Selective Insurance Group Inc. Reports Storm and Property Losses and New Jersey Personal Auto Changes

Business Wire, March 31, 1999

BRANCHVILLE, N.J.--(BUSINESS WIRE)--March 30, 1999--James W. Entringer, chairman and CEO of Selective Insurance Group, Inc., and Gregory E. Murphy, president and COO, announced that first quarter earnings will be reduced by a combination of catastrophe losses and an unusual number of large property claims. In addition, recent changes in the personal auto insurance rate reduction law in New Jersey will result in reduced earnings for Selective in 1999, although not in the first quarter.

"Winter storms in January resulted in almost $2 billion in weather-related catastrophe losses industry wide," Entringer said. "Unfortunately, we incurred catastrophe losses in many of our operating territories, particularly New Jersey, Pennsylvania and New York, our three largest states by premium volume." Selective's catastrophe losses for the quarter will be approximately $4.5 million, compared to $2 million during the first quarter of 1998.

Entringer said large property claims in excess of $100,000 added approximately $3 million more to the Company's first quarter losses than during the same period in 1998. "While we are disappointed by the impact of these large property losses incurred during the first quarter, we have carefully reviewed these claims and determined that they represent an unusual occurrence that happens from time to time in our business. The losses are not concentrated in any individual state or type of business, and we were encouraged that only one such loss occurred in our new states in the Midwest."

The combined effect of the 1999 catastrophe losses and the increase in 1999 large property losses will add approximately 4.0 points to the Company's first quarter combined ratio. After-tax earnings for the quarter will be reduced by approximately $5 million, or $0.16 per diluted share.

Murphy noted that an order of the New Jersey Department of Banking and Insurance issued March 10, 1999 modified the New Jersey personal auto insurance rate reduction law, with the result that Selective's annual premiums in this line will be reduced by approximately 15% or $24 million. Prior to the order, the Company had estimated premium reductions of 11.5% or $17 million, based on the law as adopted in May 1998. After giving effect to the premium reduction and the anticipated savings in loss costs, the impact of variable expenses and the rate adequacy in this line, the Company expects that annual after tax earnings will be reduced by about $3 million, or $.10 per diluted share.

"Changes in medical procedures mandated by the law should produce long-term savings for New Jersey's drivers," Murphy said. "The state has eliminated unnecessary tests and treatments and is helping to create an environment where patients, medical providers and insurers can work cooperatively towards optimal medical care for people injured in automobile accidents. Successful implementation of these and other reforms will be the foundation for a more competitive auto insurance market in New Jersey."

This press release contains certain statements that are not historical facts and are considered "forward-looking statements" (as defined in the Private Securities Litigation Reform Act of 1995), which can be identified by terms such as "believes," "expects," "may," "will," "should," "anticipates," "benefits," the negatives thereof, or by discussions of strategy. Such forward-looking statements involve opinions and predictions, and no assurance can be given that the future results will be achieved since events or results may differ as a result of risks facing the Company. These include, but are not limited to, economic, market or regulatory conditions as well as risks associated with Selective's entry into new markets, diversification, and catastrophic events.

Selective Insurance Group, Inc., headquartered in Branchville, New Jersey, is a holding company for five property/casualty insurance companies that offer primary insurance for commercial and personal risks. Selective's insurance companies are rated A by both A.M. Best and Standard & Poor's Insurance Rating Services. The Company offers managed care services through Alta Services as well as software development and processing services through PDA Software Service, Inc.