SELECTIVE INSURANCE GROUP INC – 10-K – Management’s Discussion and Analysis of Financial Condition and Results of Operations.

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Forward-looking Statements
Certain statements in this report, 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." of this Form 10-K. 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 new 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 1. "Organization" and Note
12. "Segment Information" in Item 8. "Financial Statements and Supplementary
Data." of this Form 10-K.

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 ("WYO"). 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. The
MD&A discusses and analyzes our 2021 results compared to 2020. Investors should
read the MD&A in conjunction with Item 8. "Financial Statements." of this Form
10-K. For discussion and analysis of our 2020 results compared to 2019, refer to
Item 7. "Management's Discussion and Analysis of Financial Condition and Results
of Operations." of our Annual Report on Form 10-K for the fiscal year ended
December 31, 2020.

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

•Critical Accounting Policies and Estimates;
•Financial Highlights of Results for Years Ended December 31, 2021, 2020, and
2019;
•Results of Operations and Related Information by Segment;
•Federal Income Taxes; and
•Liquidity and Capital Resources.

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Critical Accounting Policies and Estimates
We have identified the policies and estimates critical to our business
operations and the understanding of our results of operations. The policies and
estimates we consider most critical to the preparation of the Financial
Statements involved (i) reserves for loss and loss expense, (ii) investment
valuations and the allowance for credit losses on available-for-sale ("AFS")
fixed income securities, and (iii) reinsurance.

Reserves for Loss and Loss Expense
Significant time can elapse between the occurrence of an insured loss, the
reporting of the claim to us, and the final settlement and payment of the claim.
To recognize liabilities for unpaid loss and loss expense, insurers establish
reserves as balance sheet liabilities representing an estimate of amounts needed
to pay reported and unreported loss and loss expense. The following tables
provide case and incurred but not reported ("IBNR") reserves for loss and loss
expenses, and reinsurance recoverable on unpaid loss and loss expense as of
December 31, 2021 and 2020:
As of December 31, 2021
                                                                                             Loss and Loss Expense Reserves
                                                                                                                                                                               Reinsurance
                                                                          Case                                      IBNR                                                  Recoverable on Unpaid
($ in thousands)                                                        Reserves                                  Reserves                          Total                 Loss and Loss Expense                Net Reserves
General liability                                    $                   345,996                                       1,427,326                       1,773,322                   213,253                             1,560,069
Workers compensation                                                     351,705                                         700,304                       1,052,009                   196,670                               855,339
Commercial automobile                                                    271,729                                         476,176                         747,905                    15,480                               732,425
Businessowners' policies                                                  41,603                                          67,786                         109,389                     6,828                               102,561
Commercial property                                                       76,406                                          46,975                         123,381                    22,277                               101,104
Other                                                                      3,671                                          22,474                          26,145                     2,136                                24,009
Total Standard Commercial Lines                                        1,091,110                                       2,741,041                       3,832,151                   456,644                             3,375,507

Personal automobile                                                       60,871                                          82,468                         143,339                    40,941                               102,398
Homeowners                                                                13,709                                          35,602                          49,311                     2,392                                46,919
Other                                                                     44,301                                          33,115                          77,416                    64,975                                12,441
Total Standard Personal Lines                                            118,881                                         151,185                         270,066                   108,308                               161,758

E&S casualty lines1                                                       94,839                                         361,875                         456,714                    11,672                               445,042
E&S property lines2                                                        9,080                                          12,892                          21,972                     2,017                                19,955
Total E&S Lines                                                          103,919                                         374,767                         478,686                    13,689                               464,997

Total                                                $                 1,313,910                                       3,266,993                       4,580,903                   578,641                             4,002,262


1Includes general liability (95% of net reserves) and commercial auto liability
coverages (5% of net reserves).
2Includes commercial property (91% of net reserves) and commercial auto property
coverages (9% of net reserves).

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December 31, 2020

                                                                                     Loss and Loss Expense Reserves
                                                                                                                                                                       Reinsurance
                                                                  Case                                      IBNR                                                  Recoverable on Unpaid
($ in thousands)                                                Reserves                                  Reserves                          Total                 Loss and Loss Expense                Net Reserves
General liability                            $                   275,133                                       1,363,508                       1,638,641                   215,136                             1,423,505
Workers compensation                                             359,344                                         721,437                       1,080,781                   210,450                               870,331
Commercial auto                                                  246,428                                         410,123                         656,551                    11,611                               644,940
Businessowners' policies                                          39,047                                          62,517                         101,564                     6,849                                94,715
Commercial property                                               60,254                                          38,228                          98,482                    21,760                                76,722
Other                                                              5,247                                          15,073                          20,320                     2,853                                17,467
Total Standard Commercial Lines                                  985,453                                       2,610,886                       3,596,339                   468,659                             3,127,680

Personal automobile                                               60,860                                          79,596                         140,456                    42,403                                98,053
Homeowners                                                        15,456                                          31,926                          47,382                       847                                46,535
Other                                                             10,498                                          30,013                          40,511                    29,589                                10,922
Total Standard Personal Lines                                     86,814                                         141,535                         228,349                    72,839                               155,510

E&S casualty lines1                                               80,506                                         336,596                         417,102                    12,195                               404,907
E&S property lines2                                                9,401                                           9,164                          18,565                       576                                17,989
E&S Lines                                                         89,907                                         345,760                         435,667                    12,771                               422,896

Total                                        $                 1,162,174                                       3,098,181                       4,260,355                   554,269                             3,706,086


1Includes general liability (95% of net reserves) and commercial auto liability
coverages (5% of net reserves).
2Includes commercial property (92% of net reserves) and commercial auto property
coverages (8% of net reserves).

The duration of the provisions for net claims and expenses of the Insurance Subsidiaries was
about 3.5 years to December 31, 2021compared to 3.7 years at December
31, 2020
.

How reserves are established
Reserves for loss and loss expense include case reserves on reported claims and
IBNR reserves.  Case reserves are estimated on each individual claim based on
claim-specific facts and circumstances known at the time.  Case reserves may be
adjusted up or down as the claim's specific facts and circumstances change. IBNR
reserves are established at more aggregated levels, and they include provisions
for (i) claims not yet reported, (ii) future development on reported claims,
(iii) closed claims that will reopen in the future, and (iv) anticipated salvage
and subrogation recoveries.
Our robust reserve process relies on quarterly internal reserve reviews, based
on our own loss experience, with consideration given to various internal and
external factors. In addition to our internal reserve reviews, we have an
external consulting actuary perform an independent review of our reserves
semi-annually. We do not rely on the external consulting actuary's report to
determine our recorded reserves; however, we review and discuss with the
consulting actuary our respective observations regarding trends, key
assumptions, and actuarial methodologies. While not required, our independent
consulting actuary issues the annual statutory Statements of Actuarial Opinion
for our Insurance Subsidiaries. For additional information on our accounting
policy for reserves for loss and loss expense, refer to Note. 2. "Summary of
Significant Accounting Policies" in Item 8. "Financial Statements and
Supplementary Data." of this Form 10-K.
Range of reasonable reserve estimates
We have estimated a range of reasonable reserve estimates for net loss and loss
expense of $3,564 million to $4,236 million at December 31, 2021. This range
reflects low and high reasonable reserve estimates determined by judgmentally
adjusting the methods, factors, and assumptions selected within the internal
reserve review. This approach produces a range of reasonable reserve estimates,
and does not represent a distribution of all possible outcomes. Therefore, the
final outcomes may fall above or below these amounts. The range does not include
a provision for potential increases or decreases associated with asbestos,
environmental, and certain other continuous exposure claims, which by their
nature are more variable and, therefore, traditional actuarial techniques cannot
be effectively applied.

The range of reasonable reserve estimates increased from December 31, 2021
related to December 31, 2020. This increase is mainly due to the growth of
reserves proportional to the growth of our net earned premiums (“NPE”) and
additional risk created by the current inflationary environment.

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Changes in Reserve Estimates (Loss Development)
Our quarterly reserve process may lead to changes in the recorded reserves for
prior accident years, referred to as favorable or unfavorable prior year loss
and loss expense development. In 2021, we experienced net favorable prior year
loss development of $82.9 million, compared to $72.9 million in 2020 and $50.3
million in 2019. The following table summarizes prior year development by line
of business:
(Favorable)/Unfavorable Prior Year Loss and Loss Expense
Development
($ in millions)                                                              2021             2020               2019
General liability                                                         $ (29.0)            (35.0)              (5.0)
Commercial Automobile                                                        13.3               7.1                0.7
Workers compensation                                                        (58.0)            (60.0)             (68.0)
Businessowners' policies                                                     (0.4)              3.9                1.9
Commercial property                                                          (2.6)              9.2                5.1
Homeowners                                                                    1.8               7.7                7.5
Personal automobile                                                          (0.2)             (1.8)               4.4
E&S casualty lines                                                           (7.0)                -                2.0
E&S property lines                                                           (0.8)             (4.0)               1.0
Other                                                                           -                 -                0.1
Total                                                                     $ (82.9)            (72.9)             (50.3)


A detailed analysis of recent reserve developments by industry follows.

Standard Market General Liability Line of Business
At December 31, 2021, our general liability line of business had recorded
reserves, net of reinsurance, of $1.6 billion, representing 39% of our total net
reserves. In 2021, this line experienced favorable development of $29.0 million,
attributable to lower loss severities in accident years 2018 and prior. During
2020, this line experienced favorable development of $35.0 million, attributable
to lower loss severities in accident years 2017 and prior.

By its nature, general liability presents a diverse set of exposures. Losses and
loss trends are influenced by various factors, including legislative enactments,
judicial decisions, and economic and social inflation. Economic inflation
directly impacts our claims severities by increasing the costs of raw materials,
medical procedures and labor. Social inflation may impact both the frequency and
severity of claims by affecting (i) the propensity for a claimant to file a
claim, (ii) the percentage of claimants who engage lawyers, and (iii) the nature
of judicial verdicts and amount of the associated awards, which influence
settlement values going forward. We monitor claim litigation rates regularly and
have observed modest increases in the percentage of claims with attorney
involvement in recent periods. This trend and the impact of court closures are
affecting the time to settle claims.

We have exposure to abuse or molestation claims, mainly through insurance
policies that we (i) underwrite through our Community and Public Services
("CAPS") strategic business unit and (ii) issue to schools, religious
institutions, day-care facilities, and other social services. These customers
within our CAPS business unit represented approximately 10% of our total
Standard Commercial Lines NPW in 2021 and 11% in 2020. Through 2017, our
exposure to abuse or molestation risk increased, reflective of our CAPS book's
growth. In 2018, we implemented more stringent underwriting eligibility
guidelines and partnered with a third party to better assess exposure and
enhance loss control measures. In 2019, we filed and approved significant rate
increases for this exposure. We continue to monitor each jurisdiction's statute
of limitations to ensure our rate level accounts for the changing exposure as
best we reasonably can. While these underwriting and pricing actions have been
necessary to ensure the profitability of the portfolio going forward, they have
limited our CAPS growth in recent years.

We also have exposure to abuse or molestation claims from recently enacted state
laws that extend the statute of limitations or permit windows for abuse or
molestation claims and lawsuits to be filed that statutes of limitations
previously barred. Consequently, we may receive claims decades after the alleged
acts occurred that will involve complex claims coverage determinations,
potential litigation, higher defense costs, and the need to collect from
reinsurers under older reinsurance agreements. Our claims and actuarial
departments actively monitor these claims to identify changes in frequency or
severity and any emerging or shifting trends. While this should help us better
understand this rapidly evolving exposure, the ultimate impact of social,
political, and legal trends remains highly uncertain, and may significantly
impact the ultimate settlement values for these claims.

The COVID-19 pandemic and resulting economic slowdown have presented additional
risks to this line of business. The impact of the pandemic, including related
governmental orders, court closures, and other behavioral and procedural
changes, such as slower than usual timing in which an individual might bring a
claim, may have or could impact claims reporting or
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settlement types. Settlement patterns may be further impacted by a
trend towards greater involvement of lawyers in the claims process,
previously discussed.

Standard Market Workers Compensation Line of Business
At December 31, 2021, our workers compensation line of business had recorded
reserves, net of reinsurance, of $855 million, representing 21% of our total net
reserves. During 2021, this line experienced favorable reserve development of
$58.0 million, driven by accident years 2019 and prior. Similarly, this line
experienced favorable reserve development during 2020 of $60.0 million, driven
by accident years 2018 and prior. During both 2021 and 2020, the lower loss
emergence than expected was partly due to: (i) medical inflation that was lower
than originally anticipated; and (ii) various significant claims initiatives we
have implemented. Because of the length of time injured workers can receive
related medical treatment, decreases in medical inflation can cause favorable
loss development over an extended number of accident years.

While we believe our underwriting and claims operational changes improved our
underwriting experience, there is risk associated with these changes. Most
notably, changes in operations may inherently change paid and reported
development patterns. While our reserve analyses incorporate methods that adjust
for these changes, a greater risk of fluctuation remains in the estimated
reserves.
In addition to the operational changes, a variety of other issues can impact the
workers compensation line of business, such as the following:

Unexpected changes in medical cost inflation -The industry is currently
experiencing a period of lower medical claim cost inflation. However, some signs
indicate inflationary pressure on these costs. Changes in our historical workers
compensation medical costs, along with potential changes in future medical
inflation, can create additional variability in our reserves;

Changes to statutory workers’ compensation benefits – Changes to benefits may be
enacted that affect all outstanding claims, including claims that have arisen
in the past, but have not yet been resolved. Depending on the social situation and
political climate, these changes can increase or decrease
claim fees;

Changes in the use of the workers’ compensation system – These changes may be
motivated by economic, legislative or other changes, such as the increase
pharmaceutical prescriptions, more complex medical procedures, changes in
the life expectancy of permanently injured workers and the availability of health insurance.

COVID-19-related impacts - While not a major insurer of front-line workers (e.g.
medical facilities and hospitals), we have potential exposure to employees
contracting COVID-19 in the course of their employment. These claims may be
asserted under certain state "presumption statutes" that shift the burden of
proof from the claimant to the insurer. Medical system service and supply
constraints, coupled with injured workers delaying non-essential procedures, may
extend the duration of non-COVID-19 claims. To date, we have not seen
significant COVID-19-related workers compensation losses

Standard Market Commercial Automobile Line of Business
At December 31, 2021, our commercial automobile line of business had recorded
reserves, net of reinsurance, of $732 million, which represented 18% of our
total net reserves. In 2021, this line experienced unfavorable prior year
reserve development of $13.3 million, driven by higher loss severities in
accident years 2016 through 2019. In 2020, this line experienced unfavorable
prior year reserve development of $7.1 million, driven by higher loss severities
in accident years 2016 through 2019 and higher than expected frequencies in
accident year 2019.

For both us and the industry, the commercial automobile line has experienced
unfavorable trends in recent years. Pre-pandemic, increased frequencies were
likely due to increased miles driven related to lower unemployment, poor road
quality, and an increase in distracted driving. The onset of the COVID-19
pandemic in early 2020, along with governmental "stay-at-home" orders,
dramatically reduced miles driven and road traffic, significantly reducing
claims frequency in 2020. While miles driven increased in 2021, driving patterns
have also shifted, including changes in the days of the week and times of day
people are driving. As of the end of 2021, frequencies remained somewhat below
pre-pandemic levels.

Since the pandemic's start, we have seen increasing severities in both the
liability and physical damage coverages. The average value of our bodily injury
paid loss settlements has increased, possibly relating to higher average driving
speeds, higher jury awards, and an increase in distracted driving. Increasing
property damage severities may relate to elevated repair costs for increasingly
complex vehicles that incorporate more technology, as well as recent disruptions
to the supply chain. Continued complications in the supply chain, including
labor shortages, increase the risk of longer-term elevated economic inflation.
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Over the past few years, we have taken steps to improve profitability
of this sector of activity, in particular:

•Taking meaningful rate and underwriting actions on our renewal portfolio. We
will continue to leverage our predictive modeling and analytical capabilities to
provide more granular insights about where we should focus our actions.
•Reducing premium leakage by improving the quality of our rating information,
including validating application information with third-party data and obtaining
more detailed driver information.
•Implementing new tools to score drivers to underwrite more effectively and
align rate with exposure.
•Aggressively managing new business pricing and hazard mix while deploying
co-underwriting by our regional underwriters and corporate underwriting teams'
subject matter experts for selected higher hazard classes to improve risk driver
recognition and exposure-based pricing.

Standard Market Personal Automobile Line of Business
At December 31, 2021, our personal automobile line of business had recorded
reserves, net of reinsurance, of $102 million, which represented 3% of our total
net reserves. In 2021, this line experienced favorable prior year reserve
development of $0.2 million. In 2020, this line experienced unfavorable prior
year reserve development of $1.8 million.

Some of the same issues affecting the commercial automobile line are affecting
this line. The COVID-19-related reduction in frequencies was even more
pronounced than in commercial automobile line. As with the commercial automobile
line, these frequencies significantly rebounded in 2021, yet remain less than
pre-pandemic levels. This line also has a similar potential for higher average
severities like the commercial automobile line. In addition to the
COVID-19-related temporary impacts, the underlying trends of increased vehicle
repair costs and poor road quality are likely causes of rising severities,
possibly exacerbated by distracted driving trends. We continue to recalibrate
our predictive models and refine our underwriting and pricing approaches. While
we believe these underwriting and pricing changes will ultimately lead to
improved profitability and greater stability, the resulting changes to our
exposure profile may impact paid and reported development patterns, thereby
increasing the uncertainty in the reserves in the near term.

E&S Casualty Lines of Business
At December 31, 2021, our E&S casualty lines of business had recorded reserves,
net of reinsurance, of $445 million, representing 11% of our total net reserves.
Our E&S casualty lines results have improved over recent years. In 2021, this
line experienced favorable prior year reserve development of $7.0 million,
primarily attributable to lower loss severities in accident years 2016 and
prior. In 2020, this line did not experience prior year reserve development.

Some of the general liability line risk factors also affect E&S
help lines. These include (i) economic inflation, such as materials and
labor costs; (ii) social trends, such as the increased involvement of lawyers; and
(iii) Impacts related to COVID-19, such as court closures.

The E&S casualty lines also are impacted by operational changes we have made to
improve the portfolio's performance. Our underwriting operations have
substantially exited several targeted business classes that have historically
produced volatile results, including commercial automobile liability, liquor
liability, and snow removal.

Recent E&S accident claims actions have created further accident improvements:

•In 2020, we created a dedicated E&S claims team in our corporate claims
function, bringing greater expertise and consistency to E&S claims handling.
•We have segregated "litigated," "non-litigated," and "high exposure" claims,
with separate specialized teams for each.
•We implemented the following operational and expense improvement initiatives
for legal counsel:
•Increased the use of staff counsel, increasing legal staff in their assigned
territories to support claims volume;
•Heightened focus on legal budgeting and expense management; and
•Implemented a panel counsel review process.

While we believe these underwriting and claims operational changes improved our
underwriting experience, there is risk associated with these changes. Most
notably, changes in portfolio composition or our claims processes may inherently
change paid and reported development patterns. While our reserve analyses
incorporate methods that adjust for these changes, there remains a greater risk
of fluctuation in the estimated reserves.

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Other impacts creating additional uncertainty on claims reserves and claims expenses

Claims Initiative Impacts
Consistent with our strategic imperative to optimize operational efficiency, our
Claims Department continually identifies areas for improvement and efficiency to
increase our value proposition to policyholders. These improvements may lead to
claims practice changes that affect average case reserve levels and claims
settlement rates, which directly impact the data used to project ultimate loss
and loss expense. While these changes may increase uncertainty in our estimates
in the short term, we expect refined management of the claims process to be the
longer-term benefit.

Our internal reserve analyses incorporate certain actuarial projection methods
that make adjustments for changes in case reserve adequacy and claims settlement
rates. These methods adjust our historical loss experience to the current case
adequacy or settlement rate level, providing a more consistent basis for
projecting future development patterns. These methods, like all projection
methods, have their own associated assumptions and judgments. Therefore, no
single method can be interpreted as definitive.

Unanticipated Changes in Inflation
United States ("U.S.") monetary policy and global economic conditions will bring
additional uncertainty related to inflationary trends. Changes in inflation
affect the ultimate settlement costs for many of our lines of business, with the
greatest reserve impact on the longer-tailed lines such as general liability and
workers compensation. Therefore, uncertainty about future inflation or deflation
creates the potential for additional reserve variability in these lines of
business.

Sensitivity analysis: Potential impact on reserve estimates due to changes in
key assumptions
Our process to establish reserves includes a variety of key assumptions,
including without limitation:
•The selection of loss and loss expense development factors;
•The weight to be applied to each individual actuarial projection method;
•Projected future loss trends; and
•Expected claim frequencies, severities, and ultimate loss and loss expense
ratios for the current accident year.

The importance of any single assumption depends on several considerations, such
as the line of business and the accident year. If the actual experience emerges
differently than the assumptions underlying the reserve process, changes in our
reserve estimates are possible that may be material to the results of operations
in future periods. Below are sensitivity tests highlighting potential impacts to
loss and loss expense reserves for the major casualty lines of business under
different scenarios. These tests consider each assumption and line of business
individually, without any consideration of correlation between lines of business
and accident years. Therefore, the results do not constitute an actuarial range.
While the figures represent possible impacts from variations in certain key
assumptions, there is no assurance that future loss and loss expense emergence
will be consistent with either our current or alternative sets of assumptions.

While the sources of reserve variability are generated by different internal and
external trends and operational changes, they ultimately manifest themselves as
changes in the expected loss and loss expense development patterns. These
patterns are a key assumption in the reserving process. In addition, the current
accident year expected loss and loss expense ratios are also a key assumption.
These ratios are developed through a rigorous process of projecting recent
accident years' experience to an ultimate settlement basis. Then they are
adjusted to the current accident year's pricing and loss cost levels. The impact
from underwriting portfolio and claims handling practice changes are also
quantified and reflected where appropriate. As with all estimates, the ultimate
loss and loss expense ratios may differ from those currently estimated.

The sensitivities of loss and loss expense reserves to these key assumptions are
illustrated below for the major casualty lines. The first table displays
estimated impacts from changes in expected reported loss and loss expense
development patterns for our major casualty lines of business. It shows line of
business reserve impacts if the actual calendar year incurred amounts are
greater or less than current expectations by the selected percentages. While
judgmental, the selected percentages by line are based on the reserve range
analysis and the actual historical reserve development for the line of business.
The second table displays the estimated impacts from changes to the expected
loss and loss expense ratios for the current accident year. It shows reserve
impacts by line of business if the expected loss and loss expense ratios for the
current accident year are greater or less than current expectations by the
selected percentages.
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Reserve Impacts of Changes to Expected Loss and Loss Expense Reporting Patterns
                                                                                           (Decrease) to          Increase to Future
                                                                                          Future Calendar            Calendar Year
($ in millions)                                    Percentage Decrease/Increase            Year Reported               Reported
General liability                                                  10             %     $           (155)         $            155
Workers compensation                                               18                               (105)                      105
Commercial automobile liability                                    15                                (90)                       90
Personal automobile liability                                      15                                (10)                       10
E&S casualty lines                                                 10                                (45)                       45


Impact on reserves of changes to ultimate loss and loss expense ratios expected for the current year

                                                                                           (Decrease) to
                                                                                         Current Accident         Increase to Current
                                                                                        Year Expected Loss           Accident Year
                                                                                         and Loss Expense          Expected Loss and
($ in millions)                                    Percentage Decrease/Increase                Ratio              Loss Expense Ratio
General liability                                                  10             pts   $            (80)         $             80
Workers compensation                                               10                                (30)                       30
Commercial automobile liability                                    10                                (50)                       50
Personal automobile liability                                      10                                (10)                       10
E&S casualty lines                                                 10                                (20)                       20



Note that there is some overlap between the impacts in the two tables. For
example, increases in the calendar year development would ultimately impact our
view of the current accident year's loss and loss expense ratios. However, these
tables provide perspective on the sensitivity of each key assumption. While the
changes represent outcomes based on reasonably likely changes to our underlying
reserving assumptions, they do not represent a range of possible outcomes. Our
reserves could increase or decrease significantly from what the tables above
reflect.

Asbestos and Environmental Reserves
Our general liability, excess liability, and homeowners reserves include
exposure to asbestos and environmental claims. The emergence of these claims
occurs over an extended period and can be unpredictable. The total recorded net
loss and loss expense reserves for these claims were $21.1 million as of
December 31, 2021 and $21.4 million as of December 31, 2020, with asbestos
claims constituting approximately 23% of these reserves in both years.

Environmental claims have arisen primarily from insured landfill exposures in
municipal government and small non-manufacturing commercial risk, as well as
leaking underground storage tanks within our homeowners policies. Asbestos
claims have arisen primarily from policies issued to various distributors of
asbestos-containing products, such as electrical and plumbing materials. We
handle our asbestos and environmental claims in a centralized and specialized
asbestos and environmental claim unit. That unit establishes case reserves on
individual claims based on the facts and circumstances known at a given point in
time, supplemented by bulk IBNR reserves.

Estimating IBNR reserves for asbestos and environmental claims is difficult
because these claims have delayed and inconsistent reporting patterns. In
addition, there are significant uncertainties associated with estimating
critical reserve assumptions, such as average clean-up costs, third-party costs,
potentially responsible party shares, allocation of damages, litigation and
coverage costs, and potential state and federal legislative changes. Limiting
our exposure to asbestos and environmental claims are (i) the fuel oil system
exclusion on our New Jersey homeowners policies that we introduced in 2007, and
(ii) the Insurance Services Office, Inc.'s Total Pollution Exclusion that was
introduced in the mid-1980's, Prior to the mid-1980's, we primarily wrote
Standard Personal Lines, which has also limited our exposure to asbestos and
environmental claims.

Other Latent Exposures
We also have other latent and continuous trigger exposures in our ongoing
portfolio. Examples include claims for construction defect and abuse or
molestation, for which states have increased and expanded the statute of
limitations. We manage our exposure to these liabilities through our
underwriting and claims practices, and, a dedicated claims unit, similar to our
handling of asbestos and environmental claims. The impact of social, political,
and legal trends on these claims remains highly uncertain, so our related loss
and loss expense reserves remain highly uncertain. These exposures remain in our
ongoing portfolio, and as such, are reserved in aggregate, with other exposures
within the line of business reserves.

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Investment Valuation and Provision for Credit Losses AFS Fixed Income Securities
Securities

Investment Valuation
Accounting guidance defines the fair value of our investment portfolio as the
exit price, or the amount that would be (i) received to sell an asset or (ii)
paid to transfer a liability in an orderly transaction between market
participants. When determining an exit price we must rely on observable market
data, if available. Most securities in our equity portfolio have readily
determinable fair values and are recorded at fair value with changes in
unrealized gains or losses recognized through income. Our AFS fixed income
securities portfolio is recorded at fair value, and the related unrealized gains
or losses are reflected in stockholders' equity, net of tax. For our AFS fixed
income securities portfolios, fair value is a key factor in the measurement of
(i) losses on securities for which we have the intent to sell, and (ii) changes
in the allowance for credit losses.

The fair value of approximately 96% of our investments measured at fair value
are classified as either Level 1 or Level 2 in the fair value hierarchy and are
priced using observable inputs for identical or similar assets. About 3% are
classified as Level 3 and are based on unobservable market inputs because the
related securities are not traded on a public market. For additional
information, refer to the following within Item 8. "Financial Statements and
Supplementary Data." of this Form 10-K: (i) item (d) of Note 2. "Summary of
Significant Accounting Policies" regarding descriptions of the levels within the
fair value hierarchy and the valuation techniques used for our Level 3
securities, and (ii) Note 7. "Fair Value Measurements" for additional
information on the unobservable inputs in our securities measured using Level 3
inputs.

Allowance for Credit Losses on AFS Fixed Income Securities
When fixed income securities are in an unrealized loss position and we do not
intend to sell them, we record an allowance for credit losses for the portion of
the unrealized loss related to an expected credit loss. We estimate expected
credit losses on these securities by performing a discounted cash flow ("DCF").
The allowance for credit losses is the excess of amortized cost over the greater
of (i) our estimate of the present value of expected future cash flows, or (ii)
fair value. The allowance for credit losses cannot exceed the unrealized loss,
and therefore it may fluctuate with changes in the security's fair value. We
also consider the need to record losses on securities in an unrealized loss
position for which we have the intent to sell.

We analyze unrealized losses for credit loss in accordance with our existing
accounting policy, which includes performing DCF analyses on each security at
the lot level and analyzing these DCFs using various economic scenarios. In
performing these DCF analyses, we calculate the present value of future cash
flows using various models specific to the major security types in our
portfolio. These models use security-specific information and forecasted
macroeconomic data to determine possible expected credit loss scenarios based on
projected changes in the economy. The models contain forecasted economic data
from the Federal Reserve Board's annual supervisory stress test review on
certain large banks and financial institutions. We also have the ability to
incorporate internally-developed forecast information into the models as we deem
appropriate. In developing our best estimate of the allowance for credit losses,
we consider our outlook as to the probability of the various scenarios
occurring.

Based on these analyses, we recorded an allowance for credit losses of $9.7
million in 2021 and $4.0 million in 2020 on our AFS fixed income securities
portfolio. After considering the allowance for credit losses, the remaining
unrealized losses on this portfolio were $17.4 million in 2021 and $11.5 million
in 2020. If the security-specific and macroeconomic assumptions in our DCF
analyses or our outlook as to the occurrence probability of our DCF model
scenarios were to change, our allowance for credit losses and the resulting
credit loss expense will negatively impact our results of operations. Factors
considered in determining the allowance for credit losses require significant
judgment, including our evaluation of the security's projected cash flow stream.

For more information regarding our provision for credit losses on AFS
fixed income securities, see point (c) of note 2. “Summary of the main
Accounting methods” and point (i) of note 5. “Investments” in point 8.
“Financial Statements and Supplementary Data”. of this Form 10-K, respectively.

Reinsurance

Reinsurance recoverables on paid and unpaid loss and loss expense represent our
estimates of the amounts we will recover from reinsurers. Each reinsurance
contract is analyzed to ensure that sufficient risk is transferred to record the
transactions appropriately as reinsurance in the Financial Statements. Amounts
recovered from reinsurers are recognized as assets contemporaneously and in a
manner consistent with the paid and unpaid losses associated with the reinsured
policies. An allowance for credit losses on our reinsurance recoverable balance
is recorded based on an evaluation of balances due from reinsurers and other
available information, including collateral we hold under the terms and
conditions of the underlying agreements. Reinsurers often purchase and rely on
their own retrocessional reinsurance programs to manage their capital position
and improve their financial strength ratings. Details about retrocessional
reinsurance programs are not always transparent, making it difficult to assess
our reinsurers' exposure to counterparty credit risk. Our reinsurer's credit
quality is
                                       42
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also impacted by other factors, such as their reserve adequacy, investment
portfolio, regulatory capital position, catastrophe aggregations, and risk
management expertise. In addition, contractual language interpretations and
willingness to pay valid claims can impact our allowance for estimated
uncollectible reinsurance. Our allowance for estimated uncollectible reinsurance
totaled $1.6 million at December 31, 2021, and $1.8 million at December 31,
2020. We continually monitor developments that may impact recoverability from
our reinsurers, for which we have contractual remedies if necessary. For further
information regarding reinsurance, see the "Reinsurance" section below in
"Results of Operations and Related Information by Segment" and Note 9.
"Reinsurance" in Item 8. "Financial Statements and Supplementary Data." of this
Form 10-K.

Financial Highlights of Results for Years Ended December 31, 2021, 2020, and 20191
                                                                                                                                                                     2021                                                                2020
($ in thousands, except per share amounts)                                                                     2021                           2020                 vs. 2020                             2019                           vs. 2019
Financial Data:
Revenues                                                                                                  $ 3,379,164                         2,922,274                 16          %              $ 2,846,491                               3          %
After-tax net investment income                                                                               263,000                           184,612                 42                             181,161                               2
After-tax underwriting income                                                                                 172,688                           107,716                 60                             129,554                             (17)
Net income before federal income tax                                                                          505,310                           302,988                 67                             336,390                             (10)
Net income                                                                                                    403,837                           246,355                 64                             271,623                              (9)
Net income available to common stockholders                                                                   394,484                           246,355                 60                             271,623                              (9)

Key Metrics:
Combined ratio                                                                                                   92.8    %                         94.9               (2.1)         pts                   93.7               %             1.2          pts
Invested assets per dollar of common stockholders' equity                                                 $      2.88                              2.96                 (3)         %              $      3.05                      

(3)%

Return on average common equity ("ROE")                                                                          14.8    %                         10.4                4.4          pts                   13.6                            (3.2)         pts
Net premiums written to statutory surplus ratio                                                                  1.33    x                         1.30               0.03          pts                      1.39                        (0.09)         pts

Per Common Share Amounts:
Diluted net income per share                                                                              $      6.50                              4.09                 59          %              $      4.53                             (10)         %
Book value per share                                                                                            46.24                             42.38                  9                               36.91                              15
Dividends declared per share to common stockholders                                                              1.03                              0.94                 10                                0.83                              13

Non-GAAP Information:
Non-GAAP operating income2                                                                                $   380,580                           249,686                 52          %              $   264,418                              (6)         %
Diluted non-GAAP operating income per common share2                                                              6.27                              4.15                 51                                4.40                              (6)
Non-GAAP operating ROE2                                                                                          14.3    %                         10.5                3.8          pts                   13.3               %            (2.8)         pts


1Refer to the Glossary of Terms attached to this Form 10-K as Exhibit 99.1 for
definitions of terms used in this financial review.
2Non-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, and after-tax debt retirement costs.
They are used as important financial measures by us, analysts, and investors
because the timing of realized investment gains and losses on sales of
securities in any given period is largely discretionary. In addition, net
realized and unrealized investment gains and losses on investments that are
charged to earnings and the debt retirement costs could distort the analysis of
trends.

Reconciliations of net income available to common shareholders, net income
available to common shareholders per diluted common share, and non-GAAP ROE
operating income, non-GAAP operating income per diluted common share, and
Non-GAAP operating ROE, respectively, is provided in the tables below:

Reconciliation of net income available to common
stockholders to non-GAAP operating income
($ in thousands)                                               2021                2020                  2019
Net income available to common stockholders                $ 394,484               246,355               271,623

Net realized and unrealized (gains) losses, before
tax

                                                          (17,599)                4,217               (14,422)
Debt retirement costs, before tax                                  -                     -                 4,175
Tax on reconciling items                                       3,695                  (886)                3,042

Non-GAAP operating income                                  $ 380,580               249,686               264,418



Reconciliation of net income available to common
stockholders per diluted common share to non-GAAP
operating income per diluted common share                      2021                2020                  2019
Net income available to common stockholders per
diluted common share                                       $    6.50                  4.09                  4.53

Net realized and unrealized (gains) losses, before
tax

                                                            (0.29)                 0.07                 (0.24)
Debt retirement costs, before tax                                  -                     -                  0.07
Tax on reconciling items                                        0.06                 (0.01)                 0.04

Non-GAAP operating earnings per diluted common share $6.27

           4.15                  4.40


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     Reconciliation of ROE to non-GAAP operating ROE               2021       2020       2019
     ROE                                                          14.8  %     10.4       13.6
     Net realized and unrealized (gains) losses, before tax       (0.7)        0.2       (0.7)
     Debt retirement costs, before tax                               -           -        0.2
     Tax on reconciling items                                      0.2        (0.1)       0.2

     Non-GAAP operating ROE                                       14.3  %     10.5       13.3



The components of our ROE and non-GAAP operating ROE are as follows:
ROE Components                                                                   2021                                              2020
                                           2021               2020             vs. 2020                         2019             vs. 2019
Standard Commercial Lines
segment                                       5.9  %            5.1                0.8          pts               5.8               (0.7)         pts
Standard Personal Lines segment               0.1              (0.5)               0.6                            0.3               (0.8)
E&S Lines segment                             0.5                 -                0.5                            0.4               (0.4)
Total insurance operations                    6.5               4.6                1.9                            6.5               (1.9)

Investment income                             9.9               7.8                2.1                            9.1               (1.3)
Net realized and unrealized
gains (losses)                                0.5              (0.1)               0.6                            0.5               (0.6)
Total investments segment                    10.4               7.7                2.7                            9.6               (1.9)

Debt retirement costs                           -                 -                  -                           (0.2)               0.2

Other                                        (2.1)             (1.9)              (0.2)                          (2.3)               0.4

ROE                                          14.8  %           10.4                4.4                           13.6               (3.2)
Net realized and unrealized
(gains) losses, after tax                    (0.5)              0.1               (0.6)                          (0.5)               0.6
Debt retirement costs, after tax                -                 -                  -                            0.2               (0.2)
Non-GAAP operating ROE                       14.3  %           10.5                3.8                           13.3               (2.8)


In 2021, we met the challenges associated with (i) the economic and societal
impacts of the COVID-19 pandemic, (ii) higher inflation, (iii) severe natural
catastrophes, and (iv) a competitive labor market and delivered another
exceptional year of results. We generated our eighth consecutive year of
double-digit non-GAAP operating ROEs, with a 14.3% non-GAAP operating ROE, above
our full-year 2021 target of 11% and our 2020 non-GAAP operating ROE of 10.5%.
Our 2021 results included exceptional growth in revenues and a record level of
net income available to common stockholders per diluted common share as
discussed below. Our ongoing financial success led to an AM Best Company ("AM
Best") rating upgrade to "A+" (Superior) from "A" (Excellent) in November 2021,
reflecting our financial strength, accomplishments, and future prospects.

In 2021, we grew book value per common share by 9%. This increase reflected
$6.50 per diluted common share of net income available to common stockholders,
partially offset by $2.07 of lower unrealized gains on our fixed income
securities portfolio and $1.03 in dividends paid to our common stockholders.
Non-GAAP operating income per diluted common share of $6.27 in 2021, increased
$2.12, or 51%, compared to 2020, with the increase driven by strong
contributions from both underwriting and net investment income.

The increase in non-GAAP operating income per diluted common share in 2021
compared to 2020 was primarily driven by (i) a 60% increase in after-tax
underwriting income to $172.7 million, or $2.85 per share, resulting from a
decrease in net catastrophe losses of $1.02 due to industry-wide U.S.
catastrophe loss activity in 2020 that significantly exceeded the 10-year
historical median, and (ii) a 42% increase in after-tax net investment income to
$263 million, or $4.34 per share. The $1.28 per share increase in after-tax net
investment income in 2021 was driven by a $1.19 per share increase in after-tax
net investment income from our alternative investments within our other
investments portfolio. These strong alternative investment returns principally
reflect our private equity holdings and the results were driven by strong
corporate earnings and robust valuations.

Outlook

For 2022, we have established a non-GAAP operating ROE target of 11%. We have
based our 2022 target on (i) our current estimated weighted average cost of
capital ("WACC"), (ii) an approximate 350 basis point spread over our estimated
WACC, (iii) the current interest rate environment, and (iv) property and
casualty insurance market conditions. Our 2022 11% ROE target sets a high bar
for our financial performance, challenges us to perform at our best, and aligns
our incentive compensation structure with shareholder interests. We entered 2022
in the strongest financial position in our 95-year history, with having a record
level of GAAP equity, statutory capital and surplus, and holding company cash
and investments. We are well positioned to continue executing on our strategic
objectives and delivering growth and profitability.

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In 2022, we will focus on several areas to position ourselves for continued 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, subject
to regulatory approvals, 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.

• Continue to get pure written renewal price increases, as well as
improvements in underwriting, in line with the expected loss trend, while
achieve our strategy of continuous and disciplined growth.

•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.

For 2022, our full year forecast is as follows:

•A GAAP combined ratio, excluding catastrophe losses, of 91.0%. Our combined
ratio estimate assumes no prior-year casualty reserve development;
•Net catastrophe losses of 4.0 points on the combined ratio;
•After-tax net investment income of $200 million that includes $20 million in
after-tax net investment income from our alternative investments;
•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.

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Results of operations and related information by segment

Insurance Operations
The following table provides quantitative information for analyzing the combined
ratio:
All Lines
($ in thousands)                            2021                    2020                 2021 vs. 2020                2019              2020 vs. 2019
Insurance Operations Results:
Net premiums written ("NPW")           $ 3,189,713                  2,773,092                  15        %       $ 2,679,424                   3        %
NPE                                      3,017,253                  2,681,814                  13                  2,597,171                   3
Less:
Loss and loss expense incurred           1,813,984                  1,635,823                  11                  1,551,491                   5
Net underwriting expenses
incurred                                   979,537                    905,830                   8                    876,567                   3
Dividends to policyholders                   5,140                      3,812                  35                      5,120                 (26)
Underwriting income                    $   218,592                    136,349                  60        %       $   163,993                 (17)       %
Combined Ratios:
Loss and loss expense ratio                   60.1    %                  61.0                (0.9)       pts            59.7    %            1.3        pts
Underwriting expense ratio                    32.5                       33.8                (1.3)                      33.8                   -
Dividends to policyholders ratio               0.2                        0.1                 0.1                        0.2                (0.1)
Combined ratio                                92.8                       94.9                (2.1)                      93.7                 1.2



The 15% NPW growth in 2021 compared to the prior-year period reflects our strong
relationships with best-in-class distribution partners, sophisticated
underwriting and pricing tools, and excellent customer servicing capabilities.
This solid growth included (i) renewal pure price increases, and (ii) new
business growth, as follows


($ in millions)                              2021               2020              2021 vs. 2020                    2019             2020 vs. 2019
Direct new business                       $  648.5               579.7                  12        %             $  548.7                   6        %
Renewal pure price increases                   4.9    %            4.3                 0.6        pts                3.7  %              0.6        pts



In addition, our strong NPW growth in 2021 benefited from exposure growth driven
by robust 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 growth in 2021 was further impacted by the 2020 COVID-19-related $75 million
estimate of return audit and mid-term endorsement premium and $19.7 million of
premium credits to our personal and commercial automobile customers, which
reduced NPW by $94.7 million in 2020. The reduction in NPW in 2020 from
COVID-19-related adjustments had the impact of increasing our 2021 NPW growth
rate by 4 percentage points.

In line with impacts on NPW, the increase in NPEs in 2021 compared to 2020
reflect the elements mentioned above.

Loss and Loss Expenses
The loss and loss expense ratio decreased 0.9 points in 2021 compared to 2020,
primarily due to (i) non-catastrophe and catastrophe property loss and loss
expenses, (ii) prior year casualty reserve development, and (iii) the current
year loss and loss expense ratio, which is detailed as follows:

                                              Non-Catastrophe Property
($ in millions)                                Loss and Loss Expenses                                  Net Catastrophe Losses
                                                                                                                                                  

Total impact on
For the year ended December Impact of losses and loss charges on losses and

             Loss and Loss           Impact on Loss and            

loss and loss

            31,                         Incurred               Loss Expense Ratio           Expense Incurred          Loss Expense Ratio            Expense Ratio          (Favorable)/Unfavorable Change in Ratio
           2021                   $            471.7                      15.6      pts    $          164.2                       5.4      pts            21.0                                  (2.3)
           2020                                410.0                      15.3                        215.4                       8.0                     23.3                                   4.4
           2019                                410.5                      15.8                         81.0                       3.1                     18.9                                  (1.3)



Net catastrophe losses of 5.4 points in 2021 and 8.0 points in 2020 were higher
than our longer-term net catastrophe loss averages. Catastrophe losses in 2021
included gross losses of $53 million from Hurricane Ida, or net losses of
approximately $41 million, or 1.4 points, after factoring in the benefit from
our Property Catastrophe Excess of Loss Treaty, which attaches at $40 million.
The structure of our Property Catastrophe Excess of Loss Treaty is detailed in
the "Reinsurance" section in "Results of Operations and Related Information by
Segment" of this MD&A. The majority of the Hurricane Ida losses, which included
meaningful property losses from damage to personal and commercial automobiles,
occurred in New Jersey and the
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surrounding states. The losses in 2020 were mainly caused by a tornado and
subsequent hail event that impacted Tennessee in March, two big storms
April, Civil Unrest, Midwestern Derecho, and Hurricane Isaias.

($ in millions)                                             Favorable Prior 

Year Development of loss pool

                                                        Loss and Loss                                Impact on Loss and
     For the year ended December 31,                   Expense Incurred                              Loss Expense Ratio          

Change (favourable)/unfavorable in the ratio

                   2021                                         (81.0)                                          (2.7)     pts                          0.5
                   2020                                         (85.0)                                          (3.2)                                 (0.9)
                   2019                                         (61.0)                                          (2.3)                                 (0.6)


Details of the prior year casualty reserve development were as follows:
(Favorable)/Unfavorable Prior Year Casualty Reserve
Development
($ in millions)                                                   2021                2020                 2019
General liability                                             $   (29.0)               (35.0)                 (5.0)
Commercial automobile                                              15.0                 10.0                   4.0
Workers compensation                                              (58.0)               (60.0)                (68.0)
Businessowners' policies                                           (2.0)                   -                     -

  Total Standard Commercial Lines                                 (74.0)               (85.0)                (69.0)

Personal automobile                                                   -                    -                   6.0
  Total Standard Personal Lines                                       -                    -                   6.0

E&S                                                                (7.0)                   -                   2.0

Total (favorable) development of the health insurance reserve of the previous year $(81.0)

            (85.0)                (61.0)

(Favorable) impact on loss ratio                                   (2.7)   pts          (3.2)                 (2.3)



In addition to the prior year casualty reserve development, the current year
loss and loss expense ratio was 0.9 points higher in 2021 compared to 2020. In
2020, we experienced lower claims frequencies in our commercial and personal
automobile lines of business reflecting reductions in miles driven due to the
pandemic environment, which benefited our loss ratio in 2020. Although some
benefit continued in 2021, it was not as significant as in 2020.

For additional qualitative discussion of reserve development, see
insurance segment sections below.

Underwriting Expenses
The underwriting expense ratio decreased 1.3 points in 2021 compared to 2020.
The underwriting expense ratio in 2020 was elevated by 1.1 points for
COVID-19-related items. The decrease in the underwriting expense ratio in 2021
reflects the absence of these COVID-19-related impacts, as well as a continued
below-normal travel and entertainment expense levels due to most of 2021's
pandemic-related limited business travel. The COVID-19-related items included in
2020 results were as follows: (i) lower NPE from the estimate of return audit
and mid-term endorsement premium and premium credits given to our personal and
commercial automobile customer; and (ii) a $13.5 million increase to our
allowance for credit losses on premiums receivable.

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Standard Business Lines Segment

($ in thousands)                                     2021                    2020                 2021 vs. 2020                2019              2020 vs. 2019
Insurance Segments Results:
NPW                                             $ 2,593,018                  2,230,636                  16        %       $ 2,137,071                   4        %
NPE                                               2,443,885                  2,143,184                  14                  2,049,614                   5
Less:
Loss and loss expense incurred                    1,426,768                  1,245,627                  15                  1,187,856                   5
Net underwriting expenses incurred                  813,381                    742,014                  10                    710,648                   4
Dividends to policyholders                            5,140                      3,812                  35                      5,120                 (26)
Underwriting income                             $   198,596                    151,731                  31        %       $   145,990                   4        %
Combined Ratios:
Loss and loss expense ratio                            58.4    %                  58.1                 0.3        pts            58.0    %            0.1        pts
Underwriting expense ratio                             33.3                       34.6                (1.3)                      34.7                

(0.1)

Dividends to policyholders ratio                        0.2                        0.2                   -                        0.2                   -
Combined ratio                                         91.9                       92.9                (1.0)                      92.9                   -



NPW growth of 16% in this segment in 2021 compared to 2020 reflected (i) renewal
pure price increases, (ii) new business growth, and (iii) stable retention as
follows:
                                                     For the Year Ended December 31,
($ in millions)                                           2021                          2020
Direct new business                       $           469.9                           $ 421.1
Retention                                                85                    %           85
Renewal pure price increases on NPW                     5.3                               4.4



In line with our global insurance business, NPW growth in 2021 (i)
benefited from the growth in exposure, and (ii) was positively impacted by
approximately four points due to the following items related to COVID-19 2020 which
did not reproduce in 2021:

•A $75 million estimate of return audit and mid-term endorsement premium that
reduced 2020 NPW.
•A $15.4 million premium credit to our commercial automobile customers that
reduced 2020 NPW.

In line with impacts on NPW, the increase in NPEs in 2021 compared to 2020
reflect the elements mentioned above.

The 0.3 point increase in the loss ratio and claims expense ratio in 2021 compared to
2020 was driven by the following elements:

($ in millions)                   Non-Catastrophe Property Losses                               Catastrophe Losses
                                                                                                                                         Total Impact on
   For the year ended    Loss and Loss Expense        Impact on Loss and            Loss and Loss           Impact on Loss and            Loss and Loss              (Favorable)/Unfavorable
      December 31,             Incurred               Loss Expense Ratio           Expense Incurred         Loss Expense Ratio            Expense Ratio               Year-Over-Year Change
          2021           $            340.7                      13.9      pts    $         104.1                       4.3      pts            18.2                               (1.1)
          2020                        296.2                      13.8                       117.8                       5.5                     19.3                                2.9



Our losses in 2021 and 2020 included elevated levels of catastrophe losses, with
4.3 points this year and 5.5 points last year. Both years compared unfavorably
to our longer-term catastrophe loss average for this segment. Catastrophe losses
for this segment are consistent with the discussion in the "Insurance
Operations" section above.

                                        (Favorable) Prior Year Casualty Reserve
($ in millions)                                      Development
For the year ended December          Loss and Loss           Impact on Loss
and Loss                (Favorable) Year-Over-Year
            31,                     Expense Incurred              Expense Ratio                               Change
           2021                   $           (74.0)                       (3.0)           pts                        1.0
           2020                               (85.0)                       (4.0)                                     (0.6)



In addition to the prior year casualty reserve development above, current year
casualty loss costs were 0.4 points higher in 2021 compared to 2020, driven by
our commercial automobile line of business, which experienced an increase in
claim frequencies as driving patterns continued to evolve in the COVID-19
environment, despite still being below our 2019 pre-pandemic levels. In 2020, we
experienced lower claim frequencies in our commercial automobile line of
business due to the pandemic environment. Lower claims frequencies and lower
non-catastrophe property losses provided an offset to the $15.4 million premium
credit to customers in 2020.
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For quantitative information on the prior year development by line of business,
see "Financial Highlights of Results for Years Ended December 2021, 2020, and
2019" above and for qualitative information about the significant drivers of
this development, see the line of business discussions below.

The Standard Commercial Lines underwriting expense ratio decreased 1.3-points in
2021 compared to 2020. The ratio was elevated in 2020 by 1.2 points for
COVID-19-related items, as discussed in the "Insurance Operations" section
above. The decrease in the 2021 underwriting expense ratio reflects the absence
of these COVID-19-related impacts.

The following is a discussion of our most significant Standard Commercial Lines
of business:
General Liability
($ in thousands)                                   2021                2020              2021 vs. 2020               2019             2020 vs. 2019
NPW                                            $ 859,284              716,119                  20        %       $ 699,262                   2        %
 Direct new business                             139,255              122,159                  14                  119,055                   3
 Retention                                            85    %              85                   -        pts            83    %              2        pts
 Renewal pure price increases                        4.4                  3.9                 0.5                      2.8                 1.1
NPE                                            $ 807,158              694,019                  16        %       $ 669,895                   4        %
Underwriting income                              123,450              103,262                  20                   69,932                  48
Combined ratio                                      84.7                 85.1                (0.4)                    89.6                (4.5)
% of total standard commercial NPW                    33                   32                                           33


NPW grew 20% in 2021 due to renewal pure price increases, exposure growth, and
higher direct new business. NPW growth in 2021 also included a 7-point benefit
from the 2020 COVID-19-related $46 million estimate of return audit and mid-term
endorsement premium recorded on this line in the first quarter of 2020, which
did not reoccur in 2021.

The combined ratio decreased 0.4 points in 2021, driven principally by a
decrease in the underwriting expense ratio of 1.5 points, the drivers of which
are consistent with the items discussed in the Standard Commercial Lines Segment
above.

Partially offsetting this decrease in the combined ratio was less favorable
prior year casualty reserve development compared to 2020, as outlined in the
table below.

                                                    (Favorable) Prior Year Casualty Reserve
($ in millions)                                                  Development
                                                  Loss and Loss          Impact on Loss and                    (Favorable)/Unfavorable
     For the year ended December 31,             Expense Incurred        Loss Expense Ratio                     Year-Over-Year Change
                   2021                          $       (29.0)                     (3.6)           pts                      1.4
                   2020                                  (35.0)                     (5.0)                                    4.3



In 2021, the prior year reserve development was primarily attributable to
favorable reserve development on loss severities in accident years 2018 and
prior. In 2020, the prior year reserve development was primarily attributable to
favorable reserve development on loss severities in accident years 2017 and
prior. While this line experienced favorable prior year casualty reserve
development in 2021 and 2020, it is also exposed to changes in economic and
social trends, including litigation propensity and outcomes, and changes in
state laws such as those that extend the statute of limitations or open windows
for previously time-barred actions.

Commercial Automobile

($ in thousands)                              2021                2020              2021 vs. 2020               2019             2020 vs. 2019
NPW                                       $ 767,723              658,930                  17        %       $ 590,011                  12        %
 Direct new business                        115,088              112,893                   2                  102,956                  10
 Retention                                       86    %              86                   -        pts            83    %              3        pts
 Renewal pure price increases                   8.3                  8.1                 0.2                      7.5                 0.6
NPE                                       $ 724,398              615,181                  18        %       $ 554,256                  11        %
Underwriting loss                           (23,335)              (3,126)               (646)                 (43,797)                 93
Combined ratio                                103.2                100.5                 2.7                    107.9                (7.4)
% of total standard commercial NPW               30                   30                                           28

NPW growth of 17% benefited from pure renewal price increases and a
new business, as shown in the table above. Moreover, the growth of NPW in 2021
including (i) an increase in exposure, and (ii) a profit of 3 points compared to the financial year 2020
Related to COVID-19

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$15.4 million premium credit to our commercial automotive customers in the
second quarter of 2020, which did not reoccur in 2021.

The 2.7 point increase in the combined ratio in 2021 compared to 2020 was
mainly motivated by the items in the tables below.

($ in millions)                  Non-Catastrophe Property Losses                               Catastrophe Losses
                                                                                                                                         Total Impact on
  For the year ended    Loss and Loss Expense        Impact on Loss and             Loss and Loss           Impact on Loss and            Loss and Loss                (Favorable)
     December 31,             Incurred               Loss Expense Ratio           Expense Incurred          Loss Expense Ratio            Expense Ratio           Year-Over-Year Change
         2021           $            125.2                      17.3      pts    $            9.8                       1.4         pts         18.7                          3.1
         2020                         92.2                      15.0                          3.4                       0.6                     15.6                         (3.0)



                                        Unfavorable Prior Year Casualty Reserve
($ in millions)                                      Development
For the year ended December          Loss and Loss           Impact on Loss and Loss                   (Favorable)/ Unfavorable
            31,                     Expense Incurred              Expense Ratio                          Year-Over-Year Change
           2021                   $            15.0                         2.1            pts                         0.5
           2020                                10.0                         1.6                                        0.9



The 2021 and 2020 prior year casualty reserve development was primarily
attributable to unfavorable reserve development on loss severities in accident
years 2016 through 2019. The 2020 prior year casualty reserve development also
experienced higher than expected frequencies in accident year 2019.

In addition to the items in the table above, the combined ratio variances
included the following:
•A 1.4-point increase in the current year casualty loss costs in 2021 compared
to 2020, driven primarily by increased claim frequencies in 2021 due to driving
patterns that continue to evolve in the COVID-19 environment compared to 2020.
Last year experienced lower claim frequencies reflecting reductions in miles
driven due to the COVID-19-related driving pattern shifts impacting this line of
business. Lower claims frequencies and lower non-catastrophe property losses
provided an offset to the $15.4 million of premium credits to customers in 2020.
•A 2.2-point decrease in the underwriting expense ratio in 2021 compared to
2020, the drivers of which are consistent with the items discussed in the
Standard Commercial Lines Segment above.

This line of business remains an area of focus for us and most of the industry,
as profitability challenges continue to generate
combined ratios higher than risk-adjusted targets. We will continue to (i)
actively implement price increases consistent with levels experienced in 2021
and 2020, (ii) enhance our underwriting tools to further improve the accuracy of
our rating information to prevent premium leakage, and (iii) actively manage our
new and renewal business.

Workers Compensation

($ in thousands)                            2021                2020              2021 vs. 2020               2019             2020 vs. 2019
NPW                                     $ 317,035              270,168                  17        %       $ 309,322                 (13)       %
 Direct new business                       59,938               51,078                  17                   60,139                 (15)
 Retention                                     86    %              84                   2        pts            84    %              -        pts
 Renewal pure price increases
(decreases)                                   0.1                 (2.0)                2.1                     (2.8)                0.8
NPE                                     $ 306,428              278,062                  10        %       $ 311,370                 (11)       %
Underwriting income                        78,537               70,897                  11                   80,630                 (12)
Combined ratio                               74.4                 74.5                (0.1)                    74.1                 0.4
% of total standard commercial
NPW                                            12                   12                                           14



NPW increased 17% in 2021 compared to 2020 due to higher retention, exposure
growth, and increased direct new business. Additionally, NPW growth in 2021
included an 11-point benefit due to the 2020 COVID-19-related $29 million
estimate of return audit and mid-term endorsement premium recorded on this line
in the first quarter of 2020 that did not reoccur in 2021.

The decrease in the combined ratio in 2021 compared to 2020 was primarily due
to: (i) a decrease in the underwriting expense ratio of 1.7 points, the drivers
of which are consistent with the items discussed in the Standard Commercial
Lines Segment above; and (ii) a 1.4-point reduction in the current year casualty
loss costs. This reduction was in recognition of the favorable frequency trends
and sustained lower medical severity trends impacting this line.

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Partial offsetting of combined ratio declines was less favorable
the evolution of the health insurance reserve of the previous year compared to 2020, as follows:

($ in millions)
                                        (Favorable) Prior Year Casualty Reserve
                                                     Development
For the year ended December          Loss and Loss           Impact on Loss
and Loss                     Unfavorable/(Favorable)
            31,                     Expense Incurred              Expense Ratio                           Year-Over-Year Change
           2021                   $           (58.0)                      (18.9)           pts                           2.7
           2020                               (60.0)                      (21.6)                                         0.2



For both periods, the favorable reserve development was due to continued
favorable medical severity trends impacting accident years 2019 and prior. Due
to the length of time injured workers can receive related medical treatment,
decreases in medical inflation can cause favorable loss development across an
extended number of accident years.

Commercial property

($ in thousands)                                 2021                  2020                2021 vs. 2020               2019             2020 vs. 2019
NPW                                          $ 470,043                  413,194                  14        %       $ 373,809                  11        %
 Direct new business                           108,418                   94,697                  14                   88,527                   7
 Retention                                          84    %                  84                   -        pts            82    %              2        pts
 Renewal pure price increases                      6.0                      4.6                 1.4                      3.3                 1.3
NPE                                          $ 436,412                  388,120                  12        %       $ 353,834                  10    

%

Underwriting income (loss)                      10,515                  (21,296)               (149)                  21,639                (198)
Combined ratio                                    97.6                    105.5                (7.9)                    93.9                11.6
% of total standard commercial NPW                  18                       19                                           17



NPW growth of 14% in this line in 2021 vs. 2020 was driven by renewal
pure price increases, exposure growth and higher new business.

Quantitative information regarding material losses is as follows:
(in millions of dollars)

             Non-Catastrophe Property Losses                                        Catastrophe Losses

For the year ended December Impact of losses and loss charges on losses and

           Loss and Loss           Impact on Loss and           Total Impact on Loss              (Favorable)/Unfavorable
            31,                   Incurred               Loss Expense Ratio           Expense Incurred         Loss Expense Ratio          and Loss Expense Ratio              Year-Over-Year Change
           2021             $            182.5                      41.8      pts    $          79.3                      18.2      pts                  60.0                               (6.7)
           2020                          168.6                      43.4                        90.2                      23.3                           66.7                               11.7



Our losses in 2021 and 2020 included elevated levels of catastrophe losses, with
18.2 points this year and 23.3 points last year. Both years compare unfavorably
to our longer-term catastrophe loss average for this line of business.
Catastrophe losses for this segment are consistent with the discussion in the
"Insurance Operations" section above.

Standard Personal Lines Segment

($ in thousands)                                  2021                  2020                2021 vs. 2020               2019             2020 vs. 

2019

Insurance Segments Results:
NPW                                           $ 292,265                  295,166                  (1)       %       $ 304,592                  (3)       %
NPE                                             293,559                  299,140                  (2)                 307,739                  (3)
Less:
Loss and loss expense incurred                  212,116                  233,260                  (9)                 211,300                  10
Net underwriting expenses incurred               77,477                   81,388                  (5)                  88,179                  (8)
Underwriting income                           $   3,966                  (15,508)               (126)       %       $   8,260                (288)       %
Combined Ratios:
Loss and loss expense ratio                        72.2    %                78.0                (5.8)       pts          68.6        %        9.4        pts
Underwriting expense ratio                         26.4                     27.2                (0.8)                    28.7                (1.5)
Combined ratio                                     98.6                    105.2                (6.6)                    97.3                 7.9



NPW declined 1% in 2021 compared to 2020, primarily driven by a reduction in
direct new business and slightly lower retention, both of which were impacted by
the challenging personal automobile competitive environment. This decrease was
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partially offset by the impact of the COVID-19 related premium credits to our
personal automobile customers, which reduced NPW by $4.3 million in 2020 and
added one point of growth in 2021 compared to 2020, as these premium credits did
not reoccur in 2021. In the third quarter of 2021, we transitioned our personal
lines strategy to targeting new and renewal customers in the mass affluent
market where we believe our strong coverage and servicing capabilities can be
more competitive.

               ($ in millions)                             2021         2020
               Direct new business premiums1             $ 40.9       $ 44.7
               Retention                                     82   %       83
               Renewal pure price increases on NPW          1.0          2.5

1Excludes our direct written flood premiums, which are ceded 100% to NFIP and
therefore has no impact on our NPW.

The decrease in NPEs in 2021 compared to 2020 reflects declines in NPW
discussed above.

The loss and loss expense ratio decreased 5.8 points in 2021 compared to 2020,
the primary drivers of which were as follows:
($ in millions)             Non-Catastrophe Property Losses                                       Catastrophe Losses
                                                                                                                                          Total Impact on

For the year ended December Impact of losses and loss charges on losses and

          Loss and Loss           Impact on Loss and           Loss and Loss               Unfavorable
            31,                   Incurred               Loss Expense Ratio          Expense Incurred         Loss Expense Ratio           Expense Ratio          Year-Over-Year Change
           2021             $            102.8                      35.0      pts   $          37.4                      12.7      pts           47.7                        (6.9)
           2020                           86.0                      28.7                       77.5                      25.9                    54.6                        13.8




Our 2021 losses were impacted by 44 events that were designated as catastrophes
by Property Claims Services ("PCS"), an internationally recognized authority on
insured catastrophe property losses, including two severe thunderstorms
accompanied by wind and hail occurring in March and June, Hurricane Ida in late
August and early September, and a series of severe tornadoes that swept the
Midwest in December. Our 2020 losses were impacted by 38 events that PCS
designated as catastrophes, including a tornado affecting Tennessee in March,
two severe April storms with damaging winds and tornadoes affecting the
Midwestern states, Hurricane Isaias in late July and early August, and the
August derecho in the Midwest.

There was no prior year casualty reserve development in either 2021 and 2020.
However, current year casualty loss costs were 1.2 points higher in 2021
compared to 2020, driven by our personal automobile line of business, reflecting
increases in claim frequencies as driving patterns continued to evolve in the
COVID-19 environment.

The underwriting expense ratio decreased 0.8-points in 2021 compared to 2020.
The ratio was elevated in 2020 by 1.0 points for COVID-19-related items, as
discussed in the "Insurance Operations" section above. The decrease in the
underwriting expense ratio in 2021 reflects the absence of these
COVID-19-related impacts.

E&S Lines Segment
                                                                                                                                 2020
($ in thousands)                            2021                2020              2021 vs. 2020               2019             vs. 2019
Insurance Segments Results:
NPW                                     $ 304,430              247,290                  23        %       $ 237,761                 4      %
NPE                                       279,809              239,490                  17                  239,818                 -
Less:
Loss and loss expense incurred            175,100              156,936                  12                  152,335                 3
Net underwriting expenses
incurred                                   88,679               82,428                   8                   77,740                 6
Underwriting income (loss)              $  16,030                  126              12,622        %       $   9,743               (99)     %
Combined Ratios:
Loss and loss expense ratio                  62.6    %            65.5      

(2.9) points 63.5% 2.0 points
Technical expense ratio

                   31.7                 34.4                (2.7)                    32.4               2.0
Combined ratio                               94.3                 99.9                (5.6)                    95.9               4.0


Strong NPW growth of 23% in 2021 was driven by increased new
growth in business, pure renewal price and exposure driven by a favorable market
conditions in the E&S lines in the we

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The quantitative information is as follows:

                ($ in millions)                          2021          2020
                Overall renewal price increases            6.5    %     6.2
                Direct new business premiums           $ 137.7        113.9


The increase in NPEs in 2021 compared to 2020 reflects increases in NPW
discussed above.

The 2.9-point decrease in the loss and loss expense ratio in 2021 compared to
2020 was primarily attributable to favorable prior year casualty reserve
development and a decrease in property losses. This was partially offset by an
increase in current year casualty loss costs of 1.4 points, driven primarily by
increased claim frequencies in 2021 compared to the decreased levels experienced
in 2020.

Quantitative information regarding our property losses and prior year casualty
reserve development are as follows:
($ in millions)                       Non-Catastrophe Property Losses                               Catastrophe Losses

For the year ended December Impact of losses and loss charges on losses and

           Loss and Loss           Impact on Loss and          Total Impact on Loss              (Favorable)/Unfavorable
            31,                     Incurred               Loss Expense Ratio          Expense Incurred         Loss Expense Ratio         and Loss Expense Ratio              Year-Over-Year Change
            2021             $              28.2                      10.1      pts   $          22.7                       8.1      pts                 18.2                               (1.8)
            2020                            27.9                      11.6                       20.0                       8.4                          20.0                                8.3



Our 2021 losses were impacted by 50 events that PCS designated as catastrophes,
including Winter Storm Uri affecting Texas in February, a series of large storms
affecting the Southern and Midwestern states in May, and Hurricane Ida in late
August and early September. Our 2020 losses were impacted by 49 events that PCS
designated as catastrophes, including the civil unrest throughout the country in
June and Hurricane Laura in August.

($ in millions)                          (Favorable) Prior Year Casualty Reserve
                                                       Development
 For the year ended December           Loss and Loss           Impact on Loss and Loss                    (Favorable)/Unfavorable
             31,                      Expense Incurred              Expense Ratio                          Year-Over-Year Change
            2021                    $            (7.0)                       (2.5)           pts                         (2.5)
            2020                                    -                           -                                        (0.8)


The favorable development of the health insurance reserve from the previous year in 2021 was mainly
attributable to lower claims severity in accident years 2016 and earlier. The
there was no development of the previous year’s crash reserve in 2020.

The 2.7-point decrease in the underwriting expense ratio in 2021 compared to
2020 was primarily driven by: (i) a decrease in labor expenses of 1.5 points and
(ii) a decrease in compensation to our distribution partners of 0.6 points from
changes in premium mix and corresponding commission rates. In addition, the
underwriting expense ratio in 2020 was elevated by 0.9 points for the
COVID-19-related increase in our allowance for credit losses on premiums
receivable, as discussed in "Insurance Operations" above. The decrease in the
underwriting expense ratio in 2021 reflects the absence of this COVID-19-related
impact.

Reinsurance

We use reinsurance to protect our capital resources and insure against losses on
property and casualty risks that we underwrite in excess of the amount that we
are prepared to accept. We use two main reinsurance vehicles: (i) a reinsurance
pooling agreement among our Insurance Subsidiaries through which each company
agrees to share in premiums and losses based on certain specified percentages;
and (ii) reinsurance contracts and arrangements with third parties that cover
various policies that we issue to our customers.
Reinsurance Pooling Agreement
The primary purposes of the Insurance Subsidiaries' reinsurance pooling
agreement are to:

• Pool or proportionately share the underwriting profits and losses of
P&C insurance underwriting transactions through reinsurance;

•Reduce administration costs; and

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•Allow all Insurance Subsidiaries to obtain a uniform rating from AM Best.

Here is an illustration of the pooling percentages by Insurance Subsidiary at
December 31, 2021:

  Insurance Subsidiary                                            Pooling 

Percentage

  Selective Insurance Company of America ("SICA")                       

32.0%

  Selective Way Insurance Company ("SWIC")                              

21.0%

  Selective Insurance Company of South Carolina ("SICSC")                

9.0%

  Selective Insurance Company of the Southeast ("SICSE")                 

7.0%

  Selective Insurance Company of New York ("SICNY")                      

7.0%

  Selective Casualty Insurance Company ("SCIC")                          

7.0%

  Selective Auto Insurance Company of New Jersey ("SAICNJ")              

6.0%

  Mesa Underwriters Specialty Insurance Company ("MUSIC")                

5.0%

  Selective Insurance Company of New England ("SICNE")                   

3.0%

  Selective Fire and Casualty Insurance Company ("SFCIC")                

3.0%


Reinsurance Treaties and Arrangements
By entering into reinsurance treaties and arrangements, we can increase our
underwriting capacity, accepting larger individual risks and aggregations of
risks without directly increasing our capital or statutory surplus. Our
reinsurance program principally consists of traditional reinsurance. Under our
reinsurance treaties, we cede to our reinsurers a portion of our incurred losses
from an individual policy or group of policies in exchange for a portion of the
premium on those policies. Amounts not reinsured below a specified dollar
threshold are known as retention. Reinsurance does not legally discharge us from
liability under the terms and limits of our policies, but it does make our
reinsurers liable to us for the amount of liability we cede to them. Our
reinsurers often rely on their own reinsurance programs, or retrocessions, to
manage their large loss exposures. The size of the global reinsurance community
is relatively small. If our reinsurers are unable to collect on their
retrocessional programs, it may impair their ability to pay us for the amounts
we cede to them.

Consequently, our reinsurers present us with direct, indirect, and contingent
counterparty credit risk. We attempt to mitigate this credit risk by (i)
pursuing relationships with reinsurers rated "A-" or higher by AM Best and/or
(ii) obtaining collateral to secure reinsurance obligations. Some of our
reinsurance treaties permit us to terminate or commute them - or require the
reinsurer to post collateral if the reinsurer's financial condition or rating
deteriorates. We monitor our reinsurers' financial condition, and we review the
quality of reinsurance recoverables and reserves for uncollectible reinsurance.
For additional information regarding our reinsurance counterparty credit risk,
see Note 9. "Reinsurance" in Item 8. "Financial Statements and Supplementary
Data." of this Form 10-K.

We have reinsurance contracts that separately cover our property and accidents
insurance activities which can be broken down into the following key categories:

•Property Reinsurance, which includes our (i) property excess of loss treaties
purchased for protection against large individual property losses and (ii)
property catastrophe treaties purchased to provide protection for the overall
property portfolio against severe catastrophic events. We also purchase a
limited amount of facultative reinsurance, primarily for large individual
property risks greater than our property excess of loss treaty capacity.

•Casualty Reinsurance, which provides protection for both individual large
casualty losses and catastrophic casualty losses involving multiple claimants or
insureds. We also may use facultative reinsurance for large individual casualty
risks in excess of our treaty capacity. We may also purchase quota share
capacity for certain new or higher severity casualty lines of business.

•Terrorism Reinsurance, which provides a federal reinsurance backstop, behind
the protection built into our property and casualty reinsurance treaties, for
terrorism losses covered under the Terrorism Risk Insurance Program
Reauthorization Act ("TRIPRA"). For further information about TRIPRA, see Item
1A. "Risk Factors." of this Form 10-K.

•Flood Reinsurance, for which all of the premiums and losses related to our
participation in the WYO (for which we also receive a servicing fee) are 100%
ceded to the federal government.

Property Reinsurance
We renewed our main property catastrophe treaty, which covers both our standard
market and E&S business, effective January 1, 2022. For this treaty, we
purchased an additional $50 million in limit to respond to our growing property
portfolio, thereby
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extending the coverage to $835 million in excess of the $40 million retention.
Due to growth in our E&S property book of business, more challenging market
conditions, and our recent and planned Standard Commercial Lines geographic
expansion, we restructured our non-footprint catastrophe treaty from a $35
million in excess of $5 million structure covering a limited number of states to
a $30 million in excess of $10 million treaty, covering all 50 states and the
District of Columbia, for our E&S business only. This removed our five newest
Standard Commercial Lines states from coverage under this treaty, as they are
covered under the main property catastrophe treaty. We also increased our
co-participation from 15% to 34% to balance the cost versus volatility
protection provided by this treaty. Consistent with the prior year, both
treaties were renewed with restrictions in coverage related to the systemic
perils of communicable disease and first-party cybersecurity coverage, in line
with current market conditions. Consequently, the property catastrophe program
excludes coverage for communicable disease, but retains limited reinsurance
coverage for cybersecurity risks. Despite these limitations, coverage for
traditionally covered property perils was maintained.

We seek to minimize reinsurance credit risk by transacting with highly-rated
reinsurance partners and purchasing collateralized reinsurance products,
particularly for high-severity, low-probability events, if feasible. Our current
reinsurance program includes $259 million in collateralized limit, primarily in
the top layer of the catastrophe program, compared to $281 million in
collateralized limit under the prior year's reinsurance program.

Overall, we expect ceded premium for our property catastrophe reinsurance
treaties to increase modestly in 2022 due to three factors: (i) increases in
underlying property exposures in line with our growing property insurance
portfolio; (ii) the addition of $50 million of coverage purchased to maintain
stability in our net risk profile; and (iii) modest risk-adjusted price
increases.

We model various catastrophic perils, and hurricane risk continues to be our
portfolio's most significant natural catastrophe peril because of the geographic
location of the risks we insure. The table below illustrates the impact of the
five largest hurricane losses we have experienced in the last 35 years:

              ($ in millions)                                               Accident
                Hurricane Name       Actual Gross Loss1      Net Loss2        Year
               Superstorm Sandy            $125.5              45.6           2012
                Hurricane Ida               53.4               41.5           2021
               Hurricane Irene              44.8               40.2           2011
                Hurricane Hugo              26.4                3.0           1989
               Hurricane Isabel             25.1               15.7           2003


1This amount represents reported and unreported gross losses estimated as of
December 31, 2021.
2Net loss does not include reinstatement premiums, taxes, or flood claims
handling fees.

We review our exposure to hurricane risk by examining third-party vendor models
and conducting our own proprietary analysis. The third-party vendor models
provide a long-term view that closely relates modeled event frequency to
historical hurricane activity, adjusting to reflect certain non-modeled cost
assumptions, such as the impact of loss expenses, residual market assessments,
and automobile-related losses. We believe that modeled estimates provide a range
of potential outcomes, and we review multiple estimates to understand our
catastrophic risk.

 Occurrence Exceedance Probability                          Modeled Losses
                                                                             Net Losses
                                          Gross             Net           as a Percent of
         ($ in thousands)                Losses1          Losses2           GAAP Equity3
4.0% (1 in 25 year event)               $196,905          35,304                 1          %
2.0% (1 in 50 year event)                325,920          38,613                 1
1.0% (1 in 100 year event)               529,858          43,956                 1
0.67% (1 in 150 year event)              757,577          61,871                 2
0.5% (1 in 200 year event)               831,257          67,544                 2
0.4% (1 in 250 year event)               965,971          125,306                4
0.2% (1 in 500 year event)              1,384,970         454,888                15


1Gross losses include uncertainty associated with damage/loss estimation, demand
and storm surge, and assumptions for certain un-modeled costs, such as the
impact of loss expenses, residual market assessments, and automobile-related
losses, which collectively increase our gross losses by approximately 13%.
2Net losses are after-tax losses net of catastrophe reinsurance including
reinstatement premiums.
3GAAP Equity as of December 31, 2021.

Our current catastrophe reinsurance program exhausts at an approximately 1 in
216 year return period, or events with 0.5% probability, based on a multi-model
view of hurricane risk. Our actual gross and net losses incurred from hurricanes
making U.S.-landfall will vary, perhaps materially, from our estimated modeled
losses.

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We renewed the property excess of loss treaty, which covers both our standard
market and E&S business, on July 1, 2021, and the top layer renewed on January
1, 2022. This treaty was renewed with an increase in the retention on the first
layer to $3.0 million from $2.0 million to manage the overall reinsurance cost
on our growing portfolio and maintain projected earnings volatility protection
in line with our historical levels.
The following table summarizes of our property reinsurance treaties and
arrangements covering our Insurance Subsidiaries:
PROPERTY REINSURANCE ON INSURANCE PRODUCTS
Treaty Name                         Reinsurance Coverage                                   Terrorism Coverage
Property Catastrophe                $835 million above $40 million retention               All nuclear, biological, chemical, and
Excess of Loss                      treaty that responds on per occurrence                 radioactive ("NBCR") losses are
(covers all insurance               basis in four layers:                                  excluded regardless of whether or not
operations)                         - 82% of losses in excess of $40 million               they are certified under TRIPRA.
                                    up to                                                  Non-NBCR losses are covered to the
                                       $100 million;                                       same extent as non-terrorism losses.
                                    - 97% of losses in excess of $100 million              Please see Item 1A. "Risk Factors." of
                                    up to                                                  this Form 10-K for discussion
                                       $225 million;                                       regarding TRIPRA.
                                    - 97% of losses in excess of $225 million
                                    up to
                                       $525 million; and
                                    - 90% of losses in excess of $525 million
                                    up
                                       to $875 million.

                                    The treaty provides one reinstatement in
                                    each of the first three layers and no
                                    reinstatement in the fourth layer. The per
                                    occurrence limit is $776.5 million and the
                                    annual aggregate limit is $1.2 billion,
                                    net of the Insurance Subsidiaries'
                                    co-participation.
                                    In addition, our $30 million above $10
                                    million retention treaty that responds on
                                    per occurrence basis covers 66% of E&S
                                    losses only, in all states, and has an
                                    annual aggregate limit of $34 million, net
                                    of the Insurance Subsidiaries'
                                    co-participation.
Property Excess of Loss             $57 million above $3 million retention                 All NBCR losses are excluded
(covers all insurance               covering 100% in three layers. Losses                  regardless of whether or not they are
operations)                         other than TRIPRA certified losses are                 certified under TRIPRA.  For non-NBCR
                                    subject to the following reinstatements                losses, the treaty distinguishes
                                    and annual aggregate limits:                           between acts committed on behalf of
                                                                                           foreign persons or foreign interests
                                                                                           ("Foreign Terrorism") and those that
                                    - $7 million in excess of $3 million layer             are not.  The treaty provides annual
                                       provides unlimited reinstatements;                  aggregate limits for Foreign Terrorism
                                                                                           (other than NBCR) acts of $21 million
                                    - $30 million in excess of $10 million                 for the first layer; $60 million for
                                    layer                                                  the second layer; and $40 million for
                                        provides three reinstatements, $120                the third layer. Non-foreign terrorism
                                    million in                                             losses (other than NBCR) are covered
                                        aggregate limits; and                              to the same extent as non-terrorism
                                    - $20 million in excess of $40 million                 losses.
                                    layer
                                       provides three reinstatements, $80
                                    million in aggregate
                                       limits.

Flood                               100% reinsurance by the federal                        None
                                    government's WYO.



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Casualty Reinsurance
We renewed the casualty excess of loss treaty, which covers both our standard
market and E&S Lines business, on July 1, 2021, substantially on the same terms
as the treaty expiring June 30, 2021.

The following table summarizes our casualty reinsurance treaties and
arrangements covering our Insurance Subsidiaries:
CASUALTY REINSURANCE ON INSURANCE PRODUCTS
Treaty Name                             Reinsurance Coverage                                 Terrorism Coverage
Casualty Excess of Loss                 There are six layers covering 100% of                All NBCR losses are excluded. All
(covers all insurance                   $88 million in excess of $2 million.                 other losses stemming from the acts
operations)                             Losses other than terrorism losses are               of terrorism are subject to the
                                        subject to the following:                            following:
                                        - $3 million in excess of $2 million                 - $3 million in excess of $2 million
                                        layer                                                layer with
                                           provides 33 reinstatements, $102                     $15 million net annual terrorism
                                        million annual aggregate                             aggregate limit;
                                            limit;
                                        - $7 million in excess of $5 million                 - $7 million in excess of $5 million
                                        layer                                                layer with
                                           provides six reinstatements, $49                     $28 million net annual terrorism
                                        million annual aggregate                             aggregate limit;
                                            limit;
                                        - $9 million in excess of $12 million                - $9 million in excess of $12 million
                                        layer                                                layer with
                                           provides three reinstatements; $36                   $27 million net annual terrorism
                                        million annual                                       aggregate limit;
                                           aggregate limit;

                                        - $9 million in excess of $21 million                - $9 million in excess of $21 million
                                        layer                                                layer with
                                           provides one reinstatement, $18                      $18 million net annual terrorism
                                        million annual aggregate                             aggregate limit;
                                           limit;

                                        - $20 million in excess of $30 million               - $20 million in excess of $30
                                        layer                                                million layer with
                                           provides one reinstatement, $40                      $40 million net annual terrorism
                                        million annual aggregate                             aggregate limit; and
                                           limit; and

                                        - $40 million in excess of $50 million               - $40 million in excess of $50
                                        layer                                                million layer with
                                           provides one reinstatement, $80                      $80 million net annual terrorism
                                        million annual aggregate                             aggregate limit.
                                           limit.




We have other reinsurance treaties, such as our (i) Surety and Fidelity Excess
of Loss Reinsurance Treaty, (ii) National Workers Compensation Reinsurance Pool
Quota Share, which covers business assumed from the involuntary workers
compensation pool, (iii) Endurance Specialty Quota share and Loss Development
Cover, which protects against losses on policies written before the acquisition
and any development on reserves established by MUSIC as of the date of
acquisition, (iv) Equipment Breakdown Coverage Reinsurance Treaty, (v)
Multi-line Quota Share, which covers additional personal lines coverages, (vi)
Cyber Liability Quota Share, and (vii) Excess Liability Quota Share, which
covers MUSIC's excess liability business.

We regularly evaluate our overall reinsurance program, and we try to develop
effective ways to manage the transfer of risk. We base our analysis on a
comprehensive process that includes periodic analysis of modeling results, our
own loss experience, aggregation of exposures, exposure growth, diversification
of risks, limits written, projected reinsurance costs, reinsurer financial
strength, and projected impact on earnings, equity, and statutory surplus. We
strive to balance reinsurer credit quality, price, terms, and our appetite to
retain a certain level of risk.

Investments Segment
The primary objective of the investment portfolio is to maximize after-tax net
investment income and the overall total return of the portfolio, while
maintaining a high credit quality core fixed income securities portfolio and
managing our duration risk profile. The effective duration of the fixed income
securities portfolio, including short-term investments, was 3.9 years as of
December 31, 2021, compared to the Insurance Subsidiaries' net loss and loss
expense reserves duration of 3.5 years. The effective duration is monitored and
managed to maximize yield while managing interest rate risk at an acceptable
level. We maintain a well-diversified portfolio across sectors, with credit
quality and maturities that provide ample liquidity. Purchases and sales are
made with the intent of maximizing investment returns in the current market
environment while balancing capital preservation.

Our fixed income and short-term investments represented 91% of our invested
assets at December 31, 2021, and 92% at December 31, 2020. These investments had
a weighted average credit rating of "A+" as of December 31, 2021 and "AA-" as of
December 31, 2020, with a 96% allocation to investment grade holdings at both
December 31, 2021 and December 31, 2020. The weighted average credit rating
decline reflects a planned reduction in our sector allocation to agency
residential mortgage-backed securities over the past year as lower interest
rates accelerated prepayments, as expected. Given the very low reinvestment
rates for this asset class, we reallocated these non-sale disposal cash flows
into other high-quality fixed income sectors, including corporate securities and
other asset-backed security classes without a "AAA" rating but in our view
currently offer a better risk and reward trade-off.

For more details on composition, credit quality and different risks
to which our portfolio is subject, see point 7A. “Quantitative and qualitative
Market Risk Disclosures.” of this Form 10-K.

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Total Invested Assets
($ in thousands)                                    2021                     2020                      Change
Total invested assets                         $   8,026,988                  7,505,599                          7  %
Invested assets per dollar of common
stockholders' equity                                   2.88                       2.96                         (3)
Unrealized gain - before tax1                       255,658                    395,207                        (35)
Unrealized gain - after tax1                        201,970                    312,214                        (35)


1Includes unrealized gain on fixed income securities of $229 million and fairness
titles of $27 million at December 31, 2021.

Invested assets increased $521 million at December 31, 2021, compared to
December 31, 2020, reflecting strong 2021 operating cash flows of $771 million,
partially offset by a decrease in pre-tax unrealized gains of $140 million. The
majority of this $140 million decrease was related to our fixed income
securities portfolio, which was impacted by an increase in benchmark U. S.
Treasury rates, partially offset by a tightening of credit spreads.

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

($ in thousands)                                 2021               2020             2021 vs. 2020                2019             2020 vs. 2019
Fixed income securities                      $ 209,709            203,926                   3        %          203,255                   -        %
Equity securities                               15,920              9,286                  71                     6,996                  33
Commercial mortgage loans ("CMLs")               2,743                844                 225                         -                        n/m
Short-term investments                             260              1,821                 (86)                    6,653                 (73)
Other investments                              118,060             26,922                 339                    18,778                  43
Investment expenses                            (20,103)           (15,692)                (28)                  (13,139)                (19)
Net investment income earned - before
tax                                            326,589            227,107                  44                   222,543                   2
Net investment income tax expense               63,589             42,495                  50                    41,382                   3
Net investment income earned - after
tax                                          $ 263,000            184,612                  42                   181,161                   2
Effective tax rate                                19.5  %            18.7                 0.8        pts           18.6                 0.1        pts
Annual after-tax yield on fixed income
investments                                        2.6                2.6                   -                       2.9                (0.3)
Annual after-tax yield on investment
portfolio                                          3.4                2.6                 0.8                       2.9                (0.3)



The $78.4 million increase in after-tax net investment income in 2021 compared
to 2020 was driven by higher alternative investments gains in our other
investment portfolio of $93.0 million, after-tax, in 2021 compared to $20.9
million, after-tax, in 2020, resulting in a $72.0 million increase in after-tax
net investment income in 2021. Our alternative investments are accounted for
under the equity method of accounting and are recorded on a one-quarter lag. The
results on alternative investments in 2021 principally reflected unrealized
gains on our holdings that benefited from the strong equity and credit capital
market performance in the 12-month period ended September 2021.

Realized and Unrealized Investment 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:

($ in thousands)                                                       2021                   2020                    2019
Net realized gains on disposals                                   $     7,144                    9,148                  26,715
Net unrealized gains (losses) on equity securities                     17,881                    7,939                  (8,649)
Net credit loss (expense) on fixed income securities, AFS              (6,858)                  (5,042)
Net credit loss (expense) benefit on fixed income
securities, HTM                                                           (49)                       4
Losses on securities for which we have the intent to sell                (519)                 (16,266)

Net other-than-temporary impairment losses recognized
earnings

                                                                                                                (3,644)

Total net realized and unrealized investment gains (losses) $17,599

                   (4,217)                 14,422



Realized and unrealized investment gains (losses) in 2020 were significantly
impacted by COVID-19-related market volatility in the first quarter of 2020, and
substantially all of the $16.3 million of losses on securities we intended to
sell were recorded in that quarter to provide our investment managers
flexibility to trade and optimize our investment portfolio. The increase in
unrealized gains on equity securities in 2021 was driven by strong public
equities performance in the year.

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For additional information regarding our losses on securities we intend to sell
and our methodology for estimating the allowance for credit losses, see Note 2.
"Summary of Significant Accounting Policies" and Note 5. "Investments" in Item
8. "Financial Statements and Supplementary Data." of this Form 10-K.

Federal Income Taxes
The following table provides information regarding federal income taxes.
($ in millions)                     2021        2020       2019
Federal income tax expense       $ 101.5        56.6       64.8

Effective tax rate1                 20.5  %     18.7       19.3

1The effective tax rate is calculated by taking the “Total Federal Income Tax
expenses” divided by “Earnings before federal income tax” minus “Preferred shares
dividends” in our Consolidated Statements of Income.

Federal income tax expense increased by $44.9 million in 2021 compared to 2020,
primarily due to an increase in pre-tax income that is taxed at the statutory
rate. The increase in pre-tax income was primarily driven by increases in
underwriting income and net investment income earned primarily due to higher
gains on alternative investments in our other investment portfolio. See Note 14.
"Federal Income Taxes" in Item 8. "Financial Statements and Supplementary Data."
of this Form 10-K for further information about the following: (i) a
reconciliation of our effective tax rate to the statutory rate of 21%; and (ii)
details regarding our net deferred tax liability and asset.

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 Selective Insurance Group, Inc. ("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 $527 million at December 31, 2021, and $490
million at December 31, 2020.

The composition of the Parent's investment portfolio may change over time based
upon 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 shareholders, 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, with the target
currently estimated at approximately $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 $140 million in dividends to the Parent in 2021.
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 shareholders 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
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would be less than its total liabilities. The Parent's ability to pay dividends
to shareholders 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 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 this Form
10-K.

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 2021. 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 this Form 10-K.

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 to 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 5. "Investments" in Item 8. "Financial Statements and
Supplementary Data." of this Form 10-K.

Branch            Insurance Subsidiary Member
FHLBI             SICSC1
                  SICSE1
FHLBNY            SICA
                  SICNY

1These subsidiaries are collectively referred to as the “Indiana Subsidiaries”.
they are domiciled at 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.

The following table provides information on the remaining capacity for FHLB
borrowings based on these restrictions, as well as the amount of additional FHLB
stock that would need to be purchased to allow these member companies to borrow
their remaining capacity:
($ in millions)                                  Admitted             Borrowing                                                               Additional FHLB Stock
As of December 31, 2021                           Assets            
Limitation            Amount Borrowed          Remaining Capacity             Requirements
SICSC                                          $    833.2          $       83.3                  32.0                      51.3                            0.6
SICSE                                               665.6                  66.6                  28.0                      38.6                            0.5
SICA                                              3,160.6                 316.1                     -                     316.1                           14.2
SICNY                                               580.2                  29.0                     -                      29.0                            1.3
Total                                                              $      495.0                  60.0                     435.0                           16.6



Short-term Borrowings
We did not make any short-term borrowings from FHLB branches during 2021.

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
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Subsidiaries with 10% of the admitted assets of the respective Indiana subsidiary.
The following table provides information on borrowings and
remaining borrowing capacity of the two Indiana subsidiaries:

($ in millions)                                      Admitted Assets as           Borrowing
As of December 31, 2021                             of December 31, 2021         Limitation            Amount Borrowed          Remaining Capacity
SICSC                                               $           833.2          $       83.3                  24.0                      59.3
SICSE                                                           665.6                  66.6                  16.0                      50.6
Total                                                                          $      149.9                  40.0                     109.9



Capital Market Activities
The Parent had no private or public issuances of stock during 2021. 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 2021, we repurchased 52,781 shares of our common stock under
this authorization at a cost of $3.4 million, with a $64.49 average price per
share. We have $96.6 million of remaining capacity under our share repurchase
program. For additional information on the preferred stock transaction, refer to
Note 17. "Preferred Stock" in Item 8. "Financial Statements and Supplementary
Data." of this Form 10-K.

Uses of Liquidity
The Parent's liquidity generated from the sources discussed above is used, among
other things, to pay dividends to our shareholders. 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. In October
2021, our Board approved a 12% increase in the quarterly cash dividend, to $0.28
from $0.25 per share. On February 3, 2022, our Board declared:

•A quarterly cash dividend on common stock of $0.28 per common share, that is
payable March 1, 2022, to holders of record on February 15, 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 March
15, 2022, to holders of record as of February 28, 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. 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 December 31, 2021, we had GAAP stockholders'
equity of $3.0 billion and statutory surplus of $2.4 billion. With total debt of
$506.1 million at December 31, 2021, our debt-to-capital ratio was 14.5%. 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
this Form 10-K.

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The following table summarizes current and long-term material cash requirements
as of December 31, 2021, which we expect to fund primarily with operating cash
flows.

                                                                                                 Payment Due by Period
                                                                                     Less than                 1-3                    3-5                More than
($ in millions)                                            Total                      1 year                  years                  years                5 years
Notes payable                                    $                510.0                     -                       -                  60.0                 450.0
Interest on debt obligation                                       593.6                  28.3                    56.6                  56.6                 452.1
Subtotal                                                        1,103.6                  28.3                    56.6                 116.6                 902.1

Gross loss and loss expense payments                            4,580.9               1,303.5                 1,473.8                 701.5             

1,102.1

Ceded loss and loss expense payments                              578.6                 174.5                   137.3                  71.1             

195.7

Net loss and loss expense payments                              4,002.3               1,129.0                 1,336.5                 630.4                 906.4

Total                                            $              5,105.9               1,157.3                 1,393.1                 747.0               1,808.5



Our loss and loss expense payments in the table above represent estimated paid
amounts by year on our loss and loss expense reserves that are estimates based
on past experience, adjusted for the effects of current developments and
anticipated trends, and include considerable judgment. There is no precise
method for evaluating the impact of any specific factor on the projected timing
of loss and loss expense reserve payments, so the timing and amounts of the
actual payments will be affected by many factors. Therefore, the projected
settlement of the reserves for net loss and loss expense may differ, perhaps
significantly, from actual future payments. For more information on our case
reserves and estimates of reserves for loss and loss expense IBNR, refer to the
"Reserve for Loss and Loss Expense" section in the "Critical Accounting Policies
and Estimates" section of this MD&A and Note 2. "Summary of Significant
Accounting Policies" in Item 8. "Financial Statements and Supplementary Data."
of this Form 10-K.

For additional information regarding cross-default provisions associated with
our notes payable in the table above or our Line of Credit, see Note 11.
"Indebtedness" in Item 8. "Financial Statements and Supplementary Data." in this
Form 10-K.

In addition to the above, the following table summarizes certain contractual
obligations we had at December 31, 2021 that may require us to invest additional
amounts into our investment portfolio, which we would fund primarily with
operating cash flows.

                                                                     Amount of           Year of Expiration of
($ in millions)                                                     Obligation                 Obligation
Alternative and other investments                                $        215.0                   2036

Unlisted secured loan bonds in our
fixed income portfolio

                                          59.8                   2030

Unlisted common stock within our equity
wallet

                                                                   4.2                   2027
CMLs                                                                        5.5                   2023
Privately-placed corporate securities                                       4.3             Less than 1 year
Total                                                            $        288.8



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

Our other cash requirements include, but are not limited to, dividends
shareholders, capital expenditures and other operating expenses, including
commissions to our distribution partners, labor costs, premium taxes, overhead
and administrative costs, and income taxes.

As of December 31, 2021 and 2020, 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" included in Item 8.
"Financial Statements and Supplementary Data." of this Form 10-K, and (iii)
material relationships with unconsolidated entities or financial partnerships at
December 31, 2021 and 2020, such as structured finance or special purpose
entities, established to facilitate off-balance sheet arrangements or other
contractually narrow or 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
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and/or equity securities, buyback of existing debt, buyback of shares in the
Parent common stock and increase in shareholder 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 increased 9% to $46.24 as of December 31, 2021, from
$42.38 as of December 31, 2020, driven by $6.50 in net income per diluted common
share, partially offset by $2.07 of lower unrealized gains on our fixed income
securities portfolio and $1.03 in dividends to our common stockholders. The book
value per common share at December 31, 2021 included $3.01 of unrealized gains
on our fixed income securities portfolio, which have an inverse relationship to
changes in interest rates. The yields on benchmark U.S. Treasury securities have
increased subsequent to December 31, 2021, which has resulted in a decrease in
the net unrealized gains on our fixed income securities. If interest rates
continue to increase and/or credit spreads widen in 2022, our net unrealized
gains on our fixed income securities portfolio will come under pressure and
could move into a net unrealized loss position.

Cash Flows
Net cash provided by operating activities was $771 million in 2021 compared to
$554 million in 2020. Cash flows from operations increased in 2021 primarily
driven by growth 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 $619 million in 2021 compared to $688
million in 2020. Investing activity was greater in 2020, as we benefited from
$195 million of net proceeds from our perpetual preferred stock issuance last
year.

Net cash used in financing activities was $123 million in 2021 compared to net
cash provided of $141 million in 2020. The cash flows from financing activities
decreased due to (i) a long-term debt repayment to the FHLBNY of $50 million in
2021, and (ii) our 2020 perpetual preferred stock issuance that resulted in $195
million of net proceeds last year.
Share.

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