A.M. Best Affirms Ratings of Selective Insurance.

OLDWICK, N.J. -- A.M. Best Co. has affirmed the financial strength ratings (FSR) of A+ (Superior) and issuer credit ratings (ICR) of "aa-" for 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 and senior convertible notes and "bbb+" on convertible subordinated debentures of Selective's 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 and strong regional market presence within the small commercial lines business segment. In addition, the ratings recognize Selective's disciplined underwriting culture, diversified product offerings and the leveraging of its agency relationships, which have contributed to the group's consistent operating profitability. Furthermore, the group has made significant advancements in information technology platforms, integrated systems and web-based applications in recent years, enabling its agency and claims management specialists to be more responsive to local agents and customers, eliminating frictional costs and making it easier to do business with Selective.

Partially offsetting these positive factors are Selective's above average underwriting and investment leverage and unfavorable--albeit declining--prior year loss reserve development over the past several years, which amounted to $7 million in 2005. Another factor is its relatively high geographic concentration in New Jersey, where competition within personal auto lines from new entrants and existing players was apparent in 2005. Also worth noting, in the second quarter of 2005, Selective strengthened its loss reserves by $6 million as a result of the New Jersey Supreme Court's decision to eliminate the application of the serious life impact standard to personal auto bodily injury cases under New Jersey's verbal tort threshold, a decision that could potentially result in further dampening of results.

While A.M. Best believes Selective is well positioned to continue to outperform its peers the effects of increased competition in both commercial and personal lines and, to a lesser degree, higher catastrophe loss experience, will likely result in increased combined ratios for the group in 2006 and 2007, from its peak performance in 2005.

Selective Insurance Group, Inc's debt-to-total capital at year-end 2005 was 22.8% adjusted for the nearly $50 million held in escrow for principal payments. This leverage is approaching the high end of A.M. Best's expectations for Selective's debt ratings. Holding company liquidity will be diminished in 2006 due to its current stock repurchase program.

The FSRs of A+ (Superior) and ICRs of "aa-" have been affirmed for 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 7.25% senior unsecured notes, due 2034

--"a-" on $100 million 6.70% senior unsecured notes, due 2035

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

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

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