Selective Insurance Group Sees GAAP Combined Ratio Improved to 95.1%

April 26, 2005

New Jersey-based Selective Insurance Group Inc. reported its financial results for the first quarter ended March 31, 2005.

Compared with the first quarter of 2004:

– Net income increased 31%, to $36.1 million, or $1.15 per diluted share;

– Operating income increased 36%, to $32.6 million, or $1.04 per diluted share;

– The GAAP combined ratio improved 2.8 points to 95.1%;

– The statutory combined ratio improved 2.2 points to 93.5%;

— The commercial lines statutory combined ratio improved 0.5 points to 92.9%;

— The personal lines statutory combined ratio improved 9.8 points
(including flood operations) to 96.3%;

– Net premiums written (NPW) increased 6% to $396.8 million;

— Commercial lines NPW increased 9% to $348.2 million;

— Personal lines NPW declined 12% to $48.6 million; and

– Total revenue was up 9% to $408.3 million.

Weather-related catastrophe losses accounted for only 0.1 point of the
GAAP and statutory combined ratios for the first quarter 2005, or $0.3
million, after-tax, compared to 1.5 points, or $3.0 million, after-tax, for
the first quarter of 2004.

Gregory Murphy, Selective Insurance Group chairman, president and CEO, stated, “This was another solid quarter for Selective, driven by the continued, strong performance of our core commercial lines operation, which represents 84% of total premium.

“For the quarter, commercial lines net premiums written grew 9%, including $62.5 million of new business; the statutory combined ratio dropped below 93%; renewal prices increased 6%, including exposure; and account retention remained stable. As a top regional company with an “A+” rating from A.M. Best, we believe we are favorably positioned to meet accelerating commercial lines market competition. Agents and customers place tremendous value on our field presence, ‘high-tech’ business approach, and value-added products and services that enable us to retain the best accounts while continuing to grow at a more moderate rate.

“In personal lines, our efforts to build a smaller but more profitable
business yielded a nearly 10-point drop in the statutory combined ratio for the quarter, including the favorable impact of our flood business. Stiff competition from new market entrants in New Jersey adversely affected the growth of our personal automobile business. We continue to adjust our competitive position and remain focused on maintaining healthy margins in the pursuit of top line growth.”

The company’s Diversified Insurance Services turned in a strong quarter, contributing $0.06 in earnings per diluted share. Revenue at these fee-based businesses was up 15%, to $27.8 million, for the quarter, compared to first quarter 2004. Return on revenue was 7.4%, compared to 6.1% in the first quarter of 2004.

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