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

EXHIBIT 99.2

Supplemental Investor Package

First Quarter 2014

Investor Contact:   

Jennifer DiBerardino   

Senior Vice President, Investor Relations and Treasurer   

Tel:  973-948-1364   

jennifer.diberardino@selective.com   

Selective Insurance Group, Inc. & Consolidated Subsidiaries

Selected Balance Sheet Data

(unaudited)

	March 31,							March 31,							December 31,
($ in thousands, except per share data)	2014							2013							2013
						Unrecognized/							Unrecognized/							Unrecognized/
	Balance			Market		Unrealized		Balance			Market		Unrealized		Balance			Market		Unrealized
	Sheet			Value		Gain		Sheet			Value		Gain		Sheet			Value		Gain
Invested Assets:
Corporate bonds 1	$	2,662,019			2,666,877		44,021	$	2,388,239			2,396,950		100,025		2,595,256			2,601,556		27,812
Government and Municipal bonds		1,535,890			1,552,512		46,657		1,585,513			1,612,584		89,801		1,513,159			1,530,961		38,106
Total bonds		4,197,909			4,219,389		90,678		3,973,752			4,009,534		189,826		4,108,415			4,132,517		65,918
Equities		197,687			197,687		35,317		174,745			174,745		31,181		192,771			192,771		37,420
Short-term investments		137,733			137,733		-		163,440			163,440		-		174,251			174,251		-
Other investments		106,720			106,720		-		109,855			109,855		-		107,875			107,875		-
Total invested assets		4,640,049			4,661,529		125,995		4,421,792			4,457,574		221,007		4,583,312			4,607,414		103,338
Invested assets per $ of stockholders' equity		3.91							3.89							3.97
Total assets		6,370,236							6,344,027							6,270,170
Liabilities:
Reserve for loss and loss expenses		3,432,432							3,474,392							3,349,770
Unearned premium reserve		1,078,012							1,005,475							1,059,155
Total liabilities		5,184,705							5,207,682							5,116,242
Stockholders' equity		1,185,531							1,136,345							1,153,928
Total debt to capitalization ratio		24.9	%						25.7	%						25.4	%
Book value per share		21.09							20.46							20.63
Book value per share excluding unrealized gain or loss on bond portfolio		20.29							18.66							20.15
NPW per insurance segment employee		925							864							908
Statutory premiums to surplus ratio		1.5	x						1.5	x						1.4	x
Statutory surplus		1,263,795							1,151,959							1,256,431

1 Includes mortgage-backed and asset-backed securities.

Selective Insurance Group, Inc. & Consolidated Subsidiaries

Selected Income Statement Data

(unaudited)

		Quarter Ended March 31,
($ in thousands, except per share amounts)		2014						2013
					Per diluted share						Per diluted share
Consolidated
Revenue		$	509,071					$	459,949
Operating income			13,283			0.23			20,124			0.36
Net realized gains, after tax			4,691			0.08			2,181			0.04
Income from continuing operations			17,974			0.31			22,305			0.40
Loss on discontinued operations, after tax			-			-			(997	)		(0.02	)
Net income			17,974			0.31			21,308			0.38
Operating return on equity			4.5	%					7.2	%
Total Insurance Operations
Gross premiums written			565,741						537,298
Net premiums written			476,750						450,124
Net premiums earned			456,495						420,940
Underwriting (loss) gain	- before tax		(5,015	)					12,161
	- after tax		(3,260	)		(0.06	)		7,905			0.14
GAAP combined ratio			101.1	%					97.1	%
Total Standard lines
Net premiums earned			424,259						390,881
GAAP combined ratio			101.4	%					96.9	%
Standard Commercial lines
Net premiums earned			349,441						317,845
GAAP combined ratio			101.0	%					98.1	%
Standard Personal lines
Net premiums earned			74,818						73,036
GAAP combined ratio			103.2	%					91.8	%
Excess and Surplus lines
Net premiums earned			32,236						30,059
GAAP combined ratio			97.0	%					99.7	%
Investments
Net investment income	- before tax		35,534						32,870
	- after tax		26,486			0.46			24,839			0.44
Effective tax rate			25.5	%					24.4	%
Annual after-tax yield on investment portfolio			2.3	%					2.3	%
Annual after-tax, after-interest expense yield			2.0	%					1.9	%
Invested assets per $ of stockholders' equity			3.91						3.89
Other expenses (net of other income)
Interest expense	- before tax		(5,561	)					(5,831	)
	- after tax		(3,615	)		(0.06	)		(3,790	)		(0.07	)
Other Expense - after tax		$	(6,328	)		(0.11	)	$	(8,830	)		(0.15	)
Diluted weighted avg shares outstanding			57,172						56,455

Selective Insurance Group, Inc. & Consolidated Subsidiaries

GAAP Insurance Operations Results

First Quarter

($ in thousands)	Quarter Ended March 31, 2014															Quarter Ended March 31, 2013
	Standard Commercial Lines			Standard Personal Lines			Total Standard Lines			Excess & Surplus Lines			Grand Total			Standard Commercial Lines			Standard Personal Lines			Total Standard Lines			Excess & Surplus Lines			Grand Total
Net Premiums Written		379,350			67,338			446,688			30,062			476,750			353,189			68,555			421,744			28,380			450,124
Net Premiums Earned		349,441			74,818			424,259			32,236			456,495			317,845			73,036			390,881			30,059			420,940
Loss and Loss Expenses Incurred		242,639			58,027			300,666			19,880			320,546			203,139			47,592			250,731			19,118			269,849
Net Underwriting Expenses Incurred		109,194			19,151			128,345			11,381			139,726			107,518			19,471			126,989			10,855			137,844
Dividends to Policyholders		1,238			-			1,238			-			1,238			1,086			-			1,086			-			1,086
GAAP Underwriting (Loss) Gain		(3,630	)		(2,360	)		(5,990	)		975			(5,015	)		6,102			5,973			12,075			86			12,161
GAAP Ratios
Loss and Loss Expense Ratio		69.4	%		77.6	%		70.9	%		61.7	%		70.2	%		63.9	%		65.2	%		64.1	%		63.6	%		64.1	%
Underwriting Expense Ratio		31.2	%		25.6	%		30.2	%		35.3	%		30.6	%		33.9	%		26.6	%		32.5	%		36.1	%		32.7	%
Dividends to Policyholders Ratio		0.4	%		0.0	%		0.3	%		0.0	%		0.3	%		0.3	%		0.0	%		0.3	%		0.0	%		0.3	%
Combined Ratio		101.0	%		103.2	%		101.4	%		97.0	%		101.1	%		98.1	%		91.8	%		96.9	%		99.7	%		97.1	%

Selective Insurance Group, Inc. and Consolidated Subsidiaries

GAAP Investment Income

March 2014 (unaudited)

	Quarter Ended						%
	March			March			Increase
($ in thousands, except per share data)	2014			2013			(Decrease)
Investment Income:
Interest:
Fixed Income Securities	$	31,028			30,089			3
Short-term		19			52			(64	)
Other Investments:
Alternative Investments		5,218			4,240			23
Other		-			(638	)		N/M
Dividends		1,449			1,207			20
		37,714			34,950			8
Investment Expense		2,180			2,080			5
Net Investment Income Before Tax		35,534			32,870			8
Tax		9,048			8,031			13
Net Investment Income After Tax	$	26,486			24,839			7
Net Investment Income per Share	$	0.46			0.44			5
Effective Tax Rate		25.5	%		24.4	%
Average Yields :
Fixed Income Securities:
Pre Tax		2.99	%		3.08	%
After Tax		2.24	%		2.33	%
Portfolio:
Pre Tax		3.08	%		3.00	%
After Tax		2.30	%		2.27	%
	Year to date:
		March			March
Net Realized Gains (Losses)		2014			2013
Fixed Income Securities		35			651
Equity Securities		7,183			5,287
Other Investments		-			(2,583	)
Total		7,218			3,355
Net of Tax		4,691			2,181

As of March 31, 2014 year-to-date new money rates for fixed income securities were 2.6% on a pre-tax basis and 1.9% on an after tax-basis.

Selective Insurance Group, Inc.

Combined Insurance Company Subsidiaries

2014 Statutory Results by Line of Business

Quarter Ended March 2014 (unaudited)

($ in thousands)	Net Premiums Written		Percent Change			Net Premiums Earned		Percent Change			Loss Ratio			LAE Ratio			Underwriting Expense Ratio			Dividends to Policyholders Ratio			Combined Ratio 2014			Combined Ratio 2013			Underwriting Gain/(Loss)
Standard Personal Lines:
Homeowners	$	28,700		3.1	%	$	33,298		6.9	%		79.9	%		8.0	%		33.8	%		0.0	%		121.7	%		87.7	%	$	(5,668	)
Auto		36,817		(2.3	)%		38,227		(0.4	)%		59.9	%		11.1	%		29.9	%		0.0	%		100.9	%		105.7	%		60
Other (including flood)		1,821		(40.0	)%		3,294		(6.1	)%		50.9	%		4.8	%		(149.1	)%		0.0	%		(93.4	)%		(19.1	)%		4,264
Total	$	67,338		(1.8	)%	$	74,818		2.4	%		68.4	%		9.2	%		26.9	%		0.0	%		104.5	%		92.4	%	$	(1,344	)
Standard Commercial Lines:
Commerical property	$	64,096		11.0	%	$	60,186		12.7	%		92.0	%		5.0	%		34.3	%		0.1	%		131.4	%		86.6	%	$	(20,220	)
Workers compensation		75,971		0.8	%		69,413		5.0	%		64.7	%		15.4	%		24.3	%		1.5	%		105.9	%		118.9	%		(5,686	)
General liability		119,504		9.2	%		108,818		11.4	%		32.8	%		16.7	%		31.2	%		0.0	%		80.7	%		95.9	%		17,713
Auto		89,122		8.9	%		82,216		10.6	%		58.1	%		7.5	%		29.2	%		0.1	%		94.9	%		98.0	%		2,153
Business owners policies		22,124		8.7	%		20,869		12.6	%		83.7	%		10.3	%		35.8	%		0.0	%		129.8	%		77.0	%		(6,666	)
Bonds		4,866		(1.8	)%		4,756		(0.2	)%		16.4	%		8.6	%		51.9	%		0.0	%		76.9	%		78.0	%		1,040
Other		3,665		6.7	%		3,183		6.5	%		(0.4	)%		0.1	%		43.0	%		0.0	%		42.7	%		38.6	%		1,617
Total	$	379,350		7.4	%	$	349,441		9.9	%		57.8	%		11.6	%		30.5	%		0.4	%		100.3	%		97.6	%	$	(10,049	)
Total Standard Operations	$	446,688		5.9	%	$	424,259		8.5	%		59.7	%		11.2	%		29.9	%		0.3	%		101.1	%		96.8	%	$	(11,393	)
E&S	$	30,062		5.9	%	$	32,236		7.2	%		46.8	%		14.9	%		36.2	%		0.0	%		97.9	%		98.2	%	$	1,479
Total Insurance Operations	$	476,750		5.9	%	$	456,495		8.4	%		58.8	%		11.4	%		30.3	%		0.3	%		100.8	%		96.8	%	$	(9,914	)
Note: Some amounts may not foot due to rounding.

	2014		2013
Losses Paid	$	213,297	$	187,285
LAE Paid		44,764		44,989
Total Paid	$	258,061	$	232,274

Selective Insurance Group, Inc.

Combined Insurance Company Subsidiaries

2014 Net Catastrophe Losses and Prior Year Casualty Reserve Development

Statutory Results by Line of Business

(unaudited)

	Quarter Ended
Net Catastrophe Losses Incurred	March 31, 2014					March 31, 2013
($ in thousands)	Loss and Loss Expense Incurred		Impact on Loss and Loss Expense Ratio			Loss and Loss Expense Incurred		Impact on Loss and Loss Expense Ratio
Standard Personal Lines	$	8,280		11.1	%	$	535		0.7	%
Standard Commercial Lines	$	25,906		7.4	%	$	738		0.2	%
Total Standard Operations	$	34,186		8.1	%	$	1,273		0.3	%
E&S	$	186		0.6	%	$	303		1.0	%
Total Insurance Operations	$	34,372		7.5	%	$	1,576		0.4	%

Prior Year Casualty Reserve Development	Quarter Ended
(Favorable) / Unfavorable	March 31, 2014						March 31, 2013
($ in thousands)	Loss and Loss Expense Incurred			Impact on Loss and Loss Expense Ratio			Loss and Loss Expense Incurred			Impact on Loss and Loss Expense Ratio
Standard Personal Lines	$	(2,000	)		(2.7	)%	$	(2,500	)		(3.4	)%
Standard Commercial Lines	$	(12,000	)		(3.4	)%	$	500			0.1	%
Total Standard Operations	$	(14,000	)		(3.3	)%	$	(2,000	)		(0.5	)%
E&S	$	-			0.0	%	$	500			1.7	%
Total Insurance Operations	$	(14,000	)		(3.1	)%	$	(1,500	)		(0.4	)%

Note: Some amounts may not foot due to rounding.

Selective Insurance Group, Inc. & Consolidated Subsidiaries
Consolidated Balance Sheets
	(Unaudited) March 31,			December 31,
($ in thousands)	2014			2013
ASSETS
Investments:
Fixed income securities, held-to-maturity – at carrying value (fair value:  $403,536 – 2014; $416,981 – 2013)	$	382,056			392,879
Fixed income securities, available-for-sale – at fair value (amortized cost:  $3,748,456 – 2014; $3,675,977 – 2013)		3,815,853			3,715,536
Equity securities, available-for-sale – at fair value (cost:  $162,370 – 2014; $155,350 – 2013)		197,687			192,771
Short-term investments (at cost which approximates fair value)		137,733			174,251
Other investments		106,720			107,875
Total investments		4,640,049			4,583,312
Cash		245			193
Interest and dividends due or accrued		36,967			37,382
Premiums receivable, net of allowance for uncollectible accounts of:  $3,771 – 2014; $4,442 – 2013		553,912			524,870
Reinsurance recoverable, net		574,621			550,897
Prepaid reinsurance premiums		141,603			143,000
Current federal income tax		—			512
Deferred federal income tax		113,061			122,613
Property and equipment – at cost, net of accumulated depreciation and amortization of:  $181,959 – 2014; $179,192 – 2013		53,725			50,834
Deferred policy acquisition costs		177,678			172,981
Goodwill		7,849			7,849
Other assets		70,526			75,727
Total assets	$	6,370,236			6,270,170
LIABILITIES AND STOCKHOLDERS’ EQUITY
Liabilities:
Reserve for loss and loss expenses	$	3,432,432			3,349,770
Unearned premiums		1,078,012			1,059,155
Notes payable		392,420			392,414
Current federal income tax		3,249			—
Accrued salaries and benefits		89,558			111,427
Other liabilities		189,034			203,476
Total liabilities	$	5,184,705			5,116,242
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:  99,536,697 – 2014; 99,120,235 – 2013		199,073			198,240
Additional paid-in capital		294,365			288,182
Retained earnings		1,212,577			1,202,015
Accumulated other comprehensive income		41,529			24,851
Treasury stock – at cost (shares:  43,317,498 – 2014; 43,198,622 – 2013)		(562,013	)		(559,360	)
Total stockholders’ equity		1,185,531			1,153,928
Commitments and contingencies
Total liabilities and stockholders’ equity	$	6,370,236			6,270,170

Selective Insurance Group, Inc. & Consolidated Subsidiaries
Unaudited Consolidated Statements of Income
	Quarter Ended
	March 31,
($ in thousands, except per share amounts)	2014			2013
Revenues:
Net premiums earned	$	456,495			420,940
Net investment income earned		35,534			32,870
Net realized gains:
Net realized investment gains		8,181			5,304
Other-than-temporary impairments		(963	)		(1,919	)
Other-than-temporary impairments on fixed income securities recognized in other comprehensive income		—			(30	)
Total net realized gains		7,218			3,355
Other income		9,824			2,784
Total revenues		509,071			459,949
Expenses:
Loss and loss expenses incurred		320,546			269,849
Policy acquisition costs		149,266			139,528
Interest expense		5,561			5,831
Other expenses		8,614			15,873
Total expenses		483,987			431,081
Income from continuing operations, before federal income tax		25,084			28,868
Federal income tax expense (benefit):
Current		6,538			7,453
Deferred		572			(890	)
Total federal income tax expense		7,110			6,563
Net income from continuing operations		17,974			22,305
Loss on disposal of discontinued operations, net of tax of $(538) - 2013		—			(997	)
Net income	$	17,974			21,308
Earnings per share:
Basic net income from continuing operations	$	0.32			0.40
Basic net loss from discontinued operations		—			(0.02	)
Basic net income	$	0.32			0.38
Diluted net income from continuing operations	$	0.31			0.40
Diluted net loss from discontinued operations		—			(0.02	)
Diluted net income	$	0.31			0.38
Dividends to stockholders	$	0.13			0.13

Selective Insurance Group, Inc. & Consolidated Subsidiaries
Unaudited Consolidated Statements of Comprehensive Income	Quarter Ended
	March 31,
($ in thousands)	2014			2013
Net income	$	17,974			21,308
Other comprehensive income, net of tax:
Unrealized gains (losses) on investment securities:
Unrealized holding gains arising during period		21,426			2,394
Non-credit portion of other-than-temporary impairments recognized in other comprehensive income		—			20
Amount reclassified into net income:
Held-to-maturity securities		(296	)		(466	)
Non-credit other-than-temporary impairment		—			4
Realized gains on available for sale securities		(4,699	)		(3,884	)
Total unrealized gains (losses) on investment securities		16,431			(1,932	)
Defined benefit pension and post-retirement plans:
Net actuarial gain		—			28,600
Amounts reclassified into net income:
Net actuarial loss		247			1,196
Prior service cost		—			6
Curtailment expense		—			11
Total defined benefit pension and post-retirement plans		247			29,813
Other comprehensive income		16,678			27,881
Comprehensive income	$	34,652			49,189

Selective Insurance Group, Inc. & Consolidated Subsidiaries
Unaudited Consolidated Statements of Stockholders’ Equity	Quarter Ended
	March 31,
($ in thousands)	2014			2013
Common stock:
Beginning of year	$	198,240			196,388
Dividend reinvestment plan (shares:  15,283 – 2014; 17,314 – 2013)		31			35
Stock purchase and compensation plans (shares:  401,179 – 2014; 496,647 – 2013)		802			993
End of period		199,073			197,416
Additional paid-in capital:
Beginning of year		288,182			270,654
Dividend reinvestment plan		320			349
Stock purchase and compensation plans		5,863			5,714
End of period		294,365			276,717
Retained earnings:
Beginning of year		1,202,015			1,125,154
Net income		17,974			21,308
Dividends to stockholders ($0.13 per share –  2014 and 2013)		(7,412	)		(7,351	)
End of period		1,212,577			1,139,111
Accumulated other comprehensive income:
Beginning of year		24,851			54,040
Other comprehensive income		16,678			27,881
End of period		41,529			81,921
Treasury stock:
Beginning of year		(559,360	)		(555,644	)
Acquisition of treasury stock (shares:  118,876 – 2014; 146,436 – 2013)		(2,653	)		(3,176	)
End of period		(562,013	)		(558,820	)
Total stockholders’ equity	$	1,185,531			1,136,345

Selective Insurance Group, Inc. & Consolidated Subsidiaries
Unaudited Consolidated Statements of Cash Flow	Quarter Ended
	March 31,
($ in thousands)	2014			2013
Operating Activities:
Net Income	$	17,974			21,308
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation and amortization		10,578			13,148
Sale of renewal rights		(8,000	)		—
Loss on disposal of discontinued operations		—			997
Stock-based compensation expense		4,176			3,692
Undistributed (gains) losses of equity method investments		(33	)		426
Net realized gains		(7,218	)		(3,355	)
Retirement income plan curtailment expense		—			16
Changes in assets and liabilities:
Increase in reserve for loss and loss expenses, net of reinsurance recoverables		58,938			38,556
Increase in unearned premiums, net of prepaid reinsurance and advance premiums		19,875			30,106
Decrease in net federal income taxes		4,332			5,290
Increase in premiums receivable		(29,042	)		(36,202	)
Increase in deferred policy acquisition costs		(4,697	)		(2,963	)
Decrease in interest and dividends due or accrued		414			384
Decrease in accrued salaries and benefits		(21,869	)		(4,528	)
Decrease in accrued insurance expenses		(26,957	)		(12,378	)
Other-net		17,293			(26,357	)
Net adjustments		17,790			6,832
Net cash provided by operating activities		35,764			28,140
Investing Activities:
Purchase of fixed income securities, available-for-sale		(182,809	)		(308,289	)
Purchase of equity securities, available-for-sale		(61,360	)		(2	)
Purchase of other investments		(4,615	)		(2,329	)
Purchase of short-term investments		(398,348	)		(644,274	)
Sale of subsidiary		—			225
Sale of fixed income securities, available-for-sale		1,302			6,851
Sale of short-term investments		434,865			695,313
Redemption and maturities of fixed income securities, held-to-maturity		9,396			28,644
Redemption and maturities of fixed income securities, available-for-sale		104,358			124,975
Sale of equity securities, available-for-sale		61,523			—
Distributions from other investments		5,704			3,447
Purchase of property and equipment		(5,699	)		(3,673	)
Sale of renewal rights		8,000			—
Net cash used in investing activities		(27,683	)		(99,112	)
Financing Activities:
Dividends to stockholders		(6,948	)		(6,824	)
Acquisition of treasury stock		(2,653	)		(3,176	)
Net proceeds from stock purchase and compensation plans		1,261			1,164
Proceeds from issuance of notes payable, net of debt issuance costs		—			178,623
Repayment of notes payable		—			(100,000	)
Excess tax benefits from share-based payment arrangements		770			1,271
Repayment of capital lease obligations		(459	)		—
Net cash (used in) provided by financing activities		(8,029	)		71,058
Net increase in cash		52			86
Cash, beginning of year		193			210
Cash, end of year	$	245			296

Selective Insurance Group, Inc.

Combined Insurance Company Subsidiaries

Statutory Balance Sheets

(unaudited)

($ in thousands)	March 31, 2014			March 31, 2013		December 31, 2013
ASSETS
Bonds	$	4,072,964			3,762,737		4,010,464
Common stocks		197,688			174,745		192,771
Affiliated mortgage loan		36,534			37,266		36,721
Other investments		172,691			175,873		173,856
Short-term investments		122,118			131,767		158,827
Total investments		4,601,995			4,282,388		4,572,639
Cash on hand and in banks		(40,405	)		8,784		(31,186	)
Interest and dividends due and accrued		36,862			35,235		37,267
Premiums receivable		551,784			519,114		522,907
Reinsurance recoverable on paid losses and expenses		13,068			10,369		10,059
Deferred tax recoverable		154,620			151,114		154,320
EDP equipment		834			1,188		913
Equities and deposits in pools and associations		8,557			7,838		9,555
Receivable for sold securities		8			35,930		7
Other assets		26,535			22,175		30,671
Total assets	$	5,353,858			5,074,135		5,307,152
LIABILITIES
Reserve for losses	$	2,396,417			2,258,016		2,341,476
Reinsurance payable on paid loss and loss expense		2,098			1,813		2,557
Reserve for loss expenses		463,527			434,045		455,983
Unearned premiums		936,409			871,253		916,155
Reserve for commissions payable		41,455			41,304		63,482
Ceded balances payable		29,728			51,565		33,721
Federal income tax payable		31,587			21,281		27,749
Premium and other taxes payable		22,940			23,226		27,870
Borrowed money		58,044			58,044		58,044
Reserve for dividends to policyholders		2,019			2,348		2,070
Reserves for unauthorized reinsurance		2,735			7,498		2,735
Payable for securities		1,773			46,296		-
Funds withheld on account of others		7,724			7,217		6,623
Accrued salaries and benefits		46,499			78,592		65,053
Other liabilities		47,108			19,678		47,203
Total liabilities		4,090,063			3,922,176		4,050,721
POLICYHOLDERS' SURPLUS
Capital		42,725			42,725		42,725
Paid in surplus		492,869			492,869		492,869
Unassigned surplus		728,201			616,365		720,837
Total policyholders' surplus		1,263,795			1,151,959		1,256,431
Total liabilities and policyholders' surplus	$	5,353,858			5,074,135		5,307,152

Selective Insurance Group, Inc.

Combined Insurance Company Subsidiaries

Statutory Statements Of Income

(unaudited)

	Quarter Ended March
($ in thousands)	2014					2013
UNDERWRITING
Net premiums written	$	476,750					450,124
Net premiums earned		456,495					420,940
Net losses paid		213,297					187,285
Change in reserve for losses		54,941					31,158
Net losses incurred		268,238		58.8	%		218,443		51.9	%
Net loss expenses paid		44,764					44,989
Change in reserve for loss expenses		7,544					6,484
Net loss expenses incurred		52,308		11.4	%		51,473		12.2	%
Net underwriting expenses incurred		153,790		32.2	%		148,340		32.9	%
Total deductions		474,336					418,256
Statutory underwriting (loss) / gain		(17,840	)				2,684
Net loss from premium balances charged off		(874	)				(734	)
Finance charges and other income		10,038					2,932
Total other income		9,164		-1.9	%		2,198		-0.5	%
Policyholders' dividends incurred		(1,238	)	0.3	%		(1,086	)	0.3	%
Total underwriting (loss) / gain		(9,914	)	100.8	%		3,796		96.8	%
INVESTMENT
Net investment income earned		35,495					33,330
Net realized gain		7,215					1,212
Total income before income tax		32,796					38,338
Federal income tax expense		5,845					15,935
Net income	$	26,951					22,403
Policyholders' Surplus
Surplus, beginning of period	$	1,256,431					1,050,107
Net income		26,951					22,403
Change in deferred taxes		(1,282	)				254
Change in unrealized gains		(1,312	)				9,436
Dividends to stockholders		(14,376	)				(12,120	)
Paid in surplus		-					57,125
Change in non-admitted assets		(2,900	)				16,719
Change in Overfunded Contra Asset		(1,547	)				(8,723	)
Qual Pen Transitional Liability		1,816					(35,725	)
Excess Plan Transitional Liability		8					(595	)
PRL Plan Transitional Liability		6					(1,218	)
Change in minimum pension liability		-					54,755
Surplus adjustments		-					(459	)
Net change in surplus for period		7,364					101,852
Surplus, end of period	$	1,263,795					1,151,959
Statutory underwriting (loss) / gain	$	(9,914	)				3,796
Adjustments under GAAP:
Deferred policy acquisition costs		4,697					2,962
Pension costs		(98	)				5,925
Other, net		300					(522	)
GAAP underwriting (loss) / gain	$	(5,015	)				12,161

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

Selective Insurance Group, Inc. and Consolidated Subsidiaries

Alternative Investments

as of March 31, 2014

(unaudited)

Fund	Inception Year	Original Commitment		Remaining Commitment		Current Market Value		YTD Income			DPI(1) Ratio		TVPI(2) Ratio
Real Estate
Silverpeak RE II	2005		20,000,000		2,231,312		7,892,834		789,773			0.66		1.04
Silverpeak RE III	2008		15,000,000		7,946,585		2,834,766		48,647			0.04		0.44
Total - Real Estate			35,000,000		10,177,897		10,727,600		838,420			0.51		0.89
Mezzanine Financing
Neovara Euro Mezz	2004		9,000,000		-		579,578		-			0.98		1.02
GS Mezz V	2007		25,000,000		10,223,976		8,954,028		171,717			0.80		1.28
New Canaan V	2012		7,000,000		2,737,318		3,513,687		-			0.21		1.03
Centerfield Capital	2012		3,000,000		2,077,118		784,151		-			0.08		0.93
Total - Mezz. Financing			44,000,000		15,038,413		13,831,444		171,717			0.78		1.15
Distressed Debt
Varde VIII	2006		10,000,000		-		3,733,284		161,223			0.94		1.31
Distressed Managers III	2007		15,000,000		2,971,201		7,149,079		438,134			0.68		1.21
Total - Distressed Debt			25,000,000		2,971,201		10,882,363		599,357			0.79		1.25
Private Equity
Prospector	1997		5,000,000		-		410,408		-			2.79		2.88
Trilantic Capital Partners III	2004		10,000,000		1,407,833		2,819,472		379,308			1.61		1.91
NB Co-Invest	2006		15,000,000		1,509,887		6,546,602		(25,892	)		0.90		1.35
Trilantic Capital Partners IV	2007		11,098,351		1,315,089		10,316,670		1,002,260			0.83		1.78
Trilantic Capital Partners V	2012		7,000,000		5,726,392		1,023,974		(15,419	)		-		0.81
Total - Private Equity			48,098,351		9,959,201		21,117,126		1,340,256			1.25		1.76
Private Equity, Secondary Market
NB SOF	2005		12,000,000		899,494		3,483,546		104,523			1.02		1.33
Vintage IV	2007		20,000,000		4,118,809		12,188,457		196,584			0.70		1.32
NB SOF II	2008		12,000,000		1,460,427		7,922,678		365,615			0.80		1.46
Total - Pvt. Eq. Sec. Mkt.			44,000,000		6,478,731		23,594,681		666,723			0.81		1.36
Energy/Power Generation
ArcLight I	2002		15,000,000		-		93,901		(36,913	)		1.80		1.81
ArcLight II	2003		15,000,000		2,295,492		1,083,383		74,826			1.38		1.44
ArcLight III	2006		15,000,000		2,037,794		5,926,740		173,388			1.00		1.37
Quintana Energy	2006		10,000,000		362,821		8,122,471		854,933			0.55		1.39
ArcLight IV	2007		10,000,000		2,287,578		2,751,298		534,805			1.05		1.32
Total - Energy/Power Generation			65,000,000		6,983,685		17,977,793		1,601,039			1.23		1.49
Venture Capital
Venture V	2001		9,600,000		350,000		7,019,233		-			0.54		1.30
Total - Venture Capital			9,600,000		350,000		7,019,233		-			0.54		1.30
TOTAL - ALTERNATIVE INVESTMENTS		$	270,698,351		51,959,127		105,150,241		5,217,511			0.95		1.37
(1) Distributed to paid in ratio
(2) Total value to paid in ratio
Exhibit may not foot due to rounding

Selective Insurance Group, Inc. and Consolidated Subsidiaries

Credit Quality of Available-for-Sale Fixed Income Securities

March 31, 2014

(Unaudited)

($ in millions)	Fair Value		Unrealized Gain (Loss)			Average Credit Quality
AFS Fixed Income Portfolio:
U.S. government obligations	$	171.1		9.6		AA+
Foreign government obligations		32.4		0.9		AA-
State and municipal obligations		979.2		15.9		AA+
Corporate securities		1,815.7		38.5		A
Asset-backed securities (“ABS”)		131.9		0.5		AAA
Mortgage-backed securities (“MBS”)		685.6		1.9		AA+
Total AFS fixed income portfolio	$	3,815.9		67.3		AA-
State and Municipal Obligations:
General obligations	$	478.6		7.2		AA+
Special revenue obligations		500.6		8.7		AA
Total state and municipal obligations	$	979.2		15.9		AA+
Corporate Securities:
Financial	$	568.5		13.2		A
Industrials		135.9		4.4		A-
Utilities		155.1		1.7		A-
Consumer discretionary		213.9		5.1		A-
Consumer staples		176.4		3.7		A
Healthcare		174.7		4.2		A
Materials		104.1		2.3		A-
Energy		104.2		1.7		A-
Information technology		125.5		0.7		A+
Telecommunications services		50.0		1.1		BBB+
Other		7.4		0.4		AA+
Total corporate securities	$	1,815.7		38.5		A
ABS:
ABS	$	131.5		0.5		AAA
Sub-prime ABS1		0.4		—		D
Total ABS	$	131.9		0.5		AAA
MBS:
Government guaranteed agency commercial MBS (“CMBS”)	$	24.5		0.5		AA+
Other agency CMBS		10.6		(0.2	)	AA+
Non-agency CMBS		139.7		2.1		AA+
Government guaranteed agency residential MBS (“RMBS”)		48.3		1.3		AA+
Other agency RMBS		417.6		(2.3	)	AA+
Non-agency RMBS		40.5		0.4		A-
Alternative-A (“Alt-A”) RMBS		4.4		0.1		A
Total MBS	$	685.6		1.9		AA+

1Subprime ABS consists of one security whose issuer is currently expected by rating agencies to default on its obligations.  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 Fixed Income Securities

March 31, 2014

(Unaudited)

($ in millions)	Fair Value		Carry Value		Unrecognized Holding Gain		Unrealized Gain (Loss) in Accumulated  Other Comprehensive Income			Total Unrealized/ Unrecognized Gain		Average Credit Quality
HTM Fixed Income Portfolio:
Foreign government obligations	$	5.6		5.4		0.2		0.1			0.3	AA+
State and municipal obligations		364.3		347.9		16.4		3.4			19.8	AA
Corporate securities		24.5		21.6		2.9		(0.3	)		2.6	A+
ABS		3.3		2.7		0.6		(0.6	)		—	AA+
MBS		5.8		4.5		1.3		(0.8	)		0.5	AAA
Total HTM fixed income portfolio	$	403.5		382.1		21.4		1.8			23.2	AA
State and Municipal Obligations:
General obligations	$	117.5		112.6		4.9		1.7			6.6	AA
Special revenue obligations		246.8		235.3		11.5		1.7			13.2	AA
Total state and municipal obligations	$	364.3		347.9		16.4		3.4			19.8	AA
Corporate Securities:
Financial	$	2.3		1.9		0.4		(0.1	)		0.3	A-
Industrials		7.1		6.0		1.1		(0.2	)		0.9	A+
Utilities		13.6		12.2		1.4		—			1.4	A+
Consumer discretionary		1.5		1.5		—		—			—	AA
Total corporate securities	$	24.5		21.6		2.9		(0.3	)		2.6	A+
ABS:
ABS	$	0.8		0.8		—		—			—	AA
Alt-A ABS		2.5		1.9		0.6		(0.6	)		—	AAA
Total ABS	$	3.3		2.7		0.6		(0.6	)		—	AA+
MBS:
Non-agency CMBS	$	5.8		4.5		1.3		(0.8	)		0.5	AAA
Total MBS	$	5.8		4.5		1.3		(0.8	)		0.5	AAA