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SELECTIVE INSURANCE GROUP INC - Quarter Report: 2022 March (Form 10-Q)

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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, DC 20549
 
FORM 10-Q
(Mark One)
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
 
For the quarterly period ended: March 31, 2022
or 

TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
 
For the transition period from_____________________________to_____________________________
 
Commission File Number: 001-33067
SELECTIVE INSURANCE GROUP, INC.
(Exact Name of Registrant as Specified in Its Charter)

New Jersey22-2168890
(State or Other Jurisdiction of Incorporation or Organization)(I.R.S. Employer Identification No.)

40 Wantage Avenue
Branchville, New Jersey 07890
(Address of Principal Executive Offices) (Zip Code)

973948-3000
(Registrant’s Telephone Number, Including Area Code)
(Former Name, Former Address and Former Fiscal Year, if Changed Since Last Report)

Securities registered pursuant to Section 12(b) of the Act:
Title of each classTrading Symbol (s)Name of each exchange on which registered
Common Stock, par value $2 per shareSIGIThe Nasdaq Stock Market LLC
Depositary Shares, each representing a 1/1,000th interest in a share of 4.60% Non-Cumulative Preferred Stock, Series B, without par valueSIGIPThe Nasdaq Stock Market LLC

Indicate by check mark whether the registrant: (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes            No

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes   No

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.
Large accelerated filer
Accelerated filer
Non-accelerated filer
Smaller reporting company
Emerging growth company

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act.
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).                                                                                           
Yes No
As of April 30, 2022, there were 60,353,399 shares of common stock, par value $2.00 per share, outstanding. 


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SELECTIVE INSURANCE GROUP, INC.
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PART I. FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS.

SELECTIVE INSURANCE GROUP, INC.
CONSOLIDATED BALANCE SHEETS
Unaudited
($ in thousands, except share amounts)March 31, 2022December 31,
2021
ASSETS  
Investments:  
Fixed income securities, held-to-maturity – at carrying value (fair value: $32,625 – 2022; $29,460 – 2021)
$33,085 28,850 
Less: allowance for credit losses(50)(65)
Fixed income securities, held-to-maturity, net of allowance for credit losses33,035 28,785 
Fixed income securities, available-for-sale – at fair value
(allowance for credit losses: $37,599 – 2022 and $9,724 – 2021; amortized cost: $6,717,907 – 2022 and $6,490,753 – 2021)
6,598,822 6,709,976 
Commercial mortgage loans – at carrying value (fair value: $113,106 – 2022 and $97,598 – 2021)
115,893 95,795 
Less: allowance for credit losses — 
Commercial mortgage loans, net of allowance for credit losses115,893 95,795 
Equity securities – at fair value (cost:  $320,040 – 2022; $308,840 – 2021)
344,583 335,537 
Short-term investments256,712 447,863 
Other investments425,666 409,032 
Total investments (Note 4 and 5)$7,774,711 8,026,988 
Cash410 455 
Restricted cash17,474 44,608 
Accrued investment income48,427 48,247 
Premiums receivable1,025,833 958,787 
Less: allowance for credit losses (Note 6)(14,300)(13,600)
Premiums receivable, net of allowance for credit losses1,011,533 945,187 
Reinsurance recoverable578,959 601,668 
Less: allowance for credit losses (Note 7)(1,600)(1,600)
Reinsurance recoverable, net of allowance for credit losses577,359 600,068 
Prepaid reinsurance premiums174,951 183,007 
Current federal income tax 772 
Deferred federal income tax55,274 — 
Property and equipment – at cost, net of accumulated depreciation and amortization of:
$259,522 – 2022; $253,427 – 2021
83,180 82,053 
Deferred policy acquisition costs341,689 326,915 
Goodwill7,849 7,849 
Other assets217,690 195,240 
Total assets$10,310,547 10,461,389 
LIABILITIES AND STOCKHOLDERS’ EQUITY  
Liabilities:  
Reserve for loss and loss expense (Note 8)$4,644,391 4,580,903 
Unearned premiums1,872,666 1,803,207 
Long-term debt505,566 506,050 
Current federal income tax16,473 — 
Deferred federal income tax 13,413 
Accrued salaries and benefits90,584 121,057 
Other liabilities402,626 453,874 
Total liabilities$7,532,306 7,478,504 
Stockholders’ Equity:  
Preferred stock of $0 par value per share:
$200,000 200,000 
Authorized shares 5,000,000; Issued shares: 8,000 with $25,000 liquidation preference per share - 2022 and 2021
Common stock of $2 par value per share:
Authorized shares 360,000,000
Issued: 104,674,999 – 2022; 104,450,916 – 2021
209,336 208,902 
Additional paid-in capital472,790 464,347 
Retained earnings2,640,437 2,603,472 
Accumulated other comprehensive (loss) income (Note 11)(129,795)115,099 
Treasury stock – at cost (shares:  44,339,527 – 2022; 44,266,534 – 2021)
(614,527)(608,935)
Total stockholders’ equity$2,778,241 2,982,885 
Commitments and contingencies
Total liabilities and stockholders’ equity$10,310,547 10,461,389 

The accompanying notes are an integral part of these unaudited interim consolidated financial statements.
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SELECTIVE INSURANCE GROUP, INC.
UNAUDITED CONSOLIDATED STATEMENTS OF INCOME
Quarter ended March 31,
($ in thousands, except per share amounts)20222021
Revenues:  
Net premiums earned$812,283 724,960 
Net investment income earned72,602 69,716 
Net realized and unrealized investment (losses) gains(40,352)5,119 
Other income1,529 4,112 
Total revenues846,062 803,907 
Expenses:  
Loss and loss expense incurred494,236 413,401 
Amortization of deferred policy acquisition costs169,757 149,051 
Other insurance expenses93,990 88,910 
Interest expense7,168 7,359 
Corporate expenses11,021 9,554 
Total expenses776,172 668,275 
Income before federal income tax69,890 135,632 
Federal income tax expense:  
Current17,178 28,424 
Deferred(3,618)(2,062)
Total federal income tax expense13,560 26,362 
Net income$56,330 109,270 
Preferred stock dividends2,300 2,453 
Net income available to common stockholders$54,030 106,817 
Earnings per common share:  
Net income available to common stockholders - Basic$0.89 1.78 
Net income available to common stockholders - Diluted$0.89 1.77 
    
The accompanying notes are an integral part of these unaudited interim consolidated financial statements.


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SELECTIVE INSURANCE GROUP, INC.
UNAUDITED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME
Quarter ended March 31,
($ in thousands)20222021
Net income $56,330 109,270 
Other comprehensive loss ("OCI"), net of tax:  
Unrealized losses on investment securities:  
Unrealized holding losses arising during period (206,848)(81,613)
Unrealized losses on securities with credit loss recognized in earnings(68,430)(8,943)
  Amounts reclassified into net income:
Held-to-maturity ("HTM") securities1 (2)
Net realized losses on disposals and intent-to-sell available-for-sale ("AFS") securities12,633 477 
Credit loss expense17,421 3,948 
Total unrealized losses on investment securities(245,223)(86,133)
Defined benefit pension and post-retirement plans:  
Amounts reclassified into net income:
Net actuarial loss329 547 
  Total defined benefit pension and post-retirement plans
329 547 
Other comprehensive loss(244,894)(85,586)
Comprehensive (loss) income$(188,564)23,684 
 
The accompanying notes are an integral part of these unaudited interim consolidated financial statements.


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SELECTIVE INSURANCE GROUP, INC.
UNAUDITED CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY
Quarter ended March 31,
($ in thousands, except share and per share amounts)20222021
Preferred stock:
Beginning of period$200,000 200,000 
Issuance of preferred stock — 
End of period200,000 200,000 
Common stock:
Beginning of period208,902 208,066 
Dividend reinvestment plan11 13 
Stock purchase and compensation plans423 497 
End of period209,336 208,576 
Additional paid-in capital:
Beginning of period464,347 438,985 
Dividend reinvestment plan443 429 
Stock purchase and compensation plans8,000 6,996 
End of period472,790 446,410 
Retained earnings:
Beginning of period2,603,472 2,271,537 
Net income56,330 109,270 
Dividends to preferred stockholders(2,300)(2,453)
Dividends to common stockholders(17,065)(15,165)
End of period2,640,437 2,363,189 
Accumulated other comprehensive (loss) income ("AOCI"):
Beginning of period115,099 220,186 
Other comprehensive loss(244,894)(85,586)
End of period(129,795)134,600 
Treasury stock:
Beginning of period(608,935)(599,885)
Acquisition of treasury stock - share repurchase authorization(76)(3,404)
Acquisition of treasury stock - shares acquired related to employee share-based compensation plans(5,516)(5,441)
End of period(614,527)(608,730)
Total stockholders’ equity$2,778,241 2,744,045 
Dividends declared per preferred share$287.50 306.67 
Dividends declared per common share$0.28 0.25 
Preferred stock, shares outstanding:
Beginning of period 8,000 8,000 
Issuance of preferred stock — 
End of period8,000 8,000 
Common stock, shares outstanding:
Beginning of period60,184,382 59,905,803 
Dividend reinvestment plan5,641 6,420 
Stock purchase and compensation plan218,442 248,459 
Acquisition of treasury stock - share repurchase authorization(1,000)(52,781)
Acquisition of treasury stock - shares acquired related to employee share-based compensation plans(71,993)(84,018)
End of period60,335,472 60,023,883 

The accompanying notes are an integral part of these unaudited interim consolidated financial statements.

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SELECTIVE INSURANCE GROUP, INC.
UNAUDITED CONSOLIDATED STATEMENTS OF CASH FLOWS
Quarter ended March 31,
($ in thousands)20222021
Operating Activities  
Net income$56,330 109,270 
Adjustments to reconcile net income to net cash provided by (used in) operating activities:  
Depreciation and amortization12,807 13,703 
Stock-based compensation expense7,031 6,493 
Undistributed gains of equity method investments(9,406)(13,905)
Distributions in excess of current year income of equity method investments11,626 2,309 
Net realized and unrealized losses (gains) 40,352 (5,119)
Loss on disposal of fixed assets2 
Changes in assets and liabilities:  
Increase in reserve for loss and loss expense, net of reinsurance recoverable86,197 106,468 
Increase in unearned premiums, net of prepaid reinsurance77,515 73,218 
Increase in net federal income taxes13,656 25,927 
Increase in premiums receivable(66,346)(59,182)
Increase in deferred policy acquisition costs(14,774)(14,074)
Increase in accrued investment income(185)(1,101)
Decrease in accrued salaries and benefits(30,473)(31,216)
Increase in other assets(10,789)(14,302)
Decrease in other liabilities(80,864)(68,236)
Net cash provided by operating activities92,679 130,256 
Investing Activities  
Purchase of fixed income securities, HTM(5,000)(9,000)
Purchase of fixed income securities, AFS(874,665)(671,909)
Purchase of commercial mortgage loans(20,399)(14,860)
Purchase of equity securities(13,952)(48,910)
Purchase of other investments(15,555)(18,589)
Purchase of short-term investments(910,191)(1,723,212)
Sale of fixed income securities, AFS425,234 212,891 
Proceeds from commercial mortgage loans301 99 
Sale of short-term investments1,101,725 1,795,239 
Redemption and maturities of fixed income securities, HTM756 1,461 
Redemption and maturities of fixed income securities, AFS216,024 319,469 
Sale of equity securities2,626 42,782 
Sale of other investments525 3,004 
Distributions from other investments4,342 5,162 
Purchase of property and equipment(7,677)(4,561)
Net cash used in investing activities(95,906)(110,934)
Financing Activities  
Dividends to preferred stockholders(2,300)(2,453)
Dividends to common stockholders(16,447)(14,569)
Acquisition of treasury stock(5,592)(8,845)
Net proceeds from stock purchase and compensation plans999 824 
Preferred stock issued, net of issuance costs (479)
Repayments of finance lease obligations(612)(115)
Net cash used in financing activities(23,952)(25,637)
Net decrease in cash and restricted cash(27,179)(6,315)
Cash and restricted cash, beginning of year45,063 15,231 
Cash and restricted cash, end of period$17,884 8,916 

The accompanying notes are an integral part of these unaudited interim consolidated financial statements.
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NOTES TO UNAUDITED INTERIM CONSOLIDATED FINANCIAL STATEMENTS

NOTE 1. Basis of Presentation
The words "Company,” “we,” “us,” or “our” refer to Selective Insurance Group, Inc. (the "Parent") and its subsidiaries, except as expressly indicated or the context requires otherwise. We have prepared our interim unaudited consolidated financial statements (“Financial Statements”) in conformity with (i) United States ("U.S.") generally accepted accounting principles (“GAAP”), and (ii) the rules and regulations of the U.S. Securities and Exchange Commission (“SEC”) regarding interim financial reporting. These require management to make estimates and assumptions that affect the reported financial statement balances, as well as the disclosure of contingent assets and liabilities. Actual results could differ from those estimates. All significant intercompany accounts and transactions are eliminated in consolidation.

Our Financial Statements reflect all adjustments that, in our opinion, are normal, recurring, and necessary for a fair presentation of our results of operations and financial condition. Our Financial Statements cover the first quarters ended March 31, 2022 (“First Quarter 2022”) and March 31, 2021 (“First Quarter 2021”). Our Financial Statements do not include all information and disclosures required by GAAP and the SEC for audited annual financial statements. Because results of operations for any interim period are not necessarily indicative of results for a full year, our Financial Statements should be read in conjunction with the consolidated financial statements contained in our Annual Report on Form 10-K for the year ended December 31, 2021 (“2021 Annual Report”) filed with the SEC.

NOTE 2. Adoption of Accounting Pronouncements 
There was no adoption of accounting pronouncements in First Quarter 2022.

Pronouncements to be effective in the future
In March 2020, the Financial Accounting Standards Board ("FASB") issued Accounting Standards Update ("ASU") 2020-04, Reference Rate Reform (Topic 848) - Facilitation of the Effects of Reference Rate Reform on Financial Reporting (“ASU 2020-04”). ASU 2020-04 provides optional expedients and exceptions to the guidance in GAAP on contract modifications and hedge accounting to ease the financial reporting burdens related to the expected market transition away from the London Interbank Offered Rate ("LIBOR") and other interbank offered rates to alternative reference rates. Companies can elect to adopt ASU 2020-04 as of the beginning of the interim period that includes March 2020, or any date thereafter through December 31, 2022. We are currently evaluating the impact of this guidance on our financial condition and results of operations.

NOTE 3. Statements of Cash Flows
Supplemental cash flow information was as follows:
 Quarter ended March 31,
($ in thousands)20222021
Cash paid (received) during the period for:  
Interest$8,523 8,722 
Federal income tax(800)— 
Cash paid for amounts included in the measurement of lease liabilities:
Operating cash flows from operating leases2,058 2,226 
Operating cash flows from financing leases11 
Financing cash flows from finance leases612 115 
Non-cash items:
Corporate actions related to fixed income securities, AFS1
1,244 26,085 
Assets acquired under finance lease arrangements38 183 
Assets acquired under operating lease arrangements5,760 16 
Non-cash purchase of property and equipment 
1Examples of corporate actions include like-kind exchanges, non-cash acquisitions, and stock splits.

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The following table provides a reconciliation of cash and restricted cash reported within the Consolidated Balance Sheets that equate to the amount reported in the Consolidated Statements of Cash Flows:

($ in thousands)March 31, 2022December 31, 2021
Cash$410 455 
Restricted cash17,474 44,608 
Total cash and restricted cash shown in the Consolidated Statements of Cash Flows$17,884 45,063 

Amounts included in restricted cash represent cash received from the National Flood Insurance Program ("NFIP"), which is restricted to pay flood claims under the Write Your Own program.

NOTE 4. Investments
(a) Information regarding our AFS securities as of March 31, 2022 and December 31, 2021 were as follows:

March 31, 2022
($ in thousands)Cost/
Amortized
Cost
Allowance for Credit LossesUnrealized
Gains
Unrealized
Losses
Fair
Value
AFS fixed income securities:
U.S. government and government agencies$131,986  490 (5,383)127,093 
Foreign government17,160 (150)145 (452)16,703 
Obligations of states and political subdivisions1,122,132 (1,991)15,329 (10,039)1,125,431 
Corporate securities2,445,468 (23,066)25,658 (60,320)2,387,740 
Collateralized loan obligations ("CLO") and other asset-backed securities ("ABS")1,444,224 (2,283)7,974 (32,701)1,417,214 
Residential mortgage-backed securities ("RMBS")
903,800 (10,029)6,779 (22,591)877,959 
Commercial mortgage-backed securities ("CMBS")653,137 (80)5,618 (11,993)646,682 
Total AFS fixed income securities$6,717,907 (37,599)61,993 (143,479)6,598,822 
 
December 31, 2021
($ in thousands)Cost/
Amortized
Cost
Allowance for Credit LossesUnrealized
Gains
Unrealized
Losses
Fair
Value
AFS fixed income securities:
U.S. government and government agencies$127,974 — 3,629 (1,145)130,458 
Foreign government15,420 (46)609 (123)15,860 
Obligations of states and political subdivisions1,121,422 (137)68,258 (235)1,189,308 
Corporate securities2,478,348 (6,682)106,890 (4,953)2,573,603 
CLO and other ABS1,343,687 (939)14,350 (6,284)1,350,814 
RMBS756,280 (1,909)24,813 (2,932)776,252 
CMBS647,622 (11)27,752 (1,682)673,681 
Total AFS fixed income securities
$6,490,753 (9,724)246,301 (17,354)6,709,976 

The following tables provide a roll forward of the allowance for credit losses on our AFS fixed income securities for the periods indicated:

Quarter ended March 31, 2022
($ in thousands)Beginning BalanceCurrent Provision for Securities without Prior AllowanceInitial Allowance for Purchased Credit Deteriorated Assets with Credit DeteriorationIncrease (Decrease) on Securities with Prior Allowance, excluding intent (or Requirement) to Sell SecuritiesReductions for Securities SoldReductions for Securities Identified as Intent (or Requirement) to Sell during the PeriodEnding Balance
Foreign government$46 103  1   150 
Obligations of states and political subdivisions137 1,732  132 (10) 1,991 
Corporate securities6,682 15,393  3,337 (1,247)(1,099)23,066 
CLO and other ABS939 1,288  59 (3) 2,283 
RMBS1,909  8,318 (63)(135) 10,029 
CMBS11 72  (3)  80 
Total AFS fixed income securities$9,724 18,588 8,318 3,463 (1,395)(1,099)37,599 

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Quarter ended March 31, 2021
($ in thousands)Beginning BalanceCurrent Provision for Securities without Prior AllowanceIncrease (Decrease) on Securities with Prior Allowance, excluding intent (or Requirement) to Sell SecuritiesReductions for Securities SoldReductions for Securities Identified as Intent (or Requirement) to Sell during the PeriodEnding Balance
Foreign government$56 (1)— — 56 
Obligations of states and political subdivisions186 11 — — 201 
Corporate securities2,782 4,058 (527)(147)— 6,166 
CLO and other ABS592 1,001 (106)(17)— 1,470 
RMBS561 356 (39)(14)— 864 
CMBS29 10 (15)— — 24 
Total AFS fixed income securities$3,969 5,667 (677)(178)— 8,781 

During First Quarter 2022 and First Quarter 2021, we did not have any write-offs or recoveries of our AFS fixed income securities, so these items are not included in the tables above.

For information on our methodology and significant inputs used to measure expected credit losses, our accounting policy for recognizing write-offs of uncollectible amounts, and our treatment of accrued interest, refer to Note 2. "Summary of Significant Accounting Policies" in Item 8. "Financial Statements and Supplementary Data." of our 2021 Annual Report. Accrued interest on AFS securities was $46.8 million as of March 31, 2022, and $46.3 million as of December 31, 2021. We did not record any material write-offs of accrued interest during 2022 and 2021.

(b) Quantitative information about unrealized losses on our AFS portfolio is provided below.

March 31, 2022Less than 12 months12 months or longerTotal
($ in thousands)Fair ValueUnrealized
Losses
Fair ValueUnrealized
Losses
Fair ValueUnrealized
Losses
AFS fixed income securities:    
U.S. government and government agencies$89,044 (4,410)5,252 (973)94,296 (5,383)
Foreign government5,394 (268)1,996 (184)7,390 (452)
Obligations of states and political subdivisions223,497 (9,846)2,834 (193)226,331 (10,039)
Corporate securities1,002,980 (59,605)6,823 (715)1,009,803 (60,320)
CLO and other ABS937,362 (28,658)101,722 (4,043)1,039,084 (32,701)
RMBS545,934 (21,444)13,731 (1,147)559,665 (22,591)
CMBS337,995 (9,807)23,123 (2,186)361,118 (11,993)
Total AFS fixed income securities$3,142,206 (134,038)155,481 (9,441)3,297,687 (143,479)

December 31, 2021Less than 12 months12 months or longerTotal
($ in thousands)Fair
Value
Unrealized
Losses
Fair ValueUnrealized
Losses
Fair ValueUnrealized
Losses
AFS fixed income securities:    
U.S. government and government agencies$34,857 (746)7,827 (399)42,684 (1,145)
Foreign government2,000 (84)1,061 (39)3,061 (123)
Obligations of states and political subdivisions25,837 (235)— — 25,837 (235)
Corporate securities300,549 (4,903)2,520 (50)303,069 (4,953)
CLO and other ABS663,976 (4,934)53,368 (1,350)717,344 (6,284)
RMBS236,010 (2,931)20 (1)236,030 (2,932)
CMBS112,899 (1,016)20,326 (666)133,225 (1,682)
Total AFS fixed income securities$1,376,128 (14,849)85,122 (2,505)1,461,250 (17,354)

We do not currently intend to sell any of the securities in the tables above, nor will we be required to sell any of these securities. The increase in gross unrealized losses at March 31, 2022 compared to December 31, 2021 was driven by an increase in benchmark U.S. Treasury rates and a widening of credit spreads. Considering these factors and our review of these securities under our credit loss policy as described in Note 2. "Summary of Significant Accounting Policies" in Item 8. "Financial Statements and Supplementary Data." of our 2021 Annual Report, we have concluded that no allowance for credit loss is required on these balances. This conclusion reflects our current judgment about the financial position and future prospects of the entity that issued the investment security and underlying collateral.

(c) Fixed income securities at March 31, 2022 by contractual maturity are shown below. Mortgage-backed securities are included in the maturity tables using the estimated average life of each security. Expected maturities may differ from
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contractual maturities because issuers may have the right to call or prepay obligations with or without call or prepayment penalties.

Listed below are the contractual maturities of fixed income securities at March 31, 2022:
 
AFSHTM
($ in thousands)Fair ValueCarrying ValueFair Value
Due in one year or less$396,074 6,727 6,899 
Due after one year through five years2,915,421 5,977 6,012 
Due after five years through 10 years2,425,811 20,331 19,714 
Due after 10 years861,516   
Total fixed income securities$6,598,822 33,035 32,625 

(d) The following table summarizes our other investment portfolio by strategy:

Other InvestmentsMarch 31, 2022December 31, 2021
($ in thousands)Carrying ValueRemaining Commitment
Maximum Exposure to Loss1
Carrying ValueRemaining Commitment
Maximum Exposure to Loss1
Alternative Investments  
   Private equity$281,352 124,761 406,113 273,070 99,734 372,804 
   Private credit60,476 92,279 152,755 63,138 92,674 155,812 
   Real assets26,159 20,914 47,073 23,524 22,579 46,103 
Total alternative investments367,987 237,954 605,941 359,732 214,987 574,719 
Other securities57,679  57,679 49,300 — 49,300 
Total other investments$425,666 237,954 663,620 409,032 214,987 624,019 
1In addition to the amounts in this table, previously recognized tax credits are subject to the risk of recapture. We do not consider the risk of recapture to be significant and therefore do not include in this table.

We are contractually committed to make additional investments up to the remaining commitments stated above. We did not provide any non-contractual financial support at any time during 2022 or 2021.

The following table shows gross summarized financial information for our other investments portfolio, including the portion we do not own. As the majority of these investments are carried under the equity method of accounting and report results to us on a one-quarter lag, the summarized financial statement information is for the three-month period ended, December 31:

Income Statement InformationQuarter ended March 31,
($ in millions)20222021
Net investment income$135.5 481.6 
Realized gains2,748.0 776.0 
Net change in unrealized appreciation5,178.2 4,630.8 
Net income$8,061.7 5,888.4 
Alternative investment income included in "Net investment income earned" on our Consolidated Statements of Income $19.1 20.2 

(e) We have pledged certain AFS fixed income securities as collateral related to our borrowing relationships with the Federal Home Loan Bank of Indianapolis ("FHLBI") and the Federal Home Loan Bank of New York ("FHLBNY"). In addition, certain securities were on deposit with various state and regulatory agencies at March 31, 2022 to comply with insurance laws. We retain all rights regarding all securities pledged as collateral.

The following table summarizes the market value of these securities at March 31, 2022:

($ in millions)FHLBI CollateralFHLBNY CollateralState and
Regulatory Deposits
Total
U.S. government and government agencies$  20.3 20.3 
Obligations of states and political subdivisions  3.8 3.8 
RMBS63.1 35.9  99.0 
CMBS5.8 12.8  18.6 
Total pledged as collateral$68.9 48.7 24.1 141.7 

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(f) We did not have exposure to any credit concentration risk of a single issuer greater than 10% of our stockholders' equity, other than certain U.S. government agencies, as of March 31, 2022, or December 31, 2021.
(g) The components of pre-tax net investment income earned were as follows:

 Quarter ended March 31,
($ in thousands)20222021
Fixed income securities$53,925 52,823 
Commercial mortgage loans ("CMLs")970 514 
Equity securities2,418 2,488 
Short-term investments101 85 
Other investments19,305 17,433 
Investment expenses(4,117)(3,627)
Net investment income earned$72,602 69,716 

(h) The following table summarizes net realized and unrealized gains and losses for the periods indicated:

Quarter ended March 31,
($ in thousands)20222021
Gross gains on sales$2,197 3,676 
Gross losses on sales(13,560)(4,471)
Net realized losses on disposals(11,363)(795)
Net unrealized (losses) gains on equity securities(2,154)11,280 
Net credit loss expense on fixed income securities, AFS(22,052)(4,997)
Net credit loss benefit (expense) on fixed income securities, HTM14 (7)
Losses on securities for which we have the intent to sell(4,797)(362)
Net realized and unrealized (losses) gains$(40,352)5,119 

Net realized and unrealized investment gains decreased $45.5 million in First Quarter 2022 compared to First Quarter 2021 primarily driven by (i) active trading of our fixed income securities in an effort to opportunistically increase yield given the rising interest rate environment, and (ii) higher credit loss expense on our AFS fixed income securities portfolio.

Net unrealized losses and gains recognized in income on equity securities, as reflected in the table above, included the following:

Quarter ended March 31,
($ in thousands)20222021
Unrealized (losses) gains recognized in income on equity securities:
On securities remaining in our portfolio at end of period$(2,220)10,097 
On securities sold in period66 1,183 
Total unrealized (losses) gains recognized in income on equity securities$(2,154)11,280 

NOTE 5. Fair Value Measurements
The financial assets in our investment portfolio are primarily measured at fair value as disclosed on the Consolidated Balance Sheets. The following table presents the carrying amounts and estimated fair values of our financial liabilities as of March 31, 2022, and December 31, 2021:

March 31, 2022December 31, 2021
($ in thousands)Carrying AmountFair ValueCarrying AmountFair Value
Financial Liabilities
Long-term debt:
7.25% Senior Notes$49,919 59,828 49,917 63,719 
6.70% Senior Notes99,525 116,980 99,520 127,574 
5.375% Senior Notes294,353 332,644 294,330 395,652 
3.03% borrowings from FHLBI60,000 60,747 60,000 64,126 
Subtotal long-term debt503,797 570,199 503,767 651,071 
Unamortized debt issuance costs(3,106)(3,167)
Finance lease obligations4,875 5,450 
Total long-term debt$505,566 506,050 
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For discussion regarding the fair value techniques of our financial instruments, refer to Note 2. "Summary of Significant Accounting Policies" in Item 8. "Financial Statements and Supplementary Data." of our 2021 Annual Report.

The following tables provide quantitative disclosures of our financial assets that were measured and recorded at fair value at March 31, 2022, and December 31, 2021:

March 31, 2022 Fair Value Measurements Using
($ in thousands)Assets
 Measured at
 Fair Value
Quoted Prices in
Active Markets for
Identical Assets/
Liabilities (Level 1)
Significant Other
 Observable
Inputs
 (Level 2)
Significant Unobservable
 Inputs
 (Level 3)
Description    
Measured on a recurring basis:    
AFS fixed income securities:
U.S. government and government agencies$127,093 31,671 95,422  
Foreign government16,703  16,703  
Obligations of states and political subdivisions1,125,431  1,118,186 7,245 
Corporate securities2,387,740  2,264,938 122,802 
CLO and other ABS1,417,214  1,286,296 130,918 
RMBS877,959  877,959  
CMBS646,682  646,243 439 
Total AFS fixed income securities6,598,822 31,671 6,305,747 261,404 
Equity securities:
Common stock1
342,572 246,178   
Preferred stock2,011 2,011   
Total equity securities344,583 248,189   
Short-term investments256,712 250,938 5,774  
Total assets measured at fair value$7,200,117 530,798 6,311,521 261,404 

December 31, 2021 Fair Value Measurements Using
($ in thousands)Assets
 Measured at
 Fair Value
Quoted Prices in
 Active Markets for
Identical Assets/Liabilities
(Level 1)
Significant
Other Observable Inputs
(Level 2)
Significant Unobservable
Inputs
 (Level 3)
Description    
Measured on a recurring basis:    
AFS fixed income securities:
U.S. government and government agencies$130,458 60,615 69,843 — 
Foreign government15,860 — 15,860 — 
Obligations of states and political subdivisions1,189,308 — 1,181,563 7,745 
Corporate securities2,573,603 — 2,459,476 114,127 
CLO and other ABS1,350,814 — 1,225,905 124,909 
RMBS776,252 — 776,007 245 
CMBS673,681 — 669,425 4,256 
Total AFS fixed income securities6,709,976 60,615 6,398,079 251,282 
Equity securities:
Common stock1
333,449 249,846 — — 
Preferred stock2,088 2,088 — — 
Total equity securities335,537 251,934 — — 
Short-term investments447,863 442,723 5,140 — 
Total assets measured at fair value$7,493,376 755,272 6,403,219 251,282 
1Investments amounting to $96.4 million at March 31, 2022, and $83.6 million at December 31, 2021, were measured at fair value using the net asset value per share (or its practical expedient) and have not been classified in the fair value hierarchy. These investments are not redeemable and the timing of liquidations of the underlying assets is unknown at each reporting period. The fair value amounts in this table are intended to permit reconciliation of the fair value hierarchy to total assets measured at fair value.

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The following tables provide a summary of the changes in the fair value of securities measured using Level 3 inputs and related quantitative information for the periods indicated:

Quarter ended March 31, 2022
($ in thousands)Obligations of States and Political SubdivisionsCorporate SecuritiesCLO and Other ABSRMBSCMBSTotal
Fair value, December 31, 2021
$7,745 114,127 124,909 245 4,256 251,282 
Total net (losses) gains for the period included in:
OCI(343)(6,529)(4,335)(17)(415)(11,639)
   Net realized and unrealized (losses) gains(157)(1,809)(472) (7)(2,445)
Net investment income earned 4 15  47 66 
Purchases 2,964 27,033   29,997 
Sales      
Issuances      
Settlements (69)(136)(11)(11)(227)
Transfers into Level 3 17,055    17,055 
Transfers out of Level 3 (2,941)(16,096)(217)(3,431)(22,685)
Fair value, March 31, 2022
$7,245 122,802 130,918  439 261,404 
Change in unrealized losses for the period included in earnings for assets held at period end(157)(1,809)(472) (7)(2,445)
Change in unrealized gains for the period included in OCI for assets held at period end(343)(6,529)(4,335)(17)(415)(11,639)

Quarter ended March 31, 2021
($ in thousands)Obligation of state and Political SubdivisionsCorporate SecuritiesCLO and Other ABSTotal
Fair value, December 31, 2020
$2,894 70,700 56,375 129,969 
Total net (losses) gains for the period included in:
OCI(99)(2,388)(1,116)(3,603)
Net realized and unrealized (losses) gains— (91)(143)(234)
Net investment income earned— 
Purchases— 21,100 10,672 31,772 
Sales— — — — 
Issuances— — — — 
Settlements— — (412)(412)
Transfers into Level 35,101 — — 5,101 
Transfers out of Level 3— — (490)(490)
Fair value, March 31, 2021
$7,896 89,322 64,889 162,107 
Change in unrealized (losses) gains for the period included in earnings for assets held at period end— (91)(143)(234)
Change in unrealized gains (losses) for the period included in OCI for assets held at period end(99)(2,388)(1,116)(3,603)

The following tables present quantitative information about the significant unobservable inputs utilized in the fair value measurements of Level 3 assets at March 31, 2022 and December 31, 2021:

March 31, 2022
($ in thousands)Assets Measured at Fair ValueValuation TechniquesUnobservable InputsRange
(Weighted Average)
Internal valuations:
Corporate securities$56,510 Discounted Cash FlowIlliquidity Spread
(4.4)% - 5.3% (1.1)%
CLO and other ABS46,816 Discounted Cash FlowIlliquidity Spread
0.01% - 8.0% (1.9)%
Total internal valuations103,326 
Other1
158,078 
Total Level 3 securities$261,404 

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December 31, 2021
($ in thousands)Assets Measured at Fair ValueValuation TechniquesUnobservable InputsRange
(Weighted Average)
Internal valuations:
Corporate securities$54,135 Discounted Cash FlowIlliquidity Spread
0.3% - 3.0% (1.2)%
CLO and other ABS34,903 Discounted Cash FlowIlliquidity Spread
0.7% - 8.0% (2.1)%
Total internal valuations89,038 
Other1
162,244 
Total Level 3 securities$251,282 
1Other is comprised of broker quotes or other third-party pricing for which there is a lack of transparency as to the inputs used to develop the valuations. The quantitative details of these unobservable inputs is neither provided to us, nor reasonably available to us, and therefore are not included in the tables above.

For the securities in the tables above valued using a discounted cash flow analysis, we apply an illiquidity spread in our determination of fair value. An increase in this assumption would result in a lower fair value measurement.

The following tables provide quantitative information regarding our financial assets and liabilities that were not measured, but were disclosed at fair value at March 31, 2022, and December 31, 2021:

March 31, 2022 Fair Value Measurements Using
($ in thousands)Assets/
Liabilities
Disclosed at
Fair Value
Quoted Prices in
 Active Markets for
 Identical Assets/
Liabilities
(Level 1)
Significant Other
Observable Inputs
(Level 2)
Significant
Unobservable
Inputs
(Level 3)
Financial Assets    
HTM:    
Obligations of states and political subdivisions$3,502  3,502  
Corporate securities29,123  29,123  
Total HTM fixed income securities$32,625  32,625  
CMLs$113,106   113,106 
Financial Liabilities    
Long-term debt:
7.25% Senior Notes$59,828  59,828  
6.70% Senior Notes116,980  116,980  
5.375% Senior Notes332,644  332,644  
3.03% borrowings from FHLBI60,747  60,747  
Total long-term debt$570,199  570,199  

December 31, 2021 Fair Value Measurements Using
($ in thousands)Assets/
Liabilities
Disclosed at
Fair Value
Quoted Prices in
 Active Markets for
 Identical Assets/
Liabilities
(Level 1)
Significant Other
Observable Inputs
(Level 2)
Significant
Unobservable
Inputs
(Level 3)
Financial Assets    
HTM:    
Obligations of states and political subdivisions$3,576 — 3,576 — 
Corporate securities25,884 — 25,884 — 
Total HTM fixed income securities$29,460 — 29,460 — 
CMLs$97,598   97,598 
Financial Liabilities    
Long-term debt:
7.25% Senior Notes$63,719 — 63,719 — 
6.70% Senior Notes127,574 — 127,574 — 
5.375% Senior Notes395,652 — 395,652 — 
3.03% borrowings from FHLBI64,126 — 64,126 — 
Total long-term debt$651,071 — 651,071 — 

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NOTE 6. Allowance for Credit Losses on Premiums Receivable
The following table provides a roll forward of the allowance for credit losses on our premiums receivable balance for the periods indicated:

Quarter ended March 31,
($ in thousands)20222021
Balance at beginning of period$13,600 $21,000 
Current period change for expected credit losses916 808 
Write-offs charged against the allowance for credit losses(520)(874)
Recoveries304 66 
Allowance for credit losses, end of period$14,300 $21,000 

In First Quarter 2022, we recognized an additional allowance for credit losses of $0.7 million, net of write-offs and recoveries. Included in this was a reserve of $2.3 million on 2022 policies based on our historical write-off percentages and assumptions, partially offset by a $1.1 million allowance reduction on older policies, primarily impacted by the COVID-19 pandemic, for which the credit loss did not fully materialize.

The heightened credit risk experienced in 2020 as a result of COVID-19 resulted in the allowance for credit losses being increased to $21.0 million, where it remained as of March 31, 2021. During First Quarter 2021, we recognized expected credit losses, net of recoveries, of $2.1 million on 2021 policies based on our historical write-off percentages and assumptions, partially offset by a $1.2 million allowance reduction on older policies.

For a discussion of the methodology used to evaluate our estimate of expected credit losses, refer to Note 2. "Summary of Significant Accounting Policies" in Item 8. "Financial Statements and Supplementary Data." of our 2021 Annual Report.

NOTE 7. Reinsurance
We evaluate and monitor the financial condition of our reinsurers under voluntary reinsurance arrangements to minimize our exposure to significant losses from reinsurer insolvencies. The following tables provide (i) a disaggregation of our reinsurance recoverable balance by financial strength rating and (ii) an aging analysis of our past due reinsurance recoverable balances as of March 31, 2022, and December 31, 2021:

March 31, 2022
($ in thousands)CurrentPast DueTotal Reinsurance Recoverables
Financial strength rating of rated reinsurers
A++$42,025 $(3)$42,022 
A+349,963 735 350,698 
A97,115 926 98,041 
A-3,230 79 3,309 
B++   
B+   
Total rated reinsurers$492,333 $1,737 $494,070 
Non-rated reinsurers
Federal and state pools$79,980 $ $79,980 
Other than federal and state pools4,744 165 4,909 
Total non-rated reinsurers$84,724 $165 $84,889 
Total reinsurance recoverable, gross$577,057 $1,902 $578,959 
Less: allowance for credit losses(1,600)
Total reinsurance recoverable, net$577,359 

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December 31, 2021
($ in thousands)CurrentPast DueTotal Reinsurance Recoverables
Financial strength rating of rated reinsurers
A++$38,601 $$38,610 
A+339,857 1,520 341,377 
A95,675 1,227 96,902 
A-3,209 145 3,354 
B++— — — 
B+— — — 
Total rated reinsurers$477,342 $2,901 $480,243 
Non-rated reinsurers
Federal and state pools$116,378 $— $116,378 
Other than federal and state pools4,597 450 5,047 
Total non-rated reinsurers$120,975 $450 $121,425 
Total reinsurance recoverable, gross$598,317 $3,351 $601,668 
Less: allowance for credit losses(1,600)
Total reinsurance recoverable, net$600,068 

The following table provides a rollforward of the allowance for credit losses on our reinsurance recoverable balance for the periods indicated:

($ in thousands)Quarter ended March 31,
20222021
Balance at beginning of period$1,600 1,777 
Current period change for expected credit losses 63 
Write-offs charged against the allowance for credit losses — 
Recoveries — 
Allowance for credit losses, end of period$1,600 1,840 

For a discussion of the methodology used to evaluate our estimate of expected credit losses, refer to Note 2. "Summary of Significant Accounting Policies" in Item 8. "Financial Statements and Supplementary Data." of our 2021 Annual Report.

The following table contains a listing of direct, assumed, and ceded reinsurance amounts for premiums written, premiums earned, and loss and loss expenses incurred for the periods indicated. For more information about reinsurance, refer to Note 9. “Reinsurance” in Item 8. “Financial Statements and Supplementary Data.” of our 2021 Annual Report.

Quarter ended March 31,
($ in thousands)20222021
Premiums written:  
Direct$1,001,049 908,774 
Assumed5,314 5,533 
Ceded(116,565)(116,129)
Net$889,798 798,178 
Premiums earned:  
Direct$931,376 837,369 
Assumed5,528 5,676 
Ceded(124,621)(118,085)
Net$812,283 724,960 
Loss and loss expenses incurred:  
Direct$528,588 441,507 
Assumed4,278 3,447 
Ceded(38,630)(31,553)
Net$494,236 413,401 

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Ceded premiums written, ceded premiums earned, and ceded loss and loss expenses incurred related to our participation in the NFIP, to which we cede 100% of our NFIP flood premiums, losses, and loss expenses, were as follows:

Ceded to NFIPQuarter ended March 31,
($ in thousands)20222021
Ceded premiums written$(60,889)(65,742)
Ceded premiums earned(69,268)(67,519)
Ceded loss and loss expenses incurred(2,417)(2,207)

NOTE 8. Reserve for Loss and Loss Expense
The table below provides a roll forward of reserve for loss and loss expense for beginning and ending reserve balances:

Quarter ended March 31,
($ in thousands)20222021
Gross reserve for loss and loss expense, at beginning of period$4,580,903 4,260,355 
Less: reinsurance recoverable on unpaid loss and loss expense, at beginning of period578,641 554,269 
Net reserve for loss and loss expense, at beginning of period4,002,262 3,706,086 
Incurred loss and loss expense for claims occurring in the:  
Current year508,299 447,170 
Prior years(14,063)(33,769)
Total incurred loss and loss expense494,236 413,401 
Paid loss and loss expense for claims occurring in the:  
Current year91,292 80,158 
Prior years312,926 243,687 
Total paid loss and loss expense404,218 323,845 
Net reserve for loss and loss expense, at end of period4,092,280 3,795,642 
Add: Reinsurance recoverable on unpaid loss and loss expense, at end of period552,111 564,546 
Gross reserve for loss and loss expense at end of period$4,644,391 4,360,188 

Prior year reserve development in First Quarter 2022 was favorable by $14.1 million, consisting of $20.0 million of favorable casualty reserve development, partially offset by $5.9 million of unfavorable property reserve development. The favorable casualty reserve development included $10.0 million in our workers compensation line of business, $5.0 million in our general liability line of business, and $5.0 million in our bonds line of business.

Prior year reserve development in First Quarter 2021 was favorable by $33.8 million, consisting of $35.0 million of favorable casualty reserve development, partially offset by $1.2 million of unfavorable property reserve development. The favorable casualty reserve development included $15.0 million in our workers compensation line of business, $15.0 million in our general liability line of business, and $5.0 million in our Excess and Surplus (E&S") casualty lines of business.

NOTE 9. Segment Information
We evaluate the results of our four reportable segments as follows:

Our Standard Commercial Lines, Standard Personal Lines, and E&S Lines are evaluated based on before and after-tax underwriting results (net premiums earned, incurred loss and loss expense, policyholder dividends, policy acquisition costs, and other underwriting expenses), return on equity ("ROE") contribution, and combined ratios.

Our Investments segment is primarily evaluated on after-tax net investment income and its ROE contribution. After-tax net realized and unrealized gains and losses, which are not included in non-GAAP operating income, are also included in our Investments segment results.

In computing each segment's results, we do not make adjustments for interest expense or corporate expenses. No segment has a separate investment portfolio or allocated assets.

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The following summaries present revenues (net investment income and net realized and unrealized gains and losses on investments in the case of the Investments segment) and pre-tax income for the individual segments:

Revenue by SegmentQuarter ended March 31,
($ in thousands)20222021
Standard Commercial Lines:  
Net premiums earned:  
General liability$216,325 193,520 
Commercial automobile193,830 171,881 
Commercial property120,062 102,810 
Workers compensation84,680 78,190 
Businessowners' policies30,044 28,627 
Bonds10,360 8,593 
Other6,168 5,520 
Miscellaneous income1,101 3,707 
Total Standard Commercial Lines revenue662,570 592,848 
Standard Personal Lines:
Net premiums earned:
Personal automobile39,716 41,393 
Homeowners31,187 30,598 
Other1,739 1,830 
Miscellaneous income428 405 
Total Standard Personal Lines revenue73,070 74,226 
E&S Lines:
Net premiums earned:
Casualty lines54,624 43,833 
Property lines23,548 18,165 
Total E&S Lines revenue78,172 61,998 
Investments:  
Net investment income 72,602 69,716 
Net realized and unrealized investment (losses) gains(40,352)5,119 
Total Investments revenue32,250 74,835 
Total revenues $846,062 803,907 

Income Before and After Federal Income TaxQuarter ended March 31,
($ in thousands)20222021
Standard Commercial Lines:  
Underwriting income, before federal income tax$42,384 69,499 
Underwriting income, after federal income tax33,483 54,904 
Combined ratio93.6 %88.2 
ROE contribution5.0 8.6 
Standard Personal Lines:
Underwriting income, before federal income tax$6,520 7,695 
Underwriting income, after federal income tax5,151 6,079 
Combined ratio91.0 %89.6 
ROE contribution0.8 1.0 
E&S Lines:
Underwriting income, before federal income tax$6,925 516 
Underwriting income, after federal income tax5,471 408 
Combined ratio91.1 %99.2 
ROE contribution0.8 0.1 
Investments:  
Net investment income $72,602 69,716 
Net realized and unrealized investment (losses) gains(40,352)5,119 
Total investments segment income, before federal income tax32,250 74,835 
Tax on investments segment income5,613 14,448 
Total investments segment income, after federal income tax$26,637 60,387 
ROE contribution of after-tax net investment income earned8.7 8.9 
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Reconciliation of Segment Results to Income Before Federal Income TaxQuarter ended March 31,
($ in thousands)20222021
Underwriting income
Standard Commercial Lines$42,384 69,499 
Standard Personal Lines6,520 7,695 
E&S Lines6,925 516 
Investment income32,250 74,835 
Total all segments88,079 152,545 
Interest expense(7,168)(7,359)
Corporate expenses(11,021)(9,554)
Income, before federal income tax$69,890 135,632 
Preferred stock dividends(2,300)(2,453)
Income available to common stockholders, before federal income tax$67,590 133,179 

NOTE 10. Retirement Plans
The primary pension plan for our employees is the Retirement Income Plan for Selective Insurance Company of America (the “Pension Plan”). Selective Insurance Company of America (“SICA”) also sponsors the Supplemental Excess Retirement Plan (the “Excess Plan”) and a life insurance benefit plan. All plans are closed to new entrants, and benefits ceased accruing under the Pension Plan and the Excess Plan after March 31, 2016. For more information about SICA's retirement plans, see Note 15. “Retirement Plans” in Item 8. “Financial Statements and Supplementary Data.” of our 2021 Annual Report.

The following tables provide information about the Pension Plan:

Pension Plan
Quarter ended March 31,
($ in thousands)20222021
Net Periodic Pension Cost (Benefit):
Interest cost$2,486 2,148 
Expected return on plan assets(5,537)(5,744)
Amortization of unrecognized net actuarial loss366 625 
Total net periodic pension cost (benefit)1
$(2,685)(2,971)
1 The components of net periodic pension cost (benefit) are included within "Loss and loss expense incurred" and "Other insurance expenses" on the Consolidated Statements of Income.

Pension Plan
Quarter ended March 31,
20222021
Weighted-Average Expense Assumptions:
Discount rate2.98 %2.68 %
Effective interest rate for calculation of interest cost2.48 2.06 
Expected return on plan assets5.00 5.40 

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NOTE 11. Comprehensive Income
The components of comprehensive income, both gross and net of tax, for First Quarter 2022 and First Quarter 2021 were as follows:

First Quarter 2022   
($ in thousands)GrossTaxNet
Net income$69,890 13,560 56,330 
Components of OCI:   
Unrealized losses on investment securities:
   
Unrealized holding losses during the period(261,832)(54,984)(206,848)
Unrealized losses on securities with credit loss recognized in earnings(86,621)(18,191)(68,430)
Amounts reclassified into net income:
HTM securities1  1 
Net realized losses on disposals and intent-to-sell AFS securities15,991 3,358 12,633 
Credit loss expense22,052 4,631 17,421 
    Total unrealized losses on investment securities(310,409)(65,186)(245,223)
Defined benefit pension and post-retirement plans:   
Amounts reclassified into net income:   
Net actuarial loss417 88 329 
    Total defined benefit pension and post-retirement plans417 88 329 
Other comprehensive loss(309,992)(65,098)(244,894)
Comprehensive loss$(240,102)(51,538)(188,564)
First Quarter 2021   
($ in thousands)GrossTaxNet
Net income$135,632 26,362 109,270 
Components of OCI:   
Unrealized losses on investment securities:
   
Unrealized holding losses during the period(103,308)(21,695)(81,613)
Unrealized losses on securities with credit loss recognized in earnings(11,320)(2,377)(8,943)
Amounts reclassified into net income:
HTM securities(2)— (2)
Net realized losses on disposals and intent-to-sell AFS securities604 127 477 
Credit loss expense4,997 1,049 3,948 
    Total unrealized losses on investment securities(109,029)(22,896)(86,133)
Defined benefit pension and post-retirement plans:   
Amounts reclassified into net income:   
Net actuarial loss693 146 547 
    Total defined benefit pension and post-retirement plans693 146 547 
Other comprehensive loss(108,336)(22,750)(85,586)
Comprehensive income$27,296 3,612 23,684 
The balances of, and changes in, each component of AOCI (net of taxes) as of March 31, 2022 were as follows:

Net Unrealized (Losses) Gains on Investment SecuritiesDefined Benefit
Pension and Post-Retirement Plans
Total AOCI
($ in thousands)
Credit Loss Related1
HTM
Related
All
Other
Investments
Subtotal
Balance, December 31, 2021
$(4,287)(3)185,170 180,880 (65,781)115,099 
OCI before reclassifications(68,430)— (206,848)(275,278)— (275,278)
Amounts reclassified from AOCI17,421 12,633 30,055 329 30,384 
Net current period OCI(51,009)(194,215)(245,223)329 (244,894)
Balance, March 31, 2022
$(55,296)(2)(9,045)(64,343)(65,452)(129,795)
1Represents change in unrealized loss on securities with credit loss recognized in earnings.
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The reclassifications out of AOCI were as follows:

Quarter ended March 31,Affected Line Item in the Unaudited Consolidated Statements of Income
($ in thousands)20222021
HTM related
Unrealized (gains) losses on HTM disposals$ — Net realized and unrealized investment (losses) gains
Amortization of net unrealized losses (gains) on HTM securities1 (2)Net investment income earned
1 (2)Income before federal income tax
 — Total federal income tax expense
1 (2)Net income
Net realized losses on disposals and intent-to-sell AFS securities
Net realized losses on disposals and intent-to-sell AFS securities15,991 604 Net realized and unrealized investment (losses) gains
15,991 604 Income before federal income tax
(3,358)(127)Total federal income tax expense
12,633 477 Net income
Credit loss related
Credit loss expense22,052 4,997 Net realized and unrealized investment (losses) gains
22,052 4,997 Income before federal income tax
(4,631)(1,049)Total federal income tax expense
17,421 3,948 Net income
Defined benefit pension and post-retirement life plans
Net actuarial loss 96 159 Loss and loss expense incurred
321 534 Other insurance expenses
Total defined benefit pension and post-retirement life417 693 Income before federal income tax
(88)(146)Total federal income tax expense
329 547 Net income
Total reclassifications for the period$30,384 4,970 Net income

NOTE 12. Litigation
As of March 31, 2022, we do not believe we are involved in any legal action that could have a material adverse effect on our consolidated financial condition, results of operations, or cash flows.

In the ordinary course of conducting business, we are parties in various legal actions. Most are claims litigation involving our Insurance Subsidiaries as (i) liability insurers defending or providing indemnity for third-party claims brought against our customers, (ii) insurers defending first-party coverage claims brought against them, or (iii) liability insurers seeking declaratory judgment on our insurance coverage obligations. We account for such activity by establishing unpaid loss and loss expense reserves. Considering potential losses and defense costs reserves, we expect that any potential ultimate liability for ordinary course claims litigation will not be material to our consolidated financial condition, results of operations, or cash flows.

All our commercial property and businessowners' policies require direct physical loss of or damage to property by a covered cause of loss. All our standard lines commercial property and businessowners' policies also include or attach an exclusion that states that all loss or property damage caused by or resulting from any virus, bacterium, or other microorganism that induces or is capable of inducing physical distress, illness, or disease is not a covered cause of loss ("Virus Exclusion"). Whether COVID-19-related contamination, the existence of the COVID-19 pandemic, and the resulting COVID-19-related government shutdown orders cause physical loss of or damage to property is the subject of much public debate and first-party coverage litigation against some insurers, including us. The Virus Exclusion also is the subject of first-party coverage litigation against some insurers, including us. We cannot predict the outcome of litigation over these two coverage issues, including the interpretation of provisions similar or identical to those in our insurance policies.

From time to time, our Insurance Subsidiaries also are named as defendants in other legal actions, some asserting claims for substantial amounts. Plaintiffs may style these actions putatively as class actions and seek judicial certification of a state or national class for allegations involving our business practices, such as improper medical provider reimbursement under workers compensation and personal and commercial automobile insurance policies or improper reimbursement for automobile parts. Similarly, our Insurance Subsidiaries can be defendants in individual actions seeking extra-contractual damages, punitive damages, or penalties, often alleging bad faith claims handling. We believe that we have valid defenses to these allegations, and we account for such activity by establishing unpaid loss and loss expense reserves. Considering estimated losses and defense costs reserves, we expect that any potential ultimate liability for these other legal actions will not be material to our consolidated financial condition. As litigation outcomes are inherently unpredictable and the amounts sought in certain of these
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actions are large or indeterminate, it is possible that adverse outcomes could have a material adverse effect on our consolidated results of operations or cash flows in particular quarterly or annual periods.

NOTE 13. Subsequent Events
On April 1, 2022, SICA borrowed $35 million from the FHLBNY at an interest rate of 0.70%. This borrowing was refinanced upon its maturity on May 2, 2022, at an interest rate of 1.10%. This borrowing matures on June 27, 2022. These funds were used for general corporate purposes.

ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS.

Forward-Looking Statements
The terms "Company," "we," "us," and "our" refer to Selective Insurance Group, Inc. (the "Parent"), and its subsidiaries, except as expressly indicated or the context otherwise requires. Certain statements in this Quarterly Report on Form 10-Q, including information incorporated by reference, are “forward-looking statements” as defined by 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 and financial performance. They involve known and unknown risks, uncertainties, and other factors that may cause our or industry actual results, activity levels, or performance to materially differ from those expressed or implied by the forward-looking statements. In some cases, you can identify forward-looking statements by words such as “may,” “will,” “could,” “would,” “should,” “expect,” “plan,” “anticipate,” “target,” “project,” “intend,” “believe,” “estimate,” “predict,” “potential,” “pro forma,” “seek,” “likely,” “continue,” or comparable terms. Our forward-looking statements are only predictions, and we can give no assurance that such expectations will prove correct. We undertake no obligation, other than as federal securities laws may require, to publicly update or revise any forward-looking statements for any reason.

Factors that could cause our actual results to differ materially from what we project, forecast, or estimate in forward-looking statements are discussed in further detail in Item 1A. “Risk Factors.” in Part II. “Other Information” of this Form 10-Q. These risk factors may not be exhaustive. We operate in a constantly changing business environment, and new risk factors may emerge at any time. We can neither predict these new risk factors nor assess their impact, if any, on our businesses or the extent any factor or combination of factors may cause actual results to differ materially from any forward-looking statements. Given these risks, uncertainties, and assumptions, the forward-looking events we discuss in this report might not occur.

Introduction
We classify our business into four reportable segments:

Standard Commercial Lines;
Standard Personal Lines;
Excess and Surplus Lines ("E&S Lines"); and
Investments.

For more details about these segments, refer to Note 9. "Segment Information" in Item 1. "Financial Statements." of this Form 10-Q and Note 12. "Segment Information" in Item 8. "Financial Statements and Supplementary Data." of our Annual Report on Form 10-K for the year ended December 31, 2021 ("2021 Annual Report").

We write our Standard Commercial and Standard Personal Lines products and services through nine of our insurance subsidiaries, some of which participate in the federal government's National Flood Insurance Program's ("NFIP") Write Your Own Program. We write our E&S products through another subsidiary, Mesa Underwriters Specialty Insurance Company, a nationally-authorized non-admitted platform for customers who generally cannot obtain coverage in the standard marketplace. Collectively, we refer to our ten insurance subsidiaries as the "Insurance Subsidiaries."

The following is Management’s Discussion and Analysis (“MD&A”) of the consolidated results of operations and financial condition, as well as known trends and uncertainties, that may have a material impact in future periods. Investors should read the MD&A in conjunction with Item 1. "Financial Statements." of this Form 10-Q and the consolidated financial statements in our 2021 Annual Report filed with the United States ("U.S.") Securities and Exchange Commission.

In the MD&A, we will discuss and analyze the following:

Critical Accounting Policies and Estimates;
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Financial Highlights of Results for the first quarters ended March 31, 2022 (“First Quarter 2022”) and March 31, 2021 (“First Quarter 2021”);
Results of Operations and Related Information by Segment;
Federal Income Taxes;
Liquidity and Capital Resources; and
Ratings.

Critical Accounting Policies and Estimates
Our unaudited interim consolidated financial statements include amounts for which we have made informed estimates and judgments for transactions not yet completed. Such estimates and judgments affect the reported amounts in the consolidated financial statements. As outlined in our 2021 Annual Report, those estimates and judgments most critical to the preparation of the consolidated financial statements involved the following: (i) reserves for loss and loss expense; (ii) investment valuation and the allowance for credit losses on available-for-sale ("AFS") fixed income securities; and (iii) reinsurance. These estimates and judgments require the use of assumptions about matters that are highly uncertain, and therefore are subject to change as facts and circumstances develop. If different estimates and judgments had been applied, materially different amounts might have been reported in the financial statements. For additional information regarding our critical accounting policies and estimates, refer to pages 35 through 43 of our 2021 Annual Report.

Financial Highlights of Results for First Quarter 2022 and First Quarter 20211
($ and shares in thousands, except per share amounts)Quarter ended March 31,Change
% or Points
20222021 
Financial Data:
Revenues$846,062 803,907 5 %
After-tax net investment income58,515 56,343 4  
After-tax underwriting income44,105 61,391 (28)
Net income before federal income tax69,890 135,632 (48)
Net income56,330 109,270 (48)
Net income available to common stockholders54,030 106,817 (49)
Key Metrics:
Combined ratio93.1 %89.3 3.8 pts
Invested assets per dollar of common stockholders' equity$3.02 2.97 2 %
Annualized return on common equity ("ROE")8.1 16.8 (8.7)pts
Net premiums written to statutory surplus ratio1.36 x1.33 0.03 
Per Common Share Amounts:
Diluted net income per share$0.89 1.77 (50)%
Book value per share42.73 42.38 1 
Dividends declared per share to common stockholders0.28 0.25 12 
Non-GAAP Information:
Non-GAAP operating income2
$85,908 102,773 (16)%
Diluted non-GAAP operating income per common share2
1.41 1.70 (17)
Annualized non-GAAP operating ROE2
12.8 %16.2 (3.4)pts
Adjusted book value per common share2
$43.80 38.73 13 %
1Refer to the Glossary of Terms attached to our 2021 Annual Report as Exhibit 99.1 for definitions of terms used of this Form 10-Q.
2    Non-GAAP operating income, non-GAAP operating income per diluted common share, and non-GAAP operating ROE are measures comparable to net income available to common stockholders, net income available to common stockholders per diluted common share, and ROE, respectively, but exclude after- tax net realized and unrealized gains and losses on investments included in net income. Adjusted book value per common share is a measure comparable to book value per common share, but excludes total after-tax unrealized gains and losses on investments included in accumulated other comprehensive (loss) income. They are used as important financial measures by us, analysts, and investors because the timing of realized and unrealized investment gains and losses on securities in any given period is largely discretionary. In addition, net realized and unrealized investment gains and losses on investments could distort the analysis of trends.

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Reconciliations of net income available to common stockholders, net income available to common stockholders per diluted common share, annualized ROE, and book value per common share to non-GAAP operating income, non-GAAP operating income per diluted common share, annualized non-GAAP operating ROE, and adjusted book value per common share, respectively, are provided in the tables below:

Reconciliation of net income available to common stockholders to non-GAAP operating incomeQuarter ended March 31,
($ in thousands)20222021
Net income available to common stockholders$54,030 106,817 
Net realized and unrealized investment losses (gains) included in net income, before tax40,352 (5,119)
Tax on reconciling items(8,474)1,075 
Non-GAAP operating income$85,908 102,773 

Reconciliation of net income available to common stockholders per diluted common share to non-GAAP operating income per diluted common shareQuarter ended March 31,
20222021
Net income available to common stockholders per diluted common share$0.89 1.77 
Net realized and unrealized investment losses (gains) included in net income, before tax0.66 (0.08)
Tax on reconciling items(0.14)0.01 
Non-GAAP operating income per diluted common share$1.41 1.70 

Reconciliation of annualized ROE to annualized non-GAAP operating ROEQuarter ended March 31,
20222021
Annualized ROE8.1 %16.8 
Net realized and unrealized investment losses (gains) included in net income, before tax6.0 (0.8)
Tax on reconciling items(1.3)0.2 
Annualized non-GAAP operating ROE12.8 %16.2 

Reconciliation of book value per common share to adjusted book value per common shareQuarter ended March 31,
20222021
Book value per common share$42.73 42.38 
Total unrealized investment losses (gains) included in accumulated other comprehensive (loss) income, before tax1.35 (4.62)
Tax on reconciling items(0.28)0.97 
Adjusted book value per common share$43.80 38.73 

The components of our annualized ROE and non-GAAP operating ROE are as follows:

Annualized ROE and non-GAAP operating ROE ComponentsQuarter ended March 31,Change Points
20222021
Standard Commercial Lines Segment5.0 %8.6 (3.6)
Standard Personal Lines Segment0.8 1.0 (0.2)
E&S Lines Segment0.8 0.1 0.7 
Total insurance operations6.6 9.7 (3.1)
Investment income8.7 8.9 (0.2)
Net realized and unrealized investment (losses) gains(4.7)0.6 (5.3)
Total investments segment4.0 9.5 (5.5)
Other(2.5)(2.4)(0.1)
Annualized ROE8.1 %16.8 (8.7)
Net realized and unrealized investment losses (gains), after tax4.7 (0.6)5.3 
Annualized Non-GAAP Operating ROE12.8 %16.2 (3.4)

Our First Quarter 2022 annualized non-GAAP operating ROE of 12.8% was above our full-year 2022 targeted non-GAAP operating ROE of 11%, but below our First Quarter 2021 annualized non-GAAP operating ROE of 16.2%. The decrease compared to First Quarter 2021 was primarily driven by a $17.3 million, or 3.1-point, reduction in after-tax underwriting income, resulting from (i) an increase in non-catastrophe property loss and loss expenses in First Quarter 2022, and (ii) lower favorable prior year casualty reserve development in First Quarter 2022; partially offset by a decrease in net catastrophe losses in First Quarter 2022.
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Our First Quarter 2022 results included $245 million of after-tax net unrealized investment losses recorded in stockholders' equity. These investment losses reduced our March 31, 2022 stockholders' equity position, which resulted in an approximate 50 basis point benefit to our First Quarter 2022 annualized ROE and non-GAAP operating ROE.

In addition to the above drivers of the year-over-year change in our annualized non-GAAP operating ROE, the 8.7-point reduction in the annualized ROE was due to a decrease of 5.3 points in net realized and unrealized investment gains in First Quarter 2022 compared to First Quarter 2021. The decrease was primarily driven by (i) active trading of our fixed income securities to opportunistically increase yield in the rising interest rate environment, and (ii) higher credit loss expense on our AFS fixed income securities portfolio.

Outlook
We entered 2022 in the strongest financial position in our 95-year history, with a record level of GAAP equity, statutory capital and surplus, and holding company cash and investments. We were well positioned to continue executing on our strategic objectives and delivering growth and profitability. Although First Quarter 2022 financial results were not as favorable as First Quarter 2021, our overall First Quarter 2022 financial results were strong with 11% growth in NPW and a 12.8% annualized non-GAAP operating ROE, which was above our full-year target of 11%.

While we recorded strong financial results in First Quarter 2022, this quarter included elevated economic inflation, which resulted in a significant increase in interest rates, a widening of credit spreads, lower public equity valuations, and significant financial market volatility. The higher interest rates and widening of credit spreads reduced the value of our fixed income securities, which lowered our stockholders' equity by 8% during First Quarter 2022. The higher economic inflation impacted our non-catastrophe property loss and loss expenses with increased severities in our property lines, particularly commercial and personal automobile physical damage results. Should these trends continue in the near-term, it could negatively impact our profitability. We will continue to focus on achieving written renewal pure price increases, along with underwriting improvements, that meet or exceed expected loss trend. We achieved Standard Commercial Lines renewal pure price increases of 4.8% in First Quarter 2022. Renewal pure price increased throughout the quarter, with both February and March rate at 5.1%. This trend continued into April 2022 with renewal pure rate increases of 5.2%.

In addition, the higher interest rates and the widening of credit spreads provide an opportunity to invest our cash flows in new fixed income securities with higher yields, which over time will likely increase the overall book yield on our fixed income securities investment portfolio.

We continue to focus on several other foundational areas to position us for ongoing success:

Delivering on our strategy for continued disciplined and profitable growth by:
Continuing to expand our Standard Commercial Lines market share by (i) increasing our share towards our 12% target of our agents' premiums, (ii) strategically appointing new agents, and (iii) maximizing new business growth in the small business market through utilization of our enhanced small business platform;
Expanding our geographic footprint, with a plan to commence writing Standard Commercial Lines business in the states of Vermont, Alabama, and Idaho in the near-term, and other states over time;
Increasing customer retention by delivering a superior omnichannel experience and offering value-added technologies and services;
Shifting our focus towards targeting new and renewal customers in the mass affluent market within our Standard Personal Lines segment, where we believe we can be more competitive with the strong coverage and servicing capabilities that we offer; and
Deploying our new underwriting platform in our E&S segment that will improve agents' ease of interactions with us.

Continuing to build on a culture centered on the values of diversity, equity, and inclusion that fosters innovation, idea generation, and developing a group of specially trained leaders who can guide us successfully into the future.

Our full-year expectations are as follows:

A GAAP combined ratio, excluding net catastrophe losses, of 91.0%. Our combined ratio estimate assumes no additional prior-year casualty reserve development;
Net catastrophe losses of 4.0 points on the combined ratio;
After-tax net investment income of $205 million (prior guidance $200 million) that includes $15 million (prior guidance $20 million) in after-tax net investment income from our alternative investments;
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An overall effective tax rate of approximately 20.5% that assumes an effective tax rate of 19.5% for net investment income and 21.0% for all other items; and
Weighted average shares of 61 million on a fully diluted basis.

Results of Operations and Related Information by Segment

Insurance Operations
The following table provides quantitative information for analyzing the combined ratio:

All LinesQuarter ended March 31,Change % or Points
($ in thousands)20222021 
Insurance Operations Results:   
Net premiums written ("NPW")$889,798 798,178 11 %
Net premiums earned (“NPE”)812,283 724,960 12  
Less:  
Loss and loss expense incurred494,236 413,401 20  
Net underwriting expenses incurred260,639 232,626 12 
Dividends to policyholders1,579 1,223 29  
Underwriting income$55,829 77,710 (28)%
Combined Ratios:  
Loss and loss expense ratio60.8 %57.0 3.8 pts 
Underwriting expense ratio32.1 32.1  
Dividends to policyholders ratio0.2 0.2   
Combined ratio93.1 89.3 3.8  

The 11% NPW growth in First Quarter 2022 compared to First Quarter 2021 reflected (i) overall renewal pure price increases, and (ii) higher direct new business, as shown in the following table:

Quarter ended March 31,
($ in millions)20222021
Direct new business premiums$177.2 155.6 
Renewal pure price increases on NPW4.6 %5.2 

In addition, our NPW growth in First Quarter 2022 benefited from strong retention and exposure growth driven by increased economic activity in the U.S., which resulted in our customers increasing their sales, payrolls, and exposure units, all of which favorably impacted our NPW.

The increase in NPE in First Quarter 2022 compared to First Quarter 2021 resulted from the same impacts to the NPW increase described above.

Loss and Loss Expenses
The loss and loss expense ratio increased 3.8 points in First Quarter 2022 compared to First Quarter 2021, primarily due to the following:

First Quarter 2022First Quarter 2021
($ in millions)Loss and Loss Expense IncurredImpact on
Loss and Loss Expense Ratio
Loss and Loss
Expense
Incurred
Impact on
Loss and Loss Expense Ratio
Change in Ratio
Net catastrophe losses$20.6 2.5 pts$29.9 4.1 pts(1.6)pts
(Favorable) prior year casualty reserve development(20.0)(2.5)(35.0)(4.8)2.3 
Non-catastrophe property loss and loss expenses150.4 18.5 115.6 15.9 2.6 
Total$151.0 18.5 $110.5 15.2 3.3 

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Details of the prior year casualty reserve development were as follows:

(Favorable)/Unfavorable Prior Year Casualty Reserve DevelopmentQuarter ended March 31,
($ in millions)20222021
General liability$(5.0)(15.0)
Workers compensation(10.0)(15.0)
Bonds(5.0)— 
   Total Standard Commercial Lines(20.0)(30.0)
Homeowners — 
Personal automobile — 
   Total Standard Personal Lines — 
E&S (5.0)
Total (favorable) prior year casualty reserve development$(20.0)(35.0)
(Favorable) impact on loss ratio(2.5)pts(4.8)

For additional qualitative discussion on reserve development and non-catastrophe property loss and loss expenses, refer to the insurance segment sections below in "Results of Operations and Related Information by Segment."

Standard Commercial Lines Segment
 Quarter ended March 31,Change
% or
Points
 
($ in thousands)20222021 
Insurance Segments Results:    
NPW$737,639 665,565 11 %
NPE661,469 589,141 12  
Less:    
Loss and loss expense incurred399,474 324,850 23  
Net underwriting expenses incurred218,032 193,569 13  
Dividends to policyholders1,579 1,223 29  
Underwriting income42,384 69,499 (39)
Combined Ratios:    
Loss and loss expense ratio60.4 %55.1 5.3 pts
Underwriting expense ratio33.0 32.9 0.1  
Dividends to policyholders ratio0.2 0.2   
Combined ratio93.6 88.2 5.4  

NPW growth of 11% in First Quarter 2022 compared to First Quarter 2021 reflected (i) renewal pure price increases, (ii) higher direct new business, and (iii) stronger retention as shown in the table below. In addition, NPW growth in First Quarter 2022 benefited from exposure growth.

Quarter ended March 31,
($ in millions)20222021
Direct new business premiums$128.4 114.5 
Retention87 %86 
Renewal pure price increases on NPW4.8 5.5 

The increase in NPE in First Quarter 2022 compared to First Quarter 2021 resulted from the same impacts to the NPW increase described above.

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The 5.3-point increase in the loss and loss expense ratio in First Quarter 2022 compared to First Quarter 2021 was primarily driven by the following:

First Quarter 2022First Quarter 2021
($ in millions)Loss and Loss Expense IncurredImpact on
Loss and Loss Expense Ratio
Loss and Loss
Expense
Incurred
Impact on
Loss and Loss Expense Ratio
Change in Ratio
Net catastrophe losses$14.9 2.3 pts$16.1 2.7 (0.4)pts
Non-catastrophe property loss and loss expenses115.7 17.5 83.6 14.2 3.3 
(Favorable) prior year casualty reserve development(20.0)(3.0)(30.0)(5.1)2.1 
Total110.6 16.8 69.7 11.8 5.0 

For quantitative information on the favorable prior-year casualty reserve development by line of business, see the "Insurance Operations" section above, and for qualitative information about the significant drivers of this development, see the line of business discussions below.

The following is a discussion of our most significant Standard Commercial Lines of business:

General Liability
 Quarter ended March 31,
Change
 % or
Points1
($ in thousands)20222021
NPW$244,118 222,062 10 %
  Direct new business37,883 34,253 n/a
  Retention87 %86 n/a
  Renewal pure price increases4.0 4.4 n/a
NPE$216,325 193,520 12 %
Underwriting income28,817 36,573 (21)
Combined ratio86.7 %81.1 5.6 pts
% of total Standard Commercial Lines NPW33 33  
1n/a: not applicable.

NPW growth of 10% in First Quarter 2022 compared to First Quarter 2021 benefited from renewal pure price increases, exposure growth, and higher direct new business.

The 5.6-point increase in the combined ratio in First Quarter 2022 compared to First Quarter 2021 was primarily driven by less favorable prior year casualty reserve development, as follows:

First Quarter 2022First Quarter 2021
($ in millions)Loss and Loss Expense IncurredImpact on
Combined Ratio
Loss and Loss Expense IncurredImpact on
Combined Ratio
Change in Ratio
(Favorable) prior year casualty reserve development$(5.0)(2.3)pts$(15.0)(7.8)5.5 pts

The prior year favorable casualty reserve development in First Quarter 2022 was primarily attributable to lower loss severities in accident years 2019 and prior. The First Quarter 2021 prior year favorable casualty reserve development was primarily attributable to improved loss severities in accident years 2018 and prior.

Commercial Automobile
 Quarter ended March 31,
Change
 % or
Points1
($ in thousands)20222021
NPW$212,595 190,646 12 %
  Direct new business31,413 28,746 n/a
  Retention87 %87 n/a
  Renewal pure price increases7.4 9.0 n/a
NPE$193,830 171,881 13 %
Underwriting (loss) income(10,918)2,792 (491)
Combined ratio105.6 %98.4 7.2 pts
% of total Standard Commercial Lines NPW29 29  
1n/a: not applicable.

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NPW growth of 12% in First Quarter 2022 compared to First Quarter 2021 benefited from renewal pure price increases, higher direct new business, and exposure growth that reflects 7% growth of in-force vehicle counts as of March 31, 2022 compared to March 31, 2021.

The 7.2-point increase in the combined ratio in First Quarter 2022 compared to First Quarter 2021 was primarily driven by the following:

First Quarter 2022First Quarter 2021
($ in millions)Loss and Loss Expense IncurredImpact on
Combined Ratio
Loss and Loss Expense IncurredImpact on
Combined Ratio
Change in Ratio
Net catastrophe losses$0.3 0.2 pts$0.2 0.1 0.1 pts
Non-catastrophe property loss and loss expenses43.0 22.2 29.4 17.1 5.1 
Total$43.3 22.4 $29.6 17.2 5.2 

First Quarter 2022 experienced elevated non-catastrophe property loss and loss expenses, due primarily to higher severities from recent inflationary and supply chain impacts that have caused increases to labor and the cost of materials.

In addition, the combined ratio was impacted by a 1.6-point increase in current year casualty loss costs in First Quarter 2022 compared to First Quarter 2021, primarily due to an expected increase in claim frequencies resulting from a more normalized amount of miles driven as the COVID-19-related restrictions continue to lessen.

Commercial Property
 Quarter ended March 31,
Change
 % or
Points1
($ in thousands)20222021
NPW$130,905 113,382 15 %
  Direct new business27,817 24,270 n/a
  Retention86 %85 n/a
Renewal pure price increases6.2 6.0 n/a
NPE$120,062 102,810 17 %
Underwriting income176 6,766 97 
Combined ratio99.9 %93.4 6.5 pts
% of total Standard Commercial Lines NPW18 17  
1n/a: not applicable.

NPW growth of 15% in First Quarter 2022 compared to First Quarter 2021 benefited from renewal pure price increases, exposure growth, stronger retention, and higher direct new business.

The 6.5-point increase in the combined ratio in First Quarter 2022 compared to First Quarter 2021 was primarily driven by the items in the table shown below.

First Quarter 2022First Quarter 2021
($ in millions)Loss and Loss Expense IncurredImpact on
Combined Ratio
Loss and Loss Expense IncurredImpact on
Combined Ratio
Change in Ratio
Net catastrophe losses$12.9 10.8 pts13.7 13.3 (2.5)pts
Non-catastrophe property loss and loss expenses63.1 52.5 44.6 43.4 9.1 
Total$76.0 63.3 58.3 56.7 6.6 

First Quarter 2022 experienced elevated non-catastrophe property loss and loss expenses, primarily due to increased severity compared to First Quarter 2021 that reflects the volatility from period to period that is normally associated with our commercial property line of business.

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Workers Compensation
 Quarter ended March 31,
Change
 % or
Points1
($ in thousands)20222021
NPW$97,459 92,291 6 %
Direct new business16,946 15,946 n/a
Retention87 %86 n/a
Renewal pure price increases(1.1)0.2 n/a
NPE$84,680 78,190 8 %
Underwriting income15,905 20,418 (22)
Combined ratio81.2 %73.9 7.3 pts
% of total Standard Commercial Lines NPW13 14  
1n/a: not applicable.

NPW growth of 6% in First Quarter 2022 compared to First Quarter 2021 benefited from higher direct new business, exposure growth, and stronger retention.

The 7.3-point increase in the combined ratio in First Quarter 2022 compared to First Quarter 2021 was the result of less favorable prior year casualty reserve development, as follows:

First Quarter 2022First Quarter 2021
($ in millions)Loss and Loss Expense IncurredImpact on
Combined Ratio
Loss and Loss Expense IncurredImpact on
Combined Ratio
Change in Ratio
(Favorable) prior year casualty reserve development$(10.0)(11.8)pts$(15.0)(19.2)7.4 pts

The favorable prior year casualty reserve development in First Quarter 2022 was primarily due to improved loss severities in accident years 2019 and prior. The favorable prior year casualty reserve development in First Quarter 2021 was primarily due to improved loss severities in accident years 2018 and prior.

Standard Personal Lines Segment
Quarter ended March 31,Change
% or
Points
 
($ in thousands)20222021 
Insurance Segments Results:    
NPW$65,057 65,077  %
NPE72,642 73,821 (2) 
Less:  
Loss and loss expense incurred48,547 47,166 3  
Net underwriting expenses incurred17,575 18,960 (7)
Underwriting income6,520 7,695 (15)
Combined Ratios:  
Loss and loss expense ratio66.8 %63.9 2.9 pts
Underwriting expense ratio24.2 25.7 (1.5)
Combined ratio91.0 89.6 1.4  

NPW was flat in First Quarter 2022 compared to First Quarter 2021, continuing to be impacted by the challenging personal automobile competitive environment. In the third quarter of 2021, we transitioned our personal lines strategy to targeting customers in the mass affluent market where we believe our strong coverage and servicing capabilities can be more competitive.

Quarter ended March 31,
($ in millions)20222021
Direct new business premiums1
$9.6 9.8 
Retention84 %83 
Renewal pure price increases on NPW0.6 0.8 
1Excludes our Flood direct premiums written, which is 100% ceded to the NFIP and therefore, has no impact on our NPW.

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The 2.9-point increase in the loss and loss expense ratio in First Quarter 2022 compared to First Quarter 2021 was driven by the following:

First Quarter 2022First Quarter 2021
($ in millions)Loss and Loss Expense IncurredImpact on
Loss and Loss Expense Ratio
Loss and Loss
Expense
Incurred
Impact on
Loss and Loss Expense Ratio
Change in Ratio
Net catastrophe losses$4.3 6.0 pts5.6 7.6 (1.6)pts
Non-catastrophe property loss and loss expenses25.6 35.2 23.1 31.3 3.9 
Total$29.9 41.2 28.7 38.9 2.3 

First Quarter 2022 experienced elevated non-catastrophe property loss and loss expenses associated with physical damage losses on our personal automobile line of business due to higher frequencies and severities from recent inflationary and supply chain impacts that have caused increases to labor and the cost of materials. The likely continuation of this trend, coupled with renewal pure price increases below trend, may put pressure on this segment's profitability in the near-term.

In addition, the loss and loss expense ratio was impacted by a 0.7-point increase in current year casualty loss costs in First Quarter 2022 compared to First Quarter 2021, primarily due to an expected increase in claim frequencies resulting from a more normalized amount of miles driven as the COVID-19-related restrictions continue to lessen.

The 1.5-point decrease in the underwriting expense ratio in First Quarter 2022 compared to First Quarter 2021 was primarily driven by (i) a 0.8-point reduction in commissions, and (ii) a 0.5-point decrease in employee-related expenses.

E&S Lines Segment
 Quarter ended March 31,Change
% or
Points
($ in thousands)20222021
Insurance Segments Results:   
NPW$87,102 67,536 29 %
NPE78,172 61,998 26  
Less:    
Loss and loss expense incurred46,215 41,385 12  
Net underwriting expenses incurred25,032 20,097 25  
Underwriting income (loss)6,925 516 1,242 
Combined Ratios:    
Loss and loss expense ratio59.1 %66.8 (7.7)pts
Underwriting expense ratio32.0 32.4 (0.4)
Combined ratio91.1 99.2 (8.1) 

The strong NPW growth of 29% in First Quarter 2022 compared to First Quarter 2021 reflected renewal pure price increases and higher direct new business as shown in the table below. In addition, NPW growth in First Quarter 2022 benefited from exposure growth driven by favorable economic conditions in E&S lines in the U.S.

Quarter ended March 31,
($ in millions)20222021
Direct new business premiums$39.2 31.3 
Overall renewal price increases on NPW7.7 7.3 

The increase in NPE in First Quarter 2022 compared to First Quarter 2021 resulted from the same impacts to the NPW increase described above.

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The 7.7-point decrease in the loss and loss expense ratio in First Quarter 2022 compared to First Quarter 2021 was primarily driven by the items in the table shown below.

First Quarter 2022First Quarter 2021
($ in millions)Loss and Loss Expense IncurredImpact on
Loss and Loss Expense Ratio
Loss and Loss
Expense
Incurred
Impact on
Loss and Loss Expense Ratio
Change in Ratio
Net catastrophe losses$1.3 1.7 pts$8.3 13.3 (11.6)pts
Non-catastrophe property loss and loss expenses9.1 11.6 8.9 14.3 (2.7)
(Favorable) prior year casualty reserve development  (5.0)(8.1)8.1 
Total$10.4 13.3 $12.2 19.5 (6.2)

The decrease in net catastrophe losses in First Quarter 2022 compared to First Quarter 2021 was primarily due to a series of large storms in First Quarter 2021 that significantly impacted Texas and other Southern and Midwestern states, that did not reoccur in First Quarter 2022.

There was no prior year casualty reserve development in First Quarter 2022. The favorable prior year casualty reserve development in First Quarter 2021 was primarily due to improved loss severities in accident years 2016 through 2018.

In addition, the loss and loss expense ratio was impacted by a 1.4-point decrease in current year casualty loss costs in First Quarter 2022 compared to First Quarter 2021. Our E&S casualty lines results have improved over recent years, following a number of underwriting and claims initiatives, strong rate increases, and the decrease in current year casualty loss costs reflects the impacts of these actions.

Investments
The primary objectives of the investment portfolio are to maximize after-tax net investment income and generate long-term growth in book value by maximizing the overall total return of the portfolio. Each objective is balanced against prevailing market conditions, capital preservation considerations, and our enterprise risk-taking appetite. We maintain (i) a well-diversified portfolio across issuers, sectors, and asset classes, and (ii) a high credit quality core fixed income securities portfolio with a duration and maturity profile at an acceptable risk level that provides ample liquidity. The effective duration of the fixed income securities portfolio, including short-term investments, was 4.1 years as of March 31, 2022, compared to the Insurance Subsidiaries' net loss and loss expense reserves duration of 3.5 years at December 31, 2021.

Our fixed income and short-term investments represented 90% of our invested assets at March 31, 2022, and 91% at December 31, 2021. Additionally, as of both dates, our fixed income securities and short-term investments portfolio had a weighted average credit rating of "A+" with investment grade holdings representing 96% of the total portfolio.

For further details on the composition, credit quality, and the various risks to which our portfolio is subject, see Item 7A. “Quantitative and Qualitative Disclosures About Market Risk.” of our 2021 Annual Report.

Total Invested Assets
($ in thousands)March 31, 2022December 31, 2021Change
Total invested assets$7,774,711 8,026,988 (3)%
Invested assets per dollar of common stockholders' equity3.02 2.88 5 
Unrealized (loss) gain – before tax1
(56,904)255,658 (122)
Unrealized (loss) gain – after tax1
(44,954)201,970 (122)
1Includes unrealized losses on fixed income securities of $81.5 million and unrealized gains on equity securities of $24.5 million at March 31, 2022.

Invested assets decreased $252.3 million at March 31, 2022, compared to December 31, 2021, reflecting an increase in pre-tax unrealized losses of $312.6 million, due to an increase in benchmark U.S. Treasury rates and the widening of credit spreads, partially offset by operating cash flows during First Quarter 2022 that were 10% of NPW.

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Net Investment Income
The components of net investment income earned were as follows:

 Quarter ended March 31,Change
% or Points
($ in thousands)20222021
Fixed income securities$53,925 52,823 2 %
Commercial mortgage loans ("CMLs")970 514 89 
Equity securities2,418 2,488 (3)
Short-term investments101 85 19 
Other investments19,305 17,433 11 
Investment expenses(4,117)(3,627)14 
Net investment income earned – before tax72,602 69,716 4 
Net investment income tax expense(14,087)(13,373)5 
Net investment income earned – after tax$58,515 56,343 4 
Effective tax rate19.4 %19.2 0.2 pts
Annualized after-tax yield on fixed income investments2.6 2.6  
Annualized after-tax yield on investment portfolio3.0 3.0  

Net investment income earned increased 4% in First Quarter 2022 compared to First Quarter 2021, driven by income earned on fixed income securities and other investments. During First Quarter 2022, we actively traded our fixed income securities portfolio to opportunistically increase yield in the rising interest rate environment. The average after-tax new purchase yield on fixed income security purchases in First Quarter 2022 was 2.6%, which was up sequentially from 2.1% in the fourth quarter of 2021 and 1.7% in First Quarter 2021. In addition, as of March 31, 2022, 14% of our fixed income securities portfolio was invested in floating rate securities, which reset principally to 90-day U.S. dollar-denominated London Interbank Offered Rate.

As the returns on our alternative investments generally follow capital market performance, which was down during First Quarter 2022, we expect losses on these investments in the second quarter of 2022, which will impact net investment income. Over the remainder of 2022, we expect higher reinvestment yields within our fixed income securities portfolio, which will likely result in higher net investment income from these securities.

Realized and Unrealized Gains and Losses
When evaluating securities for sale, our general philosophy is to reduce our exposure to securities and sectors based on economic evaluations of whether the fundamentals for that security or sector have deteriorated or the timing is appropriate to opportunistically trade for other securities with better economic-return characteristics.

Net realized and unrealized gains and losses for the indicated periods were as follows:

 Quarter ended March 31,Change %
($ in thousands)20222021
Net realized losses on disposals$(11,363)(795)1,329 %
Net unrealized (losses) gains on equity securities(2,154)11,280 (119)
Net credit loss expense on fixed income securities, AFS(22,052)(4,997)341 
Net credit loss expense on fixed income securities, held-to-maturity14 (7)(300)
Losses on securities for which we have the intent to sell(4,797)(362)1,225 
Total net realized and unrealized investment (losses) gains$(40,352)5,119 (888)

Net realized and unrealized investment gains decreased $45.5 million in First Quarter 2022 compared to First Quarter 2021, primarily driven by (i) active trading of our fixed income securities in First Quarter 2022 to opportunistically increase yield in the rising interest rate environment, and (ii) higher credit loss expense on our AFS fixed income securities portfolio.

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Federal Income Taxes
The following table provides information regarding federal income taxes and reconciles federal income tax at the corporate rate to the effective tax rate:

Quarter ended March 31,
($ in thousands)20222021
Tax at statutory rate$14,677 28,483 
Tax-advantaged interest(1,074)(1,178)
Dividends received deduction(106)(109)
Executive compensation258 207 
Stock-based compensation(731)(464)
Other536 (577)
Federal income tax expense13,560 26,362 
Income before federal income tax, less preferred stock dividends67,590 133,179 
Effective tax rate20.1 %19.8 

Liquidity and Capital Resources
Capital resources and liquidity reflect our ability to generate cash flows from business operations, borrow funds at competitive rates, and raise new capital to meet our operating and growth needs.

Liquidity
We manage liquidity by focusing on generating sufficient cash flows to meet the short-term and long-term cash requirements of our business operations. We also adjust our liquidity in light of economic or market conditions, as discussed further below.

Sources of Liquidity
Sources of cash for the Parent historically have consisted of dividends from the Insurance Subsidiaries, the investment portfolio held at the Parent, borrowings under third-party lines of credit, loan agreements with certain Insurance Subsidiaries, and the issuance of equity (common or preferred) and debt securities. We continue to monitor these sources, considering both our short-term and long-term liquidity and capital preservation strategies.

The Parent's investment portfolio includes (i) short-term investments that are generally maintained in “AAA” rated money market funds approved by the National Association of Insurance Commissioners, (ii) high-quality, highly liquid government and corporate fixed income securities; (iii) equity securities; (iv) other investments, and (v) a cash balance. In the aggregate, Parent cash and total investments amounted to $518 million at March 31, 2022, and $527 million at December 31, 2021.

The composition of the Parent's investment portfolio may change over time based on various factors, including the amount and availability of dividends from our Insurance Subsidiaries, investment income, expenses, other Parent cash needs, such as dividends payable to stockholders, asset allocation investment decisions, inorganic growth opportunities, debt retirement, and share repurchases. Our target is for the Parent to maintain highly liquid investments of at least twice its expected annual net cash outflow needs, or $180 million.

Insurance Subsidiary Dividends
The Insurance Subsidiaries generate liquidity through insurance float, which is created by collecting premiums and earning investment income before paying claims. The period of float can extend over many years. Our investment portfolio consists of maturity dates that continually provide a source of cash flow for claims payments in the ordinary course of business. To protect our Insurance Subsidiaries' capital, we purchase reinsurance coverage for significantly large claims or catastrophes that may occur.

The Insurance Subsidiaries paid $40 million in total dividends to the Parent during First Quarter 2022. As of December 31, 2021, our allowable ordinary maximum dividend is $322 million for 2022. All Insurance Subsidiary dividends to the Parent are (i) subject to the approval and/or review of its domiciliary state insurance regulator, and (ii) generally payable only from earned statutory surplus reported in its annual statements as of the preceding December 31. Although domiciliary state insurance regulators historically have approved dividends, there is no assurance they will approve future Insurance Subsidiary dividends.

New Jersey corporate law also limits the maximum amount of dividends the Parent can pay our stockholders if either (i) the Parent would be unable to pay its debts as they became due in the usual course of business, or (ii) the Parent’s total assets would be less than its total liabilities. The Parent’s ability to pay dividends to stockholders is also impacted by (i) covenants in its credit agreement that obligate it, among other things, to maintain a minimum consolidated net worth and a maximum ratio of consolidated debt to total capitalization, and (ii) the terms of our preferred stock that prohibit dividends to be declared or paid
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on our common stock if dividends are not declared and paid, or made payable, on all outstanding preferred stock for the latest completed dividend period.

For additional information regarding dividend restrictions and financial covenants, where applicable, see Note 11. "Indebtedness", Note 17. "Equity", and Note 22. “Statutory Financial Information, Capital Requirements, and Restrictions on Dividends and Transfers of Funds” in Item 8. “Financial Statements and Supplementary Data.” of our 2021 Annual Report.

Line of Credit
On December 20, 2019, the Parent entered into a Credit Agreement with the lenders named therein (the “Lenders”) and the Bank of Montreal, Chicago Branch, as Administrative Agent ("Line of Credit"). Under the Line of Credit, the Lenders have agreed to provide the Parent with a $50 million revolving credit facility that can be increased to $125 million with the Lenders' consent. No borrowings were made under the Line of Credit in First Quarter 2022. The Line of Credit will mature on December 20, 2022, and has a variable interest rate based on, among other factors, the Parent’s debt ratings. For additional information regarding the Line of Credit and corresponding representations, warranties, and covenants, refer to Note 11. "Indebtedness" in Item 8. "Financial Statements and Supplementary Data." of our 2021 Annual Report. We met all covenants under our Line of Credit as of March 31, 2022.

Four of the Insurance Subsidiaries are members of Federal Home Loan Bank ("FHLB") branches, as shown in the following table. Membership requires the ownership of branch stock and includes the right to access liquidity. All Federal Home Loan Bank of Indianapolis ("FHLBI") and Federal Home Loan Bank of New York ("FHLBNY") borrowings are required to be secured by investments pledged as collateral. For additional information regarding collateral outstanding, refer to Note 4. "Investments" in Item 1. "Financial Statements." of this Form 10-Q:

BranchInsurance Subsidiary Member
FHLBI
Selective Insurance Company of South Carolina ("SICSC")1
Selective Insurance Company of the Southeast ("SICSE")1
FHLBNYSelective Insurance Company of America ("SICA")
Selective Insurance Company of New York ("SICNY")
1These subsidiaries are jointly referred to as the "Indiana Subsidiaries" as they are domiciled in Indiana.

The Line of Credit permits aggregate borrowings from the FHLBI and the FHLBNY up to 10% of the respective member company’s admitted assets for the previous year. As SICNY is domiciled in New York, its FHLBNY borrowings are limited by New York insurance regulations to the lower of 5% of admitted assets for the most recently completed fiscal quarter, or 10% of admitted assets for the previous year-end. As of March 31, 2022, we had remaining capacity of $435.2 million for FHLB borrowings, with a $17.1 million additional stock purchase requirement to allow the member companies to borrow their remaining capacity amounts.

Short-term Borrowings
We did not make any short-term borrowings from FHLB branches during First Quarter 2022. However, on April 1, 2022, SICA borrowed $35 million from the FHLBNY at an interest rate of 0.70% with repayment due on May 2, 2022. This borrowing was refinanced upon its maturity on May 2, 2022, at an interest rate of 1.10%. This borrowing now matures on June 27, 2022. These funds were used for general corporate purposes.

Intercompany Loan Agreements
The Parent has lending agreements with the Indiana Subsidiaries approved by the Indiana Department of Insurance that provide additional liquidity. Similar to the Line of Credit, these lending agreements limit the Parent's borrowings from the Indiana Subsidiaries to 10% of the admitted assets of the respective Indiana Subsidiary. The outstanding balance on these intercompany loans was $40.0 million as of both March 31, 2022, and December 31, 2021. The remaining capacity under these intercompany loan agreements was $109.9 million as of both March 31, 2022, and December 31, 2021.

Capital Market Activities
The Parent had no private or public issuances of stock during First Quarter 2022. In the fourth quarter of 2020, we enhanced our capital structure flexibility at the Parent by issuing $200 million of 4.60% non-cumulative perpetual preferred stock. Net proceeds after issuance costs were $195 million. The Parent is using these proceeds for general corporate purposes, which may include the repurchase of common stock under a $100 million share repurchase program authorized by our Board of Directors (the "Board") in conjunction with the preferred stock offering. During First Quarter 2022, we repurchased 1,000 shares of our common stock under this authorization at a cost of $75,488, with a $75.49 average price per share, excluding commission costs paid. We have $96.5 million of remaining capacity under our share repurchase program. For additional information on the
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preferred stock transaction and share repurchase program, refer to Note 17. “Equity” in Item 8. "Financial Statements and Supplementary Data." of our 2021 Annual Report.

Uses of Liquidity
The Parent's liquidity generated from the sources discussed above is used, among other things, to pay dividends to our stockholders. Dividends on shares of the Parent's common and preferred stock are declared and paid at the discretion of the Board based on our operating results, financial condition, capital requirements, contractual restrictions, and other relevant factors. On May 4, 2022, our Board declared:

A quarterly cash dividend on common stock of $0.28 per common share, that is payable June 1, 2022, to holders of record on May 16, 2022; and
A cash dividend of $287.50 per share on our 4.60% Non-Cumulative Preferred Stock, Series B (equivalent to $0.28750 per depository share) payable on June 15, 2022, to holders of record as of May 31, 2022.

Our ability to meet our interest and principal repayment obligations on our debt, as well as our ability to continue to pay dividends to our stockholders, is dependent on (i) liquidity at the Parent, (ii) the ability of the Insurance Subsidiaries to pay dividends, if necessary, and/or (iii) the availability of other sources of liquidity to the Parent. Excluding the short-term borrowing described above, our next FHLB borrowing principal repayment is $60 million to FHLBI due on December 16, 2026.

Restrictions on the ability of the Insurance Subsidiaries to declare and pay dividends, without alternative liquidity options, could materially affect our ability to service debt and pay dividends on common and preferred stock.

Capital Resources
Capital resources ensure we can pay policyholder claims, furnish the financial strength to support the business of underwriting insurance risks, and facilitate continued business growth. At March 31, 2022, we had GAAP stockholders' equity of $2.8 billion and statutory surplus of $2.4 billion. With total debt of $505.6 million at March 31, 2022, our debt-to-capital ratio was 15.4%. For additional information on our statutory surplus, see Note 22. "Statutory Financial Information, Capital Requirements, and Restrictions on Dividends and Transfers of Funds" in Item 8. "Financial Statements and Supplementary Data." of our 2021 Annual Report.

The following table summarizes certain contractual obligations we had at March 31, 2022 that may require us to invest additional amounts into our investment portfolio, which we would fund primarily with operating cash flows.

($ in millions)Amount of ObligationYear of Expiration of Obligation
Alternative and other investments$238.0 2036
Non-publicly traded collateralized loan obligations in our fixed income securities portfolio60.0 2037
Non-publicly traded common stock within our equity portfolio16.4 2027
CMLs6.3 2024
Privately-placed corporate securities65.1 2026
Total$385.8 

There is no certainty that any such additional investment will be required. We expect to have the capacity to repay and/or refinance these obligations as they come due.

Our current and long-term material cash requirements associated with (i) loss and loss expense reserves, (ii) contractual obligations pursuant to operating and financing leases for office space and equipment, and (iii) notes payable, funded primarily with operating cash flows, have not materially changed since December 31, 2021.

Our other cash requirements include, without limitation, dividends to stockholders, capital expenditures, and other operating expenses, including commissions to our distribution partners, labor costs, premium taxes, general and administrative expenses, and income taxes.

As of March 31, 2022 and December 31, 2021, we had no (i) material guarantees on behalf of others and trading activities involving non-exchange traded contracts accounted for at fair value, (ii) material transactions with related parties other than those disclosed in Note 18. “Related Party Transactions” in Item 8. “Financial Statements and Supplementary Data.” of our 2021 Annual Report, and (iii) material relationships with unconsolidated entities or financial partnerships, such as structured finance or special purpose entities, established to facilitate off-balance sheet arrangements or other contractually narrow or
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limited purposes. Consequently, we are not exposed to any material financing, liquidity, market, or credit risk related to off-balance sheet arrangements.

We continually monitor our cash requirements and the amount of capital resources we maintain at the holding company and operating subsidiary levels. As part of our long-term capital strategy, we strive to maintain capital metrics that support our targeted financial strength relative to the macroeconomic environment. Based on our analysis and market conditions, we may take a variety of actions, including, without limitation, contributing capital to the Insurance Subsidiaries, issuing additional debt and/or equity securities, repurchasing existing debt, repurchasing shares of the Parent’s common stock, and increasing common stockholders’ dividends.

Our capital management strategy is intended to protect the interests of the policyholders of the Insurance Subsidiaries and our stockholders, while enhancing our financial strength and underwriting capacity. We have a profitable book of business and solid capital base, positioning us well to take advantage of market opportunities that may arise.

Book value per common share decreased 8% to $42.73 as of March 31, 2022, from $46.24 as of December 31, 2021, driven by a $4.07 change in net unrealized losses on our fixed income securities portfolio and $0.28 in dividends to our common stockholders, partially offset by $0.89 in net income per diluted common share. The increase in net unrealized losses on our fixed income securities was primarily driven by an increase in benchmark U.S. Treasury rates and the widening of credit spreads. Our adjusted book value per share, which is book value per share excluding total after-tax unrealized gains or losses on investments included in accumulated other comprehensive (loss) income, increased slightly to $43.80 as of March 31, 2022, from $43.23 as of December 31, 2021.

Cash Flows
Net cash provided by operating activities was $93 million in First Quarter 2022 compared to $130 million in First Quarter 2021. Cash flows from operations decreased in First Quarter 2022 primarily driven by reduced underwriting results in our insurance operations. For more information on our underwriting results, refer to "Insurance Operations" above in this MD&A.

Net cash used in investing activities was $96 million in First Quarter 2022 compared to $111 million in First Quarter 2021. Investing activity was less in First Quarter 2022 as a result of reduced cash flows from our insurance operations.

Net cash used in financing activities remained relatively flat with $24 million in First Quarter 2022 compared to $26 million in First Quarter 2021.

Ratings
Our ratings remain the same as reported in our "Overview" section of Item 1. "Business." of our 2021 Annual Report and are as follows:

NRSROFinancial Strength RatingOutlook
AM Best CompanyA+Stable
Moody's Investors ServicesA2Stable
Fitch Ratings ("Fitch")A+Stable
Standard & Poor's Global RatingsAStable

On March 24, 2022, Fitch reaffirmed our "A+" rating with a "stable" outlook. In taking this rating action, Fitch cited our (i) business profile as a regional commercial lines writer with strong independent agency relationships, (ii) strong capitalization, and (iii) strong financial performance with stable underwriting results and return metrics that have remained favorable compared to peers.

ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK.

There have been no material changes in the information about market risk set forth in our 2021 Annual Report.

ITEM 4. CONTROLS AND PROCEDURES.

Our management, with the participation of our Chief Executive Officer and Chief Financial Officer, has evaluated the effectiveness of our disclosure controls and procedures (as such term is defined in Rules 13a-15(e) and 15d-15(e) under the Securities Exchange Act of 1934, as amended (the “Exchange Act”)), as of the end of the period covered by this report. In performing this evaluation, management used the criteria set forth by the Committee of Sponsoring Organizations of the Treadway Commission in Internal Control Integrated Framework ("COSO Framework") in 2013. Based on this evaluation,
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our Chief Executive Officer and Chief Financial Officer have concluded that our disclosure controls and procedures as of the end of such period are (i) effective in recording, processing, summarizing, and reporting information on a timely basis that we are required to disclose in the reports that we file or submit under the Exchange Act, and (ii) effective in ensuring that information that we are required to disclose in the reports that we file or submit under the Exchange Act is appropriately accumulated and communicated to our management, including our Chief Executive Officer and Chief Financial Officer, to allow timely decisions about required disclosure. No changes in our internal control over financial reporting (as such term is defined in Rule 13a-15(f) of the Exchange Act) occurred during First Quarter 2022 that materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

PART II. OTHER INFORMATION

ITEM 1. LEGAL PROCEEDINGS.

Incidental to our insurance operations, we are routinely engaged in legal proceedings with inherently unpredictable outcomes that could have a material adverse effect on our consolidated results of operations or cash flows in particular quarterly or annual periods. For additional information regarding our legal risks, refer to Note 12. "Litigation" in Item 1. "Financial Statements." of this Form 10-Q and Item 1A. “Risk Factors.” below in Part II. “Other Information.” As of March 31, 2022, we have no material pending legal proceedings that could have a material adverse effect on our consolidated financial condition, results of operations, or cash flows.

ITEM 1A. RISK FACTORS.

Certain risk factors can significantly impact our business, liquidity, capital resources, results of operations, financial condition, and debt ratings. These risk factors might affect, alter, or change actions we might take executing our long-term capital strategy. Examples include, without limitation, contributing capital to any or all of the Insurance Subsidiaries, issuing additional debt and/or equity securities, repurchasing our existing debt and/or equity securities, or increasing or decreasing common stockholders' dividends. We operate in a continually changing business environment, and new risk factors that we cannot predict or assess may emerge. Consequently, we can neither predict such new risk factors nor assess the potential future impact, if any, they might have on our business. Except as discussed below, there have been no material changes from the risk factors disclosed in Item 1A. “Risk Factors.” in our 2021 Annual Report.

We write business domestically in the United States and we do not have direct exposure within our insurance operations to businesses or individuals in Russia or the Ukraine. We do not have material exposure to investments subject to embargos or Russian reinsurance counterparties. However, the ongoing Russian war against Ukraine is impacting global economic, banking, commodity, and financial markets, exacerbating ongoing economic challenges, including inflation and supply chain disruption, which influences insurance loss costs, premiums and investment valuation.

ITEM 2. UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS.

The following table provides information regarding our purchases of our common stock in First Quarter 2022:

Period
Total Number of
Shares Purchased1
Average Price
Paid per Share
Total Number of
Shares Purchased
as Part of Publicly
Announced Programs2
Approximate Dollar Value of
Shares that May Yet
Be Purchased Under the Announced Programs
(in millions)2
January 1 – 31, 2022846 $80.04 — $96.6 
February 1 – 28, 202270,816 76.56 1,000 96.5 
March 1 – 31, 2022331 83.26 — 96.5 
Total71,993 $76.63 1,000 $96.5 
1We purchased these shares from employees to satisfy tax withholding obligations associated with the vesting of their restricted stock units.
2On December 2, 2020, we announced our Board of Directors authorized a $100 million share repurchase program with no set expiration or termination date. Our repurchase program does not obligate us to acquire any particular amount of our common stock. Management will determine the timing and amount of any share repurchases under the authorization at its discretion based on market conditions and other considerations.

ITEM 3. DEFAULTS UPON SENIOR SECURITIES.

None.

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ITEM 4. MINE SAFETY DISCLOSURES.

Not applicable.

ITEM 5. OTHER INFORMATION.

None.

ITEM 6. EXHIBITS.

Exhibit No. 
Statement Re: Computation of Per Share Earnings
Certification of Chief Executive Officer in accordance with Section 302 of the Sarbanes-Oxley Act of 2002.
Certification of Chief Financial Officer in accordance with Section 302 of the Sarbanes-Oxley Act of 2002.
Certification of Chief Executive Officer in accordance with Section 906 of the Sarbanes-Oxley Act of 2002.
Certification of Chief Financial Officer in accordance with Section 906 of the Sarbanes-Oxley Act of 2002.
**101
The following financial statements from the Company's Quarterly Report on Form 10-Q for the quarter ended March 31, 2022, formatted in Inline Extensible Business Reporting Language (iXBRL): (i) Consolidated Balance Sheets, (ii) Consolidated Statements of Income, (iii) Consolidated Statements of Comprehensive Income, (iv) Consolidated Statements of Stockholders' Equity, (v) Consolidated Statements of Cash Flows and (vi) Notes to Consolidated Financial Statements.
**104
The cover page from the Company's Quarterly Report on Form 10-Q for the quarter ended March 31, 2022, formatted in iXBRL.
* Filed herewith.
** Furnished and not filed herewith.
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Table of Contents

SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this Report to be signed on its behalf by the undersigned thereunto duly authorized.

SELECTIVE INSURANCE GROUP, INC.
Registrant 
Date:May 5, 2022By: /s/ John J. Marchioni
 John J. Marchioni
 Chairperson of the Board, President and Chief Executive Officer
(principal executive officer)
Date:May 5, 2022By: /s/ Mark A. Wilcox
Mark A. Wilcox
Executive Vice President and Chief Financial Officer
(principal financial officer)

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