non-audit related services in 2005. Any such future services also would require Audit Committee pre-approval on an individual engagement basis.
Page 34
STOCKHOLDER PROPOSALS AND NOMINATIONS
Proposals for the Company, the Nasdaq Stock Market (U.S. companies), and the Fire,
Marine and Casualty insurers (Nasdaq Market).
[THE FOLLWING DATA IS REPRESENTED BY A CHART IN THE PRINTED MATERIAL]
NASDAQ Stocks
(S1C 6330-
6339 US
Companies)
Selective Nasdaq Stock Fire, Marine,
Insurance Market (US and Casualty
Date Group, Inc. Companies) Insurance
12/31/1997 100.000 100.000 100.000
01/30/1998 96.296 103.169 97.265
02/27/1998 102.145 112.863 102.116
03/31/1998 100.051 117.037 102.521
04/30/1998 102.378 119.015 100.485
05/29/1998 98.701 112.403 96.898
06/30/1998 83.849 120.253 91.282
07/31/1998 72.505 118.845 87.394
08/31/1998 67.028 95.281 79.303
09/30/1998 72.094 108.499 78.427
10/30/1998 69.031 113.266 84.010
11/30/1998 71.622 124.779 85.649
12/31/1998 76.365 140.990 85.304
01/29/1999 69.250 161.453 78.199
02/26/1999 69.660 146.991 79.946
03/31/1999 67.390 158.091 79.544
04/30/1999 74.081 163.108 82.580
05/28/1999 72.710 158.531 86.513
06/30/1999 73.433 172.766 83.918
07/30/1999 76.081 169.642 79.469
08/31/1999 69.172 176.797 77.048
09/30/1999 73.298 177.013 70.424
10/29/1999 72.570 191.190 70.032
11/30/1999 68.537 214.363 65.141
12/31/1999 67.313 261.484 64.175
01/31/2000 58.991 251.857 59.997
02/29/2000 61.064 299.872 58.307
03/31/2000 67.492 293.743 70.029
04/28/2000 74.908 247.070 67.874
05/31/2000 73.508 217.289 67.979
06/30/2000 75.751 255.451 59.086
07/31/2000 73.508 241.592 64.876
08/31/2000 72.117 270.174 68.632
09/29/2000 71.866 235.087 68.448
10/31/2000 69.353 215.769 69.081
11/30/2000 81.517 166.241 72.868
12/29/2000 98.225 157.417 83.533
01/31/2001 89.364 176.478 74.249
02/28/2001 88.648 136.619 73.651
03/30/2001 94.698 117.482 77.035
04/30/2001 100.468 135.006 77.794
05/31/2001 102.545 134.812 82.464
06/29/2001 109.436 138.458 84.593
07/31/2001 108.698 129.664 85.751
08/31/2001 103.638 115.548 83.818
09/28/2001 96.253 96.077 84.389
10/31/2001 88.620 108.411 82.073
11/30/2001 96.433 123.846 85.197
12/31/2001 90.245 124.886 85.318
01/31/2002 86.840 123.939 85.758
02/28/2002 93.548 111.047 90.314
03/28/2002 111.655 118.330 94.249
04/30/2002 125.455 108.502 100.548
05/31/2002 113.831 103.716 97.102
06/28/2002 119.085 94.321 98.528
07/31/2002 107.273 85.709 90.763
08/30/2002 99.824 84.801 88.882
09/30/2002 91.914 75.674 82.665
10/31/2002 94.748 86.008 87.244
11/29/2002 109.357 95.598 89.363
12/31/2002 107.144 86.327 87.387
GRSP Total Returns Index for: 12/1997 12/1998 12/1999 12/2000 12/2001 12/2002
- ----------------------------- ------- ------- ------- ------- ------- -------
Selective Insurance Group, Inc. 100.0 76.4 67.3 98.2 90.2 107.1
Nasdaq Stock Market (US Companies) 100.0 141.0 261.5 157.4 124.9 86.3
NASDAQ Stocks (SIC 6330-6339 US Companies) 100.0 85.3 64.2 83.5 85.3 87.4
Fire, Marine, and Casualty Insurnace
Notes:
A. The lines represent monthly index levels derived from compounded daily
returnsInclusion in 2007 Proxy
From time to time, stockholders present proposals that include all dividends.
B. The indexes are reweighted daily, using the market capitalization on
the previous trading day.
C. If the monthly interval, based on the fiscal year--end, is not a
tading day, the preceding trading day is used.
D. The index level for all series was set to $100.0 on 12/31/1997.
1. The graph was prepared by the Center for Research in Security Prices
("CRSP"). The NASDAQ Stock Market index includes all U.S. Companies in
NASDAQ and the published industry index includes 68 NASDAQ Company stocks
in SIC Major Group 633 (SIC 6330-6339 U.S. fire, marine and casualty
insurance). A complete list of these companies may be obtained from CRSP at
the University of Chicago Graduate School of Business, 725 South Wells
Street, Suite 800, Chicago, Illinois, 60637; (773) 834-4606. CRSP reweighs
the indices daily, using the market capitalization on the previous trading
day.
19
II. SHAREHOLDER PROPOSAL
(Item 2 on Proxy Card)
We received a notice from John L. Soldoveri that he intends to present a
proposal at the Annual Meeting. Mr. Soldoveri's address and stock ownership will
be furnished by the Company's Corporate Secretary to any stockholder, either
orally or in writing as requested, promptly upon receipt of any oral or written
request therefore. The proposal is as follows:
WHEREAS, earnings per share and returns on equity were significantly lower
during 2000 and 2001 than during the prior five years; and
WHEREAS, 2001 compensation of senior executive officers increased substantially
over 2000, and the CEO realized significant benefits from exercising stock
options and selling Company stock during 2001 and 2002;
RESOLVED to recommend that until the Company achieves at least a 12% average
return on equity for two successive years, the Board of Directors not approve
compensation increases (other than CPI-based cost-of-living increases) above
2000 levels to senior executive officers or directors; and
FURTHER RESOLVED to recommend that the Board not award stock, stock options or
similar compensation to senior executive officers or directors unless such
compensation is performance-based, conditioned upon the Company's achieving at
least a 12% average return on equity for two successive years; and
FURTHER RESOLVED to recommend that the Board enter into understandings with
senior executive officers and directors not to exercise stock options or to sell
or otherwise dispose of stock until the Company achieves at least a 12% average
return on equity for two successive years.
Statement in Support of Proposal
2000 and 2001 diluted earnings per share were $1.01 and $0.98, respectively,
compared to $1.90 average diluted earnings per share for the prior five years.
Average returns on equity during 2002 and 2001 were 4.6% and 4.4%, respectively,
compared to 11.5% for the prior five years. Notwithstanding these decreases:
o During 2001 the Company increased the Chief Executive Officer's cash
compensation to $610,231, a 29.5% increase over 2000.
o During 2001 the Company awarded the CEO restricted stock worth
$567,188, 147% higher than the value of his 2000 stock awards.
o During 2001 the Company granted the CEO options on 15,000 shares, 50%
higher than options granted in 2000.
o During 2001 the CEO exercised options to buy 11,780 shares, realizing
$167,070 profit.
o During February 2002 the Company awarded 10,000 shares to the CEO, who
sold 7,192 shares, realizing $147,148.
o During May 2002 the CEO exercised options to buy 23,100 shares. He
immediately resold such shares at $29.00 per share, realizing $324,500
profit.
o During June 2002 the CEO exercised options to buy 15,574 shares. He
immediately resold such shares at $26.50 per share, realizing $127,000
profit.
o During September 2002 the CEO exercised options to buy 12,256 shares.
He immediately resold 8,194 shares at $24.40 per share, retaining
4,062 shares having a $97,500 value.
o During 2001 the Company significantly increased the direct and
indirect compensation of other senior executive officers above 2000
levels.
The 2001 Annual Report states that management established a goal of 12% for
average return on equity. Senior management's compensation should be directly
linked to overall Company financial performance, including achieving that highly
important stated return on equity goal.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE "AGAINST" THE SHAREHOLDER
PROPOSAL FOR THE FOLLOWING REASONS:
The Board believes that if it were to implement the recommendations contained in
the proposal, Selective's ability to attract and retain qualified management
would be significantly impaired. The Board believes that its compensation
policies already link overall compensation to both the financial goals of
Selective and long-term stock appreciation, and that restricting the
compensation paid to executives to levels paid in the year 2000 and restricting
the Board's ability to grant stock options would place Selective at a
significant competitive disadvantage in attracting and retaining the executive
talent necessary for Selective's ongoing success. The Board of Directors
believes that this proposal recommending certain actions by the Board is not in
the best interests of Selective or its stockholders and recommends that
stockholders vote "AGAINST" the proposal.
20
As stated above in the Report of the Selective Insurance Group, Inc. Salary and
Employee Benefits Committee (the "Report"), Selective's executive compensation
policies are intended to attract and retain qualified executives and to
compensate them in direct relationship to their accomplishments and levels of
responsibility. The levels of annual total compensation for executive officers
are generally intended to be comparable to the levels of annual total
compensation paid to executives with comparable responsibilities in a group of
other companies in the insurance industry, while providing for annual and
long-term incentives which are subject to the achievement of performance-related
goals. The comparison group of companies are identified by Selective as being
similar in size and scope to Selective using external surveys. After determining
the levels of compensation for each executive officer as compared with his or
her counterparts in the identified insurance industry group, the Salary and
Employee Benefits Committee weighs each executive officer's performance and
level of responsibility and considers the executive officer's contributions to
the achievement of financial and other goals of Selective. Selective's criteria
for determining executive compensation is described in more detail in the Report
beginning on page 15 in this proxy statement.
The Board believes its compensation policies align the interests of executive
officers, directors and stockholders and, in fact, encourage executive officers
and directors to focus on long-term performance. The Board believes the
executives and directors are focused on long-term performance, as Selective's
combined ratio has outperformed the property and casualty insurance industry's
combined ratio as published by A.M. Best, a leading insurance rating agency, for
each year in 14 out of the last 15 years and, in addition, has outperformed the
average of the industry combined ratios over the last 15 years by 3.4 points. In
addition, the annual average total return of Selective common stock has
outperformed the Standard & Poors 500 Stock Index and the Standard & Poors
Property and Casualty Index for the ten year period ended December 31, 2002.
Restricted stock grants made to executive officers generally vest after four
years from the date of grant, subject to the achievement of predetermined
performance goals. Stock options are granted at exercise prices equal to the
fair market value of a share of Common Stock at the date of grant. Therefore,
the value of the options increase only if the value of the Common Stock
increases. Consequently, total executive compensation is linked to the
achievement of performance goals and appreciation in Selective's stock price
thereby aligning the interests of management with your interests as
stockholders.
FOR THE FOREGOING REASONS, THE BOARD OF DIRECTORS RECOMMENDS A VOTE
"AGAINST" THE SHAREHOLDER PROPOSAL
INTEREST OF MANAGEMENT AND OTHERS IN CERTAIN TRANSACTIONS
William M. Rue, a director of the Company, is President and owner of more than a
5% equity interest in Chas. E. Rue & Sons, Inc., a general insurance agency,
which received $1,316,514 in commissions during 2002 for insurance policies
placed with the Company's subsidiaries. During 2002, the Company's insurance
subsidiaries purchased insurance coverages with premiums of $1,081,053 through
the agency. Chas. Rue & Sons, Inc. owns 20% of PL, LLC, which is an insurance
fund administrator that places reinsurance through a subsidiary of the Company.
In 2002, $427,489 in reinsurance commissions were paid to PL, LLC. The foregoing
relationship has existed during the past fiscal year, and the Company intends to
continue its relationship with Chas. E. Rue & Sons, Inc.
On December 16, 1994, Messrs. Murphy and Ochiltree, each of whom is an executive
officer of the Company, incurred certain indebtedness to the Company in
connection with their respective exercises of nonqualified stock options granted
on such date under the Company's Stock Option Plan II. Such loans were made by
the Company to such officers and certain other employees in order to encourage
such employees to exercise their options and thus to align further their
interests with those of the stockholders through greater stock ownership. The
principal amounts of such loans to Messrs. Murphy and Ochiltree were $105,395
and $197,000, respectively. These loans bear no interest and are due in 2005.
Principal amounts outstanding as of February 20, 2003 were $38,993 and $72,890,
for Messrs. Murphy and Ochiltree, respectively.
On August 7, 1998, Messrs. Murphy, Coleman and Ochiltree incurred certain
indebtedness to the Company in connection with the purchase of the Company's
Common Stock on the open market. Loans were made by the Company to senior
management and certain other officers in order to encourage greater ownership of
Common Stock. The principal amounts of such loans to Messrs. Murphy, Coleman and
Ochiltree were $162,495, $83,196 and $98,799, respectively. These loans bear an
annual interest rate of 2.5% and are due in 2009. Principal amounts outstanding
as of February 20, 2003 were $105,621, $54,077 and $64,219 for Messrs. Murphy,
Coleman and Ochiltree, respectively.
21
STOCKHOLDER PROPOSALS
Any stockholder desiring to submit a proposalproper subjects for inclusion in the Proxy
Statement relatingproxy statement and for consideration at an annual meeting. Under the rules of the SEC (Rule 14a-8 under the Exchange Act), stockholder proposals to be included in the 2004proxy statement for the 2007 Annual Meeting of Stockholders to be held on or about May 5, 2004 must submit the proposal in writing and itApril 26, 2007, must be received at
the Company's headquarters at Branchville, New Jersey 07890, Attention:
Corporate Secretary, on or before December 5, 2003, for determination of
eligibility in accordance with the rules and regulations of the Securities and
Exchange Commission.
Under the Company's By-Laws, if a stockholder wishes to bring a matter before
the meeting or if a stockholder wants to nominate a person for election to our
board of directors, the stockholder must follow the procedures outlined in
Section 3B of the Company's By-Laws. A copy of the By-Laws, which covers those
matters, is available without charge to stockholders of record upon written
request to theby Selective’s Corporate Secretary at 40 Wantage Avenue, Branchville, NJ 07890.
These procedures are separate from the Securities07890 no later than November 28, 2006.
Other Proposals and Exchange Commission's
requirementsNominations
A stockholder who otherwise intends to present business at Selective’s 2007 Annual Meeting must comply with Selective’s By-laws, which state, among other things, that to properly bring business before an annual meeting, a stockholder must meetdeliver notice to the Secretary of Selective in orderproper written form not less than ninety (90) days nor more than one hundred twenty (120) days prior to havethe first anniversary of the preceding year’s Annual Meeting. Thus, a notice of a stockholder proposal included in our proxy statement.
Onefor the 2007 Annual Meeting, submitted other than pursuant to Rule 14a-8 of the procedural requirements in the By-Laws is timely notice in writing of
the business the stockholder proposes to bring before the meeting and/or the
nomination the stockholder proposes to make at the meeting. Notice of business
proposed toExchange Act, will be brought before the 2004 annual meeting and/or director
nominations proposed to be made at the 2004 annual meeting must beuntimely if received by the Secretary before December 27, 2006 or after January 26, 2007.
Under Section 3B of Selective’s By-laws, stockholders may (i) present proposals that are proper subjects for consideration at an annual meeting, which proposals are not submitted for inclusion in the proxy statement for such annual meeting pursuant to Rule 14a-8 of the Exchange Act, or (ii) nominate a person for election to our Board of Directors at the annual meeting. On written request to Selective’s Corporate Secretary no earlier than January 8, 2004at 40 Wantage Avenue, Branchville, NJ 07890, stockholders of record may receive a free copy of Selective’s By-laws. Procedures in the By-laws are separate and no later than
February 7, 2004.
The notice for businessdistinct from those required by the SEC.
Selective’s By-laws require that the stockholder proposes to bring beforeprovide the meeting must be a proper matter for stockholder action and must describe:
o following information in writing regarding any proposal:
the business proposed to be brought before the annual meeting;
o
the reasons for conducting the business at the annual meeting;
o
any material interest of the stockholder in the business;
o
the beneficial owner, if any, on whose behalf the proposal is made;
o
the name and address of the stockholder giving the notice, as they appear on our books, and of the beneficial owner of those shares; and
o
the class and number of shares which are owned beneficially and of record by the stockholder and the beneficial owner.
The notice for a nomination
Selective’s By-laws require that the stockholder proposes to make atprovide the meeting must
describe:
o following information in writing regarding any nomination for director:
all information relating to each person whom the stockholder proposes to nominate for election as a director as would be required to be disclosed in a solicitation of proxies for the election of such person as a director pursuant to Regulation 14A under the Securities Exchange Act of 1934, as amended (including such person'sperson’s written consent to being named in the proxy statement as a nominee and to serving as a director if so elected);
o
the name and address of the stockholder giving the notice, as they appear on our books, and of the beneficial owner of those shares; and
o
the class and number of shares which are owned beneficially and of record by the stockholder and the beneficial owner.
FINANCIAL STATEMENTS AND OTHER INFORMATION
Consolidated financial statements for the Company and its subsidiaries and the
report thereon of KPMG LLP are included in the 2002 Annual Report to
Stockholders. A copy of the Company's Annual Report on Form 10-K for the year
ended December 31, 2002, as filed with the Securities and Exchange Commission,
excluding exhibits, will be provided without charge to stockholders upon written
request
Page 35
STOCKHOLDER COMMUNICATION WITH THE BOARD
Stockholders so desiring may send communications to the Executive Vice President and Chief Financial Officer,Board of Directors or individual directors by writing to Selective’s Corporate Secretary, Selective Insurance Group, Inc., 40 Wantage Avenue, Branchville, NJ 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.
* * * * * * * *
It is important that your shares be represented at the meeting, regardless of the number of shares that you hold. YOU ARE THEREFORE URGED TO PROMPTLY VOTE YOUR SHARES BY (1) CALLING THE TOLL-FREE TELEPHONE NUMBER LISTED ON THE PROXY CARD; (2) ACCESSING THE INTERNET WEBSITE LISTED ON THE PROXY CARD; OR (3) COMPLETING, DATING, AND SIGNING THE ENCLOSED PROXY CARD AND RETURNING IT IN THE ENCLOSED ENVELOPE. Stockholders who are present at the meeting may revoke their proxies and vote in person or, if they prefer, may abstain from voting in person and allow their proxies to be voted.
By Order of the Board of Directors:
Michael H. Lanza
Senior Vice President, General Counsel
and Corporate Secretary
March 28, 2006
Branchville, New Jersey
DOCUMENTS INCORPORATED BY REFERENCE
Information regarding Executive Officers is incorporated by reference to Selective’s Annual Report on Form 10-K in the item in Part I captioned “Executive Officers of the Registrant.”
Page 36
APPENDIX A
SELECTIVE INSURANCE GROUP, INC.
STOCK PURCHASE PLAN FOR INDEPENDENT INSURANCE AGENCIES
(Effective July 1, 2006)
1. | PURPOSE; GENERAL |
The purpose of the Selective Insurance Group, Inc. Stock Purchase Plan for Independent Insurance Agencies (the “Plan”) is to motivate independent insurance agencies that sell products and services for the insurance company subsidiaries of Selective Insurance Group, Inc., a New Jersey 07890. corporation (the “Company”), by enabling them to participate in the Company’s long-term growth and success and to help align their success with those interests of the Company’s stockholders.
The Form 10-K providedPlan allows each Eligible Agency (as defined in Section 2(a) below) and those eligible Principals, Key Employees and Benefit Plans (each as defined in Section 2(a) below, and collectively referred to stockholdersas the “Eligible Persons”) designated by the Eligible Agency to purchase shares of the common stock of the Company, par value $2.00 per share (“Common Stock”) at a discount as described below. An Eligible Agency or Eligible Person may elect to apply all or a portion of its Earned Cash Commissions (as defined in Section 2(c) below) and its distributions from the Company’s profit sharing commitment (the “Profit Sharing Plan”) to the purchase of shares of Common Stock under the Plan.
Each Eligible Agency, together with its designated Eligible Persons (each such Eligible Agency and its designated Eligible Persons a “Participant”), may invest up to the applicable Maximum Contribution Amount (as described in the chart below) per calendar quarter under the Plan on certain Purchase Dates (as defined in Section 2(c) below), based upon the amount of total Written Premiums (as defined below) by such Eligible Agency during the previous calendar year with one or more of Selective’s insurance subsidiaries, as follows:
Written Premiums | Maximum Contribution |
Less than $2,000,000 | $30,000 |
$2,000,000 or more but less than $5,000,000 | $50,000 |
$5,000,000 or more | $75,000 |
“Written Premiums” include all written premiums, less cancellations and returns, recorded by the Company and its insurance subsidiaries, but do not include:
1. | Premiums for policies written through pools, associations, or syndicates; |
2. | Premiums for insurance written in any reinsurance facility, joint underwriting association, or other insurance program required by law; |
3. | Policyholder dividends, expense fees, surcharges, and other like charges; |
4. | Premiums from any accident and health, systems breakdown, and flood policies; |
5. | Premiums for alternative market business, including, but not limited to, retrospectively rated policies and assumed business; and |
6. | Premiums for policies, coverages, or plans that the Committee (as defined in Section 6 hereof) may exclude from this Plan. |
There is a $100 (one hundred dollar) minimum for purchases under the Plan by a Participant per calendar quarter. If a Participant does not purchase $100 (one hundred dollars) per a calendar quarter, any amounts below such minimum will includebe refunded, without interest, to such Participant by check as soon as practicable after the end of the quarter. The Company offers shares of Common Stock under the Plan at a 10% discount from Fair Market Value (as defined below) on the Purchase Date and Participants pay no brokerage commissions or other charges on purchases of such shares under the Plan. Fair Market Value is defined as the closing selling price for the Common Stock reported on the NASDAQ National Market on the applicable Purchase Date.
2. | PARTICIPATION IN THE PLAN |
(a) | Eligibility |
Each eligible independent insurance agency that is under contract with any of the insurance subsidiaries of the Company to promote and sell Company’s subsidiaries’ insurance products, other than such agencies that promote and sell only the Company’s subsidiaries’ flood insurance products (each, an “Eligible Agency”) is eligible to participate in the Plan and to purchase shares of Common Stock under the Plan. Also eligible to purchase shares under the Plan in conjunction with an Eligible Agency are the following Eligible Persons:
• | principals, general partners, officers, and stockholders of, and designated by, an Eligible Agency (collectively, “Principals”); |
• | key employees of an Eligible Agency designated by such Eligible Agency (“Key Employees”); and |
• | individual retirement plans of Principals and Key Employees, Keogh plans of Principals and Key Employees, and employee benefit plans of, and designated by, an Eligible Agency (collectively, the “Benefit Plans”). |
No later than July 1, or the next business day following such day, of each year, each Eligible Agency shall provide to the Company, at the address contained in Section 2(c) hereof or by e-mail to agentstockplan@selective.com, a list of exhibitsall Eligible Persons designated by such Eligible Agency as of such date for the next succeeding year. The Eligible Agency shall notify the Company of any deletions from such list no later the next Contribution Date (as defined in Section 2(c) hereof). Eligible Agencies may not add any Principals, Key Employees, or Benefit Plans to the Form 10-K. Exhibitslist of Eligible Persons designated by such Eligible Agency until July 1 of the next succeeding year. The Committee or its designee shall, in its sole discretion, determine whether any Eligible Agency, or Eligible Person designated by an Eligible Agency, is ineligible to be a Participant in the Plan.
Eligible Agencies and Eligible Persons are under no obligation to participate in the Plan or to purchase shares of Common Stock under the Plan. If an Eligible Agency and/or its Eligible Persons choose not to participate in the Plan, the Eligible Agency and/or its Eligible Persons, as applicable, shall receive the Earned Cash Commissions (as defined in Section 2(c) below) and the distributions from the Profit Sharing Plan to which they are entitled. The Plan is for the benefit only of the Participants. No other persons shall be direct or indirect beneficiaries or participants in the Plan. The Company shall not be obligated with respect to the Plan under any other arrangements between an Eligible Agency and any other person, including, but not limited to, the Eligible Agency’s Principals, Key Employees, and Benefit Plans.
(b) | Enrollment in the Plan |
The Company shall send to each Eligible Agency:
a copy of the Plan;
an enrollment/purchase form;
a copy of a prospectus and any prospectus supplements; and
a copy of the most recent Annual Report of the Company.
If an Eligible Person wishes to participate in the Plan, the Eligible Agency and each participating Eligible Person must complete and sign the enrollment/purchase form and return the form to the Company at the address contained in Section 2(c) hereof. Eligible Agencies may obtain additional forms by written or telephonic request to the Company, attention: “Accounts” at the address contained in Section 2(c) hereof or by calling (973) 948-3000.
An Eligible Person shall become a Participant in the Plan only (i) after the Eligible Agency affiliated with such Eligible Person has received a copy of the Plan, a prospectus, any applicable prospectus supplement or supplements, and the most recent Annual Report of the Company, (ii) after the Company has received a properly
completed enrollment/purchase form signed by such Eligible Agency and such Eligible Person, and (iii) if such Eligible Person has not been determined to be ineligible to become a Participant in the Plan by the Committee or its designee pursuant to Section 2(a) hereof. By returning a properly completed and signed form to the Company, the Eligible Agency and participating Eligible Person each acknowledge the receipt of the documents described in subsection (i) of the previous sentence.
(c) | Purchasing Shares of Common Stock |
Shares may generally be purchased by Participants under the Plan on the first day of March, June, September, and December of each year or the next succeeding business day (each a “Purchase Date” and collectively, the “Purchase Dates”), however, the Company does not guarantee that such days will be furnishedPurchase Dates and may designate other dates as Purchase Dates. The Company does not pay any interest on cash payments received under the Plan.
Once each calendar quarter, and prior to a Contribution Date (as defined below), the Company shall provide enrollment/purchase forms to each Eligible Agency. Purchases shall be made under the Plan on the next applicable Purchase Date.
Each Participant shall designate the dollar amount to be invested (the “Contribution Amount”) on the next Purchase Date on the appropriate sections of the enrollment/purchase form. Each Participant shall designate (i) the amount, if any, of the Contribution Amount that is to be paid in cash by check, (ii) the percentage, if any, that is to be deducted from monthly payments of Earned Cash Commissions (as defined below) and applied to the Contribution Amount, and (iii) the percentage, if any, that is to be deducted from the Participant’s distributions under the Profit Sharing Plan and applied to the Contribution Amount. The Contribution Amount designations regarding the Earned Cash Commissions and Profit Sharing Plan shall remain in effect until revoked or modified in writing by such Participant, which revocation or modification will take effect for the next practicable Purchase Date. The Contribution Amount designation regarding cash shall only remain in effect for the next Purchase Date.
“Earned Cash Commissions” means those commissions that are fully earned and are due and payable to a participating Eligible Agency for personal and commercial direct bill policies after all offsetting debits and credits are applied, as determined by and solely from the records of the Company and its subsidiaries.
For each Participant, the enrollment/purchase form must include:
such Participant’s full name and address;
such Participant’s social security or taxpayer identification number; and
the amount of cash, if any, and percentages of Earned Cash Commissions and/or Profit Sharing Plan payments, if any, to be invested in shares of Common Stock for each Eligible Person for whom purchase instructions are submitted.
In addition, each Participant must sign their enrollment/purchase form and certify to the Company receipt of a copy of the Plan, any prospectus or supplements thereto, and a copy of the most recent Annual Report of the Company. The form must be signed by the applicable Eligible Agency and each affiliated Eligible Person listed on the form.
Completed and signed enrollment/purchase forms must be sent to the Company at:
Selective Insurance Group, Inc.
40 Wantage Avenue
Branchville, New Jersey 07890
Attention: Accounts
Properly completed forms and necessary payments must be received by the Company within 10 business days prior to the applicable Purchase Date (the “Contribution Date”). The Company will perform such necessary ministerial and clerical work regarding the forms as to effect the transaction and promptly forward
enrollment/purchase information to the Plan Agent (as defined in Section 2(d) hereof). If necessary payments are not received by the applicable Contribution Date, the purchase will not be effected and any payments received after the Contribution Date will be returned.
(d) | Purchased Shares and Participants’ Accounts |
The Company shall record the ownership of the shares of Common Stock purchased through the Plan in book-entry form. When a Participant makes his or her first purchase of shares of Common Stock under the Plan, the Company shall establish an account for each such Participant with Wells Fargo Shareowner Services, the Company’s transfer agent and registrar (the “Plan Agent”). Each time a Participant purchases shares of Common Stock, the shares shall be credited to the Participant’s account and the Company shall record the shares on its Common Stock records. The Participant shall receive a written account statement following each purchase of shares. A Participant may vote all shares of Common Stock held in his or her account.
(e) | Restrictions on Shares Purchased under the Plan |
Shares of Common Stock purchased under the Plan shall be restricted for a period of one year beginning on the Purchase Date and expiring upon the first anniversary of the Purchase Date (the “Restricted Period”). During the Restricted Period, the Participant may not sell, transfer, pledge, assign, or dispose of his or her shares of Common Stock in any way. During this period, the Plan Agent shall hold the Participant’s shares of Common Stock in the Participant’s account, but no share certificates shall be issued. However, a Participant shall be able to vote his or her shares of Common Stock during the Restricted Period and shall receive any dividends declared by the Board of Directors of the Company (the “Board”). The Participant shall own all of the shares in his or her account and none of the Participant’s shares of Common Stock shall be subject to forfeiture.
Following the expiration of the Restricted Period, the Participant’s shares of Common Stock shall remain in his or her account until the Participant requests, in writing to the Plan Agent, that the shares be transferred, that the shares be sold, that certificates be issued to the Participant, or that the Participant’s account be closed.
If an Eligible Agency closes its account, it may re-enroll in the Plan at any time it is eligible to participate by completing a new enrollment/purchase form. An Eligible Person may similarly re-enroll in the Plan, provided the Eligible Person is on the list of Eligible Persons designated by the Eligible Agency.
3. | SHARES AVAILABLE UNDER THE PLAN |
The maximum number of shares of Common Stock reserved for issuance under the Plan shall be 1,500,000 (one million five hundred thousand) and subject to adjustment as provided herein. The Company may make the shares available from authorized but unissued shares of Common Stock or authorized and issued shares of Common Stock held in the Company’s treasury, including shares purchased by the Company in the open market.
In the event that the Board determines that any stock dividend or other distribution,
extraordinary cash dividend, stock split or reverse stock split, recapitalization, reorganization, merger, consolidation, split-up, spin-off, combination, exchange of shares, warrants, rights offering to purchase shares of Common Stock at a price substantially below fair market value, or other similar corporate transaction or event affects the Common Stock so that an adjustment is required in order to preserve the benefits or potential benefits intended to be made available under the Plan, then the Board may, in its sole and absolute discretion, adjust any or all of the number and type of shares which may be available under the Plan.
4. | DIVIDENDS; DIVIDEND REINVESTMENT |
The Company pays dividends, as and when declared by the Board, to the record holders of shares of Common Stock. As the record holder of shares of Common Stock purchased under the Plan, a Participant shall receive dividends, if any, in cash for all shares registered in the Participant’s name on the record date. Such payment shall be made on the date that such dividend would be paid to the Company’s stockholders generally.
Any dividend payable in Common Stock or any split shares distributed by the Company on shares purchased under the Plan shall be deposited in the Participant’s account with the Plan Agent. Any shares received as the result of a stock split shall be subject to the same restrictions on transfer as the shares purchased under the Plan. Shares received as dividends shall not be subjected to any transfer restrictions.
Participants in the Plan are also eligible to participate in the Company’s dividend reinvestment plan pursuant to the terms and conditions of that plan. If a Participant elects to participate in the Company’s dividend reinvestment plan, the Participant shall be entitled to reinvest his or her dividends to purchase additional shares of Common Stock. There is no discount on the purchase price of shares under the Company’s dividend reinvestment plan. The transfer restrictions applicable to shares purchased under the Plan shall not apply to any shares purchased under the Company’s dividend reinvestment plan. Wells Fargo Shareowner Services is the plan administrator of the Company’s dividend reinvestment plan. Information about the Company’s dividend reinvestment plan may be obtained from the Company or from Wells Fargo Shareowner Services.
5. | OTHER STOCKHOLDER RIGHTS; INFORMATION REPORTING |
If the Company has a rights offering, Participants in the Plan shall be entitled to participate based upon their total share holdings. Rights on shares of Common Stock purchased under the Plan and registered in the name of a Participant shall be mailed directly to that Participant in the same manner as to stockholders upon requestnot participating in the Plan.
Each Participant in the Plan shall receive the Company’s annual and upon
paymentother periodic or quarterly reports issued to stockholders, notices of reproductionstockholder meetings, proxy statements and mailing expenses.
ACCOUNTANTS
Internal Revenue Service information for reporting dividends paid and income resulting from the discount on the purchase of Common Stock under the Plan.
Each Participant shall be entitled to vote the shares purchased under the Plan and registered in that Participant’s name on a record date for a meeting of stockholders. A Participant may vote in person or by proxy at any meeting of stockholders.
6. | ADMINISTRATION OF THE PLAN, INQUIRIES, AND CORRESPONDENCE |
The Plan shall be administered by the Salary and Employee Benefits Committee of the Board (the “Committee”) or its designee. The Committee shall have the authority, in its sole discretion, subject to and not inconsistent with the express provisions of the Plan, to administer the Plan and to exercise all the powers and authorities either specifically granted to it under the Plan or necessary or advisable in the administration of the Plan, including, without limitation, the authority to:
construe and interpret the Plan;
make adjustments in response to changes in applicable laws, regulations, or accounting principles, or for any other reason;
prescribe, amend, and rescind rules and regulations relating to the Plan and appoint such agents as it shall deem appropriate for the proper administration of the Plan, in accordance with Section 7 hereof; and
make all other determinations deemed necessary or advisable for the administration of the Plan.
Determinations of the Committee shall be final, conclusive, and binding on all persons, and the Committee will not be liable for any action or determination made in good faith with respect to the Plan.
The Committee shall engage the Plan Agent to perform custodial and record-keeping functions for the Plan, such as holding record title to the Participants’ shares, maintaining an individual investment account for each Participant, and providing periodic account status reports to each Participant.
All enrollment/purchase forms should be sent to the Company. All other inquiries and correspondence should be sent to:
Wells Fargo Shareowner Services
P.O. Box 64854
St. Paul, Minnesota 55164-0854
Telephone inquiries may be directed to the Company at (973) 948-3000 or to Wells Fargo Shareowner Services at (866) 877-6351.
The Company has engagedpays all of its administrative expenses related to the servicesPlan. Plan Participants pay no brokers commissions or administrative or other charges for purchases of KPMG LLP asCommon Stock under the Plan.
7. | AMENDMENT OR TERMINATION OF THE PLAN |
Either the Board or the Committee may amend, revise, suspend, or terminate the Plan at any time and in any respect whatsoever; provided, however, that stockholder approval shall be required for any such amendment if and to the extent such approval is required in order to comply with applicable law or any stock exchange listing requirement.
8. | RIGHTS NOT TRANSFERABLE |
Rights under the Plan are not transferable by a Participant other than by will or the laws of descent and distribution and are exercisable during the Participant’s lifetime only by the Participant.
9. | RIGHT TO CONTINUED EMPLOYMENT OR AGENCY STATUS |
Nothing in the Plan or any enrollment/purchase form shall confer an obligation on the Company or any Eligible Agency to employ or continue the employment or service of any Participant for any specified period of time and shall not lessen, affect, or interfere with the Company’s or any Eligible Agency’s right to terminate the employment or service of any such Participant at any time or for any reason not prohibited by law.
10. | APPLICABLE OR GOVERNING LAW; SEVERABILITY |
Except to the extent preempted by any applicable federal law, the Plan shall be construed and administered in accordance with the laws of the State of New Jersey without reference to its principal independent
accountants for 2003. The Company anticipates making no change in its selection
and a representativeprinciples of that firmconflicts of law.
If any provision of the Plan is expectedheld to be availableinvalid or unenforceable, the other provisions of the Plan shall not be affected but shall be applied as if the invalid or unenforceable provision had not been included in the Plan.
Selective Insurance Group, Inc.
Directions to Principal Offices
40 Wantage Avenue
Branchville, NJ 07890-1000
From East:
Route I-80 West to Route 15 North to Route 206 North. Go about 2 miles from Route 15/Route 206 intersection, turn right at the Annual
Meetingtraffic light, then left on Route 630(Broad Street). Turn right at Post Office onto Wantage Avenue(Route 519). 1st entrance on right - Northeast Operations. 2nd entrance on right - Corporate office/ main reception area.
From West:
Route I-80 East to Route 94 North to Route 206 North. Right at Branchville traffic light opposite "Our Lady Queen of StockholdersPeace" Catholic church, then left on Route 630(Broad Street). Right at Post Office onto Wantage Avenue(Route 519), 1st entrance on right - Northeast Operations. 2nd entrance on right - Corporate office/ main reception area.
- or -
Route I-78 East to respondPa. Route 611 North to appropriate questions andRoute 94 North to make a
statement if such representative so desires.
PROXY
Route 206 North. Right at Branchville traffic light opposite "Our Lady Queen of Peace" Catholic church, then left on Route 630(Broad Street). Right at Post Office onto Wantage Avenue(Route 519), 1st entrance on right - Northeast Operations. 2nd entrance on right - Corporate office/ main reception area.
- or -
Route I-78 East to Route 31 North to Route 46 West to Route 94 North to Route 206 North. Right at Branchville traffic light opposite "Our Lady Queen of Peace" Catholic church, then left on Route 630(Broad Street). Right at Post Office onto Wantage Avenue(Route 519), 1st entrance on right - Northeast Operations. 2nd entrance on right - Corporate office/ main reception area.
From North:
Route I-84 (East or West) to PA Route 209 South to NJ Route 206 South. Left at Branchville traffic light opposite "Our Lady Queen of Peace" Catholic church, then left on Route 630(Broad Street). Right at Post Office onto Wantage Avenue(Route 519), 1st entrance on right - Northeast Operations. 2nd entrance on right - Corporate office/ main reception area.
From South:
Route 206 North or Route I-80 West to Route 15 to Route 206 North. Right at Branchville traffic light opposite "Our Lady Queen of Peace" Catholic church, then left on Route 630(Broad Street). Right at Post Office onto Wantage Avenue(Route 519), 1st entrance on right - Northeast Operations. 2nd entrance on right - Corporate office/ main reception area.
SELECTIVE INSURANCE GROUP, INC.
Proxy Solicited on Behalf of
ANNUAL MEETING OF STOCKHOLDERS
Wednesday, April 26, 2006
11:00 a.m.
40 Wantage Avenue
Branchville, New Jersey 07890
----------------------------------------------------------------------------------------------------
| Selective Insurance Group, Inc. | proxy |
This proxy is solicited by the Board of Directors of Selective Insurance Group, Inc. for use at the Annual Meeting of Stockholders May 7, 2003
to be held on April 26, 2006.
The undersigned, a stockholder of Selective Insurance Group, Inc. (the "Company"“Company”) hereby constitutes and appoints C. Edward Herder,Paul D. Bauer and Joan M. Lamm-Tennant and William M. Rue and/or any one or more of them (with full power of substitution and the full power to act without the others or other), proxies to vote all the shares of the Common Stock of Selective Insurance Group, Inc. registered in the name of the undersigned at the Annual Meeting of Stockholders of the Company to be held on Wednesday, May 7, 2003April 26, 2006 at 11:00 a.m. in the auditorium at the headquarters of the Company at 40 Wantage Avenue, Branchville, New Jersey, and at any adjournment thereof.
Specify your choices by marking the appropriate box (SEE REVERSE SIDE), but you need not mark any box if you wish to vote in accordance with the Board of Directors'Directors’ recommendations. The proxies cannot vote your shares unless you sign and return this Proxy,proxy, submit a proxy by telephone or through the Internet, or attend the meeting and vote by ballot.
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SEE REVERSE
SIDE
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FOLD AND DETACH HERE
|X|
Your vote is important. Please markvote immediately.
See reverse for voting instructions.
COMPANY # |
There are three ways to vote your 9061
votes as in this
example.
This Proxy when properly executed will be voted in the manner directed
herein. If no direction is made, this proxy will be voted FOR the Election
of Directors and AGAINST the Shareholder Proposal.
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The Board recommends a vote FOR item 1.
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1. Election of FOR WITHHELD Nominees for Terms Expiring in 2006:
Directors. |_| |_| 01. A. David Brown
02. William M. Kearns, Jr.
03. S. Griffin McClellan III
04. John F. Rockart, Ph.D.
05. J. Brian Thebault
For, except vote withheld from the following nominee(s):
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The Board recommends a vote AGAINST item 2.
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FOR AGAINST ABSTAIN
2. Shareholder Proposal. |_| |_| |_|
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3. In their discretion upon such other matters as may properly come before the
meeting.
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SIGNATURE(S) _________________________________________________ DATE ____________
NOTE: Please sign exactly as name appears hereon. Joint owners should each sign.
If signing as attorney, executor, administrator, trustee or guardian,
please give full title as such.
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Please mark, sign, date and return this
Proxy promptly using the enclosed
envelope.
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FOLD AND DETACH HERE
NOW YOU CAN VOTE YOUR SHARES BY TELEPHONE OR INTERNET
VOTE BY TELEPHONE VOTE BY INTERNET VOTE BY MAIL
Call TOLL-FREE using a Access the WEBSITE Return your proxy in the
Touch Tone phone and cast your vote POSTAGE-PAID
1-877-PRX-VOTE http://www.eproxyvote.com/sigi envelope provided.
1-877-779-8683
Your telephone or Internet vote must be received by midnight eastern time on May
6, 2003authorizes the named proxies to be countedvote your shares in the final tabulation.
same manner as if you marked, signed and returned your proxy card.
VOTE BY TELEPHONE
HavePHONE — TOLL FREE — 1-800-560-1965 — QUICK *** EASY *** IMMEDIATE
Use any touch-tone telephone to vote your proxy 24 hours a day, 7 days a week, until 12:00 noon (CT) on April 25, 2006.
Please have your proxy card available when you calland the Toll-Free number 1-877-779-8683
using a Touch-Tone phone. You will be prompted to enterlast four digits of your voter control
number and then you can followSocial Security Number or Tax Identification Number available. Follow the prompts that will be presented to you to
record your vote.
simple instructions the voice provides you.
VOTE BY INTERNET Have— http://www.eproxy.com/sigi/ — QUICK *** EASY *** IMMEDIATE
Use the Internet to vote your proxy 24 hours a day, 7 days a week, until 12:00 noon (CT) on April 25, 2006.
Please have your proxy card available when you accessand the website
http://www.eproxyvote.com/sigi. You will be promptedlast four digits of your Social Security Number or Tax Identification Number available. Follow the simple instructions to enterobtain your voter control
numberrecords and then you can follow the prompts that will be presented to you to
record your vote.
create an electronic ballot.
VOTE BY MAIL
Please mark,
Mark, sign and date your proxy card and return it in the postage paidpostage-paid envelope we have provided or return it to:to Selective Insurance Group, Inc., c/o EquiServe Trust Company, N.A.Shareowner ServicesSM, P.O. Box 8079, Edison NJ 08818-9353.
64873, St. Paul, MN 55164-0873.
TO CHANGE YOUR VOTE
You may revoke your proxy by giving proper written notice of revocation to the Corporate Secretary of the Company before your proxy is exercised. Any subsequent vote, by any means, will change your prior vote. For example, if you voted by telephone, a subsequent Internet vote will change your vote. The last vote received before midnight eastern time, May 6, 200312:00 noon (CT), April 25, 2006, will be the one counted. You may also change your vote by voting in person at the Annual Meeting.
If you vote by Phone or Internet, please do not mail your Proxy Card
— Please detach here —
The Board of Directors Recommends a Vote FOR Items 1, 2 and 3.
1. Election of four (4) | Election of two (2) | Election of one (1) 07 W. Marston Becker | o Vote FOR | o Vote WITHHELD |
(Instructions:To withhold authority to vote for any indicated nominee,write the number(s) of the nominee(s) in the box provided to the right.) |
2. | Approve the Selective Insurance Group, Inc. Stock Purchase Plan for Independent Insurance Agencies. | o | For | o | Against | o | Abstain |
3. | Ratify the appointment of KPMG LLP as independent public accountants for the fiscal year ending December 31, 2006. | o | For | o | Against | o | Abstain |
THIS PROXY WHEN PROPERLY EXECUTED WILL BE VOTED AS DIRECTED OR, IF NO DIRECTION IS GIVEN, WILL BE VOTED FOR EACH PROPOSAL.
Address Change? Mark Box o Indicate changes below:
Date |
Signature(s) in Box
Please sign exactly as your name(s) appears on the proxy. If held in joint tenancy, all persons should sign. Trustees, administrators, etc., should include title and authority. Corporations should provide full name of corporation and title of authorized officer signing the proxy.