SELECTIVE INSURANCE GROUP INC (Form: 10-Q, Received: 05/05/2006 17:02:51)

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

(Mark One)

[ X ] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended: March 31, 2006

[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from to

Commission File Number: 0-8641

SELECTIVE INSURANCE GROUP, INC.

(Exact name of registrant as specified in its charter)

New Jersey		22-2168890
(State or Other Jurisdiction of Incorporation or Organization)		(I.R.S. Employer Identification No.)

40 Wantage Avenue
Branchville, New Jersey		07890
(Address of Principal Executive Offices)		(Zip Code)

(973) 948-3000

(Registrant's Telephone Number, Including Area Code)

(Former name, former address and former fiscal year, if changed since last report)

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such report), and (2) has been subject to such filing requirements for the past 90 days.

Yes [ X ] No [ ]

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, or non-accelerated filer. See definition of "accelerated filer and large accelerated filer" in Rule 12b-2 of the Exchange Act. (Check one):

Large accelerated file [ X ]

Accelerated file [ ]

Non-accelerated filer [ ]

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).

Yes[ ] No [ X ]

As of March 31, 2006, there were 27,513,041 shares of common stock, par value $2.00, outstanding.

SELECTIVE INSURANCE GROUP, INC.

Table of Contents

	Page No
PART I. FINANCIAL INFORMATION

Item 1. Financial Statements

Consolidated Balance Sheets as of March 31, 2006 (Unaudited)
and December 31, 2005	1


Unaudited Consolidated Statements of Income for the Quarter Ended
March 31, 2006 and 2005	2


Unaudited Consolidated Statements of Stockholders' Equity for the
Quarter Ended March 31, 2006 and 2005	3


Unaudited Consolidated Statements of Cash Flows for the
Quarter Ended March 31, 2006 and 2005	4


Notes to Interim Unaudited Consolidated Financial Statements	5


Item 2. Management's Discussion and Analysis of Financial Condition
and Results of Operations


Forward - Looking Statements	11


Introduction	11


Critical Accounting Policies and Estimates	11


Highlights of First Quarter 2006 and First Quarter 2005 Results	12


Results of Operations and Related Information by Segment	12


Financial Condition, Liquidity and Capital Resources	25


Federal Income Taxes	27


Adoption of Account Pronouncements	27


Item 3. Quantitative and Qualitative Disclosures About Market Risk	28


Item 4. Controls and Procedures	28


PART II. OTHER INFORMATION	29


Item 2. Unregistered Sales of Equity Securities and Use of Proceeds	29


Item 4. Submission of Matters to a Vote of Security Holders	29


Item 6. Exhibits	30

PART I. FINANCIAL INFORMATION

ITEM I. FINANCIAL STATEMENTS
SELECTIVE INSURANCE GROUP, INC.		Unaudited
CONSOLIDATED BALANCE SHEETS		March 31,	December 31,
(in thousands, except share amounts)		2006	2005
ASSETS
Investments:
Fixed maturity securities, held-to-maturity - at amortized cost
(fair value: $13,034 - 2006; $13,881 - 2005)	$	12,662	13,423
Fixed maturity securities, available-for-sale - at fair value
(amortized cost: $2,670,324 - 2006; $2,627,549 - 2005)		2,665,475	2,653,839
Equity securities, available-for-sale - at fair value
(cost of: $190,425 - 2006; $183,349 - 2005)		357,659	338,783
Short-term investments - (at cost which approximates fair value)		174,662	176,525
Alternative investments		75,719	62,975
Total investments		3,286,177	3,245,545
Cash		585	2,983
Interest and dividends due or accrued		31,962	32,579
Premiums receivable, net of allowance for uncollectible
accounts of: $3,394 - 2006; $3,908 - 2005		509,078	465,210
Other trade receivables, net of allowance for uncollectible
accounts of: $204 - 2006; $176 - 2005		15,743	16,553
Reinsurance recoverable on paid losses and loss expenses		6,020	4,549
Reinsurance recoverable on unpaid losses and loss expenses		187,448	218,248
Prepaid reinsurance premiums (Note 5)		56,845	67,157
Deferred federal income tax		3,509	-
Property and Equipment - at cost, net of accumulated
depreciation and amortization of: $97,301 - 2006; $94,730 - 2005		54,159	53,194
Deferred policy acquisition costs		220,553	204,832
Goodwill		33,637	33,637
Other assets		48,008	49,128
Total assets	$	4,453,724	4,393,615

LIABILITIES AND STOCKHOLDERS' EQUITY
Liabilities:
Reserve for losses	$	1,817,323	1,799,746
Reserve for loss expenses		295,223	284,303
Unearned premiums		803,985	752,465
Senior convertible notes		115,937	115,937
Notes payable		222,704	222,697
Current federal income tax		14,135	2,293
Deferred federal income tax		-	5,663
Commissions payable		51,971	73,872
Accrued salaries and benefits		54,362	68,024
Other liabilities		120,843	87,491
Total liabilities		3,496,483	3,412,491

Stockholders' Equity:
Preferred stock of $0 par value per share: Authorized shares: 5,000,000; no shares issued or outstanding
Common stock of $2 par value per share:
Authorized shares: 180,000,000
Issued: 43,522,645 - 2006; 43,271,273 - 2005		87,045	86,543
Additional paid-in capital		169,080	158,180
Retained earnings		881,504	847,687
Accumulated other comprehensive income		105,550	118,121
Treasury stock - at cost (shares: 16,009,604 - 2006; shares: 14,977,176 - 2005)		(285,938)	(229,407)
Total stockholders' equity (Note 10)		957,241	981,124
Commitments and contingencies (Note 11)
Total liabilities and stockholders' equity	$	4,453,724	4,393,615

The accompanying notes are an integral part of these unaudited interim consolidated financial statements.

SELECTIVE INSURANCE GROUP, INC.
UNAUDITED CONSOLIDATED STATEMENTS OF INCOME		Quarter ended
		March 31,
(in thousands, except per share amounts)		2006	2005
Revenues:
Net premiums written	$	431,989	396,778
Net increase in unearned premiums and prepaid reinsurance premiums		(61,832)	(54,038)
Net premiums earned		370,157	342,740
Net investment income earned		36,002	32,362
Net realized gains		7,367	4,598
Diversified Insurance Services revenue		27,278	23,485
Other income		1,862	854
Total revenues		442,666	404,039

Expenses:
Losses incurred		191,363	177,755
Loss expenses incurred		42,337	40,682
Policy acquisition costs		115,478	106,835
Dividends to policyholders		1,208	1,248
Interest expense		5,518	4,377
Diversified Insurance Services expenses		23,746	21,268
Other expenses		8,744	3,433
Total expenses		388,394	355,598

Income from continuing operations, before federal income tax		54,272	48,441

Federal income tax expense (benefit):
Current		16,698	12,234
Deferred		(2,404)	1,198
Total federal income tax expense		14,294	13,432

Net income from continuing operations		39,978	35,009

Income from discontinued operations, net of tax: $321 - 2005		-	597

Net income before cumulative effect of change in accounting principle		39,978	35,606

Cumulative effect of change in accounting principle, net of tax		-	495

Net income	$	39,978	36,101

Earnings per share:
Basic net income from continuing operations	$	1.49	1.29
Basic net income from discontinued operations		-	0.02
Basic cumulative effect of change in accounting principle		-	0.02
Basic net income	$	1.49	1.33

Diluted net income from continuing operations	$	1.28	1.11
Diluted net income from discontinued operations		-	0.02
Diluted cumulative effect of change in accounting principle		-	0.02
Diluted net income	$	1.28	1.15

Dividends to stockholders	$	0.22	0.19

The accompanying notes are an integral part of these unaudited interim consolidated financial statements.

SELECTIVE INSURANCE GROUP, INC.
UNAUDITED CONSOLIDATED STATEMENTS OF
STOCKHOLDERS' EQUITY
		Quarter ended March 31,
($ in thousands, except per share amounts)		2006		2005
Common stock:
Beginning of year	$	86,543		84,936
Dividend reinvestment plan
(shares: 7,982 - 2006; 8,137 - 2005)		16		16
Convertible subordinated debentures
(shares: 1,412 - 2006; 35,024 - 2005)		3		70
Stock purchase and compensation plans
(shares: 241,978 - 2006; 471,172 - 2005)		483		943
End of period		87,045		85,965

Additional paid-in capital:
Beginning of year		158,180		142,292
Dividend reinvestment plan		424		357
Convertible subordinated debentures		7		178
Stock purchase and compensation plans		10,469		(4,372)
End of period		169,080		138,455

Retained earnings:
Beginning of year		847,687		721,483
Net income		39,978	39,978	36,101	36,101
Cash dividends to stockholders ($0.22 per share - 2006;
$0.19 per share - 2005)		(6,161)		(5,351)
End of period		881,504		752,233

Accumulated other comprehensive income:
Beginning of year		118,121		154,536
Other comprehensive loss, decrease in net unrealized
gains on available-for-sale securities, net of deferred income
tax effect of: $(6,769) - 2006; $(16,737) - 2005		(12,571)	(12,571)	(31,084)	(31,084)
End of period		105,550		123,452
Comprehensive income			27,407		5,017

Treasury stock:
Beginning of year		(229,407)		(206,522)
Acquisition of treasury stock
(shares: 1,032,428 - 2006; 91,403 - 2005)		(56,531)		(4,387)
End of period		(285,938)		(210,909)

Unearned stock compensation and notes receivable from stock sales:
Beginning of year		-		(14,707)
Reclassification of unearned stock compensation		-		14,641
Amortization of deferred compensation expense and
amounts received on notes		-		66
End of period		-		-
Total stockholders' equity	$	957,241		889,196

Selective Insurance Group, Inc. also has authorized, but not issued, 5,000,000 shares of preferred stock without par value of which 300,000 shares have been designated Series A junior preferred stock without par value.

The accompanying notes are an integral part of these unaudited interim consolidated financial statements.

SELECTIVE INSURANCE GROUP, INC.
UNAUDITED CONSOLIDATED STATEMENTS OF CASH FLOW	Quarter ended March 31,
(in thousands)	2006	2005

Operating Activities
Net income	$	39,978	36,101

Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation and amortization		5,915	4,916
Stock compensation expense		4,477	2,369
Net realized gains		(7,367)	(4,598)
Deferred tax		(2,404)	1,198
Cumulative effect of change in accounting principle, net of tax		-	(495)

Changes in assets and liabilities:
Increase in reserves for losses and loss expenses, net of reinsurance recoverable
on unpaid losses and loss expenses		59,297	52,580
Increase in unearned premiums, net of prepaid reinsurance and advance premiums		61,864	53,837
Increase in net federal income tax payable		11,843	5,203
Increase in premiums receivable		(43,868)	(54,147)
Decrease (increase) in other trade receivables		810	(9,099)
Increase in deferred policy acquisition costs		(15,721)	(9,759)
Decrease in interest and dividends due or accrued		617	1,036
(Increase) decrease in reinsurance recoverable on paid losses and loss expenses		(1,471)	206
(Decrease) increase in accrued salaries and benefits		(13,662)	4,563
Decrease in accrued insurance expenses		(21,941)	(23,020)
Other-net		1,297	(14,617)
Net adjustments		39,686	10,173
Net cash provided by operating activities		79,664	46,274

Investing Activities
Purchase of fixed maturity securities, available-for-sale		(167,352)	(90,350)
Purchase of equity securities, available-for-sale		(19,777)	(12,780)
Purchase of alternative investments		(12,591)	(2,751)
Net proceeds from sale of subsidiary		376	-
Sale of fixed maturity securities, available-for-sale		96,880	35,759
Redemption and maturities of fixed maturity securities, held-to-maturity		765	5,131
Redemption and maturities of fixed maturity securities, available-for-sale		55,033	37,642
Sale of equity securities, available-for-sale		21,435	13,096
Proceeds from alternative investments		948	3,635
Purchase of property and equipment		(3,865)	(1,906)
Net cash used in investing activities		(28,148)	(12,524)

Financing Activities
Dividends to stockholders		(5,548)	(4,784)
Acquisition of treasury stock		(56,531)	(4,387)
Net proceeds from stock purchase and compensation plans		3,382	4,064
Cash retained for tax deductibility of the increase in value of equity instruments		2,920	2,793
Proceeds received on notes receivable from stock sales		-	66
Net cash (used in) financing activities		(55,777)	(2,248)
Net (decrease) increase in short-term investments and cash		(4,261)	31,502
Short-term investments and cash at beginning of year		179,508	98,657
Short-term investments and cash at end of period	$	175,247	130,159

Supplemental Disclosures of Cash Flows Information

Cash paid during the year for:
Interest	$	2,464	3,298
Federal income tax		1,935	4,560
Non-cash financing activity:
Conversion of convertible subordinated debentures		10	248

The accompanying notes are an integral part of these unaudited interim consolidated financial statements.

NOTES TO UNAUDITED INTERIM CONSOLIDATED FINANCIAL STATEMENTS

NOTE 1. Organization
Selective Insurance Group, Inc. and its subsidiaries, ("Selective") offers property and casualty insurance products and diversified insurance services and products through its various subsidiaries. Selective was incorporated in New Jersey in 1977 and its principal offices are located in Branchville, New Jersey. Selective's common stock is publicly traded on the NASDAQ National Market ^® under the symbol, "SIGI."

Selective classifies its business into three operating segments:

• Insurance Operations, which sells property and casualty insurance products and services primarily in 20 states in the Eastern and Midwestern United States, and has at least one company licensed to do business in each of the 50 states;

• Investments; and

• Diversified Insurance Services, which provides human resource administration outsourcing products and services, and federal flood insurance administrative services.

NOTE 2. Basis of Presentation
These interim unaudited consolidated financial statements include the accounts of Selective and its subsidiaries, and have been prepared in conformity with (i) accounting principles generally accepted in the United States of America ("GAAP") and (ii) the rules and regulations of the United States Securities and Exchange Commission ("SEC") regarding interim financial reporting. The preparation of the interim unaudited consolidated financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the reported financial statement balances, as well as the disclosure of contingent assets and liabilities. Actual results could differ from those estimates. All significant intercompany accounts and transactions between Selective and its subsidiaries are eliminated in consolidation.

These interim unaudited consolidated financial statements reflect all adjustments that, in the opinion of management, are normal, recurring and necessary for a fair presentation of Selective's results of operations and financial condition. These interim unaudited consolidated financial statements cover the first quarters ended March 31, 2006 ("First Quarter 2006") and March 31, 2005 ("First Quarter 2005"). As interim unaudited consolidated financial statements, they do not include all of the information and disclosures required by GAAP and the SEC for audited financial statements. Results of operations for any interim period are not necessarily indicative of results for a full year. Consequently, these interim unaudited consolidated financial statements should be read in conjunction with the consolidated financial statements contained in Selective's Annual Report on Form 10-K for the year ended December 31, 2005 ("2005 Annual Report").

NOTE 3. Reclassifications
Certain amounts in Selective's prior years' interim unaudited consolidated financial statements and related footnotes have been reclassified as a result of the sale of CHN Solutions (Alta Services LLC and Consumer Health Network Plus, LLC). Such reclassifications had no effect on Selective's net income or stockholders' equity.

NOTE 4. Adoption of Accounting Pronouncements
In December 2004, the Financial Accounting Standards Board ("FASB") issued FAS 123R, which requires that compensation expense be measured on the income statement for all share-based payments (including employee stock options) at grant date fair value of the equity instruments. Selective's January 1, 2005 adoption of this accounting pronouncement resulted in an after-tax cumulative effect of change in accounting principle benefit of $0.5 million due to the requirement to estimate the impact of expected forfeitures at the grant date in First Quarter 2005.

NOTE 5. Reinsurance
The following table contains a listing of direct, assumed and ceded reinsurance amounts by income statement caption. For more information concerning reinsurance, refer to Note 5, "Reinsurance" in Item 8. "Financial Statements and Supplementary Data" in Selective's 2005 Annual Report.

		Unaudited
		Quarter ended March 31,
($ in thousands)		2006	2005
Premiums written:
Direct	$	452,299	426,815
Assumed		5,489	5,893
Ceded		(25,799)	(35,930)

Net	$	431,989	396,778

Premiums earned:
Direct	$	396,549	369,562
Assumed		9,718	9,202
Ceded		(36,110)	(36,024)

Net	$	370,157	342,740

Losses and loss expenses incurred:
Direct	$	237,280	229,887
Assumed		7,500	7,732
Ceded		(11,080)	(19,182)

Net	$	233,700	218,437

Ceded written premiums decreased in First Quarter 2006 compared to First Quarter 2005, primarily due to the termination of the New Jersey Homeowners Property 75% Quota Share treaty ("Quota Share Treaty") effective January 1, 2006. For a more detailed discussion of Selective's reinsurance program, refer to the "Property Reinsurance" section included in Item 7. "Managements Discussion and Analysis of Financial Condition and Results of Operations" of Selective's 2005 Annual Report on Form 10-K. In First Quarter 2005, ceded written premiums were $4.2 million and ceded earned premiums were $4.9 million for the Quota Share Treaty. The Quota Share Treaty termination was effective as of January 1, 2006 and there is no prospective coverage for 2006. Consequently, Selective received a return of premium of $11.3 million previously ceded to this treaty and still unearned as of December 31, 2005. The overall effect of the termination of this treaty was to reduce ceded written premiums by $15.5 million for First Quarter 2006 compared to First Quarter 2005 and ceded earned premiums by $4.9 million for First Quarter 2006 compared to First Quarter 2005. This reduction was partially offset by the following increased flood premiums that are 100% ceded to the National Flood Insurance Program:

	Unaudited
	Quarter ended March 31,
($ in thousands)		2006	2005
Ceded premiums written	$	(25,279)	(20,164)
Ceded premiums earned		(23,895)	(19,783)
Ceded losses and loss expenses incurred		(5,374)	(7,609)

NOTE 6. Segment Information
Selective has classified its operations into three segments, the disaggregated results of which are reported to and used by senior management to manage Selective's operations:

• Insurance Operations (commercial lines and personal lines), which are evaluated based on statutory underwriting results (net premiums earned, incurred losses and loss expenses, policyholders dividends, policy acquisition costs, and other underwriting expenses) and statutory combined ratios;

• Investments, which are evaluated based on net investment income and net realized gains and losses; and

• Diversified Insurance Services (federal flood insurance administrative services and human resource administration outsourcing), which, because they are not dependent on insurance underwriting cycles, are evaluated based on several measures including, but not limited to, results of operations in accordance with GAAP, with a focus on our return on revenue (net income divided by revenues).

The Insurance Operations and Diversified Insurance Services segments share a common marketing or distribution system and create new opportunities for independent insurance agents to bring value-added services and products to their customers. Selective's commercial and personal lines property and casualty insurance products, flood insurance, and human resource administration outsourcing products are principally sold through independent insurance agents.

Selective and its subsidiaries also provide services to each other in the normal course of business. These transactions totaled $6.1 million in First Quarter 2006 and $6.8 million in First Quarter 2005. These transactions were eliminated in all consolidated statements. In computing the results of each segment, Selective does not make adjustments for interest expense, net general corporate expenses, or federal income taxes. Selective does not maintain separate investment portfolios for the segments and therefore, does not allocate assets to the segments.

The following presents revenues from continuing operations (net investment income and net realized gains on investments in the case of the Investments segment) and pre-tax income from continuing operations for the individual segments:

		Unaudited,
Revenue by segment		Quarter ended
		March 31,
($ in thousands)		2006	2005
Insurance Operations:
Commercial automobile net premiums earned	$	80,511	77,649
Workers compensation net premiums earned		75,801	69,253
General liability net premiums earned		99,090	86,016
Commercial property net premiums earned		44,390	40,210
Business owners' policy net premiums earned		11,791	11,921
Bonds net premiums earned		3,918	3,862
Other net premiums earned		180	215
Total commercial lines net premiums earned		315,681	289,126
Personal automobile net premiums earned		38,076	42,991
Homeowners net premiums earned		14,527	9,049
Other net premiums earned		1,873	1,574
Total personal lines net premiums earned		54,476	53,614
Miscellaneous income		1,861	840
Total insurance operations revenues		372,018	343,580

Investments:
Net investment income		36,002	32,362
Net realized gain on investments		7,367	4,598
Total investment revenues		43,369	36,960

Diversified Insurance Services:
Human resource administration outsourcing		17,150	15,607
Flood insurance		8,921	6,892
Other		1,207	986
Total diversified insurance services revenues		27,278	23,485

Total all segments:		442,665	404,025
Other income		1	14

Total revenues	$	442,666	404,039

		Unaudited,
Income (loss) from continuing operations before federal income tax		Quarter ended
		March 31,
($ in thousands)		2006	2005
Insurance Operations:
Commercial lines underwriting	$	22,796	13,536
Personal lines underwriting		(1,854)	3,110
Underwriting income, before federal income tax		20,942	16,646
Investments:
Net investment income		36,002	32,362
Net realized gain on investments		7,367	4,598
Total investment income, before federal income tax		43,369	36,960
Diversified Insurance Services:
Income before federal income tax		3,532	2,217
Total all segments:		67,843	55,823
Interest expense		(5,518)	(4,377)
General corporate expenses		(8,053)	(3,005)
Income from continuing operations before federal income tax	$	54,272	48,441

NOTE 7. Discontinued Operations
In December 2005, Selective sold its 100% ownership interest in CHN Solutions (Alta Services LLC and Consumer Health Network Plus, LLC), which had historically been reported as part of the "Managed Care" component of the Diversified Insurance Services segment, for $16.4 million, which produced an after-tax loss of $2.6 million. Selective has reclassified prior period amounts on the interim unaudited consolidated statements of income to present the operating results of CHN Solutions as a discontinued operation.

Operating results from discontinued operations are as follows:

(in thousands)		Unaudited
		Quarter ended
		March 31, 2005
Net revenue	$	4,267
Pre-tax profit		919
After-tax profit		597

Intercompany transactions related to the discontinued operations are as follows:

(in thousands)		Unaudited
		Quarter ended
		March 31, 2005
Net revenue	$	2,307
Pre-tax profit		129
After-tax profit		84

NOTE 8. Retirement Plans
The following tables show the costs of the Retirement Income Plan for Selective Insurance Company of America ("Retirement Income Plan") and the retirement life insurance component ("Retirement Life Plan") of the Welfare Benefits Plan for Employees of Selective Insurance Company of America. For more information concerning these plans, refer to Note 14, "Retirement Plans" in Item 8. "Financial Statements and Supplementary Data" in Selective's 2005 Annual Report.

		Retirement Income Plan			Retirement Life Plan
		Unaudited			Unaudited
		Quarter ended March 31,			Quarter ended March 31,
_{($ in thousands)}		2006		2005	2006		2005
Components of Net Periodic Benefit Cost:
Service cost	$	1,760		1,798	92		100
Interest cost		2,016		1,854	103		95
Expected return on plan assets		(2,406)		(2,253)	-		-
Amortization of unrecognized prior service cost		38		38	(8)		(8)
Amortization of unrecognized net loss		415		288	-		-
Net periodic cost	$	1,823		1,725	187		187

Weighted-Average Expense Assumptions
for the years ended December 31:		2006		2005	2006		2005
Discount rate		5.50	%	5.75	5.50	%	5.75
Expected return on plan assets		8.00	%	8.00	-	%	-
Rate of compensation increase		4.00	%	4.00	4.00	%	4.00

NOTE 9. Comprehensive Income
The components of comprehensive income, both gross and net of tax, for First Quarter 2006 and First Quarter 2005 are as follows:

First Quarter 2006
_{($ in thousands)}		Gross	Tax	Net
Net income	$	54,272	14,294	39,978
Components of other comprehensive income:
Unrealized holding losses during the period		(11,973)	(4,191)	(7,782)
Reclassification adjustment		(7,367)	(2,578)	(4,789)
Other comprehensive loss		(19,340)	(6,769)	(12,571)
Comprehensive income	$	34,932	7,525	27,407

First Quarter 2005
($ in thousands)
Net income	$	50,121	14,020	36,101
Components of other comprehensive income:
Unrealized holding losses during the period		(43,228)	(15,130)	(28,098)
Reclassification adjustment		(4,593)	(1,607)	(2,986)
Other comprehensive loss		(47,821)	(16,737)	(31,084)
Comprehensive income	$	2,300	(2,717)	5,017

NOTE 10. Stockholders' Equity
Effective April 26, 2005, the Board of Directors approved a plan to repurchase up to 5.0 million shares of Selective common stock through April 26, 2007. During First Quarter 2006, Selective repurchased approximately 952,000 shares of its common stock at a total cost of $52.1 million under Selective's authorized stock repurchase program. As of March 31, 2006, there are 3.7 million shares remaining under the authorization. No shares were purchased under the authorized program in First Quarter 2005.

NOTE 11. Commitments and Contingencies
Alternative investments, as shown on the consolidated balance sheet, were $75.7 million as of March 31, 2006, and $63.0 million as of December 31, 2005. At December 31, 2005, Selective had additional investment commitments of up to $64.5 million, of which $5.6 million were paid during First Quarter 2006. At March 31, 2006, Selective has contractual obligations that expire at various dates through 2017 to further invest up to $53.2 million in these alternative investments. There is no certainty that any such additional investment will be required.

NOTE 12. Litigation
In the ordinary course of conducting business, Selective and its subsidiaries are named as defendants in various legal proceedings. Some of these lawsuits attempt to establish liability under insurance contracts issued by our insurance subsidiaries. Plaintiffs in these lawsuits are seeking money damages that, in some cases, are extra-contractual in nature or they are seeking to have the court direct the activities of Selective's operations in certain ways. Although the ultimate outcome of these matters is not presently determinable, Selective does not believe that the total amounts that it will ultimately have to pay, if any, in all of these lawsuits in the aggregate will have a material adverse effect on its financial condition, results of operations, or liquidity.

NOTE 13. Subsequent Event
Between May 3 and 4, 2006, Selective separately negotiated two private transactions under Section 3(a)(9) of the Securities Act of 1933 in which it exchanged a total of 153,961, or approximately $58.5 million, of its Senior Convertible Notes due 2032 in the original principal amount of $305 million for 1,998,152 shares of Selective common stock, par value $2.00 per share, and cash.

ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

Forward-Looking Statements
In this Quarterly Report on Form 10-Q, Selective and its management discuss and make statements regarding their intentions, beliefs, current expectations, and projections regarding Selective's future operations and performance. Such statements are "forward-looking" statements within the meaning of the Private Securities Litigation Reform Act of 1995. These forward-looking statements are often identified by words such as "anticipates," "believes," "expects," "will," "should" and "intends" and their negatives. Selective and its management caution prospective investors that such forward-looking statements are not guarantees of future performance. Risks and uncertainties are inherent in Selective's future performance. Factors that could cause actual results to differ materially from those indicated by such forward-looking statements include, but are not limited to, those discussed under Item 1A. "Risk Factors" in Selective's 2005 Annual Report. These risk factors may not be exhaustive. We operate in a continually changing business environment, and new risk factors emerge from time-to-time. We can neither predict such new risk factors nor can we assess the impact, if any, of such new risk factors on our businesses or the extent to which any factor or combination of factors may cause actual results to differ materially from those expressed or implied in any forward-looking statements in this report. In light of these risks, uncertainties and assumptions, the forward-looking events discussed in this report might not occur. Selective and its management make forward-looking statements based on currently available information and assume no obligation to update these statements due to changes in underlying factors, new information, future developments, or otherwise.

Introduction
Selective Insurance Group, Inc., ("Selective," "we," or "our") offers property and casualty insurance products and diversified insurance services through its various subsidiaries. Selective classifies its businesses into three operating segments: (i) Insurance Operations, (ii) Investments, and (iii) Diversified Insurance Services.

The purpose of the Management's Discussion and Analysis ("MD&A") is to provide an understanding of the consolidated results of operations and financial condition and known trends and uncertainties that may have a material impact in future periods. Consequently, investors should read the MD&A in conjunction with Selective's consolidated financial statements in Selective's 2005 Annual Report. For reading ease, we have written the MD&A in the first person plural.

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

• Critical Accounting Policies and Estimates;

• Highlights of Results for First Quarter 2006 and First Quarter 2005;

• Results of Operations and Related Information by Segment;

• Financial Condition, Liquidity, and Capital Resources;

• Federal Income Taxes; and

• Adoption of Accounting Pronouncements.

Critical Accounting Policies and Estimates
These unaudited interim consolidated financial statements include amounts based on informed estimates and judgments of management for those transactions that are not yet complete. Such estimates and judgments affect the reported amounts in the financial statements. Those estimates and judgments that were most critical to the preparation of the financial statements involved the following: (i) reserves for losses and loss expenses; (ii) deferred policy acquisition costs; (iii) pension and postretirement benefit plan actuarial assumptions; and (iv) other-than-temporary investment impairments. These estimates and judgments require the use of assumptions about matters that are highly uncertain and therefore are subject to change as facts and circumstances develop. If different estimates and judgments had been applied, materially different amounts might have been reported in the financial statements. For a discussion of each of these critical accounting policies, refer to pages 30 through 35 in our 2005 Annual Report on Form 10-K.

Highlights of First Quarter 2006 and First Quarter 2005 Results

		Unaudited
		Quarter ended			Change
		March 31,			% or
($ in thousands, except per share amounts)		2006		2005	Points

Total revenues	$	442,666		404,039	10	%
Net income from continuing operations		39,978		35,009	14
Diluted net income per share from continuing
operations		1.28		1.11	15
Diluted net income per share		1.28		1.15	11
Diluted weighted-average outstanding shares		31,902		32,151	(1)
GAAP combined ratio		94.3	%	95.1	(0.8)	pts
Statutory combined ratio		93.0		93.5	(0.5)
Annualized return on average equity		16.5		16.3	0.2

• Revenues increased in First Quarter 2006 compared to First Quarter 2005 primarily due to net premiums earned ("NPE") growth of 8% in First Quarter 2006 as compared to First Quarter 2005. Increases in NPE are attributed to the following:

o Direct voluntary new business written of $80.8 million in First Quarter 2006 compared to $68.3 million in First Quarter 2005;

o Commercial Lines renewal retention, which remained relatively level in First Quarter 2006 compared to First Quarter 2005;

o Commercial Lines renewal premium price increases, including exposure, that averaged 3.4% in First Quarter 2006 down from 6% in First Quarter 2005; and

o Increased investment income due to a higher investment asset base resulting from the following: (i) strong operating cash flows of $486.5 million since December 31, 2004, and (ii) our $100.0 million debt offering in the fourth quarter of 2005, partially offset by treasury stock purchases of 1,287,164 shares at a total cost of $68.4 million since December 31, 2004.

o The above items were partially offset by increased competition in the New Jersey personal automobile market, which resulted in a decrease in rates of 4.9% along with a 7% reduction in the number of cars we insured during First Quarter 2006 compared to First Quarter 2005. Net premiums earned for our New Jersey personal automobile business were down to $26.6 million for First Quarter 2006 as compared to $31.3 million for First Quarter 2005.

• Net income from continuing operations increased in First Quarter 2006 compared to First Quarter 2005 primarily due to:

o Commercial Lines underwriting and pricing improvements over the last few years and strong new business growth partially offset by increased catastrophe losses in First Quarter 2006 compared to First Quarter 2005; and

o After-tax investment income, which increased $3.5 million, or 14%, for First Quarter 2006 as compared to First Quarter 2005 resulting from the higher investment asset base discussed above.

Results of Operations and Related Information by Segment

Insurance Operations
Our Insurance Operations segment derives substantially all of its revenues from insurance policy premiums. We predominantly write annual policies of which the associated premiums are defined as net premiums written ("NPW"). These NPW are recognized into revenue as net premiums earned ("NPE") ratably over the life of the insurance policy. Expenses fall into three categories: (i) losses associated with claims and various loss expenses incurred for adjusting claims; (ii) expenses related to the issuance of insurance policies, such as agent commissions, premium taxes, and other underwriting expenses, including employee compensation and benefits; and (iii) policyholder dividends.

Our insurance subsidiaries ("Insurance Subsidiaries") are regulated by each of the states in which they do business. They are required to file financial statements with such states prepared in accordance with accounting principles prescribed by, or permitted by, the Insurance Subsidiary's state of domicile ("Statutory Accounting Principles" or "SAP"). SAP have been promulgated by the National Association of Insurance Commissioners ("NAIC") and adopted by the various states. Selective evaluates the performance of its Insurance Subsidiaries in accordance with SAP. Incentive-based compensation to independent agents and employees is based on SAP results and our rating agencies use SAP information to evaluate our performance as well as for industry comparative purposes.

The underwriting performance of insurance companies is measured under SAP by four different ratios:

i. Loss and loss expense ratio, which is calculated by dividing incurred loss and loss expenses by NPE;

ii. Underwriting expense ratio, which is calculated by dividing all expenses related to the issuance of insurance policies by NPW;

iii. Dividend ratio, which is calculated by dividing policyholder dividends by NPE; and

iv. Combined ratio, which is the sum of the loss and loss expense ratio, the underwriting expense ratio, and the dividend ratio.

A statutory combined ratio under 100% generally indicates that an insurance company is generating an underwriting profit and a statutory combined ratio over 100% generally indicates that an insurance company is generating an underwriting loss. The statutory combined ratio does not reflect investment income, federal income taxes, or other non-operating income or expense.

SAP differs from GAAP accounting, under which Selective is required to report its financial results to the United States Securities and Exchange Commission ("SEC"), in many ways, but the most notable differences impacting our reported net income are as follows:

• Under SAP, underwriting expenses are recognized when incurred; whereas under GAAP, underwriting expenses are deferred and amortized over the life of the policy;

• Under SAP, the underwriting expense ratio is calculated using NPW as the denominator; whereas NPE is used as the denominator under GAAP; and

• Under SAP, the results of our flood line of business are included in our Insurance Operations segment, whereas under GAAP, these results are included within our Diversified Insurance Services segment.

We believe that only providing a GAAP presentation of financial information for our Insurance Operations segment would make it more difficult for investors, agents, and customers to evaluate our success or failure in our insurance business.

Summary of Insurance Operations

All Lines		Unaudited
		Quarter ended			Change
		March 31,			% or
($ in thousands)		2006		2005	Points
GAAP Insurance Operations Results:
NPW	$	431,989		396,778	9	%
NPE		370,157		342,740	8
Less:
Losses and loss expenses incurred		233,700		218,437	7
Net underwriting expenses incurred		114,307		106,409	7
Dividends to policyholders		1,208		1,248	(3)
Underwriting income	$	20,942		16,646	26	%
GAAP Ratios:
Loss and loss expense ratio		63.1	%	63.7	(0.6)	pts
Underwriting expense ratio		30.9	%	31.0	(0.1)
Dividends to policyholders ratio		0.3	%	0.4	(0.1)
Combined ratio		94.3	%	95.1	(0.8)
Statutory Ratios: ¹
Loss and loss expense ratio		63.0	%	64.2	(1.2)
Underwriting expense ratio		29.7	%	28.9	0.8
Dividends to policyholders ratio		0.3	%	0.4	(0.1)
Combined ratio		93.0	%	93.5	(0.5)	pts

¹ The statutory ratios include the flood line of business, which is included in the Diversified Insurance Services Segment on a GAAP basis and therefore excluded from the GAAP ratios. The total Statutory Combined Ratio excluding flood is 93.5% for First Quarter 2006 compared to 93.9% for First Quarter 2005.

• NPW increased due to:

o Direct voluntary new business written of $80.8 million in First Quarter 2006 compared to $68.3 million in First Quarter 2005;

o Commercial Lines renewal retention, which remained relatively level in First Quarter 2006 compared to First Quarter 2005; and

o Commercial Lines renewal premium price increases, including exposure, that averaged 3.4% in First Quarter 2006 down from 6.0% in First Quarter 2005.

o The above items were partially offset by increased competition in the New Jersey personal automobile market, which resulted in a decrease in rates of 4.9% along with a 7% reduction in the number of cars we insured during First Quarter 2006 compared to First Quarter 2005. Net premiums written for our New Jersey personal automobile business were down to $25.2 million for First Quarter 2006 as compared to $28.0 million for First Quarter 2005.

• The improvement in the GAAP loss and loss expense ratio in First Quarter 2006 compared to First Quarter 2005 was primarily attributable to ongoing underwriting improvements mainly in our Commercial Lines business, specifically in our Commercial Automobile, General Liability, and Business Owners' Policy ("BOP") lines of business. These improvements were partially offset by an increase in weather-related catastrophe losses, which accounted for $3.2 million in incurred losses or 0.9 points of the GAAP loss and loss expense ratio for First Quarter 2006, compared to $0.4 million or 0.1 points for First Quarter 2005.

Insurance Operations Outlook
During 2005, the financial performance of the property/casualty insurance industry incurred catastrophe losses on more than 3.3 million claims valued at approximately $60 billion for the industry. Despite these record losses, the industry recorded a statutory combined ratio of 100.9%. The reinsurance industry, however, posted a statutory combined ratio of 129%, reflecting the impact of the risks assumed related to these catastrophic losses. The growth in our book of business along with the hardening of the reinsurance market and reinsurers' models of catastrophic risk have led to higher property catastrophe costs in 2006 compared to 2005. In addition to higher property catastrophe costs, we also anticipate continued pricing pressure in the primary market in 2006, which is evidenced by Commercial Lines renewal pure price decreases of 1.6% for First Quarter 2006 compared to increases of 1.6% for First Quarter 2005. Barring excess catastrophe losses, we are anticipating achieving an underwriting profit for a third consecutive year in 2006. In First Quarter 2006, our commercial lines net premiums written growth of 6%, was more than twice the A.M. Best industry estimated growth rate for 2006.

We anticipate our profitability in 2006 will continue to be driven by our field strategy, which we consider to be a key competitive advantage that allows us to maneuver more favorably through challenging market conditions. This field strategy will allow us to grow our new business with our agencies. The strategic initiatives we are implementing to increase the effectiveness of our field strategy are as follows:

• Market Planning. Through business demographic and geographic analysis, this strategy: (i) identifies underserved markets in existing territories; (ii) identifies other areas for potential organic growth that may require additional agent appointments or field underwriter deployment; and (iii) enhances our ability to replicate success across different markets;

• Knowledge Management. We are accumulating and organizing existing underwriting data to enhance underwriting and pricing decisions; and

• Workers Compensation. This strategy includes six key initiatives that focus on predictive modeling, premium leakage, premium audit procedures, and other operational improvements.

Terrorism continues to remain an overall industry concern. The two-year extension of the Terrorism Risk Insurance Act of 2002 ("TRIA") that was approved by Congress on December 22, 2005, will serve to mitigate our exposure in the event of a large-scale terrorist attack; however, our deductible is substantial at $160 million in 2006. We continue to monitor concentrations of risk and have purchased a separate terrorism treaty to supplement our protection to this unknown exposure.

Technology also continues to play a critical role in our success. Our leading edge agency integration technology, xSelerate, is creating new business opportunities in allowing for the automated movement of key underwriting data from an agent's management system to our systems. This technology allows for seamless quoting and rating capabilities, which is an example of why we are ranked so highly by our agents for "ease of doing business."

On April 19, 2006, A.M. Best reaffirmed our A+ (Superior) financial strength rating for the 45 ^th consecutive year. In support of the rating, A.M. Best cited Selective's "solid capitalization, historically favorable operating performance and strong regional presence within the small commercial lines business segment." As less than 9% of personal and commercial lines carriers attain an A+ rating, this is a competitive advantage that reinforces our agents' decision to make us their carrier of choice.

Review of Underwriting Results by Line of Business

Commercial Lines Results

Commercial Lines		Unaudited
		Quarter ended			Change
		March 31,			% or
($ in thousands)		2006		2005	Points
GAAP Insurance Operations Results:
NPW	$	370,641		348,168	6	%
NPE		315,681		289,126	9
Less:
Losses and loss expenses incurred		195,979		180,937	8
Net underwriting expenses incurred		95,698		93,405	2
Dividends to policyholders		1,208		1,248	(3)
Underwriting income	$	22,796		13,536	68	%
GAAP Ratios:
Loss and loss expense ratio		62.1	%	62.6	(0.5)	pts
Underwriting expense ratio		30.3	%	32.3	(2.0)
Dividends to policyholders ratio		0.4	%	0.4	-
Combined ratio		92.8	%	95.3	(2.5)
Statutory Ratios:
Loss and loss expense ratio		62.0	%	63.1	(1.1)
Underwriting expense ratio		29.5	%	29.4	0.1
Dividends to policyholders ratio		0.4	%	0.4	-
Combined ratio		91.9	%	92.9	(1.0)	pts

• The increases in NPW and NPE were the result of:

o Direct voluntary new business written of $71.7 million for First Quarter 2006, a 17% increase compared to $61.2 million in direct voluntary new business written in First Quarter 2005;

o Year-on-year renewal retention that remained relatively level for First Quarter 2006 as compared to First Quarter 2005; and

o Renewal premium price increases, including exposure, that averaged 3.4% for First Quarter 2006, down from 6.0% for First Quarter 2005.

• The improvement in the GAAP combined ratio is attributable to:

o Ongoing underwriting and pricing improvements over the past several years; and

o Improvements in our BOP line of business, driven by the successful implementation of a correction plan for this line, which generated a 22.5 point improvement in the combined ratio to 83.0% for First Quarter 2006 as compared to 105.5% for First Quarter 2005.

o The above items were partially offset by Commercial Lines loss costs increasing by 1.6% for the quarter combined with average earned premiums that were flat for the same period.

General Liability

		Unaudited
		Quarter ended			Change
		March 31,			% or
($ in thousands)		2006		2005	Points

Statutory NPW	$	117,675		104,160	13	%
Statutory NPE		99,090		86,016	15
Statutory combined ratio		93.9	%	95.1	(1.2)	pts
% of total statutory commercial NPW		32		30	2.0

The profitability in this line of business reflects our long-term improvement strategy incorporating the following: (i) focusing our contractor growth on business segments with lower completed operations exposures; (ii) requiring subcontractors to carry equal insurance limits, up to $1.0 million, to those carried by the general contractors; (iii) placing mold limitations or exclusions on most policies; and (iv) requiring that our insureds be named on any potential subcontractors' policy as an additional insured on a primary and noncontributory basis. The policy count on this line of business increased 10% as of March 31, 2006 as compared to March 31, 2005.

Workers Compensation

		Unaudited
		Quarter ended			Change
		March 31,			% or
($ in thousands)		2006		2005	Points

Statutory NPW	$	93,895		91,046	3	%
Statutory NPE		75,816		69,264	9
Statutory combined ratio		110.3	%	108.9	1.4	pts
% of total statutory commercial NPW		25		26	(1.0)

Given our account-based underwriting approach, the inclusion of workers compensation coverage is often necessary to write an overall profitable account; however, we don't view this line as a loss leader. We are aggressively working on making improvements to the profitability of this line, although we recognize that it will take some time. For that reason, our Knowledge Management and Predictive Modeling efforts were initially focused on workers compensation. We adopted an improvement plan in 2005 which includes six key initiatives including predictive modeling, loss control and maximizing our quality agency relationships. Independent of other factors, we believe our multifaceted strategy will produce a 7-point improvement in the Workers Compensation combined ratio over the next two years. The policy count on this line of business increased 4% as of March 31, 2006 as compared to March 31, 2005.

Commercial Automobile

		Unaudited
		Quarter ended			Change
		March 31,			% or
($ in thousands)		2006		2005	Points

Statutory NPW	$	92,044		90,463	2	%
Statutory NPE		80,511		77,649	4
Statutory combined ratio		82.3	%	85.3	(3.0)	pts
% of total statutory commercial NPW		25		26	(1.0)

Continued strong performance in this line is the result of underwriting and pricing improvements over the last several years. As we continue to write accounts and grow this book of business, we have implemented granular rate decreases to remain competitive in the current marketplace. The policy count on this line of business increased 6% as of March 31, 2006 as compared to March 31, 2005 and renewal price remained flat in First Quarter 2006, compared to a 3.2% increase in First Quarter 2005.

Commercial Property

		Unaudited
		Quarter ended			Change
		March 31,			% or
($ in thousands)		2006		2005	Points

Statutory NPW	$	49,218		45,766	8	%
Statutory NPE		44,390		40,210	10
Statutory combined ratio		79.8	%	77.3	2.5	pts
% of total statutory commercial NPW		13		13	-

The continued strong performance in the Commercial Property line of business is primarily attributable to higher prices and underwriting improvements that have been made over the past five years, which include better insurance-to-value estimates across our book of business; a shift to risks of better construction quality and newer buildings; and an overall focus on low-to-medium hazard property exposures. The favorable performance of this line of business for First Quarter 2006 was partially offset by catastrophe losses of $2.5 million or 0.6 points compared to minimal catastrophe losses in First Quarter 2005. The policy count on this line of business increased 6% as of March 31, 2006 as compared to March 31, 2005.

Business Owners' Policy

		Unaudited
		Quarter ended			Change
		March 31,			% or
($ in thousands)		2006		2005	Points

Statutory NPW	$	12,761		12,045	6	%
Statutory NPE		11,794		11,925	(1)	%
Statutory combined ratio		83.0	%	105.5	(22.5)	pts
% of total statutory commercial NPW		4		4	-

The statutory combined ratio for our BOP line of business improved 22.5 points for First Quarter 2006 compared to First Quarter 2005 and has achieved its second consecutive quarter of a combined ratio under 100%. This improvement is the result of our completed BOP correction plan that included pricing and underwriting actions focused on eliminating certain consistently unprofitable classes of business and growing more profitable segments. With our BOP correction plan completed and our BOP rewrite in place in all of our states, we are beginning to see our new business increase. New business for First Quarter 2006 was up 21% as compared to First Quarter 2005.

Bonds

		Unaudited
		Quarter ended			Change
		March 31,			% or
($ in thousands)		2006		2005	Points

Statutory NPW	$	4,359		4,216	3	%
Statutory NPE		3,926		3,873	1
Statutory combined ratio		86.1	%	76.8	9.3	pts
% of total statutory commercial NPW		1		1	-

Profitability in this line of business is driven by enhancements to the bond underwriting process, including the successful rollout of our automated bond system in 2005. Results for First Quarter 2006 compared to First Quarter 2005 were negatively impacted by ceded reinstatement premiums of $0.4 million, which added 7.7 points to the statutory combined ratio. These ceded reinstatement premiums became necessary due to a large loss ceded to our reinsurers, which exceeded our expectations of annual ceded losses.

Commercial Lines Outlook
A major factor in the ongoing performance of our Commercial Lines business is the state of pricing in the marketplace. Although there is increased pressure to reduce prices in order to maintain or build marketshare, we continue to see some level of stability in overall price levels. In the quarter, commercial renewal price increases were 3.4%, including approximately 5 points of exposure growth. On a pure price basis, prices were down slightly. Retention has remained steady at 79%. We have seen the greatest level of price competition in our large account sector, which we write through our Selective Risk Managers ("SRM"). SRM handles accounts with policy premium in excess of $250,000 or $150,000 for a single line of business. SRM business accounts for approximately 11% of our premium volume. With a company-wide average account size of about $8,000, the bulk of our business is in the small to middle market, which historically has been less price sensitive. We expect to see continued pricing pressure in all sectors over the course of the year.

Personal Lines Results

Personal Lines		Unaudited
		Quarter ended			Change
		March 31,			% or
($ in thousands)		2006		2005	Points
GAAP Insurance Operations Results:
NPW	$	61,348		48,610	26	%
NPE		54,476		53,614	2
Less:
Losses and loss expenses incurred		37,721		37,500	1
Net underwriting expenses incurred		18,609		13,004	43
Underwriting income (loss)	$	(1,854)		3,110	(160)	%
GAAP Ratios:
Loss and loss expense ratio		69.2	%	69.9	(0.7)	pts
Underwriting expense ratio		34.2	%	24.3	9.9
Combined ratio		103.4	%	94.2	9.2
Statutory Ratios: ¹
Loss and loss expense ratio		69.0	%	69.4	(0.4)
Underwriting expense ratio		30.8	%	26.9	3.9
Combined ratio		99.8	%	96.3	3.5	pts

¹ The statutory ratios include the flood line of business, which is included in the Diversified Insurance Services Segment on a GAAP basis and therefore excluded from the GAAP ratios. The total Personal Lines Statutory Combined Ratio excluding flood is 103.5% for First Quarter 2006 compared to 98.9% for First Quarter 2005.

• The increase in NPW reflects the impact of the termination of the New Jersey Homeowners Property 75% Quota Share Treaty effective January 1, 2006. Termination of this treaty resulted in the return of $11.3 million in ceded premiums in 2006. Excluding the effect of this ceded premium return, NPW would have increased 3% for First Quarter 2006 as compared to First Quarter 2005. This increase is the result of the following:

o A 55% increase in NPW in our Homeowners' line of business, excluding the effect of the ceded premium return, resulting from the retention of New Jersey homeowners' business that had previously been ceded under the Quota Share Treaty; and

o A 3% increase in NPW in our expansion states, with a 9.9 point improvement on the related statutory combined ratio for First Quarter 2006 compared to First Quarter 2005.

o The two increases above were partially offset by a 7% decrease in the number of cars we insure in New Jersey as of March 31, 2006 compared to March 31, 2005 and a 4.9% decrease in New Jersey automobile rates for First Quarter 2006 as compared to First Quarter 2005. These changes are a result of increased levels of competition, mainly from direct insurance writers that have entered the marketplace. Net premiums written for our New Jersey personal automobile business were down to $25.2 million for First Quarter 2006 as compared to $28.0 million for First Quarter 2005.

Personal Automobile

		Unaudited
		Quarter ended			Change
		March 31,			% or
($ in thousands)		2006		2005	Points

Statutory NPW	$	36,056		39,182	(8)	%
Statutory NPE		38,076		42,991	(11)
Statutory combined ratio		102.2	%	99.1	3.1	pts
% of total statutory personal NPW		59		81	(22.0)

The statutory combined ratios for First Quarter 2006 compared to First Quarter 2005, were negatively impacted by decreases in statutory NPW driven by increased competition in the New Jersey automobile market. This increasingly competitive marketplace has resulted in a 4.9% decrease in rates and a 7% decrease in the number of cars we insure as noted above.

The New Jersey automobile market contains many new market entrants, including well-capitalized national carriers. This increased competition, coupled with our rating plans that currently are not competitive due to a historically restrictive regulatory environment, has led to overall pricing pressure in the Personal Automobile line of business. We are actively addressing this issue through the strategy discussed in the "Personal Lines Outlook" below.

Homeowners

		Unaudited
		Quarter ended			Change
		March 31,			% or
($ in thousands)		2006		2005	Points

Statutory NPW	$	23,522		7,896	198	%
Statutory NPE		14,527		9,049	61
Statutory combined ratio		104.3	%	98.9	5.4	pts
% of total statutory personal NPW		38		16	22.0

Our Homeowners statutory NPW for First Quarter 2006 as compared to First Quarter 2005 increased due to the termination of the Quota Share Treaty effective January 1, 2006, which resulted in the return of $11.3 million in ceded premiums in First Quarter 2006. Excluding this ceded premium return, NPW would have increased 55% as compared to First Quarter 2005, which is due to the retention of New Jersey homeowners' business that had previously been ceded. The overall statutory combined ratio for this line of business was negatively impacted by an additional $5.1 million in commissions that were incurred in First Quarter 2006 due to the termination of the treaty. Overall, the termination of this treaty negatively impacted the statutory combined ratio by 3.1 points.

Personal Lines Outlook
Personal Lines comprise nearly half of all U.S. property and casualty premiums. Independent agents have increased their personal lines market share to 37% and we believe they will continue to be a factor in the personal lines marketplace. Our strategy is designed to differentiate Selective from the other companies that compete in the agency channel through market consistency, breadth of appetite, and ease of doing business. To improve our competitive position in the overall personal lines markets in each of our primary operating states, we have taken the following strategic steps:

• Management Restructure: We have realigned the Personal Lines management roles to place a greater emphasis on product management, marketing, and project management.

• Pricing Design: Our pricing redesign for our automobile business will be implemented in all of our personal lines states in 2006, beginning with New Jersey, and we will be implementing a new pricing structure for our homeowners business in mid-to-late 2007.

• Technology: With the rollout of SelectPlus™, our personal lines automated underwriting system, over 80 percent of our agents are inputting data directly into the system for new business and almost 50 percent are issuing endorsements through the system. We expect to introduce xSelerate for use in our Personal Lines business in the third quarter of 2006.

• Service Center: We will open our Personal Lines Service Center in the second quarter of 2006, with a pilot group of New Jersey agents. This service center will allow us to assume certain policyholder service duties from our agents so that they may concentrate on sales and improved service to larger, more complex, business. The rollout of the center to other Personal Lines states is expected to occur in 2007. We believe the Personal Lines Service Center will be a selling point for new business opportunities with agents.

Investments
Our investment philosophy includes certain return and risk objectives for our fixed maturity and equity portfolios. The primary return objective of the fixed maturity portfolio is to maximize after-tax investment yield and income while balancing certain risk objectives, with a secondary objective of meeting or exceeding a weighted-average benchmark of public fixed income indices. The return objective of the equity portfolio is to exceed a weighted-average benchmark of public equity indices. The risk objectives for all portfolios are to ensure investments are being structured with a focus on: (i) asset diversification, (ii) investment quality, (iii) liquidity, (iv) consideration of taxes, and (v) preservation of capital. Managing investment risk by adhering to these objectives is intended to protect the interests of our stockholders, and the policyholders of our Insurance Subsidiaries and, enhance our financial strength and underwriting capacity. The following table presents the Moody's Investor Service and Standard & Poor's ratings of our fixed maturity portfolio, which demonstrates the quality of our investment portfolio:

	Unaudited
	March 31,		December 31,
Rating	2006		2005
Aaa/AAA	68	%	68
Aa/AA	19		19
A/A	10		10
Baa/BBB	3		3
Total	100	%	100

Our fixed maturity investments represent 82% of total invested assets. We continue to invest our fixed maturity portfolio primarily in intermediate-term securities to manage overall interest rate risk. The average duration of the fixed maturity portfolio, excluding short-term investments, was 4.2 years at March 31, 2006 compared with 4.3 years at March 31, 2005. The current duration of our fixed maturities is within our historical range and is monitored and managed to maximize yield and mitigate interest rate risk. To provide liquidity, while maintaining consistent performance, fixed maturity investments are "laddered" so that some issues are always approaching maturity and provide a source of predictable cash flow for claim payments in the ordinary course of business. In addition, we purchase reinsurance coverage for protection against any significantly large claims or catastrophes that may occur during the year.

Summary of Investments

		Unaudited
		Quarter ended			Change
		March 31,			% or
($ in thousands)		2006		2005	Points

Net investment income, before tax	$	36,002		32,362	11	%
Net investment income, after tax		28,178		24,663	14
Total invested assets		3,286,177		2,880,071	14
Effective tax rate		21.7	%	23.8	(2.1)	pts

Annual after-tax yield on investment portfolio		3.5		3.4	0.1

The increases in net investment income, before taxes were primarily the result of:

• Increased invested assets in fixed income securities driven by substantial cash flows from operations of $406.8 million for full year 2005 and $79.7 million in First Quarter 2006 as well as proceeds from the November 2005 debt offering which added approximately $100 million in assets.

• This increase was partially offset by our use of a portion of our short-term investments to fund treasury stock purchases of 335,264 shares for approximately $16.3 million for full year 2005 and 951,900 shares for approximately $52.1 million for First Quarter 2006, our short-term investment income increased to $1.6 million in First Quarter 2006 compared to $0.5 million in First Quarter 2005 due to higher short-term rates and larger average daily balances.

Realized Gains and Losses
Realized gains and losses are determined on the basis of the cost of specific investments sold or written-down, and are credited or charged to income. Our Investments segment included net realized gains before tax of $7.4 million in First Quarter 2006 compared to $4.6 million of net realized gains in First Quarter 2005. The majority of the increase in net realized gains reflects the sale of certain long-term equity holdings during First Quarter 2006. There were no write-downs in First Quarter 2006 or First Quarter 2005. We maintain a high quality and liquid investment portfolio and the sale of the securities that resulted in net realized gains did not change the overall liquidity of the investment portfolio. Our philosophy for sales of securities generally is to reduce our exposure to securities and sectors when economic evaluations or the fundamentals for that security or sector have deteriorated and/or for tax planning purposes. We generally have a long investment time horizon and our turnover is low, which has resulted in many securities accumulating large unrealized gains. Every purchase or sale is made with the intent of improving future investment returns.

The following table summarizes our net realized gains by investment type:

		Unaudited	Unaudited
		Quarter ended	Quarter ended
($ in thousands)		March 31, 2006	March 31, 2005
Held-to-maturity fixed maturities
Gains	$	-	4
Losses		-	-
Available-for-sale fixed maturities
Gains		516	191
Losses		(1,757)	(776)
Available-for-sale equity securities
Gains		8,896	5,296
Losses		(288)	(117)
Total net realized gains	$	7,367	4,598

The securities sold in First Quarter 2006 and 2005 have not diminished the overall liquidity of our portfolio because of the high quality and active market for our investment portfolio. Our liquidity requirements in the past have been met by operating cash flow from our Insurance Operations and Diversified Insurance Services segments and the issuance of debt and equity securities. We expect our liquidity requirements in the future to be met by these sources of funds or, if necessary, borrowings from our credit facilities. For a further discussion of our liquidity requirements, refer to the "Financial Condition, Liquidity and Capital Resources" section below.

We realized gains and losses from the sale of available-for-sale debt and equity securities during First Quarter 2006 and First Quarter 2005. The following tables present the period of time that securities sold at a loss were continuously in an unrealized loss position prior to sale:

Period of time in an		Unaudited		Unaudited
unrealized loss position		Quarter ended		Quarter ended
($ in millions)		March 31, 2006		March 31, 2005
		Fair		Fair
		Value on	Realized	Value on	Realized
		Sale Date	Loss	Sale Date	Loss
Fixed maturities:
0 - 6 months	$	34.8	0.4	22.7	0.4
7 - 12 months		15.3	0.4	-	-
Greater than 12 months		13.7	0.4	5.8	0.3
Total fixed maturities		63.8	1.2	28.5	0.7
Equity Securities:
0 - 6 months		2.6	0.2	0.7	0.1
7 - 12 months		0.9	0.1	-	-
Greater than 12 months		-	-	-	-
Total equity securities		3.5	0.3	0.7	0.1
Total	$	67.3	1.5	29.2	0.8

These securities were sold despite the fact that they were in a loss position. The decision to sell these securities was due to: (i) heightened credit risk during the period of the individual security sold; (ii) the decision to reduce our exposure to certain issuers, industries, or sectors in light of changing economic conditions; or (iii) tax purposes.

Unrealized Losses
As of March 31, 2006 and December 31, 2005, the following table summarizes the aggregate fair value and gross pre-tax unrealized loss recorded in our accumulated other comprehensive income, by asset class and by length of time, for all available-for-sale securities that have continuously been in an unrealized loss position:

Period of time in an unrealized loss		Unaudited
Position		March 31, 2006		December 31, 2005
			Gross		Gross
		Fair	Unrealized	Fair	Unrealized
($ in millions)		Value	Loss	Value	Loss
Fixed maturities:
0 - 6 months	$	750.1	7.2	962.7	8.0
7 - 12 months		768.0	16.0	164.8	3.0
Greater than 12 months		223.0	6.1	124.1	3.4
Total fixed maturities		1,741.1	29.3	1,251.6	14.4
Equities:
0 - 6 months		11.9	0.2	7.4	0.4
7 - 12 months		0.3	0.1	2.0	0.1
Greater than 12 months		-	-	-	-
Total equity securities		12.2	0.3	9.4	0.5
Total	$	1,753.3	29.6	1,261.0	14.9

Ten-year U.S. Treasury yields rose 46 basis points in First Quarter 2006 to 4.85%, which contributed to our increase in unrealized losses during First Quarter 2006.

The following table presents information regarding our available-for-sale fixed maturities that were in an unrealized loss position at March 31, 2006 by contractual maturity:

Contractual Maturities		Amortized	Fair
($ in millions)		Cost	Value
One year or less	$	48.6	48.1
Due after one year through five years		779.2	767.0
Due after five years through ten years		886.7	871.0
Due after ten years through fifteen years		55.9	55.0

Total	$	1,770.4	1,741.1

Investments Outlook
We believe that pre-tax investment income will continue to grow as a result of strong cash flow from Insurance Operations. Ten-year U.S. Treasury yields reached 4.85% at the end of First Quarter 2006, up from 4.39% at year-end 2005. Given the rise in interest rates, our overall portfolio yield is beginning to increase as older bonds mature and are replaced by higher yielding bonds. To manage our interest rate risk, we aim to keep portfolio duration stable and to maintain a well-laddered maturity structure for our fixed maturity portfolio. With regard to our equity portfolio, we are committed to pursuing opportunities in industries with favorable fundamentals and will continue to reduce exposure to those stocks or sectors with less favorable fundamentals and valuations. Additionally, our alternative investment portfolio has performed well over the past few years and as a result we are looking to modestly grow this investment class as a percentage of our overall portfolio, which should contribute to lowering our overall portfolio risk given that these investments have a low correlation to other investment asset classes.

Diversified Insurance Services Segment
In December 2005, we sold our 100% ownership in CHN Solutions (Alta Services LLC and Consumer Health Network Plus, LLC), which had historically been reported as part of the managed care component of the Diversified Insurance Services segment, for $16.4 million, resulting in an after-tax net loss of $2.6 million. For further information regarding this divestiture, see Note 7 in Item 1. "Financial Statements" of this Quarterly Report on Form 10-Q.

The Diversified Insurance Services operations consist of two core functions: human resource administration outsourcing ("HR Outsourcing") and flood insurance. We believe these operations are within markets that continue to offer opportunity for growth. During First Quarter 2006, these operations provided a contribution of $0.07 per diluted share compared to $0.05 per diluted share in First Quarter 2005. Contributions from the Diversified Insurance Services segment, particularly the Flood business, continue to provide a level of mitigation to insurance pricing cycles and the adverse impact that catastrophe losses have on our Insurance Operations segment. We measure the performance of these operations based on several measures, including, but not limited to, results of operations in accordance with GAAP, with a focus on our return on revenue (net income divided by revenues). The results for this segment's continuing operations are as follows:

		Unaudited
		Quarter ended			Change
		March 31,			% or
($ in thousands)		2006		2005	Points
HR Outsourcing
Revenue	$	17,150		15,607	10	%
Pre-tax profit		792		482	64
Flood Insurance
Revenue		8,921		6,892	29
Pre-tax profit		2,220		1,320	68
Other
Revenue		1,207		986	22
Pre-tax profit		520		415	25
Total
Revenue		27,278		23,485	16
Pre-tax profit		3,532		2,217	59
After-tax profit		2,359		1,467	61
After-tax return on revenue		8.6	%	6.2	2.4	pts

HR Outsourcing

• Profitability improvements in our HR Outsourcing business in First Quarter 2006 compared to First Quarter 2005 are mainly due to (i) improved margins on State Unemployment Tax Act assessments, health benefits and workers compensation; and (ii) increased average administration fee per worksite employee to $652 in First Quarter 2006 compared to $632 in First Quarter 2005.

• As of March 31, 2006, our worksite lives were up 11% to 24,911 compared to 22,416 as of March 31, 2005. To improve sales, during First Quarter 2006 we unveiled a new marketing strategy and a new agent commission structure for our basic human resources outsourcing product, which we refer to as our employer protection program ("EPP"). The EPP is designed to assist business owners in managing the risk of employee-related liabilities.

Flood Insurance

• Flood premium in force was $98.8 million on approximately 226,000 policies at March 31, 2006, compared to premium in force of $80.7 million on approximately 191,000 policies at March 31, 2005.

• Revenue increases were mainly attributable to the increase in flood premium in force as noted above, as well as the accrual of the fiscal year 2005-2006 marketing bonus from the National Flood Insurance Program ("NFIP") in First Quarter 2006 of $1.0 million. This growth was partially offset by a decrease in the fee paid to us by the NFIP of 0.4 points to 30.8% from 31.2%, which was effective for the fiscal year beginning on October 1, 2005.

• Pre-tax profit increased as a direct result of the revenue increases discussed above.

Diversified Insurance Services Outlook

Our HR Outsourcing products offer an additional potential agency revenue stream for our independent agents. During First Quarter 2006, we repositioned the human resource outsourcing products as the EPP, which assists business owners manage the risk of employee-related liabilities. Agent training regarding the EPP is currently underway and based on initial positive feedback, we expect to recognize some synergies created from this product in 2006.

Our ability to provide flood insurance is a significant component of our Diversified Insurance Services strategy. In 2005, the destruction caused by the active hurricane season stressed the NFIP with flood losses currently estimated by the Federal Emergency Management Agency ("FEMA") to be in excess of $20 billion. We continue to monitor developments with the NFIP regarding its ability to pay claims in the event of another large-scale disaster Congress controls the Federal agency's borrowing authority, which topped out after Hurricane Katrina, and is again nearing maximum capacity. At this point, it is uncertain what impact, if any, this will have on our flood operations. In addition, regulators are considering a reduction in the expense allowance which is paid to writers of flood insurance. A reduction of this rate, which is currently 30.8%, could adversely affect our results of operations for this business.

Financial Condition, Liquidity and Capital Resources

Capital resources and liquidity represent our overall financial strength and our ability to generate cash flows from business operations, borrow funds at competitive rates, and raise new capital to meet operating and growth needs.

Liquidity

Liquidity is a measure of our ability to generate sufficient cash flows to meet the short and long-term cash requirements of our business operations. Our cash and short-term investments ("cash equivalent(s)") position at March 31, 2006 was $175.2 million compared to $179.5 million at December 31, 2005. Our sources of cash consist of dividends from our subsidiaries, the issuance of debt and equity securities, as well as the sale of our common stock under our employee and agent stock purchase plans. Our ability to receive dividends from our subsidiaries, however, is restricted. Dividends from our Insurance Subsidiaries to the parent company are subject to the approval and/or review of the insurance regulators in the respective domiciliary states of the Insurance Subsidiaries under insurance holding company acts, and are generally payable only from earned surplus as reported in the statutory annual statements of those subsidiaries as of the preceding December 31. Based on the 2005 unaudited statutory financial statements, the Insurance Subsidiaries are permitted to pay to us, in 2006, ordinary dividends in the aggregate amount of approximately $120.6 million, of which $15.0 million has been paid through March 31, 2006. For additional information regarding dividends restrictions, refer to Note 7 "Indebtedness" and Note 8, "Stockholders' Equity" of the Notes to Consolidated Financial Statements, included in Item 8. "Financial Statements and Supplementary Data" of our 2005 Annual Report on Form 10-K.

Our Insurance Subsidiaries generate cash flows primarily from insurance float. Float is money that an insurance company holds for a limited time. In an insurance operation, float arises because premiums are collected before losses are paid. This interval can extend over many years. During that time, the insurer invests the money and generates investment income. The duration of the fixed maturity portfolio is 4.2 years as of March 31, 2006, while the Insurance Subsidiaries' liabilities have a duration of approximately 2.9 years. To provide liquidity, while maintaining consistent performance, fixed maturity investments are "laddered" so that some issues are always approaching maturity and provide a source of predictable cash flow for claim payments during the ordinary course of business. In addition, the Insurance Subsidiaries purchase reinsurance coverage for protection against any significantly large claims or catastrophes that may occur during the year. As of March 31, 2006, our consolidated investments portfolio was $3.3 billion compared to $3.2 billion at December 31, 2005.

We also have available revolving lines of credit totaling $45.0 million, under which no balances were outstanding as of either March 31, 2006 or December 31, 2005. These lines of credit are scheduled to expire in June 2006, and we expect to renew them with similar terms.

Selective HR Solutions ("SHRS"), our HR Outsourcing business, generates cash flows from their operations. Dividends from SHRS to the parent company are restricted by the operating needs of this entity as well as Professional Employer Organization licensing requirements to maintain a current ratio of at least 1:1. SHRS provided dividends to the parent company of $0.9 million in First Quarter 2006 and $1.0 million in First Quarter 2005.

Dividends on shares of our common stock are declared and paid at the discretion of our Board of Directors based on our operating results, financial condition, capital requirements, contractual restrictions, and other relevant factors. Our ability to declare dividends is restricted by covenants contained in the notes payable that we issued on May 4, 2000 (the "2000 Senior Notes"). All such covenants were met during First Quarter 2006 and 2005. For further information regarding our notes payable, see Note 7 of the Notes to Consolidated Financial Statements, entitled, "Indebtedness", included in Item 8. "Financial Statements and Supplementary Data" of our 2005 Annual Report on Form 10-K. At March 31, 2006, the amount available for dividends to holders of our common stock, in accordance with our restrictions of the 2000 Senior Notes, was $303.7 million. Our ability to continue to pay dividends to our stockholders is also dependent in large part on the dividend paying ability of our Insurance Subsidiaries and the subsidiaries in our Diversified Insurance Services segment to pay dividends to the parent company. Restrictions on the ability of our subsidiaries, particularly the Insurance Subsidiaries, to declare and pay dividends to the parent company could materially affect our ability to pay principal and interest on indebtedness and dividends on common stock.

Our liquidity requirements in the past have been met by dividends from our subsidiaries as well as the issuance of debt and equity securities. The Insurance Subsidiary liquidity requirements have historically been met by cash receipts from operations, consisting of insurance premiums and investment income. These cash receipts have historically provided more than sufficient funds to pay losses, operating expenses, and dividends to the parent company. In the future, we expect our liquidity requirements, as well as the liquidity requirements of our subsidiaries, to be met by these sources of funds.

Capital Resources

Capital resources provide protection for policyholders, furnish the financial strength to support the business of underwriting insurance risks, and facilitate continued business growth. At March 31, 2006, we had stockholders' equity of $957.2 million and total debt of $339.4 million.

As active capital managers, we continually monitor our cash requirements as well as the amount of capital resources that we maintain at the holding company and operating subsidiary levels. As part of our long-term capital strategy, we strive to maintain a 25% debt-to-capital ratio and a premiums to surplus ratio sufficient to maintain an "A+ (Superior)" financial strength A.M. Best Rating for our Insurance Subsidiaries. On April 19, 2006, A.M. Best reaffirmed the A+ (Superior) financial strength rating of our Insurance Subsidiaries for the 45 ^th consecutive year. Based on our analysis and market conditions, we may take a variety of actions including, but not limited to, contributing capital to subsidiaries in our Insurance Operations and Diversified Insurance Services segments, issuing additional debt and/or equity securities, repurchasing shares of our common stock, or increasing stockholders' dividends. During First Quarter 2006, we repurchased approximately 952,000 shares of our common stock under our authorized repurchase program for a total cost of $52.1 million. These repurchases were predominately funded by the proceeds from our $100 million bond offering in November 2005.

Additionally, our cash requirements include principal and interest payments on senior convertible notes, various notes payable and convertible subordinated debentures, dividends to stockholders, and payment of claims and other operating expenses, income taxes, the purchase of investments, and other expenses. Our operating obligations and cash outflows include the following: claim settlements; agents' commissions; labor costs; premium taxes; general and administrative expenses; investment purchases; and capital expenditures. For further details regarding our cash requirements refer to the section below titled "Contractual Obligations and Contingent Liabilities and Commitments."

Off-Balance Sheet Arrangements
At March 31, 2006 and December 31, 2005, we did not have any relationships with unconsolidated entities or financial partnerships, such as entities often referred to as structured finance or special purpose entities, which would have been established for the purpose of facilitating off-balance sheet arrangements or for other contractually narrow or limited purposes. As such, we are not exposed to any financing, liquidity, market or credit risk that could arise if we had engaged in such relationships.

Contractual Obligations and Contingent Liabilities and Commitments

Our future cash payments associated with loss and loss expense reserves, and contractual obligations pursuant to operating leases for office space and equipment, senior convertible notes, convertible subordinated debentures and notes payable have not materially changed since December 31, 2005. We expect to have the capacity to repay and/or refinance these obligations as they come due.

We currently have available revolving lines of credit amounting to $45.0 million, under which no balances are outstanding as of either March 31, 2006 or December 31, 2005. At March 31, 2006, we had an additional alternative investment commitment of up to $53.2 million; but there is no certainty that any such additional investment will be required. We have issued no material guarantees on behalf of others and have no trading activities involving non-exchange traded contracts accounted for at fair value. We have no material transactions with related parties other than those disclosed in Note 17 of the Notes to Consolidated Financial Statements, included in Item 8. "Financial Statements and Supplementary Data," of our 2005 Annual Report.

Federal Income Taxes
Total federal income tax expense increased $0.9 million for First Quarter 2006 to $14.3 million, compared to First Quarter 2005. The increase was attributable to increased pre-tax income driven by our Investments and Insurance Operations segments. Our effective tax rate differs from the federal corporate rate of 35% primarily as a result of tax-advantaged investment income. The effective tax rate for First Quarter 2006 was 26%, compared with 28% for First Quarter 2005.

Adoption of Accounting Pronouncement

In June 2005, the NAIC Property and Casualty Reinsurance Study Group ("Study Group") approved enhanced disclosure requirements for insurers that utilized reinsurance with limited risk transfer features, also known as finite reinsurance. These enhanced disclosure requirements have had no impact on us, as we only use traditional forms of reinsurance and do not use finite risk reinsurance. The Study Group also approved a standard reinsurance attestation supplement to be signed by an insurer's CEO and CFO attesting that there are no side agreements and that the reporting entity complies with all of the requirements set forth in Statements of Statutory Accounting Principles No. 62, "Property and Casualty Reinsurance" for all contracts entered into, renewed, or amended on or after January 1, 1994. Selective filed these attestations with the NAIC and the Insurance Subsidiaries' domiciliary states for the first time on March 1, 2006 for its 2005 annual statutory filings.

ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
There have been no material changes in the information about market risk set forth in our 2005 Annual Report.

ITEM 4. CONTROLS AND PROCEDURES
Our management, with the participation of our Chief Executive Officer and Chief Financial Officer, has evaluated the effectiveness of our disclosure controls and procedures (as such term is defined in Rules 13a-15(e) and 15d-15(e) under the Securities Exchange Act of 1934, as amended ("Exchange Act")), as of the end of the period covered by this report. Based on such evaluation, our Chief Executive Officer and Chief Financial Officer have concluded that, as of the end of such period, our disclosure controls and procedures are: (i) effective in recording, processing, summarizing, and reporting information on a timely basis that we are required to disclose in the reports that we file or submit under the Exchange Act; and (ii) effective in ensuring that information that we are required to disclose in the reports that we file or submit under the Exchange Act is accumulated and communicated to our management, including our Chief Executive Officer and Chief Financial Officer, as appropriate, to allow timely decisions regarding required disclosure. No changes in our internal control over financial reporting (as such term is defined in Rule 13a-15(f) of the Exchange Act) occurred during First Quarter 2006 that materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

PART II - OTHER INFORMATION

ITEM 2. UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS

The following table below sets forth information regarding purchases made by, or on behalf of, Selective, of Selective Insurance Group, Inc. common stock during the periods indicated:

			Total Number of	Maximum Number
	Total Number of	Average	Shares Purchased	of Shares that May Yet
	Shares	Price Paid	as Part of Publicly	Be Purchased Under the
Period	Purchased1	per Share	Announced Program	Announced Program ²
January 1-31, 2006	595	55.47	-	4,664,736
February 1-28, 2006	814,846	55.02	735,400	3,929,336
March 1-31, 2006	216,987	53.77	216,500	3,712,836
Total	1,032,428	54.75	951,900

During First Quarter 2006, 74,133 shares were purchased from employees in connection with the vesting of restricted stock and 6,395 shares were purchased from employees in connection with stock option exercises. All of these repurchases were made in connection with satisfying tax withholding obligations with respect to those employees. These shares were not purchased as part of the publicly announced program. The shares were purchased at the average of the high and low prices of Selective's common stock on the dates of the purchases.

On April 26, 2005, the Board of Directors authorized a stock repurchase program of up to 5.0 million shares, which is scheduled to expire on April 26, 2007. During First Quarter 2006, 951,900 shares were repurchased, leaving 3,712,836 shares remaining to be purchased under the authorized program.

ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS

Selective Insurance Group Inc.'s 2006 Annual Meeting of Stockholders was held on April 26, 2006. Voting was conducted in person and by proxy as follows:

(a) Stockholders voted to elect the following four (4) Class II directors, each to serve until the 2009 annual meeting of stockholders or when a successor has been duly elected and qualified, as follows:

	For	Withheld
A. David Brown	22,314,199	1,289,005
William M. Kearns, Jr.	22,488,207	1,114,997
S. Griffin McClellan III	22,531,952	1,071,252
J. Brian Thebault	22,404,284	1,198,921

Stockholders voted to elect the following two (2) Class III directors, each to serve until the 2008 annual meeting of stockholders or when a successor has been duly elected and qualified, as follows:

	For	Withheld
John C. Burville	22,389,491	1,213,714
John F. Rockart	23,109,503	493,702

Stockholders voted to elect the following one (1) Class I director, to serve until the 2007 annual meeting of stockholders or when a successor has been duly elected and qualified, as follows:

	For	Withheld
W. Marston Becker	23,102,839	500,365

Continuing directors whose terms do not expire until the 2007 annual meeting of stockholders are Gregory E. Murphy and William M. Rue. Continuing directors whose terms do not expire until the 2008 annual meeting of stockholders are: Paul D. Bauer, Joan M. Lamm-Tennant, and Ronald L. O'Kelley.

(b) Stockholders voted to approve the Selective Insurance Group, Inc. Stock Purchase Plan for Independent Insurance Agencies as follows: 19,193,000 shares voted for this proposal; 1,551,059 shares voted against it; 181,815 shares abstained; and 2,677,331 shares were broker non-votes.

(c) Stockholders voted to ratify the appointment of KPMG LLP as independent public accountants for the fiscal year ending December 31, 2006 as follows: 23,355,840 shares voted for this proposal; 114,444 shares voted against it, and 132,921 shares abstained.

ITEM 6. EXHIBITS

(a) Exhibits:

Exhibit No.

* 10.1	Amendment No. 1 to the Selective Insurance Group, Inc. Cash Incentive Plan, dated April 25, 2006.
* 10.2	Form of Selective Insurance Group, Inc. 2005 Omnibus Stock Plan Stock Option Agreement.
* 10.3	Form of Selective Insurance Group, Inc. 2005 Omnibus Stock Plan Restricted Stock Agreement.
* 10.4	Form of Selective Insurance Group, Inc. 2005 Omnibus Stock Plan Restricted Stock Agreement.
* 10.5	Form of Selective Insurance Group, Inc. Cash Incentive Plan Cash Incentive Unit Award Agreement.
* 10.6	Form of Selective Insurance Group, Inc. Cash Incentive Plan Cash Incentive Unit Award Agreement.
* 11	Statement Re: Computation of Per Share Earnings.
* 31.1	Rule 13a-14(a) Certification of the Chief Executive Officer of Selective Insurance Group, Inc. (Section 302 of the Sarbanes-Oxley Act of 2002).
* 31.2	Rule 13a-14(a) Certification of the Chief Financial Officer of Selective Insurance Group, Inc. (Section 302 of the Sarbanes-Oxley Act of 2002).
* 32.1	Certification of Chief Executive Officer of Selective Insurance Group, Inc. pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
* 32.2	Certification of Chief Financial Officer of Selective Insurance Group, Inc. pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.

* Filed herewith

SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this Report to be signed on its behalf by the undersigned, thereunto duly authorized.

SELECTIVE INSURANCE GROUP, INC.

Registrant

By: /s/ Gregory E. Murphy	May 5, 2006
Gregory E. Murphy Chairman of the Board, President and Chief Executive Officer


By: /s/ Dale A. Thatcher	May 5, 2006
Dale A. Thatcher Executive Vice President, Chief Financial Officer and Treasurer

Exhibit 10.1

Amendment No. 1 to the
Selective Insurance Group, Inc.
Cash Incentive Plan

The Selective Insurance Group, Inc. Cash Incentive Plan, (the "Plan") is amended, to expressly allow for the payment of Awards (as defined in the Plan) under the Plan in the event of a Participant's (as defined in the Plan) termination of employment on or after "Early Retirement Age" (as defined in the Retirement Income Plan for Selective Insurance Company of America), as follows:

1. Section 5 is deleted in its entirety and replaced with the following:

5. Terms of Awards.

Awards granted pursuant to the Plan shall be evidenced in such form as the Committee shall from time to time approve and the terms and conditions of such Awards shall be set forth therein. For each Performance Period, the Committee shall specify the Performance Goals applicable to each Award. Performance Goals may include a level of performance below which no payment shall be made and levels of performance at which specified percentages of the Award shall be paid. Award levels for any Performance Period may be expressed as a dollar amount or as a percentage of the Participant's annual base salary. Unless otherwise determined by the Committee, all payments in respect of Awards granted under this Plan shall be made, in cash, within a reasonable period after the end of the Performance Period, provided, however, that all payments in respect of Awards granted under this Plan shall be made within two and one-half (2 1/2) months following the of end of the taxable year in which such payments become earned and payable. Participants must be employed by the Company or one of its subsidiaries as of the payment date established for Awards relating to the Performance Period for which payment is to be made provided that, if the Participant's employment is terminated prior to such payment date by reason of death, retirement on or after "Early Retirement Age" or "Normal Retirement Age" as each is defined in the Retirement Income Plan For Selective Insurance Company of America, "Total Disability" as such is defined in the aforementioned Retirement Income Plan, or for any other reason with the express consent of the Committee, the Committee, in its sole discretion, may provide for an Award payment to the Participant or, if applicable, the Participant's designated beneficiary. Notwithstanding anything to the contrary contained herein, in no event shall payments in respect of Awards be made in any Performance Period to a Participant in an amount that exceeds the product of (x) seven million five hundred thousand dollars ($7.5 million), multiplied by (y) the number of full and partial years of the Performance Period. The Committee may reduce or eliminate any Award under the Plan, but in no event may the Committee increase the amount of an Award payable to a Covered Employee over such amount payable based on the objective criteria established at the outset of the fiscal year for which the Award is made.

2. Except as set forth in this Amendment No. 1, the Plan shall remain in full force and effect.

Exhibit 10.2

SELECTIVE INSURANCE GROUP, INC.

2005 OMNIBUS STOCK PLAN

STOCK OPTION AGREEMENT

This STOCK OPTION AGREEMENT (the " Stock Option Agreement "), is made and entered into as of [DATE] (the " Date of Grant "), by and between Selective Insurance Group, Inc., a New Jersey corporation (the " Company ") and [EMPLOYEE] (the " Optionee ").

WHEREAS, the Salary and Employee Benefits Committee (the " Committee ") of the Board of Directors of the Company (the " Board ") has approved the grant of an Option pursuant to the Selective Insurance Group Inc. 2005 Omnibus Stock Plan (the " Plan "), as hereinafter defined, to the Optionee as set forth below;

NOW, THEREFORE, in consideration of the covenants and agreements herein contained, and intending to be legally bound hereby, the parties agree as follows:

1. Definitions . Capitalized terms which are not defined herein shall have the meaning set forth in the Plan.

2. Number of Shares and Exercise Price . The Company hereby grants to the Optionee an option (the " Option "), subject to the terms and conditions set forth herein, to purchase [NUMBER] shares of the common stock of the Company, par value $2.00 per share, at a price (the " Exercise Price ") of $[PRICE] ¹ per share. The Option is intended to be a [Nonqualified Stock Option][Incentive Stock Option]. ²

3. Term of Option and Conditions of Exercise .

(a) Term of Option . Unless the Option is earlier terminated in accordance with the terms of the Plan, the term of the Option shall commence on the Date of Grant and terminate upon the expiration of [ten (10)] ³ years from the Date of Grant. Upon the termination of the Option, all rights of the Optionee hereunder shall cease.

¹ [Determined by the Committee at the time of grant, but this number must be not less 100% of the Fair Market Value of a share of company Stock on the Date of Grant (110% for ISOs granted to 10% holders).]

² [Incentive Stock Options may only be granted to employees of the Company and its Affiliates, in accordance with the provisions of Section 422 of the Code.]

³ [Five (5) years for ISOs granted to 10% holders.]

(b) Vesting . The Option shall become vested and exercisable upon the schedule set forth on Exhibit A hereto. Notwithstanding the foregoing, (i) upon the occurrence of a Change of Control, the Option shall become fully vested and exercisable as provided in Section 15 of the Plan and (ii) in the event that the employment of the Optionee with the Company (or any of its subsidiaries) shall terminate on account of the Optionee's (x) death, (y) retirement on or after "Early Retirement Age" or "Normal Retirement Age" as each is defined in the Retirement Income Plan for Selective Insurance Company of America, as amended (the "Retirement Income Plan"), or (z) "Total Disability" as such is defined in the Retirement Income Plan, the Option granted to the Optionee, shall be immediately vested and exercisable until the earlier of (i) the expiration of the term of the Option in accordance with Section 3(a) above, and (ii) the date of the fifth anniversary following the date of termination of employment with the Company and any of its subsidiaries.

4. Nontransferability of Option . [Unless otherwise determined by the Committee pursuant to Section 22 of the Plan,] ⁴ the Option shall not be assignable or transferable otherwise than by will or by the laws of descent and distribution and the Option may be exercised, during the lifetime of the Optionee, only by the Optionee or the Optionee's legal representative.

5. Exercise of Option . The Option may be exercised by written notice pursuant to the form provided by the Company, delivered to the Secretary of the Company or his or her designee, specifying the portion of the Option to be exercised and accompanied by payment therefore. The Exercise Price for any shares of Common Stock purchased pursuant to the exercise of the Option shall be paid in full upon such exercise by one or a combination of the means provided in Section 7(c)(ii) of the Plan.

6. Undertakings by Optionee . The Optionee hereby agrees to take whatever additional actions and execute whatever additional documents the Committee may, in its discretion, deem necessary or advisable in order to carry out or effect one or more of the obligations or restrictions imposed on the Optionee pursuant to the express provisions of this Stock Option Agreement and the Plan.

7. Notices . Any notice required or permitted under this Stock Option Agreement shall be deemed given when delivered personally, or when deposited in a United States Post Office, postage prepaid, addressed, as appropriate, to the Optionee either at the Optionee's address as last known by the Company or such other address as the Optionee may designate in writing to the Company.

⁴ [This language to be included for Nonqualified Stock Options.]

8. Failure to Enforce Not a Waiver . The failure of the Company to enforce at any time any provision of this Stock Option Agreement shall in no way be construed to be a waiver of such provision or of any other provision hereof.

9. Amendments . Except as otherwise provide in Section 12, this Stock Option Agreement may be amended or modified at any time only by an instrument in writing signed by each of the parties hereto.

10. Survival of Terms . This Stock Option Agreement shall apply to and bind the Optionee and the Company and their respective permitted assignees and transferees, heirs, legatees, executors, administrators and legal successors.

11. Agreement Not a Contract for Services . Neither the grant of the Option, execution of this Stock Option Agreement nor any other action taken pursuant to this Stock Option Agreement shall constitute or be evidence of any agreement or understanding, express or implied, that the Optionee has a right to continue to provide services as an employee, officer or director of the Company for any period of time or at any specific rate of compensation.

12. Severability . If a provision of this Stock Option Agreement is held invalid by a court of competent jurisdiction, the remaining provisions will nonetheless be enforceable according to their terms. Further, if any provision is held to be over broad as written, that provision shall be amended to narrow its application to the extent necessary to make the provision enforceable according to applicable law and enforced as amended.

13. Governing Law . This Stock Option Agreement shall be governed by and construed according to the laws of the State of New Jersey, without regard to the conflicts of law rules thereof.

14. Incorporation of Plan; Acknowledgment . The Plan is hereby incorporated herein by reference and made a part hereof, and the Option and this Stock Option Agreement are subject to all terms and conditions of the Plan. In the event of any inconsistency between the Plan and this Stock Option Agreement, the provisions of the Plan shall govern. By signing this Stock Option Agreement, the Optionee acknowledges having received and read a copy of the Plan.

(The remainder of this page is intentionally blank.)

IN WITNESS WHEREOF, the parties hereto have executed and delivered this Stock Option Agreement on the day and year first above written.

Selective Insurance Group, Inc.

By:

Title:

______________________________________

[EMPLOYEE]:

______________________________________

CURRENT DATE

EXHIBIT A

Number of Shares of Common Stock

Subject to the Option

Vesting Date(s)

[NUMBER]

[DATE] ⁵

[DATE]

⁵ [Determined by the Committee at the time of Grant.]

Exhibit 10.3

SELECTIVE INSURANCE GROUP, INC.

2005 OMNIBUS STOCK PLAN

RESTRICTED STOCK AGREEMENT

This RESTRICTED STOCK AGREEMENT (this " Restricted Stock Agreement ") is made and entered into as of [DATE] (the " Date of Grant "), by and between Selective Insurance Group, Inc., a New Jersey corporation (the " Company ") and [EMPLOYEE] (the " Recipient ").

WHEREAS, the Salary and Employee Benefits Committee (the " Committee ") of the Board of Directors of the Company (the " Board ") has approved the grant of Restricted Stock pursuant to the Selective Insurance Group Inc. 2005 Omnibus Stock Plan (the " Plan "), as hereinafter defined, to the Recipient as set forth below;

NOW, THEREFORE, in consideration of the covenants and agreements herein contained, and intending to be legally bound hereby, the parties agree as follows:

1. Definitions . Capitalized terms which are not defined herein shall have the meaning set forth in the Plan.

2. Grant of Restricted Stock . The Company hereby grants to the Recipient [NUMBER] restricted shares of the common stock of the Company, par value $2.00 per share (the " Restricted Stock "), subject to all of the terms and conditions of this Restricted Stock Agreement. The Recipient's grant and record of share ownership shall be kept on the books of the Company, until the restrictions on transfer have lapsed pursuant to Section 3 below. The Company shall cause to be delivered to the Recipient the shares that have become vested pursuant to Section 3 below in a manner determined by the Committee, including via book entry or a certificate evidencing such shares, which may bear a restrictive legend, if the Committee determines such a legend to be appropriate.

3. Lapse of Restrictions . All shares of Restricted Stock shall be unvested unless and until they become Vested Shares in accordance with this Section 3. If the Participant is employed by the Company or any Subsidiary as of the applicable anniversary date set forth below, or if the Recipient is not so employed solely due to death, retirement on or after "Early Retirement Age" or "Normal Retirement Age" as each is defined in the Retirement Income Plan for Selective Insurance Company of America, or "Total Disability" as such is defined in the aforementioned Retirement Income Plan, the Restricted Stock shall become " Vested Shares " upon the earlier of: (i) the date Recipient terminates employment as set forth above in this Section 3, or (ii) upon the date set forth below, in each case in an amount equal to the percentage set forth below:

Date Percentage Vested
[Third anniversary of the Date of Grant]	[100%] ¹

¹ [Actual dates and vested percentages to be determined by the Committee at the time of grant.]

4. Restrictions on Transfer . Shares of Restricted Stock may not be transferred or otherwise disposed of by the Recipient prior to become Vested Shares, including by way of sale, assignment, transfer, pledge or otherwise, except by will or the laws of descent and distribution.

5. Rights as a Stockholder . The Company shall pay to the Recipient, in cash, any dividends paid on the Restricted Stock awarded to the Recipient. Such payment shall be made on the date that such dividend would be paid to the Company's shareholders, generally. The Recipient shall be entitled to vote the shares of Restricted Stock.

6. Notices . Any notice required or permitted under this Restricted Stock Agreement shall be deemed given when delivered personally, or when deposited in a United States Post Office, postage prepaid, addressed, as appropriate, to the Recipient either at the Recipient's address as last known by the Company or such other address as the Recipient may designate in writing to the Company.

7. Securities Laws Requirements . The Company shall not be obligated to transfer any shares of Company common stock from the Recipient to another party, if such transfer, in the opinion of counsel for the Company, would violate the Securities Act of 1933, as amended from time to time (or any other federal or state statutes having similar requirements as may be in effect at that time). Further, the Company may require as a condition of transfer of any shares to the Recipient that the Recipient furnish a written representation that he or she is holding the shares for investment and not with a view to resale or distribution to the public.

8. Protections Against Violations of Restricted Stock Agreement . No purported sale, assignment, mortgage, hypothecation, transfer, pledge, encumbrance, gift, transfer in trust (voting or other) or other disposition of, or creation of a security interest in or lien on, any of the shares of Restricted Stock by any holder thereof in violation of the provisions of this Restricted Stock Agreement or the Certificate of Incorporation or the By-Laws of the Company, shall be valid, and the Company will not transfer any of said shares of Restricted Stock on its books nor will any of said shares of Restricted Stock be entitled to vote, nor will any dividends be paid thereon, unless and until there has been full compliance with said provisions to the satisfaction of the Company. The foregoing restrictions are in addition to and not in lieu of any other remedies, legal or equitable, available to enforce said provisions.

9. Taxes . The Company will withhold from the shares of Restricted Stock otherwise deliverable hereunder such number of shares as it will determines is necessary to satisfy all applicable withholding tax obligations in respect of such shares, unless the Recipient has made alternative arrangements satisfactory to the Company with respect to such tax withholding obligations. The Recipient shall promptly notify the Company of any election made pursuant to Section 83(b) of the Internal Revenue Code of 1986, as amended from time to time (the " Code ").

THE RECIPIENT ACKNOWLEDGES THAT IT IS THE RECIPIENT'S SOLE RESPONSIBILITY AND NOT THE COMPANY'S TO FILE TIMELY THE ELECTION UNDER SECTION 83(b) OF THE CODE, IN THE EVENT THAT THE RECIPIENT DESIRES TO MAKE THE ELECTION.

10. Legend . The Company's Secretary shall, or shall instruct the Company's transfer agent to, provide stop transfer instructions in the Company's stock records to prevent any transfer of the Restricted Stock for any purpose until the stock is vested. Any certificate that the Secretary or the transfer agent deems necessary to issue to represent shares of Restricted Stock shall, until all restrictions lapse and new certificates are issued, bear the following legend:

THE SECURITIES REPRESENTED BY THIS CERTIFICATE ARE SUBJECT TO CERTAIN VESTING REQUIREMENTS AND MAY BE SUBJECT TO REACQUISITION BY THE COMPANY UNDER THE TERMS OF THAT CERTAIN RESTRICTED STOCK AGREEMENT BY AND BETWEEN SELECTIVE INSURANCE GROUP, INC. (THE "COMPANY") AND THE HOLDER OF THE SECURITIES. PRIOR TO VESTING OF OWNERSHIP IN THE SECURITIES, THEY MAY NOT BE, DIRECTLY OR INDIRECTLY, OFFERED, TRANSFERRED, SOLD, ASSIGNED, PLEDGED, HYPOTHECATED OR OTHERWISE DISPOSED OF UNDER ANY CIRCUMSTANCES. COPIES OF THE ABOVE REFERENCED AGREEMENT ARE ON FILE AT THE OFFICES OF THE COMPANY, 40 WANTAGE AVENUE, BRANCHVILLE, NJ 07890.

11. Failure to Enforce Not a Waiver . The failure of the Company to enforce at any time any provision of this Restricted Stock Agreement shall in no way be construed to be a waiver of such provision or of any other provision hereof.

12. Governing Law . This Restricted Stock Agreement shall be governed by and construed according to the laws of the State of New Jersey without regard to its principles of conflict of laws.

13. Amendments . Except as otherwise provide in Section 16, this Restricted Stock Agreement may be amended or modified at any time only by an instrument in writing signed by each of the parties hereto.

14. Survival of Terms . This Restricted Stock Agreement shall apply to and bind the Recipient and the Company and their respective permitted assignees and transferees, heirs, legatees, executors, administrators and legal successors.

15. Agreement Not a Contract for Services . Neither the grant of Restricted Stock, the execution of this Restricted Stock Agreement nor any other action taken pursuant to this Restricted Stock Agreement shall constitute or be evidence of any agreement or understanding, express or implied, that the Recipient has a right to continue to provide services as an officer, director, employee or consultant of the Company for any period of time or at any specific rate of compensation.

16. Severability . If a provision of this Restricted Stock Agreement is held invalid by a court of competent jurisdiction, the remaining provisions will nonetheless be enforceable according to their terms. Further, if any provision is held to be over broad as written, that provision shall be amended to narrow its application to the extent necessary to make the provision enforceable according to applicable law and enforced as amended.

17. Incorporation of Plan; Acknowledgment . The Restricted Stock is granted pursuant to the Plan, and the Restricted Stock and this Restricted Stock Agreement are in all respects governed by the Plan and subject to all of the terms and provisions thereof, whether such terms and provisions are incorporated in this Restricted Stock Agreement by reference or are expressly cited. By signing this Restricted Stock Agreement, the Recipient acknowledges having received and read a copy of the Plan.

IN WITNESS WHEREOF, the parties hereto have executed and delivered this Restricted Stock Agreement on the day and year first above written.

Selective Insurance Group, Inc.

By:

Title:

________________________________

[EMPLOYEE]

________________________________

CURRENT DATE

Exhibit 10.4

SELECTIVE INSURANCE GROUP, INC.

2005 OMNIBUS STOCK PLAN

RESTRICTED STOCK AGREEMENT

This RESTRICTED STOCK AGREEMENT (this "Restricted Stock Agreement" ) is made and entered into as of [DATE] (the "Date of Grant" ), by and between Selective Insurance Group, Inc., a New Jersey corporation (the "Company" ) and [EMPLOYEE] (the "Recipient" ).

WHEREAS, the Salary and Employee Benefits Committee (the "Committee" ) of the Board of Directors of the Company (the "Board" ) has approved the grant of Restricted Stock pursuant to the Selective Insurance Group, Inc. 2005 Omnibus Stock Plan, as amended (the "Plan" ), as hereinafter defined, to the Recipient as set forth below;

NOW, THEREFORE, in consideration of the covenants and agreements herein contained, and intending to be legally bound hereby, the parties agree as follows:

1. Definitions . Capitalized terms which are not defined herein shall have the meaning set forth in the Plan.

2. Grant of Restricted Stock . The Company hereby grants to the Recipient [NUMBER] restricted shares of the common stock of the Company, par value $2.00 per share (the "Restricted Stock" ), subject to all of the terms and conditions of this Restricted Stock Agreement. The Recipient's grant and record of share ownership shall be kept on the books of the Company, until the restrictions on transfer have lapsed pursuant to Section 3 below. The Company shall cause to be delivered to the Recipient the shares that have become vested pursuant to Section 3 below in a manner determined by the Committee, including via book entry or a certificate evidencing such shares, which may bear a restrictive legend, if the Committee determines such a legend to be appropriate.

3. Lapse of Restrictions . All shares of Restricted Stock shall be unvested unless and until they become Vested Shares in accordance with this Section 3. if:

(a)(i) the Recipient is employed by the Company or any Subsidiary as of the applicable anniversary date set forth below, or (ii) the Recipient is not employed by the Company or any Subsidiary as of the applicable anniversary date set forth below solely due to death, retirement on or after "Early Retirement Age" or "Normal Retirement Age" as each is defined in the Retirement Income Plan for Selective Insurance Company of America, or "Total Disability" as such is defined in the aforementioned Retirement Income Plan, and

Restricted Stock Agreement (Performance Based)

(b) [Performance criteria to be determined by the Committee at the time of grant], then the Restricted Stock shall become "Vested Shares " upon the earlier of: (A) the date Recipient terminates employment pursuant to 3(a)(ii) above, or (B) the date set forth below, in each case in an amount equal to the percentage set forth below:

Date	Percentage Vested
[Third anniversary of the Date of Grant]	[100%] ¹

If, on the applicable anniversary date set forth above either requirement (a) or (b) of this Section 3 of this Restricted Stock Agreement has failed to be satisfied, then the percentage of the Restricted Stock that failed to become Vested Shares, as set forth above, shall be forfeited by the Recipient and transferred to, and reacquired by, the Company as provided by Section 9(h) of the Plan.

4. Restrictions on Transfer . Shares of Restricted Stock may not be transferred or otherwise disposed of by the Recipient prior to becoming Vested Shares, including by way of sale, assignment, transfer, pledge or otherwise, except by will or the laws of descent and distribution.

¹ [Actual dates and vesting percentages to be determined by the Committee at the time of grant.]

9. Taxes . The Company will withhold from the shares of Restricted Stock otherwise deliverable hereunder such number of shares as it determines is necessary to satisfy all applicable withholding tax obligations in respect of such shares, unless the Recipient has made alternative arrangements satisfactory to the Company with respect to such tax withholding obligations. The Recipient shall promptly notify the Company of any election made pursuant to Section 83(b) of the Internal Revenue Code of 1986, as amended from time to time (the "Code" ).

12. Governing Law . This Restricted Stock Agreement shall be governed by and construed according to the laws of the State of New Jersey without regard to its principles of conflict of laws.

13. Amendments . Except as otherwise provided in Section 16, this Restricted Stock Agreement may be amended or modified at any time only by an instrument in writing signed by each of the parties hereto.

IN WITNESS WHEREOF, the parties hereto have executed and delivered this Restricted Stock Agreement on the day and year first above written.

SELECTIVE INSURANCE GROUP, INC.

By:

Title:

________________________________

[EMPLOYEE]

________________________________

CURRENT DATE

Exhibit 10.5

SELECTIVE INSURANCE GROUP, INC.

CASH INCENTIVE PLAN

CASH INCENTIVE UNIT AWARD AGREEMENT

This CASH INCENTIVE UNIT AWARD AGREEMENT (" Agreement ") is made and entered into as of [DATE], pursuant to the Selective Insurance Group, Inc. Cash Incentive Plan (the " Plan ") by and between SELECTIVE INSURANCE GROUP, INC. , a New Jersey corporation (the " Company ") and [EMPLOYEE] (the " Recipient ").

WHEREAS, the Salary and Employee Benefits Committee (the " Committee ") of the Board of Directors of the Company (the " Board "), has approved the grant of cash incentive units (each a "Cash Unit"), as described in 2 below (the " Award ") pursuant to the Plan to the Recipient as set forth below;

NOW, THEREFORE , in consideration of the covenants and agreements herein contained, and intending to be legally bound hereby, the parties agree as follows:

1. Definitions . Capitalized terms which are not defined herein shall have the meaning set forth in the Plan. If any provision of this Agreement conflicts with any provision of the Plan, (as determined in the sole discretion of the Committee) the Plan shall govern.

2. Grant of Cash Units; Initial Value . The Company hereby grants to the Recipient, pursuant to the Plan on the date set forth above, an Award of [NUMBER] Cash Units. Each Cash Unit granted hereunder shall have an initial value of one hundred dollars ($100). The number of Cash Units deemed ultimately earned at the end of the Performance Period hereunder may increase or decrease from the initial number of Cash Units awarded as described in 4(b)(ii) below. The final value of each Cash Unit shall be adjusted to reflect the percentage increase or decrease of the total shareholder return on the common stock of the Company, as set forth in 4(b)(i) below.

3. Payment of Cash Units .

(a) The payment for this Award which the Committee determines, in writing, to be earned pursuant to Section 4 shall, subject to the provisions of this Section 3, Section 4 and Section 5, be paid in cash by the Company on a date (the "Payment Date") as soon as practicable following (but not later than 2 ½ months after the end of the calendar year coincident with) the end of the Performance Period described in Section 4(a).

(b) Deferral . The Recipient may, notwithstanding the provisions of Section 3(a) above, by election filed with the Company under the Selective Insurance Company of America Deferred Compensation Plan (or any successor plan or program), and on a form acceptable to the Committee or its designee, not later than the date six months immediately prior to the end of the Performance Period and subject to such terms and conditions as the Committee may specify, to have any payment that may become due in respect of this Award deferred until such later time as shall be specified in such election.

Cash Unit Agreement (Performance Based)

4. Vesting and Performance Criteria .

(a) Performance Period . The Performance Period for this Award shall commence on January 1, 2006 and end on December 31, 2008.

(b) Performance Goals . The Performance Goals for the Performance Period are:

(i) The value of each Cash Unit at the Payment Date shall be determined by increasing or decreasing the initial value of each Cash Unit by a percentage reflecting the increase or decrease in the total shareholder return per share of common stock to the Company's shareholders for the Performance Period, including the value of any dividends paid, regardless of the form of the dividend (cash, stock or other property) with such dividends deemed to be reinvested in the common stock of the Company; and

(ii) The actual number of Cash Units deemed earned at the Payment Date shall be the initial number of Cash Units awarded, increased or decreased based on the cumulative statutory net premium growth for the Company's property and casualty insurance subsidiaries and the cumulative three-year statutory combined ratio of the Company's property and casualty insurance subsidiaries relative to such performance for the peer index companies, as designated and determined by the Committee, as follows:

NUMBER OF UNITS EARNED AS A PERCENTAGE OF INITIAL

NUMBER OF CASH UNITS AWARDED

>=80 ^th Percentile 100% 125% 150% 175% 200%

Cumulative

Three-Year 55 ^th - 79.9 ^th Percentile 75% 100% 125% 150% 175%

Statutor

Net Premium 45 ^th - 54.9 ^th Percentile 50% 75% 100% 125% 150%

Growth

Relative to 35 ^th - 44.9 ^th Percentile 25% 50% 75% 100% 125%

Peer Index

<=35 ^th Percentile 0% 25% 50% 75% 100%

<=35 ^th 35 ^th -44.9 ^th 45 ^th -54.9 ^th 55 ^th -79.9 ^th >=80 ^th

Percentile Percentile Percentile Percentile Percentile

Cumulative Three-Year Statutory Combined Ratio Relative to Peer Index

For the purposes of this calculation, the value of the Company's common stock to be used at the commencement date and the end date of the Performance Period shall be the Fair Market Value of the Company's common stock as such Fair Market Value is defined in the Selective Insurance Group, Inc. 2005 Omnibus Stock Plan.

5. Termination of Employment .

(a) Recipient must be employed by the Company or one of its subsidiaries as of the Payment Date provided that, if the Recipient's employment is terminated prior to such Payment Date by reason of death, retirement on or after "Early Retirement Age" or "Normal Retirement Age" as each is defined in the Retirement Income Plan for Selective Insurance Company of America, "Total Disability" as such is defined in the aforementioned Retirement Income Plan, or for any other reason with the express consent of the Committee, the Award shall be payable at the same time and pursuant to the same terms and conditions had the Recipient continued employment through the Payment Date.

(b) The transfer between the Company and a subsidiary of the Company or between such subsidiaries shall not be considered a termination of employment.

(c) In the event of the Recipient's termination of employment prior to the Payment Date, except as provided in this Section 5 or in Section 6, the Recipient shall have no right to any payment hereunder.

6. Change in Control . Notwithstanding anything in Section 5, in the event a Change in Control (as defined in the Selective Insurance Group, Inc. 2005 Omnibus Stock Plan) occurs, the Award, if not previously forfeited pursuant to Section 5, shall become non-forfeitable, the number of cash units deemed earned shall be 150% of the initial number of Cash Units awarded hereunder and the value of each Cash Unit shall be determined as of the date of the Change in Control. The payment of the Award so determined shall be made to the Recipient within thirty (30) days of the Change in Control.

7. Adjustment in Capitalization . In the event that the Committee shall determine that any stock dividend, stock split, share combination, extraordinary cash dividend, recapitalization, reorganization, merger, consolidation, split-up, spin-off, combination, exchange of shares, warrants or rights offering to purchase the Company's common stock at a price substantially below fair market value, or other similar corporate event affects the Company's common stock such that an adjustment is required in order to preserve, or to prevent the enlargement of, the benefits or potential benefits intended to be made available under this Award, then the Committee shall, in its sole discretion, and in such manner as the Committee may deem equitable, adjust any or all of the number of Cash Units or calculations with respect to determining the achievement of Performance Goals subject to this Award.

8. Notice . Any notice required or permitted to be given to the Company hereunder shall be addressed to Selective Insurance Group, Inc., Attention: Corporate Secretary, 40 Wantage Avenue, Branchville, NJ 07890; any notice required or permitted to be given hereunder to the Recipient shall be deemed given when delivered personally, or when deposited with a United States Post Office, postage prepaid, addressed, as appropriate, to the Recipient either at the Recipient's address as last known by the Company, or such other address as the Recipient may designate in writing to the Company.

9. Failure to Enforce Not a Waiver . The failure of the Company to enforce at any time any provision of this Agreement shall in no way be construed to be a waiver of such provision or of any other provision hereof.

10. Amendments . This Agreement may be amended or modified only by an instrument in writing signed by each of the parties hereto.

11. S urvival of Terms . This Agreement shall apply to and bind the Recipient and the Company and their respective permitted assignees and transferees, heirs, legatees, executors, administrators and legal successors.

12. Severability . If a provision of this Agreement is held invalid by a court of competent jurisdiction, the remaining provisions will nonetheless be enforceable according to their terms. Further, if any provision is held to be overbroad as written, that provision shall be amended to narrow its application to the extent necessary to make the provision enforceable according to applicable law and enforced as amended.

13. Incorporation of Plan; Acknowledgment . This Agreement is granted pursuant to the Plan, and is in all respects governed by the Plan and subject to all of the terms and provisions thereof, whether such terms and provisions are incorporated in this Agreement by reference or are expressly cited. By signing this Agreement, the Recipient acknowledges having received and read a copy of the Plan.

IN WITNESS WHEREOF , the parties hereto have executed and delivered this Cash Incentive Unit Award Agreement on the day and year first above written.

SELECTIVE INSURANCE GROUP, INC.

By:

Title:

________________________________

[EMPLOYEE]

________________________________

CURRENT DATE

Exhibit 10.6

SELECTIVE INSURANCE GROUP, INC.

CASH INCENTIVE PLAN

CASH INCENTIVE UNIT AWARD AGREEMENT

NOW, THEREFORE , in consideration of the covenants and agreements herein contained, and intending to be legally bound hereby, the parties agree as follows:

3. Payment of Cash Units .

4. Vesting and Performance Criteria .

(a) Performance Period . The Performance Period for this Award shall commence on January 1, 2006 and end on December 31, 2008.

(b) Performance Goal . The value of each Cash Unit at the Payment Date shall be determined by increasing or decreasing the initial value of each Cash Unit by a percentage reflecting the increase or decrease in the total shareholder return per share of common stock to the Company's shareholders for the Performance Period, including the value of any dividends paid, regardless of the form of the dividend (cash, stock or other property) with such dividends deemed to be reinvested in the common stock of the Company.

(c) For the purposes of the calculation referenced in 4(b), the value of the Company's common stock to be used at the commencement date and the end date of the Performance Period shall be the Fair Market Value of the Company's common stock as such Fair Market Value is defined in the Selective Insurance Group, Inc. 2005 Omnibus Stock Plan.

5. Termination of Employment .

(b) The transfer between the Company and a subsidiary of the Company or between such subsidiaries shall not be considered a termination of employment.

6. Change in Control . Notwithstanding anything in Section 5, in the event a Change in Control (as defined in the Selective Insurance Group, Inc. 2005 Omnibus Stock Plan) occurs, the Award, if not previously forfeited pursuant to Section 5, shall become non-forfeitable and the value of each Cash Unit shall be determined as of the date of the Change in Control. The payment of the Award so determined shall be made to the Recipient within thirty (30) days of the Change in Control.

8. Notice . Any notice required or permitted to be given to the Company hereunder shall be addressed to Selective Insurance Group, Inc., Attention: Corporate Secretary, 40 Wantage Avenue, Branchville, NJ 07890; any notice required or permitted to be given hereunder to the Recipient shall be deemed given when delivered personally, or when deposited with a Untied States Post Office, postage prepaid, addressed, as appropriate, to the Recipient either at the Recipient's address as last known by the Company, or such other address as the Recipient may designate in writing to the Company.

10. Amendments . This Agreement may be amended or modified only by an instrument in writing signed by each of the parties hereto.

11. Survival of Terms . This Agreement shall apply to and bind the Recipient and the Company and their respective permitted assignees and transferees, heirs, legatees, executors, administrators and legal successors.

IN WITNESS WHEREOF , the parties hereto have executed and delivered this Cash Incentive Unit Award Agreement on the day and year first above written.

SELECTIVE INSURANCE GROUP, INC.

By:

Title:

________________________________

[EMPLOYEE]

________________________________

CURRENT DATE

EXHIBIT 11

SELECTIVE INSURANCE GROUP, INC. AND CONSOLIDATED SUBSIDIARIES

COMPUTATION OF EARNINGS PER SHARE

Three months ended March 31, 2006 and 2005

2006		Income	Shares		Per Share
(in thousands, except per share amounts)		(Numerator)	(Denominator)		Amount
Basic EPS:
Net income available to common stockholders	$	39,978	26,906	$	1.49
Effect of dilutive securities:
Restricted stock		-	518
Convertible debt		811	4,067
Stock options		-	324
Deferred shares		-	87
Diluted EPS:
Net income available to common stockholders
and assumed conversions	$	40,789	31,902	$	1.28

2005		Income	Shares		Per Share
(in thousands, except per share amounts)		(Numerator)	(Denominator)		Amount
Basic EPS:
Net income from continuing operations	$	35,009	27,104	$	1.29
Net income from discontinued operations		597	27,104		0.02
Cumulative effect of change in accounting principle		495	27,104		0.02
Net income available to common stockholders		36,101	27,104		1.33
Effect of dilutive securities:
Restricted stock		-	509
Convertible debt		812	4,075
Stock options		-	362
Deferred shares		-	101
Diluted EPS:
Net income from continuing operations		35,821	32,151		1.11
Net income from discontinued operations		597	32,151		0.02
Cumulative effect of change in accounting principle		495	32,151		0.02
Net income available to common stockholders
and assumed conversions	$	36,913	32,151	$	1.15

Exhibit 31.1

Certification pursuant to Rule 13a - 14(a), as adopted pursuant to

Section 302 of the Sarbanes-Oxley Act of 2002

I, GREGORY E. MURPHY, Chairman of the Board, President and Chief Executive Officer of Selective Insurance Group, Inc. (the Company), hereby certify, that:

1. I have reviewed this quarterly report on Form 10-Q of the Company;

2. Based on my knowledge, this quarterly report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

3. Based on my knowledge, the financial statements, and other financial information included in this quarterly report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;

4. The registrant's other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15(d)-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-q5(f) and 15(d)-15(f)) for the registrant and have:

a)		Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;
b)		Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;
c)		Evaluated the effectiveness of the registrant's disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and
d)		Disclosed in this report any change in the registrant's internal control over financial reporting that occurred during the registrant's most recent fiscal quarter (the registrant's fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonable likely to materially affect, the registrant's internal control over financial reporting.

5. The registrant's other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant's auditors and the audit committee of the registrant's board of directors (or persons performing the equivalent functions):

a)		All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant's ability to record, process, summarize and report financial information; and
b)		Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal control over financial reporting.

Date: May 5, 2006	By: /s/ Gregory E. Murphy
	Gregory E. Murphy
	Chairman of the Board, President and Chief Executive Officer

Exhibit 31.2

Certification pursuant to Rule 13a - 14(a), as adopted pursuant to

Section 302 of the Sarbanes-Oxley Act of 2002

I, DALE A. THATCHER, Executive Vice President, Chief Financial Officer and Treasurer of Selective Insurance Group, Inc. (the Company), hereby certify, that:

1. I have reviewed this quarterly report on Form 10-Q of the Company;

a)		Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;
b)		Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;
c)		Evaluated the effectiveness of the registrant's disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and
d)		Disclosed in this report any change in the registrant's internal control over financial reporting that occurred during the registrant's most recent fiscal quarter (the registrant's fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonable likely to materially affect, the registrant's internal control over financial reporting.

a)		All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant's ability to record, process, summarize and report financial information; and
b)		Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal control over financial reporting.

Date: May 5, 2006	By: /s/ Dale A. Thatcher
	Dale A. Thatcher
	Executive Vice President, Chief Financial
	Officer and Treasurer

Exhibit 32.1

Certification pursuant to 18 U.S.C. Section 1350, as adopted pursuant to
Section 906 of the Sarbanes-Oxley Act of 2002

I, GREGORY E. MURPHY, the Chairman of the Board, President and Chief Executive Officer of Selective Insurance Group, Inc. (the Company), hereby certify, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that the Form 10-Q of the Company for the quarterly period ended March 31, 2006 (the Form 10-Q), which this certification accompanies, fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934 (15 U.S.C. 78m or 78o(d)), and the information contained in the Form 10-Q fairly presents, in all material respects, the financial condition and results of operations of the Company.

Date: May 5, 2006	By: /s/ Gregory E. Murphy
	Gregory E. Murphy

Exhibit 32.2

Certification pursuant to 18 U.S.C. Section 1350, as adopted pursuant to
Section 906 of the Sarbanes-Oxley Act of 2002

I, DALE A. THATCHER, the Executive Vice President, Chief Financial Officer and Treasurer of Selective Insurance Group, Inc., (the Company), hereby certify, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that the Form 10-Q of the Company for the quarterly period ended March 31, 2006 (the Form 10-Q), which this certification accompanies, fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934 (15 U.S.C. 78m or 78o(d)), and the information contained in the Form 10-Q fairly presents, in all material respects, the financial condition and results of operations of the Company.

Date: May 5, 2006	By: /s/ Dale A. Thatcher
	Dale A. Thatcher