Monday, November 2, 2009

Selective Insurance Group Reports Third Quarter 2009 Earnings

selective insurance

Selective Insurance
Group, Inc. (Nasdaq: SIGI), today reported its financial results for the third
quarter ended September 30, 2009. Net income for the quarter was $0.24 per
diluted share and operating income(i) for the quarter was $0.44 per diluted
share. Book value was up 4% for the quarter to $18.58 per share. Net
investment income, after tax, was $28.4 million, compared to $28.5 million a
year ago.

"I am pleased with our third quarter results given the difficult economy and
competitive marketplace. The recovery in the financial markets has led to a
gain in our alternative investments this quarter," said Selective Chairman,
President and CEO Gregory E. Murphy. "We are seeing improvement in our
personal lines and continue to drive Commercial Lines renewal pure price
increases, which were up 1.5% for the quarter; a strong increase over the
second quarter result of 0.6%. Our statutory combined ratio remains strong at
99.8% due in part to very profitable property results coupled with favorable
casualty loss development of approximately $8 million."

Selective's third quarter 2009 highlights, compared to third quarter 2008:
-- Net income was up 45% to $13.0 million, or $0.24 per diluted share,
compared to $9.0 million, or $0.17 per diluted share;
-- Net realized losses on investments were $3.2 million, after tax, or
$0.06 per diluted share, including non-cash other-than-temporary
impairments of $2.8 million, after tax, compared to a loss of $14.7
million, or $0.28 per diluted share, including non-cash
other-than-temporary impairments of $22.7 million, after tax;
-- Operating income increased(i) 4% to $23.8 million, or $0.44 per
share, compared to $22.9 million, or $0.44 per diluted share;
-- Combined ratio: GAAP: 100.0% vs. 100.3%; Statutory: 99.8% vs. 97.6%;
-- Total net premiums written (NPW) were down 6% to $376.7 million;
-- Commercial lines NPW were down 9% to $314.4 million;
-- Personal lines NPW were up 11% to $62.3 million;
-- Catastrophe losses were $1.3 million, after tax, vs. $8.3 million,
tax; and

-- Net investment income, after tax, decreased 1% to $28.4 million.

Selective also announced that it has entered into an agreement to sell
Selective HR Solutions, Inc. which comprises the HR Outsourcing segment, for
approximately $13 million to AlphaStaff Group, Inc., a Florida-based human
resources outsourcing company. The transaction is subject to Florida
regulatory approval and is expected to close on or around January 1, 2010. In
connection with the discontinued operation, a goodwill impairment charge of
$7.9 million, after tax, was recorded.

"While we strongly believe HR outsourcing services are a natural complement to
our distribution force and business model, we felt it made sense at this time
to find a quality partner who could focus on those efforts, while we devote
all our resources to profitable organic growth in our 22-state footprint of
insurance operations," said Murphy. "We built a strong foundation for
Selective HR, and Selective will continue to support AlphaStaff's business
growth through our agency plant as part of the agreement. Our mutual
commitment to the independent insurance agency and their growth strategy fit
well together."

Selective's alternative investment portfolio experienced a gain during the
third quarter of 2009 of approximately $1.7 million, after tax, compared to a
gain of $2.1 million, after tax, during the same period in 2008. Results for
these investments are generally received on a one quarter lag.

For the nine months ended September 30, 2009, compared to the first nine
months of 2008:
-- Net income was $15.8 million, or $0.30 per diluted share, compared to
net income of $58.1 million, or $1.09 per diluted share;
-- Net realized losses on investments were $26.2 million, after tax, or
$0.49 per diluted share, including non-cash other-than-temporary
impairments of $28.5 million, after tax, compared to a loss of $12.4
million, or $0.23 per diluted share, including non-cash
other-than-temporary impairments of $29.0 million, after tax;
-- Operating income was $49.2 million, or $0.92 per diluted share
to operating income of $68.7 million, or $1.29 per diluted share;
-- GAAP combined ratio: 99.7% vs. 99.9%; Statutory combined ratio: 99.6%
vs. 98.2%;
-- Total NPW were down 6% to $1.1 billion for the nine months ended
September 30, 2009;
-- Commercial lines NPW were down 7% to $946.5 million;
-- Personal lines NPW were up 6% to $171.3 million; and

-- Catastrophe losses were $5.5 million, after-tax, compared to $20.1
million, after-tax.

Balance Sheet and Guidance

At September 30, 2009, Selective's assets reached $5.2 billion, including $3.8
billion in the company's investment portfolio.

The company's Board declared a $0.13 per share quarterly cash dividend on
Selective's common stock, payable December 1, 2009 to stockholders of record
as of November 13, 2009.

Guidance for the year is being positively revised based on better than
expected results year to date to a GAAP and statutory combined ratio of
approximately 101%. This includes assumptions of catastrophe losses of
approximately one point for the fourth quarter and no reserve development,
favorable or unfavorable.

The supplemental investor packet, including financial information that is not
part of this press release, is available on the Investors' page of Selective's
public website at Selective's quarterly analyst conference
call will be simulcast at 8:30 a.m. ET, on October 29, 2009 at The webcast will be available for rebroadcast until the
close of business on November 30, 2009.

About Selective Insurance Group, Inc.

Selective Insurance Group, Inc. is a holding company for seven property and
casualty insurance companies rated "A+" (Superior) by A.M. Best. Through
independent agents, the insurance companies offer primary and alternative
market insurance for commercial and personal risks, and flood insurance
underwritten by the National Flood Insurance Program. Other subsidiaries of
the company provide human resource administration outsourcing. Selective
maintains a website at

Forward-Looking Statements

In this press release, Selective and its management discuss and make
statements based on currently available information regarding their
intentions, beliefs, current expectations, and projections regarding
Selective's future operations and performance.

Certain statements in this report, including information incorporated by
reference, are "forward-looking statements" as that term is defined in the
Private Securities Litigation Reform Act of 1995 ("PSLRA"). The PSLRA
provides a safe harbor under the Securities Act of 1933 and the Securities
Exchange Act of 1934 for forward-looking statements. These statements relate
to our intentions, beliefs, projections, estimations or forecasts of future
events or our future financial performance and involve known and unknown
risks, uncertainties and other factors that may cause our or our industry's
actual results, levels of activity, or performance to be materially different
from those expressed or implied by the forward-looking statements. In some
cases, you can identify forward-looking statements by use of words such as
"may," "will," "could," "would," "should," "expect," "plan," "anticipate,"
"target," "project," "intend," "believe," "estimate," "predict," "potential,"
"pro forma," "seek," "likely" or "continue" or other comparable terminology.
These statements are only predictions, and we can give no assurance that such
expectations will prove to be correct. We undertake no obligation, other than
as may be required under the federal securities laws, to publicly update or
revise any forward-looking statements, whether as a result of new information,
future events or otherwise.

Factors that could cause our actual results to differ materially from those
projected, forecasted or estimated by us in forward-looking statements,
include, but are not limited to:
-- difficult conditions in global capital markets and the economy;
-- continued deterioration in the public debt and equity markets and
private investment marketplace that could lead to investment losses
fluctuations in interest rates;
-- ratings downgrades could affect investment values and therefore
statutory surplus;
-- the adequacy of our loss reserves and loss expense reserves;
-- the frequency and severity of natural and man-made catastrophic
including, but not limited to, hurricanes, tornadoes, windstorms,
earthquakes, hail, terrorism, explosions, severe winter weather,
and fires;
-- adverse market, governmental, regulatory, legal or judicial conditions
or actions;
-- the concentration of our business in the Eastern Region;
-- the cost and availability of reinsurance;
-- our ability to collect on reinsurance and the solvency of our
-- uncertainties related to insurance premium rate increases and business
-- changes in insurance regulations that impact our ability to write
cease writing insurance policies in one or more states, particularly
changes in New Jersey automobile insurance laws and regulations;
-- recent federal financial regulatory reform provisions that could pose
certain risks to our operations;
-- our ability to maintain favorable ratings from rating agencies,
including A.M. Best, Standard & Poor's, Moody's and Fitch;
-- our entry into new markets and businesses; and

-- other risks and uncertainties we identify in filings with the United
States Securities and Exchange Commission, including, but not limited
to, our Annual Report on Form 10-K and other periodic reports.

These risk factors may not be exhaustive. We operate in a continually
changing business environment, and new risk factors emerge from time-to-time.
We can neither predict such new risk factors nor can we assess the impact, if
any, of such new risk factors on our businesses or the extent to which any
factor or combination of factors may cause actual results to differ materially
from those expressed or implied in any forward-looking statements in this
report. In light of these risks, uncertainties and assumptions, the
forward-looking events discussed in this report might not occur.

Selective's SEC filings can be accessed through the Investors and Corporate
Governance sections of Selective's website,, or through the
SEC's EDGAR Database at (Selective EDGAR CIK No. 0000230557).

(i) Operating income differs from net income by the exclusion of realized
gains or losses on investments and the results of discontinued operations. It
is used as an important financial measure by management, analysts and
investors, because the realization of investment gains and losses on sales in
any given period is largely discretionary as to timing. In addition, these
investment gains and losses, as well as other-than-temporary investment
impairments that are charged to earnings and the results of discontinued
operations, could distort the analysis of trends. Operating income is not
intended as a substitute for net income prepared in accordance with accounting
principles generally accepted in the United States of America (GAAP). A
reconciliation of operating income to net income is provided in the GAAP
Highlights and Reconciliation of Non-GAAP Measures to Comparable GAAP
Measures. Statutory data is prepared in accordance with statutory accounting
rules as defined by the National Association of Insurance Commissioners
Accounting Practices and Procedures Manual and, therefore, is not reconciled
to GAAP.