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<SEC-DOCUMENT>0000230557-04-000177.txt : 20041105
<SEC-HEADER>0000230557-04-000177.hdr.sgml : 20041105
<ACCEPTANCE-DATETIME>20041105172232
ACCESSION NUMBER:		0000230557-04-000177
CONFORMED SUBMISSION TYPE:	10-Q
PUBLIC DOCUMENT COUNT:		12
CONFORMED PERIOD OF REPORT:	20040930
FILED AS OF DATE:		20041105
DATE AS OF CHANGE:		20041105

FILER:

	COMPANY DATA:	
		COMPANY CONFORMED NAME:			SELECTIVE INSURANCE GROUP INC
		CENTRAL INDEX KEY:			0000230557
		STANDARD INDUSTRIAL CLASSIFICATION:	FIRE, MARINE & CASUALTY INSURANCE [6331]
		IRS NUMBER:				222168890
		STATE OF INCORPORATION:			NJ
		FISCAL YEAR END:			1231

	FILING VALUES:
		FORM TYPE:		10-Q
		SEC ACT:		1934 Act
		SEC FILE NUMBER:	000-08641
		FILM NUMBER:		041123667

	BUSINESS ADDRESS:	
		STREET 1:		40 WANTAGE AVENUE
		CITY:			BRANCHVILLE
		STATE:			NJ
		ZIP:			07890
		BUSINESS PHONE:		2019483000

	MAIL ADDRESS:	
		STREET 1:		40 WANTAGE AVE
		STREET 2:		40 WANTAGE AVE
		CITY:			BRANCHVILLE
		STATE:			NJ
		ZIP:			07890

	FORMER COMPANY:	
		FORMER CONFORMED NAME:	SRI CORP
		DATE OF NAME CHANGE:	19860508
</SEC-HEADER>
<DOCUMENT>
<TYPE>10-Q
<SEQUENCE>1
<FILENAME>selective10q3rdqtr2004.htm
<DESCRIPTION>3RD QUARTER 10Q
<TEXT>
<html>

<head>

<title>Form 10-Q for the quarterly period ended September 30, 2004</title>

</head>

<body link=blue vlink=purple>

<div>

<p align=center style="margin-top: 0; margin-bottom: 0"><b>UNITED STATES<br>
SECURITIES AND EXCHANGE COMMISSION<br>
Washington, D.C.&nbsp; 20549<br><br></b></p>

<p align=center style="margin-top: 0; margin-bottom: 0"><b>FORM 10-Q<font size="2"><br><br>
</font></b></p>

<p style="margin-top: 0; margin-bottom: 0"><b><font size="2">&nbsp;</font></b></p>

<p style="margin-top: 0; margin-bottom: 0"><b><font size="2">(Mark one)<br><br>
</font></b></p>

<table border=0 cellspacing=0 cellpadding=0>
 <tr>
  <td width=61 valign=top>
  <p style="margin-top: 0; margin-bottom: 0"><b><font size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; [X]</font></b></p>
  </td>
  <td width=625 valign=top>
  <p style="margin-top: 0; margin-bottom: 0"><b><font size="2">QUARTERLY
  REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934</font></b></p>
  </td>
 </tr>
 <tr>
  <td width=61 valign=top>

  <p style="margin-top: 0; margin-bottom: 0">

  </td>
  <td width=625 valign=top>

  <p style="margin-top: 0; margin-bottom: 0">

  </td>
 </tr>
 <tr>
  <td width=686 colspan=2 valign=top>
  <p style="margin-top: 0; margin-bottom: 0">&nbsp;</td>
 </tr>
 <tr>
  <td width=686 colspan=2 valign=top>
  <p style="margin-top: 0; margin-bottom: 0"><font size="2">For the quarterly period ended: September 30, 2004<br>
&nbsp;</font></p>
  </td>
 </tr>
 <tr>
  <td width=686 colspan=2 valign=top>

  <p style="margin-top: 0; margin-bottom: 0">

  </td>
 </tr>
 <tr>
  <td width=686 colspan=2 valign=top>
  <p align=center style="margin-top: 0; margin-bottom: 0"><font size="2">OR<br>
&nbsp;</font></p>
  </td>
 </tr>
 <tr>
  <td width=686 colspan=2 valign=top>

  <p style="margin-top: 0; margin-bottom: 0">

  </td>
 </tr>
 <tr>
  <td width=61 valign=top>
  <p style="margin-top: 0; margin-bottom: 0"><b><font size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; [&nbsp; ]</font></b></p>
  </td>
  <td width=625 valign=top>
  <p style="margin-top: 0; margin-bottom: 0"><b><font size="2">TRANSITION
  REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934</font></b></p>
  </td>
 </tr>
 <tr>
  <td width=61 valign=top>
  <p style="margin-top: 0; margin-bottom: 0"><b><font size="2">&nbsp;</font></b></p>
  </td>
  <td width=625 valign=top>
  <p style="margin-top: 0; margin-bottom: 0"><b><font size="2">&nbsp;</font></b></p>
  </td>
 </tr>
</table>



<p style="margin-top: 0; margin-bottom: 0"><font size="2">For the transition period
from&nbsp; __________ to __________<br><br></font></p>

<p style="margin-top: 0; margin-bottom: 0"><font size="2">Commission
file number:&nbsp; 0-8641<br><br></font></p>

<p align=center style="margin-top: 0; margin-bottom: 0"><b><u><font size="2">SELECTIVE&nbsp;INSURANCE&nbsp;GROUP,&nbsp;INC.<br>
</font></u></b><font size="2">(Exact name of registrant as specified
in its charter)</font><br><br></p>

<div align=center>

<table border=0 cellspacing=0 cellpadding=0>
 <tr>
  <td width=211 valign=top>
  <p align=center style="margin-top: 0; margin-bottom: 0"><u><font size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
  New&nbsp;Jersey&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</font></u></p>
  </td>
  <td width=48 valign=top>

  <p style="margin-top: 0; margin-bottom: 0">

  </td>
  <td width=211 valign=top>
  <p align=center style="margin-top: 0; margin-bottom: 0"><u><font size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
  22-2168890&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</font></u></p>
  </td>
 </tr>
 <tr>
  <td width=211 valign=top>
  <p align=center style="margin-top: 0; margin-bottom: 0"><font size="1">(State or other
  jurisdiction of<br>
  incorporation or organization)</font></p>
  </td>
  <td width=48 valign=top>

  <p style="margin-top: 0; margin-bottom: 0">

  </td>
  <td width=211 valign=top>
  <p align=center style="margin-top: 0; margin-bottom: 0"><font size="1">(IRS Employer
  Identification No.)</font></p>
  </td>
 </tr>
 <tr>
  <td width=211 valign=top>

  <p style="margin-top: 0; margin-bottom: 0">

  </td>
  <td width=48 valign=top>

  <p style="margin-top: 0; margin-bottom: 0">

  </td>
  <td width=211 valign=top>

  <p style="margin-top: 0; margin-bottom: 0">

  </td>
 </tr>
 <tr>
  <td width=211 valign=top>
  <p style="margin-top: 0; margin-bottom: 0">&nbsp;</td>
  <td width=48 valign=top>

  <p style="margin-top: 0; margin-bottom: 0">&nbsp;</td>
  <td width=211 valign=top>
  <p style="margin-top: 0; margin-bottom: 0">&nbsp;</td>
 </tr>
 <tr>
  <td width=211 valign=top>
  <p align=center style="margin-top: 0; margin-bottom: 0"><font size="2">40 Wantage&nbsp;Avenue<br>
  </font>
  <u><font size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; Branchville,&nbsp;New&nbsp;Jersey&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</font></u></p>
  </td>
  <td width=48 valign=top>

  <p style="margin-top: 0; margin-bottom: 0">

  </td>
  <td width=211 valign=top>
  <p align=center style="margin-top: 0; margin-bottom: 0"><font size="2"><br>
  </font>
  <u><font size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;07890&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</font></u></p>
  </td>
 </tr>
 <tr>
  <td width=211 valign=top>
  <p align=center style="margin-top: 0; margin-bottom: 0"><font size="1">(Address of
  principal executive offices)</font></p>
  </td>
  <td width=48 valign=top>

  <p style="margin-top: 0; margin-bottom: 0">

  </td>
  <td width=211 valign=top>
  <p align=center style="margin-top: 0; margin-bottom: 0"><font size="1">(Zip Code)</font></p>
  </td>
 </tr>
 <tr>
  <td width=211 valign=top>

  <p style="margin-top: 0; margin-bottom: 0">

  </td>
  <td width=48 valign=top>

  <p style="margin-top: 0; margin-bottom: 0">

  </td>
  <td width=211 valign=top>

  <p style="margin-top: 0; margin-bottom: 0">

  </td>
 </tr>
</table>

</div>

<p style="margin-top: 0; margin-bottom: 0"><br><br></p>

<div align=center>

<table border=0 cellspacing=0 cellpadding=0>
 <tr>
  <td width=211 valign=top>
  <p align=center style="margin-top: 0; margin-bottom: 0"><u>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
  <font size="2">(973)
  948-3000&nbsp;</font>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</u></p>
  </td>
 </tr>
 <tr>
  <td width=211 valign=top>
  <p align=center style="margin-top: 0; margin-bottom: 0"><font size="1">(Registrant's
  telephone number,</font></p>
  <p align=center style="margin-top: 0; margin-bottom: 0"><font size="1">including area
  code)</font></p>
  </td>
 </tr>
</table>

</div>

<p style="margin-top: 0; margin-bottom: 0">
<br><font size="2">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.<br>
<br>
Yes [X]&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; No [&nbsp; ]<br>
<br>Indicate by check mark whether the registrant is an
accelerated filer (as defined in Rule 12b-2 of the Act)<br>
<br>
Yes [X]&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; No [&nbsp; ]<br>
<br>
Indicate the number of shares outstanding of each of the issuer's classes of
common stock as of the latest practicable date:<br>
<br>
Common stock, par value $2 per share, outstanding as of September 30, 2004:
27,770,976</font></p><hr color="#000080"><P STYLE="page-break-after: always"></P>


<p><b>&nbsp;</b></p>

<div align=center>

<table border=0 cellspacing=0 cellpadding=0 width=641>
 <tr>
  <td width=641 colspan=5 valign=top>
  <div align=center><b>
  <hr size=1 width="100%" noshade color=black align=center>
  </b></div>
  </td>
 </tr>
 <tr>
  <td width=414 valign=top>
  <p><b><font size="1">SELECTIVE
  INSURANCE GROUP, INC</font></b></p>
  </td>
  <td width=23 valign=top>
  <p align=right><b><font size="1">&nbsp;</font></b></p>
  </td>
  <td width=91 valign=top>
  <p align=center><b><font size="1">Unaudited</font></b></p>
  </td>
  <td width=23 valign=top>
  <p align=center><b><font size="1">&nbsp;</font></b></p>
  </td>
  <td width=91 valign=top>
  <p align=center><b><u><font size="1">&nbsp;</font></u></b></p>
  </td>
 </tr>
 <tr>
  <td width=414 valign=top>
  <p><i><font size="1">Consolidated
  Balance Sheets</font></i></p>
  </td>
  <td width=23 valign=top>
  <p align=right><b><font size="1">&nbsp;</font></b></p>
  </td>
  <td width=91 valign=top>
  <p align=center><b><font size="1">September 30,</font></b></p>
  </td>
  <td width=23 valign=top>
  <p align=center><b><font size="1">&nbsp;</font></b></p>
  </td>
  <td width=91 valign=top>
  <p align=center><b><font size="1">December 31,</font></b></p>
  </td>
 </tr>
 <tr>
  <td width=414 valign=top>
  <p><font size="1">(in thousands, except share
  amounts)</font></p>
  </td>
  <td width=23 valign=top>
  <p align=right><b><font size="1">&nbsp;</font></b></p>
  </td>
  <td width=91 valign=top>
  <p align=center><b><font size="1">2004</font></b></p>
  </td>
  <td width=23 valign=top>
  <p align=center><b><font size="1">&nbsp;</font></b></p>
  </td>
  <td width=91 valign=top>
  <p align=center><b><font size="1">2003</font></b></p>
  </td>
 </tr>
 <tr>
  <td width=641 colspan=5 valign=top>
  <div align=center><b>
  <hr size=1 width="100%" noshade color=black align=center>
  </b></div>
  </td>
 </tr>
</table>

</div>



<div align=center>

<table border=0 cellspacing=0 cellpadding=0 width=641>
 <tr>
  <td width=414 valign=top>
  <p><b><font size="1">ASSETS</font></b></p>
  </td>
  <td width=23 valign=top>
  <p><b><i><font size="1">&nbsp;</font></i></b></p>
  </td>
  <td width=91 valign=top>

  </td>
  <td width=23 valign=top>

  </td>
  <td width=91 valign=top>

  </td>
 </tr>
 <tr>
  <td width=414 valign=top>
  <p><b><font size="1">Investments:</font></b></p>
  </td>
  <td width=23 valign=top>
  <p align=right><b><font size="1">&nbsp;</font></b></p>
  </td>
  <td width=91 valign=top>
  <p align=right><b><u><font size="1">&nbsp;</font></u></b></p>
  </td>
  <td width=23 valign=top>
  <p align=right><b><font size="1">&nbsp;</font></b></p>
  </td>
  <td width=91 valign=top>
  <p align=right><b><u><font size="1">&nbsp;</font></u></b></p>
  </td>
 </tr>
 <tr>
  <td width=414 valign=top>
  <p><font size="1">Debt
  securities, held-to-maturity - at amortized cost</font></p>
  </td>
  <td width=23 valign=top>

  </td>
  <td width=91 valign=top>

  </td>
  <td width=23 valign=top>

  </td>
  <td width=91 valign=top>

  </td>
 </tr>
 <tr>
  <td width=414 valign=top>
  <p><font size="1">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; (fair value:&nbsp; $48,999-2004; $75,478-2003)</font></p>
  </td>
  <td width=23 valign=top>
  <p align=right><font size="1">$</font></p>
  </td>
  <td width=91 valign=top>
  <p align=right><font size="1">47,481&nbsp;</font></p>
  </td>
  <td width=23 valign=top>

  </td>
  <td width=91 valign=top>
  <p align=right><font size="1">72,321&nbsp;</font></p>
  </td>
 </tr>
 <tr>
  <td width=414 valign=top>
  <p><font size="1">Debt
  securities, available-for-sale - at fair value</font></p>
  </td>
  <td width=23 valign=top>

  </td>
  <td width=91 valign=top>

  </td>
  <td width=23 valign=top>

  </td>
  <td width=91 valign=top>

  </td>
 </tr>
 <tr>
  <td width=414 valign=top>
  <p><font size="1">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; (amortized cost:&nbsp; $2,172,339-2004; $1,914,635-2003)</font></p>
  </td>
  <td width=23 valign=top>

  </td>
  <td width=91 valign=top>
  <p align=right><font size="1">2,261,068&nbsp;</font></p>
  </td>
  <td width=23 valign=top>

  </td>
  <td width=91 valign=top>
  <p align=right><font size="1">2,010,064&nbsp;</font></p>
  </td>
 </tr>
 <tr>
  <td width=414 valign=top>
  <p><font size="1">Equity
  securities, available-for-sale - at fair value</font></p>
  </td>
  <td width=23 valign=top>

  </td>
  <td width=91 valign=top>

  </td>
  <td width=23 valign=top>

  </td>
  <td width=91 valign=top>

  </td>
 </tr>
 <tr>
  <td width=414 valign=top>
  <p><font size="1">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; (cost of:&nbsp; $175,360-2004; $163,602-2003)</font></p>
  </td>
  <td width=23 valign=top>

  </td>
  <td width=91 valign=top>
  <p align=right><font size="1">322,077&nbsp;</font></p>
  </td>
  <td width=23 valign=top>

  </td>
  <td width=91 valign=top>
  <p align=right><font size="1">296,561&nbsp;</font></p>
  </td>
 </tr>
 <tr>
  <td width=414 valign=top>
  <p><font size="1">Short-term
  investments - (at cost which approximates fair value)</font></p>
  </td>
  <td width=23 valign=top>

  </td>
  <td width=91 valign=top>
  <p align=right><font size="1">59,505&nbsp;</font></p>
  </td>
  <td width=23 valign=top>

  </td>
  <td width=91 valign=top>
  <p align=right><font size="1">23,043&nbsp;</font></p>
  </td>
 </tr>
 <tr>
  <td width=414 valign=top>
  <p><font size="1">Other
  investments</font></p>
  </td>
  <td width=23 valign=top>

  </td>
  <td width=91 valign=top>
  <p align=right><font size="1">39,773&nbsp;</font></p>
  </td>
  <td width=23 valign=top>

  </td>
  <td width=91 valign=top>
  <p align=right><font size="1">35,655&nbsp;</font></p>
  </td>
 </tr>
 <tr>
  <td width=414 valign=top>

  </td>
  <td width=23 valign=top>

  </td>
  <td width=91 valign=top>
  <div align=right>
  <hr size=1 width="95%" noshade color=gray align=right>
  </div>
  </td>
  <td width=23 valign=top>

  </td>
  <td width=91 valign=top>
  <div align=right>
  <hr size=1 width="95%" noshade color=gray align=right>
  </div>
  </td>
 </tr>
 <tr>
  <td width=414 valign=top>
  <p><font size="1">Total
  investments</font></p>
  </td>
  <td width=23 valign=top>

  </td>
  <td width=91 valign=top>
  <p align=right><font size="1">2,729,904&nbsp;</font></p>
  </td>
  <td width=23 valign=top>

  </td>
  <td width=91 valign=top>
  <p align=right><font size="1">2,437,644&nbsp;</font></p>
  </td>
 </tr>
 <tr>
  <td width=414 valign=top>

  </td>
  <td width=23 valign=top>

  </td>
  <td width=91 valign=top>

  </td>
  <td width=23 valign=top>

  </td>
  <td width=91 valign=top>

  </td>
 </tr>
 <tr>
  <td width=414 valign=top>
  <p><font size="1">Cash</font></p>
  </td>
  <td width=23 valign=top>

  </td>
  <td width=91 valign=top>
  <p align=right><font size="1">-&nbsp;</font></p>
  </td>
  <td width=23 valign=top>

  </td>
  <td width=91 valign=top>
  <p align=right><font size="1">12&nbsp;</font></p>
  </td>
 </tr>
 <tr>
  <td width=414 valign=top>
  <p><font size="1">Interest
  and dividends due or accrued</font></p>
  </td>
  <td width=23 valign=top>

  </td>
  <td width=91 valign=top>
  <p align=right><font size="1">24,775&nbsp;</font></p>
  </td>
  <td width=23 valign=top>

  </td>
  <td width=91 valign=top>
  <p align=right><font size="1">24,001&nbsp;</font></p>
  </td>
 </tr>
 <tr>
  <td width=414 valign=top>
  <p><font size="1">Premiums
  receivables, net of allowance for uncollectible accounts of:</font></p>
  </td>
  <td width=23 valign=top>

  </td>
  <td width=91 valign=top>

  </td>
  <td width=23 valign=top>

  </td>
  <td width=91 valign=top>

  </td>
 </tr>
 <tr>
  <td width=414 valign=top>
  <p><font size="1">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; $3,236-2004 and $3,121-2003</font></p>
  </td>
  <td width=23 valign=top>

  </td>
  <td width=91 valign=top>
  <p align=right><font size="1">481,634&nbsp;</font></p>
  </td>
  <td width=23 valign=top>

  </td>
  <td width=91 valign=top>
  <p align=right><font size="1">407,633&nbsp;</font></p>
  </td>
 </tr>
 <tr>
  <td width=414 valign=top>
  <p><font size="1">Other
  trade receivables, net of allowance for uncollectible accounts of: </font> </p>
  </td>
  <td width=23 valign=top>

  </td>
  <td width=91 valign=top>

  </td>
  <td width=23 valign=top>

  </td>
  <td width=91 valign=top>

  </td>
 </tr>
 <tr>
  <td width=414 valign=top>
  <p><font size="1">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; $853-2004; $1,085-2003</font></p>
  </td>
  <td width=23 valign=top>

  </td>
  <td width=91 valign=top>
  <p align=right><font size="1">23,537&nbsp;</font></p>
  </td>
  <td width=23 valign=top>

  </td>
  <td width=91 valign=top>
  <p align=right><font size="1">21,567&nbsp;</font></p>
  </td>
 </tr>
 <tr>
  <td width=414 valign=top>
  <p><font size="1">Reinsurance
  recoverable on paid losses and loss expenses</font></p>
  </td>
  <td width=23 valign=top>

  </td>
  <td width=91 valign=top>
  <p align=right><font size="1">7,226&nbsp;</font></p>
  </td>
  <td width=23 valign=top>

  </td>
  <td width=91 valign=top>
  <p align=right><font size="1">7,726&nbsp;</font></p>
  </td>
 </tr>
 <tr>
  <td width=414 valign=top>
  <p><font size="1">Reinsurance
  recoverable on unpaid losses and loss expenses</font></p>
  </td>
  <td width=23 valign=top>

  </td>
  <td width=91 valign=top>
  <p align=right><font size="1">213,527&nbsp;</font></p>
  </td>
  <td width=23 valign=top>

  </td>
  <td width=91 valign=top>
  <p align=right><font size="1">184,611&nbsp;</font></p>
  </td>
 </tr>
 <tr>
  <td width=414 valign=top>
  <p><font size="1">Prepaid
  reinsurance premiums</font></p>
  </td>
  <td width=23 valign=top>

  </td>
  <td width=91 valign=top>
  <p align=right><font size="1">60,645&nbsp;</font></p>
  </td>
  <td width=23 valign=top>

  </td>
  <td width=91 valign=top>
  <p align=right><font size="1">52,817&nbsp;</font></p>
  </td>
 </tr>
 <tr>
  <td width=414 valign=top>
  <p><font size="1">Current
  federal income tax</font></p>
  </td>
  <td width=23 valign=top>

  </td>
  <td width=91 valign=top>
  <p align=right><font size="1">2,831&nbsp;</font></p>
  </td>
  <td width=23 valign=top>

  </td>
  <td width=91 valign=top>
  <p align=right><font size="1">-&nbsp;</font></p>
  </td>
 </tr>
 <tr>
  <td width=414 valign=top>
  <p><font size="1">Real
  estate, furniture, equipment, and software development-at cost, net of
  accumulated </font> </p>
  </td>
  <td width=23 valign=top>

  </td>
  <td width=91 valign=top>

  </td>
  <td width=23 valign=top>

  </td>
  <td width=91 valign=top>

  </td>
 </tr>
 <tr>
  <td width=414 valign=top>
  <p><font size="1">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; depreciation and amortization of
  $86,651-2004; $79,199 -2003</font></p>
  </td>
  <td width=23 valign=top>

  </td>
  <td width=91 valign=top>
  <p align=right><font size="1">53,901&nbsp;</font></p>
  </td>
  <td width=23 valign=top>

  </td>
  <td width=91 valign=top>
  <p align=right><font size="1">53,317&nbsp;</font></p>
  </td>
 </tr>
 <tr>
  <td width=414 valign=top>
  <p><font size="1">Deferred
  policy acquisition costs</font></p>
  </td>
  <td width=23 valign=top>

  </td>
  <td width=91 valign=top>
  <p align=right><font size="1">195,271&nbsp;</font></p>
  </td>
  <td width=23 valign=top>

  </td>
  <td width=91 valign=top>
  <p align=right><font size="1">172,386&nbsp;</font></p>
  </td>
 </tr>
 <tr>
  <td width=414 valign=top>
  <p><font size="1">Goodwill</font></p>
  </td>
  <td width=23 valign=top>

  </td>
  <td width=91 valign=top>
  <p align=right><font size="1">43,230&nbsp;</font></p>
  </td>
  <td width=23 valign=top>

  </td>
  <td width=91 valign=top>
  <p align=right><font size="1">43,612&nbsp;</font></p>
  </td>
 </tr>
 <tr>
  <td width=414 valign=top>
  <p><font size="1">Other
  assets</font></p>
  </td>
  <td width=23 valign=top>

  </td>
  <td width=91 valign=top>
  <p align=right><font size="1">33,024&nbsp;</font></p>
  </td>
  <td width=23 valign=top>

  </td>
  <td width=91 valign=top>
  <p align=right><font size="1">33,456&nbsp;</font></p>
  </td>
 </tr>
 <tr>
  <td width=414 valign=top>

  </td>
  <td width=23 valign=top>

  </td>
  <td width=91 valign=top>
  <div align=right>
  <hr size=1 width="95%" noshade color=gray align=right>
  </div>
  </td>
  <td width=23 valign=top>

  </td>
  <td width=91 valign=top>
  <div align=right>
  <hr size=1 width="95%" noshade color=gray align=right>
  </div>
  </td>
 </tr>
 <tr>
  <td width=414 valign=top>
  <p><font size="1">Total
  assets</font></p>
  </td>
  <td width=23 valign=top>
  <p align=right><font size="1">$</font></p>
  </td>
  <td width=91 valign=top>
  <p align=right><font size="1">3,869,505&nbsp;</font></p>
  </td>
  <td width=23 valign=top>

  </td>
  <td width=91 valign=top>
  <p align=right><font size="1">3,438,782&nbsp;</font></p>
  </td>
 </tr>
 <tr>
  <td width=414 valign=top>

  </td>
  <td width=23 valign=top>

  </td>
  <td width=91 valign=top>
  <p align=right>==========</p>
  </td>
  <td width=23 valign=top>

  </td>
  <td width=91 valign=top>
  <p align=right>==========</p>
  </td>
 </tr>
 <tr>
  <td width=414 valign=top>
  <p><b><font size="1">LIABILITIES AND STOCKHOLDERS' EQUITY</font></b></p>
  </td>
  <td width=23 valign=top>
  <p><b><i><font size="1">&nbsp;</font></i></b></p>
  </td>
  <td width=91 valign=top>
  <p align=right><b><font size="1">&nbsp;</font></b></p>
  </td>
  <td width=23 valign=top>
  <p><b><i><font size="1">&nbsp;</font></i></b></p>
  </td>
  <td width=91 valign=top>
  <p align=right><b><i><font size="1">&nbsp;</font></i></b></p>
  </td>
 </tr>
 <tr>
  <td width=414 valign=top>
  <p><b><font size="1">Liabilities:</font></b></p>
  </td>
  <td width=23 valign=top>
  <p align=right><b><font size="1">&nbsp;</font></b></p>
  </td>
  <td width=91 valign=top>
  <p align=right><b><font size="1">&nbsp;</font></b></p>
  </td>
  <td width=23 valign=top>
  <p align=right><b><font size="1">&nbsp;</font></b></p>
  </td>
  <td width=91 valign=top>
  <p align=right><b><font size="1">&nbsp;</font></b></p>
  </td>
 </tr>
 <tr>
  <td width=414 valign=top>
  <p><font size="1">Reserve
  for losses</font></p>
  </td>
  <td width=23 valign=top>
  <p align=right><font size="1">$</font></p>
  </td>
  <td width=91 valign=top>
  <p align=right><font size="1">1,567,044&nbsp;</font></p>
  </td>
  <td width=23 valign=top>

  </td>
  <td width=91 valign=top>
  <p align=right><font size="1">1,400,770&nbsp;</font></p>
  </td>
 </tr>
 <tr>
  <td width=414 valign=top>
  <p><font size="1">Reserve
  for loss expenses</font></p>
  </td>
  <td width=23 valign=top>

  </td>
  <td width=91 valign=top>
  <p align=right><font size="1">213,525&nbsp;</font></p>
  </td>
  <td width=23 valign=top>

  </td>
  <td width=91 valign=top>
  <p align=right><font size="1">187,043&nbsp;</font></p>
  </td>
 </tr>
 <tr>
  <td width=414 valign=top>
  <p><font size="1">Unearned
  premiums</font></p>
  </td>
  <td width=23 valign=top>

  </td>
  <td width=91 valign=top>
  <p align=right><font size="1">760,331&nbsp;</font></p>
  </td>
  <td width=23 valign=top>

  </td>
  <td width=91 valign=top>
  <p align=right><font size="1">649,906&nbsp;</font></p>
  </td>
 </tr>
 <tr>
  <td width=414 valign=top>
  <p><font size="1">Senior
  convertible notes</font></p>
  </td>
  <td width=23 valign=top>

  </td>
  <td width=91 valign=top>
  <p align=right><font size="1">115,937&nbsp;</font></p>
  </td>
  <td width=23 valign=top>

  </td>
  <td width=91 valign=top>
  <p align=right><font size="1">115,937&nbsp;</font></p>
  </td>
 </tr>
 <tr>
  <td width=414 valign=top>
  <p><font size="1">Notes
  payable</font></p>
  </td>
  <td width=23 valign=top>

  </td>
  <td width=91 valign=top>
  <p align=right><font size="1">97,500&nbsp;</font></p>
  </td>
  <td width=23 valign=top>

  </td>
  <td width=91 valign=top>
  <p align=right><font size="1">121,500&nbsp;</font></p>
  </td>
 </tr>
 <tr>
  <td width=414 valign=top>
  <p><font size="1">Current
  federal income tax</font></p>
  </td>
  <td width=23 valign=top>

  </td>
  <td width=91 valign=top>
  <p align=right><font size="1">-&nbsp;</font></p>
  </td>
  <td width=23 valign=top>

  </td>
  <td width=91 valign=top>
  <p align=right><font size="1">7,961&nbsp;</font></p>
  </td>
 </tr>
 <tr>
  <td width=414 valign=top>
  <p><font size="1">Deferred
  federal income tax</font></p>
  </td>
  <td width=23 valign=top>

  </td>
  <td width=91 valign=top>
  <p align=right><font size="1">18,433&nbsp;</font></p>
  </td>
  <td width=23 valign=top>

  </td>
  <td width=91 valign=top>
  <p align=right><font size="1">12,677&nbsp;</font></p>
  </td>
 </tr>
 <tr>
  <td width=414 valign=top>
  <p><font size="1">Commissions
  payable</font></p>
  </td>
  <td width=23 valign=top>

  </td>
  <td width=91 valign=top>
  <p align=right><font size="1">57,582&nbsp;</font></p>
  </td>
  <td width=23 valign=top>

  </td>
  <td width=91 valign=top>
  <p align=right><font size="1">53,717&nbsp;</font></p>
  </td>
 </tr>
 <tr>
  <td width=414 valign=top>
  <p><font size="1">Accrued
  salaries and benefits</font></p>
  </td>
  <td width=23 valign=top>

  </td>
  <td width=91 valign=top>
  <p align=right><font size="1">61,545&nbsp;</font></p>
  </td>
  <td width=23 valign=top>

  </td>
  <td width=91 valign=top>
  <p align=right><font size="1">56,942&nbsp;</font></p>
  </td>
 </tr>
 <tr>
  <td width=414 valign=top>
  <p><font size="1">Other
  liabilities</font></p>
  </td>
  <td width=23 valign=top>

  </td>
  <td width=91 valign=top>
  <p align=right><font size="1">143,385&nbsp;</font></p>
  </td>
  <td width=23 valign=top>

  </td>
  <td width=91 valign=top>
  <p align=right><font size="1">82,545&nbsp;</font></p>
  </td>
 </tr>
 <tr>
  <td width=414 valign=top>

  </td>
  <td width=23 valign=top>

  </td>
  <td width=91 valign=top>
  <div align=right>
  <hr size=1 width="95%" noshade color=gray align=right>
  </div>
  </td>
  <td width=23 valign=top>

  </td>
  <td width=91 valign=top>
  <div align=right>
  <hr size=1 width="95%" noshade color=gray align=right>
  </div>
  </td>
 </tr>
 <tr>
  <td width=414 valign=top>
  <p><font size="1">Total
  liabilities</font></p>
  </td>
  <td width=23 valign=top>

  </td>
  <td width=91 valign=top>
  <p align=right><font size="1">3,035,282&nbsp;</font></p>
  </td>
  <td width=23 valign=top>

  </td>
  <td width=91 valign=top>
  <p align=right><font size="1">2,688,998&nbsp;</font></p>
  </td>
 </tr>
 <tr>
  <td width=414 valign=top>

  </td>
  <td width=23 valign=top>

  </td>
  <td width=91 valign=top>
  <div align=right>
  <hr size=1 width="95%" noshade color=gray align=right>
  </div>
  </td>
  <td width=23 valign=top>

  </td>
  <td width=91 valign=top>
  <div align=right>
  <hr size=1 width="95%" noshade color=gray align=right>
  </div>
  </td>
 </tr>
 <tr>
  <td width=414 valign=top>
  <p><b><font size="1">Stockholders' Equity:</font></b></p>
  </td>
  <td width=23 valign=top>
  <p align=right><b><font size="1">&nbsp;</font></b></p>
  </td>
  <td width=91 valign=top>
  <p align=right><b><font size="1">&nbsp;</font></b></p>
  </td>
  <td width=23 valign=top>
  <p align=right><b><font size="1">&nbsp;</font></b></p>
  </td>
  <td width=91 valign=top>
  <p align=right><b><font size="1">&nbsp;</font></b></p>
  </td>
 </tr>
 <tr>
  <td width=414 valign=top>
  <p><font size="1">Preferred
  stock of $0 par value per share:</font></p>
  </td>
  <td width=23 valign=top>

  </td>
  <td width=91 valign=top>

  </td>
  <td width=23 valign=top>

  </td>
  <td width=91 valign=top>

  </td>
 </tr>
 <tr>
  <td width=414 valign=top>
  <p><font size="1">Authorized
  shares: 5,000,000; no shares issued or outstanding</font></p>
  </td>
  <td width=23 valign=top>

  </td>
  <td width=91 valign=top>

  </td>
  <td width=23 valign=top>

  </td>
  <td width=91 valign=top>

  </td>
 </tr>
 <tr>
  <td width=414 valign=top>
  <p><font size="1">Common
  stock of $2 par value per share:</font></p>
  </td>
  <td width=23 valign=top>

  </td>
  <td width=91 valign=top>

  </td>
  <td width=23 valign=top>

  </td>
  <td width=91 valign=top>

  </td>
 </tr>
 <tr>
  <td width=414 valign=top>
  <p><font size="1">Authorized
  shares: 180,000,000</font></p>
  </td>
  <td width=23 valign=top>

  </td>
  <td width=91 valign=top>

  </td>
  <td width=23 valign=top>

  </td>
  <td width=91 valign=top>

  </td>
 </tr>
 <tr>
  <td width=414 valign=top>
  <p><font size="1">Issued:
  42,285,782-2004; 41,567,552-2003</font></p>
  </td>
  <td width=23 valign=top>

  </td>
  <td width=91 valign=top>
  <p align=right><font size="1">84,572&nbsp;</font></p>
  </td>
  <td width=23 valign=top>

  </td>
  <td width=91 valign=top>
  <p align=right><font size="1">83,135&nbsp;</font></p>
  </td>
 </tr>
 <tr>
  <td width=414 valign=top>
  <p><font size="1">Additional
  paid-in capital</font></p>
  </td>
  <td width=23 valign=top>

  </td>
  <td width=91 valign=top>
  <p align=right><font size="1">135,413&nbsp;</font></p>
  </td>
  <td width=23 valign=top>

  </td>
  <td width=91 valign=top>
  <p align=right><font size="1">113,283&nbsp;</font></p>
  </td>
 </tr>
 <tr>
  <td width=414 valign=top>
  <p><font size="1">Retained
  earnings</font></p>
  </td>
  <td width=23 valign=top>

  </td>
  <td width=91 valign=top>
  <p align=right><font size="1">682,860&nbsp;</font></p>
  </td>
  <td width=23 valign=top>

  </td>
  <td width=91 valign=top>
  <p align=right><font size="1">612,208&nbsp;</font></p>
  </td>
 </tr>
 <tr>
  <td width=414 valign=top>
  <p><font size="1">Accumulated
  other comprehensive income</font></p>
  </td>
  <td width=23 valign=top>

  </td>
  <td width=91 valign=top>
  <p align=right><font size="1">153,040&nbsp;</font></p>
  </td>
  <td width=23 valign=top>

  </td>
  <td width=91 valign=top>
  <p align=right><font size="1">148,452&nbsp;</font></p>
  </td>
 </tr>
 <tr>
  <td width=414 valign=top>
  <p><font size="1">Treasury
  stock - at cost (shares: 14,514,806-2004; 14,284,612-2003)</font></p>
  </td>
  <td width=23 valign=top>

  </td>
  <td width=91 valign=top>
  <p align=right><font size="1">(205,917)</font></p>
  </td>
  <td width=23 valign=top>

  </td>
  <td width=91 valign=top>
  <p align=right><font size="1">(197,792)</font></p>
  </td>
 </tr>
 <tr>
  <td width=414 valign=top>
  <p><font size="1">Unearned
  stock compensation and notes receivable from stock sales</font></p>
  </td>
  <td width=23 valign=top>

  </td>
  <td width=91 valign=top>
  <p align=right><font size="1">(15,745)</font></p>
  </td>
  <td width=23 valign=top>

  </td>
  <td width=91 valign=top>
  <p align=right><font size="1">(9,502)</font></p>
  </td>
 </tr>
 <tr>
  <td width=414 valign=top>

  </td>
  <td width=23 valign=top>

  </td>
  <td width=91 valign=top>
  <div align=right>
  <hr size=1 width="95%" noshade color=gray align=right>
  </div>
  </td>
  <td width=23 valign=top>

  </td>
  <td width=91 valign=top>
  <div align=right>
  <hr size=1 width="95%" noshade color=gray align=right>
  </div>
  </td>
 </tr>
 <tr>
  <td width=414 valign=top>
  <p><font size="1">Total
  stockholders' equity</font></p>
  </td>
  <td width=23 valign=top>

  </td>
  <td width=91 valign=top>
  <p align=right><font size="1">834,223&nbsp;</font></p>
  </td>
  <td width=23 valign=top>

  </td>
  <td width=91 valign=top>
  <p align=right><font size="1">749,784&nbsp;</font></p>
  </td>
 </tr>
 <tr>
  <td width=414 valign=top>

  </td>
  <td width=23 valign=top>

  </td>
  <td width=91 valign=top>
  <div align=right>
  <hr size=1 width="95%" noshade color=gray align=right>
  </div>
  </td>
  <td width=23 valign=top>

  </td>
  <td width=91 valign=top>
  <div align=right>
  <hr size=1 width="95%" noshade color=gray align=right>
  </div>
  </td>
 </tr>
 <tr>
  <td width=414 valign=top>
  <p><font size="1">Total
  liabilities and stockholders' equity</font></p>
  </td>
  <td width=23 valign=top>
  <p align=right><font size="1">$</font></p>
  </td>
  <td width=91 valign=top>
  <p align=right><font size="1">3,869,505&nbsp;</font></p>
  </td>
  <td width=23 valign=top>

  </td>
  <td width=91 valign=top>
  <p align=right><font size="1">3,438,782&nbsp;</font></p>
  </td>
 </tr>
 <tr>
  <td width=414 valign=top>

  </td>
  <td width=23 valign=top>

  </td>
  <td width=91 valign=top>
  <p align=right>==========</p>
  </td>
  <td width=23 valign=top>

  </td>
  <td width=91 valign=top>
  <p align=right>==========</p>
  </td>
 </tr>
 <tr>
  <td width=414 valign=top>

  </td>
  <td width=23 valign=top>

  </td>
  <td width=91 valign=top>

  </td>
  <td width=23 valign=top>

  </td>
  <td width=91 valign=top>

  </td>
 </tr>
 <tr>
  <td width=414 valign=top>
  <p><font size="1"><br>
  See accompanying notes to unaudited interim consolidated
  financial statements.</font></p>
  </td>
  <td width=23 valign=top>

  </td>
  <td width=91 valign=top>

  </td>
  <td width=23 valign=top>

  </td>
  <td width=91 valign=top>

  </td>
 </tr>
</table>

</div>
<p align="center"><font size="2">2</font></p>
<hr color="#000080"><P STYLE="page-break-after: always"></P><br clear=all>




<div align=center>

<table border=0 cellspacing=0 cellpadding=0>
 <tr>
  <td width=679 colspan=8 valign=top>
  <div align=center><b>
  <hr size=1 width="100%" noshade color=black align=center>
  </b></div>
  </td>
 </tr>
 <tr>
  <td width=322 valign=top>
  <p><b><font size="1">SELECTIVE
  INSURANCE GROUP, INC</font></b></p>
  </td>
  <td width=18 valign=top>

  </td>
  <td width=151 colspan=2 valign=top>
  <p align=center><b><font size="1">Unaudited,</font></b></p>
  </td>
  <td width=18 valign=top>
  <p align=center><b><font size="1">&nbsp;</font></b></p>
  </td>
  <td width=18 valign=top>
  <p><b><font size="1">&nbsp;</font></b></p>
  </td>
  <td width=153 colspan=2 valign=top>
  <p align=center><b><font size="1">Unaudited,</font></b></p>
  </td>
 </tr>
 <tr>
  <td width=322 valign=top>
  <p><i><font size="1">Consolidated
  Statements of Income</font></i></p>
  </td>
  <td width=18 valign=top>

  </td>
  <td width=151 colspan=2 valign=top>
  <p align=center><b><font size="1">Quarter ended</font></b></p>
  </td>
  <td width=18 valign=top>
  <p align=center><b><font size="1">&nbsp;</font></b></p>
  </td>
  <td width=18 valign=top>
  <p><b><font size="1">&nbsp;</font></b></p>
  </td>
  <td width=153 colspan=2 valign=top>
  <p align=center><b><font size="1">Nine months ended</font></b></p>
  </td>
 </tr>
 <tr>
  <td width=322 valign=top>

  </td>
  <td width=18 valign=top>

  </td>
  <td width=151 colspan=2 valign=top>
  <p align=center><b><font size="1">September 30,</font></b></p>
  </td>
  <td width=18 valign=top>
  <p align=center><b><font size="1">&nbsp;</font></b></p>
  </td>
  <td width=18 valign=top>
  <p><b><font size="1">&nbsp;</font></b></p>
  </td>
  <td width=153 colspan=2 valign=top>
  <p align=center><b><font size="1">September 30,</font></b></p>
  </td>
 </tr>
 <tr>
  <td width=322 valign=top>
  <p><font size="1">(in thousands, except per
  share amounts)</font></p>
  </td>
  <td width=18 valign=top>

  </td>
  <td width=75 valign=top>
  <p align=center><b><font size="1">2004</font></b></p>
  </td>
  <td width=76 valign=top>
  <p align=center><b><font size="1">2003</font></b></p>
  </td>
  <td width=18 valign=top>
  <p align=center><b><font size="1">&nbsp;</font></b></p>
  </td>
  <td width=18 valign=top>
  <p><b><font size="1">&nbsp;</font></b></p>
  </td>
  <td width=76 valign=top>
  <p align=center><b><font size="1">2004</font></b></p>
  </td>
  <td width=77 valign=top>
  <p align=center><b><font size="1">2003</font></b></p>
  </td>
 </tr>
 <tr>
  <td width=679 colspan=8 valign=top>
  <div align=center><b>
  <hr size=1 width="100%" noshade color=black align=center>
  </b></div>
  </td>
 </tr>
 <tr height=0>
  <td width=322></td>
  <td width=18></td>
  <td width=75></td>
  <td width=76></td>
  <td width=18></td>
  <td width=18></td>
  <td width=76></td>
  <td width=77></td>
 </tr>
</table>

</div>



<div align=center>

<table border=0 cellspacing=0 cellpadding=0>
 <tr>
  <td width=322 valign=top>
  <p><b><font size="1">Revenues:</font></b></p>
  </td>
  <td width=20 valign=top>

  </td>
  <td width=67 valign=top>

  </td>
  <td width=16 valign=top>

  </td>
  <td width=67 valign=top>

  </td>
  <td width=19 valign=top>

  </td>
  <td width=19 valign=top align="right">

  </td>
  <td width=67 valign=top>

  </td>
  <td width=16 valign=top>

  </td>
  <td width=67 valign=top>

  </td>
 </tr>
 <tr>
  <td width=322 valign=top>
  <p><font size="1">Net premiums written</font></p>
  </td>
  <td width=20 valign=top>
  <p align=right><font size="1">$</font></p>
  </td>
  <td width=67 valign=top>
  <p align=right><font size="1">356,451&nbsp;</font></p>
  </td>
  <td width=16 valign=top>

  </td>
  <td width=67 valign=bottom>
  <p align=right><font size="1">317,513&nbsp;</font></p>
  </td>
  <td width=19 valign=top>

  </td>
  <td width=19 valign=top align="right">
  <p><font size="1">$</font></p>
  </td>
  <td width=67 valign=top>
  <p align=right><font size="1">1,080,963&nbsp;</font></p>
  </td>
  <td width=16 valign=top>

  </td>
  <td width=67 valign=top>
  <p align=right><font size="1">947,779&nbsp;</font></p>
  </td>
 </tr>
 <tr>
  <td width=322 valign=top>
  <p><font size="1">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; Net (increase) in
  unearned premiums </font> </p>
  </td>
  <td width=20 valign=top>

  </td>
  <td width=67 valign=top>

  </td>
  <td width=16 valign=top>

  </td>
  <td width=67 valign=bottom>

  </td>
  <td width=19 valign=top>

  </td>
  <td width=19 valign=top align="right">

  </td>
  <td width=67 valign=top>

  </td>
  <td width=16 valign=top>

  </td>
  <td width=67 valign=top>

  </td>
 </tr>
 <tr>
  <td width=322 valign=top>
  <p><font size="1">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; and prepaid
  reinsurance premiums</font></p>
  </td>
  <td width=20 valign=top>

  </td>
  <td width=67 valign=top>
  <p align=right><font size="1">(19,377)</font></p>
  </td>
  <td width=16 valign=top>

  </td>
  <td width=67 valign=bottom>
  <p align=right><font size="1">(27,832)</font></p>
  </td>
  <td width=19 valign=top>

  </td>
  <td width=19 valign=top align="right">

  </td>
  <td width=67 valign=top>
  <p align=right><font size="1">(102,597)</font></p>
  </td>
  <td width=16 valign=top>

  </td>
  <td width=67 valign=top>
  <p align=right><font size="1">(114,912)</font></p>
  </td>
 </tr>
 <tr>
  <td width=322 valign=top>

  </td>
  <td width=20 valign=top>

  </td>
  <td width=67 valign=top>
  <div align=right>
  <hr size=1 width="95%" noshade color=gray align=right>
  </div>
  </td>
  <td width=16 valign=top>

  </td>
  <td width=67 valign=top>
  <div align=right>
  <hr size=1 width="95%" noshade color=gray align=right>
  </div>
  </td>
  <td width=19 valign=top>

  </td>
  <td width=19 valign=top align="right">

  </td>
  <td width=67 valign=top>
  <div align=right>
  <hr size=1 width="95%" noshade color=gray align=right>
  </div>
  </td>
  <td width=16 valign=top>

  </td>
  <td width=67 valign=top>
  <div align=right>
  <hr size=1 width="95%" noshade color=gray align=right>
  </div>
  </td>
 </tr>
 <tr>
  <td width=322 valign=top>
  <p><font size="1">Net premiums earned</font></p>
  </td>
  <td width=20 valign=top>

  </td>
  <td width=67 valign=top>
  <p align=right><font size="1">337,074&nbsp;</font></p>
  </td>
  <td width=16 valign=top>

  </td>
  <td width=67 valign=bottom>
  <p align=right><font size="1">289,681&nbsp;</font></p>
  </td>
  <td width=19 valign=top>

  </td>
  <td width=19 valign=top align="right">

  </td>
  <td width=67 valign=bottom>
  <p align=right><font size="1">978,366&nbsp;</font></p>
  </td>
  <td width=16 valign=top>

  </td>
  <td width=67 valign=bottom>
  <p align=right><font size="1">832,867&nbsp;</font></p>
  </td>
 </tr>
 <tr>
  <td width=322 valign=top>
  <p><font size="1">Net investment income earned</font></p>
  </td>
  <td width=20 valign=top>

  </td>
  <td width=67 valign=top>
  <p align=right><font size="1">29,146&nbsp;</font></p>
  </td>
  <td width=16 valign=top>

  </td>
  <td width=67 valign=bottom>
  <p align=right><font size="1">27,324&nbsp;</font></p>
  </td>
  <td width=19 valign=top>

  </td>
  <td width=19 valign=top align="right">

  </td>
  <td width=67 valign=bottom>
  <p align=right><font size="1">87,268&nbsp;</font></p>
  </td>
  <td width=16 valign=top>

  </td>
  <td width=67 valign=bottom>
  <p align=right><font size="1">84,103&nbsp;</font></p>
  </td>
 </tr>
 <tr>
  <td width=322 valign=top>
  <p><font size="1">Net realized gains</font></p>
  </td>
  <td width=20 valign=top>

  </td>
  <td width=67 valign=top>
  <p align=right><font size="1">1,631&nbsp;</font></p>
  </td>
  <td width=16 valign=top>

  </td>
  <td width=67 valign=bottom>
  <p align=right><font size="1">1,029&nbsp;</font></p>
  </td>
  <td width=19 valign=top>

  </td>
  <td width=19 valign=top align="right">

  </td>
  <td width=67 valign=bottom>
  <p align=right><font size="1">7,131&nbsp;</font></p>
  </td>
  <td width=16 valign=top>

  </td>
  <td width=67 valign=bottom>
  <p align=right><font size="1">8,373&nbsp;</font></p>
  </td>
 </tr>
 <tr>
  <td width=322 valign=top>
  <p><font size="1">Diversified insurance services revenue</font></p>
  </td>
  <td width=20 valign=top>

  </td>
  <td width=67 valign=top>
  <p align=right><font size="1">27,648&nbsp;</font></p>
  </td>
  <td width=16 valign=top>

  </td>
  <td width=67 valign=bottom>
  <p align=right><font size="1">24,453&nbsp;</font></p>
  </td>
  <td width=19 valign=top>

  </td>
  <td width=19 valign=top align="right">

  </td>
  <td width=67 valign=bottom>
  <p align=right><font size="1">78,274&nbsp;</font></p>
  </td>
  <td width=16 valign=top>

  </td>
  <td width=67 valign=bottom>
  <p align=right><font size="1">69,272&nbsp;</font></p>
  </td>
 </tr>
 <tr>
  <td width=322 valign=top>
  <p><font size="1">Other income</font></p>
  </td>
  <td width=20 valign=top>

  </td>
  <td width=67 valign=top>
  <p align=right><font size="1">688&nbsp;</font></p>
  </td>
  <td width=16 valign=top>

  </td>
  <td width=67 valign=bottom>
  <p align=right><font size="1">855&nbsp;</font></p>
  </td>
  <td width=19 valign=top>

  </td>
  <td width=19 valign=top align="right">

  </td>
  <td width=67 valign=bottom>
  <p align=right><font size="1">2,405&nbsp;</font></p>
  </td>
  <td width=16 valign=top>

  </td>
  <td width=67 valign=bottom>
  <p align=right><font size="1">2,299&nbsp;</font></p>
  </td>
 </tr>
 <tr>
  <td width=322 valign=top>

  </td>
  <td width=20 valign=top>

  </td>
  <td width=67 valign=top>
  <div align=right>
  <hr size=1 width="95%" noshade color=gray align=right>
  </div>
  </td>
  <td width=16 valign=top>

  </td>
  <td width=67 valign=top>
  <div align=right>
  <hr size=1 width="95%" noshade color=gray align=right>
  </div>
  </td>
  <td width=19 valign=top>

  </td>
  <td width=19 valign=top align="right">

  </td>
  <td width=67 valign=top>
  <div align=right>
  <hr size=1 width="95%" noshade color=gray align=right>
  </div>
  </td>
  <td width=16 valign=top>

  </td>
  <td width=67 valign=top>
  <div align=right>
  <hr size=1 width="95%" noshade color=gray align=right>
  </div>
  </td>
 </tr>
 <tr>
  <td width=322 valign=top>
  <p><font size="1">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; Total revenues</font></p>
  </td>
  <td width=20 valign=top>

  </td>
  <td width=67 valign=top>
  <p align=right><font size="1">396,187&nbsp;</font></p>
  </td>
  <td width=16 valign=top>

  </td>
  <td width=67 valign=top>
  <p align=right><font size="1">343,342&nbsp;</font></p>
  </td>
  <td width=19 valign=top>

  </td>
  <td width=19 valign=top align="right">

  </td>
  <td width=67 valign=top>
  <p align=right><font size="1">1,153,444&nbsp;</font></p>
  </td>
  <td width=16 valign=top>

  </td>
  <td width=67 valign=top>
  <p align=right><font size="1">996,914&nbsp;</font></p>
  </td>
 </tr>
 <tr>
  <td width=322 valign=top>

  </td>
  <td width=20 valign=top>

  </td>
  <td width=67 valign=top>
  <div align=right>
  <hr size=1 width="95%" noshade color=gray align=right>
  </div>
  </td>
  <td width=16 valign=top>

  </td>
  <td width=67 valign=top>
  <div align=right>
  <hr size=1 width="95%" noshade color=gray align=right>
  </div>
  </td>
  <td width=19 valign=top>

  </td>
  <td width=19 valign=top align="right">

  </td>
  <td width=67 valign=top>
  <div align=right>
  <hr size=1 width="95%" noshade color=gray align=right>
  </div>
  </td>
  <td width=16 valign=top>

  </td>
  <td width=67 valign=top>
  <div align=right>
  <hr size=1 width="95%" noshade color=gray align=right>
  </div>
  </td>
 </tr>
 <tr>
  <td width=322 valign=top>
  <p align=right><b><font size="1">&nbsp;</font></b></p>
  </td>
  <td width=20 valign=top>
  <p align=right><b><font size="1">&nbsp;</font></b></p>
  </td>
  <td width=67 valign=top>
  <p align=right><b><font size="1">&nbsp;</font></b></p>
  </td>
  <td width=16 valign=top>
  <p align=right><b><font size="1">&nbsp;</font></b></p>
  </td>
  <td width=67 valign=top>
  <p align=right><b><font size="1">&nbsp;</font></b></p>
  </td>
  <td width=19 valign=top>
  <p><b><font size="1">&nbsp;</font></b></p>
  </td>
  <td width=19 valign=top align="right">
  <p><b><font size="1">&nbsp;</font></b></p>
  </td>
  <td width=67 valign=top>
  <p align=right><b><font size="1">&nbsp;</font></b></p>
  </td>
  <td width=16 valign=top>
  <p align=right><b><font size="1">&nbsp;</font></b></p>
  </td>
  <td width=67 valign=top>
  <p align=right><b><font size="1">&nbsp;</font></b></p>
  </td>
 </tr>
 <tr>
  <td width=322 valign=top>
  <p><b><font size="1">Expenses:</font></b></p>
  </td>
  <td width=20 valign=top>

  </td>
  <td width=67 valign=top>

  </td>
  <td width=16 valign=top>

  </td>
  <td width=67 valign=top>

  </td>
  <td width=19 valign=top>

  </td>
  <td width=19 valign=top align="right">

  </td>
  <td width=67 valign=top>

  </td>
  <td width=16 valign=top>

  </td>
  <td width=67 valign=top>

  </td>
 </tr>
 <tr>
  <td width=322 valign=top>
  <p><font size="1">Losses incurred</font></p>
  </td>
  <td width=20 valign=top>

  </td>
  <td width=67 valign=top>
  <p align=right><font size="1">184,587&nbsp;</font></p>
  </td>
  <td width=16 valign=top>

  </td>
  <td width=67 valign=bottom>
  <p align=right><font size="1">172,821&nbsp;</font></p>
  </td>
  <td width=19 valign=top>

  </td>
  <td width=19 valign=top align="right">

  </td>
  <td width=67 valign=top>
  <p align=right><font size="1">533,759&nbsp;</font></p>
  </td>
  <td width=16 valign=top>

  </td>
  <td width=67 valign=bottom>
  <p align=right><font size="1">502,546&nbsp;</font></p>
  </td>
 </tr>
 <tr>
  <td width=322 valign=top>
  <p><font size="1">Loss expenses incurred</font></p>
  </td>
  <td width=20 valign=top>

  </td>
  <td width=67 valign=top>
  <p align=right><font size="1">40,255&nbsp;</font></p>
  </td>
  <td width=16 valign=top>

  </td>
  <td width=67 valign=bottom>
  <p align=right><font size="1">31,363&nbsp;</font></p>
  </td>
  <td width=19 valign=top>

  </td>
  <td width=19 valign=top align="right">

  </td>
  <td width=67 valign=top>
  <p align=right><font size="1">110,550&nbsp;</font></p>
  </td>
  <td width=16 valign=top>

  </td>
  <td width=67 valign=bottom>
  <p align=right><font size="1">90,481&nbsp;</font></p>
  </td>
 </tr>
 <tr>
  <td width=322 valign=top>
  <p><font size="1">Policy acquisition costs</font></p>
  </td>
  <td width=20 valign=top>

  </td>
  <td width=67 valign=top>
  <p align=right><font size="1">105,011&nbsp;</font></p>
  </td>
  <td width=16 valign=top>

  </td>
  <td width=67 valign=bottom>
  <p align=right><font size="1">91,132&nbsp;</font></p>
  </td>
  <td width=19 valign=top>

  </td>
  <td width=19 valign=top align="right">

  </td>
  <td width=67 valign=top>
  <p align=right><font size="1">304,680&nbsp;</font></p>
  </td>
  <td width=16 valign=top>

  </td>
  <td width=67 valign=bottom>
  <p align=right><font size="1">263,412&nbsp;</font></p>
  </td>
 </tr>
 <tr>
  <td width=322 valign=top>
  <p><font size="1">Dividends to policyholders</font></p>
  </td>
  <td width=20 valign=top>

  </td>
  <td width=67 valign=top>
  <p align=right><font size="1">1,186&nbsp;</font></p>
  </td>
  <td width=16 valign=top>

  </td>
  <td width=67 valign=bottom>
  <p align=right><font size="1">914&nbsp;</font></p>
  </td>
  <td width=19 valign=top>

  </td>
  <td width=19 valign=top align="right">

  </td>
  <td width=67 valign=top>
  <p align=right><font size="1">3,239&nbsp;</font></p>
  </td>
  <td width=16 valign=top>

  </td>
  <td width=67 valign=bottom>
  <p align=right><font size="1">3,852&nbsp;</font></p>
  </td>
 </tr>
 <tr>
  <td width=322 valign=top>
  <p><font size="1">Interest expense</font></p>
  </td>
  <td width=20 valign=top>

  </td>
  <td width=67 valign=top>
  <p align=right><font size="1">3,611&nbsp;</font></p>
  </td>
  <td width=16 valign=top>

  </td>
  <td width=67 valign=bottom>
  <p align=right><font size="1">4,145&nbsp;</font></p>
  </td>
  <td width=19 valign=top>

  </td>
  <td width=19 valign=top align="right">

  </td>
  <td width=67 valign=top>
  <p align=right><font size="1">11,534&nbsp;</font></p>
  </td>
  <td width=16 valign=top>

  </td>
  <td width=67 valign=bottom>
  <p align=right><font size="1">13,135&nbsp;</font></p>
  </td>
 </tr>
 <tr>
  <td width=322 valign=top>
  <p><font size="1">Diversified insurance services expenses</font></p>
  </td>
  <td width=20 valign=top>

  </td>
  <td width=67 valign=top>
  <p align=right><font size="1">22,886&nbsp;</font></p>
  </td>
  <td width=16 valign=top>

  </td>
  <td width=67 valign=bottom>
  <p align=right><font size="1">21,592&nbsp;</font></p>
  </td>
  <td width=19 valign=top>

  </td>
  <td width=19 valign=top align="right">

  </td>
  <td width=67 valign=top>
  <p align=right><font size="1">67,892&nbsp;</font></p>
  </td>
  <td width=16 valign=top>

  </td>
  <td width=67 valign=bottom>
  <p align=right><font size="1">61,865&nbsp;</font></p>
  </td>
 </tr>
 <tr>
  <td width=322 valign=top>
  <p><font size="1">Other expenses</font></p>
  </td>
  <td width=20 valign=top>

  </td>
  <td width=67 valign=top>
  <p align=right><font size="1">2,412&nbsp;</font></p>
  </td>
  <td width=16 valign=top>

  </td>
  <td width=67 valign=bottom>
  <p align=right><font size="1">2,494&nbsp;</font></p>
  </td>
  <td width=19 valign=top>

  </td>
  <td width=19 valign=top align="right">

  </td>
  <td width=67 valign=top>
  <p align=right><font size="1">7,996&nbsp;</font></p>
  </td>
  <td width=16 valign=top>

  </td>
  <td width=67 valign=bottom>
  <p align=right><font size="1">6,383&nbsp;</font></p>
  </td>
 </tr>
 <tr>
  <td width=322 valign=top>

  </td>
  <td width=20 valign=top>

  </td>
  <td width=67 valign=top>
  <div align=right>
  <hr size=1 width="95%" noshade color=gray align=right>
  </div>
  </td>
  <td width=16 valign=top>

  </td>
  <td width=67 valign=top>
  <div align=right>
  <hr size=1 width="95%" noshade color=gray align=right>
  </div>
  </td>
  <td width=19 valign=top>

  </td>
  <td width=19 valign=top align="right">

  </td>
  <td width=67 valign=top>
  <div align=right>
  <hr size=1 width="95%" noshade color=gray align=right>
  </div>
  </td>
  <td width=16 valign=top>

  </td>
  <td width=67 valign=top>
  <div align=right>
  <hr size=1 width="95%" noshade color=gray align=right>
  </div>
  </td>
 </tr>
 <tr>
  <td width=322 valign=top>
  <p><font size="1">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; Total expenses</font></p>
  </td>
  <td width=20 valign=top>

  </td>
  <td width=67 valign=top>
  <p align=right><font size="1">359,948&nbsp;</font></p>
  </td>
  <td width=16 valign=top>

  </td>
  <td width=67 valign=top>
  <p align=right><font size="1">324,461&nbsp;</font></p>
  </td>
  <td width=19 valign=top>

  </td>
  <td width=19 valign=top align="right">

  </td>
  <td width=67 valign=top>
  <p align=right><font size="1">1,039,650&nbsp;</font></p>
  </td>
  <td width=16 valign=top>

  </td>
  <td width=67 valign=top>
  <p align=right><font size="1">941,674&nbsp;</font></p>
  </td>
 </tr>
 <tr>
  <td width=322 valign=top>

  </td>
  <td width=20 valign=top>

  </td>
  <td width=67 valign=top>
  <div align=right>
  <hr size=1 width="95%" noshade color=gray align=right>
  </div>
  </td>
  <td width=16 valign=top>

  </td>
  <td width=67 valign=top>
  <div align=right>
  <hr size=1 width="95%" noshade color=gray align=right>
  </div>
  </td>
  <td width=19 valign=top>

  </td>
  <td width=19 valign=top align="right">

  </td>
  <td width=67 valign=top>
  <div align=right>
  <hr size=1 width="95%" noshade color=gray align=right>
  </div>
  </td>
  <td width=16 valign=top>

  </td>
  <td width=67 valign=top>
  <div align=right>
  <hr size=1 width="95%" noshade color=gray align=right>
  </div>
  </td>
 </tr>
 <tr>
  <td width=322 valign=top>

  </td>
  <td width=20 valign=top>

  </td>
  <td width=67 valign=top>

  </td>
  <td width=16 valign=top>

  </td>
  <td width=67 valign=top>

  </td>
  <td width=19 valign=top>

  </td>
  <td width=19 valign=top align="right">

  </td>
  <td width=67 valign=top>

  </td>
  <td width=16 valign=top>

  </td>
  <td width=67 valign=top>

  </td>
 </tr>
 <tr>
  <td width=322 valign=top>
  <p><font size="1">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; Income before
  federal income tax</font></p>
  </td>
  <td width=20 valign=top>

  </td>
  <td width=67 valign=top>
  <p align=right><font size="1">36,239&nbsp;</font></p>
  </td>
  <td width=16 valign=top>

  </td>
  <td width=67 valign=top>
  <p align=right><font size="1">18,881&nbsp;</font></p>
  </td>
  <td width=19 valign=top>

  </td>
  <td width=19 valign=top align="right">

  </td>
  <td width=67 valign=top>
  <p align=right><font size="1">113,794&nbsp;</font></p>
  </td>
  <td width=16 valign=top>

  </td>
  <td width=67 valign=top>
  <p align=right><font size="1">55,240&nbsp;</font></p>
  </td>
 </tr>
 <tr>
  <td width=322 valign=top>

  </td>
  <td width=20 valign=top>

  </td>
  <td width=67 valign=top>
  <div align=right>
  <hr size=1 width="95%" noshade color=gray align=right>
  </div>
  </td>
  <td width=16 valign=top>

  </td>
  <td width=67 valign=top>
  <div align=right>
  <hr size=1 width="95%" noshade color=gray align=right>
  </div>
  </td>
  <td width=19 valign=top>

  </td>
  <td width=19 valign=top align="right">

  </td>
  <td width=67 valign=top>
  <div align=right>
  <hr size=1 width="95%" noshade color=gray align=right>
  </div>
  </td>
  <td width=16 valign=top>

  </td>
  <td width=67 valign=top>
  <div align=right>
  <hr size=1 width="95%" noshade color=gray align=right>
  </div>
  </td>
 </tr>
 <tr>
  <td width=322 valign=top>

  </td>
  <td width=20 valign=top>

  </td>
  <td width=67 valign=top>

  </td>
  <td width=16 valign=top>

  </td>
  <td width=67 valign=top>

  </td>
  <td width=19 valign=top>

  </td>
  <td width=19 valign=top align="right">

  </td>
  <td width=67 valign=top>

  </td>
  <td width=16 valign=top>

  </td>
  <td width=67 valign=top>

  </td>
 </tr>
 <tr>
  <td width=322 valign=top>
  <p><b><font size="1">Federal income tax expense (benefit):</font></b></p>
  </td>
  <td width=20 valign=top>

  </td>
  <td width=67 valign=top>

  </td>
  <td width=16 valign=top>

  </td>
  <td width=67 valign=top>

  </td>
  <td width=19 valign=top>

  </td>
  <td width=19 valign=top align="right">

  </td>
  <td width=67 valign=top>

  </td>
  <td width=16 valign=top>

  </td>
  <td width=67 valign=top>

  </td>
 </tr>
 <tr>
  <td width=322 valign=top>
  <p><font size="1">Current</font></p>
  </td>
  <td width=20 valign=top>

  </td>
  <td width=67 valign=top>
  <p align=right><font size="1">6,843&nbsp;</font></p>
  </td>
  <td width=16 valign=top>

  </td>
  <td width=67 valign=bottom>
  <p align=right><font size="1">5,970&nbsp;</font></p>
  </td>
  <td width=19 valign=top>

  </td>
  <td width=19 valign=top align="right">

  </td>
  <td width=67 valign=top>
  <p align=right><font size="1">25,779&nbsp;</font></p>
  </td>
  <td width=16 valign=top>

  </td>
  <td width=67 valign=bottom>
  <p align=right><font size="1">13,394&nbsp;</font></p>
  </td>
 </tr>
 <tr>
  <td width=322 valign=top>
  <p><font size="1">Deferred</font></p>
  </td>
  <td width=20 valign=top>

  </td>
  <td width=67 valign=top>
  <p align=right><font size="1">1,068&nbsp;</font></p>
  </td>
  <td width=16 valign=top>

  </td>
  <td width=67 valign=bottom>
  <p align=right><font size="1">(1,806)</font></p>
  </td>
  <td width=19 valign=top>

  </td>
  <td width=19 valign=top align="right">

  </td>
  <td width=67 valign=top>
  <p align=right><font size="1">3,285&nbsp;</font></p>
  </td>
  <td width=16 valign=top>

  </td>
  <td width=67 valign=bottom>
  <p align=right><font size="1">(657)</font></p>
  </td>
 </tr>
 <tr>
  <td width=322 valign=top>

  </td>
  <td width=20 valign=top>

  </td>
  <td width=67 valign=top>
  <div align=right>
  <hr size=1 width="95%" noshade color=gray align=right>
  </div>
  </td>
  <td width=16 valign=top>

  </td>
  <td width=67 valign=top>
  <div align=right>
  <hr size=1 width="95%" noshade color=gray align=right>
  </div>
  </td>
  <td width=19 valign=top>

  </td>
  <td width=19 valign=top align="right">

  </td>
  <td width=67 valign=top>
  <div align=right>
  <hr size=1 width="95%" noshade color=gray align=right>
  </div>
  </td>
  <td width=16 valign=top>

  </td>
  <td width=67 valign=top>
  <div align=right>
  <hr size=1 width="95%" noshade color=gray align=right>
  </div>
  </td>
 </tr>
 <tr>
  <td width=322 valign=top>
  <p><font size="1">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; Total federal income
  tax expense</font></p>
  </td>
  <td width=20 valign=top>

  </td>
  <td width=67 valign=top>
  <p align=right><font size="1">7,911&nbsp;</font></p>
  </td>
  <td width=16 valign=top>

  </td>
  <td width=67 valign=top>
  <p align=right><font size="1">4,164&nbsp;</font></p>
  </td>
  <td width=19 valign=top>

  </td>
  <td width=19 valign=top align="right">

  </td>
  <td width=67 valign=top>
  <p align=right><font size="1">29,064&nbsp;</font></p>
  </td>
  <td width=16 valign=top>

  </td>
  <td width=67 valign=top>
  <p align=right><font size="1">12,737&nbsp;</font></p>
  </td>
 </tr>
 <tr>
  <td width=322 valign=top>

  </td>
  <td width=20 valign=top>

  </td>
  <td width=67 valign=top>
  <div align=right>
  <hr size=1 width="95%" noshade color=gray align=right>
  </div>
  </td>
  <td width=16 valign=top>

  </td>
  <td width=67 valign=top>
  <div align=right>
  <hr size=1 width="95%" noshade color=gray align=right>
  </div>
  </td>
  <td width=19 valign=top>

  </td>
  <td width=19 valign=top align="right">

  </td>
  <td width=67 valign=top>
  <div align=right>
  <hr size=1 width="95%" noshade color=gray align=right>
  </div>
  </td>
  <td width=16 valign=top>

  </td>
  <td width=67 valign=top>
  <div align=right>
  <hr size=1 width="95%" noshade color=gray align=right>
  </div>
  </td>
 </tr>
 <tr>
  <td width=322 valign=top>
  <p><font size="1">Net income</font></p>
  </td>
  <td width=20 valign=top>
  <p align=right><font size="1">$</font></p>
  </td>
  <td width=67 valign=top>
  <p align=right><font size="1">28,328&nbsp;</font></p>
  </td>
  <td width=16 valign=top>

  </td>
  <td width=67 valign=top>
  <p align=right><font size="1">14,717&nbsp;</font></p>
  </td>
  <td width=19 valign=top>

  </td>
  <td width=19 valign=top align="right">
  <p><font size="1">$</font></p>
  </td>
  <td width=67 valign=top>
  <p align=right><font size="1">84,730&nbsp;</font></p>
  </td>
  <td width=16 valign=top>

  </td>
  <td width=67 valign=top>
  <p align=right><font size="1">42,503&nbsp;</font></p>
  </td>
 </tr>
 <tr>
  <td width=322 valign=top>

  </td>
  <td width=20 valign=top>

  </td>
  <td width=67 valign=top>
  <p align=right>=======</p>
  </td>
  <td width=16 valign=top>

  </td>
  <td width=67 valign=top>
  <p align=right>=======</p>
  </td>
  <td width=19 valign=top>

  </td>
  <td width=19 valign=top align="right">

  </td>
  <td width=67 valign=top>
  <p align=right>=======</p>
  </td>
  <td width=16 valign=top>

  </td>
  <td width=67 valign=top>
  <p align=right>=======</p>
  </td>
 </tr>
 <tr>
  <td width=322 valign=top>

  </td>
  <td width=20 valign=top>

  </td>
  <td width=67 valign=top>

  </td>
  <td width=16 valign=top>

  </td>
  <td width=67 valign=top>

  </td>
  <td width=19 valign=top>

  </td>
  <td width=19 valign=top align="right">

  </td>
  <td width=67 valign=top>

  </td>
  <td width=16 valign=top>

  </td>
  <td width=67 valign=top>

  </td>
 </tr>
 <tr>
  <td width=322 valign=top>
  <p><b><font size="1">Earnings per share:</font></b></p>
  </td>
  <td width=20 valign=top>

  </td>
  <td width=67 valign=top>

  </td>
  <td width=16 valign=top>

  </td>
  <td width=67 valign=top>

  </td>
  <td width=19 valign=top>

  </td>
  <td width=19 valign=top align="right">

  </td>
  <td width=67 valign=top>

  </td>
  <td width=16 valign=top>

  </td>
  <td width=67 valign=top>

  </td>
 </tr>
 <tr>
  <td width=322 valign=top>
  <p><font size="1">Basic net income</font></p>
  </td>
  <td width=20 valign=top>
  <p align=right><font size="1">$</font></p>
  </td>
  <td width=67 valign=top>
  <p align=right><font size="1">1.05&nbsp;</font></p>
  </td>
  <td width=16 valign=top>

  </td>
  <td width=67 valign=top>
  <p align=right><font size="1">0.56&nbsp;</font></p>
  </td>
  <td width=19 valign=top>

  </td>
  <td width=19 valign=top align="right">
  <p><font size="1">$</font></p>
  </td>
  <td width=67 valign=top>
  <p align=right><font size="1">3.17&nbsp;</font></p>
  </td>
  <td width=16 valign=top>

  </td>
  <td width=67 valign=top>
  <p align=right><font size="1">1.63&nbsp;</font></p>
  </td>
 </tr>
 <tr>
  <td width=322 valign=top>

  </td>
  <td width=20 valign=top>

  </td>
  <td width=67 valign=top>
  <p align=right>=======</p>
  </td>
  <td width=16 valign=top>

  </td>
  <td width=67 valign=top>
  <p align=right>=======</p>
  </td>
  <td width=19 valign=top>

  </td>
  <td width=19 valign=top align="right">

  </td>
  <td width=67 valign=top>
  <p align=right>=======</p>
  </td>
  <td width=16 valign=top>

  </td>
  <td width=67 valign=top>
  <p align=right>=======</p>
  </td>
 </tr>
 <tr>
  <td width=322 valign=top>

  </td>
  <td width=20 valign=top>

  </td>
  <td width=67 valign=top>

  </td>
  <td width=16 valign=top>

  </td>
  <td width=67 valign=top>

  </td>
  <td width=19 valign=top>

  </td>
  <td width=19 valign=top align="right">

  </td>
  <td width=67 valign=top>

  </td>
  <td width=16 valign=top>

  </td>
  <td width=67 valign=top>

  </td>
 </tr>
 <tr>
  <td width=322 valign=top>
  <p><font size="1">Diluted net income</font></p>
  </td>
  <td width=20 valign=top>
  <p align=right><font size="1">$</font></p>
  </td>
  <td width=67 valign=top>
  <p align=right><font size="1">0.90&nbsp;</font></p>
  </td>
  <td width=16 valign=top>

  </td>
  <td width=67 valign=top>
  <p align=right><font size="1">0.53&nbsp;</font></p>
  </td>
  <td width=19 valign=top>

  </td>
  <td width=19 valign=top align="right">
  <p><font size="1">$</font></p>
  </td>
  <td width=67 valign=top>
  <p align=right><font size="1">2.70&nbsp;</font></p>
  </td>
  <td width=16 valign=top>

  </td>
  <td width=67 valign=top>
  <p align=right><font size="1">1.54&nbsp;</font></p>
  </td>
 </tr>
 <tr>
  <td width=322 valign=top>

  </td>
  <td width=20 valign=top>

  </td>
  <td width=67 valign=top>
  <p align=right>=======</p>
  </td>
  <td width=16 valign=top>

  </td>
  <td width=67 valign=top>
  <p align=right>=======</p>
  </td>
  <td width=19 valign=top>

  </td>
  <td width=19 valign=top align="right">

  </td>
  <td width=67 valign=top>
  <p align=right>=======</p>
  </td>
  <td width=16 valign=top>

  </td>
  <td width=67 valign=top>
  <p align=right>=======</p>
  </td>
 </tr>
 <tr>
  <td width=322 valign=top>

  </td>
  <td width=20 valign=top>

  </td>
  <td width=67 valign=top>

  </td>
  <td width=16 valign=top>

  </td>
  <td width=67 valign=top>

  </td>
  <td width=19 valign=top>

  </td>
  <td width=19 valign=top align="right">

  </td>
  <td width=67 valign=top>

  </td>
  <td width=16 valign=top>

  </td>
  <td width=67 valign=top>

  </td>
 </tr>
 <tr>
  <td width=322 valign=top>
  <p><font size="1">Dividends to stockholders</font></p>
  </td>
  <td width=20 valign=top>
  <p align=right><font size="1">$</font></p>
  </td>
  <td width=67 valign=top>
  <p align=right><font size="1">0.17&nbsp;</font></p>
  </td>
  <td width=16 valign=top>

  </td>
  <td width=67 valign=top>
  <p align=right><font size="1">0.15&nbsp;</font></p>
  </td>
  <td width=19 valign=top>

  </td>
  <td width=19 valign=top align="right">
  <p><font size="1">$</font></p>
  </td>
  <td width=67 valign=top>
  <p align=right><font size="1">0.51&nbsp;</font></p>
  </td>
  <td width=16 valign=top>

  </td>
  <td width=67 valign=top>
  <p align=right><font size="1">0.45&nbsp;</font></p>
  </td>
 </tr>
 <tr>
  <td width=322 valign=top>

  </td>
  <td width=20 valign=top>

  </td>
  <td width=67 valign=top>

  </td>
  <td width=16 valign=top>

  </td>
  <td width=67 valign=top>

  </td>
  <td width=19 valign=top>

  </td>
  <td width=19 valign=top>

  </td>
  <td width=67 valign=top>

  </td>
  <td width=16 valign=top>

  </td>
  <td width=67 valign=top>

  </td>
 </tr>
 <tr>
  <td width=680 colspan=10 valign=top>
  <p><font size="1"><br>
  See accompanying
  notes to unaudited interim consolidated financial statements.</font></p>
  </td>
 </tr>
</table>

</div>

&nbsp;<p align="center"><font size="2">3</font></p>
<hr color="#000080"><P STYLE="page-break-after: always"></P>
<p>

&nbsp;</p>




<div align=center>

<table border=0 cellspacing=0 cellpadding=0 width=696>
 <tr>
  <td width=674 colspan=5 valign=bottom>
  <div align=center><b>
  <hr size=1 width="100%" noshade color=black align=center>
  </b></div>
  </td>
 </tr>
 <tr>
  <td width=345 valign=bottom>
  <p><b><font size="1">SELECTIVE
  INSURANCE GROUP, INC.</font></b></p>
  </td>
  <td width=19 valign=bottom>

  </td>
  <td width=310 colspan=3 valign=bottom>
  <p align=center><b><font size="1">Unaudited,</font></b></p>
  </td>
 </tr>
 <tr>
  <td width=345 valign=bottom>
  <p><i><font size="1">Consolidated
  Statements of Stockholders' Equity</font></i></p>
  </td>
  <td width=19 valign=bottom>

  </td>
  <td width=310 colspan=3 valign=bottom>
  <p align=center><b><font size="1">Nine months ended </font> </b></p>
  </td>
 </tr>
 <tr>
  <td width=345 valign=bottom>
  <p><i><font size="1">&nbsp;</font></i></p>
  </td>
  <td width=19 valign=bottom>

  </td>
  <td width=310 colspan=3 valign=bottom>
  <p align=center><b><font size="1">September 30,</font></b></p>
  </td>
 </tr>
 <tr>
  <td width=345 valign=bottom>
  <p><font size="1">(in thousands,
  except per share amounts)</font></p>
  </td>
  <td width=19 valign=bottom>

  </td>
  <td width=146 valign=bottom>
  <p align=center><b><font size="1">2004</font></b></p>
  </td>
  <td width=19 valign=bottom>

  </td>
  <td width=146 valign=bottom>
  <p align=center><b><font size="1">2003</font></b></p>
  </td>
 </tr>
 <tr>
  <td width=674 colspan=5 valign=bottom>
  <div align=center><b>
  <hr size=1 width="100%" noshade color=black align=center>
  </b></div>
  </td>
 </tr>
</table>

</div>



<div align=center>

<table border=0 cellspacing=0 cellpadding=0 width=696>
 <tr>
  <td width=344 valign=bottom>
  <p><b><font size="1">Common stock:</font></b></p>
  </td>
  <td width=19 valign=bottom>

  </td>
  <td width=65 valign=bottom>

  </td>
  <td width=15 valign=bottom>

  </td>
  <td width=65 valign=bottom>

  </td>
  <td width=19 valign=bottom>

  </td>
  <td width=65 valign=bottom>

  </td>
  <td width=15 valign=bottom>

  </td>
  <td width=65 valign=bottom>

  </td>
 </tr>
 <tr>
  <td width=344 valign=bottom>
  <p><font size="1">Beginning
  of year</font></p>
  </td>
  <td width=19 valign=bottom>
  <p align=right><font size="1">$</font></p>
  </td>
  <td width=65 valign=bottom>
  <p align=right><font size="1">83,135&nbsp;</font></p>
  </td>
  <td width=15 valign=bottom>

  </td>
  <td width=65 valign=bottom>

  </td>
  <td width=19 valign=bottom>

  </td>
  <td width=65 valign=bottom>
  <p align=right><font size="1">81,562&nbsp;</font></p>
  </td>
  <td width=15 valign=bottom>

  </td>
  <td width=65 valign=bottom>

  </td>
 </tr>
 <tr>
  <td width=344 valign=bottom>
  <p><font size="1">Dividend
  reinvestment plan</font></p>
  </td>
  <td width=19 valign=bottom>

  </td>
  <td width=65 valign=bottom>

  </td>
  <td width=15 valign=bottom>

  </td>
  <td width=65 valign=bottom>

  </td>
  <td width=19 valign=bottom>

  </td>
  <td width=65 valign=bottom>

  </td>
  <td width=15 valign=bottom>

  </td>
  <td width=65 valign=bottom>

  </td>
 </tr>
 <tr>
  <td width=344 valign=bottom>
  <p><font size="1">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; (shares:&nbsp; 27,891-2004; 33,714-2003)</font></p>
  </td>
  <td width=19 valign=bottom>

  </td>
  <td width=65 valign=bottom>
  <p align=right><font size="1">56&nbsp;</font></p>
  </td>
  <td width=15 valign=bottom>

  </td>
  <td width=65 valign=bottom>

  </td>
  <td width=19 valign=bottom>

  </td>
  <td width=65 valign=bottom>
  <p align=right><font size="1">67&nbsp;</font></p>
  </td>
  <td width=15 valign=bottom>

  </td>
  <td width=65 valign=bottom>

  </td>
 </tr>
 <tr>
  <td width=344 valign=bottom>
  <p><font size="1">Convertible
  subordinated debentures</font></p>
  </td>
  <td width=19 valign=bottom>

  </td>
  <td width=65 valign=bottom>

  </td>
  <td width=15 valign=bottom>

  </td>
  <td width=65 valign=bottom>

  </td>
  <td width=19 valign=bottom>

  </td>
  <td width=65 valign=bottom>

  </td>
  <td width=15 valign=bottom>

  </td>
  <td width=65 valign=bottom>

  </td>
 </tr>
 <tr>
  <td width=344 valign=bottom>
  <p><font size="1">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; (shares:&nbsp; 21,323-2004; 16,522 -2003)</font></p>
  </td>
  <td width=19 valign=bottom>

  </td>
  <td width=65 valign=bottom>
  <p align=right><font size="1">43&nbsp;</font></p>
  </td>
  <td width=15 valign=bottom>

  </td>
  <td width=65 valign=bottom>

  </td>
  <td width=19 valign=bottom>

  </td>
  <td width=65 valign=bottom>
  <p align=right><font size="1">33&nbsp;</font></p>
  </td>
  <td width=15 valign=bottom>

  </td>
  <td width=65 valign=bottom>

  </td>
 </tr>
 <tr>
  <td width=344 valign=bottom>
  <p><font size="1">Stock
  purchase and compensation plans</font></p>
  </td>
  <td width=19 valign=bottom>

  </td>
  <td width=65 valign=bottom>

  </td>
  <td width=15 valign=bottom>

  </td>
  <td width=65 valign=bottom>

  </td>
  <td width=19 valign=bottom>

  </td>
  <td width=65 valign=bottom>

  </td>
  <td width=15 valign=bottom>

  </td>
  <td width=65 valign=bottom>

  </td>
 </tr>
 <tr>
  <td width=344 valign=bottom>
  <p><font size="1">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; (shares: 669,016-2004; 595,480-2003)</font></p>
  </td>
  <td width=19 valign=bottom>

  </td>
  <td width=65 valign=bottom>
  <p align=right><font size="1">1,338&nbsp;</font></p>
  </td>
  <td width=15 valign=bottom>

  </td>
  <td width=65 valign=bottom>

  </td>
  <td width=19 valign=bottom>

  </td>
  <td width=65 valign=bottom>
  <p align=right><font size="1">1,191&nbsp;</font></p>
  </td>
  <td width=15 valign=bottom>

  </td>
  <td width=65 valign=bottom>

  </td>
 </tr>
 <tr>
  <td width=344 valign=bottom>

  </td>
  <td width=19 valign=bottom>

  </td>
  <td width=65 valign=bottom>
  <div align=right>
  <hr size=1 width="90%" noshade color=gray align=right>
  </div>
  </td>
  <td width=15 valign=bottom>

  </td>
  <td width=65 valign=bottom>

  </td>
  <td width=19 valign=bottom>

  </td>
  <td width=65 valign=bottom>
  <div align=right>
  <hr size=1 width="90%" noshade color=gray align=right>
  </div>
  </td>
  <td width=15 valign=bottom>

  </td>
  <td width=65 valign=bottom>

  </td>
 </tr>
 <tr>
  <td width=344 valign=bottom>
  <p><font size="1">End
  of period</font></p>
  </td>
  <td width=19 valign=bottom>

  </td>
  <td width=65 valign=bottom>
  <p align=right><font size="1">84,572&nbsp;</font></p>
  </td>
  <td width=15 valign=bottom>

  </td>
  <td width=65 valign=bottom>

  </td>
  <td width=19 valign=bottom>

  </td>
  <td width=65 valign=bottom>
  <p align=right><font size="1">82,853&nbsp;</font></p>
  </td>
  <td width=15 valign=bottom>

  </td>
  <td width=65 valign=bottom>

  </td>
 </tr>
 <tr>
  <td width=344 valign=bottom>

  </td>
  <td width=19 valign=bottom>

  </td>
  <td width=65 valign=bottom>
  <div align=right>
  <hr size=1 width="90%" noshade color=gray align=right>
  </div>
  </td>
  <td width=15 valign=bottom>

  </td>
  <td width=65 valign=bottom>

  </td>
  <td width=19 valign=bottom>

  </td>
  <td width=65 valign=bottom>
  <div align=right>
  <hr size=1 width="90%" noshade color=gray align=right>
  </div>
  </td>
  <td width=15 valign=bottom>

  </td>
  <td width=65 valign=bottom>

  </td>
 </tr>
 <tr>
  <td width=344 valign=bottom>

  </td>
  <td width=19 valign=bottom>

  </td>
  <td width=65 valign=bottom>

  </td>
  <td width=15 valign=bottom>

  </td>
  <td width=65 valign=bottom>

  </td>
  <td width=19 valign=bottom>

  </td>
  <td width=65 valign=bottom>

  </td>
  <td width=15 valign=bottom>

  </td>
  <td width=65 valign=bottom>

  </td>
 </tr>
 <tr>
  <td width=344 valign=bottom>
  <p><b><font size="1">Additional paid-in capital:</font></b></p>
  </td>
  <td width=19 valign=bottom>

  </td>
  <td width=65 valign=bottom>

  </td>
  <td width=15 valign=bottom>

  </td>
  <td width=65 valign=bottom>

  </td>
  <td width=19 valign=bottom>

  </td>
  <td width=65 valign=bottom>

  </td>
  <td width=15 valign=bottom>

  </td>
  <td width=65 valign=bottom>

  </td>
 </tr>
 <tr>
  <td width=344 valign=bottom>
  <p><font size="1">Beginning
  of year</font></p>
  </td>
  <td width=19 valign=bottom>

  </td>
  <td width=65 valign=bottom>
  <p align=right><font size="1">113,283&nbsp;</font></p>
  </td>
  <td width=15 valign=bottom>

  </td>
  <td width=65 valign=bottom>

  </td>
  <td width=19 valign=bottom>

  </td>
  <td width=65 valign=bottom>
  <p align=right><font size="1">95,435&nbsp;</font></p>
  </td>
  <td width=15 valign=bottom>

  </td>
  <td width=65 valign=bottom>

  </td>
 </tr>
 <tr>
  <td width=344 valign=bottom>
  <p><font size="1">Dividend
  reinvestment plan</font></p>
  </td>
  <td width=19 valign=bottom>

  </td>
  <td width=65 valign=bottom>
  <p align=right><font size="1">944&nbsp;</font></p>
  </td>
  <td width=15 valign=bottom>

  </td>
  <td width=65 valign=bottom>

  </td>
  <td width=19 valign=bottom>

  </td>
  <td width=65 valign=bottom>
  <p align=right><font size="1">801&nbsp;</font></p>
  </td>
  <td width=15 valign=bottom>

  </td>
  <td width=65 valign=bottom>

  </td>
 </tr>
 <tr>
  <td width=344 valign=bottom>
  <p><font size="1">Convertible
  subordinated debentures</font></p>
  </td>
  <td width=19 valign=bottom>

  </td>
  <td width=65 valign=bottom>
  <p align=right><font size="1">110&nbsp;</font></p>
  </td>
  <td width=15 valign=bottom>

  </td>
  <td width=65 valign=bottom>

  </td>
  <td width=19 valign=bottom>

  </td>
  <td width=65 valign=bottom>
  <p align=right><font size="1">86&nbsp;</font></p>
  </td>
  <td width=15 valign=bottom>

  </td>
  <td width=65 valign=bottom>

  </td>
 </tr>
 <tr>
  <td width=344 valign=bottom>
  <p><font size="1">Stock
  purchase and compensation plans</font></p>
  </td>
  <td width=19 valign=bottom>

  </td>
  <td width=65 valign=bottom>
  <p align=right><font size="1">21,076&nbsp;</font></p>
  </td>
  <td width=15 valign=bottom>

  </td>
  <td width=65 valign=bottom>

  </td>
  <td width=19 valign=bottom>

  </td>
  <td width=65 valign=bottom>
  <p align=right><font size="1">13,219&nbsp;</font></p>
  </td>
  <td width=15 valign=bottom>

  </td>
  <td width=65 valign=bottom>

  </td>
 </tr>
 <tr>
  <td width=344 valign=bottom>

  </td>
  <td width=19 valign=bottom>

  </td>
  <td width=65 valign=bottom>
  <div align=right>
  <hr size=1 width="90%" noshade color=gray align=right>
  </div>
  </td>
  <td width=15 valign=bottom>

  </td>
  <td width=65 valign=bottom>

  </td>
  <td width=19 valign=bottom>

  </td>
  <td width=65 valign=bottom>
  <div align=right>
  <hr size=1 width="90%" noshade color=gray align=right>
  </div>
  </td>
  <td width=15 valign=bottom>

  </td>
  <td width=65 valign=bottom>

  </td>
 </tr>
 <tr>
  <td width=344 valign=bottom>
  <p><font size="1">End
  of period</font></p>
  </td>
  <td width=19 valign=bottom>

  </td>
  <td width=65 valign=bottom>
  <p align=right><font size="1">135,413&nbsp;</font></p>
  </td>
  <td width=15 valign=bottom>

  </td>
  <td width=65 valign=bottom>

  </td>
  <td width=19 valign=bottom>

  </td>
  <td width=65 valign=bottom>
  <p align=right><font size="1">109,541&nbsp;</font></p>
  </td>
  <td width=15 valign=bottom>

  </td>
  <td width=65 valign=bottom>

  </td>
 </tr>
 <tr>
  <td width=344 valign=bottom>

  </td>
  <td width=19 valign=bottom>

  </td>
  <td width=65 valign=bottom>
  <div align=right>
  <hr size=1 width="90%" noshade color=gray align=right>
  </div>
  </td>
  <td width=15 valign=bottom>

  </td>
  <td width=65 valign=bottom>

  </td>
  <td width=19 valign=bottom>

  </td>
  <td width=65 valign=bottom>
  <div align=right>
  <hr size=1 width="90%" noshade color=gray align=right>
  </div>
  </td>
  <td width=15 valign=bottom>

  </td>
  <td width=65 valign=bottom>

  </td>
 </tr>
 <tr>
  <td width=344 valign=bottom>

  </td>
  <td width=19 valign=bottom>

  </td>
  <td width=65 valign=bottom>

  </td>
  <td width=15 valign=bottom>

  </td>
  <td width=65 valign=bottom>

  </td>
  <td width=19 valign=bottom>

  </td>
  <td width=65 valign=bottom>

  </td>
  <td width=15 valign=bottom>

  </td>
  <td width=65 valign=bottom>

  </td>
 </tr>
 <tr>
  <td width=344 valign=bottom>
  <p><b><font size="1">Retained earnings:</font></b></p>
  </td>
  <td width=19 valign=bottom>

  </td>
  <td width=65 valign=bottom>

  </td>
  <td width=15 valign=bottom>

  </td>
  <td width=65 valign=bottom>

  </td>
  <td width=19 valign=bottom>

  </td>
  <td width=65 valign=bottom>

  </td>
  <td width=15 valign=bottom>

  </td>
  <td width=65 valign=bottom>

  </td>
 </tr>
 <tr>
  <td width=344 valign=bottom>
  <p><font size="1">Beginning
  of year</font></p>
  </td>
  <td width=19 valign=bottom>

  </td>
  <td width=65 valign=bottom>
  <p align=right><font size="1">612,208&nbsp;</font></p>
  </td>
  <td width=15 valign=bottom>

  </td>
  <td width=65 valign=bottom>

  </td>
  <td width=19 valign=bottom>

  </td>
  <td width=65 valign=bottom>
  <p align=right><font size="1">562,553&nbsp;</font></p>
  </td>
  <td width=15 valign=bottom>

  </td>
  <td width=65 valign=bottom>

  </td>
 </tr>
 <tr>
  <td width=344 valign=bottom>
  <p><font size="1">Net
  income</font></p>
  </td>
  <td width=19 valign=bottom>

  </td>
  <td width=65 valign=bottom>
  <p align=right><font size="1">84,730&nbsp;</font></p>
  </td>
  <td width=15 valign=bottom>

  </td>
  <td width=65 valign=bottom>
  <p align=right><font size="1">84,730&nbsp;</font></p>
  </td>
  <td width=19 valign=bottom>

  </td>
  <td width=65 valign=bottom>
  <p align=right><font size="1">42,503&nbsp;</font></p>
  </td>
  <td width=15 valign=bottom>

  </td>
  <td width=65 valign=bottom>
  <p align=right><font size="1">42,503&nbsp;&nbsp;</font></p>
  </td>
 </tr>
 <tr>
  <td width=344 valign=bottom>
  <p><font size="1">Cash
  dividends to stockholders ($0.51 per share-2004; $0.45 per share-2003)</font></p>
  </td>
  <td width=19 valign=bottom>

  </td>
  <td width=65 valign=bottom>
  <p align=right><font size="1">(14,078)</font></p>
  </td>
  <td width=15 valign=bottom>

  </td>
  <td width=65 valign=bottom>

  </td>
  <td width=19 valign=bottom>

  </td>
  <td width=65 valign=bottom>
  <p align=right><font size="1">(12,085)</font></p>
  </td>
  <td width=15 valign=bottom>

  </td>
  <td width=65 valign=bottom>

  </td>
 </tr>
 <tr>
  <td width=344 valign=bottom>

  </td>
  <td width=19 valign=bottom>

  </td>
  <td width=65 valign=bottom>
  <div align=right>
  <hr size=1 width="90%" noshade color=gray align=right>
  </div>
  </td>
  <td width=15 valign=bottom>

  </td>
  <td width=65 valign=bottom>

  </td>
  <td width=19 valign=bottom>

  </td>
  <td width=65 valign=bottom>
  <div align=right>
  <hr size=1 width="90%" noshade color=gray align=right>
  </div>
  </td>
  <td width=15 valign=bottom>

  </td>
  <td width=65 valign=bottom>

  </td>
 </tr>
 <tr>
  <td width=344 valign=bottom>
  <p><font size="1">End
  of period</font></p>
  </td>
  <td width=19 valign=bottom>

  </td>
  <td width=65 valign=bottom>
  <p align=right><font size="1">682,860&nbsp;</font></p>
  </td>
  <td width=15 valign=bottom>

  </td>
  <td width=65 valign=bottom>

  </td>
  <td width=19 valign=bottom>

  </td>
  <td width=65 valign=bottom>
  <p align=right><font size="1">592,971&nbsp;</font></p>
  </td>
  <td width=15 valign=bottom>

  </td>
  <td width=65 valign=bottom>

  </td>
 </tr>
 <tr>
  <td width=344 valign=bottom>

  </td>
  <td width=19 valign=bottom>

  </td>
  <td width=65 valign=bottom>
  <div align=right>
  <hr size=1 width="90%" noshade color=gray align=right>
  </div>
  </td>
  <td width=15 valign=bottom>

  </td>
  <td width=65 valign=bottom>

  </td>
  <td width=19 valign=bottom>

  </td>
  <td width=65 valign=bottom>
  <div align=right>
  <hr size=1 width="90%" noshade color=gray align=right>
  </div>
  </td>
  <td width=15 valign=bottom>

  </td>
  <td width=65 valign=bottom>

  </td>
 </tr>
 <tr>
  <td width=344 valign=bottom>

  </td>
  <td width=19 valign=bottom>

  </td>
  <td width=65 valign=bottom>

  </td>
  <td width=15 valign=bottom>

  </td>
  <td width=65 valign=bottom>

  </td>
  <td width=19 valign=bottom>

  </td>
  <td width=65 valign=bottom>

  </td>
  <td width=15 valign=bottom>

  </td>
  <td width=65 valign=bottom>

  </td>
 </tr>
 <tr>
  <td width=344 valign=bottom>
  <p><b><font size="1">Accumulated other comprehensive income:</font></b></p>
  </td>
  <td width=19 valign=bottom>

  </td>
  <td width=65 valign=bottom>

  </td>
  <td width=15 valign=bottom>

  </td>
  <td width=65 valign=bottom>

  </td>
  <td width=19 valign=bottom>

  </td>
  <td width=65 valign=bottom>

  </td>
  <td width=15 valign=bottom>

  </td>
  <td width=65 valign=bottom>

  </td>
 </tr>
 <tr>
  <td width=344 valign=bottom>
  <p><font size="1">Beginning
  of year</font></p>
  </td>
  <td width=19 valign=bottom>

  </td>
  <td width=65 valign=bottom>
  <p align=right><font size="1">148,452&nbsp;</font></p>
  </td>
  <td width=15 valign=bottom>

  </td>
  <td width=65 valign=bottom>

  </td>
  <td width=19 valign=bottom>

  </td>
  <td width=65 valign=top>
  <p align=right><font size="1">115,434&nbsp;</font></p>
  </td>
  <td width=15 valign=bottom>

  </td>
  <td width=65 valign=bottom>

  </td>
 </tr>
 <tr>
  <td width=344 valign=bottom>
  <p><font size="1">Other
  comprehensive income, increase </font> </p>
  </td>
  <td width=19 valign=bottom>

  </td>
  <td width=65 valign=bottom>

  </td>
  <td width=15 valign=bottom>

  </td>
  <td width=65 valign=bottom>

  </td>
  <td width=19 valign=bottom>

  </td>
  <td width=65 valign=top>

  </td>
  <td width=15 valign=bottom>

  </td>
  <td width=65 valign=bottom>

  </td>
 </tr>
 <tr>
  <td width=344 valign=bottom>
  <p><font size="1">in
  net unrealized gains on</font></p>
  </td>
  <td width=19 valign=bottom>

  </td>
  <td width=65 valign=bottom>

  </td>
  <td width=15 valign=bottom>

  </td>
  <td width=65 valign=bottom>

  </td>
  <td width=19 valign=bottom>

  </td>
  <td width=65 valign=top>

  </td>
  <td width=15 valign=bottom>

  </td>
  <td width=65 valign=bottom>

  </td>
 </tr>
 <tr>
  <td width=344 valign=bottom>
  <p><font size="1">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; available-for-sale securities, net of
  deferred income tax effect of:</font></p>
  </td>
  <td width=19 valign=bottom>

  </td>
  <td width=65 valign=bottom>

  </td>
  <td width=15 valign=bottom>

  </td>
  <td width=65 valign=bottom>

  </td>
  <td width=19 valign=bottom>

  </td>
  <td width=65 valign=top>

  </td>
  <td width=15 valign=bottom>

  </td>
  <td width=65 valign=bottom>

  </td>
 </tr>
 <tr>
  <td width=344 valign=bottom>
  <p><font size="1">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; $2,470-2004; $11,751 -2003</font></p>
  </td>
  <td width=19 valign=bottom>

  </td>
  <td width=65 valign=bottom>
  <p align=right><font size="1">4,588&nbsp;</font></p>
  </td>
  <td width=15 valign=bottom>

  </td>
  <td width=65 valign=bottom>
  <p align=right><font size="1">4,588&nbsp;</font></p>
  </td>
  <td width=19 valign=bottom>

  </td>
  <td width=65 valign=bottom>
  <p align=right><font size="1">21,824&nbsp;</font></p>
  </td>
  <td width=15 valign=bottom>

  </td>
  <td width=65 valign=bottom>
  <p align=right><font size="1">21,824&nbsp;&nbsp;</font></p>
  </td>
 </tr>
 <tr>
  <td width=344 valign=bottom>

  </td>
  <td width=19 valign=bottom>

  </td>
  <td width=65 valign=bottom>
  <div align=right>
  <hr size=1 width="90%" noshade color=gray align=right>
  </div>
  </td>
  <td width=15 valign=bottom>

  </td>
  <td width=65 valign=bottom>
  <div align=right>
  <hr size=1 width="90%" noshade color=gray align=right>
  </div>
  </td>
  <td width=19 valign=bottom>

  </td>
  <td width=65 valign=bottom>
  <div align=right>
  <hr size=1 width="90%" noshade color=gray align=right>
  </div>
  </td>
  <td width=15 valign=bottom>

  </td>
  <td width=65 valign=bottom>
  <div align=right>
  <hr size=1 width="90%" noshade color=gray align=right>
  </div>
  </td>
 </tr>
 <tr>
  <td width=344 valign=bottom>
  <p><font size="1">End
  of period</font></p>
  </td>
  <td width=19 valign=bottom>

  </td>
  <td width=65 valign=bottom>
  <p align=right><font size="1">153,040&nbsp;</font></p>
  </td>
  <td width=15 valign=bottom>

  </td>
  <td width=65 valign=bottom>

  </td>
  <td width=19 valign=bottom>

  </td>
  <td width=65 valign=bottom>
  <p align=right><font size="1">137,258&nbsp;</font></p>
  </td>
  <td width=15 valign=bottom>

  </td>
  <td width=65 valign=bottom>

  </td>
 </tr>
 <tr>
  <td width=344 valign=bottom>

  </td>
  <td width=19 valign=bottom>

  </td>
  <td width=65 valign=bottom>
  <div align=right>
  <hr size=1 width="90%" noshade color=gray align=right>
  </div>
  </td>
  <td width=15 valign=bottom>

  </td>
  <td width=65 valign=bottom>

  </td>
  <td width=19 valign=bottom>

  </td>
  <td width=65 valign=bottom>
  <div align=right>
  <hr size=1 width="90%" noshade color=gray align=right>
  </div>
  </td>
  <td width=15 valign=bottom>

  </td>
  <td width=65 valign=bottom>

  </td>
 </tr>
 <tr>
  <td width=344 valign=bottom>
  <p><font size="1">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; Comprehensive income</font></p>
  </td>
  <td width=19 valign=bottom>

  </td>
  <td width=65 valign=bottom>

  </td>
  <td width=15 valign=bottom>

  </td>
  <td width=65 valign=bottom>
  <p align=right><font size="1">89,318&nbsp;</font></p>
  </td>
  <td width=19 valign=bottom>

  </td>
  <td width=65 valign=bottom>

  </td>
  <td width=15 valign=bottom>

  </td>
  <td width=65 valign=bottom>
  <p align=right><font size="1">64,327&nbsp;&nbsp;</font></p>
  </td>
 </tr>
 <tr>
  <td width=344 valign=bottom>

  </td>
  <td width=19 valign=bottom>

  </td>
  <td width=65 valign=bottom>

  </td>
  <td width=15 valign=bottom>

  </td>
  <td width=65 valign=bottom>
  <p align=right>=======</p>
  </td>
  <td width=19 valign=bottom>

  </td>
  <td width=65 valign=bottom>

  </td>
  <td width=15 valign=bottom>

  </td>
  <td width=65 valign=bottom>
  <p align=right>=======</p>
  </td>
 </tr>
 <tr>
  <td width=344 valign=bottom>

  </td>
  <td width=19 valign=bottom>

  </td>
  <td width=65 valign=bottom>

  </td>
  <td width=15 valign=bottom>

  </td>
  <td width=65 valign=bottom>

  </td>
  <td width=19 valign=bottom>

  </td>
  <td width=65 valign=bottom>

  </td>
  <td width=15 valign=bottom>

  </td>
  <td width=65 valign=bottom>

  </td>
 </tr>
 <tr>
  <td width=344 valign=bottom>
  <p><b><font size="1">Treasury stock:</font></b></p>
  </td>
  <td width=19 valign=bottom>

  </td>
  <td width=65 valign=bottom>

  </td>
  <td width=15 valign=bottom>

  </td>
  <td width=65 valign=bottom>

  </td>
  <td width=19 valign=bottom>

  </td>
  <td width=65 valign=bottom>

  </td>
  <td width=15 valign=bottom>

  </td>
  <td width=65 valign=bottom>

  </td>
 </tr>
 <tr>
  <td width=344 valign=bottom>
  <p><font size="1">Beginning
  of year</font></p>
  </td>
  <td width=19 valign=bottom>

  </td>
  <td width=65 valign=bottom>
  <p align=right><font size="1">(197,792)</font></p>
  </td>
  <td width=15 valign=bottom>

  </td>
  <td width=65 valign=bottom>

  </td>
  <td width=19 valign=bottom>

  </td>
  <td width=65 valign=top>
  <p align=right><font size="1">(195,295)</font></p>
  </td>
  <td width=15 valign=bottom>

  </td>
  <td width=65 valign=bottom>

  </td>
 </tr>
 <tr>
  <td width=344 valign=bottom>
  <p><font size="1">Acquisition
  of treasury stock </font> </p>
  </td>
  <td width=19 valign=bottom>

  </td>
  <td width=65 valign=bottom>

  </td>
  <td width=15 valign=bottom>

  </td>
  <td width=65 valign=bottom>

  </td>
  <td width=19 valign=bottom>

  </td>
  <td width=65 valign=top>

  </td>
  <td width=15 valign=bottom>

  </td>
  <td width=65 valign=bottom>

  </td>
 </tr>
 <tr>
  <td width=344 valign=bottom>
  <p><font size="1">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; (shares 230,194-2004; 89,067-2003)</font></p>
  </td>
  <td width=19 valign=bottom>

  </td>
  <td width=65 valign=bottom>
  <p align=right><font size="1">(8,125)</font></p>
  </td>
  <td width=15 valign=bottom>

  </td>
  <td width=65 valign=bottom>

  </td>
  <td width=19 valign=bottom>

  </td>
  <td width=65 valign=top>
  <p align=right><font size="1">(2,163)</font></p>
  </td>
  <td width=15 valign=bottom>

  </td>
  <td width=65 valign=bottom>

  </td>
 </tr>
 <tr>
  <td width=344 valign=bottom>

  </td>
  <td width=19 valign=bottom>

  </td>
  <td width=65 valign=bottom>
  <div align=right>
  <hr size=1 width="90%" noshade color=gray align=right>
  </div>
  </td>
  <td width=15 valign=bottom>

  </td>
  <td width=65 valign=bottom>

  </td>
  <td width=19 valign=bottom>

  </td>
  <td width=65 valign=bottom>
  <div align=right>
  <hr size=1 width="90%" noshade color=gray align=right>
  </div>
  </td>
  <td width=15 valign=bottom>

  </td>
  <td width=65 valign=bottom>

  </td>
 </tr>
 <tr>
  <td width=344 valign=bottom>
  <p><font size="1">End
  of period</font></p>
  </td>
  <td width=19 valign=bottom>

  </td>
  <td width=65 valign=bottom>
  <p align=right><font size="1">(205,917)</font></p>
  </td>
  <td width=15 valign=bottom>

  </td>
  <td width=65 valign=bottom>

  </td>
  <td width=19 valign=bottom>

  </td>
  <td width=65 valign=bottom>
  <p align=right><font size="1">(197,458)</font></p>
  </td>
  <td width=15 valign=bottom>

  </td>
  <td width=65 valign=bottom>

  </td>
 </tr>
 <tr>
  <td width=344 valign=bottom>

  </td>
  <td width=19 valign=bottom>

  </td>
  <td width=65 valign=bottom>
  <div align=right>
  <hr size=1 width="90%" noshade color=gray align=right>
  </div>
  </td>
  <td width=15 valign=bottom>

  </td>
  <td width=65 valign=bottom>

  </td>
  <td width=19 valign=bottom>

  </td>
  <td width=65 valign=bottom>
  <div align=right>
  <hr size=1 width="90%" noshade color=gray align=right>
  </div>
  </td>
  <td width=15 valign=bottom>

  </td>
  <td width=65 valign=bottom>

  </td>
 </tr>
 <tr>
  <td width=344 valign=bottom>

  </td>
  <td width=19 valign=bottom>

  </td>
  <td width=65 valign=bottom>

  </td>
  <td width=15 valign=bottom>

  </td>
  <td width=65 valign=bottom>

  </td>
  <td width=19 valign=bottom>

  </td>
  <td width=65 valign=bottom>

  </td>
  <td width=15 valign=bottom>

  </td>
  <td width=65 valign=bottom>

  </td>
 </tr>
 <tr>
  <td width=344 valign=bottom>
  <p><b><font size="1">Unearned stock compensation and notes receivable
  from stock sales:</font></b></p>
  </td>
  <td width=19 valign=bottom>

  </td>
  <td width=65 valign=bottom>

  </td>
  <td width=15 valign=bottom>

  </td>
  <td width=65 valign=bottom>

  </td>
  <td width=19 valign=bottom>

  </td>
  <td width=65 valign=bottom>

  </td>
  <td width=15 valign=bottom>

  </td>
  <td width=65 valign=bottom>

  </td>
 </tr>
 <tr>
  <td width=344 valign=bottom>
  <p><font size="1">Beginning
  of year</font></p>
  </td>
  <td width=19 valign=bottom>

  </td>
  <td width=65 valign=bottom>
  <p align=right><font size="1">(9,502)</font></p>
  </td>
  <td width=15 valign=bottom>

  </td>
  <td width=65 valign=bottom>

  </td>
  <td width=19 valign=bottom>

  </td>
  <td width=65 valign=bottom>
  <p align=right><font size="1">(7,587)</font></p>
  </td>
  <td width=15 valign=bottom>

  </td>
  <td width=65 valign=bottom>

  </td>
 </tr>
 <tr>
  <td width=344 valign=bottom>
  <p><font size="1">Unearned
  stock compensation</font></p>
  </td>
  <td width=19 valign=bottom>

  </td>
  <td width=65 valign=bottom>
  <p align=right><font size="1">(11,543)</font></p>
  </td>
  <td width=15 valign=bottom>

  </td>
  <td width=65 valign=bottom>

  </td>
  <td width=19 valign=bottom>

  </td>
  <td width=65 valign=bottom>
  <p align=right><font size="1">(6,625)</font></p>
  </td>
  <td width=15 valign=bottom>

  </td>
  <td width=65 valign=bottom>

  </td>
 </tr>
 <tr>
  <td width=344 valign=bottom>
  <p><font size="1">Amortization
  of deferred compensation expense and</font></p>
  </td>
  <td width=19 valign=bottom>

  </td>
  <td width=65 valign=bottom>

  </td>
  <td width=15 valign=bottom>

  </td>
  <td width=65 valign=bottom>

  </td>
  <td width=19 valign=bottom>

  </td>
  <td width=65 valign=top>

  </td>
  <td width=15 valign=bottom>

  </td>
  <td width=65 valign=bottom>

  </td>
 </tr>
 <tr>
  <td width=344 valign=bottom>
  <p><font size="1">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; amounts received on notes</font></p>
  </td>
  <td width=19 valign=bottom>

  </td>
  <td width=65 valign=bottom>
  <p align=right><font size="1">5,300&nbsp;</font></p>
  </td>
  <td width=15 valign=bottom>

  </td>
  <td width=65 valign=bottom>

  </td>
  <td width=19 valign=bottom>

  </td>
  <td width=65 valign=top>
  <p align=right><font size="1">3,748&nbsp;</font></p>
  </td>
  <td width=15 valign=bottom>

  </td>
  <td width=65 valign=bottom>

  </td>
 </tr>
 <tr>
  <td width=344 valign=bottom>

  </td>
  <td width=19 valign=bottom>

  </td>
  <td width=65 valign=bottom>
  <div align=right>
  <hr size=1 width="90%" noshade color=gray align=right>
  </div>
  </td>
  <td width=15 valign=bottom>

  </td>
  <td width=65 valign=bottom>

  </td>
  <td width=19 valign=bottom>

  </td>
  <td width=65 valign=bottom>
  <div align=right>
  <hr size=1 width="90%" noshade color=gray align=right>
  </div>
  </td>
  <td width=15 valign=bottom>

  </td>
  <td width=65 valign=bottom>

  </td>
 </tr>
 <tr>
  <td width=344 valign=bottom>
  <p><font size="1">End
  of period</font></p>
  </td>
  <td width=19 valign=bottom>

  </td>
  <td width=65 valign=bottom>
  <p align=right><font size="1">(15,745)</font></p>
  </td>
  <td width=15 valign=bottom>

  </td>
  <td width=65 valign=bottom>

  </td>
  <td width=19 valign=bottom>

  </td>
  <td width=65 valign=bottom>
  <p align=right><font size="1">(10,464)</font></p>
  </td>
  <td width=15 valign=bottom>

  </td>
  <td width=65 valign=bottom>

  </td>
 </tr>
 <tr>
  <td width=344 valign=bottom>

  </td>
  <td width=19 valign=bottom>

  </td>
  <td width=65 valign=bottom>
  <div align=right>
  <hr size=1 width="90%" noshade color=gray align=right>
  </div>
  </td>
  <td width=15 valign=bottom>

  </td>
  <td width=65 valign=bottom>

  </td>
  <td width=19 valign=bottom>

  </td>
  <td width=65 valign=bottom>
  <div align=right>
  <hr size=1 width="90%" noshade color=gray align=right>
  </div>
  </td>
  <td width=15 valign=bottom>

  </td>
  <td width=65 valign=bottom>

  </td>
 </tr>
 <tr>
  <td width=344 valign=bottom>
  <p><font size="1">Total
  stockholders' equity</font></p>
  </td>
  <td width=19 valign=bottom>
  <p align=right><font size="1">$</font></p>
  </td>
  <td width=65 valign=bottom>
  <p align=right><font size="1">834,223&nbsp;</font></p>
  </td>
  <td width=15 valign=bottom>

  </td>
  <td width=65 valign=bottom>

  </td>
  <td width=19 valign=bottom>

  </td>
  <td width=65 valign=bottom>
  <p align=right><font size="1">714,701&nbsp;</font></p>
  </td>
  <td width=15 valign=bottom>

  </td>
  <td width=65 valign=bottom>

  </td>
 </tr>
 <tr>
  <td width=344 valign=bottom>

  </td>
  <td width=19 valign=bottom>

  </td>
  <td width=65 valign=bottom>
  <p align=right>=======</p>
  </td>
  <td width=15 valign=bottom>

  </td>
  <td width=65 valign=bottom>

  </td>
  <td width=19 valign=bottom>

  </td>
  <td width=65 valign=bottom>
  <p align=right>=======</p>
  </td>
  <td width=15 valign=bottom>

  </td>
  <td width=65 valign=bottom>

  </td>
 </tr>
</table>

</div>



<div align=center>

<table border=0 cellspacing=0 cellpadding=0 width=699>
 <tr>
  <td width=699 valign=bottom>
  <p><font size="1"><br>
  The Company 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.</font></p>
  </td>
 </tr>
 <tr>
  <td width=699 valign=bottom>

  &nbsp;</td>
 </tr>
 <tr>
  <td width=699 valign=bottom>
  <p><font size="1">See accompanying
  notes to unaudited interim consolidated financial statements.</font></p>
  </td>
 </tr>
</table>

<p><font size="2">4</font></div><hr color="#000080"><P STYLE="page-break-after: always"></P>
<br
clear=all>




<div align=center>

<table border=0 cellspacing=0 cellpadding=0 width=675>
 <tr>
  <td width=675 colspan=3 valign=bottom>

  <div align=center>
  <hr size=1 width="100%" noshade color=black align=center>
  </div>
  </td>
 </tr>
 <tr>
  <td width=520 valign=top>
  <p><b><font size="1">SELECTIVE
  INSURANCE GROUP, INC</font></b><font size="1">.</font></p>
  </td>
  <td width=155 colspan=2 valign=top>
  <p align=center><b><font size="1">Unaudited,</font></b></p>
  </td>
 </tr>
 <tr>
  <td width=520 valign=top>
  <p><i><font size="1">Consolidated
  Statements of Cash Flows</font></i></p>
  </td>
  <td width=155 colspan=2 valign=top>
  <p align=center><b><font size="1">Nine months ended</font></b></p>
  </td>
 </tr>
 <tr>
  <td width=520 valign=top>

  </td>
  <td width=155 colspan=2 valign=top>
  <p align=center><b><font size="1">September 30,</font></b></p>
  </td>
 </tr>
 <tr>
  <td width=520 valign=bottom>
  <p><font size="1">(in thousands)</font></p>
  </td>
  <td width=82 valign=bottom>
  <p align=center><b><font size="1">2004</font></b></p>
  </td>
  <td width=73 valign=bottom>
  <p align=center><b><font size="1">2003</font></b></p>
  </td>
 </tr>
 <tr>
  <td width=675 colspan=3 valign=bottom>
  <div align=center>
  <hr size=1 width="100%" noshade color=black align=center>
  </div>
  </td>
 </tr>
</table>

</div>



<div align=center>

<table border=0 cellspacing=0 cellpadding=0>
 <tr>
  <td width=518 valign=bottom>
  <p><b><font size="1">OPERATING
  ACTIVITIES</font></b></p>
  </td>
  <td width=19 valign=bottom>

  </td>
  <td width=58 valign=bottom>

  </td>
  <td width=19 valign=bottom>

  </td>
  <td width=59 valign=bottom>

  </td>
 </tr>
 <tr>
  <td width=518 valign=bottom>
  <p><font size="1">Net income</font></p>
  </td>
  <td width=19 valign=bottom>
  <p align=right><font size="1">$</font></p>
  </td>
  <td width=58 valign=bottom>
  <p align=right><font size="1">84,730&nbsp;</font></p>
  </td>
  <td width=19 valign=bottom>

  </td>
  <td width=59 valign=bottom>
  <p align=right><font size="1">42,503&nbsp;</font></p>
  </td>
 </tr>
 <tr>
  <td width=518 valign=bottom>

  </td>
  <td width=19 valign=bottom>

  </td>
  <td width=58 valign=bottom>
  <div align=right>
  <hr size=1 width="90%" noshade color=gray align=right>
  </div>
  </td>
  <td width=19 valign=bottom>

  </td>
  <td width=59 valign=bottom>
  <div align=right>
  <hr size=1 width="90%" noshade color=gray align=right>
  </div>
  </td>
 </tr>
 <tr>
  <td width=518 valign=bottom>
  <p><font size="1">Adjustments to
  reconcile net income to net cash provided by operating activities:</font></p>
  </td>
  <td width=19 valign=bottom>

  </td>
  <td width=58 valign=bottom>

  </td>
  <td width=19 valign=bottom>

  </td>
  <td width=59 valign=bottom>

  </td>
 </tr>
 <tr>
  <td width=518 valign=bottom>
  <p><font size="1">Increase in
  reserves for losses and loss expenses, net of reinsurance recoverable on
  unpaid losses and loss expenses</font></p>
  </td>
  <td width=19 valign=bottom>

  </td>
  <td width=58 valign=top>
  <p align=right><font size="1">163,840&nbsp;</font></p>
  </td>
  <td width=19 valign=bottom>

  </td>
  <td width=59 valign=bottom>
  <p align=right><font size="1">121,180&nbsp;</font></p>
  </td>
 </tr>
 <tr>
  <td width=518 valign=bottom>
  <p><font size="1">Increase in
  unearned premiums, net of prepaid reinsurance and advance premiums</font></p>
  </td>
  <td width=19 valign=bottom>

  </td>
  <td width=58 valign=top>
  <p align=right><font size="1">101,570&nbsp;</font></p>
  </td>
  <td width=19 valign=bottom>

  </td>
  <td width=59 valign=bottom>
  <p align=right><font size="1">116,198&nbsp;</font></p>
  </td>
 </tr>
 <tr>
  <td width=518 valign=bottom>
  <p><font size="1">Decrease
  (increase) in federal income tax recoverable</font></p>
  </td>
  <td width=19 valign=bottom>

  </td>
  <td width=58 valign=top>
  <p align=right><font size="1">(5,786)</font></p>
  </td>
  <td width=19 valign=bottom>

  </td>
  <td width=59 valign=bottom>
  <p align=right><font size="1">5,761&nbsp;</font></p>
  </td>
 </tr>
 <tr>
  <td width=518 valign=bottom>
  <p><font size="1">Depreciation and
  amortization</font></p>
  </td>
  <td width=19 valign=bottom>

  </td>
  <td width=58 valign=top>
  <p align=right><font size="1">12,045&nbsp;</font></p>
  </td>
  <td width=19 valign=bottom>

  </td>
  <td width=59 valign=bottom>
  <p align=right><font size="1">7,806&nbsp;</font></p>
  </td>
 </tr>
 <tr>
  <td width=518 valign=bottom>
  <p><font size="1">Amortization of
  deferred compensation</font></p>
  </td>
  <td width=19 valign=bottom>

  </td>
  <td width=58 valign=top>
  <p align=right><font size="1">5,245&nbsp;</font></p>
  </td>
  <td width=19 valign=bottom>

  </td>
  <td width=59 valign=bottom>
  <p align=right><font size="1">3,693&nbsp;</font></p>
  </td>
 </tr>
 <tr>
  <td width=518 valign=bottom>
  <p><font size="1">Gain on sale of
  real estate</font></p>
  </td>
  <td width=19 valign=bottom>

  </td>
  <td width=58 valign=top>
  <p align=right><font size="1">(183)</font></p>
  </td>
  <td width=19 valign=bottom>

  </td>
  <td width=59 valign=bottom>
  <p align=right><font size="1">-&nbsp;</font></p>
  </td>
 </tr>
 <tr>
  <td width=518 valign=bottom>
  <p><font size="1">Increase in
  premiums receivables</font></p>
  </td>
  <td width=19 valign=bottom>

  </td>
  <td width=58 valign=top>
  <p align=right><font size="1">(74,001)</font></p>
  </td>
  <td width=19 valign=bottom>

  </td>
  <td width=59 valign=top>
  <p align=right><font size="1">(80,044)</font></p>
  </td>
 </tr>
 <tr>
  <td width=518 valign=bottom>
  <p><font size="1">Increase in
  other trade receivables</font></p>
  </td>
  <td width=19 valign=bottom>

  </td>
  <td width=58 valign=top>
  <p align=right><font size="1">(1,970)</font></p>
  </td>
  <td width=19 valign=bottom>

  </td>
  <td width=59 valign=bottom>
  <p align=right><font size="1">(1,474)</font></p>
  </td>
 </tr>
 <tr>
  <td width=518 valign=bottom>
  <p><font size="1">Increase in
  deferred policy acquisition costs</font></p>
  </td>
  <td width=19 valign=bottom>

  </td>
  <td width=58 valign=top>
  <p align=right><font size="1">(22,885)</font></p>
  </td>
  <td width=19 valign=bottom>

  </td>
  <td width=59 valign=bottom>
  <p align=right><font size="1">(25,611)</font></p>
  </td>
 </tr>
 <tr>
  <td width=518 valign=bottom>
  <p><font size="1">Increase
  (decrease) in interest and dividends due or accrued</font></p>
  </td>
  <td width=19 valign=bottom>

  </td>
  <td width=58 valign=top>
  <p align=right><font size="1">(556)</font></p>
  </td>
  <td width=19 valign=bottom>

  </td>
  <td width=59 valign=bottom>
  <p align=right><font size="1">456&nbsp;</font></p>
  </td>
 </tr>
 <tr>
  <td width=518 valign=bottom>
  <p><font size="1">Increase in
  reinsurance recoverable on paid losses and loss expenses</font></p>
  </td>
  <td width=19 valign=bottom>

  </td>
  <td width=58 valign=top>
  <p align=right><font size="1">500&nbsp;</font></p>
  </td>
  <td width=19 valign=bottom>

  </td>
  <td width=59 valign=bottom>
  <p align=right><font size="1">628&nbsp;</font></p>
  </td>
 </tr>
 <tr>
  <td width=518 valign=bottom>
  <p><font size="1">Net realized
  gains</font></p>
  </td>
  <td width=19 valign=bottom>

  </td>
  <td width=58 valign=top>
  <p align=right><font size="1">(7,131)</font></p>
  </td>
  <td width=19 valign=bottom>

  </td>
  <td width=59 valign=bottom>
  <p align=right><font size="1">(8,373)</font></p>
  </td>
 </tr>
 <tr>
  <td width=518 valign=bottom>
  <p><font size="1">Increase in
  accrued salaries and benefits</font></p>
  </td>
  <td width=19 valign=bottom>

  </td>
  <td width=58 valign=bottom>
  <p align=right><font size="1">4,603&nbsp;</font></p>
  </td>
  <td width=19 valign=bottom>

  </td>
  <td width=59 valign=bottom>
  <p align=right><font size="1">7,636&nbsp;</font></p>
  </td>
 </tr>
 <tr>
  <td width=518 valign=bottom>
  <p><font size="1">Increase in
  accrued insurance expenses</font></p>
  </td>
  <td width=19 valign=bottom>

  </td>
  <td width=58 valign=bottom>
  <p align=right><font size="1">2,176&nbsp;</font></p>
  </td>
  <td width=19 valign=bottom>

  </td>
  <td width=59 valign=bottom>
  <p align=right><font size="1">8,470&nbsp;</font></p>
  </td>
 </tr>
 <tr>
  <td width=518 valign=bottom>
  <p><font size="1">Other, net</font></p>
  </td>
  <td width=19 valign=bottom>

  </td>
  <td width=58 valign=bottom>
  <p align=right><font size="1">3,972&nbsp;</font></p>
  </td>
  <td width=19 valign=bottom>

  </td>
  <td width=59 valign=bottom>
  <p align=right><font size="1">8,718&nbsp;</font></p>
  </td>
 </tr>
 <tr>
  <td width=518 valign=bottom>

  </td>
  <td width=19 valign=bottom>

  </td>
  <td width=58 valign=bottom>
  <div align=right>
  <hr size=1 width="90%" noshade color=gray align=right>
  </div>
  </td>
  <td width=19 valign=bottom>

  </td>
  <td width=59 valign=bottom>
  <div align=right>
  <hr size=1 width="90%" noshade color=gray align=right>
  </div>
  </td>
 </tr>
 <tr>
  <td width=518 valign=bottom>
  <p><font size="1">Net adjustments</font></p>
  </td>
  <td width=19 valign=bottom>

  </td>
  <td width=58 valign=bottom>
  <p align=right><font size="1">181,439&nbsp;</font></p>
  </td>
  <td width=19 valign=bottom>

  </td>
  <td width=59 valign=bottom>
  <p align=right><font size="1">165,044&nbsp;</font></p>
  </td>
 </tr>
 <tr>
  <td width=518 valign=bottom>

  </td>
  <td width=19 valign=bottom>

  </td>
  <td width=58 valign=bottom>
  <div align=right>
  <hr size=1 width="90%" noshade color=gray align=right>
  </div>
  </td>
  <td width=19 valign=bottom>

  </td>
  <td width=59 valign=bottom>
  <div align=right>
  <hr size=1 width="90%" noshade color=gray align=right>
  </div>
  </td>
 </tr>
 <tr>
  <td width=518 valign=bottom>
  <p><font size="1">Net cash
  provided by operating activities</font></p>
  </td>
  <td width=19 valign=bottom>

  </td>
  <td width=58 valign=bottom>
  <p align=right><font size="1">266,169&nbsp;</font></p>
  </td>
  <td width=19 valign=bottom>

  </td>
  <td width=59 valign=bottom>
  <p align=right><font size="1">207,547&nbsp;</font></p>
  </td>
 </tr>
 <tr>
  <td width=518 valign=bottom>

  </td>
  <td width=19 valign=bottom>

  </td>
  <td width=58 valign=bottom>
  <div align=right>
  <hr size=1 width="90%" noshade color=gray align=right>
  </div>
  </td>
  <td width=19 valign=bottom>

  </td>
  <td width=59 valign=bottom>
  <div align=right>
  <hr size=1 width="90%" noshade color=gray align=right>
  </div>
  </td>
 </tr>
 <tr>
  <td width=518 valign=bottom>
  <p><b><font size="1">INVESTING
  ACTIVITIES</font></b></p>
  </td>
  <td width=19 valign=bottom>

  </td>
  <td width=58 valign=bottom>

  </td>
  <td width=19 valign=bottom>

  </td>
  <td width=59 valign=bottom>

  </td>
 </tr>
 <tr>
  <td width=518 valign=bottom>
  <p><font size="1">Purchase of debt
  securities, available-for-sale</font></p>
  </td>
  <td width=19 valign=bottom>

  </td>
  <td width=58 valign=top>
  <p align=right><font size="1">(536,648)</font></p>
  </td>
  <td width=19 valign=bottom>

  </td>
  <td width=59 valign=bottom>
  <p align=right><font size="1">(445,885)</font></p>
  </td>
 </tr>
 <tr>
  <td width=518 valign=bottom>
  <p><font size="1">Purchase of
  equity securities, available-for-sale</font></p>
  </td>
  <td width=19 valign=bottom>

  </td>
  <td width=58 valign=top>
  <p align=right><font size="1">(38,165)</font></p>
  </td>
  <td width=19 valign=bottom>

  </td>
  <td width=59 valign=bottom>
  <p align=right><font size="1">(36,379)</font></p>
  </td>
 </tr>
 <tr>
  <td width=518 valign=bottom>
  <p><font size="1">Purchase of
  other investments</font></p>
  </td>
  <td width=19 valign=bottom>

  </td>
  <td width=58 valign=top>
  <p align=right><font size="1">(5,969)</font></p>
  </td>
  <td width=19 valign=bottom>

  </td>
  <td width=59 valign=bottom>
  <p align=right><font size="1">(7,366)</font></p>
  </td>
 </tr>
 <tr>
  <td width=518 valign=bottom>
  <p><font size="1">Purchase and
  adjustments of subsidiaries acquired (net of cash equivalents acquired of
  $4,890 in 2004)</font></p>
  </td>
  <td width=19 valign=bottom>

  </td>
  <td width=58 valign=top>
  <p align=right><font size="1">(407)</font></p>
  </td>
  <td width=19 valign=bottom>

  </td>
  <td width=59 valign=bottom>
  <p align=right><font size="1">(804)</font></p>
  </td>
 </tr>
 <tr>
  <td width=518 valign=bottom>
  <p><font size="1">Sale of debt
  securities, available-for-sale</font></p>
  </td>
  <td width=19 valign=bottom>

  </td>
  <td width=58 valign=top>
  <p align=right><font size="1">181,313&nbsp;</font></p>
  </td>
  <td width=19 valign=bottom>

  </td>
  <td width=59 valign=bottom>
  <p align=right><font size="1">174,165&nbsp;</font></p>
  </td>
 </tr>
 <tr>
  <td width=518 valign=bottom>
  <p><font size="1">Redemption and
  maturities of debt securities, held-to-maturity</font></p>
  </td>
  <td width=19 valign=bottom>

  </td>
  <td width=58 valign=top>
  <p align=right><font size="1">25,027&nbsp;</font></p>
  </td>
  <td width=19 valign=bottom>

  </td>
  <td width=59 valign=bottom>
  <p align=right><font size="1">30,068&nbsp;</font></p>
  </td>
 </tr>
 <tr>
  <td width=518 valign=bottom>
  <p><font size="1">Redemption and
  maturities of debt securities, available-for-sale</font></p>
  </td>
  <td width=19 valign=bottom>

  </td>
  <td width=58 valign=top>
  <p align=right><font size="1">150,022&nbsp;</font></p>
  </td>
  <td width=19 valign=bottom>

  </td>
  <td width=59 valign=bottom>
  <p align=right><font size="1">118,142&nbsp;</font></p>
  </td>
 </tr>
 <tr>
  <td width=518 valign=bottom>
  <p><font size="1">Sale of equity
  securities, available-for-sale</font></p>
  </td>
  <td width=19 valign=bottom>

  </td>
  <td width=58 valign=top>
  <p align=right><font size="1">33,718&nbsp;</font></p>
  </td>
  <td width=19 valign=bottom>

  </td>
  <td width=59 valign=bottom>
  <p align=right><font size="1">6,834&nbsp;</font></p>
  </td>
 </tr>
 <tr>
  <td width=518 valign=bottom>
  <p><font size="1">Proceeds from
  other investments </font> </p>
  </td>
  <td width=19 valign=bottom>

  </td>
  <td width=58 valign=top>
  <p align=right><font size="1">6,013&nbsp;</font></p>
  </td>
  <td width=19 valign=bottom>

  </td>
  <td width=59 valign=bottom>
  <p align=right><font size="1">1,066&nbsp;</font></p>
  </td>
 </tr>
 <tr>
  <td width=518 valign=bottom>
  <p><font size="1">Net additions to
  real estate, furniture, equipment and software development</font></p>
  </td>
  <td width=19 valign=bottom>

  </td>
  <td width=58 valign=top>
  <p align=right><font size="1">(7,951)</font></p>
  </td>
  <td width=19 valign=bottom>

  </td>
  <td width=59 valign=top>
  <p align=right><font size="1">(7,203)</font></p>
  </td>
 </tr>
 <tr>
  <td width=518 valign=bottom>

  </td>
  <td width=19 valign=bottom>

  </td>
  <td width=58 valign=bottom>
  <div align=right>
  <hr size=1 width="90%" noshade color=gray align=right>
  </div>
  </td>
  <td width=19 valign=bottom>

  </td>
  <td width=59 valign=bottom>
  <div align=right>
  <hr size=1 width="90%" noshade color=gray align=right>
  </div>
  </td>
 </tr>
 <tr>
  <td width=518 valign=bottom>
  <p><font size="1">Net cash used in
  investing activities</font></p>
  </td>
  <td width=19 valign=bottom>

  </td>
  <td width=58 valign=bottom>
  <p align=right><font size="1">(193,047)</font></p>
  </td>
  <td width=19 valign=bottom>

  </td>
  <td width=59 valign=bottom>
  <p align=right><font size="1">(167,362)</font></p>
  </td>
 </tr>
 <tr>
  <td width=518 valign=bottom>

  </td>
  <td width=19 valign=bottom>

  </td>
  <td width=58 valign=bottom>
  <div align=right>
  <hr size=1 width="90%" noshade color=gray align=right>
  </div>
  </td>
  <td width=19 valign=bottom>

  </td>
  <td width=59 valign=bottom>
  <div align=right>
  <hr size=1 width="90%" noshade color=gray align=right>
  </div>
  </td>
 </tr>
 <tr>
  <td width=518 valign=bottom>
  <p><b><font size="1">FINANCING
  ACTIVITIES</font></b></p>
  </td>
  <td width=19 valign=bottom>

  </td>
  <td width=58 valign=bottom>

  </td>
  <td width=19 valign=bottom>

  </td>
  <td width=59 valign=bottom>

  </td>
 </tr>
 <tr>
  <td width=518 valign=bottom>
  <p><font size="1">Dividends to
  stockholders</font></p>
  </td>
  <td width=19 valign=bottom>

  </td>
  <td width=58 valign=bottom>
  <p align=right><font size="1">(12,603)</font></p>
  </td>
  <td width=19 valign=bottom>

  </td>
  <td width=59 valign=bottom>
  <p align=right><font size="1">(10,851)</font></p>
  </td>
 </tr>
 <tr>
  <td width=518 valign=bottom>
  <p><font size="1">Principal
  payments of notes payable</font></p>
  </td>
  <td width=19 valign=bottom>

  </td>
  <td width=58 valign=bottom>
  <p align=right><font size="1">(24,000)</font></p>
  </td>
  <td width=19 valign=bottom>

  </td>
  <td width=59 valign=bottom>
  <p align=right><font size="1">(24,000)</font></p>
  </td>
 </tr>
 <tr>
  <td width=518 valign=bottom>
  <p><font size="1">Acquisition of
  treasury stock</font></p>
  </td>
  <td width=19 valign=bottom>

  </td>
  <td width=58 valign=top>
  <p align=right><font size="1">(8,125)</font></p>
  </td>
  <td width=19 valign=bottom>

  </td>
  <td width=59 valign=bottom>
  <p align=right><font size="1">(2,163)</font></p>
  </td>
 </tr>
 <tr>
  <td width=518 valign=bottom>
  <p><font size="1">Net proceeds
  from stock purchase and compensation plans</font></p>
  </td>
  <td width=19 valign=bottom>

  </td>
  <td width=58 valign=top>
  <p align=right><font size="1">8,001&nbsp;</font></p>
  </td>
  <td width=19 valign=bottom>

  </td>
  <td width=59 valign=top>
  <p align=right><font size="1">7,419&nbsp;</font></p>
  </td>
 </tr>
 <tr>
  <td width=518 valign=bottom>
  <p><font size="1">Proceeds
  received on notes receivable from stock sales</font></p>
  </td>
  <td width=19 valign=bottom>

  </td>
  <td width=58 valign=top>
  <p align=right><font size="1">55&nbsp;</font></p>
  </td>
  <td width=19 valign=bottom>

  </td>
  <td width=59 valign=top>
  <p align=right><font size="1">55&nbsp;</font></p>
  </td>
 </tr>
 <tr>
  <td width=518 valign=bottom>

  </td>
  <td width=19 valign=bottom>

  </td>
  <td width=58 valign=bottom>
  <div align=right>
  <hr size=1 width="90%" noshade color=gray align=right>
  </div>
  </td>
  <td width=19 valign=bottom>

  </td>
  <td width=59 valign=bottom>
  <div align=right>
  <hr size=1 width="90%" noshade color=gray align=right>
  </div>
  </td>
 </tr>
 <tr>
  <td width=518 valign=bottom>
  <p><font size="1">Net cash used in
  financing activities</font></p>
  </td>
  <td width=19 valign=bottom>

  </td>
  <td width=58 valign=bottom>
  <p align=right><font size="1">(36,672)</font></p>
  </td>
  <td width=19 valign=bottom>

  </td>
  <td width=59 valign=bottom>
  <p align=right><font size="1">(29,540)</font></p>
  </td>
 </tr>
 <tr>
  <td width=518 valign=bottom>

  </td>
  <td width=19 valign=bottom>

  </td>
  <td width=58 valign=bottom>
  <div align=right>
  <hr size=1 width="90%" noshade color=gray align=right>
  </div>
  </td>
  <td width=19 valign=bottom>

  </td>
  <td width=59 valign=bottom>
  <div align=right>
  <hr size=1 width="90%" noshade color=gray align=right>
  </div>
  </td>
 </tr>
 <tr>
  <td width=518 valign=bottom>
  <p><font size="1">Net increase in
  short-term investments and cash</font></p>
  </td>
  <td width=19 valign=bottom>

  </td>
  <td width=58 valign=top>
  <p align=right><font size="1">36,450&nbsp;</font></p>
  </td>
  <td width=19 valign=bottom>

  </td>
  <td width=59 valign=top>
  <p align=right><font size="1">10,645&nbsp;</font></p>
  </td>
 </tr>
 <tr>
  <td width=518 valign=bottom>
  <p><font size="1">Short-term
  investments and cash at beginning of year</font></p>
  </td>
  <td width=19 valign=bottom>

  </td>
  <td width=58 valign=top>
  <p align=right><font size="1">23,055&nbsp;</font></p>
  </td>
  <td width=19 valign=bottom>

  </td>
  <td width=59 valign=top>
  <p align=right><font size="1">26,928&nbsp;</font></p>
  </td>
 </tr>
 <tr>
  <td width=518 valign=bottom>

  </td>
  <td width=19 valign=bottom>

  </td>
  <td width=58 valign=bottom>
  <div align=right>
  <hr size=1 width="90%" noshade color=gray align=right>
  </div>
  </td>
  <td width=19 valign=bottom>

  </td>
  <td width=59 valign=bottom>
  <div align=right>
  <hr size=1 width="90%" noshade color=gray align=right>
  </div>
  </td>
 </tr>
 <tr>
  <td width=518 valign=bottom>
  <p><font size="1">Short-term
  investments and cash at end of period</font></p>
  </td>
  <td width=19 valign=bottom align="right">
  <p><font size="1">$</font></p>
  </td>
  <td width=58 valign=bottom>
  <p align=right><font size="1">59,505&nbsp;</font></p>
  </td>
  <td width=19 valign=bottom>

  </td>
  <td width=59 valign=bottom>
  <p align=right><font size="1">37,573&nbsp;</font></p>
  </td>
 </tr>
 <tr>
  <td width=518 valign=bottom>

  </td>
  <td width=19 valign=bottom align="right">

  </td>
  <td width=58 valign=bottom>
  <p align=right>======</p>
  </td>
  <td width=19 valign=bottom>

  </td>
  <td width=59 valign=bottom>
  <p align=right>======</p>
  </td>
 </tr>
 <tr>
  <td width=518 valign=bottom>
  <p><b><font size="1">SUPPLEMENTAL
  DISCLOSURES OF CASH FLOWS INFORMATION</font></b></p>
  </td>
  <td width=19 valign=bottom align="right">

  </td>
  <td width=58 valign=bottom>

  </td>
  <td width=19 valign=bottom>

  </td>
  <td width=59 valign=bottom>

  </td>
 </tr>
 <tr>
  <td width=518 valign=bottom>
  <p><b><font size="1">Cash paid during the period for:</font></b></p>
  </td>
  <td width=19 valign=bottom align="right">

  </td>
  <td width=58 valign=bottom>

  </td>
  <td width=19 valign=bottom>

  </td>
  <td width=59 valign=bottom>

  </td>
 </tr>
 <tr>
  <td width=518 valign=bottom>
  <p><font size="1">Interest</font></p>
  </td>
  <td width=19 valign=bottom align="right">
  <p><font size="1">$</font></p>
  </td>
  <td width=58 valign=top>
  <p align=right><font size="1">11,945&nbsp;</font></p>
  </td>
  <td width=19 valign=bottom>

  </td>
  <td width=59 valign=bottom>
  <p align=right><font size="1">13,738&nbsp;</font></p>
  </td>
 </tr>
 <tr>
  <td width=518 valign=bottom>
  <p><font size="1">Federal income
  tax</font></p>
  </td>
  <td width=19 valign=bottom>

  </td>
  <td width=58 valign=top>
  <p align=right><font size="1">34,850&nbsp;</font></p>
  </td>
  <td width=19 valign=bottom>

  </td>
  <td width=59 valign=bottom>
  <p align=right><font size="1">6,371&nbsp;</font></p>
  </td>
 </tr>
 <tr>
  <td width=518 valign=bottom>
  <p><b><font size="1">Supplemental schedule of non-cash financing activity:</font></b></p>
  </td>
  <td width=19 valign=bottom>

  </td>
  <td width=58 valign=top>

  </td>
  <td width=19 valign=bottom>

  </td>
  <td width=59 valign=bottom>

  </td>
 </tr>
 <tr>
  <td width=518 valign=bottom>
  <p><font size="1">Conversion of
  convertible subordinated debentures</font></p>
  </td>
  <td width=19 valign=bottom>

  </td>
  <td width=58 valign=top>
  <p align=right><font size="1">153&nbsp;</font></p>
  </td>
  <td width=19 valign=bottom>

  </td>
  <td width=59 valign=bottom>
  <p align=right><font size="1">117&nbsp;</font></p>
  </td>
 </tr>
 <tr>
  <td width=518 valign=bottom>
  <p><font size="1">Equity transactions</font></p>
  </td>
  <td width=19 valign=bottom>

  </td>
  <td width=58 valign=top>
  <p align=right><font size="1">2,395&nbsp;</font></p>
  </td>
  <td width=19 valign=bottom>

  </td>
  <td width=59 valign=bottom>
  <p align=right><font size="1">-&nbsp;&nbsp;</font></p>
  </td>
 </tr>
 <tr>
  <td width=518 valign=bottom>
  <p><font size="1">Unearned stock
  compensation</font></p>
  </td>
  <td width=19 valign=bottom>

  </td>
  <td width=58 valign=top>
  <p align=right><font size="1">11,543&nbsp;</font></p>
  </td>
  <td width=19 valign=bottom>

  </td>
  <td width=59 valign=bottom>
  <p align=right><font size="1">6,625&nbsp;</font></p>
  </td>
 </tr>
 <tr>
  <td width=518 valign=bottom>

  </td>
  <td width=19 valign=bottom>

  </td>
  <td width=58 valign=bottom>

  </td>
  <td width=19 valign=bottom>

  </td>
  <td width=59 valign=bottom>

  </td>
 </tr>
 <tr>
  <td width=518 valign=bottom>
  <p><font size="1"><br>
  See accompanying
  notes to unaudited interim consolidated financial statements.</font></p>
  </td>
  <td width=19 valign=bottom>

  </td>
  <td width=58 valign=bottom>

  </td>
  <td width=19 valign=bottom>

  </td>
  <td width=59 valign=bottom>

  </td>
 </tr>
</table>

</div>

<p align="center"><font size="2">5</font></p>

<b><hr color="#000080"><P STYLE="page-break-after: always"></P>
<p style="margin-top: 0; margin-bottom: 0"><font size="2"><br clear=all>
NOTES TO
UNAUDITED INTERIM CONSOLIDATED FINANCIAL STATEMENTS<br>
<br>1.&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; Basis of
Presentation<br>
</font>
</b><font size="2">The interim consolidated financial statements, which have been prepared in
accordance with accounting principles generally accepted in the United States
of America (GAAP) are unaudited, but reflect all adjustments which, in the
opinion of management, are necessary to provide a fair statement of the results
of Selective Insurance Group, Inc. and its consolidated subsidiaries for the
interim periods presented.&nbsp; References
herein to &quot;Selective&quot; or &quot;Company&quot; are to Selective Insurance Group, Inc. and
its subsidiaries. &nbsp;All such adjustments
are of a normal recurring nature.&nbsp; The
results of operations for any interim period are not necessarily indicative of
results for a full year.&nbsp; These interim consolidated financial
statements cover the third quarters ended September 30, 2004 (Third Quarter
2004) and September 30, 2003 (Third Quarter 2003) as well as the nine-month
periods ended September 30, 2004 (Nine Months 2004) and September 30, 2003
(Nine Months 2003).&nbsp; This document should
be read in conjunction with the consolidated financial statements and notes
thereto contained in our Annual Report on Form 10-K for the year ended December
31, 2003.<br>
<br>
<b>2.&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; Reclassifications<br></b>Certain amounts in the Company's prior year interim consolidated
financial statements and related footnotes have been reclassified to conform to
the 2004 presentation.&nbsp; Such
reclassification had no effect on the Company's net income or stockholders'
equity.<br>
<br>
<b>3.&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; Current and
Pending Accounting Pronouncements<br>
</b>In December 2003, the Financial Accounting Standards Board (FASB) issued
revised FASB Interpretation No. 46, &quot;Consolidation of Variable Interest
Entities&quot; (FIN 46R), which is a revised interpretation of Accounting Research
Bulletin No. 51, &quot;Consolidated Financial Statements&quot;. FIN 46R is required to be
applied starting with fiscal years beginning after December 15, 2003. FIN 46R
requires the consolidation of a variable interest entity (VIE) by an enterprise
if that enterprise either absorbs a majority of the VIE's expected losses or
receives a majority of the VIE's expected residual returns as a result of
ownership, contractual or other financial interests in the VIE.&nbsp; Prior to FIN 46R, entities were generally
consolidated by an enterprise that had a controlling financial interest through
ownership of a majority voting interest in the entity. FIN 46R defines a VIE as
an entity in which equity investors do not have the characteristics of a
controlling financial interest nor do they have sufficient equity at risk for
the entity to finance its activities without additional subordinated financial
support.&nbsp; The Company has no interests in
VIEs or potential VIEs commonly referred to as special-purpose entities and as
such, the adoption of this revised interpretation on January 1, 2004 has had no
effect on the Company's results of operations or financial condition. <br>
<br>
In March 2004, the Emerging Issues Task Force (EITF or Task Force) of the FASB
reached a consensus on Issue No. 03-01, &quot;The Meaning of Other-Than-Temporary
Impairment and Its Application to Certain Investments.&quot;&nbsp;&nbsp; This consensus provides recognition and
measurement guidance for determining when an investment is
other-than-temporarily impaired, specifically when the investor has the ability
and intent to hold an investment until recovery.&nbsp; When originally issued, this guidance was to
be effective for reporting periods beginning after June 15, 2004. In September
2004, the FASB decided to delay the effective date of the requirement to record
impairment losses caused by the effect of increases in interest rates or sector
spreads on debt securities subject to paragraph 16 of EITF 03-01 and to exclude
minor impairments from the requirement as well. In addition, the scope of the
Task Force's consensus, which was limited to certain debt securities, now
includes all types of securities within the scope of EITF 03-01. The disclosure
requirements as presently prescribed by EITF 03-01 and SEC Staff Accounting
Bulletin No. 59, &quot;Accounting for Noncurrent Marketable Equity Securities&quot;
remain in effect for public companies until new guidance is issued and becomes
effective. Until such guidance is determined, the Company is unable to
determine the impact any such guidance would have on its results of operations
or financial condition.&nbsp; The adoption of
the proposed accounting literature could cause the Company: (i) to recognize
impairment losses in the Consolidated Statements of Income that are not
recognized currently; (ii) to recognize impairment losses, especially those due
to increases in interest rates, in earlier periods; and (iii) alter its
recognition of investment income on impaired securities.&nbsp; Such an impact will likely increase earnings
volatility in future periods.&nbsp; However,
since fluctuations in the fair value for available-for-sale-securities are
already recorded in Accumulated Other Comprehensive Income, adoption of this
standard in any form is not expected to have a significant impact on
stockholders' equity. Further information on the Company's investments is
provided in Item 2. &quot;Management's Discussion and Analysis of Financial
Condition and Results of Operations,&quot; in this report beginning on page 23.<br>
</font></p>
<p style="margin-top: 0; margin-bottom: 0" align="center">&nbsp;</p>
<p style="margin-top: 0; margin-bottom: 0" align="center"><font size="2">6</font></p>
<hr color="#000080"><P STYLE="page-break-after: always"></P>
<p style="margin-top: 0; margin-bottom: 0"><font size="2"><br clear=all><br>On October 13, 2004, the FASB concluded that the Proposed Statement
123R, &quot;Share-Based Payment&quot; (FAS 123R), which would require all companies to
measure compensation expense on the income statement for all share-based
payments (including employee stock options) at fair value, would be effective
for public companies for interim or annual periods beginning after June 15,
2005. Retroactive application of the requirements of Financial Accounting
Standards No. 123, &quot;Accounting for Stock-Based Compensation&quot; (FAS 123) to the
beginning of the fiscal year that includes the effective date would be
permitted, but not required.&nbsp; The
Proposed Statement 123R is expected to be finalized either later this year or
in early 2005. The pro forma results presented in Note 7 are in accordance with
the required disclosures under Financial Accounting Standards No. 148,
&quot;Accounting for Stock-Based Compensation - Transition and Disclosure&quot; (FAS 148),
which should provide for a reasonable approximation of the impact the Proposed
Statement 123R will have on the Company.<br>
<br>
Also on October 13, 2004, the FASB ratified EITF Issue No. 04-8, &quot;The Effect of
Contingently Convertible Instruments on Diluted Earnings per Share.&quot;&nbsp; As of September 30, 2004, the Company
accounted for its Senior Convertible Notes in accordance with the FASB
Statements of Financial Accounting Standards No. 128 &quot;Earnings per share.&quot;
Accordingly, the 3.9 million shares issuable upon conversion of the Convertible
Notes are included in the diluted earnings per share calculation in the quarter
when the contingency is met as well as the following quarter when the&nbsp; convertible notes are actually convertible.&nbsp; Therefore, the shares have been included in
diluted earnings per share calculation for the Third Quarter 2004 as well as
for the Nine Months 2004, but excluded from the calculation for periods prior
to January 1, 2004, for which the contingency criteria was not met dating back
to date of issuance in September 2002. EITF Issue No. 04-8, which will require
that all shares issuable under a convertible security be included in the
diluted earnings per share calculation upon issuance of the instrument, is
expected to become effective for periods ending after December 15, 2004 and
must be applied by restating all periods during which the instrument was
outstanding regardless of whether the market price contingency was met or not.
The implementation of this guidance is not anticipated to have any impact on
our 2004 diluted earnings per share calculation, but it is likely to result in
the restatement of our 2003 and 2002 diluted earnings per share calculations.<br>
<br>
<b>4.&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; Acquisition of
Wholly-Owned Subsidiary <br>
</b>On January 1, 2004, the Company purchased a property and casualty insurance
company, domiciled in Maine, with approximately $5.0 million in surplus that
was not then writing any business, for $5.3 million. The acquisition has been
accounted for using the purchase method of accounting as prescribed by FASB
Statement of Financial Accounting Standards No. 141, &quot;Business
Combinations.&quot;&nbsp; The acquisition included
assets of approximately $4.9 million in cash and cash equivalents, $0.1 million
in bonds and $0.3 million of goodwill, which is being accounted for in
accordance with FASB Statement of Financial Accounting Standards No. 142,
&quot;Goodwill and Other Intangible Assets.&quot; There were no liabilities acquired in
connection with this acquisition.<br>
<br>
<b>5.&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; Concentration
of Credit Risk<br>
</b>The Company's concentration of credit risk includes accounts receivable due
by clients to its human resource administration outsourcing operations,
Selective HR Solutions (SHRS).&nbsp; By law
and/or by contract, SHRS assumes substantial employer rights, responsibilities,
and risks related to certain employees of its clients and becomes a co-employer
of the client's employees. Earned but unpaid wages related to SHRS's
co-employees are recognized as an accrued payroll liability, as well as an
account receivable, during the period in which such wages are earned.&nbsp; Subsequent to the end of each period, such
wages are paid and the related co-employer service fees are billed.&nbsp; Accrued co-employer payroll and related
service fees were $17.4 million as of September 30, 2004 and $15.5 million as
of December 31, 2003.&nbsp; Certain states
limit a co-employer's liability for earned payroll to minimum wage and,
accordingly, SHRS's potential liability for accrued co-employer payroll could
be reduced.<br>
</font></p>
<p style="margin-top: 0; margin-bottom: 0" align="center"><font size="2">
<br>
7</font></p>
<hr color="#000080"><P STYLE="page-break-after: always"></P>
<p style="margin-top: 0; margin-bottom: 0"><font size="2"><br clear=all>
If a client does not pay its related payroll and service fees prior to the
applicable payroll date, SHRS has the right to cancel the co-employer contract
or, at its option, require letters of credit or other collateral. SHRS
generally has not required such collateral.&nbsp;
As of September 30, 2004, the maximum exposure to any one account for
earned payroll was approximately $0.6 million.&nbsp;
If the financial condition of a client were to deteriorate rapidly,
resulting in nonpayment, SHRS's accounts receivable balances could grow and
SHRS could be required to provide for allowances, which would decrease net
income in the period that such determination was made. <br>
<br>The Company's Insurance Operations and
SHRS segments are subject to geographic concentration.&nbsp; Approximately 37% of net premiums written are
related to insurance policies written in New Jersey, while 39% of HR
outsourcing co-employer service fees are related to business in Florida.&nbsp; Substantially all of the Company's remaining
revenues come from the states of Connecticut, Delaware, Georgia, Illinois,
Indiana, Iowa, Kentucky, Maryland, Michigan, Minnesota, Missouri, New York,
North Carolina, Ohio Pennsylvania, Rhode Island, South Carolina, Virginia, and
Wisconsin, Consequently, changes to economic or regulatory conditions in these
states could adversely affect the Company.<br>
<br>
For a discussion regarding reinsurance recoverables and related concentration
of credit risk see Note 6, &quot;Reinsurance&quot; to the September 30, 2004 unaudited
interim consolidated financial statements.<br>
<br>
<b>6.&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; Reinsurance<br></b>The Company's consolidated financial
statements reflect the effects of assumed and ceded reinsurance
transactions.&nbsp; Assumed reinsurance refers
to the acceptance of certain insurance risks that other insurance entities have
underwritten.&nbsp; Ceded reinsurance involves
transferring certain insurance risks (along with the related written and earned
premiums) the Company has underwritten to other insurance companies who agree
to share these risks.&nbsp; The primary
purpose of ceded reinsurance is to protect the Company from potential losses in
excess of the amount it is prepared to accept.&nbsp;
The reinsurance recoverable from American Re-Insurance Company
represents 8% and 7% of the Company's uncollateralized consolidated reinsurance
recoverables as of September 30, 2004 and December 31, 2003, respectively. As
of September 30, 2004, collateral in the amount of $37.7 million is held in a
trust fund for the benefit of the Company related to the reinsurance contracts
with American Re-Insurance Company.&nbsp; In
addition, just over 60% of the Company's uncollateralized net
reinsurance recoverable balances are ceded to two state or federally sponsored
pools (New Jersey Unsatisfied Claims
Judgment Fund and the National
Flood Insurance Program).<br>
<br>The Company evaluates and monitors the financial condition of its
reinsurers under voluntary reinsurance arrangements to minimize its exposure to
significant losses from reinsurer insolvencies.&nbsp;
On an ongoing basis, the Company reviews amounts outstanding, length of
collection period, changes in reinsurance credit standing and other relevant
factors to determine collectibility of reinsurance recoverables. During the
Third Quarter 2004, there were rating downgrades and substantial reserve developments within the
reinsurance industry that could affect our ability to collect under certain
reinsurance contracts.&nbsp; As
a result, we increased our loss reserves by $2.5 million and exercised the
special termination provision, which is effective in October 2004, on two of our reinsurance contracts due to rating
agency downgrades of specific reinsurers that could adversely affect our ability
to collect under certain reinsurance contracts.&nbsp; We eliminated one
carrier and added two highly rated carriers to our Property Catastrophe Excess
of Loss and Terrorism Aggregate Excess of Loss treaties. We believe these
actions will enhance and strengthen our reinsurance program.<br>
<br>
</font></p>
<p style="margin-top: 0; margin-bottom: 0" align="center"><font size="2">8</font></p>
<hr color="#000080"><P STYLE="page-break-after: always"></P>
<p style="margin-top: 0; margin-bottom: 0"><font size="2"><br clear=all>
The following table is a listing of direct,
assumed and ceded amounts by income statement caption:</font><br></p>
</p>

<table border=0 cellspacing=0 cellpadding=0 width="586">
 <tr>
  <td width=586 colspan=10 valign=top>
  <div align=center><b>
  <hr size=1 width="100%" noshade color=black align=center>
  </b></div>
  </td>
 </tr>
 <tr>
  <td width=240 valign=top>
  <p><font size="1">&nbsp;</font></p>
  </td>
  <td width=19 valign=top>

  </td>
  <td width=144 colspan=3 valign=top>
  <p align=center><b><font size="1">Unaudited,</font></b></p>
  </td>
  <td width=19 valign=top>
  <p align=center><b><font size="1">&nbsp;</font></b></p>
  </td>
  <td width=163 colspan=4 valign=top>
  <p align=center><b><font size="1">Unaudited,</font></b></p>
  </td>
 </tr>
 <tr>
  <td width=240 valign=top>
  <p><font size="1">&nbsp;</font></p>
  </td>
  <td width=19 valign=top>

  </td>
  <td width=144 colspan=3 valign=top>
  <p align=center><b><font size="1">Quarter ended</font></b></p>
  </td>
  <td width=19 valign=top>
  <p align=center><b><font size="1">&nbsp;</font></b></p>
  </td>
  <td width=163 colspan=4 valign=top>
  <p align=center><b><font size="1">Nine months ended</font></b></p>
  </td>
 </tr>
 <tr>
  <td width=240 valign=top>
  <p><font size="1">&nbsp;</font></p>
  </td>
  <td width=19 valign=top>

  </td>
  <td width=144 colspan=3 valign=top>
  <p align=center><b><font size="1">September 30,</font></b></p>
  </td>
  <td width=19 valign=top>
  <p align=center><b><font size="1">&nbsp;</font></b></p>
  </td>
  <td width=163 colspan=4 valign=top>
  <p align=center><b><font size="1">September 30,</font></b></p>
  </td>
 </tr>
 <tr>
  <td width=240 valign=top>
  <p><font size="1">(in thousands)</font></p>
  </td>
  <td width=19 valign=top>
  <p align=right><font size="1">&nbsp;</font></p>
  </td>
  <td width=62 valign=top>
  <p align=center><b><font size="1">2004</font></b></p>
  </td>
  <td width=19 valign=top>
  <p align=center><b><font size="1">&nbsp;</font></b></p>
  </td>
  <td width=63 valign=top>
  <p align=center><b><font size="1">2003</font></b></p>
  </td>
  <td width=19 valign=top>
  <p align=right><b><font size="1">&nbsp;</font></b></p>
  </td>
  <td width=19 valign=top>
  <p align=right><b><font size="1">&nbsp;</font></b></p>
  </td>
  <td width=62 valign=top>
  <p align=center><b><font size="1">2004</font></b></p>
  </td>
  <td width=19 valign=top>
  <p align=center><b><font size="1">&nbsp;</font></b></p>
  </td>
  <td width=62 valign=top>
  <p align=center><b><font size="1">2003</font></b></p>
  </td>
 </tr>
 <tr>
  <td width=586 colspan=10 valign=top>
  <div align=center><b>
  <hr size=1 width="100%" noshade color=black align=center>
  </b></div>
  </td>
 </tr>
 <tr height=0>
  <td width=240></td>
  <td width=19></td>
  <td width=62></td>
  <td width=19></td>
  <td width=63></td>
  <td width=19></td>
  <td width=19></td>
  <td width=62></td>
  <td width=19></td>
  <td width=62></td>
 </tr>
</table>



<table border=0 cellspacing=0 cellpadding=0>
 <tr>
  <td width=240 valign=top>
  <p><b><font size="1">Premiums written:</font></b></p>
  </td>
  <td width=19 valign=top>
  <p align=right><font size="1">&nbsp;</font></p>
  </td>
  <td width=62 valign=top>
  <p><font size="1">&nbsp;</font></p>
  </td>
  <td width=19 valign=top>
  <p><font size="1">&nbsp;</font></p>
  </td>
  <td width=63 valign=top>
  <p><font size="1">&nbsp;</font></p>
  </td>
  <td width=19 valign=top>
  <p align=right><font size="1">&nbsp;</font></p>
  </td>
  <td width=19 valign=top>
  <p align=right><font size="1">&nbsp;</font></p>
  </td>
  <td width=62 valign=top>
  <p><font size="1">&nbsp;</font></p>
  </td>
  <td width=19 valign=top>
  <p><font size="1">&nbsp;</font></p>
  </td>
  <td width=62 valign=top>
  <p><font size="1">&nbsp;</font></p>
  </td>
 </tr>
 <tr>
  <td width=240 valign=top>
  <p><font size="1">Direct</font></p>
  </td>
  <td width=19 valign=top>
  <p align=right><font size="1">$</font></p>
  </td>
  <td width=62 valign=top>
  <p align=right><font size="1">377,562&nbsp;</font></p>
  </td>
  <td width=19 valign=top>
  <p align=right><font size="1">&nbsp;</font></p>
  </td>
  <td width=63 valign=top>
  <p align=right><font size="1">345,274&nbsp; </font></p>
  </td>
  <td width=19 valign=top>
  <p align=right><font size="1">&nbsp;</font></p>
  </td>
  <td width=19 valign=top>
  <p align=right><font size="1">$</font></p>
  </td>
  <td width=62 valign=top>
  <p align=right><font size="1">1,159,702&nbsp;</font></p>
  </td>
  <td width=19 valign=top>
  <p align=right><font size="1">&nbsp;</font></p>
  </td>
  <td width=62 valign=top>
  <p align=right><font size="1">1,036,897&nbsp;</font></p>
  </td>
 </tr>
 <tr>
  <td width=240 valign=top>
  <p><font size="1">Assumed </font></p>
  </td>
  <td width=19 valign=top>
  <p align=right><font size="1">&nbsp;</font></p>
  </td>
  <td width=62 valign=top>
  <p align=right><font size="1">19,448&nbsp;</font></p>
  </td>
  <td width=19 valign=top>
  <p align=right><font size="1">&nbsp;</font></p>
  </td>
  <td width=63 valign=top>
  <p align=right><font size="1">13,469&nbsp;</font></p>
  </td>
  <td width=19 valign=top>
  <p align=right><font size="1">&nbsp;</font></p>
  </td>
  <td width=19 valign=top>
  <p align=right><font size="1">&nbsp;</font></p>
  </td>
  <td width=62 valign=top>
  <p align=right><font size="1">32,789&nbsp;</font></p>
  </td>
  <td width=19 valign=top>
  <p align=right><font size="1">&nbsp;</font></p>
  </td>
  <td width=62 valign=top>
  <p align=right><font size="1">24,313&nbsp;</font></p>
  </td>
 </tr>
 <tr>
  <td width=240 valign=top>
  <p><font size="1">Ceded</font></p>
  </td>
  <td width=19 valign=top>
  <p align=right><font size="1">&nbsp;</font></p>
  </td>
  <td width=62 valign=top>
  <p align=right><font size="1">(40,559)</font></p>
  </td>
  <td width=19 valign=top>
  <p align=right><font size="1">&nbsp;</font></p>
  </td>
  <td width=63 valign=top>
  <p align=right><font size="1">(41,230)</font></p>
  </td>
  <td width=19 valign=top>
  <p align=right><font size="1">&nbsp;</font></p>
  </td>
  <td width=19 valign=top>
  <p align=right><font size="1">&nbsp;</font></p>
  </td>
  <td width=62 valign=top>
  <p align=right><font size="1">(111,528)</font></p>
  </td>
  <td width=19 valign=top>
  <p align=right><font size="1">&nbsp;</font></p>
  </td>
  <td width=62 valign=top>
  <p align=right><font size="1">(113,431)</font></p>
  </td>
 </tr>
 <tr>
  <td width=240 valign=top>
  <p><font size="1">&nbsp;</font></p>
  </td>
  <td width=19 valign=top>
  <p align=right><font size="1">&nbsp;</font></p>
  </td>
  <td width=62 valign=top>
  <div align=right>
  <hr size=1 width="95%" noshade color=gray align=right>
  </div>
  </td>
  <td width=19 valign=top>
  <p align=right><font size="1">&nbsp;</font></p>
  </td>
  <td width=63 valign=top>
  <div align=right>
  <hr size=1 width="95%" noshade color=gray align=right>
  </div>
  </td>
  <td width=19 valign=top>
  <p align=right><font size="1">&nbsp;</font></p>
  </td>
  <td width=19 valign=top>
  <p align=right><font size="1">&nbsp;</font></p>
  </td>
  <td width=62 valign=top>
  <div align=right>
  <hr size=1 width="95%" noshade color=gray align=right>
  </div>
  </td>
  <td width=19 valign=top>
  <p align=right><font size="1">&nbsp;</font></p>
  </td>
  <td width=62 valign=top>
  <div align=right>
  <hr size=1 width="95%" noshade color=gray align=right>
  </div>
  </td>
 </tr>
 <tr>
  <td width=240 valign=top>
  <p><font size="1">Net</font></p>
  </td>
  <td width=19 valign=top>
  <p align=right><font size="1">$</font></p>
  </td>
  <td width=62 valign=top>
  <p align=right><font size="1">356,451&nbsp;</font></p>
  </td>
  <td width=19 valign=top>
  <p align=right><font size="1">&nbsp;</font></p>
  </td>
  <td width=63 valign=top>
  <p align=right><font size="1">317,513&nbsp;</font></p>
  </td>
  <td width=19 valign=top>
  <p align=right><font size="1">&nbsp;</font></p>
  </td>
  <td width=19 valign=top>
  <p align=right><font size="1">$</font></p>
  </td>
  <td width=62 valign=top>
  <p align=right><font size="1">1,080,963&nbsp;</font></p>
  </td>
  <td width=19 valign=top>
  <p align=right><font size="1">&nbsp;</font></p>
  </td>
  <td width=62 valign=top>
  <p align=right><font size="1">947,779&nbsp;</font></p>
  </td>
 </tr>
 <tr>
  <td width=240 valign=top>
  <p>&nbsp;</p>
  </td>
  <td width=19 valign=top>
  <p align=right>&nbsp;</p>
  </td>
  <td width=62 valign=top>
  <p align=right>=======</p>
  </td>
  <td width=19 valign=top>
  <p align=right>&nbsp;</p>
  </td>
  <td width=63 valign=top>
  <p align=right>=======</p>
  </td>
  <td width=19 valign=top>
  <p align=right>&nbsp;</p>
  </td>
  <td width=19 valign=top>
  <p align=right>&nbsp;</p>
  </td>
  <td width=62 valign=top>
  <p align=right>=======</p>
  </td>
  <td width=19 valign=top>
  <p align=right>&nbsp;</p>
  </td>
  <td width=62 valign=top>
  <p align=right>=======</p>
  </td>
 </tr>
 <tr>
  <td width=240 valign=top>
  <p><b><font size="1">Premiums earned:</font></b></p>
  </td>
  <td width=19 valign=top>
  <p align=right><font size="1">&nbsp;</font></p>
  </td>
  <td width=62 valign=top>
  <p align=right><font size="1">&nbsp;</font></p>
  </td>
  <td width=19 valign=top>
  <p align=right><font size="1">&nbsp;</font></p>
  </td>
  <td width=63 valign=top>
  <p align=right><font size="1">&nbsp;</font></p>
  </td>
  <td width=19 valign=top>
  <p align=right><font size="1">&nbsp;</font></p>
  </td>
  <td width=19 valign=top>
  <p align=right><font size="1">&nbsp;</font></p>
  </td>
  <td width=62 valign=top>
  <p align=right><font size="1">&nbsp;</font></p>
  </td>
  <td width=19 valign=top>
  <p align=right><font size="1">&nbsp;</font></p>
  </td>
  <td width=62 valign=top>
  <p align=right><font size="1">&nbsp;</font></p>
  </td>
 </tr>
 <tr>
  <td width=240 valign=top>
  <p><font size="1">Direct</font></p>
  </td>
  <td width=19 valign=top>
  <p align=right><font size="1">$</font></p>
  </td>
  <td width=62 valign=top>
  <p align=right><font size="1">361,670&nbsp;</font></p>
  </td>
  <td width=19 valign=top>
  <p align=right><font size="1">&nbsp;</font></p>
  </td>
  <td width=63 valign=top>
  <p align=right><font size="1">317,951&nbsp;</font></p>
  </td>
  <td width=19 valign=top>
  <p align=right><font size="1">&nbsp;</font></p>
  </td>
  <td width=19 valign=top>
  <p align=right><font size="1">$</font></p>
  </td>
  <td width=62 valign=top>
  <p align=right><font size="1">1,056,050&nbsp;</font></p>
  </td>
  <td width=19 valign=top>
  <p align=right><font size="1">&nbsp;</font></p>
  </td>
  <td width=62 valign=top>
  <p align=right><font size="1">919,591&nbsp;</font></p>
  </td>
 </tr>
 <tr>
  <td width=240 valign=top>
  <p><font size="1">Assumed</font></p>
  </td>
  <td width=19 valign=top>
  <p align=right><font size="1">&nbsp;</font></p>
  </td>
  <td width=62 valign=top>
  <p align=right><font size="1">9,440&nbsp;</font></p>
  </td>
  <td width=19 valign=top>
  <p align=right><font size="1">&nbsp;</font></p>
  </td>
  <td width=63 valign=top>
  <p align=right><font size="1">7,374&nbsp;</font></p>
  </td>
  <td width=19 valign=top>
  <p align=right><font size="1">&nbsp;</font></p>
  </td>
  <td width=19 valign=top>
  <p align=right><font size="1">&nbsp;</font></p>
  </td>
  <td width=62 valign=top>
  <p align=right><font size="1">26,016&nbsp;</font></p>
  </td>
  <td width=19 valign=top>
  <p align=right><font size="1">&nbsp;</font></p>
  </td>
  <td width=62 valign=top>
  <p align=right><font size="1">18,865&nbsp;</font></p>
  </td>
 </tr>
 <tr>
  <td width=240 valign=top>
  <p><font size="1">Ceded</font></p>
  </td>
  <td width=19 valign=top>
  <p align=right><font size="1">&nbsp;</font></p>
  </td>
  <td width=62 valign=top>
  <p align=right><font size="1">(34,036)</font></p>
  </td>
  <td width=19 valign=top>
  <p align=right><font size="1">&nbsp;</font></p>
  </td>
  <td width=63 valign=top>
  <p align=right><font size="1">(35,644)</font></p>
  </td>
  <td width=19 valign=top>
  <p align=right><font size="1">&nbsp;</font></p>
  </td>
  <td width=19 valign=top>
  <p align=right><font size="1">&nbsp;</font></p>
  </td>
  <td width=62 valign=top>
  <p align=right><font size="1">(103,700)</font></p>
  </td>
  <td width=19 valign=top>
  <p align=right><font size="1">&nbsp;</font></p>
  </td>
  <td width=62 valign=top>
  <p align=right><font size="1">(105,589)</font></p>
  </td>
 </tr>
 <tr>
  <td width=240 valign=top>
  <p><font size="1">&nbsp;</font></p>
  </td>
  <td width=19 valign=top>
  <p align=right><font size="1">&nbsp;</font></p>
  </td>
  <td width=62 valign=top>
  <div align=right>
  <hr size=1 width="95%" noshade color=gray align=right>
  </div>
  </td>
  <td width=19 valign=top>
  <p align=right><font size="1">&nbsp;</font></p>
  </td>
  <td width=63 valign=top>
  <div align=right>
  <hr size=1 width="95%" noshade color=gray align=right>
  </div>
  </td>
  <td width=19 valign=top>
  <p align=right><font size="1">&nbsp;</font></p>
  </td>
  <td width=19 valign=top>
  <p align=right><font size="1">&nbsp;</font></p>
  </td>
  <td width=62 valign=top>
  <div align=right>
  <hr size=1 width="95%" noshade color=gray align=right>
  </div>
  </td>
  <td width=19 valign=top>
  <p align=right><font size="1">&nbsp;</font></p>
  </td>
  <td width=62 valign=top>
  <div align=right>
  <hr size=1 width="95%" noshade color=gray align=right>
  </div>
  </td>
 </tr>
 <tr>
  <td width=240 valign=top>
  <p><font size="1">Net</font></p>
  </td>
  <td width=19 valign=top>
  <p align=right><font size="1">$</font></p>
  </td>
  <td width=62 valign=top>
  <p align=right><font size="1">337,074&nbsp;</font></p>
  </td>
  <td width=19 valign=top>
  <p align=right><font size="1">&nbsp;</font></p>
  </td>
  <td width=63 valign=top>
  <p align=right><font size="1">289,681&nbsp;</font></p>
  </td>
  <td width=19 valign=top>
  <p align=right><font size="1">&nbsp;</font></p>
  </td>
  <td width=19 valign=top>
  <p align=right><font size="1">$</font></p>
  </td>
  <td width=62 valign=top>
  <p align=right><font size="1">978,366&nbsp;</font></p>
  </td>
  <td width=19 valign=top>
  <p align=right><font size="1">&nbsp;</font></p>
  </td>
  <td width=62 valign=top>
  <p align=right><font size="1">832,867&nbsp;</font></p>
  </td>
 </tr>
 <tr>
  <td width=240 valign=top>
  <p>&nbsp;</p>
  </td>
  <td width=19 valign=top>
  <p align=right>&nbsp;</p>
  </td>
  <td width=62 valign=top>
  <p align=right>=======</p>
  </td>
  <td width=19 valign=top>
  <p align=right>&nbsp;</p>
  </td>
  <td width=63 valign=top>
  <p align=right>=======</p>
  </td>
  <td width=19 valign=top>
  <p align=right>&nbsp;</p>
  </td>
  <td width=19 valign=top>
  <p align=right>&nbsp;</p>
  </td>
  <td width=62 valign=top>
  <p align=right>=======</p>
  </td>
  <td width=19 valign=top>
  <p align=right>&nbsp;</p>
  </td>
  <td width=62 valign=top>
  <p align=right>=======</p>
  </td>
 </tr>
 <tr>
  <td width=240 valign=top>
  <p><b><font size="1">Losses and loss expenses incurred:</font></b></p>
  </td>
  <td width=19 valign=top>
  <p align=right><font size="1">&nbsp;</font></p>
  </td>
  <td width=62 valign=top>
  <p align=right><font size="1">&nbsp;</font></p>
  </td>
  <td width=19 valign=top>
  <p align=right><font size="1">&nbsp;</font></p>
  </td>
  <td width=63 valign=top>
  <p align=right><font size="1">&nbsp;</font></p>
  </td>
  <td width=19 valign=top>
  <p align=right><font size="1">&nbsp;</font></p>
  </td>
  <td width=19 valign=top>
  <p align=right><font size="1">&nbsp;</font></p>
  </td>
  <td width=62 valign=top>
  <p align=right><font size="1">&nbsp;</font></p>
  </td>
  <td width=19 valign=top>
  <p align=right><font size="1">&nbsp;</font></p>
  </td>
  <td width=62 valign=top>
  <p align=right><font size="1">&nbsp;</font></p>
  </td>
 </tr>
 <tr>
  <td width=240 valign=top>
  <p><font size="1">Direct</font></p>
  </td>
  <td width=19 valign=top>
  <p align=right><font size="1">$</font></p>
  </td>
  <td width=62 valign=top>
  <p align=right><font size="1">259,563&nbsp;</font></p>
  </td>
  <td width=19 valign=top>
  <p align=right><font size="1">&nbsp;</font></p>
  </td>
  <td width=63 valign=top>
  <p align=right><font size="1">236,125&nbsp;</font></p>
  </td>
  <td width=19 valign=top>
  <p align=right><font size="1">&nbsp;</font></p>
  </td>
  <td width=19 valign=top>
  <p align=right><font size="1">$</font></p>
  </td>
  <td width=62 valign=top>
  <p align=right><font size="1">703,662&nbsp;</font></p>
  </td>
  <td width=19 valign=top>
  <p align=right><font size="1">&nbsp;</font></p>
  </td>
  <td width=62 valign=top>
  <p align=right><font size="1">640,051&nbsp;</font></p>
  </td>
 </tr>
 <tr>
  <td width=240 valign=top>
  <p><font size="1">Assumed</font></p>
  </td>
  <td width=19 valign=top>
  <p align=right><font size="1">&nbsp;</font></p>
  </td>
  <td width=62 valign=top>
  <p align=right><font size="1">8,398&nbsp;</font></p>
  </td>
  <td width=19 valign=top>
  <p align=right><font size="1">&nbsp;</font></p>
  </td>
  <td width=63 valign=top>
  <p align=right><font size="1">6,022&nbsp;</font></p>
  </td>
  <td width=19 valign=top>
  <p align=right><font size="1">&nbsp;</font></p>
  </td>
  <td width=19 valign=top>
  <p align=right><font size="1">&nbsp;</font></p>
  </td>
  <td width=62 valign=top>
  <p align=right><font size="1">22,654&nbsp;</font></p>
  </td>
  <td width=19 valign=top>
  <p align=right><font size="1">&nbsp;</font></p>
  </td>
  <td width=62 valign=top>
  <p align=right><font size="1">15,949&nbsp;</font></p>
  </td>
 </tr>
 <tr>
  <td width=240 valign=top>
  <p><font size="1">Ceded</font></p>
  </td>
  <td width=19 valign=top>
  <p align=right><font size="1">&nbsp;</font></p>
  </td>
  <td width=62 valign=top>
  <p align=right><font size="1">(43,119)</font></p>
  </td>
  <td width=19 valign=top>
  <p align=right><font size="1">&nbsp;</font></p>
  </td>
  <td width=63 valign=top>
  <p align=right><font size="1">(37,963)</font></p>
  </td>
  <td width=19 valign=top>
  <p align=right><font size="1">&nbsp;</font></p>
  </td>
  <td width=19 valign=top>
  <p align=right><font size="1">&nbsp;</font></p>
  </td>
  <td width=62 valign=top>
  <p align=right><font size="1">(82,007)</font></p>
  </td>
  <td width=19 valign=top>
  <p align=right><font size="1">&nbsp;</font></p>
  </td>
  <td width=62 valign=top>
  <p align=right><font size="1">(62,973)</font></p>
  </td>
 </tr>
 <tr>
  <td width=240 valign=top>
  <p><font size="1">&nbsp;</font></p>
  </td>
  <td width=19 valign=top>
  <p align=right><font size="1">&nbsp;</font></p>
  </td>
  <td width=62 valign=top>
  <div align=right>
  <hr size=1 width="90%" noshade color=gray align=right>
  </div>
  </td>
  <td width=19 valign=top>
  <p align=right><font size="1">&nbsp;</font></p>
  </td>
  <td width=63 valign=top>
  <div align=right>
  <hr size=1 width="95%" noshade color=gray align=right>
  </div>
  </td>
  <td width=19 valign=top>
  <p align=right><font size="1">&nbsp;</font></p>
  </td>
  <td width=19 valign=top>
  <p align=right><font size="1">&nbsp;</font></p>
  </td>
  <td width=62 valign=top>
  <div align=right>
  <hr size=1 width="95%" noshade color=gray align=right>
  </div>
  </td>
  <td width=19 valign=top>
  <p align=right><font size="1">&nbsp;</font></p>
  </td>
  <td width=62 valign=top>
  <div align=right>
  <hr size=1 width="95%" noshade color=gray align=right>
  </div>
  </td>
 </tr>
 <tr>
  <td width=240 valign=top>
  <p><font size="1">Net</font></p>
  </td>
  <td width=19 valign=top>
  <p align=right><font size="1">$</font></p>
  </td>
  <td width=62 valign=top>
  <p align=right><font size="1">224,842&nbsp;</font></p>
  </td>
  <td width=19 valign=top>
  <p align=right><font size="1">&nbsp;</font></p>
  </td>
  <td width=63 valign=top>
  <p align=right><font size="1">204,184&nbsp;</font></p>
  </td>
  <td width=19 valign=top>
  <p align=right><font size="1">&nbsp;</font></p>
  </td>
  <td width=19 valign=top>
  <p align=right><font size="1">$</font></p>
  </td>
  <td width=62 valign=top>
  <p align=right><font size="1">644,309&nbsp;</font></p>
  </td>
  <td width=19 valign=top>
  <p align=right><font size="1">&nbsp;</font></p>
  </td>
  <td width=62 valign=top>
  <p align=right><font size="1">593,027&nbsp;</font></p>
  </td>
 </tr>
 <tr>
  <td width=240 valign=top>
  <p>&nbsp;</p>
  </td>
  <td width=19 valign=top>
  <p align=right>&nbsp;</p>
  </td>
  <td width=62 valign=top>
  <p align=right>=======</p>
  </td>
  <td width=19 valign=top>
  <p align=right>&nbsp;</p>
  </td>
  <td width=63 valign=top>
  <p align=right>=======</p>
  </td>
  <td width=19 valign=top>
  <p align=right>&nbsp;</p>
  </td>
  <td width=19 valign=top>
  <p align=right>&nbsp;</p>
  </td>
  <td width=62 valign=top>
  <p align=right>=======</p>
  </td>
  <td width=19 valign=top>
  <p align=right>&nbsp;</p>
  </td>
  <td width=62 valign=top>
  <p align=right>======</p>
  </td>
 </tr>
</table>

<p style="margin-top: 0; margin-bottom: 0">&nbsp;</p>
<p style="margin-top: 0; margin-bottom: 0"><font size="2">Flood business, which we cede 100% to the National Flood Insurance Program, is
included in the above amounts as follows:</font></p>

<table border=0 cellspacing=0 cellpadding=0>
 <tr>
  <td width=586 colspan=10 valign=top>
  <div align=center><b>
  <hr size=1 width="100%" noshade color=black align=center>
  </b></div>
  </td>
 </tr>
 <tr>
  <td width=240 valign=top>
  <p><font size="1">&nbsp;</font></p>
  </td>
  <td width=19 valign=top>

  </td>
  <td width=144 colspan=3 valign=top>
  <p align=center><b><font size="1">Unaudited,</font></b></p>
  </td>
  <td width=19 valign=top>
  <p align=center><b><font size="1">&nbsp;</font></b></p>
  </td>
  <td width=163 colspan=4 valign=top>
  <p align=center><b><font size="1">Unaudited,</font></b></p>
  </td>
 </tr>
 <tr>
  <td width=240 valign=top>
  <p><font size="1">&nbsp;</font></p>
  </td>
  <td width=19 valign=top>

  </td>
  <td width=144 colspan=3 valign=top>
  <p align=center><b><font size="1">Quarter ended</font></b></p>
  </td>
  <td width=19 valign=top>
  <p align=center><b><font size="1">&nbsp;</font></b></p>
  </td>
  <td width=163 colspan=4 valign=top>
  <p align=center><b><font size="1">Nine months ended</font></b></p>
  </td>
 </tr>
 <tr>
  <td width=240 valign=top>
  <p><font size="1">&nbsp;</font></p>
  </td>
  <td width=19 valign=top>

  </td>
  <td width=144 colspan=3 valign=top>
  <p align=center><b><font size="1">September 30,</font></b></p>
  </td>
  <td width=19 valign=top>
  <p align=center><b><font size="1">&nbsp;</font></b></p>
  </td>
  <td width=163 colspan=4 valign=top>
  <p align=center><b><font size="1">September 30,</font></b></p>
  </td>
 </tr>
 <tr>
  <td width=240 valign=top>
  <p><font size="1">(in thousands)</font></p>
  </td>
  <td width=19 valign=top>
  <p align=right><font size="1">&nbsp;</font></p>
  </td>
  <td width=62 valign=top>
  <p align=center><b><font size="1">2004</font></b></p>
  </td>
  <td width=19 valign=top>
  <p align=center><b><font size="1">&nbsp;</font></b></p>
  </td>
  <td width=63 valign=top>
  <p align=center><b><font size="1">2003</font></b></p>
  </td>
  <td width=19 valign=top>
  <p align=right><b><font size="1">&nbsp;</font></b></p>
  </td>
  <td width=19 valign=top>
  <p align=right><b><font size="1">&nbsp;</font></b></p>
  </td>
  <td width=62 valign=top>
  <p align=center><b><font size="1">2004</font></b></p>
  </td>
  <td width=19 valign=top>
  <p align=center><b><font size="1">&nbsp;</font></b></p>
  </td>
  <td width=62 valign=top>
  <p align=center><b><font size="1">2003</font></b></p>
  </td>
 </tr>
 <tr>
  <td width=586 colspan=10 valign=top>
  <div align=center><b>
  <hr size=1 width="100%" noshade color=black align=center>
  </b></div>
  </td>
 </tr>
 <tr height=0>
  <td width=240></td>
  <td width=19></td>
  <td width=62></td>
  <td width=19></td>
  <td width=63></td>
  <td width=19></td>
  <td width=19></td>
  <td width=62></td>
  <td width=19></td>
  <td width=62></td>
 </tr>
</table>



<table border=0 cellspacing=0 cellpadding=0>
 <tr>
  <td width=240 valign=top>
  <p><font size="1">Ceded premiums written</font></p>
  </td>
  <td width=19 valign=top>
  <p align=right><font size="1">$</font></p>
  </td>
  <td width=62 valign=top>
  <p align=right><font size="1">(22,816)</font></p>
  </td>
  <td width=19 valign=top>
  <p align=right><b><font size="1">&nbsp;</font></b></p>
  </td>
  <td width=61 valign=top>
  <p align=right><font size="1">(19,302)</font></p>
  </td>
  <td width=20 valign=top>

  </td>
  <td width=22 valign=top>
  <p align=right><font size="1">$</font></p>
  </td>
  <td width=60 valign=top>
  <p align=right><font size="1">(59,972)</font></p>
  </td>
  <td width=19 valign=top>
  <p align=right><b><font size="1">&nbsp;</font></b></p>
  </td>
  <td width=62 valign=top>
  <p align=right><font size="1">(50,177)</font></p>
  </td>
 </tr>
 <tr>
  <td width=240 valign=top>
  <p><font size="1">Ceded premiums earned</font></p>
  </td>
  <td width=19 valign=top>

  </td>
  <td width=62 valign=top>
  <p align=right><font size="1">(18,062)</font></p>
  </td>
  <td width=19 valign=top>
  <p align=right><b><font size="1">&nbsp;</font></b></p>
  </td>
  <td width=61 valign=top>
  <p align=right><font size="1">(15,240)</font></p>
  </td>
  <td width=20 valign=top>

  </td>
  <td width=22 valign=top>

  </td>
  <td width=60 valign=top>
  <p align=right><font size="1">(51,906)</font></p>
  </td>
  <td width=19 valign=top>
  <p align=right><b><font size="1">&nbsp;</font></b></p>
  </td>
  <td width=62 valign=top>
  <p align=right><font size="1">(43,051)</font></p>
  </td>
 </tr>
 <tr>
  <td width=240 valign=top>
  <p><font size="1">Ceded losses and loss expenses incurred</font></p>
  </td>
  <td width=19 valign=top>

  </td>
  <td width=62 valign=top>
  <p align=right><font size="1">(32,442)</font></p>
  </td>
  <td width=19 valign=top>
  <p align=right><b><font size="1">&nbsp;</font></b></p>
  </td>
  <td width=61 valign=top>
  <p align=right><font size="1">(27,416)</font></p>
  </td>
  <td width=20 valign=top>

  </td>
  <td width=22 valign=top>

  </td>
  <td width=60 valign=top>
  <p align=right><font size="1">(43,234)</font></p>
  </td>
  <td width=19 valign=top>
  <p align=right><b><font size="1">&nbsp;</font></b></p>
  </td>
  <td width=62 valign=top>
  <p align=right><font size="1">(31,044)</font></p>
  </td>
 </tr>
</table>

<p style="margin-top: 0; margin-bottom: 0"><font size="2"><br>Assumed written and earned
premiums increased primarily due to an increase in mandatory pool assumptions
and an increase in writings of voluntary municipal pool business.&nbsp; Offsetting the increases in our flood
business, ceded written and earned premiums decreased primarily as a result of
the termination of the New Jersey Unsatisfied Claims Judgment Fund (UCJF). The
New Jersey UCJF was a mandatory reinsurance program, which provided for
personal injury protection (PIP) coverage for New Jersey auto policies.&nbsp; The UCJF assumed unlimited New Jersey PIP
losses in excess of $75,000 up to $250,000 per person/ per occurrence from
January 1, 1991 through December 31, 2003.&nbsp;
Effective January 1, 2004 the program was terminated for all new
policies with carriers being responsible for 100% of the coverage, which
remains capped at $250,000. A final adjustment to the prior treaty year UCJF
premium resulted in a return of premium previously ceded of $2.4 million recorded
by the Company in this quarter.<br>
<br>Increases in assumed losses were influenced primarily by increases in
losses assumed from mandatory pools.&nbsp; The
increases in these assumptions are related to the Company's increased
participations in the mandatory pools and general growth of the National
Council on Compensation Insurance (NCCI) pool. Increases in ceded incurred
losses were primarily attributable to increases in business ceded to the
National Flood Insurance program and increased losses ceded to the casualty
treaties.<br>
</font>
<p style="margin-top: 0; margin-bottom: 0" align="center">&nbsp;<p style="margin-top: 0; margin-bottom: 0" align="center">
<font size="2">9</font><hr color="#000080"><P STYLE="page-break-after: always"></P>
<p style="margin-top: 0; margin-bottom: 0"><font size="2"><br clear=all>
<br>
<b>7.&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; Stock-Based
Compensation<br>
</b>The FASB Statement of Financial Accounting Standards No. 123, &quot;Accounting
for Stock-Based Compensation&quot; (FAS 123) establishes financial accounting and
reporting standards for stock-based compensation plans. As permitted by FAS
123, the Company uses the accounting method prescribed by Accounting Principles
Board Opinion No. 25 &quot;Accounting for Stock Issued to Employees&quot; (APB 25) to
account for its stock-based compensation plans. Companies using APB 25 are
required to make pro forma note disclosures of net income and earnings per
share as if the fair value method of accounting, as defined in FAS 123, had
been applied.<br>
<br>
The FASB Statement of Financial Accounting Standards No. 148, &quot;Accounting for
Stock-Based Compensation - Transition and Disclosure&quot; (FAS 148) amends FAS 123
to provide alternative methods of transition to FAS 123's fair value method of
accounting for stock-based compensation.&nbsp;
The Company has adopted the pro forma footnote disclosure-only
provisions of FAS 148. Based on the fair value method consistent with the
provisions of FAS 148, the Company's net income and earnings per share would
have been the following pro forma amounts indicated below:</font></p>
<p style="margin-top: 0; margin-bottom: 0"></p>

<table border=0 cellspacing=0 cellpadding=0 width=641 style="line-height: 100%; word-spacing: 0; margin-top: 0; margin-bottom: 0">
 <tr>
  <td width=641 colspan=10 valign=top>
  <div align=center><b>
  <hr size=1 width="100%" noshade color=black align=center>
  </b></div>
  </td>
 </tr>
 <tr>
  <td width=296 valign=top>&nbsp;</td>
  <td width=20 valign=top>

  <p style="margin-top: 0; margin-bottom: 0">

  </td>
  <td width=143 colspan=3 valign=top>
  <p align=center style="margin-top: 0; margin-bottom: 0"><b>
  <font size="1" face="Times New Roman">Unaudited,</font></b></p>
  </td>
  <td width=24 valign=top>

  <p style="margin-top: 0; margin-bottom: 0">

  </td>
  <td width=19 valign=top>

  <p style="margin-top: 0; margin-bottom: 0">

  </td>
  <td width=138 colspan=3 valign=top>
  <p align=center style="margin-top: 0; margin-bottom: 0"><b>
  <font size="1" face="Times New Roman">Unaudited,</font></b></p>
  </td>
 </tr>
 <tr>
  <td width=296 valign=top>

  <p style="margin-top: 0; margin-bottom: 0">

  </td>
  <td width=20 valign=top>

  <p style="margin-top: 0; margin-bottom: 0">

  </td>
  <td width=143 colspan=3 valign=top>
  <p align=center style="margin-top: 0; margin-bottom: 0"><b>
  <font size="1" face="Times New Roman">Quarter
  ended</font></b></p>
  </td>
  <td width=24 valign=top>

  <p style="margin-top: 0; margin-bottom: 0">

  </td>
  <td width=19 valign=top>

  <p style="margin-top: 0; margin-bottom: 0">

  </td>
  <td width=138 colspan=3 valign=top>
  <p align=center style="margin-top: 0; margin-bottom: 0"><b>
  <font size="1" face="Times New Roman">Nine months
  ended</font></b></p>
  </td>
 </tr>
 <tr>
  <td width=296 valign=top>

  <p style="margin-top: 0; margin-bottom: 0">

  </td>
  <td width=20 valign=top>

  <p style="margin-top: 0; margin-bottom: 0">

  </td>
  <td width=143 colspan=3 valign=top>
  <p align=center style="margin-top: 0; margin-bottom: 0"><b>
  <font size="1" face="Times New Roman">September
  30,</font></b></p>
  </td>
  <td width=24 valign=top>

  <p style="margin-top: 0; margin-bottom: 0">

  </td>
  <td width=19 valign=top>

  <p style="margin-top: 0; margin-bottom: 0">

  </td>
  <td width=138 colspan=3 valign=top>
  <p align=center style="margin-top: 0; margin-bottom: 0"><b>
  <font size="1" face="Times New Roman">September
  30,</font></b></p>
  </td>
 </tr>
 <tr>
  <td width=296 valign=top>
  <p style="margin-top: 0; margin-bottom: 0">
  <font size="1" face="Times New Roman">(in thousands, except per
  share amounts)</font></p>
  </td>
  <td width=20 valign=top>

  <p style="margin-top: 0; margin-bottom: 0">

  </td>
  <td width=60 valign=top>
  <p align=center style="margin-top: 0; margin-bottom: 0"><b>
  <font size="1" face="Times New Roman">2004</font></b></p>
  </td>
  <td width=18 valign=top>
  <p align=center style="margin-top: 0; margin-bottom: 0"><b>
  <font size="1" face="Times New Roman">&nbsp;</font></b></p>
  </td>
  <td width=65 valign=top>
  <p align=center style="margin-top: 0; margin-bottom: 0"><b>
  <font size="1" face="Times New Roman">2003</font></b></p>
  </td>
  <td width=24 valign=top>

  <p style="margin-top: 0; margin-bottom: 0">

  </td>
  <td width=19 valign=top>

  <p style="margin-top: 0; margin-bottom: 0">

  </td>
  <td width=60 valign=top>
  <p align=center style="margin-top: 0; margin-bottom: 0"><b>
  <font size="1" face="Times New Roman">2004</font></b></p>
  </td>
  <td width=18 valign=top>
  <p align=center style="margin-top: 0; margin-bottom: 0"><b>
  <font size="1" face="Times New Roman">&nbsp;</font></b></p>
  </td>
  <td width=60 valign=top>
  <p align=center style="margin-top: 0; margin-bottom: 0"><b>
  <font size="1" face="Times New Roman">2003</font></b></p>
  </td>
 </tr>
 <tr>
  <td width=641 colspan=10 valign=top>
  <div align=center><b>
  <hr size=1 width="100%" noshade color=black align=center>
  </b></div>
  </td>
 </tr>
 <tr height=0>
  <td width=296></td>
  <td width=20></td>
  <td width=60></td>
  <td width=18></td>
  <td width=65></td>
  <td width=24></td>
  <td width=19></td>
  <td width=60></td>
  <td width=18></td>
  <td width=60></td>
 </tr>
</table>



<table border=0 cellspacing=0 cellpadding=0 width=641>
 <tr>
  <td width=296 valign=top>
  <p><font size="1">Net income, as reported</font></p>
  </td>
  <td width=20 valign=top align="right">
  <p><font size="1">$</font></p>
  </td>
  <td width=60 valign=top>
  <p align=right><font size="1">28,328&nbsp;</font></p>
  </td>
  <td width=18 valign=top>
  <p align=right><b><font size="1">&nbsp;</font></b></p>
  </td>
  <td width=65 valign=top>
  <p align=right><font size="1">14,717&nbsp;</font></p>
  </td>
  <td width=24 valign=top>

  </td>
  <td width=19 valign=top>

  </td>
  <td width=60 valign=top>
  <p align=right><font size="1">84,730&nbsp;</font></p>
  </td>
  <td width=18 valign=top>
  <p><b><font size="1">&nbsp;</font></b></p>
  </td>
  <td width=60 valign=top>
  <p align=right><font size="1">42,503&nbsp;</font></p>
  </td>
 </tr>
 <tr>
  <td width=296 valign=top>
  <p><font size="1">Add:&nbsp; Stock-based employee compensation reported
  in net </font> </p>
  </td>
  <td width=20 valign=top align="right">

  </td>
  <td width=60 valign=top>

  </td>
  <td width=18 valign=top>
  <p align=right><b><font size="1">&nbsp;</font></b></p>
  </td>
  <td width=65 valign=top>

  </td>
  <td width=24 valign=top>

  </td>
  <td width=19 valign=top>

  </td>
  <td width=60 valign=top>

  </td>
  <td width=18 valign=top>
  <p><b><font size="1">&nbsp;</font></b></p>
  </td>
  <td width=60 valign=top>

  </td>
 </tr>
 <tr>
  <td width=296 valign=top>
  <p><font size="1">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; income,
  net of related tax effect</font></p>
  </td>
  <td width=20 valign=top align="right">

  </td>
  <td width=60 valign=top>
  <p align=right><font size="1">971&nbsp;</font></p>
  </td>
  <td width=18 valign=top>
  <p align=right><b><font size="1">&nbsp;</font></b></p>
  </td>
  <td width=65 valign=top>
  <p align=right><font size="1">1,078&nbsp;</font></p>
  </td>
  <td width=24 valign=top>

  </td>
  <td width=19 valign=top>

  </td>
  <td width=60 valign=top>
  <p align=right><font size="1">3,409&nbsp;</font></p>
  </td>
  <td width=18 valign=top>
  <p><b><font size="1">&nbsp;</font></b></p>
  </td>
  <td width=60 valign=top>
  <p align=right><font size="1">2,400&nbsp;</font></p>
  </td>
 </tr>
 <tr>
  <td width=296 valign=top>
  <p><font size="1">Deduct:&nbsp; Total stock-based employee compensation
  expense </font> </p>
  </td>
  <td width=20 valign=top align="right">

  </td>
  <td width=60 valign=top>

  </td>
  <td width=18 valign=top>
  <p align=right><b><font size="1">&nbsp;</font></b></p>
  </td>
  <td width=65 valign=top>

  </td>
  <td width=24 valign=top>

  </td>
  <td width=19 valign=top>

  </td>
  <td width=60 valign=top>

  </td>
  <td width=18 valign=top>
  <p><b><font size="1">&nbsp;</font></b></p>
  </td>
  <td width=60 valign=top>

  </td>
 </tr>
 <tr>
  <td width=296 valign=top>
  <p><font size="1">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; determined
  under fair value-based method for all awards, </font> </p>
  </td>
  <td width=20 valign=top align="right">

  </td>
  <td width=60 valign=top>

  </td>
  <td width=18 valign=top>
  <p align=right><b><font size="1">&nbsp;</font></b></p>
  </td>
  <td width=65 valign=top>

  </td>
  <td width=24 valign=top>

  </td>
  <td width=19 valign=top>

  </td>
  <td width=60 valign=top>

  </td>
  <td width=18 valign=top>
  <p><b><font size="1">&nbsp;</font></b></p>
  </td>
  <td width=60 valign=top>

  </td>
 </tr>
 <tr>
  <td width=296 valign=top>
  <p><font size="1">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; net of
  related tax effects</font></p>
  </td>
  <td width=20 valign=top align="right">

  </td>
  <td width=60 valign=top>
  <p align=right><font size="1">(1,125)</font></p>
  </td>
  <td width=18 valign=top>
  <p align=right><b><font size="1">&nbsp;</font></b></p>
  </td>
  <td width=65 valign=top>
  <p align=right><font size="1">(771)</font></p>
  </td>
  <td width=24 valign=top>

  </td>
  <td width=19 valign=top>

  </td>
  <td width=60 valign=top>
  <p align=right><font size="1">(4,214)</font></p>
  </td>
  <td width=18 valign=top>
  <p><b><font size="1">&nbsp;</font></b></p>
  </td>
  <td width=60 valign=top>
  <p align=right><font size="1">(3,136)</font></p>
  </td>
 </tr>
 <tr>
  <td width=296 valign=top>

  </td>
  <td width=20 valign=top align="right">

  </td>
  <td width=60 valign=top>
  <div align=right>
  <hr size=1 width="95%" noshade color=gray align=right>
  </div>
  </td>
  <td width=18 valign=top>
  <p align=right><b><font size="1">&nbsp;</font></b></p>
  </td>
  <td width=65 valign=top>
  <div align=right>
  <hr size=1 width="95%" noshade color=gray align=right>
  </div>
  </td>
  <td width=24 valign=top>

  </td>
  <td width=19 valign=top>

  </td>
  <td width=60 valign=top>
  <div align=right>
  <hr size=1 width="95%" noshade color=gray align=right>
  </div>
  </td>
  <td width=18 valign=top>
  <p><b><font size="1">&nbsp;</font></b></p>
  </td>
  <td width=60 valign=top>
  <div align=right>
  <hr size=1 width="95%" noshade color=gray align=right>
  </div>
  </td>
 </tr>
 <tr>
  <td width=296 valign=top>
  <p><font size="1">Pro forma net income</font></p>
  </td>
  <td width=20 valign=top align="right">
  <p><font size="1">$</font></p>
  </td>
  <td width=60 valign=top>
  <p align=right><font size="1">28,174&nbsp;</font></p>
  </td>
  <td width=18 valign=top>
  <p align=right><b><font size="1">&nbsp;</font></b></p>
  </td>
  <td width=65 valign=top>
  <p align=right><font size="1">15,024&nbsp;</font></p>
  </td>
  <td width=24 valign=top>

  </td>
  <td width=19 valign=top>

  </td>
  <td width=60 valign=top>
  <p align=right><font size="1">83,925&nbsp;</font></p>
  </td>
  <td width=18 valign=top>
  <p><b><font size="1">&nbsp;</font></b></p>
  </td>
  <td width=60 valign=top>
  <p align=right><font size="1">41,767&nbsp;</font></p>
  </td>
 </tr>
 <tr>
  <td width=296 valign=top>

  </td>
  <td width=20 valign=top align="right">

  </td>
  <td width=60 valign=top>
  <p align=right>======</p>
  </td>
  <td width=18 valign=top>
  <p align=right><b>&nbsp;</b></p>
  </td>
  <td width=65 valign=top>
  <p align=right>======</p>
  </td>
  <td width=24 valign=top>

  </td>
  <td width=19 valign=top>

  </td>
  <td width=60 valign=top>
  <p align=right>======</p>
  </td>
  <td width=18 valign=top>
  <p><b>&nbsp;</b></p>
  </td>
  <td width=60 valign=top>
  <p align=right>======</p>
  </td>
 </tr>
 <tr>
  <td width=296 valign=top>
  <p><b><font size="1">Net income per share:</font></b></p>
  </td>
  <td width=20 valign=top align="right">

  </td>
  <td width=60 valign=top>

  </td>
  <td width=18 valign=top>
  <p align=right><b><font size="1">&nbsp;</font></b></p>
  </td>
  <td width=65 valign=top>

  </td>
  <td width=24 valign=top>

  </td>
  <td width=19 valign=top>

  </td>
  <td width=60 valign=top>

  </td>
  <td width=18 valign=top>
  <p><b><font size="1">&nbsp;</font></b></p>
  </td>
  <td width=60 valign=top>

  </td>
 </tr>
 <tr>
  <td width=296 valign=top>
  <p><font size="1">Basic - as reported</font></p>
  </td>
  <td width=20 valign=top align="right">
  <p><font size="1">$</font></p>
  </td>
  <td width=60 valign=top>
  <p align=right><font size="1">1.05&nbsp;</font></p>
  </td>
  <td width=18 valign=top>
  <p align=right><b><font size="1">&nbsp;</font></b></p>
  </td>
  <td width=65 valign=top>
  <p align=right><font size="1">0.56&nbsp;</font></p>
  </td>
  <td width=24 valign=top>

  </td>
  <td width=19 valign=top>

  </td>
  <td width=60 valign=top>
  <p align=right><font size="1">3.17&nbsp;</font></p>
  </td>
  <td width=18 valign=top>
  <p><b><font size="1">&nbsp;</font></b></p>
  </td>
  <td width=60 valign=top>
  <p align=right><font size="1">1.63&nbsp;</font></p>
  </td>
 </tr>
 <tr>
  <td width=296 valign=top>
  <p><font size="1">Basic - pro forma</font></p>
  </td>
  <td width=20 valign=top align="right">

  </td>
  <td width=60 valign=top>
  <p align=right><font size="1">1.05&nbsp;</font></p>
  </td>
  <td width=18 valign=top>
  <p align=right><b><font size="1">&nbsp;</font></b></p>
  </td>
  <td width=65 valign=top>
  <p align=right><font size="1">0.57&nbsp;</font></p>
  </td>
  <td width=24 valign=top>

  </td>
  <td width=19 valign=top>

  </td>
  <td width=60 valign=top>
  <p align=right><font size="1">3.14&nbsp;</font></p>
  </td>
  <td width=18 valign=top>
  <p><b><font size="1">&nbsp;</font></b></p>
  </td>
  <td width=60 valign=top>
  <p align=right><font size="1">1.60&nbsp;</font></p>
  </td>
 </tr>
 <tr>
  <td width=296 valign=top>
  <p><font size="1">Diluted - as reported</font></p>
  </td>
  <td width=20 valign=top align="right">

  </td>
  <td width=60 valign=top>
  <p align=right><font size="1">0.90&nbsp;</font></p>
  </td>
  <td width=18 valign=top>
  <p align=right><b><font size="1">&nbsp;</font></b></p>
  </td>
  <td width=65 valign=top>
  <p align=right><font size="1">0.53&nbsp;</font></p>
  </td>
  <td width=24 valign=top>

  </td>
  <td width=19 valign=top>

  </td>
  <td width=60 valign=top>
  <p align=right><font size="1">2.70&nbsp;</font></p>
  </td>
  <td width=18 valign=top>
  <p><b><font size="1">&nbsp;</font></b></p>
  </td>
  <td width=60 valign=top>
  <p align=right><font size="1">1.54&nbsp;</font></p>
  </td>
 </tr>
 <tr>
  <td width=296 valign=top>
  <p><font size="1">Diluted - pro forma</font></p>
  </td>
  <td width=20 valign=top align="right">

  </td>
  <td width=60 valign=top>
  <p align=right><font size="1">0.89&nbsp;</font></p>
  </td>
  <td width=18 valign=top>
  <p align=right><b><font size="1">&nbsp;</font></b></p>
  </td>
  <td width=65 valign=top>
  <p align=right><font size="1">0.54&nbsp;</font></p>
  </td>
  <td width=24 valign=top>

  </td>
  <td width=19 valign=top>

  </td>
  <td width=60 valign=top>
  <p align=right><font size="1">2.67&nbsp;</font></p>
  </td>
  <td width=18 valign=top>
  <p><b><font size="1">&nbsp;</font></b></p>
  </td>
  <td width=60 valign=top>
  <p align=right><font size="1">1.52&nbsp;</font></p>
  </td>
 </tr>
</table>

<p style="margin-top: 0; margin-bottom: 0"><b><font size="2"><br>
8.&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; Senior Convertible Notes<br>
</font>
</b><font size="2">In 2002, the Company issued $305 million aggregate principal amount of
1.6155% senior convertible notes (Senior Convertible Notes), due September 24, 2032, at
a discount of 61.988% resulting in an effective yield of 4.25%. The carrying
value of these notes was $115.9 million at September 30, 2004 and December 31,
2003.&nbsp; The Senior Convertible Notes are
convertible at the option of the holders, if the conditions for conversion are
satisfied, into 12.9783 shares of the Company's common stock per $1,000
principal amount of notes surrendered at a conversion price of $29.29.&nbsp; The conditions for conversion are satisfied
when the price of the Company's common stock has maintained a 20% premium to
the conversion price of&nbsp; $29.29, or
$35.15, for 20 of 30 consecutive trading days ending on the last trading day of
a calendar quarter. As previously reported, the conditions of conversion were
met for the quarters ended March 31, 2004 (First Quarter 2004) and June 30,
2004 (Second Quarter 2004), and as such the holders were able to surrender the
Senior Convertible Notes for conversion into shares of common stock, or cash at the
Company's option, on any business day during the Second and Third quarters
2004, respectively. As of September 30, 2004, no such conversions had
occurred.&nbsp; On October 26, 2004, in
accordance with the provisions of the Indenture, the Company's Board of
Directors voted to permanently waive the stock price contingency provision.<br>
<br>
In accordance with the FASB Statements of Financial Accounting Standards No.
128 &quot;Earnings per share,&quot; the 3.9 million shares
issuable upon conversion of the Senior Convertible Notes have been included in the
diluted earnings per share calculation for Third Quarter and Nine Months
2004.&nbsp; Additionally, as a result of the
actions taken by the Board of Directors the shares issuable upon conversion of
the Senior Convertible Notes will continue to be included in the diluted earnings per
share calculation until the Senior Convertible Notes reach maturity or are otherwise
extinguished.&nbsp; <br>
</font>
<p style="margin-top: 0; margin-bottom: 0" align="center"><font size="2">
<br>
10</font><hr color="#000080"><P STYLE="page-break-after: always"></P>
<p style="margin-top: 0; margin-bottom: 0"><font size="2"><br clear=all>
On October 13, 2004, the FASB ratified EITF Issue No. 04-8, &quot;The Effect of
Contingently Convertible Instruments on Diluted Earnings per Share.&quot;&nbsp; EITF 04-8 will require that convertible
shares be included in the diluted earnings per share calculation upon issuance
of the instrument. This guidance is expected to become effective for periods
ending after December 15, 2004 and must be applied by restating all periods during
which the instrument was outstanding regardless of whether the market price
contingency was met or not. The implementation of this guidance is not
anticipated to have any impact on our 2004 diluted earnings per share
calculation, but it is likely to result in the restatement of our 2003 and 2002
diluted earnings per share calculations.<br>
<br>
The Senior Convertible Notes are redeemable by the Company in whole or in part, at any
time on or after September 24, 2007, at a price equal to the sum of the issue
price, plus the call premium, if any, plus accrued original issue discount and
accrued and unpaid cash interest, if any, on such Senior Convertible Notes to the
applicable redemption date. The holders of the Senior Convertible Notes may require
the Company to purchase all or a portion of their Senior Convertible Notes on either
September 24, 2009, 2012, 2017, 2022, or 2027 at stated prices plus accrued
cash interest, if any, to the purchase date. The Company may pay the purchase
price in cash or shares of Company common stock or in a combination of cash and
shares of Company common stock at the Company's option.<br>
<br>
<b>9.&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; Stockholders'
Equity<br>
</b>On November 4, 2003, the Board of Directors authorized a 2.5 million-share
common stock repurchase program scheduled to expire on November 30, 2005. The
Company acquired approximately 141,000 shares for $4.9 million under that
program during the Third Quarter and Nine Months 2004 leaving a remaining
authorization of 2.4 million shares.<br>
<br>
<b>10.&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; Segment
Information<br>
</b>The Company is primarily engaged in writing property and casualty
insurance. The Company has classified its business into three segments, which
is at the same level of disaggregation as that reviewed by senior management:
Insurance Operations (commercial lines underwriting, personal lines
underwriting), Investments, and Diversified Insurance Services (flood
insurance, human resource administration outsourcing and managed care).&nbsp; Insurance Operations are evaluated based on
accounting principles generally accepted in the United States of America (GAAP)
underwriting results, as well as statutory combined ratios.&nbsp; Investments are evaluated based on after-tax
investment returns, and the Diversified Insurance Services are evaluated based
on several measures including, but not limited to, results of operations in
accordance with GAAP.&nbsp; The Company does
not aggregate any of its operating segments.<br>
<br>
The GAAP underwriting results of the Insurance Operations segment are
determined taking into account net premiums earned, incurred losses and loss
expenses, policyholders dividends, policy acquisition costs and other
underwriting expenses. Management of the Investments segment is separate from
the Insurance Operations segment and, therefore, has been classified as a
separate segment. The operating results of the Investments segment takes into
account net investment income and net realized gains and losses.&nbsp; Also classified as a segment are the
Diversified Insurance Services operations, which are managed separately from
the other segments due to the fact that these businesses create a fee-based
source of revenue that is not dependent on insurance underwriting cycles.&nbsp;&nbsp; <br>
<br>
These businesses fit into our business model in one of two ways: complementary
(they share a common marketing or distribution system) or vertically (one company
uses the other's products or services in its own product or supply
output).&nbsp; The flood and HR administration
outsourcing products are sold through our independent agent distribution
channel, while our managed care businesses provide a service used by our
insurance claims operation, as well as by other insurance carriers. The segment
results are determined taking into account the net revenues generated in each
of the businesses, less the costs of operations.<br>
<br>
Selective and its subsidiaries provide services to each other in the normal
course of business.&nbsp; These transactions
totaled $7.8 million for Third Quarter 2004 and $21.3 million for Nine Months
2004, compared with $7.0 million for Third Quarter 2003 and $20.1 million for
Nine Months 2003.&nbsp; These transactions
were eliminated in all consolidated statements.<br>
<br>
In computing the results of each segment, no adjustment is made for interest
expense, net general corporate expenses or federal income taxes. The Company
does not maintain separate investment portfolios for the segments and,
therefore, does not allocate assets to the segments.<br>
</font></p>
<p style="margin-top: 0; margin-bottom: 0" align="center"><font size="2">11</font></p>
<hr color="#000080"><P STYLE="page-break-after: always"></P>
<p style="margin-top: 0; margin-bottom: 0"><font size="2"><br clear=all>The following summaries present revenues (net
investment income and net realized gains or losses in the case of the
Investments segment) and pre-tax income (loss) for the individual segments:</font></p>
<p style="margin-top: 0; margin-bottom: 0"></p>

<table border=0 cellspacing=0 cellpadding=0>
 <tr>
  <td width=622 colspan=10 valign=top>
  <div align=center><b>
  <hr size=1 width="100%" noshade color=black align=center>
  </b></div>
  </td>
 </tr>
 <tr>
  <td width=305 valign=top>

  </td>
  <td width=18 valign=top>

  </td>
  <td width=126 colspan=3 valign=top>
  <p align=center><b><font size="1">Unaudited, </font> </b></p>
  </td>
  <td width=18 valign=top>
  <p align=center><b><font size="1">&nbsp;</font></b></p>
  </td>
  <td width=18 valign=top>
  <p align=center><b><font size="1">&nbsp;</font></b></p>
  </td>
  <td width=136 colspan=3 valign=top>
  <p align=center><b><font size="1">Unaudited, </font> </b></p>
  </td>
 </tr>
 <tr>
  <td width=305 valign=top>
  <p><b><font size="1">Revenue by segment</font></b></p>
  </td>
  <td width=18 valign=top>

  </td>
  <td width=126 colspan=3 valign=top>
  <p align=center><b><font size="1">Quarter ended </font> </b></p>
  </td>
  <td width=18 valign=top>
  <p align=center><b><font size="1">&nbsp;</font></b></p>
  </td>
  <td width=18 valign=top>
  <p align=center><b><font size="1">&nbsp;</font></b></p>
  </td>
  <td width=136 colspan=3 valign=top>
  <p align=center><b><font size="1">Nine months ended</font></b></p>
  </td>
 </tr>
 <tr>
  <td width=305 valign=top>

  </td>
  <td width=18 valign=top>

  </td>
  <td width=126 colspan=3 valign=top>
  <p align=center><b><font size="1">September 30,</font></b></p>
  </td>
  <td width=18 valign=top>
  <p align=center><b><font size="1">&nbsp;</font></b></p>
  </td>
  <td width=18 valign=top>
  <p align=center><b><font size="1">&nbsp;</font></b></p>
  </td>
  <td width=136 colspan=3 valign=top>
  <p align=center><b><font size="1">September 30,</font></b></p>
  </td>
 </tr>
 <tr>
  <td width=305 valign=top>
  <p><font size="1">(in thousands)</font></p>
  </td>
  <td width=18 valign=top>

  </td>
  <td width=54 valign=top>
  <p align=center><b><font size="1">2004</font></b></p>
  </td>
  <td width=18 valign=top>
  <p align=center><b><font size="1">&nbsp;</font></b></p>
  </td>
  <td width=54 valign=top>
  <p align=center><b><font size="1">2003</font></b></p>
  </td>
  <td width=18 valign=top>
  <p><b><font size="1">&nbsp;</font></b></p>
  </td>
  <td width=18 valign=top>
  <p><b><font size="1">&nbsp;</font></b></p>
  </td>
  <td width=60 valign=top>
  <p align=center><b><font size="1">2004</font></b></p>
  </td>
  <td width=18 valign=top>
  <p align=center><b><font size="1">&nbsp;</font></b></p>
  </td>
  <td width=58 valign=top>
  <p align=center><b><font size="1">2003</font></b></p>
  </td>
 </tr>
 <tr>
  <td width=622 colspan=10 valign=top>
  <div align=center><b>
  <hr size=1 width="100%" noshade color=black align=center>
  </b></div>
  </td>
 </tr>
 <tr height=0>
  <td width=305></td>
  <td width=18></td>
  <td width=54></td>
  <td width=18></td>
  <td width=54></td>
  <td width=18></td>
  <td width=18></td>
  <td width=60></td>
  <td width=18></td>
  <td width=58></td>
 </tr>
</table>



<table border=0 cellspacing=0 cellpadding=0 style="word-spacing: 0; line-height: 100%; margin-top: 0; margin-bottom: 0">
 <tr>
  <td width=305 valign=top>
  <p><b><font size="1">Insurance Operations:</font></b></p>
  </td>
  <td width=18 valign=top>

  </td>
  <td width=54 valign=top>

  </td>
  <td width=18 valign=top>
  <p align=right><b><font size="1">&nbsp;</font></b></p>
  </td>
  <td width=54 valign=top>
  <p align=right><b><font size="1">&nbsp;</font></b></p>
  </td>
  <td width=18 valign=top>

  </td>
  <td width=18 valign=top>

  </td>
  <td width=60 valign=top>

  </td>
  <td width=17 valign=top>
  <p align=right><b><font size="1">&nbsp;</font></b></p>
  </td>
  <td width=59 valign=top>
  <p align=right><b><font size="1">&nbsp;</font></b></p>
  </td>
 </tr>
 <tr>
  <td width=305 valign=top>
  <p><font size="1">Commercial
  automobile net premiums earned</font></p>
  </td>
  <td width=18 valign=top>
  <p align=right><font size="1">$</font></p>
  </td>
  <td width=54 valign=top>
  <p align=right><font size="1">78,456&nbsp;</font></p>
  </td>
  <td width=18 valign=top>

  </td>
  <td width=54 valign=top>
  <p align=right><font size="1">65,258&nbsp;</font></p>
  </td>
  <td width=18 valign=top>

  </td>
  <td width=18 valign=top>
  <p align=right><font size="1">$</font></p>
  </td>
  <td width=60 valign=top>
  <p align=right><font size="1">225,323&nbsp;</font></p>
  </td>
  <td width=17 valign=top>

  </td>
  <td width=59 valign=top>
  <p align=right><font size="1">186,987&nbsp;</font></p>
  </td>
 </tr>
 <tr>
  <td width=305 valign=top>
  <p><font size="1">Workers'
  compensation net premiums earned</font></p>
  </td>
  <td width=18 valign=top>

  </td>
  <td width=54 valign=top>
  <p align=right><font size="1">67,003&nbsp;</font></p>
  </td>
  <td width=18 valign=top>

  </td>
  <td width=54 valign=top>
  <p align=right><font size="1">55,181&nbsp;</font></p>
  </td>
  <td width=18 valign=top>

  </td>
  <td width=18 valign=top>

  </td>
  <td width=60 valign=top>
  <p align=right><font size="1">195,872&nbsp;</font></p>
  </td>
  <td width=17 valign=top>

  </td>
  <td width=59 valign=top>
  <p align=right><font size="1">162,293&nbsp;</font></p>
  </td>
 </tr>
 <tr>
  <td width=305 valign=top>
  <p><font size="1">General
  liability net premiums earned</font></p>
  </td>
  <td width=18 valign=top>

  </td>
  <td width=54 valign=top>
  <p align=right><font size="1">79,125&nbsp;</font></p>
  </td>
  <td width=18 valign=top>

  </td>
  <td width=54 valign=top>
  <p align=right><font size="1">66,579&nbsp;</font></p>
  </td>
  <td width=18 valign=top>

  </td>
  <td width=18 valign=top>

  </td>
  <td width=60 valign=top>
  <p align=right><font size="1">227,648&nbsp;</font></p>
  </td>
  <td width=17 valign=top>

  </td>
  <td width=59 valign=top>
  <p align=right><font size="1">188,898&nbsp;</font></p>
  </td>
 </tr>
 <tr>
  <td width=305 valign=top>
  <p><font size="1">Commercial
  property net premiums earned</font></p>
  </td>
  <td width=18 valign=top>

  </td>
  <td width=54 valign=top>
  <p align=right><font size="1">38,970&nbsp;</font></p>
  </td>
  <td width=18 valign=top>

  </td>
  <td width=54 valign=top>
  <p align=right><font size="1">34,048&nbsp;</font></p>
  </td>
  <td width=18 valign=top>

  </td>
  <td width=18 valign=top>

  </td>
  <td width=60 valign=top>
  <p align=right><font size="1">113,139&nbsp;</font></p>
  </td>
  <td width=17 valign=top>

  </td>
  <td width=59 valign=top>
  <p align=right><font size="1">94,584&nbsp;</font></p>
  </td>
 </tr>
 <tr>
  <td width=305 valign=top>
  <p><font size="1">Business
  owners' policy net premiums earned</font></p>
  </td>
  <td width=18 valign=top>

  </td>
  <td width=54 valign=top>
  <p align=right><font size="1">12,534&nbsp;</font></p>
  </td>
  <td width=18 valign=top>

  </td>
  <td width=54 valign=top>
  <p align=right><font size="1">11,318&nbsp;</font></p>
  </td>
  <td width=18 valign=top>

  </td>
  <td width=18 valign=top>

  </td>
  <td width=60 valign=top>
  <p align=right><font size="1">37,249&nbsp;</font></p>
  </td>
  <td width=17 valign=top>

  </td>
  <td width=59 valign=top>
  <p align=right><font size="1">32,223&nbsp;</font></p>
  </td>
 </tr>
 <tr>
  <td width=305 valign=top>
  <p><font size="1">Bonds
  net premiums earned</font></p>
  </td>
  <td width=18 valign=top>

  </td>
  <td width=54 valign=top>
  <p align=right><font size="1">3,331&nbsp;</font></p>
  </td>
  <td width=18 valign=top>

  </td>
  <td width=54 valign=top>
  <p align=right><font size="1">2,950&nbsp;</font></p>
  </td>
  <td width=18 valign=top>

  </td>
  <td width=18 valign=top>

  </td>
  <td width=60 valign=top>
  <p align=right><font size="1">9,549&nbsp;</font></p>
  </td>
  <td width=17 valign=top>

  </td>
  <td width=59 valign=top>
  <p align=right><font size="1">9,252&nbsp;</font></p>
  </td>
 </tr>
 <tr>
  <td width=305 valign=top>
  <p><font size="1">Other
  net premiums earned</font></p>
  </td>
  <td width=18 valign=top>

  </td>
  <td width=54 valign=top>
  <p align=right><font size="1">233&nbsp;</font></p>
  </td>
  <td width=18 valign=top>

  </td>
  <td width=54 valign=top>
  <p align=right><font size="1">230&nbsp;</font></p>
  </td>
  <td width=18 valign=top>

  </td>
  <td width=18 valign=top>

  </td>
  <td width=60 valign=top>
  <p align=right><font size="1">681&nbsp;</font></p>
  </td>
  <td width=17 valign=top>

  </td>
  <td width=59 valign=top>
  <p align=right><font size="1">674&nbsp;</font></p>
  </td>
 </tr>
 <tr>
  <td width=305 valign=top>

  </td>
  <td width=18 valign=top>

  </td>
  <td width=54 valign=top>
  <div align=right>
  <hr size=1 width="95%" noshade color=gray align=right>
  </div>
  </td>
  <td width=18 valign=top>

  </td>
  <td width=54 valign=top>
  <div align=right>
  <hr size=1 width="95%" noshade color=gray align=right>
  </div>
  </td>
  <td width=18 valign=top>

  </td>
  <td width=18 valign=top>

  </td>
  <td width=60 valign=top>
  <div align=right>
  <hr size=1 width="95%" noshade color=gray align=right>
  </div>
  </td>
  <td width=17 valign=top>

  </td>
  <td width=59 valign=top>
  <div align=right>
  <hr size=1 width="95%" noshade color=gray align=right>
  </div>
  </td>
 </tr>
 <tr>
  <td width=305 valign=top>
  <p><font size="1">Total commercial
  lines net premiums earned</font></p>
  </td>
  <td width=18 valign=top>

  </td>
  <td width=54 valign=top>
  <p align=right><font size="1">279,652&nbsp;</font></p>
  </td>
  <td width=18 valign=top>

  </td>
  <td width=54 valign=top>
  <p align=right><font size="1">235,564&nbsp;</font></p>
  </td>
  <td width=18 valign=top>

  </td>
  <td width=18 valign=top>

  </td>
  <td width=60 valign=top>
  <p align=right><font size="1">809,461&nbsp;</font></p>
  </td>
  <td width=17 valign=top>

  </td>
  <td width=59 valign=top>
  <p align=right><font size="1">674,911&nbsp;</font></p>
  </td>
 </tr>
 <tr>
  <td width=305 valign=top>

  </td>
  <td width=18 valign=top>

  </td>
  <td width=54 valign=top>

  </td>
  <td width=18 valign=top>

  </td>
  <td width=54 valign=top>

  </td>
  <td width=18 valign=top>

  </td>
  <td width=18 valign=top>

  </td>
  <td width=60 valign=top>

  </td>
  <td width=17 valign=top>

  </td>
  <td width=59 valign=top>

  </td>
 </tr>
 <tr>
  <td width=305 valign=top>
  &nbsp;</td>
  <td width=18 valign=top>

  &nbsp;</td>
  <td width=54 valign=top>
  &nbsp;</td>
  <td width=18 valign=top>

  &nbsp;</td>
  <td width=54 valign=top>
  &nbsp;</td>
  <td width=18 valign=top>

  &nbsp;</td>
  <td width=18 valign=top>

  &nbsp;</td>
  <td width=60 valign=top>
  &nbsp;</td>
  <td width=17 valign=top>

  &nbsp;</td>
  <td width=59 valign=top>
  &nbsp;</td>
 </tr>
 <tr>
  <td width=305 valign=top>
  <p><font size="1">Personal
  automobile net premiums earned</font></p>
  </td>
  <td width=18 valign=top>

  </td>
  <td width=54 valign=top>
  <p align=right><font size="1">47,076&nbsp;</font></p>
  </td>
  <td width=18 valign=top>

  </td>
  <td width=54 valign=top>
  <p align=right><font size="1">44,608&nbsp;</font></p>
  </td>
  <td width=18 valign=top>

  </td>
  <td width=18 valign=top>

  </td>
  <td width=60 valign=top>
  <p align=right><font size="1">138,926&nbsp;</font></p>
  </td>
  <td width=17 valign=top>

  </td>
  <td width=59 valign=top>
  <p align=right><font size="1">130,771&nbsp;</font></p>
  </td>
 </tr>
 <tr>
  <td width=305 valign=top>
  <p><font size="1">Homeowners' net
  premiums earned</font></p>
  </td>
  <td width=18 valign=top>

  </td>
  <td width=54 valign=top>
  <p align=right><font size="1">8,700&nbsp;</font></p>
  </td>
  <td width=18 valign=top>

  </td>
  <td width=54 valign=top>
  <p align=right><font size="1">8,025&nbsp;</font></p>
  </td>
  <td width=18 valign=top>

  </td>
  <td width=18 valign=top>

  </td>
  <td width=60 valign=top>
  <p align=right><font size="1">25,468&nbsp;</font></p>
  </td>
  <td width=17 valign=top>

  </td>
  <td width=59 valign=top>
  <p align=right><font size="1">23,059&nbsp;</font></p>
  </td>
 </tr>
 <tr>
  <td width=305 valign=top>
  <p><font size="1">Other net
  premiums earned</font></p>
  </td>
  <td width=18 valign=top>

  </td>
  <td width=54 valign=top>
  <p align=right><font size="1">1,646&nbsp;</font></p>
  </td>
  <td width=18 valign=top>

  </td>
  <td width=54 valign=top>
  <p align=right><font size="1">1,484&nbsp;</font></p>
  </td>
  <td width=18 valign=top>

  </td>
  <td width=18 valign=top>

  </td>
  <td width=60 valign=top>
  <p align=right><font size="1">4,511&nbsp;</font></p>
  </td>
  <td width=17 valign=top>

  </td>
  <td width=59 valign=top>
  <p align=right><font size="1">4,126&nbsp;</font></p>
  </td>
 </tr>
 <tr>
  <td width=305 valign=top>

  </td>
  <td width=18 valign=top>

  </td>
  <td width=54 valign=top>
  <div align=right>
  <hr size=1 width="95%" noshade color=gray align=right>
  </div>
  </td>
  <td width=18 valign=top>

  </td>
  <td width=54 valign=top>
  <div align=right>
  <hr size=1 width="95%" noshade color=gray align=right>
  </div>
  </td>
  <td width=18 valign=top>

  </td>
  <td width=18 valign=top>

  </td>
  <td width=60 valign=top>
  <div align=right>
  <hr size=1 width="95%" noshade color=gray align=right>
  </div>
  </td>
  <td width=17 valign=top>

  </td>
  <td width=59 valign=top>
  <div align=right>
  <hr size=1 width="95%" noshade color=gray align=right>
  </div>
  </td>
 </tr>
 <tr>
  <td width=305 valign=top>
  <p><font size="1">Total personal
  lines net premiums earned</font></p>
  </td>
  <td width=18 valign=top>

  </td>
  <td width=54 valign=top>
  <p align=right><font size="1">57,422&nbsp;</font></p>
  </td>
  <td width=18 valign=top>

  </td>
  <td width=54 valign=top>
  <p align=right><font size="1">54,117&nbsp;</font></p>
  </td>
  <td width=18 valign=top>

  </td>
  <td width=18 valign=top>

  </td>
  <td width=60 valign=top>
  <p align=right><font size="1">168,905&nbsp;</font></p>
  </td>
  <td width=17 valign=top>

  </td>
  <td width=59 valign=top>
  <p align=right><font size="1">157,956&nbsp;</font></p>
  </td>
 </tr>
 <tr>
  <td width=305 valign=top>

  </td>
  <td width=18 valign=top>

  </td>
  <td width=54 valign=top>

  </td>
  <td width=18 valign=top>

  </td>
  <td width=54 valign=top>

  </td>
  <td width=18 valign=top>

  </td>
  <td width=18 valign=top>

  </td>
  <td width=60 valign=top>

  </td>
  <td width=17 valign=top>

  </td>
  <td width=59 valign=top>

  </td>
 </tr>
 <tr>
  <td width=305 valign=top>
  &nbsp;</td>
  <td width=18 valign=top>

  &nbsp;</td>
  <td width=54 valign=top>
  &nbsp;</td>
  <td width=18 valign=top>

  &nbsp;</td>
  <td width=54 valign=top>
  &nbsp;</td>
  <td width=18 valign=top>

  &nbsp;</td>
  <td width=18 valign=top>

  &nbsp;</td>
  <td width=60 valign=top>
  &nbsp;</td>
  <td width=17 valign=top>

  &nbsp;</td>
  <td width=59 valign=top>
  &nbsp;</td>
 </tr>
 <tr>
  <td width=305 valign=top>
  <p><font size="1">Miscellaneous
  income</font></p>
  </td>
  <td width=18 valign=top>

  </td>
  <td width=54 valign=top>
  <p align=right><font size="1">674&nbsp;</font></p>
  </td>
  <td width=18 valign=top>

  </td>
  <td width=54 valign=top>
  <p align=right><font size="1">838&nbsp;</font></p>
  </td>
  <td width=18 valign=top>

  </td>
  <td width=18 valign=top>

  </td>
  <td width=60 valign=top>
  <p align=right><font size="1">2,163&nbsp;</font></p>
  </td>
  <td width=17 valign=top>

  </td>
  <td width=59 valign=top>
  <p align=right><font size="1">2,177&nbsp;</font></p>
  </td>
 </tr>
 <tr>
  <td width=305 valign=top>

  </td>
  <td width=18 valign=top>

  </td>
  <td width=54 valign=top>
  <div align=right>
  <hr size=1 width="95%" noshade color=gray align=right>
  </div>
  </td>
  <td width=18 valign=top>

  </td>
  <td width=54 valign=top>
  <div align=right>
  <hr size=1 width="95%" noshade color=gray align=right>
  </div>
  </td>
  <td width=18 valign=top>

  </td>
  <td width=18 valign=top>

  </td>
  <td width=60 valign=top>
  <div align=right>
  <hr size=1 width="95%" noshade color=gray align=right>
  </div>
  </td>
  <td width=17 valign=top>

  </td>
  <td width=59 valign=top>
  <div align=right>
  <hr size=1 width="95%" noshade color=gray align=right>
  </div>
  </td>
 </tr>
 <tr>
  <td width=305 valign=top>
  <p><font size="1">Total insurance
  operations revenues</font></p>
  </td>
  <td width=18 valign=top>

  </td>
  <td width=54 valign=top>
  <p align=right><font size="1">337,748&nbsp;</font></p>
  </td>
  <td width=18 valign=top>

  </td>
  <td width=54 valign=top>
  <p align=right><font size="1">290,519&nbsp;</font></p>
  </td>
  <td width=18 valign=top>

  </td>
  <td width=18 valign=top>

  </td>
  <td width=60 valign=top>
  <p align=right><font size="1">980,529&nbsp;</font></p>
  </td>
  <td width=17 valign=top>

  </td>
  <td width=59 valign=top>
  <p align=right><font size="1">835,044&nbsp;</font></p>
  </td>
 </tr>
 <tr>
  <td width=305 valign=top>

  </td>
  <td width=18 valign=top>

  </td>
  <td width=54 valign=top>

  </td>
  <td width=18 valign=top>

  </td>
  <td width=54 valign=top>

  </td>
  <td width=18 valign=top>

  </td>
  <td width=18 valign=top>

  </td>
  <td width=60 valign=top>

  </td>
  <td width=17 valign=top>

  </td>
  <td width=59 valign=top>

  </td>
 </tr>
 <tr>
  <td width=305 valign=top>
  &nbsp;</td>
  <td width=18 valign=top>

  &nbsp;</td>
  <td width=54 valign=top>

  &nbsp;</td>
  <td width=18 valign=top>

  &nbsp;</td>
  <td width=54 valign=top>

  &nbsp;</td>
  <td width=18 valign=top>

  &nbsp;</td>
  <td width=18 valign=top>

  &nbsp;</td>
  <td width=60 valign=top>

  &nbsp;</td>
  <td width=17 valign=top>

  &nbsp;</td>
  <td width=59 valign=top>

  &nbsp;</td>
 </tr>
 <tr>
  <td width=305 valign=top>
  <p><b><font size="1">Investments:</font></b></p>
  </td>
  <td width=18 valign=top>

  </td>
  <td width=54 valign=top>

  </td>
  <td width=18 valign=top>

  </td>
  <td width=54 valign=top>

  </td>
  <td width=18 valign=top>

  </td>
  <td width=18 valign=top>

  </td>
  <td width=60 valign=top>

  </td>
  <td width=17 valign=top>

  </td>
  <td width=59 valign=top>

  </td>
 </tr>
 <tr>
  <td width=305 valign=top>
  <p><font size="1">Net investment
  income</font></p>
  </td>
  <td width=18 valign=top>

  </td>
  <td width=54 valign=top>
  <p align=right><font size="1">29,146&nbsp;</font></p>
  </td>
  <td width=18 valign=top>

  </td>
  <td width=54 valign=top>
  <p align=right><font size="1">27,324&nbsp;</font></p>
  </td>
  <td width=18 valign=top>

  </td>
  <td width=18 valign=top>

  </td>
  <td width=60 valign=top>
  <p align=right><font size="1">87,268&nbsp;</font></p>
  </td>
  <td width=17 valign=top>

  </td>
  <td width=59 valign=top>
  <p align=right><font size="1">84,103&nbsp;</font></p>
  </td>
 </tr>
 <tr>
  <td width=305 valign=top>
  <p><font size="1">Net realized gain on
  investments</font></p>
  </td>
  <td width=18 valign=top>

  </td>
  <td width=54 valign=top>
  <p align=right><font size="1">1,631&nbsp;</font></p>
  </td>
  <td width=18 valign=top>

  </td>
  <td width=54 valign=top>
  <p align=right><font size="1">1,029&nbsp;</font></p>
  </td>
  <td width=18 valign=top>

  </td>
  <td width=18 valign=top>

  </td>
  <td width=60 valign=top>
  <p align=right><font size="1">7,131&nbsp;</font></p>
  </td>
  <td width=17 valign=top>

  </td>
  <td width=59 valign=top>
  <p align=right><font size="1">8,373&nbsp;</font></p>
  </td>
 </tr>
 <tr>
  <td width=305 valign=top>

  </td>
  <td width=18 valign=top>

  </td>
  <td width=54 valign=top>
  <div align=right>
  <hr size=1 width="95%" noshade color=gray align=right>
  </div>
  </td>
  <td width=18 valign=top>

  </td>
  <td width=54 valign=top>
  <div align=right>
  <hr size=1 width="95%" noshade color=gray align=right>
  </div>
  </td>
  <td width=18 valign=top>

  </td>
  <td width=18 valign=top>

  </td>
  <td width=60 valign=top>
  <div align=right>
  <hr size=1 width="95%" noshade color=gray align=right>
  </div>
  </td>
  <td width=17 valign=top>

  </td>
  <td width=59 valign=top>
  <div align=right>
  <hr size=1 width="95%" noshade color=gray align=right>
  </div>
  </td>
 </tr>
 <tr>
  <td width=305 valign=top>
  <p><font size="1">Total investment
  revenues</font></p>
  </td>
  <td width=18 valign=top>

  </td>
  <td width=54 valign=top>
  <p align=right><font size="1">30,777&nbsp;</font></p>
  </td>
  <td width=18 valign=top>

  </td>
  <td width=54 valign=top>
  <p align=right><font size="1">28,353&nbsp;</font></p>
  </td>
  <td width=18 valign=top>

  </td>
  <td width=18 valign=top>

  </td>
  <td width=60 valign=top>
  <p align=right><font size="1">94,399&nbsp;</font></p>
  </td>
  <td width=17 valign=top>

  </td>
  <td width=59 valign=top>
  <p align=right><font size="1">92,476&nbsp;</font></p>
  </td>
 </tr>
 <tr>
  <td width=305 valign=top>

  </td>
  <td width=18 valign=top>

  </td>
  <td width=54 valign=top>

  </td>
  <td width=18 valign=top>

  </td>
  <td width=54 valign=top>

  </td>
  <td width=18 valign=top>

  </td>
  <td width=18 valign=top>

  </td>
  <td width=60 valign=top>

  </td>
  <td width=17 valign=top>

  </td>
  <td width=59 valign=top>

  </td>
 </tr>
 <tr>
  <td width=305 valign=top>
  &nbsp;</td>
  <td width=18 valign=top>
  &nbsp;</td>
  <td width=54 valign=top>

  &nbsp;</td>
  <td width=18 valign=top>
  &nbsp;</td>
  <td width=54 valign=top>

  &nbsp;</td>
  <td width=18 valign=top>

  &nbsp;</td>
  <td width=18 valign=top>

  &nbsp;</td>
  <td width=60 valign=top>

  &nbsp;</td>
  <td width=17 valign=top>
  &nbsp;</td>
  <td width=59 valign=top>

  &nbsp;</td>
 </tr>
 <tr>
  <td width=305 valign=top>
  <p style="margin-top: 0; margin-bottom: 0"><b><font size="1">Diversified Insurance Services:</font></b></p>
  </td>
  <td width=18 valign=top>
  <p align=right style="margin-top: 0; margin-bottom: 0"><b><font size="1">&nbsp;</font></b></p>
  </td>
  <td width=54 valign=top>

  <p style="margin-top: 0; margin-bottom: 0">

  </td>
  <td width=18 valign=top>
  <p align=right style="margin-top: 0; margin-bottom: 0">&nbsp;</p>
  </td>
  <td width=54 valign=top>

  <p style="margin-top: 0; margin-bottom: 0">

  </td>
  <td width=18 valign=top>

  <p style="margin-top: 0; margin-bottom: 0">

  </td>
  <td width=18 valign=top>

  <p style="margin-top: 0; margin-bottom: 0">

  </td>
  <td width=60 valign=top>

  <p style="margin-top: 0; margin-bottom: 0">

  </td>
  <td width=17 valign=top>
  <p align=right style="margin-top: 0; margin-bottom: 0">&nbsp;</p>
  </td>
  <td width=59 valign=top>

  <p style="margin-top: 0; margin-bottom: 0">

  </td>
 </tr>
 <tr>
  <td width=305 valign=top>
  <p><font size="1">Human resource
  administration outsourcing</font></p>
  </td>
  <td width=18 valign=top>
  <p align=right><b><font size="1">&nbsp;</font></b></p>
  </td>
  <td width=54 valign=top>
  <p align=right><font size="1">13,448&nbsp;</font></p>
  </td>
  <td width=18 valign=top>
  <p align=right><font size="1">&nbsp;</font></p>
  </td>
  <td width=54 valign=top>
  <p align=right><font size="1">11,137&nbsp;</font></p>
  </td>
  <td width=18 valign=top>

  </td>
  <td width=18 valign=top>

  </td>
  <td width=60 valign=top>
  <p align=right><font size="1">39,809&nbsp;</font></p>
  </td>
  <td width=17 valign=top>
  <p align=right><font size="1">&nbsp;</font></p>
  </td>
  <td width=59 valign=top>
  <p align=right><font size="1">32,453&nbsp;</font></p>
  </td>
 </tr>
 <tr>
  <td width=305 valign=top>
  <font size="1">Flood insurance</font></td>
  <td width=18 valign=top>
  <p align=right><b><font size="1">&nbsp;</font></b></p>
  </td>
  <td width=54 valign=top>
  <p align=right><font size="1">8,992&nbsp;</font></p>
  </td>
  <td width=18 valign=top>
  <p align=right><font size="1">&nbsp;</font></p>
  </td>
  <td width=54 valign=top>
  <p align=right><font size="1">7,386&nbsp;</font></p>
  </td>
  <td width=18 valign=top>

  </td>
  <td width=18 valign=top>

  </td>
  <td width=60 valign=top>
  <p align=right><font size="1">21,952&nbsp;</font></p>
  </td>
  <td width=17 valign=top>
  <p align=right><font size="1">&nbsp;</font></p>
  </td>
  <td width=59 valign=top>
  <p align=right><font size="1">17,917&nbsp;</font></p>
  </td>
 </tr>
 <tr>
  <td width=305 valign=top>
  <p><font size="1">Managed care</font></p>
  </td>
  <td width=18 valign=top>
  <p align=right><b><font size="1">&nbsp;</font></b></p>
  </td>
  <td width=54 valign=top>
  <p align=right><font size="1">4,536&nbsp;</font></p>
  </td>
  <td width=18 valign=top>
  <p align=right><font size="1">&nbsp;</font></p>
  </td>
  <td width=54 valign=top>
  <p align=right><font size="1">5,375&nbsp;</font></p>
  </td>
  <td width=18 valign=top>

  </td>
  <td width=18 valign=top>

  </td>
  <td width=60 valign=top>
  <p align=right><font size="1">14,613&nbsp;</font></p>
  </td>
  <td width=17 valign=top>
  <p align=right><font size="1">&nbsp;</font></p>
  </td>
  <td width=59 valign=top>
  <p align=right><font size="1">17,412&nbsp;</font></p>
  </td>
 </tr>
 <tr>
  <td width=305 valign=top>
  <p><font size="1">Other</font></p>
  </td>
  <td width=18 valign=top>
  <p align=right><b><font size="1">&nbsp;</font></b></p>
  </td>
  <td width=54 valign=top>
  <p align=right><font size="1">672&nbsp;</font></p>
  </td>
  <td width=18 valign=top>
  <p align=right><font size="1">&nbsp;</font></p>
  </td>
  <td width=54 valign=top>
  <p align=right><font size="1">555&nbsp;</font></p>
  </td>
  <td width=18 valign=top>

  </td>
  <td width=18 valign=top>

  </td>
  <td width=60 valign=top>
  <p align=right><font size="1">1,900&nbsp;</font></p>
  </td>
  <td width=17 valign=top>
  <p align=right><font size="1">&nbsp;</font></p>
  </td>
  <td width=59 valign=top>
  <p align=right><font size="1">1,490&nbsp;</font></p>
  </td>
 </tr>
 <tr>
  <td width=305 valign=top>

  </td>
  <td width=18 valign=top>

  </td>
  <td width=54 valign=top>
  <div align=right>
  <hr size=1 width="95%" noshade color=gray align=right>
  </div>
  </td>
  <td width=18 valign=top>

  </td>
  <td width=54 valign=top>
  <div align=right>
  <hr size=1 width="95%" noshade color=gray align=right>
  </div>
  </td>
  <td width=18 valign=top>

  </td>
  <td width=18 valign=top>

  </td>
  <td width=60 valign=top>
  <div align=right>
  <hr size=1 width="95%" noshade color=gray align=right>
  </div>
  </td>
  <td width=17 valign=top>

  </td>
  <td width=59 valign=top>
  <div align=right>
  <hr size=1 width="95%" noshade color=gray align=right>
  </div>
  </td>
 </tr>
 <tr>
  <td width=305 valign=top>
  <p><font size="1">Total diversified insurance
  services revenues</font></p>
  </td>
  <td width=18 valign=top>

  </td>
  <td width=54 valign=top>
  <p align=right><font size="1">27,648&nbsp;</font></p>
  </td>
  <td width=18 valign=top>

  </td>
  <td width=54 valign=top>
  <p align=right><font size="1">24,453&nbsp;</font></p>
  </td>
  <td width=18 valign=top>

  </td>
  <td width=18 valign=top>

  </td>
  <td width=60 valign=top>
  <p align=right><font size="1">78,274&nbsp;</font></p>
  </td>
  <td width=17 valign=top>

  </td>
  <td width=59 valign=top>
  <p align=right><font size="1">69,272&nbsp;</font></p>
  </td>
 </tr>
 <tr>
  <td width=305 valign=top>

  </td>
  <td width=18 valign=top>

  </td>
  <td width=54 valign=top>
  <div align=right>
  <hr size=1 width="95%" noshade color=gray align=right>
  </div>
  </td>
  <td width=18 valign=top>

  </td>
  <td width=54 valign=top>
  <div align=right>
  <hr size=1 width="95%" noshade color=gray align=right>
  </div>
  </td>
  <td width=18 valign=top>

  </td>
  <td width=18 valign=top>

  </td>
  <td width=60 valign=top>
  <div align=right>
  <hr size=1 width="95%" noshade color=gray align=right>
  </div>
  </td>
  <td width=17 valign=top>

  </td>
  <td width=59 valign=top>
  <div align=right>
  <hr size=1 width="95%" noshade color=gray align=right>
  </div>
  </td>
 </tr>
 <tr>
  <td width=305 valign=top>
  <p><b><font size="1">Total all segments</font></b></p>
  </td>
  <td width=18 valign=top>

  </td>
  <td width=54 valign=top>
  <p align=right><font size="1">396,173&nbsp;</font></p>
  </td>
  <td width=18 valign=top>

  </td>
  <td width=54 valign=top>
  <p align=right><font size="1">343,325&nbsp;</font></p>
  </td>
  <td width=18 valign=top>

  </td>
  <td width=18 valign=top>

  </td>
  <td width=60 valign=top>
  <p align=right><font size="1">1,153,202&nbsp;</font></p>
  </td>
  <td width=17 valign=top>

  </td>
  <td width=59 valign=top>
  <p align=right><font size="1">996,792&nbsp;</font></p>
  </td>
 </tr>
 <tr>
  <td width=305 valign=top>
  <p><b><font size="1">&nbsp;</font></b></p>
  </td>
  <td width=18 valign=top>

  </td>
  <td width=54 valign=top>
  <div align=right>
  <hr size=1 width="95%" noshade color=gray align=right>
  </div>
  </td>
  <td width=18 valign=top>

  </td>
  <td width=54 valign=top>
  <div align=right>
  <hr size=1 width="95%" noshade color=gray align=right>
  </div>
  </td>
  <td width=18 valign=top>

  </td>
  <td width=18 valign=top>

  </td>
  <td width=60 valign=top>
  <div align=right>
  <hr size=1 width="95%" noshade color=gray align=right>
  </div>
  </td>
  <td width=17 valign=top>

  </td>
  <td width=59 valign=top>
  <div align=right>
  <hr size=1 width="95%" noshade color=gray align=right>
  </div>
  </td>
 </tr>
 <tr>
  <td width=305 valign=top>
  <p><font size="1">Other income</font></p>
  </td>
  <td width=18 valign=top>

  </td>
  <td width=54 valign=top>
  <p align=right><font size="1">14&nbsp;</font></p>
  </td>
  <td width=18 valign=top>

  </td>
  <td width=54 valign=top>
  <p align=right><font size="1">17&nbsp;</font></p>
  </td>
  <td width=18 valign=top>

  </td>
  <td width=18 valign=top>

  </td>
  <td width=60 valign=top>
  <p align=right><font size="1">242&nbsp;</font></p>
  </td>
  <td width=17 valign=top>

  </td>
  <td width=59 valign=top>
  <p align=right><font size="1">122&nbsp;</font></p>
  </td>
 </tr>
 <tr>
  <td width=305 valign=top>

  </td>
  <td width=18 valign=top>

  </td>
  <td width=54 valign=top>
  <div align=right>
  <hr size=1 width="95%" noshade color=gray align=right>
  </div>
  </td>
  <td width=18 valign=top>

  </td>
  <td width=54 valign=top>
  <div align=right>
  <hr size=1 width="95%" noshade color=gray align=right>
  </div>
  </td>
  <td width=18 valign=top>

  </td>
  <td width=18 valign=top>

  </td>
  <td width=60 valign=top>
  <div align=right>
  <hr size=1 width="95%" noshade color=gray align=right>
  </div>
  </td>
  <td width=17 valign=top>

  </td>
  <td width=59 valign=top>
  <div align=right>
  <hr size=1 width="95%" noshade color=gray align=right>
  </div>
  </td>
 </tr>
 <tr>
  <td width=305 valign=top>
  <p><b><font size="1">Total revenues</font></b></p>
  </td>
  <td width=18 valign=top>
  <p align=right><font size="1">$</font></p>
  </td>
  <td width=54 valign=top>
  <p align=right><font size="1">396,187&nbsp;</font></p>
  </td>
  <td width=18 valign=top>

  </td>
  <td width=54 valign=top>
  <p align=right><font size="1">343,342&nbsp;</font></p>
  </td>
  <td width=18 valign=top>

  </td>
  <td width=18 valign=top>
  <p align=right><font size="1">$</font></p>
  </td>
  <td width=60 valign=top>
  <p align=right><font size="1">1,153,444&nbsp;</font></p>
  </td>
  <td width=17 valign=top>

  </td>
  <td width=59 valign=top>
  <p align=right><font size="1">996,914&nbsp;</font></p>
  </td>
 </tr>
 <tr>
  <td width=305 valign=top>

  </td>
  <td width=18 valign=top>

  </td>
  <td width=54 valign=top>
  <p align=right>======</p>
  </td>
  <td width=18 valign=top>

  </td>
  <td width=54 valign=top>
  <p align=right>======</p>
  </td>
  <td width=18 valign=top>

  </td>
  <td width=18 valign=top>

  </td>
  <td width=60 valign=top>
  <p align=right>=======</p>
  </td>
  <td width=17 valign=top>

  </td>
  <td width=59 valign=top>
  <p align=right>======</p>
  </td>
 </tr>
</table>

<p align="center">&nbsp;</p>
<p align="center"><font size="2">12</font></p>

<hr color="#000080"><P STYLE="page-break-after: always"></P><br clear=all>




<table border=0 cellspacing=0 cellpadding=0 style="word-spacing: 0; line-height: 100%; margin-top: 0; margin-bottom: 0">
 <tr>
  <td width=615 colspan=10 valign=top>
  <div align=center><b>
  <hr size=1 width="100%" noshade color=black align=center>
  </b></div>
  </td>
 </tr>
 <tr>
  <td width=301 valign=top>&nbsp;</td>
  <td width=19 valign=top>

  <p style="margin-top: 0; margin-bottom: 0">

  </td>
  <td width=119 colspan=3 valign=top>
  <p align=center style="margin-top: 0; margin-bottom: 0"><b><font size="1">Unaudited,
  </font> </b></p>
  </td>
  <td width=24 valign=top>
  <p align=center style="margin-top: 0; margin-bottom: 0"><b><font size="1">&nbsp;</font></b></p>
  </td>
  <td width=18 valign=top>
  <p align=center style="margin-top: 0; margin-bottom: 0"><b><font size="1">&nbsp;</font></b></p>
  </td>
  <td width=134 colspan=3 valign=top>
  <p align=center style="margin-top: 0; margin-bottom: 0"><b><font size="1">Unaudited,</font></b></p>
  </td>
 </tr>
 <tr>
  <td width=301 valign=top>
  <p style="margin-top: 0; margin-bottom: 0"><b><font size="1">Income (loss), before
  federal income tax by segment</font></b></p>
  </td>
  <td width=19 valign=top>

  <p style="margin-top: 0; margin-bottom: 0">

  </td>
  <td width=119 colspan=3 valign=top>
  <p align=center style="margin-top: 0; margin-bottom: 0"><b><font size="1">Quarter ended</font></b></p>
  </td>
  <td width=24 valign=top>
  <p align=center style="margin-top: 0; margin-bottom: 0"><b><font size="1">&nbsp;</font></b></p>
  </td>
  <td width=18 valign=top>
  <p align=center style="margin-top: 0; margin-bottom: 0"><b><font size="1">&nbsp;</font></b></p>
  </td>
  <td width=134 colspan=3 valign=top>
  <p align=center style="margin-top: 0; margin-bottom: 0"><b><font size="1">Nine months ended</font></b></p>
  </td>
 </tr>
 <tr>
  <td width=301 valign=top>

  <p style="margin-top: 0; margin-bottom: 0">

  </td>
  <td width=19 valign=top>

  <p style="margin-top: 0; margin-bottom: 0">

  </td>
  <td width=119 colspan=3 valign=top>
  <p align=center style="margin-top: 0; margin-bottom: 0"><b><font size="1">September 30,</font></b></p>
  </td>
  <td width=24 valign=top>
  <p align=center style="margin-top: 0; margin-bottom: 0"><b><font size="1">&nbsp;</font></b></p>
  </td>
  <td width=18 valign=top>
  <p align=center style="margin-top: 0; margin-bottom: 0"><b><font size="1">&nbsp;</font></b></p>
  </td>
  <td width=134 colspan=3 valign=top>
  <p align=center style="margin-top: 0; margin-bottom: 0"><b><font size="1">September 30,</font></b></p>
  </td>
 </tr>
 <tr>
  <td width=301 valign=top>
  <p style="margin-top: 0; margin-bottom: 0"><font size="1">(in thousands)</font></p>
  </td>
  <td width=19 valign=top>

  <p style="margin-top: 0; margin-bottom: 0">

  </td>
  <td width=54 valign=top>
  <p align=center style="margin-top: 0; margin-bottom: 0"><b><font size="1">2004</font></b></p>
  </td>
  <td width=18 valign=top>
  <p align=center style="margin-top: 0; margin-bottom: 0"><b><font size="1">&nbsp;</font></b></p>
  </td>
  <td width=47 valign=top>
  <p align=center style="margin-top: 0; margin-bottom: 0"><b><font size="1">2003</font></b></p>
  </td>
  <td width=24 valign=top>
  <p align=center style="margin-top: 0; margin-bottom: 0"><b><font size="1">&nbsp;</font></b></p>
  </td>
  <td width=18 valign=top>
  <p style="margin-top: 0; margin-bottom: 0"><b><font size="1">&nbsp;</font></b></p>
  </td>
  <td width=54 valign=top>
  <p align=center style="margin-top: 0; margin-bottom: 0"><b><font size="1">2004</font></b></p>
  </td>
  <td width=24 valign=top>
  <p align=center style="margin-top: 0; margin-bottom: 0"><b><font size="1">&nbsp;</font></b></p>
  </td>
  <td width=56 valign=top>
  <p align=center style="margin-top: 0; margin-bottom: 0"><b><font size="1">2003</font></b></p>
  </td>
 </tr>
 <tr>
  <td width=615 colspan=10 valign=top>
  <div align=center><b>
  <hr size=1 width="100%" noshade color=black align=center>
  </b></div>
  </td>
 </tr>
 <tr height=0>
  <td width=301></td>
  <td width=19></td>
  <td width=54></td>
  <td width=18></td>
  <td width=47></td>
  <td width=24></td>
  <td width=18></td>
  <td width=54></td>
  <td width=24></td>
  <td width=56></td>
 </tr>
</table>



<table border=0 cellspacing=0 cellpadding=0>
 <tr>
  <td width=300 valign=top>
  <p><b><font size="1">Insurance Operations:</font></b></p>
  </td>
  <td width=18 valign=top align="right">

  </td>
  <td width=51 valign=top>

  </td>
  <td width=21 valign=top>
  <p><b><font size="1">&nbsp;</font></b></p>
  </td>
  <td width=51 valign=top>
  <p><b><font size="1">&nbsp;</font></b></p>
  </td>
  <td width=21 valign=top>
  <p><b><font size="1">&nbsp;</font></b></p>
  </td>
  <td width=18 valign=top>

  </td>
  <td width=54 valign=top>

  </td>
  <td width=24 valign=top>
  <p><b><font size="1">&nbsp;</font></b></p>
  </td>
  <td width=54 valign=top>
  <p><b><font size="1">&nbsp;</font></b></p>
  </td>
 </tr>
 <tr>
  <td width=300 valign=top>
  <p><font size="1">Commercial lines
  underwriting</font></p>
  </td>
  <td width=18 valign=top align="right">
  <p><font size="1">$</font></p>
  </td>
  <td width=51 valign=top>
  <p align=right><font size="1">6,365&nbsp;</font></p>
  </td>
  <td width=21 valign=top>

  </td>
  <td width=51 valign=top>
  <p align=right><font size="1">70&nbsp;</font></p>
  </td>
  <td width=21 valign=top>

  </td>
  <td width=18 valign=top>
  <p align=right><font size="1">$</font></p>
  </td>
  <td width=54 valign=top>
  <p align=right><font size="1">27,414&nbsp;</font></p>
  </td>
  <td width=24 valign=top>

  </td>
  <td width=54 valign=top>
  <p align=right><font size="1">(15,394)</font></p>
  </td>
 </tr>
 <tr>
  <td width=300 valign=top>
  <p><font size="1">Personal lines
  underwriting</font></p>
  </td>
  <td width=18 valign=top align="right">

  </td>
  <td width=51 valign=top>
  <p align=right><font size="1">(77)</font></p>
  </td>
  <td width=21 valign=top>

  </td>
  <td width=51 valign=top>
  <p align=right><font size="1">(6,350)</font></p>
  </td>
  <td width=21 valign=top>

  </td>
  <td width=18 valign=top>

  </td>
  <td width=54 valign=top>
  <p align=right><font size="1">(267)</font></p>
  </td>
  <td width=24 valign=top>

  </td>
  <td width=54 valign=top>
  <p align=right><font size="1">(11,392)</font></p>
  </td>
 </tr>
 <tr>
  <td width=300 valign=top>

  </td>
  <td width=18 valign=top align="right">

  </td>
  <td width=51 valign=top>
  <div align=right>
  <hr size=1 width="95%" noshade color=gray align=right>
  </div>
  </td>
  <td width=21 valign=top>

  </td>
  <td width=51 valign=top>
  <div align=right>
  <hr size=1 width="95%" noshade color=gray align=right>
  </div>
  </td>
  <td width=21 valign=top>

  </td>
  <td width=18 valign=top>

  </td>
  <td width=54 valign=top>
  <div align=right>
  <hr size=1 width="95%" noshade color=gray align=right>
  </div>
  </td>
  <td width=24 valign=top>

  </td>
  <td width=54 valign=top>
  <div align=right>
  <hr size=1 width="95%" noshade color=gray align=right>
  </div>
  </td>
 </tr>
 <tr>
  <td width=300 valign=top>
  <p><font size="1">Underwriting
  gain (loss), before federal income tax</font></p>
  </td>
  <td width=18 valign=top align="right">

  </td>
  <td width=51 valign=top>
  <p align=right><font size="1">6,288&nbsp;</font></p>
  </td>
  <td width=21 valign=top>

  </td>
  <td width=51 valign=top>
  <p align=right><font size="1">(6,280)</font></p>
  </td>
  <td width=21 valign=top>

  </td>
  <td width=18 valign=top>

  </td>
  <td width=54 valign=top>
  <p align=right><font size="1">27,147&nbsp;</font></p>
  </td>
  <td width=24 valign=top>

  </td>
  <td width=54 valign=top>
  <p align=right><font size="1">(26,786)</font></p>
  </td>
 </tr>
 <tr>
  <td width=300 valign=top>
  <p><b><font size="1">Investments:</font></b></p>
  </td>
  <td width=18 valign=top align="right">

  </td>
  <td width=51 valign=top>

  </td>
  <td width=21 valign=top>

  </td>
  <td width=51 valign=top>

  </td>
  <td width=21 valign=top>

  </td>
  <td width=18 valign=top>

  </td>
  <td width=54 valign=top>

  </td>
  <td width=24 valign=top>

  </td>
  <td width=54 valign=top>

  </td>
 </tr>
 <tr>
  <td width=300 valign=top>
  <p><font size="1">Net investment
  income</font></p>
  </td>
  <td width=18 valign=top align="right">

  </td>
  <td width=51 valign=top>
  <p align=right><font size="1">29,146&nbsp;</font></p>
  </td>
  <td width=21 valign=top>

  </td>
  <td width=51 valign=top>
  <p align=right><font size="1">27, 324&nbsp;</font></p>
  </td>
  <td width=21 valign=top>

  </td>
  <td width=18 valign=top>

  </td>
  <td width=54 valign=top>
  <p align=right><font size="1">87,268&nbsp;</font></p>
  </td>
  <td width=24 valign=top>

  </td>
  <td width=54 valign=top>
  <p align=right><font size="1">84,103&nbsp;</font></p>
  </td>
 </tr>
 <tr>
  <td width=300 valign=top>
  <p><font size="1">Net realized gain on investments</font></p>
  </td>
  <td width=18 valign=top align="right">

  </td>
  <td width=51 valign=top>
  <p align=right><font size="1">1,631&nbsp;</font></p>
  </td>
  <td width=21 valign=top>

  </td>
  <td width=51 valign=top>
  <p align=right><font size="1">1,029&nbsp;</font></p>
  </td>
  <td width=21 valign=top>

  </td>
  <td width=18 valign=top>

  </td>
  <td width=54 valign=top>
  <p align=right><font size="1">7,131&nbsp;</font></p>
  </td>
  <td width=24 valign=top>

  </td>
  <td width=54 valign=top>
  <p align=right><font size="1">8,373&nbsp;</font></p>
  </td>
 </tr>
 <tr>
  <td width=300 valign=top>
  <p><b><font size="1">&nbsp;</font></b></p>
  </td>
  <td width=18 valign=top align="right">

  </td>
  <td width=51 valign=top>
  <div align=right>
  <hr size=1 width="95%" noshade color=gray align=right>
  </div>
  </td>
  <td width=21 valign=top>

  </td>
  <td width=51 valign=top>
  <div align=right>
  <hr size=1 width="95%" noshade color=gray align=right>
  </div>
  </td>
  <td width=21 valign=top>

  </td>
  <td width=18 valign=top>

  </td>
  <td width=54 valign=top>
  <div align=right>
  <hr size=1 width="95%" noshade color=gray align=right>
  </div>
  </td>
  <td width=24 valign=top>

  </td>
  <td width=54 valign=top>
  <div align=right>
  <hr size=1 width="95%" noshade color=gray align=right>
  </div>
  </td>
 </tr>
 <tr>
  <td width=300 valign=top>
  <p><font size="1">Total investment
  income, before federal income tax</font></p>
  </td>
  <td width=18 valign=top align="right">

  </td>
  <td width=51 valign=top>
  <p align=right><font size="1">30,777&nbsp;</font></p>
  </td>
  <td width=21 valign=top>

  </td>
  <td width=51 valign=top>
  <p align=right><font size="1">28,353&nbsp;</font></p>
  </td>
  <td width=21 valign=top>

  </td>
  <td width=18 valign=top>

  </td>
  <td width=54 valign=top>
  <p align=right><font size="1">94,399&nbsp;</font></p>
  </td>
  <td width=24 valign=top>

  </td>
  <td width=54 valign=top>
  <p align=right><font size="1">92,476&nbsp;</font></p>
  </td>
 </tr>
 <tr>
  <td width=300 valign=top>
  <p><b><font size="1">Diversified Insurance Services:</font></b></p>
  </td>
  <td width=18 valign=top align="right">
  <p align=right><font size="1">&nbsp;</font></p>
  </td>
  <td width=51 valign=top>
  <p align=right><b><font size="1">&nbsp;</font></b></p>
  </td>
  <td width=21 valign=top>
  <p align=right><b><font size="1">&nbsp;</font></b></p>
  </td>
  <td width=51 valign=top>
  <p align=right><b><font size="1">&nbsp;</font></b></p>
  </td>
  <td width=21 valign=top>
  <p><b><font size="1">&nbsp;</font></b></p>
  </td>
  <td width=18 valign=top>
  <p align=right><font size="1">&nbsp;</font></p>
  </td>
  <td width=54 valign=top>
  <p align=right><b><font size="1">&nbsp;</font></b></p>
  </td>
  <td width=24 valign=top>
  <p align=right><b><font size="1">&nbsp;</font></b></p>
  </td>
  <td width=54 valign=top>
  <p align=right><b><font size="1">&nbsp;</font></b></p>
  </td>
 </tr>
 <tr>
  <td width=300 valign=top>
  <p><font size="1">Income before federal income tax</font></p>
  </td>
  <td width=18 valign=top align="right">
  <p><font size="1">&nbsp;</font></p>
  </td>
  <td width=51 valign=top>
  <p align=right><font size="1">4,762&nbsp;</font></p>
  </td>
  <td width=21 valign=top>

  </td>
  <td width=51 valign=top>
  <p align=right><font size="1">2,861&nbsp;</font></p>
  </td>
  <td width=21 valign=top>

  </td>
  <td width=18 valign=top>
  <p><font size="1">&nbsp;</font></p>
  </td>
  <td width=54 valign=top>
  <p align=right><font size="1">10,382&nbsp;</font></p>
  </td>
  <td width=24 valign=top>

  </td>
  <td width=54 valign=top>
  <p align=right><font size="1">7,407&nbsp;</font></p>
  </td>
 </tr>
 <tr>
  <td width=300 valign=top>

  </td>
  <td width=18 valign=top align="right">
  <p><font size="1">&nbsp;</font></p>
  </td>
  <td width=51 valign=top>
  <div align=right>
  <hr size=1 width="95%" noshade color=gray align=right>
  </div>
  </td>
  <td width=21 valign=top>

  </td>
  <td width=51 valign=top>
  <div align=right>
  <hr size=1 width="95%" noshade color=gray align=right>
  </div>
  </td>
  <td width=21 valign=top>

  </td>
  <td width=18 valign=top>
  <p><font size="1">&nbsp;</font></p>
  </td>
  <td width=54 valign=top>
  <div align=right>
  <hr size=1 width="95%" noshade color=gray align=right>
  </div>
  </td>
  <td width=24 valign=top>

  </td>
  <td width=54 valign=top>
  <div align=right>
  <hr size=1 width="95%" noshade color=gray align=right>
  </div>
  </td>
 </tr>
 <tr>
  <td width=300 valign=top>
  <p><b><font size="1">Total all segments</font></b></p>
  </td>
  <td width=18 valign=top align="right">
  <p><font size="1">&nbsp;</font></p>
  </td>
  <td width=51 valign=top>
  <p align=right><font size="1">41,827&nbsp;</font></p>
  </td>
  <td width=21 valign=top>

  </td>
  <td width=51 valign=top>
  <p align=right><font size="1">24,934&nbsp;</font></p>
  </td>
  <td width=21 valign=top>

  </td>
  <td width=18 valign=top>
  <p><font size="1">&nbsp;</font></p>
  </td>
  <td width=54 valign=top>
  <p align=right><font size="1">131,928&nbsp;</font></p>
  </td>
  <td width=24 valign=top>

  </td>
  <td width=54 valign=top>
  <p align=right><font size="1">73,097&nbsp;</font></p>
  </td>
 </tr>
 <tr>
  <td width=300 valign=top>
  <p><b><font size="1">&nbsp;</font></b></p>
  </td>
  <td width=18 valign=top align="right">
  <p><font size="1">&nbsp;</font></p>
  </td>
  <td width=51 valign=top>
  <div align=right>
  <hr size=1 width="95%" noshade color=gray align=right>
  </div>
  </td>
  <td width=21 valign=top>

  </td>
  <td width=51 valign=top>
  <div align=right>
  <hr size=1 width="95%" noshade color=gray align=right>
  </div>
  </td>
  <td width=21 valign=top>

  </td>
  <td width=18 valign=top>
  <p><font size="1">&nbsp;</font></p>
  </td>
  <td width=54 valign=top>
  <div align=right>
  <hr size=1 width="95%" noshade color=gray align=right>
  </div>
  </td>
  <td width=24 valign=top>

  </td>
  <td width=54 valign=top>
  <div align=right>
  <hr size=1 width="95%" noshade color=gray align=right>
  </div>
  </td>
 </tr>
 <tr>
  <td width=300 valign=top>
  <p><font size="1">Interest expense</font></p>
  </td>
  <td width=18 valign=top align="right">
  <p><font size="1">&nbsp;</font></p>
  </td>
  <td width=51 valign=top>
  <p align=right><font size="1">(3,611)</font></p>
  </td>
  <td width=21 valign=top>

  </td>
  <td width=51 valign=top>
  <p align=right><font size="1">(4,145)</font></p>
  </td>
  <td width=21 valign=top>

  </td>
  <td width=18 valign=top>
  <p><font size="1">&nbsp;</font></p>
  </td>
  <td width=54 valign=top>
  <p align=right><font size="1">(11,534)</font></p>
  </td>
  <td width=24 valign=top>

  </td>
  <td width=54 valign=top>
  <p align=right><font size="1">(13,135)</font></p>
  </td>
 </tr>
 <tr>
  <td width=300 valign=top>
  <p><font size="1">General
  corporate expenses</font></p>
  </td>
  <td width=18 valign=top align="right">
  <p><font size="1">&nbsp;</font></p>
  </td>
  <td width=51 valign=top>
  <p align=right><font size="1">(1,977)</font></p>
  </td>
  <td width=21 valign=top>

  </td>
  <td width=51 valign=top>
  <p align=right><font size="1">(1,908)</font></p>
  </td>
  <td width=21 valign=top>

  </td>
  <td width=18 valign=top>
  <p><font size="1">&nbsp;</font></p>
  </td>
  <td width=54 valign=top>
  <p align=right><font size="1">(6,600)</font></p>
  </td>
  <td width=24 valign=top>

  </td>
  <td width=54 valign=top>
  <p align=right><font size="1">(4,722)</font></p>
  </td>
 </tr>
 <tr>
  <td width=300 valign=top>

  </td>
  <td width=18 valign=top align="right">
  <p><font size="1">&nbsp;</font></p>
  </td>
  <td width=51 valign=top>
  <div align=right>
  <hr size=1 width="95%" noshade color=gray align=right>
  </div>
  </td>
  <td width=21 valign=top>

  </td>
  <td width=51 valign=top>
  <div align=right>
  <hr size=1 width="95%" noshade color=gray align=right>
  </div>
  </td>
  <td width=21 valign=top>

  </td>
  <td width=18 valign=top>
  <p><font size="1">&nbsp;</font></p>
  </td>
  <td width=54 valign=top>
  <div align=right>
  <hr size=1 width="95%" noshade color=gray align=right>
  </div>
  </td>
  <td width=24 valign=top>

  </td>
  <td width=54 valign=top>
  <div align=right>
  <hr size=1 width="95%" noshade color=gray align=right>
  </div>
  </td>
 </tr>
 <tr>
  <td width=300 valign=top>
  <p><b><font size="1">Income before federal income tax</font></b></p>
  </td>
  <td width=18 valign=top align="right">
  <p><font size="1">$</font></p>
  </td>
  <td width=51 valign=top>
  <p align=right><font size="1">36,239&nbsp;</font></p>
  </td>
  <td width=21 valign=top>

  </td>
  <td width=51 valign=top>
  <p align=right><font size="1">18,881&nbsp;</font></p>
  </td>
  <td width=21 valign=top>

  </td>
  <td width=18 valign=top>
  <p align="right"><font size="1">$</font></p>
  </td>
  <td width=54 valign=top>
  <p align=right><font size="1">113,794&nbsp;</font></p>
  </td>
  <td width=24 valign=top>

  </td>
  <td width=54 valign=top>
  <p align=right><font size="1">55,240&nbsp;</font></p>
  </td>
 </tr>
 <tr>
  <td width=300 valign=top>
  <p><b>&nbsp;</b></p>
  </td>
  <td width=18 valign=top align="right">
  <p>&nbsp;</p>
  </td>
  <td width=51 valign=top>
  <p align=right>======</p>
  </td>
  <td width=21 valign=top>

  </td>
  <td width=51 valign=top>
  <p align=right>======</p>
  </td>
  <td width=21 valign=top>

  </td>
  <td width=18 valign=top>
  <p><b>&nbsp;</b></p>
  </td>
  <td width=54 valign=top>
  <p align=right>======</p>
  </td>
  <td width=24 valign=top>

  </td>
  <td width=54 valign=top>
  <p align=right>======</p>
  </td>
 </tr>
</table>

<p style="margin-top: 0; margin-bottom: 0"><font size="2"><br>
</font>
<b><font size="2">11.&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; Retirement Plans<br>
</font>
</b><font size="2">As of December 31, 2003, the Company adopted the revised FASB statement of
Financial Accounting Standards No. 132R, &quot;Employers' Disclosures about Pensions
and Other Postretirement Benefits&quot; (FAS 132R).&nbsp;
FAS 132R addresses disclosure items only and does not address
measurement or recognition.&nbsp; FAS 132R
requires additional interim disclosures that were not required by the original
statement, all of which are included for all periods presented.</font><br></p>

<table border=0 cellspacing=0 cellpadding=0 width="632">
 <tr>
  <td width=632 colspan=5 valign=top>
  <div align=center><b>
  <hr size=1 width="100%" noshade color=black align=center>
  </b></div>
  </td>
 </tr>
 <tr>
  <td width=288 valign=top>
  <p><font size="1">&nbsp;</font></p>
  </td>
  <td width=19 valign=top>
  <p align=center><b><font size="1">&nbsp;</font></b></p>
  </td>
  <td width=154 valign=top>
  <p align=center><b><font size="1">Retirement
  Income Plan</font></b></p>
  </td>
  <td width=19 valign=top>
  <p align=center><b><font size="1">&nbsp;</font></b></p>
  </td>
  <td width=152 valign=top>
  <p align=center><b><font size="1">Postretirement
  Plan</font></b></p>
  </td>
 </tr>
 <tr>
  <td width=288 valign=top>
  <p><font size="1">&nbsp;</font></p>
  </td>
  <td width=19 valign=top>
  <p align=center><b><font size="1">&nbsp;</font></b></p>
  </td>
  <td width=154 valign=top>
  <p align=center><b><font size="1">Unaudited,</font></b></p>
  </td>
  <td width=19 valign=top>
  <p align=center><b><font size="1">&nbsp;</font></b></p>
  </td>
  <td width=152 valign=top>
  <p align=center><b><font size="1">Unaudited,</font></b></p>
  </td>
 </tr>
 <tr>
  <td width=288 valign=top>
  <p><font size="1">&nbsp;</font></p>
  </td>
  <td width=19 valign=top>
  <p align=center><b><font size="1">&nbsp;</font></b></p>
  </td>
  <td width=154 valign=top>
  <p align=center><b><font size="1">Quarter ended
  September 30,</font></b></p>
  </td>
  <td width=19 valign=top>
  <p align=center><b><font size="1">&nbsp;</font></b></p>
  </td>
  <td width=152 valign=top>
  <p align=center><b><font size="1">Quarter ended
  September 30,</font></b></p>
  </td>
 </tr>
 <tr>
  <td width=632 colspan=5 valign=top>
  <div align=center><b>
  <hr size=1 width="100%" noshade color=black align=center>
  </b></div>
  </td>
 </tr>
</table>



<table border=0 cellspacing=0 cellpadding=0>
 <tr>
  <td width=288 valign=top>
  <p><font size="1">($ in thousands)</font></p>
  </td>
  <td width=19 valign=top>
  <p align=center><b><font size="1">&nbsp;</font></b></p>
  </td>
  <td width=67 valign=top>
  <p align=center><b><font size="1">2004</font></b></p>
  </td>
  <td width=19 valign=top>
  <p align=center><b><font size="1">&nbsp;</font></b></p>
  </td>
  <td width=67 valign=top>
  <p align=center><b><font size="1">2003</font></b></p>
  </td>
  <td width=19 valign=top>
  <p align=center><b><font size="1">&nbsp;</font></b></p>
  </td>
  <td width=67 valign=top>
  <p align=center><b><font size="1">2004</font></b></p>
  </td>
  <td width=19 valign=top>
  <p align=center><b><font size="1">&nbsp;</font></b></p>
  </td>
  <td width=67 valign=top>
  <p align=center><b><font size="1">2003</font></b></p>
  </td>
 </tr>
 <tr>
  <td width=288 valign=top>
  <p><font size="1">&nbsp;</font></p>
  </td>
  <td width=19 valign=top>
  <p align=center><b><font size="1">&nbsp;</font></b></p>
  </td>
  <td width=67 valign=top>
  <div align=right><b>
  <hr size=1 width="100%" noshade color=black align=right>
  </b></div>
  </td>
  <td width=19 valign=top>
  <p align=right><b><font size="1">&nbsp;</font></b></p>
  </td>
  <td width=67 valign=top>
  <div align=right><b>
  <hr size=1 width="100%" noshade color=black align=right>
  </b></div>
  </td>
  <td width=19 valign=top>

  </td>
  <td width=67 valign=top>
  <div align=right>
  <hr size=1 width="100%" noshade color=black align=right>
  </div>
  </td>
  <td width=19 valign=top>

  </td>
  <td width=67 valign=top>
  <div align=right><b>
  <hr size=1 width="100%" noshade color=black align=right>
  </b></div>
  </td>
 </tr>
 <tr>
  <td width=288 valign=top>
  <p><b><font size="1">Components of Net Periodic Benefit
  Cost:</font></b></p>
  </td>
  <td width=19 valign=top>
  <p align=right><b><font size="1">&nbsp;</font></b></p>
  </td>
  <td width=67 valign=top>
  <p align=right><b><font size="1">&nbsp;</font></b></p>
  </td>
  <td width=19 valign=top>
  <p align=right><b><font size="1">&nbsp;</font></b></p>
  </td>
  <td width=67 valign=top>

  </td>
  <td width=19 valign=top>

  </td>
  <td width=67 valign=top>

  </td>
  <td width=19 valign=top>

  </td>
  <td width=67 valign=top>

  </td>
 </tr>
 <tr>
  <td width=288 valign=top>
  <p><font size="1">Service
  cost</font></p>
  </td>
  <td width=19 valign=top>
  <p align=right><font size="1">$</font></p>
  </td>
  <td width=67 valign=top>
  <p align=right><font size="1">1,660&nbsp;</font></p>
  </td>
  <td width=19 valign=top>
  <p align=right><font size="1">&nbsp;</font></p>
  </td>
  <td width=67 valign=top>
  <p align=right><font size="1">1,174&nbsp;</font></p>
  </td>
  <td width=19 valign=top>

  </td>
  <td width=67 valign=top>
  <p align=right><font size="1">87&nbsp;</font></p>
  </td>
  <td width=19 valign=top>

  </td>
  <td width=67 valign=top>
  <p align=right><font size="1">66&nbsp;</font></p>
  </td>
 </tr>
 <tr>
  <td width=288 valign=top>
  <p><font size="1">Interest
  cost</font></p>
  </td>
  <td width=19 valign=top>
  <p align=right><font size="1">&nbsp;</font></p>
  </td>
  <td width=67 valign=top>
  <p align=right><font size="1">1,875&nbsp;</font></p>
  </td>
  <td width=19 valign=top>
  <p align=right><font size="1">&nbsp;</font></p>
  </td>
  <td width=67 valign=top>
  <p align=right><font size="1">1,644&nbsp; </font> </p>
  </td>
  <td width=19 valign=top>

  </td>
  <td width=67 valign=top>
  <p align=right><font size="1">92&nbsp;</font></p>
  </td>
  <td width=19 valign=top>

  </td>
  <td width=67 valign=top>
  <p align=right><font size="1">95&nbsp;</font></p>
  </td>
 </tr>
 <tr>
  <td width=288 valign=top>
  <p><font size="1">Expected
  return on plan assets</font></p>
  </td>
  <td width=19 valign=top>
  <p align=right><font size="1">&nbsp;</font></p>
  </td>
  <td width=67 valign=top>
  <p align=right><font size="1">(1,672)</font></p>
  </td>
  <td width=19 valign=top>
  <p align=right><font size="1">&nbsp;</font></p>
  </td>
  <td width=67 valign=top>
  <p align=right><font size="1">&nbsp;(1,281)</font></p>
  </td>
  <td width=19 valign=top>

  </td>
  <td width=67 valign=top>
  <p align=right><font size="1">-&nbsp;</font></p>
  </td>
  <td width=19 valign=top>

  </td>
  <td width=67 valign=top>
  <p align=right><font size="1">-&nbsp;</font></p>
  </td>
 </tr>
 <tr>
  <td width=288 valign=top>
  <p><font size="1">Amortization
  of unrecognized transition obligation</font></p>
  </td>
  <td width=19 valign=top>
  <p align=right><font size="1">&nbsp;</font></p>
  </td>
  <td width=67 valign=top>
  <p align=right><font size="1">-&nbsp;</font></p>
  </td>
  <td width=19 valign=top>
  <p align=right><font size="1">&nbsp;</font></p>
  </td>
  <td width=67 valign=top>
  <p align=right><font size="1">-&nbsp;</font></p>
  </td>
  <td width=19 valign=top>

  </td>
  <td width=67 valign=top>
  <p align=right><font size="1">-&nbsp;</font></p>
  </td>
  <td width=19 valign=top>

  </td>
  <td width=67 valign=top>
  <p align=right><font size="1">-&nbsp;</font></p>
  </td>
 </tr>
 <tr>
  <td width=288 valign=top>
  <p><font size="1">Amortization
  of unrecognized prior service cost</font></p>
  </td>
  <td width=19 valign=top>
  <p align=right><font size="1">&nbsp;</font></p>
  </td>
  <td width=67 valign=top>
  <p align=right><font size="1">53&nbsp;</font></p>
  </td>
  <td width=19 valign=top>
  <p align=right><font size="1">&nbsp;</font></p>
  </td>
  <td width=67 valign=top>
  <p align=right><font size="1">63&nbsp;</font></p>
  </td>
  <td width=19 valign=top>

  </td>
  <td width=67 valign=top>
  <p align=right><font size="1">(8)</font></p>
  </td>
  <td width=19 valign=top>

  </td>
  <td width=67 valign=top>
  <p align=right><font size="1">&nbsp;(8)</font></p>
  </td>
 </tr>
 <tr>
  <td width=288 valign=top>
  <p><font size="1">Amortization
  of unrecognized net (gain) loss</font></p>
  </td>
  <td width=19 valign=top>
  <p align=right><font size="1">&nbsp;</font></p>
  </td>
  <td width=67 valign=top>
  <p align=right><font size="1">359&nbsp;</font></p>
  </td>
  <td width=19 valign=top>
  <p align=right><font size="1">&nbsp;</font></p>
  </td>
  <td width=67 valign=top>
  <p align=right><font size="1">287&nbsp;</font></p>
  </td>
  <td width=19 valign=top>

  </td>
  <td width=67 valign=top>
  <p align=right><font size="1">-&nbsp;</font></p>
  </td>
  <td width=19 valign=top>

  </td>
  <td width=67 valign=top>
  <p align=right><font size="1">-&nbsp;</font></p>
  </td>
 </tr>
 <tr>
  <td width=288 valign=top>

  </td>
  <td width=19 valign=top>

  </td>
  <td width=67 valign=top>
  <div align=right>
  <hr size=1 width="90%" noshade color=gray align=right>
  </div>
  </td>
  <td width=19 valign=top>
  <p align=right><font size="1">&nbsp;</font></p>
  </td>
  <td width=67 valign=top>
  <div align=right>
  <hr size=1 width="90%" noshade color=gray align=right>
  </div>
  </td>
  <td width=19 valign=top>

  </td>
  <td width=67 valign=top>
  <div align=right>
  <hr size=1 width="90%" noshade color=gray align=right>
  </div>
  </td>
  <td width=19 valign=top>

  </td>
  <td width=67 valign=top>
  <div align=right>
  <hr size=1 width="90%" noshade color=gray align=right>
  </div>
  </td>
 </tr>
 <tr>
  <td width=288 valign=top>
  <p><font size="1">Net
  periodic cost</font></p>
  </td>
  <td width=19 valign=top>
  <p align=right><font size="1">$</font></p>
  </td>
  <td width=67 valign=top>
  <p align=right><font size="1">2,275&nbsp;</font></p>
  </td>
  <td width=19 valign=top>
  <p align=right><font size="1">&nbsp;</font></p>
  </td>
  <td width=67 valign=top>
  <p align=right><font size="1">1,887&nbsp;</font></p>
  </td>
  <td width=19 valign=top>

  </td>
  <td width=67 valign=top>
  <p align=right><font size="1">171&nbsp;</font></p>
  </td>
  <td width=19 valign=top>

  </td>
  <td width=67 valign=top>
  <p align=right><font size="1">153&nbsp;</font></p>
  </td>
 </tr>
 <tr>
  <td width=288 valign=top>

  </td>
  <td width=19 valign=top>
  <p align=right><b><font size="1">&nbsp;</font></b></p>
  </td>
  <td width=67 valign=top>
  <p align=right>=======</p>
  </td>
  <td width=19 valign=top>
  <p align=right><b>&nbsp;</b></p>
  </td>
  <td width=67 valign=top>
  <p align=right>=======</p>
  </td>
  <td width=19 valign=top>

  </td>
  <td width=67 valign=top>
  <p align=right>=======</p>
  </td>
  <td width=19 valign=top>

  </td>
  <td width=67 valign=top>
  <p align=right>=======</p>
  </td>
 </tr>
 <tr>
  <td width=288 valign=top>
  <p><b><font size="1">Weighted-Average Expense Assumptions
  for the years ended December 31:</font></b></p>
  </td>
  <td width=19 valign=top>
  <p align=right><b><font size="1">&nbsp;</font></b></p>
  </td>
  <td width=67 valign=top>

  </td>
  <td width=19 valign=top>
  <p align=right><b><font size="1">&nbsp;</font></b></p>
  </td>
  <td width=67 valign=top>

  </td>
  <td width=19 valign=top>

  </td>
  <td width=67 valign=top>

  </td>
  <td width=19 valign=top>

  </td>
  <td width=67 valign=top>

  </td>
 </tr>
 <tr>
  <td width=288 valign=top>
  <p><font size="1">Discount
  rate</font></p>
  </td>
  <td width=19 valign=top>
  <p align=right><b><font size="1">&nbsp;</font></b></p>
  </td>
  <td width=67 valign=top>
  <p align=right><font size="1">6.25</font></p>
  </td>
  <td width=19 valign=top>
  <p align=right><font size="1">%</font></p>
  </td>
  <td width=67 valign=top>
  <p align=right><font size="1">6.75</font></p>
  </td>
  <td width=19 valign=top>

  </td>
  <td width=67 valign=top>
  <p align=right><font size="1">6.25</font></p>
  </td>
  <td width=19 valign=top>
  <p align=right><b><font size="1">&nbsp;</font></b></p>
  </td>
  <td width=67 valign=top>
  <p align=right><font size="1">6.75</font></p>
  </td>
 </tr>
 <tr>
  <td width=288 valign=top>
  <p><font size="1">Expected
  return on plan assets</font></p>
  </td>
  <td width=19 valign=top>
  <p align=right><b><font size="1">&nbsp;</font></b></p>
  </td>
  <td width=67 valign=top>
  <p align=right><font size="1">8.25</font></p>
  </td>
  <td width=19 valign=top>
  <p align=right><font size="1">%</font></p>
  </td>
  <td width=67 valign=top>
  <p align=right><font size="1">8.25</font></p>
  </td>
  <td width=19 valign=top>

  </td>
  <td width=67 valign=top>
  <p align=right><font size="1">-</font></p>
  </td>
  <td width=19 valign=top>
  <p align=right><b><font size="1">&nbsp;</font></b></p>
  </td>
  <td width=67 valign=top>
  <p align=right><font size="1">-</font></p>
  </td>
 </tr>
 <tr>
  <td width=288 valign=top>
  <p><font size="1">Rate
  of compensation increase</font></p>
  </td>
  <td width=19 valign=top>
  <p align=right><b><font size="1">&nbsp;</font></b></p>
  </td>
  <td width=67 valign=top>
  <p align=right><font size="1">5.00</font></p>
  </td>
  <td width=19 valign=top>
  <p align=right><font size="1">%</font></p>
  </td>
  <td width=67 valign=top>
  <p align=right><font size="1">5.00</font></p>
  </td>
  <td width=19 valign=top>

  </td>
  <td width=67 valign=top>
  <p align=right><font size="1">5.00</font></p>
  </td>
  <td width=19 valign=top>
  <p align=right><b><font size="1">&nbsp;</font></b></p>
  </td>
  <td width=67 valign=top>
  <p align=right><font size="1">5.00</font></p>
  </td>
 </tr>
</table>

<p align="left">&nbsp;</p>
<p align="center"><font size="2">13</font></p>

<hr color="#000080"><P STYLE="page-break-after: always"></P><br clear=all>




<table border=0 cellspacing=0 cellpadding=0>
 <tr>
  <td width=634 colspan=5 valign=top>
  <div align=center><b>
  <hr size=1 width="100%" noshade color=black align=center>
  </b></div>
  </td>
 </tr>
 <tr>
  <td width=288 valign=top>
  <p><font size="1">&nbsp;</font></p>
  </td>
  <td width=19 valign=top>
  <p align=center><b><font size="1">&nbsp;</font></b></p>
  </td>
  <td width=154 valign=top>
  <p align=center><b><font size="1">Retirement Income Plan</font></b></p>
  </td>
  <td width=19 valign=top>
  <p align=center><b><font size="1">&nbsp;</font></b></p>
  </td>
  <td width=154 valign=top>
  <p align=center><b><font size="1">Postretirement Plan</font></b></p>
  </td>
 </tr>
 <tr>
  <td width=288 valign=top>
  <p><font size="1">&nbsp;</font></p>
  </td>
  <td width=19 valign=top>
  <p align=center><b><font size="1">&nbsp;</font></b></p>
  </td>
  <td width=154 valign=top>
  <p align=center><b><font size="1">Unaudited,</font></b></p>
  </td>
  <td width=19 valign=top>
  <p align=center><b><font size="1">&nbsp;</font></b></p>
  </td>
  <td width=154 valign=top>
  <p align=center><b><font size="1">Unaudited,</font></b></p>
  </td>
 </tr>
 <tr>
  <td width=288 valign=top>
  <p><font size="1">&nbsp;</font></p>
  </td>
  <td width=19 valign=top>
  <p align=center><b><font size="1">&nbsp;</font></b></p>
  </td>
  <td width=154 valign=top>
  <p align=center><b><font size="1">Nine months ended </font> </b></p>
  </td>
  <td width=19 valign=top>
  <p align=center><b><font size="1">&nbsp;</font></b></p>
  </td>
  <td width=154 valign=top>
  <p align=center><b><font size="1">Nine months ended </font> </b></p>
  </td>
 </tr>
 <tr>
  <td width=288 valign=top>
  <p><font size="1">&nbsp;</font></p>
  </td>
  <td width=19 valign=top>
  <p align=center><b><font size="1">&nbsp;</font></b></p>
  </td>
  <td width=154 valign=top>
  <p align=center><b><font size="1">September 30,</font></b></p>
  </td>
  <td width=19 valign=top>
  <p align=center><b><font size="1">&nbsp;</font></b></p>
  </td>
  <td width=154 valign=top>
  <p align=center><b><font size="1">September 30,</font></b></p>
  </td>
 </tr>
 <tr>
  <td width=634 colspan=5 valign=top>
  <div align=center><b>
  <hr size=1 width="100%" noshade color=black align=center>
  </b></div>
  </td>
 </tr>
</table>



<table border=0 cellspacing=0 cellpadding=0>
 <tr>
  <td width=288 valign=top>
  <p><font size="1">($
  in thousands)</font></p>
  </td>
  <td width=19 valign=top>
  <p align=center><font size="1">&nbsp;</font></p>
  </td>
  <td width=67 valign=top>
  <p align=center><b><font size="1">2004</font></b></p>
  </td>
  <td width=19 valign=top>
  <p align=center><b><font size="1">&nbsp;</font></b></p>
  </td>
  <td width=67 valign=top>
  <p align=center><b><font size="1">2003</font></b></p>
  </td>
  <td width=19 valign=top>
  <p align=center><b><font size="1">&nbsp;</font></b></p>
  </td>
  <td width=67 valign=top>
  <p align=center><b><font size="1">2004</font></b></p>
  </td>
  <td width=19 valign=top>
  <p align=center><b><font size="1">&nbsp;</font></b></p>
  </td>
  <td width=67 valign=top>
  <p align=center><b><font size="1">2003</font></b></p>
  </td>
 </tr>
 <tr>
  <td width=288 valign=top>
  <p><font size="1">&nbsp;</font></p>
  </td>
  <td width=19 valign=top>
  <p align=center><font size="1">&nbsp;</font></p>
  </td>
  <td width=67 valign=top>
  <div align=right>
  <hr size=1 width="90%" noshade color=gray align=right>
  </div>
  </td>
  <td width=19 valign=top>
  <p align=right><b><font size="1">&nbsp;</font></b></p>
  </td>
  <td width=67 valign=top>
  <div align=right>
  <hr size=1 width="90%" noshade color=gray align=right>
  </div>
  </td>
  <td width=19 valign=top>

  </td>
  <td width=67 valign=top>
  <div align=right>
  <hr size=1 width="90%" noshade color=gray align=right>
  </div>
  </td>
  <td width=19 valign=top>

  </td>
  <td width=67 valign=top>
  <div align=right>
  <hr size=1 width="90%" noshade color=gray align=right>
  </div>
  </td>
 </tr>
 <tr>
  <td width=288 valign=top>
  <p><b><font size="1">Components of Net Periodic Benefit
  Cost:</font></b></p>
  </td>
  <td width=19 valign=top>
  <p align=right><font size="1">&nbsp;</font></p>
  </td>
  <td width=67 valign=top>
  <p align=right><b><font size="1">&nbsp;</font></b></p>
  </td>
  <td width=19 valign=top>
  <p align=right><b><font size="1">&nbsp;</font></b></p>
  </td>
  <td width=67 valign=top>

  </td>
  <td width=19 valign=top>

  </td>
  <td width=67 valign=top>

  </td>
  <td width=19 valign=top>

  </td>
  <td width=67 valign=top>

  </td>
 </tr>
 <tr>
  <td width=288 valign=top>
  <p><font size="1">Service
  cost</font></p>
  </td>
  <td width=19 valign=top>
  <p align=right><font size="1">$</font></p>
  </td>
  <td width=67 valign=top>
  <p align=right><font size="1">4,464&nbsp;</font></p>
  </td>
  <td width=19 valign=top>
  <p align=right><b><font size="1">&nbsp;</font></b></p>
  </td>
  <td width=67 valign=top>
  <p align=right><font size="1">3,780&nbsp;</font></p>
  </td>
  <td width=19 valign=top>

  </td>
  <td width=67 valign=top>
  <p align=right><font size="1">253&nbsp;</font></p>
  </td>
  <td width=19 valign=top>

  </td>
  <td width=67 valign=top>
  <p align=right><font size="1">210&nbsp;</font></p>
  </td>
 </tr>
 <tr>
  <td width=288 valign=top>
  <p><font size="1">Interest
  cost</font></p>
  </td>
  <td width=19 valign=top>
  <p align=right><font size="1">&nbsp;</font></p>
  </td>
  <td width=67 valign=top>
  <p align=right><font size="1">5,491&nbsp;</font></p>
  </td>
  <td width=19 valign=top>
  <p align=right><b><font size="1">&nbsp;</font></b></p>
  </td>
  <td width=67 valign=top>
  <p align=right><font size="1">4,892&nbsp;</font></p>
  </td>
  <td width=19 valign=top>

  </td>
  <td width=67 valign=top>
  <p align=right><font size="1">284&nbsp;</font></p>
  </td>
  <td width=19 valign=top>

  </td>
  <td width=67 valign=top>
  <p align=right><font size="1">297&nbsp;</font></p>
  </td>
 </tr>
 <tr>
  <td width=288 valign=top>
  <p><font size="1">Expected
  return on plan assets</font></p>
  </td>
  <td width=19 valign=top>
  <p align=right><font size="1">&nbsp;</font></p>
  </td>
  <td width=67 valign=top>
  <p align=right><font size="1">(5,016)</font></p>
  </td>
  <td width=19 valign=top>
  <p align=right><b><font size="1">&nbsp;</font></b></p>
  </td>
  <td width=67 valign=top>
  <p align=right><font size="1">(3,779)</font></p>
  </td>
  <td width=19 valign=top>

  </td>
  <td width=67 valign=top>
  <p align=right><font size="1">-&nbsp;</font></p>
  </td>
  <td width=19 valign=top>

  </td>
  <td width=67 valign=top>
  <p align=right><font size="1">-&nbsp;</font></p>
  </td>
 </tr>
 <tr>
  <td width=288 valign=top>
  <p><font size="1">Amortization
  of unrecognized transition obligation</font></p>
  </td>
  <td width=19 valign=top>
  <p align=right><font size="1">&nbsp;</font></p>
  </td>
  <td width=67 valign=top>
  <p align=right><font size="1">-&nbsp;</font></p>
  </td>
  <td width=19 valign=top>
  <p align=right><b><font size="1">&nbsp;</font></b></p>
  </td>
  <td width=67 valign=top>
  <p align=right><font size="1">-&nbsp;</font></p>
  </td>
  <td width=19 valign=top>

  </td>
  <td width=67 valign=top>
  <p align=right><font size="1">-&nbsp;</font></p>
  </td>
  <td width=19 valign=top>

  </td>
  <td width=67 valign=top>
  <p align=right><font size="1">-&nbsp;</font></p>
  </td>
 </tr>
 <tr>
  <td width=288 valign=top>
  <p><font size="1">Amortization
  of unrecognized prior service cost</font></p>
  </td>
  <td width=19 valign=top>
  <p align=right><font size="1">&nbsp;</font></p>
  </td>
  <td width=67 valign=top>
  <p align=right><font size="1">159&nbsp;</font></p>
  </td>
  <td width=19 valign=top>
  <p align=right><b><font size="1">&nbsp;</font></b></p>
  </td>
  <td width=67 valign=top>
  <p align=right><font size="1">187&nbsp;</font></p>
  </td>
  <td width=19 valign=top>

  </td>
  <td width=67 valign=top>
  <p align=right><font size="1">(24)</font></p>
  </td>
  <td width=19 valign=top>

  </td>
  <td width=67 valign=top>
  <p align=right><font size="1">(24)</font></p>
  </td>
 </tr>
 <tr>
  <td width=288 valign=top>
  <p><font size="1">Amortization
  of unrecognized net (gain) loss</font></p>
  </td>
  <td width=19 valign=top>
  <p align=right><font size="1">&nbsp;</font></p>
  </td>
  <td width=67 valign=top>
  <p align=right><font size="1">931&nbsp;</font></p>
  </td>
  <td width=19 valign=top>
  <p align=right><b><font size="1">&nbsp;</font></b></p>
  </td>
  <td width=67 valign=top>
  <p align=right><font size="1">825&nbsp;</font></p>
  </td>
  <td width=19 valign=top>

  </td>
  <td width=67 valign=top>
  <p align=right><font size="1">-&nbsp;</font></p>
  </td>
  <td width=19 valign=top>

  </td>
  <td width=67 valign=top>
  <p align=right><font size="1">-&nbsp;</font></p>
  </td>
 </tr>
 <tr>
  <td width=288 valign=top>

  </td>
  <td width=19 valign=top>

  </td>
  <td width=67 valign=top>
  <div align=right>
  <hr size=1 width="90%" noshade color=gray align=right>
  </div>
  </td>
  <td width=19 valign=top>
  <p align=right><b><font size="1">&nbsp;</font></b></p>
  </td>
  <td width=67 valign=top>
  <div align=right>
  <hr size=1 width="90%" noshade color=gray align=right>
  </div>
  </td>
  <td width=19 valign=top>

  </td>
  <td width=67 valign=top>
  <div align=right>
  <hr size=1 width="90%" noshade color=gray align=right>
  </div>
  </td>
  <td width=19 valign=top>

  </td>
  <td width=67 valign=top>
  <div align=right>
  <hr size=1 width="90%" noshade color=gray align=right>
  </div>
  </td>
 </tr>
 <tr>
  <td width=288 valign=top>
  <p><font size="1">Net
  periodic cost</font></p>
  </td>
  <td width=19 valign=top>
  <p align=right><font size="1">$</font></p>
  </td>
  <td width=67 valign=top>
  <p align=right><font size="1">6,029&nbsp;</font></p>
  </td>
  <td width=19 valign=top>
  <p align=right><b><font size="1">&nbsp;</font></b></p>
  </td>
  <td width=67 valign=top>
  <p align=right><font size="1">5,905&nbsp;</font></p>
  </td>
  <td width=19 valign=top>

  </td>
  <td width=67 valign=top>
  <p align=right><font size="1">513&nbsp;</font></p>
  </td>
  <td width=19 valign=top>

  </td>
  <td width=67 valign=top>
  <p align=right><font size="1">483&nbsp;</font></p>
  </td>
 </tr>
 <tr>
  <td width=288 valign=top>

  </td>
  <td width=19 valign=top>
  <p align=right><b>&nbsp;</b></p>
  </td>
  <td width=67 valign=top>
  <p align=right>=======</p>
  </td>
  <td width=19 valign=top>
  <p align=right><b>&nbsp;</b></p>
  </td>
  <td width=67 valign=top>
  <p align=right>=======</p>
  </td>
  <td width=19 valign=top>

  </td>
  <td width=67 valign=top>
  <p align=right>=======</p>
  </td>
  <td width=19 valign=top>

  </td>
  <td width=67 valign=top>
  <p align=right>=======</p>
  </td>
 </tr>
 <tr>
  <td width=288 valign=top>
  <p><b><font size="1">Weighted-Average Expense Assumptions
  for the years </font> </b></p>
  </td>
  <td width=19 valign=top>
  <p align=right><b><font size="1">&nbsp;</font></b></p>
  </td>
  <td width=67 valign=top>

  </td>
  <td width=19 valign=top>
  <p align=right><b><font size="1">&nbsp;</font></b></p>
  </td>
  <td width=67 valign=top>

  </td>
  <td width=19 valign=top>

  </td>
  <td width=67 valign=top>

  </td>
  <td width=19 valign=top>

  </td>
  <td width=67 valign=top>

  </td>
 </tr>
 <tr>
  <td width=288 valign=top>
  <p><b><font size="1">ended December 31:</font></b></p>
  </td>
  <td width=19 valign=top>
  <p align=right><b><font size="1">&nbsp;</font></b></p>
  </td>
  <td width=67 valign=top>

  </td>
  <td width=19 valign=top>
  <p align=right><b><font size="1">&nbsp;</font></b></p>
  </td>
  <td width=67 valign=top>

  </td>
  <td width=19 valign=top>

  </td>
  <td width=67 valign=top>

  </td>
  <td width=19 valign=top>

  </td>
  <td width=67 valign=top>

  </td>
 </tr>
 <tr>
  <td width=288 valign=top>
  <p><font size="1">Discount
  rate</font></p>
  </td>
  <td width=19 valign=top>
  <p align=right><b><font size="1">&nbsp;</font></b></p>
  </td>
  <td width=67 valign=top>
  <p align=right><font size="1">6.25</font></p>
  </td>
  <td width=19 valign=top>
  <p align=right><font size="1">%</font></p>
  </td>
  <td width=67 valign=top>
  <p align=right><font size="1">6.75</font></p>
  </td>
  <td width=19 valign=top>

  </td>
  <td width=67 valign=top>
  <p align=right><font size="1">6.25</font></p>
  </td>
  <td width=19 valign=top>
  <p align=right><b><font size="1">&nbsp;</font></b></p>
  </td>
  <td width=67 valign=top>
  <p align=right><font size="1">6.75</font></p>
  </td>
 </tr>
 <tr>
  <td width=288 valign=top>
  <p><font size="1">Expected
  return on plan assets</font></p>
  </td>
  <td width=19 valign=top>
  <p align=right><b><font size="1">&nbsp;</font></b></p>
  </td>
  <td width=67 valign=top>
  <p align=right><font size="1">8.25</font></p>
  </td>
  <td width=19 valign=top>
  <p align=right><font size="1">%</font></p>
  </td>
  <td width=67 valign=top>
  <p align=right><font size="1">8.25</font></p>
  </td>
  <td width=19 valign=top>

  </td>
  <td width=67 valign=top>
  <p align=right><font size="1">-</font></p>
  </td>
  <td width=19 valign=top>
  <p align=right><b><font size="1">&nbsp;</font></b></p>
  </td>
  <td width=67 valign=top>
  <p align=right><font size="1">-</font></p>
  </td>
 </tr>
 <tr>
  <td width=288 valign=top>
  <p><font size="1">Rate
  of compensation increase</font></p>
  </td>
  <td width=19 valign=top>
  <p align=right><b><font size="1">&nbsp;</font></b></p>
  </td>
  <td width=67 valign=top>
  <p align=right><font size="1">5.00</font></p>
  </td>
  <td width=19 valign=top>
  <p align=right><font size="1">%</font></p>
  </td>
  <td width=67 valign=top>
  <p align=right><font size="1">5.00</font></p>
  </td>
  <td width=19 valign=top>

  </td>
  <td width=67 valign=top>
  <p align=right><font size="1">5.00</font></p>
  </td>
  <td width=19 valign=top>
  <p align=right><b><font size="1">&nbsp;</font></b></p>
  </td>
  <td width=67 valign=top>
  <p align=right><font size="1">5.00</font></p>
  </td>
 </tr>
</table>

<p style="margin-top: 0; margin-bottom: 0"><font size="2"><br>
<b>12.&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
Federal Income Tax</b></font><p style="margin-top: 0; margin-bottom: 0">
<font size="2">During Third Quarter 2004, the Company received a favorable
ruling from the Internal Revenue Service (IRS) regarding our ability to take
interest deductions on debt at the holding company, while also holding municipal
bonds at the insurance subsidiary level.&nbsp; This favorable ruling allowed us
to reverse our previously accrued $2.3 million in tax expense, which was
slightly offset by an increase in tax expense in Third Quarter 2004 for $0.5
million for potential tax exposure items.&nbsp; The result of this activity was
that the effective tax rate remained flat for Third Quarter 2004 compared to the
same period a year ago even though the Company experienced marked improvement in
its underwriting results.&nbsp; Although the IRS ruling in the Third Quarter
2004 also favorably impacted the effective tax rate for the Nine Months 2004,
the improved underwriting results for the year more than offset this favorable
impact as they resulted in an increase in the effective tax rate for Nine Months
2004 compared to the same period a year ago.</font><p style="margin-top: 0; margin-bottom: 0">&nbsp;<p style="margin-top: 0; margin-bottom: 0">
<font size="2"><b>13.</b>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; <b>Commitments
and Contingencies<br>
</b>Included in other investments is approximately $39.7 million of investments
in limited partnerships as of September 30, 2004, and $35.6 million as of
December 31, 2003. At September 30, 2004 the Company has an additional limited
partnership investment commitment of up to $39.1 million.&nbsp; There is no certainty that any additional
investment will be required. The Company satisfied $0.9 million of our future
commitments in the Third Quarter 2004 and $2.3 million for the Nine Months
2004.<br>
<br>
<b>14.</b>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; <b>Litigation<br>
</b>Like other companies in the insurance business, the Company is routinely
party to litigation.&nbsp; The Company does
not believe that any pending litigation will have a material adverse effect on
its financial condition, results of operations, or liquidity. <br>
<br>
Three of the Company's subsidiaries, Consumer Health Network Plus, LLC (CHN),
Alta Services, LLC (Alta) and Selective Insurance Company of America (SICA),
were named as defendants, together with ten other unrelated parties, in <u>Berlin
Medical Associates PA, et al. v. CMI New Jersey Operating Corp., et al</u>, a
purported class action filed on May 21, 2003, by several non-hospital health
care providers in the Superior Court of New Jersey, Law Division - Camden
County.<br>
<br>
The lawsuit alleges that the defendants breached the terms of their
participating provider agreements and/or the terms of New Jersey automobile
personal injury protection policies by reducing payments for plaintiffs'
services pursuant to provider discount schedules when paying claims and were
unjustly enriched.&nbsp; The complaint does not specify monetary damages.&nbsp; The defendants,
including CHN, Alta, and SICA, are vigorously defending this lawsuit and,
together with the other defendants, filed a motion to dismiss.&nbsp; After a hearing on the motion, the court
ordered the plaintiffs to amend their complaint.&nbsp; In March 2004, the plaintiffs filed an
amended complaint, which no longer named Alta as a defendant.&nbsp; In May 2004, all remaining defendants,
including CHN and SICA, moved to dismiss the amended complaint.&nbsp; In July, they also filed a motion to dismiss
the class action allegations.&nbsp; The court
has scheduled argument on both such motions in January 2005.<br>
<br>
<br>
<br>
</font>
<p style="margin-top: 0; margin-bottom: 0" align="center"><font size="2">14</font><hr color="#000080"><P STYLE="page-break-after: always"></P>
<p style="margin-top: 0; margin-bottom: 0"><font size="2"><br clear=all>
Given the early stages of the litigation, it is extremely difficult to provide
a meaningful estimate or range of any potential loss.&nbsp; CHN and SICA will continue to vigorously
defend the case.&nbsp; At this time, however,
the Company believes that, should the case ultimately be decided unfavorably,
it would not have a material adverse effect on the Company's financial
condition, results of operations, or liquidity.</font></p>
<p style="margin-top: 0; margin-bottom: 0">&nbsp;</p>
<p style="margin-top: 0; margin-bottom: 0"><font size="2">One of the Company's insurance subsidiaries, Selective Insurance Company of the
Southeast (SISE), is one of nine property and casualty insurance company
defendants in <u>Howell et all v. State Farm et al</u>., a purported class
action filed on May 18, 2004 in the United States District Court for the
District of Maryland, Baltimore Division.&nbsp;
The court has not yet ruled on class certification.&nbsp; The plaintiffs hold Standard Flood Insurance
Policies (SFIP) issued by the defendant insurers, who are participants in the
Write Your Own (WYO) Program of the Federal Insurance Administration's (FIA)
National Flood Insurance Program (NFIP).&nbsp;
The FIA is an agency within the Federal Emergency Management Administration
(FEMA).&nbsp; All claims under SFIPs are 100%
reinsured by FEMA.<br>
<br>
The suit alleges that the insurers underpaid flood claims arising from
Hurricane Isabel in breach of their contractual obligations, fiduciary duties,
and the implied covenant of good faith and fair dealing and seeks damages.&nbsp;
The complaint does not specify monetary damages.&nbsp; The insurers, including SISE, have denied the
allegations, noting that they adjusted the claims as fiduciary agents of the
U.S. Government in accordance with specific federal guidelines.&nbsp; The insurers also have filed a motion to
dismiss certain of the claims, which the court has not yet decided.<br>
<br>
Given the early stages of the litigation, it is extremely difficult to provide
a meaningful estimate or range of any potential loss.&nbsp; FEMA's Office of the General Counsel,
however, has advised the defendant carriers that, in its opinion, the claims
were adjusted in accordance with the law and that FEMA will indemnify and
reimburse the defense costs of the defendant insurers, including SISE.&nbsp; Consequently, the Company believes that its
exposure in the case is minimal.<br>
</font></p>
<p style="margin-top: 0; margin-bottom: 0" align="center"><font size="2">15</font></p>
<hr color="#000080"><P STYLE="page-break-after: always"></P>
<p style="margin-top: 0; margin-bottom: 0"><font size="2"><br clear=all>
</font><b><font size="2">FORWARD-LOOKING
STATEMENTS<br></font>
</b><font size="2">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
&quot;forward-looking&quot; statements within the meaning of the Private
Securities Litigation Reform Act of 1995. These forward-looking statements are
often identified by words such as &quot;anticipates,&quot; &quot;believes,&quot; &quot;expects,&quot;
&quot;will,&quot; &quot;should&quot; and &quot;intends&quot; 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 &quot;Business
Risks&quot; in &quot;Item 7 -- Management's Discussion and Analysis of Financial
Condition and Results of Operations&quot; in Selective's Annual Report on Form
10-K for 2003 (&quot;Annual Report&quot;). Those portions of the Annual Report
are incorporated by reference into this report.&nbsp;
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.<br><br>
Factors that could cause our actual results to differ materially from those
projected, forecasted or estimated by us in forward-looking statements,
include, but are not limited to:</font></p>
<ul>
  <li>
  <p style="margin-top: 0; margin-bottom: 0"><font size="2">the frequency and severity of catastrophic
events, including, but not limited to, hurricanes, tornadoes, windstorms,
earthquakes, hail, severe winter weather, fires, explosions and terrorism;</font></p>
  </li>
  <li>
  <p style="margin-top: 0; margin-bottom: 0"><font size="2">adverse economic, market or regulatory
conditions;</font></p></li>
  <li>
  <p style="margin-top: 0; margin-bottom: 0"><font size="2">the concentration of our business in a number of
east coast and midwestern states;</font></p></li>
  <li>
  <p style="margin-top: 0; margin-bottom: 0"><font size="2">the adequacy of our loss reserves;</font></p>
  </li>
  <li>
  <p style="margin-top: 0; margin-bottom: 0"><font size="2">the cost and availability of reinsurance;</font></p>
  </li>
  <li>
  <p style="margin-top: 0; margin-bottom: 0"><font size="2">our ability to collect on reinsurance and the
solvency of our reinsurers;</font></p></li>
  <li>
  <p style="margin-top: 0; margin-bottom: 0"><font size="2">uncertainties related to insurance premium rate
increases and business retention;</font></p></li>
  <li>
  <p style="margin-top: 0; margin-bottom: 0"><font size="2">changes in insurance regulations that impact our
ability to write and/or cease writing insurance policies in one or more states
particularly changes in New Jersey automobile insurance laws and regulations;</font></p>
  </li>
  <li>
  <p style="margin-top: 0; margin-bottom: 0"><font size="2">our ability to maintain favorable ratings from
A.M. Best, Standard &amp; Poor's, Moody's and Fitch;</font></p></li>
  <li>
  <p style="margin-top: 0; margin-bottom: 0"><font size="2">fluctuations in interest rates and the
performance of the financial markets;</font></p></li>
  <li>
  <p style="margin-top: 0; margin-bottom: 0"><font size="2">our entry into new markets and businesses; and</font></p>
  </li>
  <li>
  <p style="margin-top: 0; margin-bottom: 0"><font size="2">other risks and uncertainties we identify in
this report and other filings with the Securities and Exchange Commission.</font></p>
  </li>
</ul>

<p style="margin-top: 0; margin-bottom: 0" align="left"><font size="2"><br>
<b>ITEM 2.&nbsp; Management's Discussion and Analysis of
Financial Condition and Results of Operations<br></b>The Company is primarily engaged in
writing property and casualty insurance. The Company has classified its
businesses into three segments, which is at the same level of disaggregation as
that reviewed by senior management: Insurance Operations (commercial lines
underwriting, personal lines underwriting), Investments, and Diversified
Insurance Services (flood insurance, human resource administration outsourcing
and managed care). Insurance Operations are evaluated based on underwriting
results determined in accordance with Generally Accepted Accounting Principles
(GAAP); Investments are evaluated based on after-tax investment returns; and
the Diversified Insurance Services are evaluated based on several measures
including, but not limited to, results of operations determined in accordance
with GAAP. For an additional description of our critical accounting policies
and estimates, refer to Item 8. &quot;Financial Statements and Supplementary Data,&quot;
Note 2 to our consolidated financial statements of our Annual Report on Form
10-K for the year-ended December 31, 2003 and the discussion beginning on page
31 of this report on Form 10-Q.&nbsp; See Note
10 to the September 30, 2004 unaudited interim consolidated financial statements
on pages 11 through 13 of this report on Form 10-Q for revenues and related
income before federal income tax for each individual segment discussed below.<br>
<br>
The following discussion relates to our results of operations, financial
condition, liquidity and capital resources, off-balance sheet arrangements,
contractual obligations and contingent liabilities and commitments and critical
accounting policies for the interim periods indicated.<br>
<br>
</font>
<p style="margin-top: 0; margin-bottom: 0" align="center"><font size="2">16</font><hr color="#000080"><P STYLE="page-break-after: always"></P>
<p style="margin-top: 0; margin-bottom: 0"><font size="2"><br clear=all>
<b><u>Results of Operations<br></u></b>The following discussion is a comparison of the third quarter
ended September 30, 2004 (Third Quarter 2004) and the nine-month period ended
September 30, 2004 (Nine Months 2004) to the third quarter ended September 30,
2003 (Third Quarter 2003) and the nine-month period ended September 30, 2003
(Nine Months 2003), respectively.<br>
<br>
Our net income increased 92% to $28.3 million, or $0.90 per diluted share, for
Third Quarter 2004, compared to $14.7 million, or $0.53 per diluted share, for
Third Quarter 2003. For the Nine Months 2004, our net income increased 99% to
$84.7 million, or $2.70 per diluted share, compared to $42.5 million, or $1.54
per diluted share, for Nine Months 2003. Included in net income are net
realized capital gains, after-tax, of $1.1 million for Third Quarter 2004 and
$4.6 million for Nine Months 2004, compared to $0.7 million for Third Quarter
2003 and $5.4 million for Nine Months 2003. These results increased our
annualized return on average equity (annualized net income divided by average
equity) as of the Nine Months 2004 to 14.3%, which substantially exceeded our 9.5%
return on average equity for the full year of 2003. <br>
<br>
</font>
<b><i><font size="2">Insurance
Operations </font> </i></b></p>
</p>

<table border=0 cellspacing=0 cellpadding=0>
 <tr>
  <td width=606 colspan=10 valign=top>
  <div align=center><b>
  <hr size=1 width="100%" noshade color=black align=center>
  </b></div>
  </td>
 </tr>
 <tr>
  <td width=240 valign=top>
  <p><b><font size="1">All Lines</font></b></p>
  </td>
  <td width=19 valign=top>

  </td>
  <td width=154 colspan=3 valign=top>
  <p align=center><b><font size="1">Unaudited,</font></b></p>
  </td>
  <td width=19 valign=top>
  <p align=center><b><font size="1">&nbsp;</font></b></p>
  </td>
  <td width=19 valign=top>
  <p align=center><b><font size="1">&nbsp;</font></b></p>
  </td>
  <td width=155 colspan=3 valign=top>
  <p align=center><b><font size="1">Unaudited,</font></b></p>
  </td>
 </tr>
 <tr>
  <td width=240 valign=top>

  </td>
  <td width=19 valign=top>

  </td>
  <td width=154 colspan=3 valign=top>
  <p align=center><b><font size="1">Quarter ended</font></b></p>
  </td>
  <td width=19 valign=top>
  <p align=center><b><font size="1">&nbsp;</font></b></p>
  </td>
  <td width=19 valign=top>
  <p align=center><b><font size="1">&nbsp;</font></b></p>
  </td>
  <td width=155 colspan=3 valign=top>
  <p align=center><b><font size="1">Nine months ended</font></b></p>
  </td>
 </tr>
 <tr>
  <td width=240 valign=top>

  </td>
  <td width=19 valign=top>

  </td>
  <td width=154 colspan=3 valign=top>
  <p align=center><b><font size="1">September 30,</font></b></p>
  </td>
  <td width=19 valign=top>
  <p align=center><b><font size="1">&nbsp;</font></b></p>
  </td>
  <td width=19 valign=top>
  <p align=center><b><font size="1">&nbsp;</font></b></p>
  </td>
  <td width=155 colspan=3 valign=top>
  <p align=center><b><font size="1">September 30,</font></b></p>
  </td>
 </tr>
 <tr>
  <td width=240 valign=top>
  <p><font size="1">($ in thousands)</font></p>
  </td>
  <td width=19 valign=top>

  </td>
  <td width=67 valign=top>
  <p align=center><b><font size="1">2004</font></b></p>
  </td>
  <td width=19 valign=top>

  </td>
  <td width=67 valign=top>
  <p align=center><b><font size="1">2003</font></b></p>
  </td>
  <td width=19 valign=top>
  <p align=center><b><font size="1">&nbsp;</font></b></p>
  </td>
  <td width=19 valign=top>
  <p align=center><b><font size="1">&nbsp;</font></b></p>
  </td>
  <td width=67 valign=top>
  <p align=center><b><font size="1">2004</font></b></p>
  </td>
  <td width=19 valign=top>

  </td>
  <td width=68 valign=top>
  <p align=center><b><font size="1">2003</font></b></p>
  </td>
 </tr>
 <tr>
  <td width=606 colspan=10 valign=top>
  <div align=center><b>
  <hr size=1 width="100%" noshade color=black align=center>
  </b></div>
  </td>
 </tr>
 <tr height=0>
  <td width=240></td>
  <td width=19></td>
  <td width=67></td>
  <td width=19></td>
  <td width=67></td>
  <td width=19></td>
  <td width=19></td>
  <td width=67></td>
  <td width=19></td>
  <td width=68></td>
 </tr>
</table>



<table border=0 cellspacing=0 cellpadding=0>
 <tr>
  <td width=240 valign=top>
  <p><b><font size="1">GAAP
  Insurance Operations Results:</font></b></p>
  </td>
  <td width=19 valign=top>

  </td>
  <td width=67 valign=top>

  </td>
  <td width=19 valign=top>

  </td>
  <td width=67 valign=top>

  </td>
  <td width=19 valign=top>

  </td>
  <td width=19 valign=top>

  </td>
  <td width=67 valign=top>

  </td>
  <td width=19 valign=top>

  </td>
  <td width=68 valign=top>

  </td>
 </tr>
 <tr>
  <td width=240 valign=top>
  <p><font size="1">Net premiums written</font></p>
  </td>
  <td width=19 valign=top>
  <p align=right><font size="1">$</font></p>
  </td>
  <td width=67 valign=top>
  <p align=right><font size="1">356,451&nbsp;</font></p>
  </td>
  <td width=19 valign=top>

  </td>
  <td width=67 valign=top>
  <p align=right><font size="1">317,513&nbsp;</font></p>
  </td>
  <td width=19 valign=top>

  </td>
  <td width=19 valign=top>

  </td>
  <td width=67 valign=top>
  <p align=right><font size="1">1,080,963&nbsp;</font></p>
  </td>
  <td width=19 valign=top>

  </td>
  <td width=68 valign=top>
  <p align=right><font size="1">947,779&nbsp;</font></p>
  </td>
 </tr>
 <tr>
  <td width=240 valign=top>

  </td>
  <td width=19 valign=top>

  </td>
  <td width=67 valign=top>
  <p align=right>======</p>
  </td>
  <td width=19 valign=top>

  </td>
  <td width=67 valign=top>
  <p align=right>======</p>
  </td>
  <td width=19 valign=top>

  </td>
  <td width=19 valign=top>

  </td>
  <td width=67 valign=top>
  <p align=right>======</p>
  </td>
  <td width=19 valign=top>

  </td>
  <td width=68 valign=top>
  <p align=right>======</p>
  </td>
 </tr>
 <tr>
  <td width=240 valign=top>
  <p><font size="1">Net premiums
  earned</font></p>
  </td>
  <td width=19 valign=top>
  <p align="right"><font size="1">$</font></p>
  </td>
  <td width=67 valign=top>
  <p align=right><font size="1">337,074&nbsp;</font></p>
  </td>
  <td width=19 valign=top>

  </td>
  <td width=67 valign=top>
  <p align=right><font size="1">289,681&nbsp;</font></p>
  </td>
  <td width=19 valign=top>

  </td>
  <td width=19 valign=top>

  </td>
  <td width=67 valign=top>
  <p align=right><font size="1">978,366&nbsp;</font></p>
  </td>
  <td width=19 valign=top>

  </td>
  <td width=68 valign=top>
  <p align=right><font size="1">832,867&nbsp;</font></p>
  </td>
 </tr>
 <tr>
  <td width=240 valign=top>
  <p><font size="1">Less:</font></p>
  </td>
  <td width=19 valign=top>

  </td>
  <td width=67 valign=top>

  </td>
  <td width=19 valign=top>

  </td>
  <td width=67 valign=top>

  </td>
  <td width=19 valign=top>

  </td>
  <td width=19 valign=top>

  </td>
  <td width=67 valign=top>

  </td>
  <td width=19 valign=top>

  </td>
  <td width=68 valign=top>

  </td>
 </tr>
 <tr>
  <td width=240 valign=top>
  <p><font size="1">Losses and loss expenses incurred</font></p>
  </td>
  <td width=19 valign=top>

  </td>
  <td width=67 valign=top>
  <p align=right><font size="1">224,842&nbsp;</font></p>
  </td>
  <td width=19 valign=top>

  </td>
  <td width=67 valign=top>
  <p align=right><font size="1">204,184&nbsp;</font></p>
  </td>
  <td width=19 valign=top>

  </td>
  <td width=19 valign=top>

  </td>
  <td width=67 valign=top>
  <p align=right><font size="1">644,309&nbsp;</font></p>
  </td>
  <td width=19 valign=top>

  </td>
  <td width=68 valign=top>
  <p align=right><font size="1">593,027&nbsp;</font></p>
  </td>
 </tr>
 <tr>
  <td width=240 valign=top>
  <p><font size="1">Net underwriting expenses incurred</font></p>
  </td>
  <td width=19 valign=top>

  </td>
  <td width=67 valign=top>
  <p align=right><font size="1">104,758&nbsp;</font></p>
  </td>
  <td width=19 valign=top>

  </td>
  <td width=67 valign=top>
  <p align=right><font size="1">90,863&nbsp;</font></p>
  </td>
  <td width=19 valign=top>

  </td>
  <td width=19 valign=top>

  </td>
  <td width=67 valign=top>
  <p align=right><font size="1">303,671&nbsp;</font></p>
  </td>
  <td width=19 valign=top>

  </td>
  <td width=68 valign=top>
  <p align=right><font size="1">262,774&nbsp;</font></p>
  </td>
 </tr>
 <tr>
  <td width=240 valign=top>
  <p><font size="1">Dividends to
  policyholders</font></p>
  </td>
  <td width=19 valign=top>

  </td>
  <td width=67 valign=top>
  <p align=right><font size="1">1,186&nbsp;</font></p>
  </td>
  <td width=19 valign=top>

  </td>
  <td width=67 valign=top>
  <p align=right><font size="1">914&nbsp;</font></p>
  </td>
  <td width=19 valign=top>

  </td>
  <td width=19 valign=top>

  </td>
  <td width=67 valign=top>
  <p align=right><font size="1">3,239&nbsp;</font></p>
  </td>
  <td width=19 valign=top>

  </td>
  <td width=68 valign=top>
  <p align=right><font size="1">3,852&nbsp;</font></p>
  </td>
 </tr>
 <tr>
  <td width=240 valign=top>

  </td>
  <td width=19 valign=top>

  </td>
  <td width=67 valign=top>
  <div align=right>
  <hr size=1 width="90%" noshade color=gray align=right>
  </div>
  </td>
  <td width=19 valign=top>

  </td>
  <td width=67 valign=top>
  <div align=right>
  <hr size=1 width="90%" noshade color=gray align=right>
  </div>
  </td>
  <td width=19 valign=top>

  </td>
  <td width=19 valign=top>

  </td>
  <td width=67 valign=top>
  <div align=right>
  <hr size=1 width="90%" noshade color=gray align=right>
  </div>
  </td>
  <td width=19 valign=top>

  </td>
  <td width=68 valign=top>
  <div align=right>
  <hr size=1 width="90%" noshade color=gray align=right>
  </div>
  </td>
 </tr>
 <tr>
  <td width=240 valign=top>
  <p><font size="1">Underwriting
  profit (loss) </font> </p>
  </td>
  <td width=19 valign=top>
  <p align=right><font size="1">$</font></p>
  </td>
  <td width=67 valign=top>
  <p align=right><font size="1">6,288&nbsp;</font></p>
  </td>
  <td width=19 valign=top>

  </td>
  <td width=67 valign=top>
  <p align=right><font size="1">(6,280)</font></p>
  </td>
  <td width=19 valign=top>

  </td>
  <td width=19 valign=top>

  </td>
  <td width=67 valign=top>
  <p align=right><font size="1">27,147&nbsp;</font></p>
  </td>
  <td width=19 valign=top>

  </td>
  <td width=68 valign=top>
  <p align=right><font size="1">(26,786)</font></p>
  </td>
 </tr>
 <tr>
  <td width=240 valign=top>

  </td>
  <td width=19 valign=top>

  </td>
  <td width=67 valign=top>
  <div align=right>
  <hr size=1 width="90%" noshade color=gray align=right>
  </div>
  </td>
  <td width=19 valign=top>

  </td>
  <td width=67 valign=top>
  <div align=right>
  <hr size=1 width="90%" noshade color=gray align=right>
  </div>
  </td>
  <td width=19 valign=top>

  </td>
  <td width=19 valign=top>

  </td>
  <td width=67 valign=top>
  <div align=right>
  <hr size=1 width="90%" noshade color=gray align=right>
  </div>
  </td>
  <td width=19 valign=top>

  </td>
  <td width=68 valign=top>
  <div align=right>
  <hr size=1 width="90%" noshade color=gray align=right>
  </div>
  </td>
 </tr>
 <tr>
  <td width=240 valign=top>
  <p><b><font size="1">GAAP Ratios:</font></b></p>
  </td>
  <td width=19 valign=top>

  </td>
  <td width=67 valign=top>

  </td>
  <td width=19 valign=top>

  </td>
  <td width=67 valign=top>

  </td>
  <td width=19 valign=top>

  </td>
  <td width=19 valign=top>

  </td>
  <td width=67 valign=top>

  </td>
  <td width=19 valign=top>

  </td>
  <td width=68 valign=top>

  </td>
 </tr>
 <tr>
  <td width=240 valign=top>
  <p><font size="1">Loss and loss
  expense ratio </font> </p>
  </td>
  <td width=19 valign=top>

  </td>
  <td width=67 valign=top>
  <p align=right><font size="1">66.7&nbsp;</font></p>
  </td>
  <td width=19 valign=top>
  <p align=right><font size="1">%</font></p>
  </td>
  <td width=67 valign=top>
  <p align=right><font size="1">70.5&nbsp;</font></p>
  </td>
  <td width=19 valign=top>

  </td>
  <td width=19 valign=top>

  </td>
  <td width=67 valign=top>
  <p align=right><font size="1">65.9&nbsp;</font></p>
  </td>
  <td width=19 valign=top>
  <p align=right><font size="1">%</font></p>
  </td>
  <td width=68 valign=top>
  <p align=right><font size="1">71.2&nbsp;</font></p>
  </td>
 </tr>
 <tr>
  <td width=240 valign=top>
  <p><font size="1">Underwriting
  expense ratio</font></p>
  </td>
  <td width=19 valign=top>

  </td>
  <td width=67 valign=top>
  <p align=right><font size="1">31.0&nbsp;</font></p>
  </td>
  <td width=19 valign=top>
  <p align=right><font size="1">%</font></p>
  </td>
  <td width=67 valign=top>
  <p align=right><font size="1">31.4&nbsp;</font></p>
  </td>
  <td width=19 valign=top>

  </td>
  <td width=19 valign=top>

  </td>
  <td width=67 valign=top>
  <p align=right><font size="1">31.0&nbsp;</font></p>
  </td>
  <td width=19 valign=top>
  <p align=right><font size="1">%</font></p>
  </td>
  <td width=68 valign=top>
  <p align=right><font size="1">31.5&nbsp;</font></p>
  </td>
 </tr>
 <tr>
  <td width=240 valign=top>
  <p><font size="1">Dividends to
  policyholders ratio</font></p>
  </td>
  <td width=19 valign=top>

  </td>
  <td width=67 valign=top>
  <p align=right><font size="1">0.4&nbsp;</font></p>
  </td>
  <td width=19 valign=top>
  <p align=right><font size="1">%</font></p>
  </td>
  <td width=67 valign=top>
  <p align=right><font size="1">0.3&nbsp;</font></p>
  </td>
  <td width=19 valign=top>

  </td>
  <td width=19 valign=top>

  </td>
  <td width=67 valign=top>
  <p align=right><font size="1">0.3&nbsp;</font></p>
  </td>
  <td width=19 valign=top>
  <p align=right><font size="1">%</font></p>
  </td>
  <td width=68 valign=top>
  <p align=right><font size="1">0.5&nbsp;</font></p>
  </td>
 </tr>
 <tr>
  <td width=240 valign=top>

  </td>
  <td width=19 valign=top>

  </td>
  <td width=67 valign=top>
  <div align=right>
  <hr size=1 width="90%" noshade color=gray align=right>
  </div>
  </td>
  <td width=19 valign=top>

  </td>
  <td width=67 valign=top>
  <div align=right>
  <hr size=1 width="90%" noshade color=gray align=right>
  </div>
  </td>
  <td width=19 valign=top>

  </td>
  <td width=19 valign=top>

  </td>
  <td width=67 valign=top>
  <div align=right>
  <hr size=1 width="90%" noshade color=gray align=right>
  </div>
  </td>
  <td width=19 valign=top>

  </td>
  <td width=68 valign=top>
  <div align=right>
  <hr size=1 width="90%" noshade color=gray align=right>
  </div>
  </td>
 </tr>
 <tr>
  <td width=240 valign=top>
  <p><font size="1">Combined ratio</font></p>
  </td>
  <td width=19 valign=top>

  </td>
  <td width=67 valign=top>
  <p align=right><font size="1">&nbsp;&nbsp;98.1&nbsp;</font></p>
  </td>
  <td width=19 valign=top>
  <p align=right><font size="1">%</font></p>
  </td>
  <td width=67 valign=top>
  <p align=right><font size="1">102.2&nbsp;</font></p>
  </td>
  <td width=19 valign=top>

  </td>
  <td width=19 valign=top>

  </td>
  <td width=67 valign=top>
  <p align=right><font size="1">97.2&nbsp;</font></p>
  </td>
  <td width=19 valign=top>
  <p align=right><font size="1">%</font></p>
  </td>
  <td width=68 valign=top>
  <p align=right><font size="1">103.2&nbsp;</font></p>
  </td>
 </tr>
 <tr>
  <td width=240 valign=top>

  </td>
  <td width=19 valign=top>

  </td>
  <td width=67 valign=top>
  <p align=right>=======</p>
  </td>
  <td width=19 valign=top>

  </td>
  <td width=67 valign=top>
  <p align=right>=======</p>
  </td>
  <td width=19 valign=top>

  </td>
  <td width=19 valign=top>

  </td>
  <td width=67 valign=top>
  <p align=right>=======</p>
  </td>
  <td width=19 valign=top>

  </td>
  <td width=68 valign=top>
  <p align=right>=======</p>
  </td>
 </tr>
</table>

<p style="margin-top: 0; margin-bottom: 0"><font size="2"><br>
Net premiums written increased by approximately $38.9 million or 12%, to $356.5
million in Third Quarter 2004 and by $133.2 million, or 14%, to $1.1 billion in
Nine Months 2004 when compared to the same periods in 2003. Net premiums earned
increased by $47.4 million or 16%, to $337.1 million in Third Quarter 2004 and
by $145.5 million, or 17%, to $1.0 billion in Nine Months 2004 when compared to
the same periods in 2003. These increases were largely attributable to
commercial lines renewal premium&nbsp; price
increases, including exposure, that averaged 9.4% in Third Quarter 2004 and
9.5% in the Nine Months 2004 compared to 12.0% in Third Quarter 2003 and 13.2%
in the Nine Months 2003.&nbsp; As expected,
these price increases have decelerated over the nine months of 2004 and we
expect this trend to continue over the remainder of the year; however,
commercial lines earned price increases outpaced loss trends by 2.8 points for
the Third Quarter 2004 and 3.9 points for the Nine Months 2004.&nbsp; Combined ratios and ultimately net income
would be unfavorably impacted if earned price increases cease to
outpace loss costs trends in the future. However, underwriting improvements
resulting in lower loss ratios could partially offset the unfavorable impact of
increased loss trends.<br>
<br>
Additional factors contributing to growth in net premiums written were: (i) net
new business written of $68.9 million for the Third Quarter 2004 compared with
$69.2 million in Third Quarter 2003 and $213.4 million in net new business
written in the Nine Months 2004 compared with $206.0 million for Nine Months
2003 and (ii) commercial lines year-on-year retention improvement of 1 point to
81% in Third Quarter 2004 and 3 points to 83% in Nine Months 2004 compared with
80% for Third Quarter 2003 and Nine Months 2003.<br></font>
<p align="center" style="margin-top: 0; margin-bottom: 0"><font size="2">17<br>
</font>
<hr color="#000080"><P STYLE="page-break-after: always"></P>
<p style="margin-top: 0; margin-bottom: 0"><font size="2"><br clear=all>
The loss and loss expense ratio decreased 3.8 points to 66.7% for Third Quarter
2004 and 5.3 points to 65.9% for Nine Months 2004 when compared with the same
periods in 2003. The improvements were primarily due to increased premium rates
coupled with underwriting improvements in both our commercial lines and
personal lines businesses. Additionally, the loss and loss expense ratio
declined due to lower catastrophe losses in the quarter and for the nine
months. Weather-related catastrophe losses were&nbsp;
$12.2 million or 3.6 points in Third Quarter 2004 compared with $13.5
million or 4.7 points for Third Quarter 2003. Weather-related catastrophe
losses accounted for $19.5 million in incurred losses and added 2.0 points to
the loss and loss expense ratio for the Nine Months 2004, compared with $25.3
million and 3.0 points for Nine Months 2003.<br>
<br>
The underwriting expense ratio decreased 0.4 points to 31.0% for Third
Quarter 2004 and 0.5 points to 31.0% for Nine Months 2004 compared with the
same periods last year.&nbsp; Overall
productivity, as measured by fiscal year net premiums written per insurance
operations employee, increased approximately 18% to $781,000 compared to
$662,000 for the same period a year ago. Contributing to the productivity gains
are our strategic initiatives that are designed to either reduce costs and/or
increase business, which include: (i) streamlined processing for small
commercial lines accounts (One &amp; Done) and (ii) web-based commercial lines
and personal lines automated systems. These technology enhancements allow
agents to initiate and self-service a portion of our business from their
offices. At the end of the Third Quarter 2004, agents were processing
approximately 50% of all endorsements through our commercial lines system,
while underwriting templates automatically renewed over 30% of commercial lines
policies. Additionally, agents are issuing 76% of new automobile policies
directly on-line in the personal lines underwriting system. <br>
<br>
The combined ratio decreased 4.1 points to 98.1% for Third Quarter 2004 and 6.0
points to 97.2% for Nine Months 2004 compared with the same periods last
year.&nbsp; The decrease in the combined ratio
is attributable to the decreases in the loss and loss expense ratio and the
underwriting expense ratio discussed above.</font><b><font size="2"><br>
<br>
Commercial Lines Results</font></b></p>
</p>

<table border=0 cellspacing=0 cellpadding=0>
 <tr>
  <td width=610 colspan=10 valign=top>
  <div align=center><b>
  <hr size=1 width="100%" noshade color=black align=center>
  </b></div>
  </td>
 </tr>
 <tr>
  <td width=240 valign=top>

  </td>
  <td width=18 valign=top>

  </td>
  <td width=154 colspan=3 valign=top>
  <p align=center><b><font size="1">Unaudited,</font></b></p>
  </td>
  <td width=19 valign=top>
  <p><b><font size="1">&nbsp;</font></b></p>
  </td>
  <td width=19 valign=top>
  <p><b><font size="1">&nbsp;</font></b></p>
  </td>
  <td width=160 colspan=3 valign=top>
  <p align=center><b><font size="1">Unaudited,</font></b></p>
  </td>
 </tr>
 <tr>
  <td width=240 valign=top>
  <p><b><font size="1">Commercial Lines</font></b></p>
  </td>
  <td width=18 valign=top>

  </td>
  <td width=154 colspan=3 valign=top>
  <p align=center><b><font size="1">Quarter ended</font></b></p>
  </td>
  <td width=19 valign=top>
  <p><b><font size="1">&nbsp;</font></b></p>
  </td>
  <td width=19 valign=top>
  <p><b><font size="1">&nbsp;</font></b></p>
  </td>
  <td width=160 colspan=3 valign=top>
  <p align=center><b><font size="1">Nine months ended</font></b></p>
  </td>
 </tr>
 <tr>
  <td width=240 valign=top>
  <p><b><font size="1">&nbsp;</font></b></p>
  </td>
  <td width=18 valign=top>

  </td>
  <td width=154 colspan=3 valign=top>
  <p align=center><b><font size="1">September 30,</font></b></p>
  </td>
  <td width=19 valign=top>
  <p><b><font size="1">&nbsp;</font></b></p>
  </td>
  <td width=19 valign=top>
  <p><b><font size="1">&nbsp;</font></b></p>
  </td>
  <td width=160 colspan=3 valign=top>
  <p align=center><b><font size="1">September 30,</font></b></p>
  </td>
 </tr>
 <tr>
  <td width=240 valign=top>
  <p><font size="1">($ in thousands)</font></p>
  </td>
  <td width=18 valign=top>

  </td>
  <td width=67 valign=top>
  <p align=center><b><font size="1">2004</font></b></p>
  </td>
  <td width=19 valign=top>

  </td>
  <td width=67 valign=top>
  <p align=center><b><font size="1">2003</font></b></p>
  </td>
  <td width=19 valign=top>

  </td>
  <td width=19 valign=top>

  </td>
  <td width=67 valign=top>
  <p align=center><b><font size="1">2004</font></b></p>
  </td>
  <td width=19 valign=top>

  </td>
  <td width=73 valign=top>
  <p align=center><b><font size="1">2003</font></b></p>
  </td>
 </tr>
 <tr>
  <td width=610 colspan=10 valign=top>
  <div align=center><b>
  <hr size=1 width="100%" noshade color=black align=center>
  </b></div>
  </td>
 </tr>
 <tr height=0>
  <td width=240></td>
  <td width=18></td>
  <td width=67></td>
  <td width=19></td>
  <td width=67></td>
  <td width=19></td>
  <td width=19></td>
  <td width=67></td>
  <td width=19></td>
  <td width=73></td>
 </tr>
</table>



<table border=0 cellspacing=0 cellpadding=0>
 <tr>
  <td width=240 valign=top>
  <p><b><font size="1">GAAP Insurance Operations
  Results:</font></b></p>
  </td>
  <td width=18 valign=top>

  </td>
  <td width=67 valign=top>

  </td>
  <td width=19 valign=top>

  </td>
  <td width=67 valign=top>

  </td>
  <td width=19 valign=top>

  </td>
  <td width=19 valign=top>

  </td>
  <td width=67 valign=top>

  </td>
  <td width=19 valign=top>

  </td>
  <td width=73 valign=top>

  </td>
 </tr>
 <tr>
  <td width=240 valign=top>
  <p><font size="1">Net premiums written</font></p>
  </td>
  <td width=18 valign=top align="right">
  <p><font size="1">$</font></p>
  </td>
  <td width=67 valign=top align="right">
  <p align=right><font size="1">297,469&nbsp;</font></p>
  </td>
  <td width=19 valign=top align="right">

  </td>
  <td width=67 valign=top align="right">
  <p align=right><font size="1">261,397&nbsp;</font></p>
  </td>
  <td width=19 valign=top align="right">

  </td>
  <td width=19 valign=top align="right">
  <p><font size="1">$</font></p>
  </td>
  <td width=67 valign=top align="right">
  <p align=right><font size="1">908,298&nbsp;</font></p>
  </td>
  <td width=19 valign=top align="right">

  </td>
  <td width=73 valign=top align="right">
  <p align=right><font size="1">780,821&nbsp;</font></p>
  </td>
 </tr>
 <tr>
  <td width=240 valign=top>

  </td>
  <td width=18 valign=top align="right">

  </td>
  <td width=67 valign=top align="right">
  <p align=right>=======</p>
  </td>
  <td width=19 valign=top align="right">

  </td>
  <td width=67 valign=top align="right">
  =======</td>
  <td width=19 valign=top align="right">

  </td>
  <td width=19 valign=top align="right">

  </td>
  <td width=67 valign=top align="right">
  =======</td>
  <td width=19 valign=top align="right">

  </td>
  <td width=73 valign=top align="right">
  =======</td>
 </tr>
 <tr>
  <td width=240 valign=top>
  <p><font size="1">Net premiums earned</font></p>
  </td>
  <td width=18 valign=top align="right">
  <p><font size="1">$</font></p>
  </td>
  <td width=67 valign=top align="right">
  <p align=right><font size="1">279,652&nbsp;</font></p>
  </td>
  <td width=19 valign=top align="right">

  </td>
  <td width=67 valign=top align="right">
  <p align=right><font size="1">235,564&nbsp;</font></p>
  </td>
  <td width=19 valign=top align="right">

  </td>
  <td width=19 valign=top align="right">
  <p><font size="1">$</font></p>
  </td>
  <td width=67 valign=top align="right">
  <p align=right><font size="1">809,461&nbsp;</font></p>
  </td>
  <td width=19 valign=top align="right">

  </td>
  <td width=73 valign=top align="right">
  <p align=right><font size="1">674,911&nbsp;</font></p>
  </td>
 </tr>
 <tr>
  <td width=240 valign=top>
  <p><font size="1">Less:</font></p>
  </td>
  <td width=18 valign=top align="right">

  </td>
  <td width=67 valign=top align="right">

  </td>
  <td width=19 valign=top align="right">

  </td>
  <td width=67 valign=top align="right">

  </td>
  <td width=19 valign=top align="right">

  </td>
  <td width=19 valign=top align="right">

  </td>
  <td width=67 valign=top align="right">

  </td>
  <td width=19 valign=top align="right">

  </td>
  <td width=73 valign=top align="right">

  </td>
 </tr>
 <tr>
  <td width=240 valign=top>
  <p><font size="1">Losses and loss expenses incurred</font></p>
  </td>
  <td width=18 valign=top align="right">

  </td>
  <td width=67 valign=top align="right">
  <p align=right><font size="1">182,957&nbsp;</font></p>
  </td>
  <td width=19 valign=top align="right">

  </td>
  <td width=67 valign=top align="right">
  <p align=right><font size="1">160,688&nbsp;</font></p>
  </td>
  <td width=19 valign=top align="right">

  </td>
  <td width=19 valign=top align="right">

  </td>
  <td width=67 valign=top align="right">
  <p align=right><font size="1">520,476&nbsp;</font></p>
  </td>
  <td width=19 valign=top align="right">

  </td>
  <td width=73 valign=top align="right">
  <p align=right><font size="1">472,270&nbsp;</font></p>
  </td>
 </tr>
 <tr>
  <td width=240 valign=top>
  <p><font size="1">Net underwriting expenses
  incurred</font></p>
  </td>
  <td width=18 valign=top align="right">

  </td>
  <td width=67 valign=top align="right">
  <p align=right><font size="1">89,144&nbsp;</font></p>
  </td>
  <td width=19 valign=top align="right">

  </td>
  <td width=67 valign=top align="right">
  <p align=right><font size="1">73,892&nbsp;</font></p>
  </td>
  <td width=19 valign=top align="right">

  </td>
  <td width=19 valign=top align="right">

  </td>
  <td width=67 valign=top align="right">
  <p align=right><font size="1">258,332&nbsp;</font></p>
  </td>
  <td width=19 valign=top align="right">

  </td>
  <td width=73 valign=top align="right">
  <p align=right><font size="1">214,183&nbsp;</font></p>
  </td>
 </tr>
 <tr>
  <td width=240 valign=top>
  <p><font size="1">Dividends to policyholders</font></p>
  </td>
  <td width=18 valign=top align="right">

  </td>
  <td width=67 valign=top align="right">
  <p align=right><font size="1">1,186&nbsp;</font></p>
  </td>
  <td width=19 valign=top align="right">

  </td>
  <td width=67 valign=top align="right">
  <p align=right><font size="1">914&nbsp;</font></p>
  </td>
  <td width=19 valign=top align="right">

  </td>
  <td width=19 valign=top align="right">

  </td>
  <td width=67 valign=top align="right">
  <p align=right><font size="1">3,239&nbsp;</font></p>
  </td>
  <td width=19 valign=top align="right">

  </td>
  <td width=73 valign=top align="right">
  <p align=right><font size="1">3,852&nbsp;</font></p>
  </td>
 </tr>
 <tr>
  <td width=240 valign=top>

  </td>
  <td width=18 valign=top align="right">

  </td>
  <td width=67 valign=top align="right">
  <div align=right>
  <hr size=1 width="90%" noshade color=gray align=right>
  </div>
  </td>
  <td width=19 valign=top align="right">

  </td>
  <td width=67 valign=top align="right">
  <div align=right>
  <hr size=1 width="90%" noshade color=gray align=right>
  </div>
  </td>
  <td width=19 valign=top align="right">

  </td>
  <td width=19 valign=top align="right">

  </td>
  <td width=67 valign=top align="right">
  <div align=right>
  <hr size=1 width="90%" noshade color=gray align=right>
  </div>
  </td>
  <td width=19 valign=top align="right">

  </td>
  <td width=73 valign=top align="right">
  <div align=right>
  <hr size=1 width="90%" noshade color=gray align=right>
  </div>
  </td>
 </tr>
 <tr>
  <td width=240 valign=top>
  <p><font size="1">Underwriting profit (loss)</font></p>
  </td>
  <td width=18 valign=top align="right">
  <p><font size="1">$</font></p>
  </td>
  <td width=67 valign=top align="right">
  <p align=right><font size="1">6,365&nbsp;</font></p>
  </td>
  <td width=19 valign=top align="right">

  </td>
  <td width=67 valign=top align="right">
  <p align=right><font size="1">&nbsp;70&nbsp;</font></p>
  </td>
  <td width=19 valign=top align="right">

  </td>
  <td width=19 valign=top align="right">
  <p><font size="1">$</font></p>
  </td>
  <td width=67 valign=top align="right">
  <p align=right><font size="1">27,414&nbsp;</font></p>
  </td>
  <td width=19 valign=top align="right">

  </td>
  <td width=73 valign=top align="right">
  <p align=right><font size="1">(15,394)</font></p>
  </td>
 </tr>
 <tr>
  <td width=240 valign=top>

  </td>
  <td width=18 valign=top align="right">

  </td>
  <td width=67 valign=top align="right">
  <div align=right>
  <hr size=1 width="90%" noshade color=gray align=right>
  </div>
  </td>
  <td width=19 valign=top align="right">

  </td>
  <td width=67 valign=top align="right">
  <div align=right>
  <hr size=1 width="90%" noshade color=gray align=right>
  </div>
  </td>
  <td width=19 valign=top align="right">

  </td>
  <td width=19 valign=top align="right">

  </td>
  <td width=67 valign=top align="right">
  <div align=right>
  <hr size=1 width="90%" noshade color=gray align=right>
  </div>
  </td>
  <td width=19 valign=top align="right">

  </td>
  <td width=73 valign=top align="right">
  <div align=right>
  <hr size=1 width="90%" noshade color=gray align=right>
  </div>
  </td>
 </tr>
 <tr>
  <td width=240 valign=top>
  <p><b><font size="1">GAAP Ratios:</font></b></p>
  </td>
  <td width=18 valign=top align="right">

  </td>
  <td width=67 valign=top align="right">

  </td>
  <td width=19 valign=top align="right">

  </td>
  <td width=67 valign=top align="right">

  </td>
  <td width=19 valign=top align="right">

  </td>
  <td width=19 valign=top align="right">

  </td>
  <td width=67 valign=top align="right">

  </td>
  <td width=19 valign=top align="right">

  </td>
  <td width=73 valign=top align="right">

  </td>
 </tr>
 <tr>
  <td width=240 valign=top>
  <p><font size="1">Loss and loss expense ratio </font> </p>
  </td>
  <td width=18 valign=top align="right">

  </td>
  <td width=67 valign=top align="right">
  <p align=right><font size="1">65.4&nbsp;</font></p>
  </td>
  <td width=19 valign=top align="right">
  <p align=right><font size="1">%</font></p>
  </td>
  <td width=67 valign=top align="right">
  <p align=right><font size="1">68.2&nbsp;</font></p>
  </td>
  <td width=19 valign=top align="right">

  </td>
  <td width=19 valign=top align="right">

  </td>
  <td width=67 valign=top align="right">
  <p align=right><font size="1">64.3&nbsp;</font></p>
  </td>
  <td width=19 valign=top align="right">
  <p align=right><font size="1">%</font></p>
  </td>
  <td width=73 valign=top align="right">
  <p align=right><font size="1">70.0&nbsp;</font></p>
  </td>
 </tr>
 <tr>
  <td width=240 valign=top>
  <p><font size="1">Underwriting expense ratio</font></p>
  </td>
  <td width=18 valign=top align="right">

  </td>
  <td width=67 valign=top align="right">
  <p align=right><font size="1">31.9&nbsp;</font></p>
  </td>
  <td width=19 valign=top align="right">
  <p align=right><font size="1">%</font></p>
  </td>
  <td width=67 valign=top align="right">
  <p align=right><font size="1">31.4&nbsp;</font></p>
  </td>
  <td width=19 valign=top align="right">

  </td>
  <td width=19 valign=top align="right">

  </td>
  <td width=67 valign=top align="right">
  <p align=right><font size="1">31.9&nbsp;</font></p>
  </td>
  <td width=19 valign=top align="right">
  <p align=right><font size="1">%</font></p>
  </td>
  <td width=73 valign=top align="right">
  <p align=right><font size="1">31.7&nbsp;</font></p>
  </td>
 </tr>
 <tr>
  <td width=240 valign=top>
  <p><font size="1">Dividends to policyholders
  ratio</font></p>
  </td>
  <td width=18 valign=top align="right">

  </td>
  <td width=67 valign=top align="right">
  <p align=right><font size="1">0.4&nbsp;</font></p>
  </td>
  <td width=19 valign=top align="right">
  <p align=right><font size="1">%</font></p>
  </td>
  <td width=67 valign=top align="right">
  <p align=right><font size="1">0.4&nbsp;</font></p>
  </td>
  <td width=19 valign=top align="right">

  </td>
  <td width=19 valign=top align="right">

  </td>
  <td width=67 valign=top align="right">
  <p align=right><font size="1">0.4&nbsp;</font></p>
  </td>
  <td width=19 valign=top align="right">
  <p align=right><font size="1">%</font></p>
  </td>
  <td width=73 valign=top align="right">
  <p align=right><font size="1">0.6&nbsp;</font></p>
  </td>
 </tr>
 <tr>
  <td width=240 valign=top>

  </td>
  <td width=18 valign=top align="right">

  </td>
  <td width=67 valign=top align="right">
  <div align=right>
  <hr size=1 width="90%" noshade color=gray align=right>
  </div>
  </td>
  <td width=19 valign=top align="right">

  </td>
  <td width=67 valign=top align="right">
  <div align=right>
  <hr size=1 width="90%" noshade color=gray align=right>
  </div>
  </td>
  <td width=19 valign=top align="right">

  </td>
  <td width=19 valign=top align="right">

  </td>
  <td width=67 valign=top align="right">
  <div align=right>
  <hr size=1 width="90%" noshade color=gray align=right>
  </div>
  </td>
  <td width=19 valign=top align="right">

  </td>
  <td width=73 valign=top align="right">
  <div align=right>
  <hr size=1 width="90%" noshade color=gray align=right>
  </div>
  </td>
 </tr>
 <tr>
  <td width=240 valign=top>
  <p><font size="1">Combined ratio</font></p>
  </td>
  <td width=18 valign=top align="right">

  </td>
  <td width=67 valign=top align="right">
  <p align=right><font size="1">97.7&nbsp;</font></p>
  </td>
  <td width=19 valign=top align="right">
  <p align=right><font size="1">%</font></p>
  </td>
  <td width=67 valign=top align="right">
  <p align=right><font size="1">100.0&nbsp;</font></p>
  </td>
  <td width=19 valign=top align="right">

  </td>
  <td width=19 valign=top align="right">

  </td>
  <td width=67 valign=top align="right">
  <p align=right><font size="1">96.6&nbsp;</font></p>
  </td>
  <td width=19 valign=top align="right">
  <p align=right><font size="1">%</font></p>
  </td>
  <td width=73 valign=top align="right">
  <p align=right><font size="1">102.3&nbsp;</font></p>
  </td>
 </tr>
 <tr>
  <td width=240 valign=top>

  </td>
  <td width=18 valign=top align="right">

  </td>
  <td width=67 valign=top align="right">
  <p align=right>=======</p>
  </td>
  <td width=19 valign=top align="right">

  </td>
  <td width=67 valign=top align="right">
  =======</td>
  <td width=19 valign=top align="right">

  </td>
  <td width=19 valign=top align="right">

  </td>
  <td width=67 valign=top align="right">
  =======</td>
  <td width=19 valign=top align="right">

  </td>
  <td width=73 valign=top align="right">
  =======</td>
 </tr>
</table>

<p style="margin-top: 0; margin-bottom: 0">&nbsp;<p align="center" style="margin-top: 0; margin-bottom: 0">
<font size="2">18<br>
</font>
<hr color="#000080"><P STYLE="page-break-after: always"></P>
<p style="margin-top: 0; margin-bottom: 0"><font size="2"><br clear=all>
Commercial Lines underwriting accounted for approximately 84% of net premiums
written in Nine Months 2004 compared to 82% in Nine Months 2003. Net premiums
written increased $36.1 million, or 14%, to $297.5 million for Third Quarter
2004 and $127.5 million, or 16%, to $908.3 million for Nine Months 2004
compared with the same periods in 2003.&nbsp;
Net premiums earned increased by approximately $44.1 million or 19%, to
$279.7 million in Third Quarter 2004 and by $134.6 million, or 20%, to $809.5
million in Nine Months 2004 when compared to the same periods in 2003. These
increases were largely attributable to commercial lines renewal premium price
increases, including exposure, that averaged 9.4% in Third Quarter 2004 and
9.5% in the Nine Months 2004 compared to 12.0% in Third Quarter 2003 and 13.2%
in the Nine Months 2003.&nbsp; As expected,
these price increases have decelerated over the nine months of 2004 and we
expect this trend to continue over the remainder of the year; however,
commercial lines earned price increases outpaced loss trends by 2.8 points for
the Third Quarter 2004 and 3.9 points for the Nine Months 2004.&nbsp; Combined ratios and ultimately net income
would be unfavorably impacted if earned price increases cease to
outpace loss costs trends in the future. However, underwriting improvements
resulting in lower loss ratios could partially offset the unfavorable impact of
increased loss trends. <br>
<br>
Additional factors contributing to growth in premiums written were: (i) net new
business written of $60.1 million for the Third Quarter 2004 compared with
$60.2 million in Third Quarter 2003 and $190.1 million in net new business
written in the Nine Months 2004 compared with $180.1 million for Nine Months
2003 and (ii) commercial lines year-on-year retention improvement of 1 point to
81% in Third Quarter 2004 and 3 points to 83% in Nine Months 2004 compared with
80% for Third Quarter 2003 and Nine Months 2003.<br>
<br>
The Commercial Lines loss and loss expense ratio decreased 2.8 points to 65.4%
for Third Quarter 2004 and 5.7 points to 64.3% for Nine Months 2004 when
compared with the same periods in 2003. This improvement reflects fewer large
losses that amounted to $3.3 million during the quarter compared to $7.7
million for the same period a year ago in our property line of business as well
as the success of our long-term strategy that incorporates higher pricing,
continued underwriting enhancements, and heightened loss control efforts - all
of which led to a better overall mix of business. The Third Quarter 2004 loss
and loss expense ratio included an impact of 3.9 points or $11.1 million of
weather-related catastrophe losses compared with 3.7 points in Third Quarter
2003. The Nine Months 2004 loss and loss expense ratio included an impact of
2.1 points or $17.2 million as the result of weather-related catastrophes
compared with an impact of 2.8 points or $18.7 million for Nine Months 2003.
Partially offsetting improvements in the Commercial Lines loss and loss expense
ratio was an increase to our loss reserves of $2.5 million adding 0.9 points to
the ratio for Third Quarter 2004 and 0.3 points for Nine Months 2004.&nbsp; This was due to rating agency downgrades of
specific reinsurers, which could adversely affect our ability to collect under
reinsurance contracts.<br>
<br>
The Commercial Lines underwriting expense ratio increased by 0.5 points to
31.9% for Third Quarter 2004 and 0.2 points to 31.9% for the Nine Months 2004
compared to the same period a year ago. Improvements in productivity were more
than offset by increases in profit-based compensation for agents and employees
of 2.4 points for Third Quarter 2004 and 0.8 points for Nine Months 2004
compared with the same periods a year ago.<br>
<br>
The Commercial Lines combined ratio decreased 2.3 points, to 97.7%, for Third
Quarter 2004 and 5.7 points, to 96.6%, for Nine Months 2004 when compared to a
combined ratio of 100.0% in Third Quarter 2003 and 102.3% for Nine Months 2003.
These favorable results were driven primarily by improvements in the loss and
loss expense ratio as discussed above. <br>
<br>
<b>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; Commercial
Automobile Business<br>
</b>Commercial automobile, which accounted for 28% of commercial lines
statutory net premiums earned in Third Quarter 2004 and Nine Months 2004 compared
to 28% in Third Quarter and Nine Months 2003 registered another strong quarter,
with a statutory loss and loss expense ratio that improved 11.4 points to 52.1%
in Third Quarter 2004 and 7.9 points to 55.4% for Nine Months 2004 compared to
63.5% in Third Quarter 2003 and 63.3% for Nine Months 2003. This line has been favorably impacted by price increases,
stricter underwriting standards, and the removal of certain classes of business
that we determined to be unprofitable.<br>
</font></p>
<p align="center" style="margin-top: 0; margin-bottom: 0"><font size="2">19<br>
</font></p>
<hr color="#000080"><P STYLE="page-break-after: always"></P>
<p style="margin-top: 0; margin-bottom: 0"><font size="2"><br clear=all>
<b>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; Workers'
Compensation Business<br>
</b>Our workers' compensation business accounted for 24% of commercial lines
statutory net premiums earned in Third Quarter and Nine Months 2004 compared to
23% in Third Quarter 2003 and 24% in Nine Months 2003.&nbsp; Our workers' compensation business posted a
statutory loss and loss expense ratio of 85.1% for Third Quarter 2004 and 83.4%
for Nine Months 2004, compared with 82.5% for Third Quarter 2003 and 84.9% for
Nine Months 2003. Rating agency downgrades of certain reinsurers caused us to
reevaluate our ability to collect under certain reinsurance contracts, which
resulted in an increase to our loss reserves of $1.3
million to this line of business adding 1.9 points to the statutory loss and
loss expense ratio for the Third Quarter 2004 and 0.7 points for the Nine
Months 2004.&nbsp; This line of business also
continues to be impacted by unfavorable external factors, including: a
regulatory climate that makes it difficult to obtain rate increases in some
states; rising medical costs; increasing indemnity benefits; and a decreasing
number of workers' compensation-only providers who can provide our agents with
alternative markets for this line of business.&nbsp;
Although results for this line of business are not at an acceptable
level, the Company continues to maintain an underwriting position for the
workers' compensation business that focuses on low-to-medium hazard business.&nbsp; In addition, our underwriting measures also include
requiring job site inspections and increasing the number of our trained loss
control representatives from 61 as of Third Quarter 2003 to 65 as of Third
Quarter 2004<b>.</b>&nbsp; Our workers'
compensation pricing has increased by 40% since 2000 through a combination of
rate increases, credit and dividend reductions, and moving business to
higher-priced tiers. However, the rate increases that we have been able to get
approved have just kept pace with loss trends.&nbsp;
Since 2000, commercial lines policy counts have risen almost 13% while
workers' compensation policy counts have risen&nbsp;
less than 1%.&nbsp; Given the Company's
broad desire for business, it is essential that we write this business, where
appropriate, to meet the overall account needs of agents and their
clients.&nbsp; However, when it is
appropriate, we encourage our agents to place this line elsewhere.&nbsp; Currently, less than 5% of the business is
unsupported by another commercial line. Our underwriting and pricing actions
are ongoing, including a focus on low-to-medium hazard business, limiting
growth in policy counts, and a forecasted 11.6% overall price increase in 2004.<br>
<br>
<b>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; General
Liability Business<br>
</b>Our general liability business, which accounted for 28% of commercial lines
statutory net premiums earned in Third Quarter and Nine Months 2004 and 28% in
Third Quarter and Nine Months 2003, posted a statutory loss and loss expense
ratio of 68.5% for Third Quarter 2004 and 64.2% for Nine Months 2004, compared
to 65.3% for Third Quarter 2003 and 66.8% for Nine Months 2003. Rating agency
downgrades of certain reinsurers caused us to reevaluate our ability to collect
under certain reinsurance contracts, which resulted in an increase to our loss
reserves of $1.2 million to this line of
business adding 1.5 points to the statutory loss and loss expense ratio for the
Third Quarter 2004 and 0.5 points for the Nine Months 2004. Our favorable
performance in this line through the Nine Months 2004 reflects our long-term
improvement strategy that incorporates higher pricing, heightened loss control
efforts and continued underwriting enhancements, which includes contractual
underwriting procedures.&nbsp; <br>
<br>
<b>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; Commercial
Property Business<br>
</b>Our commercial property business, which accounted for 14% of commercial
lines statutory net premiums earned in Third Quarter and Nine Months 2004 as
well as Third Quarter and Nine Months 2003, posted a statutory loss and loss
expense ratio of 50.8% for Third Quarter 2004 and 48.4% for Nine Months 2004,
compared with 61.5% for Third Quarter 2003 and 64.4% for Nine Months 2003. The
Third Quarter 2004 loss and loss expense ratio included 26.2 points or $10.2
million of weather-related catastrophe losses compared with 19.6 points or $6.7
million in Third Quarter 2003. The Nine Months 2004 loss and loss expense ratio
included 13.0 points or $14.7 million as the result of weather-related
catastrophes compared with 16.3 points or $15.4 million for Nine Months
2003.&nbsp; Improvements in the Third Quarter
2004 were largely due to substantially lower frequency and severity of claims
when compared to the same period a year ago.&nbsp;
Additionally, we continue to implement ongoing pricing and underwriting
actions to improve results in this line of business, 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.</font></p>
<p>&nbsp;</p>
<p align="center"><font size="2">20<br>
</font></p>
<hr color="#000080"><P STYLE="page-break-after: always"></P><font size="2"><br clear=all>
</font>
<b><font size="2"><br>
Personal Lines Results</font></b></p>

<table border=0 cellspacing=0 cellpadding=0>
 <tr>
  <td width=602 colspan=10 valign=top>
  <div align=center><b>
  <hr size=1 width="100%" noshade color=black align=center>
  </b></div>
  </td>
 </tr>
 <tr>
  <td width=240 valign=top>

  </td>
  <td width=19 valign=top>

  </td>
  <td width=154 colspan=3 valign=top>
  <p align=center><b><font size="1">Unaudited,</font></b></p>
  </td>
  <td width=18 valign=top>
  <p><b><font size="1">&nbsp;</font></b></p>
  </td>
  <td width=18 valign=top>
  <p align=right><b><font size="1">&nbsp;</font></b></p>
  </td>
  <td width=154 colspan=3 valign=top>
  <p align=center><b><font size="1">Unaudited,</font></b></p>
  </td>
 </tr>
 <tr>
  <td width=240 valign=top>
  <p><b><font size="1">Personal Lines</font></b></p>
  </td>
  <td width=19 valign=top>

  </td>
  <td width=154 colspan=3 valign=top>
  <p align=center><b><font size="1">Quarter ended</font></b></p>
  </td>
  <td width=18 valign=top>
  <p><b><font size="1">&nbsp;</font></b></p>
  </td>
  <td width=18 valign=top>
  <p align=right><b><font size="1">&nbsp;</font></b></p>
  </td>
  <td width=154 colspan=3 valign=top>
  <p align=center><b><font size="1">Nine months ended</font></b></p>
  </td>
 </tr>
 <tr>
  <td width=240 valign=top>
  <p><b><font size="1">&nbsp;</font></b></p>
  </td>
  <td width=19 valign=top>

  </td>
  <td width=154 colspan=3 valign=top>
  <p align=center><b><font size="1">September 30,</font></b></p>
  </td>
  <td width=18 valign=top>
  <p><b><font size="1">&nbsp;</font></b></p>
  </td>
  <td width=18 valign=top>
  <p align=right><b><font size="1">&nbsp;</font></b></p>
  </td>
  <td width=154 colspan=3 valign=top>
  <p align=center><b><font size="1">September 30,</font></b></p>
  </td>
 </tr>
 <tr>
  <td width=240 valign=top>
  <p><font size="1">($ in thousands)</font></p>
  </td>
  <td width=19 valign=top>

  </td>
  <td width=67 valign=top>
  <p align=center><b><font size="1">2004</font></b></p>
  </td>
  <td width=19 valign=top>

  </td>
  <td width=67 valign=top>
  <p align=center><b><font size="1">2003</font></b></p>
  </td>
  <td width=18 valign=top>

  </td>
  <td width=18 valign=top>

  </td>
  <td width=67 valign=top>
  <p align=center><b><font size="1">2004</font></b></p>
  </td>
  <td width=19 valign=top>

  </td>
  <td width=67 valign=top>
  <p align=center><b><font size="1">2003</font></b></p>
  </td>
 </tr>
 <tr>
  <td width=602 colspan=10 valign=top>
  <div align=center><b>
  <hr size=1 width="100%" noshade color=black align=center>
  </b></div>
  </td>
 </tr>
 <tr height=0>
  <td width=240></td>
  <td width=19></td>
  <td width=67></td>
  <td width=19></td>
  <td width=67></td>
  <td width=18></td>
  <td width=18></td>
  <td width=67></td>
  <td width=19></td>
  <td width=67></td>
 </tr>
</table>



<table border=0 cellspacing=0 cellpadding=0>
 <tr>
  <td width=240 valign=top>
  <p><b><font size="1">GAAP Insurance Operations
  Results:</font></b></p>
  </td>
  <td width=19 valign=top>

  </td>
  <td width=67 valign=top>

  </td>
  <td width=19 valign=top>

  </td>
  <td width=67 valign=top>

  </td>
  <td width=18 valign=top>

  </td>
  <td width=18 valign=top>

  </td>
  <td width=67 valign=top>

  </td>
  <td width=19 valign=top>

  </td>
  <td width=67 valign=top>

  </td>
 </tr>
 <tr>
  <td width=240 valign=top>
  <p><font size="1">Net premiums written</font></p>
  </td>
  <td width=19 valign=top>
  <p align=right><font size="1">$</font></p>
  </td>
  <td width=67 valign=top align="right">
  <p align=right><font size="1">58,982&nbsp;</font></p>
  </td>
  <td width=19 valign=top align="right">

  </td>
  <td width=67 valign=top align="right">
  <p align=right><font size="1">56,116&nbsp;</font></p>
  </td>
  <td width=18 valign=top align="right">

  </td>
  <td width=18 valign=top align="right">
  <p align=right><font size="1">$</font></p>
  </td>
  <td width=67 valign=top align="right">
  <p align=right><font size="1">172,665&nbsp;</font></p>
  </td>
  <td width=19 valign=top align="right">

  </td>
  <td width=67 valign=top align="right">
  <p align=right><font size="1">166,958&nbsp;</font></p>
  </td>
 </tr>
 <tr>
  <td width=240 valign=top>

  </td>
  <td width=19 valign=top>

  </td>
  <td width=67 valign=top align="right">
  <p align=right>=======</p>
  </td>
  <td width=19 valign=top align="right">

  </td>
  <td width=67 valign=top align="right">
  =======</td>
  <td width=18 valign=top align="right">

  </td>
  <td width=18 valign=top align="right">

  </td>
  <td width=67 valign=top align="right">
  =======</td>
  <td width=19 valign=top align="right">

  </td>
  <td width=67 valign=top align="right">
  =======</td>
 </tr>
 <tr>
  <td width=240 valign=top>
  <p><font size="1">Net premiums earned</font></p>
  </td>
  <td width=19 valign=top>
  <p align=right><font size="1">$</font></p>
  </td>
  <td width=67 valign=top align="right">
  <p align=right><font size="1">57,422&nbsp;</font></p>
  </td>
  <td width=19 valign=top align="right">

  </td>
  <td width=67 valign=top align="right">
  <p align=right><font size="1">54,117&nbsp;</font></p>
  </td>
  <td width=18 valign=top align="right">

  </td>
  <td width=18 valign=top align="right">
  <p align=right><font size="1">$</font></p>
  </td>
  <td width=67 valign=top align="right">
  <p align=right><font size="1">168,905&nbsp;</font></p>
  </td>
  <td width=19 valign=top align="right">

  </td>
  <td width=67 valign=top align="right">
  <p align=right><font size="1">157,956&nbsp;</font></p>
  </td>
 </tr>
 <tr>
  <td width=240 valign=top>
  <p><b><font size="1">Less:</font></b></p>
  </td>
  <td width=19 valign=top>

  </td>
  <td width=67 valign=top align="right">

  </td>
  <td width=19 valign=top align="right">

  </td>
  <td width=67 valign=top align="right">

  </td>
  <td width=18 valign=top align="right">

  </td>
  <td width=18 valign=top align="right">

  </td>
  <td width=67 valign=top align="right">

  </td>
  <td width=19 valign=top align="right">

  </td>
  <td width=67 valign=top align="right">

  </td>
 </tr>
 <tr>
  <td width=240 valign=top>
  <p><font size="1">Losses and loss expenses
  incurred</font></p>
  </td>
  <td width=19 valign=top>

  </td>
  <td width=67 valign=top align="right">
  <p align=right><font size="1">41,885&nbsp;</font></p>
  </td>
  <td width=19 valign=top align="right">

  </td>
  <td width=67 valign=top align="right">
  <p align=right><font size="1">43,496&nbsp;</font></p>
  </td>
  <td width=18 valign=top align="right">

  </td>
  <td width=18 valign=top align="right">

  </td>
  <td width=67 valign=top align="right">
  <p align=right><font size="1">123,833&nbsp;</font></p>
  </td>
  <td width=19 valign=top align="right">

  </td>
  <td width=67 valign=top align="right">
  <p align=right><font size="1">120,757&nbsp;</font></p>
  </td>
 </tr>
 <tr>
  <td width=240 valign=top>
  <p><font size="1">Net underwriting expenses
  incurred</font></p>
  </td>
  <td width=19 valign=top>

  </td>
  <td width=67 valign=top align="right">
  <p align=right><font size="1">15,614&nbsp;</font></p>
  </td>
  <td width=19 valign=top align="right">

  </td>
  <td width=67 valign=top align="right">
  <p align=right><font size="1">16,971&nbsp;</font></p>
  </td>
  <td width=18 valign=top align="right">

  </td>
  <td width=18 valign=top align="right">

  </td>
  <td width=67 valign=top align="right">
  <p align=right><font size="1">45,339&nbsp;</font></p>
  </td>
  <td width=19 valign=top align="right">

  </td>
  <td width=67 valign=top align="right">
  <p align=right><font size="1">48,591&nbsp;</font></p>
  </td>
 </tr>
 <tr>
  <td width=240 valign=top>

  </td>
  <td width=19 valign=top>

  </td>
  <td width=67 valign=top align="right">
  <div align=right>
  <hr size=1 width="90%" noshade color=gray align=right>
  </div>
  </td>
  <td width=19 valign=top align="right">

  </td>
  <td width=67 valign=top align="right">
  <div align=right>
  <hr size=1 width="90%" noshade color=gray align=right>
  </div>
  </td>
  <td width=18 valign=top align="right">

  </td>
  <td width=18 valign=top align="right">

  </td>
  <td width=67 valign=top align="right">
  <div align=right>
  <hr size=1 width="90%" noshade color=gray align=right>
  </div>
  </td>
  <td width=19 valign=top align="right">

  </td>
  <td width=67 valign=top align="right">
  <div align=right>
  <hr size=1 width="90%" noshade color=gray align=right>
  </div>
  </td>
 </tr>
 <tr>
  <td width=240 valign=top>
  <p><font size="1">Underwriting profit (loss)</font></p>
  </td>
  <td width=19 valign=top>
  <p align="right"><font size="1">$</font></p>
  </td>
  <td width=67 valign=top align="right">
  <p align=right><font size="1">(77)</font></p>
  </td>
  <td width=19 valign=top align="right">

  </td>
  <td width=67 valign=top align="right">
  <p align=right><font size="1">(6,350)</font></p>
  </td>
  <td width=18 valign=top align="right">

  </td>
  <td width=18 valign=top align="right">
  <p align=right><font size="1">$</font></p>
  </td>
  <td width=67 valign=top align="right">
  <p align=right><font size="1">(267)</font></p>
  </td>
  <td width=19 valign=top align="right">

  </td>
  <td width=67 valign=top align="right">
  <p align=right><font size="1">(11,392)</font></p>
  </td>
 </tr>
 <tr>
  <td width=240 valign=top>

  </td>
  <td width=19 valign=top>

  </td>
  <td width=67 valign=top align="right">
  <div align=right>
  <hr size=1 width="90%" noshade color=gray align=right>
  </div>
  </td>
  <td width=19 valign=top align="right">

  </td>
  <td width=67 valign=top align="right">
  <div align=right>
  <hr size=1 width="90%" noshade color=gray align=right>
  </div>
  </td>
  <td width=18 valign=top align="right">

  </td>
  <td width=18 valign=top align="right">

  </td>
  <td width=67 valign=top align="right">
  <div align=right>
  <hr size=1 width="90%" noshade color=gray align=right>
  </div>
  </td>
  <td width=19 valign=top align="right">

  </td>
  <td width=67 valign=top align="right">
  <div align=right>
  <hr size=1 width="90%" noshade color=gray align=right>
  </div>
  </td>
 </tr>
 <tr>
  <td width=240 valign=top>
  <p><b><font size="1">GAAP Ratios:</font></b></p>
  </td>
  <td width=19 valign=top>

  </td>
  <td width=67 valign=top align="right">

  </td>
  <td width=19 valign=top align="right">

  </td>
  <td width=67 valign=top align="right">

  </td>
  <td width=18 valign=top align="right">

  </td>
  <td width=18 valign=top align="right">

  </td>
  <td width=67 valign=top align="right">

  </td>
  <td width=19 valign=top align="right">

  </td>
  <td width=67 valign=top align="right">

  </td>
 </tr>
 <tr>
  <td width=240 valign=top>
  <p><font size="1">Loss and loss expense ratio </font> </p>
  </td>
  <td width=19 valign=top>

  </td>
  <td width=67 valign=top align="right">
  <p align=right><font size="1">72.9&nbsp;</font></p>
  </td>
  <td width=19 valign=top align="right">
  <p align=right><font size="1">%</font></p>
  </td>
  <td width=67 valign=top align="right">
  <p align=right><font size="1">80.4&nbsp;</font></p>
  </td>
  <td width=18 valign=top align="right">

  </td>
  <td width=18 valign=top align="right">

  </td>
  <td width=67 valign=top align="right">
  <p align=right><font size="1">73.3&nbsp;</font></p>
  </td>
  <td width=19 valign=top align="right">
  <p align=right><font size="1">%</font></p>
  </td>
  <td width=67 valign=top align="right">
  <p align=right><font size="1">76.4&nbsp;</font></p>
  </td>
 </tr>
 <tr>
  <td width=240 valign=top>
  <p><font size="1">Underwriting expense ratio</font></p>
  </td>
  <td width=19 valign=top>

  </td>
  <td width=67 valign=top align="right">
  <p align=right><font size="1">27.2&nbsp;</font></p>
  </td>
  <td width=19 valign=top align="right">
  <p align=right><font size="1">%</font></p>
  </td>
  <td width=67 valign=top align="right">
  <p align=right><font size="1">31.3&nbsp;</font></p>
  </td>
  <td width=18 valign=top align="right">

  </td>
  <td width=18 valign=top align="right">

  </td>
  <td width=67 valign=top align="right">
  <p align=right><font size="1">26.8&nbsp;</font></p>
  </td>
  <td width=19 valign=top align="right">
  <p align=right><font size="1">%</font></p>
  </td>
  <td width=67 valign=top align="right">
  <p align=right><font size="1">30.8&nbsp;</font></p>
  </td>
 </tr>
 <tr>
  <td width=240 valign=top>

  </td>
  <td width=19 valign=top>

  </td>
  <td width=67 valign=top align="right">
  <div align=right>
  <hr size=1 width="90%" noshade color=gray align=right>
  </div>
  </td>
  <td width=19 valign=top align="right">

  </td>
  <td width=67 valign=top align="right">
  <div align=right>
  <hr size=1 width="90%" noshade color=gray align=right>
  </div>
  </td>
  <td width=18 valign=top align="right">

  </td>
  <td width=18 valign=top align="right">

  </td>
  <td width=67 valign=top align="right">
  <div align=right>
  <hr size=1 width="90%" noshade color=gray align=right>
  </div>
  </td>
  <td width=19 valign=top align="right">

  </td>
  <td width=67 valign=top align="right">
  <div align=right>
  <hr size=1 width="90%" noshade color=gray align=right>
  </div>
  </td>
 </tr>
 <tr>
  <td width=240 valign=top>
  <p><font size="1">Combined ratio</font></p>
  </td>
  <td width=19 valign=top>

  </td>
  <td width=67 valign=top align="right">
  <p align=right><font size="1">100.1&nbsp;</font></p>
  </td>
  <td width=19 valign=top align="right">
  <p align=right><font size="1">%</font></p>
  </td>
  <td width=67 valign=top align="right">
  <p align=right><font size="1">111.7&nbsp;</font></p>
  </td>
  <td width=18 valign=top align="right">

  </td>
  <td width=18 valign=top align="right">

  </td>
  <td width=67 valign=top align="right">
  <p align=right><font size="1">100.1&nbsp;</font></p>
  </td>
  <td width=19 valign=top align="right">
  <p align=right><font size="1">%</font></p>
  </td>
  <td width=67 valign=top align="right">
  <p align=right><font size="1">107.2&nbsp;</font></p>
  </td>
 </tr>
 <tr>
  <td width=240 valign=top>

  </td>
  <td width=19 valign=top>

  </td>
  <td width=67 valign=top align="right">
  <p align=right>=======</p>
  </td>
  <td width=19 valign=top align="right">

  </td>
  <td width=67 valign=top align="right">
  =======</td>
  <td width=18 valign=top align="right">

  </td>
  <td width=18 valign=top align="right">

  </td>
  <td width=67 valign=top align="right">
  =======</td>
  <td width=19 valign=top align="right">

  </td>
  <td width=67 valign=top align="right">
  =======</td>
 </tr>
</table>

<p style="margin-top: 0; margin-bottom: 0"><font size="2"><br>
Personal Lines underwriting accounted for approximately 16% of net premiums
written for Nine Months 2004 compared to 18% for Nine Months 2003. Personal
Lines Underwriting net premiums written increased $2.9 million, or 5%, to $59.0
million for Third Quarter 2004 and $5.7 million, or 3%, to $172.7 million for
Nine Months 2004 when compared to the same periods in 2003.&nbsp; The principal factors contributing to this
growth were: (i) personal lines renewal premium price increases averaging 5.6%
in Third Quarter 2004 and 5.4% in the Nine Months 2004 compared to 4.7% in
Third Quarter 2003 and 4.6% in the Nine Months 2003 and (ii) net new business
written of $8.8 million in Third Quarter 2004 compared to $8.9 million in Third
Quarter 2003.&nbsp; Net new business written in
Nine Months 2004 was $23.3 million compared with $25.8 million written in Nine
Months 2003. <br>
<br>
The Personal Lines loss and loss expense ratio decreased 7.5 points, to 72.9%,
for Third Quarter 2004 and 3.1 points, to 73.3%, for Nine Months 2004 when
compared to the same periods in 2003. The Third Quarter 2004 included 2.0
points of weather-related catastrophe losses compared with 9.0 points in Third
Quarter 2003, while the Nine Months 2004 included 1.4 points of weather-related
catastrophes compared with 4.2 points for the Nine Months 2003. Additionally,
we added $2.0 million to our homeowners' reserves, which partially offset the
improvements in the Personal Lines loss and loss expense ratio for the Third
Quarter 2004 and Nine Months 2004.&nbsp; This
action resulted from unfavorable trends in claims for groundwater contamination
caused by leakage of certain underground heating oil storage tanks in New
Jersey.&nbsp; Increased frequency was
triggered, in part, by the state's robust real estate market, leading to an
increase in home tank inspections.&nbsp;
Overall claim severity has been low, with average claim payments of
$22,000, and there has been almost no similar claim activity in our other
operating states.&nbsp; To address this issue,
we began restricting writings of policies with coverage for underground heating
oil storage tanks, company-wide, more than 18 months ago, and are reviewing
possible coverage changes for existing business.&nbsp; Further improvements in the Personal Lines
loss and loss expense ratio were attributable to price increases. During Third
Quarter 2004, we implemented a new rate filing that allows us to use credit
scoring for New Jersey auto business, as well as tier changes, which reduce
rates by an average of approximately 2.5%.&nbsp;
These enhancements will lead to greater savings for our best risks, while
improving the overall book of business. <br>
<br>The Personal Lines underwriting expense ratio showed
improvement of 4.1 points, to 27.2%, for Third Quarter 2004 and 4.0 points, to
26.8%, for the Nine Months 2004 compared to the same periods a year ago. These
improvements are attributable to increased pricing and&nbsp;a change in deferred acquisition cost
amortization estimates, which were revised last year to better match
acquisition expenses and earned premiums.<br>
<br>The Personal Lines Underwriting combined ratio decreased 11.6 points, to
100.1%, for Third Quarter 2004 and 7.1 points, to 100.1%, for Nine Months 2004
compared with the same periods last year. The decrease in the combined ratio
was primarily attributable to the decreases in the loss and loss expense ratio
as well as the underwriting expense ratio discussed above.<br>
</font>
<p align="center" style="margin-top: 0; margin-bottom: 0"><font size="2">21<br>
</font>
<hr color="#000080"><P STYLE="page-break-after: always"></P>
<p style="margin-top: 0; margin-bottom: 0"><font size="2"><br clear=all>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; <b>Personal
Automobile Business<br>
</b>Our personal automobile line of business represented 82% of our personal
lines statutory net premiums earned for Third Quarter 2004 and Nine Months
2004, compared with 82% for Third Quarter 2003 and 83% for Nine Months 2003.
New Jersey accounted for 75% of our overall personal automobile net premiums
written for Third Quarter 2004 and 74% for Nine Months 2004 compared to 72% for
Third Quarter 2003, and 73% for Nine Months 2003.The personal automobile statutory loss and loss expense
ratio decreased 4.2 points to 69.0% for Third Quarter 2004 and 3.7 points to
70.3% for Nine Months 2004 when compared with the same periods in 2003. This
improvement reflects continued progress in our New Jersey personal automobile
business resulting from significant actions taken over the last four years,
including aggressive pricing initiatives; a redesign of our rating tiers; and
an improving political and regulatory climate.&nbsp;&nbsp;
Most recently, to remain competitive for the best risks, we have
implemented a new rate filing that allows us to use credit scoring for New
Jersey auto business, as well as tier changes to reduce rates by an average of
approximately 2.5%. These enhancements will lead to greater savings for our
best risks.&nbsp; Additionally,
further improvements in our loss costs can also be attributed to benefits
derived as a result of the verbal tort threshold, which has reduced the number
and severity of litigated claims, as modified by the New Jersey Automobile
Insurance Cost Reduction Act (AICRA). <br>
<br>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; <b>Homeowners
Business<br>
</b>Our homeowners line of business, which accounted for 15% of personal lines
statutory net premiums earned for Third Quarter 2004 and Nine Months 2004,
compared with 15% for Third Quarter 2003 and Nine Months 2003,had a statutory loss and loss expense ratio of 101.6%
for Third Quarter 2004 and 86.4% for the Nine Months 2004 compared to 127.6%
for Third Quarter 2003 and 97.1% for the Nine Months 2003.Weather-related catastrophes added 10.3 points in the
Third Quarter 2004 and 8.1 points for the Nine Months 2004 compared to 54.7
points in the Third Quarter 2003 and 26.1 points for the Nine Months 2003.&nbsp; In addition,
we added $2.0 million to our homeowners' reserves.&nbsp; This action resulted from unfavorable trends
in claims related to groundwater contamination caused by leakage of certain
underground heating oil storage tanks in New Jersey, which added 23.0 points to
the statutory loss and loss expense ratio for Third Quarter 2004 and 7.9 points
for Nine Months 2004. Increased frequency of claims was triggered, in part, by
the state's robust real estate market, leading to an increase in home tank
inspections.&nbsp; Overall claim severity has
been low, with average claim payments of $22,000, and there has been almost no
similar claim activity in our other operating states.&nbsp; We began restricting writings of policies
with coverage for underground heating oil storage tanks, company-wide, more than
18 months ago, and are reviewing possible coverage changes for existing
business. Further improvements in this line have been driven by the results of
the plan initiated three years ago, which included: (i) double-digit rate
increases in six states; (ii) expanding the use of credit history to apply
discounts and surcharges for new and renewal business; (iii) continuing the
rollout of higher wind and hail deductibles in coastal and selected inland
territories; and (iv) expanding the account credit, where appropriate, to
encourage agents to write entire accounts. <br>
<br>
<b><i>Reinsurance<br></i></b>The Insurance Subsidiaries follow the customary practice of
ceding a portion of their risks and paying to reinsurers a portion of the
premiums received under the policies.&nbsp;
This reinsurance program permits greater diversification of business and
the ability to offer increased coverage while limiting maximum net losses.&nbsp; The Insurance Subsidiaries are parties to
reinsurance contracts under which certain types of policies are automatically
reinsured without the need for approval by the reinsurer of individual risks
covered (treaty reinsurance), reinsurance contracts handled on an individual
policy or per-risk basis requiring the agreement of the reinsurer as to each
risk insured (facultative reinsurance).&nbsp;
Reinsurance does not legally discharge an insurer from its liability for
the full face amount of its policies, but does make the reinsurer liable to the
insurer to the extent of the reinsurance ceded.<br>
<br>
Our Property and Casualty Excess of Loss treaties were successfully renewed
effective July 1, 2004, with a modest reduction to the prior year's cession
rates.&nbsp; The ceded premium for the renewed
treaties is expected to decrease by approximately $300,000 as compared to the
prior treaty year.&nbsp; However, we are
expecting to retain approximately $3.0 million more in losses due to an
increase in our co-participation in the first layer of the Casualty Excess of
Loss treaty.<br>
</font></p>
<p align="center" style="margin-top: 0; margin-bottom: 0"><font size="2">22<br>
</font></p>
<hr color="#000080"><P STYLE="page-break-after: always"></P>
<p style="margin-top: 0; margin-bottom: 0"><font size="2"><br clear=all>
Our Casualty Excess of Loss treaty provides per occurrence coverage of $48.0
million in excess of $2.0 million retention of any casualty loss.&nbsp; Selective retains 50%, or $1.5 million, of
the first $3.0 million excess of $2.0 million layer.&nbsp; Our co-participation in this layer was 25% in
the prior year.&nbsp; The casualty treaty
distinguishes between certified (Terrorism Risk Insurance Act of 2002 (TRIA)
events or foreign acts) and non-certified (all other or domestic) terrorism
losses. Non-certified terrorism losses are treated like any other losses.&nbsp; The annual aggregate limit for certified
terrorism losses is capped at two times each layer's occurrence limit, or $96.0
million.&nbsp; Consistent with the 2003
treaty: nuclear, biological and chemical losses are excluded from the casualty
excess of loss treaty; however, our Terrorism Excess of Loss treaty covers
these exposures once our $15.0 million annual aggregate deductible is met.
There are no exclusions for mold or cyber risks in this treaty.<br>
<br>
Our Property Excess of Loss treaty provides coverage on each property risk of
$18 million in excess of $2.0 million retention.&nbsp; Under the 2004 treaty, the Company cedes 100%
of $18.0 million per risk in excess of the $2.0 million retention.&nbsp; This is a change from the prior year treaty
where the Company retained 25% of the $5.0 million excess of the $5.0 million
second layer for a total coverage of $16.7 million per risk in excess of the
$2.0 million retention.&nbsp; As with the
casualty treaty, the property treaty distinguishes between certified (TRIA) and
non-certified terrorism losses. The treaty provides annual aggregate certified
terrorism limits for all risks of $9.0 million for the first layer, $15.0
million for the second layer and $20.0 million for the third layer.&nbsp; The provision in last year's treaty that
limited coverage for TRIA losses for all risks up to $75.0 million in total
insured value per location was eliminated with the July 1, 2004 renewal.&nbsp; Claims arising from non-certified terrorist
acts are treated like any other losses.&nbsp;
Consistent with the 2003 contract: nuclear, biological and chemical
losses are excluded from the Property Excess of Loss treaty; however, our
Terrorism Excess of Loss Treaty covers these exposures once our $15.0 million
annual aggregate deductible is met. There are no exclusions for mold or cyber
risks in this contract. <br>
<br>Effective January 1, 2004 the New Jersey
Unsatisfied Claims Judgment Fund (UCJF) was terminated for all new policies
with carriers being responsible for 100% of the coverage, which is capped at
$250,000. The New Jersey UCJF was a mandatory reinsurance program, which
provided for personal injury protection (PIP) coverage for New Jersey auto
policies.&nbsp; The UCJF assumed unlimited New
Jersey PIP losses in excess of $75,000 up to $250,000 per person/per occurrence
from January 1, 1991 through December 31, 2003.&nbsp;
A final adjustment to the prior treaty year UCJF premium resulted in a
return of premium previously ceded of $2.4 million, which was recorded by the
Company in the Third Quarter 2004.<br>
<br>Additionally, during Third Quarter 2004, we exercised the special
termination provision, which is effective in October 2004, on two of our reinsurance contracts due to rating agency
downgrades of specific reinsurers that could adversely affect our ability to
collect under certain reinsurance contracts. We eliminated one
carrier and added two highly rated carriers to our Property Catastrophe Excess
of Loss and Terrorism Aggregate Excess of Loss treaties. We believe these
actions will enhance and strengthen our reinsurance program.<br>
<br>
<b><i>Investments<br></i></b>After-tax investment income increased&nbsp; 9% , to $22.0 million, for Third Quarter
2004, up from $20.2 million for Third Quarter 2003.&nbsp; The increase reflects an increased asset base
as our overall investment portfolio reached $2.7 billion at September 30, 2004,
compared with $2.4 billion at September 30, 2003.&nbsp; The increased asset base was driven by
improved underwriting results generating $266.2 million of net operating cash
flow and an increase in net securities payable of $56.9 million for Nine Months
2004 compared with $207.5 million of net operating cash flow and an increase in
net securities payable of $16.3 million for Nine Months 2003.&nbsp; Also contributing to the increase on a
year-to-date basis were our limited partnership investments.&nbsp; These investments, which are subject to
market fluctuations, added $2.7 million, after-tax, to investment income for
Nine Months 2004 compared with $1.7 million for Nine Months 2003.&nbsp; The overall after-tax portfolio yield was
3.4%, compared with 3.7% for the same period last year, reflecting downward
pressure from maturing bonds that are being replaced by bonds with lower
interest rates.<br>
<br>
We continue to maintain a conservative, diversified investment portfolio, with
our debt securities representing 85% of invested assets. Approximately 63% of
our debt securities portfolio is rated &quot;AAA.&quot; Our portfolio has an average
rating of &quot;AA,&quot; with less than 1% of the portfolio rated below investment
grade.<br>
</font></p>
<p align="center" style="margin-top: 0; margin-bottom: 0"><font size="2">23<br>
</font></p>
<hr color="#000080"><P STYLE="page-break-after: always"></P>
<p style="margin-top: 0; margin-bottom: 0"><font size="2"><br clear=all>
At September 30, 2004 our investment portfolio included non-investment grade
securities, all of which were in unrealized gain positions, with an amortized cost of $7.2 million, or less than 1% of the
portfolio, and a fair value of $7.3 million.&nbsp;
At December 31, 2003, non-investment grade securities in our investment
portfolio represented 1% of the portfolio, with an amortized cost of $25.2
million and a fair value of $27.2 million. The non-investment grade securities
in unrealized loss positions represented 5% of our total gross unrealized loss
at December 31, 2003.&nbsp; The fair value of these securities was
determined by independent pricing services or bid prices provided by various
broker dealers.&nbsp; The Company did not have
a material investment in non-traded securities at September 30, 2004, or at
December 31, 2003. The Company also regularly reviews the diversification of
the investment portfolio compared with an investment grade corporate index. <br>
<br>
The Company regularly reviews its entire investment portfolio for declines in
value.&nbsp; If we believe a decline in the
value of a particular investment is temporary, we record the decline as an
unrealized loss in accumulated other comprehensive income. If we believe the
decline is &quot;other than temporary,&quot; we write down the carrying value of the
investment and record a realized loss in our consolidated statements of
income.&nbsp; Our assessment of a decline in
value includes our current judgment as to the financial position and future
prospects of the entity that issued the investment security.&nbsp; Broad changes in the overall market or
interest rate environment generally will not lead to a write-down.&nbsp; If our judgment about an individual security
changes in the future we may ultimately record a realized loss after having
originally concluded that the decline in value was temporary, which could have
a material impact on our net income and financial position of future periods.<br>
<br>
In evaluating potential impairment of debt securities, we evaluate certain
factors, including but not limited to the following:</font></p>
<p style="margin-top: 0; margin-bottom: 0"></p>

<ul>
  <li>
  <p style="margin-top: 0; margin-bottom: 0"><font size="2">Whether the decline appears to be issuer or
industry specific;</font></p></li>
  <li>
  <p style="margin-top: 0; margin-bottom: 0"><font size="2">The degree to which an issuer is current or in
arrears in making principal and interest payments on the debt securities in
question;</font></p></li>
  <li>
  <p style="margin-top: 0; margin-bottom: 0"><font size="2">The issuer's current financial condition and its
ability to make future scheduled principal and interest payments on a timely
basis;</font></p></li>
  <li>
  <p style="margin-top: 0; margin-bottom: 0"><font size="2">Buy/hold/sell recommendations published by
outside investment advisors and analysts; and</font></p></li>
  <li>
  <p style="margin-top: 0; margin-bottom: 0"><font size="2">Relevant rating history, analysis and guidance
provided by rating agencies and analysts.</font></p></li>
</ul>

<p style="margin-top: 0; margin-bottom: 0"><font size="2"><br>
In evaluating potential impairment of equity securities, we evaluate certain
factors, including but not limited to the following:</font></p>

<ul>
  <li>
  <p style="margin-top: 0; margin-bottom: 0"><font size="2">Whether the decline appears to be issuer or
industry specific;</font></p></li>
  <li>
  <p style="margin-top: 0; margin-bottom: 0"><font size="2">The relationship of market prices per share to
book value per share at the date of acquisition and date of evaluation;</font></p>
  </li>
  <li>
  <p style="margin-top: 0; margin-bottom: 0"><font size="2">The price-earnings ratio at the time of
acquisition and date of evaluation;</font></p></li>
  <li>
  <p style="margin-top: 0; margin-bottom: 0"><font size="2">The financial condition and near-term prospects
of the issuer, including any specific events that may influence the issuer's
operations;</font></p></li>
  <li>
  <p style="margin-top: 0; margin-bottom: 0"><font size="2">The recent income or loss of the issuer;</font></p>
  </li>
  <li>
  <p style="margin-top: 0; margin-bottom: 0"><font size="2">The independent auditors' report on the issuer's
recent financial statements;</font></p></li>
  <li>
  <p style="margin-top: 0; margin-bottom: 0"><font size="2">The dividend policy of the issuer at the date of
acquisition and the date of evaluation;</font></p></li>
  <li>
  <p style="margin-top: 0; margin-bottom: 0"><font size="2">Any buy/hold/sell recommendations or price
projections published by outside investment advisors; and </font></p></li>
  <li>
  <p style="margin-top: 0; margin-bottom: 0"><font size="2">Any rating agency announcements.</font></p>
  </li>
</ul>

<p><b><font size="2"><br>
Realized Gains and Losses<br>
</font>
</b><font size="2">Realized gains and losses are determined on the basis of the amortized cost
of specific investments sold or written-down, and are credited or charged to
income. Management's decision to sell securities is based on portfolio
management considerations, which include security valuations, credit concerns
and certain underlying&nbsp; financial
indicators. We also consider sector weightings, tax management, and general
economic factors. Decisions to sell securities are made to benefit the overall
investment portfolio. We sell securities to enhance portfolio risk/reward and
to maximize future investment returns. Liquidity is a
consideration when buying or selling securities, but because of the high
quality of our investment portfolio, the securities sold have not diminished
the overall liquidity of our portfolio.<br>
</font> </p>
<p align="center"><font size="2">24<br>
</font>
<hr color="#000080"><P STYLE="page-break-after: always"></P><font size="2"><br clear=all>
The following table presents the Company's net realized gains (losses) during
Third Quarter 2004 and Third Quarter 2003 as well as Nine Months 2004 and Nine
Months 2003:</font><table border=0 cellspacing=0 cellpadding=0>
 <tr>
  <td width=586 colspan=9 valign=top>
  <div align=center><b>
  <hr size=1 width="100%" noshade color=black align=center>
  </b></div>
  </td>
 </tr>
 <tr>
  <td width=240 valign=top>

  </td>
  <td width=173 colspan=4 valign=top>
  <p align=center><b><font size="1">Unaudited,</font></b></p>
  </td>
  <td width=173 colspan=4 valign=top>
  <p align=center><b><font size="1">Unaudited,</font></b></p>
  </td>
 </tr>
 <tr>
  <td width=240 valign=top>
  <p><b><font size="1">&nbsp;</font></b></p>
  </td>
  <td width=173 colspan=4 valign=top>
  <p align=center><b><font size="1">Quarter ended</font></b></p>
  </td>
  <td width=173 colspan=4 valign=top>
  <p align=center><b><font size="1">Nine months ended</font></b></p>
  </td>
 </tr>
 <tr>
  <td width=240 valign=top>

  </td>
  <td width=173 colspan=4 valign=top>
  <p align=center><b><font size="1">September 30,</font></b></p>
  </td>
  <td width=173 colspan=4 valign=top>
  <p align=center><b><font size="1">September 30,</font></b></p>
  </td>
 </tr>
 <tr>
  <td width=240 valign=top>
  <p><font size="1">(in millions)</font></p>
  </td>
  <td width=19 valign=top>

  </td>
  <td width=67 valign=top>
  <p align=center><b><font size="1">2004</font></b></p>
  </td>
  <td width=19 valign=top>
  <p align=center><b><font size="1">&nbsp;</font></b></p>
  </td>
  <td width=67 valign=top>
  <p align=center><b><font size="1">2003</font></b></p>
  </td>
  <td width=19 valign=top>

  </td>
  <td width=67 valign=top>
  <p align=center><b><font size="1">2004</font></b></p>
  </td>
  <td width=19 valign=top>
  <p align=center><b><font size="1">&nbsp;</font></b></p>
  </td>
  <td width=67 valign=top>
  <p align=center><b><font size="1">2003</font></b></p>
  </td>
 </tr>
 <tr>
  <td width=586 colspan=9 valign=top>
  <div align=center><b>
  <hr size=1 width="100%" noshade color=black align=center>
  </b></div>
  </td>
 </tr>
 <tr height=0>
  <td width=240></td>
  <td width=19></td>
  <td width=67></td>
  <td width=19></td>
  <td width=67></td>
  <td width=19></td>
  <td width=67></td>
  <td width=19></td>
  <td width=67></td>
 </tr>
</table>



<table border=0 cellspacing=0 cellpadding=0 width=586>
 <tr>
  <td width=240 valign=top>
  <p><b><font size="1">Held-to-maturity debt securities</font></b></p>
  </td>
  <td width=19 valign=top>

  </td>
  <td width=67 valign=top>

  </td>
  <td width=19 valign=top>

  </td>
  <td width=67 valign=top>

  </td>
  <td width=19 valign=top>

  </td>
  <td width=67 valign=top>

  </td>
  <td width=19 valign=top>

  </td>
  <td width=67 valign=top>

  </td>
 </tr>
 <tr>
  <td width=240 valign=top>
  <p><font size="1">Gains</font></p>
  </td>
  <td width=19 valign=top>
  <p align="right"><font size="1">$</font></p>
  </td>
  <td width=67 valign=top>
  <p align=right><font size="1">0.1&nbsp;</font></p>
  </td>
  <td width=19 valign=top>

  </td>
  <td width=67 valign=top>
  <p align=right><font size="1">-&nbsp;</font></p>
  </td>
  <td width=19 valign=top>

  </td>
  <td width=67 valign=top>
  <p align=right><font size="1">0.2&nbsp;</font></p>
  </td>
  <td width=19 valign=top>

  </td>
  <td width=67 valign=top>
  <p align=right><font size="1">-&nbsp;</font></p>
  </td>
 </tr>
 <tr>
  <td width=240 valign=top>
  <p><font size="1">Losses</font></p>
  </td>
  <td width=19 valign=top>

  </td>
  <td width=67 valign=top>
  <p align=right><font size="1">-&nbsp;</font></p>
  </td>
  <td width=19 valign=top>

  </td>
  <td width=67 valign=top>
  <p align=right><font size="1">-&nbsp;</font></p>
  </td>
  <td width=19 valign=top>

  </td>
  <td width=67 valign=top>
  <p align=right><font size="1">-&nbsp;</font></p>
  </td>
  <td width=19 valign=top>

  </td>
  <td width=67 valign=top>
  <p align=right><font size="1">-&nbsp;</font></p>
  </td>
 </tr>
 <tr>
  <td width=240 valign=top>

  </td>
  <td width=19 valign=top>

  </td>
  <td width=67 valign=top>

  </td>
  <td width=19 valign=top>

  </td>
  <td width=67 valign=top>

  </td>
  <td width=19 valign=top>

  </td>
  <td width=67 valign=top>

  </td>
  <td width=19 valign=top>

  </td>
  <td width=67 valign=top>

  </td>
 </tr>
 <tr>
  <td width=240 valign=top>
  <p><b><font size="1">Available-for-sale debt securities</font></b></p>
  </td>
  <td width=19 valign=top>

  </td>
  <td width=67 valign=top>

  </td>
  <td width=19 valign=top>

  </td>
  <td width=67 valign=top>

  </td>
  <td width=19 valign=top>

  </td>
  <td width=67 valign=top>

  </td>
  <td width=19 valign=top>

  </td>
  <td width=67 valign=top>

  </td>
 </tr>
 <tr>
  <td width=240 valign=top>
  <p><font size="1">Gains</font></p>
  </td>
  <td width=19 valign=top>

  </td>
  <td width=67 valign=top>
  <p align=right><font size="1">1.0</font></p>
  </td>
  <td width=19 valign=top>

  </td>
  <td width=67 valign=top>
  <p align=right><font size="1">0.9&nbsp;</font></p>
  </td>
  <td width=19 valign=top>

  </td>
  <td width=67 valign=top>
  <p align=right><font size="1">4.3&nbsp;</font></p>
  </td>
  <td width=19 valign=top>

  </td>
  <td width=67 valign=top>
  <p align=right><font size="1">7.6&nbsp;</font></p>
  </td>
 </tr>
 <tr>
  <td width=240 valign=top>
  <p><font size="1">Losses</font></p>
  </td>
  <td width=19 valign=top>

  </td>
  <td width=67 valign=top>
  <p align=right><font size="1">(0.4)</font></p>
  </td>
  <td width=19 valign=top>

  </td>
  <td width=67 valign=top>
  <p align=right><font size="1">(1.8)</font></p>
  </td>
  <td width=19 valign=top>

  </td>
  <td width=67 valign=top>
  <p align=right><font size="1">(4.9)</font></p>
  </td>
  <td width=19 valign=top>

  </td>
  <td width=67 valign=top>
  <p align=right><font size="1">(1.8)</font></p>
  </td>
 </tr>
 <tr>
  <td width=240 valign=top>

  </td>
  <td width=19 valign=top>

  </td>
  <td width=67 valign=top>

  </td>
  <td width=19 valign=top>

  </td>
  <td width=67 valign=top>

  </td>
  <td width=19 valign=top>

  </td>
  <td width=67 valign=top>

  </td>
  <td width=19 valign=top>

  </td>
  <td width=67 valign=top>

  </td>
 </tr>
 <tr>
  <td width=240 valign=top>
  <p><b><font size="1">Available-for-sale equity securities</font></b></p>
  </td>
  <td width=19 valign=top>

  </td>
  <td width=67 valign=top>

  </td>
  <td width=19 valign=top>

  </td>
  <td width=67 valign=top>

  </td>
  <td width=19 valign=top>

  </td>
  <td width=67 valign=top>

  </td>
  <td width=19 valign=top>

  </td>
  <td width=67 valign=top>

  </td>
 </tr>
 <tr>
  <td width=240 valign=top>
  <p><font size="1">Gains</font></p>
  </td>
  <td width=19 valign=top>

  </td>
  <td width=67 valign=top>
  <p align=right><font size="1">1.8&nbsp;</font></p>
  </td>
  <td width=19 valign=top>

  </td>
  <td width=67 valign=top>
  <p align=right><font size="1">2.0&nbsp;</font></p>
  </td>
  <td width=19 valign=top>

  </td>
  <td width=67 valign=top>
  <p align=right><font size="1">9.2&nbsp;</font></p>
  </td>
  <td width=19 valign=top>

  </td>
  <td width=67 valign=top>
  <p align=right><font size="1">2.7&nbsp;</font></p>
  </td>
 </tr>
 <tr>
  <td width=240 valign=top>
  <p><font size="1">Losses</font></p>
  </td>
  <td width=19 valign=top>

  </td>
  <td width=67 valign=top>
  <p align=right><font size="1">(0.9)</font></p>
  </td>
  <td width=19 valign=top>

  </td>
  <td width=67 valign=top>
  <p align=right><font size="1">(0.1)</font></p>
  </td>
  <td width=19 valign=top>

  </td>
  <td width=67 valign=top>
  <p align=right><font size="1">(1.7)</font></p>
  </td>
  <td width=19 valign=top>

  </td>
  <td width=67 valign=top>
  <p align=right><font size="1">(0.1)</font></p>
  </td>
 </tr>
 <tr>
  <td width=240 valign=top>

  </td>
  <td width=19 valign=top>

  </td>
  <td width=67 valign=top>
  <div align=right>
  <hr size=1 width="90%" noshade color=gray align=right>
  </div>
  </td>
  <td width=19 valign=top>

  </td>
  <td width=67 valign=top>
  <div align=right>
  <hr size=1 width="90%" noshade color=gray align=right>
  </div>
  </td>
  <td width=19 valign=top>

  </td>
  <td width=67 valign=top>
  <div align=right>
  <hr size=1 width="90%" noshade color=gray align=right>
  </div>
  </td>
  <td width=19 valign=top>

  </td>
  <td width=67 valign=top>
  <div align=right>
  <hr size=1 width="90%" noshade color=gray align=right>
  </div>
  </td>
 </tr>
 <tr>
  <td width=240 valign=top>
  <p><b><font size="1">Total net realized gains</font></b></p>
  </td>
  <td width=19 valign=top>

  </td>
  <td width=67 valign=top>
  <p align=right><font size="1">1.6&nbsp;</font></p>
  </td>
  <td width=19 valign=top>

  </td>
  <td width=67 valign=top>
  <p align=right><font size="1">1.0&nbsp;</font></p>
  </td>
  <td width=19 valign=top>

  </td>
  <td width=67 valign=top>
  <p align=right><font size="1">7.1&nbsp;</font></p>
  </td>
  <td width=19 valign=top>

  </td>
  <td width=67 valign=top>
  <p align=right><font size="1">8.4&nbsp;</font></p>
  </td>
 </tr>
 <tr>
  <td width=240 valign=top>
  <p><font size="1">Income tax expense</font></p>
  </td>
  <td width=19 valign=top>

  </td>
  <td width=67 valign=top>
  <p align=right><font size="1">0.5&nbsp;</font></p>
  </td>
  <td width=19 valign=top>

  </td>
  <td width=67 valign=top>
  <p align=right><font size="1">0.3&nbsp;</font></p>
  </td>
  <td width=19 valign=top>

  </td>
  <td width=67 valign=top>
  <p align=right><font size="1">2.5&nbsp;</font></p>
  </td>
  <td width=19 valign=top>

  </td>
  <td width=67 valign=top>
  <p align=right><font size="1">3.0&nbsp;</font></p>
  </td>
 </tr>
 <tr>
  <td width=240 valign=top>

  </td>
  <td width=19 valign=top>

  </td>
  <td width=67 valign=top>
  <div align=right>
  <hr size=1 width="90%" noshade color=gray align=right>
  </div>
  </td>
  <td width=19 valign=top>

  </td>
  <td width=67 valign=top>
  <div align=right>
  <hr size=1 width="90%" noshade color=gray align=right>
  </div>
  </td>
  <td width=19 valign=top>

  </td>
  <td width=67 valign=top>
  <div align=right>
  <hr size=1 width="90%" noshade color=gray align=right>
  </div>
  </td>
  <td width=19 valign=top>

  </td>
  <td width=67 valign=top>
  <div align=right>
  <hr size=1 width="90%" noshade color=gray align=right>
  </div>
  </td>
 </tr>
 <tr>
  <td width=240 valign=top>
  <p><font size="1">Net realized gains, net of
  income tax</font></p>
  </td>
  <td width=19 valign=top>

  </td>
  <td width=67 valign=top>
  <p align=right><font size="1">1.1&nbsp;</font></p>
  </td>
  <td width=19 valign=top>

  </td>
  <td width=67 valign=top>
  <p align=right><font size="1">0.7&nbsp;</font></p>
  </td>
  <td width=19 valign=top>

  </td>
  <td width=67 valign=top>
  <p align=right><font size="1">4.6&nbsp;</font></p>
  </td>
  <td width=19 valign=top>

  </td>
  <td width=67 valign=top>
  <p align=right><font size="1">5.4&nbsp;</font></p>
  </td>
 </tr>
 <tr>
  <td width=240 valign=top>

  </td>
  <td width=19 valign=top>

  </td>
  <td width=67 valign=top>
  <p align=right>=======</p>
  </td>
  <td width=19 valign=top>

  </td>
  <td width=67 valign=top>
  <p align=right>=======</p>
  </td>
  <td width=19 valign=top>

  </td>
  <td width=67 valign=top>
  <p align=right>=======</p>
  </td>
  <td width=19 valign=top>

  </td>
  <td width=67 valign=top>
  <p align=right>=======</p>
  </td>
 </tr>
</table>

<p style="margin-top: 0; margin-bottom: 0"><font size="2"><br>Realized losses include impairment charges from investment write-downs
for other than temporary declines, if any, in the period such determination is made.&nbsp; There were no impairment charges recorded
during Third Quarter 2004, compared with $1.2 million during Third Quarter 2003,
nor were there any for Nine Months 2004, compared with $1.2 million for Nine
Months 2003. The following tables present the period of time that securities,
sold at a loss during these periods, were continuously in an unrealized loss
position prior to sale:</font></p>

<table border=0 cellspacing=0 cellpadding=0>
 <tr>
  <td width=630 colspan=6 valign=top>
  <div align=center><b>
  <hr size=1 width="100%" noshade color=black align=center>
  </b></div>
  </td>
 </tr>
 <tr>
  <td width=264 valign=top>

  </td>
  <td width=20 valign=top>

  </td>
  <td width=154 valign=top>
  <p align=center><b><font size="1">Unaudited,</font></b></p>
  </td>
  <td width=19 valign=top>

  </td>
  <td width=19 valign=top>

  </td>
  <td width=154 valign=top>
  <p align=center><b><font size="1">Unaudited,</font></b></p>
  </td>
 </tr>
 <tr>
  <td width=264 valign=top>
  <p><b><font size="1">Period of time in an
  unrealized loss position</font></b></p>
  </td>
  <td width=20 valign=top>

  </td>
  <td width=154 valign=top>
  <p align=center><b><font size="1">Quarter ended </font> </b></p>
  </td>
  <td width=19 valign=top>

  </td>
  <td width=19 valign=top>

  </td>
  <td width=154 valign=top>
  <p align=center><b><font size="1">Quarter ended </font> </b></p>
  </td>
 </tr>
 <tr>
  <td width=264 valign=top>
  <p><b><font size="1">&nbsp;</font></b></p>
  </td>
  <td width=20 valign=top>

  </td>
  <td width=154 valign=top>
  <p align=center><b><font size="1">September 30,</font></b></p>
  </td>
  <td width=19 valign=top>

  </td>
  <td width=19 valign=top>

  </td>
  <td width=154 valign=top>
  <p align=center><b><font size="1">September 30,</font></b></p>
  </td>
 </tr>
 <tr>
  <td width=264 valign=top>
  <p><font size="1">(in millions)</font></p>
  </td>
  <td width=20 valign=top>

  </td>
  <td width=154 valign=top>
  <p align=center><b><font size="1">2004</font></b></p>
  </td>
  <td width=19 valign=top>

  </td>
  <td width=19 valign=top>

  </td>
  <td width=154 valign=top>
  <p align=center><b><font size="1">2003</font></b></p>
  </td>
 </tr>
 <tr>
  <td width=630 colspan=6 valign=top>
  <div align=center><b>
  <hr size=1 width="100%" noshade color=black align=center>
  </b></div>
  </td>
 </tr>
</table>



<table border=0 cellspacing=0 cellpadding=0>
 <tr>
  <td width=264 valign=top>

  </td>
  <td width=20 valign=top>

  </td>
  <td width=67 valign=top>
  <p align=center><font size="1">Fair</font></p>
  </td>
  <td width=19 valign=top>

  </td>
  <td width=67 valign=top>

  </td>
  <td width=19 valign=top>

  </td>
  <td width=19 valign=top>

  </td>
  <td width=67 valign=top>
  <p align=center><font size="1">Fair</font></p>
  </td>
  <td width=19 valign=top>

  </td>
  <td width=67 valign=top>

  </td>
 </tr>
 <tr>
  <td width=264 valign=top>

  </td>
  <td width=20 valign=top>

  </td>
  <td width=67 valign=top>
  <p align=center><font size="1">Value on</font></p>
  </td>
  <td width=19 valign=top>

  </td>
  <td width=67 valign=top>
  <p align=center><font size="1">Realized</font></p>
  </td>
  <td width=19 valign=top>

  </td>
  <td width=19 valign=top>

  </td>
  <td width=67 valign=top>
  <p align=center><font size="1">Value on</font></p>
  </td>
  <td width=19 valign=top>

  </td>
  <td width=67 valign=top>
  <p align=center><font size="1">Realized</font></p>
  </td>
 </tr>
 <tr>
  <td width=264 valign=top>

  </td>
  <td width=20 valign=top>

  </td>
  <td width=67 valign=top>
  <p align=center><font size="1">Sale Date</font></p>
  </td>
  <td width=19 valign=top>

  </td>
  <td width=67 valign=top>
  <p align=center><font size="1">Loss</font></p>
  </td>
  <td width=19 valign=top>

  </td>
  <td width=19 valign=top>

  </td>
  <td width=67 valign=top>
  <p align=center><font size="1">Sale Date</font></p>
  </td>
  <td width=19 valign=top>

  </td>
  <td width=67 valign=top>
  <p align=center><font size="1">Loss</font></p>
  </td>
 </tr>
 <tr>
  <td width=264 valign=top>

  </td>
  <td width=366 colspan=9 valign=top>
  <div align=center><b>
  <hr size=1 width="100%" noshade color=black align=center>
  </b></div>
  </td>
 </tr>
 <tr>
  <td width=264 valign=top>
  <p><b><font size="1">Debt securities:</font></b></p>
  </td>
  <td width=20 valign=top>

  </td>
  <td width=67 valign=top>

  </td>
  <td width=19 valign=top>

  </td>
  <td width=67 valign=top>

  </td>
  <td width=19 valign=top>

  </td>
  <td width=19 valign=top>

  </td>
  <td width=67 valign=top>

  </td>
  <td width=19 valign=top>

  </td>
  <td width=67 valign=top>

  </td>
 </tr>
 <tr>
  <td width=264 valign=top>
  <p><font size="1">0 - 6 months</font></p>
  </td>
  <td width=20 valign=top>
  <p align="right"><font size="1">$</font></p>
  </td>
  <td width=67 valign=top>
  <p align=right><font size="1">5.0</font></p>
  </td>
  <td width=19 valign=top>

  </td>
  <td width=67 valign=top>
  <p align=right><font size="1">0.1</font></p>
  </td>
  <td width=19 valign=top>

  </td>
  <td width=19 valign=top>

  </td>
  <td width=67 valign=bottom>
  <p align=right><font size="1">17.5&nbsp;</font></p>
  </td>
  <td width=19 valign=top>

  </td>
  <td width=67 valign=bottom>
  <p align=right><font size="1">0.3&nbsp;</font></p>
  </td>
 </tr>
 <tr>
  <td width=264 valign=top>
  <p><font size="1">7 - 12 months</font></p>
  </td>
  <td width=20 valign=top>

  </td>
  <td width=67 valign=top>
  <p align=right><font size="1">17.5</font></p>
  </td>
  <td width=19 valign=top>

  </td>
  <td width=67 valign=top>
  <p align=right><font size="1">0.2</font></p>
  </td>
  <td width=19 valign=top>

  </td>
  <td width=19 valign=top>

  </td>
  <td width=67 valign=bottom>
  <p align=right><font size="1">-&nbsp;</font></p>
  </td>
  <td width=19 valign=top>

  </td>
  <td width=67 valign=bottom>
  <p align=right><font size="1">-&nbsp;</font></p>
  </td>
 </tr>
 <tr>
  <td width=264 valign=top>
  <p><font size="1">Greater than 12 months</font></p>
  </td>
  <td width=20 valign=top>

  </td>
  <td width=67 valign=top>
  <p align=right><font size="1">-</font></p>
  </td>
  <td width=19 valign=top>

  </td>
  <td width=67 valign=bottom>
  <p align=right><font size="1">-&nbsp;</font></p>
  </td>
  <td width=19 valign=top>

  </td>
  <td width=19 valign=top>

  </td>
  <td width=67 valign=bottom>
  <p align=right><font size="1">-&nbsp;</font></p>
  </td>
  <td width=19 valign=top>

  </td>
  <td width=67 valign=bottom>
  <p align=right><font size="1">-&nbsp;</font></p>
  </td>
 </tr>
 <tr>
  <td width=264 valign=top>

  </td>
  <td width=20 valign=top>

  </td>
  <td width=67 valign=top>
  <div align=right>
  <hr size=1 width="90%" noshade color=gray align=right>
  </div>
  </td>
  <td width=19 valign=top>

  </td>
  <td width=67 valign=top>
  <div align=right>
  <hr size=1 width="90%" noshade color=gray align=right>
  </div>
  </td>
  <td width=19 valign=top>

  </td>
  <td width=19 valign=top>

  </td>
  <td width=67 valign=top>
  <div align=right>
  <hr size=1 width="90%" noshade color=gray align=right>
  </div>
  </td>
  <td width=19 valign=top>

  </td>
  <td width=67 valign=top>
  <div align=right>
  <hr size=1 width="90%" noshade color=gray align=right>
  </div>
  </td>
 </tr>
 <tr>
  <td width=264 valign=top>
  <p><font size="1">Total debt securities</font></p>
  </td>
  <td width=20 valign=top>

  </td>
  <td width=67 valign=top>
  <p align=right><font size="1">22.5</font></p>
  </td>
  <td width=19 valign=top>

  </td>
  <td width=67 valign=top>
  <p align=right><font size="1">0.3</font></p>
  </td>
  <td width=19 valign=top>

  </td>
  <td width=19 valign=top>

  </td>
  <td width=67 valign=top>
  <p align=right><font size="1">17.5&nbsp;</font></p>
  </td>
  <td width=19 valign=top>

  </td>
  <td width=67 valign=top>
  <p align=right><font size="1">0.3&nbsp;</font></p>
  </td>
 </tr>
 <tr>
  <td width=264 valign=top>

  </td>
  <td width=20 valign=top>

  </td>
  <td width=67 valign=top>

  </td>
  <td width=19 valign=top>

  </td>
  <td width=67 valign=top>

  </td>
  <td width=19 valign=top>

  </td>
  <td width=19 valign=top>

  </td>
  <td width=67 valign=top>

  </td>
  <td width=19 valign=top>

  </td>
  <td width=67 valign=top>

  </td>
 </tr>
 <tr>
  <td width=264 valign=top>
  &nbsp;</td>
  <td width=20 valign=top>

  &nbsp;</td>
  <td width=67 valign=top>

  &nbsp;</td>
  <td width=19 valign=top>

  &nbsp;</td>
  <td width=67 valign=top>

  &nbsp;</td>
  <td width=19 valign=top>

  &nbsp;</td>
  <td width=19 valign=top>

  &nbsp;</td>
  <td width=67 valign=top>

  &nbsp;</td>
  <td width=19 valign=top>

  &nbsp;</td>
  <td width=67 valign=top>

  &nbsp;</td>
 </tr>
 <tr>
  <td width=264 valign=top>
  <p><b><font size="1">Equities:</font></b></p>
  </td>
  <td width=20 valign=top>

  </td>
  <td width=67 valign=top>

  </td>
  <td width=19 valign=top>

  </td>
  <td width=67 valign=top>

  </td>
  <td width=19 valign=top>

  </td>
  <td width=19 valign=top>

  </td>
  <td width=67 valign=top>

  </td>
  <td width=19 valign=top>

  </td>
  <td width=67 valign=top>

  </td>
 </tr>
 <tr>
  <td width=264 valign=top>
  <p><font size="1">0 - 6 months</font></p>
  </td>
  <td width=20 valign=top>

  </td>
  <td width=67 valign=top>
  <p align=right><font size="1">3.2</font></p>
  </td>
  <td width=19 valign=top>

  </td>
  <td width=67 valign=top>
  <p align=right><font size="1">1.0</font></p>
  </td>
  <td width=19 valign=top>

  </td>
  <td width=19 valign=top>

  </td>
  <td width=67 valign=bottom>
  <p align=right><font size="1">1.0&nbsp;</font></p>
  </td>
  <td width=19 valign=top>

  </td>
  <td width=67 valign=bottom>
  <p align=right><font size="1">0.1&nbsp;</font></p>
  </td>
 </tr>
 <tr>
  <td width=264 valign=top>
  <p><font size="1">7 - 12 months</font></p>
  </td>
  <td width=20 valign=top>

  </td>
  <td width=67 valign=top>
  <p align=right><font size="1">-</font></p>
  </td>
  <td width=19 valign=top>

  </td>
  <td width=67 valign=top>
  <p align=right><font size="1">-</font></p>
  </td>
  <td width=19 valign=top>

  </td>
  <td width=19 valign=top>

  </td>
  <td width=67 valign=bottom>
  <p align=right><font size="1">-&nbsp;</font></p>
  </td>
  <td width=19 valign=top>

  </td>
  <td width=67 valign=bottom>
  <p align=right><font size="1">-&nbsp;</font></p>
  </td>
 </tr>
 <tr>
  <td width=264 valign=top>
  <p><font size="1">Greater than 12 months</font></p>
  </td>
  <td width=20 valign=top>

  </td>
  <td width=67 valign=top>
  <p align=right><font size="1">-</font></p>
  </td>
  <td width=19 valign=top>

  </td>
  <td width=67 valign=top>
  <p align=right><font size="1">-</font></p>
  </td>
  <td width=19 valign=top>

  </td>
  <td width=19 valign=top>

  </td>
  <td width=67 valign=bottom>
  <p align=right><font size="1">-&nbsp;</font></p>
  </td>
  <td width=19 valign=top>

  </td>
  <td width=67 valign=bottom>
  <p align=right><font size="1">-&nbsp;</font></p>
  </td>
 </tr>
 <tr>
  <td width=264 valign=top>

  </td>
  <td width=20 valign=top>

  </td>
  <td width=67 valign=top>
  <div align=right>
  <hr size=1 width="90%" noshade color=gray align=right>
  </div>
  </td>
  <td width=19 valign=top>

  </td>
  <td width=67 valign=top>
  <div align=right>
  <hr size=1 width="90%" noshade color=gray align=right>
  </div>
  </td>
  <td width=19 valign=top>

  </td>
  <td width=19 valign=top>

  </td>
  <td width=67 valign=top>
  <div align=right>
  <hr size=1 width="90%" noshade color=gray align=right>
  </div>
  </td>
  <td width=19 valign=top>

  </td>
  <td width=67 valign=top>
  <div align=right>
  <hr size=1 width="90%" noshade color=gray align=right>
  </div>
  </td>
 </tr>
 <tr>
  <td width=264 valign=top>
  <p><font size="1">Total equities</font></p>
  </td>
  <td width=20 valign=top>

  </td>
  <td width=67 valign=top>
  <p align=right><font size="1">3.2</font></p>
  </td>
  <td width=19 valign=top>

  </td>
  <td width=67 valign=top>
  <p align=right><font size="1">1.0</font></p>
  </td>
  <td width=19 valign=top>

  </td>
  <td width=19 valign=top>

  </td>
  <td width=67 valign=top>
  <p align=right><font size="1">1.0&nbsp;</font></p>
  </td>
  <td width=19 valign=top>

  </td>
  <td width=67 valign=top>
  <p align=right><font size="1">0.1&nbsp;</font></p>
  </td>
 </tr>
 <tr>
  <td width=264 valign=top>

  </td>
  <td width=20 valign=top>

  </td>
  <td width=67 valign=top>
  <div align=right>
  <hr size=1 width="90%" noshade color=gray align=right>
  </div>
  </td>
  <td width=19 valign=top>

  </td>
  <td width=67 valign=top>
  <div align=right>
  <hr size=1 width="90%" noshade color=gray align=right>
  </div>
  </td>
  <td width=19 valign=top>

  </td>
  <td width=19 valign=top>

  </td>
  <td width=67 valign=top>
  <div align=right>
  <hr size=1 width="90%" noshade color=gray align=right>
  </div>
  </td>
  <td width=19 valign=top>

  </td>
  <td width=67 valign=top>
  <div align=right>
  <hr size=1 width="90%" noshade color=gray align=right>
  </div>
  </td>
 </tr>
 <tr>
  <td width=264 valign=top>
  <p><font size="1">Total</font></p>
  </td>
  <td width=20 valign=top>
  <p align="right"><font size="1">$</font></p>
  </td>
  <td width=67 valign=top>
  <p align=right><font size="1">25.7</font></p>
  </td>
  <td width=19 valign=top>

  </td>
  <td width=67 valign=top>
  <p align=right><font size="1">1.3</font></p>
  </td>
  <td width=19 valign=top>

  </td>
  <td width=19 valign=top>

  </td>
  <td width=67 valign=top>
  <p align=right><font size="1">18.5&nbsp;</font></p>
  </td>
  <td width=19 valign=top>

  </td>
  <td width=67 valign=top>
  <p align=right><font size="1">0.4&nbsp;</font></p>
  </td>
 </tr>
 <tr>
  <td width=264 valign=top>

  </td>
  <td width=20 valign=top>

  </td>
  <td width=67 valign=top>
  <p align=right>=======</p>
  </td>
  <td width=19 valign=top>

  </td>
  <td width=67 valign=top>
  <p align=right>=======</p>
  </td>
  <td width=19 valign=top>

  </td>
  <td width=19 valign=top>

  </td>
  <td width=67 valign=top>
  <p align=right>=======</p>
  </td>
  <td width=19 valign=top>

  </td>
  <td width=67 valign=top>
  <p align=right>=======</p>
  </td>
 </tr>
</table>

<p align="center"><font size="2"><br>25<br></font></p><hr color="#000080"><P STYLE="page-break-after: always"></P>
<font size="2"><br clear=all>




</font>




<table border=0 cellspacing=0 cellpadding=0>
 <tr>
  <td width=630 colspan=6 valign=top>

  <div align=center><b>
  <hr size=1 width="100%" noshade color=black align=center>
  </b></div>
  </td>
 </tr>
 <tr>
  <td width=264 valign=top>

  </td>
  <td width=20 valign=top>

  </td>
  <td width=154 valign=top>
  <p align=center><b><font size="1">Unaudited,</font></b></p>
  </td>
  <td width=19 valign=top>

  </td>
  <td width=19 valign=top>

  </td>
  <td width=154 valign=top>
  <p align=center><b><font size="1">Unaudited,</font></b></p>
  </td>
 </tr>
 <tr>
  <td width=264 valign=top>
  <p><b><font size="1">Period of time in an
  unrealized loss position</font></b></p>
  </td>
  <td width=20 valign=top>

  </td>
  <td width=154 valign=top>
  <p align=center><b><font size="1">Nine months ended </font> </b></p>
  </td>
  <td width=19 valign=top>

  </td>
  <td width=19 valign=top>

  </td>
  <td width=154 valign=top>
  <p align=center><b><font size="1">Nine months ended </font> </b></p>
  </td>
 </tr>
 <tr>
  <td width=264 valign=top>
  <p><b><font size="1">&nbsp;</font></b></p>
  </td>
  <td width=20 valign=top>

  </td>
  <td width=154 valign=top>
  <p align=center><b><font size="1">September 30,</font></b></p>
  </td>
  <td width=19 valign=top>

  </td>
  <td width=19 valign=top>

  </td>
  <td width=154 valign=top>
  <p align=center><b><font size="1">September 30,</font></b></p>
  </td>
 </tr>
 <tr>
  <td width=264 valign=top>
  <p><font size="1">(in millions)</font></p>
  </td>
  <td width=20 valign=top>

  </td>
  <td width=154 valign=top>
  <p align=center><b><font size="1">2004</font></b></p>
  </td>
  <td width=19 valign=top>

  </td>
  <td width=19 valign=top>

  </td>
  <td width=154 valign=top>
  <p align=center><b><font size="1">2003</font></b></p>
  </td>
 </tr>
 <tr>
  <td width=630 colspan=6 valign=top>
  <div align=center><b>
  <hr size=1 width="100%" noshade color=black align=center>
  </b></div>
  </td>
 </tr>
</table>



<table border=0 cellspacing=0 cellpadding=0>
 <tr>
  <td width=264 valign=top>

  </td>
  <td width=20 valign=top>

  </td>
  <td width=67 valign=top>
  <p align=center><font size="1">Fair</font></p>
  </td>
  <td width=19 valign=top>

  </td>
  <td width=67 valign=top>

  </td>
  <td width=19 valign=top>

  </td>
  <td width=19 valign=top>

  </td>
  <td width=67 valign=top>
  <p align=center><font size="1">Fair</font></p>
  </td>
  <td width=19 valign=top>

  </td>
  <td width=67 valign=top>

  </td>
 </tr>
 <tr>
  <td width=264 valign=top>

  </td>
  <td width=20 valign=top>

  </td>
  <td width=67 valign=top>
  <p align=center><font size="1">Value on</font></p>
  </td>
  <td width=19 valign=top>

  </td>
  <td width=67 valign=top>
  <p align=center><font size="1">Realized</font></p>
  </td>
  <td width=19 valign=top>

  </td>
  <td width=19 valign=top>

  </td>
  <td width=67 valign=top>
  <p align=center><font size="1">Value on</font></p>
  </td>
  <td width=19 valign=top>

  </td>
  <td width=67 valign=top>
  <p align=center><font size="1">Realized</font></p>
  </td>
 </tr>
 <tr>
  <td width=264 valign=top>

  </td>
  <td width=20 valign=top>

  </td>
  <td width=67 valign=top>
  <p align=center><font size="1">Sale Date</font></p>
  </td>
  <td width=19 valign=top>

  </td>
  <td width=67 valign=top>
  <p align=center><font size="1">Loss</font></p>
  </td>
  <td width=19 valign=top>

  </td>
  <td width=19 valign=top>

  </td>
  <td width=67 valign=top>
  <p align=center><font size="1">Sale Date</font></p>
  </td>
  <td width=19 valign=top>

  </td>
  <td width=67 valign=top>
  <p align=center><font size="1">Loss</font></p>
  </td>
 </tr>
 <tr>
  <td width=264 valign=top>

  </td>
  <td width=366 colspan=9 valign=top>
  <div align=center><b>
  <hr size=1 width="100%" noshade color=black align=center>
  </b></div>
  </td>
 </tr>
 <tr>
  <td width=264 valign=top>
  <p><b><font size="1">Debt securities:</font></b></p>
  </td>
  <td width=20 valign=top>

  </td>
  <td width=67 valign=top>

  </td>
  <td width=19 valign=top>

  </td>
  <td width=67 valign=top>

  </td>
  <td width=19 valign=top>

  </td>
  <td width=19 valign=top>

  </td>
  <td width=67 valign=top>

  </td>
  <td width=19 valign=top>

  </td>
  <td width=67 valign=top>

  </td>
 </tr>
 <tr>
  <td width=264 valign=top>
  <p><font size="1">0 - 6 months</font></p>
  </td>
  <td width=20 valign=top>
  <p align="right"><font size="1">$</font></p>
  </td>
  <td width=67 valign=top>
  <p align=right><font size="1">104.7</font></p>
  </td>
  <td width=19 valign=top>

  </td>
  <td width=67 valign=top>
  <p align=right><font size="1">4.6</font></p>
  </td>
  <td width=19 valign=top>

  </td>
  <td width=19 valign=top>

  </td>
  <td width=67 valign=top>
  <p align=right><font size="1">22.5&nbsp;</font></p>
  </td>
  <td width=19 valign=top>

  </td>
  <td width=67 valign=top>
  <p align=right><font size="1">0.3&nbsp;</font></p>
  </td>
 </tr>
 <tr>
  <td width=264 valign=top>
  <p><font size="1">7 - 12 months</font></p>
  </td>
  <td width=20 valign=top>

  </td>
  <td width=67 valign=top>
  <p align=right><font size="1">17.5</font></p>
  </td>
  <td width=19 valign=top>

  </td>
  <td width=67 valign=top>
  <p align=right><font size="1">0.2</font></p>
  </td>
  <td width=19 valign=top>

  </td>
  <td width=19 valign=top>

  </td>
  <td width=67 valign=top>
  <p align=right><font size="1">-&nbsp;</font></p>
  </td>
  <td width=19 valign=top>

  </td>
  <td width=67 valign=top>
  <p align=right><font size="1">-&nbsp;</font></p>
  </td>
 </tr>
 <tr>
  <td width=264 valign=top>
  <p><font size="1">Greater than 12 months</font></p>
  </td>
  <td width=20 valign=top>

  </td>
  <td width=67 valign=top>
  <p align=right><font size="1">-</font></p>
  </td>
  <td width=19 valign=top>

  </td>
  <td width=67 valign=top>
  <p align=right><font size="1">-</font></p>
  </td>
  <td width=19 valign=top>

  </td>
  <td width=19 valign=top>

  </td>
  <td width=67 valign=top>
  <p align=right><font size="1">-&nbsp;</font></p>
  </td>
  <td width=19 valign=top>

  </td>
  <td width=67 valign=top>
  <p align=right><font size="1">-&nbsp;</font></p>
  </td>
 </tr>
 <tr>
  <td width=264 valign=top>

  </td>
  <td width=20 valign=top>

  </td>
  <td width=67 valign=top>
  <div align=right>
  <hr size=1 width="90%" noshade color=gray align=right>
  </div>
  </td>
  <td width=19 valign=top>

  </td>
  <td width=67 valign=top>
  <div align=right>
  <hr size=1 width="90%" noshade color=gray align=right>
  </div>
  </td>
  <td width=19 valign=top>

  </td>
  <td width=19 valign=top>

  </td>
  <td width=67 valign=top>
  <div align=right>
  <hr size=1 width="90%" noshade color=gray align=right>
  </div>
  </td>
  <td width=19 valign=top>

  </td>
  <td width=67 valign=top>
  <div align=right>
  <hr size=1 width="90%" noshade color=gray align=right>
  </div>
  </td>
 </tr>
 <tr>
  <td width=264 valign=top>
  <p><font size="1">Total debt securities</font></p>
  </td>
  <td width=20 valign=top>

  </td>
  <td width=67 valign=top>
  <p align=right><font size="1">122.2</font></p>
  </td>
  <td width=19 valign=top>

  </td>
  <td width=67 valign=top>
  <p align=right><font size="1">4.8</font></p>
  </td>
  <td width=19 valign=top>

  </td>
  <td width=19 valign=top>

  </td>
  <td width=67 valign=top>

  </td>
  <td width=19 valign=top>

  </td>
  <td width=67 valign=top>

  </td>
 </tr>
 <tr>
  <td width=264 valign=top>

  </td>
  <td width=20 valign=top>

  </td>
  <td width=67 valign=top>

  </td>
  <td width=19 valign=top>

  </td>
  <td width=67 valign=top>

  </td>
  <td width=19 valign=top>

  </td>
  <td width=19 valign=top>

  </td>
  <td width=67 valign=top>
  <p align=right><font size="1">22.5&nbsp;</font></p>
  </td>
  <td width=19 valign=top>

  </td>
  <td width=67 valign=top>
  <p align=right><font size="1">0.3&nbsp;</font></p>
  </td>
 </tr>
 <tr>
  <td width=264 valign=top>
  <p><b><font size="1">Equities:</font></b></p>
  </td>
  <td width=20 valign=top>

  </td>
  <td width=67 valign=top>

  </td>
  <td width=19 valign=top>

  </td>
  <td width=67 valign=top>

  </td>
  <td width=19 valign=top>

  </td>
  <td width=19 valign=top>

  </td>
  <td width=67 valign=top>

  </td>
  <td width=19 valign=top>

  </td>
  <td width=67 valign=top>

  </td>
 </tr>
 <tr>
  <td width=264 valign=top>
  <p><font size="1">0 - 6 months</font></p>
  </td>
  <td width=20 valign=top>

  </td>
  <td width=67 valign=top>
  <p align=right><font size="1">10.0</font></p>
  </td>
  <td width=19 valign=top>

  </td>
  <td width=67 valign=top>
  <p align=right><font size="1">1.6</font></p>
  </td>
  <td width=19 valign=top>

  </td>
  <td width=19 valign=top>

  </td>
  <td width=67 valign=top>
  <p align=right><font size="1">1.0&nbsp;</font></p>
  </td>
  <td width=19 valign=top>

  </td>
  <td width=67 valign=top>
  <p align=right><font size="1">0.1&nbsp;</font></p>
  </td>
 </tr>
 <tr>
  <td width=264 valign=top>
  <p><font size="1">7 - 12 months</font></p>
  </td>
  <td width=20 valign=top>

  </td>
  <td width=67 valign=top>
  <p align=right><font size="1">-</font></p>
  </td>
  <td width=19 valign=top>

  </td>
  <td width=67 valign=top>
  <p align=right><font size="1">-</font></p>
  </td>
  <td width=19 valign=top>

  </td>
  <td width=19 valign=top>

  </td>
  <td width=67 valign=top>
  <p align=right><font size="1">-&nbsp;</font></p>
  </td>
  <td width=19 valign=top>

  </td>
  <td width=67 valign=top>
  <p align=right><font size="1">-&nbsp;</font></p>
  </td>
 </tr>
 <tr>
  <td width=264 valign=top>
  <p><font size="1">Greater than 12 months</font></p>
  </td>
  <td width=20 valign=top>

  </td>
  <td width=67 valign=top>
  <p align=right><font size="1">-</font></p>
  </td>
  <td width=19 valign=top>

  </td>
  <td width=67 valign=top>
  <p align=right><font size="1">-</font></p>
  </td>
  <td width=19 valign=top>

  </td>
  <td width=19 valign=top>

  </td>
  <td width=67 valign=top>
  <p align=right><font size="1">-&nbsp;</font></p>
  </td>
  <td width=19 valign=top>

  </td>
  <td width=67 valign=top>
  <p align=right><font size="1">-&nbsp;</font></p>
  </td>
 </tr>
 <tr>
  <td width=264 valign=top>

  </td>
  <td width=20 valign=top>

  </td>
  <td width=67 valign=top>
  <div align=right>
  <hr size=1 width="90%" noshade color=gray align=right>
  </div>
  </td>
  <td width=19 valign=top>

  </td>
  <td width=67 valign=top>
  <div align=right>
  <hr size=1 width="90%" noshade color=gray align=right>
  </div>
  </td>
  <td width=19 valign=top>

  </td>
  <td width=19 valign=top>

  </td>
  <td width=67 valign=top>
  <div align=right>
  <hr size=1 width="90%" noshade color=gray align=right>
  </div>
  </td>
  <td width=19 valign=top>

  </td>
  <td width=67 valign=top>
  <div align=right>
  <hr size=1 width="90%" noshade color=gray align=right>
  </div>
  </td>
 </tr>
 <tr>
  <td width=264 valign=top>
  <p><font size="1">Total equities</font></p>
  </td>
  <td width=20 valign=top>

  </td>
  <td width=67 valign=top>
  <p align=right><font size="1">10.0</font></p>
  </td>
  <td width=19 valign=top>

  </td>
  <td width=67 valign=top>
  <p align=right><font size="1">1.6</font></p>
  </td>
  <td width=19 valign=top>

  </td>
  <td width=19 valign=top>

  </td>
  <td width=67 valign=top>
  <p align=right><font size="1">1.0&nbsp;</font></p>
  </td>
  <td width=19 valign=top>

  </td>
  <td width=67 valign=top>
  <p align=right><font size="1">0.1&nbsp;</font></p>
  </td>
 </tr>
 <tr>
  <td width=264 valign=top>

  </td>
  <td width=20 valign=top>

  </td>
  <td width=67 valign=top>
  <div align=right>
  <hr size=1 width="90%" noshade color=gray align=right>
  </div>
  </td>
  <td width=19 valign=top>

  </td>
  <td width=67 valign=top>
  <div align=right>
  <hr size=1 width="90%" noshade color=gray align=right>
  </div>
  </td>
  <td width=19 valign=top>

  </td>
  <td width=19 valign=top>

  </td>
  <td width=67 valign=top>
  <div align=right>
  <hr size=1 width="90%" noshade color=gray align=right>
  </div>
  </td>
  <td width=19 valign=top>

  </td>
  <td width=67 valign=top>
  <div align=right>
  <hr size=1 width="90%" noshade color=gray align=right>
  </div>
  </td>
 </tr>
 <tr>
  <td width=264 valign=top>
  <p><font size="1">Total</font></p>
  </td>
  <td width=20 valign=top>
  <p align="right"><font size="1">$</font></p>
  </td>
  <td width=67 valign=top>
  <p align=right><font size="1">132.2</font></p>
  </td>
  <td width=19 valign=top>

  </td>
  <td width=67 valign=top>
  <p align=right><font size="1">6.4</font></p>
  </td>
  <td width=19 valign=top>

  </td>
  <td width=19 valign=top>

  </td>
  <td width=67 valign=top>
  <p align=right><font size="1">23.5&nbsp;</font></p>
  </td>
  <td width=19 valign=top>

  </td>
  <td width=67 valign=top>
  <p align=right><font size="1">0.4&nbsp;</font></p>
  </td>
 </tr>
 <tr>
  <td width=264 valign=top>

  </td>
  <td width=20 valign=top>

  </td>
  <td width=67 valign=top>
  <p align=right>=======</p>
  </td>
  <td width=19 valign=top>

  </td>
  <td width=67 valign=top>
  <p align=right>=======</p>
  </td>
  <td width=19 valign=top>

  </td>
  <td width=19 valign=top>

  </td>
  <td width=67 valign=top>
  <p align=right>=======</p>
  </td>
  <td width=19 valign=top>

  </td>
  <td width=67 valign=top>
  <p align=right>=======</p>
  </td>
 </tr>
</table>

<p style="margin-top: 0; margin-bottom: 0"><font size="2"><br>
These securities were sold despite the fact that they were in a loss position
due to a tax management shift from taxable to tax-advantaged securities, which
included offsetting some of our realized capital gains, heightened credit risk
of the individual security sold, or the need to reduce our exposure to certain issuers, industries or sectors in
light of changing economic conditions.<br>
<br><b>Unrealized losses<br>
</b>The following table summarizes, for all available-for-sale securities in an
unrealized loss position at September 30, 2004 and December 31, 2003, 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
those securities have continuously been in an unrealized loss position:</font></p>

<table border=0 cellspacing=0 cellpadding=0>
 <tr>
  <td width=620 colspan=4 valign=top>
  <div align=center><b>
  <hr size=1 width="100%" noshade color=black align=center>
  </b></div>
  </td>
 </tr>
 <tr>
  <td width=258 valign=top>
  <p><b><font size="1">Period
  of time in unrealized loss position</font></b></p>
  </td>
  <td width=172 valign=top>
  <p align=center><b><font size="1">Unaudited</font></b></p>
  </td>
  <td width=18 valign=top>

  </td>
  <td width=172 valign=top>
  <p align=center><b><font size="1">Unaudited</font></b></p>
  </td>
 </tr>
 <tr>
  <td width=258 valign=top>
  <p><font size="1">(in
  millions)</font></p>
  </td>
  <td width=172 valign=top>
  <p align=center><b><font size="1">September 30, 2004</font></b></p>
  </td>
  <td width=18 valign=top>

  </td>
  <td width=172 valign=top>
  <p align=center><b><font size="1">December 31, 2003</font></b></p>
  </td>
 </tr>
 <tr>
  <td width=620 colspan=4 valign=top>
  <div align=center><b>
  <hr size=1 width="100%" noshade color=black align=center>
  </b></div>
  </td>
 </tr>
</table>



<table border=0 cellspacing=0 cellpadding=0>
 <tr>
  <td width=239 valign=top>

  </td>
  <td width=19 valign=top>

  </td>
  <td width=76 valign=top>

  </td>
  <td width=19 valign=top>

  </td>
  <td width=76 valign=top>
  <p align=center><font size="1">Gross</font></p>
  </td>
  <td width=18 valign=top>

  </td>
  <td width=76 valign=top>

  </td>
  <td width=19 valign=top>

  </td>
  <td width=76 valign=top>
  <p align=center><font size="1">Gross</font></p>
  </td>
 </tr>
 <tr>
  <td width=239 valign=top>

  </td>
  <td width=19 valign=top>

  </td>
  <td width=76 valign=top>
  <p align=center><font size="1">Fair</font></p>
  </td>
  <td width=19 valign=top>

  </td>
  <td width=76 valign=top>
  <p align=center><font size="1">Unrealized</font></p>
  </td>
  <td width=18 valign=top>

  </td>
  <td width=76 valign=top>
  <p align=center><font size="1">Fair</font></p>
  </td>
  <td width=19 valign=top>

  </td>
  <td width=76 valign=top>
  <p align=center><font size="1">Unrealized</font></p>
  </td>
 </tr>
 <tr>
  <td width=239 valign=top>

  </td>
  <td width=19 valign=top>

  </td>
  <td width=76 valign=top>
  <p align=center><font size="1">Value</font></p>
  </td>
  <td width=19 valign=top>

  </td>
  <td width=76 valign=top>
  <p align=center><font size="1">Loss</font></p>
  </td>
  <td width=18 valign=top>

  </td>
  <td width=76 valign=top>
  <p align=center><font size="1">Value</font></p>
  </td>
  <td width=19 valign=top>

  </td>
  <td width=76 valign=top>
  <p align=center><font size="1">Loss</font></p>
  </td>
 </tr>
 <tr>
  <td width=239 valign=top>

  </td>
  <td width=381 colspan=8 valign=top>
  <div align=center><b>
  <hr size=1 width="100%" noshade color=black align=center>
  </b></div>
  </td>
 </tr>
 <tr>
  <td width=239 valign=top>
  <p><b><font size="1">Debt securities:</font></b></p>
  </td>
  <td width=19 valign=top>

  </td>
  <td width=76 valign=top>

  </td>
  <td width=19 valign=top>

  </td>
  <td width=76 valign=top>

  </td>
  <td width=18 valign=top>

  </td>
  <td width=76 valign=top>

  </td>
  <td width=19 valign=top>

  </td>
  <td width=76 valign=top>

  </td>
 </tr>
 <tr>
  <td width=239 valign=top>
  <p><font size="1">0 - 6 months</font></p>
  </td>
  <td width=19 valign=top>
  <p align="right"><font size="1">$</font></p>
  </td>
  <td width=76 valign=top>
  <p align=right><font size="1">229.1</font></p>
  </td>
  <td width=19 valign=top>

  </td>
  <td width=76 valign=top>
  <p align=right><font size="1">1.5</font></p>
  </td>
  <td width=18 valign=top>

  </td>
  <td width=76 valign=top>
  <p align=right><font size="1">143.2&nbsp;</font></p>
  </td>
  <td width=19 valign=top>

  </td>
  <td width=76 valign=top>
  <p align=right><font size="1">2.3&nbsp;</font></p>
  </td>
 </tr>
 <tr>
  <td width=239 valign=top>
  <p><font size="1">7 - 12 months</font></p>
  </td>
  <td width=19 valign=top>

  </td>
  <td width=76 valign=top>
  <p align=right><font size="1">69.7</font></p>
  </td>
  <td width=19 valign=top>

  </td>
  <td width=76 valign=top>
  <p align=right><font size="1">1.1</font></p>
  </td>
  <td width=18 valign=top>

  </td>
  <td width=76 valign=top>
  <p align=right><font size="1">57.3&nbsp;</font></p>
  </td>
  <td width=19 valign=top>

  </td>
  <td width=76 valign=top>
  <p align=right><font size="1">1.3&nbsp;</font></p>
  </td>
 </tr>
 <tr>
  <td width=239 valign=top>
  <p><font size="1">Greater than 12 months</font></p>
  </td>
  <td width=19 valign=top>

  </td>
  <td width=76 valign=top>
  <p align=right><font size="1">16.0</font></p>
  </td>
  <td width=19 valign=top>

  </td>
  <td width=76 valign=top>
  <p align=right><font size="1">0.2</font></p>
  </td>
  <td width=18 valign=top>

  </td>
  <td width=76 valign=top>
  <p align=right><font size="1">5.5&nbsp;</font></p>
  </td>
  <td width=19 valign=top>

  </td>
  <td width=76 valign=top>
  <p align=right><font size="1">0.1&nbsp;</font></p>
  </td>
 </tr>
 <tr>
  <td width=239 valign=top>

  </td>
  <td width=19 valign=top>

  </td>
  <td width=76 valign=top>
  <div align=right>
  <hr size=1 width="90%" noshade color=gray align=right>
  </div>
  </td>
  <td width=19 valign=top>

  </td>
  <td width=76 valign=top>
  <div align=right>
  <hr size=1 width="90%" noshade color=gray align=right>
  </div>
  </td>
  <td width=18 valign=top>

  </td>
  <td width=76 valign=top>
  <div align=right>
  <hr size=1 width="90%" noshade color=gray align=right>
  </div>
  </td>
  <td width=19 valign=top>

  </td>
  <td width=76 valign=top>
  <div align=right>
  <hr size=1 width="90%" noshade color=gray align=right>
  </div>
  </td>
 </tr>
 <tr>
  <td width=239 valign=top>
  <p><font size="1">Total debt securities</font></p>
  </td>
  <td width=19 valign=top>

  </td>
  <td width=76 valign=top>
  <p align=right><font size="1">314.8</font></p>
  </td>
  <td width=19 valign=top>

  </td>
  <td width=76 valign=top>
  <p align=right><font size="1">2.8</font></p>
  </td>
  <td width=18 valign=top>

  </td>
  <td width=76 valign=top>
  <p align=right><font size="1">206.0&nbsp;</font></p>
  </td>
  <td width=19 valign=top>

  </td>
  <td width=76 valign=top>
  <p align=right><font size="1">3.7&nbsp;</font></p>
  </td>
 </tr>
 <tr>
  <td width=239 valign=top>

  </td>
  <td width=19 valign=top>

  </td>
  <td width=76 valign=top>
  <div align=right>
  <hr size=1 width="90%" noshade color=gray align=right>
  </div>
  </td>
  <td width=19 valign=top>

  </td>
  <td width=76 valign=top>
  <div align=right>
  <hr size=1 width="90%" noshade color=gray align=right>
  </div>
  </td>
  <td width=18 valign=top>

  </td>
  <td width=76 valign=top>
  <div align=right>
  <hr size=1 width="90%" noshade color=gray align=right>
  </div>
  </td>
  <td width=19 valign=top>

  </td>
  <td width=76 valign=top>
  <div align=right>
  <hr size=1 width="90%" noshade color=gray align=right>
  </div>
  </td>
 </tr>
 <tr>
  <td width=239 valign=top>
  <p><b><font size="1">Equities:</font></b></p>
  </td>
  <td width=19 valign=top>

  </td>
  <td width=76 valign=top>

  </td>
  <td width=19 valign=top>

  </td>
  <td width=76 valign=top>

  </td>
  <td width=18 valign=top>

  </td>
  <td width=76 valign=top>

  </td>
  <td width=19 valign=top>

  </td>
  <td width=76 valign=top>

  </td>
 </tr>
 <tr>
  <td width=239 valign=top>
  <p><font size="1">0 - 6 months</font></p>
  </td>
  <td width=19 valign=top>

  </td>
  <td width=76 valign=top>
  <p align=right><font size="1">10.6</font></p>
  </td>
  <td width=19 valign=top>

  </td>
  <td width=76 valign=top>
  <p align=right><font size="1">0.9</font></p>
  </td>
  <td width=18 valign=top>

  </td>
  <td width=76 valign=top>
  <p align=right><font size="1">1.5&nbsp;</font></p>
  </td>
  <td width=19 valign=top>

  </td>
  <td width=76 valign=top>
  <p align=right><font size="1">-&nbsp;</font></p>
  </td>
 </tr>
 <tr>
  <td width=239 valign=top>
  <p><font size="1">7 - 12 months</font></p>
  </td>
  <td width=19 valign=top>

  </td>
  <td width=76 valign=top>
  <p align=right><font size="1">-</font></p>
  </td>
  <td width=19 valign=top>

  </td>
  <td width=76 valign=top>
  <p align=right><font size="1">-</font></p>
  </td>
  <td width=18 valign=top>

  </td>
  <td width=76 valign=top>
  <p align=right><font size="1">-&nbsp;</font></p>
  </td>
  <td width=19 valign=top>

  </td>
  <td width=76 valign=top>
  <p align=right><font size="1">-&nbsp;</font></p>
  </td>
 </tr>
 <tr>
  <td width=239 valign=top>
  <p><font size="1">Greater than 12 months</font></p>
  </td>
  <td width=19 valign=top>

  </td>
  <td width=76 valign=top>
  <p align=right><font size="1">-</font></p>
  </td>
  <td width=19 valign=top>

  </td>
  <td width=76 valign=top>
  <p align=right><font size="1">-</font></p>
  </td>
  <td width=18 valign=top>

  </td>
  <td width=76 valign=top>
  <p align=right><font size="1">17.4&nbsp;</font></p>
  </td>
  <td width=19 valign=top>

  </td>
  <td width=76 valign=top>
  <p align=right><font size="1">0.3&nbsp;</font></p>
  </td>
 </tr>
 <tr>
  <td width=239 valign=top>

  </td>
  <td width=19 valign=top>

  </td>
  <td width=76 valign=top>
  <div align=right>
  <hr size=1 width="90%" noshade color=gray align=right>
  </div>
  </td>
  <td width=19 valign=top>

  </td>
  <td width=76 valign=top>
  <div align=right>
  <hr size=1 width="90%" noshade color=gray align=right>
  </div>
  </td>
  <td width=18 valign=top>

  </td>
  <td width=76 valign=top>
  <div align=right>
  <hr size=1 width="90%" noshade color=gray align=right>
  </div>
  </td>
  <td width=19 valign=top>

  </td>
  <td width=76 valign=top>
  <div align=right>
  <hr size=1 width="90%" noshade color=gray align=right>
  </div>
  </td>
 </tr>
 <tr>
  <td width=239 valign=top>
  <p><font size="1">Total equities</font></p>
  </td>
  <td width=19 valign=top>

  </td>
  <td width=76 valign=top>
  <p align=right><font size="1">10.6</font></p>
  </td>
  <td width=19 valign=top>

  </td>
  <td width=76 valign=top>
  <p align=right><font size="1">0.9</font></p>
  </td>
  <td width=18 valign=top>

  </td>
  <td width=76 valign=top>
  <p align=right><font size="1">18.9&nbsp;</font></p>
  </td>
  <td width=19 valign=top>

  </td>
  <td width=76 valign=top>
  <p align=right><font size="1">0.3&nbsp;</font></p>
  </td>
 </tr>
 <tr>
  <td width=239 valign=top>

  </td>
  <td width=19 valign=top>

  </td>
  <td width=76 valign=top>
  <div align=right>
  <hr size=1 width="90%" noshade color=gray align=right>
  </div>
  </td>
  <td width=19 valign=top>

  </td>
  <td width=76 valign=top>
  <div align=right>
  <hr size=1 width="90%" noshade color=gray align=right>
  </div>
  </td>
  <td width=18 valign=top>

  </td>
  <td width=76 valign=top>
  <div align=right>
  <hr size=1 width="90%" noshade color=gray align=right>
  </div>
  </td>
  <td width=19 valign=top>

  </td>
  <td width=76 valign=top>
  <div align=right>
  <hr size=1 width="90%" noshade color=gray align=right>
  </div>
  </td>
 </tr>
 <tr>
  <td width=239 valign=top>
  <p><font size="1">Total</font></p>
  </td>
  <td width=19 valign=top>
  <p align="right"><font size="1">$</font></p>
  </td>
  <td width=76 valign=top>
  <p align=right><font size="1">325.4</font></p>
  </td>
  <td width=19 valign=top>

  </td>
  <td width=76 valign=top>
  <p align=right><font size="1">3.7</font></p>
  </td>
  <td width=18 valign=top>

  </td>
  <td width=76 valign=top>
  <p align=right><font size="1">224.9&nbsp;</font></p>
  </td>
  <td width=19 valign=top>

  </td>
  <td width=76 valign=top>
  <p align=right><font size="1">4.0&nbsp;</font></p>
  </td>
 </tr>
 <tr>
  <td width=239 valign=top>

  </td>
  <td width=19 valign=top>

  </td>
  <td width=76 valign=top align="right">
  <p align=right>========</p>
  </td>
  <td width=19 valign=top align="right">

  </td>
  <td width=76 valign=top align="right">
  ========</td>
  <td width=18 valign=top align="right">

  </td>
  <td width=76 valign=top align="right">
  ========</td>
  <td width=19 valign=top align="right">

  </td>
  <td width=76 valign=top align="right">
  ========</td>
 </tr>
</table>

<p align="center" style="margin-top: 0; margin-bottom: 0"><font size="2">26<br>
</font>
<hr color="#000080"><P STYLE="page-break-after: always"></P>
<p style="margin-top: 0; margin-bottom: 0"><font size="2"><br clear=all>
<br>
At September 30, 2004, the Company had four debt securities in an unrealized
loss position for more than 12 months, with a fair value of $16.0 million and
an unrealized loss of $0.2 million compared to one debt security at December
31, 2003 with a fair value of $5.5 million and an unrealized loss of $0.1
million.&nbsp; The increase in the number of
securities with unrealized losses was mainly due to changes in the interest
rate environment. As interest rates rise, the market value of debt securities
with fixed interest rates falls. At present, the Company believes these
declines to be temporary.<br>
<br>
At September 30, 2004, there were no equity securities that have been in an
unrealized loss position for more than 12 months.&nbsp; At December 31, 2003, there were two equity
securities in an unrealized loss position for more than 12 months with a fair
value of $17.4 million and an unrealized loss of $0.3 million, which have both
moved into an unrealized gain position as of September 30, 2004.&nbsp; Both of these securities had fair values not
less than 98% of cost, and these declines were deemed to be temporary.<br>
<br>
The following table presents information regarding our available-for-sale debt
securities that were in an unrealized loss position at September 30, 2004 by
maturity. Expected maturities may differ from contractual maturities because
issuers may have the right to call or prepay obligations with or without call
or prepayment penalties.</font></p>
</p>

<table border=0 cellspacing=0 cellpadding=0>
 <tr>
  <td width=464 colspan=5 valign=top>
  <div align=center><b>
  <hr size=1 width="100%" noshade color=black align=center>
  </b></div>
  </td>
 </tr>
 <tr>
  <td width=283 valign=top>
  <p><b><font size="1">Contractual Maturities:</font></b></p>
  </td>
  <td width=21 valign=top>
  <p align=center><font size="1">&nbsp;</font></p>
  </td>
  <td width=71 valign=top>
  <p align=center><b><font size="1">Amortized</font></b></p>
  </td>
  <td width=17 valign=top>
  <p align=center><b><font size="1">&nbsp;</font></b></p>
  </td>
  <td width=72 valign=top>
  <p align=center><b><font size="1">Fair</font></b></p>
  </td>
 </tr>
 <tr>
  <td width=283 valign=top>
  <p><font size="1">(in millions)</font></p>
  </td>
  <td width=21 valign=top>
  <p align=center><font size="1">&nbsp;</font></p>
  </td>
  <td width=71 valign=top>
  <p align=center><b><font size="1">Cost</font></b></p>
  </td>
  <td width=17 valign=top>
  <p align=center><b><font size="1">&nbsp;</font></b></p>
  </td>
  <td width=72 valign=top>
  <p align=center><b><font size="1">Value</font></b></p>
  </td>
 </tr>
 <tr>
  <td width=464 colspan=5 valign=top>
  <div align=center><b>
  <hr size=1 width="100%" noshade color=black align=center>
  </b></div>
  </td>
 </tr>
 <tr>
  <td width=283 valign=top>
  <p><font size="1">One year or less</font></p>
  </td>
  <td width=21 valign=top>
  <p align="right"><font size="1">$</font></p>
  </td>
  <td width=71 valign=top>
  <p align=right><font size="1">6.5</font></p>
  </td>
  <td width=17 valign=top>

  </td>
  <td width=72 valign=top>
  <p align=right><font size="1">6.4</font></p>
  </td>
 </tr>
 <tr>
  <td width=283 valign=top>
  <p><font size="1">Due after one year through
  five years</font></p>
  </td>
  <td width=21 valign=top>

  </td>
  <td width=71 valign=top>
  <p align=right><font size="1">156.4</font></p>
  </td>
  <td width=17 valign=top>

  </td>
  <td width=72 valign=top>
  <p align=right><font size="1">155.2</font></p>
  </td>
 </tr>
 <tr>
  <td width=283 valign=top>
  <p><font size="1">Due after five years through
  ten years</font></p>
  </td>
  <td width=21 valign=top>

  </td>
  <td width=71 valign=top>
  <p align=right><font size="1">146.4</font></p>
  </td>
  <td width=17 valign=top>

  </td>
  <td width=72 valign=top>
  <p align=right><font size="1">144.9</font></p>
  </td>
 </tr>
 <tr>
  <td width=283 valign=top>
  <p><font size="1">Due after ten years through
  fifteen years</font></p>
  </td>
  <td width=21 valign=top>

  </td>
  <td width=71 valign=top>
  <p align=right><font size="1">8.3</font></p>
  </td>
  <td width=17 valign=top>

  </td>
  <td width=72 valign=top>
  <p align=right><font size="1">8.3</font></p>
  </td>
 </tr>
 <tr>
  <td width=283 valign=top>

  </td>
  <td width=21 valign=top>

  </td>
  <td width=71 valign=top>
  <div align=right>
  <hr size=1 width="90%" noshade color=gray align=right>
  </div>
  </td>
  <td width=17 valign=top>

  </td>
  <td width=72 valign=top>
  <div align=right>
  <hr size=1 width="90%" noshade color=gray align=right>
  </div>
  </td>
 </tr>
 <tr>
  <td width=283 valign=top>
  <p><font size="1">Total</font></p>
  </td>
  <td width=21 valign=top>
  <p align="right"><font size="1">$</font></p>
  </td>
  <td width=71 valign=top>
  <p align=right><font size="1">317.6</font></p>
  </td>
  <td width=17 valign=top>

  </td>
  <td width=72 valign=top>
  <p align=right><font size="1">314.8</font></p>
  </td>
 </tr>
 <tr>
  <td width=283 valign=top>

  </td>
  <td width=21 valign=top>

  </td>
  <td width=71 valign=top>
  <p align=right>========</p>
  </td>
  <td width=17 valign=top>

  </td>
  <td width=72 valign=top>
  <p align=right>========</p>
  </td>
 </tr>
</table>



<p style="margin-top: 0; margin-bottom: 0">&nbsp;</p>
<p style="margin-top: 0; margin-bottom: 0"><b><i><font size="2">Diversified
Insurance Services Segment</font></i></b></p>

<table border=0 cellspacing=0 cellpadding=0>
 <tr>
  <td width=586 colspan=9 valign=top>
  <div align=center><b>
  <hr size=1 width="100%" noshade color=black align=center>
  </b></div>
  </td>
 </tr>
 <tr>
  <td width=240 valign=top>

  </td>
  <td width=173 colspan=4 valign=top>
  <p align=center><b><font size="1">Unaudited,</font></b></p>
  </td>
  <td width=173 colspan=4 valign=top>
  <p align=center><b><font size="1">Unaudited,</font></b></p>
  </td>
 </tr>
 <tr>
  <td width=240 valign=top>

  </td>
  <td width=173 colspan=4 valign=top>
  <p align=center><b><font size="1">Quarter ended</font></b></p>
  </td>
  <td width=173 colspan=4 valign=top>
  <p align=center><b><font size="1">Nine months ended</font></b></p>
  </td>
 </tr>
 <tr>
  <td width=240 valign=top>

  </td>
  <td width=173 colspan=4 valign=top>
  <p align=center><b><font size="1">September 30,</font></b></p>
  </td>
  <td width=173 colspan=4 valign=top>
  <p align=center><b><font size="1">September 30,</font></b></p>
  </td>
 </tr>
 <tr>
  <td width=240 valign=top>
  <p><font size="1">($ in thousands)</font></p>
  </td>
  <td width=19 valign=top>

  </td>
  <td width=67 valign=top>
  <p align=center><b><font size="1">2004</font></b></p>
  </td>
  <td width=19 valign=top>
  <p align=center><b><font size="1">&nbsp;</font></b></p>
  </td>
  <td width=67 valign=top>
  <p align=center><b><font size="1">2003</font></b></p>
  </td>
  <td width=19 valign=top>

  </td>
  <td width=67 valign=top>
  <p align=center><b><font size="1">2004</font></b></p>
  </td>
  <td width=19 valign=top>
  <p align=center><b><font size="1">&nbsp;</font></b></p>
  </td>
  <td width=67 valign=top>
  <p align=center><b><font size="1">2003</font></b></p>
  </td>
 </tr>
 <tr>
  <td width=586 colspan=9 valign=top>
  <div align=center><b>
  <hr size=1 width="100%" noshade color=black align=center>
  </b></div>
  </td>
 </tr>
 <tr height=0>
  <td width=240></td>
  <td width=19></td>
  <td width=67></td>
  <td width=19></td>
  <td width=67></td>
  <td width=19></td>
  <td width=67></td>
  <td width=19></td>
  <td width=67></td>
 </tr>
</table>



<table border=0 cellspacing=0 cellpadding=0>
 <tr>
  <td width=240 valign=top>
  <p><b><font size="1">Human resource
  administration outsourcing</font></b></p>
  </td>
  <td width=19 valign=top>

  </td>
  <td width=67 valign=top>

  </td>
  <td width=19 valign=top>

  </td>
  <td width=67 valign=top>

  </td>
  <td width=19 valign=top>

  </td>
  <td width=67 valign=top>

  </td>
  <td width=19 valign=top>

  </td>
  <td width=67 valign=top>

  </td>
 </tr>
 <tr>
  <td width=240 valign=top>
  <p><font size="1">Net revenue</font></p>
  </td>
  <td width=19 valign=top>
  <p align="right"><font size="1">$</font></p>
  </td>
  <td width=67 valign=top>
  <p align=right><font size="1">13,448&nbsp;</font></p>
  </td>
  <td width=19 valign=top>

  </td>
  <td width=67 valign=top>
  <p align=right><font size="1">11,137&nbsp;</font></p>
  </td>
  <td width=19 valign=top>
  <p align="right"><font size="1">$</font></p>
  </td>
  <td width=67 valign=top>
  <p align=right><font size="1">39,809&nbsp;</font></p>
  </td>
  <td width=19 valign=top>

  </td>
  <td width=67 valign=top>
  <p align=right><font size="1">32,453&nbsp;</font></p>
  </td>
 </tr>
 <tr>
  <td width=240 valign=top>
  <p><font size="1">Pre-tax profit (loss) </font> </p>
  </td>
  <td width=19 valign=top>

  </td>
  <td width=67 valign=top>
  <p align=right><font size="1">624&nbsp;</font></p>
  </td>
  <td width=19 valign=top>

  </td>
  <td width=67 valign=top>
  <p align=right><font size="1">(520)</font></p>
  </td>
  <td width=19 valign=top>

  </td>
  <td width=67 valign=top>
  <p align=right><font size="1">1,335&nbsp;</font></p>
  </td>
  <td width=19 valign=top>

  </td>
  <td width=67 valign=top>
  <p align=right><font size="1">(408)</font></p>
  </td>
 </tr>
 <tr>
  <td width=240 valign=top>
  <p><b><font size="1">Flood Insurance </font> </b></p>
  </td>
  <td width=19 valign=top>

  </td>
  <td width=67 valign=top>

  </td>
  <td width=19 valign=top>

  </td>
  <td width=67 valign=top>

  </td>
  <td width=19 valign=top>

  </td>
  <td width=67 valign=top>

  </td>
  <td width=19 valign=top>

  </td>
  <td width=67 valign=top>

  </td>
 </tr>
 <tr>
  <td width=240 valign=top>
  <p><font size="1">Net revenue</font></p>
  </td>
  <td width=19 valign=top>

  </td>
  <td width=67 valign=top>
  <p align=right><font size="1">8,992&nbsp;</font></p>
  </td>
  <td width=19 valign=top>

  </td>
  <td width=67 valign=top>
  <p align=right><font size="1">7,386&nbsp;</font></p>
  </td>
  <td width=19 valign=top>

  </td>
  <td width=67 valign=top>
  <p align=right><font size="1">21,952&nbsp;</font></p>
  </td>
  <td width=19 valign=top>

  </td>
  <td width=67 valign=top>
  <p align=right><font size="1">17,917&nbsp;</font></p>
  </td>
 </tr>
 <tr>
  <td width=240 valign=top>
  <p><font size="1">Pre-tax profit </font> </p>
  </td>
  <td width=19 valign=top>

  </td>
  <td width=67 valign=top>
  <p align=right><font size="1">3,134&nbsp;</font></p>
  </td>
  <td width=19 valign=top>

  </td>
  <td width=67 valign=top>
  <p align=right><font size="1">2,400&nbsp;</font></p>
  </td>
  <td width=19 valign=top>

  </td>
  <td width=67 valign=top>
  <p align=right><font size="1">6,242&nbsp;</font></p>
  </td>
  <td width=19 valign=top>

  </td>
  <td width=67 valign=top>
  <p align=right><font size="1">4,590&nbsp;</font></p>
  </td>
 </tr>
 <tr>
  <td width=240 valign=top>
  <p><b><font size="1">Managed Care</font></b></p>
  </td>
  <td width=19 valign=top>

  </td>
  <td width=67 valign=top>

  </td>
  <td width=19 valign=top>

  </td>
  <td width=67 valign=top>

  </td>
  <td width=19 valign=top>

  </td>
  <td width=67 valign=top>

  </td>
  <td width=19 valign=top>

  </td>
  <td width=67 valign=top>
  <p align=right><b><font size="1">&nbsp;</font></b></p>
  </td>
 </tr>
 <tr>
  <td width=240 valign=top>
  <p><font size="1">Net
  revenue</font></p>
  </td>
  <td width=19 valign=top>

  </td>
  <td width=67 valign=top>
  <p align=right><font size="1">4,536&nbsp;</font></p>
  </td>
  <td width=19 valign=top>

  </td>
  <td width=67 valign=top>
  <p align=right><font size="1">5,375&nbsp;</font></p>
  </td>
  <td width=19 valign=top>

  </td>
  <td width=67 valign=top>
  <p align=right><font size="1">14,613&nbsp;</font></p>
  </td>
  <td width=19 valign=top>

  </td>
  <td width=67 valign=top>
  <p align=right><font size="1">17,412&nbsp;</font></p>
  </td>
 </tr>
 <tr>
  <td width=240 valign=top>
  <p><font size="1">Pre-tax
  profit </font> </p>
  </td>
  <td width=19 valign=top>

  </td>
  <td width=67 valign=top>
  <p align=right><font size="1">758&nbsp;</font></p>
  </td>
  <td width=19 valign=top>

  </td>
  <td width=67 valign=top>
  <p align=right><font size="1">953&nbsp;</font></p>
  </td>
  <td width=19 valign=top>

  </td>
  <td width=67 valign=top>
  <p align=right><font size="1">2,186&nbsp;</font></p>
  </td>
  <td width=19 valign=top>

  </td>
  <td width=67 valign=top>
  <p align=right><font size="1">3,015&nbsp;</font></p>
  </td>
 </tr>
 <tr>
  <td width=240 valign=top>

  </td>
  <td width=19 valign=top>

  </td>
  <td width=67 valign=top>

  </td>
  <td width=19 valign=top>

  </td>
  <td width=67 valign=top>

  </td>
  <td width=19 valign=top>

  </td>
  <td width=67 valign=top>

  </td>
  <td width=19 valign=top>

  </td>
  <td width=67 valign=top>

  </td>
 </tr>
 <tr>
  <td width=240 valign=top>

  </td>
  <td width=19 valign=top>

  </td>
  <td width=67 valign=top>

  </td>
  <td width=19 valign=top>

  </td>
  <td width=67 valign=top>

  </td>
  <td width=19 valign=top>

  </td>
  <td width=67 valign=top>

  </td>
  <td width=19 valign=top>

  </td>
  <td width=67 valign=top>

  </td>
 </tr>
 <tr>
  <td width=240 valign=top>
  <p><b><font size="1">Other</font></b></p>
  </td>
  <td width=19 valign=top>
  <p><b><font size="1">&nbsp;</font></b></p>
  </td>
  <td width=67 valign=top>
  <p align=right><b><font size="1">&nbsp;</font></b></p>
  </td>
  <td width=19 valign=top>
  <p align=right><b><font size="1">&nbsp;</font></b></p>
  </td>
  <td width=67 valign=top>
  <p align=right><b><font size="1">&nbsp;</font></b></p>
  </td>
  <td width=19 valign=top>
  <p><b><font size="1">&nbsp;</font></b></p>
  </td>
  <td width=67 valign=top>
  <p align=right><b><font size="1">&nbsp;</font></b></p>
  </td>
  <td width=19 valign=top>
  <p align=right><b><font size="1">&nbsp;</font></b></p>
  </td>
  <td width=67 valign=top>
  <p align=right><b><font size="1">&nbsp;</font></b></p>
  </td>
 </tr>
 <tr>
  <td width=240 valign=top>
  <p><font size="1">Net revenue</font></p>
  </td>
  <td width=19 valign=top>

  </td>
  <td width=67 valign=top>
  <p align=right><font size="1">672&nbsp;</font></p>
  </td>
  <td width=19 valign=top>

  </td>
  <td width=67 valign=top>
  <p align=right><font size="1">555&nbsp;</font></p>
  </td>
  <td width=19 valign=top>

  </td>
  <td width=67 valign=top>
  <p align=right><font size="1">1,900&nbsp;</font></p>
  </td>
  <td width=19 valign=top>

  </td>
  <td width=67 valign=top>
  <p align=right><font size="1">1,490&nbsp;</font></p>
  </td>
 </tr>
 <tr>
  <td width=240 valign=top>
  <p><font size="1">Pre-tax profit </font> </p>
  </td>
  <td width=19 valign=top>

  </td>
  <td width=67 valign=top>
  <p align=right><font size="1">246&nbsp;</font></p>
  </td>
  <td width=19 valign=top>

  </td>
  <td width=67 valign=top>
  <p align=right><font size="1">28&nbsp;</font></p>
  </td>
  <td width=19 valign=top>

  </td>
  <td width=67 valign=top>
  <p align=right><font size="1">619&nbsp;</font></p>
  </td>
  <td width=19 valign=top>

  </td>
  <td width=67 valign=top>
  <p align=right><font size="1">210&nbsp;</font></p>
  </td>
 </tr>
 <tr>
  <td width=240 valign=top>
  <p><b><font size="1">Total</font></b></p>
  </td>
  <td width=19 valign=top>

  </td>
  <td width=67 valign=top>

  </td>
  <td width=19 valign=top>

  </td>
  <td width=67 valign=top>

  </td>
  <td width=19 valign=top>

  </td>
  <td width=67 valign=top>

  </td>
  <td width=19 valign=top>

  </td>
  <td width=67 valign=top>

  </td>
 </tr>
 <tr>
  <td width=240 valign=top>
  <p><font size="1">Net revenue</font></p>
  </td>
  <td width=19 valign=top>

  </td>
  <td width=67 valign=top>
  <p align=right><font size="1">27,648&nbsp;</font></p>
  </td>
  <td width=19 valign=top>

  </td>
  <td width=67 valign=top>
  <p align=right><font size="1">24,453&nbsp;</font></p>
  </td>
  <td width=19 valign=top>

  </td>
  <td width=67 valign=top>
  <p align=right><font size="1">78,274&nbsp;</font></p>
  </td>
  <td width=19 valign=top>

  </td>
  <td width=67 valign=top>
  <p align=right><font size="1">69,272&nbsp;</font></p>
  </td>
 </tr>
 <tr>
  <td width=240 valign=top>
  <p><font size="1">Pre-tax profit</font></p>
  </td>
  <td width=19 valign=top>

  </td>
  <td width=67 valign=top>
  <p align=right><font size="1">4,762&nbsp;</font></p>
  </td>
  <td width=19 valign=top>

  </td>
  <td width=67 valign=top>
  <p align=right><font size="1">2,861&nbsp;</font></p>
  </td>
  <td width=19 valign=top>

  </td>
  <td width=67 valign=top>
  <p align=right><font size="1">10,382&nbsp;</font></p>
  </td>
  <td width=19 valign=top>

  </td>
  <td width=67 valign=top>
  <p align=right><font size="1">7,407&nbsp;</font></p>
  </td>
 </tr>
 <tr>
  <td width=240 valign=top>
  <p><font size="1">Net income</font></p>
  </td>
  <td width=19 valign=top>

  </td>
  <td width=67 valign=top>
  <p align=right><font size="1">3,115&nbsp;</font></p>
  </td>
  <td width=19 valign=top>

  </td>
  <td width=67 valign=top>
  <p align=right><font size="1">1,892&nbsp;</font></p>
  </td>
  <td width=19 valign=top>

  </td>
  <td width=67 valign=top>
  <p align=right><font size="1">6,833&nbsp;</font></p>
  </td>
  <td width=19 valign=top>

  </td>
  <td width=67 valign=top>
  <p align=right><font size="1">4,972&nbsp;</font></p>
  </td>
 </tr>
 <tr>
  <td width=240 valign=top>
  <p><font size="1">Return on net revenue</font></p>
  </td>
  <td width=19 valign=top>

  </td>
  <td width=67 valign=top>
  <p align=right><font size="1">11.3&nbsp;</font></p>
  </td>
  <td width=19 valign=top>
  <p align=right><font size="1">%</font></p>
  </td>
  <td width=67 valign=top>
  <p align=right><font size="1">7.7&nbsp;</font></p>
  </td>
  <td width=19 valign=top>

  </td>
  <td width=67 valign=top>
  <p align=right><font size="1">8.7&nbsp;</font></p>
  </td>
  <td width=19 valign=top>
  <p align=right><font size="1">%</font></p>
  </td>
  <td width=67 valign=top>
  <p align=right><font size="1">7.2&nbsp;</font></p>
  </td>
 </tr>
</table>

<p style="margin-top: 0; margin-bottom: 0"><font size="2"><br>
The Diversified Insurance Services segment's operations generated $27.6 million
of net revenue and $3.1 million of net income for Third Quarter 2004 compared
to $24.5 million of net revenue and $1.9 million of net income for Third
Quarter 2003. These same businesses generated $78.3 million of net revenue and
$6.8 million of net income for Nine Months 2004 compared to $69.3 million of
net revenue and $5.0 million of net income for the same period in 2003.&nbsp; The segment generated a return on net revenue
of 11.3% for the Third Quarter 2004 and 8.7% for the Nine Months 2004, compared
to 7.7% for the Third Quarter 2003 and 7.2% for the Nine Months 2003.<br>
</font>
<p align="center" style="margin-top: 0; margin-bottom: 0"><font size="2">27<br>
</font>
<hr color="#000080"><P STYLE="page-break-after: always"></P>
<p style="margin-top: 0; margin-bottom: 0"><font size="2"><br clear=all>
<b>Human Resource Administration Outsourcing (HR Outsourcing)<br>
</b>Net revenue for Selective HR Solutions Inc., provider of our human resource
administration outsourcing product, was $13.4 million for Third Quarter 2004,
up 21% compared with $11.1 million in Third Quarter 2003.&nbsp; Net revenue for Nine Months 2004 increased
23% to $39.8 million compared to $32.5 million for Nine Months 2003. Pre-tax
profit was $0.6 million for Third Quarter 2004, compared to a pre-tax loss of
$0.5 million for Third Quarter 2003. For Nine Months 2004, pre-tax profit was
$1.3 million compared to a pre-tax loss of $0.4 million for Nine Months 2003.
For Nine Months 2004, we added 5,463 new worksite lives, which increased our
total worksite lives to 22,759 and led to better economies of scale. The
improved results are also reflective of price increases that have been
implemented over the past couple of years, which have led to an increase in our
HR Outsourcing's average administration fee per worksite employee to $584 for
the Nine Months 2004 compared to $550 for the same period a year ago.<br>
<br>
<b>Flood Insurance<br>
</b>Premium growth of 18% for Third Quarter 2004 and 20% for Nine Months 2004
compared to the same periods a year ago were driven by enhanced marketing
efforts with the personal lines underwriting operation. These efforts resulted
in new business of $6.4 million for Third Quarter 2004 compared to $5.6 million
for the comparable period last year, and $15.6 million for Nine Months 2004
compared to $14.6 million for the same period last year.&nbsp; This growth brought our total in-force
premium served to approximately $76 million as of September 30, 2004 compared
to approximately $63 million as of September 30, 2003. Premium growth has
resulted in increased servicing fees of $7.9 million for Third Quarter 2004
compared to $6.5 million for Third Quarter 2003 and $20.6 million for Nine
Months 2004 compared to $16.9 million for Nine Months 2003.&nbsp; Claim administration servicing fees, which
are included in net revenues, amounted to $1.1 million for servicing
approximately 2,200 claims in Third Quarter 2004 and $1.4 million for servicing
approximately 3,100 claims in Nine Months 2004 compared to $0.9 million for
servicing approximately 1,600 claims in Third Quarter 2003 and $1.0 million for
servicing approximately 1,800 claims in Nine Months 2003. The increase in claim
administration servicing fees is primarily attributable to an active hurricane
season and its impact on the east coast of the United States. Pre-tax profit
increased to $3.1 million for Third Quarter 2004 and $6.2 million for Nine Months 2004 due
to the aforementioned growth in servicing fees and claim administration fees
for Third Quarter 2004 compared to $2.4 million for Third Quarter 2003 and $4.6
million for Nine Months 2003.<br>
<br>
<b>Managed Care<br>
</b>Net revenues decreased 16%, to $4.5 million, for Third Quarter 2004
compared to $5.4 million for Third Quarter 2003, and 16%, to $14.6 million, for
Nine Months 2004 compared to $17.4 million for Nine Months 2003.&nbsp; This reduction reflected the loss of business
that occurred primarily as a result of industry consolidation, the elimination
of unprofitable accounts, and the loss of one large client to a competitor.
Decreased net revenues, partially offset by expense reductions that included a
10% reduction in the managed care workforce, resulted in a corresponding
decrease in pre-tax profit by 20% to $0.8 million for Third Quarter 2004
compared to $1.0 million for Third Quarter 2003, and 27% to $2.2 million for
Nine Months 2004 compared to $3.0 million for Nine Months 2003. <br>
<br>
<b><i>Federal Income
Taxes<br></i></b>Total federal income tax expense increased $3.7 million for
Third Quarter 2004, to $7.9 million, and $16.3 million for Nine Months 2004, to
$29.1 million, compared with the same periods last year.&nbsp; Our effective tax rate differs from the
federal corporate rate of 35% primarily as a result of tax-advantaged
investment income.&nbsp; The effective tax
rate for the Third Quarter 2004 was 22%, flat compared with the same period
last year and 26% for Nine Months 2004, compared with 23% for the same period
last year.&nbsp; During Third Quarter 2004,
the Company received a favorable ruling
from the Internal Revenue Service (IRS) regarding our ability to take interest
deductions on debt at the holding company, while also holding municipal bonds
at the insurance subsidiary level. This favorable ruling allowed us to reverse
our previously accrued $2.3 million in tax expense, which was slightly offset
by an increase in tax expense in Third Quarter 2004 of $0.5 million for
potential tax exposure items. The result of this activity was that the
effective tax rate remained flat for the Third Quarter 2004 compared to the
same period a year ago even though the Company experienced marked improvement
in its underwriting results. Although the IRS ruling in the Third Quarter 2004
also favorably impacted the effective tax rate for the Nine Months 2004, the
improved underwriting results for the year more than offset this favorable
impact as they resulted in an increase in the effective tax rate for Nine
Months 2004 compared to the same period a year ago.<br>
&nbsp;</font></p><p align="center" style="margin-top: 0; margin-bottom: 0">
<font size="2">28<br>
</font>
<hr color="#000080"><P STYLE="page-break-after: always"></P>
<p style="margin-top: 0; margin-bottom: 0"><font size="2"><br clear=all>
<b><i>Financial
Condition, Liquidity and Capital Resources<br></i></b>Selective Insurance Group, Inc. (Parent) is an insurance holding
company whose principal assets are investments in its subsidiaries. The
Parent's primary means of meeting its liquidity requirements is through
dividends from these subsidiaries. The payment of dividends from the Insurance
Subsidiaries is governed by state regulatory requirements, and these dividends
are generally payable only from earned surplus as reported in our statutory
Annual Statements as of the preceding December 31. Based upon the 2003 combined
statutory financial statements, the Insurance Subsidiaries are permitted to pay
the Parent in 2004 ordinary dividends in the aggregate amount of approximately
$64.0 million.&nbsp; Through the Nine Months
2004 and the Nine Months 2003, the Insurance Subsidiaries provided $15.0
million in ordinary dividends of which $5.0 million was provided in Third
Quarter 2004 and in Third Quarter 2003. There can be no assurance that the
Insurance Subsidiaries will be able to pay additional dividends to the Parent
in the future in an amount sufficient to enable the Parent to meet its
liquidity requirements.&nbsp;&nbsp; For additional
information regarding regulatory limitations on the payment of dividends by the
insurance subsidiaries to the Parent and amounts available for the payment of
such dividends, refer to Item 8. &quot;Financial Statements and Supplementary Data&quot;,
Note 8 to the consolidated financial statements in our Annual Report on Form
10-K for the year ended December 31, 2003.&nbsp;
The payment of dividends from
Diversified Insurance Services subsidiaries are restricted only by the
available operating cash flows of those subsidiaries. Growth in the Diversified
Insurance Services segment has increased consolidated cash flows from
operations to $7.3 million for Nine Months 2004, compared with $5.8 million for
Nine Months 2003 and resulted in dividends to the Parent of $8.4 million for
Nine Months 2004 of which $1.3 million was provided in the Third Quarter 2004
compared to $7.9 million for Nine Months 2003 of which $2.0 million was
provided in the Third Quarter 2003.<br>
<br>
The Parent also generates cash from the sale of its common stock under various
stock plans, the dividend reinvestment program, and from investment income, all
of which totaled $1.7 million in the Third Quarter 2004 and $7.8 million for
the Nine Months 2004, further reducing the Parent's cash requirements. The
Parent also currently has available revolving lines of credit amounting to
$45.0 million, under which no balances were outstanding as of either September
30, 2004 or December 31, 2003 as well as $24.4 million remaining in an
irrevocable trust to provide for the repayment of notes that have maturities
over the next 15 months. <br>
<br>
The Parent's cash requirements were&nbsp;
$31.4 million in Third Quarter 2004 and $53.7 million for the Nine
Months 2004. These cash requirements include principal and interest payments
on the Senior Convertible Notes and various notes payable, dividends to
stockholders and general operating expenses.&nbsp;
The Company has contractual principal obligations pursuant to various
notes payable of $24.0 million in 2004, all of which have been paid as of
September 30, 2004.&nbsp; The 2002 convertible
note issuance has a contingent conversion feature that permits the holders of
the notes to convert the notes when the price of the Company's common stock has
maintained a 20% premium to the conversion price of $29.29, or $35.15, for 20
of 30 consecutive trading days ending on the last trading day of the previous
calendar quarter.&nbsp; On October 26, 2004,
in accordance with the available provisions of the Indenture, the Company's
Board of Directors voted to permanently waive the stock price contingency provision.&nbsp; As a result, the Senior Convertible Notes
will continue to be convertible into shares of common stock until their
maturity, although no such conversions had occurred as of the end of Third
Quarter 2004.&nbsp; As a result of the notes
being convertible, 3.9 million shares of common stock were added to our diluted
earnings per share calculation in Third Quarter 2004 and Nine Months 2004. See
Note 8 to our unaudited interim consolidated financial statements for more information
on our senior convertible notes. <br>
<br>
Dividends to stockholders are declared and paid at the discretion of the Board
of Directors based upon the Company's operating results, financial condition,
capital requirements, contractual restrictions and other relevant factors.&nbsp; The Parent has paid regular quarterly cash
dividends to its stockholders for 75 consecutive years.&nbsp; On October 26, 2004, the Board of Directors
approved a 12% increase in the cash dividend on the Company's common stock, to
$0.19 per share, payable on December 1, 2004 to stockholders of record on
November 15, 2004.&nbsp;&nbsp; The Parent currently
plans to continue to pay quarterly cash dividends. For information regarding
restrictions on the Parent's ability to pay dividends to its stockholders,
refer to Item 8. &quot;Financial Statements and Supplementary Data&quot;, Note 7(b) to
the consolidated financial statements in our Annual Report on Form 10-K for the
year ended December 31, 2003.<br>
<br>
On November 4, 2003, the Board of Directors authorized a 2.5 million-share
stock repurchase program scheduled to expire on November 30, 2005. The Company
acquired approximately 141,000 shares for $4.9 million under that program
during the Third Quarter and Nine Months 2004 leaving a remaining authorization
of 2.4 million shares.<br>
</font></p>
<p align="center" style="margin-top: 0; margin-bottom: 0"><font size="2">29<br>
</font></p>
<hr color="#000080"><P STYLE="page-break-after: always"></P>
<p style="margin-top: 0; margin-bottom: 0"><font size="2"><br clear=all>
In addition to the cash requirements of the Parent, our operating obligations
and cash outflows include: claim settlements; commissions; labor costs; premium
taxes; general and administrative expenses; investment purchases; and capital
expenditures. The Insurance Subsidiaries satisfy their obligations and cash
outflows through premium collections, interest and dividend income and
maturities or calls of its debt securities.&nbsp;
Generally, the Insurance Subsidiaries do not match securities held to
liabilities as part of ongoing asset/liability duration management. The
duration of the asset portfolio of 4.3 years is longer than its liabilities of
approximately 2.5 years. The current duration of our debt securities, which is
within the Company's historical range and a component of our investment
philosophy, utilizes a laddered maturity structure so that liquidation of
available-for-sale debt securities should not be necessary in the ordinary
course of business.&nbsp; Liquidity is always
a consideration when buying or selling securities, but because of the high
quality of our investment portfolio, the securities sold have not diminished
the overall liquidity of our portfolio. Since cash inflow from premiums is
received in advance of cash outflow required to settle claims, we accumulate
funds that we invest. At September 30, 2004, we had $2.7 billion in investments
compared with $2.4 billion at December 31, 2003.&nbsp;&nbsp; Additionally, the Insurance Subsidiaries
have additional investment commitments for their limited partnership
investments of up to $39.1 million; however, there is no certainty that any
additional investment will be required.<br>
<br>
Net Cash provided by operating activities amounted to $140.2 million in Third
Quarter 2004 and $266.2 million in Nine Months 2004 compared to $107.2 million
in Third Quarter 2003 and $207.5 million in Nine Months 2003. Included in net
cash provided by operating activities were paid loss and loss expenses of
$153.0 million in Third Quarter 2004 and $479.9 million in Nine Months 2004 compared
to $154.5 million in Third Quarter 2003 and $472.3 million in Nine Months 2003.
The increase in net cash from provided by operating activities in 2004 is a
result of: (i) price increases, premium growth, and lower loss and loss expense
ratios; and (ii) increased investment income from a larger investment
portfolio.<br>
<br>
Total assets increased by 13%, or $430.7 million, at September 30, 2004
compared to December 31, 2003.&nbsp; Invested
assets increased by $292.3 million due to: (i) net purchases in the amount of
$285.3 million primarily funded by $266.2 million of operating cash flow as
well as an increase in net securities payable of $56.9 million and (ii) an
increase in unrealized gains of $7.1 million.&nbsp;
Increased premium written drove increases in premium receivables of
$74.0 million and deferred policy acquisition costs of $22.9 million.&nbsp; Reinsurance recoverable on unpaid losses and
loss expenses increased $28.9 million due to a $14.5 million increase in Flood
losses, which are ceded to the Federal Government's National Flood Insurance
Program, and a $14.0 million increase in casualty losses. Current federal tax
recoverable increased $10.8 million primarily due to a combination of 2003 and
2004 tax payments offset by tax expense associated with improved profitability.
<br>
<br>
Total liabilities increased 13%, or $346.3 million, at September 30, 2004
compared to December 31, 2003.&nbsp; Loss and
loss expense reserves increased $192.8 million as a result of increased
exposure on new and existing policies as well as normal loss trends, which
include inflation and rising medical costs. Increased premium writings are
primarily responsible for the increase in unearned premium reserves of $110.4
million.&nbsp; Notes payable decreased $24.0
million due to scheduled payments made in May and August 2004. Deferred federal
income tax liability increased $5.8 million from $12.7 million at December 31,
2003 to $18.4 million at September 30, 2004 primarily due to increased
unrealized gains in our investment portfolio; the deferred impact of improved
underwriting results from the insurance operations; and tax depreciation and
amortization.&nbsp; Other liabilities
increased $60.8 million compared to December 31, 2004 primarily due to an
increase in securities payable of&nbsp; $57.7
million for investment trades that had not yet been settled in cash as of
September 30, 2004.<br>
<br>
Total stockholders' equity increased 11%, or $84.4 million at September 30,
2004 compared to December 31, 2003. Additional paid in capital increased $22.1
million primarily due to activity involving various stock award and purchase
plans. Retained earnings increased $70.7 million due to net income of $84.7
million offset by shareholder dividends of $14.0 million. After-tax unrealized
gains on our investment portfolio increased as of September 30, 2004 compared
to December 31, 2003 accounting for the $4.6 million increase in accumulated
other comprehensive income.&nbsp; As an offset
to stockholders' equity, unearned stock compensation and notes receivable from
stock sales increased $6.2 million, or 66%, compared to December 31, 2003 due
to the issuance of 2004 restricted stock grants. Treasury stock increased $8.1
million due to the repurchase of approximately 141,000 shares for $4.9 million
under the Company's common stock repurchase program and the repurchase of
89,000 shares for $3.2 million in relation to various stock plan awards.<br>
<br>
</font></p>
<p align="center" style="margin-top: 0; margin-bottom: 0"><font size="2">30</font><a name="_Toc58916195"></p>
<hr color="#000080"><P STYLE="page-break-after: always"></P>
<p style="margin-top: 0; margin-bottom: 0"><font size="2"><br clear=all>
</font>
</a><font size="2"><b><i>Critical
Accounting Policies and Estimates<br></i></b>We have identified the policies below as critical to our
business operations and the understanding of our results of operations. For a
detailed discussion of the application of these and other accounting policies,
see Item 8. &quot;Financial Statements and Supplementary Data,&quot; Note 2 to our
consolidated financial statements in our Annual Report on Form 10-K for the
year ended December 31, 2003.&nbsp; Our
preparation of the unaudited interim consolidated financial statements requires
us to make estimates and assumptions that affect the reported amount of assets
and liabilities, disclosure of contingent assets and liabilities at the date of
our financial statements, and the reported amounts of revenue and expenses
during the reporting period. There can be no assurance that actual results will
not differ from those estimates.<br>
<br>
<b>Reserves for Losses and Loss Expenses<br>
</b>Significant periods of time can elapse between the occurrence of an insured
loss, the reporting of the loss to the insurer and the insurer's payment of
that loss.&nbsp; To recognize liabilities for
unpaid losses and loss expenses, insurers establish reserves as balance sheet
liabilities representing estimates of amounts needed to pay reported and
unreported net losses and loss expenses. <br>
<br>When a claim is reported to an
insurance subsidiary, its claims personnel establish a &quot;case reserve&quot; for the
estimated amount of the ultimate payment.&nbsp;
The amount of the reserve is primarily based upon a case&#8209;by&#8209;case
evaluation of the type of claim involved, the circumstances surrounding each
claim and the policy provisions relating to the type of losses.&nbsp; The estimate reflects the informed judgment
of such personnel based on general insurance reserving practices, as well as
the experience and knowledge of the claims person.&nbsp; Until the claim is resolved, these estimates
are revised as deemed necessary by the responsible claims personnel based on subsequent
developments and periodic reviews of the cases.<br>
<br>In accordance with industry practice, we maintain, in addition to case
reserves, estimates of reserves for losses and loss expenses incurred but not
yet reported (IBNR).&nbsp; We project our
estimate of ultimate losses and loss expenses on a quarterly basis.&nbsp; The difference between: (i) projected
ultimate loss and loss expense reserves and (ii) case loss reserves and loss
expense reserves thereon are carried as the IBNR reserve.&nbsp; By using both estimates of reported claims
and IBNR determined using generally accepted actuarial reserving techniques, we
estimate the ultimate net reserve for losses and loss expenses.&nbsp; Reserves are reviewed by both internal and
independent actuaries for adequacy on a periodic basis.&nbsp; Beginning in 2003, we began using independent
actuaries to certify the adequacy of our reserves. When reviewing reserves, we
analyze historical data and estimate the impact of various factors such as: (i)
per claim information; (ii) Company and industry historical loss experience;
(iii) legislative enactments, judicial decisions, legal developments in the
imposition of damages, and changes in political attitudes; and (iv) trends in
general economic conditions, including the effects of inflation.&nbsp; This process assumes that past experience,
adjusted for the effects of current developments and anticipated trends, is an
appropriate basis for predicting future events.&nbsp;
There is no precise method, however, for subsequently evaluating the
impact of any specific factor on the adequacy of reserves because the eventual
deficiency or redundancy is affected by many factors.<br>
</font></p>
<p align="center" style="margin-top: 0; margin-bottom: 0"><font size="2">31<br>
</font></p>
<hr color="#000080"><P STYLE="page-break-after: always"></P>
<p style="margin-top: 0; margin-bottom: 0"><font size="2"><br clear=all>
The following tables provide case and IBNR reserves for losses, reserves for
loss expenses, and reinsurance recoverable on unpaid losses and loss expenses
as of September 30, 2004 and December 31, 2003:</font></p>
<p style="margin-top: 0; margin-bottom: 0"></p>

<table border=0 cellspacing=0 cellpadding=0 width=648>
 <tr>
  <td width=648 colspan=13 valign=bottom>
  <div align=center><b>
  <hr size=1 width="100%" noshade color=black align=center>
  </b></div>
  </td>
 </tr>
 <tr>
  <td width=114 valign=bottom>
  <p align=center><i><font size="1">As of September 30, 2004</font></i></p>
  </td>
  <td width=16 valign=top>

  </td>
  <td width=82 valign=bottom>
  <p align=center><b><font size="1">&nbsp;</font></b></p>
  </td>
  <td width=19 valign=top>
  <p align=center><b><font size="1">&nbsp;</font></b></p>
  </td>
  <td width=72 valign=bottom>
  <p align=center><b><font size="1">&nbsp;</font></b></p>
  </td>
  <td width=19 valign=top>

  </td>
  <td width=67 valign=bottom>
  <p align=center><b><font size="1">&nbsp;</font></b></p>
  </td>
  <td width=17 valign=top>
  <p align=center><b><font size="1">&nbsp;</font></b></p>
  </td>
  <td width=70 valign=bottom>
  <p align=center><b><font size="1">&nbsp;</font></b></p>
  </td>
  <td width=17 valign=top>

  </td>
  <td width=70 valign=top>
  <p align=center><b><font size="1">Reinsurance</font></b></p>
  </td>
  <td width=17 valign=top>

  </td>
  <td width=68 valign=top>

  </td>
 </tr>
 <tr>
  <td width=114 valign=bottom>

  </td>
  <td width=16 valign=top>

  </td>
  <td width=259 colspan=5 valign=bottom>
  <p align=center><b><font size="1">Loss Reserves</font></b></p>
  </td>
  <td width=17 valign=top>
  <p align=center><b><font size="1">&nbsp;</font></b></p>
  </td>
  <td width=70 valign=bottom>

  </td>
  <td width=17 valign=top>

  </td>
  <td width=70 valign=top>
  <p align=center><b><font size="1">recoverable</font></b></p>
  </td>
  <td width=17 valign=top>

  </td>
  <td width=68 valign=top>

  </td>
 </tr>
 <tr>
  <td width=114 valign=bottom>

  </td>
  <td width=16 valign=top>

  </td>
  <td width=259 colspan=5 valign=bottom>
  <div align=center><b>
  <hr size=1 width="100%" noshade color=black align=center>
  </b></div>
  </td>
  <td width=17 valign=top>
  <p align=center><b><font size="1">&nbsp;</font></b></p>
  </td>
  <td width=70 valign=bottom>
  <p align=center><b><font size="1">&nbsp;</font></b></p>
  </td>
  <td width=17 valign=top>

  </td>
  <td width=70 valign=top>
  <p align=center><b><font size="1">on unpaid</font></b></p>
  </td>
  <td width=17 valign=top>

  </td>
  <td width=68 valign=top>

  </td>
 </tr>
 <tr>
  <td width=114 valign=bottom>

  </td>
  <td width=16 valign=top>

  </td>
  <td width=82 valign=bottom>
  <p align=center><b><font size="1">Case</font></b></p>
  </td>
  <td width=19 valign=top>
  <p align=center><b><font size="1">&nbsp;</font></b></p>
  </td>
  <td width=72 valign=bottom>
  <p align=center><b><font size="1">IBNR</font></b></p>
  </td>
  <td width=19 valign=top>

  </td>
  <td width=67 valign=bottom>
  <p align=center><b><font size="1">&nbsp;</font></b></p>
  </td>
  <td width=17 valign=top>
  <p align=center><b><font size="1">&nbsp;</font></b></p>
  </td>
  <td width=70 valign=bottom>
  <p align=center><b><font size="1">Loss expense</font></b></p>
  </td>
  <td width=17 valign=top>

  </td>
  <td width=70 valign=top>
  <p align=center><b><font size="1">losses and</font></b></p>
  </td>
  <td width=17 valign=top>

  </td>
  <td width=68 valign=top>

  </td>
 </tr>
 <tr>
  <td width=114 valign=bottom>
  <p><font size="1">($ in thousands)</font></p>
  </td>
  <td width=16 valign=top>

  </td>
  <td width=82 valign=bottom>
  <p align=center><b><font size="1">reserves</font></b></p>
  </td>
  <td width=19 valign=top>
  <p align=center><b><font size="1">&nbsp;</font></b></p>
  </td>
  <td width=72 valign=bottom>
  <p align=center><b><font size="1">reserves</font></b></p>
  </td>
  <td width=19 valign=top>

  </td>
  <td width=67 valign=bottom>
  <p align=center><b><font size="1">Total</font></b></p>
  </td>
  <td width=17 valign=top>
  <p align=center><b><font size="1">&nbsp;</font></b></p>
  </td>
  <td width=70 valign=bottom>
  <p align=center><b><font size="1">reserves</font></b></p>
  </td>
  <td width=17 valign=top>

  </td>
  <td width=70 valign=top>
  <p align=center><b><font size="1">loss expenses</font></b></p>
  </td>
  <td width=17 valign=top>

  </td>
  <td width=68 valign=top>
  <p align=center><b><font size="1">Net reserves</font></b></p>
  </td>
 </tr>
 <tr>
  <td width=648 colspan=13 valign=bottom>
  <div align=center><b>
  <hr size=1 width="100%" noshade color=black align=center>
  </b></div>
  </td>
 </tr>
</table>



<table border=0 cellspacing=0 cellpadding=0 width="649">
 <tr>
  <td width=114 valign=bottom>
  <p><font size="1">Commercial automobile</font></p>
  </td>
  <td width=16 valign=top>
  <p align=right><font size="1">$</font></p>
  </td>
  <td width=81 valign=bottom>
  <p align=right><font size="1">90,999&nbsp; </font> </p>
  </td>
  <td width=19 valign=top>
  <p align=right><b><font size="1">&nbsp;</font></b></p>
  </td>
  <td width=69 valign=bottom>
  <p align=right><font size="1">172,905&nbsp; </font> </p>
  </td>
  <td width=18 valign=top>

  </td>
  <td width=71 valign=bottom>
  <p align=right><font size="1">263,904&nbsp; </font> </p>
  </td>
  <td width=17 valign=top>
  <p align=right><font size="1">$</font></p>
  </td>
  <td width=70 valign=bottom>
  <p align=right><font size="1">28,757&nbsp; </font> </p>
  </td>
  <td width=17 valign=top>

  </td>
  <td width=70 valign=top>
  <p align=right><font size="1">5,955&nbsp; </font> </p>
  </td>
  <td width=17 valign=top>

  </td>
  <td width=70 valign=top>
  <p align=right><font size="1">286,706</font></p>
  </td>
 </tr>
 <tr>
  <td width=114 valign=bottom>
  <p><font size="1">Workers' compensation</font></p>
  </td>
  <td width=16 valign=top>

  </td>
  <td width=81 valign=bottom>
  <p align=right><font size="1">297,624&nbsp; </font> </p>
  </td>
  <td width=19 valign=top>
  <p align=right><b><font size="1">&nbsp;</font></b></p>
  </td>
  <td width=69 valign=bottom>
  <p align=right><font size="1">224,786&nbsp; </font> </p>
  </td>
  <td width=18 valign=top>

  </td>
  <td width=71 valign=bottom>
  <p align=right><font size="1">522,410&nbsp; </font> </p>
  </td>
  <td width=17 valign=top>

  </td>
  <td width=70 valign=bottom>
  <p align=right><font size="1">49,738&nbsp; </font> </p>
  </td>
  <td width=17 valign=top>

  </td>
  <td width=70 valign=top>
  <p align=right><font size="1">67,092&nbsp; </font> </p>
  </td>
  <td width=17 valign=top>

  </td>
  <td width=70 valign=top>
  <p align=right><font size="1">505,056</font></p>
  </td>
 </tr>
 <tr>
  <td width=114 valign=bottom>
  <p><font size="1">General liability</font></p>
  </td>
  <td width=16 valign=top>

  </td>
  <td width=81 valign=bottom>
  <p align=right><font size="1">138,906&nbsp; </font> </p>
  </td>
  <td width=19 valign=top>
  <p align=right><b><font size="1">&nbsp;</font></b></p>
  </td>
  <td width=69 valign=bottom>
  <p align=right><font size="1">276,724&nbsp; </font> </p>
  </td>
  <td width=18 valign=top>

  </td>
  <td width=71 valign=bottom>
  <p align=right><font size="1">415,630&nbsp; </font> </p>
  </td>
  <td width=17 valign=top>

  </td>
  <td width=70 valign=bottom>
  <p align=right><font size="1">82,683&nbsp; </font> </p>
  </td>
  <td width=17 valign=top>

  </td>
  <td width=70 valign=top>
  <p align=right><font size="1">25,897&nbsp; </font> </p>
  </td>
  <td width=17 valign=top>

  </td>
  <td width=70 valign=top>
  <p align=right><font size="1">472,416</font></p>
  </td>
 </tr>
 <tr>
  <td width=114 valign=bottom>
  <p><font size="1">Commercial property</font></p>
  </td>
  <td width=16 valign=top>

  </td>
  <td width=81 valign=bottom>
  <p align=right><font size="1">20,406&nbsp; </font> </p>
  </td>
  <td width=19 valign=top>
  <p align=right><b><font size="1">&nbsp;</font></b></p>
  </td>
  <td width=69 valign=bottom>
  <p align=right><font size="1">5,545&nbsp; </font> </p>
  </td>
  <td width=18 valign=top>

  </td>
  <td width=71 valign=bottom>
  <p align=right><font size="1">25,951&nbsp; </font> </p>
  </td>
  <td width=17 valign=top>

  </td>
  <td width=70 valign=bottom>
  <p align=right><font size="1">1,625&nbsp; </font> </p>
  </td>
  <td width=17 valign=top>

  </td>
  <td width=70 valign=top>
  <p align=right><font size="1">797&nbsp; </font> </p>
  </td>
  <td width=17 valign=top>

  </td>
  <td width=70 valign=top>
  <p align=right><font size="1">26,779</font></p>
  </td>
 </tr>
 <tr>
  <td width=114 valign=bottom>
  <p><font size="1">Business owners' policy</font></p>
  </td>
  <td width=16 valign=top>

  </td>
  <td width=81 valign=bottom>
  <p align=right><font size="1">21,228&nbsp; </font> </p>
  </td>
  <td width=19 valign=top>
  <p align=right><b><font size="1">&nbsp;</font></b></p>
  </td>
  <td width=69 valign=bottom>
  <p align=right><font size="1">20,820&nbsp; </font> </p>
  </td>
  <td width=18 valign=top>

  </td>
  <td width=71 valign=bottom>
  <p align=right><font size="1">42,048&nbsp; </font> </p>
  </td>
  <td width=17 valign=top>

  </td>
  <td width=70 valign=bottom>
  <p align=right><font size="1">6,047&nbsp; </font> </p>
  </td>
  <td width=17 valign=top>

  </td>
  <td width=70 valign=top>
  <p align=right><font size="1">4,947&nbsp; </font> </p>
  </td>
  <td width=17 valign=top>

  </td>
  <td width=70 valign=top>
  <p align=right><font size="1">43,148</font></p>
  </td>
 </tr>
 <tr>
  <td width=114 valign=bottom>
  <p><font size="1">Bonds</font></p>
  </td>
  <td width=16 valign=top>

  </td>
  <td width=81 valign=bottom>
  <p align=right><font size="1">2,041&nbsp; </font> </p>
  </td>
  <td width=19 valign=top>
  <p align=right><b><font size="1">&nbsp;</font></b></p>
  </td>
  <td width=69 valign=bottom>
  <p align=right><font size="1">2,693&nbsp; </font> </p>
  </td>
  <td width=18 valign=top>

  </td>
  <td width=71 valign=bottom>
  <p align=right><font size="1">4,734&nbsp; </font> </p>
  </td>
  <td width=17 valign=top>

  </td>
  <td width=70 valign=bottom>
  <p align=right><font size="1">1,666&nbsp; </font> </p>
  </td>
  <td width=17 valign=top>

  </td>
  <td width=70 valign=top>
  <p align=right><font size="1">1,301&nbsp; </font> </p>
  </td>
  <td width=17 valign=top>

  </td>
  <td width=70 valign=top>
  <p align=right><font size="1">5,099</font></p>
  </td>
 </tr>
 <tr>
  <td width=114 valign=bottom>
  <p><font size="1">Other</font></p>
  </td>
  <td width=16 valign=top>

  </td>
  <td width=81 valign=bottom>
  <p align=right><font size="1">764&nbsp; </font> </p>
  </td>
  <td width=19 valign=top>
  <p align=right><b><font size="1">&nbsp;</font></b></p>
  </td>
  <td width=69 valign=bottom>
  <p align=right><font size="1">2,649&nbsp; </font> </p>
  </td>
  <td width=18 valign=top>

  </td>
  <td width=71 valign=bottom>
  <p align=right><font size="1">3,413&nbsp; </font> </p>
  </td>
  <td width=17 valign=top>

  </td>
  <td width=70 valign=bottom>
  <p align=right><font size="1">5&nbsp; </font> </p>
  </td>
  <td width=17 valign=top>

  </td>
  <td width=70 valign=top>
  <p align=right><font size="1">364</font></p>
  </td>
  <td width=17 valign=top>

  </td>
  <td width=70 valign=top>
  <p align=right><font size="1">3,054</font></p>
  </td>
 </tr>
 <tr>
  <td width=114 valign=bottom>

  </td>
  <td width=16 valign=top>

  </td>
  <td width=81 valign=top>
  <div align=right>
  <hr size=1 width="90%" noshade color=gray align=right>
  </div>
  </td>
  <td width=19 valign=top>
  <p align=right><b><font size="1">&nbsp;</font></b></p>
  </td>
  <td width=69 valign=bottom>
  <div align=right>
  <hr size=1 width="90%" noshade color=gray align=right>
  </div>
  </td>
  <td width=18 valign=top>

  </td>
  <td width=71 valign=bottom>
  <div align=right>
  <hr size=1 width="90%" noshade color=gray align=right>
  </div>
  </td>
  <td width=17 valign=top>

  </td>
  <td width=70 valign=bottom>
  <div align=right>
  <hr size=1 width="90%" noshade color=gray align=right>
  </div>
  </td>
  <td width=17 valign=top>

  </td>
  <td width=70 valign=top>
  <div align=right>
  <hr size=1 width="90%" noshade color=gray align=right>
  </div>
  </td>
  <td width=17 valign=top>

  </td>
  <td width=70 valign=top>
  <div align=right>
  <hr size=1 width="90%" noshade color=gray align=right>
  </div>
  </td>
 </tr>
 <tr>
  <td width=114 valign=bottom>
  <p><font size="1">Total commercial lines</font></p>
  </td>
  <td width=16 valign=top>

  </td>
  <td width=81 valign=top>
  <p align=right><font size="1">571,968&nbsp;</font></p>
  </td>
  <td width=19 valign=top>
  <p align=right><b><font size="1">&nbsp;</font></b></p>
  </td>
  <td width=69 valign=bottom>
  <p align=right><font size="1">706,122&nbsp; </font> </p>
  </td>
  <td width=18 valign=top>

  </td>
  <td width=71 valign=bottom>
  <p align=right><font size="1">1,278,090&nbsp; </font> </p>
  </td>
  <td width=17 valign=top>

  </td>
  <td width=70 valign=bottom>
  <p align=right><font size="1">170,521&nbsp; </font> </p>
  </td>
  <td width=17 valign=top>

  </td>
  <td width=70 valign=top>
  <p align=right><font size="1">106,353&nbsp;</font></p>
  </td>
  <td width=17 valign=top>

  </td>
  <td width=70 valign=top>
  <p align=right><font size="1">1,342,258</font></p>
  </td>
 </tr>
 <tr>
  <td width=114 valign=bottom>

  </td>
  <td width=16 valign=top>

  </td>
  <td width=81 valign=top>
  <p align=right><b><font size="1">&nbsp;</font></b></p>
  </td>
  <td width=19 valign=top>
  <p align=right><b><font size="1">&nbsp;</font></b></p>
  </td>
  <td width=69 valign=bottom>

  </td>
  <td width=18 valign=top>

  </td>
  <td width=71 valign=bottom>

  </td>
  <td width=17 valign=top>

  </td>
  <td width=70 valign=bottom>

  </td>
  <td width=17 valign=top>

  </td>
  <td width=70 valign=top>

  </td>
  <td width=17 valign=top>

  </td>
  <td width=70 valign=top>

  </td>
 </tr>
 <tr>
  <td width=114 valign=bottom>
  <p><font size="1">Personal automobile</font></p>
  </td>
  <td width=16 valign=top>

  </td>
  <td width=81 valign=bottom>
  <p align=right><font size="1">133,115&nbsp; </font> </p>
  </td>
  <td width=19 valign=top>
  <p align=right><b><font size="1">&nbsp;</font></b></p>
  </td>
  <td width=69 valign=bottom>
  <p align=right><font size="1">99,107&nbsp; </font> </p>
  </td>
  <td width=18 valign=top>

  </td>
  <td width=71 valign=bottom>
  <p align=right><font size="1">232,222&nbsp; </font> </p>
  </td>
  <td width=17 valign=top>

  </td>
  <td width=70 valign=bottom>
  <p align=right><font size="1">37,179&nbsp; </font> </p>
  </td>
  <td width=17 valign=top>

  </td>
  <td width=70 valign=top>
  <p align=right><font size="1">69,600&nbsp;</font></p>
  </td>
  <td width=17 valign=top>

  </td>
  <td width=70 valign=top>
  <p align=right><font size="1">199,801</font></p>
  </td>
 </tr>
 <tr>
  <td width=114 valign=bottom>
  <p><font size="1">Homeowners</font></p>
  </td>
  <td width=16 valign=top>

  </td>
  <td width=81 valign=bottom>
  <p align=right><font size="1">12,592&nbsp; </font> </p>
  </td>
  <td width=19 valign=top>
  <p align=right><b><font size="1">&nbsp;</font></b></p>
  </td>
  <td width=69 valign=bottom>
  <p align=right><font size="1">5,720&nbsp; </font> </p>
  </td>
  <td width=18 valign=top>

  </td>
  <td width=71 valign=bottom>
  <p align=right><font size="1">18,312&nbsp; </font> </p>
  </td>
  <td width=17 valign=top>

  </td>
  <td width=70 valign=bottom>
  <p align=right><font size="1">2,506&nbsp; </font> </p>
  </td>
  <td width=17 valign=top>

  </td>
  <td width=70 valign=top>
  <p align=right><font size="1">3,091&nbsp;</font></p>
  </td>
  <td width=17 valign=top>

  </td>
  <td width=70 valign=top>
  <p align=right><font size="1">17,727</font></p>
  </td>
 </tr>
 <tr>
  <td width=114 valign=bottom>
  <p><font size="1">Other</font></p>
  </td>
  <td width=16 valign=top>

  </td>
  <td width=81 valign=bottom>
  <p align=right><font size="1">29,551&nbsp; </font> </p>
  </td>
  <td width=19 valign=top>
  <p align=right><b><font size="1">&nbsp;</font></b></p>
  </td>
  <td width=69 valign=bottom>
  <p align=right><font size="1">8,869&nbsp; </font> </p>
  </td>
  <td width=18 valign=top>

  </td>
  <td width=71 valign=bottom>
  <p align=right><font size="1">38,420&nbsp; </font> </p>
  </td>
  <td width=17 valign=top>

  </td>
  <td width=70 valign=bottom>
  <p align=right><font size="1">3,319&nbsp; </font> </p>
  </td>
  <td width=17 valign=top>

  </td>
  <td width=70 valign=top>
  <p align=right><font size="1">34,483&nbsp;</font></p>
  </td>
  <td width=17 valign=top>

  </td>
  <td width=70 valign=top>
  <p align=right><font size="1">7,256</font></p>
  </td>
 </tr>
 <tr>
  <td width=114 valign=bottom>

  </td>
  <td width=16 valign=top>

  </td>
  <td width=81 valign=bottom>
  <div align=right>
  <hr size=1 width="90%" noshade color=gray align=right>
  </div>
  </td>
  <td width=19 valign=top>
  <p align=right><b><font size="1">&nbsp;</font></b></p>
  </td>
  <td width=69 valign=bottom>
  <div align=right>
  <hr size=1 width="90%" noshade color=gray align=right>
  </div>
  </td>
  <td width=18 valign=top>

  </td>
  <td width=71 valign=bottom>
  <div align=right>
  <hr size=1 width="90%" noshade color=gray align=right>
  </div>
  </td>
  <td width=17 valign=top>

  </td>
  <td width=70 valign=bottom>
  <div align=right>
  <hr size=1 width="90%" noshade color=gray align=right>
  </div>
  </td>
  <td width=17 valign=top>

  </td>
  <td width=70 valign=top>
  <div align=right>
  <hr size=1 width="90%" noshade color=gray align=right>
  </div>
  </td>
  <td width=17 valign=top>

  </td>
  <td width=70 valign=top>
  <div align=right>
  <hr size=1 width="90%" noshade color=gray align=right>
  </div>
  </td>
 </tr>
 <tr>
  <td width=114 valign=bottom>
  <p><font size="1">Total personal lines</font></p>
  </td>
  <td width=16 valign=top>

  </td>
  <td width=81 valign=bottom>
  <p align=right><font size="1">175,258&nbsp; </font> </p>
  </td>
  <td width=19 valign=top>
  <p align=right><b><font size="1">&nbsp;</font></b></p>
  </td>
  <td width=69 valign=bottom>
  <p align=right><font size="1">113,696&nbsp; </font> </p>
  </td>
  <td width=18 valign=top>

  </td>
  <td width=71 valign=bottom>
  <p align=right><font size="1">288,954&nbsp; </font> </p>
  </td>
  <td width=17 valign=top>

  </td>
  <td width=70 valign=bottom>
  <p align=right><font size="1">43,004&nbsp; </font> </p>
  </td>
  <td width=17 valign=top>

  </td>
  <td width=70 valign=top>
  <p align=right><font size="1">107,174&nbsp;</font></p>
  </td>
  <td width=17 valign=top>

  </td>
  <td width=70 valign=top>
  <p align=right><font size="1">224,784</font></p>
  </td>
 </tr>
 <tr>
  <td width=114 valign=top>

  </td>
  <td width=16 valign=top>

  </td>
  <td width=81 valign=bottom>
  <div align=right>
  <hr size=1 width="90%" noshade color=gray align=right>
  </div>
  </td>
  <td width=19 valign=top>
  <p align=right><b><font size="1">&nbsp;</font></b></p>
  </td>
  <td width=69 valign=bottom>
  <div align=right>
  <hr size=1 width="90%" noshade color=gray align=right>
  </div>
  </td>
  <td width=18 valign=top>

  </td>
  <td width=71 valign=bottom>
  <div align=right>
  <hr size=1 width="90%" noshade color=gray align=right>
  </div>
  </td>
  <td width=17 valign=top>

  </td>
  <td width=70 valign=bottom>
  <div align=right>
  <hr size=1 width="90%" noshade color=gray align=right>
  </div>
  </td>
  <td width=17 valign=top>

  </td>
  <td width=70 valign=top>
  <div align=right>
  <hr size=1 width="90%" noshade color=gray align=right>
  </div>
  </td>
  <td width=17 valign=top>

  </td>
  <td width=70 valign=top>
  <div align=right>
  <hr size=1 width="90%" noshade color=gray align=right>
  </div>
  </td>
 </tr>
 <tr>
  <td width=114 valign=top>
  <p><font size="1">Total</font></p>
  </td>
  <td width=16 valign=top>
  <p align=right><font size="1">$</font></p>
  </td>
  <td width=81 valign=bottom>
  <p align=right><font size="1">747,226&nbsp; </font> </p>
  </td>
  <td width=19 valign=top>
  <p align=right><b><font size="1">&nbsp;</font></b></p>
  </td>
  <td width=69 valign=bottom>
  <p align=right><font size="1">819,818&nbsp; </font> </p>
  </td>
  <td width=18 valign=top>

  </td>
  <td width=71 valign=bottom>
  <p align=right><font size="1">1,567,044&nbsp; </font> </p>
  </td>
  <td width=17 valign=top>
  <p align=right><font size="1">$</font></p>
  </td>
  <td width=70 valign=bottom>
  <p align=right><font size="1">213,525&nbsp; </font> </p>
  </td>
  <td width=17 valign=top>

  </td>
  <td width=70 valign=top>
  <p align=right><font size="1">213,527&nbsp;</font></p>
  </td>
  <td width=17 valign=top>

  </td>
  <td width=70 valign=top>
  <p align=right><font size="1">1,567,042</font></p>
  </td>
 </tr>
 <tr>
  <td width=114 valign=top>

  </td>
  <td width=16 valign=top>

  </td>
  <td width=81 valign=top>
  <p align=right><b>=======</b></p>
  </td>
  <td width=19 valign=top>
  <p align=right><b>&nbsp;</b></p>
  </td>
  <td width=69 valign=top>
  <p align=right><b>=======</b></p>
  </td>
  <td width=18 valign=top>

  </td>
  <td width=71 valign=top>
  <p align=right><b>=======</b></p>
  </td>
  <td width=17 valign=top>

  </td>
  <td width=70 valign=top>
  <p align=right><b>=======</b></p>
  </td>
  <td width=17 valign=top>
  <p align=right><b>&nbsp;</b></p>
  </td>
  <td width=70 valign=top>
  <p align=right><b>=======</b></p>
  </td>
  <td width=17 valign=top>
  <p align=right><b>&nbsp;</b></p>
  </td>
  <td width=70 valign=top>
  <p align=right><b>=======</b></p>
  </td>
 </tr>
</table>



<p style="margin-top: 0; margin-bottom: 0">&nbsp;</p>

<table border=0 cellspacing=0 cellpadding=0 width=651>
 <tr>
  <td width=651 colspan=13 valign=bottom>
  <div align=center><b>
  <hr size=1 width="100%" noshade color=black align=center>
  </b></div>
  </td>
 </tr>
 <tr>
  <td width=115 valign=bottom>
  <p align=center><i><font size="1">As of December 31, 2003</font></i></p>
  </td>
  <td width=16 valign=top>

  </td>
  <td width=81 valign=bottom>
  <p align=center><b><font size="1">&nbsp;</font></b></p>
  </td>
  <td width=19 valign=top>
  <p align=center><b><font size="1">&nbsp;</font></b></p>
  </td>
  <td width=68 valign=bottom>
  <p align=center><b><font size="1">&nbsp;</font></b></p>
  </td>
  <td width=18 valign=top>

  </td>
  <td width=71 valign=bottom>
  <p align=center><b><font size="1">&nbsp;</font></b></p>
  </td>
  <td width=18 valign=top>
  <p align=center><b><font size="1">&nbsp;</font></b></p>
  </td>
  <td width=70 valign=bottom>
  <p align=center><b><font size="1">&nbsp;</font></b></p>
  </td>
  <td width=17 valign=top>

  </td>
  <td width=69 valign=top>
  <p align=center><b><font size="1">Reinsurance</font></b></p>
  </td>
  <td width=18 valign=top>

  </td>
  <td width=71 valign=top>

  </td>
 </tr>
 <tr>
  <td width=115 valign=bottom>

  </td>
  <td width=16 valign=top>

  </td>
  <td width=257 colspan=5 valign=bottom>
  <p align=center><b><font size="1">Loss Reserves</font></b></p>
  </td>
  <td width=18 valign=top>
  <p align=center><b><font size="1">&nbsp;</font></b></p>
  </td>
  <td width=70 valign=bottom>

  </td>
  <td width=17 valign=top>

  </td>
  <td width=69 valign=top>
  <p align=center><b><font size="1">recoverable</font></b></p>
  </td>
  <td width=18 valign=top>

  </td>
  <td width=71 valign=top>

  </td>
 </tr>
 <tr>
  <td width=115 valign=bottom>

  </td>
  <td width=16 valign=top>

  </td>
  <td width=257 colspan=5 valign=bottom>
  <div align=center><b>
  <hr size=1 width="100%" noshade color=black align=center>
  </b></div>
  </td>
  <td width=18 valign=top>
  <p align=center><b><font size="1">&nbsp;</font></b></p>
  </td>
  <td width=70 valign=bottom>
  <p align=center><b><font size="1">&nbsp;</font></b></p>
  </td>
  <td width=17 valign=top>

  </td>
  <td width=69 valign=top>
  <p align=center><b><font size="1">on unpaid</font></b></p>
  </td>
  <td width=18 valign=top>

  </td>
  <td width=71 valign=top>

  </td>
 </tr>
 <tr>
  <td width=115 valign=bottom>

  </td>
  <td width=16 valign=top>

  </td>
  <td width=81 valign=bottom>
  <p align=center><b><font size="1">Case</font></b></p>
  </td>
  <td width=19 valign=top>
  <p align=center><b><font size="1">&nbsp;</font></b></p>
  </td>
  <td width=68 valign=bottom>
  <p align=center><b><font size="1">IBNR</font></b></p>
  </td>
  <td width=18 valign=top>

  </td>
  <td width=71 valign=bottom>
  <p align=center><b><font size="1">&nbsp;</font></b></p>
  </td>
  <td width=18 valign=top>
  <p align=center><b><font size="1">&nbsp;</font></b></p>
  </td>
  <td width=70 valign=bottom>
  <p align=center><b><font size="1">Loss expense</font></b></p>
  </td>
  <td width=17 valign=top>

  </td>
  <td width=69 valign=top>
  <p align=center><b><font size="1">losses and</font></b></p>
  </td>
  <td width=18 valign=top>

  </td>
  <td width=71 valign=top>

  </td>
 </tr>
 <tr>
  <td width=115 valign=bottom>
  <p><font size="1">($ in thousands)</font></p>
  </td>
  <td width=16 valign=top>

  </td>
  <td width=81 valign=bottom>
  <p align=center><b><font size="1">reserves</font></b></p>
  </td>
  <td width=19 valign=top>
  <p align=center><b><font size="1">&nbsp;</font></b></p>
  </td>
  <td width=68 valign=bottom>
  <p align=center><b><font size="1">reserves</font></b></p>
  </td>
  <td width=18 valign=top>

  </td>
  <td width=71 valign=bottom>
  <p align=center><b><font size="1">Total</font></b></p>
  </td>
  <td width=18 valign=top>
  <p align=center><b><font size="1">&nbsp;</font></b></p>
  </td>
  <td width=70 valign=bottom>
  <p align=center><b><font size="1">reserves</font></b></p>
  </td>
  <td width=17 valign=top>

  </td>
  <td width=69 valign=top>
  <p align=center><b><font size="1">loss expenses</font></b></p>
  </td>
  <td width=18 valign=top>

  </td>
  <td width=71 valign=top>
  <p align=center><b><font size="1">Net reserves</font></b></p>
  </td>
 </tr>
 <tr>
  <td width=651 valign=bottom colspan="13">
  <div align=center><b>
  <hr size=1 width="100%" noshade color=black align=center>
  </b></div>
  </td>
 </tr>
 </table>



<table border=0 cellspacing=0 cellpadding=0 width=653>
 <tr>
  <td width=114 valign=bottom>
  <p><font size="1">Commercial automobile</font></p>
  </td>
  <td width=18 valign=top>
  <p align=right><font size="1">$</font></p>
  </td>
  <td width=79 valign=bottom>
  <p align=right><font size="1">87,332&nbsp; </font> </p>
  </td>
  <td width=19 valign=top>
  <p align=right><b><font size="1">&nbsp;</font></b></p>
  </td>
  <td width=68 valign=bottom>
  <p align=right><font size="1">150,797&nbsp; </font> </p>
  </td>
  <td width=19 valign=top>

  </td>
  <td width=71 valign=bottom>
  <p align=right><font size="1">238,129&nbsp; </font> </p>
  </td>
  <td width=18 valign=top>
  <p align=right><font size="1">$</font></p>
  </td>
  <td width=70 valign=bottom>
  <p align=right><font size="1">26,673&nbsp; </font> </p>
  </td>
  <td width=17 valign=top>

  </td>
  <td width=69 valign=top>
  <p align=right><font size="1">5,746</font></p>
  </td>
  <td width=19 valign=top>

  </td>
  <td width=72 valign=top>
  <p align=right><font size="1">259,056</font></p>
  </td>
 </tr>
 <tr>
  <td width=114 valign=bottom>
  <p><font size="1">Workers compensation</font></p>
  </td>
  <td width=18 valign=top>

  </td>
  <td width=79 valign=bottom>
  <p align=right><font size="1">285,999&nbsp; </font> </p>
  </td>
  <td width=19 valign=top>
  <p align=right><b><font size="1">&nbsp;</font></b></p>
  </td>
  <td width=68 valign=bottom>
  <p align=right><font size="1">182,075&nbsp; </font> </p>
  </td>
  <td width=19 valign=top>

  </td>
  <td width=71 valign=bottom>
  <p align=right><font size="1">468,074&nbsp; </font> </p>
  </td>
  <td width=18 valign=top>

  </td>
  <td width=70 valign=bottom>
  <p align=right><font size="1">44,330&nbsp; </font> </p>
  </td>
  <td width=17 valign=top>

  </td>
  <td width=69 valign=top>
  <p align=right><font size="1">64,589</font></p>
  </td>
  <td width=19 valign=top>

  </td>
  <td width=72 valign=top>
  <p align=right><font size="1">447,815</font></p>
  </td>
 </tr>
 <tr>
  <td width=114 valign=bottom>
  <p><font size="1">General liability</font></p>
  </td>
  <td width=18 valign=top>

  </td>
  <td width=79 valign=bottom>
  <p align=right><font size="1">120,697&nbsp; </font> </p>
  </td>
  <td width=19 valign=top>
  <p align=right><b><font size="1">&nbsp;</font></b></p>
  </td>
  <td width=68 valign=bottom>
  <p align=right><font size="1">237,821&nbsp; </font> </p>
  </td>
  <td width=19 valign=top>

  </td>
  <td width=71 valign=bottom>
  <p align=right><font size="1">358,518&nbsp; </font> </p>
  </td>
  <td width=18 valign=top>

  </td>
  <td width=70 valign=bottom>
  <p align=right><font size="1">72,249&nbsp; </font> </p>
  </td>
  <td width=17 valign=top>

  </td>
  <td width=69 valign=top>
  <p align=right><font size="1">15,516</font></p>
  </td>
  <td width=19 valign=top>

  </td>
  <td width=72 valign=top>
  <p align=right><font size="1">415,251</font></p>
  </td>
 </tr>
 <tr>
  <td width=114 valign=bottom>
  <p><font size="1">Commercial property*</font></p>
  </td>
  <td width=18 valign=top>

  </td>
  <td width=79 valign=bottom>
  <p align=right><font size="1">20,080&nbsp; </font> </p>
  </td>
  <td width=19 valign=top>
  <p align=right><b><font size="1">&nbsp;</font></b></p>
  </td>
  <td width=68 valign=bottom>
  <p align=right><font size="1">(857)</font></p>
  </td>
  <td width=19 valign=top>

  </td>
  <td width=71 valign=bottom>
  <p align=right><font size="1">19,223&nbsp; </font> </p>
  </td>
  <td width=18 valign=top>

  </td>
  <td width=70 valign=bottom>
  <p align=right><font size="1">1,590&nbsp; </font> </p>
  </td>
  <td width=17 valign=top>

  </td>
  <td width=69 valign=top>
  <p align=right><font size="1">907</font></p>
  </td>
  <td width=19 valign=top>

  </td>
  <td width=72 valign=top>
  <p align=right><font size="1">19,906</font></p>
  </td>
 </tr>
 <tr>
  <td width=114 valign=bottom>
  <p><font size="1">Business owners' policy</font></p>
  </td>
  <td width=18 valign=top>

  </td>
  <td width=79 valign=bottom>
  <p align=right><font size="1">19,703&nbsp; </font> </p>
  </td>
  <td width=19 valign=top>
  <p align=right><b><font size="1">&nbsp;</font></b></p>
  </td>
  <td width=68 valign=bottom>
  <p align=right><font size="1">19,251&nbsp; </font> </p>
  </td>
  <td width=19 valign=top>

  </td>
  <td width=71 valign=bottom>
  <p align=right><font size="1">38,954&nbsp; </font> </p>
  </td>
  <td width=18 valign=top>

  </td>
  <td width=70 valign=bottom>
  <p align=right><font size="1">5,543&nbsp; </font> </p>
  </td>
  <td width=17 valign=top>

  </td>
  <td width=69 valign=top>
  <p align=right><font size="1">4,936</font></p>
  </td>
  <td width=19 valign=top>

  </td>
  <td width=72 valign=top>
  <p align=right><font size="1">39,561</font></p>
  </td>
 </tr>
 <tr>
  <td width=114 valign=bottom>
  <p><font size="1">Bonds</font></p>
  </td>
  <td width=18 valign=top>

  </td>
  <td width=79 valign=bottom>
  <p align=right><font size="1">1,020&nbsp; </font> </p>
  </td>
  <td width=19 valign=top>
  <p align=right><b><font size="1">&nbsp;</font></b></p>
  </td>
  <td width=68 valign=bottom>
  <p align=right><font size="1">2,881&nbsp; </font> </p>
  </td>
  <td width=19 valign=top>

  </td>
  <td width=71 valign=bottom>
  <p align=right><font size="1">3,901&nbsp; </font> </p>
  </td>
  <td width=18 valign=top>

  </td>
  <td width=70 valign=bottom>
  <p align=right><font size="1">1,676&nbsp; </font> </p>
  </td>
  <td width=17 valign=top>

  </td>
  <td width=69 valign=top>
  <p align=right><font size="1">1,357</font></p>
  </td>
  <td width=19 valign=top>

  </td>
  <td width=72 valign=top>
  <p align=right><font size="1">4,220</font></p>
  </td>
 </tr>
 <tr>
  <td width=114 valign=bottom>
  <p><font size="1">Other</font></p>
  </td>
  <td width=18 valign=top>

  </td>
  <td width=79 valign=bottom>
  <p align=right><font size="1">1,198&nbsp; </font> </p>
  </td>
  <td width=19 valign=top>
  <p align=right><b><font size="1">&nbsp;</font></b></p>
  </td>
  <td width=68 valign=bottom>
  <p align=right><font size="1">2,168&nbsp; </font> </p>
  </td>
  <td width=19 valign=top>

  </td>
  <td width=71 valign=bottom>
  <p align=right><font size="1">3,366&nbsp; </font> </p>
  </td>
  <td width=18 valign=top>

  </td>
  <td width=70 valign=bottom>
  <p align=right><font size="1">6&nbsp; </font> </p>
  </td>
  <td width=17 valign=top>

  </td>
  <td width=69 valign=top>
  <p align=right><font size="1">790</font></p>
  </td>
  <td width=19 valign=top>

  </td>
  <td width=72 valign=top>
  <p align=right><font size="1">2,582</font></p>
  </td>
 </tr>
 <tr>
  <td width=114 valign=bottom>

  </td>
  <td width=18 valign=top>

  </td>
  <td width=79 valign=top>
  <div align=right>
  <hr size=1 width="90%" noshade color=gray align=right>
  </div>
  </td>
  <td width=19 valign=top>
  <p align=right><b><font size="1">&nbsp;</font></b></p>
  </td>
  <td width=68 valign=bottom>
  <div align=right>
  <hr size=1 width="90%" noshade color=gray align=right>
  </div>
  </td>
  <td width=19 valign=top>

  </td>
  <td width=71 valign=bottom>
  <div align=right>
  <hr size=1 width="90%" noshade color=gray align=right>
  </div>
  </td>
  <td width=18 valign=top>

  </td>
  <td width=70 valign=bottom>
  <div align=right>
  <hr size=1 width="90%" noshade color=gray align=right>
  </div>
  </td>
  <td width=17 valign=top>

  </td>
  <td width=69 valign=top>
  <div align=right>
  <hr size=1 width="90%" noshade color=gray align=right>
  </div>
  </td>
  <td width=19 valign=top>

  </td>
  <td width=72 valign=top>
  <div align=right>
  <hr size=1 width="90%" noshade color=gray align=right>
  </div>
  </td>
 </tr>
 <tr>
  <td width=114 valign=bottom>
  <p><font size="1">Total Commercial</font></p>
  </td>
  <td width=18 valign=top>

  </td>
  <td width=79 valign=bottom>
  <p align=right><font size="1">536,029&nbsp; </font> </p>
  </td>
  <td width=19 valign=bottom>
  <p align=right><b><font size="1">&nbsp;</font></b></p>
  </td>
  <td width=68 valign=bottom>
  <p align=right><font size="1">594,136&nbsp; </font> </p>
  </td>
  <td width=19 valign=bottom>

  </td>
  <td width=71 valign=bottom>
  <p align=right><font size="1">1,130,165&nbsp; </font> </p>
  </td>
  <td width=18 valign=bottom>

  </td>
  <td width=70 valign=bottom>
  <p align=right><font size="1">152,067&nbsp; </font> </p>
  </td>
  <td width=17 valign=top>

  </td>
  <td width=69 valign=top>
  <p align=right><font size="1">93,841</font></p>
  </td>
  <td width=19 valign=top>

  </td>
  <td width=72 valign=top>
  <p align=right><font size="1">1,188,391</font></p>
  </td>
 </tr>
 <tr>
  <td width=114 valign=bottom>

  </td>
  <td width=18 valign=top>

  </td>
  <td width=79 valign=top>
  <p align=right><b><font size="1">&nbsp;</font></b></p>
  </td>
  <td width=19 valign=top>
  <p align=right><b><font size="1">&nbsp;</font></b></p>
  </td>
  <td width=68 valign=bottom>

  </td>
  <td width=19 valign=top>

  </td>
  <td width=71 valign=bottom>

  </td>
  <td width=18 valign=top>

  </td>
  <td width=70 valign=bottom>

  </td>
  <td width=17 valign=top>

  </td>
  <td width=69 valign=top>

  </td>
  <td width=19 valign=top>

  </td>
  <td width=72 valign=top>

  </td>
 </tr>
 <tr>
  <td width=114 valign=bottom>
  <p><font size="1">Personal automobile</font></p>
  </td>
  <td width=18 valign=top>

  </td>
  <td width=79 valign=bottom>
  <p align=right><font size="1">138,710&nbsp; </font> </p>
  </td>
  <td width=19 valign=bottom>
  <p align=right><b><font size="1">&nbsp;</font></b></p>
  </td>
  <td width=68 valign=bottom>
  <p align=right><font size="1">95,411&nbsp; </font> </p>
  </td>
  <td width=19 valign=bottom>

  </td>
  <td width=71 valign=bottom>
  <p align=right><font size="1">234,121&nbsp; </font> </p>
  </td>
  <td width=18 valign=bottom>

  </td>
  <td width=70 valign=bottom>
  <p align=right><font size="1">30,191&nbsp; </font> </p>
  </td>
  <td width=17 valign=top>

  </td>
  <td width=69 valign=top>
  <p align=right><font size="1">69,440</font></p>
  </td>
  <td width=19 valign=top>

  </td>
  <td width=72 valign=top>
  <p align=right><font size="1">194,872</font></p>
  </td>
 </tr>
 <tr>
  <td width=114 valign=bottom>
  <p><font size="1">Homeowners</font></p>
  </td>
  <td width=18 valign=top>

  </td>
  <td width=79 valign=bottom>
  <p align=right><font size="1">10,213&nbsp; </font> </p>
  </td>
  <td width=19 valign=bottom>
  <p align=right><b><font size="1">&nbsp;</font></b></p>
  </td>
  <td width=68 valign=bottom>
  <p align=right><font size="1">5,858&nbsp; </font> </p>
  </td>
  <td width=19 valign=bottom>

  </td>
  <td width=71 valign=bottom>
  <p align=right><font size="1">16,071&nbsp; </font> </p>
  </td>
  <td width=18 valign=bottom>

  </td>
  <td width=70 valign=bottom>
  <p align=right><font size="1">2,376&nbsp; </font> </p>
  </td>
  <td width=17 valign=top>

  </td>
  <td width=69 valign=top>
  <p align=right><font size="1">3,336</font></p>
  </td>
  <td width=19 valign=top>

  </td>
  <td width=72 valign=top>
  <p align=right><font size="1">15,111</font></p>
  </td>
 </tr>
 <tr>
  <td width=114 valign=bottom>
  <p><font size="1">Other</font></p>
  </td>
  <td width=18 valign=top>

  </td>
  <td width=79 valign=bottom>
  <p align=right><font size="1">13,112&nbsp; </font> </p>
  </td>
  <td width=19 valign=bottom>
  <p align=right><b><font size="1">&nbsp;</font></b></p>
  </td>
  <td width=68 valign=bottom>
  <p align=right><font size="1">7,301&nbsp; </font> </p>
  </td>
  <td width=19 valign=bottom>

  </td>
  <td width=71 valign=bottom>
  <p align=right><font size="1">20,413&nbsp; </font> </p>
  </td>
  <td width=18 valign=bottom>

  </td>
  <td width=70 valign=bottom>
  <p align=right><font size="1">2,409&nbsp; </font> </p>
  </td>
  <td width=17 valign=top>

  </td>
  <td width=69 valign=top>
  <p align=right><font size="1">17,994</font></p>
  </td>
  <td width=19 valign=top>

  </td>
  <td width=72 valign=top>
  <p align=right><font size="1">4,828</font></p>
  </td>
 </tr>
 <tr>
  <td width=114 valign=bottom>

  </td>
  <td width=18 valign=top>

  </td>
  <td width=79 valign=top>
  <div align=right>
  <hr size=1 width="90%" noshade color=gray align=right>
  </div>
  </td>
  <td width=19 valign=top>
  <p align=right><b><font size="1">&nbsp;</font></b></p>
  </td>
  <td width=68 valign=bottom>
  <div align=right>
  <hr size=1 width="90%" noshade color=gray align=right>
  </div>
  </td>
  <td width=19 valign=top>

  </td>
  <td width=71 valign=bottom>
  <div align=right>
  <hr size=1 width="90%" noshade color=gray align=right>
  </div>
  </td>
  <td width=18 valign=top>

  </td>
  <td width=70 valign=bottom>
  <div align=right>
  <hr size=1 width="90%" noshade color=gray align=right>
  </div>
  </td>
  <td width=17 valign=top>

  </td>
  <td width=69 valign=top>
  <div align=right>
  <hr size=1 width="90%" noshade color=gray align=right>
  </div>
  </td>
  <td width=19 valign=top>

  </td>
  <td width=72 valign=top>
  <div align=right>
  <hr size=1 width="90%" noshade color=gray align=right>
  </div>
  </td>
 </tr>
 <tr>
  <td width=114 valign=bottom>
  <p><font size="1">Total personal lines</font></p>
  </td>
  <td width=18 valign=top>

  </td>
  <td width=79 valign=bottom>
  <p align=right><font size="1">162,035&nbsp; </font> </p>
  </td>
  <td width=19 valign=bottom>
  <p align=right><b><font size="1">&nbsp;</font></b></p>
  </td>
  <td width=68 valign=bottom>
  <p align=right><font size="1">108,570&nbsp; </font> </p>
  </td>
  <td width=19 valign=bottom>

  </td>
  <td width=71 valign=bottom>
  <p align=right><font size="1">270,605&nbsp; </font> </p>
  </td>
  <td width=18 valign=bottom>

  </td>
  <td width=70 valign=bottom>
  <p align=right><font size="1">34,976&nbsp; </font> </p>
  </td>
  <td width=17 valign=top>

  </td>
  <td width=69 valign=top>
  <p align=right><font size="1">90,770</font></p>
  </td>
  <td width=19 valign=top>

  </td>
  <td width=72 valign=top>
  <p align=right><font size="1">214,811</font></p>
  </td>
 </tr>
 <tr>
  <td width=114 valign=top>

  </td>
  <td width=18 valign=top>

  </td>
  <td width=79 valign=top>
  <div align=right>
  <hr size=1 width="90%" noshade color=gray align=right>
  </div>
  </td>
  <td width=19 valign=top>
  <p align=right><b><font size="1">&nbsp;</font></b></p>
  </td>
  <td width=68 valign=bottom>
  <div align=right>
  <hr size=1 width="90%" noshade color=gray align=right>
  </div>
  </td>
  <td width=19 valign=top>

  </td>
  <td width=71 valign=bottom>
  <div align=right>
  <hr size=1 width="90%" noshade color=gray align=right>
  </div>
  </td>
  <td width=18 valign=top>

  </td>
  <td width=70 valign=bottom>
  <div align=right>
  <hr size=1 width="90%" noshade color=gray align=right>
  </div>
  </td>
  <td width=17 valign=top>

  </td>
  <td width=69 valign=top>
  <div align=right>
  <hr size=1 width="90%" noshade color=gray align=right>
  </div>
  </td>
  <td width=19 valign=top>

  </td>
  <td width=72 valign=top>
  <div align=right>
  <hr size=1 width="90%" noshade color=gray align=right>
  </div>
  </td>
 </tr>
 <tr>
  <td width=114 valign=bottom>
  <p><font size="1">Total</font></p>
  </td>
  <td width=18 valign=top>
  <p align=right><font size="1">$</font></p>
  </td>
  <td width=79 valign=bottom>
  <p align=right><font size="1">698,064&nbsp; </font> </p>
  </td>
  <td width=19 valign=bottom>
  <p align=right><b><font size="1">&nbsp;</font></b></p>
  </td>
  <td width=68 valign=bottom>
  <p align=right><font size="1">702,706&nbsp; </font> </p>
  </td>
  <td width=19 valign=bottom>

  </td>
  <td width=71 valign=bottom>
  <p align=right><font size="1">1,400,770&nbsp; </font> </p>
  </td>
  <td width=18 valign=bottom>
  <p align=right><font size="1">$</font></p>
  </td>
  <td width=70 valign=bottom>
  <p align=right><font size="1">187,043&nbsp; </font> </p>
  </td>
  <td width=17 valign=top>

  </td>
  <td width=69 valign=top>
  <p align=right><font size="1">184,611</font></p>
  </td>
  <td width=19 valign=top>

  </td>
  <td width=72 valign=top>
  <p align=right><font size="1">1,403,202</font></p>
  </td>
 </tr>
 <tr>
  <td width=114 valign=bottom>

  </td>
  <td width=18 valign=top>

  </td>
  <td width=79 valign=top>
  <p align=right><b>=======</b></p>
  </td>
  <td width=19 valign=top>
  <p align=right><b>&nbsp;</b></p>
  </td>
  <td width=68 valign=top>
  <p align=right><b>=======</b></p>
  </td>
  <td width=19 valign=top>

  </td>
  <td width=71 valign=top>
  <p align=right><b>=======</b></p>
  </td>
  <td width=18 valign=top>

  </td>
  <td width=70 valign=top>
  <p align=right><b>=======</b></p>
  </td>
  <td width=17 valign=top>

  </td>
  <td width=69 valign=top>
  <p align=right><b>=======</b></p>
  </td>
  <td width=19 valign=top>

  </td>
  <td width=72 valign=top>
  <p align=right><b>=======</b></p>
  </td>
 </tr>
</table>

<p style="margin-top: 0; margin-bottom: 0"><font size="2"><br></font>
<font size="1">*Negative IBNR reserves are due to the inclusion
of reserves for recoveries from salvage and subrogation.<br>
</font>
<p align="center" style="margin-top: 0; margin-bottom: 0"><font size="2">32<br>
</font>
<hr color="#000080"><P STYLE="page-break-after: always"></P>
<p style="margin-top: 0; margin-bottom: 0"><font size="2"><br clear=all>
In light of the many uncertainties associated with establishing the estimates
and making the assumptions necessary to establish reserve levels, the Company
reviews its reserve estimates on a regular basis as described above and makes
adjustments in the period that the need for such adjustment is determined.
These reviews, from time to time, result in the Company identifying information
and trends that cause the Company to increase some reserves and decrease other
reserves for prior periods and could lead to the identification of a need for
additional increases in loss and loss adjustment expense reserves, which could
materially adversely affect the Company's results of operations, equity,
business, insurer financial strength and debt ratings. As of September 30,
2004, the Company had accrued $1,567.0 million of net loss and loss expense
reserves compared to $1,403.2 million as of December 31, 2003. During the Nine
Months 2004, the Company experienced negligible adverse development in its loss
and loss expense reserves totaling $3.6 million.&nbsp; This development was driven by an increase to
our loss reserves for doubtful reinsurance recoveries of $2.5 million
attributable to the general liability and workers compensation lines of
business and reductions in expected bond subrogation recoveries in our bond
line of business of $2.0 million. In addition, we had net favorable emergence
of $0.9 million from our other lines of business.&nbsp; For the full year 2003, our general liability
line of business, specifically products/completed operations business,
demonstrated significant prior year development.&nbsp; The estimates for prior year losses increased
$17.9 million, with $14.0 million in accident years 2000 and prior.&nbsp; Prior to 2002 we had more exposure to faulty
workmanship and materials for both the general contractor and subcontractors
and inadequate limits on subcontractors. <br>
<br>
As of December 31, 2003, we had established a range of reasonably possible
reserves for net claims of approximately $1,331.0 million to $1,487.8
million.&nbsp; A low and high reasonable IBNR
selection was derived primarily by considering the range of indications
calculated using standard actuarial techniques. Such techniques assume that
past experience, adjusted for the effects of current developments and
anticipated trends, are an appropriate basis for predicting future events.&nbsp; Although this range reflects the most likely
scenarios, it is possible that the final outcomes may fall above or below these
amounts.&nbsp; This range does not include any
provision for potential increases or decreases associated with environmental
reserves, as management believes it is not meaningful to calculate a range
given the uncertainties associated with environmental claims.&nbsp; Included in our net carried loss and loss expense
reserves were net reserves for environmental claims of $38.5 million at
September 30, 2004 and $36.5 million at December 31, 2003.&nbsp; The ultimate actual liability may be higher
or lower than reserves established.&nbsp; We
do not discount to present value that portion of our loss and loss expense
reserves expected to be paid in future periods. However, the loss reserves
include anticipated recoveries from salvage and subrogation.<br>
<br>As noted above, included in the loss
and loss expense reserves on the consolidated balance sheets are amounts for
environmental claims, both asbestos and non&#8209;asbestos.&nbsp; These claims have arisen primarily under
older policies containing exclusions for environmental liability which certain
courts, in interpreting such exclusions, have determined do not bar such
claims.&nbsp; The emergence of these claims is
slow and highly unpredictable.&nbsp; Since
1986, policies issued by the Insurance Subsidiaries have contained a more
expansive exclusion for losses related to environmental claims. Our asbestos
and non&#8209;asbestos environmental claims have arisen primarily from
exposures in municipal government, small commercial risks and homeowners
policies. <br>
<br>IBNR reserve estimation for environmental claims is often difficult
because, in addition to other factors, there are significant uncertainties
associated with critical assumptions in the estimation process such as average
clean-up costs, third-party costs, potentially responsible party shares,
allocation of damages, insurer litigation costs, insurer coverage defenses and
potential changes to state and federal statutes.&nbsp; However, management is not aware of any
emerging trends that could result in future reserve adjustments except for the
unfavorable trends in groundwater contamination claims, resulting in an increase
in loss reserves in our homeowners line of business during Third Quarter 2004
caused by certain underground heating oil storage tanks in New Jersey.&nbsp; Increased frequency of claims has been
triggered, in part, by the state's robust real estate market, leading to an
increase in home tank inspections.&nbsp;
Overall claim severity has been low, with average claim payments of
$22,000, and there has been almost no similar claim activity in our other
operating states.&nbsp; We began restricting
writings of policies with coverage for underground heating oil storage tanks,
company-wide, more than 18 months ago, and are reviewing possible coverage
changes for existing business.&nbsp;&nbsp;&nbsp;
Moreover, normal historically-based actuarial approaches are difficult
to apply because relevant history is not available. In addition, while models
can be applied, such models can produce significantly different results with
small changes in assumptions. As a result, management does not calculate a
specific environmental loss range, as it believes it would not be meaningful.<br>
</font></p>
<p align="center" style="margin-top: 0; margin-bottom: 0"><font size="2">33</font></p>
<a name="_Toc58916197"><hr color="#000080"><P STYLE="page-break-after: always"></P>
<p style="margin-top: 0; margin-bottom: 0"><font size="2"><br clear=all>
</font>
</a><font size="2"><b>Premium Revenue<br>
</b>Net premiums written equal direct premiums written, plus assumed premiums
less ceded premiums. All three components of net premiums written are
recognized in revenue over the period that coverage is provided. The Company
had net premiums written of $356.5 million for Third Quarter 2004 and $1.1
billion for Nine Months 2004 compared with $317.5 million for Third Quarter
2003 and $947.8 million for Nine Months 2003. The vast majority of our net
premiums written have a coverage period of twelve months. This means we record
1/12 of the net premiums written as earned premium each month, until the full
amount is recognized.&nbsp; When premium rates
increase, the effect of those increases would not immediately affect earned
premium. Rather, those increases will be recognized ratably over the period of
coverage. The Company earned net premiums of&nbsp;
$337.1 million for Third Quarter 2004 and $978.4 million for Nine Months
2004 compared with $289.7 million for Third Quarter 2003 and $832.9 million for
Nine Months 2003. Unearned premiums and prepaid reinsurance premiums, which are
recorded on the consolidated balance sheets, represent that portion of premiums
written that are applicable to the unexpired terms of policies in force. As of
September 30, 2004 the Company had unearned premiums of $760.3 million and
prepaid reinsurance premiums of $60.6 million compared with unearned premiums
of $649.9 million and prepaid reinsurance premiums of $52.8 million as of
December 31, 2004. <br>
<br>
<b>Deferred Policy Acquisition Costs<br>
</b>Policy acquisition costs, which include commissions, premium taxes, fees,
and certain other costs of underwriting policies, are deferred and amortized
over the same period in which the related premiums are earned.&nbsp; Deferred policy acquisition costs are limited
to the estimated amounts recoverable after providing for losses and loss
expenses that are expected to be incurred, based upon historical and current
experience.&nbsp; Anticipated investment
income is considered in determining whether a premium deficiency exists. The
Company continually reviews the methods of making such estimates and
establishing the deferred costs, and any adjustments therefrom are made in the
accounting period in which the adjustment arose. As of September 30, 2004 the
Company had deferred policy acquisition costs of $195.3 million compared with
$172.4 million as of December 31, 2003.<br>
<br>
<b><i>Adoption of
Accounting Pronouncements<br></i></b>In December 2003, the Financial Accounting Standards Board
(FASB) issued revised FASB Interpretation No. 46, &quot;Consolidation of Variable
Interest Entities&quot; (FIN 46R), which is a revised interpretation of Accounting
Research Bulletin No. 51, &quot;Consolidated Financial Statements&quot;. FIN 46R is
required to be applied starting with fiscal years beginning after December 15,
2003.&nbsp; FIN 46R requires the consolidation
of a variable interest entity (VIE) by an enterprise if that enterprise either
absorbs a majority of the VIE's expected losses or receives a majority of the
VIE's expected residual returns as a result of ownership, contractual or other
financial interests in the VIE.&nbsp; Prior to
FIN 46R, entities were generally consolidated by an enterprise that had a
controlling financial interest through ownership of a majority voting interest
in the entity. FIN 46R defines a VIE as an entity in which equity investors do
not have the characteristics of a controlling financial interest nor do they
have sufficient equity at risk for the entity to finance its activities without
additional subordinated financial support.&nbsp;
The Company has no interests in VIEs or potential VIEs commonly referred
to as special-purpose entities and as such, the adoption of this revised
interpretation on January 1, 2004 has had no effect on the Company's results of
operations or financial condition.<br>
<br>
In March 2004, the Emerging Issues Task Force (EITF or Task Force) of the FASB
reached a consensus on Issue No. 03-01, &quot;The Meaning of Other-Than-Temporary
Impairment and Its Application to Certain Investments.&quot;&nbsp;&nbsp; This consensus provides recognition and
measurement guidance for determining when an investment is
other-than-temporarily impaired, specifically when the investor has the ability
and intent to hold an investment until recovery.&nbsp; When originally issued this guidance was to
be effective for reporting periods beginning after June 15, 2004. In September
2004, the FASB decided to delay the effective date of the requirement to record
impairment losses caused by the effect of increases in interest rates or sector
spreads on debt securities subject to paragraph 16 of EITF 03-01 and to exclude
minor impairments from the requirement as well. Along with the delay, the scope
of the Task Force's consensus, which was limited to certain debt securities,
now includes all types of securities within the scope of EITF 03-01. The
disclosure requirements as presently prescribed by EITF 03-01 and SEC Staff
Accounting Bulletin No. 59, &quot;Accounting for Noncurrent Marketable Equity
Securities&quot; remain in effect for public companies until new guidance is issued
and becomes effective. Until such guidance is determined, the Company is unable
to determine the impact any such guidance would have on its results of
operations or financial condition.&nbsp; The
adoption of the proposed accounting literature could cause the Company: (i) to
recognize impairment losses in the Consolidated Statements of Income that are
not recognized currently; (ii) to recognize impairment losses, especially those
due to increases in interest rates, in earlier periods; and (iii) alter its recognition
of investment income on impaired securities.&nbsp;
Such an impact will likely increase earnings volatility in future
periods.&nbsp; However, since fluctuations in
the fair value for available-for-sale-securities are already recorded in
Accumulated Other Comprehensive Income, adoption of this standard in any form
is not expected to have a significant impact on stockholders' equity. </font>
</p>
<p style="margin-top: 0; margin-bottom: 0">&nbsp;</p>
<p align="center" style="margin-top: 0; margin-bottom: 0"><font size="2">34</font></p>
<p style="margin-top: 0; margin-bottom: 0"> </p><hr color="#000080"><P STYLE="page-break-after: always"></P>
<p style="margin-top: 0; margin-bottom: 0"><font size="2"><br clear=all>


Further information on the Company's investments is provided
in Item 2. &quot;Management's Discussion and Analysis of Financial Condition and
Results of Operations,&quot; on this Form 10-Q beginning on page 28 of this Form
10-Q. <br>
<br>On October 13, 2004, the FASB concluded
that the Proposed Statement 123R, &quot;Share-Based Payment&quot; (FAS 123R), which would
require all companies to measure compensation expense in the income statement
for all share-based payments (including employee stock options) at fair value,
would be effective for public companies for interim or annual periods beginning
after June 15, 2005. Retroactive application of the requirements of FAS 123
(not FAS 123R) to the beginning of the fiscal year that includes the effective
date would be permitted, but not required.&nbsp;
The Proposed Statement 123R is expected to be finalized either later
this year or in early 2005.&nbsp; The pro
forma results presented in Note 7 to the Consolidated Financial Statements on
this Form 10Q, page 10, are in accordance with the required disclosures under
FAS 148, and should provide for a reasonable approximation of the impact the
Proposed Statement 123R will have on the Company.<br>
<br>Also on October 13, 2004, the FASB ratified EITF Issue No. 04-8, &quot;The
Effect of Contingently Convertible Instruments on Diluted Earnings per
Share.&quot;&nbsp; As of September 30, 2004, the
Company treated its Senior Convertible Notes in accordance with the FASB
Statements of Financial Accounting Standards No. 128 &quot;Earnings per share.&quot;
Accordingly, the potentially convertible 3.9 million shares have been included
in diluted earnings per share calculation for Third Quarter and Nine Months
2004 based on the fact that the conditions of conversion were met for the
quarters ending March 31, 2004 (First Quarter 2004) and June 30, 2004 (Second
Quarter 2004), but excluded from the calculation for all previous periods for
which the contingency criteria was not met dating back to the date of issuance
in September 2002.&nbsp; However, on October
26, 2004, in accordance with the available provisions of the Indenture, the
Company's Board of Directors voted to permanently waive the stock price contingency
provision and as a result the potentially convertible shares will continue to
be included in the diluted earnings per share calculation until the bonds reach
maturity.&nbsp; EITF Issue No. 04-8, which
will require that convertible shares be included in the diluted earnings per
share calculation upon issuance of the instrument, is expected to become
effective for periods ending after December 15, 2004 and must be applied by
restating all periods during which the instrument was outstanding
regardless of whether the market price contingency was met or not. The
implementation of this guidance is not anticipated to have any impact on our
2004 diluted earnings per share calculation, but it is likely to result in the
restatement of our 2003 and 2002 diluted earnings per share calculations for
the inclusion of the aforementioned shares as well as the addition of related
interest expense to the calculation. </font></p>

<p style="margin-top: 0; margin-bottom: 0"><font size="2"><br>
<b><i>Off-Balance
Sheet Arrangements, Contractual Obligations and Contingent Liabilities and
Commitments<br></i></b>At September 30, 2004 and December 31, 2003, the Company 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.&nbsp; As such, the Company is not
exposed to any financing, liquidity, market or credit risk that could arise if
the Company had engaged in such relationships.<br>
<br>
Our future cash payments associated with 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, 2003.&nbsp; We
expect to have the capacity to repay and/or refinance these obligations as they
come due.<br>
<br>The senior convertible notes have a
contingent conversion feature that allows conversion of the notes when the
stock price has maintained a 20% premium to the conversion price of $29.29, or
$35.15, for 20 of 30 consecutive trading days ending on the last trading day of
such calendar quarter.&nbsp; As was previously
reported this contingency had been met as of the first and second quarters of
2004 and as such the holders were able to surrender notes for conversion into
shares of common stock, or cash, at the Company's option on any business day in
second and third quarters of 2004. As of the end of the Third Quarter
2004, no such conversions had occurred. The conditions of conversion were not
met at the end of the Third Quarter 2004.&nbsp;
However, on October 26, 2004, in accordance with the available
provisions of the Indenture, the Company's Board of Directors voted to
permanently waive
the stock price contingency provision. As a result, the Convertible Notes will
continue to be convertible into shares of common stock until their maturity. As a result of the notes being convertible
during the third quarter, 3.9 million shares have been added to our
diluted earnings per share calculation for Third Quarter 2004 and the Nine
Months 2004. We expect to have the
capacity to repay and/or refinance all of these obligations as they come due.</font><p style="margin-top: 0; margin-bottom: 0">&nbsp;<p align="center" style="margin-top: 0; margin-bottom: 0">
<font size="2">35<br>
<br>
</font>
<hr color="#000080"><P STYLE="page-break-after: always"></P>
<p style="margin-top: 0; margin-bottom: 0"><font size="2"><br clear=all>
We currently have available revolving lines of credit amounting to $45.0
million, under which no balances are outstanding as of either September 30,
2004 or December 31, 2003. We have issued no 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 Item 8. &quot;Financial Statements and Supplementary Data&quot;,
Note 17 to our consolidated financial statements in our Annual Report on Form
10-K for the year ended December 31, 2003.<br>
<br>
<b>ITEM 3.&nbsp; Quantitative and Qualitative Disclosures
About Market Risk<br></b>There have been no material changes in the
information about market risk set forth in our Annual Report on Form 10-K for
the year-ended December 31, 2003.<br>
<br><b>ITEM
4.&nbsp; Control and Procedures<br></b>The Company, under the supervision and with the participation of
Company's management, including its Chief Executive Officer and Chief Financial
Officer, evaluated the effectiveness of our disclosure controls and procedures
(as defined in Rule 13a-15(e) of the Exchange Act) as of the end of the period
covered by this report.&nbsp; Based on that
evaluation, the Chief Executive Officer and Chief Financial Officer concluded
that the disclosure controls and procedures were effective as of the end of the
period covered by this report.<br>
<br>
No change in the Company's internal control over financial reporting (as
defined in Rule 13a-15(f) of the Exchange Act) occurred during the Third
Quarter 2004 that materially affected, or is reasonably likely to materially
affect, the Company's internal control over financial reporting.<br>
<br>
<b>PART II&nbsp; Other Information<br>
<br>Item 1.&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; Legal
Proceedings<br></b>Like other companies in the insurance business, the Company is
routinely party to litigation.&nbsp; The
Company does not believe that any pending litigation will have a material
adverse effect on its financial condition, results of operations, or liquidity.<br>
<br>
Three of the Company's subsidiaries, Consumer Health Network Plus, LLC (CHN),
Alta Services, LLC (Alta) and Selective Insurance Company of America (SICA),
were named as defendants, together with ten other unrelated parties, in <u>Berlin
Medical Associates PA, et al. v. CMI New Jersey Operating Corp., et al</u>, a
purported class action filed on May 21, 2003, by several non-hospital health
care providers in the Superior Court of New Jersey, Law Division - Camden
County.<br>
<br>
The lawsuit alleges that the defendants breached the terms of their
participating provider agreements and/or the terms of New Jersey automobile
personal injury protection policies by reducing payments for plaintiffs'
services pursuant to provider discount schedules when paying claims and were
unjustly enriched.&nbsp; The complaint does not specify monetary damages.&nbsp; The defendants,
including CHN, Alta, and SICA, are vigorously defending this lawsuit and,
together with the other defendants, filed a motion to dismiss.&nbsp; After a hearing on the motion, the court
ordered the plaintiffs to amend their complaint.&nbsp; In March 2004, the plaintiffs filed an
amended complaint, which no longer named Alta as a defendant.&nbsp; In May 2004, all remaining defendants,
including CHN and SICA, moved to dismiss the amended complaint.&nbsp; In July, they also filed a motion to dismiss
the class action allegations.&nbsp; The court
has scheduled arguments on both such motions in January 2005.<br>
<br>
Given the early stages of the litigation, it is extremely difficult to provide
a meaningful estimate or range of any potential loss.&nbsp; CHN and SICA will continue to vigorously
defend the case.&nbsp; At this time, however,
the Company believes that, should the case ultimately be decided unfavorably,
it would not have a material adverse effect on the Company's financial
condition, results of operations, or liquidity.<br>
<br>
One of the Company's insurance subsidiaries, Selective Insurance Company of the
Southeast (SISE), is one of nine property and casualty insurance company
defendants in <u>Howell et all v. State Farm et al</u>., a purported class
action filed on May 18, 2004 in the United States District Court for the
District of Maryland, Baltimore Division.&nbsp;
The court has not yet ruled on class certification.&nbsp; The plaintiffs hold Standard Flood Insurance
Policies (SFIP) issued by the defendant insurers, who are participants in the
Write Your Own (WYO) Program of the Federal Insurance Administration's (FIA)
National Flood Insurance Program (&quot;NFIP&quot;).&nbsp;
The FIA is an agency within the Federal Emergency Management Administration
(FEMA).&nbsp; All claims under SFIPs are 100%
reinsured by FEMA.<br>
</font></p>
<p align="center" style="margin-top: 0; margin-bottom: 0"><font size="2">36<br>
</font></p>
<hr color="#000080"><P STYLE="page-break-after: always"></P>
<p style="margin-top: 0; margin-bottom: 0"><font size="2"><br clear=all>
The suit alleges that the insurers underpaid flood claims arising from
Hurricane Isabel in breach of their contractual obligations, fiduciary duties,
and the implied covenant of good faith and fair dealing and seeks damages.&nbsp;
The complaint does not specify monetary damages.&nbsp; The insurers, including SISE, have denied the
allegations, noting that they adjusted the claims as fiduciary agents of the
U.S. Government in accordance with specific federal guidelines.&nbsp; The insurers also have filed a motion to
dismiss certain of the claims, which the court has not yet decided. <br>
<br>
Given the early stages of the litigation, it is extremely difficult to provide
a meaningful estimate or range of any potential loss.&nbsp; FEMA's Office of the General Counsel, however,
has advised the defendant carriers that, in its opinion, the claims were
adjusted in accordance with the law and that FEMA will indemnify and reimburse
the defense costs of the defendant insurers, including SISE.&nbsp; Consequently, the Company believes that its
exposure in the case is minimal.&nbsp; </font></p>
<p style="margin-top: 0; margin-bottom: 0"> </p>

<p style="margin-top: 0; margin-bottom: 0"><b><font size="2"><br>
Item 2.&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; Unregistered Sales of Equity Securities
and Use of Proceeds <br>
<br></font>
</b><font size="2">(a)&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; Recent
Sales of Unregistered Securities: None</font></p>



<p style="margin-top: 0; margin-bottom: 0"><font size="2">(b)&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; Use of Proceeds: None</font></p>



<p style="margin-top: 0; margin-bottom: 0"><font size="2">(c)&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; Purchases of Equity Securities by
Issuer and Affiliated Purchases:</font></p>



<p style="margin-top: 0; margin-bottom: 0">&nbsp;</p>
<p style="margin-top: 0; margin-bottom: 0"><font size="2">The table below sets forth
information regarding the purchase by the Company of our common stock during
the periods indicated:<br></font></p>

<table border=0 cellspacing=0 cellpadding=0>
 <tr>
  <td width=125 valign=top>

  </td>
  <td width=10 valign=top>

  </td>
  <td width=96 valign=top>

  </td>
  <td width=10 valign=top>

  </td>
  <td width=96 valign=top>

  </td>
  <td width=18 valign=top>

  </td>
  <td width=96 valign=top>
  <p align=center><b><font size="1">Total Number of</font></b></p>
  </td>
  <td width=10 valign=top>

  </td>
  <td width=168 valign=top>
  <p align=center><b><font size="1">Maximum Number</font></b></p>
  </td>
 </tr>
 <tr>
  <td width=125 valign=top>

  </td>
  <td width=10 valign=top>

  </td>
  <td width=96 valign=top>

  </td>
  <td width=10 valign=top>

  </td>
  <td width=96 valign=top>

  </td>
  <td width=18 valign=top>

  </td>
  <td width=96 valign=top>
  <p align=center><b><font size="1">Shares Purchased</font></b></p>
  </td>
  <td width=10 valign=top>

  </td>
  <td width=168 valign=top>
  <p align=center><b><font size="1">of&nbsp; Shares that May Yet</font></b></p>
  </td>
 </tr>
 <tr>
  <td width=125 valign=top>

  </td>
  <td width=10 valign=top>

  </td>
  <td width=96 valign=top>
  <p align=center><b><font size="1">Total Number of</font></b></p>
  </td>
  <td width=10 valign=top>

  </td>
  <td width=96 valign=top>
  <p align=center><b><font size="1">Average Price Paid</font></b></p>
  </td>
  <td width=18 valign=top>

  </td>
  <td width=96 valign=top>
  <p align=center><b><font size="1">as Part of Publicly</font></b></p>
  </td>
  <td width=10 valign=top>

  </td>
  <td width=168 valign=top>
  <p align=center><b><font size="1">Be Purchased Under the</font></b></p>
  </td>
 </tr>
 <tr>
  <td width=125 valign=top>
  <p><b><font size="1">Period</font></b></p>
  </td>
  <td width=10 valign=top>

  </td>
  <td width=96 valign=top>
  <p align=center><b><font size="1">Shares Purchased<sup>1</sup></font></b></p>
  </td>
  <td width=10 valign=top>

  </td>
  <td width=96 valign=top>
  <p align=center><b><font size="1">Per Share</font></b></p>
  </td>
  <td width=18 valign=top>

  </td>
  <td width=96 valign=top>
  <p align=center><b><font size="1">Announced Plans</font></b></p>
  </td>
  <td width=10 valign=top>

  </td>
  <td width=168 valign=top>
  <p align=center><b><font size="1">Announced Plans </font></b> </p>
  </td>
 </tr>
 <tr>
  <td width=125 valign=top>

  </td>
  <td width=10 valign=top>

  </td>
  <td width=96 valign=top>

  </td>
  <td width=10 valign=top>

  </td>
  <td width=96 valign=top>

  </td>
  <td width=18 valign=top>

  </td>
  <td width=96 valign=top>
  <p align=center><b><font size="1">or Programs</font></b></p>
  </td>
  <td width=10 valign=top>

  </td>
  <td width=168 valign=top>
  <p align=center><b><font size="1">or Programs<sup>2</sup></font></b></p>
  </td>
 </tr>
 <tr>
  <td width=125 valign=top>

  </td>
  <td width=10 valign=top>

  </td>
  <td width=96 valign=top>
  <div align=center><b>
  <hr size=1 width="100%" noshade color=black align=center>
  </b></div>
  </td>
  <td width=10 valign=top>

  </td>
  <td width=96 valign=top>
  <div align=center><b>
  <hr size=1 width="100%" noshade color=black align=center>
  </b></div>
  </td>
  <td width=18 valign=top>

  </td>
  <td width=96 valign=top>
  <div align=center><b>
  <hr size=1 width="100%" noshade color=black align=center>
  </b></div>
  </td>
  <td width=10 valign=top>

  </td>
  <td width=168 valign=top>
  <div align=center><b>
  <hr size=1 width="100%" noshade color=black align=center>
  </b></div>
  </td>
 </tr>
 <tr>
  <td width=125 valign=top>
  <p><font size="1">July 1-31, 2004</font></p>
  </td>
  <td width=10 valign=top>

  </td>
  <td width=96 valign=top>
  <p align=right><font size="1">-&nbsp;</font></p>
  </td>
  <td width=10 valign=top>

  </td>
  <td width=96 valign=top>
  <p align=right><font size="1">-&nbsp;</font></p>
  </td>
  <td width=18 valign=top>

  </td>
  <td width=96 valign=top>
  <p align=right><font size="1">-&nbsp;</font></p>
  </td>
  <td width=10 valign=top>

  </td>
  <td width=168 valign=top>
  <p align=right><font size="1">2,500,000&nbsp;</font></p>
  </td>
 </tr>
 <tr>
  <td width=125 valign=top>
  <p><font size="1">August 1-31, 2004</font></p>
  </td>
  <td width=10 valign=top>

  </td>
  <td width=96 valign=top>
  <p align=right><font size="1">147,557&nbsp;</font></p>
  </td>
  <td width=10 valign=top>

  </td>
  <td width=96 valign=top>
  <p align=right><font size="1">35.04&nbsp;</font></p>
  </td>
  <td width=18 valign=top>

  </td>
  <td width=96 valign=top>
  <p align=right><font size="1">141,199&nbsp;</font></p>
  </td>
  <td width=10 valign=top>

  </td>
  <td width=168 valign=top>
  <p align=right><font size="1">2,358,801&nbsp;</font></p>
  </td>
 </tr>
 <tr>
  <td width=125 valign=top>
  <p><font size="1">September 1-30, 2004</font></p>
  </td>
  <td width=10 valign=top>

  </td>
  <td width=96 valign=top>
  <p align=right><font size="1">1,063&nbsp;</font></p>
  </td>
  <td width=10 valign=top>

  </td>
  <td width=96 valign=top>
  <p align=right><font size="1">36.29&nbsp;</font></p>
  </td>
  <td width=18 valign=top>

  </td>
  <td width=96 valign=top>
  <p align=right><font size="1">-&nbsp;</font></p>
  </td>
  <td width=10 valign=top>

  </td>
  <td width=168 valign=top>
  <p align=right><font size="1">2,358,801&nbsp;</font></p>
  </td>
 </tr>
 <tr>
  <td width=125 valign=top>
  <p><b><font size="1">Total</font></b></p>
  </td>
  <td width=10 valign=top>

  </td>
  <td width=96 valign=top>
  <p align=right><font size="1">148,620&nbsp;</font></p>
  </td>
  <td width=10 valign=top>
  <p><font size="1">$</font></p>
  </td>
  <td width=96 valign=top>
  <p align=right><font size="1">35.05&nbsp;</font></p>
  </td>
  <td width=18 valign=top>

  </td>
  <td width=96 valign=top>
  <p align=right><font size="1">141,199&nbsp;</font></p>
  </td>
  <td width=10 valign=top>

  </td>
  <td width=168 valign=top>

  </td>
 </tr>
</table>



<table border=0 cellspacing=0 cellpadding=0 width=629>
 <tr>
  <td width=629 valign=top>
  <div align=center><b>
  <hr size=1 width="100%" noshade color=black align=center>
  </b></div>
  </td>
 </tr>
 <tr>
  <td width=629 valign=top>
  <p style="margin-top: 0; margin-bottom: 0"><font size="1"><sup>1</sup>&nbsp;&nbsp;&nbsp; The Third Quarter included 3,161 shares purchased from employees in
  connection with the vesting of restricted stock.&nbsp; The Company also purchased 4,260 shares
  from employees in connection with stock option exercises.&nbsp;&nbsp;&nbsp; These shares were not purchased as part
  of the publicly announced program.&nbsp; The
  shares were purchased at the closing price of the Company's common stock on
  the dates of the purchases.</font></p>
  <p style="margin-top: 0; margin-bottom: 0">&nbsp;</p>
  </td>
 </tr>
 <tr>
  <td width=629 valign=top>
  <p style="margin-top: 0; margin-bottom: 0"><font size="1"><sup>2&nbsp;</sup>&nbsp;&nbsp; On November 4, 2003 the Board of Directors authorized a 2.5
  million-share repurchase program scheduled to expire on November 30, 2005,
  which was publicly announced on November 5, 2003. In August of 2004, the
  Company repurchased 141,199 shares.</font></p>
  </td>
 </tr>
</table>

<p style="margin-top: 0; margin-bottom: 0"><font size="2"><br>
<b>Item 3.&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; Defaults Upon Senior Securities -
None<br>
<br>
Item 4.&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; Submission of Matters
to a Vote of Security Holders - None<br>
<br>
Item 5.&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; Other Information - <br>
<br></b>Following the end of the Third Quarter 2004, the New York Attorney
General (&quot;NYAG&quot;) filed a civil complaint against Marsh, Inc., an insurance
brokerage firm, and its parent, Marsh &amp; McLennan Companies, Inc.
(collectively, &quot;Marsh&quot;), for alleged bid rigging and price fixing.&nbsp; The NYAG has also questioned the business
practices of several of our national competitors and is investigating these
issues further.&nbsp; The NYAG has challenged
Marsh for advising clients and receiving fees as an insurance broker while
simultaneously receiving compensation from insurance companies for the
placement of the clients' business under marketing services agreements that
were undisclosed to the clients.&nbsp;
Regulators in other states subsequently announced investigations and
other reviews of the insurance industry.&nbsp;
These reviews are ongoing and the Company cannot estimate the scope or
breadth of the issues that may be investigated, their results, or timeframe in
which the reviews might be completed.&nbsp;
The Company also cannot predict the impact, if any, that these
investigations and reviews may have on its business or the property and casualty
insurance industry generally.&nbsp; <br>
</font>
<p align="center"><font size="2">37<br>
</font>
<hr color="#000080"><P STYLE="page-break-after: always"></P>
<p style="margin-top: 0; margin-bottom: 0"><font size="2"><br clear=all>
Since its inception in 1926, the Company has distributed almost 100% of its
insurance products through non-exclusive independent insurance agents.&nbsp; The Company has agency agreements with the
independent insurance agents it appoints.&nbsp;
By law and Company practice, the independent insurance agents must be
licensed by the states in which they do business.&nbsp; Independent agents are not obligated to
promote the Company's insurance products and they also may and do sell our competitors'
insurance products.&nbsp; The Company does not
distribute its products through insurance brokerages, such as Marsh, nor does
it use marketing services agreements.&nbsp;
Through its agency agreements, the Company also restricts the ability of
its appointed independent agents to receive compensation from other sources for
writing business with the Company.&nbsp; <br>
<br>
The Company, pursuant to its agency agreements, pays independent agents
commissions for the business they write with the Company.&nbsp; The general commission structure paid on each
policy is disclosed as part of the Company's public rate filings made in the
states where we write insurance business.&nbsp;
The Company also pays additional commission based on the annual underwriting
results and growth of an agent's entire book of business -not specific
individual accounts - with the Company. <br>
<br>
</font>
<b><font size="2">Item 6.&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; Exhibits and Reports on Form 8-K<br>
</font></b></p>
<p style="margin-top: 0; margin-bottom: 0"><font size="2">(a)&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; Exhibits:</font></p>

<p style="margin-top: 0; margin-bottom: 0"><font size="2">The exhibits required by Item 601 of Regulation S-K are
listed in the Exhibit Index, which immediately precedes the exhibits filed with this Form
10-Q. <br></font></p>

<p style="margin-top: 0; margin-bottom: 0"><font size="2">(b)&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; Reports
on Form 8-K:</font></p>

<p style="margin-top: 0; margin-bottom: 0"><font size="2">On July 27, 2004, the Company
furnished a report on Form 8-K under Item 12 thereof with respect to the
issuance of a press release announcing its financial results for the quarter
and year ended June 30, 2004.&nbsp; The
Company's press release dated July 27, 2004 was attached as Exhibit 99.1.<br>
</font></p>
<p align="center" style="margin-top: 0; margin-bottom: 0"><font size="2">38<br>
</font></p><hr color="#000080"><P STYLE="page-break-after: always"></P><font size="2"><br clear=all>
<br><br></font></p>

<p align=center><b><font size="2">SIGNATURES<br>
<br><br></font></b></p>

<p><font size="2"><br>
<br>
Pursuant to the requirements of Section 13 or 15(d) 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.<br>
<br>
<br></font><b><font size="2">SELECTIVE INSURANCE GROUP, INC.<br>Registrant<br>
<br>
<br><br></font></b></p>

<table border=0 cellspacing=0 cellpadding=0>
 <tr>
  <td width=298 valign=top>
  <p><font size="2">Date: November 5, 2004</font></p>
  </td>
  <td width=321 valign=top>
  <p><u><font size="2">By:&nbsp; /s/ Gregory
  E. Murphy</font></u></p>
  </td>
 </tr>
 <tr>
  <td width=298 valign=top>

  </td>
  <td width=321 valign=top>
  <p><font size="2">Gregory E. Murphy</font></p>
  </td>
 </tr>
 <tr>
  <td width=298 valign=top>

  </td>
  <td width=321 valign=top>
  <p><font size="2">Chairman, President and Chief Executive Officer</font></p>
  </td>
 </tr>
 <tr>
  <td width=298 valign=top>

  </td>
  <td width=321 valign=top>

  </td>
 </tr>
 <tr>
  <td width=298 valign=top>

  </td>
  <td width=321 valign=top>

  </td>
 </tr>
 <tr>
  <td width=298 valign=top>

  </td>
  <td width=321 valign=top>

  </td>
 </tr>
 <tr>
  <td width=298 valign=top>

  </td>
  <td width=321 valign=top>

  </td>
 </tr>
 <tr>
  <td width=298 valign=top>
  <p><font size="2"><br>
  <br>
  Date: November 5, 2004</font></p>
  </td>
  <td width=321 valign=top>
  <p><u><font size="2"><br>
  <br>
  By:&nbsp; /s/ Dale A. Thatcher</font></u></p>
  </td>
 </tr>
 <tr>
  <td width=298 valign=top>

  </td>
  <td width=321 valign=top>
  <p><font size="2">Dale A. Thatcher</font></p>
  </td>
 </tr>
 <tr>
  <td width=298 valign=top>

  </td>
  <td width=321 valign=top>
  <p><font size="2">Executive Vice President of
  Finance, Chief Financial Officer and Treasurer</font></p>
  </td>
 </tr>
</table>

<p><font size="2"><br>
<br>
<br>
<br>
<br><br></font></p>

</div><hr color="#000080"><P STYLE="page-break-after: always"></P><font size="2"><br clear=all>


</font>


<div>

<p><font size="2"><br>
</font>
<b><font size="2">SELECTIVE
INSURANCE GROUP, INC.<br>
<br>
<br>
<br><br></font></b></p>

<p align=center><b><font size="2">INDEX TO EXHIBITS<br><br></font></b></p>

<p><font size="2"><br>
&nbsp;</font></p>

<table border=0 cellspacing=0 cellpadding=0>
 <tr>
  <td width=84 valign=top>
  <p style="margin-top: 0; margin-bottom: 0"><font size="2">Exhibit No.</font></p>
  </td>
  <td width=601 valign=top>
  <h2 style="margin-top: 0; margin-bottom: 0"><b><font size="2">&nbsp;</font></b></h2>
  </td>
 </tr>
 <tr>
  <td width=84 valign=top>
  <p><font size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; 10</font></p>
  </td>
  <td width=601 valign=top>
  <p><font size="2">Material Contracts</font></p>
  </td>
 </tr>
 <tr>
  <td width=84 valign=top>
  <p><font size="2">*&nbsp;&nbsp; 10.1</font></p>
  </td>
  <td width=601 valign=top>
  <p><font size="2">Form of Incentive Stock Option Grant Agreement (Stock
  Option Plan III).</font></p>
  </td>
 </tr>
 <tr>
  <td width=84 valign=top>
  <p><font size="2">*&nbsp;&nbsp; 10.2</font></p>
  </td>
  <td width=601 valign=top>
  <p><font size="2">Form of Nonqualified Stock Option Grant Agreement (Stock
  Option Plan III).</font></p>
  </td>
 </tr>
 <tr>
  <td width=84 valign=top>
  <p><font size="2">*&nbsp;&nbsp; 10.3</font></p>
  </td>
  <td width=601 valign=top>
  <p><font size="2">Form of Restricted Stock Award Agreement (Executive
  Officers) (Stock Option Plan III).</font></p>
  </td>
 </tr>
 <tr>
  <td width=84 valign=top>
  <p><font size="2">*&nbsp;&nbsp; 10.4</font></p>
  </td>
  <td width=601 valign=top>
  <p><font size="2">Form of Restricted Stock Award Agreement (Stock Option
  Plan III).</font></p>
  </td>
 </tr>
 <tr>
  <td width=84 valign=top>
  <p><font size="2">*&nbsp;&nbsp; 10.5</font></p>
  </td>
  <td width=601 valign=top>
  <p><font size="2">Form of Stock Option Agreement (Stock Option Plan for
  Directors).</font></p>
  </td>
 </tr>
 <tr>
  <td width=84 valign=top>
  <p><font size="2">*&nbsp;&nbsp; 10.6</font></p>
  </td>
  <td width=601 valign=top>
  <p><font size="2">Termination Agreement dated July 27, 2004 between
  Selective Insurance Company of America </font> </p>
  </td>
 </tr>
 <tr>
  <td width=84 valign=top>

  </td>
  <td width=601 valign=top>
  <p><font size="2">and Michael H. Lanza.</font></p>
  </td>
 </tr>
 <tr>
  <td width=84 valign=top>
  <p><font size="2">*&nbsp;&nbsp; 11</font></p>
  </td>
  <td width=601 valign=top>
  <p><font size="2">Statement Re: Computation of Per Share Earnings.</font></p>
  </td>
 </tr>
 <tr>
  <td width=84 valign=top>
  <p><font size="2">*&nbsp;&nbsp; 31.1</font></p>
  </td>
  <td width=601 valign=top>
  <p><font size="2">Certification of Chief Executive Officer pursuant to
  Section 302 of the Sarbanes-Oxley Act of 2002.</font></p>
  </td>
 </tr>
 <tr>
  <td width=84 valign=top>
  <p><font size="2">*&nbsp;&nbsp; 31.2</font></p>
  </td>
  <td width=601 valign=top>
  <p><font size="2">Certification of Chief Financial Officer pursuant to
  Section 302 of the Sarbanes-Oxley Act of 2002.</font></p>
  </td>
 </tr>
 <tr>
  <td width=84 valign=top>
  <p><font size="2">*&nbsp;&nbsp; 32.1</font></p>
  </td>
  <td width=601 valign=top>
  <p><font size="2">Certification of Chief Executive Officer pursuant to
  Section 906 of the Sarbanes-Oxley Act of 2002.</font></p>
  </td>
 </tr>
 <tr>
  <td width=84 valign=top>
  <p><font size="2">*&nbsp;&nbsp; 32.2</font></p>
  </td>
  <td width=601 valign=top>
  <p><font size="2">Certification of Chief Financial Officer pursuant to
  Section 906 of the Sarbanes-Oxley Act of 2002.</font></p>
  </td>
 </tr>
</table>





<p>&nbsp;</p>
<p><u><font size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; <br>
</font>
</u><font size="2">* Filed herewith</font><br><br></p>

</div>

</body>

</html>

</TEXT>
</DOCUMENT>
<DOCUMENT>
<TYPE>EX-10
<SEQUENCE>2
<FILENAME>exhibit101.htm
<DESCRIPTION>EXHIBIT 10.1
<TEXT>
<html>

<head>

<title>exhibit101</title>

</head>

<body>

<div>

<p align=right>
<font face="Times New Roman"><b>Exhibit 10.1</b></font></p>

<p align=center>
<font face="Times New Roman">SELECTIVE INSURANCE
GROUP, INC.<br>
STOCK OPTION PLAN III<br>
<br>
INCENTIVE STOCK OPTION GRANT<br>
<br><br></font></p>

<p><font face="Times New Roman">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; THIS DOCUMENT EVIDENCES
A INCENTIVE STOCK OPTION GRANT (the &quot;Grant&quot;), effective the _____day of
__________, 200_(the
&quot;Grant Date&quot;), from Selective Insurance Group, Inc., a New Jersey corporation
(the &quot;Company&quot;), to _______________(the
&quot;Grantee&quot;), an employee of the Company or of a &quot;Related Corporation,&quot; as
defined in the Selective Insurance Stock Option Plan III (the &quot;Plan&quot;).<br><br>
</font></p>

<p align=center>
<font face="Times New Roman"><b>WITNESSETH THAT:<br><br></b></font></p>

<p><font face="Times New Roman">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; WHEREAS, the Company has
adopted the Selective Insurance Stock Option Plan III; and<br>
<br>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; WHEREAS, the
Employee has been designated by the Committee, as defined in the Plan (the
&quot;Committee&quot;), as an employee to whom an incentive stock option award is to be
made under the Plan subject to the terms and conditions of this grant document;
<br>
<br>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; NOW THEREFORE, the
Company hereby grants to the Grantee, subject to the terms and conditions
hereinafter set forth an Incentive Stock Option Award (the &quot;Award&quot;).&nbsp; The Award shall be subject to the terms and conditions
of the Plan and this Grant, the Employee, by accepting the option, agrees to be
bound by the provisions hereof and the provisions of the Plan with respect to
the Grant.<br>
<br>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; 1.&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; <b>Grant
of Option.</b>&nbsp; The Company hereby grants
to the Grantee the right and option (the &quot;Option&quot;) to purchase all or any part
of an aggregate of <u>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; </u>&nbsp;shares of the Company's common stock
(&quot;Shares&quot;).&nbsp; The Option is in all
respects limited and conditioned as hereinafter provided, and is subject in all
respects to the terms and conditions of the Plan now in effect and as it may be
amended from time to time (but only to the extent that such amendments apply to
outstanding options).&nbsp; Such terms and
conditions are incorporated herein by reference, made a part hereof, and shall
control in the event of any conflict with any other terms of this Award
Agreement.&nbsp; The Option granted hereunder
is intended to be an incentive stock option (&quot;ISO&quot;) meeting the requirements of
the Plan and section 422 of the Internal Revenue Code of 1986,
as amended (the &quot;Code&quot;), and not a nonqualified stock option (&quot;NQSO&quot;). <br>
<br>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; 2.&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; <b>Exercise
Price</b>.&nbsp; The exercise price of the
Shares covered by this Option shall be $<u>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; </u>
per Share.&nbsp; It is the determination of
the Committee that on the Grant Date the exercise price was not less than 100%
of the &quot;Fair Market Value&quot; (as defined in the Plan) of a Share.<br>
</font><font face="Times New Roman"><hr color="#000080"><P STYLE="page-break-after: always"></P><br clear=all>
<br>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; 3.&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; <b>Term.</b>&nbsp; Unless earlier terminated pursuant to any
provision of the Plan or of this Award Agreement, this Option shall expire at 4 p.m. Eastern Time on __________,
20__ (the &quot;Expiration
Date&quot;), which date is not more than 10 years from the Grant Date. This Option
shall not be exercisable after the Expiration Date.<br>
<br>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; 4.&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; <b>Exercise
of Option</b>.&nbsp; The right to purchase the
Shares subject to this Option shall accrue immediately.<br>
<br>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; 5.&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; <b>Method
of Exercising Option</b>.&nbsp; Subject to the
terms and conditions of this Award Agreement and the Plan, the Option may be
exercised by written notice to the Company at its principal office, which is
presently located at 40 Wantage
  Avenue, Branchville, New Jersey 07890.&nbsp; Such notice shall state the election to
exercise the Option and the number of whole Shares with respect to which it is
being exercised; shall be signed by the person or persons so exercising the
Option; shall be accompanied by payment of the full exercise price of such
Shares.&nbsp; Only full Shares will be
issued.&nbsp; <br>
<br>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; The exercise price
shall be paid to the Company - <br><br></font></p>
<p></p>

<table border=0 cellspacing=0 cellpadding=0>
 <tr>
  <td width=98 valign=top>

  <p>

  </td>
  <td width=48 valign=top>
  <p><font face="Times New Roman">(a)</font></p>
  </td>
  <td width=493 valign=top>
  <p><font face="Times New Roman">in cash, or by certified check,
  bank draft, or money order;<br><br></font></p>
  </td>
 </tr>
 <tr>
  <td width=98 valign=top>

  <p>

  </td>
  <td width=48 valign=top>
  <p><font face="Times New Roman">(b)</font></p>
  </td>
  <td width=493 valign=top>
  <p><font face="Times New Roman">by delivering Shares previously
  acquired;<br><br></font></p>
  </td>
 </tr>
 <tr>
  <td width=98 valign=top>

  <p>

  </td>
  <td width=48 valign=top>
  <p><font face="Times New Roman">(c)</font></p>
  </td>
  <td width=493 valign=top>
  <p><font face="Times New Roman">by delivering a properly
  executed notice of exercise of the Option to the Company and a broker, with
  irrevocable instructions to the broker promptly to deliver to the Company the
  amount of sale or loan proceeds necessary to pay the exercise price of the
  Option;<br><br></font></p>
  </td>
 </tr>
 <tr>
  <td width=98 valign=top>

  <p>

  </td>
  <td width=48 valign=top>
  <p><font face="Times New Roman">(d)</font></p>
  </td>
  <td width=493 valign=top>
  <p><font face="Times New Roman">in any combination of (a), (b)
  or (c) above.</font></p>
  </td>
 </tr>
</table>

<p><font face="Times New Roman"><br>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; In the event the
exercise price is paid, in whole or in part, with Shares, the portion of the
exercise price so paid shall be equal to the Fair Market Value of the Shares
surrendered on the date of exercise.<br>
<br>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; Provided the
provisions of Section 10.3 of the Plan have been met, as soon as practicable
after the receipt of notice of exercise and payment, the Company shall
establish a book entry share account in the name of the Grantee and shall issue
said Shares to the Grantee.&nbsp; If the
Grantee delivers a properly executed notice of exercise of the Option to the
Company and a broker, with irrevocable instructions to the broker to promptly
deliver to the Company the amount of sale or loan proceeds necessary to pay the
exercise price of the Option, the Company shall issue said Shares to the
Grantee and arrange to deliver the Shares directly to the broker.&nbsp; When issued, the Shares shall be fully paid
and non-assessable.<br>
<br>
</font><font face="Times New Roman"><hr color="#000080"><P STYLE="page-break-after: always"></P><br clear=all>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; Such shares shall
be registered in the name of the person so exercising the Option (or, if the
Option is exercised by the Grantee and if the Grantee so requests in the notice
exercising the Option, shall be registered in the name of the Grantee and the
Grantee's spouse, jointly, with right of survivorship), and shall be delivered
as provided above to, or upon the written order of, the person exercising the
Option.&nbsp; In the event the Option is
exercised by any person after the death or &quot;Disability&quot; (as defined in the
Plan) of the Grantee, the notice shall be accompanied by appropriate proof of
the right of such person to exercise the Option.&nbsp; All Shares that are purchased upon exercise
of the Option as provided herein shall be fully paid and non-assessable.<br>
<br>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; 6.&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; <b>Non-Transferability
of Option</b>.&nbsp; This Option is not
assignable or transferable, in whole or in part, by the Grantee other than by
will or by the laws of descent and distribution.&nbsp; <br>
<br>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; 7.&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; <b>Termination
of Employment</b>.&nbsp; If the Grantee's
employment with the Company and all &quot;Related Corporations&quot; (as defined in the
Plan) is terminated for any reason other than Cause,death or
Disability prior to the Expiration Date, this Option may be exercised, to the
extent of the number of Shares with respect to which the Grantee could have
exercised it on the date of such termination of employment, or to any greater
extent permitted by the Committee in its discretion, by the Grantee at any time
prior to the earlier of (i) the Expiration Date, or (ii) three months after
such termination of employment.<br>
<br>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; 8.&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; <b>Disability.</b>&nbsp; If the Grantee incurs a Disability during his
or her employment, this Option may be exercised, to the extent of the number of
Shares with respect to which the Grantee could have exercised it on the date of
such Disability, or to any greater extent permitted by the Committee in its
discretion, by the Grantee (or by the Grantee's legal representative) at any
time prior to the earlier of (i) the Expiration Date, or (ii) one year after
such Disability.<br>
<br>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; 9.&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; <b>Death.</b>&nbsp; If the Grantee dies during his or her employment
and prior to the Expiration Date, or if the Grantee's employment is terminated
for any reason (as described in Paragraphs 7 and 8 and the Grantee dies
following his or her termination of employment but prior to the earliest of (i)
the Expiration Date, (ii) the expiration of the period determined under
Paragraphs&nbsp;7 or 8, or (iii) three months following the Grantee's
termination of employment, this Option may be exercised, to the extent of the
number of Shares with respect to which the Grantee could have exercised it on
the date of his or her death, or to any greater extent permitted by the
Committee in its discretion, by the Grantee's estate, personal representative,
or beneficiary who acquired the right to exercise this Option by bequest or
inheritance or by reason of the Grantee's death, at any time prior to the
earlier of (i) the Expiration Date, or (ii) one year after the date of the
Grantee's death.<br>
<br>
</font>
<p><font face="Times New Roman"><hr color="#000080"><P STYLE="page-break-after: always"></P><br clear=all>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; 10.&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; <b>Cause.</b>&nbsp; Notwithstanding any other provision of this
Award Agreement to the contrary, if a Grantee's employment with the Company and
all Related Corporations is terminated for Cause (as defined below), all
unexercised Options shall be forfeited immediately and automatically as of the
date of such termination of employment.&nbsp;
For purposes of this Award Agreement, Cause means the Grantee has:<br><br>
</font></p>
<p></p>

<table border=0 cellspacing=0 cellpadding=0>
 <tr>
  <td width=98 valign=top>
  <p>&nbsp;</td>
  <td width=48 valign=top>
  <p><font face="Times New Roman">(a)</font></p>
  </td>
  <td width=493 valign=top>
  <p><font face="Times New Roman">failed to perform his or her stated duties
  satisfactorily and not cured such failure (if curable) within 15 days of his
  or her receipt of written notice of the failure;<br><br></font></p>
  </td>
 </tr>
 <tr>
  <td width=98 valign=top>
  <p>&nbsp;</td>
  <td width=48 valign=top>
  <p><font face="Times New Roman">(b)</font></p>
  </td>
  <td width=493 valign=top>
  <p><font face="Times New Roman">been dishonest;<br><br>
  </font></p>
  </td>
 </tr>
 <tr>
  <td width=98 valign=top>

  <p>

  </td>
  <td width=48 valign=top>
  <p><font face="Times New Roman">(c)</font></p>
  </td>
  <td width=493 valign=top>
  <p><font face="Times New Roman">disregarded or disobeyed an express
  direction from a member of the Board of Directors or an executive officer of
  the Company or a Related Corporation;<br><br></font></p>
  </td>
 </tr>
 <tr>
  <td width=98 valign=top>

  <p>

  </td>
  <td width=48 valign=top>
  <p><font face="Times New Roman">(d)</font></p>
  </td>
  <td width=493 valign=top>
  <p><font face="Times New Roman">engaged in willful misconduct;<br><br>
  </font></p>
  </td>
 </tr>
 <tr>
  <td width=98 valign=top>

  <p>

  </td>
  <td width=48 valign=top>
  <p><font face="Times New Roman">(e)</font></p>
  </td>
  <td width=493 valign=top>
  <p><font face="Times New Roman">engaged in a breach of fiduciary duty
  involving personal profit;<br><br></font></p>
  </td>
 </tr>
 <tr>
  <td width=98 valign=top>

  <p>

  </td>
  <td width=48 valign=top>
  <p><font face="Times New Roman">(f)</font></p>
  </td>
  <td width=493 valign=top>
  <p><font face="Times New Roman">violated any law, rule, or regulation, or
  final cease-and-desist order (other than traffic violations or similar
  offenses);<br><br></font></p>
  </td>
 </tr>
 <tr>
  <td width=98 valign=top>

  <p>

  </td>
  <td width=48 valign=top>
  <p><font face="Times New Roman">(g)</font></p>
  </td>
  <td width=493 valign=top>
  <p><font face="Times New Roman">been disloyal toward the Company or a
  Related Corporation; or <br><br></font></p>
  </td>
 </tr>
 <tr>
  <td width=98 valign=top>

  <p>

  </td>
  <td width=48 valign=top>
  <p><font face="Times New Roman">(h)</font></p>
  </td>
  <td width=493 valign=top>
  <p><font face="Times New Roman">engaged in other misconduct such a that the
  continuation of the Grantee's status as an employee is determined by the
  Company to be no longer in the best interest of the Company</font></p>
  </td>
 </tr>
</table>

<p><font face="Times New Roman"><br>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; 11.&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; <b>Disqualifying Disposition of Option Shares</b>.&nbsp; The Grantee agrees to give written notice to
the Company, at its principal office, if a &quot;disposition&quot; of the Shares acquired
through exercise of the Option granted hereunder occurs at any time within two
years after the Grant Date or within one year after the transfer to the Grantee
of such Shares.&nbsp; The Grantee acknowledges
that if such disposition occurs, the Grantee generally will recognize ordinary
income as of the date the Option was exercised in an amount equal to the lesser
of (i) the Fair Market Value of the Shares on the date of exercise minus the
exercise price, or (ii) the amount realized on disposition of such Shares minus
the exercise price.&nbsp; For purposes of this
Paragraph, the term &quot;disposition&quot; shall have the meaning assigned to such term
by section 424(c) of the Code.<br>
<br>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; 12.&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; <b>Governing Law.</b>&nbsp; This Award Agreement shall be governed by the
applicable Code provisions to the maximum extent possible.&nbsp; Otherwise, the laws of New Jersey (without
reference to the principles of conflict of laws) shall govern the operation of,
and the rights of the Grantee under, the Plan and Options granted thereunder. <br>
<br>
</font><font face="Times New Roman"><hr color="#000080"><P STYLE="page-break-after: always"></P><br clear=all>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; 13.&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; <b>Capital Adjustments</b>. If
prior to the issuance by the Company of all of the Shares covered by this
Option, there shall be any increases or reductions in the number of Shares
outstanding by reason of any stock dividends or stock splits or other
readjustments or, if there is any other material change in the capital
structure of the Company by reason of any reclassification, reorganization,
recapitalization or otherwise, there shall be a proportionate and equitable
adjustment of the terms of this Option with respect to the amount and class of
Shares remaining subject to the Option and the purchase price to be paid
therefore as determined by the Committee.<br>
<br>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; 14.&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; <b>Miscellaneous Provisions</b>.<br>
<br>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; 14.1&nbsp;&nbsp;&nbsp;&nbsp; This Award Agreement is not an agreement to
employ or to continue the employment of the Grantee.&nbsp; Nothing in this Award Agreement shall be
deemed to create any limitation or restriction upon such rights as the Company
would otherwise have to terminate the employment of the Grantee at any time for
any reason.<br>
<br>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; 14.2&nbsp;&nbsp;&nbsp;&nbsp; The Grantee shall have no rights or
privileges as a stockholder of the Company with respect to the Shares issuable
under this Option until such Shares have been issued to the Grantee.&nbsp; Prior to the issuance of such Shares, the
Company may require the Grantee or other person exercising this Option to
furnish such representations as may be required, in the sole discretion of the
Company's counsel, to satisfy the requirements of the Securities and Exchange
Commission under the Securities Act of 1933, as amended.<br>
<br>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; IN WITNESS WHEREOF, the
Company has caused this Incentive Stock Option Award Agreement to be duly
executed by its duly authorized officer as of the day and year first above
written.<br><br></font></p>
<p></p>

<table border=0 cellspacing=0 cellpadding=0>
 <tr>
  <td width=319 valign=top>

  <p>

  </td>
  <td width=319 valign=top>
  <p><font face="Times New Roman">SELECTIVE
  INSURANCE GROUP, INC.<br>
  <br>
  By:<u>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; </u>
  </font></p>
  </td>
 </tr>
 <tr>
  <td width=319 valign=top>

  <p>

  </td>
  <td width=319 valign=top>
  <p><font face="Times New Roman">Gregory
  E. Murphy</font></p>
  </td>
 </tr>
 <tr>
  <td width=319 valign=top>

  <p>

  </td>
  <td width=319 valign=top>
  <p><font face="Times New Roman">Chairman,
  President and</font></p>
  </td>
 </tr>
 <tr>
  <td width=319 valign=top>

  <p>

  </td>
  <td width=319 valign=top>
  <p><font face="Times New Roman">Chief
  Executive Officer</font></p>
  </td>
 </tr>
</table>

<p><font face="Times New Roman"><br>
<br>
<br>
<br><br></font></p>

<table border=0 cellspacing=0 cellpadding=0>
 <tr>
  <td width=326 valign=top>
  <p><font face="Times New Roman">ATTEST:<br>
  <br>
  <u>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; </u>
  </font></p>
  </td>
  <td width=312 valign=top>

  <p>

  </td>
 </tr>
 <tr>
  <td width=326 valign=top>
  <p><font face="Times New Roman">Michele
  N. Schumacher</font></p>
  </td>
  <td width=312 valign=top>

  <p>

  </td>
 </tr>
 <tr>
  <td width=326 valign=top>
  <p><font face="Times New Roman">Vice
  President, Corporate Secretary</font></p>
  </td>
  <td width=312 valign=top>

  <p>

  </td>
 </tr>
 <tr>
  <td width=326 valign=top>
  <p><font face="Times New Roman">and
  Corporate Governance Officer</font></p>
  </td>
  <td width=312 valign=top>

  <p>

  </td>
 </tr>
</table>



</div>

</body>

</html>

</TEXT>
</DOCUMENT>
<DOCUMENT>
<TYPE>EX-10
<SEQUENCE>3
<FILENAME>exhibit102.htm
<DESCRIPTION>EXHIBIT 10.2
<TEXT>
<html>

<head>

<title>Exhibit 10.2</title>

</head>

<body>

<div>

<p align=right><b>Exhibit 10.2<br><br></b></p>



<p align=center>SELECTIVE INSURANCE
GROUP, INC.<br>
STOCK OPTION PLAN III<br>
<br>
NONQUALIFIED STOCK OPTION GRANT<br></p>

<p align=center><br></p>



<p>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; THIS DOCUMENT EVIDENCES A NONQUALIFIED STOCK
OPTION GRANT (the &quot;Grant&quot;), effective the ___ day of __________, 200_ (the &quot;Grant Date&quot;), from
Selective Insurance Group, Inc., a New Jersey corporation (the &quot;Company&quot;), to <u>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; </u>&nbsp;(the &quot;Grantee&quot;), an employee of the Company or
of a &quot;Related Corporation,&quot; as defined in the Selective Insurance Stock Option
Plan III (the &quot;Plan&quot;).<br><br></p>

<p align=center><b>WITNESSETH
THAT:<br><br></b></p>

<p>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; WHEREAS, the Company has adopted the
Selective Insurance Stock Option Plan&nbsp;III; and<br>
<br>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; WHEREAS, the
Employee has been designated by the Committee, as defined in the Plan (the
&quot;Committee&quot;), as an employee to whom a nonqualified stock option award is to be
made under the Plan subject to the terms and conditions of this grant document;
<br>
<br>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; NOW, THEREFORE,
the Company hereby grants to the Grantee, subject to the terms and conditions
hereinafter set forth a nonqualified stock option award (the &quot;Award&quot;).&nbsp; The Award shall be subject to the terms and
conditions of the Plan and this Grant.&nbsp;
By accepting the Grant, the Employee agrees to be bound by the
provisions hereof and the provisions of the Plan with respect to the Grant.<br>
<br>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; 1.&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; <b>Grant of Option</b>.&nbsp; The Company hereby grants to the Grantee the
right and option (the &quot;Option&quot;) to purchase all or any part of an aggregate of <u>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; </u>&nbsp;shares of the Company's common stock
(&quot;Shares&quot;).&nbsp; The Option is in all
respects limited and conditioned as hereinafter provided, and is subject in all
respects to the terms and conditions of the Plan now in effect and as it may be
amended from time to time (but only to the extent that such amendments apply to
outstanding options).&nbsp; Such terms and
conditions are incorporated herein by reference, made a part hereof, and shall
control in the event of any conflict with any other terms of this Award
Agreement.&nbsp; The Option granted hereunder
is intended to be a nonqualified stock option (&quot;NQSO&quot;) and not an incentive
stock option (&quot;ISO&quot;) as such term is defined in section 422 of the Internal Revenue Code of 1986,
as amended (the &quot;Code&quot;).<br>
<br>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; 2.&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; <b>Exercise Price</b>.&nbsp; The exercise price of the Shares covered by
this Option shall be $<u>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; </u> per Share.&nbsp; It is the determination of the Committee that
on the Grant Date the exercise price was not less than 100% of the &quot;Fair Market
Value&quot; (as defined in the Plan) of a Share.<br>
<br>
<P></P>
<p><hr color="#000080"><P STYLE="page-break-after: always"></P><br clear=all>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; 3.<b>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; Term.</b>&nbsp; Unless earlier terminated pursuant to any
provision of the Plan or of this Award Agreement, this Option shall expire at 4
p.m. Eastern Time on ____________, 20__
(the &quot;Expiration Date&quot;), which date is not more than 10 years from the
Grant Date.&nbsp; This Option shall not be
exercisable after the Expiration Date.<br>
<br>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; 4.<b>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; Exercise of Option</b>.&nbsp; The right to purchase the Shares subject to
this Option shall accrue immediately.<br>
<br>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; 5.<b>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; Method of Exercising Option</b>.&nbsp; Subject to the terms and conditions of this
Option Agreement and the Plan, the Option may be exercised by written notice to
the Company at its principal office, which is presently located at 40 Wantage
Avenue, Branchville, New Jersey 07890. Such notice shall state the election to
exercise the Option and the number of whole Shares with respect to which it is
being exercised; shall be signed by the person or persons so exercising the
Option; and shall be accompanied by payment of the full exercise price of such
Shares.&nbsp; Only full Shares will be issued.<br>
<br>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; The exercise price
shall be paid to the Company -<br><br></p>
<p></p>

<table border=0 cellspacing=0 cellpadding=0>
 <tr>
  <td width=98 valign=top>

  <p>

  </td>
  <td width=48 valign=top>
  <p>(a)</p>
  </td>
  <td width=493 valign=top>
  <p>in cash, or by certified check,
  bank draft, or money order;<br><br></p>
  </td>
 </tr>
 <tr>
  <td width=98 valign=top>

  <p>

  </td>
  <td width=48 valign=top>
  <p>(b)</p>
  </td>
  <td width=493 valign=top>
  <p>by delivering Shares previously
  acquired;<br><br></p>
  </td>
 </tr>
 <tr>
  <td width=98 valign=top>

  <p>

  </td>
  <td width=48 valign=top>
  <p>(c)</p>
  </td>
  <td width=493 valign=top>
  <p>by delivering a properly
  executed notice of exercise of the Option to the Company and a broker, with
  irrevocable instructions to the broker promptly to deliver to the Company the
  amount of sale or loan proceeds necessary to pay the exercise price of the Option;
  or<br><br></p>
  </td>
 </tr>
 <tr>
  <td width=98 valign=top>

  <p>

  </td>
  <td width=48 valign=top>
  <p>(d)</p>
  </td>
  <td width=493 valign=top>
  <p>in any combination of (a), (b)
  or (c) above.<br><br></p>
  </td>
 </tr>
</table>

<p>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; In the event the exercise price is paid, in
whole or in part, with Shares, the portion of the exercise price so paid shall
be equal to the Fair Market Value of the Shares surrendered on the date of
exercise.<br>
<br>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; Provided the
provisions of Section 10.3 of the Plan have been met, as soon as practicable
after the receipt of notice of exercise and payment, the Company shall
establish a book entry share account in the name of the Grantee and shall issue
said Shares to the Grantee.&nbsp; If the
Grantee delivers a properly executed notice of exercise of the Option to the
Company and a broker, with irrevocable instructions to the broker to promptly
deliver to the Company the amount of sale or loan proceeds necessary to pay the
exercise price of the Option, the Company shall issue said Shares to the
Grantee and arrange to deliver the Shares directly to the broker.&nbsp; When issued, the Shares shall be fully paid
and non-assessable.<br>
<br>
<P></P>
<p><hr color="#000080"><P STYLE="page-break-after: always"></P><br clear=all>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; Such Shares shall
be registered in the name of the person so exercising the Option or, if the
Option is exercised by the Grantee and if the Grantee so requests in the notice
exercising the Option, shall be registered in the name of the Grantee and the
Grantee's spouse, jointly, with right of survivorship, and shall be delivered
as provided above to, or upon the written order of, the person exercising the
Option.&nbsp; In the event any person or
persons exercise the Option after the death or &quot;Disability&quot; (as defined in the
Plan) of the Grantee, the notice shall be accompanied by appropriate proof of
the right of such person to exercise the Option.&nbsp; All Shares that are purchased upon exercise
of the Option as provided herein shall be fully paid and non-assessable.<br>
<br>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; 6.&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; <b>Transferability of Option</b>. &nbsp;The Option may not be transferred other than
by will or by the laws of descent and distribution.<br>
<br>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; 7.&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; <b>Termination of Employment</b>.&nbsp; If the Grantee's employment with the Company
and all &quot;Related Corporations&quot; (as defined in the Plan) is terminated for any
reason other than Cause, death or Disability prior to the Expiration Date, this
Option may be exercised by the Grantee at any time prior to the earlier of (i)
the Expiration Date, or (ii) 12 months after the date of such termination of
employment.<br>
<br>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; 8.&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; <b>Disability</b>.&nbsp; If the Grantee incurs a Disability, this
Option may be exercised by the Grantee or by the Grantee's legal
representative, at any time prior to the earlier of (i) the Expiration Date, or
(ii) one year after such Disability.<br>
<br>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; 9.&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; <b>Death</b>.&nbsp; If the Grantee dies during his or her
employment and prior to the Expiration Date, or if the Grantee's employment is
terminated for any reason (as described in Paragraphs 7 and 8 and the Grantee
dies following his or her termination of employment but prior to the earlier of
the Expiration Date or the expiration of the period determined under Paragraph
7 or 8, this Option may be exercised by the Grantee's estate, personal
representative, or beneficiary who acquired the right to exercise this Option
by bequest or inheritance or by reason of the Grantee's death, at any time
prior to the earlier of (i) the Expiration Date, or (ii) one year after the
date of the Grantee's death.<br>
<br>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; 10.&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; <b>Cause.</b>&nbsp; Notwithstanding any other provision of this
Award Agreement to the contrary, if a Grantee's employment with the Company and
all Related Corporations is terminated for Cause (as defined below), all
unexercised Options shall be forfeited immediately and automatically as of the
date of such termination of employment.&nbsp;
For purposes of this Award Agreement, Cause means the Grantee has:<br><br></p>
<p></p>

<table border=0 cellspacing=0 cellpadding=0>
 <tr>
  <td width=98 valign=top>

  <p>

  </td>
  <td width=48 valign=top>
  <p>(a)</p>
  </td>
  <td width=493 valign=top>
  <p>failed to perform his or her
  stated duties satisfactorily and not cured such failure (if curable) within
  15 days of his or her receipt of written notice of the failure;<br><br></p>
  </td>
 </tr>
 <tr>
  <td width=98 valign=top>

  <p>

  </td>
  <td width=48 valign=top>
  <p>(b)</p>
  </td>
  <td width=493 valign=top>
  <p>been dishonest;<br><br></p>
  </td>
 </tr>
</table>

<P></P><hr color="#000080"><P STYLE="page-break-after: always"></P><br clear=all>




<table border=0 cellspacing=0 cellpadding=0>
 <tr>
  <td width=98 valign=top>

  <p>

  </td>
  <td width=48 valign=top>
  <p>(c)</p>
  </td>
  <td width=493 valign=top>
  <p>disregarded or disobeyed an
  express direction from a member of the Board of Directors or an executive
  officer of the Company or a Related Corporation;<br><br></p>
  </td>
 </tr>
 <tr>
  <td width=98 valign=top>

  <p>

  </td>
  <td width=48 valign=top>
  <p>(d)</p>
  </td>
  <td width=493 valign=top>
  <p>engaged in willful misconduct;<br><br></p>
  </td>
 </tr>
 <tr>
  <td width=98 valign=top>

  <p>

  </td>
  <td width=48 valign=top>
  <p>(e)</p>
  </td>
  <td width=493 valign=top>
  <p>engaged in a breach of
  fiduciary duty involving personal profit;<br><br></p>
  </td>
 </tr>
 <tr>
  <td width=98 valign=top>

  <p>

  </td>
  <td width=48 valign=top>
  <p>(f)</p>
  </td>
  <td width=493 valign=top>
  <p>violated any law, rule, or
  regulation, or final cease-and-desist order (other than traffic violations or
  similar offenses);<br><br></p>
  </td>
 </tr>
 <tr>
  <td width=98 valign=top>

  <p>

  </td>
  <td width=48 valign=top>
  <p>(g)</p>
  </td>
  <td width=493 valign=top>
  <p>been disloyal toward the
  Company or a Related Corporation; or<br><br></p>
  </td>
 </tr>
 <tr>
  <td width=98 valign=top>

  <p>

  </td>
  <td width=48 valign=top>
  <p>(h)</p>
  </td>
  <td width=493 valign=top>
  <p>engaged in other misconduct
  such that the continuation of the Grantee's status as an employee is
  determined by the Company to be no longer in the best interest of the
  Company.<br><br></p>
  </td>
 </tr>
</table>



<p>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; 11.&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; <b>Withholding
of Taxes</b>.&nbsp; The obligation of the
Company to deliver Shares upon the exercise of this Option shall be subject to
applicable federal, state, and local tax withholding requirements.&nbsp; If the exercise of the Option is subject to
the withholding requirements of applicable federal, state and/or local tax law,
the Grantee, subject to the provisions of the Plan and such additional
withholding rules (the &quot;Withholding Rules&quot;) as shall be adopted by the
Committee, may satisfy the withholding tax, in whole or in part, by electing to
have the Company withhold or by returning to the Company Shares, which shall be
valued, for this purpose, at their Fair Market Value on the date the amount
attributable to the exercise of the Option is includable in income by the
Grantee under section 83 of the Code.&nbsp;
Such election must be made in compliance with and subject to the
Withholding Rules, and the Company may limit the number of withheld Shares to
the extent necessary to avoid adverse accounting consequences.<br>
<br>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; 12.&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; <b>Governing Law.</b>&nbsp; This Option Agreement shall be governed by
the applicable Code provisions to the maximum extent possible.&nbsp; Otherwise, the laws of New Jersey (without reference to the
principles of conflict of laws) shall govern the operation of, and the rights
of the Grantee under, the Plan and Options granted hereunder.<br>
<br>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; 13.&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; <b>Capital Adjustments</b>. If prior to
the issuance by the Company of all of the Shares covered by this Option, there
shall be any increases or reductions in the number of Shares outstanding by
reason of any stock dividends or stock splits or other readjustments or, if
there is any other material change in the capital structure of the Company by
reason of any reclassification, reorganization, recapitalization or otherwise,
there shall be a proportionate and equitable adjustment of the terms of this
Option with respect to the amount and class of Shares remaining subject to the
Option and the purchase price to be paid therefore as determined by the
Committee.<br>
<br>
<P></P>
<p><hr color="#000080"><P STYLE="page-break-after: always"></P><br clear=all>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; 14.&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; <b>Miscellaneous Provisions</b>.<br>
<br>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; 14.1&nbsp;&nbsp;&nbsp;&nbsp; This Award Agreement is not an agreement to
employ or to continue the employment of the Grantee.&nbsp; Nothing in this Award Agreement shall be
deemed to create any limitation or restriction upon such rights as the Company
would otherwise have to terminate the employment of the Grantee at any time for
any reason.<br>
<br>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; 14.2&nbsp;&nbsp;&nbsp;&nbsp; The Grantee shall have no rights or
privileges as a stockholder of the Company with respect to the Shares issuable
under this Option until such Shares have been issued to the Grantee.&nbsp; Prior to the issuance of such Shares, the
Company may require the Grantee or other person exercising this Option to
furnish such representations as may be required, in the sole discretion of the
Company's counsel, to satisfy the requirements of the Securities and Exchange
Commission under the Securities Act of 1933, as amended.<br>
<br>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; IN WITNESS
WHEREOF, the Company has caused this Nonqualified Stock Option Award Agreement
to be duly executed by its duly authorized officer as of the day and year first
above written.<br>
<br><br></p>
<p></p>

<table border=0 cellspacing=0 cellpadding=0>
 <tr>
  <td width=319 valign=top>

  <p>

  </td>
  <td width=319 valign=top>
  <p>SELECTIVE
  INSURANCE GROUP, INC.<br>
  <br>
  By:<u>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; </u></p>
  </td>
 </tr>
 <tr>
  <td width=319 valign=top>

  <p>

  </td>
  <td width=319 valign=top>
  <p>Gregory
  E. Murphy</p>
  </td>
 </tr>
 <tr>
  <td width=319 valign=top>

  <p>

  </td>
  <td width=319 valign=top>
  <p>Chairman,
  President and</p>
  </td>
 </tr>
 <tr>
  <td width=319 valign=top>

  <p>

  </td>
  <td width=319 valign=top>
  <p>Chief
  Executive Officer</p>
  </td>
 </tr>
</table>

<p><br>
<br>
<br>
<br><br></p>

<table border=0 cellspacing=0 cellpadding=0>
 <tr>
  <td width=326 valign=top>
  <p>ATTEST:<br>
  <br>
  <u>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; </u></p>
  </td>
  <td width=312 valign=top>

  <p>

  </td>
 </tr>
 <tr>
  <td width=326 valign=top>
  <p>Michele
  N. Schumacher</p>
  </td>
  <td width=312 valign=top>

  <p>

  </td>
 </tr>
 <tr>
  <td width=326 valign=top>
  <p>Vice
  President, Corporate Secretary</p>
  </td>
  <td width=312 valign=top>

  <p>

  </td>
 </tr>
 <tr>
  <td width=326 valign=top>
  <p>and
  Corporate Governance Officer</p>
  </td>
  <td width=312 valign=top>

  <p>

  </td>
 </tr>
</table>



</div>

</body>

</html>

</TEXT>
</DOCUMENT>
<DOCUMENT>
<TYPE>EX-10
<SEQUENCE>4
<FILENAME>exhibit103.htm
<DESCRIPTION>EXHIBIT 10.3
<TEXT>
<html>

<head>

<title>Exhibit 10.3</title>

</head>

<body>

<div>

<p align=right><b>Exhibit 10.3<br><br></b></p>

<p align=center>SELECTIVE INSURANCE
GROUP, INC.<br>
STOCK OPTION PLAN III<br>
<br>
RESTRICTED STOCK AWARD<sup>1</sup><br></p>

<p align=center><br></p>



<p>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; THIS
DOCUMENT EVIDENCES A RESTRICTED STOCK GRANT (the &quot;Grant&quot;), effective the ___day of _________, 200_ (the
&quot;Grant Date&quot;), from Selective Insurance Group, Inc., a New Jersey corporation
(the &quot;Company&quot;), to <u>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; </u>&nbsp;(the &quot;Grantee&quot;), an employee of the Company or
a &quot;Related Corporation,&quot; as defined in the Selective Insurance Stock Option
Plan III (the &quot;Plan&quot;).<br>
<br><br></p>

<p align=center><b>WITNESSETH
THAT:<br><br></b></p>

<p><b>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; </b>WHEREAS,
the Company has adopted the Selective Insurance Stock Option Plan III; and<br>
<br>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; WHEREAS, the Employee has been
designated by the Committee, as defined in the Plan (the &quot;Committee&quot;), as an
employee to whom a restricted stock grant is to be made under the Plan subject
to the terms and conditions of this grant document; <br>
<br>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; NOW THEREFORE, the Company
hereby grants to the Grantee, subject to the terms and conditions hereinafter
set forth a Restricted Stock Award (&quot;Award&quot;).&nbsp;
The Award shall be subject to the terms and conditions of the Plan and
this Grant.&nbsp; By accepting the Grant, the
Employee agrees to be bound by the provisions hereof and the provisions of the
Plan with respect to the Grant.<br>
<br>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; 1.&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; <b>Grant of Award</b>.&nbsp; The Company hereby awards to the Grantee an
Award under the Plan for an aggregate of <u>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; </u>&nbsp;shares of the Company's common stock
(&quot;Shares&quot;), subject to adjustment pursuant to Section 8.3 of the Plan.&nbsp; The Award is in all respects limited and
conditioned as hereinafter provided, and is subject to the terms and conditions
of the Plan now in effect and as they may be amended from time to time, in
accordance with the Plan (which terms and conditions are incorporated herein by
reference, made a part hereof, and shall control in the event of any conflict
with any other terms of this Restricted Stock Award Agreement).&nbsp; <br>
<br>
<br>
<br>
___________________________________<br>
<br>
<sup>1</sup>&nbsp; Award agreement for
Executive Officers</p><P></P><hr color="#000080"><P STYLE="page-break-after: always"></P><br clear=all>


<p>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; 2.&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; <b>Vesting</b>.&nbsp; Subject to the provisions of Sections 4, 6
and 7 hereof, the Shares and any and all accumulated Shares, dividends, and
distributions with respect thereto shall vest to the Grantee on <b>(fourth anniversary of date of grant)</b>
(the &quot;Vesting Date&quot;) and shall no longer be subject to forfeiture provided that
(i) Grantee shall have remained in the full-time employ of the Company or a
subsidiary of the Company from and after the date hereof to and including the
Vesting Date and (ii) for the period January
1,<b> (year of grant)</b> through December 31, <b>(third year after year of grant)</b> the Company
shall have generated a cumulative fiscal year return on average equity of at
least 25% (computed by excluding from the determination of average equity any
unrealized gain occurring after December
31,<b> (year immediately prior to year of grant)</b> at any time during such period or shall have achieved a 20%
cumulative growth in net premiums written at any time during such period, for
purposes of this provision, fiscal years include the following:<br>
<br>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; January 1, <b>(year of
grant) </b>through December 31,<b> (year of grant)<br>
</b>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; January 1, <b>(first
year after year of grant) </b>through <br>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; December
31, <b>(first year after year of grant)<br>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; </b>January 1, <b>(second
year after year of grant) </b>through <br>
<b>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; </b>December
31, <b>(second year after year of grant) <br>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; </b>January 1, <b>(third
year after year of grant) </b>through <br>
<b>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; </b>December
31,<b> (third year after year of grant)<br>
<br>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; </b>At such time as the Committee shall have
determined that the foregoing conditions have been satisfied, the Company shall
release from escrow to Grantee the Shares and any and all accumulated shares,
dividends, and distributions with respect thereto.<br>
<br>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; 3.&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; <b>Stock</b>.&nbsp;&nbsp; Shares subject to the Award shall be issued
and registered in the Grantee's name (or, if the Grantee so requests, in the
name of the Grantee and the Grantee's spouse, jointly with a right of
survivorship) and shall be deposited in escrow with Company pursuant to the
provisions of this grant.&nbsp; The shares,
when issued, shall be validly issued, fully-paid and non assessable.<br>
<br>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; 4.&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; <b>Dividends;
Rights as Shareholder in Unvested Shares</b>.&nbsp;
The Grantee shall be entitled to receive dividends on unvested Shares
subject to the Award (if any), shall have the right to vote such unvested
Shares and shall have all other shareholder's rights in such unvested Shares,
with the exception that (i) the Grantee shall not be entitled to delivery of
the&nbsp; unvested Shares until he becomes
vested in the Shares, (ii) the Company shall retain custody of the unvested
Shares until the Grantee becomes vested in such Shares, at which time such
Shares shall be delivered to the Grantee, and (iii) the Grantee's rights to
such unvested Shares shall be forfeited if the Grantee terminates employment
with the Company and its Related Corporations before becoming vested in such
Shares.&nbsp; Provided, however, that at the
time of any such distribution, the Grantee shall have the option to elect the
equivalent of such reinvested dividends in cash, without interest, in lieu of
the additional Shares.<br>
<br>
<P></P>
<p><hr color="#000080"><P STYLE="page-break-after: always"></P><br clear=all>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; 5.&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; <b>Transferability</b>.&nbsp; The Grantee may not assign or transfer, in
whole or in part, Shares subject to this Award in which the Grantee is not
vested, other than by will or by the laws of descent and distribution.<br>
<br>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; 6.<b>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; Withholding of Taxes</b>.&nbsp; The obligation of the Company to deliver the
Shares upon vesting shall be subject to applicable federal, state and local tax
withholding requirements.&nbsp; If the vesting
of the Award is subject to the withholding requirements of applicable federal,
state and/or local tax laws, the Salary and Employee Benefits Committee may, in
its discretion, but shall not be obligated to, authorize the Company to
purchase from the Grantee for cash such number of shares which shall have
vested to the Employee on the Vesting Date.&nbsp;
Such Shares shall be valued, for this purpose, at their Fair Market
Value on the date the amount attributable to the vesting of the Award is
includable in income by the Grantee under section 83 of the Internal Revenue
Code (the &quot;Determination Date&quot;).&nbsp; Such
election must be made in compliance with and subject to the Withholding Rules,
and the Company may not withhold shares in excess of that necessary to satisfy
the minimum federal, state and local income tax withholding requirements.&nbsp; In the event Shares acquired upon the
exercise of an incentive stock option are used to satisfy such withholding
requirement, such shares must have been held by the Grantee for a period of not
less than the holding period described in section 422(a)(1) of the Internal
Revenue Code on the Determination Date.&nbsp;
In the event Shares acquired by means of a restricted stock award are
used to satisfy such withholding requirement, such shares must have vested in
the Grantee on or before the Determination Date.<br>
<br>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; 7.<b>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; Termination</b>.&nbsp; If the Grantee shall cease to be employed by
the Company or any of its Related Corporations prior to the Vesting Date for
any reason other than death, disability or retirement, the Award shall
immediately be forfeited and shall be void.&nbsp;
If the Grantee shall cease to be employed by the company or any of its
Related Corporations by reason of death, disability or retirement, the Grantee
or his executor, administrator, personal representative, heirs or
beneficiaries, as the case may be, shall be entitled to receive, upon vesting,
all of the Shares, together with any and all accumulated shares, dividends and
distributions with respect thereto.&nbsp;&nbsp;&nbsp; For
purposes of this Agreement retirement is defined as the date the Grantee leaves
the employ of the Company provided the Grantee has either (i) reached 55 years
of age and has 10 years of service with the Company; or (ii) the Grantees age
plus years of service with the Company equals 70.<br>
<br>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; 8.&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; <b>Governing Law</b>.&nbsp; This Restricted Stock Award Agreement shall
be construed in accordance with, and its interpretation shall be governed by
applicable Federal law, and otherwise by New Jersey law (without reference to
the principles of conflict of laws).<br>
<br>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; 9.&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; <b>Capital Adjustments</b>. If prior to
the issuance by the Company of all of the Shares covered by this Agreement,
there shall be any increases or reductions in the number of Shares outstanding
by reason of any stock dividends or stock splits or other readjustments or, if
there is any other material change in the capital structure of the Company by
reason of any reclassification, reorganization, recapitalization or otherwise,
there shall be a proportionate and equitable adjustment of the terms of this
Agreement with respect to the amount and class of Shares subject to the
Agreement as determined by the Committee.<br>
</p>
<P></P>
<p><hr color="#000080"><P STYLE="page-break-after: always"></P><br clear=all>
<br>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; 10.&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;  <b>Miscellaneous Provisions</b>.&nbsp;&nbsp;&nbsp; This Award Agreement is not an agreement to
employ or to continue the employment of the Grantee.&nbsp; Nothing in this Award Agreement shall be
deemed to create any limitation or restriction upon such rights as the Company
would otherwise have to terminate the employment of the Grantee at any time for
any reason.<br>
<br>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; IN WITNESS
WHEREOF, the Company has caused this Restricted Stock Award Agreement to be
duly executed by its duly authorized officers, and is effective on the date
first written above. <br>
<br><br></p>
<p></p>

<table border=0 cellspacing=0 cellpadding=0>
 <tr>
  <td width=319 valign=top>

  <p>

  </td>
  <td width=319 valign=top>
  <p>SELECTIVE
  INSURANCE GROUP, INC.<br>
  <br>
  By:<u>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; </u></p>
  </td>
 </tr>
 <tr>
  <td width=319 valign=top>

  <p>

  </td>
  <td width=319 valign=top>
  <p>Gregory
  E. Murphy</p>
  </td>
 </tr>
 <tr>
  <td width=319 valign=top>

  <p>

  </td>
  <td width=319 valign=top>
  <p>Chairman,
  President and</p>
  </td>
 </tr>
 <tr>
  <td width=319 valign=top>

  <p>

  </td>
  <td width=319 valign=top>
  <p>Chief
  Executive Officer</p>
  </td>
 </tr>
</table>

<p><br>
<br>
<br>
<br><br></p>

<table border=0 cellspacing=0 cellpadding=0>
 <tr>
  <td width=326 valign=top>
  <p>ATTEST:<br>
  <br>
  <u>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; </u></p>
  </td>
  <td width=312 valign=top>

  <p>

  </td>
 </tr>
 <tr>
  <td width=326 valign=top>
  <p>Michele
  N. Schumacher</p>
  </td>
  <td width=312 valign=top>

  <p>

  </td>
 </tr>
 <tr>
  <td width=326 valign=top>
  <p>Vice
  President, Corporate Secretary</p>
  </td>
  <td width=312 valign=top>

  <p>

  </td>
 </tr>
 <tr>
  <td width=326 valign=top>
  <p>and
  Corporate Governance Officer</p>
  </td>
  <td width=312 valign=top>

  <p>

  </td>
 </tr>
</table>



</div>

<div>

<div id=edn1>



</div>

</div>

</body>

</html>

</TEXT>
</DOCUMENT>
<DOCUMENT>
<TYPE>EX-10
<SEQUENCE>5
<FILENAME>exhibit104.htm
<DESCRIPTION>EXHIBIT 10.4
<TEXT>
<html>

<head>

<title>Exhibit 10.4</title>

</head>

<body>

<div>

<p align=right><b>Exhibit 10.4<br><br></b></p>



<p align=center>SELECTIVE INSURANCE GROUP, INC.<br>
STOCK OPTION PLAN III<br>
<br>
RESTRICTED STOCK AWARD<br><br></p>



<p>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; THIS DOCUMENT EVIDENCES
A RESTRICTED STOCK GRANT, (the &quot;Grant&quot;), effective the ______ day of _________, 200<b>__</b> (the &quot;Grant Date&quot;),
from Selective Insurance Group, Inc., a New Jersey corporation (the &quot;Company&quot;),
to __________ (the &quot;Grantee&quot;), an employee of the Company or a &quot;Related
Corporation&quot;, as defined in the Selective Insurance Stock Option Plan III (the
&quot;Plan&quot;).<br><br></p>

<p align=center><b>WITNESSETH THAT:<br><br></b></p>

<p style="margin-top: 0; margin-bottom: 0">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; WHEREAS, the Company has
adopted the Selective Insurance Stock Option Plan III; and<br>
<br>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; WHEREAS, the
Employee has been designated by the Committee, as defined in the Plan (the
&quot;Committee&quot;), as an employee to whom a restricted stock grant is to be made
under the Plan subject to the terms and conditions of this grant document;<br>
<br>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; NOW THEREFORE, the
Company hereby grants to the Grantee, subject to the terms and conditions
hereinafter set forth a Restricted Stock Award (the &quot;Award&quot;).&nbsp; The Award shall be subject to the terms and
conditions of the Plan and this Grant.&nbsp;
By accepting the Grant, the Employee agrees to be bound by the
provisions hereof and the provisions of the Plan with respect to the Grant.<br>
<br>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; 1.&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; <b>Grant of Award</b>.&nbsp; The Company hereby awards to the Grantee an
Award under the Plan for an aggregate of <u>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; </u>&nbsp;shares of the Company's common stock
(&quot;Shares&quot;), subject to adjustment pursuant to Section 8.3 of the Plan.&nbsp; The Award is in all respects limited and
conditioned as hereinafter provided, and is subject to the terms and conditions
of the Plan now in effect and as they may be amended from time to time, in
accordance with the Plan (which terms and conditions are incorporated herein by
reference, made a part hereof, and shall control in the event of any conflict
with any other terms of this Restricted Stock Award). <br>
<br>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; 2.&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; <b>Vesting</b>.&nbsp; Subject to the provisions of Sections 4, 6
and 7 hereof, the Shares and any and all accumulated Shares, dividends, and
distributions with respect thereto shall vest to the Grantee on <b>(fourth anniversary of date of grant) </b>(the
&quot;Vesting Date&quot;) and shall no longer be subject to forfeiture provided that the
Grantee shall have remained in the employ of the Company or Related Corporation
from and after the date hereof to and including the Vesting Date.<P></P>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; 3.&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; <b>Stock</b>.&nbsp; Shares subject to the Award shall be issued
and registered in the Grantee's name (or, if the Grantee so requests, in the
name of the Grantee and the Grantee's spouse, jointly with a right of
survivorship) and shall be deposited in escrow with Company pursuant to the
provisions of this grant.&nbsp; The shares,
when issued, shall be validly issued, fully-paid and non assessable.<br>
&nbsp;<hr color="#000080"><P STYLE="page-break-after: always"></P><p>
<br>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; 4.&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; <b>Dividends;
Rights as Shareholder in Unvested Shares</b>.&nbsp;
The Grantee shall be entitled to receive dividends on unvested Shares
subject to the Award (if any), shall have the right to vote such unvested
Shares and shall have all other shareholder's rights in such unvested Shares,
with the exception that (i) the Grantee shall not be entitled to delivery of
the&nbsp; unvested Shares until he becomes vested
in the Shares, (ii) the Company shall retain custody of the unvested Shares
until the Grantee becomes vested in such Shares, at which time such Shares
shall be delivered to the Grantee, and (iii) the Grantee's rights to such
unvested Shares shall be forfeited if the Grantee terminates employment with
the Company and its Related Corporations before becoming vested in such
Shares.&nbsp; Provided, however, that at the
time of any such distribution, the Grantee shall have the option to elect the
equivalent of such reinvested dividends in cash, without interest, in lieu of
the additional Shares.<br>
<br>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; 5.&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; <b>Transferability</b>.&nbsp; The Grantee may not assign or transfer, in
whole or in part, Shares subject to this Award in which the Grantee is not
vested, other than by will or by the laws of descent and distribution.<br>
<br>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; 6.<b>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; Withholding of Taxes</b>.&nbsp; The obligation of the Company to deliver the
Shares upon vesting shall be subject to applicable federal, state and local tax
withholding requirements.&nbsp; If the vesting
of the Award is subject to the withholding requirements of applicable federal,
state and/or local tax laws, the Salary and Employee Benefits Committee may, in
its discretion, but shall not be obligated to, authorize the Company to
purchase from the Grantee for cash such number of shares which shall have
vested to the Employee on the Vesting Date.&nbsp;
Such Shares shall be valued, for this purpose, at their Fair Market
Value on the date the amount attributable to the vesting of the Award is
includable in income by the Grantee under section 83 of the Internal Revenue
Code (the &quot;Determination Date&quot;).&nbsp; Such
election must be made in compliance with and subject to the Withholding Rules,
and the Company may not withhold shares in excess of that necessary to satisfy
the minimum federal, state and local income tax withholding requirements.&nbsp; In the event Shares acquired upon the
exercise of an incentive stock option are used to satisfy such withholding
requirement, such shares must have been held by the Grantee for a period of not
less than the holding period described in section 422(a)(1) of the Internal
Revenue Code on the Determination Date.&nbsp;
In the event Shares acquired by means of a restricted stock award are
used to satisfy such withholding requirement, such shares must have vested in the
Grantee on or before the Determination Date.<br>
<br>
</p>
&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; 7.&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; <b>Termination</b>.&nbsp; If the Grantee shall cease to be employed by
the Company or any of its Related Corporations prior to the Vesting Date for
any reason other than death, disability or retirement, the Award shall
immediately be forfeited and shall be void.&nbsp;
If the Grantee shall cease to be employed by the company or any of its
Related Corporations by reason of death, disability or retirement, the Grantee
or his executor, administrator, personal representative, heirs or
beneficiaries, as the case may be, shall be entitled to receive, upon vesting,
all of the Shares, together with&nbsp; any and
all accumulated shares, dividends and distributions with respect thereto.&nbsp;&nbsp; For purposes of this Award retirement is
defined as the date the Grantee leaves the employ of the Company provided the
Grantee has either (i) reached 55 years of age and has 10 years of service with
the Company; or (ii) the Grantees age plus years of service with the Company
equals 70.<br>
<br>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; 8. &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; <b>Governing Law</b>.&nbsp; This Restricted Stock Award shall be
construed in accordance with, and its interpretation shall be governed by
applicable Federal law, and otherwise by New
  Jersey law (without reference to the principles of
conflict of laws).<br>
&nbsp;<hr color="#000080"><P STYLE="page-break-after: always"></P><p>
<br>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; 9.&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; <b>Capital Adjustments</b>. If prior to
the issuance by the Company of all of the Shares covered by this Agreement,
there shall be any increases or reductions in the number of Shares outstanding
by reason of any stock dividends or stock splits or other readjustments or, if
there is any other material change in the capital structure of the Company by
reason of any reclassification, reorganization, recapitalization or otherwise,
there shall be a proportionate and equitable adjustment of the terms of this
Agreement with respect to the amount and class of Shares subject to the
Agreement as determined by the Committee.<br>
<br>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; 10.&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; <b>Miscellaneous Provisions</b>.&nbsp; This Award is not an agreement to employ or
to continue the employment of the Grantee.&nbsp;
Nothing in this Award&nbsp; Agreement
shall be deemed to create any limitation or restriction upon such rights as the
Company would otherwise have to terminate the employment of the Grantee at any
time for any reason.<br>
</p>
<p style="margin-top: 0; margin-bottom: 0">
<br>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; IN
WITNESS WHEREOF, the Company has caused this Restricted Stock Award to be duly
executed by its duly authorized officers, and is effective on the date first
written above. <br>
<br><br></p>
</p>

<table border=0 cellspacing=0 cellpadding=0>
 <tr>
  <td width=319 valign=top>

  </td>
  <td width=319 valign=top>
  <p>SELECTIVE
  INSURANCE GROUP, INC.<br>
  <br>
  By:<u>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; </u></p>
  </td>
 </tr>
 <tr>
  <td width=319 valign=top>

  </td>
  <td width=319 valign=top>
  <p>Gregory
  E. Murphy</p>
  </td>
 </tr>
 <tr>
  <td width=319 valign=top>

  </td>
  <td width=319 valign=top>
  <p>Chairman,
  President and</p>
  </td>
 </tr>
 <tr>
  <td width=319 valign=top>

  </td>
  <td width=319 valign=top>
  <p>Chief
  Executive Officer</p>
  </td>
 </tr>
</table>

<p><br>
<br>
<br><br></p>

<table border=0 cellspacing=0 cellpadding=0>
 <tr>
  <td width=326 valign=top>
  <p>ATTEST:<br>
  <br>
  <u>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; </u></p>
  </td>
  <td width=312 valign=top>

  </td>
 </tr>
 <tr>
  <td width=326 valign=top>
  <p>Michele
  N. Schumacher</p>
  </td>
  <td width=312 valign=top>

  </td>
 </tr>
 <tr>
  <td width=326 valign=top>
  <p>Vice
  President, Corporate Secretary</p>
  </td>
  <td width=312 valign=top>

  </td>
 </tr>
 <tr>
  <td width=326 valign=top>
  <p>and
  Corporate Governance Officer</p>
  </td>
  <td width=312 valign=top>

  </td>
 </tr>
</table>



</div>

</body>

</html>

</TEXT>
</DOCUMENT>
<DOCUMENT>
<TYPE>EX-10
<SEQUENCE>6
<FILENAME>exhibit105.htm
<DESCRIPTION>EXHIBIT 10.5
<TEXT>
<html>

<head>

<title>Exhibit 10.5</title>

</head>

<body>

<div>

<p align=right><b>Exhibit 10.5<br><br></b></p>

<p align=center>
<br>
<b>SELECTIVE INSURANCE GROUP, INC.<br>
STOCK OPTION PLAN FOR DIRECTORS<br>
STOCK OPTION AGREEMENT<br>
<br></b></p>



<p><b>THIS AGREEMENT</b>,
effective the 1st day of ____________, 200_ by and between <b>SELECTIVE INSURANCE GROUP, INC.</b>, a New
Jersey corporation, with its principal office at Wantage Avenue, Branchville,
New Jersey 07890 (hereinafter called the &quot;Company&quot;), and____________________ residing at _____________________________
(hereinafter called the &quot;Optionee&quot;).<br>
<br></p>

<p align=center><b><u>WITNESSETH THAT:</u></b></p>

<p><br>
<b>WHEREAS,</b> the Board of Directors of
the Company (the &quot;Board&quot;) adopted a Stock Option Plan for Directors
(the &quot;Plan&quot;) on May
 4, 1990; and<br>
<br>
<b>WHEREAS,</b> the Plan provides for the
automatic grant of options to Directors of the Company who are not full-time
employees of the Company to purchase shares of the Company's Common Stock,
$2.00 par value (&quot;Common Stock&quot;);<br>
<br>
<b>NOW THEREFORE,</b> it is mutually agreed
as follows:<br><br></p>

<table border=0 cellspacing=0 cellpadding=0 width="717">
 <tr>
  <td width=55 valign=top>
  <p>1.)</p>
  </td>
  <td width=662 valign=top>
  <p>The Company hereby grants to the Optionee, pursuant to the
  Plan and on the terms and conditions hereinafter set forth, an option to purchase
  all or any part of _________________ (______) shares of Common Stock at a
  price of $_________ per share (the &quot;Option&quot;), said price being the
  Fair Market Value of a share of Common Stock on the date hereof as determined
  under the Plan.<br><br></p>
  </td>
 </tr>
 <tr>
  <td width=55 valign=top>
  <p>2.)</p>
  </td>
  <td width=662 valign=top>
  <p>The right to purchase the shares of Common Stock subject
  to the Option shall vest and be exercisable twelve (12) months after the date
  hereof.&nbsp; Any unexercised part of the
  Option shall lapse ten (10) years after the date hereof.&nbsp; No fractional share may be purchased or
  delivered hereunder.&nbsp; In no event shall
  any Option become exercisable until twenty (20) days after the filing with
  the Securities and Exchange Commission of a registration statement of Form
  S-8, or such other form of registration statement, if any, as shall be
  required.<br><br></p>
  </td>
 </tr>
 <tr>
  <td width=55 valign=top>
  <p>3.)</p>
  </td>
  <td width=662 valign=top>
  <p>The Option may be exercised only by written notice to the
  Company, addressed to the Secretary of the Company, specifying the number of
  shares of Common Stock in respect of which the Option is being exercised and
  accompanied by payment in cash or in shares of Common Stock of the Company
  for the full exercise price for such shares.</p>
  </td>
 </tr>
</table>

<hr color="#000080"><P STYLE="page-break-after: always"></P><P></P><br clear=all>




<table border=0 cellspacing=0 cellpadding=0 width="716">
 <tr>
  <td width=55 valign=top>

  <p>4.)</p>
  </td>
  <td width=661 valign=top>
  <p>The Company shall take any action required by law and
  applicable regulations to authorize the issuance and delivery of any shares
  of Common Stock subject to an Option.&nbsp;
  Upon completion of such action, and upon valid exercise of an Option,
  the Company shall deliver to the Optionee certificates for such shares, which
  shares, when issued, shall be fully paid and nonassessable.<br><br></p>
  </td>
 </tr>
 <tr>
  <td width=55 valign=top>
  <p>5.)</p>
  </td>
  <td width=661 valign=top>
  <p>If, prior to delivery by the Company of all of the shares
  covered by the Option, there shall be any increases or reductions in the
  number or shares of Common Stock outstanding by reason of any stock dividend
  or stock split or other readjustment or, if there is any other material
  change in the capital structure of the Company by reason of any
  reclassification, reorganization, recapitalization or otherwise, there shall
  be a proportionate and equitable adjustment of the terms of the Option with
  respect to the amount and class of shares remaining subject to the Option and
  the purchase price to be paid therefor.<br><br></p>
  </td>
 </tr>
 <tr>
  <td width=55 valign=top>
  <p>6.)</p>
  </td>
  <td width=661 valign=top>
  <p>The Optionee shall have no rights or privileges as a
  stockholder of the Company with respect to the shares of Common Stock
  issuable under the Option until certificates representing such shares have
  been issued to said Optionee.&nbsp; Prior to
  the delivery of such shares, the Company may require the Optionee or other
  authorized person exercising the Option to furnish such representations as
  may be required in the sole discretion of the Company's counsel to satisfy
  the requirements of applicable law.<br><br></p>
  </td>
 </tr>
 <tr>
  <td width=55 valign=top>
  <p>7.)</p>
  </td>
  <td width=661 valign=top>
  <p>The Option shall not be assignable or transferable by the
  Optionee otherwise than by will or the laws of descent and distribution and
  shall be exercisable during the Optionee's lifetime only by the Optionee or
  the Optionee's guardian or legal representative.<br><br></p>
  </td>
 </tr>
 <tr>
  <td width=55 valign=top>
  <p>8.)</p>
  </td>
  <td width=661 valign=top>
  <p>In the event that the Optionee shall cease to be a
  Director of the Company, or in the event of the death or disability of the
  Optionee, the Option shall be exercisable in accordance with the terms and
  conditions of the Plan.<br><br></p>
  </td>
 </tr>
 <tr>
  <td width=55 valign=top>
  <p>9.)</p>
  </td>
  <td width=661 valign=top>
  <p>Neither the granting of the Option, nor any action taken
  pursuant to the Plan, shall constitute or be evidence of any agreement or
  understanding, express or implied, that the Company shall retain a Director
  for any period of time or any particular rate of compensation.<br><br></p>
  </td>
 </tr>
 <tr>
  <td width=55 valign=top>
  <p>10.)</p>
  </td>
  <td width=661 valign=top>
  <p>The acceptance by the Optionee of the Option and the
  execution and delivery of this Agreement constitutes the agreement by the
  Optionee to be bound by the terms and conditions of the Plan, as amended from
  time to time.&nbsp; In the event of any
  inconsistency between the terms and conditions of the Plan and the provisions
  of this Agreement, the terms and conditions of the Plan shall take
  precedence.</p>
  </td>
 </tr>
</table>

<P></P><hr color="#000080"><P STYLE="page-break-after: always"></P><br clear=all>




<table border=0 cellspacing=0 cellpadding=0 width="715">
 <tr>
  <td width=55 valign=top>
  <p>11.)</p>
  </td>
  <td width=660 valign=top>
  <p>Any notice to be given or served under the terms of this
  Agreement or the Plan shall be delivered to the Secretary of the Company and
  to the Optionee at the address shown above or such other address or addresses
  as either party may designate in writing to the other.&nbsp; Any such notice shall be given by hand
  delivery or by registered or certified United States mail, postage prepaid,
  return receipt requested, and shall become effective when received.<br><br></p>
  </td>
 </tr>
 <tr>
  <td width=55 valign=top>
  <p>12.)</p>
  </td>
  <td width=660 valign=top>
  <p>This Agreement shall be construed in accordance with the
  laws of New Jersey and shall be binding on and inure to the benefit of any
  successor or successors of the Company and each executor, administrator,
  guardian or legal representative of the Optionee.<br><br></p>
  </td>
 </tr>
 <tr>
  <td width=55 valign=top>
  <p>13.)</p>
  </td>
  <td width=660 valign=top>
  <p>The Company may make such provisions as it may deem
  necessary and appropriate for the withholding of any taxes if the Company
  determines it is required to withhold in connection with this Agreement and
  the transactions contemplated hereby.</p>
  </td>
 </tr>
</table>




<p><b>IN WITNESS WHEREOF</b>,
the parties have caused this Agreement to be executed as of the day and year
first above written.<br>
<br></p>

<table border=0 cellspacing=0 cellpadding=0>
 <tr>
  <td width=289 valign=top>

  <p>

  </td>
  <td width=349 valign=top>
  <p><b>SELECTIVE INSURANCE
  GROUP, INC.<br>
  <br>
  <br>
  <br>
  By</b>:________________________________</p>
  </td>
 </tr>
 <tr>
  <td width=289 valign=top>

  <p>

  </td>
  <td width=349 valign=top>
  <p>Gregory E. Murphy, Chairman, </p>
  </td>
 </tr>
 <tr>
  <td width=289 valign=top>

  <p>

  </td>
  <td width=349 valign=top>
  <p>President and Chief Executive Officer</p>
  </td>
 </tr>
</table>

<p><b><br>
<br>
<br><br></b></p>

<table border=0 cellspacing=0 cellpadding=0>
 <tr>
  <td width=289 valign=top>
  <p><b>ATTEST</b>:<br>
  <br>
  ____________________________</p>
  </td>
  <td width=349 valign=top>

  <p>

  </td>
 </tr>
 <tr>
  <td width=289 valign=top>
  <p>Michele N.
  Schumacher</p>
  </td>
  <td width=349 valign=top>

  <p>

  </td>
 </tr>
 <tr>
  <td width=289 valign=top>
  <p>Vice President,
  Corporate Secretary</p>
  </td>
  <td width=349 valign=top>

  <p>

  </td>
 </tr>
 <tr>
  <td width=289 valign=top>
  <p>and Corporate Governance Officer</p>
  </td>
  <td width=349 valign=top>

  <p>

  </td>
 </tr>
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<DOCUMENT>
<TYPE>EX-10
<SEQUENCE>7
<FILENAME>termagreement.htm
<DESCRIPTION>EXHIBIT 10.6
<TEXT>
<html>

<head>

<title>TERMINATION AGREEMENT</title>

</head>

<body>

<div>

<p align=center><b><u><font
size=2 face="Times New Roman">TERMINATION
AGREEMENT</font></u></b></p>

<p><font size=2 face="Times New Roman">&nbsp;</font></p>

<p><font size=2 face="Times New Roman">&nbsp;</font></p>

<p><b><font size=2 face="Times New Roman">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; TERMINATION
AGREEMENT</font></b><font size=2 face="Times New Roman">
dated as of July 27, 2004, &nbsp;by and
between <b>SELECTIVE INSURANCE COMPANY OF AMERICA</b>
(the &quot;Company&quot;), a New Jersey corporation, having an office at 40 Wantage
Avenue, Branchville, New Jersey 07826, and <b>Michael H. Lanza, </b>100
Goddard Avenue, Brookline, MA&nbsp;&nbsp; 02445.<br><br></font></p>

<p align=center><b><font
size=2 face="Times New Roman">W I T N E S
S E T H:<br><br></font></b></p>

<p><b><font
size=2 face="Times New Roman">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; WHEREAS,</font></b><font size=2
face="Times New Roman"> the Company recognizes the Executive to be a valuable
management employee of the Company; and</font></p>

<p><b><font
size=2 face="Times New Roman">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; WHEREAS, </font></b><font size=2
face="Times New Roman">the Company recognizes that a change in control of
Selective Insurance Group, Inc., the Company's parent corporation
(&quot;Selective&quot;), could occur in the future, and that it is of importance to the
Company and to Selective and its stockholders to provide for the continuity of
management and its uninterrupted attention and dedication to the business
affairs of the Company; and</font></p>

<p><b><font
size=2 face="Times New Roman">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; WHEREAS, </font></b><font size=2
face="Times New Roman">the Board of Directors of the Company (the &quot;Board&quot;) has
determined that appropriate steps should be taken to encourage the continued
attention and dedication of principal members of the Company's management to
their assigned duties in circumstances arising from the possibility of a change
in control of Selective; and</font></p>

<p><b><font
size=2 face="Times New Roman">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; WHEREAS,</font></b><font size=2
face="Times New Roman"> the Company has determined that an arrangement of the
type set forth herein will serve the purpose of attracting desirable persons
for executive positions with the Company, will induce the Executive to remain
with the Company, and will enhance the Executive's ability to assess and advise
the Board as to whether any proposal involving a change in the control would be
in the best interests of the Company, Selective and its shareholders and to
take such other action regarding such proposal without being influenced by the
prospects of his own future employment with the Company; and</font></p>

<p><b><font
size=2 face="Times New Roman">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; WHEREAS,</font></b><font size=2
face="Times New Roman"> the Company and the Executive wish to set forth their
agreements as to the subject and procedures contemplated hereunder
acknowledging, however, that this Agreement supplements any employment
agreement that may be in effect from time to time between the Executive and the
Company and sets forth the severance benefits which the Company agrees will be
provided to the Executive in the event the Executive's employment with the
Company is terminated subsequent to a change of control of Selective under the
circumstances hereinbelow described.</font></p>

<p><b><font
size=2 face="Times New Roman">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; NOW, THEREFORE,</font></b><font
size=2 face="Times New Roman"> in consideration of the mutual covenants herein
contained, the Company and the Executive hereby agree as follows:</font></p>

<p><b><font
size=2 face="Times New Roman">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; 1.&nbsp;&nbsp;&nbsp;&nbsp; Term
of Agreement. </font></b></p>

<p><font size=2 face="Times New Roman">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; The term of this Agreement (the
&quot;Term&quot;) shall commence on the date hereof and shall continue in effect until July
27, 2007, <u>provided</u>, <u>however</u>, that commencing on July 27, 2007 and
each July 27<sup>th</sup>&nbsp;thereafter
(each such July 27<sup>th</sup>&nbsp;being
hereinafter referred to as an &quot;Extension Date&quot;), the Term shall automatically
be extended for one (1) additional year, unless at least twenty&#8209;four (24)
months prior to an Extension Date, the Company or the Executive shall have
given written notice in the manner hereinafter prescribed that the Term shall
not be extended as of the next Extension Date; and, <u>provided</u> <u>further</u>,
that if a &quot;Change in Control&quot; of Selective, as defined in Section 2 hereof,
shall have occurred during the term, as the same may be extended, this
Agreement shall terminate on the last day of the twenty-four (24) month period
commencing on the date that such Change in Control shall have occurred.&nbsp; Notwithstanding anything in this Section 1 to
the contrary, this Agreement shall terminate if the Executive or the Company terminates
the Executive's employment prior to the date on which a Change in Control shall
occur.</font></p>

<p><b><font
size=2 face="Times New Roman">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; 2.&nbsp;&nbsp;&nbsp;&nbsp; Change
in Control.</font></b></p>

<p><font size=2 face="Times New Roman">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; (a)&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; For the purposes of this Agreement, a &quot;change in control
of Selective&quot; (a &quot;Change in Control&quot;) shall mean the occurrence of an event of
a nature that would be required to be reported in response to Item 1(a) of a
Current Report on Form 8-K, as in effect on the date hereof, pursuant to
Sections 13 or 15(d) of the Securities Exchange Act of 1934, as amended (the
&quot;Exchange Act&quot;) <u>provided</u>, <u>however</u>, that a Change in Control
shall, in any event, conclusively be deemed to have occurred upon the first to
occur of any one of the following events:</font></p>

<font size=2 face="Times New Roman"><hr color="#000080"><P STYLE="page-break-after: always"></P><br clear=all>
</font>

<p><font size=2 face="Times New Roman">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; (i)&nbsp; The acquisition by any person or group,
including, without limitation, any current shareholder or shareholders of
Selective, of securities of Selective resulting in such person's or group's owning
of record or beneficially twenty&#8209;five percent (25%) or more, of any class
of voting securities of Selective;</font></p>

<p><font size=2 face="Times New Roman">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; (ii)&nbsp; The acquisition by any person or group,
including, without limitation, any current shareholder or shareholders of
Selective, of securities of Selective resulting in such person's or group's
owning of record or beneficially twenty percent (20%) or more, but less than
twenty&#8209;five percent (25%), of any class of voting securities of
Selective, if the Board adopts a resolution that such acquisition constitutes a
Change in Control;</font></p>

<p><font size=2 face="Times New Roman">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; (iii)&nbsp; The sale or disposition of all or
substantially all of the assets of Selective;</font></p>

<p><font size=2 face="Times New Roman">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; (iv)&nbsp; The reorganization, recapitalization, merger,
consolidation or other business combination involving Selective the result&nbsp; of which is the ownership by the
shareholders&nbsp; of Selective of less than
eighty percent (80%) of those voting securities of the resulting or acquiring
entity having the power to elect a majority of the board of directors of such
entity; or</font></p>

<p><font size=2 face="Times New Roman">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; (v)&nbsp; A change in the membership in the Board of
Directors of Selective (the &quot;Selective Board&quot;) which, taken in conjunction with
any other prior or concurrent changes, results in twenty percent (20%) or more
of the Selective Board's membership being persons not nominated by Selective's
management or Selective's Board as set forth in Selective's then most recent
proxy statement, excluding changes resulting from substitutions by Selective's
Board because of retirement or death of a director or directors, removal of a director
or directors by Selective's Board or resignation of a director or directors due
to demonstrated disability or incapacity.</font></p>

<p><font size=2 face="Times New Roman">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; (b)&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; Notwithstanding anything in the foregoing Section&nbsp; 2(a) to the contrary, no Change in Control
shall be deemed to have occurred for the purposes of this Agreement by virtue
of any transaction which results in the Executive, or a group of persons which
includes the Executive, acquiring, directly or indirectly, voting securities of
Selective.</font></p>

<p><font size=2 face="Times New Roman">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; (c)&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; For the purpose of Section 2(a) the following definitions
shall apply:</font></p>

<p><font size=2 face="Times New Roman">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; (i)&nbsp; the terms &quot;person&quot; and &quot;beneficial&nbsp; owner&quot; shall have the meanings set forth in
Regulation 13D under the Exchange Act, as such Regulation exists on the date
hereof;</font></p>

<p><font size=2 face="Times New Roman">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; (ii)&nbsp; the term &quot;voting security&quot; shall include any
security that has, or may have upon an event of default or in respect to any
transaction, a right to vote on any matter upon which the holder of any class
of common stock of Selective would have a right to vote;</font></p>

<p><font size=2 face="Times New Roman">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; (iii)&nbsp; the term &quot;group&quot; shall have the meaning set
forth in Section 13(d)(3) of the Exchange Act; and</font></p>

<p><font size=2 face="Times New Roman">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; (iv)&nbsp; the term
&quot;substantially all of the assets of Selective&quot; shall mean more than fifty
percent (50%) of Selective's assets on a consolidated basis, as shown in
Selective's most recent audited balance sheet.</font></p>

<p><b><font
size=2 face="Times New Roman">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; 3.&nbsp;&nbsp;&nbsp;&nbsp; Continuation
of Employment. </font></b></p>

<p><b><font
size=2 face="Times New Roman">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; </font></b><font size=2
face="Times New Roman">Notwithstanding any termination date as may be specified
in any employment agreement in effect from time to time between the Company and
the Executive, in the event of a Change in Control, the Company agrees to
continue to employ the Executive, and, subject to the provisions of Section 4
hereof, the Executive agrees to continue in the employ of the Company, in the
capacity in which the Executive was serving, and with the duties,
responsibilities and status of the Executive immediately prior to such Change
in Control or in such other capacity as shall be agreeable to the Executive,
for a term commencing on the date on which the Change in Control shall have
occurred and ending three (3) years after the date on which the Change in
Control shall have occurred.&nbsp; Commencing
on the date three (3) years after the date on which the Change in Control shall
have occurred and each anniversary date of the Change in Control thereafter
(each such date being hereinafter referred to as a &quot;Renewal Date&quot;), the term of
the Executive's employment shall automatically be renewed for one (1)
additional year unless at least twenty&#8209;four (24) months prior to a
Renewal Date the Company or the Executive shall have given written notice in
the manner hereinafter prescribed that such employment shall not be renewed as
of such Renewal Date.&nbsp; The provisions of
this Section 3 shall survive any termination of this Agreement pursuant to
Section 1 hereof after a Change in Control and shall continue in full force and
effect.</font></p>
<p align="center"><font face="Times New Roman" size="2">2</font></p>

<font size=2 face="Times New Roman"><hr color="#000080"><P STYLE="page-break-after: always"></P><br clear=all>
</font>

<p><b><font
size=2 face="Times New Roman">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; 4.&nbsp;&nbsp;&nbsp;&nbsp; Termination
of Employment Following Change in Control.</font></b></p>

<p><font size=2 face="Times New Roman">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; The Executive shall be entitled
to the benefits provided in Section 5 hereof upon the termination of his
employment during the term of this Agreement, as the same may be extended,
after a Change in Control has occurred, unless such termination is:&nbsp; (a)&nbsp;
due to the Executive's death or Retirement, (b) by the Company for&nbsp; Cause or Disability, or (c) by the Executive
other than for Good Reason (as such foregoing capitalized terms are hereinafter
defined).</font></p>

<p><font size=2 face="Times New Roman">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; (i)&nbsp; Termination by the Executive or by the
Company of the Executive's employment based on &quot;Retirement&quot; shall mean
termination: (A) at such age as shall be established by the Board prior to a
Change in Control for mandatory or normal retirement of Company executives in
general, which shall not be less than age 65, or (B) at any other retirement
age set by mutual agreement of the Company and the Executive and approved by
the Board.</font></p>

<p><font size=2 face="Times New Roman">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; (ii)&nbsp; Termination by the Company of the Executive's
employment based on &quot;Disability&quot; shall mean termination because of the
Executive's physical injury or physical or mental illness which causes him to
be absent from his duties with the Company on a full&#8209;time basis for a
continuous period in excess of the greater of:&nbsp;
(A) the period of disability constituting permanent disability as
specified under the Company's long&#8209;term disability insurance coverage
applicable to the Executive prior to a Change in Control or (B) six (6)
calendar months, unless within thirty (30) days after Notice of Termination (as
hereinafter defined) is thereafter given the Executive shall have returned to
the full&#8209;time performance of his duties.</font></p>

<p><font size=2 face="Times New Roman">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; (iii)&nbsp; Termination by the Company of the&nbsp; Executive's employment based on &quot;Cause&quot; shall
mean termination upon: (A) the Executive's conviction of a felony (as evidenced
by a binding and final judgment, order or decree of a court of competent
jurisdiction, in effect after exhaustion or lapse of all rights of appeal), (B)
the continued willful failure by the Executive to perform substantially his
duties with the Company (other than any such failure resulting from his
incapacity due to physical injury or physical or mental illness) for a period
of thirty (30) days after a demand for substantial performance is delivered to
the Executive by the Board of Directors of the Company which specifically
identifies the manner in which the Board of Directors believes that the
Executive has not substantially performed his duties, or (C) willful misconduct
in the performance of the Executive's duties and obligations to the Company
which constitute common law fraud or other gross malfeasance of duty; <u>provided</u>,
<u>however</u>, that no termination for Cause pursuant to clauses (B) or (C)
shall occur unless and until there shall have been delivered to the Executive a
copy of a resolution duly adopted by the affirmative vote of not less than
sixty&#8209;six and two thirds percent (66 2/3%) of the entire membership of
the Board, excluding the Executive, at a meeting of the Board called and held
for the purpose (after reasonable notice to the Executive and an opportunity
for the Executive, together with his counsel, to be heard before the Board),
finding that in good faith opinion of the Board the Executive was guilty of the
conduct set forth in such clause (B) or (C) and specifying the particulars
thereof in reasonable detail.&nbsp; For
purposes of this clause (iii), no act, or failure to act, on the part of the
Executive shall be considered &quot;willful&quot; unless done or omitted to be done by
the Executive in bad faith and without reasonable belief that his action or
omission was in, or not opposed to, the best interests of the Company.&nbsp; Any act, or failure to act, based upon
authority given pursuant to a resolution duly adopted by the Board or based
upon the advice of counsel for the Company shall be conclusively presumed to
have been done or omitted to have been done by the Executive in good faith and
in the best interests of the Company.</font></p>
<p align="center"><font face="Times New Roman" size="2">3</font></p>

<font size=2 face="Times New Roman"><hr color="#000080"><P STYLE="page-break-after: always"></P><br clear=all>
</font>

<p><font size=2 face="Times New Roman">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; (iv)&nbsp; Termination by the Executive of his
employment for &quot;Good Reason&quot; shall mean (A) termination by the Executive based
on: (1) any reduction in his base salary below the annualized rate in effect on
the date preceding the date on which a Change in Control shall have occurred or
the Company's failure to increase (within 12 months of the Executive's last
increase in base salary) the Executive's base salary after a Change in Control
in an amount which at least equals, on a percentage basis, changes in the
Consumer Price Index, all items, for New Jersey in the preceding twelve (12)
months; or (2) a failure by the Company to continue in effect, or the material
reduction of any of Executive's benefits under, any Plan (as hereinafter
defined) in which the&nbsp; Executive was
participating on the date preceding the date on which a Change in Control shall
have occurred (or Plans providing the Executive with at least substantially
similar benefits) other than as a result of the normal expiration of any such
Plan in accordance with its terms as in effect on the date preceding the date
on which a Change in Control shall have occurred, or the taking of any action,
or the failure to act, by the Company which would adversely affect the
Executive's continued participation in any of such Plans on at least as favorable
a basis to him as was the case on the date preceding the date on which a Change
in Control shall have occurred or which would materially reduce the Executive's
benefits in the future under any such Plans or deprive the Executive of any
material benefit enjoyed by him at the time of the Change in Control; or (3)
without the Executive's express prior written consent, the assignment to the
Executive of any duties inconsistent with his positions, duties,
responsibilities and status with the Company immediately prior to a Change in
Control, or any diminution in the Executive's responsibilities as an executive
of the Company as compared with those he had as an executive of the Company
immediately prior to a Change in Control, or any change in the Executive's titles
or office as in effect immediately prior to a Change in Control, or any removal
of the Executive from, or failure to re&#8209;elect him to, any of such
positions, except in connection with the termination of the Executive's
employment for Cause, Disability or Retirement or as a result of the
Executive's death or by his termination of his employment other than for Good
Reason; or (4) without the Executive's express prior written consent, the
imposition of a requirement by the Company that the Executive be based anywhere
other than where the Executive's office is located on the date preceding the
date on which a Change in Control shall have occurred; or (5) without the
Executive's express prior written consent, any reduction in the number of paid
vacation days to which the Executive was entitled as of the date preceding the
date on which a Change in Control shall have occurred; or (6) a failure by the
Company to provide the Executive with office, secretarial, computer and other
support services and facilities consistent with his position in the Company and
substantially equivalent to those available to the Executive on the date
preceding the date on which a Change in Control shall have occurred; or (7) the
failure by the Company to obtain from any successor to the business of the
Company, as set forth in Section 13, the assent to this Agreement, as described
in such Section 13; or (8) subsequent to a Change in Control, any
purported&nbsp; termination of the Executive's
employment which is not effected pursuant to a Notice of Termination (as
hereinafter defined) satisfying the requirements of Section 4(v) (and, if
applicable, Section 4(iii)), and for purposes of this Agreement no such
purported termination shall be effective; or (9) any breach by the Company of
any of the terms and conditions of any employment agreement between the Company
and the Executive or any agreement between the Company and the Executive
providing for incentive compensation, stock options, stock appreciation rights,
stock bonuses, pension benefits, group insurance or any similar benefits; or
(10) any requirement by the Company that the Executive be absent from
Executive's office on business travel or otherwise more than forty&#8209;five
(45) days in any calendar year or for more than fourteen (14) consecutive days
at any time, or (B) a voluntary termination by the Executive upon Notice of
Termination given by the Executive to the Company no later than six (6) months
after the occurrence of a Change in Control, provided that Executive shall not
thereafter violate the provisions of any agreement between the Executive and
the Company relating to nondisclosure of confidential information or
noncompetition with the Company.&nbsp; For
purposes of this Agreement, a &quot;Plan&quot; shall mean any plan, contract,
authorization or arrangement, whether or not set forth in any formal written
documents, providing for compensation, incentive compensation, non&#8209;qualified
supplemental retirement benefits, stock options (whether or not in tandem with
stock appreciation rights), stock appreciation rights, long-term incentives,
stock bonuses or restricted stock grants or any employee benefit plan such as a
pension, retirement, profit sharing, medical, disability, accident, life
insurance plan or a relocation plan or policy or any other plan, program,
policy or arrangement of the Company intended to benefit the Executive or
employees of the Company generally.</font></p>
<p align="center"><font face="Times New Roman" size="2">4</font></p>

<font size=2 face="Times New Roman"><hr color="#000080"><P STYLE="page-break-after: always"></P><br clear=all>
</font>

<p><font size=2 face="Times New Roman">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; (v)&nbsp; Any termination of the Executive's employment
by the Company or by the Executive shall be communicated by a Notice of
Termination to the other party hereto.&nbsp;
For purposes of this Agreement, a &quot;Notice of Termination&quot; shall mean a
written notice given in the manner hereinafter prescribed which shall indicate
the specific termination provision in this Agreement relied upon and shall set
forth in reasonable detail the facts and circumstances claimed to provide a
basis for termination of the Executive's employment under the provision so
indicated and shall specify the date of termination in accordance with this
Agreement.</font></p>

<p><font size=2 face="Times New Roman">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; (vi)&nbsp; &quot;Date of Termination&quot; following a Change in
Control shall mean:&nbsp; (A) if the
employment is to be terminated by the Company for Disability, thirty (30) days
after Notice of Termination is given (provided that the Executive shall not
have returned to the performance of the Executive's duties on a&nbsp; full&#8209;time basis during such thirty (30)
day period), or (B) if the employment is to be terminated by either party for
any other reason, the date on which Notice of Termination is given.</font></p>

<p><font size=2 face="Times New Roman">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; (vii)&nbsp; In the event of dispute as to the Executive's
termination under Section 4(iv) the matter shall be forthwith submitted to
binding arbitration as hereinafter provided.</font></p>

<p><b><font
size=2 face="Times New Roman">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; 5.&nbsp;&nbsp;&nbsp;&nbsp; Payment
of Benefits.</font></b></p>

<p><font size=2 face="Times New Roman">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; (a)&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; If an event has occurred pursuant to Section 4 hereof
which entitles the Executive to the benefits and rights set forth in this
Section 5, the Executive shall receive from the Company, or from the Escrow
Agent (as hereinafter defined), as the case may be, within five (5) days
following the Date of Termination (except as otherwise provided) all of the
following benefits, other than those benefits which he specifically elects by
written notice to the Company or to the Escrow Agent, as the case may be, not
to receive:</font></p>

<p><font size=2 face="Times New Roman">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; (i)&nbsp; earned but unpaid base salary through the
Date of Termination at the rate in effect immediately prior to the time a
Notice of Termination is given plus any incentive compensation, benefits or
awards (including both the cash and stock components) which pursuant to the
terms of any Plans have been accrued, earned or have become payable, but which
have not yet been paid to the Executive (including any amounts which previously
had been deferred at the Executive's request); and</font></p>

<p><font size=2 face="Times New Roman">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; (ii)&nbsp; as severance pay and in lieu of any further
salary for periods subsequent to the Date of Termination (including any
payments of salary provided for by any employment agreement with the Company),
an amount in cash equal to the Executive's &quot;annualized includible compensation
for the base period&quot; (as defined in Section 280G(d)(1) of the Internal Revenue Code
of 1986, as amended (the &quot;Code&quot;)), multiplied by a factor of 2.99.</font></p>

<p><font size=2 face="Times New Roman">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; (b)&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; If an event has occurred pursuant to Section 4 hereof
which entitles the Executive to the benefits and rights set forth in this
Section 5, the Executive shall be entitled to the benefits of any stock
options, stock appreciation rights, restricted stock grants, stock bonuses or
other benefits theretofore granted by the Company to the Executive under any
Plan, whether or not provided for in any agreement with the Company, <u>provided</u>,
<u>however</u>, that, except to the extent requiring approval of Selective's
stockholders, (i) all unvested stock options, stock appreciation rights,
restricted stock grants, stock bonuses, long-term incentives and similar
benefits shall be deemed to be vested in full on the Date of Termination,
notwithstanding any provision to the contrary or any provision requiring any
act or acts by the Executive in any agreement with the Company or Selective or
any Plan, and (ii) to the extent that any such stock options, stock
appreciation rights, restricted stock grants, stock bonuses, long-term
incentives or similar benefits shall require by its terms the exercise thereof
by the Executive, the last date to exercise the same shall, notwithstanding any
provision to the contrary in any agreement or any Plan, shall be the later to
occur of (A) the last date provided for such exercise in any agreement or Plan
evidencing any such stock options, stock appreciation rights, restricted stock
grants, stock bonuses, long-term incentives or similar benefits&nbsp; or (B) the close of business on the date
which shall be one hundred twenty (120) days after the Date of Termination and
(iii) if the vesting pursuant hereto of any such stock options, stock appreciation
rights, restricted stock grants, stock bonuses, long-term incentives or similar
benefits shall have the effect of subjecting the Executive to liability under
Section 16(b) of the Exchange Act or any similar provision of law, the vesting
date thereof shall be deemed to be the first day after the Termination Date on
which such vesting may occur without subjecting the Executive to such
liability.</font></p>
<p align="center"><font face="Times New Roman" size="2">5</font></p>

<font size=2 face="Times New Roman"><hr color="#000080"><P STYLE="page-break-after: always"></P><br clear=all>
</font>

<p><font size=2 face="Times New Roman">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; (c)&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; If an event has occurred pursuant to Section 4 hereof
which entitles the Executive to the benefits and rights set forth in this
Section 5, the Company shall maintain in full force and effect, for the
continued benefit of the Executive and his dependents for a period terminating
on the earliest of:&nbsp; (i) three (3) years
after the Date of Termination or (ii) the commencement&nbsp; date of equivalent benefits from a new
employer, all insured and&nbsp; self&#8209;insured
employee welfare benefit Plans in which the Executive&nbsp; was entitled to participate immediately prior
to the Date of Termination, provided that the Executive's continued
participation is not barred under the general terms and provisions of such
Plans.&nbsp; In the event that the Executive's
participation in any such Plan is barred by its terms, the Company, at its sole
cost and expense, shall arrange to have issued for the benefit of the Executive
and his dependents individual policies of insurance providing benefits
substantially similar (on an after&#8209;tax basis) to those which the
Executive otherwise would have been entitled to receive under such Plans
pursuant to this Section 5(c).&nbsp; If, at
the end of three (3) years after the Termination Date, the Executive has not
previously received or is not receiving equivalent benefits from a new
employer, or is not otherwise receiving such benefits, the Company shall
arrange, at its sole cost and expense, to enable him to convert his and his
dependents' coverage under such Plans to individual policies or programs upon
the same terms as employees of the Company may apply for such conversions upon
termination of employment.</font></p>

<p><font size=2 face="Times New Roman">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; (d)&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; Except as specifically provided in Section 5(c) above, the
amount of any payment provided for in this Section 5 shall not be reduced,
offset or subject to recovery by the Company by reason of any compensation
earned by the Executive as the result of employment by another employer after
the Date of Termination, or otherwise.&nbsp;
The Executive shall not be required to mitigate any amounts payable or
benefits provided under this Agreement by seeking or accepting other
employment.</font></p>

<p><font size=2 face="Times New Roman">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; (e)&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; The rights and benefits provided herein shall be in
addition to, and not (except as provided in this Agreement) to the exclusion
of, any other rights and benefits that may be available to the Executive in
regard to or arising out of the termination of the Executive's employment,
including claims for breach of contract&nbsp;
or for violation of relevant employment, worker's compensation or&nbsp; employee benefits laws.&nbsp; The prosecution or enforcement of rights&nbsp; granted by this Agreement or the election to
take benefits under&nbsp; this Agreement shall
in no manner constitute an election of rights or remedies by the Executive
other than in respect of this Agreement.</font></p>

<p><font size=2 face="Times New Roman">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; (f)&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; Notwithstanding anything in this Agreement to the&nbsp; contrary, if any of the payments or benefits
provided for in this Agreement, together with any other payments or benefits
which the Executive has the right to receive from the Company (including,&nbsp; without limitation, any amounts payable under
any employment&nbsp; contract with the
Company), would constitute a &quot;parachute payment&quot; (as defined in Section
280G(b)(2) of the Code), the payments and benefits due to the Executive shall
be reduced, in such order of priority and amount as the Executive shall elect,
to the largest amount as will result in no portion of such payments being
subject to the excise tax imposed by Section 4999 of the Code.&nbsp; Notwithstanding anything in the foregoing to
the contrary, any dispute or controversy regarding whether any payments under
this Agreement must be reduced pursuant to this Section 5(f) shall be
conclusively settled by an independent accounting firm acceptable to each of
the parties hereto, or, if no firm is acceptable to both parties hereto, each
of the Executive and the Company shall select&nbsp;
an accounting firm acceptable to it, and such accounting firms shall together
designate an independent accounting firm to settle such dispute or controversy,
and such settlement shall be binding upon both parties, <u>provided</u>, <u>however</u>,
that any accounting firm&nbsp; designated to
settle any dispute or controversy hereunder shall not have been previously
retained by either party for a period of a least two (2) years subsequent to
the date of this settlement of&nbsp; such
dispute or controversy.&nbsp; The Company or
the Escrow Agent, as&nbsp; the case may be,
may withhold from any benefits payable under this Agreement all federal, state,
city or other taxes as shall be required pursuant to any law or governmental
regulation or ruling.</font></p>

<p><font size=2 face="Times New Roman">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; (g)&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; In the event that a court of competent jurisdiction shall
determine that any portion of the payment and benefits paid to the Executive
pursuant to this Agreement shall have constituted a &quot;parachute payment&quot; (as
defined in Section 280G(b)(2) of the Code) and subject to an excise tax under
Section 4999(a) of the Code, the Company shall pay to the Executive in cash
such additional amount as is necessary so that the total amount received by the
Executive under this Agreement, after payment of any applicable taxes on such
total amount (including, without limitation, federal, state or local income
taxes, any taxes imposed by Section 4999(a) of the Code and any taxes in
respect of any amount payable to the Executive under this Section 5(g)) shall
not&nbsp; be less than the net after tax
amount that the Executive would have been entitled to receive under this
Agreement had such excise tax under Section 4999(a) not been imposed.&nbsp; The Company shall pay such additional amount
to the Executive within thirty (30) days after the Executive gives written
notice to the Company that such determination has been made by a court of
competent jurisdiction. </font></p>
<p align="center"><font face="Times New Roman" size="2">6</font></p>

<font size=2 face="Times New Roman"><hr color="#000080"><P STYLE="page-break-after: always"></P><br clear=all>
</font>

<p><b><font
size=2 face="Times New Roman">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; 6.&nbsp;&nbsp;&nbsp;&nbsp; Escrow
of Benefits.</font></b></p>

<p><font size=2 face="Times New Roman">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; (a)&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; At any time after the occurrence of a Change in Control,
the Company shall, upon the written request of the Executive, promptly deliver
to a bank or other institution acceptable to the Executive, as escrow agent
(the &quot;Escrow Agent&quot;), an amount of cash or certificates of deposit, treasury
bills or irrevocable letters of credit adequate to fully fund the&nbsp; obligations of the Company under this
Agreement.</font></p>

<p><font size=2 face="Times New Roman">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; (b)&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; The escrow agreement or arrangement between the Company
and the Escrow Agent shall provide that amounts payable to the Executive under
this Agreement shall be paid by the Escrow Agent to the Executive five (5) days
after written demand therefore by the Executive to the Escrow Agent, with a
copy to the Company, certifying that such amounts are due and&nbsp; payable under this Agreement because of the
occurrence of an event specified under&nbsp;
Section 4 hereof.&nbsp; Such escrow
agreement or arrangements shall also provide that if the Company shall, prior
to payment by the Escrow Agent, object in writing to the Escrow Agent, with a
copy to the Executive, as to the payment of any amounts demanded by the
Executive under this Agreement, certifying that such amounts are not due and
payable to the Executive because an event specified in&nbsp; Section 4 hereof has not occurred, such
dispute shall be resolved by binding arbitration as hereinafter set forth.</font></p>

<p><font size=2 face="Times New Roman">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; (c)&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; Such escrow agreement or arrangements shall further
provide that any dispute described in Section 6(b) hereof shall be forthwith
submitted to binding arbitration as hereinafter provided.</font></p>

<p><b><font
size=2 face="Times New Roman">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; 7.&nbsp;&nbsp;&nbsp;&nbsp; Arbitration.</font></b></p>

<p><font size=2 face="Times New Roman">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; Any disputes arising under
Section 4(iv) or Section 6(b) hereof shall be forthwith submitted to binding
arbitration by&nbsp; three (3) arbitrators in
Newark, New Jersey, under the expedited rules of the American Arbitration
Association then obtaining.&nbsp; One such
arbitrator shall be selected by each of the Company and the Executive, and the
two arbitrators so selected shall&nbsp; select
the third arbitrator.&nbsp; Selection of all
three arbitrators shall be made&nbsp; within
thirty (30) days after the date the dispute arose.&nbsp; Such arbitration shall be limited solely to a
determination of whether or not an event has occurred pursuant to Section 4 of
this Agreement which entitles the Executive to the benefits and rights set
forth in Section 5 of this Agreement.&nbsp;
The written decision of the arbitrators shall be rendered within ninety
(90) days after selection of the third arbitrator.&nbsp; The decision of the arbitrators&nbsp; shall be final and binding on the Company and
the Executive and may be entered by either party in any court having
jurisdiction.</font></p>

<p><b><font
size=2 face="Times New Roman">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; 8.&nbsp;&nbsp;&nbsp;&nbsp; Enforcement
of Rights.</font></b></p>

<p><font size=2 face="Times New Roman">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; The Company, and any survivor of
any business combination&nbsp; with the
Company causing rights to accrue to the Executive under this Agreement, shall
pay all the Executive's legal, accounting and arbitration fees and expenses and
costs as they become due, which the Executive may become obligated to pay in
obtaining, enforcing, retaining or defending any right or benefit provided by
this Agreement, whether in respect of any enforcement undertaken or demand made
by the Executive that is successful or in respect of any enforcement undertaken
or demand made in good faith by the Executive that is not successful.&nbsp; If judgment is rendered against any of such
persons, it will pay the Executive, unless expressly included in the judgment,
prejudgment interest from the date of the Notice of Termination at the prime
rate being charged by Midlantic National Bank on the date of the Notice of
Termination.</font></p>

<p><b><font
size=2 face="Times New Roman">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; 9.&nbsp;&nbsp;&nbsp;&nbsp; Executive's
Commitment.</font></b></p>

<p><font size=2 face="Times New Roman">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; The Executive agrees that
subsequent to his period of employment with the Company, he will not at any
time communicate or disclose to any unauthorized person, without the written
consent of the Company, any proprietary or confidential information concerning
the business affairs, products or customers of the Company which, if disclosed,
would have a material adverse effect upon the business or operations of the
Company and its subsidiaries, taken as a whole; it being understood, however,
that the obligations of this Section 9 shall not apply to the extent that the
aforesaid matters:&nbsp; (a) are disclosed in
circumstances where the Executive is legally required to do so or (b) become
generally known to and available for use by the public otherwise than by the
Executive's wrongful act or omission.</font></p>
<p align="center"><font face="Times New Roman" size="2">7</font></p>

<font size=2 face="Times New Roman"><hr color="#000080"><P STYLE="page-break-after: always"></P><br clear=all>
</font>

<p><b><font
size=2 face="Times New Roman">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; 10.&nbsp; Severability.</font></b></p>

<p><font size=2 face="Times New Roman">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; If&nbsp; any&nbsp;
one or more of the provisions (or any part thereof) of this Agreement
would be, invalid, illegal or unenforceable in any respect under applicable
law, then such provision (or any part thereof) shall be deemed modified to the
extent necessary to render it valid while most nearly preserving its original
intent; no provision (or any part thereof) of this Agreement shall be affected
by another provision (or any part thereof) of this Agreement being held
invalid.</font></p>

<p><b><font
size=2 face="Times New Roman">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; 11.&nbsp; Notice.</font></b></p>

<p><font size=2 face="Times New Roman">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; For the purposes of this
Agreement, notices, requests, demands and all other communications provided for
in this Agreement shall be in writing and shall be deemed to have been duly
given: (i) when delivered personally, or (ii) three (3) days after having been
mailed by registered or certified mail, return receipt&nbsp; requested, or (iii) one (1) day after having
been sent by telegraph&nbsp; or mailed by
express mail or other overnight courier service, postage, telegraph, courier
and registry fees, as the case may be, prepaid and addressed to the addresses
set forth in the first paragraph of this Agreement or to such other address as
either party may have furnished to the other in writing in accordance herewith,
except that notice of change of address shall be effective only upon
receipt.&nbsp; All notices to the Company
shall be directed to the attention of the President of the Company.</font></p>

<p><b><font
size=2 face="Times New Roman">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; 12.&nbsp; Merger;
Amendment; Waiver.</font></b></p>

<p><font size=2 face="Times New Roman">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; (a)&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; This Agreement supersedes all other agreements,
arrangements and understandings, and merges all negotiations and discussions,
with respect to the subject matter hereof; <u>provided</u>, <u>however</u>,
that this Agreement shall not, except to the extent&nbsp; specifically provided herein, supersede or
limit the rights, duties&nbsp; or obligations
that the Executive may have under any written&nbsp;
employment agreement with the Company.</font></p>

<p><font size=2 face="Times New Roman">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; (b)&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; This Agreement may be amended or modified only by&nbsp; a writing signed by both parties.&nbsp; No further agreement between the&nbsp; parties shall be deemed to supersede, amend
or modify this Agreement unless a statement to that effect is made in such
future agreement or the enforcement of such agreement would give rise to
conflicting obligations between the Executive on the one hand and&nbsp; the Company, its successor or other bound
party on the other hand;&nbsp; in the latter
case, however, this Agreement shall be deemed to be superseded, amended or
modified only to the extent necessary to avoid such conflict.</font></p>

<p><font size=2 face="Times New Roman">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; (c)&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; The waiver of the non&#8209;performance of any
obligation&nbsp; under this Agreement shall
apply to that non&#8209;performance only and shall not constitute a waiver,
modification or amendment of this&nbsp;
provision giving rise to such obligation.</font></p>

<p><b><font
size=2 face="Times New Roman">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; 13.&nbsp; Successors;
Binding Agreement.</font></b></p>

<p><font size=2 face="Times New Roman">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; (a)&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; The Company will require any successor (whether&nbsp; direct or indirect, by merger, consolidation
or other combination other than a sale of assets) to the business of the
Company, by agreement in form and substance satisfactory to the Executive, to
expressly assume and agree to perform this Agreement in the same manner and to
the same extent that the Company would be required to perform it if no such
succession had taken place.&nbsp; Failure of
the Company to obtain such agreement prior to the effectiveness of any such
succession shall constitute Good Reason for termination by the Executive of his
employment, and, if a Change in Control shall have occurred, the Executive
shall be entitled to the benefits set forth in Section 5 of this Agreement,
except that for purposes of implementing the foregoing, the date.&nbsp; On which any such succession&nbsp; becomes effective shall be deemed the Date of
Termination.&nbsp; As&nbsp; used in this Agreement, the &quot;Company&quot; shall
mean the Company as hereinbefore defined, and any successor and assign to its
business as aforesaid which executes and delivers the agreement provided for in
this Section 13 or which otherwise becomes bound by all the terms and
provisions of this Agreement by operation&nbsp;
of law.</font></p>

<p><font size=2 face="Times New Roman">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; (b)&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; This Agreement shall inure to the benefit of and be&nbsp; enforceable by the personal or legal
representatives, executors, administrators, successors, heirs, distributees,
devises and legatees of the Executive.&nbsp;
If the Executive should die while any amount would still be payable to
him hereunder if he had continued to live, all such amounts, unless otherwise
provided herein, shall&nbsp; be paid in
accordance with the terms of this Agreement to the Executive's devisee, legatee
or other designee or, if there be no such designee, to his estate.</font></p>
<p align="center"><font face="Times New Roman" size="2">8</font></p>

<font size=2 face="Times New Roman"><hr color="#000080"><P STYLE="page-break-after: always"></P><br clear=all>
</font>

<p><b><font
size=2 face="Times New Roman">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; 14.&nbsp; Governing
Law.</font></b></p>

<p><font size=2 face="Times New Roman">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; This Agreement is being made in
the State of New Jersey and shall be governed
by, and interpreted and construed with reference to, the laws of New Jersey.</font></p>

<p><b><font
size=2 face="Times New Roman">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; 15.&nbsp; Headings.</font></b></p>

<p><font size=2 face="Times New Roman">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; Headings in this Agreement are
for convenience of reference only&nbsp; and
shall not be used to construe or interpret this Agreement.</font></p>

<p><b><font
size=2 face="Times New Roman">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; 16.&nbsp; Counterparts.</font></b></p>

<p><font size=2 face="Times New Roman">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; This Agreement may be executed
in one or more counterparts, each of which shall be deemed an original, but all
of which together shall constitute one and the same instrument.</font></p>

<p><b><font
size=2 face="Times New Roman">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; IN WITNESS WHEREOF,</font></b><font
size=2 face="Times New Roman"> the parties hereunder have executed this Agreement as
of the date first above written.</font></p>

<p><font size=2 face="Times New Roman">&nbsp;</font></p>

<p><font size=2 face="Times New Roman">&nbsp;</font></p>

<table border=0 cellspacing=0 cellpadding=0>
 <tr>
  <td width=199 valign=top>
  <p><font size=2 face="Times New Roman">&nbsp;</font></p>
  </td>
  <td width=439 valign=top>
  <p><b><font
  size=2 face="Times New Roman">SELECTIVE
  INSURANCE COMPANY OF AMERICA</font></b></p>
  </td>
 </tr>
 <tr>
  <td width=199 valign=top>
  <p><font size=2 face="Times New Roman">&nbsp;</font></p>
  </td>
  <td width=439 valign=top>
  <p><font size=2 face="Times New Roman">&nbsp;</font></p>
  </td>
 </tr>
 <tr>
  <td width=199 valign=top>
  <p><font size=2 face="Times New Roman">&nbsp;</font></p>
  </td>
  <td width=439 valign=top>
  <p><font size=2 face="Times New Roman">&nbsp;</font></p>
  </td>
 </tr>
 <tr>
  <td width=199 valign=top>
  <p><font size=2 face="Times New Roman">&nbsp;</font></p>
  </td>
  <td width=439 valign=top>
  <p><b><font
  size=2 face="Times New Roman"><u>By:&nbsp;
  /s/ Gregory E.&nbsp; Murphy</u></font></b></p>
  </td>
 </tr>
 <tr>
  <td width=199 valign=top>
  <p><font size=2 face="Times New Roman">&nbsp;</font></p>
  </td>
  <td width=439 valign=top>
  <p><b><font size=2
  face="Times New Roman">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; Gregory E. Murphy,<br>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; Chairman, President and Chief
  Executive Officer</font></b></p>
  </td>
 </tr>
 <tr>
  <td width=199 valign=top>
  <p><font size=2 face="Times New Roman">&nbsp;</font></p>
  </td>
  <td width=439 valign=top>
  <p><b><font size=2
  face="Times New Roman">&nbsp;</font></b></p>
  </td>
 </tr>
 <tr>
  <td width=199 valign=top>
  <p><font size=2 face="Times New Roman">&nbsp;</font></p>
  </td>
  <td width=439 valign=top>
  <p><b><font size=2
  face="Times New Roman">&nbsp;</font></b></p>
  </td>
 </tr>
 <tr>
  <td width=199 valign=top>
  <p><font size=2 face="Times New Roman">&nbsp;</font></p>
  </td>
  <td width=439 valign=top>
  <p><b><font size=2
  face="Times New Roman">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; <u>/s/
  Michael H. Lanza</u></font></b></p>
  </td>
 </tr>
 <tr>
  <td width=199 valign=top>
  <p><font size=2 face="Times New Roman">&nbsp;</font></p>
  </td>
  <td width=439 valign=top>
  <p><b><font size=2
  face="Times New Roman">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; Michael H. Lanza</font></b></p>
  </td>
 </tr>
</table>

<p><b><font size=2
face="Times New Roman">&nbsp;</font></b></p>
<p>&nbsp;</p>
<p>&nbsp;</p>
<p>&nbsp;</p>
<p align="center"><font face="Times New Roman" size="2">9</font></p>

<p><b><font size=2
face="Times New Roman">&nbsp;</font></b></p>

<font size=2 face="Times New Roman"><hr color="#000080"><P STYLE="page-break-after: always"></P><br clear=all>
</font>

<p><font size=2 face="Times New Roman">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; In consideration of the covenants of the
Executive hereinabove set forth, Selective hereby guarantees to the Executive
the full performance by the Company of all of its obligations under the foregoing
Termination Agreement.</font></p>

<p><font size=2 face="Times New Roman">&nbsp;</font></p>

<p><font size=2 face="Times New Roman">&nbsp;</font></p>

<table border=0 cellspacing=0 cellpadding=0>
 <tr>
  <td width=199 valign=top>
  <p><font size=2 face="Times New Roman">&nbsp;</font></p>
  </td>
  <td width=439 valign=top>
  <p><b><font size=2
  face="Times New Roman">SELECTIVE
  INSURANCE GROUP, INC.</font></b></p>
  </td>
 </tr>
 <tr>
  <td width=199 valign=top>
  <p><font size=2 face="Times New Roman">&nbsp;</font></p>
  </td>
  <td width=439 valign=top>
  <p><b><font size=2
  face="Times New Roman">&nbsp;</font></b></p>
  </td>
 </tr>
 <tr>
  <td width=199 valign=top>
  <p><font size=2 face="Times New Roman">&nbsp;</font></p>
  </td>
  <td width=439 valign=top>
  <p><b><font size=2
  face="Times New Roman">&nbsp;</font></b></p>
  </td>
 </tr>
 <tr>
  <td width=199 valign=top>
  <p><font size=2 face="Times New Roman">&nbsp;</font></p>
  </td>
  <td width=439 valign=top>
  <p><b><font
  size=2 face="Times New Roman"><u>By:&nbsp;
  /s/ Gregory E.&nbsp; Murphy</u></font></b></p>
  </td>
 </tr>
 <tr>
  <td width=199 valign=top>
  <p><font size=2 face="Times New Roman">&nbsp;</font></p>
  </td>
  <td width=439 valign=top>
  <p><b><font size=2
  face="Times New Roman">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; Gregory E. Murphy,<br>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; Chairman, President and Chief
  Executive Officer</font></b></p>
  </td>
 </tr>
</table>

<p><font size=2 face="Times New Roman">&nbsp;</font></p>
<p>&nbsp;</p>
<p>&nbsp;</p>
<p>&nbsp;</p>
<p>&nbsp;</p>
<p align="center"><font face="Times New Roman" size="2">10</font></p>

</div>

</body>

</html>

</TEXT>
</DOCUMENT>
<DOCUMENT>
<TYPE>EX-11
<SEQUENCE>8
<FILENAME>exhibit11.htm
<DESCRIPTION>EXHIBIT 11
<TEXT>
<html>

<head>

<title>Exhibit 11</title>

</head>

<body link=blue vlink=purple>

<div>

<p align=right style="margin-top: 0; margin-bottom: 0"><b><font size="2">EXHIBIT 11<br>
<br><br></font></b></p>

<p align=center style="margin-top: 0; margin-bottom: 0"><b><font size="2">SELECTIVE INSURANCE GROUP, INC. AND CONSOLIDATED SUBSIDIARIES<br>
COMPUTATION OF EARNINGS PER SHARE<br>
Nine months ended September 30, 2004 and 2003<br>
<br>
<br><br></font></b></p>

<p style="margin-top: 0; margin-bottom: 0">&nbsp;</p>

<table border=0 cellspacing=0 cellpadding=0>
 <tr>
  <td width=613 colspan=7 valign=top>
  <div align=center><b>
  <hr size=1 width="100%" noshade color=black align=center>
  </b></div>
  </td>
 </tr>
 <tr>
  <td width=295 valign=top>
  <p style="margin-top: 0; margin-bottom: 0"><b><u><font size="2">2004</font></u></b></p>
  </td>
  <td width=18 valign=top>
  <p align=right style="margin-top: 0; margin-bottom: 0"><font size="2">&nbsp;</font></p>
  </td>
  <td width=96 valign=top>
  <p align=center style="margin-top: 0; margin-bottom: 0"><b><font size="2">Income
  </font></b></p>
  </td>
  <td width=18 valign=top>
  <p align=center style="margin-top: 0; margin-bottom: 0"><b><font size="2">&nbsp;</font></b></p>
  </td>
  <td width=96 valign=top>
  <p align=center style="margin-top: 0; margin-bottom: 0"><b><font size="2">Shares
  </font></b></p>
  </td>
  <td width=18 valign=top>
  <p align=center style="margin-top: 0; margin-bottom: 0"><b><font size="2">&nbsp;</font></b></p>
  </td>
  <td width=72 valign=top>
  <p align=center style="margin-top: 0; margin-bottom: 0"><b><font size="2">Per Share
  </font></b></p>
  </td>
 </tr>
 <tr>
  <td width=295 valign=top>
  <p style="margin-top: 0; margin-bottom: 0"><font size="2">(in
  thousands, except per share amounts)</font></p>
  </td>
  <td width=18 valign=top>
  <p align=right style="margin-top: 0; margin-bottom: 0"><font size="2">&nbsp;</font></p>
  </td>
  <td width=96 valign=top>
  <p align=center style="margin-top: 0; margin-bottom: 0"><b><font size="2">(Numerator)</font></b></p>
  </td>
  <td width=18 valign=top>
  <p align=center style="margin-top: 0; margin-bottom: 0"><b><font size="2">&nbsp;</font></b></p>
  </td>
  <td width=96 valign=top>
  <p align=center style="margin-top: 0; margin-bottom: 0"><b><font size="2">(Denominator)</font></b></p>
  </td>
  <td width=18 valign=top>
  <p align=center style="margin-top: 0; margin-bottom: 0"><b><font size="2">&nbsp;</font></b></p>
  </td>
  <td width=72 valign=top>
  <p align=center style="margin-top: 0; margin-bottom: 0"><b><font size="2">Amount</font></b></p>
  </td>
 </tr>
 <tr>
  <td width=613 colspan=7 valign=top>
  <div align=center><b>
  <hr size=1 width="100%" noshade color=black align=center>
  </b></div>
  </td>
 </tr>
 <tr>
  <td width=295 valign=top>
  <p style="margin-top: 0; margin-bottom: 0"><b><font size="2">Basic
  EPS:</font></b></p>
  </td>
  <td width=18 valign=top>

  <p style="margin-top: 0; margin-bottom: 0">

  </td>
  <td width=96 valign=top>

  <p style="margin-top: 0; margin-bottom: 0">

  </td>
  <td width=18 valign=top>
  <p align=right style="margin-top: 0; margin-bottom: 0"><font size="2">&nbsp;</font></p>
  </td>
  <td width=96 valign=top>

  <p style="margin-top: 0; margin-bottom: 0">

  </td>
  <td width=18 valign=top>

  <p style="margin-top: 0; margin-bottom: 0">

  </td>
  <td width=72 valign=top>

  <p style="margin-top: 0; margin-bottom: 0">

  </td>
 </tr>
 <tr>
  <td width=295 valign=top>
  <p style="margin-top: 0; margin-bottom: 0"><font size="2">Net
  income available to common stockholders</font></p>
  </td>
  <td width=18 valign=top>
  <p align=right style="margin-top: 0; margin-bottom: 0"><font size="2">$</font></p>
  </td>
  <td width=96 valign=top>
  <p align=right style="margin-top: 0; margin-bottom: 0"><font size="2">84,730</font></p>
  </td>
  <td width=18 valign=top>
  <p align=right style="margin-top: 0; margin-bottom: 0"><font size="2">&nbsp;</font></p>
  </td>
  <td width=96 valign=top>
  <p align=right style="margin-top: 0; margin-bottom: 0"><font size="2">26,695&nbsp;</font></p>
  </td>
  <td width=18 valign=top>
  <p align=right style="margin-top: 0; margin-bottom: 0"><font size="2">$</font></p>
  </td>
  <td width=72 valign=top>
  <p align=right style="margin-top: 0; margin-bottom: 0"><font size="2">3.17&nbsp;</font></p>
  </td>
 </tr>
 <tr>
  <td width=295 valign=top>

  <p style="margin-top: 0; margin-bottom: 0">

  </td>
  <td width=18 valign=top>

  <p style="margin-top: 0; margin-bottom: 0">

  </td>
  <td width=96 valign=top>
  <p align=right style="margin-top: 0; margin-bottom: 0">==========</p>
  </td>
  <td width=18 valign=top>
  <p align=right style="margin-top: 0; margin-bottom: 0">&nbsp;</p>
  </td>
  <td width=96 valign=top>
  <p align=right style="margin-top: 0; margin-bottom: 0">==========</p>
  </td>
  <td width=18 valign=top>

  <p style="margin-top: 0; margin-bottom: 0">

  </td>
  <td width=72 valign=top>
  <p align=right style="margin-top: 0; margin-bottom: 0">=======</p>
  </td>
 </tr>
 <tr>
  <td width=295 valign=top>
  <p style="margin-top: 0; margin-bottom: 0"><b><font size="2">Effect
  of dilutive securities:</font></b></p>
  </td>
  <td width=18 valign=top>
  <p align=right style="margin-top: 0; margin-bottom: 0"><font size="2">&nbsp;</font></p>
  </td>
  <td width=96 valign=top>
  <p align=right style="margin-top: 0; margin-bottom: 0"><font size="2">&nbsp;</font></p>
  </td>
  <td width=18 valign=top>
  <p align=right style="margin-top: 0; margin-bottom: 0"><font size="2">&nbsp;</font></p>
  </td>
  <td width=96 valign=top>
  <p align=right style="margin-top: 0; margin-bottom: 0"><font size="2">&nbsp;</font></p>
  </td>
  <td width=18 valign=top>
  <p align=right style="margin-top: 0; margin-bottom: 0"><font size="2">&nbsp;</font></p>
  </td>
  <td width=72 valign=top>
  <p align=right style="margin-top: 0; margin-bottom: 0"><font size="2">&nbsp;</font></p>
  </td>
 </tr>
 <tr>
  <td width=295 valign=top>
  <p style="margin-top: 0; margin-bottom: 0"><font size="2">Restricted
  stock</font></p>
  </td>
  <td width=18 valign=top>
  <p align=right style="margin-top: 0; margin-bottom: 0"><font size="2">&nbsp;</font></p>
  </td>
  <td width=96 valign=top>
  <p align=right style="margin-top: 0; margin-bottom: 0"><font size="2">&nbsp;</font></p>
  </td>
  <td width=18 valign=top>
  <p align=right style="margin-top: 0; margin-bottom: 0"><font size="2">&nbsp;</font></p>
  </td>
  <td width=96 valign=top>
  <p align=right style="margin-top: 0; margin-bottom: 0"><font size="2">991&nbsp;</font></p>
  </td>
  <td width=18 valign=top>
  <p align=right style="margin-top: 0; margin-bottom: 0"><font size="2">&nbsp;</font></p>
  </td>
  <td width=72 valign=top>
  <p align=right style="margin-top: 0; margin-bottom: 0"><font size="2">&nbsp;</font></p>
  </td>
 </tr>
 <tr>
  <td width=295 valign=top>
  <p style="margin-top: 0; margin-bottom: 0"><font size="2">Convertible
  debt</font></p>
  </td>
  <td width=18 valign=top>
  <p align=right style="margin-top: 0; margin-bottom: 0"><font size="2">&nbsp;</font></p>
  </td>
  <td width=96 valign=top>
  <p align=right style="margin-top: 0; margin-bottom: 0"><font size="2">2,448&nbsp;</font></p>
  </td>
  <td width=18 valign=top>
  <p align=right style="margin-top: 0; margin-bottom: 0"><font size="2">&nbsp;</font></p>
  </td>
  <td width=96 valign=top>
  <p align=right style="margin-top: 0; margin-bottom: 0"><font size="2">4,110&nbsp;</font></p>
  </td>
  <td width=18 valign=top>
  <p align=right style="margin-top: 0; margin-bottom: 0"><font size="2">&nbsp;</font></p>
  </td>
  <td width=72 valign=top>
  <p align=right style="margin-top: 0; margin-bottom: 0"><font size="2">&nbsp;</font></p>
  </td>
 </tr>
 <tr>
  <td width=295 valign=top>
  <p style="margin-top: 0; margin-bottom: 0"><font size="2">Stock
  options</font></p>
  </td>
  <td width=18 valign=top>
  <p align=right style="margin-top: 0; margin-bottom: 0"><font size="2">&nbsp;</font></p>
  </td>
  <td width=96 valign=top>
  <p align=right style="margin-top: 0; margin-bottom: 0"><font size="2">&nbsp;</font></p>
  </td>
  <td width=18 valign=top>
  <p align=right style="margin-top: 0; margin-bottom: 0"><font size="2">&nbsp;</font></p>
  </td>
  <td width=96 valign=top>
  <p align=right style="margin-top: 0; margin-bottom: 0"><font size="2">431&nbsp;</font></p>
  </td>
  <td width=18 valign=top>
  <p align=right style="margin-top: 0; margin-bottom: 0"><font size="2">&nbsp;</font></p>
  </td>
  <td width=72 valign=top>
  <p align=right style="margin-top: 0; margin-bottom: 0"><font size="2">&nbsp;</font></p>
  </td>
 </tr>
 <tr>
  <td width=295 valign=top>
  <p style="margin-top: 0; margin-bottom: 0"><font size="2">Deferred
  shares</font></p>
  </td>
  <td width=18 valign=top>

  <p style="margin-top: 0; margin-bottom: 0">

  </td>
  <td width=96 valign=top>

  <p style="margin-top: 0; margin-bottom: 0">

  </td>
  <td width=18 valign=top>
  <p align=right style="margin-top: 0; margin-bottom: 0"><font size="2">&nbsp;</font></p>
  </td>
  <td width=96 valign=top>
  <p align=right style="margin-top: 0; margin-bottom: 0"><font size="2">113&nbsp;</font></p>
  </td>
  <td width=18 valign=top>

  <p style="margin-top: 0; margin-bottom: 0">

  </td>
  <td width=72 valign=top>

  <p style="margin-top: 0; margin-bottom: 0">

  </td>
 </tr>
 <tr>
  <td width=295 valign=top>

  <p style="margin-top: 0; margin-bottom: 0">

  </td>
  <td width=18 valign=top>

  <p style="margin-top: 0; margin-bottom: 0">

  </td>
  <td width=96 valign=top>
  <div align=right>
  <hr size=1 width="90%" noshade color=gray align=right>
  </div>
  </td>
  <td width=18 valign=top>
  <p align=right style="margin-top: 0; margin-bottom: 0"><font size="2">&nbsp;</font></p>
  </td>
  <td width=96 valign=top>
  <div align=right>
  <hr size=1 width="90%" noshade color=gray align=right>
  </div>
  </td>
  <td width=18 valign=top>

  <p style="margin-top: 0; margin-bottom: 0">

  </td>
  <td width=72 valign=top>

  <p style="margin-top: 0; margin-bottom: 0">

  </td>
 </tr>
 <tr>
  <td width=295 valign=top>
  <p style="margin-top: 0; margin-bottom: 0"><b><font size="2">Diluted
  EPS:</font></b></p>
  </td>
  <td width=18 valign=top>

  <p style="margin-top: 0; margin-bottom: 0">

  </td>
  <td width=96 valign=top>

  <p style="margin-top: 0; margin-bottom: 0">

  </td>
  <td width=18 valign=top>
  <p align=right style="margin-top: 0; margin-bottom: 0"><font size="2">&nbsp;</font></p>
  </td>
  <td width=96 valign=top>

  <p style="margin-top: 0; margin-bottom: 0">

  </td>
  <td width=18 valign=top>

  <p style="margin-top: 0; margin-bottom: 0">

  </td>
  <td width=72 valign=top>

  <p style="margin-top: 0; margin-bottom: 0">

  </td>
 </tr>
 <tr>
  <td width=295 valign=top>
  <p style="margin-top: 0; margin-bottom: 0"><font size="2">Income
  available to common stockholders</font></p>
  </td>
  <td width=18 valign=top>
  <p align=right style="margin-top: 0; margin-bottom: 0"><font size="2">&nbsp;</font></p>
  </td>
  <td width=96 valign=top>
  <p align=right style="margin-top: 0; margin-bottom: 0"><font size="2">&nbsp;</font></p>
  </td>
  <td width=18 valign=top>
  <p align=right style="margin-top: 0; margin-bottom: 0"><font size="2">&nbsp;</font></p>
  </td>
  <td width=96 valign=top>
  <p align=right style="margin-top: 0; margin-bottom: 0"><font size="2">&nbsp;</font></p>
  </td>
  <td width=18 valign=top>

  <p style="margin-top: 0; margin-bottom: 0">

  </td>
  <td width=72 valign=top>
  <p align=right style="margin-top: 0; margin-bottom: 0"><font size="2">&nbsp;</font></p>
  </td>
 </tr>
 <tr>
  <td width=295 valign=top>
  <p style="margin-top: 0; margin-bottom: 0"><font size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; and
  assumed conversions</font></p>
  </td>
  <td width=18 valign=top>
  <p align=right style="margin-top: 0; margin-bottom: 0"><font size="2">$</font></p>
  </td>
  <td width=96 valign=top>
  <p align=right style="margin-top: 0; margin-bottom: 0"><font size="2">87,178&nbsp;</font></p>
  </td>
  <td width=18 valign=top>
  <p align=right style="margin-top: 0; margin-bottom: 0"><font size="2">&nbsp;</font></p>
  </td>
  <td width=96 valign=top>
  <p align=right style="margin-top: 0; margin-bottom: 0"><font size="2">32,340&nbsp;</font></p>
  </td>
  <td width=18 valign=top>
  <p align=right style="margin-top: 0; margin-bottom: 0"><font size="2">$</font></p>
  </td>
  <td width=72 valign=top>
  <p align=right style="margin-top: 0; margin-bottom: 0"><font size="2">2.70&nbsp;</font></p>
  </td>
 </tr>
 <tr>
  <td width=295 valign=top>

  <p style="margin-top: 0; margin-bottom: 0">

  </td>
  <td width=18 valign=top>

  <p style="margin-top: 0; margin-bottom: 0">

  </td>
  <td width=96 valign=top>
  <p align=right style="margin-top: 0; margin-bottom: 0">==========</p>
  </td>
  <td width=18 valign=top>
  <p align=right style="margin-top: 0; margin-bottom: 0">&nbsp;</p>
  </td>
  <td width=96 valign=top>
  <p align=right style="margin-top: 0; margin-bottom: 0">==========</p>
  </td>
  <td width=18 valign=top>

  <p style="margin-top: 0; margin-bottom: 0">

  </td>
  <td width=72 valign=top>
  <p align=right style="margin-top: 0; margin-bottom: 0">=======</p>
  </td>
 </tr>
 <tr>
  <td width=295 valign=top>

  <p style="margin-top: 0; margin-bottom: 0">

  </td>
  <td width=18 valign=top>

  <p style="margin-top: 0; margin-bottom: 0">

  </td>
  <td width=96 valign=top>

  <p style="margin-top: 0; margin-bottom: 0">

  </td>
  <td width=18 valign=top>
  <p align=right style="margin-top: 0; margin-bottom: 0"><font size="2">&nbsp;</font></p>
  </td>
  <td width=96 valign=top>

  <p style="margin-top: 0; margin-bottom: 0">

  </td>
  <td width=18 valign=top>

  <p style="margin-top: 0; margin-bottom: 0">

  </td>
  <td width=72 valign=top>

  <p style="margin-top: 0; margin-bottom: 0">

  </td>
 </tr>
 <tr>
  <td width=295 valign=top>

  <h2 style="margin-top: 0; margin-bottom: 0"><font size="2"><br>
  <br><br></font></h2>

  </td>
  <td width=18 valign=top>

  <p style="margin-top: 0; margin-bottom: 0">

  </td>
  <td width=96 valign=top>

  <p style="margin-top: 0; margin-bottom: 0">

  </td>
  <td width=18 valign=top>
  <p align=right style="margin-top: 0; margin-bottom: 0"><font size="2">&nbsp;</font></p>
  </td>
  <td width=96 valign=top>

  <p style="margin-top: 0; margin-bottom: 0">

  </td>
  <td width=18 valign=top>

  <p style="margin-top: 0; margin-bottom: 0">

  </td>
  <td width=72 valign=top>

  <p style="margin-top: 0; margin-bottom: 0">

  </td>
 </tr>
 <tr>
  <td width=613 colspan=7 valign=top>
  <div align=center><b>
  <hr size=1 width="100%" noshade color=black align=center>
  </b></div>
  </td>
 </tr>
 <tr>
  <td width=295 valign=top>
  <p style="margin-top: 0; margin-bottom: 0"><b><u><font size="2">2003</font></u></b></p>
  </td>
  <td width=18 valign=top>

  <p style="margin-top: 0; margin-bottom: 0">

  </td>
  <td width=96 valign=top>
  <p align=center style="margin-top: 0; margin-bottom: 0"><b><font size="2">Income</font></b></p>
  </td>
  <td width=18 valign=top>
  <p align=center style="margin-top: 0; margin-bottom: 0"><b><font size="2">&nbsp;</font></b></p>
  </td>
  <td width=96 valign=top>
  <p align=center style="margin-top: 0; margin-bottom: 0"><b><font size="2">Shares</font></b></p>
  </td>
  <td width=18 valign=top>
  <p align=center style="margin-top: 0; margin-bottom: 0"><b><font size="2">&nbsp;</font></b></p>
  </td>
  <td width=72 valign=top>
  <p align=center style="margin-top: 0; margin-bottom: 0"><b><font size="2">Per Share</font></b></p>
  </td>
 </tr>
 <tr>
  <td width=295 valign=top>
  <p style="margin-top: 0; margin-bottom: 0"><font size="2">(in
  thousands, except per share amounts)</font></p>
  </td>
  <td width=18 valign=top>

  <p style="margin-top: 0; margin-bottom: 0">

  </td>
  <td width=96 valign=top>
  <p align=center style="margin-top: 0; margin-bottom: 0"><b><font size="2">(Numerator)</font></b></p>
  </td>
  <td width=18 valign=top>
  <p align=center style="margin-top: 0; margin-bottom: 0"><b><font size="2">&nbsp;</font></b></p>
  </td>
  <td width=96 valign=top>
  <p align=center style="margin-top: 0; margin-bottom: 0"><b><font size="2">(Denominator)</font></b></p>
  </td>
  <td width=18 valign=top>
  <p align=center style="margin-top: 0; margin-bottom: 0"><b><font size="2">&nbsp;</font></b></p>
  </td>
  <td width=72 valign=top>
  <p align=center style="margin-top: 0; margin-bottom: 0"><b><font size="2">Amount</font></b></p>
  </td>
 </tr>
 <tr>
  <td width=613 colspan=7 valign=top>
  <div align=center><b>
  <hr size=1 width="100%" noshade color=black align=center>
  </b></div>
  </td>
 </tr>
 <tr>
  <td width=295 valign=top>
  <p style="margin-top: 0; margin-bottom: 0"><b><font size="2">Basic
  EPS:</font></b></p>
  </td>
  <td width=18 valign=top>

  <p style="margin-top: 0; margin-bottom: 0">

  </td>
  <td width=96 valign=top>

  <p style="margin-top: 0; margin-bottom: 0">

  </td>
  <td width=18 valign=top>
  <p align=right style="margin-top: 0; margin-bottom: 0"><font size="2">&nbsp;</font></p>
  </td>
  <td width=96 valign=top>

  <p style="margin-top: 0; margin-bottom: 0">

  </td>
  <td width=18 valign=top>

  <p style="margin-top: 0; margin-bottom: 0">

  </td>
  <td width=72 valign=top>

  <p style="margin-top: 0; margin-bottom: 0">

  </td>
 </tr>
 <tr>
  <td width=295 valign=top>
  <p style="margin-top: 0; margin-bottom: 0"><font size="2">Net
  income available to common stockholders</font></p>
  </td>
  <td width=18 valign=top>
  <p align=right style="margin-top: 0; margin-bottom: 0"><font size="2">$</font></p>
  </td>
  <td width=96 valign=top>
  <p align=right style="margin-top: 0; margin-bottom: 0"><font size="2">42,503&nbsp;</font></p>
  </td>
  <td width=18 valign=top>
  <p align=right style="margin-top: 0; margin-bottom: 0"><font size="2">&nbsp;</font></p>
  </td>
  <td width=96 valign=top>
  <p align=right style="margin-top: 0; margin-bottom: 0"><font size="2">26,067&nbsp;</font></p>
  </td>
  <td width=18 valign=top>
  <p align=right style="margin-top: 0; margin-bottom: 0"><font size="2">$</font></p>
  </td>
  <td width=72 valign=top>
  <p align=right style="margin-top: 0; margin-bottom: 0"><font size="2">1.63&nbsp;</font></p>
  </td>
 </tr>
 <tr>
  <td width=295 valign=top>

  <p style="margin-top: 0; margin-bottom: 0">

  </td>
  <td width=18 valign=top>

  <p style="margin-top: 0; margin-bottom: 0">

  </td>
  <td width=96 valign=top>
  <p align=right style="margin-top: 0; margin-bottom: 0">==========</p>
  </td>
  <td width=18 valign=top>
  <p align=right style="margin-top: 0; margin-bottom: 0">&nbsp;</p>
  </td>
  <td width=96 valign=top>
  <p align=right style="margin-top: 0; margin-bottom: 0">==========</p>
  </td>
  <td width=18 valign=top>

  <p style="margin-top: 0; margin-bottom: 0">

  </td>
  <td width=72 valign=top>
  <p align=right style="margin-top: 0; margin-bottom: 0">=======</p>
  </td>
 </tr>
 <tr>
  <td width=295 valign=top>
  <p style="margin-top: 0; margin-bottom: 0"><b><font size="2">Effect
  of dilutive securities:</font></b></p>
  </td>
  <td width=18 valign=top>
  <p align=right style="margin-top: 0; margin-bottom: 0"><font size="2">&nbsp;</font></p>
  </td>
  <td width=96 valign=top>
  <p align=right style="margin-top: 0; margin-bottom: 0"><font size="2">&nbsp;</font></p>
  </td>
  <td width=18 valign=top>
  <p align=right style="margin-top: 0; margin-bottom: 0"><font size="2">&nbsp;</font></p>
  </td>
  <td width=96 valign=top>
  <p align=right style="margin-top: 0; margin-bottom: 0"><font size="2">&nbsp;</font></p>
  </td>
  <td width=18 valign=top>
  <p align=right style="margin-top: 0; margin-bottom: 0"><font size="2">&nbsp;</font></p>
  </td>
  <td width=72 valign=top>
  <p align=right style="margin-top: 0; margin-bottom: 0"><font size="2">&nbsp;</font></p>
  </td>
 </tr>
 <tr>
  <td width=295 valign=top>
  <p style="margin-top: 0; margin-bottom: 0"><font size="2">Restricted
  stock</font></p>
  </td>
  <td width=18 valign=top>
  <p align=right style="margin-top: 0; margin-bottom: 0"><font size="2">&nbsp;</font></p>
  </td>
  <td width=96 valign=top>
  <p align=right style="margin-top: 0; margin-bottom: 0"><font size="2">-&nbsp;</font></p>
  </td>
  <td width=18 valign=top>
  <p align=right style="margin-top: 0; margin-bottom: 0"><font size="2">&nbsp;</font></p>
  </td>
  <td width=96 valign=top>
  <p align=right style="margin-top: 0; margin-bottom: 0"><font size="2">878&nbsp;</font></p>
  </td>
  <td width=18 valign=top>
  <p align=right style="margin-top: 0; margin-bottom: 0"><font size="2">&nbsp;</font></p>
  </td>
  <td width=72 valign=top>
  <p align=right style="margin-top: 0; margin-bottom: 0"><font size="2">&nbsp;</font></p>
  </td>
 </tr>
 <tr>
  <td width=295 valign=top>
  <p style="margin-top: 0; margin-bottom: 0"><font size="2">8.75%
  convertible subordinated debentures</font></p>
  </td>
  <td width=18 valign=top>
  <p align=right style="margin-top: 0; margin-bottom: 0"><font size="2">&nbsp;</font></p>
  </td>
  <td width=96 valign=top>
  <p align=right style="margin-top: 0; margin-bottom: 0"><font size="2">55&nbsp;</font></p>
  </td>
  <td width=18 valign=top>
  <p align=right style="margin-top: 0; margin-bottom: 0"><font size="2">&nbsp;</font></p>
  </td>
  <td width=96 valign=top>
  <p align=right style="margin-top: 0; margin-bottom: 0"><font size="2">177&nbsp;</font></p>
  </td>
  <td width=18 valign=top>
  <p align=right style="margin-top: 0; margin-bottom: 0"><font size="2">&nbsp;</font></p>
  </td>
  <td width=72 valign=top>
  <p align=right style="margin-top: 0; margin-bottom: 0"><font size="2">&nbsp;</font></p>
  </td>
 </tr>
 <tr>
  <td width=295 valign=top>
  <p style="margin-top: 0; margin-bottom: 0"><font size="2">Stock
  options</font></p>
  </td>
  <td width=18 valign=top>
  <p align=right style="margin-top: 0; margin-bottom: 0"><font size="2">&nbsp;</font></p>
  </td>
  <td width=96 valign=top>
  <p align=right style="margin-top: 0; margin-bottom: 0"><font size="2">-&nbsp;</font></p>
  </td>
  <td width=18 valign=top>
  <p align=right style="margin-top: 0; margin-bottom: 0"><font size="2">&nbsp;</font></p>
  </td>
  <td width=96 valign=top>
  <p align=right style="margin-top: 0; margin-bottom: 0"><font size="2">313&nbsp;</font></p>
  </td>
  <td width=18 valign=top>
  <p align=right style="margin-top: 0; margin-bottom: 0"><font size="2">&nbsp;</font></p>
  </td>
  <td width=72 valign=top>
  <p align=right style="margin-top: 0; margin-bottom: 0"><font size="2">&nbsp;</font></p>
  </td>
 </tr>
 <tr>
  <td width=295 valign=top>
  <p style="margin-top: 0; margin-bottom: 0"><font size="2">Deferred
  shares</font></p>
  </td>
  <td width=18 valign=top>

  <p style="margin-top: 0; margin-bottom: 0">

  </td>
  <td width=96 valign=top>
  <p align=right style="margin-top: 0; margin-bottom: 0"><font size="2">-&nbsp;</font></p>
  </td>
  <td width=18 valign=top>
  <p align=right style="margin-top: 0; margin-bottom: 0"><font size="2">&nbsp;</font></p>
  </td>
  <td width=96 valign=top>
  <p align=right style="margin-top: 0; margin-bottom: 0"><font size="2">120&nbsp;</font></p>
  </td>
  <td width=18 valign=top>

  <p style="margin-top: 0; margin-bottom: 0">

  </td>
  <td width=72 valign=top>

  <p style="margin-top: 0; margin-bottom: 0">

  </td>
 </tr>
 <tr>
  <td width=295 valign=top>

  <p style="margin-top: 0; margin-bottom: 0">

  </td>
  <td width=18 valign=top>

  <p style="margin-top: 0; margin-bottom: 0">

  </td>
  <td width=96 valign=top>
  <div align=right>
  <hr size=1 width="90%" noshade color=gray align=right>
  </div>
  </td>
  <td width=18 valign=top>
  <p align=right style="margin-top: 0; margin-bottom: 0"><font size="2">&nbsp;</font></p>
  </td>
  <td width=96 valign=top>
  <div align=right>
  <hr size=1 width="90%" noshade color=gray align=right>
  </div>
  </td>
  <td width=18 valign=top>

  <p style="margin-top: 0; margin-bottom: 0">

  </td>
  <td width=72 valign=top>

  <p style="margin-top: 0; margin-bottom: 0">

  </td>
 </tr>
 <tr>
  <td width=295 valign=top>
  <p style="margin-top: 0; margin-bottom: 0"><b><font size="2">Diluted
  EPS:</font></b></p>
  </td>
  <td width=18 valign=top>

  <p style="margin-top: 0; margin-bottom: 0">

  </td>
  <td width=96 valign=top>

  <p style="margin-top: 0; margin-bottom: 0">

  </td>
  <td width=18 valign=top>
  <p align=right style="margin-top: 0; margin-bottom: 0"><font size="2">&nbsp;</font></p>
  </td>
  <td width=96 valign=top>

  <p style="margin-top: 0; margin-bottom: 0">

  </td>
  <td width=18 valign=top>

  <p style="margin-top: 0; margin-bottom: 0">

  </td>
  <td width=72 valign=top>

  <p style="margin-top: 0; margin-bottom: 0">

  </td>
 </tr>
 <tr>
  <td width=295 valign=top>
  <p style="margin-top: 0; margin-bottom: 0"><font size="2">Income
  available to common stockholders</font></p>
  </td>
  <td width=18 valign=top>
  <p align=right style="margin-top: 0; margin-bottom: 0"><font size="2">&nbsp;</font></p>
  </td>
  <td width=96 valign=top>
  <p align=right style="margin-top: 0; margin-bottom: 0"><font size="2">&nbsp;</font></p>
  </td>
  <td width=18 valign=top>
  <p align=right style="margin-top: 0; margin-bottom: 0"><font size="2">&nbsp;</font></p>
  </td>
  <td width=96 valign=top>
  <p align=right style="margin-top: 0; margin-bottom: 0"><font size="2">&nbsp;</font></p>
  </td>
  <td width=18 valign=top>

  <p style="margin-top: 0; margin-bottom: 0">

  </td>
  <td width=72 valign=top>
  <p align=right style="margin-top: 0; margin-bottom: 0"><font size="2">&nbsp;</font></p>
  </td>
 </tr>
 <tr>
  <td width=295 valign=top>
  <p style="margin-top: 0; margin-bottom: 0"><font size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; and
  assumed conversions</font></p>
  </td>
  <td width=18 valign=top>
  <p align=right style="margin-top: 0; margin-bottom: 0"><font size="2">$</font></p>
  </td>
  <td width=96 valign=top>
  <p align=right style="margin-top: 0; margin-bottom: 0"><font size="2">42,558&nbsp;</font></p>
  </td>
  <td width=18 valign=top>
  <p align=right style="margin-top: 0; margin-bottom: 0"><font size="2">&nbsp;</font></p>
  </td>
  <td width=96 valign=top>
  <p align=right style="margin-top: 0; margin-bottom: 0"><font size="2">27,555&nbsp;</font></p>
  </td>
  <td width=18 valign=top>
  <p align=right style="margin-top: 0; margin-bottom: 0"><font size="2">$</font></p>
  </td>
  <td width=72 valign=top>
  <p align=right style="margin-top: 0; margin-bottom: 0"><font size="2">1.54&nbsp;</font></p>
  </td>
 </tr>
 <tr>
  <td width=295 valign=top>

  <p style="margin-top: 0; margin-bottom: 0">

  </td>
  <td width=18 valign=top>

  <p style="margin-top: 0; margin-bottom: 0">

  </td>
  <td width=96 valign=top>
  <p align=right style="margin-top: 0; margin-bottom: 0">==========</p>
  </td>
  <td width=18 valign=top>
  <p align=right style="margin-top: 0; margin-bottom: 0">&nbsp;</p>
  </td>
  <td width=96 valign=top>
  <p align=right style="margin-top: 0; margin-bottom: 0">==========</p>
  </td>
  <td width=18 valign=top>

  <p style="margin-top: 0; margin-bottom: 0">

  </td>
  <td width=72 valign=top>
  <p align=right style="margin-top: 0; margin-bottom: 0">=======</p>
  </td>
 </tr>
</table><hr color="#000080"><P STYLE="page-break-after: always"></P><font size="2"><br clear=all>




</font>




<p align=right style="margin-top: 0; margin-bottom: 0"><b><font size="2">EXHIBIT 11<br>
<br><br></font></b></p>



<p align=center style="margin-top: 0; margin-bottom: 0"><b><font size="2">SELECTIVE INSURANCE GROUP, INC. AND CONSOLIDATED SUBSIDIARIES<br>
COMPUTATION OF EARNINGS PER SHARE<br>
Quarter ended September 30, 2004 and 2003<br>
<br><br></font></b></p>

<p style="margin-top: 0; margin-bottom: 0">&nbsp;</p>

<table border=0 cellspacing=0 cellpadding=0>
 <tr>
  <td width=613 colspan=7 valign=top>
  <div align=center><b>
  <hr size=1 width="100%" noshade color=black align=center>
  </b></div>
  </td>
 </tr>
 <tr>
  <td width=295 valign=top>
  <p style="margin-top: 0; margin-bottom: 0"><b><u><font size="2">2004</font></u></b></p>
  </td>
  <td width=18 valign=top>
  <p align=right style="margin-top: 0; margin-bottom: 0"><font size="2">&nbsp;</font></p>
  </td>
  <td width=96 valign=top>
  <p align=center style="margin-top: 0; margin-bottom: 0"><b><font size="2">Income</font></b></p>
  </td>
  <td width=18 valign=top>
  <p align=center style="margin-top: 0; margin-bottom: 0"><b><font size="2">&nbsp;</font></b></p>
  </td>
  <td width=96 valign=top>
  <p align=center style="margin-top: 0; margin-bottom: 0"><b><font size="2">Shares</font></b></p>
  </td>
  <td width=18 valign=top>
  <p align=center style="margin-top: 0; margin-bottom: 0"><b><font size="2">&nbsp;</font></b></p>
  </td>
  <td width=72 valign=top>
  <p align=center style="margin-top: 0; margin-bottom: 0"><b><font size="2">Per Share</font></b></p>
  </td>
 </tr>
 <tr>
  <td width=295 valign=top>
  <p style="margin-top: 0; margin-bottom: 0"><font size="2">(in
  thousands, except per share amounts)</font></p>
  </td>
  <td width=18 valign=top>
  <p align=right style="margin-top: 0; margin-bottom: 0"><font size="2">&nbsp;</font></p>
  </td>
  <td width=96 valign=top>
  <p align=center style="margin-top: 0; margin-bottom: 0"><b><font size="2">(Numerator)</font></b></p>
  </td>
  <td width=18 valign=top>
  <p align=center style="margin-top: 0; margin-bottom: 0"><b><font size="2">&nbsp;</font></b></p>
  </td>
  <td width=96 valign=top>
  <p align=center style="margin-top: 0; margin-bottom: 0"><b><font size="2">(Denominator)</font></b></p>
  </td>
  <td width=18 valign=top>
  <p align=center style="margin-top: 0; margin-bottom: 0"><b><font size="2">&nbsp;</font></b></p>
  </td>
  <td width=72 valign=top>
  <p align=center style="margin-top: 0; margin-bottom: 0"><b><font size="2">Amount</font></b></p>
  </td>
 </tr>
 <tr>
  <td width=613 colspan=7 valign=top>
  <div align=center><b>
  <hr size=1 width="100%" noshade color=black align=center>
  </b></div>
  </td>
 </tr>
 <tr>
  <td width=295 valign=top>
  <p style="margin-top: 0; margin-bottom: 0"><b><font size="2">Basic
  EPS:</font></b></p>
  </td>
  <td width=18 valign=top>

  <p style="margin-top: 0; margin-bottom: 0">

  </td>
  <td width=96 valign=top>

  <p style="margin-top: 0; margin-bottom: 0">

  </td>
  <td width=18 valign=top>
  <p align=right style="margin-top: 0; margin-bottom: 0"><font size="2">&nbsp;</font></p>
  </td>
  <td width=96 valign=top>

  <p style="margin-top: 0; margin-bottom: 0">

  </td>
  <td width=18 valign=top>

  <p style="margin-top: 0; margin-bottom: 0">

  </td>
  <td width=72 valign=top>

  <p style="margin-top: 0; margin-bottom: 0">

  </td>
 </tr>
 <tr>
  <td width=295 valign=top>
  <p style="margin-top: 0; margin-bottom: 0"><font size="2">Net
  income available to common stockholders</font></p>
  </td>
  <td width=18 valign=top>
  <p align=right style="margin-top: 0; margin-bottom: 0"><font size="2">$</font></p>
  </td>
  <td width=96 valign=top>
  <p align=right style="margin-top: 0; margin-bottom: 0"><font size="2">28,328&nbsp;</font></p>
  </td>
  <td width=18 valign=top>
  <p align=right style="margin-top: 0; margin-bottom: 0"><font size="2">&nbsp;</font></p>
  </td>
  <td width=96 valign=top>
  <p align=right style="margin-top: 0; margin-bottom: 0"><font size="2">26,779&nbsp;</font></p>
  </td>
  <td width=18 valign=top>
  <p align=right style="margin-top: 0; margin-bottom: 0"><font size="2">$</font></p>
  </td>
  <td width=72 valign=top>
  <p align=right style="margin-top: 0; margin-bottom: 0"><font size="2">1.05&nbsp;</font></p>
  </td>
 </tr>
 <tr>
  <td width=295 valign=top>

  <p style="margin-top: 0; margin-bottom: 0">

  </td>
  <td width=18 valign=top>

  <p style="margin-top: 0; margin-bottom: 0">

  </td>
  <td width=96 valign=top>
  <p align=right style="margin-top: 0; margin-bottom: 0">==========</p>
  </td>
  <td width=18 valign=top>
  <p align=right style="margin-top: 0; margin-bottom: 0">&nbsp;</p>
  </td>
  <td width=96 valign=top>
  <p align=right style="margin-top: 0; margin-bottom: 0">==========</p>
  </td>
  <td width=18 valign=top>

  <p style="margin-top: 0; margin-bottom: 0">

  </td>
  <td width=72 valign=top>
  <p align=right style="margin-top: 0; margin-bottom: 0">=======</p>
  </td>
 </tr>
 <tr>
  <td width=295 valign=top>
  <p style="margin-top: 0; margin-bottom: 0"><b><font size="2">Effect
  of dilutive securities:</font></b></p>
  </td>
  <td width=18 valign=top>
  <p align=right style="margin-top: 0; margin-bottom: 0"><font size="2">&nbsp;</font></p>
  </td>
  <td width=96 valign=top>
  <p align=right style="margin-top: 0; margin-bottom: 0"><font size="2">&nbsp;</font></p>
  </td>
  <td width=18 valign=top>
  <p align=right style="margin-top: 0; margin-bottom: 0"><font size="2">&nbsp;</font></p>
  </td>
  <td width=96 valign=top>
  <p align=right style="margin-top: 0; margin-bottom: 0"><font size="2">&nbsp;</font></p>
  </td>
  <td width=18 valign=top>
  <p align=right style="margin-top: 0; margin-bottom: 0"><font size="2">&nbsp;</font></p>
  </td>
  <td width=72 valign=top>
  <p align=right style="margin-top: 0; margin-bottom: 0"><font size="2">&nbsp;</font></p>
  </td>
 </tr>
 <tr>
  <td width=295 valign=top>
  <p style="margin-top: 0; margin-bottom: 0"><font size="2">Restricted
  stock</font></p>
  </td>
  <td width=18 valign=top>
  <p align=right style="margin-top: 0; margin-bottom: 0"><font size="2">&nbsp;</font></p>
  </td>
  <td width=96 valign=top>
  <p align=right style="margin-top: 0; margin-bottom: 0"><font size="2">&nbsp;</font></p>
  </td>
  <td width=18 valign=top>
  <p align=right style="margin-top: 0; margin-bottom: 0"><font size="2">&nbsp;</font></p>
  </td>
  <td width=96 valign=top>
  <p align=right style="margin-top: 0; margin-bottom: 0"><font size="2">1,006&nbsp;</font></p>
  </td>
  <td width=18 valign=top>
  <p align=right style="margin-top: 0; margin-bottom: 0"><font size="2">&nbsp;</font></p>
  </td>
  <td width=72 valign=top>
  <p align=right style="margin-top: 0; margin-bottom: 0"><font size="2">&nbsp;</font></p>
  </td>
 </tr>
 <tr>
  <td width=295 valign=top>
  <p style="margin-top: 0; margin-bottom: 0"><font size="2">Convertible
  debt</font></p>
  </td>
  <td width=18 valign=top>
  <p align=right style="margin-top: 0; margin-bottom: 0"><font size="2">&nbsp;</font></p>
  </td>
  <td width=96 valign=top>
  <p align=right style="margin-top: 0; margin-bottom: 0"><font size="2">818&nbsp;</font></p>
  </td>
  <td width=18 valign=top>
  <p align=right style="margin-top: 0; margin-bottom: 0"><font size="2">&nbsp;</font></p>
  </td>
  <td width=96 valign=top>
  <p align=right style="margin-top: 0; margin-bottom: 0"><font size="2">4,104&nbsp;</font></p>
  </td>
  <td width=18 valign=top>
  <p align=right style="margin-top: 0; margin-bottom: 0"><font size="2">&nbsp;</font></p>
  </td>
  <td width=72 valign=top>
  <p align=right style="margin-top: 0; margin-bottom: 0"><font size="2">&nbsp;</font></p>
  </td>
 </tr>
 <tr>
  <td width=295 valign=top>
  <p style="margin-top: 0; margin-bottom: 0"><font size="2">Stock
  options</font></p>
  </td>
  <td width=18 valign=top>
  <p align=right style="margin-top: 0; margin-bottom: 0"><font size="2">&nbsp;</font></p>
  </td>
  <td width=96 valign=top>
  <p align=right style="margin-top: 0; margin-bottom: 0"><font size="2">&nbsp;</font></p>
  </td>
  <td width=18 valign=top>
  <p align=right style="margin-top: 0; margin-bottom: 0"><font size="2">&nbsp;</font></p>
  </td>
  <td width=96 valign=top>
  <p align=right style="margin-top: 0; margin-bottom: 0"><font size="2">409&nbsp;</font></p>
  </td>
  <td width=18 valign=top>
  <p align=right style="margin-top: 0; margin-bottom: 0"><font size="2">&nbsp;</font></p>
  </td>
  <td width=72 valign=top>
  <p align=right style="margin-top: 0; margin-bottom: 0"><font size="2">&nbsp;</font></p>
  </td>
 </tr>
 <tr>
  <td width=295 valign=top>
  <p style="margin-top: 0; margin-bottom: 0"><font size="2">Deferred
  shares</font></p>
  </td>
  <td width=18 valign=top>

  <p style="margin-top: 0; margin-bottom: 0">

  </td>
  <td width=96 valign=top>

  <p style="margin-top: 0; margin-bottom: 0">

  </td>
  <td width=18 valign=top>
  <p align=right style="margin-top: 0; margin-bottom: 0"><font size="2">&nbsp;</font></p>
  </td>
  <td width=96 valign=top>
  <p align=right style="margin-top: 0; margin-bottom: 0"><font size="2">100&nbsp;</font></p>
  </td>
  <td width=18 valign=top>

  <p style="margin-top: 0; margin-bottom: 0">

  </td>
  <td width=72 valign=top>

  <p style="margin-top: 0; margin-bottom: 0">

  </td>
 </tr>
 <tr>
  <td width=295 valign=top>

  <p style="margin-top: 0; margin-bottom: 0">

  </td>
  <td width=18 valign=top>

  <p style="margin-top: 0; margin-bottom: 0">

  </td>
  <td width=96 valign=top>
  <div align=right>
  <hr size=1 width="90%" noshade color=gray align=right>
  </div>
  </td>
  <td width=18 valign=top>
  <p align=right style="margin-top: 0; margin-bottom: 0"><font size="2">&nbsp;</font></p>
  </td>
  <td width=96 valign=top>
  <div align=right>
  <hr size=1 width="90%" noshade color=gray align=right>
  </div>
  </td>
  <td width=18 valign=top>

  <p style="margin-top: 0; margin-bottom: 0">

  </td>
  <td width=72 valign=top>

  <p style="margin-top: 0; margin-bottom: 0">

  </td>
 </tr>
 <tr>
  <td width=295 valign=top>
  <p style="margin-top: 0; margin-bottom: 0"><b><font size="2">Diluted
  EPS:</font></b></p>
  </td>
  <td width=18 valign=top>

  <p style="margin-top: 0; margin-bottom: 0">

  </td>
  <td width=96 valign=top>

  <p style="margin-top: 0; margin-bottom: 0">

  </td>
  <td width=18 valign=top>
  <p align=right style="margin-top: 0; margin-bottom: 0"><font size="2">&nbsp;</font></p>
  </td>
  <td width=96 valign=top>

  <p style="margin-top: 0; margin-bottom: 0">

  </td>
  <td width=18 valign=top>

  <p style="margin-top: 0; margin-bottom: 0">

  </td>
  <td width=72 valign=top>

  <p style="margin-top: 0; margin-bottom: 0">

  </td>
 </tr>
 <tr>
  <td width=295 valign=top>
  <p style="margin-top: 0; margin-bottom: 0"><font size="2">Income
  available to common stockholders&nbsp; </font> </p>
  </td>
  <td width=18 valign=top>
  <p align=right style="margin-top: 0; margin-bottom: 0"><font size="2">&nbsp;</font></p>
  </td>
  <td width=96 valign=top>
  <p align=right style="margin-top: 0; margin-bottom: 0"><font size="2">&nbsp;</font></p>
  </td>
  <td width=18 valign=top>
  <p align=right style="margin-top: 0; margin-bottom: 0"><font size="2">&nbsp;</font></p>
  </td>
  <td width=96 valign=top>
  <p align=right style="margin-top: 0; margin-bottom: 0"><font size="2">&nbsp;</font></p>
  </td>
  <td width=18 valign=top>

  <p style="margin-top: 0; margin-bottom: 0">

  </td>
  <td width=72 valign=top>
  <p align=right style="margin-top: 0; margin-bottom: 0"><font size="2">&nbsp;</font></p>
  </td>
 </tr>
 <tr>
  <td width=295 valign=top>
  <p style="margin-top: 0; margin-bottom: 0"><font size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; and
  assumed conversions</font></p>
  </td>
  <td width=18 valign=top>
  <p align=right style="margin-top: 0; margin-bottom: 0"><font size="2">$</font></p>
  </td>
  <td width=96 valign=top>
  <p align=right style="margin-top: 0; margin-bottom: 0"><font size="2">29,146&nbsp;</font></p>
  </td>
  <td width=18 valign=top>
  <p align=right style="margin-top: 0; margin-bottom: 0"><font size="2">&nbsp;</font></p>
  </td>
  <td width=96 valign=top>
  <p align=right style="margin-top: 0; margin-bottom: 0"><font size="2">32,398&nbsp;</font></p>
  </td>
  <td width=18 valign=top>
  <p align=right style="margin-top: 0; margin-bottom: 0"><font size="2">$</font></p>
  </td>
  <td width=72 valign=top>
  <p align=right style="margin-top: 0; margin-bottom: 0"><font size="2">0.90&nbsp;</font></p>
  </td>
 </tr>
 <tr>
  <td width=295 valign=top>

  <p style="margin-top: 0; margin-bottom: 0">

  </td>
  <td width=18 valign=top>

  <p style="margin-top: 0; margin-bottom: 0">

  </td>
  <td width=96 valign=top>
  <p align=right style="margin-top: 0; margin-bottom: 0">==========</p>
  </td>
  <td width=18 valign=top>
  <p align=right style="margin-top: 0; margin-bottom: 0">&nbsp;</p>
  </td>
  <td width=96 valign=top>
  <p align=right style="margin-top: 0; margin-bottom: 0">==========</p>
  </td>
  <td width=18 valign=top>

  <p style="margin-top: 0; margin-bottom: 0">

  </td>
  <td width=72 valign=top>
  <p align=right style="margin-top: 0; margin-bottom: 0">=======</p>
  </td>
 </tr>
 <tr>
  <td width=295 valign=top>

  <p style="margin-top: 0; margin-bottom: 0">

  </td>
  <td width=18 valign=top>

  <p style="margin-top: 0; margin-bottom: 0">

  </td>
  <td width=96 valign=top>
  <p align=right style="margin-top: 0; margin-bottom: 0"><font size="2">&nbsp;</font></p>
  </td>
  <td width=18 valign=top>
  <p align=right style="margin-top: 0; margin-bottom: 0"><font size="2">&nbsp;</font></p>
  </td>
  <td width=96 valign=top>

  <p style="margin-top: 0; margin-bottom: 0">

  </td>
  <td width=18 valign=top>

  <p style="margin-top: 0; margin-bottom: 0">

  </td>
  <td width=72 valign=top>

  <p style="margin-top: 0; margin-bottom: 0">

  </td>
 </tr>
 <tr>
  <td width=295 valign=top>

  <h2 style="margin-top: 0; margin-bottom: 0"><font size="2"><br>
  <br><br></font></h2>

  </td>
  <td width=18 valign=top>

  <p style="margin-top: 0; margin-bottom: 0">

  </td>
  <td width=96 valign=top>
  <p align=right style="margin-top: 0; margin-bottom: 0"><font size="2">&nbsp;</font></p>
  </td>
  <td width=18 valign=top>
  <p align=right style="margin-top: 0; margin-bottom: 0"><font size="2">&nbsp;</font></p>
  </td>
  <td width=96 valign=top>

  <p style="margin-top: 0; margin-bottom: 0">

  </td>
  <td width=18 valign=top>

  <p style="margin-top: 0; margin-bottom: 0">

  </td>
  <td width=72 valign=top>

  <p style="margin-top: 0; margin-bottom: 0">

  </td>
 </tr>
 <tr>
  <td width=613 colspan=7 valign=top>
  <div align=center><b>
  <hr size=1 width="100%" noshade color=black align=center>
  </b></div>
  </td>
 </tr>
 <tr>
  <td width=295 valign=top>
  <p style="margin-top: 0; margin-bottom: 0"><b><u><font size="2">2003</font></u></b></p>
  </td>
  <td width=18 valign=top>

  <p style="margin-top: 0; margin-bottom: 0">

  </td>
  <td width=96 valign=top>
  <p align=center style="margin-top: 0; margin-bottom: 0"><b><font size="2">Income</font></b></p>
  </td>
  <td width=18 valign=top>
  <p align=center style="margin-top: 0; margin-bottom: 0"><font size="2">&nbsp;</font></p>
  </td>
  <td width=96 valign=top>
  <p align=center style="margin-top: 0; margin-bottom: 0"><b><font size="2">Shares</font></b></p>
  </td>
  <td width=18 valign=top>

  <p style="margin-top: 0; margin-bottom: 0">

  </td>
  <td width=72 valign=top>
  <p align=center style="margin-top: 0; margin-bottom: 0"><b><font size="2">Per Share</font></b></p>
  </td>
 </tr>
 <tr>
  <td width=295 valign=top>
  <p style="margin-top: 0; margin-bottom: 0"><font size="2">(in
  thousands, except per share amounts)</font></p>
  </td>
  <td width=18 valign=top>
  <p align=right style="margin-top: 0; margin-bottom: 0"><font size="2">&nbsp;</font></p>
  </td>
  <td width=96 valign=top>
  <p align=center style="margin-top: 0; margin-bottom: 0"><b><font size="2">(Numerator)</font></b></p>
  </td>
  <td width=18 valign=top>
  <p align=center style="margin-top: 0; margin-bottom: 0"><b><font size="2">&nbsp;</font></b></p>
  </td>
  <td width=96 valign=top>
  <p align=center style="margin-top: 0; margin-bottom: 0"><b><font size="2">(Denominator)</font></b></p>
  </td>
  <td width=18 valign=top>
  <p align=center style="margin-top: 0; margin-bottom: 0"><b><font size="2">&nbsp;</font></b></p>
  </td>
  <td width=72 valign=top>
  <p align=center style="margin-top: 0; margin-bottom: 0"><b><font size="2">Amount</font></b></p>
  </td>
 </tr>
 <tr>
  <td width=613 colspan=7 valign=top>
  <div align=center><b>
  <hr size=1 width="100%" noshade color=black align=center>
  </b></div>
  </td>
 </tr>
 <tr>
  <td width=295 valign=top>
  <p style="margin-top: 0; margin-bottom: 0"><b><font size="2">Basic
  EPS:</font></b></p>
  </td>
  <td width=18 valign=top>

  <p style="margin-top: 0; margin-bottom: 0">

  </td>
  <td width=96 valign=top>

  <p style="margin-top: 0; margin-bottom: 0">

  </td>
  <td width=18 valign=top>
  <p align=right style="margin-top: 0; margin-bottom: 0"><font size="2">&nbsp;</font></p>
  </td>
  <td width=96 valign=top>

  <p style="margin-top: 0; margin-bottom: 0">

  </td>
  <td width=18 valign=top>

  <p style="margin-top: 0; margin-bottom: 0">

  </td>
  <td width=72 valign=top>

  <p style="margin-top: 0; margin-bottom: 0">

  </td>
 </tr>
 <tr>
  <td width=295 valign=top>
  <p style="margin-top: 0; margin-bottom: 0"><font size="2">Net
  income available to common stockholders</font></p>
  </td>
  <td width=18 valign=top>
  <p align=right style="margin-top: 0; margin-bottom: 0"><font size="2">$</font></p>
  </td>
  <td width=96 valign=top>
  <p align=right style="margin-top: 0; margin-bottom: 0"><font size="2">14,717&nbsp;</font></p>
  </td>
  <td width=18 valign=top>
  <p align=right style="margin-top: 0; margin-bottom: 0"><font size="2">&nbsp;</font></p>
  </td>
  <td width=96 valign=top>
  <p align=right style="margin-top: 0; margin-bottom: 0"><font size="2">26,179&nbsp;</font></p>
  </td>
  <td width=18 valign=top>
  <p align=right style="margin-top: 0; margin-bottom: 0"><font size="2">$</font></p>
  </td>
  <td width=72 valign=top>
  <p align=right style="margin-top: 0; margin-bottom: 0"><font size="2">0.56&nbsp;</font></p>
  </td>
 </tr>
 <tr>
  <td width=295 valign=top>

  <p style="margin-top: 0; margin-bottom: 0">

  </td>
  <td width=18 valign=top>

  <p style="margin-top: 0; margin-bottom: 0">

  </td>
  <td width=96 valign=top>
  <p align=right style="margin-top: 0; margin-bottom: 0">==========</p>
  </td>
  <td width=18 valign=top>
  <p align=right style="margin-top: 0; margin-bottom: 0">&nbsp;</p>
  </td>
  <td width=96 valign=top>
  <p align=right style="margin-top: 0; margin-bottom: 0">==========</p>
  </td>
  <td width=18 valign=top>

  <p style="margin-top: 0; margin-bottom: 0">

  </td>
  <td width=72 valign=top>
  <p align=right style="margin-top: 0; margin-bottom: 0">=======</p>
  </td>
 </tr>
 <tr>
  <td width=295 valign=top>
  <p style="margin-top: 0; margin-bottom: 0"><b><font size="2">Effect
  of dilutive securities:</font></b></p>
  </td>
  <td width=18 valign=top>
  <p align=right style="margin-top: 0; margin-bottom: 0"><font size="2">&nbsp;</font></p>
  </td>
  <td width=96 valign=top>
  <p align=right style="margin-top: 0; margin-bottom: 0"><font size="2">&nbsp;</font></p>
  </td>
  <td width=18 valign=top>
  <p align=right style="margin-top: 0; margin-bottom: 0"><font size="2">&nbsp;</font></p>
  </td>
  <td width=96 valign=top>
  <p align=right style="margin-top: 0; margin-bottom: 0"><font size="2">&nbsp;</font></p>
  </td>
  <td width=18 valign=top>
  <p align=right style="margin-top: 0; margin-bottom: 0"><font size="2">&nbsp;</font></p>
  </td>
  <td width=72 valign=top>
  <p align=right style="margin-top: 0; margin-bottom: 0"><font size="2">&nbsp;</font></p>
  </td>
 </tr>
 <tr>
  <td width=295 valign=top>
  <p style="margin-top: 0; margin-bottom: 0"><font size="2">Restricted
  stock</font></p>
  </td>
  <td width=18 valign=top>
  <p align=right style="margin-top: 0; margin-bottom: 0"><font size="2">&nbsp;</font></p>
  </td>
  <td width=96 valign=top>
  <p align=right style="margin-top: 0; margin-bottom: 0"><font size="2">-&nbsp;</font></p>
  </td>
  <td width=18 valign=top>
  <p align=right style="margin-top: 0; margin-bottom: 0"><font size="2">&nbsp;</font></p>
  </td>
  <td width=96 valign=top>
  <p align=right style="margin-top: 0; margin-bottom: 0"><font size="2">893&nbsp;</font></p>
  </td>
  <td width=18 valign=top>
  <p align=right style="margin-top: 0; margin-bottom: 0"><font size="2">&nbsp;</font></p>
  </td>
  <td width=72 valign=top>
  <p align=right style="margin-top: 0; margin-bottom: 0"><font size="2">&nbsp;</font></p>
  </td>
 </tr>
 <tr>
  <td width=295 valign=top>
  <p style="margin-top: 0; margin-bottom: 0"><font size="2">8.75%
  convertible subordinated debentures</font></p>
  </td>
  <td width=18 valign=top>
  <p align=right style="margin-top: 0; margin-bottom: 0"><font size="2">&nbsp;</font></p>
  </td>
  <td width=96 valign=top>
  <p align=right style="margin-top: 0; margin-bottom: 0"><font size="2">18&nbsp;</font></p>
  </td>
  <td width=18 valign=top>
  <p align=right style="margin-top: 0; margin-bottom: 0"><font size="2">&nbsp;</font></p>
  </td>
  <td width=96 valign=top>
  <p align=right style="margin-top: 0; margin-bottom: 0"><font size="2">171&nbsp;</font></p>
  </td>
  <td width=18 valign=top>
  <p align=right style="margin-top: 0; margin-bottom: 0"><font size="2">&nbsp;</font></p>
  </td>
  <td width=72 valign=top>
  <p align=right style="margin-top: 0; margin-bottom: 0"><font size="2">&nbsp;</font></p>
  </td>
 </tr>
 <tr>
  <td width=295 valign=top>
  <p style="margin-top: 0; margin-bottom: 0"><font size="2">Stock
  options</font></p>
  </td>
  <td width=18 valign=top>
  <p align=right style="margin-top: 0; margin-bottom: 0"><font size="2">&nbsp;</font></p>
  </td>
  <td width=96 valign=top>
  <p align=right style="margin-top: 0; margin-bottom: 0"><font size="2">-&nbsp;</font></p>
  </td>
  <td width=18 valign=top>
  <p align=right style="margin-top: 0; margin-bottom: 0"><font size="2">&nbsp;</font></p>
  </td>
  <td width=96 valign=top>
  <p align=right style="margin-top: 0; margin-bottom: 0"><font size="2">360&nbsp;</font></p>
  </td>
  <td width=18 valign=top>
  <p align=right style="margin-top: 0; margin-bottom: 0"><font size="2">&nbsp;</font></p>
  </td>
  <td width=72 valign=top>
  <p align=right style="margin-top: 0; margin-bottom: 0"><font size="2">&nbsp;</font></p>
  </td>
 </tr>
 <tr>
  <td width=295 valign=top>
  <p style="margin-top: 0; margin-bottom: 0"><font size="2">Deferred
  shares</font></p>
  </td>
  <td width=18 valign=top>

  <p style="margin-top: 0; margin-bottom: 0">

  </td>
  <td width=96 valign=top>
  <p align=right style="margin-top: 0; margin-bottom: 0"><font size="2">-&nbsp;</font></p>
  </td>
  <td width=18 valign=top>
  <p align=right style="margin-top: 0; margin-bottom: 0"><font size="2">&nbsp;</font></p>
  </td>
  <td width=96 valign=top>
  <p align=right style="margin-top: 0; margin-bottom: 0"><font size="2">120&nbsp;</font></p>
  </td>
  <td width=18 valign=top>

  <p style="margin-top: 0; margin-bottom: 0">

  </td>
  <td width=72 valign=top>

  <p style="margin-top: 0; margin-bottom: 0">

  </td>
 </tr>
 <tr>
  <td width=295 valign=top>

  <p style="margin-top: 0; margin-bottom: 0">

  </td>
  <td width=18 valign=top>

  <p style="margin-top: 0; margin-bottom: 0">

  </td>
  <td width=96 valign=top>
  <div align=right>
  <hr size=1 width="90%" noshade color=gray align=right>
  </div>
  </td>
  <td width=18 valign=top>
  <p align=right style="margin-top: 0; margin-bottom: 0"><font size="2">&nbsp;</font></p>
  </td>
  <td width=96 valign=top>
  <div align=right>
  <hr size=1 width="90%" noshade color=gray align=right>
  </div>
  </td>
  <td width=18 valign=top>

  <p style="margin-top: 0; margin-bottom: 0">

  </td>
  <td width=72 valign=top>

  <p style="margin-top: 0; margin-bottom: 0">

  </td>
 </tr>
 <tr>
  <td width=295 valign=top>
  <p style="margin-top: 0; margin-bottom: 0"><b><font size="2">Diluted
  EPS:</font></b></p>
  </td>
  <td width=18 valign=top>

  <p style="margin-top: 0; margin-bottom: 0">

  </td>
  <td width=96 valign=top>

  <p style="margin-top: 0; margin-bottom: 0">

  </td>
  <td width=18 valign=top>
  <p align=right style="margin-top: 0; margin-bottom: 0"><font size="2">&nbsp;</font></p>
  </td>
  <td width=96 valign=top>

  <p style="margin-top: 0; margin-bottom: 0">

  </td>
  <td width=18 valign=top>

  <p style="margin-top: 0; margin-bottom: 0">

  </td>
  <td width=72 valign=top>

  <p style="margin-top: 0; margin-bottom: 0">

  </td>
 </tr>
 <tr>
  <td width=295 valign=top>
  <p style="margin-top: 0; margin-bottom: 0"><font size="2">Income
  available to common stockholders</font></p>
  </td>
  <td width=18 valign=top>
  <p align=right style="margin-top: 0; margin-bottom: 0"><font size="2">&nbsp;</font></p>
  </td>
  <td width=96 valign=top>
  <p align=right style="margin-top: 0; margin-bottom: 0"><font size="2">&nbsp;</font></p>
  </td>
  <td width=18 valign=top>
  <p align=right style="margin-top: 0; margin-bottom: 0"><font size="2">&nbsp;</font></p>
  </td>
  <td width=96 valign=top>
  <p align=right style="margin-top: 0; margin-bottom: 0"><font size="2">&nbsp;</font></p>
  </td>
  <td width=18 valign=top>

  <p style="margin-top: 0; margin-bottom: 0">

  </td>
  <td width=72 valign=top>
  <p align=right style="margin-top: 0; margin-bottom: 0"><font size="2">&nbsp;</font></p>
  </td>
 </tr>
 <tr>
  <td width=295 valign=top>
  <p style="margin-top: 0; margin-bottom: 0"><font size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; and
  assumed conversions</font></p>
  </td>
  <td width=18 valign=top>
  <p align=right style="margin-top: 0; margin-bottom: 0"><font size="2">$</font></p>
  </td>
  <td width=96 valign=top>
  <p align=right style="margin-top: 0; margin-bottom: 0"><font size="2">14,735&nbsp;</font></p>
  </td>
  <td width=18 valign=top>
  <p align=right style="margin-top: 0; margin-bottom: 0"><font size="2">&nbsp;</font></p>
  </td>
  <td width=96 valign=top>
  <p align=right style="margin-top: 0; margin-bottom: 0"><font size="2">27,723&nbsp;</font></p>
  </td>
  <td width=18 valign=top>
  <p align=right style="margin-top: 0; margin-bottom: 0"><font size="2">$</font></p>
  </td>
  <td width=72 valign=top>
  <p align=right style="margin-top: 0; margin-bottom: 0"><font size="2">0.53&nbsp;</font></p>
  </td>
 </tr>
 <tr>
  <td width=295 valign=top>

  <p style="margin-top: 0; margin-bottom: 0">

  </td>
  <td width=18 valign=top>

  <p style="margin-top: 0; margin-bottom: 0">

  </td>
  <td width=96 valign=top>
  <p align=right style="margin-top: 0; margin-bottom: 0">==========</p>
  </td>
  <td width=18 valign=top>
  <p align=right style="margin-top: 0; margin-bottom: 0">&nbsp;</p>
  </td>
  <td width=96 valign=top>
  <p align=right style="margin-top: 0; margin-bottom: 0">==========</p>
  </td>
  <td width=18 valign=top>

  <p style="margin-top: 0; margin-bottom: 0">

  </td>
  <td width=72 valign=top>
  <p align=right style="margin-top: 0; margin-bottom: 0">=======</p>
  </td>
 </tr>
</table>



</div>

</body>

</html>

</TEXT>
</DOCUMENT>
<DOCUMENT>
<TYPE>EX-31
<SEQUENCE>9
<FILENAME>exhibit311.htm
<DESCRIPTION>EXHIBIT 31.1
<TEXT>
<html>

<head>

<title>Exhibit 31.1</title>

</head>

<body link=blue vlink=purple>

<div>



<p align=right style="margin-top: 0; margin-bottom: 0"><b><font size="2">Exhibit 31.1</font></b></p>

<p style="margin-top: 0; margin-bottom: 0"><b><font size="2"><br><br></font></b></p>



<p align=center style="margin-top: 0; margin-bottom: 0"><b><font size="2">Certification pursuant to Rule 13a - 14(a), as adopted pursuant to<br>
Section 302 of the Sarbanes-Oxley Act of 2002 <br><br></font></b></p>



<p style="margin-top: 0; margin-bottom: 0"><font size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; I,
GREGORY E. MURPHY, Chief Executive Officer of Selective Insurance Group, Inc.
(the &quot;Company&quot;), hereby certify, that:<br>
<br>
1. I have reviewed this quarterly report on Form 10-Q of Selective Insurance
Group, Inc.;<br>
<br>
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;<br>
<br>
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;<br>
<br>
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 15d-15(e)) for the registrant and have:<br><br></font></p>

<table border=0 cellspacing=0 cellpadding=0>
 <tr>
  <td width=49 valign=top>
  <p align=right style="margin-top: 0; margin-bottom: 0"><font size="2">a)</font></p>
  </td>
  <td width=18 valign=top>

  <p style="margin-top: 0; margin-bottom: 0">

  </td>
  <td width=629 valign=top>
  <p style="margin-top: 0; margin-bottom: 0"><font size="2">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;<br><br></font></p>
  </td>
 </tr>
 <tr>
  <td width=49 valign=top>
  <p align=right style="margin-top: 0; margin-bottom: 0"><font size="2">b)</font></p>
  </td>
  <td width=18 valign=top>

  <p style="margin-top: 0; margin-bottom: 0">

  </td>
  <td width=629 valign=top>
  <p style="margin-top: 0; margin-bottom: 0"><font size="2">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<br><br></font></p>
  </td>
 </tr>
 <tr>
  <td width=49 valign=top>
  <p align=right style="margin-top: 0; margin-bottom: 0"><font size="2">c)</font></p>
  </td>
  <td width=18 valign=top>

  <p style="margin-top: 0; margin-bottom: 0">

  </td>
  <td width=629 valign=top>
  <p style="margin-top: 0; margin-bottom: 0"><font size="2">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.</font></p>
  </td>
 </tr>
</table>

<p style="margin-top: 0; margin-bottom: 0"><font size="2"><br>
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):<br><br></font></p>

<table border=0 cellspacing=0 cellpadding=0>
 <tr>
  <td width=49 valign=top>
  <p align=right style="margin-top: 0; margin-bottom: 0"><font size="2">a)</font></p>
  </td>
  <td width=18 valign=top>

  <p style="margin-top: 0; margin-bottom: 0">

  </td>
  <td width=629 valign=top>
  <p style="margin-top: 0; margin-bottom: 0"><font size="2">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<br><br></font></p>
  </td>
 </tr>
 <tr>
  <td width=49 valign=top>
  <p align=right style="margin-top: 0; margin-bottom: 0"><font size="2">b)</font></p>
  </td>
  <td width=18 valign=top>

  <p style="margin-top: 0; margin-bottom: 0">

  </td>
  <td width=629 valign=top>
  <p style="margin-top: 0; margin-bottom: 0"><font size="2">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.<br><br></font></p>
  </td>
 </tr>
</table>

<p style="margin-top: 0; margin-bottom: 0"><font size="2"><br><br></font></p>

<table border=0 cellspacing=0 cellpadding=0>
 <tr>
  <td width=306 valign=top>
  <p style="margin-top: 0; margin-bottom: 0"><font size="2">Date: November 5, 2004</font></p>
  </td>
  <td width=341 valign=top>
  <p style="margin-top: 0; margin-bottom: 0"><u><font size="2">By: /s/ Gregory E. Murphy</font></u></p>
  </td>
 </tr>
 <tr>
  <td width=306 valign=top>

  <p style="margin-top: 0; margin-bottom: 0">

  </td>
  <td width=341 valign=top>
  <p style="margin-top: 0; margin-bottom: 0"><font size="2">Gregory E. Murphy</font></p>
  </td>
 </tr>
 <tr>
  <td width=306 valign=top>

  <p style="margin-top: 0; margin-bottom: 0">

  </td>
  <td width=341 valign=top>
  <p style="margin-top: 0; margin-bottom: 0"><font size="2">Chairman, President and Chief
  Executive Officer</font></p>
  </td>
 </tr>
</table>



</div>

</body>

</html>

</TEXT>
</DOCUMENT>
<DOCUMENT>
<TYPE>EX-31
<SEQUENCE>10
<FILENAME>exhibit312.htm
<DESCRIPTION>EXHIBIT 31.2
<TEXT>
<html>

<head>

<title>Exhibit 31.2</title>

</head>

<body link=blue vlink=purple>

<div>

<div>

<p align=right style="margin-top: 0; margin-bottom: 0"><b><font size="2">Exhibit 31.2</font></b></p>

<p style="margin-top: 0; margin-bottom: 0"><b><font size="2">&nbsp;</font></b></p>







<p align=center style="margin-top: 0; margin-bottom: 0">&nbsp;</p>
<p align=center style="margin-top: 0; margin-bottom: 0"><b><font size="2">Certification
pursuant to Rule 13a - 14(a), as adopted pursuant to<br>
Section 302 of the Sarbanes-Oxley Act of 2002 </font> </b></p>
<p align=center style="margin-top: 0; margin-bottom: 0">&nbsp;</p>
<p align=center style="margin-top: 0; margin-bottom: 0">&nbsp;</p>



<p style="margin-top: 0; margin-bottom: 0"><font size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; I,
DALE A. THATCHER, Chief Financial Officer of Selective Insurance Group, Inc.
(the &quot;Company&quot;), hereby certify,&nbsp; that:<br>
<br>
1. I have reviewed this quarterly report on Form 10-Q of Selective Insurance
Group, Inc.;<br>
<br>
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;<br>
<br>
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;<br>
<br>
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 15d-15(e)) for the registrant and have:</font></p>
<p style="margin-top: 0; margin-bottom: 0">&nbsp;</p>

<table border=0 cellspacing=0 cellpadding=0>
 <tr>
  <td width=49 valign=top>
  <p align=right style="margin-top: 0; margin-bottom: 0"><font size="2">a)</font></p>
  </td>
  <td width=18 valign=top>

  <p style="margin-top: 0; margin-bottom: 0">

  </td>
  <td width=629 valign=top>
  <p style="margin-top: 0; margin-bottom: 0"><font size="2">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;</font></p>
  <p style="margin-top: 0; margin-bottom: 0">&nbsp;</p>
  </td>
 </tr>
 <tr>
  <td width=49 valign=top>
  <p align=right style="margin-top: 0; margin-bottom: 0"><font size="2">b)</font></p>
  </td>
  <td width=18 valign=top>

  <p style="margin-top: 0; margin-bottom: 0">

  </td>
  <td width=629 valign=top>
  <p style="margin-top: 0; margin-bottom: 0"><font size="2">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</font></p>
  <p style="margin-top: 0; margin-bottom: 0">&nbsp;</p>
  </td>
 </tr>
 <tr>
  <td width=49 valign=top>
  <p align=right style="margin-top: 0; margin-bottom: 0"><font size="2">c)</font></p>
  </td>
  <td width=18 valign=top>

  <p style="margin-top: 0; margin-bottom: 0">

  </td>
  <td width=629 valign=top>
  <p style="margin-top: 0; margin-bottom: 0"><font size="2">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.</font></p>
  </td>
 </tr>
</table>

<p style="margin-top: 0; margin-bottom: 0"><font size="2"><br>
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):</font></p>
<p style="margin-top: 0; margin-bottom: 0">&nbsp;</p>

<table border=0 cellspacing=0 cellpadding=0>
 <tr>
  <td width=49 valign=top>
  <p align=right style="margin-top: 0; margin-bottom: 0"><font size="2">a)</font></p>
  </td>
  <td width=18 valign=top>

  <p style="margin-top: 0; margin-bottom: 0">

  </td>
  <td width=629 valign=top>
  <p style="margin-top: 0; margin-bottom: 0"><font size="2">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</font></p>
  <p style="margin-top: 0; margin-bottom: 0">&nbsp;</p>
  </td>
 </tr>
 <tr>
  <td width=49 valign=top>
  <p align=right style="margin-top: 0; margin-bottom: 0"><font size="2">b)</font></p>
  </td>
  <td width=18 valign=top>

  <p style="margin-top: 0; margin-bottom: 0">

  </td>
  <td width=629 valign=top>
  <p style="margin-top: 0; margin-bottom: 0"><font size="2">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.</font></p>
  <p style="margin-top: 0; margin-bottom: 0">&nbsp;</p>
  </td>
 </tr>
</table>



<table border=0 cellspacing=0 cellpadding=0>
 <tr>
  <td width=304 valign=top>
  <p style="margin-top: 0; margin-bottom: 0">&nbsp;</p>
  <p style="margin-top: 0; margin-bottom: 0">&nbsp;</p>
  <p style="margin-top: 0; margin-bottom: 0"><font size="2">Date: November 5, 2004</font></p>
  </td>
  <td width=359 valign=top>
  <p style="margin-top: 0; margin-bottom: 0">&nbsp;</p>
  <p style="margin-top: 0; margin-bottom: 0">&nbsp;</p>
  <p style="margin-top: 0; margin-bottom: 0"><u><font size="2">By: /s/ Dale A. Thatcher</font></u></p>
  </td>
 </tr>
 <tr>
  <td width=304 valign=top>

  <p style="margin-top: 0; margin-bottom: 0">

  </td>
  <td width=359 valign=top>
  <p style="margin-top: 0; margin-bottom: 0"><font size="2">Dale A. Thatcher</font></p>
  </td>
 </tr>
 <tr>
  <td width=304 valign=top>

  <p style="margin-top: 0; margin-bottom: 0">

  </td>
  <td width=359 valign=top>
  <p style="margin-top: 0; margin-bottom: 0"><font size="2">Executive Vice President of Finance, Chief Financial</font></p>
  </td>
 </tr>
 <tr>
  <td width=304 valign=top>

  <p style="margin-top: 0; margin-bottom: 0">

  </td>
  <td width=359 valign=top>
  <p style="margin-top: 0; margin-bottom: 0"><font size="2">Officer and Treasurer</font></p>
  </td>
 </tr>
</table>



</div>

</div>

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</html>

</TEXT>
</DOCUMENT>
<DOCUMENT>
<TYPE>EX-32
<SEQUENCE>11
<FILENAME>exhibit321.htm
<DESCRIPTION>EXHIBIT 32.1
<TEXT>
<html>

<head>

<title>Exhibit 32.1</title>

</head>

<body link=blue vlink=purple>

<div>

<div>

<p align=right style="margin-top: 0; margin-bottom: 0"><b><font size="2">Exhibit 32.1</font></b></p>



<p align=center style="margin-top: 0; margin-bottom: 0">&nbsp;</p>
<p align=center style="margin-top: 0; margin-bottom: 0"><b><font size="2">Certification
pursuant to 18 U.S.C. Section 1350, as adopted pursuant to<br>
Section 906 of the Sarbanes-Oxley Act of 2002 </font> </b></p>



<p style="margin-top: 0; margin-bottom: 0">&nbsp;</p>
<p style="margin-top: 0; margin-bottom: 0">&nbsp;</p>
<p style="margin-top: 0; margin-bottom: 0"><font size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; I, GREGORY
E. MURPHY, the Chairman, President and Chief Executive Officer of Selective
Insurance Group, Inc. (the &quot;Company&quot;), 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
September 30, 2004 (the &quot;Form 10-Q&quot;), which this certification accompanies,
fully complies with the requirements of Section 13(a) or 15(d) of the
Securities Exchange Act of 1934&nbsp; 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.<br>
<br>
<br><br></font></p>

<table border=0 cellspacing=0 cellpadding=0>
 <tr>
  <td width=301 valign=top>
  <p style="margin-top: 0; margin-bottom: 0"><font size="2">Date: November 5, 2004</font></p>
  </td>
  <td width=395 valign=top>
  <p style="margin-top: 0; margin-bottom: 0"><u><font size="2">By: /s/ Gregory E. Murphy</font></u></p>
  </td>
 </tr>
 <tr>
  <td width=301 valign=top>

  <p style="margin-top: 0; margin-bottom: 0">

  </td>
  <td width=395 valign=top>
  <p style="margin-top: 0; margin-bottom: 0"><font size="2">Gregory E. Murphy</font></p>
  </td>
 </tr>
</table>



</div>

</div>

</body>

</html>

</TEXT>
</DOCUMENT>
<DOCUMENT>
<TYPE>EX-32
<SEQUENCE>12
<FILENAME>exhibit322.htm
<DESCRIPTION>EXHIBIT 32.2
<TEXT>
<html>

<head>

<title>Exhibit 32.2</title>

</head>

<body link=blue vlink=purple>

<div>

<div>

<p align=right style="margin-top: 0; margin-bottom: 0"><b><font size="2">Exhibit 32.2</font></b></p>

<p style="margin-top: 0; margin-bottom: 0"><font size="2"><br><br></font></p>

<p align=center style="margin-top: 0; margin-bottom: 0"><b><font size="2">Certification
pursuant to 18 U.S.C. Section 1350, as adopted pursuant to<br>
Section 906 of the Sarbanes-Oxley Act of 2002 </font> </b></p>

<p style="margin-top: 0; margin-bottom: 0"><font size="2"><br><br></font></p>

<p style="margin-top: 0; margin-bottom: 0"><font size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; I,
DALE A. THATCHER, the Executive Vice President of Finance, Chief Financial
Officer and Treasurer of Selective Insurance Group, Inc., (the &quot;Company&quot;),
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 September 30, 2004 (the &quot;Form 10-Q&quot;), which
this certification accompanies, fully complies with the requirements of Section
13(a) or 15(d) of the Securities Exchange Act of 1934&nbsp; 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.<br>
&nbsp;</font></p>
<p style="margin-top: 0; margin-bottom: 0">
<font size="2">
<br><br></font></p>

<table border=0 cellspacing=0 cellpadding=0>
 <tr>
  <td width=301 valign=top>
  <p style="margin-top: 0; margin-bottom: 0"><font size="2">Date: November 5, 2004</font></p>
  </td>
  <td width=395 valign=top>
  <p style="margin-top: 0; margin-bottom: 0"><u><font size="2">By: /s/ Dale A. Thatcher</font></u></p>
  </td>
 </tr>
 <tr>
  <td width=301 valign=top>

  <p style="margin-top: 0; margin-bottom: 0">

  </td>
  <td width=395 valign=top>
  <p style="margin-top: 0; margin-bottom: 0"><font size="2">Dale A. Thatcher</font></p>
  </td>
 </tr>
</table>



</div>

</div>

</body>

</html>

</TEXT>
</DOCUMENT>
</SEC-DOCUMENT>
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