Best Affirms Selective’s ‘A+’ Ratings

May 19, 2008

A.M. Best Co. has affirmed the financial strength ratings (FSR) of ‘A+’ (Superior) and issuer credit ratings (ICR) of “aa-” of Selective Insurance Group and its seven P/C pooling members. Best also affirmed the ICR of “a-” and the debt ratings of Selective’s parent holding company, Selective Insurance Group, Inc. (SIGI) of Branchville, N.J. The outlook for all ratings is stable. (See below for a detailed listing of the companies and ratings.)

Best said “the ratings reflect Selective’s solid capitalization, sustained level of operating profitability, established presence within its targeted regional markets, successful field-based operating model and the technology infrastructure, which allows the group the ability to leverage its strong agency relationships.

“Furthermore, the ratings consider the favorable market presence and strong franchise value of Selective, which ranks among the top 50 property/casualty organizations in the United States based on net premiums written. This strong reputation, along with Selective’s dedicated service capabilities, has enabled it to sustain strong market penetration and maintain high policyholder retention rates.”

The report also indicated that the Group “benefits from the additional financial flexibility provided by SIGI, which maintains modest financial leverage, strong interest coverage ratios and considerable liquid assets.”

However, Best cautioned that Selective’s “above average underwriting and investment leverage ratios and significant prior year adverse loss reserve development, although it has been more favorable in recent years,” should be taken into account as partial offsetting factors.

In addition, Best noted that Selective’s market profile is “somewhat geographically concentrated relative to its rating level, as more than 50 percent of its writings are derived from three states (New Jersey, Pennsylvania and New York), leaving it exposed to regulatory, competitive and catastrophic risks.

“Despite these concerns, the rating outlook is reflective of the group’s solid level of risk-adjusted capital, strong regional market knowledge and proven operating performance. While the group’s underwriting performance is expected to deteriorate modestly given the increased competitive environment and likelihood of higher catastrophe related losses, A.M. Best believes Selective should continue to report favorable operating results over the near term.”

The FSR of ‘A+’ (Superior) and ICRs of “aa-” have been affirmed for Selective Insurance Group and its following P/C pooling members:
— Selective Insurance Company of America
— Selective Way Insurance Company
— Selective Insurance Company of the Southeast
— Selective Insurance Company of New York
— Selective Insurance Company of South Carolina
— Selective Insurance Company of New England
— Selective Auto Insurance Company of New Jersey

The ICR of “a-” has been affirmed for Selective Insurance Group, Inc.

The following debt ratings have been affirmed:
Selective Insurance Group, Inc. —
— “a-” on $36.9 million 8.87 percent senior unsecured notes, due 2010
— “a-” on $49.9 million 7.25 percent senior unsecured notes, due 2034
— “a-” on $99.4 million 6.70 percent senior unsecured notes, due 2035
— “a-” on $8.7 million 1.6155 percent senior unsecured convertible notes, due 2032
— “bbb” on $100 million 7.50 percent junior subordinated notes, due 2066.

Source: A.M. Best – www.ambest.com

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