Selective Insurance (SIGI) 8-K Results of Operations and Financial Condition

Supplemental Investor Package

Fourth Quarter and

Full Year 2009

Investor Contact:

Jennifer DiBerardino

Vice President, Investor Relations

Tel:  973-948-1364

jennifer.diberardino@selective.com

SELECTIVE INSURANCE GROUP, INC.
FOURTH QUARTER AND FULL YEAR 2009 INVESTOR PACKET
TABLE OF CONTENTS
Earnings Press Release		1
Selected Balance Sheet Data		6
Selected Income Statement Data		7
Quarterly Investment Income		8
Investment Yield and Tax Rate Portfolio Breakdown		9
Statutory Combined Ratio Summary by LOB Quarter		10
Statutory Combined Ratio Summary by LOB YTD September		11
Consolidated Balance Sheets		12
Consolidated Statements of Income - Fourth Quarter		13a
Consolidated Statements of Income - Full Year		13b
Consolidated Statements of Stockholder’s Equity		14
Consolidated Statements of Cash Flow		15
Statutory Balance Sheets		16
Statutory Statements of Income		17
Investment Portfolio – Appendix
	Alternative Investments Exhibit	18
	Municipal Bond Portfolio Exhibit	19
	Structured Securities Exhibit	20
	RMBS & RABS Exhibit	21
	RMBS & RABS by Vintage Year Exhibit	22
	RMBS and RABS by Type Exhibit	23
	Alt-A by Vintage Year Exhibit	24
	CMBS Exhibit	25
	CMBS by Vintage Year Exhibit	26
	CMBS by Type Exhibit	27
	Credit Quality of AFS Securities Exhibit	28
	Credit Quality of HTM Securities Exhibit	29

Selective Insurance Group, Inc.

Selected Balance Sheet Data (unaudited)

($ in thousands, except per share amounts)

	December 31,								December 31,
	2009								2008
						Unrealized/								Unrecognized/
	Balance			Market		Unrecognized			Balance			Market		Unrealized
	Sheet			Value		Gain/(Loss)			Sheet			Value		Gain/(Loss)
Invested Assets:
Corporate bonds1,2	$	1,144,692			1,163,973		(13,031	)	$	1,024,179			1,024,181		(124,294	)
Gov't\ Municipal bonds2		2,201,580			2,212,107		72,101			2,011,262			2,011,275		35,240
Total bonds		3,346,272			3,376,080		59,070			3,035,441			3,035,456		(89,054	)
Equities		80,264			80,264		15,874			132,131			132,131		6,184
Short-term investments		213,848			213,848		-			198,111			198,111		-
Trading securities		-			-		-			2,569			2,569		(1,216	)
Other investments		140,667			140,667		(25,774	)		172,057			172,057		(5,585	)
Total invested assets		3,781,051			3,810,859		49,170			3,540,309			3,540,324		(89,671	)
Invested assets per $ of stockholders' equity		3.77								3.98
Total assets		5,114,827								4,945,556
Liabilities:
Reserve for losses		2,342,919								2,256,329
Reserve for loss expenses		402,880								384,644
Unearned premium reserve		844,847								844,334
Total liabilities		4,112,452								4,055,063
Stockholders' equity		1,002,375								890,493
Total debt to capitalization ratio		21.5	%							23.5	%
Adjusted total debt to capitalization ratio 3		15.6	%							17.0	%
Book value per share		18.83								16.84
Book value per share excluding unrealized gain or loss on bond portfolio		18.47								17.94
NPW per insurance segment employee		766								797
Statutory premiums to surplus ratio		1.5	x							1.7	x
Statutory surplus4		981,937								884,431

 

1 Includes mortgage-backed and asset-backed securities.

2 Certain prior year amounts were reclassified to conform with current year presentation.

3	The adjusted debt to capitalization ratio reflects a reduction in debt for amounts held in an irrevocable trust for the benefit of senior note holders as well as the median rating agency equity treatment of 75% applied to our $100 million Junior Subordinated Notes issued September 25, 2006.
4	December 31, 2008 amount includes a retroactive affiliate transaction involving SICA, SIGI, and Wantage Avenue Holding Company.

Selective Insurance Group, Inc.

Selected Income Statement Data (unaudited)

December 2009

($ in thousands, except per share amounts)

		THREE MONTHS ENDED DECEMBER 31,												TWELVE MONTHS ENDED DECEMBER 31,
		2009						2008						2009						2008
					Per diluted share						Per diluted share						Per diluted share						Per diluted share
Consolidated
Revenue		$	389,802					$	356,944						1,514,018					$	1,589,939
Operating income			25,327			0.47			7,524			0.14			74,538			1.39			76,245			1.43
Net realized losses, after tax			(3,683	)		(0.07	)		(19,703	)		(0.38	)		(29,880	)		(0.56	)		(32,144	)		(0.60	)
Income (loss) from continuing operations			21,644			0.40			(12,179	)		(0.24	)		44,658			0.83			44,101			0.83
Loss on discontinued operations, net of tax			(1,064	)		(0.02	)		(2,209	)		(0.04	)		(8,260	)		(0.15	)		(343	)		(0.01	)
Net income (loss)			20,580			0.38			(14,388	)		(0.28	)		36,398			0.68			43,758			0.82
Operating return on equity			10.2	%					3.2	%					7.9	%					7.8	%
Insurance Operations
Gross premiums written			367,296						362,340						1,679,926						1,724,610
Net premiums written			304,891						308,651						1,422,655						1,492,738
Net premiums earned			352,957						368,838						1,431,047						1,504,187
Underwriting (loss) profit	- before tax		(542	)					(1,407	)					2,385						132
	- after tax		(353	)		(0.01	)		(914	)		(0.02	)		1,550			0.03			86			-
GAAP combined ratio			100.2	%					100.4	%					99.8	%					100.0	%
Commercial lines
Net premiums earned			296,884						315,107						1,214,952						1,294,244
GAAP combined ratio			98.6	%					99.2	%					98.8	%					99.2	%
Personal lines
Net premiums earned			56,074						53,731						216,095						209,943
GAAP combined ratio			108.5	%					107.1	%					105.6	%					105.1	%
Investments
Net investment income	- before tax		39,801						18,517						118,471						131,032
	- after tax		30,333			0.57			17,043			0.33			95,725			1.79			105,039			1.97
Effective tax rate			23.8	%					8.0	%					19.2	%					19.8	%
Annual after-tax yield on investment portfolio															2.6	%					2.9	%
Annual after-tax, after-interest expense yield															2.3	%					2.5	%
Invested assets per $ of stockholders' equity															3.77						3.98
Other expenses (net of other income)
Interest expense	- before tax		(4,768	)					(5,036	)					(19,386	)					(20,508	)
	- after tax		(3,099	)		(0.06	)		(3,273	)		(0.06	)		(12,601	)		(0.24	)		(13,330	)		(0.25	)
Other - after tax		$	(1,554	)		(0.03	)	$	(5,332	)		(0.11	)		(10,136	)		(0.19	)	$	(15,550	)		(0.29	)
Diluted weighted avg shares outstanding			53,639						51,948						53,397						53,319

Selective Insurance Group, Inc. and Consolidated Subsidiaries

Quarterly

GAAP Investment Income

(unaudited)

($ in thousands)

	For the three months ended						%			Year to Date						%
	December			December			Increase			December			December			Increase
	2009			2008			(Decrease)			2009			2008			(Decrease)
Investment Income:
Interest:
Fixed Maturity Securities	$	34,902			36,874			(5.3	)	$	141,882			146,555			(3.2	)
Short-term		112			549			(79.6	)		1,273			4,252			(70.1	)
Alternative Investments		5,018			(18,036	)		127.8			(21,726	)		(12,676	)		(71.4	)
Dividends		786			1,920			(59.1	)		2,348			5,603			(58.1	)
Change in Fair Value		-			(1,681	)		100.0			262			(8,129	)		103.2
Miscellaneous		50			105			(52.4	)		343			340			0.9
		40,868			19,731			107.1			124,382			135,945			(8.5	)
Investment Expense		1,067			1,214			(12.1	)		5,911			4,913			20.3
Net Investment Income Before Tax		39,801			18,517			114.9			118,471			131,032			(9.6	)
Tax		9,468			1,474			542.3			22,746			25,993			(12.5	)
Net Investment Income After Tax	$	30,333			17,043			78.0		$	95,725			105,039			(8.9	)
Net Investment Income per Share		0.57			0.33			72.7			1.79			1.97			(9.1	)
Effective Tax Rate		23.8	%		8.0	%					19.2	%		19.8	%
Average Yields:
Fixed Maturity Securities
Pre Tax											4.2	%		4.6	%
After Tax											3.3	%		3.6	%
Portfolio
Pre Tax											3.2	%		3.6	%
After Tax											2.6	%		2.9	%
	For the three months ended									Year to Date
	December			December						December			December
	2009			2008						2009			2008
Net Realized Gains (Losses)
Fixed Maturities		(9,085	)		(13,388	)					(47,123	)		(54,159	)
Equity Securities		3,417			(11,769	)					3,192			13,292
Other		-			(5,156	)					(2,039	)		(8,585	)
Total		(5,668	)		(30,313	)					(45,970	)		(49,452	)
Net of Tax		(3,683	)		(19,703	)					(29,880	)		(32,144	)

Selective Insurance Group, Inc. and Consolidated Subsidiaries

Investment Yield and Effective Tax Rate Portfolio Breakdown

December 31, 2009

($ in thousands)

(Unaudited)

			Q4 2009				FY 2009
	Market Value		Yield		Effective Tax Rate		Yield			Effective Tax Rate
	($)		(%)		(%)		(%)			(%)
Fixed Maturities Securities:
State & Municipal T/E		1,508,318		0.9		4.4		3.7			3.8
State & Municipal Tax		82,277		1.4		35.0		5.0			35.0
State & Municipal		1,590,595		0.9		6.5		3.7			5.7
U.S. Gov't		621,513		1.1		35.0		3.1			35.0
Corporate		487,161		1.4		35.0		5.3			35.0
ABS's		60,142		1.5		35.0		6.7			35.0
MBS's		616,669		1.3		35.0		5.5			35.0
Total Debt Securities		3,376,080		1.1		22.3		4.2			21.5
Equity Securities		80,264		0.7		17.6		2.1			15.5
Trading Securities		-		0.0		0.0		19.4			35.0
Short-term Investments		213,848		0.1		35.0		0.6			35.0
Other Investments
Alternative Investments		137,589		3.2		35.0		(13.7	)		35.0
Other		3,078		0.0		0.0		0.0			0.0
		3,810,859		1.1		23.8		3.2			19.2

Selective Insurance Group, Inc.

2009 Statutory Results by Line of Business

4th Qtr 2009 (unaudited)

($ in thousands)

	Net					Net											Underwriting			Dividends to
	Premiums		Percent			Premiums		Percent			Loss			LAE			Expense			Policyholders			Combined Ratio			Combined Ratio			Underwriting
	Written		Change			Earned		Change			Ratio			Ratio			Ratio			Ratio			2009			2008			Gain/(Loss)
Personal Lines:
Homeowners	$	20,870		23.7	%	$	19,739		14.0	%		52.6	%		13.6	%		33.6	%		0.0	%		99.8	%		89.2	%	$	(342	)
Auto		32,610		3.0	%		34,116		0.3	%		76.9	%		8.3	%		32.5	%		0.0	%		117.7	%		118.7	%		(5,537	)
Other (including flood)		3,114		25.2	%		2,218		(7.6	)%		61.2	%		(20.5	)%		(14.4	)%		0.0	%		26.3	%		44.3	%		1,764
Total	$	56,594		11.0	%	$	56,073		4.4	%		67.8	%		9.0	%		30.3	%		0.0	%		107.1	%		105.6	%	$	(4,115	)
Commercial Lines:
Fire/IM	$	43,734		3.7	%	$	49,931		2.0	%		28.1	%		5.0	%		42.9	%		0.2	%		76.2	%		82.5	%	$	14,544
Workers compensation		48,148		(17.1	)%		61,781		(16.8	)%		80.6	%		14.4	%		33.7	%		1.4	%		130.1	%		102.1	%		(13,998	)
General liability		71,217		(4.7	)%		88,122		(7.2	)%		41.3	%		20.5	%		38.1	%		0.2	%		100.1	%		110.3	%		6,327
Auto		61,807		1.1	%		73,864		(1.5	)%		59.8	%		7.6	%		31.9	%		0.3	%		99.6	%		104.8	%		4,142
BOP		16,967		8.0	%		16,073		7.6	%		80.1	%		12.7	%		33.8	%		0.0	%		126.6	%		116.8	%		(4,583	)
Bonds		4,215		12.3	%		4,638		0.7	%		26.3	%		5.0	%		69.4	%		0.0	%		100.7	%		89.9	%		259
Other		2,209		7.5	%		2,475		5.0	%		1.6	%		0.9	%		46.9	%		0.0	%		49.4	%		52.5	%		1,377
Total	$	248,297		(3.6	)%	$	296,883		(5.8	)%		53.4	%		12.6	%		36.8	%		0.5	%		103.3	%		102.4	%	$	8,069
Grand Total	$	304,891		(1.2	)%	$	352,957		(4.3	)%		55.7	%		12.0	%		35.6	%		0.4	%		103.7	%		102.7	%	$	3,953

Note: Some amounts may not foot due to rounding.

	2009		2008
Losses Paid	$	185,896	$	199,130
LAE Paid		40,841		36,095
Total Paid	$	226,737	$	235,225

Selective Insurance Group, Inc.

2009 Statutory Results by Line of Business

December 2009 YTD (unaudited)

($ in thousands)

	Net					Net											Underwriting			Dividends to
	Premiums		Percent			Premiums		Percent			Loss			LAE			Expense			Policyholders			Combined Ratio			Combined Ratio			Underwriting
	Written		Change			Earned		Change			Ratio			Ratio			Ratio			Ratio			2009			2008			Gain/(Loss)
Personal Lines:
Homeowners	$	80,639		16.7	%	$	73,076		7.3	%		61.4	%		10.4	%		33.7	%		0.0	%		105.5	%		98.9	%	$	(6,531	)
Auto		135,861		1.0	%		133,320		0.4	%		67.5	%		11.9	%		31.3	%		0.0	%		110.7	%		113.8	%	$	(15,112	)
Other (including flood)		11,358		18.8	%		9,698		7.6	%		59.3	%		(15.8	)%		(27.4	)%		0.0	%		16.1	%		(6.0	)%		8,596
Total	$	227,859		6.9	%	$	216,095		2.9	%		65.0	%		10.2	%		29.2	%		0.0	%		104.4	%		103.7	%	$	(13,047	)
Commercial Lines:
Fire/IM	$	199,707		2.7	%	$	197,665		0.8	%		41.0	%		5.0	%		38.0	%		(0.1	)%		83.9	%		92.9	%	$	30,958
Workers compensation		251,121		(17.3	)%		263,490		(14.6	)%		63.2	%		14.9	%		28.1	%		1.4	%		107.6	%		96.1	%		(16,664	)
General liability		352,336		(10.3	)%		362,479		(8.5	)%		49.6	%		19.0	%		34.3	%		0.0	%		102.9	%		102.0	%		(6,905	)
Auto		298,036		(0.8	)%		300,562		(2.2	)%		60.4	%		8.3	%		29.5	%		0.0	%		98.2	%		99.7	%		6,204
BOP		64,958		7.5	%		62,638		7.9	%		69.9	%		12.4	%		34.1	%		0.0	%		116.4	%		113.1	%		(11,056	)
Bonds		18,678		2.4	%		18,455		(2.0	)%		26.6	%		5.1	%		61.7	%		0.0	%		93.4	%		80.5	%		1,087
Other		9,960		6.5	%		9,663		4.0	%		1.0	%		0.8	%		44.7	%		0.0	%		46.5	%		47.3	%		5,033
Total	$	1,194,797		(6.6	)%	$	1,214,953		(6.1	)%		54.1	%		12.5	%		32.9	%		0.3	%		99.8	%		98.5	%	$	8,657
Grand Total	$	1,422,655		(4.7	)%	$	1,431,047		(4.9	)%		55.8	%		12.1	%		32.3	%		0.3	%		100.5	%		99.2	%	$	(4,391	)

Note: Some amounts may not foot due to rounding.

	2009		2008
Losses Paid	$	757,916	$	768,165
LAE Paid		157,034		140,877
Total Paid	$	914,950	$	909,042

Consolidated Balance Sheets
December 31,	Unaudited
($ in thousands, except share amounts)	2009			2008
ASSETS
Investments:
Fixed maturity securities, held-to-maturity – at carry value
(fair value:  $1,740,211 – 2009; $1,178 – 2008)	$	1,710,403			1,163
Fixed maturity securities, available-for-sale – at fair value
(amortized cost:  $1,616,456 – 2009; $3,123,346 – 2008)		1,635,869			3,034,278
Equity securities, available-for-sale – at fair value
(cost of:  $64,390 – 2009; $125,947 – 2008)		80,264			132,131
Short-term investments (at cost which approximates fair value)		213,848			198,111
Equity securities, trading – at fair value		-			2,569
Other investments		140,667			172,057
Total investments		3,781,051			3,540,309
Cash and cash equivalents		811			3,606
Interest and dividends due or accrued		34,651			36,538
Premiums receivable, net of allowance for uncollectible
accounts of:  $5,880 – 2009; $4,237 – 2008		446,577			480,894
Reinsurance recoverable on paid losses and loss expenses		4,408			6,513
Reinsurance recoverable on unpaid losses and loss expenses		271,610			224,192
Prepaid reinsurance premiums		105,522			96,617
Current federal income tax		17,662			26,593
Deferred federal income tax		111,038			150,759
Property and Equipment – at cost, net of accumulated
depreciation and amortization of:  $141,251 – 2009; $129,333 – 2008		46,287			51,580
Deferred policy acquisition costs		218,601			212,319
Goodwill		7,849			7,849
Assets of discontinued operations		-			56,468
Other assets		68,760			51,319
Total assets	$	5,114,827			4,945,556
LIABILITIES AND STOCKHOLDERS’ EQUITY
Liabilities:
Reserve for losses	$	2,342,919			2,256,329
Reserve for loss expenses		402,880			384,644
Unearned premiums		844,847			844,334
Notes payable		274,606			273,878
Commissions payable		49,237			48,560
Accrued salaries and benefits		103,802			118,422
Liabilities of discontinued operations		-			34,138
Other liabilities		94,161			94,758
Total liabilities	$	4,112,452			4,055,063
Stockholders’ Equity:
Preferred stock of $0 par value per share:
Authorized shares 5,000,000; no shares issue or outstanding
Common stock of $2 par value per share
Authorized shares:  360,000,000
Issued:  95,822,959 – 2009; 95,263,508 – 2008	$	191,646			190,527
Additional paid-in capital		231,933			217,195
Retained earnings		1,138,978			1,128,149
Accumulated other comprehensive loss		(12,460	)		(100,666	)
Treasury stock – at cost (shares:  42,578,779 – 2009; 42,386,921 – 2008)		(547,722	)		(544,712	)
Total stockholders’ equity		1,002,375			890,493
Commitments and contingencies
Total liabilities and stockholders’ equity	$	5,114,827			4,945,556

Consolidated Statements of Income

Fourth Quarter

	Unaudited
($ in thousands, except share amounts)	2009			2008
Revenues:
Net premiums written	$	304,891			308,651
Net increase in unearned premiums and prepaid reinsurance premiums		48,066			60,187
Net premiums earned		352,957			368,838
Net investment income earned		39,801			18,517
Net realized (losses):
Net realized investment gains (losses)		5,931			(21,851	)
Other-than-temporary impairments		(18,717	)		(8,462	)
Other-than-temporary impairments on fixed maturity securities
recognized in other comprehensive income		7,118			-
Total net realized investment (losses)		(5,668	)		(30,313	)
Other income		2,712			(98	)
Total revenues		389,802			356,944
Expenses:
Losses incurred		196,202			210,516
Loss expenses incurred		42,428			40,600
Policy acquisition costs		115,276			115,234
Dividends to policyholders		1,372			1,946
Interest expense		4,768			5,036
Other expenses		3,662			6,031
Total expenses		363,708			379,363
Income (loss) from continuing operations, before federal income tax		26,094			(22,419	)
Federal income tax  expense (benefit):
Current		(233	)		(12,145	)
Deferred		4,683			1,905
Total federal income tax expense (benefit)		4,450			(10,240	)
Net income (loss) from continuing operations		21,644			(12,179	)
Income (loss) from discontinued operations, net of tax: $59-2009;
$(1,239)-2008		110			(2,209	)
Loss on disposal of discontinued operations, net of tax: $(631)-2009		(1,174	)		-
Total discontinued operations, net of tax		(1,064	)		(2,209	)
Net income (loss)		20,580			(14,388	)
Earnings per share:
Basic net income (loss) from continuing operations		0.41			(0.24	)
Basic net loss from discontinued operations		(0.02	)		(0.04	)
Basic net income (loss)	$	0.39			(0.28	)
Diluted net income (loss) from continuing operations	$	0.40			(0.24	)
Diluted net loss from discontinued operations		(0.02	)		(0.04	)
Diluted net income (loss)		0.38			(0.28	)
Dividends to stockholders	$	0.13			0.13

Consolidated Statements of Income

December 31,

	Unaudited
($ in thousands, except share amounts)	2009			2008			2007
Revenues:
Net premiums written	$	1,422,655			1,492,738			1,562,450
Net decrease (increase) in unearned premiums and prepaid reinsurance premiums		8,392			11,449			(37,561	)
Net premiums earned		1,431,047			1,504,187			1,524,889
Net investment income earned		118,471			131,032			174,144
Net realized (losses) gains:
Net realized investment gains		9,446			3,648			38,244
Other-than-temporary impairments		(64,184	)		(53,100	)		(4,890	)
Other-than-temporary impairments on fixed maturity securities recognized in
other comprehensive income		8,768			-			-
Total net realized investment (losses) gains		(45,970	)		(49,452	)		33,354
Other income		10,470			4,172			6,928
Total revenues		1,514,018			1,589,939			1,739,315
Expenses:
Losses incurred		798,363			845,656			829,524
Loss expenses incurred		173,542			165,888			168,288
Policy acquisition costs		457,424			485,702			491,235
Dividends to policyholders		3,640			5,211			7,202
Interest expense		19,386			20,508			23,795
Other expenses		22,477			26,807			30,507
Total expenses		1,474,832			1,549,772			1,550,551
Income from continuing operations, before federal income tax		39,186			40,167			188,764
Federal income tax (benefit) expense:
Current		3,585			21,995			42,557
Deferred		(9,057	)		(25,929	)		2,571
Total federal income tax (benefit) expense		(5,472	)		(3,934	)		45,128
Net income from continuing operations		44,658			44,101			143,636
(Loss) income from discontinued operations, net of tax of $(4,042) – 2009;
$(438) – 2008; $1,132 – 2007		(7,086	)		(343	)		2,862
Loss on disposal of discontinued operations, net of tax of $(631) – 2009		(1,174	)		-			-
Total discontinued operations, net of tax		(8,260	)		(343	)		2,862
Net income		36,398			43,758			146,498
Earnings per share:
Basic net income from continuing operations		0.84			0.85			2.75
Basic net (loss) income from discontinued operations		(0.15	)		(0.01	)		0.05
Basic net income	$	0.69			0.84			2.80
Diluted net income from continuing operations	$	0.83			0.83			2.54
Diluted net (loss) income from discontinued operations		(0.15	)		(0.01	)		0.05
Diluted net income		0.68			0.82			2.59
Dividends to stockholders	$	0.52			0.52			0.49

Consolidated Statements of Stockholders’ Equity	Unaudited
December 31,
($ in thousands, except share amounts)	2009				2008					2007
Common stock:
Beginning of year	$	190,527				189,306					183,124
Dividend reinvestment plan
(shares:  123,880 – 2009; 81,200 – 2008;
78,762 – 2007)		248				162					158
Convertible debentures
(shares:  45,759 – 2008; 2,074,067 – 2007)		-				92					4,148
Stock purchase and compensation plans
(shares:  435,571 – 2009; 483,619 – 2008;
937,835 –2007)		871				967					1,876
End of year		191,646				190,527					189,306
Additional paid-in capital:
Beginning of year		217,195				192,627					153,246
Dividend reinvestment plan		1,514				1,677					1,708
Convertible debentures		-				645					9,806
Stock purchase and compensation plans		13,224				22,246					27,867
End of year		231,933				217,195					192,627
Retained earnings:
Beginning of year		1,128,149				1,105,946					986,017
Cumulative-effect adjustment due to fair value election
under ASC 825, net of deferred income tax effect of $3,344		-				6,210					-
Cumulative-effect adjustment due to adoption of other-
than-temporary impairment guidance under ASC 320,
net of deferred income tax effect of $1,282		2,380				-					-
Net income		36,398		36,398		43,758		43,758			146,498		146,498
Cash dividends to stockholders ($0.52 per share – 2009;
$0.52 per share – 2008; and $0.49 per share – 2007)		(27,949	)			(27,765	)				(26,569	)
End of year		1,138,978				1,128,149					1,105,946
Accumulated other comprehensive (loss) income:
Beginning of year		(100,666	)			86,043					100,601
Cumulative-effect adjustment due to fair value election
under ASC 825, net of deferred income tax effect of
$(3,344)		-				(6,210	)				-
Cumulative-effect adjustment due to adoption of other-
than-temporary impairment guidance under ASC 320,
net of deferred income tax effect of $(1,282)		(2,380	)			-					-
Other comprehensive income (loss), increase (decrease) in:
Unrealized (losses) gains on investment securities:
Non-credit portion of other-than-temporary
impairment losses recognized in other
comprehensive income, net of deferred income tax
effect of $(3,030)		(5,629	)			-					-
Other net unrealized gains (losses) on investment
securities, net of deferred income tax effect of
$49,637 – 2009; $(76,831) – 2008;
and $(10,925) – 2007		92,183				(142,685	)				(20,289	)
Total unrealized gains (losses) on investment
securities		86,554		86,554		(142,685	)	(142,685	)		(20,289	)	(20,289	)
Defined benefit pension plans, net of deferred income
tax  effect of:  $2,171 – 2009; $(20,362) – 2008;
$3,086 – 2007		4,032		4,032		(37,814	)	(37,814	)		5,731		5,731
End of year		(12,460	)			(100,666	)				86,043
Comprehensive income (loss)				126,984				(136,741	)				131,940
Treasury stock:
Beginning of year		(544,712	)			(497,879	)				(345,761	)
Acquisition of treasury stock
(shares:  191,858 – 2009; 2,039,027 – 2008;
6,057,920 – 2007)		(3,010	)			(46,833	)				(152,118	)
End of year		(547,722	)			(544,712	)				(497,879	)
Total stockholders’ equity	$	1,002,375				890,493					1,076,043

Consolidated Statements of Cash Flows
December 31,	Unaudited
($ in thousands, except share amounts)	2009			2008			2007
Operating Activities
Net Income	$	36,398			43,758			146,498
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation and amortization		28,593			28,552			29,139
Loss on disposal of discontinued operations		1,174			-			-
Stock-based compensation expense		11,036			17,215			20,992
Undistributed losses (income) of equity method investments		21,726			13,753			(4,281	)
Net realized losses (gains)		45,970			49,452			(33,354	)
Postretirement life curtailment benefit		(4,217	)		-			-
Deferred tax (benefit) expense		(9,057	)		(26,665	)		3,214
Unrealized (gain) loss on trading securities		(262	)		8,129			-
Goodwill impairment on discontinued operations		12,214			4,000			-
Changes in assets and liabilities:
Increase in reserves for losses and loss expenses, net of reinsurance recoverable
on unpaid losses and loss expenses		58,514			102,100			227,749
(Decrease) increase in unearned premiums, net of prepaid reinsurance and advance premiums		(8,028	)		(10,766	)		38,346
Decrease (increase) in net federal income tax recoverable		5,339			(22,092	)		(3,767	)
Decrease (increase) in premiums receivable		34,317			15,469			(37,911	)
(Increase) decrease in deferred policy acquisition costs		(6,282	)		14,115			(8,331	)
Decrease (increase) in interest and dividends due or accrued		1,918			(431	)		(1,331	)
Decrease (increase) in reinsurance recoverable on paid losses and loss expenses		2,105			916			(2,736	)
Decrease in accrued salaries and benefits		(15,020	)		(3,100	)		(3,266	)
Increase (decrease) in accrued insurance expenses		2,240			(15,880	)		6,370
Purchase of trading securities		-			(6,587	)		-
Sale of trading securities		2,831			21,002			-
Other-net		6,050			8,233			8,957
Net adjustments		191,161			197,415			239,790
Net cash provided by operating activities		227,559			241,173			386,288
Investing Activities
Purchase of fixed maturity securities, held-to-maturity		(158,827	)		-			-
Purchase of fixed maturity securities, available-for-sale		(1,041,277	)		(587,430	)		(580,864	)
Purchase of equity securities, available-for-sale		(79,455	)		(70,651	)		(148,569	)
Purchase of other investments		(16,298	)		(53,089	)		(80,147	)
Purchase of short-term investments		(1,956,164	)		(2,204,107	)		(2,198,362	)
Sale of subsidiary		(12,538	)		-			-
Sale of fixed maturity securities, held-to-maturity		5,820			-			-
Sale of fixed maturity securities, available-for-sale		538,769			152,655			102,613
Sale of short-term investments		1,940,427			2,196,162			2,205,194
Redemption and maturities of fixed maturity securities, held-to-maturity		282,310			4,652			4,051
Redemption and maturities of fixed maturity securities, available-for-sale		122,403			294,342			319,118
Sale of equity securities, available-for-sale		137,244			102,313			187,259
Proceeds from other investments		25,596			26,164			40,115
Purchase of property and equipment		(8,207	)		(8,083	)		(14,511	)
Net cash used in investment activities		(220,197	)		(147,072	)		(164,103	)
Financing Activities
Dividends to stockholders		(26,296	)		(25,804	)		(24,464	)
Acquisition of treasury stock		(3,010	)		(46,833	)		(152,118	)
Principal payment of notes payable		(12,300	)		(12,300	)		(18,300	)
Proceeds from borrowings		13,000			-			-
Net proceeds from stock purchase and compensation plans		4,612			8,222			8,609
Excess tax benefits from share-based payment arrangements		(1,200	)		1,628			3,484
Borrowings under line of credit agreement		-			-			6,000
Repayment of borrowings under line of credit agreement		-			-			(6,000	)
Principal payments of convertible bonds		-			(8,754	)		(37,456	)
Net cash used in financing activities		(25,194	)		(83,841	)		(220,245	)
Net (decrease) increase in cash and cash equivalents		(17,832	)		10,260			1,940
Net (decrease) increase in cash and cash equivalents from discontinued operations		(15,037	)		8,619			921
Net (decrease) increase in cash from continuing operations		(2,795	)		1,641			1,019
Cash from continuing operations, beginning of year		3,606			1,965			946
Cash from continuing operations, end of year	$	811			3,606			1,965

Selective Insurance Group, Inc.

Combined Insurance Company Subsidiaries

Unaudited Statutory Balance Sheets

($ in thousands)

	Dec-31			* Dec-31
	2009			2008
ASSETS
Bonds	$	3,289,336			3,104,395
Common stocks		80,264			134,700
Affiliated mortgage loan		39,408			40,000
Other investments		176,983			172,346
Short-term investments		165,957			137,878
Total investments		3,751,948			3,589,319
Cash on hand and in banks		(29,128	)		(36,472	)
Interest and dividends due and accrued		34,808			36,523
Premiums receivable		443,223			476,768
Reinsurance recoverable on paid losses and expenses		4,408			6,513
Federal income tax recoverable		1,608			12,069
Deferred tax recoverable		119,377			86,208
EDP equipment		2,134			3,815
Equities and deposits in pools and associations		4,886			8,517
Receivable for sold securities		19,655			13,278
Other assets		29,748			28,719
Total assets	$	4,382,667			4,225,257
LIABILITIES
Reserve for losses	$	2,072,376			2,031,947
Reinsurance payable on paid loss and loss expense		1,011			716
Reserve for loss expenses		399,457			382,796
Unearned premiums		739,325			747,717
Reserve for commissions payable		49,237			48,560
Ceded balances payable		9,856			8,421
Premium and other taxes payable		22,283			20,721
Borrowed money		13,016			-
Reserve for dividends to policyholders		3,718			5,023
Reserves for unauthorized reinsurance		1,013			1,416
Funds withheld on account of others		6,261			4,977
Accrued salaries and benefits		66,847			74,287
Other liabilities		16,330			14,245
Total liabilities		3,400,730			3,340,826
POLICYHOLDERS' SURPLUS
Capital		28,325			28,325
Aggregate write-ins for special surplus funds		33,951			-
Paid in surplus		255,792			235,792
Unassigned surplus		663,869			620,314
Total policyholders' surplus		981,937			884,431
Total liabilities and policyholders' surplus	$	4,382,667			4,225,257

*December 31, 2008 results include a retroactive affiliate transaction involving SICA, SIGI, and Wantage Avenue Holding Company.

Selective Insurance Group, Inc.

Combined Insurance Company Subsidiaries

Unaudited Statutory Statements Of Income

($ in thousands)

	Three Months Ended										Twelve Months Ended
	December										December
	2009					2008					2009					2008
UNDERWRITING
Net premiums written	$	304,891					308,651					1,422,655					1,492,938
Net premiums earned		352,957					368,839					1,431,047					1,504,386
Net losses paid		185,896					199,130					757,916					768,165
Change in reserve for losses		10,559					11,670					40,428					77,988
Net losses incurred		196,455		55.7	%		210,800		57.2	%		798,344		55.8	%		846,153		56.2	%
Net loss expenses paid		40,841					36,095					157,034					140,877
Change in reserve for loss expenses		1,595					4,512					16,662					24,670
Net loss expenses incurred		42,436		12.0	%		40,607		11.0	%		173,696		12.1	%		165,547		11.0	%
Net underwriting expenses incurred		110,432		36.2	%		103,189		33.4	%		465,723		32.7	%		470,362		31.6	%
Total deductions		349,323					354,596					1,437,763					1,482,062
Statutory underwriting (loss) gain		3,634					14,243					(6,716	)				22,324
Net loss from premium balances charged off		(1,044	)				(1,440	)				(4,490	)				(3,876	)
Finance charges and other income		2,735					(426	)				10,455					2,610
Total other income (expense)		1,691		-0.6	%		(1,866	)	0.6	%		5,965		-0.4	%		(1,266	)	0.1	%
Policyholders' dividends incurred		(1,372	)	0.4	%		(1,946	)	0.5	%		(3,640	)	0.3	%		(5,211	)	0.3	%
Total underwriting (loss) gain		3,953		103.7	%		10,431		102.7	%		(4,391	)	100.5	%		15,847		99.2	%
INVESTMENT
Net investment income earned		37,329					32,886					133,309					156,336
Net realized (loss) gain		2,337					(18,979	)				(39,055	)				(32,939	)
Total income before income tax		43,619					24,338					89,863					139,244
Federal income tax expense (benefit)		2,653					(9,996	)				20,015					34,898
Net income	$	40,966					34,334					69,848					104,346
Policyholders' Surplus
Surplus, beginning of period	$	903,488					932,846					884,431					1,034,294
Net income		40,966					34,334					69,848					104,346
Change in deferred tax		(10,666	)				(8,410	)				3,972					10,949
Change in unrealized gains (losses)		33					(35,535	)				(11,212	)				(97,931	)
Dividends to stockholders		-					-					(24,518	)				(77,045	)
Paid in surplus		-					-					20,000					-
Change in cum. effect of acctg principle		-					-					2,540					-
Change in reserve for unauthorized		404					(159	)				404					(159	)
Change in non-admitted assets		11,016					(10,447	)				(283	)				(61,548	)
Change in additional admitted deferred tax		33,951					-					33,951					-
Change in minimum pension liability		3,512					(28,748	)				3,512					(28,748	)
Surplus adjustments		(767	)				550					(708	)				273
Net change in surplus for period		78,449					(48,415	)				97,506					(149,863	)
Surplus, end of period	$	981,937					884,431					981,937					884,431
Statutory underwriting (loss) gain:	$	3,953					10,431					(4,391	)				15,847
Adjustments under GAAP:
Deferred policy acquisition costs		(5,093	)				(11,785	)				6,283					(14,116	)
Other, net		598					(53	)				493					(1,599	)
GAAP underwriting (loss) gain	$	(542	)				(1,407	)				2,385					132

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

Certain amounts have been reclassified to conform to the current year's presentation.

Selective Insurance Group, Inc. and Consolidated Subsidiaries

Alternative Investments

as of December 31, 2009

(unaudited)

	Inception	Current				Invest.		4th QTR			YTD			Remaining
Fund	Year	Market Value		Cost		Multiple(1)		Income			Income			Commitment
Real Estate
LEH RE II	2005	$	9,381,351	$	12,011,057		0.86	$	(1,340,909	)	$	(6,071,286	)	$	4,020,851
GS Whitehall 2007	2007	$	4,150,885	$	14,250,000		0.29	$	(135,683	)	$	(4,396,536	)	$	750,000
LEH RE III	2008	$	3,323,525	$	6,227,933		0.53	$	(239,446	)	$	(1,870,237	)	$	8,772,067
Total - Real Estate		$	16,855,761	$	32,488,990			$	(1,716,038	)	$	(12,338,059	)	$	13,542,918
Mezzanine Financing
GS Mezz III	2003	$	3,525,552	$	2,403,021		1.11	$	26,240		$	(822,879	)	$	5,637,326
LEH Euro Mezz	2004	$	3,310,945	$	1,666,328		1.13	$	223,551		$	(190,157	)	$	-
GS Mezz 2006	2006	$	5,734,349	$	9,224,574		0.69	$	1,570,729		$	(1,484,828	)	$	5,228,783
GS Mezz V	2007	$	7,752,553	$	7,094,103		1.08	$	851,060		$	1,022,500		$	17,752,669
Total - Mezz. Financing		$	20,323,399	$	20,388,026			$	2,671,580		$	(1,475,364	)	$	28,618,778
Distressed Debt
Varde LP	1997	$	-	$	-		-	$	(168,089	)	$	545,094		$	-
Varde VIII	2006	$	11,777,125	$	10,000,000		1.18	$	286,343		$	1,413,166		$	-
GS Distressed Opp III	2007	$	7,423,866	$	10,000,056		0.75	$	1,146,875		$	(997,002	)	$	4,610,862
Total - Distressed Debt		$	19,200,991	$	20,000,056			$	1,265,129		$	961,258		$	4,610,862
Private Equity
Prospector	1997	$	1,778,445	$	1,778,000		2.89	$	931		$	476		$	-
Trilantic Capital Partners III	2004	$	7,328,103	$	3,722,215		1.39	$	120,731		$	(98,586	)	$	1,073,616
NB Co-Invest	2006	$	7,522,231	$	8,080,716		0.95	$	531,365		$	(1,751,256	)	$	4,504,351
GS PEP Asia	2007	$	1,212,898	$	1,542,716		0.79	$	56,843		$	(141,791	)	$	5,454,989
Trilantic Capital Partners IV	2007	$	3,683,090	$	4,165,840		0.88	$	162,148		$	(79,787	)	$	6,932,511
Total - Private Equity		$	21,524,768	$	19,289,488			$	872,017		$	(2,070,944	)	$	17,965,468
Private Equity, Secondary Market
NB SOF	2005	$	7,139,892	$	6,382,035		1.07	$	232,366		$	(1,284,329	)	$	899,494
GS Vintage IV	2007	$	9,201,938	$	11,994,286		0.79	$	224,544		$	(3,366,254	)	$	6,781,085
NB SOF II	2008	$	2,561,197	$	2,289,234		1.11	$	67,971		$	315,698		$	9,623,752
GS Vintage V	2008	$	2,032,875	$	2,200,000		0.92	$	75,714		$	(176,988	)	$	7,800,000
Total - Pvt. Eq. Sec. Mkt.		$	20,935,902	$	22,865,554			$	600,595		$	(4,511,873	)	$	25,104,331
Energy/Power Generation
ArcLight I	2002	$	1,441,516	$	1,441,516		1.74	$	501,723		$	(1,139,962	)	$	1,655,505
ArcLight II	2003	$	7,014,467	$	1,639,149		1.28	$	271,057		$	(852,108	)	$	2,295,492
ArcLight III	2006	$	12,453,803	$	11,816,880		1.04	$	160,429		$	436,623		$	1,681,702
Quintana Energy	2006	$	6,523,861	$	7,558,234		0.86	$	164,989		$	(359,162	)	$	2,441,766
ArcLight IV	2007	$	5,561,960	$	5,712,041		0.98	$	100,424		$	148,674		$	2,939,591
Total - Energy/Power Generation		$	32,995,607	$	28,167,820			$	1,198,622		$	(1,765,935	)	$	11,014,056
Venture Capital
Venture V	2001	$	5,752,309	$	6,273,978		0.93	$	127,019		$	(524,587	)	$	2,000,000
Total - Venture Capital		$	5,752,309	$	6,273,978			$	127,019		$	(524,587	)	$	2,000,000
TOTAL - ALTERNATIVE INVESTMENTS		$	137,588,736	$	149,473,913			$	5,018,925		$	(21,725,504	)	$	102,856,413

(1) Market value +  capital returned  divided  by capital called

Selective Insurance Group, Inc. and Consolidated Subsidiaries

Municipal Bond Portfolio

State and Repayment Source Composition

December 31, 2009

($s in thousands)

(unaudited)

Selective Insurance Group, Inc. and Consolidated Subsidiaries

Structured Securities

December 31, 2009

($ in thousands)

(unaudited)

•Market Value = $676,811 ; Unrealized Gain/(Loss) = ($29,838)

•Held to Maturity (HTM) 41%; Available for Sale (AFS) 59%

•Structured Security Portfolio Average Rating =  AA+

•Structured Securities = 17.8% of the Total Portfolio

Ratings Migration (1)

December 31, 2009

Original Rating			Current Rating										Downgraded
Rating	Amount		AAA		AA		A		BBB		Below In v Grade		$		%
AAA		657,384		577,504		13,460		13,670		23,751		28,999		79,880	12.2	%
AA		36,238		5,000		14,845				242		16,151		16,393	45.2	%
A		13,436						10,000				3,436		3,436	25.6	%
BBB		25,156								7,000		18,156		18,156	72.2	%
Below Inv Grade		5,000										5,000		-	0.0	%
Total Par Value		737,214		582,504		28,305		23,670		30,993		71,742		117,865	16.0	%

Note (1): Migration period is from the purchase date of each security to Decemeber 31, 2009

Selective Insurance Group, Inc. and Consolidated Subsidiaries

Residential Mortgage Backed (RMBS) and Residential ABS (RABS) Securities

December 31, 2009

($ in thousands)

(unaudited)

•Market Value = $433,191; Unrealized Gain/(Loss) = ($14,436)

•Held to Maturity (HTM) 35%; Available for Sale (AFS) 65%

•RMBS & RABS Portfolio Average Rating = AA+

•RMBS & RABS Securities = 11.4% of the Total Portfolio

Ratings Migration (1)

December 31, 2009

Original Rating			Current Rating										Downgraded
Rating	Amount		AAA		AA		A		BBB		Below Inv Grade		$		%
AAA		442,283		391,495		13,460		1,287		988		35,053		50,788		11.5	%
AA		3,889								242		3,647		3,889		100.0	%
A		3,436										3,436		3,436		100.0	%
BBB		1,406										1,406		1,406		100.0	%
Total Par Value		451,014		391,495		13,460		1,287		1,230		43,542		59,519		13.2	%

Note (1): Migration period is from the purchase date of each security to December 31, 2009

Selective Insurance Group Inc. and Consolidated Subsidiaries

Residential Mortgage Backed Securities (RMBS) and Residential ABS (RABS) - by Vintage Year

December 31, 2009

($ in thousands)

(unaudited)

Market Value

Vintage Yr	AAA			AA				A		BBB			Below Investment Grade			Total			% of Total RMBS & RABS			% of Total Fixed Income Portfolio			% of Total GAAP Equity
1983	$	8		$	-		$	-		$	-		$	-		$	8			0	%		0	%		0	%
2002		44,997			-			-			809			1,105			46,912			11	%		1	%		5	%
2003		40,736			-			-			-			763			41,499			10	%		1	%		4	%
2004		51,317			3,076			-			-			-			54,393			13	%		2	%		5	%
2005		32,224			8,446			655			-			-			41,325			10	%		1	%		4	%
2006		32,872			-			-			-			18,463			51,335			12	%		2	%		5	%
2007		7,733			-			-			-			1,727			9,460			1	%		0	%		1	%
2008		38,584			-			-			-			-			38,584			9	%		1	%		4	%
2009		149,675			-			-			-			-			149,675			34	%		5	%		15	%
Total RMBS & RABS-Market Value	$	398,147		$	11,522		$	655		$	809		$	22,057		$	433,191			100	%		13	%		43	%
% of Total RMBS & RABS		92	%		3	%		0	%		0	%		5	%		100	%
% of Total Fixed Income Portfolio		12	%		0	%		0	%		0	%		1	%		13	%
% of Total GAAP Equity		40	%		1	%		0	%		0	%		2	%		43	%
Weighted Average Market Price		101.7			85.6			50.9			65.8			50.7			96.0

Unrealized/Unrecognized Gain/(Loss)

Vintage Yr	AAA			AA				A		BBB			Below Investment Grade			Total
1983	$	-		$	-		$	-		$	-		$	-		$	-
2002		1,418			-			-			(428	)		(357	)		633
2003		612			-			-			-			(1,246	)		(634	)
2004		(209	)		(388	)		-			-			-			(597	)
2005		(3,229	)		(1,470	)		(632	)		-			-			(5,332	)
2006		661			-			-			-			(7,695	)		(7,034	)
2007		128			-			-			-			(3,045	)		(2,916	)
2008		482			-			-			-			-			482
2009		963			-			-			-			-			963
Total RMBS & RABS - Unrealized/Unrecognized	$	826		$	(1,858	)	$	(632	)	$	(428	)	$	(12,343	)	$	(14,436	)

Note: Some amounts may not foot due to rounding.

Selective Insurance Group Inc. and Consolidated Subsidiaries

Residential Mortgage Backed Securities (RMBS) and Residential ABS (RABS) - by Type

December 31, 2009

($ in thousands)

(unaudited)

Market Value

RMBS Type	AAA			AA				A		BBB			Below Investment Grade			Total			% of Total RMBS & RABS			% of Total Fixed Income Portfolio			% of Total GAAP Equity
Gov't Guaranteed Agency	$	109,481		$	-		$	-		$	-		$	-		$	109,481			25	%		3	%		11	%
Other Agency		259,964			-			-			-			-			259,964			60	%		8	%		26	%
Total Agency		369,445			-			-			-			-			369,445			85	%		11	%		37	%
Alt-A		13,388			1,317			-			-			9,403			24,108			6	%		1	%		2	%
Alt-A CDO		-			-			-			-			1,774			1,774			0	%		0	%		0	%
Home Equity ABS		-			-			-			715			1,105			1,820			0	%		0	%		0	%
Non-Agency & Other Prime		15,314			10,206			655			95			9,775			36,044			9	%		1	%		4	%
Total RMBS & RABS-Market Value	$	398,147		$	11,522		$	655		$	809		$	22,057		$	433,191			100	%		13	%		43	%
% of Total RMBS & RABS		92	%		3	%		0	%		0	%		5	%		100	%
% of Total Fixed Income Portfolio		12	%		0	%		0	%		0	%		1	%		13	%
% of Total GAAP Equity		40	%		1	%		0	%		0	%		2	%		43	%
Weighted Average Market Price		101.7			85.6			50.9			65.8			50.7			96.0

Unrealized/Unrecognized Gain/(Loss)

RMBS Type	AAA			AA				A		BBB			Below Investment Grade			Total
Gov't Guaranteed Agency	$	241		$	-		$	-		$	-		$	-		$	241
Other Agency		6,848			-			-			-			-			6,848
Total Agency		7,089			-			-			-			-			7,089
Alt-A		(2,240	)		(230	)		-			-			(4,942	)		(7,412	)
Alt-A CDO		-			-			-			-			266			266
Home Equity ABS		-			-			-			(281	)		(357	)		(637	)
Non-Agency & Other Prime		(4,023	)		(1,629	)		(632	)		(148	)		(7,310	)		(13,742	)
Total RMBS & RABS - Unrealized/Unrecognized	$	826		$	(1,858	)	$	(632	)	$	(428	)	$	(12,343	)	$	(14,436	)

Note: Some amounts may not foot due to rounding.

Selective Insurance Group, Inc. and Consolidated Subsidiaries

ALT-A by Vintage Year

December 31, 2009

($ in thousands)

(unaudited)

Market Value

Vintage Yr	ALT-A Fixed-15			Alt-A Fixed-30			Alt-A Hybrid ARM			Alt-A CDO			Total			% of Total Alt-A			% of Total Fixed Income Portfolio			% of Total GAAP Equity
2002	$	4,335		$	-		$	-		$	-		$	4,335			17	%		0	%		1	%
2003		-			1,481			412			-			1,893			7	%		0	%		0	%
2004		-			1,284			1,437			-			2,721			11	%		0	%		0	%
2005		-			2,903			2,853			-			5,756			22	%		0	%		1	%
2006		-			6,969			2,433			1,774			11,177			43	%		1	%		1	%
Total ALT-A, Market Value	$	4,335		$	12,637		$	7,135		$	1,774		$	25,882			100	%		1	%		3	%
% of Total ALT-A		17	%		48	%		28	%		7	%		100	%
% of Total Fixed Income Portfolio		0	%		1	%		0	%		0	%		1	%
% of Total GAAP Equity		1	%		1	%		1	%		0	%		3	%
Weighted Average Market Price		96.4			76.4			67.5			20.0			63.9

Unrealized/Unrecognized Gain/(Loss)

Vintage Yr	ALT-A Fixed-15			Alt-A Fixed-30			Alt-A Hybrid ARM			Alt-A CDO			Total
2002	$	(160	)	$	-		$	-		$	-		$	(160	)
2003		-			(319	)		(48	)		-			(367	)
2004		-			(59	)		(273	)		-			(332	)
2005		-			(462	)		(1,150	)		-			(1,612	)
2006		-			(3,031	)		(1,911	)		266			(4,676	)
Total ALT-A, Unrealized/Unrecognized	$	(160	)	$	(3,870	)	$	(3,382	)	$	266		$	(7,146	)
% of Total ALT-A		2	%		54	%		47	%		-3	%		100	%

Note: Some amounts may not foot due to rounding.

Selective Insurance Group, Inc. and Consolidated Subsidiaries

Commercial Mortgage Backed (CMBS) Securities

December 31, 2009

($ in thousands)

(unaudited)

•Market Value = $187,072; Unrealized Gain/(Loss) = ($14,255)

•Held to Maturity (HTM) 49%; Available for Sale (AFS) 51%

•CMBS Portfolio Average Rating = AA+

•CMBS Securities = 4.9% of the Total Portfolio

Ratings Migration (1)

December 31, 2009

Original Rating			Current Rating								Downgraded
Rating	Amount		AAA		AA	A	BBB		Below Inv Grade		$		%
AAA		190,569		161,107		9,424		17,223		2,815		29,462		15.5	%
AA		8,635		5,000						3,635		3,635		42.1	%
A		-										-		0.0	%
BBB		17,000						7,000		10,000		10,000		58.8	%
Below Inv Grade		5,000								5,000		-		0.0	%
Total Par Value		221,204		166,107	-	9,424		24,223		21,450		43,097		19.5	%

Note (1): Migration period is from the purchase date of each security to December 31, 2009

Selective Insurance Group Inc. and Consolidated Subsidiaries

Commercial Mortgage Backed Securities (CMBS) - by Vintage Year

December 31, 2009

($ in thousands)

(unaudited)

Market Value

Vintage Yr	AAA				A		BBB			Below Investment Grade			Total			% of Total CMBS			% of Total Fixed Income Portfolio			% of Total GAAP Equity
1996	$	1,605		$	-		$	-		$	-		$	1,605			1	%		0	%		0	%
1999		3,427			-			-			-			3,427			2	%		0	%		0	%
2000		24,930			-			-			-			24,930			13	%		1	%		2	%
2001		8,922			-			-			-			8,922			5	%		0	%		1	%
2002		9,452			-			-			-			9,452			5	%		0	%		1	%
2003		1,952			-			-			-			1,952			1	%		0	%		0	%
2004		9,684			-			-			-			9,684			5	%		0	%		1	%
2005		13,880			2,212			1,276			253			17,622			9	%		1	%		2	%
2006		53,586			-			3,755			-			57,341			31	%		3	%		7	%
2007		33,117			2,967			1,642			4,379			42,105			23	%		1	%		4	%
2009		10,032			-			-			-			10,032			5	%		0	%		1	%
Total CMBS-Market Value	$	170,587		$	5,179		$	6,674		$	4,632		$	187,072			100	%		6	%		19	%
% of Total CMBS		91	%		3	%		4	%		2	%		100	%
% of Total Fixed Income Portfolio		5	%		0	%		1	%		0	%		6	%
% of Total GAAP Equity		17	%		1	%		1	%		0	%		19	%
Weighted Average Market Price		102.7			117.1			27.6			21.6			84.6

Unrealized/Unrecognized Gain/(Loss)

Vintage Yr	AAA				A		BBB			Below Investment Grade			Total
1996	$	(56	)	$	-		$	-		$	-		$	(56	)
1999		127			-			-			-			127
2000		595			-			-			-			595
2001		236			-			-			-			236
2002		576			-			-			-			576
2003		36			-			-			-			36
2004		184			-			-			-			184
2005		(302	)		(2,212	)		(1,791	)		(2,562	)		(6,867	)
2006		16			-			(4,625	)		-			(4,609	)
2007		366			(2,033	)		(358	)		(2,482	)		(4,507	)
2009		32			-			-			-			32
Total CMBS-Unrealized/Unrecognized	$	1,809		$	(4,245	)	$	(6,774	)	$	(5,044	)	$	(14,255	)

Note: Some amounts may not foot due to rounding.

Selective Insurance Group Inc. and Consolidated Subsidiaries

Commercial Mortgage Backed Securities (CMBS) - by Type

December 31, 2009

($ in thousands)

(unaudited)

Market Value

CMBS Type	AAA				A		BBB			Below  Investment  Grade			Total			% of Total CMBS			% of Total Fixed Income Portfolio			% of Total GAAP Equity
Gov't Guaranteed Agency MultiFamily	$	105,660		$	-		$	-		$	-		$	105,660			56	%		3	%		11	%
Other Agency MultiFamily		3,830			-			-			-			3,830			2	%		1	%		0	%
Total Agency		109,490			-			-			-			109,490			58	%		4	%		11	%
Conduit		11,257			-			-			-			11,257			6	%		1	%		1	%
Fusion (1)		41,168			2,967			1,276			439			45,851			25	%		1	%		5	%
Lease-Backed		3,427			-			-			-			3,427			2	%		0	%		0	%
Re-Securitization		52			2,212			3,755			253			6,272			3	%		0	%		1	%
Single Borrower - Multiple Properties		5,193			-			1,642			3,939			10,775			6	%		0	%		1	%
Total CMBS-Market Value	$	170,587		$	5,179		$	6,674		$	4,632		$	187,072			100	%		6	%		19	%
% of Total CMBS		91	%		3	%		4	%		2	%		100	%
% of Total Fixed Income Portfolio		5	%		0	%		1	%		0	%		6	%
% of Total GAAP Equity		17	%		1	%		1	%		0	%		19	%
Weighted Average Market Price		102.7			117.1			27.6			21.6			84.6

Unrealized/Unrecognized Gain/(Loss)

CMBS Type	AAA				A		BBB			Below  Investment  Grade			Total
Gov't Guaranteed Agency MultiFamily	$	1,352		$	-		$	-		$	-		$	1,352
Other Agency MultiFamily		144			-			-			-			144
Total Agency		1,495			-			-			-			1,495
Conduit		284			-			-			-			284
Fusion (1)		(274	)		(2,033	)		(1,791	)		(1,422	)		(5,520	)
Lease-Backed		127			-			-			-			127
Re-Securitization		(3	)		(2,212	)		(4,625	)		(2,562	)		(9,402	)
Single Borrower - Multiple Properties		179			-			(358	)		(1,061	)		(1,239	)
Total CMBS-Unrealized/Unrecognized	$	1,809		$	(4,245	)	$	(6,774	)	$	(5,044	)	$	(14,255	)

(1) Fusion means a CMBS composed of large and small loans.

Note: Some amounts may not foot due to rounding.

Selective Insurance Group, Inc. and Consolidated Subsidiaries

Credit Quality of Available-for-Sale Securities

December 31, 2009

($ in millions)

(unaudited) 

	December 31, 2009							December 31, 2008
	Fair Value		Unrealized Gain (Loss)			Credit Quality		Fair Value		Unrealized Gain (Loss)			Credit Quality
AFS Portfolio:
U.S. government obligations1	$	475.6		1.8		AAA			252.2		16.6		AAA
State and municipal obligations		379.8		20.3		AA+			1,758.0		18.6		AA+
Corporate securities		379.6		14.1		A+			366.5		(22.9	)	A
Mortgage-backed securities		373.9		(17.2	)	AA+			596.2		(86.1	)	AA+
Asset-backed securities ("ABS")		27.0		0.4		AA			61.4		(15.3	)	AA
Total AFS portfolio	$	1,635.9		19.4		AA+			3,034.3		(89.1	)	AA+
State and Municipal Obligations:
Government obligations	$	222.6		11.0		AA+			574.1		16.2		AA+
Special revenue obligations		157.2		9.3		AA+			1,183.9		2.4		AA+
Total state and municipal obligations	$	379.8		20.3		AA+			1,758.0		18.6		AA+
Corporate Securities:
Financial	$	67.4		3.0		AA-			101.0		(13.1	)	A+
Industrials		46.6		2.2		A			67.7		(2.1	)	A-
Utilities		18.9		0.9		A-			47.6		(0.8	)	A
Consumer discretion		26.3		1.3		A-			33.9		(1.5	)	A-
Consumer staples		51.6		1.4		A			42.0		0.5		A
Health care		52.8		1.7		AA-			22.7		0.7		A+
Materials		20.7		0.8		A-			13.2		(3.7	)	BBB+
Energy		42.4		1.3		AA-			19.1		(0.2	)	A-
Information technology		10.8		0.1		AA			10.1		(1.9	)	BBB
Telecommunications services		14.6		0.5		A			9.2		(0.8	)	A-
Other		27.5		0.9		A			-		-
Total corporate securities	$	379.6		14.1		A+			366.5		(22.9	)	A
Mortgage-backed securities:
Gov't Guaranteed Agency CMBS	$	94.6		1.1		AAA			56.3		2.2		AAA
Other Agency CMBS		-		-			-		16.6		0.6		AAA
Non-agency CMBS		-		-			-		154.3		(34.8	)	AAA
Gov't Guaranteed Agency RMBS		105.2		0.1		AAA			84.6		0.7		AAA
Other Agency RMBS		119.8		1.9		AAA			160.9		3.5		AAA
Non-agency RMBS		30.2		(12.8	)		A-		74.3		(28.4	)	AA+
Alternative-A ("Alt-A") RMBS		24.1		(7.5	)		A-		49.2		(29.9	)	AA+
Total MBS	$	373.9		(17.2	)	AA+			596.2		(86.1	)	AA+
Asset-backed securities:
ABS	$	27.0		0.4		AA			59.3		(15.1	)	AA+
Alt-A ABS		-		-			-		0.9		-		B
Sub-prime ABS2		-		-			-		1.2		(0.2	)	A
Total ABS	$	27.0		0.4		AA			61.4		(15.3	)	AA

1 U.S. Governemnt includes coporate securities fully guaranteed by the FDIC.

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

Selective Insurance Group, Inc. and Consolidated Subsidiaries

Credit Quality of Held-to-Maturity Securities

December 31, 2009

($ in millions)

(unaudited)

	Fair Value		Carry Value		Unrecognized Holding Gain (Loss)2		Unrealized Gain (Loss) in Other Comprehensive Income3			Total Unrealized / Unrecognized Gain (Loss)			Credit Quality
HTM Fixed Maturity Portfolio1:
U.S. government obligations	$	146.0		144.8		1.2		5.6			6.8		AAA
State and municipal obligations		1,210.8		1,201.4		9.4		33.9			43.3		AA
Corporate securities		107.5		98.8		8.7		(6.0	)		2.7		A-
Mortgage-backed securities		242.8		236.4		6.4		(17.6	)		(11.2	)	AA+
Asset-backed securities		33.1		29.0		4.1		(6.0	)		(1.9	)	AA-
Total HTM portfolio	$	1,740.2		1,710.4		29.8		9.9			39.7		AA+
State and Municipal Obligations:
Government obligations	$	301.5		300.8		0.7		14.7			15.4		AA+
Special revenue obligations		909.3		900.6		8.7		19.2			27.9		AA
Total state and municipal obligations	$	1,210.8		1,201.4		9.4		33.9			43.3		AA
Corporate Securities:
Financial	$	35.4		31.8		3.6		(4.0	)		(0.4	)	A
Industrials		29.1		25.7		3.4		(2.0	)		1.4		A-
Utilities		16.5		16.3		0.2		(0.1	)		0.1		A-
Consumer discretion		6.3		6.0		0.3		-			0.3		BBB+
Consumer staples		14.6		13.9		0.7		0.5			1.2		AA-
Materials		2.1		1.9		0.2		(0.1	)		0.1		BBB-
Energy		3.5		3.2		0.3		(0.3	)		-		BB+
Total corporate securities	$	107.5		98.8		8.7		(6.0	)		2.7		A-
Mortgage-backed securities:
Gov't Guaranteed Agency CMBS	$	11.1		10.8		0.3		-			0.3		AAA
Other Agency CMBS		3.8		3.8		-		0.1			0.1		AAA
Non-agency CMBS		77.6		74.4		3.2		(18.9	)		(15.7	)	AA+
Gov't Guaranteed Agency RMBS		4.2		3.9		0.3		(0.2	)		0.1		AAA
Other Agency RMBS		140.2		137.7		2.5		2.5			5.0		AAA
Non-agency RMBS		5.9		5.8		0.1		(1.1	)		(1.0	)	AAA
Total mortgage-backed securities	$	242.8		236.4		6.4		(17.6	)		(11.2	)	AA+
Asset-backed securities:
ABS	$	30.2		27.0		3.2		(5.1	)		(1.9	)	AA
Alt-A ABS		1.8		1.0		0.8		(0.5	)		0.3		CC
Sub-prime ABS4		1.1		1.0		0.1		(0.4	)		(0.3	)	A
Total ABS	$	33.1		29.0		4.1		(6.0	)		(1.9	)	AA-

1 2008 HTM securities are not presented as they are not material

2 Unrecognized holding gains (losses) are equal to the fair value less the carry value of the security

3 Unrealized gains (losses) are equal to the fair value less the amortized costs of securities transferred from AFS to HTM at the date of transfer, adjusted for subsequent amortization into income

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