Selective Group Notes Q1 Earnings

New Jersey-based Selective Insurance Group, Inc. reported net income of $8.0 million, or $0.29 per diluted share, for the first quarter ended March 31, 2003, compared with $10.3 million, or $0.39 per diluted share for the same period last year.

Operating income from continuing operations was $5.5 million, or $0.20 per diluted share for the period, compared with $10.2 million, or $0.39 per diluted share in the first quarter of 2002. Net and operating income were affected by catastrophe losses stemming from some of the worst winter storms to hit the East Coast in a decade.

Catastrophe losses for the first quarter of 2003, on an after-tax basis, were approximately $7.7 million, or $0.28 per diluted share, compared with $1.1 million or $0.04 per diluted share in the first quarter of 2002. The first quarter 2003 statutory combined ratio was 104.4 percent, compared with 102.7 percent one year ago. Included in the first quarter 2003 ratio is 4.4 points of catastrophe losses, compared with 0.7 points for the same period last year.

On April 29, 2003, the A.M. Best rating agency affirmed Selective’s financial strength rating of “A+” (Superior) for the 42nd year. A.M. Best stated: “The ratings reflect Selective’s solid capitalization, quality management team, well controlled execution capabilities, stable balance sheet and strong regional market presence … assisted by the leveraging of its agency relationships.” The ratings also recognize the company’s “disciplined underwriting culture, conservative investment philosophy and prudent capital management, which have contributed to consistent operating profitability.”

According to Selective Insurance Group, Inc., chairman, president and CEO Gregory Murphy, “We are honored to rank among the very best in our industry, as only about 10 percent of property and casualty companies currently hold an “A+” (Superior) or higher rating from A.M. Best. The rating agency’s favorable comments reflect our significant commitment to creating profitable growth and long-term shareholder value.

“Concurrently, our progress during the quarter on pricing, retention and other strategic initiatives, continues to favorably affect our outlook. Although property results were impacted by extreme weather in January and February, we continue to expect solid premium growth in 2003, building off our strong 2002 performance. The statutory combined ratios for our major commercial casualty lines continued to improve, with renewal price increases for all commercial lines continuing their upward positive trend – reaching 15 percent. There is still pricing power in commercial lines, which accounts for over 83 percent of our total premium volume, as this was the twelfth straight quarter of double-digit price increases. Commercial lines net premiums written advanced 16 percent for the quarter and pushed our overall premium growth to 15 percent, while retention at point of renewal for commercial lines edged higher to 86 percent.

“The ongoing progress in our core commercial lines business is driven, in part, by our ‘high tech-high touch’ approach that makes it easy for agents and customers to do business with us. In less than two years, our independent agents have delivered premiums of more than $27 million from their small-to- mid sized commercial accounts to Selective’s underwriting Service Center – at a policy retention rate of about 92 percent. A portion of this business comes directly from our One & Done small business processing system – enabling agents to seamlessly process and service their accounts with Selective – and freeing them up to grow their agencies and increase the amount of profitable business they place with us.

“We are encouraged by our improving personal lines underwriting performance, reflecting significant price increases in all of our operating territories and tightened underwriting. For the quarter, our personal automobile statutory combined ratio narrowed to 104.2 percent, from 111.4 percent for the same period last year. In New Jersey, our personal automobile ratio was 102.2 percent for the quarter, down over six points from this period last year, while average premium per vehicle continues to move higher due to a series of rate increases and tiering modifications. Our overall personal lines statutory combined ratio dropped to 105.3 percent for the quarter, including 3.1 points of catastrophe losses, down from a 109.8 percent last year that included 1.1 points of catastrophe losses.”