Selective Insurance (SIGI) 8-K Selective Insurance Group Reports

Supplemental Investor Package

_______________________________________________

Fourth Quarter and

Full Year 2010

Investor Contact:

Jennifer DiBerardino

Senior Vice President, Investor Relations and Treasurer

Tel:  973-948-1364

jennifer.diberardino@selective.com

Selective Insurance Group, Inc.
Selected Balance Sheet Data (unaudited)
($ in thousands, except per share amounts)
	December 31,								December 31,
	2010								2009
						Unrealized/								Unrealized/
	Balance			Market		Unrecognized			Balance			Market		Unrecognized
	Sheet			Value		Gain/(Loss)			Sheet			Value		Gain/(Loss)
Invested Assets:
Corporate bonds1, 3	$	1,683,336			1,704,600		35,334		$	1,138,957			1,158,453		(13,259	)
Government and municipal bonds3		1,873,730			1,894,436		77,913			2,207,315			2,217,627		72,329
Total bonds		3,557,066			3,599,036		113,247			3,346,272			3,376,080		59,070
Equities		69,636			69,636		11,597			80,264			80,264		15,874
Short-term investments		161,155			161,155		-			213,848			213,848		-
Other investments		137,865			137,865		(4,982	)		140,667			140,667		(25,774	)
Total invested assets		3,925,722			3,967,692		119,862			3,781,051			3,810,859		49,170
Invested assets per $ of stockholders' equity		3.67								3.77
Total assets		5,231,772								5,114,827
Liabilities:
Reserve for losses and loss expenses		2,830,058								2,745,799
Unearned premium reserve		823,596								844,847
Total liabilities		4,160,663								4,112,452
Stockholders' equity		1,071,109								1,002,375
Total debt to capitalization ratio		19.7	%							21.5	%
Adjusted total debt to capitalization ratio 2		14.0	%							15.6	%
Book value per share		19.95								18.83
Book value per share excluding
unrealized gain or loss on bond portfolio		19.09								18.47
NPW per insurance segment employee		761								766
Statutory premiums to surplus ratio		1.3	x							1.5	x
Statutory surplus		1,073,025								981,955
1 Includes mortgage-backed and asset-backed securities.
2 The adjusted debt to capitalization ratio reflects an estimated equity treatment of 75% applied to our $100 million Junior Subordinated Notes issued September 25, 2006.
3 Certain prior year amounts were reclassified to conform with current year presentation.

Selective Insurance Group, Inc.
Selected Income Statement Data (unaudited)
December 2010		Three Months Ended December 31,												Twelve Months Ended December 31,
($ in thousands, except per share amounts)		2010						2009						2010						2009
					Per diluted share						Per diluted share						Per diluted share						Per diluted share
Consolidated
Revenue		$	394,089					$	389,802					$	1,564,621					$	1,514,018
Operating income			26,284			0.48			25,327			0.47			73,925			1.35			74,538			1.39
Net realized losses, after tax			(2,478	)		(0.05	)		(3,683	)		(0.07	)		(4,604	)		(0.08	)		(29,880	)		(0.56	)
Income from continuing operations			23,806			0.43			21,644			0.40			69,321			1.27			44,658			0.83
Loss on discontinued operations, after tax			(31	)		-			(1,064	)		(0.02	)		(3,780	)		(0.07	)		(8,260	)		(0.15	)
Net income			23,775			0.43			20,580			0.38			65,541			1.20			36,398			0.68
Operating return on equity			9.7	%					10.2	%					7.1	%					7.9	%
Insurance Operations
Gross premiums written			364,047						367,296						1,659,669						1,679,926
Net premiums written			301,812						304,891						1,390,541						1,422,655
Net premiums earned			353,497						352,957						1,416,598						1,431,047
Underwriting (loss) gain	- before tax		(468	)					(542	)					(22,167	)					2,385
	- after tax		(305	)		(0.01	)		(353	)		(0.01	)		(14,409	)		(0.26	)		1,550			0.03
GAAP combined ratio			100.1	%					100.2	%					101.6	%					99.8	%
Commercial lines
Net premiums earned			290,148						296,884						1,174,282						1,214,952
GAAP combined ratio			97.9	%					98.6	%					100.1	%					98.8	%
Personal lines
Net premiums earned			63,349						56,074						242,316						216,095
GAAP combined ratio			110.2	%					108.5	%					108.5	%					105.6	%
Investments
Net investment income	- before tax		41,471						39,801						145,708						118,471
	- after tax		31,001			0.56			30,333			0.57			111,059			2.04			95,725			1.79
Effective tax rate			25.2	%					23.8	%					23.8	%					19.2	%
Annual after-tax yield on investment portfolio															2.9	%					2.6	%
Annual after-tax, after-interest expense yield															2.6	%					2.3	%
Invested assets per $ of stockholders' equity															3.67						3.77
Other expenses (net of other income)
Interest expense	- before tax		(4,560	)					(4,768	)					(18,616	)					(19,386	)
	- after tax		(2,964	)		(0.05	)		(3,099	)		(0.06	)		(12,100	)		(0.22	)		(12,601	)		(0.24	)
Other - after tax		$	(1,448	)		(0.02	)	$	(1,554	)		(0.03	)	$	(10,625	)		(0.21	)	$	(10,136	)		(0.19	)
Diluted weighted avg. shares outstanding			54,894						53,639						54,504						53,397

Selective Insurance Group, Inc. and Consolidated Subsidiaries

GAAP Investment Income

 (unaudited)

 ($ in thousands)

		For the three months ended						%			Year to Date						%
		December			December			Increase			December			December			Increase
		2010			2009			(Decrease)			2010			2009			(Decrease)
Investment Income:
	Interest:
	Fixed Maturity Securities		33,076			34,902			(5.2	)		130,990			141,882			(7.7	)
	Short-term		70			112			(37.5	)		437			1,273			(65.7	)
	Alternative Investments		9,191			5,018			83.2			20,313			(21,726	)		193.5
	Dividends		959			786			22.0			2,238			2,348			(4.7	)
	Changes in Fair Value		-			-			N/M			-			262			(100.0	)
	Miscellaneous		45			50			(10.0	)		139			343			(59.5	)
			43,341			40,868			6.1			154,117			124,382			23.9
Investment Expense			1,870			1,067			75.3			8,409			5,911			42.3
Net Investment Income Before Tax			41,471			39,801			4.2			145,708			118,471			23.0
Tax			10,470			9,468			10.6			34,649			22,746			52.3
Net Investment Income After Tax		$	31,001			30,333			2.2		$	111,059			95,725			16.0
Net Investment Income per Share		$	0.56			0.57			(1.8	)	$	2.04			1.79			14.0
Effective Tax Rate			25.2	%		23.8	%					23.8	%		19.2	%
Average Yields :
Fixed Maturity Securities:
	Pre Tax											3.59	%		4.24	%
	After Tax											2.80	%		3.33	%
Portfolio:
	Pre Tax											3.78	%		3.24	%
	After Tax											2.88	%		2.61	%
		For the three months ended									Year to date:
		December			December						December			December
Net Realized Gains (Losses)		2010			2009						2010			2009
	Fixed Maturities		(86	)		(9,085	)					(14,898	)		(47,123	)
	Equity Securities		1,464			3,417						12,999			3,192
	Other Investments		(5,184	)		-						(5,184	)		(2,039	)
	Total		(3,812	)		(5,668	)					(7,083	)		(45,970	)
	Net of Tax		(2,478	)		(3,683	)					(4,604	)		(29,880	)

Selective Insurance Group, Inc. and Consolidated Subsidiaries

Investment Yield and Effective Tax Rate Portfolio Breakdown

December 31, 2010

($ in thousands)

(unaudited)

				Q4 2010			FY 2010
	Market Value		Yield		Effective Tax Rate		Yield		Effective Tax Rate
	($)		(%)		(%)		(%)		(%)
Fixed Maturities Securities:
State & Municipal T/E		1,383,746		0.9		3.8		3.6		3.6
State & Municipal Tax		62,435		1.3		35.0		5.0		35.0
State & Municipal		1,446,181		0.9		5.8		3.6		5.7
Government (1)		448,255		0.8		35.0		2.6		35.0
Corporate		1,075,789		0.9		35.0		3.8		35.0
ABS's		60,661		1.1		35.0		4.2		35.0
MBS's		568,150		1.0		35.0		4.1		35.0
Total Debt Securities		3,599,036		0.9		22.7		3.6		22.1
Equity Securities		69,636		1.4		19.3		2.8		18.1
Short-term Investments		161,155		0.0		35.0		0.2		35.0
Other Investments
Alternative Investments (2)		135,110		6.1		35.0		14.1		35.0
Other		2,755		0.0		0.0		0.0		0.0
		3,967,692		1.1		25.2		3.8		23.8

(1) Includes U.S Gov't with market value of $423.7 million and Foreign Gov't with market value of $24.6 million.

(2) Alternative Investments are not carried at market value, they are carried under the equity method.

Selective Insurance Group, Inc.
2010 Statutory Results by Line of Business
4th Qtr 2010 (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			2010			2009			Gain/(Loss)
Personal Lines:
Homeowners	$	25,136		20.4	%	$	23,699		20.1	%		66.4	%		6.8	%		31.4	%		0.0	%		104.6	%		99.8	%	$	(1,546	)
Auto		35,219		8.0	%		36,471		6.9	%		79.5	%		7.7	%		30.2	%		0.0	%		117.4	%		117.7	%		(5,984	)
Other (including flood)		3,376		8.4	%		3,179		43.3	%		59.8	%		(9.1	)%		(21.0	)%		0.0	%		29.7	%		26.3	%		2,278
Total	$	63,731		12.6	%	$	63,349		13.0	%		73.6	%		6.5	%		28.0	%		0.0	%		108.1	%		107.1	%	$	(5,252	)
Commercial Lines:
Commercial property	$	40,977		(6.3	)%	$	49,064		(1.7	)%		40.9	%		4.7	%		40.4	%		0.3	%		86.3	%		76.2	%	$	9,973
Workers compensation		49,869		3.6	%		62,566		1.3	%		79.2	%		13.8	%		29.7	%		1.1	%		123.8	%		130.1	%		(11,122	)
General liability		66,088		(7.2	)%		84,037		(4.6	)%		45.7	%		17.4	%		37.9	%		0.0	%		101.0	%		100.1	%		5,978
Auto		57,685		(6.7	)%		70,564		(4.5	)%		60.7	%		7.0	%		31.3	%		0.2	%		99.2	%		99.6	%		4,601
BOP		17,192		1.3	%		16,422		2.2	%		52.6	%		13.6	%		33.3	%		0.0	%		99.5	%		126.6	%		(169	)
Bonds		4,006		(5.0	)%		4,928		6.2	%		10.0	%		(4.0	)%		68.0	%		0.0	%		74.0	%		100.7	%		1,909
Other		2,264		2.5	%		2,566		3.7	%		(0.4	)%		0.2	%		45.7	%		0.0	%		45.5	%		49.4	%		1,537
Total	$	238,081		(4.1	)%	$	290,148		(2.3	)%		55.1	%		11.2	%		35.3	%		0.3	%		101.9	%		103.3	%	$	12,706
Grand Total	$	301,812		(1.0	)%	$	353,496		0.2	%		58.4	%		10.4	%		33.7	%		0.3	%		102.8	%		103.7	%	$	7,454
Note: Some amounts may not foot due to rounding.
				2010			2009
	Losses Paid		$	195,666		$	185,896
	LAE Paid			39,958			40,841
	Total Paid		$	235,624		$	226,737

Selective Insurance Group, Inc.
2010 Statutory Results by Line of Business
December 2010 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			2010			2009			Gain/(Loss)
Personal Lines:
Homeowners	$	96,792		20.0	%	$	87,862		20.2	%		69.5	%		7.4	%		31.7	%		0.0	%		108.6	%		105.5	%	$	(10,386	)
Auto		147,497		8.6	%		141,962		6.5	%		73.3	%		10.6	%		29.7	%		0.0	%		113.6	%		110.7	%	$	(20,920	)
Other (including flood)		12,376		9.0	%		12,493		28.8	%		58.1	%		(15.7	)%		(37.2	)%		0.0	%		5.2	%		16.1	%		11,795
Total	$	256,666		12.6	%	$	242,316		12.1	%		71.1	%		8.1	%		27.2	%		0.0	%		106.4	%		104.4	%	$	(19,511	)
Commercial Lines:
Commercial property	$	194,382		(2.7	)%	$	199,252		0.8	%		51.5	%		4.3	%		37.9	%		0.0	%		93.7	%		83.9	%	$	14,357
Workers compensation		237,409		(5.5	)%		250,456		(4.9	)%		79.7	%		15.2	%		27.7	%		1.6	%		124.2	%		107.6	%		(56,955	)
General liability		323,276		(8.2	)%		336,475		(7.2	)%		44.4	%		17.1	%		35.0	%		(0.1	)%		96.4	%		102.9	%		16,682
Auto		281,365		(5.6	)%		291,495		(3.0	)%		52.4	%		8.0	%		29.8	%		0.0	%		90.2	%		98.2	%		31,721
BOP		66,079		1.7	%		65,260		4.2	%		68.1	%		13.7	%		34.2	%		0.0	%		116.0	%		116.4	%		(10,701	)
Bonds		19,142		2.5	%		19,243		4.3	%		13.8	%		3.7	%		61.6	%		0.0	%		79.1	%		93.4	%		4,087
Other		10,236		2.8	%		10,115		4.7	%		1.3	%		0.3	%		45.0	%		0.0	%		46.6	%		46.5	%		5,349
Total	$	1,131,890		(5.3	)%	$	1,172,296		(3.5	)%		55.6	%		11.7	%		33.2	%		0.3	%		100.8	%		99.8	%	$	4,539
Grand Total	$	1,388,556		(2.4	)%	$	1,414,612		(1.1	)%		58.2	%		11.1	%		32.0	%		0.3	%		101.6	%		100.5	%	$	(14,972	)
Note: Some amounts may not foot due to rounding.
				2010			2009
	Losses Paid		$	784,641		$	757,916
	LAE Paid			154,661			157,034
	Total Paid		$	939,302		$	914,950

Consolidated Balance Sheets
December 31,	Unaudited
($ in thousands, except share amounts)	2010			2009
ASSETS
Investments:
Fixed maturity securities, held-to-maturity – at carry value
(fair value:  $1,256,294 – 2010; $1,740,211 – 2009)	$	1,214,324			1,710,403
Fixed maturity securities, available-for-sale – at fair value
(amortized cost:  $2,285,988 – 2010; $1,616,456 – 2009)		2,342,742			1,635,869
Equity securities, available-for-sale – at fair value
(cost of:  $58,039 – 2010; $64,390 – 2009)		69,636			80,264
Short-term investments (at cost which approximates fair value)		161,155			213,848
Other investments		137,865			140,667
Total investments		3,925,722			3,781,051
Cash		645			811
Interest and dividends due or accrued		37,007			34,651
Premiums receivable, net of allowance for uncollectible
accounts of:  $4,691 – 2010; $5,880 – 2009		414,105			446,577
Reinsurance recoverable, net		318,752			276,018
Prepaid reinsurance premiums		110,327			105,522
Current federal income tax		11,200			17,662
Deferred federal income tax		93,234			111,038
Property and equipment – at cost, net of accumulated
depreciation and amortization of:  $151,704 – 2010; $141,251 – 2009		41,775			46,287
Deferred policy acquisition costs		209,627			218,601
Goodwill		7,849			7,849
Other assets		61,529			68,760
Total assets	$	5,231,772			5,114,827
LIABILITIES AND STOCKHOLDERS’ EQUITY
Liabilities:
Reserve for losses and loss expenses	$	2,830,058			2,745,799
Unearned premiums		823,596			844,847
Notes payable		262,333			274,606
Accrued salaries and benefits		100,933			103,802
Other liabilities		143,743			143,398
Total liabilities	$	4,160,663			4,112,452
Stockholders’ Equity:
Preferred stock of $0 par value per share:
Authorized shares 5,000,000; no shares issued or outstanding	$	-			-
Common stock of $2 par value per share
Authorized shares:  360,000,000
Issued:  96,362,667 – 2010; 95,822,959 – 2009		192,725			191,646
Additional paid-in capital		244,613			231,933
Retained earnings		1,176,155			1,138,978
Accumulated other comprehensive income (loss)		7,024			(12,460	)
Treasury stock – at cost (shares:  42,686,204 – 2010; 42,578,779 – 2009)		(549,408	)		(547,722	)
Total stockholders’ equity		1,071,109			1,002,375
Commitments and contingencies
Total liabilities and stockholders’ equity	$	5,231,772			5,114,827

Consolidated Statements of Income
Fourth Quarter
	Unaudited
($ in thousands, except share amounts)	2010			2009
Revenues:
Net premiums earned	$	353,497			352,957
Net investment income earned		41,471			39,801
Net realized losses:
Net realized investment (losses) gains		(3,385	)		5,931
Other-than-temporary impairments		101			(18,717	)
Other-than-temporary impairments on fixed maturity securities
recognized in other comprehensive income		(528	)		7,118
Total net realized losses		(3,812	)		(5,668	)
Other income		2,933			2,712
Total revenues		394,089			389,802
Expenses:
Losses and loss expenses incurred		242,976			238,630
Policy acquisition costs		111,902			115,276
Interest expense		4,560			4,768
Other expenses		5,250			5,034
Total expenses		364,688			363,708
Income from continuing operations, before federal income tax		29,401			26,094
Federal income tax expense:
Current		(3,152	)		(233	)
Deferred		8,747			4,683
Total federal income tax expense		5,595			4,450
Net income from continuing operations		23,806			21,644
Income from discontinued operations, net of tax of $64 – 2009		-			110
Loss on disposal of discontinued operations, net of tax of $(16) – 2010;
$(631) – 2009		(31	)		(1,174	)
Total discontinued operations, net of tax		(31	)		(1,064	)
Net income		23,775			20,580
Earnings per share:
Basic net income from continuing operations		0.44			0.41
Basic net loss from discontinued operations		-			(0.02	)
Basic net income	$	0.44			0.39
Diluted net income from continuing operations	$	0.43			0.40
Diluted net loss from discontinued operations		-			(0.02	)
Diluted net income		0.43			0.38
Dividends to stockholders	$	0.13			0.13

Consolidated Statements of Income
December 31,
	Unaudited
($ in thousands, except share amounts)	2010			2009			2008
Revenues:
Net premiums earned	$	1,416,598			1,431,047			1,504,187
Net investment income earned		145,708			118,471			131,032
Net realized losses:
Net realized investment gains		10,575			9,446			3,648
Other-than-temporary impairments		(16,225	)		(64,184	)		(53,100	)
Other-than-temporary impairments on fixed maturity securities recognized in
other comprehensive income		(1,433	)		8,768			-
Total net realized losses		(7,083	)		(45,970	)		(49,452	)
Other income		9,398			10,470			4,172
Total revenues		1,564,621			1,514,018			1,589,939
Expenses:
Losses and loss expenses incurred		982,118			971,905			1,011,544
Policy acquisition costs		458,045			457,424			485,702
Interest expense		18,616			19,386			20,508
Other expenses		23,886			26,117			32,018
Total expenses		1,482,665			1,474,832			1,549,772
Income from continuing operations, before federal income tax		81,956			39,186			40,167
Federal income tax expense (benefit):
Current		5,323			3,585			21,995
Deferred		7,312			(9,057	)		(25,929	)
Total federal income tax expense (benefit)		12,635			(5,472	)		(3,934	)
Net income from continuing operations		69,321			44,658			44,101
Loss from discontinued operations, net of tax of $(4,042) – 2009;
$(438) – 2008		-			(7,086	)		(343	)
Loss on disposal of discontinued operations, net of tax of $(2,035) – 2010;
$(631) – 2009		(3,780	)		(1,174	)		-
Total discontinued operations, net of tax		(3,780	)		(8,260	)		(343	)
Net income		65,541			36,398			43,758
Earnings per share:
Basic net income from continuing operations		1.30			0.84			0.85
Basic net loss from discontinued operations		(0.07	)		(0.15	)		(0.01	)
Basic net income	$	1.23			0.69			0.84
Diluted net income from continuing operations	$	1.27			0.83			0.83
Diluted net loss from discontinued operations		(0.07	)		(0.15	)		(0.01	)
Diluted net income		1.20			0.68			0.82
Dividends to stockholders	$	0.52			0.52			0.52

Consolidated Statements of Stockholders’ Equity
December 31,
	Unaudited
($ in thousands, except share amounts)	2010					2009				2008
Common stock:
Beginning of year	$	191,646					190,527				189,306
Dividend reinvestment plan
(shares:  106,437– 2010; 123,880 – 2009; 81,200 – 2008)		213					248				162
Convertible debentures
(shares:  45,759 – 2008)		-					-				92
Stock purchase and compensation plans
(shares:  433,271 – 2010; 435,571 – 2009; 483,619 – 2008)		866					871				967
End of year		192,725					191,646				190,527
Additional paid-in capital:
Beginning of year		231,933					217,195				192,627
Dividend reinvestment plan		1,465					1,514				1,677
Convertible debentures		-					-				645
Stock purchase and compensation plans		11,215					13,224				22,246
End of year		244,613					231,933				217,195
Retained earnings:
Beginning of year		1,138,978					1,128,149				1,105,946
Cumulative-effect adjustment due to fair value election
under ASC 825, net of deferred income tax		-					-				6,210
Cumulative-effect adjustment due to adoption of other-
than-temporary impairment guidance under ASC 320,
net of deferred income tax		-					2,380				-
Net income		65,541		65,541			36,398		36,398		43,758		43,758
Cash dividends to stockholders ($0.52 per share – 2010;
2009; and 2008)		(28,364	)				(27,949	)			(27,765	)
End of year		1,176,155					1,138,978				1,128,149
Accumulated other comprehensive income (loss):
Beginning of year		(12,460	)				(100,666	)			86,043
Cumulative-effect adjustment due to fair value election
under ASC 825, net of deferred income tax		-					-				(6,210	)
Cumulative-effect adjustment due to adoption of other-
than-temporary impairment guidance under ASC 320,
net of deferred income tax		-					(2,380	)			-
Other comprehensive income (loss), increase (decrease) in:
Unrealized gains (losses) on investment securities:
Non-credit portion of other-than-temporary
impairment losses recognized in other
comprehensive income, net of deferred income tax		3,416					(5,629	)			-
Other net unrealized gains (losses) on investment
securities, net of deferred income tax		21,113					92,183				(142,685	)
Total unrealized gains (losses) on investment
securities		24,529		24,529			86,554		86,554		(142,685	)	(142,685	)
Defined benefit pension plans, net of deferred income tax		(5,045	)	(5,045	)		4,032		4,032		(37,814	)	(37,814	)
End of year		7,024					(12,460	)			(100,666	)
Comprehensive income (loss)				85,025					126,984				(136,741	)
Treasury stock:
Beginning of year		(547,722	)				(544,712	)			(497,879	)
Acquisition of treasury stock
(shares:  107,425 – 2010; 191,858 – 2009;
2,039,027 – 2008)		(1,686	)				(3,010	)			(46,833	)
End of year		(549,408	)				(547,722	)			(544,712	)
Total stockholders’ equity	$	1,071,109					1,002,375				890,493

Consolidated Statements of Cash Flows
December 31,
	Unaudited
($ in thousands, except share amounts)	2010			2009			2008
Operating Activities
Net Income	$	65,541			36,398			43,758
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation and amortization		31,770			28,593			28,552
Loss on disposal of discontinued operations		3,780			1,174			-
Stock-based compensation expense		12,355			11,036			17,215
Undistributed (income) loss of equity method investments		(8,712	)		21,726			13,753
Net realized losses		7,083			45,970			49,452
Postretirement life curtailment benefit		-			(4,217	)		-
Deferred tax expense (benefit)		7,312			(9,057	)		(26,665	)
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 recoverables		41,526			60,619			103,016
Decrease in unearned premiums, net of prepaid reinsurance and advance premiums		(26,661	)		(8,028	)		(10,766	)
Decrease (increase) in net federal income tax recoverable		8,497			5,339			(22,092	)
Decrease in premiums receivable		32,472			34,317			15,469
Decrease (increase) in deferred policy acquisition costs		8,974			(6,282	)		14,115
(Increase) decrease in interest and dividends due or accrued		(2,361	)		1,918			(431	)
Decrease in accrued salaries and benefits		(19,251	)		(15,020	)		(3,100	)
(Decrease) increase in accrued insurance expenses		(4,470	)		2,240			(15,880	)
Purchase of trading securities		-			-			(6,587	)
Sale of trading securities		-			2,831			21,002
Other-net		1,330			6,050			8,233
Net adjustments		93,644			191,161			197,415
Net cash provided by operating activities		159,185			227,559			241,173
Investing Activities
Purchase of fixed maturity securities, held-to-maturity		-			(158,827	)		-
Purchase of fixed maturity securities, available-for-sale		(1,007,679	)		(1,041,277	)		(587,430	)
Purchase of equity securities, available-for-sale		(71,192	)		(79,455	)		(70,651	)
Purchase of other investments		(20,673	)		(16,298	)		(53,089	)
Purchase of short-term investments		(1,741,738	)		(1,956,164	)		(2,204,107	)
Sale of subsidiary		978			(12,538	)		-
Sale of fixed maturity securities, held-to-maturity		-			5,820			-
Sale of fixed maturity securities, available-for-sale		190,438			538,769			152,655
Sale of short-term investments		1,794,434			1,940,427			2,196,162
Redemption and maturities of fixed maturity securities, held-to-maturity		319,835			282,310			4,652
Redemption and maturities of fixed maturity securities, available-for-sale		298,171			122,403			294,342
Sale of equity securities, available-for-sale		98,015			137,244			102,313
Distributions from other investments		22,406			25,596			26,164
Purchase of property and equipment		(6,522	)		(8,207	)		(8,083	)
Net cash used in investing activities		(123,527	)		(220,197	)		(147,072	)
Financing Activities
Dividends to stockholders		(26,056	)		(26,296	)		(25,804	)
Acquisition of treasury stock		(1,686	)		(3,010	)		(46,833	)
Principal payment of notes payable		(12,300	)		(12,300	)		(12,300	)
Proceeds from borrowings		-			13,000			-
Net proceeds from stock purchase and compensation plans		4,962			4,612			8,222
Excess tax benefits from share-based payment arrangements		(744	)		(1,200	)		1,628
Principal payments of convertible bonds		-			-			(8,754	)
Net cash used in financing activities		(35,824	)		(25,194	)		(83,841	)
Net (decrease) increase in cash and cash equivalents		(166	)		(17,832	)		10,260
Net (decrease) increase in cash and cash equivalents from discontinued operations		-			(15,037	)		8,619
Net (decrease) increase in cash from continuing operations		(166	)		(2,795	)		1,641
Cash from continuing operations, beginning of year		811			3,606			1,965
Cash from continuing operations, end of year	$	645			811			3,606

 Selective Insurance Group, Inc.

 Combined Insurance Company Subsidiaries

 Unaudited Statutory Balance Sheets

 ($ in thousands)

	Dec-31			Dec-31
	2010			2009
ASSETS
Bonds	$	3,482,204			3,289,336
Common stocks		69,636			80,264
Affiliated mortgage loan		38,785			39,408
Other investments		174,067			176,983
Short-term investments		111,021			165,957
Total investments		3,875,713			3,751,948
Cash on hand and in banks		(30,343	)		(29,110	)
Interest and dividends due and accrued		37,172			34,808
Premiums receivable		410,809			443,223
Reinsurance recoverable on paid losses and expenses		5,013			4,408
Federal income tax recoverable		-			1,608
Deferred tax recoverable		133,100			119,377
EDP equipment		1,409			2,134
Equities and deposits in pools and associations		6,681			4,886
Receivable for sold securities		16,738			19,655
Other assets		30,164			29,747
Total assets	$	4,486,456			4,382,684
LIABILITIES
Reserve for losses	$	2,111,557			2,072,376
Reinsurance payable on paid loss and loss expense		1,030			1,011
Reserve for loss expenses		401,508			399,457
Unearned premiums		713,268			739,325
Reserve for commissions payable		43,590			49,237
Ceded balances payable		12,835			9,856
Federal income tax payable		1,645			-
Premium and other taxes payable		23,466			22,283
Borrowed money		13,018			13,016
Reserve for dividends to policyholders		2,390			3,718
Reserves for unauthorized reinsurance		1,811			1,013
Payable for securities		5,028			-
Funds withheld on account of others		7,015			6,261
Accrued salaries and benefits		61,353			66,847
Other liabilities		13,917			16,329
Total liabilities		3,413,431			3,400,729
POLICYHOLDERS' SURPLUS
Capital		28,325			28,325
Aggregate write-ins for special surplus funds		40,521			33,951
Paid in surplus		255,792			255,792
Unassigned surplus		748,387			663,887
Total policyholders' surplus		1,073,025			981,955
Total liabilities and policyholders' surplus	$	4,486,456			4,382,684

Selective Insurance Group, Inc.

Combined Insurance Company Subsidiaries

Unaudited Statutory Statements Of Income

($ in thousands)

	Three Months Ended										Twelve Months Ended
	December										December
UNDERWRITING	2010					2009					2010					2009
Net premiums written	$	301,812					304,891					1,388,556					1,422,655
Net premiums earned		353,497					352,957					1,414,612					1,431,047
Net losses paid		195,666					185,896					784,641					757,916
Change in reserve for losses		10,910					10,559					39,181					40,428
Net losses incurred		206,576		58.4	%		196,455		55.7	%		823,822		58.2	%		798,344		55.8	%
Net loss expenses paid		39,958					40,841					154,661					157,034
Change in reserve for loss expenses		(3,230	)				1,595					2,051					16,662
Net loss expenses incurred		36,728		10.4	%		42,436		12.0	%		156,712		11.1	%		173,696		12.1	%
Net underwriting expenses incurred		103,578		34.3	%		110,432		36.2	%		449,620		32.3	%		465,723		32.7	%
Total deductions		346,882					349,323					1,430,154					1,437,763
Statutory underwriting (loss) / gain		6,615					3,634					(15,542	)				(6,716	)
Net loss from premium balances charged off		(1,057	)				(1,044	)				(5,142	)				(4,490	)
Finance charges and other income		2,907					2,735					9,590					10,455
Total other income		1,850		-0.6	%		1,691		-0.6	%		4,448		-0.3	%		5,965		-0.4	%
Policyholders' dividends incurred		(1,011	)	0.3	%		(1,372	)	0.4	%		(3,878	)	0.3	%		(3,640	)	0.3	%
Total underwriting (loss) / gain		7,454		102.8	%		3,953		103.7	%		(14,972	)	101.6	%		(4,391	)	100.5	%
INVESTMENT
Net investment income earned		39,362					37,329					138,021					133,309
Net realized (loss) / gain		(15,909	)				2,337					(19,282	)				(39,055	)
Total income before income tax		30,907					43,619					103,767					89,863
Federal income tax expense (benefit)		(456	)				2,653					16,848					20,015
Net income	$	31,363					40,966					86,919					69,848
Policyholders' Surplus
Surplus, beginning of period	$	1,034,321					903,488					981,955					884,431
Net income		31,363					40,966					86,919					69,848
Change in deferred tax		2,941					(10,666	)				2,169					3,972
Change in unrealized gains / (losses)		12,506					33					26,198					(11,212	)
Dividends to stockholders		(12,002	)				-					(48,010	)				(24,518	)
Paid in surplus		-					-					-					20,000
Change in cum. effect of acctg principle		-					-					-					2,540
Change in reserve for unauthorized		(798	)				404					(798	)				404
Change in non-admitted assets		(4,263	)				11,034					14,851					(265	)
Change in additional admitted deferred tax		5,550					33,951					6,570					33,951
Change in minimum pension liability		3,407					3,512					3,407					3,512
Surplus adjustments		-					(767	)				(236	)				(708	)
Net change in surplus for period		38,704					78,467					91,070					97,524
Surplus, end of period	$	1,073,025					981,955					1,073,025					981,955
Statutory underwriting (loss) / gain :	$	7,454					3,953					(14,972	)				(4,391	)
Adjustments under GAAP:
Deferred policy acquisition costs		(8,963	)				(5,093	)				(8,974	)				6,283
Other, net		1,041					598					1,779					493
GAAP underwriting (loss) / gain:	$	(468	)				(542	)				(22,167	)				2,385
Note: Some amounts or ratios may not foot due to rounding

Selective Insurance Group, Inc. and Consolidated Subsidiaries
Alternative Investments
as of December 31, 2010
(unaudited)
				Paid in
	Inception	Original		Contributed		Remaining		Total		Current		YTD			DPI(2)		TVPI(3)
Fund	Year	Commitment		Capital		Commitment		Distributions(1)		Market Value		Income			Ratio		Ratio
Real Estate
LEH RE II	2005		20,000,000		17,379,077		2,620,923		7,516,650		10,757,410		467,000			0.43		1.05
GS Whitehall 2007	2007		15,000,000		14,250,000		-		2,533,307		-		(1,399,443	)		0.18		0.18
LEH RE III	2008		15,000,000		6,837,113		8,162,887		58,228		3,434,083		(440,394	)		0.01		0.51
Total - Real Estate			50,000,000		38,466,190		10,783,810		10,108,185		14,191,493		(1,372,837	)		0.26		0.63
Mezzanine Financing
GS Mezz III	2003		10,000,000		4,362,674		-		10,314,718		-		253,647			2.36		2.36
LEH Euro Mezz	2004		9,000,000		9,000,000		-		12,355,149		1,908,910		(431,003	)		1.37		1.58
GS Mezz 2006	2006		15,000,000		9,771,217		-		9,218,019		-		3,106,880			0.94		0.94
GS Mezz V	2007		25,000,000		9,747,331		15,252,669		4,465,931		8,320,753		878,234			0.46		1.31
Total - Mezz. Financing			59,000,000		32,881,222		15,252,669		36,353,817		10,229,663		3,807,758			1.11		1.42
Distressed Debt
Varde LP	1997		4,000,000		4,000,000		-		12,146,213		-		16,619			3.04		3.04
Varde VIII	2006		10,000,000		10,000,000		-		-		11,516,005		(261,120	)		-		1.15
GS Distressed Opp III	2007		15,000,000		10,389,138		4,610,862		512,894		8,916,134		1,492,268			0.05		0.91
Total - Distressed Debt			29,000,000		24,389,138		4,610,862		12,659,107		20,432,139		1,247,767			0.52		1.36
Private Equity
Prospector	1997		5,000,000		5,000,000		-		13,965,078		411,444		(82,867	)		2.79		2.88
Trilantic Capital Partners III	2004		10,000,000		9,099,872		900,128		9,911,240		4,651,020		1,546,259			1.09		1.60
NB Co-Invest	2006		15,000,000		11,889,961		3,110,039		4,527,018		9,561,893		1,931,091			0.38		1.18
GS PEP Asia	2007		7,000,000		2,589,319		-		1,203,640		0		115,145			0.46		0.46
Trilantic Capital Partners IV	2007		11,098,351		6,785,670		4,312,681		374,573		6,976,825		1,048,477			0.06		1.08
Total - Private Equity			48,098,351		35,364,822		8,322,848		29,981,549		21,601,181		4,558,105			0.85		1.46
Private Equity, Secondary Market
NB SOF	2005		12,000,000		11,100,506		899,494		5,377,440		7,303,448		822,525			0.48		1.14
GS Vintage IV	2007		20,000,000		15,674,444		4,325,556		3,842,962		13,849,876		3,102,897			0.25		1.13
NB SOF II	2008		12,000,000		5,195,909		6,804,091		837,111		5,556,132		865,033			0.16		1.23
GS Vintage V	2008		10,000,000		3,863,279		-		2,941,822		-		480,849			0.76		0.76
Total - Pvt. Eq. Sec. Mkt.			54,000,000		35,834,138		12,029,141		12,999,336		26,709,456		5,271,303			0.36		1.11
Energy/Power Generation
ArcLight I	2002		15,000,000		13,344,495		1,655,505		27,358,382		1,294,534		168,807			2.05		2.15
ArcLight II	2003		15,000,000		12,704,508		2,295,492		18,484,819		6,059,986		2,337,132			1.45		1.93
ArcLight III	2006		15,000,000		12,962,206		2,037,794		3,998,052		14,054,385		1,600,582			0.31		1.39
Quintana Energy	2006		10,000,000		7,765,984		2,234,016		392,978		7,292,352		879,075			0.05		0.99
ArcLight IV	2007		10,000,000		7,009,043		2,990,957		3,557,137		6,859,171		1,453,314			0.51		1.49
Total - Energy/Power Generation			65,000,000		53,786,236		11,213,764		53,791,368		35,560,428		6,438,910			1.00		1.66
Venture Capital
Venture V	2001		10,000,000		8,600,000		1,400,000		2,054,791		6,385,674		362,134			0.24		0.98
Total - Venture Capital			10,000,000		8,600,000		1,400,000		2,054,791		6,385,674		362,134			0.24		0.98
TOTAL - ALTERNATIVE INVESTMENTS		$	315,098,351		229,321,746		63,613,094		157,948,152		135,110,034		20,313,140			0.69		1.28
(1) Includes sales proceeds, if applicable.
(2) Distributed to paid in ratio
(3) Total value to paid in ratio

Selective Insurance Group, Inc. and Consolidated Subsidiaries

Municipal Bond Portfolio

State and Repayment Source Composition

December 31, 2010

($s  in thousands)

(unaudited)

Exposure = 63% Held-to-Maturity; 37% Available-for-Sale

Repayment Source Composition by State %s
Market Values
State	Revenue		% of State			General Obligation (GO)-Local		% of State			General Obligation (GO)-State		% of State			TX - Permanent School Fund (PSF)		% of State			Total		% of Total
TX		63,934		54	%		52,622		45	%		1,030		1	%		-		0	%		117,586		8	%
TX-PSF		-		0	%		-		0	%		-		0	%		48,542		100	%		48,542		3	%
WA		45,792		50	%		45,417		50	%		-		0	%		-		0	%		91,209		6	%
AZ		68,206		91	%		6,778		9	%		-		0	%		-		0	%		74,984		5	%
FL		69,463		99	%		-		0	%		509		1	%		-		0	%		69,972		5	%
NC		27,624		41	%		40,324		59	%		-		0	%		-		0	%		67,948		5	%
NY		66,826		100	%		-		0	%		-		0	%		-		0	%		66,826		5	%
OH		37,547		64	%		13,764		23	%		7,367		13	%		-		0	%		58,678		4	%
IL		38,529		66	%		20,003		34	%		-		0	%		-		0	%		58,532		4	%
MN		12,555		24	%		5,255		10	%		35,480		67	%		-		0	%		53,290		4	%
CO		22,755		45	%		26,375		52	%		1,591		3	%		-		0	%		50,721		3	%
Pre-refunded		52,839		56	%		28,779		31	%		12,525		13	%		-		0	%		94,143		7	%
Other		410,264		69	%		116,516		20	%		66,970		11	%		-		0	%		593,750		41	%
Grand Total		916,334		63	%		355,833		25	%		125,472		9	%		48,542		3	%		1,446,181		100	%

Selective Insurance Group, Inc. and Consolidated Subsidiaries

  Structured Securities

 December 31, 2010

($ in thousands)

    (unaudited)

Market Value	628,811
Unrealized/Unrecognized Gain/(Losses)	10,043
Held to Maturity (HTM)	24%
Available for Sale (AFS)	76%
Structured Security Portfolio Average Rating	AA+
Structured Security % of Total Portfolio	17%

 Selective Insurance Group, Inc. and Consolidated Subsidiaries

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

 December 31, 2010

($ in thousands)

  (unaudited)

Market Value	413,064
Unrealized/Unrecognized Gain/(Losses)	8,367
Held to Maturity (HTM)	22%
Available for Sale (AFS)	78%
RMBS & RABS Portfolio Average Rating	AA+
RMBS & RABS % of Total Portfolio	11.5%

Selective Insurance Group, Inc. and Consolidated Subsidiaries

Commercial Mortgage Backed (CMBS) Securities

December 31, 2010

($ in thousands)

(unaudited)

Market Value	159,404
Unrealized/Unrecognized Gain/(Losses)	1,121
Held to Maturity (HTM)	34%
Available for Sale (AFS)	66%
CMBS Portfolio Average Rating	AA
CMBS % of Total Portfolio	4.4%

Selective Insurance Group, Inc. and Consolidated Subsidiaries
Credit Quality of Available-for-Sale Fixed Maturity Securities
December 31, 2010
($ in millions)
(unaudited)
	Fair Value		Unrealized Gain (Loss)			Average Credit Quality
AFS Fixed Maturity Portfolio:
U.S. government obligations1	$	320.5		8.1		AAA
Foreign government obligations		19.0		-		AA
State and municipal obligations		533.9		21.9		AA+
Corporate securities		993.7		19.9		A
Mortgage-backed securities ("MBS")		426.9		6.7		AA+
Asset-backed securities ("ABS")2		48.7		0.2		AAA
Total AFS fixed maturity portfolio	$	2,342.7		56.8		AA
State and Municipal Obligations:
Government obligations	$	289.6		11.1		AA+
Special revenue obligations		244.3		10.8		AA
Total state and municipal obligations	$	533.9		21.9		AA+
Corporate Securities:
Financial	$	289.9		4.5		A+
Industrials		77.0		3.6		A-
Utilities		56.5		0.2		BBB+
Consumer discretion		98.9		1.1		A-
Consumer staples		101.6		2.1		A-
Health care		138.0		4.1		AA-
Materials		57.0		0.8		A-
Energy		49.5		1.2		A
Information technology		51.5		0.4		A+
Telecommunications services		50.5		0.2		A-
Other		23.3		1.7		AA+
Total corporate securities	$	993.7		19.9		A
Mortgage-backed securities:
Government Guaranteed Agency CMBS	$	71.9		3.3		AAA
Non-agency CMBS		32.6		(2.1	)	A-
Government Guaranteed Agency RMBS		91.1		3.0		AAA
Other Agency RMBS		183.6		3.8		AAA
Non-agency RMBS		38.3		(1.0	)	BBB
Alternative-A ("Alt-A") RMBS		9.4		(0.3	)	AAA
Total MBS	$	426.9		6.7		AA+
Asset-backed securities:
ABS	$	47.8		0.2		AAA
Sub-prime ABS2,3		0.9		-		D
Total ABS	$	48.7		0.2		AAA

1 U.S. Government 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.

3 Sub-prime ABS includes one security which is currently expected to default on its obligations according to the rating agencies.

Selective Insurance Group, Inc. and Consolidated Subsidiaries
Credit Quality of Held-to-Maturity Securities
December 31, 2010
($ in millions)
(unaudited)
	Fair Value		Carry Value		Unrecognized Holding Gain (Loss)		Unrealized Gain (Loss) in Accumulated Other Comprehensive Income			Total Unrealized / Unrecognized Gain (Loss)			Average Credit Quality
HTM Fixed Maturity Portfolio:
U.S. government obligations1	$	103.1		98.1		5.0		4.7			9.7		AAA
Foreign government obligations		5.6		5.6		-		0.3			0.3		AA+
State and municipal obligations		912.3		896.6		15.7		22.2			37.9		AA
Corporate securities		82.1		72.7		9.4		(4.0	)		5.4		A-
Mortgage-backed securities ("MBS")		141.3		130.8		10.5		(6.3	)		4.2		AAA
Asset-backed securities ("ABS")		11.9		10.5		1.4		(2.4	)		(1.0	)	A
Total HTM fixed maturity portfolio	$	1,256.3		1,214.3		42.0		14.5			56.5		AA
State and Municipal Obligations:
Government obligations	$	240.3		236.8		3.5		9.7			13.2		AA
Special revenue obligations		672.0		659.8		12.2		12.5			24.7		AA
Total state and municipal obligations	$	912.3		896.6		15.7		22.2			37.9		AA
Corporate Securities:
Financial	$	23.5		20.0		3.5		(2.5	)		1.0		A-
Industrials		22.8		19.4		3.4		(1.2	)		2.2		A
Utilities		16.9		16.1		0.8		(0.1	)		0.7		BBB
Consumer discretion		7.7		7.1		0.6		0.2			0.8		AA-
Consumer staples		5.4		4.9		0.5		(0.1	)		0.4		A
Materials		2.1		1.9		0.2		(0.1	)		0.1		BBB-
Energy		3.7		3.3		0.4		(0.2	)		0.2		BB+
Total corporate securities	$	82.1		72.7		9.4		(4.0	)		5.4		A-
Mortgage-backed securities:
Government guaranteed agency CMBS	$	9.2		8.9		0.3		-			0.3		AAA
Other agency CMBS		3.6		3.6		-		-			-		AAA
Non-agency CMBS		42.1		35.0		7.1		(7.4	)		(0.3	)	AA+
Government guaranteed agency RMBS		4.5		4.0		0.5		(0.1	)		0.4		AAA
Other agency RMBS		81.8		79.2		2.6		1.2			3.8		AAA
Non-agency RMBS		0.1		0.1		-		-			-		BBB
Total mortgage-backed securities	$	141.3		130.8		10.5		(6.3	)		4.2		AAA
Asset-backed securities:
ABS	$	9.1		8.0		1.1		(0.9	)		0.2		A-
Alt-A ABS		2.8		2.5		0.3		(1.5	)		(1.2	)	AA-
Total ABS	$	11.9		10.5		1.4		(2.4	)		(1.0	)	A

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