A.M. Best Affirms Ratings of Selective Insurance; Assigns Issuer Credit Ratings.

OLDWICK, N.J. -- A.M. Best Co. has affirmed the financial strength rating of A+ (Superior) and has assigned issuer credit ratings (ICR) of "aa-" to Selective Insurance Group (Selective) and its six property/casualty pooling members. Concurrently, A.M. Best has affirmed the debt ratings of "a-" on senior notes, "a-" on senior convertible notes and "bbb+" on convertible subordinated debentures of its parent holding company, Selective Insurance Group, Inc. (NASDAQ:SIGI) (both of Branchville, NJ). All ratings have a stable outlook.

The ratings reflect Selective's solid capitalization, historically favorable operating performance, quality management team and strong regional market presence within the small commercial lines business segment. In addition, the ratings recognize Selective's disciplined underwriting culture, broad product offerings, the leveraging of its agency relationships, conservative investment philosophy and prudent capital management, which have contributed to the group's consistent operating profitability.

Furthermore, the group has made significant advancements in Web-based technology in recent years, enabling its agency and claims management specialists to be more responsive to local agents and customers, making it easier for them to do business with Selective. Selective's operating results have improved substantially over the past several years and, despite the recent emergence of more competitive property/casualty markets, are expected to remain strong in 2005.

Partially offsetting these positive factors is Selective's above-average net underwriting leverage and investment leverage, the emergence of unfavorable prior year loss reserve development in recent years and the group's relatively high geographic concentration in New Jersey, where competition within personal lines from existing players and new entrants has become particularly intense.

Selective Insurance Group, Inc.'s debt-to-total capital was moderate at 24% at December 31, 2004, in line with management's long-term objective of maintaining financial leverage below 25%. It maintained $20.8 million of cash and short-term investments and $24 million of funds in an escrow account, which are specifically earmarked for debt repayments this year. Holding company liquidity is furthered by a $45 million bank credit facility (unused).

Finally, holding company fixed charge coverage and interest coverage ratios remain strong and are in line with the debt and ICR ratings.

The financial strength rating of A+ (Superior) has been affirmed and issuer credit ratings of "aa-" have been assigned to Selective Insurance Group and its following property/casualty 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 

The following debt ratings have been affirmed:

Selective Insurance Group, Inc.--

--"a-" on $50 million senior unsecured notes, due 2034

--"a-" on $305 million $1.6155% senior unsecured convertible notes, due 2032

--"bbb+" on $25 million 8.75% convertible subordinated debenture, due 2008

For Best's Debt Ratings, all other Best's Ratings, an overview of the rating process and rating methodologies, please visit http://www.ambest.com/ratings.

A.M. Best Co., established in 1899, is the world's oldest and most authoritative insurance rating and information source. For more information, visit A.M. Best's Web site at http://www.ambest.com.